# M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd v. U.P. Micro Small & Medium Entp. Kanpur & Ors

- **Citation:** (2024) 3 ILRA 2025
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-02-21
- **Case number:** Writ-C No. 35190 of 2023
- **Bench:** Mahesh Chandra Tripathi, Prashant Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-neeraj-potato-preservation-food-prod-pvt-ltd-v-u-p-micro-small-medium-entp-51612
- **Pages:** 14

## Headnote

Civil Law - Micro, Small and Medium
Enterprises
Development
Act,
2006
(MSMED Act) - Sections 8, 18, 24 - U.P.
Regulation of Cold Storage Act, 1976 -
Sections 2(c), 5 & 22 - Jurisdiction of Micro
and Small Enterprises Facilitation Council -
Financial Services - Registration Requirement -
Maintainability of Writ Petition

The
petitioner,
a
cold
storage
company
registered
under
the
MSMED
Act
for
warehousing and storage services, sought
recovery of a loan of Rs. 4,09,022/- with 18%
interest from farmers (respondents nos. 2 and
3) through the U.P. Micro, Small and Medium
Enterprises Facilitation Council, Kanpur. The
Council dismissed the claim on 29.07.2022
(signed
14.08.2023),
holding
it
lacked
jurisdiction as the petitioner was not registered
for financial services under the MSMED Act, and
the loan was not covered under cold storage
services as per the U.P. Regulation of Cold
Storage Act, 1976. The petitioner challenged
2026 INDIAN LAW REPORTS ALLAHABAD SERIES
this order, arguing that financial services were
incidental to cold storage under Section 22 of
the 1976 Act and covered by the MSMED Act's
overriding effect (Section 24). Held: Financial
services are distinct from cold storage services,
as defined under Section 2(c) and regulated by
Sections 5 and 22 of the 1976 Act, and require
separate registration under the MSMED Act (NIC
Code 64). The petitioner's loan, advanced at
18% interest on 09.03.2018, exceeded the
permissible rate under Section 22 and was not
against pledged goods, thus falling outside the
1976 Act's scope. The petitioner's registration
under the MSMED Act for warehousing (NIC
Code 52101) did not cover financial services,
and its application for modification of NIC Code
was made post-loan (24.09.2018). As per Silpi
Industries
Vs
Kerala
St.
Road
Transport
Corporation (2021) 18 SCC 790, benefits under
the MSMED Act apply only to services registered
at the time of the contract, not retrospectively.
The Council correctly held it lacked jurisdiction.
The writ petition was maintainable under Article
226 as the Council's order was not an arbitral
award but a refusal to exercise jurisdiction.
However, the order was upheld as no illegality
was found.

Petition was dismissed.

Case Law Cited:

## Text

_Characters 0–39,850 of 45,744. This is a partial read: ask again with offset=39850 for what follows._

3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2025
the ground taken by the respondents that
the petitioners had an alternative remedy of
filing an Appeal and thereafter a Revision
has no legs to stand. The petitioners and the
respondent no.5 had offered their lands to
the District Magistrate for mining purposes
as per Rule 23(2)(d) of the Rules. The bids
were invited and when the petitioners had
offered their bid which was higher than the
highest bid then nothing further had to be
decided. The respondent no.5 would get the
compensation as per the proviso to Rule
23(2)(d) of the Rules just as he would have
got had the highest bidder in the tender got
the lease. Since nothing further had to be
decided and only the question that who
should be granted the mining lease had to
be looked into when the respondent no.5
had refused to take the mining rights
despite the fact that he had earlier given his
consent, we are of the view that nothing
further could have been decided by the
Appellate Court and thus the case was not
required to be relegated to the Appellate or
Revisional forum.

9. Under such circumstances, the
order dated 4.9.2023 passed by the District
Magistrate, Sonbhadra is quashed and is
set-aside. The petitioners may now be
given the mining lease for mining on the
land in question comprising plot no.454
area 0.5190 hectare; plot no.460 area
0.0760 hectare; plot no.461-Ka area 0.9360
hectare and plot no.461-kha area 0.4020
hectare situated in village Billi Markundi,
Pargana Agori, Tehsil
Obra,
District
Sonbhadra forthwith. The respondent no.5
would be given the compensation as is
envisaged in the proviso to Rule 23(2)(d) of
the Rules.

10. With these observations, the writ
petition stands allowed.
----------
(2024) 3 ILRA 2025
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 21.02.2024

BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.
THE HON'BLE PRASHANT KUMAR, J.

Writ-C No. 35190 of 2023

M/s Neeraj Potato Preservation & Food
Prod. Pvt. Ltd. ...Petitioner
Versus
U.P. Micro Small & Medium Entp. Kanpur &
Ors. ...Respondents

Counsel for the Petitioner:
Sri Mushir Khan, Sri Amit Saxena (Sr. Advocate)

Counsel for the Respondents:
C.S.C., Sri Manish Goyal (Addl. A.G.), Sri Fuzail
Ahmad Ansari(S.C.)

