The Kerala High Court recently ruled that the Kerala Micro, Small, and Medium Enterprises Facilitation Act, 2019 (MSME Facilitation Act) does not apply to units established before the Act’s enactment 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 designed to support and facilitate the establishment of new enterprises within the State.
The Court explained that the provisions of the 2019 Act are intended to assist in the “starting” or “facilitating” of enterprises, as evidenced by the Act’s preamble and specific sections.
“There is merit in the contention that the provisions of the MSME Facilitation Act apply only to new units… This is further clarified by Section 4, which outlines the powers and functions of the nodal agency, with its primary function being to assist and facilitate the establishment of enterprises in the State. Section 5, which provides for self-certification, also references individuals intending to start an enterprise,” the Court stated.
The case involved a petition filed by Thajudheen A and Sudheer S, who operated a hot mix plant called “N & T Hotmix” in Nellad village. They claimed that the plant was operating with all necessary licenses and permissions.
However, the Nellanad Grama Panchayat issued stop memos at the behest of a local protest group, the Samara Samithi. In response, the petitioners obtained an acknowledgment certificate under the MSME Facilitation Act, 2019, arguing that this exempted them from needing a Panchayat license.
Although the stop memos were stayed by the Tribunal for Local Self Institutions, the petitioners alleged that their operations were obstructed by Samara Samithi members and that the police failed to take action.
Senior Counsel Ranjith Thampan, representing the petitioners, argued that the hot mix plant operated under all necessary permissions and had begun functioning based on a deemed license under Section 236(3) of the Kerala Panchayat Raj Act, 1994, after the Panchayat failed to decide on their license application within the prescribed period.
Thampan also argued that the acknowledgment certificate under Section 5(3) of the MSME Facilitation Act served as approval, preventing any authority from inspecting the unit for three years while the certificate was valid.
Advocate Kaleeswaram Raj, representing the Samara Samithi members, countered that the High Court had previously directed the petitioners to obtain a valid Panchayat license in an interim order on an earlier petition. He argued that the petitioners’ decision to file a new writ petition without obtaining the license was an attempt
