How do I recover my MSME payment?
MSME Law notes by NB Associates
To recover your MSME payment, you can follow these steps
Send a formal reminder:
If a buyer has not made the payment within the agreed-upon period, send a formal reminder to the buyer.
The reminder should include the invoice number, date of delivery, and the amount due, and request the buyer to make the payment
Send a legal notice:
If the buyer does not respond to the reminder, send a legal notice to the buyer.
A legal notice is a formal communication that highlights the details of the outstanding payment and the consequences of non-payment.
File a complaint under MSME Samadhaan:
If sending reminders and legal notices do not yield any results, file a complaint on the MSME Samadhaan portal.
Provide all the necessary details, including invoices, delivery challans, purchase orders, and any other relevant documents.
Approach to MSME Facilitation Council
If the complaint filed on MSME Samadhaan is not resolved, you can approach under MSMED Act 2006 to concerned MSME Facilitation Council by physically filing the complaint.
Under this act, you can file a case in the Micro and Small Enterprises Facilitation Council (MSEFC).
The council will then try to settle the dispute through conciliation.
If conciliation fails, the MSME Facilitation Council shall refer matter to arbitration for adjudication of disputes.
Filing a commercial suit for recovery
If your invoice date is prior to your MSME registration, you may file a commercial suit for recovery.
A civil suit is a legal proceeding in which you can claim your outstanding payment along with interest and other damages..
It’s important to keep records of all communication related to the outstanding payment and maintain copies of all relevant documents for future reference
What is the interest rate for MSME claim?
MSME Law notes by NB Associates
As per the guidelines of the MSME Samadhaan portal in India, if a buyer fails to make payment to an MSME within 45 days of the acceptance or deemed acceptance of goods or services, the buyer will be required to pay interest to the MSME at a rate equal to three times the bank rate notified by the Reserve Bank of India.
The bank rate notified by the Reserve Bank of India currently stands at 6.5%, as of March 2023.
This means that the interest rate for MSME claims under the MSME Samadhaan portal is 3 times the current bank rate, which is 19.5% (6.5% x 3)
It’s worth noting that the interest rate can be subject to change as per the notification from the Reserve Bank of India, and MSME Samadhaan portal may update the interest rate accordingly.
Bank rate notified by RBI (Reserve Bank of India) since 2018.
| Date from | Date to | RBI Bank rate |
| 01/08/2018 | 06/02/2019 | 6.75% |
| 07/02/2019 | 03/04/2019 | 6.50% |
| 04/04/2019 | 05/06/2019 | 6.25% |
| 06/06/2019 | 06/08/2019 | 6% |
| 07/08/2019 | 03/10/2019 | 5.65% |
| 04/10/2019 | 26/03/2020 | 5.40% |
| 27/03/2020 | 21/05/2020 | 4.65% |
| 22/05/2020 | 03/05/2022 | 4.25% |
| 04/05/2022 | 07/06/2022 | 4.65% |
| 08/06/2022 | 04/08/2022 | 5.15% |
| 05/08/2022 | 29/09/2022 | 5.65% |
| 30/09/2022 | 06/12/2022 | 6.15% |
| 07/12/2022 | 28/02/2023 | 6.50% |
What are the benefits of MSME Samadhaan?
MSME Law notes by NB Associates
MSME Samadhaan is an online portal launched by the Indian government to facilitate the speedy settlement of disputes related to delayed payments for MSMEs.
The portal provides various benefits to MSMEs, including:
Resolution of MSME payment disputes
MSME Samadhaan provides an online platform for MSMEs to file their complaints regarding delayed payments.
This helps to speed up the dispute resolution process, allowing MSMEs to receive their payments more quickly.
Reduction in financial stress
MSMEs often face cash flow problems due to delayed payments from buyers, which can lead to financial stress.
MSME Samadhaan helps to alleviate this stress by providing a platform for the resolution of payment disputes.