Civil Law - Micro, Small and Medium
Enterprises
Development
Act,
2006
(MSMED Act) - Sections 8, 18, 24 - U.P.
Regulation of Cold Storage Act, 1976 -
Sections 2(c), 5 & 22 - Jurisdiction of Micro
and Small Enterprises Facilitation Council -
Financial Services - Registration Requirement -
Maintainability of Writ Petition

The
petitioner,
a
cold
storage
company
registered
under
the
MSMED
Act
for
warehousing and storage services, sought
recovery of a loan of Rs. 4,09,022/- with 18%
interest from farmers (respondents nos. 2 and
3) through the U.P. Micro, Small and Medium
Enterprises Facilitation Council, Kanpur. The
Council dismissed the claim on 29.07.2022
(signed
14.08.2023),
holding
it
lacked
jurisdiction as the petitioner was not registered
for financial services under the MSMED Act, and
the loan was not covered under cold storage
services as per the U.P. Regulation of Cold
Storage Act, 1976. The petitioner challenged
2026 INDIAN LAW REPORTS ALLAHABAD SERIES
this order, arguing that financial services were
incidental to cold storage under Section 22 of
the 1976 Act and covered by the MSMED Act's
overriding effect (Section 24). Held: Financial
services are distinct from cold storage services,
as defined under Section 2(c) and regulated by
Sections 5 and 22 of the 1976 Act, and require
separate registration under the MSMED Act (NIC
Code 64). The petitioner's loan, advanced at
18% interest on 09.03.2018, exceeded the
permissible rate under Section 22 and was not
against pledged goods, thus falling outside the
1976 Act's scope. The petitioner's registration
under the MSMED Act for warehousing (NIC
Code 52101) did not cover financial services,
and its application for modification of NIC Code
was made post-loan (24.09.2018). As per Silpi
Industries
Vs
Kerala
St.
Road
Transport
Corporation (2021) 18 SCC 790, benefits under
the MSMED Act apply only to services registered
at the time of the contract, not retrospectively.
The Council correctly held it lacked jurisdiction.
The writ petition was maintainable under Article
226 as the Council's order was not an arbitral
award but a refusal to exercise jurisdiction.
However, the order was upheld as no illegality
was found.

Petition was dismissed.

Case Law Cited:

1. Silpi Industries Etc. Vs Kerala St. Road
Transport Corporation & anr., (2021) 18 SCC 790

2. Shanti Conductors Pvt. Ltd. Vs Assam St.
Electricity Board, (2019) 19 SCC 529

3. M/s India Glycols Ltd. Vs Micro and Small
Enterprises Facilitation Council, Civil Appeal No.
7491 of 2023

4. Kannauj Cold Storage Vs St. of U.P., 1989
ALL.L.J. 689

5.
National
Seeds
Corp.
Ltd.
Vs
M.
Madhusudhan Reddy, 2012 (2) SCC 506

6. M/s Chakor Cold Storage Vs District
Consumer Dispute Redressal Forum, 2020 (10)
ADJ 400

7. M/s Chandel Cold Storage Vs St. Consumer
Disputes Redressal Commission, Misc. Single No.
5743 of 2010

8. M/s Chotey Lal Cold Storage Vs St. of U.P.,
2012 (1) ADJ (LB) 528

9. St. of U.P. Vs Satya Narain Kapoor, (2004) 8
SCC 630

10. Kantaru Rajeevaru Vs Indian Young Lawyers
Association, (2020) 2 SCC 1

11. Spencer & Company Ltd. Vs Vishwdarshan
Distributors Pvt. Ltd., 1995 (1) SCC 259

(Delivered by Hon'ble Mahesh Chandra
Tripathi, J.)

1. Heard Shri Amit Saxena, learned
Senior Counsel assisted by Shri Mushir
Khan, learned counsel for the petitioner and
Shri
Manish
Goyal,
learned
Addl.
Advocate General assisted by Shri Fuzail
Ahmad Ansari, learned Standing Counsel
for the State respondents.

