There could be several occasions where a business might have supplied the goods or completed the services as per the agreed terms but did not receive payments from the customer/buyer. While there are various recourses available to recover such payments, we will discuss one of the quickest & easy recourse available to Micro & Small Enterprises registered under MSME Act.

A smaller number of business know about such facility available to Micro & Small Enterprises & thus it is not so popular.

Under the MSMED (The Micro, Small and Medium Enterprise Development) Act, 2006- a robust facility was launched which is know as MSME SAMADHAAN to complain about the delayed payments to Micro & Small Enterprises registered under MSME Act. This facility works for the settlement of disputes with regards to delayed payments

Let’s look at the some of the important aspects of MSME SAMADHAAN:

I. Who can apply or use the facility of MSME SAMADHAAN?

Any Micro or Small Enterprise having registration under MSME Act, i.e., having a valid Udyog Aadhaar or Udyaam Registration can apply under MSME SAMADHAAN.

Following is the revised classification of a business as Micro & Small Enterprises

Micro Enterprises: Manufacturing Enterprises & Enterprise rendering services having

  • Investment in Plant, Machinery or Equipment: not more than Rs 1 crore, and
  • Annual turnover: not more than Rs. 5 crores.

Small Enterprises: Manufacturing Enterprises & Enterprise rendering services having

  • Investment in Plant, Machinery or Equipment: not more than Rs 10 crores, and
  • Annual turnover: not more than Rs. 50 crores.

II. Whether a legal notice by the supplier to buyer is necessary before filing the complaint?

No, it is not required.

III. What does MSMED Act say about the delayed payments?

Below are the points stated in the MSMED Act.

1. The buyer should make the payment to the supplier on or before the date agreed between them.

2. If buyer fails to make payment, it shall be liable to pay compound interest with monthly rests to the supplier at 3 times the bank rate notified by RBI for the period in default.

3. Once such dispute of payment is referred to the council formed under the MSMED Act, it shall be decided within a period of 90 days.

4. The resolution made by the council will not be entertained in any court unless the buyer deposits 75% of the disputed amount to the court

5. The council after examining the case will issue directions to the buyer for payment of due amount along with interest.

6. The amount of interest paid by the defaulting buyer will not be allowed as a deduction from Income under the Income tax Act.

Also read: Other benefits to a MSME- Why should you register your business as a MSME: https://taxguru.in/corporate-law/register-msme.html

IV. What are the documents or Information required to make a complaint?

Following documents & information will be required:

1. UAM or Udyaam certificate of the Supplier

2. Basic details of the Supplier: like PAN, Mobile Number, Address, GSTIN, email address etc.

3. Basic details of the Buyer: like PAN, Mobile Number, Address, GSTIN, email address etc.

4. Documents substantiating that work was awarded & payment is due: like Invoice, work order, Purchase order etc.

V. Why Should we use the MSME SAMADHAAN facility?

Simply because it’s available for a quick & easy resolution.

1. It doesn’t involve the hassle that’s there in court proceeding

2. There is no cost involved in filing the complaint.

3. The facility is specially made available to Micro & Small Enterprises as an alternative & seamless debt recovery medium

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Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

The author is a CA in practice at Delhi and can be contacted at: E-mail: [email protected], Mobile: +91-9811741451

Author Bio

Qualification: CA in Practice
Company: Abhinandan Sethia & Associates
Location: west delhi, Delhi, India
Member Since: 26 May 2018 | Total Posts: 44
I am a Practicing Chartered Accountant with over 6 years of professional service experience. My professional services experience include specialization in #GST compliance #Risk based Internal Audits #Risk Management, #business process reviews, #Fraud Investigations etc. among other services View Full Profile

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