Introduction:
In October 1999, The Ministry of Small-Scale Industries and Agro and Rural Industries was established, for the development and growth of these enterprises, however, in September 2001, it separated into two ministries i.e. Ministry of Small-Scale Industries and Ministry of Agro and Rural Industries. On 9th May 2007, an amendment was made to the Government of India (Allocation of Business) Rules, 1961 to merge both of the above-mentioned ministries into a single ministry making one Ministry of Micro, Small, and Medium Enterprises which was done for the progress and advancement for all the Micro, Small and Medium Enterprises (MSME) which was based on financial basis and not on the basis of industry type. It is governed under the Micro Small and Medium Enterprises Development (MSMED) Act, 2006.
MSMED Act was introduced to make policies and to protect the enterprises from the difficulties faced by them like the delayed payment or non-payment of the goods and services supplied. The increase in these kinds of problems has resulted in the loss of many enterprises and insolvency for some. That’s why we should know where an enterprise can file a complaint for these kinds of grievances. The ways to file a complaint for the above is briefly stated below:
Filing of Complaint
Under Section 15 of the MSMED Act, 2006, a buyer should pay the supplier for the goods supplied on the date mentioned on the agreement, if no date for payment is agreed or no agreement exists, the buyer would have to pay within 45 days after the transaction is accepted. If not paid within the above period, the buyer will have to also pay compound interest or three times the bank rate as specified by RBI. If still, the buyer doesn’t pay the supplier, then the supplier can file a complaint to the Micro and Small Facilitation Council which is established under Section 20 of the MSMED Act, 2006
A party of a dispute can file a complaint to the Micro and Small Enterprises Facilitation Council (MSEFC) by physically submitting a complaint in the concerned MSEFC which would be in the area of the dispute or by filing a complaint online via the MSME Samadhaan portal, created by the Development Commissioner, Ministry of Micro, Small and Medium Enterprises which would be transferred to the concerned MSEFC, though it is necessary for an enterprise to have an Udyog Aadhar Memorandum Number to file a complaint.
Procedure After the Complaint is Registered
The complaint registered by the party of the dispute with MSEFC is to proceed with the procedure given in Section 18 of the MSMED Act, 2006 which is explained below:
Section 18(1) states that an enterprise who is the victim of non-payment can file a reference to the MSEFC for the amount due under Section 17 of the Act.
After the reference is filed, MSEFC shall itself do conciliation on the dispute or ask any other organisation or institute which provides alternate dispute resolution to do the conciliation. Section 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) would be applied in any conciliation proceeding. This is specified under Section 18(2).
If the conciliation proceeding done by the Council or by any other organisation that conducted conciliation under Section 18(2) is not successful without any clearance, under Section 18(3), the Council shall either take up the dispute for arbitration or would ask any other organisation that provides Alternate Dispute Resolution to conduct arbitration and Arbitration and Conciliation Act, 1996 would be applied to the arbitration in the dispute.
Section 18(4) states that, in the dispute, the MSEFC or any other institution or organisation can act as the conciliator or an arbitration, also there are no restrictions for them to be both as well. Every reference that is filed under Section 18(1) is to be decided within 90 days from the date of reference made, which is stated in Section 18(5).
Landmark Case interpreting the Procedure
Gujarat State Petronet Limited vs. Micro and Small Enterprises Facilitation Council [1]
This case was about whether the Micro and Small Enterprises Facilitation Council can act as a conciliator and the arbitrator in the same dispute. The court decided that a conciliator cannot act as an arbitrator as it is mentioned in Section 80 of the Arbitration and Conciliation Act which states the same and contradicts Section 18(1) and 18(2). MSEFC cannot act as both, a conciliator and an arbitrator in the same dispute thought it can refer the matter to any organisation that provides alternate dispute resolution.
M/S Cummins Technologies India Private Limited vs. Micro and Small Enterprises Facilitation Council [2]
In Gujarat State Petronet limited vs MSEFC, it was stated in the verdict, that a conciliator cannot act as an arbitrator in the same dispute, though in this case, the court cleared all the doubts that were coming up regarding these kinds of disputes. The court stated that while Section 80 of the Arbitration and Conciliation Act states that no conciliator can act as an arbitrator in the same dispute, Section 24 of the MSMED Act which is an overriding clause, contradicts it. Therefore, Section 80 wouldn’t be applicable to MSEFC’s and the council can act as a conciliator and an arbitrator in a dispute.
Recent Developments in the MSME Sector
Due to the impact of COVID-19, Nirmala Sitharaman, the finance minister of India to boost the economy, announced some amendments in the MSME Sector. The most important would be the change in the definition of MSMEs, which has amended Section 7 of the MSMED Act, 2006. This was huge as it changed the whole standard for an enterprise to be an MSME enterprise. The distinction between the definition is differentiated below:
Old Definition
As per the old definition of MSME’s, the criteria of an enterprise to be an MSME was on the basis of Investments, although this amount of investments for manufacturing enterprises and servicing enterprises required is different.
For a manufacturing unit to be a micro enterprise, it should have equal to or less than 25 Lakhs Investment, to be a small enterprise, should be more than 25 Lakhs and maximum 5 Crores Investment and for Medium Enterprises, it should have at least 5 crores Investment and maximum 10 Crores Investment. For a Service enterprise, to be a Micro enterprise, it should have equal to or less than 10 lakhs Investment, to be a small enterprise, it would need at least 10 lakhs Investment and maximum 2 Crores Investment and for it to be a Medium enterprise, it should have at least 2 crores and maximum 5 Crores.
New Definition
The new definition, on the other hand, states that the criteria of an enterprise to be an MSME is to be on the basis of both Investments and Turnover, although, the distinction between a manufacturing enterprise and service enterprise in MSME is removed which means that there would be no division on the basis of industries.
According to the amendment, for any manufacturing or a service enterprise to be a Micro enterprise, should have less than or equal to 1 Crore Investment, 5 Crores Turnover, for it to be a Small enterprise, it should have at least 1 Crore Investment, 5 Crores Turnover and maximum 10 Crores Investment and 50 Crores Turnover, and lastly, for it to be a Medium Enterprise, it should have at least 10 Crores Investment, 50 Crores Turnover and maximum of 20 Crores Investment, 100 Crores Turnover.
Conclusion
MSME’s in our country has been facing a lot of problems and issues for decades. The establishment of the Ministry of MSME was done so that solutions can be given for the problems faced by these MSME’s so that there could be growth and development for them. This sector of enterprises is very important for the overall growth of our country. Non-payment for goods and supplies is the most important issue for this Sector. In recent years, this problem was diminishing but the COVID-19 pandemic has severely damaged this sector and increased the rate of disputes for non-payments. New amendments have been made so it can protect the MSME’s from this pandemic but to what extent. There are no new ordinances or amendments for the non-payment to MSME’s which is certainly crucial for the survival of the sector.
References:
| [1] | G. S. P. L. v. MSEFC. [Online]. Available: https://indiankanoon.org/doc/192653919/. |
| [2] | M. C. T. I. P. L. v. M. A. S. E. F. Council. [Online]. Available: http://elegalix.allahabadhighcourt.in/elegalix/WebShowJudgment.do. |
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