Facts of the case

2. M/s Neeraj Potato Preservation and
Food Products Pvt. Ltd. (in short "the
petitioner company") is in the business of
running cold storage at Shivrajpur. The
farmers of that area grow crops and use the
petitioner's facility for storage of their
potatoes and other crops and for this
purpose the company charges rent/ fees (for
the services provided) for keeping the crop
in cold storage facility. When the farmers
come to take back their crop, they pay the
charges according to the period of storage
and area occupied in petitioner's cold
storage. The respondent nos.2 and 3 are the
farmers, who had used the services of the
petitioner's cold storage. They had stored
their potatoes to be sold in the market at a
suitable time. While the produce of the
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2027
farmers is kept in cold storage, the farmers
sometimes
need
financial
assistance
towards the input cost needed for fresh
sowing, which may be provided by the
petitioner
company.
Accordingly,
the
respondent nos.2 and 3, who needed
financial assistance to sow their next crop
took a loan from the petitioner company of
Rs.4,09,022/-. It seems that the respondent
nos.2 and 3 did not pay back the loan to the
petitioner. The petitioner, claiming itself to
be Micro, Small and Medium Enterprises
(MSME) registered under the Micro, Small
and Medium Enterprises Development Act,
2006 (in short "MSMED Act") had filed a
claim petition before the 'U.P. Micro,
Small and Medium Enterprises Facilitation
Council, Kanpur Nagar' (in short "the
Council") on 24.12.2020, which was
registered as Claim Petition No.105 (127)
of 2021 for the recovery of the principal
amount of Rs.4,09,022/- along with interest
at the rate of 18% per annum, as provided
under the MSMED Act, which came out to
be Rs.2,26,851/-, so the total claim was of
Rs.6,35,873/-.

3. In the said proceeding, notices were
issued to the respondents on 19.7.2021
calling them for settlement and to appear
on 29.7.2021 for conciliation. It is
contended that on 29.7.2021, the petitioner
had appeared but the respondents did not
appear before the Council, hence the
reference could not be decided and the
proceeding of Section 76 of the Arbitration
and Conciliation Act, 1996 was terminated
and the matter was referred for arbitration
asking the respondents to file reply within
15 days.

4. It is contended that once the
aforesaid case/claim of the petitioner was
not
being
decided,
the
petitioner
approached this Court by preferring Writ-C
No.4379 of 2022 (M/s Neeraj Potato
Preservation and Food Products Pvt. Ltd. v.
U.P. Micro and Medium Enterprises
Facilitation Council and Anr.), which was
decided on 2.3.2022 directing the Council
to decide the claim of the petitioner
preferably within three months.

5. Inspite of aforesaid direction, once
the claim of the petitioner was not decided,
the
petitioner
preferred
Contempt
Application (Civil) No.7143 of 2022 (M/s
Neeraj Potato Preservation and Food
Products
Pvt.
Ltd.
v.
Dr.
Raj
Shekhar/Chairman of U.P. Micro and
Medium Enterprises Facilitation Council),
which
was
decided
on
25.11.2022
according three months further time to
comply with the Writ Court order.

6. In response to the aforesaid order,
the claim of the petitioner was decided by
the order impugned. While passing the
order impugned, the Council has framed
following main issues for adjudication:-

(1)
Whether
the
Claimant/
Supplier is entitled for the claim of
Rs.4,09,022/- as Principal Amount from the
Buyer?

(2)
Whether
the
Claimant/
Supplier is entitled for the claim of
Rs.2,26,851/- as interest from the Buyer?.

7. While deciding the first issue, the
Council opined that it has jurisdiction to
decide the matter only for delayed
payments in lieu of cooling & preservation
services provided to customers. As per the
Udyog Aadhar Registration Certificate of
the claimant, the activities being done by
the claimant, are related to warehousing
and support activities, warehousing and
storage, warehousing of refrigerated (cold
storage). The claimant failed to produce
2028 INDIAN LAW REPORTS ALLAHABAD SERIES
any such document, which inspires the
confidence of the Council regarding the
arrear of rent/ services of Cold Storage,
provided to the respondents by the claimant
(petitioner), which is still due on the
respondents.

8. The Council has observed that the
opinion/ report of Lead District Manager
(L.D.M.) regarding the issue of re-finance
service makes it clear that if the claimant
company has provided loan against the
products stored in its cold storage and the
list of such borrowers, along with the
receipts of their products, has been made
available to the bank, only then the Council
may entertain the claim petition otherwise
not. The claimant has failed to produce any
such document as mentioned in the
opinion/ report of L.D.M. As such the
Council opined that as per the provisions of
MSMED Act, 2006, it has no jurisdiction to
decide the matter for recovery of loan /
financial services and other recovery
matters and in such circumstances the
Council cannot act beyond its jurisdiction.
It was also observed that the claimant may
approach for other alternate legal remedies
for recovery of loan/ financial services.

9. While deciding the second issue,
the Council observed that the claimant is
not entitled to receive any interest from the
respondent as there is no principal amount
of delayed payment due on the respondents.
Accordingly, the claim/ reference of the
petitioner was dismissed by the order
impugned.

10. Aggrieved by the said order, the
petitioner had preferred the instant writ
petition with following prayers:-

"(i) Issue a writ, order or
direction in the nature of certiorari to
quash/ set aside the impugned order made
on 29.07.022 signed on 14.08.2023 passed
by the Chairman of Divisional Micro and
Small Enterprises, Facilitation Council,
Kanpur.

