In the previous article [MSME Legal backdrops Series – Part II], we have gained knowledge about Chapter – I covering section 1 & 2 of MSMED Act, 2006. We have also discussed some important definitions viz. Supplier, Buyer, Enterprise, Goods etc.
In this article, we will discuss about Chapter – II covering section 3 to 6 of MSMED Act, 2006 along with related notifications / circulars issued by Ministry of Micro, Small & Medium Enterprises. Italic lines in the article represent text of Act.
A. Chapter – II of MSMED Act, 2006:-
- Chapter 2 of MSMED Act, 2006 prescribes about establishment, members, functions, and powers of National Board for Micro, Small & Medium Enterprises (NB-MSME).
- It contains 4 sections, Section 3 to 6, which are described below.
I. Section 3 – Establishment of Board:-
(1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a Board to be known as the National Board for Micro, Small and Medium Enterprises.
(2) The head office of the Board shall be at Delhi.
(3) The Board shall consist of the following members, namely:—
(Detailed list of members discussed in Interpretation & Comments Section)
(4) The term of office of the members of the Board, other than ex officio members of the Board, the manner of filling vacancies, and the procedure to be followed in the discharge of their functions by the members of the Board, shall be such as may be prescribed:
Provided that the term of office of an ex officio member of the Board shall continue so long as he holds the office by virtue of which he is such a member.
(5) No act or proceedings of the Board shall be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Board; or
(b) any defect in the appointment of a person acting as a member of the Board; or
(c) any irregularity in the procedure of the Board not affecting the merits of the case.
(6) The Board shall meet at least once in every three months in a year.
(7) The Board may associate with itself, in such manner and for such purposes as it may deem necessary, any person or persons whose assistance or advice it may desire in complying with any of the provisions of this Act and a person so associated shall have the right to take part in the discussions of the Board relevant to the purposes for which he has been associated but shall not have the right to vote.
(8) Without prejudice to sub-section (7) the Chairperson of the Board shall, for not less than two of the meetings of the Board in a year, invite such Ministers of the State Governments having administrative control of the departments of small scale industries or, as the case may be, the micro, small and medium enterprises, or the Administrators of Union territories and representatives of such other associations of micro, small and medium enterprises, as he may deem necessary for carrying out the purposes of this Act.
(9) It is hereby delcared that the office of member of the Board shall not disqualify its holder for being chosen as, or for being, a member of either House of Parliament.
Interpretations & Comments:
√ Central Government has the power to constitute NB-MSME.
√ Central Government, for the first time, constituted NB-MSME vide Notification No. S.O. 766(E) dt. 15.05.2007 with 47 persons as members including charperson.
√ Head office of NB-MSME is at Delhi.
√ Following persons (Total 47) will be members of NB-MSME:-
| Sec. 3(3) | Description | Designation |
| (a) | Minister of MSME | Ex-Officio Chairperson |
| (b) | Minister of State or Deputy Minister of MSME, if any | Ex-Officio Vice-Chairperson |
| (b) | If there is no Min. of State or Dep. Min. then CG will appoint someone as | Vice-Chairperson |
| (c) | Six Ministers of State Government, one from each of 6 regions, appointed by C.G. * | Ex-Officio Member |
| (d) | Two Members of Parliament from Lok Sabha | Member |
| (d) | One Member of Parliament from Rajya Sabha | Member |
| (e) | Administrator of a Union Territory, appointed by C.G. | Ex-officio Member |
| (f) | Secretary to Ministry of MSME | Ex-Officio Member |
| (g) | Secretary to Ministry of Commerce & Industry | Ex-Officio Member |
| (g) | Secretary to Ministry of Finance | Ex-Officio Member |
| (g) | Secretary to Ministry of Food Precessing Industry | Ex-Officio Member |
| (g) | Secretary to Ministry of Labour & Employment | Ex-Officio Member |
| (h) | Chairman of NABARD | Ex-Officio Member |
| (i) | Chairman of SIDBI | Ex-Officio Member |
| (j) | Chairman of Indian Banks Association | Ex-Officio Member |
| (k) | Executive Director or above ranked one person from RBI, appointed by C.G. | Member |
| (l) | 20 Persons to represent associations of MSME including minimum 3 persons from Women’s enterprises & minimum 3 persons from Micro enterprises, appointed by C.G. | Members |
| (m) | 3 eminent persons, one from each field of Economics, Industry & Science and Technology (Atleast one should be woman), appointed by C.G. | Members |
| (n) | 2 Representatives from Central Trade Union Organizations, appointed by C.G. | Members |
| (o) | Joint Secretary or above ranked officer in Ministry of MSME, appointed by C.G. | Ex-officio Member Secretary |
* Central Government vide Notification No. S.O. 765 (E) dt. 14.05.2007 has divided all states into 6 Regions viz. Northern Zone, Central Zone, Southern Zone, Eastern Zone, North-Eastern Zone & Western Zone for selection of six ministers of the State Government of MSME to represent each of these regions.
