Efforts of Government of India for the Development of Micro, Small and Medium Enterprises

INTRODUCTION

Due to the ongoing pandemic issue of Covid-19 in India and worldwide the economy of India and all over the world like U.S.A, Italy etc. are seriously affected and most of the businesses, Industries and Companies are closed, for they have suffered huge loss. So, for the aforesaid reason, Ministry of Finance of Government of India has provided various schemes/packages for Micro, Small Enterprises and Medium enterprises.

OBJECT TO DEVELOPM MICRO, SMALL AND MEDIUM ENTERPPRISES

The object to develop Micro, Small and Medium Enterprises are (i) promoting e-Governance for empowering citizens, (ii) promoting the inclusive and sustainable growth of the Electronics, (iii) promoting Information Technology (IT) and Information Technology Enabled Service Industries (ITeS), (iv) enhancing India’s role in Internet Governance, (v) adopting a multipronged approach that includes development of human resources, (vi) Promoting Research and Development and innovation, (vii) enhancing efficiency thorough digital services and ensuring a secure cyber space.

WHAT ARE MICRO, SMALL AND MEDIUM ENTERPRISES

As per the Section 7 of Micro, Small and Medium Enterprises Act, 2006 and recent notification1 issued by the Ministry of Micro, Small and Medium Enterprises on 01.06.2020, following criteria for classification of Micro, Small and Medium enterprises were notified, namely:-

1. a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees.

2. a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees.

3. a medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed Fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

The aforesaid notification shall come into effect from 01.07.2020

MAJOR SCHEMES PROVIDED BY THE MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES, GOVERNMENT OF INDIA FOR MICRO, SMALL AND MEDIUM ENTERPRISES

1. Prime Minister Employment Generation Programme and other Credit Support Schemes
2. Development of Khadi, Village and Coir Industries
3. Technology Upgradation and Quality Certification
4. Marketing Promotions Schemes
5. Entrepreneurship and Skill Development Programme
6. Infrastructure Development Programme
7. Scheme of Surveys, Studies and Policy Research
8. National SC-ST-HUB
9. Scheme of Information, Education and Communication

LEGAL FRAMEWORK FOR MICRO, SMALL AND MEDIUM ENTERPRISES

In India laws governing the Micro, Small and Medium Enterprises is the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as Act of 2006) and following are the main objects to enact the aforesaid Act:

1. to provide for statutory definitions of “small enterprise” and “medium enterprise”
2. to provide for the establishment of a National Small and Medium Enterprises Board, a high level forum of stakeholders for participative review of and making recommendations on the policies and programmes for the development of small and medium enterprises;
3. to provide for classification of small and medium enterprises on the basis of investment in plant and machinery, or equipment and establishment of an Advisory Committee to recommend on the related matter;
4. empower the Central Government to notify Programmes, Guidelines or instructions for facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises;
5. empower the state Governments to specify, by notification, that provisions of the labour laws specified in clause 9(2) will not apply to small and medium enterprises employing upto fifty employees with a view of facilitating the graduation of small enterprises to medium enterprises;
6. make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimize the incidences of sickness among and enhancing the competitiveness of such enterprises, in accordance with the guidelines or instructions of the Reserve Bank of India;
7. empower the central and state governments to notify preference policies in respect of procurement of goods and services, produced and provided by small enterprises, by the Ministries, Departments and Public Sector Enterprises;
8. empower the Central Government to create a Fund or Funds for Facilitating promotion and development and enhancing the competiveness of small enterprises and medium enterprises;
9. empower and promote harmonized, simpler and streamlined procedures for inspection of small and medium enterprises under the labour laws enumerated in clause 15, having regard to the need to promote self- regulation or self certification by such enterprises;
10. provide for maintenance of records and filing of returns by small and medium enterprises with a view to reduce the multiplicity of often-overlapping types of returns to be filed;
11. Making further improvements in the Interest on delayed Payments to small Scale and Ancillary Industrial Undertakings Act, 1993 and making that enactment a part of the proposed legislation and to repeal that enactment.

LEGAL REMEDIES PROVIDED BY ACT OF 2006 IN CASE OF DELAYED PAYMENTS BY SUPPLIER TO THE BUYER

As per the Act of 2006, ‘Supplier’ means a micro or small enterprise , which has filed a memorandum with the authority referred to in sub-section (1) of Section 8, and includes,-

(i) The National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956)
(ii) The Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956)
(iii) Any company, co-operative society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises

As per the Act of 2006, ‘Buyer’ means whoever buys any goods or receives any services from a supplier for consideration

The Act of 2006 is providing the legal remedies to the suppliers who fall in the above definition.

1.1. LIABILITY OF BUYER TO MAKE PAYMENT TO THE SUPPLIER- Section 15 of the Act of 2006 provides that any supplier (who filed a memorandum with the authority referred to in sub-section (1) of section 8) supplies any goods or renders any services to any buyer, after that the buyer has liability to make payment within an agreed date between buyer and supplier or in case no particular date is agreed between buyer and supplier, the buyer must make payment to the supplier within 45 days from the day of acceptance or the day of deemed acceptance.

The relevant provision reads as under:-

“15. Liability of buyer to make payment.- Where any Supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:

Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty- five days from the day of acceptance or the day of deemed acceptance.”

1.2. INTEREST PAYABLE BY BUYER TO SUPPLIER- Section 16 of the Act of 2006 provides that in case any buyer fails to make payment to the supplier as per the provisions under section 15 of Act of 2006, the buyer shall be liable to pay compound interest with monthly rests to the supplier on whatever due amount from the date of appointed day or in case of an agreed date between Buyer and Supplier, the interest is calculated on the basis of three times of the bank rate notified by the Reserve bank of India.