Saving time and cost
The portal provides a cost-effective and time-saving solution for MSMEs to settle payment disputes without having to go through a lengthy and expensive legal process.
Promoting business growth
Timely payment settlements can help MSMEs to manage their working capital more efficiently, promoting their growth and expansion.
Encouraging buyer compliance
MSME Samadhaan encourages buyers to comply with the payment terms agreed upon with MSMEs, as non-compliance can result in penalties and damage to their credit rating.
Overall, MSME Samadhaan has been beneficial for MSMEs as it provides a speedy, cost-effective, and efficient solution for resolving payment disputes, promoting their financial stability and growth.
What is MSME 45 days payment rule
MSME Law Notes by NB Associates
In India, the MSME Act has introduced a 45-days payment rule for Micro & Small Enterprises.
So, if you are a Micro or Small enterprise, and you have sold goods or provided services to a Buyer, the Buyer must make payments for the goods or services within a maximum period of 45 (Forty-Five) days from the date of the delivery of the goods or services.
This MSME 45 days payment rule aims to improve the cash flow and liquidity of MSMEs, which often face challenges in managing their working capital due to delayed payments from buyers.
We are among the top Law firms / Lawyers providing legal consultancy related to MSME dues recovery and handling related cases Pan India.
For any kind of legal consultancy, our client may contact us at the following number or email id :
Call us – 9811899279 | Email us – mail@nbassociates.net
Provisions for the MSME 45 days payment rule lie in sections 15, 16 and 2(b) of the MSME Act.
The crux of the provisions is as under:
1. Where any supplier supplies goods or services to any buyer, the buyer must make payment on or before the date agreed between the buyer and supplier in writing.
Provided however that such an agreed period should not exceed 45 days.
2. 45 days counting to begin from the date of the delivery of the goods or services, as per section 2(b) of the MSME Act.
3. Where supplier and buyer have no agreement for the period within which payments are to be made, payments are to be made before the ‘appointed day’ i.e. within a period of 15 days from the date of the delivery of the goods or services. [Section 2(b) defines appointed day]
1. Where Supplier and Buyer have no agreement for the period during which payments are to be made:
The payments have to be made within a period of 15 days from the date of the delivery of the goods or services.
So, if Delivery was made on 01.01.2023, payment is to be made by 15.01.2023
2. Where Supplier and Buyer have an agreement for the period during which payments are to be made and such agreed period is more than 45 days.
The payments are to be made within a period of 45 days from the date of the delivery of the goods or services.
So, if Delivery was made on 01.01.2023, payment is to be made by 15.02.2023
3. Where Supplier and Buyer have an agreement for the period during which payments are to be made and such agreed period is more than 15 days and less than 45 days.
The payments are to be made within the agreed period from the date of the delivery of the goods or services.
So, if Delivery was made on 01.01.2023, and the agreed period of payment is 30 days then payment is to be made by 30.01.2023
As per provisions of section 16 of the MSME Act, If payment is not made during the given period, the Supplier is entitled to interest at the rate which is 3 times the bank rate notified by RBI.
This interest is compounding interest, which compounds at monthly intervals.
Section 16 reads as under:
16. Date from which and rate at which interest is payable.—Where any buyer fails to make
payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding
anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
The provisions of the MSME Act mandate that any buyer who purchases goods or services from an MSME must make the payment maximum within 45 (Forty-Five) days.
If the buyer fails to make the payment within 45 days, the buyer will be required to pay interest at a rate equal to three times the bank rate notified by the Reserve Bank of India.
The rule also helps to reduce the financial stress on MSMEs and promotes timely payments, which can help them to grow and expand their business.
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MSME Case Filing – Step-by-Step Procedure
Law Article by NB Associates
Micro and small enterprises (MSEs) can file MSME case to recover their dues or outstanding by using the provisions of sections 15 to 18 of the MSME Act.
These provisions are an effective solution for the MSEs dues recovery.
Here we are going to discuss the step-by-step procedure for MSME case filing.
So how can one go for MSME case filing?
