Company Not Registered In Financial Services Category Not Entitled To Any Reprieve Under MSMED Act: Allahabad HC
The Allahabad High Court held that a company is not entitled to any reprieve under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) if it was not registered in the category of financial services under the said Act.
The petitioner company operated a cold storage facility where farmers stored their produce. The company also provided financial assistance to farmers for input costs. The farmers in this case had borrowed from the company and defaulted on payments.
The company, registered under the MSME Act, filed a claim for recovery. The U.P. Micro Small And Medium Enterprises Facilitation Council (Council) dismissed the claim, stating that it lacked jurisdiction to decide on matters related to loan recovery or financial services under the MSMED Act. The company challenged this decision before the High Court.
The Court held that if a company was not registered under the MSMED Act then it could not seek recovery for an alleged loan under Section 22 of the U.P. Regulation of Cold Storage Act, 1976 (the 1976 Act) using provisions from the MSMED Act.
A Division Bench of Justice Mahesh Chandra Tripathi and Justice Prashant Kumar observed, “Once the services provided by the petitioner is not registered under the MSMED Act, Facilitation Council established under the Act, will be divested of jurisdiction to entertain any such dispute arising out of any service not registered under MSMED Act. In such a situation, the MSMED Act will not be applicable as per Section 18 of the Act. ”
Advocate Mushir Khan represented the petitioner, while AAG Manish Goyal appeared for the respondent.
The Court explained that a company becomes subject to the framework of the MSMED Act based on the Udyog Aadhaar Memorandum Certificate. If a company’s registration does not fall within a specific category, the provisions of the MSMED Act will not apply to that category.
The Court stated that at the time when the petitioner gave the loan, it did not have the required registration under the NIC Data 2008 Code.
The Court held that “once the alleged financial services rendered by the petitioner was not registered at the time of disbursement of the loan under the MSMED Act, then certainly the Facilitation Council, which is established under the MSMED Act, will not be having jurisdiction to entertain any such dispute arising out of any service not registered under the MSMED Act.”
Accordingly, the High Court dismissed the petition.
Cause Title: M/S Neeraj Potato Preservation And Food Products Pvt. Ltd. v. U.P. Micro Small And Medium Enterprises (Neutral Citation: 2024:AHC:30417-DB)
Appearance:
Petitioner: Advocate Mushir Khan
Respondent: AAG Manish Goyal and Standing Counsel Fuzail Ahmad Ansari
