In our previous article, we talked about why MSME Registration is a must?. Today we are going to talk about the non-payment issues Companies face and how a non-payment to an MSME Registered Supplier can create troubles for you.
Due to the dynamic nature and commitment of MSMEs towards India’s development, the Government of India established a separate Ministry, the Ministry of MSME. Though there is room for future development for MSMEs, these MSMEs were suffering from various financial and delayed payment issues. These problems were eventually affecting the future growth of those MSMEs and India at length.
Considering this in mind, the Ministry of MSME issued some rules, benefits and compliances to adhere with. These benefits and compliances give security, a proper structure and smooth growth to these MSMEs. Non-Compliances lead to penalties, huge losses and disputes.
What is Form MSME-1?
The Companies that receive supplies of goods or services from MSME registered suppliers and payments outstanding with respect to these MSME suppliers exceed 45 days from the date of acceptance; such companies have to submit a return to the Ministry of Corporate Affairs in e-Form MSME-1 as on half yearly basis.
This form-1 is to be filled by all the Companies like MSMEs, Pvt, Unlisted, Public, Listed, Producer and section 8 Companies.
However, this does not apply in the case of import of goods or services. A duration of 45 days is calculated from the date of deemed acceptance of goods and services. Deemed acceptance means, hen no objection is made in writing by the buyer regarding receiving of goods or services within 15 days from the day of the delivery of goods or services.
Penalty for non-compliance: – If any Company fails to comply with filling e-Form MSME-1 or fills in any incorrect/incomplete information about a material fact, Such Company shall be punishable with a fine which may extend to Rs. 25000 and every officer of the Company, who is at fault, shall be punishable with imprisonment for a period which may extend to six months or with fine which shall not be less than 25,000 Rs. and extend up to 3 lacks Rs. or both.
How to handle delayed payments if you are MSME?
- Any supplier who supplies goods or renders services to any buyer.
- The buyer has to make payment to the supplier as per the written agreement before the date agreed upon, but in no case, the period agreed upon between the supplier and the buyer shall exceed 45 days from the day of acceptance or the day of deemed acceptance.
- If any buyer fails to make payment of the amount to the supplier from the appointed day is liable to pay compound interest with the rest of the amount, at three times of the bank rate notified by the Reserve Bank.
- The buyer shall be liable to pay the amount due with interest; otherwise, a dispute arises
- A seller who is registered under MSME for a dispute regarding any amount due files the application under the Micro and Small Enterprises Facilitation Council.
- Then, the council conducts the Conciliation to resolve the dispute.
- If a dispute is not resolved by Conciliation, then it is referred to Arbitration to resolve by Arbitrator.
- Any decree awarded by Arbitrator is not set aside by any Council or by any Court unless the appellant (not being a supplier) will deposit seventy per cent of the amount in terms of the decree or award.
- The further order in such cases is directed by the court.
Suppliers of MSE units can file an online application under MSEFC, against the buyer of goods/services through MSME Samadhan portal of his/her state/UT. So, every Company or buyer needs to keep abreast themselves of these legal compliances and the time limits allowed by the Micro, Small and Medium Enterprises Development Act 2006; also, fulfil those compliances before time to avoid penalty.
If your payments are struck, and you are an MSME Registered entity, feel free to reach out to us for more discussion.
Happy Reading!
