LEGAL FRAMEWORK FOR WAREHOUSING IN INDIA

WAREHOUSING

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Warehousing in India operates within a legal framework designed to govern the storage, distribution and management of goods. India's Warehousing (Development and Regulation) Act of 2007 ("WDR Act") stands as a pivotal legislation governing the storage, regulation, and development of?warehouses?across the country. Some of the key provisions are:

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(a)?????????? Accreditation of Warehouses: It lays down the criteria and procedures for accrediting warehouses, ensuring adherence to specified standards of storage, infrastructure, and operations.

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(b)?????????? Negotiable Warehouse Receipts (NWRs): WDR Act facilitates the issuance of negotiable warehouse receipts (NWRs) by accredited warehouses which serve as negotiable instruments, enabling the transfer of ownership or pledge of stored goods, thereby facilitating trade and easing access to credit.

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(c)??????????? Regulatory Oversight: It empowers regulatory authorities to oversee compliance with standards, prevent malpractices, and ensure fair practices within the warehousing sector.

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LEGAL FORMALITIES TO SET UP A WAREHOUSE

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The Warehousing (Development and Regulation) Act, 2007 (“the Act”) and the Warehousing (Development and Regulation) Registration of Warehouses Rules, 2017 (“the Rules”) are the two main legislations in India with respect to warehousing in India. Section 2(s)[i] of the Act defines a warehouse.

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Section 4[ii] of the Act deals with Registration of Warehouses and sub-section 1 states that an application to the authority must be made if any person is desirous of commencing or carrying on the business. Similarly, Section 3[iii] of the Rules deals with Registration with Authority and mentions that the authority shall grant a certificate of registration if a person has submitted the application and has fulfilled the requirements

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Rule 4 of the Rules emphasizes that the application has to be made in the prescribed form which may be submitted to the authority in an electronic manner?or as may be specified by the authority. It also mentions that the form should contain all the documents along with the fees. Further, rule 5 of the Rules mentions that the applicant must pay a certain amount to the authority which is non-refundable in nature.

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Chapter 5 of the said Rules talks about eligibility requirements of an applicant for registration of a warehouse which consists of sections 15 to 21 and are as follows:

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1.????????????? Section 15[iv] – Identity of the applicant

2.????????????? Section 16[v] – Fit and proper person

3.????????????? Section 17[vi] – Insurance coverage

4.????????????? Section 18[vii] – Minimum net worth

5.????????????? Section 19[viii] – Maintenance of security deposit

6.????????????? Section 20[ix] – Infrastructure requirements of the warehouse

7.????????????? Section 21[x] – Comply with the standard operating procedure

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Some of the documents to be submitted with the application for registering a warehouse are individual or authorized representative’s photograph, identity proof of the applicant, insurance policy copies, net worth documents, warehouse layout plan, etc. It is to be noted that the certificate is not transferable, and the respected person shall display and keep it pasted immediately upon receipt until it has been suspended or revoked.?Moreover, failure to duly comply with the laws relating to the registration or not fulfilling any requirements would attract penalty in the form of fines or imprisonment or both.

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Governing the regulation and development of warehouses in Maharashtra is the Maharashtra Warehousing Act, 1960 ("MWA"), which is a state-specific legislation. Apart from licensing of warehouse, crucial features are:

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(a)?????????? Regulation of Warehouse Operations: MWA aims to regulate the conduct of warehouse operations to ensure the proper storage, safety, and handling of goods stored in these facilities.

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(b)?????????? Protection of Depositors' Interests: MWA includes provisions to safeguard the interests of depositors or individuals storing goods in warehouse outlining procedures for handling disputes, liabilities, and responsibilities in case of loss or damage to stored goods.

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(c)??????????? Penalties for Violations: MWA prescribes penalties for non-compliance with its provisions. Warehouse keepers failing to adhere to licensing requirements or violating regulations may face penalties or other disciplinary actions.

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CONCLUSION

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It is imperative that the Government comes up with?incentive?schemes and the laws which are in place today need to be future ready and must have ability to tackle the needs of the future. Solving these challenges requires a collaborative effort involving the government, industry stakeholders, and regulatory bodies. Implementing measures that focus on infrastructure development, technology integration, regulatory reforms and skill enhancement can significantly enhance the efficiency and competitiveness of the?warehouse sector?in India, driving its growth and contribution to the overall economy.

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[i] “warehouse” means any premises (including any protected place) conforming to all the requirements including manpower specified by the Authority by regulations wherein the warehouseman takes custody of the goods deposited by the depositor and includes a place of storage of goods under controlled conditions of temperature and humidity.

[ii] 4. Registration of warehouses.—

(1)?????????? Any person desirous of commencing or carrying on the business of maintaining a warehouse issuing negotiable warehouse receipts may make an application to the Authority for registration in respect of one or more warehouses owned or occupied by him.

(2)?????????? Every application for registration under sub-section (1) shall be in such form and manner and shall be accompanied by such fees as may be prescribed.

