What is the MSME Facilitation council
Section 20 of the Micro, Small and Medium Enterprises Development Act, 2006 (the ‘Act’) for the establishment of Micro and Small Enterprise Facilitation Councils (MSEFC) by the State Government.
Each Facilitation council consists of 3 – 5 members. The composition, and procedure to be followed in the discharge of their functions is / to be prescribed by State Government.
The general function of the Micro and Small Enterprise Facilitation Council is provided in Section 18 of the Act. The facilitation council firstly conducts conciliation.
If conciliation fails without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration.
For the conciliation as the provisions of section 65-81 of Arbitration & Conciliation Act, 1996 apply, as if the conciliation was initiated under Part III of that Arbitration & Conciliation Act, 1996.
For arbitration provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section(1) of section 7 of that Arbitration & Conciliation Act, 1996.
What is MSME
MSME is an abbreviation of Micro, Small and Medium Enterprises. In other words, these are the enterprises which are Micro, Small and Medium in nature.
The enterprises which are Micro, Small and Medium are presently determined by the amount of investment in plant, machinery or equipment and the annual turnover, as per notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020
Micro enterprise literally means an enterprise operating on a very small scale.
Micro enterprise generally refers to a type of small business enterprise that has a very small number of employees, typically less than ten people, and very low levels of revenue or capital investment
Micro enterprise can take many forms, such as home-based businesses, street vendors, small-scale agricultural or manufacturing operations, and small service providers.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises 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 is a type of business that is larger than a micro enterprise, but small than a medium – sized enterprise. Small enterprise typically have more employees and higher level of revenue or capital investment than micro enterprise, but less than medium – sized enterprises.
In general, small enterprise have fewer than 50 employees. Small enterprise can take many forms, including retail shops, restaurants, consulting firms etc.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises 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 – sized enterprise is a type of business that is larger than a small enterprises but smaller than a large enterprise. These enterprise typically have more employees and higher levels of revenue or capital investment than small enterprise.
Generally medium sized enterprise have between 50 to 200 employees. Medium – sized enterprise can take many forms, including manufacturing firms, wholesalers, and professional service firms.
Notification No. S.O. 2119(E) dated 26.06.2020 / 26th June, 2020 classify Micro enterprises as enterprises 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.
A composite criterion of investment and turnover applies for classification of an enterprise as micro, small or medium.
If an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category.
However, no enterprise is placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.
All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) is / are collectively treated as one enterprise and the turnover and investment figures for all of such entities be seen together and only the aggregate values is considered for deciding the category as micro, small or medium enterprise
The calculation of investment in plant and machinery or equipment is linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961.
In case of a new enterprise, where no prior ITR is available, the investment is based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR.
The expression ―plant and machinery or equipment of the enterprise, have the same meaning as assigned to the plant and machinery in the Income Tax Rules, 1962 framed under the Income Tax Act, 1961 and include all tangible assets (other than land and building, furniture and fittings).
The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, is taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR. (
The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the MSMED Act is excluded from the calculation of the amount of investment in plant and machinery.
Exports of goods or services or both, is excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.
Information as regards turnover and exports turnover for an enterprise to be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.
The turnover related figures of such enterprise which do not have PAN was considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN has been made mandatory.
The form for registration is provided in the Udyam Registration portal.
There is no fee for filing Udyam Registration.
Aadhaar number is required for Udyam Registration.
The Aadhaar number to be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF).
In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number.
In case an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis.
No enterprise to file more than one Udyam Registration. Any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.
Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process is liable to such penalty as specified under section 27 of the MSMED Act.
An enterprise having Udyam Registration Number can update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self declaration basis.
Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.
Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise is updated.
In case of graduation (from a lower to a higher category) or reverse-graduation (sliding down to lower category) of an enterprise, a communication is sent to the enterprise about the change in the status.
In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise to maintain its prevailing status till expiry of one year from the close of the year of registration.
In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise to continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place.
In order to facilitate the promotion and development and enhancing the competitiveness of micro, small and medium enterprises the through Act No. 27 of 2006 came up with Micro, Small and Medium Enterprises Development Act, 2006 (the ‘Act’)
As per section 8 of the Act Any person who intends to establish a micro, small or medium enterprise is to file a memorandum for such micro, small or medium enterprises with such authority as is prescribed.
