Brief Review On Micro, Small And Medium Enterprises Development Act, 2006

Aim of the Act is to:-

1. Facilitating promotion;
2. Development and;
3. Enhancing competitiveness ;
   of micro small and medium enterprises.

Under Section 3 (1) of the act National Board for Micro, Small and medium enterprises have to be established by the Central Government and its office shall be in Delhi. The above-referred section also specifies who all can be the members of the board.

Term of office, manner of filling the vacancies and procedure followed in the discharge of the function of board members shall be decided by the Central Government.

It is specifically mentioned in the act that due to any vacancy or any constitution defect in the board or due to any irregularity in the procedure that is not affecting the merits of the case will not lead to invalidation of proceedings of the board.

Board can associate any person whose assistance and advice is required for complying with the provisions of this act and such a person can take part in the board discussions but shall not be given the right to vote.

Section -5(2) of the act states the Functions of the board, as specified under:-

1. To examine the factors affecting the promotion and development of these enterprises
2. To make a recommendation; and
3. Advise the Central Government on the use of funds.

Section 7 elaborates on the classification of enterprises on the basis of two categories and specifies the investment limit in plant and machinery of each micro, small and medium enterprises

1. Manufacture enterprises
2. Service enterprises

Central Government shall also constitute an Advisory Committee which shall examine the matter referred to the board.

Section 8 states that any person intends to establish micro or small enterprises or medium enterprises and rendering services or engaged in the manufacture of goods pertaining to any industry specified in the first schedule of the Industries Development and Regulation Act,1951 has to file a memorandum with such authority that has to be specified by the state government for micro and small enterprises and the central government has to specify the authority for medium enterprises.

Modes of Payment

Section 15 of the act states that buyer should make the payment on or before the agreed date and in case there is no agreement between the parties than before the appointed day (section 2(b) appointed day will be the day immediately following the expiry of a period of 15 days starting from the day of acceptance or deemed acceptance). In any case i.e in case of the agreement also the buyer shall make the payment within 45 days from the day of acceptance or deemed acceptance. Under Section- 16 there are remedies available in case of failure of making payment.

Irrespective of the agreement signed between the parties buyer is liable to pay compound interest on that amount at three times the bank rate notified by RBI from the agreed date or appointed day as the case may be.

What to be done in case any dispute arises?

In case any dispute arises matter will be referred to Micro and Small Enterprises Facilitation Council (shall consist of 3 to 5 members) and the council either conduct the conciliation proceeding itself or refer the same to any center or institute providing alternate dispute resolution services which imply that dispute arising under this act must be resolved using an alternate dispute resolution method. This means that the provision of Arbitration and Conciliation Act, 1996 will apply in case any dispute is referred. In case conciliation proceedings are not successful then the council shall take up the dispute for arbitration.

Jurisdiction

The center providing alternate dispute resolution services shall have jurisdiction to act as arbitrator or conciliator as the suppliers should be located within the jurisdiction of such institutions. Court inferior to a metropolitan magistrate or magistrate of first-class has jurisdiction to try offenses punishable under this act. Reference made to any of the institutions or centers for providing alternate dispute resolution services shall decide the matter within 90 days from the date of reference made to it. In case of any application for setting aside any decree or any order either made by the council or any institution, the buyer shall deposit 75% of the amount in term of the decree, award or other order otherwise the court will not entertain such applications from the appellant.

Interest paid/payable by the buyer under this act shall not be allowed as a deduction for the purpose of calculating income under the Income Tax Act,1961.

Penalties

1. Contravention of the provision of section 8(1) (i.e filing of the memorandum) and section 26(2) in first conviction with fie of Rs. 1000.
2. On second or further subsequent conviction of a fine not less than Rs. 1000 and may extend up to Rs. 10.000.
3. Buyer contravenes provisions of section 22 (i.e fails to fulfill the requirements to specify unpaid amount with interest in the annual statement of account)then will be punishable with a fine of not less than 10,000 rupees.

Earlier act i.e The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act, 1993 was repealed after commencement of the act of 2006. Any action taken under the repealed act shall be deemed to have been done under the corresponding provision of this act.

MSME Amendment Bill, 2015 was introduced with an intention to increase the allowance of investment in micro, small and medium enterprises.

[The author, Pratibha Bansal is a final year law student at Banasthali Vidhyapith, Rajasthan]

1. The Micro, Small and Medium Enterprises Development Act, 2006, Universal Publication, 1

2. ibid