| 40 | Assistance 80% - 100% subsidy (subject to upper caps) on Space rent and reimbursement of contingency expenditures like travel, publicity & freight for: — Participation of individual MSE’s in domestic trade fairs / exhibitions across the country. — Organising Domestic Trade Fair Capacity building of MSMEs in modern packaging techniques Development of Marketing Haats Vendor Development Program International / National Workshops / Seminar Awareness Programs Eligibility Individual Manufacturing/Service MSEs. How to apply? Eligible MSEs may submit their application online or system in place. 5. Entrepreneurship and Skill Development Programme 5.1. Entrepreneurship Skill Development Programme (ESDP) Description Entrepreneurship Development Programmes (EDP) are being organized regularly to nurture the talent of youth by enlightening them on various aspects of industrial activity required for setting up MSEs. These EDPs are generally conducted in ITIs, Polytechnics and other technical institutions, where skill is available to motivate them towards self-employment. Assistance 20% of the total targeted of ESDPs are conducted exclusively for weaker sections of the society i.e. (SC/ ST/women and PH) with a stipend of ` 500/- per month per candidate under the Promotional Package for Micro and Small Enterprises. No fee is charged from the candidates under these programmes. Eligibility These programmes are conducted by MSME-DIs of Ministry 5.2. Assistance to Training Institutions (ATI) Description The assistance is provided to National Level Training Institutions operating under the Ministry of MSME, namely, NIMSME, KVIC, Coir Board, Tool Rooms, NSIC & MGIRI in the form of capital grant for the purpose of creation and strengthening of infrastructure and support for entrepreneurship development and skill
| 41 | development training programmes. Assistance is also provided to existing State level Entrepreneurship Development Institute (EDI) for creation or strengthening/expansion of their training infrastructure. Assistance Amount of assistance will not exceed the actual amount for strengthening/ expansion o f the infrastructure required by the training institutions of this Ministry. Scale of maximum assistance to the State level EDIs will be restricted to ` 2.5 crore in each case. Assistance for skill development programmes will be provided as per the prescribed rates. Eligibility Institutions of Ministry of MSME and existing State level EDIs. How to apply? Organisations wishing to apply for assistance for creation or strengthening of infrastructure may send their applications to the Director/Deputy Secretary (EDI), Ministry of Micro, Small and Medium Enterprises, Udyog Bhawan, Rafi Marg, New Delhi – 110 011. 6. Infrastructure Development Programme 6.1 Micro & Small Enterprises Cluster Development (MSE – CDP) Description The Ministry o f MSME has adopted cluster development approach for enhancing productivity and competitiveness as well as capacity building of MSEs. The Scheme supports financial assistance for establishment o f Common Facility Centres (CFCs) for testing, training centres, R&D, effluent treatment, raw material depot, complementing production processes etc. and to create/upgrade infrastructural facilities (IDs) in the new/existing industrial areas/clusters of MSE’s such as power distribution network, water, telecommunication, drainage and pollution control facilities, roads, banks, raw materials, storage and marketing outlets, common service facilities and technological backup services for MSEs in the new/existing industrial estates/areas.
| 42 | Assistance Hard interventions, i.e., setting up of CFCs with maximum eligible project cost of Rs 15.00 cr with GoI contribution of 70% (90% for special category States and for clusters with more than 50% women/micro/ village/ SC/ST units). Infrastructure development in the new/ existing industrial estates/areas in which the maximum eligible project cost is Rs 10.00 cr, with GoI contribution amounting to 60% of project cost (80% for special category States and for clusters with more than 50% women/micro/SC/ST units). Eligibility Clusters, Industrial Associations/Consortia How to apply? Online applications can be filled at https://cluster. dcmsme.gov.in, Hardcopy of applications need to be sent through State Governments or their autonomous bodies or field institutes of the Ministry of MSME i.e., MSME- DIs. The proposals are to be approved by the Steering Committee of MSE-CDP. Website: http://www.dcmsme.gov.in/MSE-CDProg.htm Source: www.msme.gov.in 7. MSME Sambandh Due to their lack of scale and in-house capabilities, MSEs find it difficult to access proper market for selling their products. Inaccessibility to remunerative market affects their growth and sustainability. In order to support MSEs in selling their products at a competitive price, various countries have framed public procurement policy wherein certain percentage of goods manufactured by them are procured by the Government, Government Departments, etc. The Public Procurement Policy for Micro and Small Enterprises (MSME) Order 2012 has mandated Every Central Ministry/ Department/PSU to set an annual goal for procurement from the MSE sector at the beginning of the year, with the objective of achieving an overall procurement goal of minimum 25% of the total annual purchases from the products or services produced or rendered by MSEs. The policy has been recently amended vide Gazette notification No. S.O.5670(E). dated 9th November, 2018. Amended policy mandates 25% annual procurement from MSEs by Central Ministries/Departments/Public Sector Enterprises (CPSEs) which include 4% from MSEs owned by SC/ST and 3% from MSEs owned by Women entrepreneurs.
| 43 | For effective implementation and monitoring of the policy, the Ministry launched the Public Procurement Portal titled “MSMESAMBANDH” on 08.12.2017. The portal would help in monitoring the procurement by Central Government Ministries, Departments and Central Public Sector Enterprises (CPSEs) and would enable them to share the list of required products/services from MSEs. The portal features the following : • Central Government Ministries, Departments and Central Public Sector Enterprises (CPSEs) have been provided authenticated access in the portal. • Annual Targets for procurements of the CPSEs will be uploaded on the portal and will be available in public domain. • Monthly Update of Procurement by CPSEs from MSEs • Monthly Update of Procurement by CPSEs from MSEs owned by SC/ST/Women • Reports for monitoring by Heads o f Ministries, Departments and CPSEs • Items purchased by CPSEs - Hyperlinks to CPSEs web page from Sambandh Portal will be available in public domain. • 161 CPSEs have uploaded their annual procurement target during 2018-2019. These CPSEs have reported an annual procurement target of ` 152068.73 crore. The share of purchases from all MSMEs amounts to ` 40463.91 crore (1,26,553 MSEs benefited).The amount of purchases from SC/ST owned MSEs amounts to ` 822.75 crore (4,481 MSEs benefited). The amount of purchases from Women owned MSEs amounts to ` 231.19 crore (1,369 MSEs benefited). 8. MSME Sampark A job portal called “MSME SAMPARK” has been launched by the Hon’ble President of India on 27.06.2018. This portal is a digital platform wherein jobseekers (i.e. passed out trainees / students of MSME Technology Centres) and recruiters can register themselves for mutually beneficial interaction. As on 31.03.2019, a total of 35819 passed out trainees (job seekers) and 5060 recruiters (job provider) have registered on the SAMPARK portal against vacancies posted by recruiters, 7090 resumes have been shared with recruiters and 2124 jobs have been offered.
| 44 | 2. CREDIT AND FINANCIAL SUPPORT RELATED INITIATIVES / SCHEMES Sr. No. Scheme Description A Priority Sector Lending Status for MSME B Interest Subvention Scheme C Credit-Linked Capital Subsidy Scheme for technology upgradation (CLCSS) D Credit Guarantee Fund Scheme for Micro and Small Enterprises Schemes through the Atmanirbhar Bharat Package E Emergency Credit Line Guarantee Scheme F Subordinate Debt Scheme G Fund of Funds (Atmanirbhar Bharat Package) TReDS Platform A. Priority Sector Lending Status for MSME: As per Master Direction – Priority Sector Lending – Targets and Classification, domestic Scheduled Commercial Banks (SCBs) as well as foreign banks are required to extend 40% of their Adjusted Net Bank Credit (ANBC) as loans to priority sectors. These priority sectors include the following: • Agriculture • Micro, Small and Medium Enterprises • Export Credit • Education • Housing • Social Infrastructure • Renewable Energy • Others • Further, domestic SCBs and foreign banks with 20 branches and above are specifically required to lend to Micro enterprises, a minimum of 7.5% of their ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher as part of the PSL targets. This limit of 7.5% shall be inclusive of loans to Khadi and Village Industries Sector. The Priority Sector Lending status enhances the credit flow to the MSMEs.
