Kerala MSME Facilitation Act 2019 applies only to new enterprises: Kerala High Court

The Kerala High Court recently held that the Kerala Micro Small and Medium Enterprises Facilitation Act, 2019 (MSME Facilitation Act) does not apply to units established prior to the Act and is limited to new enterprises [Thajudheen A & anr v State Police Chief & ors]..Justice VG Arun observed that the MSME Facilitation Act, 2019, is intended to assist and facilitate the establishment of new enterprises in the State.The Court explained that provisions of the 2019 Act indicated that they were meant to assist in "starting" or "facilitating" an enterprise. The preamble to the Act also contained similar references. "There is also merit in the contention ... that the provision of the MSME Facilitation Act would apply only to new units ... The position is further clear from Section 4 dealing with the powers and functions of the nodal agency. The first among the functions is to assist and facilitate the establishment of enterprises in the State. Section 5, providing for self certification, also mentions about persons intending to start an enterprise," the Court said..The Court was hearing a petition by Thajudheen A and Sudheer S whose plea concerned a hot mix plant (a tar mixing unit), "N & T Hotmix," which was being operated by them in Nellad village.They claimed that the plant was being operated with all the necessary licences and permissions.However, the Nellanad Grama Panchayat, at the instance of members of a Samara Samithi (protest committee), issued stop memos to the petitioners.The petitioners then obtained an acknowledgment certificate under the MSME Facilitation Act, 2019. They argued that this exempted them from needing a Panchayat licence. Although the stop memos were stayed by the Tribunal for Local Self Institutions, the petitioners alleged that their vehicles were being obstructed by Samara Samithi members.The petitioners approached the police but said that the authorities took no action against the illegal obstruction.Therefore, the petitioners moved before the High Court seeking police protection to resume operations in their unit..Senior Counsel Ranjith Thampan argued that the hot mix plant operated with all necessary permissions. He explained that due to the Panchayat's failure to decide on the petitioners' license application, the hot mix unit started functioning based on a deemed license under Section 236(3) of the Kerala Panchayat Raj Act, 1994.Section 236(3) states that if an application for a license or permission is not decided within 30 days (or a prescribed longer period), it will be deemed granted subject to the usual conditions.He argued that the acknowledgment certificate under Section 5(3) of the MSME Facilitation Act has the effect of approval. During the period of three years for which the certificate is valid, no authority can undertake any inspection for the purpose of, or in connection with any such approval, he contended..Advocate Kaleeswaram Raj, who represented some members of the Samara Samithi, countered that the High Court had already directed the petitioners to obtain a valid Pachayat licence in an interim order passed on an earlier petition (which was ultimately withdrawn).Raj contended that the petitioners' decision to file a new writ petition without obtaining the licence constituted a fraud on the Court.Additionally, it was submitted that the hot mix plant's operation was in a densely populated area which was causing health and environmental issues, and that the Panchayat had issued stop memos based on complaints from local residents..The Court noted that since the petitioners' unit was established before the MSME Facilitation Act, it could not benefit from the 2019 Act's provisions, which were intended for new enterprises.The Court found that the acknowledgment certificate under the MSME Facilitation Act of 2019 did not exempt the petitioners from obtaining necessary permits under the Panchayat Building Rules."The fact that a functioning unit, issued with an acknowledgment certificate, for which new enterprises alone are entitled, casts a shadow on the statutory right claimed by the petitioners. The shadow gets darker by the fact that the unit is functioning in unauthorised buildings, some of which were constructed without obtaining permit from the Panchayat ... can the elaborate procedure under the Panchayat Raj Act and the corresponding rules, which prescribe elaborate procedure, be overlooked in such a casual manner(?) Part IX of the Constitution by which the Panchayat are made institution of self governances, is also to be kept in mind, " the Court added..The Court proceeded to take note of the grievances of the local residents about the environmental and health issues caused by the hot mix plant and concluded that the petitioners were not entitled to police protection.However, it clarified that the police could intervene in case any law and order issues arise from the dispute between the petitioners and respondents (Samara Samithi members).The writ petition was dismissed..The petitioners were represented by Senior Advocate Ranjith Thampan assisted by advocate Ajith Krishnan.Advocate Kaleeswaram Raj appeared for members of the Samara Samithi.The Nellanad Grama panchayat was represented by advocate Hanil Kumar..[Read Judgment]