(ii) Issue a writ, order or
direction in the nature of mandamus
commanding and directing the respondent
authorities to consider and recover the
loan/ financial service as per the provision
of MSMED Act.

(iii) Issue a writ, order or
direction in the nature of mandamus
commanding and directing the respondent
authorities
to
decide
the
case
of
petitioner's company consider the loan/
financial service which comes under the
jurisdiction of Facilitation Council as per
the MSMED Act."

Arguments of the petitioner

11. Learned Senior Counsel for the
petitioner has vehemently argued that the
order impugned is not sustainable in the
eyes of law. He has submitted that Section
22 of the U.P. Regulation of Cold Storage
Act, 1976 (in short "the Act, 1976") has
given the right to Company to offer service
of finance to individuals, who are doing
business/ work (agricultural produce),
hence the petitioner is entitled and
authorised to offer service of finance to the
farmers. He has also submitted that after
the enforcement of MSMED Act, the cold
storage service stands included under the
MSMED Act vide notification dated
5.11.2014 issued by Government of India
and the recovery of petitioner's services of
finance shall be permissible in view of
Section 24 (overriding effect) of the
MSMED Act and as such the finding given
under the impugned order is not sustainable
and contrary to law.
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2029

12. Learned Senior Counsel appearing
for the petitioner has contended that, in the
process of preservation of potato, the
company charges rent against the potato
stored by farmers as well as interest on
advance loan provided to the farmers. The
farmers are required to deposit the rent/
advance loan and interest on rent/ advance
loan at the time to take away their potato.
Sometimes, looking into the financial
position of the farmers, the unpaid balance
of the farmers is carried forward and is
adjusted in the coming financial year. It is
contended that the bank as well as the Act,
1976 both permit the petitioner to provide
short terms finance to farmers in order to
meet expenses and there is amicable
agreement between the petitioner and the
farmers.

13. It is also submitted that the
company is not doing prime lending and
the company is offerring amicable service
to the farmers for sowing the crops for
which a separate agreement was also
executed by the company with farmers as
per the Contract Act, 1972. The service of
finance was rendered by the petitioner and
the farmer is liable to pay the loan amount
and interest as prescribed to the petitioner
company. Since the petitioner is registered
MSME, as per the provisions of MSMED
Act, the Council had the jurisdiction to
adjudicate the dispute.

14. It is further submitted that if the
order impugned is not set aside, it will set
up a very wrong precedent, inasmuch as if
the farmers after taking the loan does not
pay back, then the petitioner will have no
efficacious remedy to recover the same,
which would lead the petitioner company
to insolvency.

15. It is also argued that the order
impugned can not be challenged under
Section
34
of
the
Arbitration
and
Conciliation Act, 1996 and the position of
the petitioner is very different as more than
84 cases of the petitioner of same nature
are pending before the Council and the
Council had passed the order impugned
without following the rule of jurisdiction.
The company is at the verge of closure and
only legal question is involved in the
present matter as to whether the service of
finance rendered by the petitioner would be
covered under the MSMED Act or not. The
petitioner has given all particulars with
regard to genuineness of the claim in the
present case but the Council has ignored
the same. The petitioner is a company
doing the work for the welfare of the
farmers but the respondents and such other
farmers are blocking the money of the
petitioner as such the petitioner is not being
able to settle the loan amount of the bank or
advance financial assistance to other
farmers, who are in need. On one hand, the
petitioner is disbursing
the
financial
assistance to the farmers and on the other
hand it is not able to recover the same and
as such the order impugned is not justified.

16. It is also argued that the cold
storage business is a regulated business and
the Act, 1976 provide for complete
mechanism as to how the cold storage
services are to be provided. The statement
of objects and reasons discloses that the
State Government was conscious of the fact
that cold storages have to run smoothly and
efficiently so as to mitigate the hardships of
agricultural producers and hence proper
control in regulation of cold storage
business is necessary for public interest.
The Act provides for due remedies to the
farmers and balances the right of the
licensee by providing the right to retain lien
upon the goods so long as the charges fixed
by the Government are not paid and the
2030 INDIAN LAW REPORTS ALLAHABAD SERIES
discharge receipt is not issued, where the
period of delivery is over.

Arguments of the respondent/State

17. On the other hand, learned Addl.
Advocate General has vehemently opposed
the writ petition and submitted that the
order impugned has been passed strictly in
accordance with law and there is no
infirmity in it. He submitted that in the
present matter the controversy is as to
whether the loan/ financial services will be
covered under the Cold Storage Services
and will be falling within the jurisdiction of
the Council so as to be adjudicated as per
the procedure contemplated under the
MSMED Act.

18. He submitted that as per the
Udyog Aadhar Memorandum Certificate of
the petitioner, the petitioner has been
registered for the following services:-

• Warehousing and support activities
for transportation.

