Recover your payments conveniently via MSME

The salient features of the Micro, Small, and Medium Enterprise Development (MSMED) Act:

1. Establishment of MSE Facilitation Councils: The State Governments are mandated to establish Micro and Small Enterprise Facilitation Councils (MSEFC) in each district to resolve disputes related to delayed payments. These councils work to ensure timely settlements.
2. Time-Bound Resolution: The Act sets a strict timeframe for resolving payment-related disputes through the MSEFC, ensuring speedy resolution for MSMEs. The buyer is required to settle the claim within 90 days of the SMEFC council's notice issue date.
3. Supplier's entitlement to initiate legal action: In the event that a supplier does not receive a payment within 45 days of providing goods or services, they possess the right to file a debt recovery case at MSEFC against any type of buyer, which may include MSME companies, publicly listed companies, government departments, or foreign buyers.
4. Right to Interest: MSMEs have the right to claim interest on payments made beyond the agreed-upon timeframe, providing them with a financial safeguard against late payments. In situations where a buyer fails to settle their dues for goods or services within 45 days of accepting them, the buyer is obligated to pay compound interest on the outstanding amount. The rate of interest is set at three times the bank rate notified by the Reserve Bank of India (RBI), compounded on a monthly basis until the payment to the supplier is made.
5. Mandatory Declaration of Outstanding Payments: Buyers are required to declare any outstanding payments to MSME suppliers in their annual accounts, increasing transparency and accountability.
6. Disallowed Interest Deduction: Interest paid or payable by the buyer is disallowed for income tax purposes, incentivizing buyers to make timely payments.
7. Appeal Process: The Act outlines an appeal process but mandates that no appeal against the decision of the Facilitation Council can be entertained by any court without the deposit of 75% of the decreed amount payable by the buyer.
8. Legal Proceedings locally: Suppliers can initiate cases within the jurisdiction of their respective MSEFCs, regardless of whether the dispute resolution terms specified in the purchase order or work order dictate proceedings in the buyer's jurisdiction.
9. Multilingual Proceedings: Proceedings can be conducted in local languages, with English for a broader understanding by higher courts.
10. Old Dispute: Regarding older cases, the Facilitation Council does not consider delayed payment dispute cases where the outstanding payments from buyers have been pending for more than three years.
11. No External Manipulation: The respondent cannot use any undue influence in the dispute resolution process. The process is fair, and even the Ministry of MSME cannot intervene.

These features collectively serve to protect the interests of MSMEs, ensuring they receive timely payments and have legal recourse in case of payment-related disputes.

Process for Filing a Payment Recovery Case Under the MSME Act

1. Gather the necessary documents: Collect all relevant documents pertaining to the transaction, including the purchase order, delivery challans, invoices, and any correspondence related to the payment dispute. If you have multiple invoices related to the same case, combine them into a single PDF document.
2. Access the MSME Samadhaan Portal: Visit the MSME Samadhaan Portal. This portal is designed for MSME companies to file applications regarding delayed payments online.
3. Complete the online application: Fill out the online application form provided on the MSME Samadhaan Portal. You will need to input details about the transaction, the buyer's contact details, the amount owed, and other relevant information.
4. Upload Documents: Attach the compiled PDF document containing your invoices and the affidavit, along with any other supporting documents that may be required.
5. Verification and Submission: Review the details you've entered, ensuring accuracy. Once satisfied, submit the application through the portal. Once you submit the application, it cannot be modified.
6. Receipt Acknowledgment: After submission, you will receive an acknowledgment of your application at your registered email address. This acknowledgement will contain contact information for the concerned Micro and Small Enterprise Facilitation Council (MSEFC). The respondent party also receives an email notification as soon as you file the application.
7. Application Assessment: Once you've submitted your application, it undergoes a thorough review by the MSE Satisfaction Council. If they find the details and documents you've provided satisfactory, your application is converted into a formal case. You'll receive an email notification confirming the acceptance of your application, along with a unique case number generated for future reference.
8. Submission of original documents: When your case is successfully converted, you will need to provide three sets of original documents. These sets should include copies of the work order, invoice copies, records of your communication with the buyers regarding payment recovery that may include email copies, notices,or WhatsApp chat history, an interest calculation sheet, your company documents, and any other documentary evidence relevant to the case.
9. Hearing: After you submit your documents, the MSME Facilitation Council will send a notice about the payment recovery to the person or company you're in dispute with (the respondent). Then, the council arranges a meeting where both you (the applicant) and the respondent are told to come.
10. Amicable solution: During the hearing, the council listens to both parties and may tell the person or company who owes the money (the respondent) to either pay what they owe or try to work out the problem together within one month. Under no circumstances does the respondent company get more than one month's notice.
11. Passing the order (judgment): If the respondent company doesn't pay the money they owe to the applicant company or can't find a friendly solution, the MSME Facilitation Council will make a decision based on the information available. An order is passed by the chairman of the MSME Facilitation Council to the respondent company to pay an additional amount of approximately 21% per year as interest for the delayed payment, in addition to the outstanding amount.

Documents required for filling out a case at MSME for debt recovery

Following is the updated list of documents required for initiating a debt recovery case with MSME, which includes the additional documents you mentioned:

• Authorization Letter: You need to give an authority letter that says who is authorized to represent your company during case hearings and reply to the case. Include their name, address, and proof of identity in this letter.
• Udyog Aadhaar Certificate: A copy of your Udyog Aadhaar certificate, which serves as your enterprise's registration.
• Purchase Order Copies: Copies of the purchase orders or work orders issued by the buyer that outline the terms of the supply of goods or services.
• Invoice Copies: Copies of the invoices you sent to the buyer for the goods or services provided, clearly showing the amount due and the due date.
• Communication Records: Copies of any communication between you and the buyer related to the recovery of payment. This can include emails, letters, or any written correspondence.
• Interest Calculation Sheet: A document that calculates the interest on the outstanding payment. The applied delayed payment interest is 21%.
• Company Documents: Relevant documents pertaining to your company, such as its registration certificates, financial statements, and any other legal documentation
• Delivery Challans: Copies of delivery challans or receipts confirming the delivery of goods or services to the buyer.
• Demand Letter: A copy of the demand letter sent to the buyer requesting payment of the outstanding dues
• Any Other Supporting Evidence: Include any additional documentary evidence related to the case that can further substantiate your claim.

Having these documents ready and organized will be crucial when filing your case through the MSME portal, helping to facilitate the process and strengthen your case for debt recovery.