| 45 | B. Interest Subvention Scheme Background The Scheme aims at encouraging both manufacturing and service enterprises to increase productivity and provides incentives to MSMEs for onboarding in GST platform which helps in formalization of economy, while reducing the cost of credit. Eligibility Eligibility: MSME having URC / UAM and a valid GST number. Key Benefit • 2% (two percent) interest subvention benefit on working capital and terms loans upto an extent of INR 100 lakhs. • This interest relief will be calculated at two percentage points per annum (2% p.a.), on outstanding balance from time to time from the date of disbursal / drawal or the date of notification of this scheme, whichever is later, on the incremental or fresh amount of working capital sanctioned or incremental or new term loan disbursed by eligible institutions. Incremental/fresh term loan or incremental/fresh working capital extended from 2nd November 2018 by any Scheduled Commercial Banks, NBFCs, RRBs, UCBs (Scheduled & Non-scheduled) and DCCBs would be covered under the scheme. How to Apply Approaching the existing lenders and making an application. Further details: http://dcmsme.gov.in/Notification_of_ Interest_subvention_Scheme_2018.pdf C. Credit-Linked Capital Subsidy Scheme for technology upgradation (CLCSS) Refer para 3.3.1 above on page 30 for full details of the scheme D. Credit Guarantee Fund Scheme for Micro and Small Enterprises Background Availability of adequate collateral security remains a challenge for MSEs to raise resources. Accordingly, to guarantee the credit to MSEs, the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the Government of India (GoI). The purpose is to make available collateral-free credit to the micro and small enterprise sector. Both
| 46 | the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. Eligibility Registered MSEs with valid URC/UAM. Both term loans and/or working capital facility up to ` 100 lakh per borrowing unit, extended without any collateral security and / or third party guarantee, to a new or existing micro and small enterprise. Key Benefit CGFT shall guarantee up to 75% of the credit facility up to ` 50 lakh (85% for loans up to ` 5 lakh provided to micro enterprises, 80% for MSEs owned/ operated by women and all loans to NER including Sikkim) with a uniform guarantee at 50% for the entire amount if the credit exposure is above ` 50 lakh and up to ` 100 lakh. How to Apply Borrowers need to conduct a market analysis and prepare a business plan containing relevant information, such as business model, promoter profile, projected financials, etc. and submit the loan application which is sanctioned, as per the bank’s policy. After the loan is sanctioned, the bank applies to CGTMSE authority and obtains the guarantee cover. A composite all-in Annual Guarantee Fee of 1.0 % p.a. of the credit facility sanctioned (0.75% for credit facility upto ` 5 lakh and 0.85% for above ` 5 lakh and upto 100 lakh for Women, Micro Enterprises and units in NER including Sikkim) is being charged. To be applied through the existing financial lenders. Details of the scheme along with latest circulars are available in the website of CGTMSE at www.cgtmse. in. Similar scheme is also available for NBFCs
| 47 | E. Emergency Credit Line Guarantee Scheme (Atmanirbhar Bharat Package) Background Launched by the Government of India as a part of Atmanirbhar Bharat Package in view of the Covid-19 situation with an aim to provide 100% guarantee coverage to banks and NBFCs to enable them to extend emergency credit facilities to MSMEs amongst others to meet additional term loan or working capital requirements. Eligibility Any entity who has outstanding loan facility and the loan account is classified as standard, SMA-0 or SMA-1. Outstanding credit of up to ` 25 crores as on February 29, 2020; and the annual turnover is up to ` 100 crores. No need for MSME registration. Key Benefit 20% additional credit loan based on outstanding fund-based credit availed as on 29th February, 2020 without any additional collateral or security at 0% guarantee fees. Interest rate capped at 9.25% for banks and 14% for NBFCs. Moratorium on principal payment for 12 months. How to Apply Existing lenders have reached out to all eligible borrowers. The borrower can also approach the Bank/NBFC for availing this limit. Details of the scheme along with latest circulars are available https://www.eclgs.com/. F. Subordinate Debt (Atmanirbhar Bharat Package) Background This Scheme seeks to extend support to the promoter(s) o f the operational MSMEs which are stressed and have become NPA as on 30th April, 2020. Promoter(s) in turn will infuse this amount in the MSME unit as equity and thereby enhance the liquidity and maintain debt-equity ratio Eligibility Operational MSMEs but classified as NPA Key Benefit In a situation, where an outright loan is difficult, sub-debt with guarantee will provide the requisite financing to the MSME Units. Subordinate debt will be of substantial help in sustaining and reviving the
| 48 | MSMEs which have either become NPA or are on the brink of becoming NPA. Promoter(s) of the MSMEs will be given credit equal to 15% of their stake (equity plus debt) or ` 75 lakh whichever is lower How to Apply Promoter(s) of MSMEs meeting the eligibility criteria may approach scheduled commercial banks to avail benefit under the scheme. For additional details refer www.cgtmse.in. G. Fund of Funds (Atmanirbhar Bharat Package) Background MSMEs face severe shortage of equity. The Fund of Funds will provide equity funding for MSMEs with growth potential and viability with the ultimate aim of encouraging MSMEs to grow and get listed on stock exchanges. GOI will support VC/PE firms in investing in commercially viable MSMEs in meeting their growth requirements. The proposed fund of funds will encourage private sector investments in the MSME sector and leverage ` 50,000 crore. The actual investment may be even higher. Eligibility All MSMEs Key Benefit Under the scheme, there would be a Mother Fund, where Government of India will be Anchor Investor; The Mother Fund can invest into daughter funds that can deploy the investments in targeted MSMEs. How to Apply Through Investor Funds onboarded and registered with proposed Fund of Funds. For further details refer www.champions.gov.in.
| 49 | TReDS RBI floated a concept paper for launching Electronic Bill Discounting Exchange in 2013. RBI issued TReDS guidelines on December 3, 2014. The Reserve Bank of India (RBI) has set up an institutional mechanism for financing trade receivables of MSMEs through the initiative of Trade Receivables Discounting System (‘TReDS’). TReDS is aimed at ‘facilitating the discounting of both invoices as well as bills of exchange’. TReDS is a common platform that connects MSME sellers, corporate buyers, and financiers (banks and NBFCs). After approval from both the seller and the buyer, the financiers would bid on invoices and make the payment to the seller. And the transactions processed under TReDS would be without recourse to MSMEs, meaning that MSME vendors need not be responsible for non-payment of the trade receivables amount (from buyers). Presently, three entities viz., Receivables Exchange of India Ltd. (RXIL), A. TREDS, and Mynd Solutions licensed by RBI are operating the platform for more than two years. The summary
| 50 | of traction gained on the TReDS platform as on March 31, 2019 is as below: Traction gained on TReDS platforms Participants registered Invoices financed MSME Sellers Buyers Banks NBFC Factors No. of Invoices Amount (₹ in Crores) 3708 604 71 5 251988 6,669 Source: Data submitted by TReDS entities to RBI Companies whose turnover exceeds Rs 500 crore will have to be registered on TReDS in order to smoothen cash flows for MSMEs. This set the ball rolling for TReDS, with a large number of MSME vendors, corporate buyers, banks and NBFCs coming onboard one of the three TReDS platforms. The process to join any of the TReDS platforms is short and quick. Once registered on one of the three TReDS platforms, here’s how the process flow works, supported by RBI data: 1. The MSME delivers the goods / renders the services and generates an invoice. 2. Based on the invoice, the MSME goes on their registered TReDS platform creates a ‘factoring unit.’ In absence of an invoice, a copy of work order can be uploaded alongwith an affidavit. 3. The recipient of goods / services logs on to TReDS and accepts this factoring unit. All Central Ministries/ Departments/Public Sector Enterprises (CPSEs) and companies having a turnover above INR 500 crores are required mandatorily register themselves on TReDS platform. 4. Based on the invoice, the TReDS will standardise the time window available for corporate buyers to ‘accept’ the factoring units. This process in online through the platform\ exchange. 5. A factoring unit will have the same sanctity and enforceability as allowed for physical instruments under the ‘Factoring Regulation Act, 2011’ or under the ‘Negotiable Instruments Act, 1881’.
| 51 | 6. The MSME factoring unit shall provide all details such as information of the seller and the buyer, issue date, due date, amount due, etc. to enable the platform to filter basis these parameters. 7. The TReDS platforms enables filtering these factoring units by any of the above parameters. This provides flexibility of operations to the stakeholders including facilitation of bidding by the lenders. 8. A notice or advice is created and automatically sent to the buyer’s bank once the factoring unit and all the details have been generated. 9. Apart from the buyers bank, these factoring units can be financed or bid for by any of the financiers registered on the TReDS platform. 10. The final amount quoted by the financier can be viewed only by the MSME seller and not other financiers. This process in completely online through the platform / exchange. 11. There will be a window period provided for financiers to quote these bids against factoring units. Further, financiers are free to choose how long their bids are valid. 12. The MSME then chooses and accepts any bid or may choose not to accept any. 13. Incase the MSME accepts the bid, the financier gets the notification that their bid has been accepted. Once a bid is accepted by the MSME seller, financiers cannot revise or change their bid. 14. The factoring unit will then get tagged as ‘financed’ and the funds will be deposited in the MSME seller’s account by the financier on T+2 basis (two business days after the date of acceptance). 15. Simultaneously, financing by a financier generates another notice to the buyer’s bank which enables a direct debit from the buyer’s account to the financier’s account on the due date. These are based on the settlement obligations generated by the TReDS platform. 16. On the due date, the corporate buyer transfers the due amount to the financier. All the while, the TReDS platform sends due notifications to corporate buyers and their banks reminding them of the amount due.