• Warehousing and storage

• Warehousing of refrigerated (cold
storage).

19. He submitted that the Council has
rightly arrived at a conclusion that the
petitioner has not been registered for any
financial services under the MSMED Act,
therefore, the Council did not possess the
jurisdiction to enter into reference in terms
of Section 18 of the Act, leaving it open for
the petitioner to pursue the other legal
remedies available to it. There was no
infirmity in the impugned order passed by
the Council that no recovery can be made
by any instrumentality under MSMED Act
unless and until the petitioner registers
itself for financial services under the
MSMED
Act
by
submitting
a
memorandum to that effect and that too
prospectively.

20. He further submitted that the
order impugned has rightly been passed
and no interference is required in the
matter. In support of his submissions, he
has placed reliance on the judgments in
Silpi Industries Etc. v. Kerala State
Road Transport Corporation & Anr.,
(2021) 18 SCC 790; Kannauj Cold
Storage & Ors. v. State of U.P. & Ors.,
1989 ALL.L.J. 689; National Seeds
Corporation Ltd. v. M. Madhusudhan
Reddy & Anr., 2012 (2) SCC 506; M/s
Chakor Cold Storage & Ors. v. District
Consumer Dispute Redrssal Forum &
Ors., 2020 (10) ADJ 400; M/s Chandel
Cold
Storage
v.
State
Consumer
Disputes Redressal Commission, U.P. &
Ors., Misc. Single No.5743 of 2010 dt.
17.5.2019; M/s Chotey Lal Cold Storage
& Allied Ind. v. State of U.P. & Ors.,
2012 (1) ADJ (LB) 528; State of U.P. &
Anr. v. Satya Narain Kapoor (Dead) by
Lrs. & Ors., (2004) 8 SCC 630; Kantaru
Rajeevaru (Sabrimala Temple Review5J) v. Indian Young Lawyers Association
through its General Secretary & Ors.,
(2020) 2 SCC 1 and Spencer & Company
Ltd.
&
anr.
v.
Vishwdarshan
Distributors Pvt. Ltd. & Ors., 1995 (1)
SCC 259.

ANALYSIS

21. Heard rival submissions, perused
the
record
as
well
as
respectfully
considered the judgments cited at Bar. In
the present matter, three issues are to be
adjudicated, which are as follows:-

(i) whether the loan/ financial
services will be covered under the Cold
Storage Services; and
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2031

(ii) whether the petitioner has
been registered for any financial services
under the MSMED Act.

(iii) Whether the present writ
petition is maintainable or not.

22. With regard to first issue as to
whether the financial services will be
covered under the Cold Storage Services,
we first need to look into the definition of
'cold storage'. The term 'cold storage' has
been defined under Section 2 (c) of the Act,
1976, which provides:-

(c) "cold storage" means an
enclosed
chamber
insulated
and
mechanically
cooled
by
refrigeration
machinary to provide refrigerated condition
to agricultural produce stored therein, but
does not include refrigerated cabinets and
chilling plants having a capacity of less
than 100 cubic meters.

23. For the purposes of providing cold
storage services a license is to be issued
inasmuch as cold storage services are
regulated within the State of U.P., which is
evident from perusal of Section 5 of the
Act, 1976, as under:-

"5. On and after such date as the
State Government may, by notification
appoint in that behalf, no person shall carry
on the business of storing any agricultural
produce in a cold storage under and in
accordance with the terms and conditions
of a licence granted under this Act."

24. Section 22 of the Act, 1976 lays
down as to what should be the rate of
interest charged by the cold storage, in case
they provide financial assistance to the
farmers. Section 22 of the Act, 1976 reads
as follows:-

"22. If any money is lent by the
licensee to a hirer against the goods stored
by some hirer in the cold storage, the rate
of interest, in no case, shall be higher than
one-half of one percent annum simple
interest over the current rate of interest
charged by the State Bank of India, at the
time of the loan, for like purposes in
respect of advances made by it against
goods pledged in its favour."

25. The admitted facts of the present
case are that the loan advanced to the hirer/
farmer by the licensee was not in terms of
Section 22 of the Act, 1976 as nowhere it
has been stated in the writ petition that the
loan so advanced was lower than one half
of one percent per annum simple interest
over the current rate of interest charged by
the State Bank of India. Infact the loan was
advanced @ 18% per annum, which is
much higher than the rate of interest
charged by the State Bank of India.

26. Moreover, the loan advanced was
not against the goods pledged in favour of
the petitioner company but with a bond that
if the payment is not done, the farmer
undertakes to deposit his goods in the next
agricultural year also in the cold storage of
the petitioner. Hence, Section 22 of the
Act, 1976 does not come into play.

