Author – Rashi Suri & Intern – Geetansh Nagpal
Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 contains the provisions of Delayed Payments to the Micro and Small Enterprises (MSEs). For these provisions to be enacted, the State Government established Micro and Small Facilitation Council (MSEFC) for settlement of disputes on getting references or filing of Delayed Payments.
WHO ARE MSMEs?
Any Indian Enterprise, dealing in goods or services, which is registered with the MSME department vide online registration process is a registered MSME. The Government of India has classified an MSME Enterprise in three categories i.e., Micro, small and medium Enterprises.
- a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
- a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
- a medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
Type of Enterprise Investment Turnover Micro Rs. 1 Crore Rs. 5 Crore Small Rs. 10 Crore Rs. 50 Crore Medium Rs. 50 Crore Rs. 250 Crore
WHAT TO DO?
The seller of goods and services, registered under MSMED, Act 2006, through its Advocate/Legal Counsel, shall in the ordinary course of business follow below mentioned mandatory compliances for a legally viable and stronger case against the buyer of goods and services.
Purchase order or Agreement – Every business transaction shall begin with a valid PO or Agreement in between buyer and seller. PO or Agreement party description clause shall clearly mention that the seller is registered with MSME. Further, a Purchase Order is compulsory to file an application before the MSEFC Samadhan Portal. If, the PO is oral, then an affidavit duly drafted needs to be submitted before the Council in that regard.
Invoice or Performa Invoice – Every invoice of the seller shall also clearly mention that the seller is registered with MSME.
Delivery and Acceptance – The seller shall intimate the buyer when the goods or services are delivered via email or letter, and the seller shall keep a record of such delivery of goods or services. The seller also may ask the buyer to acknowledge delivery of Goods/Services. However, if no acceptance is provided by the buyer, 15 days from the date of delivery of goods or services shall be considered as deemed accepted.
Defective Goods or Services – If the buyer of the goods or services raise any objection with regard to defective goods or services or otherwise the seller shall within stipulated time rectify such objection.
Payment Reminder – The seller shall after the expiry of credit period, if any, or where no payment time is mentioned then after 15 days from the date of delivery of goods or Services shall send a written payment reminder to the Buyer through its Advocate / Legal Counsel. The payment reminder shall clearly mention the P.O/Agreement date, Invoice Date, Invoice Amount, Date of delivery of goods or services and payment due date.
SITUATIONS WHICH LEAD TO GRIEVANCES
- Buyer approaches the Seller for buying goods from him.
- Seller sells the goods to the buyer at an appropriate price and enter into an agreement with each other.
- If, the buyer and the seller come into a mutual contract for the payment of the goods, then the buyer would make the payment according to the contract held between the buyer and the seller.
- And, if, the buyer and seller does not come into a mutual contract, then according to the Section 15 to 24 of the MSMED Act, 2006, the buyer is bound to make the payment to the seller within 45 days on the day of acceptance or deemed acceptance.
DISPUTE RESOLUTION MECHANISM
How to File a Case in MSEFC?
It is stated that when the buyer does not make payment or delays the payment of the seller after buying goods or services from the seller, then according to the Provisions in the MSMED Act, 2006, the seller unit, can file a suit against the buyer unit before the Micro and Small Enterprise Facilitation Counsel for the recovery of the amount.
The case or suit can be filed online on the site of https://msme.gov.in/ and upon the acceptance of the case filed by any unit, the MSEFC calls upon both the units along with their Advocates/Lawyers to keeps their point of views and their arguments, according to which the MSEFC makes a decision on the particular case. The application should be suitable drafted so as to satisfy the requirements of the Act.
The MSEFC after examining the case, issue directions to the buyer unit for payment of due amount along with interest and compound interest as per the provisions of the MSMED Act, 2006.
MSME SAMADHAN online portal is developed by the Ministry of Micro, Small and Medium Enterprises to provide an online dispute resolution mechanism for MSEs. MSEs, through their Advocates/Legal Counsels, can file an online application regarding delayed payments. The application once filed is forwarded automatically online to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) for disposal.
- Legal Notice- Before filing an application before the MSEFC, the seller, through its Advocate/Legal Counsel, shall send a Demand/Legal notice to the buyer clearly stating P.O/Agreement date, Invoice Date, Invoice Amount, Date of delivery of goods or services and payment due date. The notice should be carefully drafted so as to showcase all defaults of the counterparty.
- Online Application Filing- Filing an online application with MSEFC doesn’t include any court fee. MSEFC proceedings are completely online and autonomous.
- Arbitration- If the buyer of goods and services refuses to make payment within 45 days from the date of notice, MSEFC holds meetings regularly and delayed payment applications are decided by the Council/Arbitrator.
- Award- The award of MSEFC is enforceable in the court of law.