In other words, such a person needs to register as MSME.
MSME Act of 2006 was passed for promotion and development and to enhance the competitiveness of micro, small and medium enterprises.
Govt of India has recognised the contributions of MSME in India’s economic sector. Indian Government’s recognition has given thrust to the development and promotion of MSMEs.
From time to time Indian Govt. or State Govt. has come up with several benefits.
Read here: Benefits of MSME registration
Section 15, 16, 17, 18, and 19 of the Act relates to liability of the buyer to make payment, provisions related to the adjudication of dispute between buyer and supplier.
How does arbitration proceeds?
Arbitration is an agreement based dispute resolution mechanism. So proceeds for arbitration followings are the pre-requisites:
1. Existence of an arbitration agreement within the scheme of section 7 of Arbitration and Conciliation Act, 1996; and
2. Existence of a dispute.
As per the provisions Arbitration and Conciliation Act, 1996, normally arbitration proceeds as per the followings :
1. Invocation of arbitration agreement & arbitrator appointment: section 21, 11
2. Filing of statement of claim
3. Filing of statement of defence or counterclaim
4. Evidence
5. Payment of stamp duty & Passing of an award
6. Execution of award
What power an arbitrator has in an arbitration proceeding ?
Arbitration & Conciliation Act, 1996 is an special Act. Arbitrator derives its power from the same.
The Act has envisaged almost all the situation, and provided provisions where Arbitrator enjoys the same power like a normal court.
Arbitrator’s power includes the followings :
To rule on its own jurisdiction : section 16
To pass orders on interim measures : section 17
Determination of rule of procedure : section 19, 24
To appoint experts : section 26
To take court assistance : section 27
To use mediation, conciliation or other procedure to encourage settlement : section 30
Correction and interpretation of award; passing of additional award : section 33
How can parties go to arbitration ?
For adjudication of dispute through arbitration, as per section 7 of the Arbitration & Conciliation Act, 1996 an arbitration agreement must exists between the parties.
As per section 7 of the Arbitration & Conciliation Act, 1996
1. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
2. An arbitration agreement shall be in writing.
3. An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication including
communication through electronic means which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
4. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Thus, there has to be an arbitration agreement as per the scheme of section 7 for a parties to go for arbitration.
Sometimes court may refer disputes to arbitration. In case commercial transaction where supplier or service provider is Micro, Small or Medium enterprises, the matter is referred to arbitration.
How arbitration is beneficial?
We take example of filing a suit and will see how arbitration is beneficial
| Suit in District Court / High court | Arbitration |
| Court fee is payable for filing suit (Ranging from 1 % to 7 % of valuation) | Initially, no fee is payable. On Award Rs. 100 per Rs. 1 Lac stamp duty is payable which is much less than the court fee payable |
| Jurisdiction of the court is fixed as per the provisions of Civil Procedure Code | Parties can agree the seat of arbitration |
| Normally it leads to a lengthy trial, and this is time taking. In metro cities, it takes average 2-3 years to conclude the case. | Normally the procedure is summary. On average arbitration proceedings can conclude in 4- 6 months. |
| Normally simple interest is awarded in money suit | Fixed interest as per the provisions of Arbitration & Conciliation Act, 1996 is awarded which is higher than the court award. |
| Execution of the decree or judgement can be filed in the same court which passed the decree. In case Defendant is residing outside the jurisdiction of court, it is time consuming and execution takes time. | Execution can be directly filed where Defendant resides. |
| Judgement or decree is normally challenged and it takes time to decide. | Objection against award can be filed on narrow grounds available as per the provisions of section 34 of Arbitration & Conciliation Act, 1996 |
There are also other benefits of the arbitration proceedings.
Arbitration is a preferred method for resolving disputes outside the court system. Therefore, its binding nature is a common query.
An arbitrator issues an award as the final decision in arbitration. This decision resolves the conflict between the parties.
The award may include monetary compensation or specific obligations. Consequently, it has a similar effect as a court judgment.
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Yes, the arbitrator’s decision is binding when parties agree to arbitration. Therefore, parties must comply with its terms.
Binding awards make arbitration an effective and final dispute resolution method. Consequently, they provide certainty and minimize further disputes.
