MSMED Act came into force from 2006
wherein MSMEs have been classified into
manufacturing Industries & Service enterprises. Manufacturing
industries are defined on the basis of the original value of investment
in Plant & Machinery used in production of goods. Service industries
are defined on the basis original value of investment in equipment
used in rendering of services. This investment ceilingwas fixed 5 years
ago, since than the cost of Plant & Machinery has shot up significantly
thus there is a need for revision –a need to link the investment to
inflation, so that the industry does not have to depend on periodic
revision and can instead scale up as and when required. Further, the
micro, small & medium enterprises should also be linked with
employment and turnover.
The Act contains several provisions defining the policies and
measures to be evolved for the promotion and development Micro,
Small and Medium Enterprises like establishment of National Board.
Advisory Committee, Arbitration Council etc.
The Provisions contained in chapter V of the Act pertaining to
prompt recovery of the supply bills of micro & small enterprises from
the buyer is very important and significant. The objective of this
chapter is to remove the financial strain caused to micro & small
enterprises by inordinate delay in getting their bills settled by the
“Buyers,” impeding their growth, leading to their sickness and failure
tomeet theirownpayment obligations.
The Act provides that the supply bills shall be paid within
stipulated time which is maximum 45 days. If however the buyer finds
any quality defect in the supply he should communicate that to the
Micro/Small unit withinmaximum 15 days fromthe date of delivery. If
the quality defect has been communicated within 15 days, the period
of credit will be applicable from the date the defect is rectified by the
supplier. The only option left to the buyer to avoid the penal provision
is to pay the supply bill promptly on due date.
Penal provision imposed on defaulting buyer is liable to pay
interest for the period of delay at 3 times the bank rate of interest
notified by the RBI, from time to time compounded on monthly basis.
Such interest liability will continue till it is finally paid and settled on
account of the aggrieved Micro/Small unit. Apart from interest
liability the Act also casts on the defaulting buyers the liability of
incometax, on such interest to the aggrieved suppliers.
These provisions of the Act may thus be termed “Preventive
Remedies” in the sense they ensure prompt payment to Micro/Small
Units without jeopardizing the buyer-supplier relationship.
The Act provides for “Fast Track” inexpensive legal remedy for
the aggrieved Micro/Small Units against the defaulting “Buyer's”
through the Micro and Small Enterprises Facilitation Council. The
council will mediate to arrive at mutually acceptable solution and
dispose off the conciliation Proceedings. If such conciliation
proceedings fails, the council will arbitrate the dispute between the
parties and will pass final order within a period of 90 days. If any
“buyer” is aggrieved by the order of the council and desires to
challenge the same in appeal, he can do so only after depositing 75%
of the awardamount.
Thus, MSMED Act can prove to be an empowering legislation for
the target sector if its provisions are implemented in the right spirit. |