(3)?????????? The Authority may, after such enquiry and subject to such terms and conditions as it thinks fit, grant a certificate of registration of the warehouse in the prescribed form and bearing a registration number to the applicant authorising him to carry on the business of maintaining a warehouse or warehouses and to issue negotiable warehouse receipts.

(4)?????????? The Authority may not grant a certificate of registration under this section unless it is satisfied that the warehouse in respect of which the application has been made has adequate facilities and safeguards required to warehouse the goods of the nature specified in the application and the applicant satisfies the financial, managerial and other eligibility criteria and competence as may be prescribed: Provided that no certificate of registration shall be refused to any applicant under this section unless the applicant has been given an opportunity of being heard.

[iii] Requirement of registration for warehouses issuing negotiable warehouse receipts.—

(1)?????????? No person shall commence or carry on the warehousing business unless he has obtained a registration certificate in respect of the concerned warehouse or warehouses granted by the Authority under this Act:

Provided that a person carrying on the warehousing business immediately before the commencement of this Act shall be allowed to carry on such business, in case he has made an application for registration within thirty days from the date of such commencement:

Provided further that no such registration shall be required for warehouses which do not propose to issue negotiable warehouse receipt.

Explanation.—For the removal of doubts, it is hereby clarified that a warehouse registered under this Act shall also be eligible to issue non-negotiable warehouse receipts.

(2)?????????? Notwithstanding anything contained in sub-section (1), the Authority may, subject to such regulations and guidelines issued by it, authorise any person registered under section 5 as an accreditation agency to issue certificate of accreditation to any person for carrying on the business of warehousing issuing negotiable warehouse receipts.

[iv] Warranties on negotiation of warehouse receipt.—

A person who, for valuable consideration, negotiates a negotiable warehouse receipt by endorsement and delivery, including one who assigns for 10 valuable consideration, a claim secured by a receipt, unless a contrary intention appears, warrants the following:—

(a)?????????? that the receipt is genuine;

(b)?????????? that the person has a legal right to negotiate or transfer it;

(c)??????????? that the person has no knowledge of any fact that would impair the validity of the receipt;

(d)?????????? that the person has a right to transfer the title to the goods; and

(e)?????????? that the goods are merchantable or fit for a particular purpose when those warranties would have been implied, if the contract of the parties had been to transfer without a receipt the goods represented by it.

[v] . Non-liability of the endorser.—

The endorsement of a receipt does not make the endorser liable for any failure on the part of the warehouseman or previous endorsers of the receipt to fulfil their respective obligations.

[vi] Negotiation of warehouse receipt not impaired by fraud, mistake or duress.—

The validity of the negotiation of a receipt is not impaired by the fact that—

(a)?????????? the negotiation was a breach of duty on the part of the person making the negotiation; or

(b)?????????? the owner of the receipt was induced by fraud, mistake or duress to entrust the possession or custody of the receipt to that person, if the person to whom the receipt was negotiated or a person to whom the receipt was subsequently negotiated, paid value for it without knowing of the breach of duty, fraud, mistake or duress.

[vii] Subsequent negotiation of warehouse receipts.—

If a person having sold, mortgaged or pledged goods that are in the custody of a warehouseman and for which a negotiable receipt has been issued, continues in possession of the negotiable receipt, the subsequent negotiation of it by that person under any sale or other disposition of the goods to any person receiving the receipt in good faith, for valuable consideration and without notice of the previous sale, mortgage or pledge, has the same effect as if a previous purchaser, mortgagee or pledgee of the goods, as the case may be, had expressly authorised the subsequent negotiation.

[viii] Delivery of goods to be made after due charges are paid.—

When a negotiable warehouse receipt has been issued in respect of any goods, the warehouseman shall not deliver the goods to the depositor or endorsee, until the due charges are paid to the custodian from the date of initial deposit till delivery is made and the warehouse receipt is surrendered for cancellation.

[ix] Transfer of non-negotiable receipts.—

(1)?????????? A non-negotiable warehouse receipt may be transferred by the holder by delivery to a purchaser or donee of the goods in writing executed by the holder.

(2)?????????? A person to whom the goods covered by a non-negotiable warehouse receipt is transferred acquires—

(a)?????????? the title of the transferor to the goods; and

(b)?????????? the right to deposit with the warehouseman the receipt or duplicate thereof or to give notice in writing to the warehouseman of the transfer.

(3)?????????? The transferee shall acquire the benefit of the obligation of the warehouseman to hold goods in storage for him according to the terms of the receipt upon deposit of the transfer of the goods and on giving notice in writing of the transfer and upon the warehouseman having a reasonable opportunity of verifying the transfer.

[x] Conclusiveness of negotiable warehouse receipt. —

In the hands of a holder who has purchased a negotiable warehouse receipt for valuable consideration, it shall be conclusive evidence of the goods described in it as against the warehouseman or any person claiming through him.