Case Law Details
Focal Hub Vs State of Odisha and others (Orissa High Court)
Orissa HC Directs Scrutiny Committee to Reevaluate MSME Unit’s RFP Rejection in Odisha I&PR Department Empanelment
In a recent case, the Orissa High Court addressed the petition filed by Focal Hub, a micro, small, and medium enterprise (MSME) unit, challenging its exclusion from a list of empanelled agencies in the Department of Information and Public Relations (I&PR), Government of Odisha. Focal Hub sought an order mandating the department to include it in the list for producing audio-visual content, following its submission in response to a Request for Proposal (RFP).
The case was heard through hybrid mode, with Mr. Panda, representing Focal Hub, arguing that the company, as an MSME, was entitled to certain benefits and exemptions per government notifications and policies, which he contended had been overlooked by the Scrutiny Committee.
Petitioner’s Arguments on MSME Benefits and Exemptions
Mr. Panda, counsel for Focal Hub, highlighted that the petitioner, as a registered MSME unit, had participated in the RFP for empanelment in the Odisha I&PR Department. He argued that the company was eligible for various exemptions granted under a government-issued letter dated December 27, 2023. According to the letter, MSME units were entitled to exemptions, including:
- Exemption from Earnest Money Deposit (EMD)
- Relaxation in Annual Turnover Criteria
- Relaxation in Prior Experience Requirements
- Reduced Performance Security Deposit Requirements
Mr. Panda argued that these exemptions were ignored, leading to the petitioner’s disqualification. He further contended that the petitioner had demonstrated relevant experience, including projects involving live streaming and the creation of audio-visual content. However, this experience was allegedly not given appropriate consideration.
Additionally, he argued that Section 44AD of the Income Tax Act, 1961 exempts the petitioner from furnishing a Chartered Accountant’s audit report, which was stipulated in the eligibility criteria. This exemption, he stated, should have been recognized, allowing the petitioner’s bid to proceed without requiring an additional audit report.
State’s Response on Document Authenticity and Criteria Compliance
Representing the state, Mr. Mishra, Additional Government Advocate, disputed the petitioner’s claims. He questioned the authenticity of Focal Hub’s experience certificate, citing the absence of a letter number and an official letterhead from the issuing authority, the Central Project Coordinator of the Orissa High Court. This raised doubts about the certificate’s credibility.
Mr. Mishra added that the Scrutiny Committee had adhered to eligibility criteria outlined in the RFP, specifically regarding financial turnover and work experience requirements. According to the state’s records, Focal Hub did not meet the stipulated turnover threshold of ₹10 lakh per year over three years within the past five years, nor had it submitted adequate work experience documentation.
Additionally, the Scrutiny Committee meeting on December 27, 2023, occurred on the same day the MSME Department issued its notification granting certain exemptions. Mr. Mishra argued that it would have been challenging to apply these new guidelines during that meeting, given the timing of the notification.
Court’s Observations and Directions for Re-evaluation
The Orissa High Court noted that Focal Hub, as an MSME, was entitled to certain relaxations under the notification. Furthermore, the court acknowledged that the Scrutiny Committee convened on December 28, 2023—one day after the MSME notification. The court held that this timing provided sufficient opportunity for the Scrutiny Committee to apply the MSME guidelines to Focal Hub’s proposal.
The court found that the Scrutiny Committee did not appropriately consider the provisions of Section 44AD of the Income Tax Act, which exempts the petitioner from submitting a Chartered Accountant’s audit report. This, the court observed, was another aspect warranting reconsideration.
Consequently, the court issued a directive to the Scrutiny Committee to re-evaluate Focal Hub’s application, taking into account the MSME exemptions and relaxation provisions outlined in the December 27, 2023 notification, as well as in subsequent policy documents. The court emphasized the importance of adhering to government policies regarding MSME units and ordered the committee to provide a fair assessment.
Timeline and Opportunity for Representation
The court instructed that Focal Hub be notified of the upcoming review meeting to allow the petitioner an opportunity to present additional supporting documents. This meeting must be convened promptly, with the re-evaluation to be completed within three months of the court order.
The court’s directive underscores the need for administrative bodies to align their processes with established government policies, particularly in cases involving MSME units that are entitled to certain benefits and exemptions. It also highlights the necessity of due process in considering RFP applications, especially when eligibility criteria are potentially influenced by policy changes.
Conclusion
The Orissa High Court’s order mandates a fresh review of Focal Hub’s application for empanelment as an audio-visual content agency for the Odisha I&PR Department. The court’s intervention underscores the importance of incorporating MSME benefits during RFP evaluations and adherence to relevant state policies.
The Scrutiny Committee’s decision following this review will determine whether Focal Hub, an MSME entity, is entitled to inclusion in the list of empanelled agencies.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. This matter is taken up through hybrid mode.
2. The Petitioner in this writ petition prays for a direction to empanel it as an Agency for production of audio visual contents.