| 52 | 17. If the buyer doesn’t pay on the due date, it will attract penal provisions and enable the banker to proceed against the corporate buyer. The financing under TReDS shall be on a non-recourse basis to the MSME. FAQs on TReDS Q1. Who can participate on the TReDS platform? Ans. There are three direct participants involved in the activities of TReDS: (a) Seller - MSME, (b) Buyer - Corporates, government departments, Public Sector Undertakings (PSUs) and any other entity, and (c) Financiers - banks, NBFC Factors and other financial institutions permitted by the RBI. Q2. What are the applicable guidelines? Ans. The TReDS are inter alia governed by: (a) the Guidelines for the Trade Receivables Discounting System (TReDS) issued by the RBI, updated as on 2nd July 2018; (b) the Factoring Regulation Act, 2011; and (c) the Rules and Regulations issued under the Factoring Regulation Act, 2011. Q3. Nature of MSMEs that are eligible to participate on the TReDS platform? Ans. All entities that can be classified as MSMEs under Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”) are eligible to participate on the TReDS platform.
| 53 | Q4. Is any pre-registration of the eligible MSMEs required to be done with the platform? Ans. The MSMEs have to complete a one-time process to register online by submitting the online application and other documents and create its account on any of the TReDS platforms. Q5. Do MSMEs have to be registered under the MSMED Act? Ans. Yes Q6. Do MSMEs need to have banking limits? Ans. On the TReDS platform as the financier discounts invoices based on the buyers’ credit rating, the credit limit is defined only for the buyers. This is because an invoice is discounted by a financier without recourse to the seller. Q7. How is “double-discounting” avoided or taken care of on the TReDS platform? Ans. The TReDS platforms have implemented a common blockchain platform to eliminate instances of double financing, without sharing specific elements of any invoice or a client. Q8. Can reverse factoring take place on TReDS platform? Ans. Yes Q9. Are there any restrictions on the nature of goods / services underlying the invoice? Ans. All goods and services with which an MSME can deal with under the MSMED Act, 2006 or any other notification with regard to MSMEs can form part of the underlying invoice. Q10. Can an advertising firm, a chartered accountant firm and even a law firm avail services on TReDS platform? Ans. As long as a sole proprietorship, partnership firm, limited liability partnership firm, hindu undivided family, trust or a private/ public company is registered under the MSMED Act and meets the eligibility criteria, there is no restriction as to whether an advertising firm, a chartered accountant firm or a law firm can avail the services provided on TReDS platform. Q11. Are services on the TReDS platform available only for goods or even include services? Ans. The services on the TReDS platforms are available for MSMEs involved in both - manufacturing and services sectors.
| 54 | Q12. Who can participate as a financier in TReDS? Ans. Banks, NBFC - Factors and other financial institutions as permitted by the Reserve Bank of India (RBI), can participate as financiers in TReDS. Q13. How does TReDS work? Ans. Ans. Broadly, following steps take place during financing / discounting through TReDS: Creation of a Factoring Unit (FU) - standard nomenclature used in TReDS for invoice(s) or bill(s) of exchange - containing details of invoices / bills of exchange (evidencing sale of goods / services by the MSME sellers to the buyers) on TReDS platform by the MSME seller (in case of factoring) or the buyer (in case of reverse factoring); Acceptance of the FU by the counterparty - buyer or the seller, as the case may be; Bidding by financiers; Selection of best bid by the seller or the buyer, as the case may be; Payment made by the financier (of the selected bid) to the MSME seller at the agreed rate of financing / discounting; Payment by the buyer to the financier on the due date. Q14. What is a Factoring Unit (FU)? Ans. A Factoring Unit (FU) is a standard nomenclature used in TReDS for invoice(s) or bill(s) of exchange. Each FU represents a confirmed obligation of the corporates or other buyers, including Government Departments and PSUs. Q15. Who can create an FU? Ans. Ans. In TReDS, FU can be created either by the MSME seller or the buyer. If MSME seller creates it, the process is called factoring; if the same is created by corporates or other buyers, it is called as reverse factoring. Q16. Whether TReDS could deal with reverse factoring? Ans. Yes. The TReDS could deal with both receivables factoring as well as reverse factoring.
| 55 | Q17. Whether the MSME seller would have to pay to the financier in case the buyer defaults in repayment? Ans. No. The transactions processed under TReDS are “without recourse” to the MSMEs. Q18. Whether any authorisation is required to set up and operate a TReDS platform? Ans. Yes, authorisation is required to be obtained from RBI under the Payment and Settlement Systems (PSS) Act, 2007. Q19. Whether TReDS entities undertake KYC (Know Your Customer) of participants? Ans. Yes. The KYC process adopted by the TReDS entities shall adhere to the “Master Direction – Know Your Customer (KYC) Direction, 2016” dated February 25, 2016 (as amended from time to time) issued by RBI. Q20. What is a settlement file and who generates it in TReDS? Ans. A settlement file provides information as to how much amount has to be debited from and credited to the accounts of participants (sellers, buyers and financiers), due on a particular date / time. In other words, it indicates how much a financier has to pay to an MSME seller, and how much a buyer owes to the financier on a particular date / time. The TReDS entities generate the settlement file and send the same to existing payment systems (for instance, National Automated Clearing House) for actual payment of funds. Q21. Whether defaults on TReDS platform are the responsibility of TReDS entities? Ans. No. Default handling is outside the purview of TReDS platforms.
| 56 | Chapter V: Delayed payments to Micro and Small Enterprises The provisions of this Chapter V on Delayed payments to Micro and Small Enterprises do not apply to Medium Enterprises. • Liability for making payment: The Act prescribes that where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefore on or before (i) the date agreed upon between him and the supplier in writing or, (ii) the Appointed Date. Appointed Date means the day following immediately after the expiry of the period of 15 (fifteen) days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier. (i) ‘the day of acceptance’ means (a) the day of the actual delivery of goods or the rendering of services; or (b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day o f the delivery o f goods or the rendering of services, the day on which such objection is removed by the supplier; (ii) ‘the day of deemed acceptance’ means, where no objection is made in writing by the buyer regarding acceptance of goods or services within 15 (fifteen) days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of service. However, in no case the period agreed upon between the supplier and the buyer shall exceed a period of 45 (fortyfive) days from the day of acceptance or the day of deemed acceptance (Section 15). • Interest of delayed payment: Apart from requiring the buyer to make payment within the due time-frame, buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case maybe, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank (Section 16). • Reference to Micro and Small Enterprises Facilitation Council: In order to facilitate the recovery of dues and interest for the MSME supplier, notwithstanding anything contained in any other law for the time being in force, any party to a dispute
| 57 | may, with regard to any amount due, make a reference to the Micro and Small Enterprises Facilitation Council (‘Council’) The Council shall either itself or through an institution conduct conciliation in accordance with provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996. Such dispute shall be deemed to be as if conciliation was initiated under Part III of that Arbitration and Conciliation Act, 1996 In the event conciliation is not successful, the Council shall either itself or through an institution take up the dispute for arbitration and such dispute shall be considered as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Arbitration and Conciliation Act, 1996. Every reference made to the Council shall be decided within a period of 90 (ninety) days from the date of making such a reference. (Section 18). The Act enables Councils to be set-up in various states. 33 States/UTs (i.e. except Arunachal Pradesh, Assam and Manipur) have notified rules of Council and all the 36 States/UTs have constituted Councils, as per provisions laid down under Act. The Council located in the jurisdictional location of the supplier shall be the designated arbitrator and conciliator under the Act, irrespective of where the buyer is located. The list of existing Council centers are listed in Annexure – A. • Appeal arising from the Order of the Council: No application for setting aside any decree, award or other Order made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it (75%) seventyfive per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court. The court may also consider such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose. (Section 19). • Disclosure in annual statement of accounts: Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely:-- (i) the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year;
| 58 | (ii) the amount of interest paid by the buyer, along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year; (iii) the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act; (iv) the amount of interest accrued and remaining unpaid at the end of each accounting year; and (v) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure. (Section 22). The amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income-tax Act, 1961, be allowed as deduction. The Samadhaan Initiative MSME Samadhaan Portal - Ease of filing application under MSEFC, an Initiative from Ministry of MSME, Govt. of India (https://samadhaan.msme.gov.in) Ministry of MSME has taken an initiative for filing online application by the supplier MSE unit against the buyer of goods/services before the concerned MSEFC of his/her State/UT. These will be viewed by MSEFC Council for their actions. These will be also visible to Concerned Central Ministries, Departments, CPSEs, State Government, etc for pro-active actions. The application once filed is forwarded automatically online to the concerned Council established by the State/UTs as per the provisions of Act. Action on the applications regarding delayed payment is taken by the concerned Council only. Though the Samadhaan initiative has been started by the Ministry of Micro Small and Medium Enterprises, only the Council have been empowered as per Act for taking decisions regarding its reference made with them. The Ministry nor the Samadhaan portal intervenes in the matters of Council.
