There is no doubt that Delayed Payment has been and is the biggest problem majority of the business entities are facing and there are very less companies who pay to its vendors in time. This delay in payment to MSME creates a huge financial problem as due to this the money is stuck and the MSME business entities are not able to use the money for business growth and are stuck due to less finance and infact sometimes this money becomes claimale money and for this such business entities have to approach Court or Forum for recovery and this is where they have to approach Lawyers for recovery of money and in India to recover the money as such is big headache from legal point of view due to lengthy and more lengthy procedure and also a Litigation is a costly affair. It is very interesting to note that more than 38.95 lakh UAMs have been filed since September 2015 upto December 2017.
There are many benefits under MSME Act and infact getting business registered under MSME only plays an important part in availing the benefit of all the schemes under MSME Act. One of the most important and best advantages given to all MSME holders is the simplest process and procedure to recovery their pending dues from MSME Forum which is nothing but popularly called as Statutory Arbitration.
Just a quick look on Relevant Provisions for Recovery of Money
Chapter V of MSMED Act contained the provisions with regard to the Recovery of the Outstanding from the Buyer in case of any service(s) availed or good brought by him
Objectives of MSMED Act 2006 in regard to Recovery of Money:
How MSME Registration helps in the Recovery of Dues?
There is a defined period for raising any dispute regarding goods or services under MSME rules from delivery and if there is no such raised dispute/s, then raising dispute at later stages is of no use and these reasons have been used by many in court matters in any monetary claim as defense and hence this benefit take away one of the major Defense of the proposed defaulter and secondly, the invoice payment has to be made within 45 days from the date of invoice except for any credit period mutually agreed between parties to the business. In case there is a default in making the payment, the following steps be followed:
(The person who files the case is called Aggrieved Party/Claimant/s and against whom it is filed is called as Opposite Party/Respondent/s)
The biggest advantage of MSME Act is that MSME overrides the Contractual Arbitration clause between the Parties (Refer, GET & D India Limited Vs Reliable Engineering 2017 SCC Online 6978)
One can also file the MSME Petition (prefer getting this drafted by Legal Advisor) on MSME portal in following manner:
What is MSME Samadhaan portal?
To address Delayed Payment to MSME Section 15-24 of The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 deal with the issues relating to the Delayed Payments to Micro and Small Enterprises (MSEs) by the buyers to the MSE supplier. In the case of delay in payment beyond 45 days, MSME suppliers may approach the Micro and Small Enterprises Facilitation Council (MSEFC) constituted under the Act in all States/UTs. Under Section 16 of the MSMED Act, delayed payment to supplier units, attracts compound interest with monthly rests at three times of the bank rate notified by the Reserve Bank. To further the objectives of MSMED Act, 2006 Ministry of MSME launched a portal (http:// samadhaan.msme.gov.in/) on 30th October, 2017.
It is relevant to note that from the date of launch of MSME SAMADHAAN Portal, i.e. 30th October 2017, MSME have filed 2927 applications related to delayed payments. These cases involve an amount of Rs. 744.65 Crore. This portal has also helped in getting the delayed payments getting settled mutually between seller and buyer. 105 mutual settlements have been done amounting to Rs. 8.87 Crore. Applications are getting converted to cases by MSE-Facilitation Councils in States. 264 applications have been converted to cases by 31.1.2018.This has empowered the MSEs to file their delayed payments cases directly. This is being monitored by respective Ministries/ CPSEs and State governments (this para has been taken from the Annual Statement for Year 2017-2018 by MSME)
MSME + ROC Compliance = Removes Law of Limitation on Recovery of Dues: In order to protect the interest of MSME the Central Government on 22.01.2019 has issued a notification under the MSMED Act, 2006 to ensure timely and smooth flow of credit to MSMEs and minimize sickness among them. As Per the Notification Number S.O. 5622(E), every specified company shall file an Initial Return in MSME Form I stating details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification. Please note that the Registrar of Companies (ROC) is asking the detail of the default and delay in payments to MSME (means Micro, Small and medium Business entities whether they are individual, firm, LLP or companies) along with the complete list of the name, amount outstanding, period of delay with reason and total outstanding to MSME exceeding 45 days through filing the ‘MSME FORM I’ with ROC. The companies are also required to file the half yearly report on the delay of payment to MSME as well as a one-time report. A half-yearly return MSME-1 specifying the payments outstanding to micro and small enterprises suppliers which are outstanding for more than 45 days from the date of acceptance or the date of deemed acceptance of goods or services stating the following: a)The amount of payment due, and b) the reasons of delay. The Penal provisions are serious for non-compliance. If the said details are not submitted to Registrar of Companies on MCA on or before 22.02.2019 or the information submitted is incorrect or incomplete, then the fine on company is up to Rs. 25,000 and the Directors, CFO & CS shall be punishable for imprisonment up to 6 months OR fine not less than Rs. 25,000 up to Rs. 3,00,000 per person each.
The Law on Limitation is very clear that three years is the Limitation period in which one has to claim their money under the laws of India and MSME being statutory law, Law of Limitation is not applicable. Further this ROC compliance will automatically confirm the legitimate dues of MSME and such confirmation is nothing but Acknowledge of Debt which will in turn renew the Limitation Period, if at all is applicable
*Content of this post is a Copyright work and is owned by THE LEGAL DESK (Adv Lalit K Jain)