Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy. It has not only played crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. A nation we think can be built by participation and equitable distribution of wealth only.
MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. BUT there are challenges also and such initiative and awareness are going to help this sector undoubtedly in big way.
Delayed Payments to Micro and Small Enterprises under Micro, Small and Medium Enterprise Development (MSMED) Act, 2006.
The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs).
The Act states that where the supplier supplies goods or renders any services to any buyer, then the buyer shall make payment on or before the date mentioned in the agreement and, if there is no agreement, then before the appointed date. The proviso to this Section states that the period of credit given by the seller shall not exceed 45 days from the day of acceptance or from the date of deemed acceptance.
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.
Any Micro or small enterprise having valid Udyog Aadhar(UAM) can apply.
Micro Enterprise: Enterprise engaged in manufacture and production pertaining to any industries specified in First Schedule to the IDR Act, 1951 as where the investment in Plant & Machinery does not exceed Rs. 25 Lakhs.
Small Enterprise: Enterprise engaged in manufacture and production pertaining to any industries specified in First Schedule to the IDR Act, 1951 as where the investment in Plant & Machinery is more than Rs. 25 Lakhs but does not exceed Rs.5 crore.
State Governments has established Micro and Small Enterprise Facilitation Council (MSEFC) for settlement of disputes on getting references/filing on Delayed payments.
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.
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.
Ministry of MSME has taken an initiative for filing online application by the supplier MSE unit against the buyer of goods/services before the concerned 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.
Adding this on 2nd of November 2018 S.O. 5622(E).—In exercise of powers conferred by Section 9 of the Micro, Small and Medium Enterprises Development Act, The Central Government directs that all companies which buy goods or avail services from micro and small enterprises and whose payments to such suppliers have exceeded 45 days shall submit a half yearly return to the ministry of corporate affairs (MCA) stating the outstanding amount and the reasons for delay.
DISCLAIMER: The information given in this Note is based on the analysis of the facts and understanding and interpretation of applicable laws. Mritunjay Shekhar & Associates, Company Secretaries expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this note.