An Overdue Customer
When you do business with a client, you expect to be paid for your product or services within stipulated time. But what happens when those payments are late – or don’t come at all? Sometimes, no matter what you do to prevent the issue, even then you’re still left empty-handed and you feels like being cheated. There are a few questions those come up often in our mind and we went looking for a definitive answer for those questions.
- What can I do if a customer doesn’t pay me?
- Should I sue a customer for non-payment?
- How to get overdue payments from clients?
- How do I report a company for not paying?
- What to do when a client won’t pay an invoice?
Vicious Circle of Liquidity Crunch
Non Payment/delayed payment is a major issue for many business houses these days and even critical for business enterprises which are dependent upon working capital facilities raised from Bank. In case of Cash Credit facility availed from banks/financial institutions, even Banks don’t permit Drawing Power against Book Debts which are outstanding above sanctioned debtor realization period (mostly 90 Days) and similar overdue books debts. So neither you are getting payment from Customer nor Banks are funding these overdue debtors. Liquidity crunch and its vicious circle impact the business much deeply in today’s cut throat competitive business environment.
Does suing a customer effective measure for Small Vendors?
First and foremost solution comes in our mind is to send legal notice to customer and file a suit against such non-payment. But does this really work? In case of Micro, Small & Mid-sized Business Enterprises, most of the times, there are no written agreements and/or poor documentation of business contracts. So they end up waiting for customer payments with a little hope of realization of over-dues. Further time gap between filing a suit and getting justice gets longer and longer…!!! Alternative to the filing of Civil Suit has been discussed in this article.
Protection available under The MSMED Act, 2006
The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs). As per section 16, the buyer is liable to pay compound interest with the monthly rests to the supplier on the amount at the three times of the bank rate notified by RBI in case he does not make payment to the supplier for his supplies of goods or services within 45 days of the acceptance of the goods/service rendered.
MSME Samadhaan Portal – “ Delayed Payment Monitoring System “
Ministry of MSME has taken an initiative for filing online application through website https://samadhaan.msme.gov.in by the supplier Micro & Small Enterprises (MSE) unit against the buyer of goods/services before the concerned Micro and Small Enterprise Facilitation Council (MSEFC) of his/her State/UT. These will be viewed by MSEFC Council for their actions. These will be also visible to Concerned Central Ministries, Departments, CPSEs, State Government, etc for pro-active actions. MSEFC of the State after examining the case filed by MSE unit will issue directions to the buyer unit for payment of due amount along with interest as per the provisions under the MSMED Act, 2006.
Salient Features of MSME Samadhaan Portal
- Any Micro or small enterprise having valid Udyog Aadhar(UAM) can apply. One can easily apply Udyog Aadhar Memorandum (UAM) on the website https://udyogaadhaar.gov.in/UA/UAM_Registration.aspx
- Process to Initiate application on https://samadhaan.msme.gov.in
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- Enter Your Udyog Aadhaar Number
- Enter Your Mobile Number as in Udyog Aadhaar
- Enter verification code as displayed
- Click on Validate Udyog Aadhaar button to receive your OTP sent to the registered email ID in Udyog Aadhaar
- Documents required for filing application:
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- Scanned PDF documents of work orders (Purchase Order) of Respondent
- Invoices generated by you against those work orders.
- Maximum three work orders and three invoices can be uploaded at a time.
- In case purchase order is oral an affidavit to that effect is to be submitted
- Legal notice by the supplier to buyer is not necessary before filling the case in the Council.
- Claim can be filed for interest alone where the claimant has received principal of dues already
- Receivables from buyer such as advance deposit, EMD, Statutory deposits as other than supply of goods and services can also be claimed in the claim before the Council
- Every reference made to MSEFC shall be decided within a period of ninety days from the date of making such a reference as per provisions laid in the Act.
- If the Appellant (not being the supplier) wants to file an appeal, no application for setting aside any decree or award by the MSEFC shall be entertained by any court unless the appellant (not being supplier) has deposited with it, the 75% of the award amount.
Thus, MSME Samadhaan Portal created by Office of DC(MSME), Ministry of Micro, Small and Medium Enterprises (MSME) where Micro and Small Enterprises (MSEs) can file their applications online regarding delayed payments. Frequently asked questions (FAQs) regarding MSME Samadhaan Portal are also available on the official Portal of government (https://taxguru.in/corporate-law/msme-samadhaan-delayed-payment-monitoring-system-faqs.html)
Companies to Furnish Return to ROC for delayed Payment to Supplier
To ensure effective implementation of MSMED Act, 2006, the ministry of micro, small and medium enterprise issued the notification S.O. 5622(E) dated 2nd November 2018, wherein all the companies dealing with such enterprises were required to fill return to MCA stating the following details:
1. The Amount payments due; and
2. The reason of the delay.
With reference to the notification issued by MEMEDA-2006, Ministry of Corporate Affairs on 22nd day of January 2019 issued notification no. S.O. 368(E) under which Ministry of Corporate Affairs using the power define under section 405 of Companies Act, 2013 Central Government make order called as “Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019”. Under this order every specified company is required to file MSME Form I.
