Judicial Scrutiny Of Contractual Classification And Scope Of Services

Summary:

^[1]A writ petition contesting the award of cloud services contract given to Micro & Small Enterprise (MSME), (hereinafter referred to as Respondent No.3). The Petitioner contended that the Respondent No. 3 awarded the contract purely because MSMEs were given presential treatment, even though they had the lowest bid. A major concern was raised that the contract’s work is to be executed by Amazon Web Services (AWS), a non-MSME entity, while the role of the Respondent No. 3 remains largely incidental. Additionally, the Petitioner contended that the Respondent No. 3 had performed services that go beyond the parameters of the Request for Proposal (RFP) and that the contract, which was derived from an RFP, does not qualify as a valid works contract.

Facts:

• The Directorate General of Hydrocarbons (DGH) issued a tender for cloud services to upgrade the National Data Repository (NDR).
• Both the Petitioner and Respondent No. 3 qualified in the technical evaluation, while the Petitioner submitted the lowest financial bid (L1).
• Despite this, DGH awarded the contract to Respondent No. 3, citing the MSME preference policy of 2012.
• The Petitioner contended that AWS will execute approximately 97% of the contract, while the Respondent No. 3’s contribution is limited to about 3%.
• Subsequently, the Petitioner argues that the contract qualifies as a works contract as the contract includes both services and goods, such as software licenses, making the MSME preference inapplicable.

Issues:

1. Whether the DGH appropriately applied the MSE preference policy in awarding the contract, as per the MSME Act and relevant government policies defined for the tender.
2. Whether Respondent No. 3’s status as an MSE justifies the contract award, considering AWS’s predominant role in execution.
3. Whether the contract should be classified primarily as a services contract, a goods contract, or a works contract.

Held:

The Hon’ble Court analysed the definitions and scope of works contract while evaluating the services provided by the Respondent No. 3. The court held that the contract did not qualify as a works contract and that the Respondent No. 3 had exceeded the scope outlined in the RFP.

Analysis:

The Hon’ble Court’s emphasized on the contractual terms outlined in the RFP and the actual services provided by comparing the intended scope with the executed tasks, the Hon’ble Court determined discrepancies that supported the Petitioner’s claims.

^[1] BEFORE THE HON’BLE HIGH COURT OF ALLAHABAD

Thoughtsol Infotech Pvt. Ltd. vs. Union of India & Ors.

WRIT – C No. 605 of 2025, 2025: AHC:34318-DB

Judgment Dated: March 10, 2025