Non-compliance with an award allows the other party to seek court enforcement. Therefore, legal backing strengthens the arbitration process.
In India, the Arbitration and Conciliation Act, 1996 governs arbitration proceedings. Consequently, it ensures awards follow international standards.
Section 35 of the Act states that arbitral awards are final. Therefore, the law obligates parties to comply with awards.
This framework aligns with the UNCITRAL Model Law. Consequently, it makes arbitration globally recognized and legally robust.
Parties can challenge an award under Section 34 of the Arbitration Act. Therefore, the law offers limited grounds for objections.
Fraud or corruption during arbitration can invalidate the award. Consequently, fairness in proceedings is a legal requirement.
Parties can object if the award violates public policy or laws. Therefore, the arbitration process respects legal boundaries.
Improper constitution of the arbitration panel is another valid ground. Consequently, parties can challenge such procedural irregularities.
Arbitrators must stay within the agreed scope. Therefore, overstepping boundaries allows parties to seek annulment of the award.
Courts enforce arbitration awards under Section 36 of the Arbitration Act. Consequently, the award has the same effect as a court decree.
When a party fails to comply, the other can approach the court. Therefore, legal enforcement ensures adherence to the award.
The process is straightforward and efficient. Consequently, it provides parties with timely resolutions to their disputes.
Parties voluntarily agree to arbitration. Consequently, this agreement ensures they honor the arbitrator’s decision.
Arbitration offers a private and efficient alternative to litigation. Therefore, it gains acceptance as a binding and effective method.
Binding decisions minimize disputes and prevent prolonged legal battles. Consequently, arbitration saves time and resources.
Binding arbitration ensures dispute resolution without court delays. Consequently, parties benefit from timely decisions.
Arbitrators specialize in the subject matter. Therefore, their decisions are informed and credible.
The process remains private and confidential. Consequently, parties avoid public scrutiny of their disputes.
Arbitration costs less than lengthy court trials. Therefore, it becomes a cost-effective option for resolving conflicts.
An arbitrator’s decision is legally binding and enforceable. Consequently, parties can trust arbitration for final and fair resolutions.
Courts rarely interfere in arbitration awards. Therefore, the process remains efficient and impartial.
Arbitration offers flexibility, confidentiality, and reliability. Consequently, it has become a favored choice for resolving disputes.
By complying with the award, parties demonstrate commitment to resolution. Therefore, arbitration continues to provide effective dispute settlement.
This article delves into the question, “Who is an arbitrator?” and explores their role, responsibilities, and importance in the arbitration process.
Arbitration has become a preferred method for resolving disputes in business and legal settings due to its efficiency and flexibility. Central to the arbitration process is the arbitrator, a neutral party responsible for delivering a fair and binding resolution.
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An arbitrator is an impartial individual appointed to resolve disputes between parties in an arbitration proceeding. They act as a judge in an informal setting, hearing arguments, examining evidence, and issuing a binding decision known as an arbitral award.
Parties often choose arbitrators based on their expertise in the subject matter of the dispute, ensuring a fair and informed resolution
The disputing parties or an arbitration institution privately select arbitrators, unlike traditional court judges They play a crucial role in alternative dispute resolution (ADR), offering a faster and more cost-effective method than litigation.
The arbitrator’s primary role is to facilitate the resolution of disputes by maintaining neutrality and ensuring procedural fairness. Below are key aspects of their role:
An arbitrator’s responsibilities go beyond merely hearing the case. Their duties ensure that arbitration remains a credible and efficient alternative to litigation.
Arbitrators are integral to the arbitration process and play a significant role in resolving disputes efficiently and fairly.
Arbitrators are appointed through a mutual agreement between the disputing parties or by an arbitration institution. The appointment process typically includes:
To effectively resolve disputes, arbitrators should possess the following qualities:
Despite their importance, arbitrators face several challenges, such as:
An arbitrator plays a pivotal role in resolving disputes through arbitration. Their expertise, neutrality, and ability to deliver binding decisions make them indispensable in alternative dispute resolution. By understanding the role, responsibilities, and importance of arbitrators, businesses and individuals can make informed decisions when opting for arbitration to settle disputes.
When choosing an arbitrator, consider their qualifications, experience, and reputation to ensure a fair and effective resolution process. With the growing preference for arbitration over litigation, the significance of arbitrators in modern dispute resolution continues to rise.