| 59 | MSME Samadhaan Portal has been created only to facilitate online applications regarding delayed payments. Physical applications can also be filed at the concerned Council. Annexures to this Chapter: 1. Annexure A: Address and details of Councils. 2. Annexure B: FAQs in relation to Samadhaan Initiative.
| 60 | Annexure – A Details of Micro and Small Enterprises Facilitation Council Addresses MSEFC Council Addresses 1. MSEFC Andaman and Nicobar Islands Address : Directorate of Industries, Udhyog Parishar, Middle Point, Port Blair State : ANDAMAN AND NICOBAR ISLANDS PinCode : 744101 Email Id : [email protected] Phone No : 232395 2. MSEFC Andhra Pradesh Address : Office of the Commissioner of Industries, 1st Floor, Mutyalamapadu, Satyanarayanapuram, Vijayawada. State : ANDHRA PRADESH PinCode : 520011 Email Id : [email protected] Phone No : 97952316 3. MSEFC Arunachal Pradesh Address : Director of Industries, Government of Arunachal Pradesh, Udyog Sadan, Itanagar State : ARUNACHAL PRADESH PinCode : 791111 Phone No : 2212323 4. MSEFC Assam Address : Commissioner of Industries, Government of Assam, Udyog Bhawan, Bamuni Maidan, Industrial Estate, Guwahati State : ASSAM PinCode : 781021 Phone No : 2550242 5. MSEFC Bihar Address : Director of Industries, Government of Bihar, 2nd Floor, Vikas Bhawan Bailey Road Patna State : BIHAR PinCode : 800015 Phone No : 2235812
| 61 | 6. MSEFC Chandigarh Address : Director of Industries, Chandigarh Administration, 39- Industrial Area, Phase-II, Ram Darbar, Chandigarh State : CHANDIGARH PinCode : 160001 Phone No : 2701344 7. MSEFC Chhattishgarh Address : Directorate of industries, Udyog Bhawan, Ring Road No. 1. Telibandha, Raipur, C.G. State : CHHATTISGARH PinCode : 492001 Email Id : [email protected] Phone No : 2583652 8. MSEFC Dadra and Nagar Haveli Address : Udyog Bhavan, Ground Floor, 66 KVA Road, Amli, Silvassa, Dadra and Nagar Haveli (UT) State : DADRA AND NAGAR HAVELI PinCode : 396230 Email Id : [email protected] Phone No : 2643122 9. MSEFC Daman and Diu Address : District Industries Centre, Udyog Bhawan, 1st Floor, Bhenslore, Nani Daman State : DAMAN AND DIU PinCode : 396210 Email Id : [email protected] Phone No : 2260871 10. MSEFC Delhi Address : Commissioner o f Industries, Plot No. 419, Patparganj Industrial Area, Delhi State : DELHI PinCode : 110092 Phone No : 22157011
| 62 | 11. MSEFC Goa Address : office of the Directorate of Industries, Trade and Commerce, 1st Floor, Udyog Bhavan, Panaji-Goa State : GOA PinCode : 403001 Email Id : [email protected] Phone No : 2222241 12. MSEFC Gujarat Address : Office of The Industries Commissionerate Block No. 1, 2nd Floor, Udyog Bhavan, Gandhinagar, Gujarat. INDIA State : GUJARAT PinCode : 382010 Email Id : [email protected] Phone No : 23252532 13. MSEFC Haryana Address : Director of Industries & Commerce, Government o f Haryana, 30-Bays Building, Sector-17, Chandigarh State : HARYANA PinCode : 160017 Phone No : 2701344 14. MSEFC Himachal Pradesh Address : Director of Industries, Government of Himachal Pradesh, Udyog Bhavan, Bemloe, Shimla State : HIMACHAL PRADESH PinCode : 171001 Phone No : 2813414 15. MSEFC Jammu Address : Directorate of Industries & Commerce, Ist Floor, Udyog Bhawan, Railhead Complex, Jammu Union Territory: JAMMU PinCode : 180012 Email Id : [email protected] Phone No : 2474085
| 63 | 16. MSEFC Kashmir Address : Directorate of Industries and Commerce, Kashmir Sanat Ghar Bemina, Sri Nagar Union Territory: KASHMIR PinCode : 190018 Email Id : [email protected] Phone No : 2493041 17. MSEFC Jharkhand Address : 3rd Floor, Nepal House, Doranda, Ranchi, Jharkhand State : JHARKHAND PinCode : 834002 Email Id : [email protected] Phone No : 2491844 18. MSEFC Bangalore Address : Directorate o f Micro, Small and Medium Enterprises, 49, Khanija Bhavan, South block Ground floor, Race course road, Bengaluru State : KARNATAKA PinCode : 560001 Email Id : [email protected] Phone No : 22386797 19. MSEFC Belagavi Address : Regional Commissioner, O/O Regional Commissioner, Belagavi Division, Court Compound, Near Rani Channamma Circle Belagavi State : KARNATAKA PinCode : 590001 Email Id : [email protected] Phone No : 2404007 20. MSEFC Kalaburagi Address : Regional Commissioner, Kalaburagi Division, Kalaburagi State : KARNATAKA PinCode : 585102 Phone No : 278811
| 64 | 21. MSEFC Mysuru Address : Regional Commissioner, Mysuru Region, HIGH View, Vinoba Road, Mysuru State : KARNATAKA PinCode : 570005 Phone No : 2516300 22. MSEFC Kerala Address : Director of Industries & Commerce, Government of Kerala, Vikas Bhavan P.O., Thiruvananthapuram, Kerala State : KERALA PinCode : 695033 Phone No : 2302774 23. MSEFC Lakshadweep Islands Address : Director of Industries, UT Administration of Lakshadweep, Kavaratti Union Territory:- LAKSHADWEEP PinCode : 682555 Phone No : 263132 24. MSEFC Madhya Pradesh Address : 4th Floor, Directorate of Industries, Vindhyachal Bhawan Bhopal State : MADHYA PRADESH PinCode : 462004 Email Id : [email protected] Phone No : 2558744 25. MSEFC-Amravati Address : Office of the Joint Director of Industries, Amravati Region, 36, Snehal Building, Ganediwal Layout, Behind Commissioner Office, Amravati State : MAHARASHTRA PinCode : 444602 Phone No : 2662769
| 65 | 26. MSEFC-Nagpur Address : Office of the Joint Director of Industries, (Nagpur Region), Udyog Bhavan, 2nd Floor, Civil Lines, Nagpur State : MAHARASHTRA PinCode : 444001 Phone No : 2560335 27. MSEFC-Konkan Thane Address : Office of Joint Director of Industries, 1st Floor, MIDC Commercial Complex Building, Mulund Check Naka,Wagale Estate, Thane (West) Maharashtra, India State : MAHARASHTRA PinCode : 400604 Email Id : [email protected] Phone No : 25828504 28. MSEFC-Pune Address : Agriculture Collage Campus, Shivajinagar, Pune State : MAHARASHTRA PinCode : 411005 Email Id : [email protected] Phone No : 25537332 29. MSEFC-Nashik Address : Office of Joint Director of Industries, Nashik Region, Nashik Plot No. P-15, MIDC, Near ITI Signal, Satpur, Nashik State : MAHARASHTRA PinCode : 422007 Email Id : [email protected] Phone No : 2350087 30. MSEFC-Aurangabad Address : Joint Director of Industries, 2nd Floor, Vikas Bhavan, Adalat Road, Near Baba Petrol Pump, Aurangabad State : MAHARASHTRA PinCode : 431001 Email Id : [email protected] Phone No : 2331105
| 66 | 31. MSEFC-Mumbai Address : Office of The Joint Director of Industries, Mumbai Metropolitan Region, 702, 7th Floor, Vikas Centre, Dr. C. Gidwani Marg, Chembur (E), Mumbai State : MAHARASHTRA PinCode : 400074 Email Id : [email protected] Phone No : 25208182 32. MSEFC Manipur Address : Director of Industries, Government of Manipur, Secretariat, North Block, Imphal State : MANIPUR PinCode : 795001 Phone No : 2414220 33. MSEFC Meghalaya Address : 2nd Floor, Administrative Building, Lower Lachumiere, Shillong State : MEGHALAYA PinCode : 793001 Email Id : [email protected] Phone No : 2226253 34. MSEFC Mizoram Address : Director of Industries & Commerce, Department of Industries Government of Mizoram, Aizwal State : MIZORAM PinCode : 796190 Phone No : 2322450 35. MSEFC Nagaland Address : Director of Industries & Commerce, Government of Nagaland Upper Chandmari KOHIMA State : NAGALAND PinCode : 797001 Phone No : 2248476
