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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.


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. 


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. 


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.


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.

What does LegalFund do?

LegalFund provides strong financial support for the litigation or arbitration proceedings and focuses on mitigating the claimant’s financial burdens.

It helps to meet various other goals such as:

How do we Process Funds for your claim?

To consider your case fit for funding, we need to understand the details of the claim to bring it down for successful representation. The below questions can help us in quick analyses of your case.

Whether the dispute is genuine to be resolved ; what laws will govern the dispute?

What are the rules, statutes or laws used?

What can be the value of the claim and what counterclaims can be brought by the respondent?

Are there any parallel proceedings involved where you are either respondent or claimant?

What amount of funding is required, the longevity of the case?

What are the grounds of breach of contract and losses incurred?

What is the evidence and witnesses to substantiate the claim? Also, are they available?

Is the respondent competent to fulfill the award or judgment against them?

Who are the legal experts and their track record of bringing the claim to a successful conclusion? Also, what is the strategy made for the case?

What makes LegalFund different?

It has an association with a team of legal experts specialized in the area of the dispute who quickly analyze your claim by evaluating based on the merits and facts of your cases.

We also provide you an insight into the pricing before leading you towards our funding process.

Litigation finance helps firms and companies in pursuing worthwhile claims without affecting their cash flow by releasing funds to help their litigations. Litigation finance can be useful for the monetary establishment as well.

Legal Fund helps companies or firms stage their grounds in opposition to their well-established opponents. It ensures {that a} claimant can get a lawyer with the correct high quality and experience to pursue the case with correct methods.

The price of litigation typically leads to double bills. The costs and the prices of litigations incur month-to-month and are expensed by the corporate monetary statements, decreasing its working earnings. Secondly, if an organization makes a restoration, the revenue is recorded beneath the road as it’s not generated by its core enterprise.

So, LegalFund weakens the monetary threats and prepares an undisrupted platform.

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