Warehousing is an aspect of logistic management with many business and legal implications. There are numerous laws governing warehousing as there are different legal requirements for warehousing of different commodities. The warehousing of imported goods also attract legal compliances under Customs Act, 1962.
Warehousing as a business in India is governed by the Warehousing (Development and Regulation) Act 2007 and Rules & Regulations framed thereunder. The Warehousing (Development and Regulation) Act 2007 is not applicable to all warehouses. The registration of a warehouse and related compliances is only applicable to warehouses issuing negotiable receipts as per the Warehousing (Development and Regulation) Act and Warehousing (Development and Regulation) Registration of Warehouses Rules, 2017.
The Section 4 of the Act provides that any person desirous of commencing or carrying on the business of maintaining a warehouse issuing negotiable warehouse receipts may make an application to the Warehousing Development and Regulatory Authority for registration
Thus, it can be inferred that registration shall be obtained by any person :
- Maintaining a warehouse business
- Allowing third party to store goods in the warehouse
- Receiving payment for storage of goods
- Issuing negotiable receipts for goods stored in the warehouse
The criteria that qualify as a warehouse business for registration and other compliances under the act and rules thereunder is issue of negotiable receipts for goods stored in the warehouse.
Negotiable warehouse receipts were introduced in 2011. Negotiable warehouse receipts are instruments that allows transfer of ownership of a commodity stored in a warehouse without having to deliver the physical commodity.
These receipts are issued in negotiable form, making them eligible as collateral for loans. Negotiable receipts therefore serve as an evidence for title of goods stored in a warehouse. Negotiable receipts treats warehoused goods as liquid and transferable assets. This helps all players in the logistic chain to conveniently raise finance and transfer goods.
Warehouse registered under this Act shall also be eligible to issue non-negotiable warehouse receipts.
Compliance obligations of warehouse owners and lessees
Majority of the warehouses are maintained at leased property. This demands further clarity regarding the compliance obligations of warehouse owners and lessees. The Act and rules demand registration by any person Maintaining a warehouse and not by a person who own warehouse property. Therefore, irrespective of ownership of property, it shall be concluded that the person running the warehouse business shall obtain registration.
Further, the Act and Rules use the word warehouseman to describe the person holding the registration and does not use ‘owner of the warehouse’.
The Rules mandates that the applicant shall file a document to demonstrate effective control of warehouse along with application for registration. The First schedule of Warehousing (Development and Regulation) Registration of Warehouses Rules, 2017 provides that such evidence for effective control of warehouse can be lease deed.
Therefore, it can be concluded that any person who carry on the business of warehousing in property owned by him or possessed by virtue of a lease deed qualify as a person maintaining a warehouses. Any such person who allows third party to store goods in the warehouse for payment and Issue negotiable receipts for such goods shall obtain a registration from Warehousing Development and Regulatory Authority
A person obtaining such registration shall qualify as a warehouseman and shall be required to comply with other legal obligations of a warehouseman under the Warehousing (Development and Regulation) Act and rules and regulations made thereunder.
Alby Stephan. K, Legal executive at Legality Simplified