The relevant provision reads as under:-

“ 16. Date from which and rate at which interest is payable.- Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or , as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

1.3. REFERENCE TO MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL- Section 18 of the Act of 2006 provides that the supplier (who filed a memorandum with the authority referred to in sub-section (1) of section 8) has the right to make a reference to the Micro and Small Enterprises Facilitation Council (hereinafter referred to as MSME Council) for Recovery of due amount from buyer.

(i) Once the reference is made by Supplier before MSME Council, the MSME Council may either itself conduct Conciliation or may refer to any institution or centre providing alternate dispute resolution for conducting Conciliation proceedings and aforesaid Conciliation proceedings conducted by MSME Council or any institution or centre providing alternate dispute resolution must adhere to the provisions provided under Section 65 to Section 81 of the Arbitration and Conciliation Act, 1996.

(ii) If Conciliation proceedings are not successful or are terminated without any settlement between buyer and seller, then the MSME Council may either itself take the dispute for Arbitration or may refer to any institution or centre providing alternate dispute resolution for Arbitration proceedings and aforesaid arbitration proceedings conduct by MSME Council or any institution or centre providing alternate dispute resolution must adhere to the provisions of the Arbitration and Conciliation Act, 1996. The aforesaid Arbitration proceedings shall be in pursuance of an Arbitration Agreement referred to in sub-section (1) of Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006.

1.4. JURISDICTION- Section 18 of the Act of 2006 provides that the MSME Council or the Centre providing Alternate Dispute Resolution shall have Jurisdiction to act as an Arbitrator or Conciliator as per the Section 18 of Act of 2006 to decide the dispute between supplier and buyer where the supplier is located within its jurisdiction and a buyer is located anywhere in the Territory of India.

1.5. LIMITATION FOR MSME COUNCIL TO DECIDE THE DISPUTE BETWEEN SUPPLIER AND BUYER- Section 18 of the Act of 2006 provides that the MSME Council shall decide the dispute between supplier and buyer within a period of 90 days from the date of making reference by supplier before MSME Council.

1.6. APPLICATION FOR SETTING ASIDE DECREE, AWARD OR ORDER PASSED BY MSME COUNCIL OR BY ANY INSTITUTION OR BY CENTRE PROVIDING ALTERNATE DISPUTE RESOLUTION- Section 19 of the Act of 2006 provides that both supplier and buyer have a right to file application for setting aside decree, award or order passed by MSME Council or by any institution or by centre providing Alternate Dispute Resolution but in case of buyer the application shall only be entertained for setting aside decree, award or order passed by MSME Council or by any institution or by centre providing Alternate Dispute Resolution if the buyer should deposit seventy five percent of the amount in terms of decree, award or, as the case may be, the other order in the manner directed by such court. Further, during the pendency of the aforesaid application the court shall order that such percentage of the amount deposited by buyer shall be paid to the supplier. In this regard, reliance is being placed on the case of Goodyear India Limited Vs. Norton Intech Rubbers (P) Ltd. And Ors. wherein the Honb’le Apex Court did not interfere with the decision passed by the Division Bench of Hon’ble Madras High Court and considered the decision of Honb’le Madras High Court. Therefore, in case of buyer the application shall only be entertained for setting aside decree, award or order passed by MSME Council or by any institution or by centre providing Alternate Dispute Resolution if buyer should deposit seventy five percent of the amount in terms of decree, award or, as the case may be, the other order in the manner directed by such court.

1.7. WRIT PETITION UNDER ARTION 226 OF THE CONSTITUTION OF INDIA IS NOT MAINTAINABLE – Writ Petition under Article 226 of the Constitution of India is not maintainable for setting aside decree, award or order passed by MSME council or by any institution or by centre providing alternate dispute resolution because alternative Remedy is available under Section 34 of Arbitration and Conciliation Act, 1996. Therefore, buyer or supplier has only remedy available under section 34 of Arbitration and Conciliation Act, 1996 to set aside decree, award or order passed by MSME Council or by any institution or by centre providing alternate dispute resolution. In this regard, reliance is being placed on the case of Sanghi Industries Limited and Ors. Vs. Micro Small Enterprises Facilitation Council, Department of Industries Rajasthan and Ors. wherein the Hon’ble Rajasthan High Court, Bench Jaipur held that the writ petition filed by the petitioner was not maintainable on account of the alternative efficacious remedy available under section 34 of Arbitration and Conciliation Act, 1996 against the award passed by MSME Council.

1.8. OVERRIDING EFFECT- Section 24 of the Act of 2006 provides that Section 15 to Section 23 of the Act of 2006 (i.e. Chapter 5 – Delayed Payments to Micro and Small Enterprises) is over any other prevailing inconsistent laws.

CONCLUSION

Thus, the efforts of the Government of India for promoting the Micro, Small and Medium enterprises and legal framework for Micro, Small and Medium Enterprises could be understood from the background discussed above. Further, the Ministries of Finance, Government of India announced various economic packages, schemes for the development and operations of Micro, Small and Medium Enterprises on 13.05.2020; it is clear that the Government of India is doing major efforts and is playing a very important role for the development of Areas of Micro, Small and Medium enterprises.

2018 (2) WLN 146 (Raj.)

(2012) 6 SCC 345

Notification No. S.O. 1702 (E) – Dated 01.06.2020

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-Umang Gupta