27. For the purposes of MSMED Act
and to provide financial services under
Section 22 of the Act, 1976 the petitioner
ought to have the registration under the
MSMED Act, 2006 for 'financial activity',
which admittedly could not be explained by
the petitioner. The petitioner having not
been registered under the MSMED Act for
financial activity and there being a private
agreement between the petitioner and the
contesting respondents, the petitioner could
not have sought a recovery for an alleged
2032 INDIAN LAW REPORTS ALLAHABAD SERIES
loan purportedly granted under Section 22
of the Act, 1976 by taking aid of the
provisions contained under MSMED Act.

28. As per Section 45 of the Act,
1976, the Government was authorised to
make Rules. In pursuance of this power
granted under the Act, 1976, the 'U.P.
Regulation of Cold Storage (Licensing)
Rules, 1976' (in short "the Rules, 1976")
was framed. Rule 3 of the Rules, 1976
provides for the terms and conditions of the
license and Rule 6 of the Rules, 1976
provides for specification of a cold storage.
The term 'condition and the specification
of the cold storage' together with the
definition clauses constitute the cold
storage services and, therefore, cold storage
services have been properly structured
under the U.P. Enactment read with
modified subordinate legislation of Uttar
Pradesh. Grant of loan is not incidental to a
cold storage services, which is explicit
from bare perusal of the definition clauses,
the licence, terms and conditions and
specification of cold storage. Therefore,
cold storage service and credit facilities by
pledging the produce stored in the cold
storage are two different services, which
are not directly linked with each other.
Therefore, the grant of loan will not be
covered under cold storage services.

29. With regard to second issue as to
whether the petitioner has been registered
for any financial services under the
MSMED Act, we have to first see the
objects and reasons as well as the relevant
provisions of MSMED Act, which are
enumerated as under:-

"Statement
of
Objects
and
Reasons

Small scale industry is at present
defined by notification under section 11b.
of
the
industries
(development
and
regulation) Act, 1951. Section 29B of the
Act provides for notifying reservation of
items for exclusive manufacturing in the
small Scale Industry Sector. Except for
these two provisions, there exists no legal.
Framework for this dynamic and vibrant
sector of the country's economy. Many
expert groups or committees appointed by
the government from time to time as well
as the small scale industry sector itself have
emphasized
the
need
for
An
Comprehensive
Central
Enactment
to
Provide an Appropriate Legal Framework
for the Sector to Facilitate Its Growth and
Development. Emergence of a large
services sector assisting the small scale
industry in the last two decades also
warrants a composite view of the sector,
encompassing both Industrial units and
related service entities. The world over, the
emphasis has now been shifted from
"industries" to "enterprises". Added to this,
a growing need is being felt to extend
policy support for the small enterprises so
that they are enabled to grow into medium
ones, adopt Better and higher levels of
technology
and
achieve-
higher
productivity to remain competitive in a fast
globalisation area. Thus, as in most
developed and many developing countries,
it is necessary in India too, the concerns of
the Entire Small and Medium Enterprises
Sector Are addressed and the sector is
provided with a single legal framework. As
of now, the medium industry or enterprise
is not even defined in any law.

2.
In
view
of
the
abovementioned circumstances, the bill aims at
facilitating the promotion and development
and enhancing the competitiveness of small
and medium Enterprises and learns to-

(a)
Provide
for
Statutory
Definitions of "Small Enterprise" and
"Medium Enterprise":
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2033

(b) Provide for the Establishment
of
a
National
Small
and
Medium
Enterprises Board, a high-level forum
consisting of stakeholders for participative
review of and making recommendations on
the policies and programmes for the
development
of
small
and
medium
enterprises;

(c) provide for classification of
small and medium enterprises on the basis
of investment in plant and machinery, or
equipment
and
establishment
of
an
Advisory Committee to recommend on the
related matter;

(d)
empower
the
Central
Government
to
notify
programmes,
guidelines or instructions for facilitating the
promotion and development and enhancing
the competitiveness of small and medium
enterprises;

(e)
empower
the
State
Governments to specify, by notification,
that provisions of the labour laws specified
in clause 9(2) will not apply to small and
medium enterprises employing upto fifty
employees with a view to facilitating the
graduation of small enterprises to medium
enterprises;

(f) make provisions for ensuring
timely and smooth flow of credit to small
and medium enterprises to minimise the
incidence of sickness among and enhancing
the competitiveness of such enterprises, in
accordance
with
the
guidelines
or
instructions of the Reserve Bank of India;

(g) empower the Central and
State Governments to notify preference
policies in respect of procurement of goods
and services, produced and provided by
small
enterprises,
by
the
Ministries,
departments and public sector enterprises;

(h)
empowering
the
Central
Government to create a Fund or Funds for
facilitating promotion and development and
enhancing the competitiveness of small
enterprises and medium enterprises;

(i)
empower
to
prescribe
harmonised,
simpler
and
streamlined
procedures for inspection of small and
medium enterprises under the labour laws
enumerated in clause 15, having regard to
the need to promote self-regulation or selfcertification by such enterprises;

(j) prescribe for maintenance of
records and filing of returns by small and
medium enterprises with a view to reduce
the multiplicity of often-overlapping types
of returns to be filed;

(k) make further improvements in
the Interest on Delayed Payments to Small
Scale
and
Ancillary
Industrial
Undertakings Act, 1993 and making that
enactment a part of the proposed legislation
and to repeal that enactment."

