Recovery of Money under the MSMED Act

Recovery of Money under the MSMED Act

MSMED Act, 2006 was enacted to protect the interests of Micro, Small and Medium Enterprises (MSME s). According to the Act, "Buyer" would mean any person who buys goods for consideration from a supplier. "Supplier" would refer to a micro or small enterprise which has filed the Entrepreneurs Memorandum/ Udyam registration.

In accordance with the MSMED Act, 2006, the payments should be made prior to or on the agreed date that cannot exceed 45 days from the date of acceptance of such goods or services. If no date is so agreed, payments should be received within 15 days as per Section 15 of the Act. In case of delay in payment, the buyer will be liable to pay the compound interest at three times the rate of bank notified by Reserve Bank of India.

Where the buyer makes no objection in writing against the acceptance of goods or services within 15 days from the date of delivery, it is deemed to be that the buyer has accepted the goods or services. In such an event as well, the day of deemed acceptance will be the actual day of delivery.

The buyer is liable to pay the principal amount under section 16 along with interest. As per Section 18, If the payments are delayed, MSEs can refer the case to Micro and Small Enterprises Facilitation Council (MSEFC). The Council either can entertain conciliation proceedings itself or get the aid of an institution or center providing alternate dispute redressal services. If conciliation fails or is brought to an end without a mutually agreed settlement, the council may take up the dispute for arbitration or get it referred to a suitable institution for arbitration.

MSME Samadhaan portal offers the facility for online complaint filing. It is designed for MSE suppliers whose payments are delayed. The essential documents that may be needed to file a complaint are:

1. Copies of supply invoices raised by the supplier;

2. Purchase order or agreement;

3. Evidence regarding the delivery of goods or services;

4. Any other document relevant to the case.

Compared to the Commercial Courts, the proceedings before MSEFC may not be efficient and time bound, which differs on facts and circumstances of the dispute. However, the fee payable towards the proceedings before MSEFC is cost effective.

The MSEFC / the Council operates as part of the District Industry Centre in various cities, including that of Coimbatore. At the city of Coimbatore, the Council is situated at Townhall, and the Council is incharge of the claims arising from various districts such as Coimbatore, Tiruppur, Erode, Salem, Dharmapuri, Namakkal, Karur, Krishnagiri and Uthagamandalam.

Disclaimer: The article reflects personal and general views of the Firm and does not constitute to be legal advice. Kindly take legal opinion and consultation while proceeding further.