To know what legal services we provide in relation to MSME Recovery – Click here
We may be contacted at 9811899279 | mail@nbassociates.net
MSEs can file cases through MSME Samadhaan portal.
The Government of India launched the MSME Samadhaan portal in 2017. This portal allows MSMEs to file cases against buyers to recover their dues.
Access the MSME Samadhan Portal by following link:
https://samadhaan.msme.gov.in/MyMsme/MSEFC/COM_MSEFC_EntLogin.aspx
While filing an MSME case through the MSME Samadhaan portal, MSEs must upload relevant documents, including the contract or work order and invoices,
Once the MSE files the case online, they receive an acknowledgment of receipt and a unique case number to track the case’s progress.
The complainant or claimant should be a micro or small enterprise (MSE) as per the definition provided in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
The Ministry of Micro, Small, and Medium Enterprises (MSMEs) provides a valid Udyog Aadhaar Number (UAN), a 12-digit identification number, to MSEs, which the complainant or claimant must have.
Read More – Who is eligible for MSME Samadhan?
After filing an MSME case through the MSME Samadhaan portal, the system forwards the MSME complaint to the concerned buyer. The buyer has 15 days to respond to the complaint to the concerned complainant.
If an MSE files a case on the MSME Samadhaan portal and the buyer does not respond or pay, the system forwards the case to the respective MSME facilitation council.
MSME facilitation council then convert this complaint into an MSME case.
MSME facilitation council then start proceedings under section 18(2), which is a mandatory conciliation proceeding between the parties. If conciliation fails MSME facilitation council refers the matter to statutory arbitration.
MSME Samadhan portal has a dashboard that enables MSMEs to track the status of their complaints online. The portal also provides information related to the various schemes and policies of the Government related to MSMEs
Thus, a complainant can always track the MSME case filing status.
You can track your MSME case filing status by following links :
Tracking your case status here :
https://samadhaan.msme.gov.in/MyMsme/MSEFC/MSEFC_Entrepreneur_status.aspx
MSEs can issue a legal notice to the buyer demanding the payment of dues.
A legal notice serves as a warning to the buyer. It may prompt them to make the payment to avoid litigation.
However, it is not mandatory by law to issue a legal notice.
MSME facilitation council converts the complaint into an MSME case, when buyer does not pay or respond to the notice issued after complaint filing.
Once the case becomes an MSME case, Section 18(2) requires conciliation between the parties.
The council can itself conduct conciliation proceedings or it may seek the assistance of an institution by making a reference to such an institution or centre for conducting conciliation.
Sections 65 to 81 of the Arbitration & Conciliation Act, 1996 apply to such a dispute as if the parties had initiated conciliation under Part III of the Arbitration & Conciliation Act, 1996
If conciliation under section 18(2) is not successful or is terminated without a settlement, the MSME facilitation council refers the dispute to arbitration for adjudication as per the law.
The council can itself take the dispute for arbitration or refer the dispute to any institution or centre providing alternate dispute resolution services for such arbitration.
The provisions of the Arbitration & Conciliation Act, 1996 apply to such arbitration proceeding or disputes.
Section 19 of the MSME Act, provides for an application for setting aside a decree, award or order arising out of an arbitration proceeding can be filed.
The Arbitration and Conciliation Act, 1996 applies to any alternate dispute resolution or arbitration initiated under this Act.
Hence, a party can file an objection or application to set aside the decree or award order as per the provisions of Section 34 of the Arbitration and Conciliation Act, 1996, read with Section 19 of the MSME Act..
Parties can execute the decree, award, or order as per the provisions of Section 36 of the Arbitration and Conciliation Act, 1996..
Certain states have formulated their own rules allowing the recovery of the decree amount as arrears of land revenue, such as Rule 5 of the Madhya Pradesh Micro and Small Enterprises Facilitation Council Rules, 2006.
MSME case filing provisions as provided under the MSME Act, and Govt of India initiative in the form of MSME Samadhan portal is a significant step towards creating a more business-friendly environment and improving the ease of doing business in the country.