"8. Memorandum of micro, small
and medium enterprises-

(1) Any person who intends to
establish,--

(a) a micro or small enterprise,
may, at his discretion; or

(b) a medium enterprise engaged
in providing or rendering of services may,
at his discretion; or

(c) a medium enterprise engaged
in the manufacture or production of goods
pertaining to any industry specified in the
First
Schedule
to
the
Industries
(Development and Regulation) Act, 1951
(65 of 1951), shall file the memorandum of
micro, small or, as the case may be, of
medium enterprise with such authority as
may be specified by the State Government
under sub-section (4) or the Central
Government under sub-section (3):

Provided that any person who,
before the commencement of this Act,
established--
2034 INDIAN LAW REPORTS ALLAHABAD SERIES

(a) a small scale industry and
obtained a registration certificate, may, at
his discretion; and

(b) an industry engaged in the
manufacture
or
production
of
goods
pertaining to any industry specified in the
First
Schedule
to
the
Industries
(Development and Regulation) Act, 1951
(65 of 1951),having investment in plant and
machinery of more than one crore rupees
but not exceeding ten crore rupees and, in
pursuance of the notification of the
Government of India in the erstwhile
Ministry of Industry (Department of
Industrial
Development)
number
S.O.
477(E), dated the 25th July, 1991 filed an
Industrial Entrepreneur's Memorandum,

shall within one hundred and
eighty days from the commencement of
this
Act,
file
the
memorandum,
in
accordance with the provisions of this Act.

(2)
The
form
of
the
memorandum, the procedure of its filing
and other matters incidental thereto shall be
such as may be notified by the Central
Government
after
obtaining
the
recommendations
of
the
Advisory
Committee in this behalf.

(3) The authority with which the
memorandum shall be filed by a medium
enterprise shall be such as may be
specified, by notification, by the Central
Government.

(4) The State Government shall,
by notification, specify the authority with
which a micro or small enterprise may file
the memorandum.

(5) The authorities specified
under sub-sections (3) and (4) shall follow,
for the purposes of this section, the
procedure
notified
by
the
Central
Government under sub-section (2)."

18. Reference to Micro and Small
Enterprises Facilitation Council-

(1)
Notwithstanding
anything
contained in any other law for the time
being in force, any party to a dispute may,
with regard to any amount due under
section 17, make a reference to the Micro
and Small Enterprises Facilitation Council.

(2) On receipt of a reference
under sub-section (1), the Council shall
either itself conduct conciliation in the
matter or seek the assistance of any
institution or centre providing alternate
dispute resolution services by making a
reference to such an institution or centre,
for
conducting
conciliation
and
the
provisions of sections 65 to 81 of the
Arbitration and Conciliation Act, 1996 (26
of 1996) shall apply to such a dispute as if
the conciliation was initiated under Part III
of that Act.

(3)
Where
the
conciliation
initiated under sub-section (2) is not
successful and stands terminated without
any settlement between the parties, the
Council shall either itself take up the
dispute for arbitration or refer to it any
institution or centre providing alternate
dispute
resolution
services
for
such
arbitration and the provisions of the
Arbitration and Conciliation Act, 1996 (26
of 1996) shall then apply to the dispute as if
the arbitration was in pursuance of an
arbitration agreement referred to in subsection (1) of section 7 of that Act.

(4)
Notwithstanding
anything
contained in any other law for the time
being in force, the Micro and Small
Enterprises Facilitation Council or the
centre
providing
alternate
dispute
resolution services shall have jurisdiction to
act as an Arbitrator or Conciliator under
this section in a dispute between the
supplier located within its jurisdiction and a
buyer located anywhere in India.

(5) Every reference made under
this section shall be decided within a period
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2035
of ninety days from the date of making
such a reference.

20. Establishment of Micro and
Small Enterprises Facilitation Council-

The State Government shall, by
notification, establish one or more Micro
and
Small
Enterprises
Facilitation
Councils, at such places, exercising such
jurisdiction and for such areas, as may be
specified in the notification.

