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Date:June 3, 2023
Section 18 of MSME Act – What is Section 18 of MSME Act
MSME Law Notes by NB Associates
In the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, there is a provision for the establishment of Micro and Small Enterprises Facilitation Councils.
These councils are responsible for facilitating the resolution of disputes and grievances related to delayed payments or other disputes between the buyer and the micro or small enterprise.
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Section 18 of the MSMED Act deals with the followings :
1. Reference of disputes of delayed payment to Micro and Small Enterprises Facilitation Council [Section 18(1)]
2. Micro and Small Enterprises Facilitation Council conducting conciliation on receipt of reference [Section 18(2)]
3. Initiation of Arbitration proceeding, in case conciliation initiated under section 18(2) is not successful and stands terminated without any settlement between the parties. [Section 18(3)]
4. Micro and Small Enterprises Facilitation Council Territorial jurisdiction where reference of the dispute of delayed payment to be made. [Section 18(4)]
5. Provision that Every reference made to be decided within a period of ninety days from the date of a reference. [Section 18(5)]
18. Reference to Micro and Small Enterprises Facilitation Council.—(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated 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 and the 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 Act.
(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.
Under the provisions the Section 18(1) of MSME Act dispute in regards to any amount due against the buyer for the goods or services supplied by the Supplier can be referred to the Micro and Small Enterprises Facilitation Council.
The provisions uses the words ‘Any party to the dispute may make reference’. So, either Buyer or the Seller can make such reference. It is not that only Supplier can make reference. A buyer can also make reference.
Provided however that this reference to be for any amount due against the buyer for the goods or services supplied by the Supplier as per section 17 of the Act.
Section 18(2) of the MSME Act provides that on receipt of a reference under section 18(1), the Micro and Small Enterprises Facilitation Council can itself conduct conciliation in the matter.
Micro and Small Enterprises Facilitation Council can also seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation.
For such conciliation the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.
Section 18(3) of MSME Act provides that where the conciliation initiated under section 18(2) is not successful and stands terminated without any settlement between the parties, the Micro and Small Enterprises Facilitation Council shall itself take up the dispute for arbitration
Micro and Small Enterprises Facilitation Council can also refer it to any institution or centre providing alternate dispute resolution services for such arbitration.
In such arbitration proceeding the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall 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 Act.
Section 18(4) of MSME Act provides thatnotwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
Thus, as per section 18(4) of MSMED Act, the MSME facilitation council where supplier is located has jurisdiction to adjudicate the dispute of the delayed payment between the Supplier and the buyer.
Section 18(5) of MSME Act provides that Every reference made under this section 18 to be decided within a period of ninety days from the date of making such a reference.
Thus, the Arbitration proceeding has to be completed within a period of 90 days.
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