The provisions of filing case through MSME Samadhan reduces the need for physical visits to government offices, saves time and resources, and provides greater transparency and accountability in the MSME dispute resolution process.
MSME case filing process is a significant step. It has made the recovery process easy for MSME.
MSME case filing through the MSME Samadhan portal awareness is gaining moment. However, we need to raise more awarenes.
Both the State and Central Governments need to make improvements in certain areas.
Hopefully, the Government is ensuring that it takes more and more improvement initiatives.
MSME Online Case Filing – the process is a significant step
Law Article by NB Associates
Micro and small enterprises (MSEs) can recover their dues or outstanding by using the provisions of sections 15 to 18 of the MSME Act. These provisions are an effective solution for the MSEs debt recovery.
For debt recovery, MSEs can start with MSME online case filing.
MSME online case filing refers to the process of filing a case related to MSMEs through online channel.
It provides a convenient and efficient way for MSEs to file their grievances and seek redressal of their MSME complaint.
MSEs can file online case through MSME Samadhaan portal.
The MSME Samadhaan portal was launched by the Government of India to facilitate the settlement of disputes related to payment of dues by MSEs.
MSEs can file a case in the portal and the concerned authority takes appropriate action to resolve the dispute
MSME Samadhaan portal provide a quick and easy platform for resolving grievances related to the delayed payment of dues by buyers to MSMEs. The portal is designed to empower the MSMEs and ensure the timely settlement of their disputes.
MSME Samadhan portal enables MSEs to file their complaints online against buyers who have failed to make payments for the goods or services provided by the MSEs.
The portal allows MSMEs to file complaints with necessary documents such as invoices, work orders, contracts, etc.
After MSME online case filing through MSME Samadhaan portal, the complaint is then forwarded to the concerned buyer. The buyer is given 15 days to respond to the complaint, and the concerned authorities take necessary actions to recover the amount due to the MSME.
MSME Samadhan portal has a dashboard that enables the MSMEs to track the status of their complaints online. The portal also provides information related to the various schemes and policies of the Government related to MSMEs
Overall, the MSME Samadhan portal is a useful initiative by the Government of India to provide MSMEs with an easy and hassle-free mechanism to resolve their grievances related to delayed payments by buyer.
MSMEs may also be required to upload relevant documents, such as contracts, work order and invoices.
Once the case is filed online, the MSME will receive an acknowledgement of receipt and a unique case number, which can be used to track the progress of the case.
If a buyer does not pay after a case has been filed by an MSME on the MSME Samadhan portal, the case is forwarded to the respective MSME facilitation council.
MSME facilitation council then start proceedings under section 18(2), which is a mandatory conciliation proceeding between the parties. If conciliation fails MSME facilitation council refers the matter to statutory arbitration.
MSEs can issue a legal notice to the debtor demanding the payment of outstanding dues.
A legal notice serves as a warning to the debtor and may prompt them to make the payment to avoid further legal action
However, it is not mandatory by law to issue a legal notice.
The supplier should be a micro or small enterprise (MSE) as per the definition provided in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
The supplier should also have a valid Udyog Aadhaar Number (UAN), which is a 12-digit identification number provided to MSEs by the Ministry of Micro, Small and Medium Enterprises (MSMEs)
Read More – Who are eligible for MSME Samadhan?
MSME Online case filing is a significant step towards creating a more business-friendly environment and improving the ease of doing business in the country.
It reduces the need for physical visits to government offices, saves time and resources, and provides greater transparency and accountability in the MSME dispute resolution process.
MSME Online Case Filing has helped MSMEs in several ways, some of which are :
Convenience: Online case filing has made it easy and convenient for MSEs to file their complaints and seek redressal for their grievances related to delayed payments or other issues. They can file their complaints from anywhere at any time, without the need to physically visit the concerned authorities.
