Unregistered MSME will also be treated as ‘supplier’ u/s 2(n) of MSMED Act

M/s Ramky Infrastructure Private Limited Vs Micro And Small Enterprises Facilitation Council & ANR (Delhi High Court)

Conclusion- There has been ambiguity since long regarding the applicability of the MSMED Act, 2006 in cases where the entities were not registered under the MSMED Act at the time of execution of the contract. Hon’ble HC held that  an entity which falls within the definition of the micro/small enterprise will be treated as a ‘supplier’ under Section 2(n) of the MSMED Act even if it has not filed a Memorandum as required under Section 8(1) of the MSMED Act.

There is no dispute in the present case that CGIL falls within the definition of the micro/small enterprise and would be classified as such even at the time of execution of the contract awarded by RIL. The only controversy raised is that at the material time (at the time of execution of the contract), GCIL had not filed a Memorandum as required under Section 8(1) of the Act. This brings us to the central question – whether it was mandatory for a small/medium enterprise to file the Memorandum under Section 8(1) of the Act in order to fall within the definition of a supplier under Section 2(n) of the Act.

 An examination of Section 2(n) of the Act indicates that it is in two parts. The first limb defines a supplier to mean a micro or small enterprise which has filed a memorandum with the authority referred to in sub-section (1) of Section 8 of the Act and the second limb refers to (i) National Small Industries Corporation; (ii) the Small Industries Development Corporation of a State or a Union territory; and (iii) a company, co-operative society, trust or a body engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises. The two limbs are joined by the word ―and. Usually, this would mean that the conditions as specified in both the limbs must be satisfied. However, it is obvious that the same is not the apposite way to read Section 2(n) of the Act. This is so because, admittedly, neither the National Small Industries Corporation – which is a Government of India Enterprise – nor the Small Industries Development Corporation of a State or a Union territory is required to file a memorandum as referred to under Section 8(1) of the Act. Thus, the two limbs of Section 2(n) of the Act are required to be read to exhaust all categories. The second limb, which specifies three categories to fall within the definition of the term ‘supplier‘, is in addition to the category of small and medium enterprises that have filed the Memorandum under Section 8(1) of the Act. Thus, the term ‘supplier‘ as defined under Section 2(n) of the Act must be read to comprise of four categories: (i) micro or small enterprises that have filed the Memorandum under Section 8(1) of the Act; (ii) National Small Industries Corporation; (iii) Small Industries Development Corporation of a State or a Union territory; and (iv) a company co-operative society, trust or a body engaged in selling goods produced by micro or small enterprises or rendering services provided by such enterprises.

The aforesaid view is also fortified by the decision of the Supreme Court in the case of Thalappalam Service Cooperative Bank Limited and Others (supra). In that case, the Supreme Court was concerned with interpreting the definition of the term ―public authority‖ as defined under Section 2(h) of the Right to Information Act, 2005. The said definition is also in two parts. The first limb consists of four categories and the second limb comprises of two other categories. Although, the definition of the said term uses both the expressions “means” and “includes” – as in the case of Section 2(n) of the Act – the second limb consists of two categories that do not fall within the four categories indicated in the first limb.

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