MSME businesses are at the forefront of economic growth in a
country like India. It is very important for the small businesses to
get themselves registered under the domain of the MSME sector.
This proves to be a major turning point for many MSMEs as they
are able to expand their businesses more effectively by harnessing
the powerful network of the MSMEs. MSME businesses have largely
contributed towards the economic well being of the country. The
Government of India has been very keen on establishing the Ministry
of MSME for the supervision of the sector and has thus led to the
creation of various different schemes for MSME entrepreneurs. One
such initiative is the MSME claim settlement procedure which has
been proved to be a boon for MSMEs.
The MSME act of 2006 proved to be pivotal turning point for the
MSMEs in India. The current economic condition has come a long
way since then. Many changes have taken place for good and bad.
The recent pandemic hit the MSME sector in a very harsh way yet
most of the MSME businesses found their own innovative ways to
survive. The MSME culture is slowly shaping up as more and more
traditional businesses are finding their way into the sector.
The MSME claims settlement procedure helped many of the distressed
MSMEs. When it came to initiating litigation for recovery of money to
whom the services or goods have been supplied, always came in mind
the protracted litigation, the jurisdictions issues, the cumbersome
process of the enforcement of the decree passed by the court, and
other factors. The litigant felt it intricate and perplexing to approach
a court for the recovery of money which is due to the person or
institution to whom they have supplied the services or goods. Small
business houses are more in need of money inflow to survive. If
money is stuck against the supply of goods or services, small businesses
are hardly going to survive. The advent of provisions of commercial
suits has given some relief, however, small business houses i.e. MSMEs
always needed better solutions to their money recovery issues.
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Now we have an effective mechanism giving wings to this MSME claim
settlement procedure, and more are being done so that people avail of
this claim settlement procedure. Section 15 of the MSME Act makes it
mandatory for the buyer of the goods or services to make payment on
or before the agreed date to the supplier of such goods or services.
Instance such as where there is no agreed date, the MSME payment
within 45 days notification needs to be followed.
The following are some of the MSME advantages :
1. Collateral free loan.
2. Subsidy on patent registration.
3. Interest rate exemption on overdrafts.
4. Protection against delayed payments.
5. Subsidy on NSIC performance & Credit score.
6. ZED Certification Scheme.
7. Subsidy on Capital requirements.
The statutory interest rate in case of non-payment :
In case of payment is not made within the specified period under
section 15 to the supplier, then the buyer is liable to pay interest
to the supplier on the principal amount at a fixed rate prescribed
under section 16. Such interest is compounded interest with monthly
rest, meaning interest will compound at monthly intervals.
Such interest rate is applicable notwithstanding anything contained in
any agreement between the buyer and the supplier or in anything
contained in law for the time being in force. Interest-rate provided
under section 16 of the Act is 3 (three) times of the bank rate notified
by RBI (Reserve Bank of India). This is the statutory interest rate
prescribed under section 16 of the MSME Act, and there cannot be any
deviation.
In the event of any dispute with regard to any amount due, the
procedure stipulated in Section 18 has to be followed, which is
enumerated hereunder. Any case/reference under Section 18 of the
MSME Act has to be decided in ninety (90) days. Further, in case,
the Buyer decides to challenge the award or decree passed, then
as per Section 19 of the MSME Act, the Buyer has to deposit 75%
of the amount in terms of the decree, award or order of the court,
as the case may be.
Recovery of the amount due to MSME :
For the goods supplied or services provided by the supplier, the buyer
is liable to pay the amount with interest thereon as provided under
section 16. If the amount is not paid along with interest as provided
under section 16, the supplier can file a claim before the Micro and
Small Enterprises Facilitation Council as per the provisions of section
18 of the Act.
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The MSME legal notice format must be adhered to strictly while making
claims or there is a chance of it being considered null & void. MSME
Samadhaan is a Portal created by the Office of DC(MSME), Ministry of
Micro, Small and Medium Enterprises (MSME), where Micro and Small
Enterprises (MSEs) can file their applications online regarding delayed
payments.
What are the Prerequisites for Making a Claim before MSEFC?
To file a complaint with the MSEFC, the concerned enterprise must
have a Udyog Aadhar Memorandum (UAM) or Udyam Registration prior
to the dispute or contract with the Supplier. Secondly, the MSME
should have a valid and strong claim against the Buyer. A well-founded
claim comprises a written purchase agreement and a valid invoice post-
UAM or Udyam registration.
Filing complaints on the MSME Samadhaan Portal requires mandated
document verification, such as work orders, agreements, invoices, etc.
However, a significant number of MSMEs fail to keep a record of these
requisite documents. MSME borrowers MSME procedure has to be duly
followed while making claims and settlement. It has thus become more
important to establish more facilitation counsils, at district level to fast
track and the current structure. Other adequate steps must be duly
taken for the rapid growth of the MSME sector in the near future.