Time-saving: Online case filing has reduced the time taken for filing complaints and seeking redressal. The process is streamlined, and MSEs receive an acknowledgement of receipt and a unique case number, which can be used to track the progress of the case.
Transparency: Online case filing has increased transparency and accountability in the dispute resolution process. MSEs can track the progress of their cases online and receive updates on the actions taken by the concerned authorities.
Efficiency: Online case filing has improved the efficiency of the dispute resolution process. The concerned authorities can quickly access the complaint and take appropriate actions to resolve the issue, leading to faster resolution of dispute.
Reduced costs: Online case filing has reduced the costs associated with filing complaints and seeking redressal. MSEs do not need to spend money on travel or legal fees, and the process is faster and more efficient, reducing the overall cost of dispute resolution.
Overall, MSME Online Case Filing has helped MSEs to resolve their disputes related to delayed payments or other issues in a timely and efficient manner, thus promoting a business-friendly environment and improving the ease of doing business in the country.
MSME online case filing process is a significant step. It has made the recovery process easy for MSME.
MSME online case filing awareness is gaining moment. However more and more awareness is to be done.
There is also some area where improvement is to be made by Government.
Law is always evolving and hopefully, Government is taking care that more and more improvement initiatives taken.
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MSME Frequently Asked Questions
What are the benefits of MSME registration?
What is the MSME Facilitation council?
How does MSME Facilitation Council work?
Where can an MSME claim be filed? Jurisdictions
Why is filing of claim before the MSME Facilitation Council beneficial?
Whether Limitation Act applies to claims under MSME Act?
MSME Frequently Asked Questions – Read more
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Read : MSME case Study
Who are eligible for MSME Samadhan?
Legal points by NB Associates
MSME Samadhaan is an online portal that provides a mechanism for micro and small enterprises (MSEs) to file their delayed payment complaints. The eligibility criteria for filing a complaint on the MSME Samadhaan portal are as follows:
1. The supplier should be a micro or small enterprise (MSE) as per the definition provided in the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.
2. The supplier should have a valid Udyog Aadhaar Number (UAN), which is a 12-digit identification number provided to MSEs by the Ministry of Micro, Small and Medium Enterprises (MSMEs)
3. The buyer should be a public sector enterprise or a company or a registered society or a trust or a limited liability partnership or any other entity engaged in the production or supply of goods or services.
4. The payment for the supplies made by the supplier should have been due for a period of more than 15 days from the date of acceptance of the goods or services or the date of deemed acceptance.
5. The supplier should have raised an invoice for the supplies made and the same should have been accepted by the buyer or deemed to have been accepted by the buyer.
MSEs meeting the above eligibility criteria can file their delayed payment complaints on the MSME Samadhaan portal.
The portal provides a platform for MSEs to file their complaints and track the status of their complaints.
How effective is MSME Samadhaan? Is MSME Samadhan effective ?
MSME Law points by NB Associates
MSME Samadhaan is an online portal that provides a mechanism for micro and small enterprises (MSEs) to file their delayed payment complaints.
The effectiveness of the portal in resolving delayed payment complaints depends on several factors, including the number of complaints filed, the response time of the concerned parties, and the efficacy of the dispute resolution mechanism.
Since its launch in 2017, MSME Samadhaan has received a significant number of delayed payment complaints from MSEs.
The portal has been successful in resolving a large number of complaints and ensuring that payments are made to the MSEs within the stipulated time period.
According to the Ministry of Micro, Small and Medium Enterprises, as of November 2020, MSME Samadhaan had resolved over 31,000 delayed payment complaints, resulting in the recovery of over Rs. 3,800 crores for MSEs.
One of the strengths of MSME Samadhaan is its ability to provide a time-bound and efficient mechanism for the resolution of delayed payment complaints.
The portal provides a platform for MSEs to file their complaints and track the status of their complaints.
The portal also facilitates communication between the parties and ensures that the concerned parties are notified of the complaint and given a reasonable opportunity to respond.
