Startups cannot seek relaxation under Centre’s startup policy as matter of right: Delhi High Court

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Court was hearing a plea by a startup company involved in the supply of goods to super specialty hospitals

The Delhi High Court has held that start up company cannot, as a matter of right claim relaxations under the Startup policy rolled out by the Central Government. 

A Division Bench of Chief Justice Satish Chandra Sharma and Justice Subramoniam Prasad dismissed the petition while also observing that such policies were intended for startups that are in the business of innovations. The Petitioner in the present case was only a supplier of goods to super specialty hospitals. 

The Petitioner, being a private company registered as a Start-up, had filed this plea as it was aggrieved by the inaction on the part of the Delhi Government to provide relaxation for the Startups in terms of policies and circulars issued by the Central Government from time to time. 

The Petitioner argued that the Rajiv Gandhi Super Specialty Hospital, being an autonomous institute under the Delhi Government, had issued tenders for procurement of Stents, Grafts, Valves, etc. for its cardiology department and was bound to give relaxations to the Petitioner in lieu of the Startup Policy of the Central Government.

The Petitioners argued that Central Government in order to promote MSME entities and Startups came up with a policy called "Startup India initiative" in 2016. Accordingly, executive instructions were issued through circulars to various Ministries for granting relaxations to Startups and MSMEs. The Petitioner have also argued that even the Delhi Government had framed a policy in 2019 for promoting Startups and that the Petitioner was eligible to avail relaxations under both the said policies. 

However, the court observed that the Central Government was not mandated to provide relaxations to every startup in all tenders.

While referring to the Central Government's policy, the court observed 

"31. It categorically provides “all Central Ministries/ Departments may relax condition of prior turnover and prior experience with respect to MSME in all public procurements subject to meeting of quality and technical specifications”

32. The executive instruction does not make it mandatory for any establishment to relax the condition in respect of turnover and prior experience/ EMD as the word “may” has been used in the policy Circular dated 10.03.2016."

The court further held that while it is true that the Delhi Government under its NCT of Delhi 2019 Policy promotes startups, in certain fields past experience and other qualifications cannot be relaxed. This was especially in the field of healthcare. 

The present case also related to procurement of Stents, Grafts Valves for the Cardiology Department of Rajiv Gandhi Super Specialty Hospitals, which had recently experienced an abnormally high rate of deaths in respect of heart patients. 

"In less than one year 218 patients lost their lives and in that drop back in order to ensure supply of quality products/quality implants from experienced persons-only because element of human life was involved the criteria of Startups and MSMEs have not been relaxed", observed the court. 

The court also held that the Start up Policy is not applicable to the Petitioner as it was only a supplier/trader and the police framed was aimed at recognising Start-ups which are working towards innovation, development or improvement of products or processes or services or if it is a scalable business model with a high potential of employment generation or wealth creation. 

The court held that the Petitioner in the present case is merely a trader who has to supply goods and no innovation of any kind is involved in the so called Start-up of the Petitioner. 

Cause Title:- Triveni Healthcare Private Limited v Government of NCT of Delhi & Anr.