MSME Status Verification By Buyer

Micro, Small and Medium Enterprises (MSME) is the most dynamic and vibrant topic of Indian economy. Now days, government has introduced a lot of schemes and provided a lot of packages to MSMEs to uplift them vis a vis economy.

For detailed knowledge about MSME, MSMED Act, 2006 and related other provisions, kindly refer to my earlier articles titled:-

1. An insight into Micro, Small and Medium Enterprises

2. New era of MSME

Many times, it has been observed that seller has provided false or incorrect information to obtain Udyog Aadhar Memorandum (UAM) certificate and also availing benefits of schemes of government in wrong manner. It causes distrust among genuine MSEs and leads them to face many hardships and force them away from availing benefits of government schemes.

A. Legal Backdrops of “Self Declaration for obtaining UAM”:

Government vide Notification No. S.O. 2052 (E) dt. 30.06.2017 has specified that: –

i. To obtain Udyog Aadhar Memorandum, one has to apply in online manner.

ii. As per clause 7, the memorandum shall be filed on self declaration basis and no additional document is required to be uploaded at the time of filing application for UAM.

iii. Udyog Aadhar Registration Certificate shall be generated and mailed to the email address provided in the memorandum.

iv. There shall be no fees for filing of UAM.

Although by giving so much ease to obtain UAM certificate, the intention of government was to promote ease of doing business and very much positive, yet there is always a negative side of each action. By that virtue, some enterprises have started providing false information for obtaining UAM certificate and getting benefits of government schemes in a malafide manner.

B. Powers of enquiry to validate MSE status:

Government has also provided provisions for curbing false practices. Central Government or State Government may authorize such person(s) who may seek such documentary proofs from applicants or the registered persons to verify their MSE status.

General Managers of the District Industries Centre of concerned districts have been authorized to undertake enquiry and verify credentials of UAM submitted by enterprises.

In spite of all efforts, still some enterprises furnish false information for obtaining UAM and claims benefits of government schemes falsely.

C. Special powers of enquiry to buyers:

In order to curb these false practices and to protect interest of genuine MSEs, Ministry of MSME vide Office Memorandum – F.No.5/1(1)/2019-P&G/Policy dt.10.01.2020 has provided powers to specified buyers to enquire upon the status of MSEs before awarding any contract.

As per above OM, “while awarding contract to MSEs under the Public Procurement Policy (PPP), the Government Departments/ CPSEs / Other Organizations shall satisfy themselves about the MSE status of the concerned enterprise. In case of any doubt/ lack of evidence in respect of the MSE status of any enterprise, they may go through due verification process with the help of supporting documents such as CA certificate, details available from the website of Ministry of Corporate Affairs (MCA) etc.”

D. Analysis in simple terms:

Based on above, following are clear:-

1. Government Departments, Central Public Sector Enterprises or other organizations which are procuring goods or services from MSEs under Public Procurement Policy has the power to ask from supplier to provide further documents to justify their MSE status.

2. A certificate from a Chartered Accountant, Financial Statements of last years, proofs for investment in Plant & Machinery, Valuation certificate of Plant & Machinery or any other such document can be asked to justify MSE status.

3. If the supplier is an LLP or a Company, data can also be verified from MCA portal.

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