However, despite the effectiveness of MSME Samadhaan, delayed payment continues to be a significant problem for MSEs in India.
Many MSEs face challenges in accessing credit, managing cash flow, and meeting their operational expenses due to delayed payments from their buyers.
Therefore, there is a need for greater awareness about the provisions of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 and the use of mechanisms like MSME Samadhaan to address delayed payment issues.
Delayed payments to Micro and Small Enterprises under MSME Act – Law Article by NB Associates
Micro, Small and Medium Enterprises Development Act, 2006 came in the year 2006.
The preamble of the Act provides the following objectives:
‘An Act to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto’.
This Act is now primarily known for Chapter V which provides for provisions related to Delayed payments to Micro and Small Enterprises.
Chapter V contains provisions starting with section 15 to section 25, out of which sections 15 to 19 primarily deals with Delayed payments to Micro and Small Enterprises.
These provisions are having overriding effect on any other laws as per section 24 of the Act.
The provisions for delayed payments to MSMEs are aimed at protecting the interests of businesses, which are often small-scale enterprises with limited financial resources.
Delayed payments can have a significant impact on the cash flow and working capital of these businesses, which can affect their ability to operate and grow.
Overall the provisions for delayed payments to MSMEs are designed to protect the interests of these businesses and ensure their continued growth and development. By ensuring that they are paid on time, these provisions help to improve the cash flow and working capital of MSMEs, which in turn can lead to increased investment, job creation, and economic growth.
Section 15 of MSME Act imposes liability on the buyer to make payment on or before the date agreed. And, where there is no agreement in this behalf, before the appointed day.
This Section further provides that in no case the period agreed to exceed forty-five (45) days from the day of acceptance or the day of deemed acceptance.
As per Section 2(b) of MSME Act, “appointed day” means the day following immediately after the expiry of the period of fifteen days (15) from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.
This definition is important as it sets the timeline for the payment of dues to micro, small and medium enterprises (MSMEs) under the Act.
As per Explanation (i) of section 2(b) the day of acceptance means :
(1) the day of the actual delivery of goods or the rendering of services; or
(2) where any 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 on which such objection is removed by the supplier.
As per Explanation (ii) of section 2(b) the day of acceptance means :
“the 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.
16 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides for the payment of interest by a buyer to a supplier in case of delayed payment.
According to this section, if a buyer fails to make payment to an MSME supplier within 15 days from the “appointed day”, the buyer is liable to pay compound interest with monthly rests to the supplier at the rate three times of prevailing bank rate notified by RBI (Reserve Bank of India)
The appointed day is already defined above.
It is important to note that the interest payable under this provision is compound interest with monthly rests. This means that the interest amount for each month is added to the principal amount, and the interest for the next month is calculated on the total amount (principal + interest for the previous month).
The provision for payment of interest on delayed payment is a significant step towards promoting a timely payment culture in the business ecosystem. It provides a legal remedy for MSMEs to recover their dues and acts as a deterrent for buyers who may be tempted to delay payments. The provision also helps in improving the financial health of MSMEs by providing them with a predictable cash flow, which is crucial for their growth and sustainability.
Section 17 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides for the recovery of amount due to a micro, small or medium enterprise (MSME) by a buyer who has failed to make payment for the goods or services supplied.
Section 18 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides for the reference of disputes between a buyer and a micro or small enterprise (MSE) to the Micro and Small Enterprises Facilitation Council (MSEFC)
Under this section, an MSE supplier can make a reference to the MSEFC regarding any dispute arising out of a transaction with a buyer
This section Provides that any party to dispute may make reference to MSEFC in respect of any amount due under section 17.
On such reference, section 18 (2) provides for conciliation between the parties.
The council can itself conduct conciliation proceedings or it may seek the assistance of an institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for conducting conciliation.
The provisions of sections 65 to 81 of the Arbitration & Conciliation Act, 1996 apply to such a dispute as if conciliation was initiated under part III of the Arbitration & Conciliation Act, 1996.
