HOW TO FILE A CASE BY MSME FOR RECOVERY OF DELAYED PAYMENTS

INTRODUCTION

The Micro, Small, and Medium Enterprises (MSME) sector is vital to the Indian economy, contributing significantly to GDP and employment. However, delayed payments often cause severe cash flow problems for MSMEs. To address this issue, the Ministry of MSME launched the MSME Samadhaan portal, enabling small businesses to resolve delayed payment disputes efficiently. This article provides a step-by-step guide to filing your case under MSME Samadhaan for the recovery of delayed payments.

CLASSIFICATION OF MICRO, SMALL, AND MEDIUM ENTERPRISES

As per the revised MSME classification (effective July 1, 2020), enterprises are categorized based on investment and turnover:

1. Micro Enterprises:
   • Investment in plant and Machinery or Equipment: Up to ₹1 crore
   • Annual Turnover: Up to ₹5 crore
2. Small Enterprises:
   • Investment in plant and Machinery or Equipment: Up to ₹10 crore
   • Annual Turnover: Up to ₹50 crore
3. Medium Enterprises:
   • Investment in plant and Machinery or Equipment: Up to ₹50 crore
   • Annual Turnover: Up to ₹250 crore

PROCEDURE TO FILE THE CASE

Step 1 Eligibility Check:

1. Your enterprise is registered as an MSME under the Udyam Registration. The MSME Samadhaan scheme can be availed only by Micro and Small enterprises and not by Medium enterprises.
2. The payment in question pertains to goods or services delivered to a buyer.
3. The payment has been delayed beyond the agreed credit period or 45 days (as per the MSME Development Act, 2006).

Step 2 Gather Necessary Documents:

1. Invoice copies related to the payment dispute.
2. Purchase orders or agreements with the buyer. In case the purchase order is not available, an affidavit is to be filed.
3. Correspondence (emails, letters) indicating reminders sent for payment.
4. Proof of Udyam Registration.

Step 3 File an Application:

1. Fill out the details of the Petitioner provide details of your enterprise, including name, Udyam Registration number, and contact information. The NIC Code wise activity specifies a list of goods and services provided by the enterprise which the applicant as to choose from.
2. Enter the buyer’s (Respondent) details, such as name, address, and contact number. Specify the invoice amount, due date, and the total amount pending.

Step 4 Time for Repayment:

A period of 15 days will be granted to the respondent to repay the outstanding amount. If the respondent fails to make the payment within this timeframe, the case will be referred to the MSEFC for further proceedings.

Step 5 Monitoring Your Application:

Your application will be forwarded to the Micro and Small Enterprises Facilitation Council (MSEFC) for resolution.

Step 6 Attend Conciliation Proceedings:

The MSEFC will initiate conciliation proceedings to resolve the dispute amicably. Ensure to attend the scheduled hearings with all necessary documentation and present your case clearly and professionally.

Step 7 Attend Arbitration Proceedings:

If the respondent fails to appear before the MSEFC for conciliation proceedings or refuses to make the payment, the authorities will appoint an arbitrator to resolve the matter. Upon commencement of the arbitration proceedings, the arbitrator will adjudicate the dispute and pass an award directing the respondent to pay the outstanding amount. This award will carry the same legal effect as a court order and will be enforceable accordingly.

CONCLUSION

The MSEFC is a valuable resource for small businesses facing delayed payment issues. By following this guide, you can streamline the process and enhance your chances of recovering pending dues. Prompt action and proper documentation are key to securing your enterprise’s financial health.

-Article by Adv. Akhila Bolla and Adv. K S Samiksha