Benefit of Immunity under CFSS-2020 not Available to MSME-I

[Ref: “Companies Fresh Start Scheme, 2020 (CFSS-2020)” vide Circular No. 12/2020 dated 30th March, 2020 and General Circular No. 30/2020 dated 28th September, 2020] 

You are well aware that the companies are required to make certain disclosures pertaining to the vendors registered under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. However, we would like to marmorise flashback of changes made in the MSMED Act and requirement of Form MSME-I.

In exercise of powers conferred by Section 9 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the Ministry of Micro, Small and Medium Enterprises had vide Notification Dated 2^nd November, 2018 directed all companies who

• get supplies of goods and services from micro and small enterprises and,
• whose payments to micro and small enterprise suppliers exceed 45 days from the date of acceptance or deemed acceptance

to file a half yearly return with the Ministry of Corporate Affairs (‘MCA’) stating the amounts due and the reasons for delay.

It is pertinent to note that- there is no word as ‘Specified Companies’ in the said notification. 

Subsequently, in exercise of power under section 405 of the Companies Act, 2013 (Power of Central Government to direct companies to furnish information for statistics), the Central Government, considers it necessary to require “Specified Companies” to furnish above information under said section of the Act. Therefore, MCA vide Notification dated 22 January 2019 issued an Order i.e. Specified Companies (Furnishing of Information about Payment to Micro and Small Supplier) Order, 2019 and directed all Specified Companies to file form MSME-I.

The aforesaid requirement is applicable only to “Specified Companies” as defined under MCA notification: –

a) Companies which get supplies of goods and services from Micro and Small Enterprises and

b) Whose payments exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services.

The MCA notification requires the following:-

a) One time return within 30 days of notification to be filed by Specified Companies.

b) Half yearly return by the end of the month succeeding the end of half year. The half year for this purpose shall be April to September and October to March and the due dates shall accordingly be 31st October and 30th April respectively.

It is submitted that this notification is applicable only for those suppliers who are registered as Micro, Small and Medium Enterprises (‘MSME’) and include micro or small enterprise, which has filed a memorandum with the specified authority and has obtained the Unique Identification Number (UIN) for MSMEs.

Due Date of Filing of MSME-I in the year 2020-21.

Half yearly return with the registrar in respect of outstanding payments to Micro or Small Enterprise shall be filed within a month for each half year ended.

Due Date	For the period
30/04/2020	For half year October 2019 to March 2020.
31/10/2020	For half year April 2020 to September 2020.

Penalty for not complying the statutory provisions: –

 Penalty for furnishing any information or statistics which is incorrect or incomplete in any material respect and not to comply the order issued by the Government under Section 405(1) are as under- 

Pursuant to the provisions of Section 405(3),

• The Company shall be punishable with fine which may extend to twenty-five thousand rupees and
• Every officer of the company who is in default, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to three lakh rupees, or with both.

Particulars	Penalty
On defaulting company	Extended upto Rs. 25,000/-
Every officer who is in default	Minimum Fine: Rs. 25,000/- which may be extended to Rs. 3,00,000/- Or Imprisonment which may be extended to 6 months or both.

Test of applicability of General Circular No. 11/ 2020 dated 24th March, 2020 for delayed filing of MSME-I.

Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, there is delay in filing of various forms which are provided under the Act. In view of this, Ministry of Corporate Affairs (MCA) has taken special measures under Companies Act, 2013 and Limited Liability Partnership Act, 2008 in view of the COVID -19 outbreak vide General Circular No. 11/ 2020 dated 24th March, 2020.

In order to support and enable Companies and Limited Liability Partnerships (LLPs) in India to focus on taking necessary measures to address the COVID-19 threat, including the economic disruptions caused by it, some measures have been implemented by the MCA to reduce their compliance burden and other risks. In Para I of the said Circular- 

“No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’. The Circulars specifying detailed requirements in this regard are being issued separately.” 

It is submitted that there is no fee to file MSME Form, therefore, there is no benefit of special measure provided by MCA vide General Circular No. 11/ 2020 dated 24th March, 2020, as a moratorium period from 1^st April, 2020 to 30^th September, 2020.

Test of applicability of “Companies Fresh Start Scheme, 2020 (CFSS-2020)” vide Circular No. 12/2020 dated 30^th March, 2020 for delayed filing of MSME-I.

The CFSS-2020 is applicable between the 1st of April, 2020 and the 30th of September, 2020. Therefore, company will be able to file remaining forms, compliances till 30^th September, 2020. The said Scheme CFSS-2020 is a golden opportunity for the defaulting companies to clear their slate and to make good any filling related defaults, irrespective of the duration of defaults, without any additional fees/ penalty / prosecution and make a fresh start as a fully compliant entity. 

However, under said Scheme CFSS-2020, there is one additional compliance which a company have to abide by i.e. company has to file a FORM CFSS-2020 after closure of scheme and after the document(s) are taken on file, or on record or approved by the designated authority as the case may be but not after the expiry of six months from the date of closure of the scheme. There shall not be any fee payable on this Form.

The ultimate benefits given by said Scheme CFSS-2020,

• No addition fees/penalty/prosecution for filing of belated documents;
• Seeking immunity by filing FORM CFSS-2020.

Now, in view of large-scale disruption caused by COVID-19 Pandemic, MCA vide General Circular No. 30/ 2020 dated 28^th September, 2020 has extended the CFSS-2020 till 31^st December, 2020.

Now, Question is arises herein, whether the immunity benefit shall be given for filing belated form MSME-I?, i.e. Whether MSME-I can be filed under said Scheme CFSS-2020?

As per para 6(iv) of CFSS-2020, every defaulting company shall be required to pay normal fees as prescribed under the Companies (Registration Offices and Fee) Rules, 2014 on the date of filing of each belated document and no additional fee shall be payable.

Immunity from the launch of prosecution or proceedings for imposing penalty shall be provided only to the extent such prosecution or proceedings for imposing penalty under the Act pertain in any delay associated with filings of belated documents.

Any other consequential proceedings, including any proceedings involving interests of any shareholder or any other person qua the company or its directors or key managerial personnel would not be covered by such immunity. 

For example, under Section 42(8), every company is required to file a return of allotment within the period provided therein. However, the proviso to Section 42(4) also requires that the utilisation of money raised through private placement shall not be made unless the return of allotment has been filed in the registry. Now, the immunity under the Scheme shall only be available in respect of the proceedings for imposing penalty on account of delay in filing the return of allotment, but not on account of utilisation of the money raised through private placement prior to the filing of the return with the registry. 

For more understanding: The immunity shall be issued only in respect to filing of the belated documents under the Scheme. Filing of Annual Return and Balance Sheet under this scheme will give immunity with respect to penalty for filing these belated documents. However, if Annual General Meeting is not convened with in statutorily prescribed time, then it is violation of law for which prosecution or adjudication may be initiated. Similarly, non composition of CSR Committee as required under section 135 cannot be absolved under this Scheme. 

Note: The basic thumb rule of the scheme is that the “Immunity will be provided to defaulting companies only in case of belated filings by waiving off additional fees however where proceedings involve interest of any shareholder or its director, or key managerial person or any other person belonging to the company than immunity shall not be provided”.

The MCA has uploaded a list of 76 forms (including for companies and LLPs) for which the benefit of the Scheme CFSS-2020 can be availed. Form MSME-I is not included in the list to avail the benefits under CFSS-2020.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.