Where the conciliation is not successful or stands terminated without any settlement between the parties, a reference to the arbitration is made for adjudication of the dispute as per law.
The council can itself take the dispute for arbitration or refer the dispute to any institution or centre providing alternate dispute resolution services for such arbitration.
The provisions of the Arbitration & Conciliation Act, 1996 apply to the dispute.
Section 19 of the MSME Act, provides for an application for setting aside a decree, award or order arising out of an arbitration proceeding can be filed.
The provisions of the Arbitration and Conciliation act, 1996 are applicable to an alternate dispute resolution/arbitration initiated under this Act.
Hence an objection / Application for setting aside the decree, or award order can be filed as per provisions of section 34 of Arbitration and Conciliation Act, 1996 read with section 19 of MSME act.
The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
These provisions are having overriding effect on other laws. The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, as says section 24 of the Act.
To conclude Delayed payment provisions under MSME Act is the best and effective mechanism available to a micro and small enterprise for MSME delayed payment .
This Act provides for the completion of proceeding within a period of 90 days. However it is taking time because of lack of effective system in place.
This law is certainly going to evolve during the passes of time. This Law with an effective mechanism with speedy disposal of cases definitely going to give much relief to the small business houses.
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Please note
This Article is written by Managing Partner Naveen Bhardwaj with assistance and research from the NB Associates team.
The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
‘NB Associates’ provides comprehensive MSME related legal consultancy.
Our clients can contact us for MSME related claims – Recovery of dues or other related legal consultancy
_____________________________
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Can the Bank guarantee be accepted as 75% pre-deposit u/s 19 MSME Act?
Law articles on MSME claim – Read more
______________________________
What are the benefits of MSME registration?
What is the MSME Facilitation council?
How does MSME Facilitation Council work?
Where can an MSME claim be filed? Jurisdictions
Why is filing of claim before the MSME Facilitation Council beneficial?
Whether Limitation Act applies to claims under MSME Act?
MSME Frequently Asked Questions – Read more
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Law Article by NB Associates – MSME Samadhan Scheme –The effective recovery system
We have a special law related to MSME in the form of the Micro, Small and Medium Enterprises Development Act, 2006. This Act / law came in to the year 2006.
What is MSME?
This Act’s objective is to facilitate the promotion and development and enhancement of the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.
This Act, besides having other provisions for the promotion of and development of the MSME also contains provisions for the recovery of the payments due to MSME.
Chapter V of the Act is devoted to the ‘Delayed payments to Micro and Small Enterprises’.
These provisions are having overriding effect on other laws. The provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, as says section 24 of the Act.
Thus, notwithstanding anything contrary contained in any other law, the provisions of section 15 to 23 which relates to ‘Delayed payments to Micro and Small Enterprises’ has an overriding effect, i.e. the provisions of these sections prevail over any other laws.
Micro, Small and Medium Enterprises Development Act, 2006 provides the following specific provisions for recovery of the payment due to MSME:
1. Section 15 of the Act provides for the ‘Liability of buyer to make payment’.
2. Section 16 provides for the ‘Date from which and rate at which interest is payable’
3. Section 17 provides for ‘Recovery of the amount due’
4. Section 18 provides for ‘Reference to Micro and Small Enterprises Facilitation Council;.
5. Section 19 provides an Application for setting aside a decree, award or order arising from the proceedings under section 18.
6. Section 24 provides the overriding effect of sections 15 to 23 in terms that the provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
The above noted provisions i.e. sections 15 to 23 have been there since 2006, however, this was seldom used by Micro or small enterprises.
Central Govt considered the need to speed up the recovery process for Micro and Small enterprises. And, with aim to make the system of ‘Delayed Payments to Micro and Small Enterprises’ efficient, speedy and more accessible, it launched MSME Samadhan on 30th October, 2017
MSME Samadhaan enables MSEs to register cases related to delayed payments online. And this came as an effective solution for MSME delayed payment.
