Background
Although the Micro, Small and Medium Enterprises Development Act was enacted in 2006 but Micro, Small and Medium Enterprises (MSME) has gained popularity in past few years. Government has actively promoted MSME’s and taken various initiative to protect the interest of MSME.
Hon’ble Prime Minister of India launched “Support and Outreach Programme” for MSME Sector at Vigyan Bhawan, New Delhi on 02.11.2018, and unveiled 12 key initiatives which will help the growth, expansion and facilitation of MSMEs across the Country.
One such policy was directed vide Gazette notification S.O. 5622(E) dated 02.11.2018, whereby all companies who get supplies of goods or services from MSEs and whose payments to MSE suppliers exceed 45 days from the date of acceptance of goods or services shall submit a half yearly return to the Ministry of Corporate Affairs.
Further, Ministry of Corporate Affairs vide its notification dated 22nd January 2019 instructed all companies for the above said compliance.
To comply with such regulatory provision, it is imperative to understand the concept of MSME.
What is MSME?
As name suggests Micro, Small and Medium Enterprises are business set up by small businessmen and investment and turnover of these organisation are limited only due to lack of fund, limited access to advanced facilities etc.
Ministry of Micro, Small and Medium Enterprises have classified these enterprises on the basis on investment and turnover.
As per the revised Classification applicable w.e.f 1st July 2020 Composite Criteria of Investment in Plant & Machinery/equipment and Annual Turnover is as given below:
| Classification | Micro | Small | Medium |
| Manufacturing Enterprises and Enterprises rendering Services | Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and Annual Turnover; not more than Rs. 5 crore | Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and Annual Turnover; not more than Rs. 50 crore | Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and Annual Turnover; not more than Rs. 250 crore |
Power of Central Government under Companies Act, 2013
Section 405 of Companies Act, 2013 entrusts power to the Central Government to direct companies to furnish information or statistics.
The Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time, as may be specified in the order.
The Central Government also may by order require such companies to produce such records or documents in its possession or allow inspection thereof by such officer or furnish such further information as that Government may consider necessary for verification of information or statistics as submitted by the Companies.
Obligation of Company towards MSME
In exercise of the powers conferred by section 405 of the Companies Act, 2013 the Central has issued order called as the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019.
As per the order:
- Initial Return: Every specified company shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification.
- Half yearly return: Every specified company shall file a return as per MSME Form, by 31st October for the period from April to September and by 30th April for the period from October to March.
As on date Companies are required to submit half yearly returns only
What are Specified Companies?
As per MCA notification dated 22nd January 2019 all companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 are referred as “Specified Companies”.
Particular of Return
Companies are required to submit half yearly return specifying:
- the amount of payment due; and
- the reasons of the delay;
How to access category of suppliers?
Companies need to undertake an exercise to identify the suppliers as MSME. Companies are required to seek MSME registration details from each of its supplier and if the registration certificate is provided by supplier than Companies must take care to make payments as record of delayed payment will be captured in MSME Form
Consequence of non-compliance
Penalty for non-compliance is not given in the notification order, however section 405 states the provision of non-compliance as follows:
If any company fails to comply with the order
or
furnishes any information or statistics which is incorrect or incomplete in any material respect,
the company and every officer of the company who is in default shall be liable to:
- A penalty of Rs. 25,000 and
- In case of continuing failure, with a further penalty of Rs. 1000 for each day after the first during which such failure continues, subject to a maximum of Rs. 3 Lakh.
Development of MSME is crucial for overall development of our Country so it becomes moral responsibility of Corporates to support these MSME. Corporates can play their part by providing opportunities to these MSME to become part of their business process like becoming supplier, dealer etc. Corporates should take care of the fact that MSME does not have much accumulated funds thus they need timely payment of their dues.
It is responsibility of every corporate who deals with MSME to make timely payment of their dues and also comply with the provision of the regulation as mentioned in the article.
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