MSME Form I
MSME Form I is the half yearly return to be filled by every specified company with the Registrar of companies. This return contains detail of all the outstanding payments to the micro and small vendors for the goods and services supplied by them. All the payments which are due from more than 45 days need to be reported under this return. All the companies will have to file MSME – I if following conditions are satisfied.
1. Who get supplies of goods or services from Micro and Small Enterprises and
2. Whose payments to Micro and Small Enterprises Suppliers exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services
Suppliers can check their name included in MSME Form I through option available under ‘View Public Documents’ on link http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do by paying a nominal Fees. In case of Non-reporting/false reporting by companies, the aggrieved Supplier can bring the same to the attention of ROC by providing satisfactory documents for suitable action against the company for incorrect furnishing of Returns. Address & Email IDs of Jurisdictional ROC are available on the website http://www.mca.gov.in/MinistryV2/registrarofcompanies.html .
Thus, it can be concluded that steps are being taken by government to provide platform viz. ‘MSME Samadhaan Portal’ to Suppliers where they can approach in case of delayed/non-payment of dues by customers in a time-bound manner. By introducing MSME Form I, government has taken a bold step towards transparency and effective implementation of MSME Development Act.
It’s recommended to all Professionals to popularize the benefits available for MSME Concerns & register their Clients to avail the same.
Please refer all the relevant section, rules, notifications, amendments as applicable. The Author is not responsible for any losses incurred. Content is merely for sharing knowledge. Author can be reached at [email protected] for any queries/recommendations
Author Bio
I am seeking your valuable legal advice regarding an issue that has been bothering me for quite some time now. I had availed services from **** Clinic and made an advance payment for the same. However, I did not receive an invoice for the payment made.
Further to this, I was extremely dissatisfied with the services provided, and I decided not to continue with the treatment. I requested a refund for the advance payment made, but **** Clinic has refused to do so. I have tried to reach out to them multiple times, but they have not been responding to my calls or emails. I feel that my money is stuck, and I am not able to get a resolution on the same. I am reaching se out to you for legal advice on how best to proceed with this matter. I genuinely don’t want to go back to the clinic as their services were not up to the mark.
I had supplied hydraulic oil in 2022 to JBM Engineering. after more than a year a cheque was issued but that also got bounced due to insufficient balance
material and invoice was received by one of his employee but soon after about a month that employee also left a job
please guide what can be done
I am registered as trader with MSME udhyog adhaar
We supplied hospital equipment to one of the customer in Jharkhand. Almost 4 years passed he has not paid the money. what best we can do to recover the same.
company named nico we had given credit for matria around 3 lakhs, customer not paying from 3 years, what shall we do to recover
i am a salaried person i had supplied materials to the company and they issued a cheque and it is not cleared as they committed to do transfer to the company account but now they have a notice to us that they are bank crupt notice through a lawyer and asked us to come to court but they have already taken the amount and supplied they have cheated many vendors and issued different bank cheques to all what shall we do now required help please await for response urgently
Sir, We are into Lodging business. A guest with family approached during Dec.25/26 2021 for room at middle of night.
He made payment by scanning QR code given by Canara Bank. Since it was a busy period with tourists, the message displayed was “Pending”.
When we checked at the bank for non payment, they asked to contact the customer. Both the local bank branches expressed their inability to process our request when presented with transaction details.
The guest is not picking up calls and not making the payment due to us since 3 months.
Please suggest future course of action.
in Gujarat one of the customer who has taken service from us and since last 210 days he not paying Amount of Rs 25000/- we have talk with hid MD but he is very rude and G M Has no power. what to do?pl advice
our is small lab and micro unit with registration in every segments of industries.
can MSME intervenes for non payment of the invoices which are raised before MSME registration date
Sir I paid amount to party for supply of goods through account. But he never supply goods and not return money also.How I recover payment from him
we have a customer who not payments of our supply material, since 380 days and we also send 19 remainder mail , whatsapp and call also but they did’t reply any single call or massage
we are an MSME based in New Delhi have outstanding due from our party since 3years of around 175000/-. They dont pick up the phone neither reply to the messages. Please suggest
We have completed contract job in cpcl under subcontract from bridge & roof co india ltd(B&R), b&R not release our outstanding, defect liability period has been over on 2018, at the time of tender clause for no interest claim & payment will be released within 7 day after releasing of payment by cpcl which we have signed, now we can claim interest?
