Micro, small and medium enterprises have always been one of the main growth
engines of the Indian Economy. In recognition of their contributions, the Indian
Government has formulated various incentive plans to strengthen and improve the
competitiveness of the MSME sector. The Government promulgated the Micro, Small
and Medium Enterprises Act 2006. This law gives MSME many exclusive rights so
that it can further strengthen its economic activities.
Challenges Faced by MSME in the event of delayed payment
MSMEs around the world face limitations in maintaining combat readiness. Due to
the lack of MSME capital, payment delays are a serious problem. A World Bank
Group report released in January 2014 stated that 35 per cent or one in three
MSMEs receive their payment only after 90 days or even more. While larger
corporations are able to alleviate the adverse effects of delayed payment but
managing the cash flows is a struggle for MSMEs because of the nature of their
Furthermore, the consequence of delayed payments is that 15-20 per cent of an
MSME's cash flow remains locked up, which in turn affects the smooth running of
the business. Here, manufacturers face the greatest difficulty in coping up
since they need to invest in raw materials, manufacture goods, and then sell
them to customers.
Manufacturers, who have already invested substantially in buying the raw
materials for production, eventually end up with a huge cash crunch because of
the 90-day cycle for cash receivables and successive delays by their customers.
They are even hampered by weak bargaining power as they are stuck between the
corporate buyers and a highly networked raw material supplier base. Late
payments have caused many MSMEs to become NPAs.
SAMADAN Portal-Payment Monitoring System
On October 30, 2017, the Ministry of Small and Medium Enterprises launched
electronic means to enable micro and small suppliers to submit online quotations
of their goods and services to the potential buyers. But to be eligible to
submit MSMED Samadhaan, MSME must be registered in the national Udyog Aadhaar
According to Article 16 of the MSMED Act 2006, if the buyer fails to make the
payment to the seller, he shall be liable to pay the compound interest every
month on that specific amount from the appointed date or as the case may be,
three times the bank rate notified by the Reserve Bank. The Samadhaan portal
provides information about the pending payments of micro and small businesses
within its jurisdiction to the central public sector/central government, state
government, etc., and further provides the necessary instructions to resolve
Section 20 of the MSMED Act describes the Micro and Small Business Promotion
Committee (MSEFC). This section states that the state government will establish
the required number of MSEFCs through notification to make MSEFC the competent
authority. The implementation specified in Section 21 describes the structure of
Here, MSEFC shall consist of three to five members appointed by multiple
categories, namely, industry directors or other officials not below the rank of
designated directors, one or more officials, or representatives of MSMEs, one or
more representatives of the banks and financial institutions that grant MSME
loans, or one or more persons with professional knowledge in the field of
finance, law, industry, trade or business conditions, MSEFC will provide
instructions to the purchaser of the payment Period amount and interest. Section
18(5) of this Act requires the Council to adjudicate each reference within 90
days from the date of each reference.
Section 19 provides an opportunity to file an appeal and states that the
appellant (not the supplier) can file the appeal after depositing 75% of the
award amount. If the appellant fails to pay the amount specified above, the
decision or order of the Chamber or the Alternative Dispute Resolution Center
will not be considered.
Steps involved in filing online application
Micro and small businesses require to go to the web MSMED Samadhaan portal
https://samadhaan.msme.gov.in/MyMsme/MSEFC/MSEFC_Welcome.aspx and click on Case
submitting for Entrepreneur / MSE units. It redirects to the Entrepreneur
validation web page.
Once the Entrepreneur validation web page appears, the Udyog Aadhaar Number and
the wide cellular variety registered on Udyog Aadhaar should be stuffed.
After filling in the details mentioned above, the application for payment
recovery has to be filed with the MSEFC. Here, the application has to be
referred to the Council according to its jurisdiction. Important information
such as the PAN or GSTIN number of the petitioner, the buyers' information
against whom the grievance is to be filled are necessities that would require
strict adherence. Further, work orders and invoice details associated with the
customer are required to be uploaded. A maximum of five work orders and five
invoices per buyer can be uploaded. The next step would be entering the
verification code as displayed on the screen and then validating the Udyog
Aadhaar by clicking on the button to receive the OTP on the email registered
during the Udyog Aadhaar registration.
In the very last step, the application is submitted post last review.
According to Section 18 of the Micro, Small and Medium Enterprises Development
Act, 2006, as soon as the reference is received, a possibility for mutual
agreement is granted through conciliation. The Council can either conduct
conciliation itself or seek the help of any organization or centre dealing with
trade dispute decision offerings. The provisions of sections 65 to 81 of the
Arbitration and Conciliation Act, 1996 are applicable to such disputes.
On failure or termination of the conciliation with no settlement between the
parties, the Council shall either itself take up the dispute for arbitration or
refer to it any institution or centre that provides alternate dispute resolution
services for such arbitration and then the provisions of the Arbitration and
Conciliation Act, 1996 shall be applied to the dispute as if the arbitration was
in pursuance of an arbitration agreement. MSEFC passes a very last and binding
award. That award shall be communicated to the Interim Resolution Professional
and Hon'ble National Company Law Tribunal (NCLT) in the course of the insolvency
procedure. The execution of such an award is under the Arbitration and
Conciliation Act, 1996.
If the customer stays unresponsive, then it will be deemed as an affirmation of
its liability, and the customer's offences will be attempted through the
Metropolitan Magistrate or Magistrate of First Class or courts of better
MSMED Samadhaan portal is a powerful device to understand the outstanding dues
since the aim of this portal is to empower micro and small entrepreneurs.
Further, the portal promotes the tracking of delayed payments in an efficient
aspect. Statistically, because of the commencement of e-medium in 2017, the
number of cases filed in the MSEFC has been around 13190, out of which 3149 were
disposed of, granting an amount of Rs. 598.90 Crore.
The information on the portal is made available to the public, consequently
exerting ethical obligation on the part of the defaulters to make sure the
payment is made within a reasonable time. Thus, it can be said that this portal
promotes the viability of micro and small businesses.
With recent developments in the MSME Act and the Insolvency and Bankruptcy Code
that was introduced by the Government of India during the COVID 19 outbreak, the
window to MSME's future has been created towards the protection of the Economy
of the country.Award Winning Article Is Written By: Mr.Kishan Dutt Kalaskar
Authentication No: NV131593856599-11-1121
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