| 67 | 36. MSEFC Odisha Address : Directorate of Industries, Killa Maidan, Buxi Bazar, Cuttack State : ODISHA PinCode : 753001 Email Id : [email protected] Phone No : 2301892 37. MSEFC Pondicherry Address : Director of Industries & Commerce, Administration of UT of Pondicherry, Huzuga Theatre, Industrial Estate, Thattanchavady, Puducherry State : PUDUCHERRY PinCode : 605009 Phone No : 2248476 38. MSEFC Punjab Address : Director of Industries & Commerce, Government of Punjab, 17-Bays Building, Sector-17, Chandigarh State : PUNJAB PinCode : 160015 Phone No : 2722945 39. MSEFC-Ludhiana Address : Office of General Manager, District Industries Centre, Adjoining Punjab Trade Centre, Miller Ganj, Near SBI, Ludhiana. State : PUNJAB PinCode : 141003 Email Id : [email protected] Phone No : 2532052 40. MSEFC-Jalandhar Address : Director of Industries & Commerce, Government of Punjab, 17-Bays Building, Sector-17, Chandigarh State : PUNJAB PinCode : 160015 Phone No : 2722945
| 68 | 41. MSEFC-Amritsar Address : Director of Industries & Commerce, Government of Punjab, 17-Bays Building, Sector-17, Chandigarh State : PUNJAB PinCode : 160015 Phone No : 2722945 42. MSEFC-SAS Nager(Mohali) Address : Director of Industries & Commerce, Government of Punjab, 17-Bays Building, Sector-17, Chandigarh State : PUNJAB PinCode : 160015 Phone No : 2722945 43. MSEFC-Patiala Address : Genera Manager, District Industries Centre, Opposite Sunrise Motel, Near Chittosho Motors, Patiala State : PUNJAB PinCode : 147001 Email Id : [email protected] Phone No : 2357333 44. MSEFC-Bathinda Address : Director of Industries & Commerce, Government of Punjab, 17-Bays Building, Sector-17, Chandigarh State : PUNJAB PinCode : 160015 Phone No : 2722945 45. MSEFC-Sangrur Address : Chairman-Cum-Deputy Commissioner, Sangrur State : PUNJAB PinCode : 148001 Email Id : [email protected] Phone No : 253092
| 69 | 46. MSEFC Rajasthan Address : Commissioner of Industries, Government of Rajasthan, Udyog Bhavan, Tilak Marg, Jaipur State : RAJASTHAN PinCode : 302005 Phone No : 2227796 47. MSEFC Sikkim Address : Director of Industries, Government of Sikkim, Gangtok Secretariat Annexe-1, S. T. Marg, Gangtok State : SIKKIM PinCode : 737001 Phone No : 202318 48. MSEFC-Chennai Address : Regional Joint Director of Industries and Commerce, Thiru-vi-ka Industrial Estate, Guindy, Chennai State : TAMIL NADU PinCode : 600032 Phone No : 22505013 49. MSEFC-Trichy Address : District Industries Centre, Collector Office Road, Trichy State : TAMIL NADU PinCode : 620001 Email Id : [email protected] Phone No : 2460331 50. MSEFC-Madurai Address : District Industries Centre, Madurai State : TAMIL NADU PinCode : 625002 Email Id : [email protected] Phone No : 2537621
| 70 | 51. MSEFC-Coimbatore Address : No. 2 Raja Street, Coimbatore State : TAMIL NADU PinCode : 641001 Email Id : [email protected] Phone No : 2391678 52. MSEFC-Rangareddy Address : DIC, 4th Floor, Spoorthy Bhavan, Collectorate, Lakdikapool, Hyderabad, Telangana State : TELANGANA PinCode : 500004 Email Id : [email protected] Phone No : 29551242 53. MSEFC-Medchal Address : O/o the General Manager, District Industries Centre, 3rd Floor, A-Block, Collectorate Complex, Medchal - Malkajgiri District, Near ORR, Keesara (V&M), Medchal - Malkajgiri District State : TELANGANA PinCode : 501301 Email Id : [email protected] Phone No : 0 54. MSEFC-Karimnagar Address : District Industries Centre, Padmanagar Karimnagar State : TELANGANA PinCode : 505001 Email Id : [email protected] Phone No : 2254372 55. MSEFC-Warangal Urban Address : District Industry Centre, Warangal Urban, H. No. 1-1-13/1, Chaitanyapuri Colony, Opp: NIT Petrol Pump, Kazipet, Warangal Urban State : TELANGANA PinCode : 506004 Phone No : 23441666
| 71 | 56. MSEFC Telangana Address : Commissioner of Industries Commissionerate of Industries Government of Telangana Chirag Ali Lane, Abids, Hyderabad State : TELANGANA PinCode : 500001 Phone No : 23441666 57. MSEFC Tripura Address : Director of Industries & Commerce Directorate of Industries & Commerce Government of Tripura, Shilpa Udyog Bhavan, Khejurbagan PO- Kunjaban, Agartala State : TRIPURA PinCode : 799006 Phone No : 2223826 58. MSEFC Uttar Pradesh Address : Chairman, Up Micro Small and Medium Enterprises, Facilitation Council, Sarvodaya Nagar, G.t. Road, Kanpur State : UTTAR PRADESH PinCode : 208005 Email Id : [email protected] Phone No : 2234956 59. MSEFC Uttarakhand Address : Industrial Area Patel NagarDehradun State : UTTARAKHAND PinCode : 248001 Email Id : [email protected] Phone No : 2728227 60. MSEFC West Bengal Address : New Secretariat Buildings, 1, K S Roy Road State : WEST BENGAL PinCode : 700001 Email Id : [email protected] Phone No : 22489666
| 72 | Annexure – B FAQ of the MSME SAMADHAAN-Delayed Payment Monitoring System A. Procedural Issues on Samadhaan Portal Q1. What is MSME Samadhaan Portal ? Ans: MSME Samadhaan is a Portal created by Office of DC(MSME), Ministry of Micro, Small and Medium Enterprises (MSME) where Micro and Small Enterprises (MSEs) can file their applications online regarding delayed payments. Q2. Do Ministry of MSME take action on applications filed on MSME Samadhaan Portal ? Ans: No, MSME SAMADHAAN online portal is developed by Ministry of MSME only to facilitate MSEs filing of their applications regarding delayed payments online. The application once filed is forwarded automatically online to the concerned Micro and Small Enterprise Facilitation Council (MSEFC) established by the State/UTs as per the provisions of MSMED-Act 2006. Action on the applications regarding delayed payment is taken by the concerned MSEFC only. Q3. Can Ministry of MSME intervene in matters of MSEFC. Ans: No. Only the MSEFCs have been empowered as per MSMED Act, 2006 for taking decisions regarding its reference made with them. This office does not intervene in the matters of MSEFC. In short Ministry of MSME cannot interfere with judicial functioning of MSEFC. Q4. Is filing of Udyam Registration Number Mandatory to file applications on MSME Samadhaan Portal? Ans: Yes, UAM is mandatory to file applications online on MSME Samadhaan Portal. Q5. Is it mandatory to file Delayed Payment Applications online on MSME Samadhaan Portal only? Ans: No. MSME Samadhaan Portal has been created only to facilitate online applications regarding delayed payments. Physical applications can also be filed at the concerned MSEFC.
