Many MSMEs do not even file a case because the bargaining power is so poor, they just fear that they will get caught in the system and lose a buyer," said DP Goel, co-chairman of the MSME Committee at the PHD Chamber of Commerce.Ĭurrently, an estimated 27,186 cases are under consideration in the state facilitation councils.
Often buyers hold back payments claiming that the quality supplies were poor, several industry associations said. It may then take up to 10 years to recover the dues because the civil court is also very slow," he added.
The buyer will just never attend the hearings and keep pushing the case for years because there is simply no penalty for doing that." Even when the arbitration goes in the favour of an MSME to collect the dues, the business is forced to approach a local civil court to collect its dues. I do not understand why it has not been amended yet. "There are just so many flaws in that Act. However, there are several loopholes in the system that ultimately favour the defaulters to get away without making the payments, the associations’ representatives said. Payment delays attract compound interest with monthly rests on the defaulter at three times the bank rate notified by the Reserve Bank of India. The Act stipulates that payment for the supply made by an MSME should be mandatorily cleared by the buyer within the outer limit of 45 days from the date of acceptance or deemed acceptance of the supply unless agreed otherwise by the parties. R Ramamurthy, a member of the All India Council of Associations of MSMEs, a body that represents 170 MSME associations across the country, said, "Although the Micro, Small and Medium Enterprise Development Act, 2006, provides that buyers should make payments to MSMEs within 45 days, this is not honoured by most entities." Delays in payments to MSMEs blocks their working capital, affects the overall business cycle and poses liquidity challenges, he explained. However, a settlement within 90 days rarely happens.
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