Remedial Provisions for Delayed Payments to Micro, Small & Medium Enterprises

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The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 (hereinafter “the Act”) which contains provisions for the safeguard and development of Micro, Small and Medium Enterprises (MSME) and for recovery of delayed payments to MSME. Section 15 to 24 of the Act deals with the measures for delayed payments. State Government to set up Micro, Small and Medium Enterprise Facilitation Council for settlement of disputes on getting reference/filings on delayed payments to MSME.

  • According to Sec. 15 of the Act, the buyer has to make payment of goods or services to supplier on or before the date mentioned in the agreement between the buyer and supplier. Further, in any case, a buyer cannot delay the payment due to MSME beyond 45 days from the date of acceptance or the day of deemed acceptance.
  • But if the buyer does not make payment of goods supplied to MSME within 45 days of the acceptance of goods or service rendered, then the buyer is liable to pay compound interest with monthly interest rests to the supplier on the amount at the three times of the current bank rate as notified by the RBI. (Sec. 16)
  • Any party i.e. buyer and supplier both for the resolution of any dispute arisen out of due payment may make a reference before the Micro and Small Enterprises Facilitation Council (MSEFC).
  • A supplier of goods and services i.e. MSME unit can also file online application against the buyer through MSME Samadhaan Portal to get decided by the MSEFC of his State/Union Territory. But to apply through this portal the applicant should have a valid Udog Aadhar Number (UAM).
  • On receiving application the council may initiate conciliation proceedings either itself or through some other institution. Any reference made under this section shall be decided within 90 days.
  • An application by buyer for setting aside the order or the Micro and Small Enterprises Facilitation Council (MSEFC) can be entertained only after depositing of 75% of the amount of the award made by the council.
  • The buyer must disclose the amount of delayed payment and interest due thereon in his Annual Account Audit Statement.

If any of the MSME unit having problem of recovery of payment, it may initiate action in accordance with the steps mentioned above to get the process in a speedy manner.

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