Kalloor Electronics and Lightings Pvt. Ltd. v. State of Kerala

Small and Medium Enterprises Development Act, 2006 – Principles of Promissory Estoppel and Legitimate Expectation Explained.

The MSMEs enjoy a reservation regarding such products produced by them, which are included in the Annexure to Ext.P6 procurement policy. The policy is a legal document, issued under the powers available under Section 11 of the MSMED Act. The MSMEs thus have a legitimate expectation that the Central Government, its Departments and its PSUs will follow the policy scrupulously, while proceeding for public procurement. As such, non-consideration of the above right available to them while procuring LED lights required for street lighting under the “Nilaavu” project, by the 4th respondent, is necessarily arbitrary and violative of Article 14 of the Constitution of India.

The petitioners are aggrieved by the implementation of the “Nilaavu” project by the respondents and the procuring of LED bulbs and other allied fixtures and fittings for street lighting in Local Self Government Institutions (LSGI for short) from agencies other than the petitioners and similarly placed MSMEs in the State. The project aims at replacing the conventional street lighting in all the LSGIs with LED lamps and the KSEB Ltd. was to be the special purpose vehicle for the project and the procurement of LED lights is to be through the 4th respondent.

On the basis of the pleadings and arguments advanced by the petitioners and respondents, the following questions are formulated for the purpose of deciding the dispute.

(a) Are the MSMEs entitled to any exclusive reservation regarding public procurement of street lighting?

(b) If no exclusive reservation is available, are MSMEs entitled to any preference in purchase by the Governments, LSGIs and PSUs?

(c) Is “Nilaavu” project a part of the Street Lighting National Programme which is implemented through the 4 th respondent?

(d) Can the State or LSGI or KSEB avoid public procurement by tender process, including the preference available to the MSMEs, while they are implementing a Policy through a management consultant (4th respondent)?

(e) Have the respondents followed the tender process for procuring LED lighting, required for implementation of the “Nilaavu” project or is it a case of outright purchase from a single PSU (the 4th respondent)?

(f) Do the principles of promissory estoppel and legitimate expectation apply in the facts of this case?

(g) Can the petitioners invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India?