| 73 | Q6. Who can convert the application into Regular Reference Petition/claim case? Ans: The applications are converted into case by the concerned MSEFC. Q7. If there is no action on an application filed by MSEs, whom to contact? Ans: After submission, the application is automatically forwarded online to concerned MSEFC. Therefore, concerned MSEFC is to be contacted after filing the application online on MSME Samadhaan Portal. The contact address of concerned MSEFC is mentioned on the acknowledgement sent on the registered email of the applicant. Q8. Is work order compulsory to file application on MSME Samadhaan Portal? Ans: Yes, work order is compulsory. In case purchase order is oral an affidavit to that effect is to be submitted. Q9. How to upload multiple invoices? Ans: Multiple invoices can be combined into single PDF and can be uploaded. The affidavit of oral purchase order is to be included in single PDF. Q10. On which email OTP is sent? Ans: The OTP is sent to the registered email ID in Udyam Registration. B. Legal Issues in relation to Samadhaan Portal Q1. Whether the claim from a supplier engaged in services/ trading sector can be admitted by Council ? Ans: Categories admitted in MSEFCs are in respect of goods manufacturing and service rendering sectors for which UAM has been obtained. These categories cannot be challenged by the respondent/buyer. Q2. Whether an appellate court can allow an appeal against Award of Council without depositing of 75% of Award amount ? How the amount is released? Ans: Application under Section 19 of the MSMED Act, 2006 cannot be entertained by any court without deposit of 75% of Award amount. Deposited amount can be released to the applicant as per the directions to the Court.
| 74 | Q3. Is there any legal disqualification, if a case is decided after 90 days as stipulated in the Act? Ans: No. It is the act of court for which applicant cannot suffer. Q4. Whether the silence of the buyer after physical receipt of goods can make a claim ineligible for admission by the Council? Ans: No. The silence of buyer is confirmation of liabilities upon him. Q5. Whether 90 days period for settlement of claim starts from the date of filling the case or issue of notice to buyer? Ans: No. This time period begins only after notice of Arbitration under Section 18(3) of MSMED Act, 2006. Q6. Whether council should deliver a conciliation award after the successful conciliation ? Ans: Yes. It is called award by mutual consent. It is valid award and buyer cannot make appeal against it. Q7. What are the responsibilities and powers of Council members? Ans: They are judges having equal power. They should be well-versed in factual aspect of the case before them. Q8. Under administrative exigencies whether the Chairperson can delegate the presiding power to another subordinate official or another member? Ans: No. But the meeting/proceeding can take place, if Coram of three members is complete, members can elect the Chairperson and take further proceedings. It is necessary to mention why Chairperson could not attend the hearing. Q9. Whether there is provision for a Member Secretary as council Member and whether he can act as a Member in case of any exigency? Ans: Yes. Member Secretary is acting as Registrar of MSEFC and judge also when he sits in Council. Q10. Whether a legal notice by the supplier to buyer is necessary before filling the case in the Council? Ans: No.
| 75 | Q11. Whether a claim can be filed for interest alone where the claimant has received principal of dues already? Ans: Yes. Q12.Whether the receivables due in a claim before the enactment of Act can be adjudicated by Council? Ans: Only the claim under Section 6 of Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act, 1993 if pending, before IFC or Civil Courts, they can be considered. However, to approach the MSEFC, liberty of court is to be obtained on earlier claims. Q13.If there is a false claim from the applicant whether a penalty can be imposed by Council? Ans: No. The petition is to be rejected summarily. Q14. Whether grace period given for MSEs registration to the supplier can be considered while entertaining the claim. Ans: It is not hurdle in the matter of claim. Q15. Whether receivables from buyer such as advance deposit. EMD, Statutory deposits as other than supply of goods and services can be claimed in the claim before the Council? Ans: Yes. It includes in the total due amount. Q16. Whether Council should decide on breach of contract between buyer and supplier? Such as rejection of goods for quality deficiencies by buyer as a ground for refusal of dues to supplier. Ans: Breach of contract is not within scope of MSMED Act, 2006. Rejection of goods should be genuine within 15 days of the receipt of goods and its immediate communication to supplier. Q17. How the penal interest is calculated whether on monthly or quarterly rests? Ans: On a monthly compounding basis. Q18. Whether the jurisdiction of State Council can be extended to a district where no council is available ? Ans: Yes.
| 76 | Q19. Is there the power of dissent to a member of Council in the proceedings and insisting on recording in minutes? Ans: Yes, the member can dissent. It is to be recorded. But majority decision prevails. Q20. If the conciliation conducted by Council fails whether Council can take up Arbitration automatically? Ans: Yes, diverse view is taken by Bombay High court. But Supreme Court says that conciliation and arbitration are the legally vested functions of the Council. Q21. Is it necessary for Full Council to conduct conciliation ? Ans: No. Q22. Is it sufficient for Chairman or any member alone to participate in conciliation? Ans: Yes. Q23. Whether members of MSEFC participating in conciliation are barred from being members in Arbitration proceedings? Ans: No. It is not commercial conciliation or analysis of various contractual liabilities. It is simple arbitration to get compliance of Section 16 of MSMED Act, 2006. Q24. Who is empowered to constitute additional Councils? Ans: State government under Section 20 of MSMED Act, 2006. Q25. What is the process of execution of Award and the role of Council in assisting the Claimant? Ans: Procedure is under Section 36 of Arbitration and Conciliation Act, 1996. Q26. Whether the Council has power to review, revise or amend its own award? Ans: No. After final award it becomes “Funcous officio” means having no relation to award. Q27. Whether a Government Department as a buyer can be proceeded against in the Council. Ans: Yes.
| 77 | Q28. Whenever a notice is received by Council from an Appellate Court to represent as witness. What procedure is to be followed by the Council? Ans: The Council is not required to appear in any court as it is only a formal party. Q29. Is there a limit of pecuniary jurisdiction for State and District Council? Ans: No. Q30. What are legal implications for claimant in case of inordinate delay between the pronouncement of judgment and delivery of copies to concerned parties? Ans: The date of receipt of the copy of award is only effective date. Q31. If the same or related subject matter is under another court proceedings, whether a claim is admissible in Council? Ans: If amount is claimed in the Civil Court, then it cannot be claimed before MSEFC. Q32. If an Appellate Court reverts back the case to the Council how it should be dealt with ? Ans: It is to be decided as per instructions of the Higher Court. Q33. What is the impact of insolvency proceedings on the proceedings taken up in the Council? Ans: The Award by MSEFC is to be communicated to Interim Resolution Professional (IRP) and then to NCLT as per procedural law. Q34. Whether an Award holder from MSEFC can gain any preference as creditor in Insolvency proceedings? Ans: Yes. The Award Holder is considered as a secured creditor. Q35. Whether notices should be served to a dissolved buyer firm and partners even if subsequently reconstituted/ merged with a new entity? Ans: Yes, in partnership liabilities are unlimited. It is a lengthy procedure as first claim is to be kept alive.
| 78 | Q36. Whether Council can deal with criminal offences related to subject matter of claim ? Ans: No. Q37. Whether the request of any party to have representation by an attorney or any other authorized agent can be allowed by Council? If so what are the conditions to be fulfilled? Ans: Yes. By way of irrevocable power of Attorney. His commitment must be binding upon buyer. Resolution is required for this. Q38. Whether a time barred receivable from a buyer can be decided by Council ? Ans: Yes. No limitation is applicable in Arbitration by Council. But, delay and latches principle is applicable. Supplier sleeping over his legal rights cannot get assistance of Council. Q39. What are the exemptions available under the law of Limitation in treating a receivable from limitation of time barring? Ans: Law of limitation is not applicable. However, there should not be delay and latches on the part of the supplier. Q40. Whether the council is entitled to undertake summary proceedings without following strict rules of evidence? If so what are the areas in which such approach can be adopted? Ans: It is only summary proceedings and on the basis of affidavits of both the parties, the dispute can be resolved. Q41. If time is the essence of contract, how the Council should treat the rejection of goods by buyer? Ans: The MSMED Act, 2006 is set in motion after supplies of goods and services made by supplier and buyer accepts them but does not pay the bill within 45 days. Q42. What are the records to be maintained by the council? What is the time limit for preservation of such records? Ans: Petition with Purchase Order, Bills, delivery challans of goods and services and demand letter etc. are to be kept if the matter is challenged in any higher court. In any other case, where the amount is already realized by the supplier, it is at the discretion of the MSEFC.
