The MSME Development Disputes

The MSME Development Disputes

 

In the growing financial sector, micro, small and medium enterprises are rising. The rise of such enterprises also makes them the victim of delayed payments by large enterprises. Defaulting payments creates hardships for the micro, small and medium enterprises in running business operations. The MSME Development Act of 2006 was enacted to protect such businesses.

The Acts classifies the enterprises under Section 7 based on the investment in plant & machinery and equipment:

1. In the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry where the investment in plant & machinery–
2. does not exceed twenty-five lakh rupees, is micro-enterprise;
3. is more than twenty-five lakh rupees but does not exceed five crore rupees, is a small enterprise; or
4. is more than five crore rupees but does not exceed ten crore rupees, is a medium enterprise;
5. In the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry where investment in equipment–
6. does not exceed ten lakh rupees, is a micro-enterprise;
7. is more than ten lakh rupees but does not exceed two crore rupees, is a small enterprise; or
8. is more than two crores rupee and does not exceed five crore rupees; is a medium enterprise.

NOTE: while calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices, and such other items as may be specified by notification; shall be excluded.

Under the under Atma Nirbhar Bharat Abhiyan (ABA), the revised criteria to classify enterprises is based on investment & Annual Turnover:

1. For micro-enterprises, the investment does not exceed Rs. 1 crore & Rs.5 crore turnover, respectively.
2. For small enterprises, investment does not exceed Rs.10 crore & Rs.50 crore turnover, respectively.
3. For Medium enterprises, investment does not exceed Rs.50 crore & Rs. 250 crore turnover, respectively.

REGISTRATION PROCESS

MSME registration can be on the government portal udyamregistration.gov.in 

For New Enterprises:

• On the portal’s homepage, click the button “For New Entrepreneurs who are not yet Registered as MSME or those with EM-II.”
• Enter the Aadhar card number, entrepreneur name, and number. 
• After entering the details, validate it with OTP. A PAN verification page will open.
• Enter the “organization-name” and PAN Number. Validate it.
• After verification of PAN, the Udyam Registration box will appear. The entrepreneurs need to fill in the personal details and details of the plant or industry.
• After filling in all the details, “ submit the details and get the final OTP”. 
• An enterprise will be registered, and a message is received. The issuance of the Udyam Registration Certificate may take a few days.

For Registered Enterprises:

• On the portal’s homepage, click the button “For those with UAM registration” or “For those with UAM registration through Assisted filing.”
• Enter the Udyog Aadhaar Number and select the OTP option. Generate OTP and validate it.
• Hence, your registration completes. 

PAYMENT LIABILITY OF BUYER (Section 15-17)

The buyer is liable to make the payment of the supplier before the agreed date in writing or before the appointed date. But, the agreed period should not exceed 45 days of the acceptance or deemed acceptance of the goods. 

If the buyer fails to make the payment of the supplier on the agreed-upon date, he will be liable to pay the compound interest on the amount from the appointed day, or, as the case may be, from the date immediately following the agreed-upon date, at three times the Reserve Bank’s notified bank rates, every month. Hence, the buyer shall be liable to pay the amount with interest. 

PROCEDURE UNDER SECTION 18 OF THE ACT

According to this section, The facilitation council can act only in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

• To bring the case under the ambit of MSME. There should be an amount pending between the buyer and supplier.
• Any party with valid EM Part -II /UAM can make a reference to the Micro and Small Enterprises Facilitation Council of the state having jurisdiction in such disputes. 
• In reference, the Facilitation council will first step up a conciliation either by itself or can refer it to a conciliation center.
• If the parties’ conciliation is successful, the matter will be resolved there as per their settlement.
• If the conciliation is not successful between parties; then the facilitation council will initiate arbitration proceedings either by itself or will refer the matter to an arbitration center.
• The reference under this section has to be resolved within 90 days.

APPEAL

Any court shall not entertain an application to set aside a decree, award, or order made by the Council constituted under the act unless the appellant has deposited 75 per cent of the amount due under the decree, award, or other order in the manner specified by the High Court.

Proviso to Section 19 empowers the court to pass appropriate orders for the disbursement of the amount to the supplier on the condition as it considers reasonable under the circumstances of the case. 

Therefore, a deposit of 75% of the amount is mandatory and the court has the discretion to indicate the manner of depositing 75% of the amount, and it can be in installments if required.