The Micro, Small, and Medium Enterprise Development Act of 2006 provides provisions for dealing with micro and small business payment delays. If the buyer is unable to pay the supplier for the supply of their products or services within 45 days after acceptance of the goods or services or the scheduled day of acceptance, the buyer is obligated to pay the supplier up to three times the amount of compound interest on the due amount. The Reserve Bank of India determines the amount monthly.
State governments establish a Micro and Small Enterprise Facilitation Council (MSEFC) to solve challenges linked to acquiring references and filing Delayed Payments records. Any small or micro firm with a valid Udyog Aadhar (UAM) number may initiate a payment dispute case. After analysing the case presented by the MSE unit, the State’s MSEFC will give payment instructions to the buying unit.
The Ministry of Micro, Small, and Medium-Sized Enterprises has created a programme that enables a supplier, also known as an MSE unit, to register an online complaint against a buyer of goods or services with the relevant MSEFC in their state/UT. If the complaint is valid, the MSEFC Council will investigate and the relevant laws and regulations will be made accessible for proactive action by pertinent Departments, CPSEs, Central Ministries, State Governments, and others to proceed with the sanction of interest.
- Entrepreneurs and micro, small, and medium-sized enterprises can utilise the platform to submit online applications for delayed payments. To submit an application, the user must have an Udyog Aadhaar Number that has been validated using a physical Aadhaar card.
- Examine the case status: Micro, small, and medium-sized enterprises (MSMEs) and entrepreneurs can use the site to check the status of their online applications for delayed payments.
- Dashboard for Pending Payments: The Portal will give information on pending payments between MSEs and certain CPSEs, Central Ministries, and State Governments, etc. PSE, CEOs, and Secretaries of the relevant Ministry will be accountable for tracking instances of delayed payments under their purview and issuing the required directives to remedy associated concerns.
Provisions to Be Established by the State Government
The Micro, Small, and Medium Enterprise Development Act of 2006 includes the clause Resolving Delayed Payment to Micro and Small Enterprises. Every state government must create a Micro and Small Enterprise Facilitation Council to solve concerns of getting references and submitting records of Delayed Payments.
Nature of Assistance Provided By MSEFC
In accordance with the MSMED Act of 2006, the State’s MSEFC will provide instructions to the buyer for payment of the required amount plus the acquired interest after analysing the case filed by the MSE unit.
Who is Eligible to Apply?
Any micro or small company having a valid Udyog Aadhar number or anybody with a valid Udyam Registration can make an online complaint against the buyer or purchaser of products or services with the appropriate MSEFC of their State or UT. The MSEFC Council will carefully review these applications. The relevant federal ministries, CPSEs, departments, and state governments will also have access to these apps.
The buyer must pay compound interest as well as monthly interest on the amount at three times the RBI’s announced bank rate if they fail to pay the supplier for their products or services within 45 days of the acceptance of the goods or services. State governments must inform the Authorities for Filing Entrepreneur Memorandum.
All States/UTs have informed the central government Authorities for Filing Entrepreneurs Memorandum, MSEFC regulations, and MSEFC constitution in accordance with the MSMED Act of 2006. This contains 33 states and territories (excluding Arunachal Pradesh, Assam, and Manipur). All of these states have announced MSEFC regulations, and all 36 states and UTs have implemented MSEFCs.
According to the law, MSEFC must review every referral within ninety days of the date of the referral.
If the Appellant (who is not the supplier) decides to file an appeal, no court will entertain an application to vacate an MSEFC decision or award until the Appellant (who is not the supplier) has paid the MSEFC 75% of the sum charged.
Who is Responsible for Carrying Out the Provisions of MSMED Act of 2006?
The MSEFC, which is managed by the Director of Industries and is also in charge of the MSE units, is responsible for implementing the Act’s requirements. As mandated by the MSMED Act of 2006, state and territorial governments are recommended to ensure that the MSE Facilitation Council meets on a regular basis and that any payment concerns are handled within 90 days.
MSME Samadhan Portal
How to File an Application on the MSME Samadhan Portal?
The following is the procedure for MSMEs to submit an application to the MSMEs Samadhan Portal:
- Go to MSME Samadhan website.
- On the homepage, choose the ‘Case Filing for Entrepreneur or MSE Units’ option.
- Then, you have to choose between ‘Udyog Aadhaar Number’ and ‘Udyam Registration Number.’
- By clicking ‘Validate Udyog Aadhaar’ or ‘Validate Udyam Registration’ button you have to enter the Udyog Aadhaar or Udyam Registration Number and your mobile number.
- Then, you will get an OTP on email address used at the time of registration.
- Enter the OTP and submit the application for delayed payment.
- Submit the application after uploading the documents (in PDF format) of Respondent’s work orders and invoices generated by you against those orders.
The Ministry of Micro, Small, and Medium-Sized Enterprises has created an online application site for suppliers to register complaints against purchasers of goods and services with the MSEFC in their respective state or territory. The MSEFC Council will evaluate them and determine their disposition. Concerned Central Ministries, Departments, CPSEs, State Governments, and others will have access to this data in order to take preventative action.
In the event of non-payment or late payment, Section 16 of the Act stipulates that the buyer shall include interest with the monthly payment reminders sent to the service provider. The compounded interest rate is three times the RBI’s bank rate. If the appellant is not a supplier but nevertheless files an appeal, they must set aside 75% of the assessed sum before the court may determine the case.
The sector of micro, small, and medium-sized businesses is the backbone of the Indian economy. This industry has demonstrated its importance to the nation’s economic growth by boosting exports and creating numerous employment chances for the unskilled, recent graduates, and underemployed. It also provides banks with many possibilities for extending loans to MSME enterprises. In order to ensure the long-term survival of the sector, the government should pay special attention to the significance of MSME by increasing MSME Registration advantages and establishing laws that allow financial institutions to give more loans at lower interest rates.