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MSMED ACT

11 November 2018

Hello everyone,

I have doubt regarding Delayed payments.
Ours is a Digital marketing company ( service industry) based in Maharashtra.
We have a Debtor who has not paid us since quite long time, say more than an year. We have stopped working with them, however they have not paid us yet.

Query : We have recently registered ourselves in MSMED and want to use this medium to recover funds from them. However, we were not registered under MSMED when we had provided services to them and obviously they werent informed about it. Is there any way where we can take help of MSME to recover our debts now?

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7 Replies

Vibha Trivedi (437 Points)
Replied 11 November 2018

Even not registered as MSME at the time of execution of contract with the debtor, the company qualifies to claim recovery of delayed payments.

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Mayur Chitnis (40 Points)
Replied 11 November 2018

Thank you for your revert Vibha.
Yes we are trying to recover payment but can we go through MSME? If yes, can't client claim that we were not informed about this at the time of providing services? Can you help me with the process in this type of situation?

Vibha Trivedi (437 Points)
Replied 11 November 2018

Yes, for recovery of delayed payments, reference for resolution relating to delayed payments under Section 18 of the MSMED Act, 2006 shall be made.

The Company can also avail online portal of MSME Delayed payment portal which is MSME Samadhaan.

Sir, the client may claim that at the time of provision of services, the company was
not registered as MSME. So the company is not authorised to make reference under section 18 of MSMED Act, 2006. But there a Delhi High Court Judgement in this regard which says that MSME Registration is not mandatory at the time of entering contract for being eligible to make reference under section 18 of the MSMED Act, 2006. If the company is falling within the definition of MSME it can avail of section18 of MSMED Act, 2006.

Further the client cannot say that he/she was not informed about registration as MSME in near future as the company' s board takes decisions regarding all this. No permission is taken from any outsider which in your case is the client.

Mayur Chitnis (40 Points)
Replied 11 November 2018

Thanks a lot Vibha. This will help me a lot.

Vibha Trivedi (437 Points)
Replied 12 November 2018

You're Welcome Sir

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SACHIN KACHHELA (3 Points)
Replied 14 December 2018

Hello,
If I want to start new business of designer clothes I. E. for new startup I need machinaries like sewing machine etc. Starting with 2 3 workers on weekly basis payment.
So, what is applicability of MSME on this. May I get registered under the MSME act. Also guide on do and don'ts

saurendra rautray (Advocate) (85 Points)
Replied 12 April 2020

Dear Mayur,

I would like to make a point in concern to whether a registration of a unit post the contract or post delivery of goods/service will not be able to take the benefit of MSMED Act.

Although the Delhi High Court[4] has taken the view that entities which fall under the third limb of the definition are absolved of the obligation to get a registration but if we take a close look it is abundantly clear that the act talks about entities who are selling the goods and service of Micro or Small units. In my opinion the Delhi High Court Judgement is per incuriam since Bombay High Court and other High Courts have already held that MSMED Act does not have retrospective effect and hence registration subsequent to the execution of the contract will not attract the MSMED Act 2006.

Saurendra Rautray

Advocate

Rautray & Co

New Delhi

9437008255