21. Composition of Micro and Small
Enterprises Facilitation Council.-

(1)
The
Micro
and
Small
Enterprise Facilitation Council shall consist
of not less than three but not more than five
members to be appointed from among the
following categories, namely:-

(i) Director of Industries, by
whatever name called, or any other officer
not below the rank of such Director, in the
Department of the State Government
having administrative control of the small
scale industries or, as the case may be,
micro, small and medium enterprises; and

(ii) one or more office-bearers or
representatives of associations of micro or
small industry or enterprises in the State;
and

(iii) one or more representatives
of banks and financial institutions lending
to micro or small enterprises; or

(iv) one or more persons having
special knowledge in the field of industry,
finance, law, trade or commerce.

(2) The person appointed under
clause (i) of sub-section (1) shall be the
Chairperson of the Micro and Small
Enterprises Facilitation Council.

(3) The composition of the Micro
and Small Enterprises Facilitation Council,
the manner of filling vacancies of its
members and the procedure to be followed
in the discharge of their functions by the
members shall be such as may be
prescribed by the State Government.

30. The preamble of the MSMED Act
shows that it is an Act to provide for
facilitating the promotion, development and
enhancing the activities of Micro, Small
and Medium Enterprises and for matters
connected therewith or incidental thereto. It
will be apt to quote relevant extract of the
prefatory note to the enactment:-

"Whereas a declaration as to
expediency of control of certain industries
by the Union was made under Section 2 of
the
Industries
(Development
and
Regulation) Act, 1951;

And whereas it is expedient to
provide for facilitating the promotion and
development
and
enhancing
the
competitiveness of micro, small and
medium
enterprises
and
for
matters
connected therewith or incidental thereto."

31. Section 8 of the MSMED Act
provides for memorandum of micro, small
and medium enterprises and states that
whoever wishes to set up a micro, small or
medium enterprise will have to file a
memorandum with such authority as may
be specified by the State Government or the
Central government as the case may be.
Sub-section (3) and sub-section (4) of
Section 8 delegates the power upon the
Central
Government
and
the
State
Government respectively specifying the
authorities through notification, which will
be accepting the memorandum. Under
Section 8 (2) different sector and industries
have been classified.

32. Once the services provided by the
petitioner is not registered under the
2036 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

33. Further the National Industrial
Classification Data 2008 has formed the
basis of providing the codification of
accepting the memorandum under the Act.
Part-II of detailed structure of NIC 2008
contains different divisions and Codes.
Division 52 has been given to warehousing
and support activities for transportation.
Code 5210 has been given to warehousing
and storage and Code 52101 was given to
warehousing of refrigerated (cold storage).
In none of the said entries, the financial
activity is available, which falls under a
different Code. Section 'K' deals with
financial services and insurance company,
which has been given Code '64'.

34. On the basis of Udyog Aadhaar
Memorandum Certificate, an enterprise
becomes amenable to frame work of
MSMED Act. If the registration of an
enterprise does not fall in a particular
category, the provisions of the MSMED
Act will not be applicable for that category.
As per the Udyog Aadhar Memorandum
Certificate of the petitioner, the petitioner
has been registered for the following
services:-

• Warehousing and support activities
for transportation.

• Warehousing and storage

• Warehousing of refrigerated (cold
storage).

35. The Udyog Aadhar Memorandum
Certificate of the petitioner (valid til
30.6.2022) has been provided by the State
through written submissions. The Udyog
Aadhar
Memorandum
Certificate
is
reproduced below:-

36. Even as per the claim petition
filed by the petitioner, the date of loan is
shown to be 9.3.2018, wherein an amount
of Rs.4,09,022/- was loaned to the
respondent nos.2 and 3. However, the
petitioner had made an application on
24.9.2018 for modification of NIC Code in
Udyog Aadhar Card issued by MSME.
Hence it is clear that on the date of the loan
given by the petitioner, it was not having
the registration under required Code as per
NIC Data 2008. Hon'ble the Supreme
Court in the matter of Silpi Industries Etc.
v.
Kerala
State
Road
Transport
Corporation & Anr. (Supra) has held in
para 26 as under:-

"26. Though the Appellant claims
the benefit of provisions under MSMED
Act, on the ground that the Appellant was
also supplying as on the date of making the
claim, as provided Under Section 8 of the
MSMED Act, but same is not based on any
acceptable material. The Appellant, in
3 All. M/s Neeraj Potato Preservation & Food Prod. Pvt. Ltd. Vs. U.P. Micro Small & Medium
 Entp. Kanpur & Ors.
2037
support of its case placed reliance on a
judgment of the Delhi High Court in the
case of GE T&D India Ltd. v. Reliable
Engineering Projects and Marketing, but
the said case is clearly distinguishable on
facts as much as in the said case, the
supplies continued even after registration
of entity Under Section 8 of the Act. In the
present case, undisputed position is that the
supplies
were
concluded
prior
to
registration of supplier. The said judgment
of Delhi High Court relied on by the
Appellant also would not render any
assistance in support of the case of the
Appellant.