MSME SAMADHAAN- Delayed Payments to Micro and Small Enterprises and How To Recover Delayed Payment By MSME by Praveen singh


Background:

Hope all of you are doing great, this write up will be helpful for the small businesses that are searching to recover their outstanding from corporate and other entities.

Government of India has taken the number of measures for the promotion and development of MSME ie., Micro, Small and Medium Enterprises as it is being presumed that this sector is very critical for the overall development of a nation. Further, these small businesses play a substantial role in the economy of a nation as they not only generate production but also help in creating employment opportunities for the younger generation.

Going forward, as the very title of the present article suggests, I will be restricting the flow only towards the recovery of delayed payment, this means that I am assuming you all are well aware of the provisions related to the classification and other condition for the recognition of MSME.

A quick look at the relevant Provisions

Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 (Hereinafter “MSMED”) contained the provisions with regard to the recovery of the outstanding from the buyer in case of any service(s) availed or well brought by him.

Section 15: It provides that buyer to make payment in case of any service(s) being availed or well brought by him on or before the date as agreed in writing otherwise before the appointed date.

It is to be noted that the period whether agreed in writing or otherwise cannot exceed a maximum period of 45 days from the day of acceptance or deemed acceptance. This means that buyer to make payment in all cases before 45 days. Here, it is equally important to understand the meaning of the terms ie., appointed date, day of acceptance or deemed acceptance collectively used in the aforesaid provision.

Appointed date means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.

Day of Acceptance means,-

(a) the day of the actual delivery of goods or the rendering of services; or

(b) where any objection is made in writing by the buyer regarding the acceptance of goods or services within 15 days from the day of the delivery of goods or the rendering of services, the day on which· such objection is removed by the supplier;

Day of Deemed Acceptance means, where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services.

Section 16: Buyer shall be liable to pay compound interest with monthly rests in case of failure to comply with the aforesaid provision. Interest Rate will be 3 times of the bank rate notified by the RBI.

Section 17: Buyer to make payment along with interest.

Section 18: MSME may make a reference to the Micro and Small Enterprises Facilitation Council (“MSEFC”) and MSEFC may initiative on its own, action as it may deed necessary.

Though the provisions for recovery were always there from the constitution of the Act however, it is being very difficult for the small business registered under the Act to recover the outstanding from Big Entities. Further, the problem still persist, if you are also facing the same problem ie., whom to visit or before whom to file an application and/or complaint, or having any concern here is how your problem can be resolved.

Government of India has launched 
https://samadhaan.msme.gov.in/MyMsme/MSEFC/MSEFC_Welcome.aspx portal, a unique and central point where all the MSMEs can file their complaint.

Any Micro or small enterprise having valid Udyog Aadhar(UAM) can apply.
Register in UAM by Clicking Here 

Step 1: Visit above web portal and look for the option case filing for entrepreneurs/MSE units in the menu bar. After clicking above option enter your UAN and the mobile number which was provided at the time of registration along with the verification captcha. Thereafter, one time password will be sent to your registered email ID please enter that and click on continue.

Step II: Now, you will see an option Application entry which will help you to file an application and/or compliant with the appropriate authority, before filling it please keep the details of work orders and/or details of invoices ready or any other document which can prove your claim. You can provide the details over the portal, if it is less than 5 however, in case it is more than 5 then you can combined all invoices in single PDF and upload it over the web-portal and submit it, thereafter one more page will be pop-up for the review and final submission.

Step III: All done now MSEFC will send this application to the concerned respondent and status of your complaint can be seen Entrepreneur Application list, the application will proceed faster than that of the court, furthermore the concerned officer may ask you to come and advise you in case of any other document and/or information being required by him.

Salient Features

  • 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. (Section 16)
  • State Governments to notify (i) Authority for filing Entrepreneur Memorandum (ii) Rules of MSEFC and (iii) Constitution of MSEFC.
  • All States/UTs have notified Authority for Filing Entrepreneur's Memorandum, 33 States/UTs (i.e. except Arunachal Pradesh, Assam and Manipur) have Notified rules of MSEFC and all the 36 States/UTs have constituted MSEFCs, as per provisions laid down under 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. (Section 19)
Hope they write will provide clarity on how to proceed with the filing of the complaint about the recovery of money.

Author's Disclaimer:

The above write up is only for the educational purpose and shall not constitute any opinion. Author in no case shall be responsible for and actions being taken on the basis of above write up.

Source:

a). Micro, Small and Medium Enterprises Development Act, 2006; 5c42288e922875e9d8c1d25832beaf28.pdf

b). Personal experience

Tags: MSMED Act

FAQ of the MSME SAMADHAAN-Delayed Payment Monitoring System

 

FAQ on Legal Issues Pertaining to the Provissions of MSMED ACT, 2006.

Procedural Issues:

 

You can reach out in case of any clarification at cspraveensingh111@gmail.com

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