What is Arbitration? Meaning, Process, and Benefits Explained
In this article, we will explore the what is Arbitration or meaning of arbitration, how the process works, and the numerous benefits it offers to individuals and businesses.
Parties widely recognize and prefer arbitration as a method of dispute resolution because it offers an efficient, private, and flexible alternative to traditional litigation
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So Lets see what is Arbitration ?
Arbitration is a form of alternative dispute resolution (ADR) where disputing parties agree to resolve their conflicts outside the courtroom. Instead of a judge, the parties appoint an independent and impartial arbitrator or a panel of arbitrators to hear both sides, review the evidence, and deliver a binding decision known as an arbitral award.
Parties often use this method in commercial disputes, construction contracts, employment disagreements, and international trade matters.
People favor arbitration for its efficiency, confidentiality, and cost-effectiveness compared to traditional court proceedings.
The arbitration process typically follows these steps:
1. Agreement to Arbitrate
Arbitration begins with an agreement between the parties. Parties may include this agreement as a clause in a contract or as a separate agreement after a dispute arises. The arbitration agreement outlines the rules, procedures, and arbitrators that the parties will involve
2. Appointment of Arbitrator(s)
Parties select one or more arbitrators, either mutually or through an arbitration institution. Parties choose arbitrators based on their expertise, neutrality, and ability to handle the specific dispute.
3. Preliminary Hearing
The arbitrator conducts a preliminary hearing to discuss procedural matters, including timelines, evidence submission, and hearing schedules.
4. Submission of Evidence
Both parties present their evidence, supporting documents, and arguments to the arbitrator. This step is similar to court proceedings but is usually less formal.
5. Hearings
If required, the arbitration panel conducts hearings where both parties can present their case, cross-examine witnesses, and provide rebuttals.
6. Arbitral Award
After reviewing the evidence and arguments, the arbitrator delivers the arbitral award, which resolves the dispute. This award is final and enforceable under the law.
Arbitration can be classified into several types based on the nature of the dispute and the agreement between the parties:
Arbitration offers numerous advantages, making it an attractive option for dispute resolution:
1. Cost-Effectiveness
Arbitration is often less expensive than litigation due to streamlined procedures and shorter timelines.
2. Speedy Resolution
Arbitration resolves disputes faster than court cases, reducing delays and ensuring timely decisions.
3. Expertise
Arbitrators who specialize in the subject matter are often chosen by the parties, ensuring that the decision is well-informed and accurate.
4. Confidentiality
Arbitration proceedings are private, protecting sensitive information from public disclosure.
5. Flexibility
Parties have control over the process, including the choice of arbitrators, procedures, and timelines.
6. Finality
The arbitral award is binding and enforceable, providing closure to the dispute without prolonged appeals.
While arbitration has many advantages, it also has certain limitations:
| Aspect | Arbitration | Litigation |
| Cost | Generally lower | Higher due to court fees |
| Speed | Faster resolution | Lengthy process |
| Confidentiality | Private proceedings | Public records |
| Flexibility | Parties control the process | Governed by court rules |
| Enforcement | Awards are binding | Judgments may be appealed |
In India, the Arbitration and Conciliation Act, 1996 governs arbitration and aligns with international standards like the UNCITRAL Model Law. The Act provides a robust framework for domestic and international arbitration, promoting India as a hub for arbitration in Asia.
Key features of arbitration in India include:
So what is Arbitration ?
Arbitration is a powerful tool for resolving disputes efficiently, privately, and cost-effectively. Its flexibility and ability to cater to the specific needs of disputing parties make it a preferred choice for businesses and individuals worldwide.
By understanding the meaning, process, and benefits of arbitration, parties can make informed decisions to resolve conflicts effectively. Whether through domestic or international arbitration, this ADR method ensures that disputes are settled with fairness, expertise, and finality.
How arbitral award is enforced or executed?
Award is enforced as per the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court as per the provisions of section 36 of the Arbitration and Conciliation Act, 1996.
The award can be enforced only after the expiry of the time period of objection provided in section 34.
This page is intended for informative purposes only and does not constitute solicitation of client or legal advice.
For advice specific to your situation existing clients may please consult our team.