| 79 | Q43. Whether notices can be served by e-mail/SMS/Whattsapp? Ans: Yes. Email is legal document and even Whattsapp. Q44. Whether the claim should be submitted in hard copy also. Ans: Yes. It is necessary as submission is required duly signed and verified. Q45. How many notices are to be served to opposite party if notices are not acknowledgement? What are next steps for declaring ex-parte proceedings? Ans: The notice of Council is to be published in daily Newspaper of the area where the Respondent is located, with the orders of Council after 3 notices are issued. Q46. How the Council should react, if the applicant abstains from the proceedings of the Council? Ans: It is at the discretion of the MSEFC Council and it can exercise its own diligence by giving opportunity to the applicant since he has to prove his claim before council. Q47. Is the Award binding on foreign buyer? Ans: Yes. When the supplier is a micro or small enterprises and agreement is made between Micro/ Small Enterprises in India. Goods are purchased/taken by foreign buyer and he returns to his country. Payment terms are not honored in these circumstances, matter can be filed before the Council. After following due procedure of law, the Council can issue award and same could be sent to both Consulates i.e Foreign buyers Consulate in that country. It can be enforced. Q48. Whether a private Arbitration clause in sale contract prevents admission of claim for Arbitration by Council? Ans: No. Q49. Whether proceedings can be conducted in local language? Ans: Yes. With English also so that Higher Court should understand later on. Q50. Who should prepare claim statement and is there a need for verification by a Chartered Accountant? Ans: Claim preparation is the responsibility of the claimant. It is advisable to get certified from C.A.
| 80 | Q51. Whether a claim against deceased buyer or dissolved company of buyer is maintainable in Council? Ans: Deceased buyer is liable through his legal heirs : But dissolved company is always under some authority and claim is maintainable. Q52. How company and partnership entities can be represented in the proceedings? Ans: A Company through its M.D. with resolution of Board of Directors and Partnership firms through its Managing Partner/s. Q53. Is it absolutely necessary to have purchase/work order as evidence? Can council allow secondary and corroborated evidence? Ans: No. Acknowledgement on invoice, delivery challans or part payment, email etc. all are accepted. Q54. Whether Members of Council are liable for prosecution if inadvertently an erroneous judgment is delivered by the Council ? Ans: No. On the contrary they are expected to act without fear and favour. Q55. Whether Chairman has veto power in judging a case ? Ans: No. Q56. Whether GM, DIC is ex-officio member in Council and any new official in his official position can take over as Chairman? Ans: No. Q57. Whether an Award should be with seal of the Council? Who should preserve the original ? Ans: Yes, an award should bear round seal on every page. Original is to be retained by the MSEFC and only certified copies to be delivered. Q58. Whether consent by absentee members for Award can be obtained by circulation to fulfill quorum requirement? Ans: The Coram of three Members physically is must. The above FAQs include those sourced from various guidance provided on and by the Samadhaan portal.
| 81 | I. BEST PRACTICES AND STANDARD OPERATING PROCEDURES IN RELATION TO MSME [XYZ Pvt Ltd/LLP] Standard Operating Procedures Manual Finance and Accounting Table of Contents Introduction 81 Division of Duties 82 Cash Receipts Procedures 84 Cash Disbursements Procedures 85 Reconciliations 87 Petty Cash Fund 89 Purchases 90 Fixed Asset Management 92 Payroll 93 Financial Reporting 94 Introduction This manual has been prepared to document the internal accounting procedures for [XYZ Pvt Ltd/LLP]. Its purpose is to ensure that assets are safeguarded, that financial statements are in conformity with generally accepted accounting principles, and that finances are managed with responsible stewardship. All personnel with a role in the management of [XYZ Pvt Ltd/ LLP]’s Financial operations are expected to uphold the policies and procedures in this manual. It is the intention of [XYZ Pvt Ltd/LLP] that this accounting manual serve as our commitment to proper, accurate financial management and reporting. Some of the benefits to be accrued from use of SOPs are: • They will be helpful in many workplaces which require strict procedures or adherence to a set of instructions to ensure that certain outcomes are attained • They will also serve as a good reference to employees who are required to follow laid down procedures. It has been shown that even the best of employees tend to forget, this implies that having SOPs will be quite vital in helping all the employees to stick to the right or recommended procedure.
| 82 | • SOPs also assist newly trained employees. They will be key in helping them keep afresh the instructions and they will also act as an easily available reference source Division of Duties The following is a list of personnel who have responsibilities within the accounting department: Head of Department (HOD) - Accounts: 1. Reviews and approves all financial reports. 2. Reviews and approves annual budget. 3. Reviews the payroll summary for the correct payee, hours worked and cheque amount. 4. Reviews all vouchers and invoices for those chequess which require his or her signature. 5. Reviews and approves all contracts for goods and services that will exceed ₹ 10,000 (amount can be decided by the MSME) over the year. Manager - Accounts: 1. Approves all vouchers, invoices and cheques. 2. Receives bank statements. 3. With the Assistant Manager - Accounts, and input from the HOD – Accounts and the Departmental Heads, develops the annual budget. 4. Reviews and approves all financial reports. 5. Reviews and approves list of pending cheque disbursements. 6. Reviews all vouchers and invoices for those cheques which require his or her signature. 7. Authorizes all interfund transfers. 8. Reviews all bank reconciliations. 9. Reviews the payroll summary for the correct payee, hours worked and cheque amount. 10. Approves all reimbursements. 11. Manages the assets accounts.
| 83 | [In many organization the role of HOD and Manager can be performed by one employee only] Assistant Manager - Accounts: 1. Processes all receipts and disbursements. 2. Processes the payroll, including payroll tax returns. 3. Submits requests for interfund transfers. 4. Maintains and reconciles the general ledger monthly. 5. With the Manager Accounts, and with input from the HODAccounts and Departmental Heads, develops the annual budget. 6. Prepares all financial reports, including requests for reimbursements. 7. Manages the petty cash fund. 8. Reconciles the bank accounts. 9. Reconciles the statement of credit card deposits and service charges. 10. Double-checks all reimbursement requests against receipts provided. Office Assistant/Receptionist: 1. Receives and opens all incoming mail, except the bank statements. 2. Prepares cash receipts log and invoice log. 3. Mails all cheques for payments. 4. Processes credit card payments for publications. [In many organization the role of Asst Manager and Office Assistant can be performed by one employee only] Senior Director/Partner: 1. Acts as second signatory on cheques. 2. Reviews all vouchers and invoices for those cheques which require his or her signature. All Departmental HODs: 1. Develops first draft of department budgets and works with the Manager and Assistant Manager - Accounts to finalize.
| 84 | 2. Accountability to approved departmental budgets in purchasing decisions and in preparing cheque request vouchers with the proper account code. Designated Board Members/Partners 1. Cheque signing authority on all [XYZ Pvt Ltd/LLP] accounts. 2. Authorizes expenditures in excess of ₹ 10,000, except preapproved recurring expenditures (such as rent) which might exceed ₹ 10,000. Cash Receipts Procedures The Office Assistant receives all incoming mail. All cheques received by the Office Assistant should be recorded on a cash receipts log which states the department to which the income is attributed, and stamped For Deposit Only. The Office Assistant then makes two copies of the check with one copy forwarded to the Assistant Manager - Accounts and the other copy to the responsible department. A copy of the cash receipts log will be given to the HOD Finance on a daily basis. Next, the Assistant Manager - Accounts prepares a deposit slip and deposits the funds into the savings account. The validated deposit slip should be attached to the Assistant Manager’s cash receipts log and filed. All cheque copies should be filed according to the month in which received. A deposit not forwarded or mailed to the bank should be locked in the accounting department’s lock box. No deposit should be locked in the lock box for more than 24 hours. If the funds are mailed to the bank, the Assistant Manager - Accounts should indicate the date mailed and received on the cash receipts log. The Assistant Manager - Accounts should make a copy of each cheque mailed and file them in a separate file folder. Funds Received by Electronic Transfer: The Manager - Accounts will request an electronic transfer of funds. This request will be prepared by the Assistant Manager - Accounts and should be signed by the Manager - Accounts. Next, the Assistant Manager - Accounts will monitor the transfer of funds and maintain the appropriate records of this transaction. As soon as the funds are credited to the Entities account, the bank should send a credit intimation to the Assistant Manager - Accounts. The Assistant Manager - Accounts should reconcile these credit intimations to the total funds received at the end of the month.