To avail MSME Samadhan scheme for Delayed payment the business entity needs to be registered as Micro or Small enterprises.
Further, this provisions is available for only Micro and Small Enterprises and not for medium enterprises.
These provisions i.e. sections 15 to 23 of the Act are only applicable to micro and small enterprises. It is not applicable to the medium enterprises.
It is only micro and small enterprises, which can avail this benefit of these provisions for MSME payment delay.
Buyers of the goods or services are required to make payment on or before the agreed date to the supplier of such goods or services, as per section 15. The agreed date not to exceed 45 days period
Where there is no agreed date, the payment to the supplier has to be made maximum within 15 days.
Where no objection to the goods or services is made in writing within a period of 15 (Fifteen) days from the date of delivery of goods or rendering services, the buyer shall be deemed to have accepted goods or services.
Section 2(b) Explanation (ii) provides that where no objection is made in writing by the buyer regarding acceptance of goods or services within 15 (fifteen) days from the day of the delivery of goods or the rendering of services, the day of deemed acceptance shall be the day of the actual delivery of goods or the rendering of services.
There is provision of paying fixed compounding interest if payment is not made within the specified period to the supplier.
Such interest rate is applicable even if buyer and supplier has agreed any other rate of interest
Interest-rate provided under section 16 of the Act is 3 (three) times of the bank rate notified by RBI (Reserve Bank of India)
This is the statutory interest rate prescribed under section 16 of the MSME Act, and there cannot be any deviation.
Section 18 of the Act provides that the supplier can file a claim before the Micro and Small Enterprises Facilitation Council as per the provisions of section 18 of the Act, If the amount is not paid along with interest as provided under section 16,
So, when the payment is not made, an online complaint to MSME Samadhan Portal can be made. Once claim is made, a reference is made to the Micro and Small Enterprises Facilitation Council.
On such reference, section 18 (2) provides for conciliation between the parties.
The council can itself conduct conciliation proceedings or it may seek the assistance of an institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for conducting conciliation.
The provisions of sections 65 to 81 of the Arbitration & Conciliation Act, 1996 apply to such a dispute as if conciliation was initiated under part III of the Arbitration & Conciliation Act, 1996.
Where the conciliation is not successful or stands terminated without any settlement between the parties, a reference to the arbitration is made for adjudication of the dispute as per law.
The council can itself take the dispute for arbitration or refer the dispute to any institution or centre providing alternate dispute resolution services for such arbitration.
The provisions of the Arbitration & Conciliation Act, 1996 apply to the dispute.
Section 19 of the MSME Act, provides for an application for setting aside a decree, award or order arising out of an arbitration proceeding can be filed.
The provisions of the Arbitration and Conciliation act, 1996 are applicable to an alternate dispute resolution/arbitration initiated under this Act.
Hence an objection / Application for setting aside the decree, or award order can be filed as per provisions of section 34 of Arbitration and Conciliation Act, 1996 read with section 19 of MSME act.
Execution of the degree, award or order can be as per the provisions of section 36 of the Arbitration and Conciliation Act, 1996.
Certain states have formulated their own rule under which the amount decree can be recovered as arrears of land revenue e.g. Madhya Pradesh Micro and Small Enterprises Facilitation Council Rules, 2006 (Rule 5)
To conclude MSME Samadhan scheme for Delayed payment is the best and effective mechanism available to a micro and small enterprise for MSME delayed payment recovery.
This Act provides for the completion of proceeding within a period of 90 days. However it is taking time because of lack of effective system in place.
This law is certainly going to evolve during the passes of time. This Law with an effective mechanism with speedy disposal of cases definitely going to give much relief to the small business houses.
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Please note
This Article is written by Managing Partner Naveen Bhardwaj with assistance and research from the NB Associates team.
The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
‘NB Associates’ provides comprehensive MSME related legal consultancy.
Our clients can contact us for MSME related claims – Recovery of dues or other related legal consultancy
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For advice specific to your situation existing clients may please consult our team.