3. Mr. Panda, learned counsel for the Petitioner submits that pursuant to the invitation to submit Request for Proposal (RFP) under Annexure-4, the Petitioner submitted its proposal to be empanelled as an agency in the Information and Public Relations Department, Government of Odisha, Bhubaneswar for production of audio visual contents. Pursuant to the proposal received, the Information and Public Relations Department prepared a list of empanelled Houses/Agencies on 25th January, 2024 (Annexure-9), in which the name of the Petitioner does not find place.
4. It is submitted by Mr. Panda, learned counsel that the Petitioner is a MSME Unit having its Registration No.OD07E000 1354. Thus, it is entitled to the benefits of exemption/relaxation in terms of the letter dated 27th December, 2023 (Annexure-8) issued by the MSME Department, which should have been taken into consideration. In the said letter, MSME Units are granted with certain exemption/relaxations. The same are as follows:
“1. Exemption from deposit of EMD
2. Relaxation from annual turn-over criteria
3. Relaxation from prior experience criteria
4. Relaxation in performance security deposit amount (25% of what is applicable to non-MSE Bidder).”
Thus, the Petitioner should have got relaxation from annual turn-over criteria and prior experience criteria. Be that as it may, the Petitioner had submitted the documents in support its experience of doing live streaming and preparation of audio visual contents. The same was not given proper weightage while preparing the list of empanelled Houses/Agencies as per Annexure-9.
5. In view of Section 44 AD of Income Tax Act, 1961 (for brevity ‘the Act’), the Petitioner is exempted from furnishing the audit report of the Chattered Accountant as required under Clause-5 of the Eligibility Criteria of Information to the Bidders stipulated under Annexure-4. Had these materials been taken into consideration, the name of the Petitioner would have been empanelled. Hence, he prays for re-consideration of its case for being empanelled in Information and Public Relations Department, Government of Odisha as an agency for production of audio visual contents.
6. Mishra, learned Additional Government Advocate vehemently objects to the above. It is his submission that the experience certificate submitted by the Petitioner, which was granted by learned Central Project Co-ordinator (CPC), High Court of Orissa is doubtful, as the letter number has not been given therein. It was not also issued in the letter head of learned Central Project Coordinator (CPC), High Court of Orissa, who allegedly issued such experience certificate. The Scrutiny Committee convened its meeting on 27th December, 2023 on which date, the letter under Annexure-8 by the MSME Department, Government of Odisha was issued. Thus, it could not have been taken into consideration. Further, live streaming is not equivalent to production of audio visual contents. Taking into consideration the above, the Petitioner was not empanelled under Annexure-9.
7. It is his submission that detail proceedings of rejection of RFP of the Petitioner has been annexed as Annexure-A/1 to the counter affidavit. Enclosure to the said proceedings clearly indicates that the Petitioner was not qualified for the following reason:
“Not qualified due to not having annual turn-over of Rs.10 lakh in each year for 3 year in last five year and non submission of work experience for three years.”
He, therefore, submits that the request of the Petitioner was rightly rejected by I & PR Department, Government of Odisha.
8. Mr. Panda, learned counsel for the Petitioner, however, referring to the income tax returns of the Petitioner annexed to the writ petition, submitted that the Petitioner had turn-over of more than 10 lakh for last three years before submission of RFP. Thus, there is an error apparent on the face of the record in rejecting the RFP of the Petitioner. He further submits that the policy of the State Government with regard to MSME Unit and the notification under Annexure-10 and Office Memorandum under Annexure-1 1 are binding on the Government of Odisha, which were apparently ignored by the Scrutiny Committee.
9. Taking into consideration the submissions made by learned counsel for the parties, this Court finds that the Petitioner being a MSME Unit is entitled for certain exemptions/relaxations as per the letter under Annexure-8 and notification as well as Memorandum under Annexure- 10 and 11 respectively. The plea taken by the State of Odisha-Opposite Party Nos. 1 & 2 that the case of the Petitioner could not have been considered, as the notification was issued on the date of sitting of the Scrutiny Committee is not sustainable. From the counter affidavit, it appears that the Scrutiny Committee was convened on 27th December, 2023 and subsequently on 28th December, 2023. Admittedly, notification of MSME Department (Annexure-8) was issued on 27th December, 2023. Thus, it could have been considered by the Scrutiny Committee on 28th December, 2023. Further the Petitioner claims that in view of Section 44AD of the Act, it is not required to submit the audit report of the Chattered Accountant. These aspects need fresh consideration by the Scrutiny Committee. Further the Scrutiny Committee failed to take into consideration the instruction and policy decision of the Government under Annexures- 10 and 11.
10. Accordingly, the writ petition is disposed of with a direction that the Scrutiny Committee shall review the case of the Petitioner giving its representative an opportunity of being heard and to produce documents in support of its case. The Petitioner shall be intimated about the date of consideration of its case by the Scrutiny Committee and entire exercise shall be completed as expeditiously as possible preferably within a period of three months from the date of production of certified copy of this order before the Director, Department of Information and Public Relations, Government of Odisha, Bhubaneswar-Opposite Party No.2.
11. As requested, a copy of this order shall be made over to Mishra, learned AGA for communication and compliance.
Urgent certified copy of this order be granted on proper application.
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