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How MSME Suppliers can recover Delayed Payment
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How MSME Suppliers Can Recover Delayed Payment

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Payment delayed of Goods or Services supplied by you?
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    Introduction to Micro, Small and Medium Enterprises

    The micro, small and medium enterprises are terms which are defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, which has been enacted by the Government of India in 2006.

    MSME enterprises which are engaged in production and processing of goods have been categorized in 3 categories and have been defined as under:

    #1. Micro EnterpriseWhere investment in plant and machinery does not exceed Rs. 25 lakh, such companies fall in the category of a Micro enterprise.

    #2. Small Enterprise: An enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore, is called a small enterprise in India.

    #3. Medium Enterprise: A medium enterprise is an enterprise where the investment in plant and machinery is between Rs.5 crore to Rs.10 crore.

    Note: The cost mentioned above for different categories does not include the cost of land and building.

    The benefits drawn from MSMEs

    The role and contribution of MSMEs in India’s economic growth & development is significant. The huge advantages that Micro, Small and Medium Enterprises have rendered to our country are as follows:

    Catalyst for economy’s growth
    Creates job on a large scale
    Helps in sustaining economic growth
    Propels the export sector
    Encourages inclusive growth

    Problem of Delayed Payments in MSME Sector

    MSME suppliers face immense monetary hardships as their buyers do not pay on time, thus, pending payments from buyers have the below effects on  the small businesses :

    They face liquidity crunch as cash flow is hindered,
    They are pushed into debt-traps,
    They face failure and closures, and
    Their future investment and growth plans are severely hampered.

    Relevant Provisions to Recover Delayed Payments

    One effective tool which provides means to deal with the problem of delayed payments is Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED).

    This is available to the enterprises registered under the Act as the Act has been specifically framed to ease the problem of pending payment from the buyers to the suppliers.

    #Section 15: This Section provides that the buyer shall make the payment on or before the date as had been agreed between him and the supplier in writing or, in the absence of a written agreement, it should be done before the appointed date. (Appointed date means the day following immediately after the expiry of a period of 15 days from the date of acceptance or the date of deemed acceptance of the goods and services).

    The provision further lays down that in no case the period agreed upon between the supplier and the buyer in writing shall exceed 45 days from the date of acceptance or the day of deemed acceptance.

    The terms “designated/appointed date, day of acceptance and day of deemed acceptance” collectively used in the above provision has been defined in Section 2 of the definition part of the MSMED Act.

    1. Appointed Date: This term refers to the day immediately following after the expiry of 15 days period from the day of acceptance of goods or the day of deemed acceptance of any goods or any services by a purchaser from a supplier.
    2. Day of Acceptance: The term “Day of Acceptance” means: 

    (a) The day the goods were delivered or services were rendered from the premises of Seller in actual; or 

     (b) In case any objection was raised in writing within 15 days from the day of the delivery of goods or the rendering of services by the buyer regarding acceptance of goods or services, then the day of acceptance shall be the day on which such objection is removed by the supplier.

    1. Day of Deemed Acceptance: This simply refers to the point that if no objection is made in writing by the buyer regarding acceptance of goods or services within 15 days from the day of the delivery of goods or rendering of services, then it shall be considered the day of the actual delivery of goods or the rendering of services.

    #Section 16: In case a buyer is unable to pay the supplier the amount that is due, he shall be liable to pay interest at the rate as mentioned in the agreement entered or as per the law in force.

    Otherwise, the buyer is liable to pay compound interest with monthly interests in case of failure to comply with the aforesaid provision. Interest Rate will be 3 times of the bank rate notified by the RBI.

    In event of any dispute arising that concerns any amount due, the provision points out that a reference should be made to the Micro and Small Enterprises Facilitation Council (MSMEF), constituted by the respective State Government.

    #Section 17: Buyer to make payment along with interest.

    #Section 18: An MSME can make reference to the council i.e. Micro and Small Enterprises Facilitation Council and the council may take initiative on its own discretion or take action as it may deem appropriate.

    Though the provisions for recovery were always in place since the constitution of the Act, yet, the MSMEs which generally are small businesses registered under the Act, found it very tough to recover the pending payment, especially from the big companies.

    SAMADHAAN: Delayed Payment Monitoring System

    As the problem of pending payments still persists, the Government of India has taken initiative and launched https://samadhaan.msme.gov.in portal, a unique and central point where all the MSMEs can file their complaint.

    If you are also an MSME and are facing a delayed payment problem and do not know how, where and to whom to file a complaint application, then we can resolve your problem.

    Procedure of Filing a Complaint

    A fairly simple, easy to fill application will help to launch your complaint against the defaulting entity.

    #Step 1:

    Visit the above website.
    Look for the option of case filing for entrepreneurs/MSE units at the top.
    Click on the option and enter your UAN and the registered mobile number.
    Verify the one-time password sent to your registered email ID.

    #Step II:

    Look for an option of Application entry that will help you to file the application with the respective authority.
    Before filing the relevant application, the complainant needs to keep the details ready of:
    1. work orders and/or
    2. details of invoices or
    3. other relevant documents.

    These documents shall help to prove your claim.

    Fill in all the details carefully over the website.
    In case of less than 5 invoices and work orders, they can be attached.
    However, in case the number of such documents exceeds 5, then all of them have to be combined as a single PDF and uploaded.
    Click on submit, thereafter a pop-up window will become visible for review.

    #Step III:

    After submission of the application, MSEFC will send this application to the concerned respondent and status of your complaint can be seen in the Entrepreneur Application list.
    The concerned officer, in case of any information being required by him, may request you to come and do the needful.

    Your application will proceed faster than that of the court and you will be able to recover your pending amount.

    MSME Samadhaan: the delayed payment monitoring system, is an appreciable initiative by the government as it effectively assists small businesses to address and recover delayed payments.

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      Frequently Asked Questions on How MSME Suppliers can recover Delayed Payment

      MSME Samadhaan is a Portal where Micro and Small Enterprises (MSEs) can file their applications online regarding delayed payments. It is created by the Ministry of Micro, Small and Medium Enterprises (MSME) to effectively tackle the problem of pending payments.

      Although the MSME Samadhaan online portal has been developed by the Ministry of MSME but it does not take action on the complaints. It only facilitates MSEs filing of their applications regarding delayed payments online.

      Once the application is filed online it is forwarded automatically to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) established by the State/UTs as per the provisions of MSMED-Act 2006, which takes action accordingly.

      No, the Ministry of MSME has no power to interfere with judicial functioning of MSEFCs.

      Yes, it is mandatory to file UAM online MSME Samadhaan Portal.

      After submission of the application on MSME Samadhaan Portal, it is automatically forwarded online to concerned MSEFC and the contact address of that particular MSEFC is mentioned on the acknowledgement sent on the registered email of the applicant. Thus, if no action has been taken then the said MSEFC needs to be contacted.

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