RESOLVING DELAYED PAYMENTS LEGAL REMEDIES FOR MSMES IN INDIA
In this video we discuss the challenges faced by Micro, Small, and Medium Enterprises (MSME) in India regarding recovery issues. These small businesses are the backbone of our economy, and their survival is crucial for inclusive development.
MSME – Recovery Issues
The MSME sector has been contributing to India’s economic growth for decades. However, in recent years, the vulnerability of these small businesses has become apparent, particularly when it comes to recovery issues.
The Impact of Payment Default on MSMEs
When payment defaults occur, it can threaten the very survival of these MSMEs. Small business owners often struggle to recover their dues, which can lead to the closure of their businesses.
Government Support for MSMEs
To protect the MSME sector, the Government of India has taken steps. In March 2020, the Ministry of Finance released a press statement outlining various benefits for MSMEs, making them a top priority. Among the measures being considered is the suspension of Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code, 2016 (IBC), which could provide relief for MSMEs in corporate insolvency resolution processes.
The MSMED Act – A Solution for MSME Owners
However, many MSMEs are turning to the Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act) for relief. This act holds the buyer liable to make all payments before the agreed-upon time or within 45 days of accepting goods or services, whichever comes first. If they fail to do so, they are required to pay compound interest on three times the bank lending rate.
The Role of MSEFC
MSME owners can also turn to the Micro and Small Enterprise Facilitation Council (MSEFC), which is established under the MSMED Act. The MSEFC is responsible for taking up matters regarding any amount due from the buyer for goods and services rendered.
Dispute Resolution Process
The MSEFC has a procedure for settling disputes. The process begins with online notification to both parties, followed by a chance for mutual settlement through conciliation. If that fails, the matter is referred to arbitration, with the MSEFC providing a final and binding award.
The Importance of Proper Planning and Communication
It is essential to remember that payment defaults and recovery issues are some of the most significant challenges faced by MSMEs. However, with proper planning, communication, and a proactive approach, these issues can be tackled, enabling MSMEs to continue thriving in today’s competitive business environment.
The MSME sector remains a vital part of India’s economy, and with the right support, it can continue to thrive. Let’s work together to support MSMEs and foster sustainable economic growth.