√ Term of office of members of NB-MSME, manner of filling vacancies, procedure to discharge duties by members, powers and functions of Member-secretary has been prescribed by Central Government vide Notification No. G.S.R. 596(E) dt. 26.09.2006 which is called as “National Board for Micro, Small & Medium Enterprises Rules, 2006” applicable w.e.f. 02.10.2006.
√ Term of office of Ex-Officio members will be as long as they hold that position.
√ Mandatory Meetings – At least once in every 3 months.
√ Board can appoint any person for assistance or advice.
√ Any member of Board will not be considered as disqualified for being a member of either House of Parliament.
√ Latest NB-MSME constituted by Central Government was vide Notification No. S.O. 1274 (E) dt. 24.04.2017.
II. Section 4 – Removal of member from Board:
(1) The Central Government may remove a member of the Board from it, if he—
(a) is, or at any time has been, adjudged as insolvent; or
(b) is, or becomes, of unsound mind and stands so declared by a competent court; or
(c) refuses to act or becomes incapable of acting as a member of the Board; or
(d) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or
(e) has so abused, in the opinion of the Central Government, his position as a member of the Board as to render his continuance in the Board detrimental to the interests of the general public.
(2) Notwithstanding anything contained in sub-section (1), no member shall be removed from his office on the grounds specified in clauses (c) to (e) of that sub-section unless he has been given a reasonable opportunity of being heard in the matter.
Interpretations & Comments:
√ If any member of Board –
a) Adjudged as insolvent or
b) declared unsound mind or
c) refuses to become member or becomes incapable of acting as a member or
d) convicted for offence involving moral turpitude or
e) abused his powers as member
Central Government has the power to remove him/her.
√ But in case of reasons (c) to (e), Central Government may remove such member(s) only after giving a reasonable opportunity of being heard.
III. Section 5 – Functions of Board:
The Board shall, subject to the general directions of the Central Government, perform all or any of the following functions, namely:—
(a) examine the factors affecting the promotion and development of micro, small and medium enterprises and review the policies and programmes of the Central Government in regard to facilitating the promotion and development and enhancing the competitiveness of such enterprises and the impact thereof on such enterprises;
(b) make recommendations on matters referred to in clause (a) or on any other matter referred to it by the Central Government which, in the opinion of that Government, is necessary or expedient for facilitating the promotion and development and enhancing the competitiveness of the micro, small and medium enterprises; and
(c) advise the Central Government on the use of the Fund or Funds constituted under section 12.
Interpretations & Comments:
The main function of the Board is:
a) Examine factors which may affect promotion, development of MSMES.
b) Review Government’s policies to facilitate promotion, development and competitiveness of MSMEs.
c) Make recommendations to C.G. on matters referred to it.
d) Advise Central Government on use of Fund (Meaning and purpose Fund will be discussed later)
IV. Section 6 – Powers and functions of Member-Secretary of Board:
Subject to other provisions of this Act, the Member-Secretary of the Board shall exercise such powers and perform such functions as may be prescribed.
Interpretations & Comments:
√ Central Government prescribed powers and functions of Member – Secretary of Board vide Notification No. G.S.R. 596(E) dt. 26.09.2006 which is called as “National Board for Micro, Small & Medium Enterprises Rules, 2006” applicable w.e.f. 02.10.2006.
√ As per this notification, major powers and functions are as follows:-
a) Act as Head of office of Board.
b) Maintain records of Receipts and Payments, Sanction Expenditure related to Board.
c) Assist Chairperson in administrative matters.
d) Make arrangements for conducting Meetings, Issue Minutes of Meetings and keep records of all members.
B. Synopsis:
- We have covered 4 sections of MSMED Act, 2006.
- Section 3 prescribes the provisions and manner of constitution of NB-MSME.
- Section 4 prescribes the manner for removal of member from Board.
- Section 5 prescribes the various functions of the Board.
- Section 6 prescribes powers and functions of Member Secretary of Board.
C. What Next:
- In next article, efforts will be made to provide an insight into the most important 3rd Chapter and related sections of MSMED Act, 2006 which deals with Classification of MSME from legal as well as practical point of view.
D. References:
- MSMED Act, 2006. Link for downloading MSMED Act, 2006 – https://www.indiacode.nic.in/handle/123456789/2013?view_type=search&sam_handle=123456789/1362
- Various Notifications issued by Ministry of Micro, Small and Medium Enterprises.
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Disclaimer : This material and the information contained herein is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser.
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