DISPUTE RESOLUTION UNDER MSMED ACT,2006
The Micro Small and Medium Enterprises Development Act, 2006 is enacted for the growth and regulation of micro, small, and medium enterprises in India. The main aim of this Act is to facilitate the promotion, growth, development, and enhancing the competitiveness of micro, small, and medium enterprises.
The Act provides for resolution of disputes through alternative dispute resolution mechanisms for matters related to delayed payments. Section 15 of the said Act states that a buyer is liable to make the payment of the goods purchased or services utilized, on the date that is agreed upon by him and the supplier. If no date has been agreed upon by the buyer and the seller, then the payment has to be made within 45 days from the date of acceptance. If the payment is not made, the buyer is liable to pay the whole amount along with an interest. Any dispute arising out of non- payment has to be referred to the Micro and Small Enterprises Facilitation Council.
The MSMED Act, 2006 states that it is the duty of the State Government to establish Micro and Small Enterprises Facilitation Councils. The State Government must lay down the jurisdiction of the Council so established. The Council has the jurisdiction to attend to disputes that are between suppliers belonging to their jurisdiction (as specified by the State Government) and buyers from anywhere in India.
The Micro and Small Enterprises Facilitation Council consists of a minimum of 3 and a maximum of 5 members. The members of the Council must be appointed from amongst the following categories:
- Director of Industries, or any other officer not below the rank of such Director, who is having administrative control of small-scale industries- Chairman.
- One or more office- bearers or representatives of associations of micro and small industries- Member.
- One or more representatives from banks and financial institutions, who are lending to micro, small or medium enterprises- Member.
- One or more persons having special knowledge in the field of industry, finance, law, trade, or commerce- Member.
Once a dispute is referred to the Micro and Small Enterprises Facilitation Council, it is the duty of the Council to conduct conciliation for the same. It is upon the discretion of the Council, whether to act as the conciliator itself or to take the assistance of an institution that provides services of alternative dispute resolution.
If the parties are unable to reach on a settlement, and the whole conciliation procedure has become futile, the Council has the authority to act as the arbitrator of the dispute. The Council may appoint an institution or center that provides services of alternative dispute resolution, for the purpose of acting as an arbitrator. The dispute referred should be decided with a period of 90 days from the date of such reference. The provisions of Arbitration and Conciliation Act, 1996 shall apply to the disputes referred to the council.
The provisions of the MSMED Act, 2006 has enabled the small- scale industries to counter the problem of delayed payments. This has also led to the growth of micro, small, and medium enterprises in India.