Micro, Small and Medium Enterprise (MSME), introduced by Government of India vide Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 are entities engaged in the production, manufacturing, processing or preservation of goods and commodities.

An entity to be identified as a MSME shall be within the following limits as per Section 7 of the MSMED Act, 2006 and Notification issued by Ministry of MSME dated 01st June, 2020 effective 01st July, 2020:-

Composite Criteria: Investment in Plant & Machinery / Equipment and Annual Turnover
Classification Micro Enterprise Small Enterprise Medium Enterprise
Manufacturing Enterprises and Enterprises rendering Services Investment in Plant and Machinery or Equipment does not exceed Rs.1 crore and Annual Turnover does not exceed Rs. 5 crore. Investment in Plant and Machinery or Equipment does not exceed Rs. 10 crore and Annual Turnover does not exceed Rs. 50 crore. Investment in Plant and Machinery or Equipment does not exceed Rs. 50 crore and Annual Turnover does not exceed Rs. 250 crore

Criteria prior to the issuance of the notification:

Composite Criteria: Investment in Plant & Machinery / Equipment
Classification Micro Enterprise Small Enterprise Medium Enterprise
Manufacturing  Enterprises Investment in Plant and Machinery does not exceed Rs. 25 lakhs. Investment in Plant and Machinery does not exceed Rs. 5 crore. Investment in Plant and Machinery does not exceed Rs. 10 crore
Enterprises rendering services Investment in Equipment does not exceed Rs. 10 lakhs. Investment in r Equipment does not exceed Rs. 2 crore. Investment in Equipment does not exceed Rs. 5 crore

MSME SAMADHAAN – DELAYED PAYMENT MONITORING SYSTEM

Section 15 to 24 (Chapter V) of the Act deals with the provisions of delayed payment by the buyer to such Micro and Small supplier / seller which are registered under the Act.

As per Section 15 of the Act – Where a supplier (seller) supplies goods or renders services to any buyer, the buyer shall make the payment on or before the date as agreed between the parties in writing OR where there is no agreement in this behalf, before the “Appointed Day” i.e. immediately after the expiry of fifteen days from the date of acceptance or deemed acceptance. However, in no case the period agreed upon between the parties in writing shall exceed forty-five days from appointed date.

Explanation:

“Day of Acceptance”- The day of actual delivery of goods or rendering of services OR in case of objection in writing made by the buyer for acceptance of goods / services within fifteen days from the delivery date / rendering of services, the day on which such objection is removed by the supplier.

“Day of Deemed Acceptance”- In case no objection in writing is made by the buyer for acceptance of goods / services within fifteen days from the delivery date / rendering of services, the actual delivery date / rendering of services date.

MSME Samadhaan (https://samadhaan.msme.gov.in) is a web portal launched on 30th October, 2017, created by Office of Development Commissioner (MSME), Ministry of Micro, Small and Medium Enterprises (MSME) where Micro and Small Enterprises (MSEs) can file their applications online related to delayed payments. The application once filed is automatically forwarded to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) established by respective State / Union Territory as per the provisions of the Act. Action on the applications related to delayed payment is taken by the concerned MSEFC only.

Following are the steps and procedure to file an application over delayed payments and disposal of such application:-

1. Any party under dispute may, with regard to any amount due make a reference to MSEFC for recovery of the due amount under Section 18 of the Act.

2. The parties can file an online application for recovery of delayed payments, by visiting https://samadhaan.msme.gov.in portal and click on ‘Case filing for entrepreneurs / MSE units’ on the home page.

3. After clicking on ‘Case filing for entrepreneurs / MSE units’, enter your Udyog Adhaar Number (UAN) and the mobile number which was registered at the time of registration. Thereafter, enter the OTP generated on the registered email id and click on continue.

4. In case, a UAN is not possessed, first register for the same on https://udyamregistration.gov.in/   After registration go back to https://samadhaan.msme.gov.in portal and login for filing application for recovery of delayed payments as explained in the above step.

5. Please note the following before proceeding to file the application for delayed payments:

  • The scanned PDF documents of work orders of Respondent and invoices generated against those work order should be ready.
  • Each file size should not exceed 1MB.
  • Maximum three work orders and three invoices can be uploaded.

6. Submit the requisite details of the delayed payments.

7. On filing the application, the respective state MSEFC will send this application to the concerned respondent. The status of your complain can be seen in the Entrepreneur Application list. The application is processed faster than a regular Court hearing.

8. On receipt of the application, in accordance with Section 18 of the Act, the MSEFC shall either itself conduct conciliation in the matter or seek assistance by referring to any institution or centre for providing Alternate Dispute Resolution under Section 65 to 81 of the Arbitration and Conciliation Act, 1996 and shall apply to such dispute as if a conciliation is initiated. However, in case such conciliation is not successful and is terminated without any settlement, the MSEFC shall either take up the dispute or refer to any institution or centre for providing Alternate Dispute Resolution for arbitration. The provisions of the Arbitration and Conciliation Act, 1996 shall be applicable to such dispute as if the arbitration is initiated.

9. Under Section 19 of the Act, no appeal / application for setting aside any decree, award or order either made by MSEFC or the institution providing alternate dispute resolution, shall be accepted by any Court unless the appellant (not being the supplier) has deposited with the Court seventy-five percent (75%) of the amount as per the terms of such decree, award or order. Further, pending disposal of such application to set aside decree, award or order, the Court shall as is it considers reasonable, order to pay a certain percentage of amount deposited with the Court to the supplier (seller) and with such conditions as it deems fit.

10. Section 16 of the Act states that when the buyer fails to make the payment of such goods or services availed, notwithstanding anything contained in any agreement between the parties or any law for the time being in force, the buyer is liable to pay a compound interest with monthly rests, at the rate of three times the rate of interest as notified by the Reserve Bank of India, on that amount from the due date.

Section 22 of the Act states that where any buyer is liable to get its annual accounts audited under any law for the time being in force, shall furnish the following additional information:-

  • The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year;
  • The amount of interest paid by the buyer under Section 16 of the Act, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year;
  • The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act;
  • The amount of interest accrued and remaining unpaid at the end of each accounting year; and
  • The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23.

It is important to note that Section 23 of the Act specifically states that notwithstanding anything contained in the Income Tax Act, 1961, the amount of interest paid or payable by any buyer in accordance with the provisions of MSMED Act, 2006 shall not be allowed as a deduction for the purpose of computation of income under the Income Tax Act, 2006.

Section 24 of the Act states that provisions of Section 15 to 23 of this Act shall have an overriding effect in anything inconsistent contained in any law for the time being in force.

Address / Contact details of respective MSEFC is available on this link – https://samadhaan.msme.gov.in/MyMsme/MSEFC/CouncilAddress.aspx

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Qualification: LL.B / Advocate
Company: Pereira & Associates, Advocates and Business & Property Law Consultants
Location: Maharashtra, IN
Member Since: 06 May 2020 | Total Posts: 3

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