ENSURE TIMELY PAYMENTS TO MSMEs
ENSURE TIMELY PAYMENTS TO MSMEs
The biggest problem being faced by MSMEs is the delayed payments to them against their supply of goods or services. These MSMEs run pillar to post to get their payments on time from most of the Public Sector Enterprises, Government Departments and Large Corporates in many of the cases.
There are provisions under Micro Small and Medium Enterprises Development Act, 2006 for the payment to MSEs within 45 days of the acceptance of their invoice. In case the payment is not made within 45 days, interest at the rate of 3 time of bank rate is payable by the buyers of these MSEs.
It is also provided under the Micro Small and Medium Enterprises Development Act, 2006 that in case any buyers do not abide by the provisions on Delayed Payments, the MSEs can approach Micro and Small Enterprises Facilitation Councils (MSEFCs), which are mandated to decide with 90 days of application.
We at Chamber of Indian Micro Small and Medium Enterprises have observed that the cases pending at MSEFCs are even for years, despite 90 days provisions.
Further, even if there is an award in favour of MSEs by these MSEFCs, the buyers has right to file appeal at Lower Courts, the Hon'ble High Court and then the Supreme Court. Thus it is difficult to get the solution of Delayed Payments by these MSMEs even through the Judiciary System in most of the cases.
We at Chamber of Indian Micro Small and Medium Enterprises have suggested many measures to the Government to be taken to solve Delayed Payment issues of MSMEs, some of which are as follows:
01. Separate Tribunals for cases of MSMEs,
02. Strict compliance of 90 days timeline as provided under MSMED Act 2006 for decision by MSEFCs,
03. No appeal by the buyers of MSMEs, against the decision of MSEFCs, atleast for 2 years considering Covid situation,
04. Reducing default Amount under Insolvency and Bankruptcy Code, 2016 from Rs. 100 lakh to 10 lakh in case of MSMEs,
05. Issuance of LC by all Government departments/ PSUs to the MSMEs with the order,
06. Deemed acceptance of invoice by the buyer at 15th day of receipt of goods / services,
07. Decision on dishonoured cheques within one month. There should not be any logic / reasoning for dishonoured cheque. If the cheque is returned for want of funds, no need to consider any logic, as the MSMEs receive the cheque on good faith and trust,
08. The composition of the MSEFCs should be changed. Most of the time officers at are busy in their other official duties. Even if they spare one day in a week, the 90 days timeline will never be achieved. Independent professionals, particularly those having knowledge of MSME Act and guidelines should be inducted / appointed as Chairman of the MSEFCs.
09. Micro Small and Medium Enterprises should may be classified under Financial Creditor for the purpose of Insolvency and Bankruptcy Code, 2016 as these MSMEs have also funded the corporate debtors without the support of whom it would have not been possible to operate the unit of Corporate Debtor,
10. In case it is not possible to classify the MSMEs as Financial Creditors under IBC 2016, they may be given preference over Financial Creditors in water fall mechanism,
11. MSMEs should be authorised to initiate the insolvency process against the director/promoters/ guarantors of the corporate debtors under CIRP,
12. The default amount for initiation of CIRP by the MSMEs should be reduced to Rs. 10 lakhs.
I, Mukesh Mohan Gupta on behalf of Chamber of Indian Micro Small and Medium Enterprises request you to sign this Petition if you agree to suggest these recommendations to the Government.