I have supplied material to the party,also created EWAY Bills.Now he is telling that he has not received any such goods,which is total lie.What should I do?
Dear Sir,
We are a LPG Gas Agency, we have given cylinders to many non domestic customers and we are still waiting for payments. We come under the essential goods and services. Now the payments from these establishments have been pending for a long period of time. Kindly guide us through.
sir one of my customer has not paid for invoices made in 2006 from then there is no bussiness from them they are running the unit and simply not attending calls is it possible to recover the payment
We have supplied the material to one of our customer and now its been year we have not yet received the payment ! customer is giving us cheque which is not getting cleared. We are not under MSME , pl guide
Can file suit for cheque bouncing
Dear sir, I have a electrical business and a dealer of a particular brand. I had supplied the material to a shop keeper and have given him the gst bill of the material too, it’s been a year and he isn’t receiving my call. Can you please suggest me what can I do to get the payment
more than 3 years have passed since the payment is outstanding . Can we file a case
We have done service to Airline company that is providing cars for captain and crew pick up and drop in Blr
The invoice of Jan and Feb 2020 is not paid
contract was ended on 29the feb 2020.
So far no response to our mail
Kindly advice us
Dear sir
The material we supplied to 4star hotel during October November and December 2019, payment has not yet received on 45 days is agreement schedule requested many times verbal,mobile, mail, now they show up corona so business is not happening.
Request the way proceed at minimum time would make our family survival too.
With last hope iam writing this.
Thank you
9597067890
We are a registered LLP firm and provided construction material to a private limited company against a PO shared by them from a company email ID. They also issued a post dated cheque which we misplaced and asked them to stop payment by submitting a letter on our letter head with the cheque details. It has been 3 months now against the agreed time period of 30 days. We are not a MSME. What can we do?
Most of orders are done without PO, how to enter details in msme samadhan if supplier has supplied goods on WhatsApp or spoken confirmation (NO po available)?
You have to make affidavit on 100 rs stamp paper ….write all details regarding oral purchase order balance amt party name delivery date etc & submit at the place of purchase order
Can anybody provide me format of affidavit to be filed with MSME Samadhaan portal (there was oral contract of supply)
Respected Sir,
I would like to know that what if payment stuck of enterprise is registered as medium enterprise. Whether any remedy is available to him except of filing civil suit.
1) if we filed the complaint at DIC, in how many days they should respond? If they are not responding by quoting various reasons, is there any mechanism to track the file?
2) is there any possibility to check whether the buyer has shown our dues in ROC MSME return? If they have not shown what is the procedure to complain against buyer.
3) being part of our system integration work, we will be trader, manufacturer and service provider also based on the requirements of the projects. We will purchase some equipment and value addition with some components to accomplish the output. Are we eligible to file under MSME as we have registered under manufacturer.
Thanks in advance for your reply.
What action will be taken by govt. if any party found guilty and what is the assurance that the concerned party will make full payment after the notification or action taken against him and also in how many days the concerned party will pay the dues ? Don’t you think that, a non – bailable warrant should be issued against the concerned party.
What in case of traders/suppliers.?
When a company doesn’t pay the dues or unwilling to pay the balance. What should a supplier can do ? Pl advice
A Person Having aadhar Udyog, and Proper documents such as PO/WO/LOI under which Invoice raised can file a suit on MSME – Samadhan
Does S.O. 368(E) cover Port Trusts, Railways, Defence, Govt Departments, Public Sector ?
Those being major Buyers of MSE supplies, Ministry of MSME, CAG and Deptt. concerned with Public Sector Buyers needs to issue suitable S.O. similar to MCA notification with measures for its implementation rather urgently. Jai Shree Ram !
Sagar Ji
Thanks for sharing the wonderful info. Please keep sharing
Wonderful
Very nice article helping genuine MSME’s
But these MSME’s doesn’t have this protection, if their payments r held for non compliance of GST which affects their customer from availing ITC
The measures given above are not useful in long term.
Informative Article.
For ready ref, should have mentioned limits of Investment in P&M to be eligible for Regn as MSME.
Kindly clarify:
1) Is this applicable to professional and management consultants who have provided services but not getting paid?
2) Is this a better remedy than going thru IBC as an Operational Creditors?
3) Pending receipt due the professional have to keep paying GST on pending invoices?
I appreciate your effort in guiding several small business entity who is running after the courts for realisation of their dues from corporate clients. This will definitely help small business community if properly guided by the consultants.
Hi, Whether traders can register to recover dues from Debtors. Or this benefit only to manufacturers MSME