Once Acknowledgement Certificate Is Obtained Under Kerala MSME Act, Then Permission From Gram Panchayat Is Not Required- SC

The Supreme Court has observed that once an Acknowledgment Certificate under Section 5(3) of the Kerala Micro Small and Medium Enterprises Facilitation Act, 2019 (MSME Act) was obtained to set up a Hot Mix Plant, permission under the Kerala Panchayat Raj Act, 1994 was not necessary.

The Bench of Justice V. Ramasubramanian and Justice Pankaj Mithal observed that “What is held against the writ petitioners today is the requirement of a permission under the Act of 1994. But Section 10 of the Kerala MSME Act not only confers overriding effect to the Act on other laws, but also makes a specific reference to the Act of 1994... Therefore, the prayer made by the writ petitioners in their second writ petition, deserved to be granted, clearly in the light of the statutory prescription. But unfortunately, both the learned Single Judge and the Division Bench completely overlooked this most vital aspect.”

Advocate K. Parameshwar appeared for the appellants- objectors and Advocate Kuriakose Varghese appeared for the respondent- writ petitioners.

By way of the appeals, George Elias and Associates, which was the respondent No.1 in the first set of three appeals has prayed for-

(i) setting aside an Order of the Committee of the Kalloorkad Gram Panchayat refusing to grant license to them for establishing a Hot Mix Plant; and

(ii) for a declaration that by virtue of the certificate granted under the Kerala Micro Small and Medium Enterprises Facilitation Act, 2019 (MSME Act), all licenses and approvals including the license of the Panchayat should be deemed to have been obtained.

Factual Background

George Elias and Associates are engaged in undertaking road works in different parts of the State of Kerala. They were awarded the contract for road work in Cherthala Aroorkutty and Acknowledgement Certificate under Section 5 of the MSME Act was also obtained by them.

An application was submitted to Gram Panchayat for the grant of a license for installation of the Hot Mix Plant. But there was no response from the Panchayat, the respondents claimed the benefit of the deeming provision under Rule 12(3) of the Kerala Panchayat Raj (Issue of License to Factories, Trades, Entrepreneurship Activities and Other Services) Rules, 1996 and started setting up the plant. 

Meanwhile, the Kerala State Pollution Control Board also granted “Consent to Establish” the plant. Objections were raised by some members of the locality which led to a conciliation meeting. However, the Gram Panchayat rejected the application by an Order. Thereafter writ petitions were filed by the respondents. 

The respondents argued that by virtue of the Acknowledgement Certificate obtained under the MSME Act, a license under the Kerala Panchayat Raj Act, 1943 was not necessary. Therefore, the Single Judge without getting into the question relating to the overriding effect of MSME Act, held that the Hot Mix Plant was portable equipment and that it did not fall within the definition of the word “building” under the Rules of 2019.

The Apex Court said that the Single Judge and the Division Bench had failed to consider the most vital aspect that consent to establish was already obtained from the State Pollution Control Board and an Acknowledgment Certificate under Section 5(3) of the Kerala MSME Act was also obtained and therefore, a license under the Kerala Panchayat Raj Act was not necessary.

“The Kerala MSME Act overrides the 1994 Act and a few other local enactments. This is why the writ petitioners have taken “consent” from the Pollution Control Board. Once consent is taken from the Pollution Control Board, the necessity for reading down Section 10 of the Kerala MSME Act, for the purpose of protecting the environment, does not arise.” said the Court.

Further, the counsel for the appellants contended that as per Rule 3 of the MSME Rules, all persons seeking Acknowledgment Certificate under Section 5(3) were required to furnish a duly filled self-certification in Form-I. This form contained an undertaking from the applicant to comply with the Kerala Panchayat Building Rules, 2019 and hence the respondent could not avoid the requirement of permission from the local Panchayat.

The Apex Court rejected the argument and said that “...the Rules framed under the Act cannot annul the effect of the statutory provisions. Section 10(2) of the Kerala MSME Act makes it clear that the provisions of the Act of 1994, shall be read as amended to be in conformity with the provisions of the Kerala MSME Act. Therefore, the objectors cannot fall back upon the Rules to nullify the effect of the provisions of the Act.”

Therefore, the Acknowledgement Certificate obtained under the MSME Act, alone was sufficient to clinch the issue in favour of the writ petitioner, said the Court.

Cause Title- Jolly George & Anr v. George Elias And Associates & Ors.

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