| 85 | In the absence of the Manager - Accounts, the HOD - Accounts or, in dire emergencies, the director, should authorize electronic transfers. Funds received from Credit Card Charges: The Office Assistant is responsible for processing the receipt of funds through the credit card authorizer directly into the entities bank account. Transactions should be processed on a weekly basis, with a list of the credits and date processed delivered to the Assistant Manager - Accounts in order to double-check against the bank statement. The statement of deposits and service charges will be reconciled by the Assistant Manager - Accounts. Cash Disbursements Procedures 1. Incoming invoices will be logged in by the Office Assistant (naming the staff person responsible for ordering the product or service) and delivered to the responsible staff person for his/ her approval and to prepare a cheque request voucher prior to disbursement dates. 2. The staff person responsible for ordering the product or service will check the validity of the invoice against proposals/bids, etc. and work accomplished and/or delivered and prepare a cheque request voucher prior to disbursement dates. 3. Fortnightly (or the next business day if the date falls on a weekend or holiday), cash disbursements should be prepared by the Assistant Manager - Accounts for signature by authorized [XYZ Pvt Ltd/LLP] officials for expenses, debts and liabilities of [XYZ Pvt Ltd/LLP]. 4. The Assistant Manager - Accounts is responsible for the preparation of disbursements. All disbursements are to be made by cheque unless the item is considered a petty cash item. 5. A cheque request voucher should then be completed by the purchasing staff person and attached to the original vendor invoice, and/or any other supporting documentation. The voucher should include the account codes to which the expense will be applied. Approval for an expense by the Manager - Accounts must be indicated on the cheque request voucher. 6. After inputting all the cheque requests, the Assistant Manager - Accounts will prepare a master list of all cheques to be paid for approval by the HOD - Accounts or Manager - Accounts. If there are any questions or concerns about the amounts, the Assistant Manager - Accounts should provide necessary information prior to running any disbursements. If there are any items removed
| 86 | from the batch, the totals on the payment summary form should be corrected, initialed and dated by the HOD - Accounts or Manager - Accounts. 7. The Assistant Manager - Accounts should then run an accounts payable ageing, which is generated by the accounting software. A total of the disbursements to be paid will be recorded on the form and sent to the Manager - Accounts for approval, along with the current balance in any and all bank accounts. 8. Once the amount to be disbursed has been received, the Assistant Manager - Accounts should prepare the cheque from the computer system. The cheque should be attached to the invoice, and other supporting documentation, being paid and submitted for signatures. A register should be run and filed together with the disbursement transmittal form. 9. While the HOD - Accounts, Manager - Accounts, and/or Director/ Partner signs each cheque, he/she should double check the cheque request voucher. This approval is to ensure the account and grant/project is charged to the correct expense and line item. Any cheque made to pay invoices in excess of ₹10,000 must be signed by the HOD - Accounts and authorized for payment in writing by one of Directors/Partners authorized for signature. 10. After the cheques have been signed, the second signatory will double-check the work, cancel the invoice by stamping “PAID” on it in red ink, and pass the cheques on to the Office Assistant for mailing. In the event that the Office Assistant is out, the administrative assistant will assume these duties. 11. All cheques will be mailed as soon as this process is completed. 12. Supporting documentation should be filed by the Assistant Manager - Accounts in appropriate vendor files. 13. The Assistant Manager - Accounts will utilize the paid invoice files to respond to any discrepancies which arise with vendors or other payees. 14. Once monthly, the Assistant Manager - Accounts will check the invoice log to determine if there are any outstanding invoices which have not yet been paid. If so, the Assistant Manager - Accounts will investigate the non-payment of these invoices with the responsible staff member.
| 87 | Reconciliations Cash Flow: [XYZ Pvt Ltd/LLP] is to maintain a minimum of ten percent (10%) of the operating budget between its operating and savings bank accounts at all times. In the event that balances fall below that amount the HOD - Accounts and partner / director should be notified immediately. Bank Reconciliations: 1. Bank statements are to be received unopened by the Manager - Accounts. The receiving party should review the contents for inconsistent cheque numbers, cash balances and payees and endorsements at a minimum. After this cursory review is conducted, the official should initial and date the bottom, right hand corner of the first page of each bank statement reviewed. The reviewed bank statement should then be forwarded to the Assistant Manager - Accounts (an individual without cheque signing rights) to reconcile the bank accounts using the approved reconciliation form. 2. The person charged with this responsibility should reconcile each account promptly upon receipt of the bank statements. All accounts will be reconciled no later than 7 days after receipt of the monthly bank statements. In the event it is not possible to reconcile the bank statements in this period of time, the HOD – Accounts or Manager - Accounts should be notified by a written memo/email from the Assistant Manager - Accounts. 3. Completed bank reconciliations should be reviewed by the Manager - Accounts and initialed and dated by the reviewer. 4. The Assistant Manager - Accounts upon receipt of the completed bank reconciliations, prepares any general ledger adjustments. 5. Copies of the completed bank reconciliations will be forwarded to the Treasurer for his/her review. Reconciliations of Other General Ledger Accounts: 1. Each month/quarter the Assistant Manager - Accounts and Manager - Accounts should review the ending balance shown on balance sheet accounts such as the bank accounts, accounts receivable, accounts payable and deferred revenue. The Assistant Manager - Accounts and Manager - Accounts should review the bank reconciliations, schedules of accounts receivable and deferred revenue and the aging of accounts payable to support the balances shown on the balance sheet.
| 88 | 2. Assets - These accounts will include bank, petty cash, prepaids, property, equipment and fixtures, security deposits, and intangible assets. a. Bank - The balances in bank accounts should agree with the balances shown on the bank reconciliations for each month. b. Petty Cash - The balance in this account should always equal the maximum amount of all petty cash funds. The current amount equals ₹5000. c. Prepaids - The amounts in these accounts should equal advance payments paid to vendors at the end of the accounting period. d. Property, Equipment & Fixtures - The amounts in this account should equal the totals generated from the audited depreciation schedules. When additional purchases are made during the year, the balances in the accounts may be updated accordingly. e. Security Deposits - The balance in this account should equal amounts paid in escrow to landlords and lessors and should not change frequently, but should be updated as applicable. 3. Liabilities - These accounts are described as accounts payable, payroll tax liabilities, loans and working capital limits payable, and amounts due to others. a. Accounts Payable - The balance in this account should equal amounts owed to vendors at the end o f the accounting period and the ageing report. b. Payroll Tax Liabilities - The amounts in these accounts should equal amounts withheld from employee paycheques as well as the employer’s portion of the expense for the period, that has not been remitted to the government authorities. c. Sundry Creditors - If there are any amounts owed to others at the end of the period they should be recorded and the correct balance maintained in the general ledger accounts. 4. Income/Expenses - These accounts are described as income from main activities of the entity and other expense line items such as salaries, consulting fees, etc. a. Income – Appropriate booking of revenue to be ensured
| 89 | b. Gross Salary Accounts - The balances in the gross salary accounts should be added together and reconciled with the amounts reported on payroll returns. c. Consulting - The amounts charged should be reconciled to the contracts. Petty Cash Fund 1. The petty cash fund should never exceed ₹5000 [entities may decide the amount]. 2. The Assistant Manager - Accounts is the custodian of the petty cash fund. 3. A single disbursement from petty cash shall never exceed ₹1000 [entities to decide the amount]. 4. The petty cash fund shall be operated on an imprest basis. This means that when it is time to replenish the petty cash fund, the Assistant Manager - Accounts shall total out the expenses made and identify those expenses by general ledger account number. When the cheque request is submitted for payment it should indicate the total amount needed to bring the fund back up to ₹5000. Also, the request should breakdown the various expense accounts being charged and the amount charged to each. 5. When a request for petty cash reimbursement is made to the Assistant Manager - Accounts, the item will be listed on the Petty Cash Fund Reconciliation Sheet. A description of the item charged should be recorded together with the amount. A vendor receipt must be received by the Assistant Manager - Accounts for the amount of the request in order for the request to be approved. 6. The recipient of the petty cash funds must sign the sheet to indicate receipt of the funds. The paid receipt should be attached to the sheet. All paid information should remain in the locked petty cash box until it is time to replenish the fund. At that time, the Petty Cash Fund Reconciliation Sheet and associated receipts are attached to the cheque request voucher. 7. The petty cash box is to be locked at all times when the Assistant Manager - Accounts is not disbursing or replenishing the fund. The locked petty cash box is to be kept in the locked file cabinets within the finance office. 8. At least once annually, the HOD - Accounts or Manager - Accounts should conduct a “surprise review” of the fund. When this is done, he/she should count, while the Assistant Manager