MSME Samadhaan: FAQ on Legal Issues Pertaining to the Provissions of MSMED ACT, 2006.

1. Can the Council accept claims from suppliers in the service/trading sector?

Answer: The Council can only accept claims from suppliers in the manufacturing and service sectors for which UAM has been obtained. These categories cannot be challenged by the respondent/buyer.

2. Can an appellate court allow an appeal against the Council’s award without depositing 75% of the award amount? How is the amount released?

Answer: An application under Section 19 of the MSMED Act, 2006 cannot be considered by any court. The deposited amount can be released to the applicant as per the court’s directions.

3. Is there any legal consequence if a case is decided after the 90-day stipulated period?

Answer: No, it is the court’s responsibility, and the applicant cannot be penalized.

4. Can the buyer’s silence after receiving goods make a claim ineligible for admission by the Council?

Answer: No, the buyer’s silence confirms their liabilities.

5. Does the 90-day period for settling a claim begin from the date of filing the case or issuing a notice to the buyer?

Answer: No, the time period begins only after the notice of arbitration under Section 18(3) of the MSMED Act, 2006.

6. Should the Council issue a conciliation award after a successful conciliation?

Answer: Yes, the award by mutual consent is valid and cannot be appealed by the buyer.

7. What are the responsibilities and powers of Council members?

Answer: Council members are judges with equal power, and they should be well-versed in the factual aspects of the case before them.

8. Can the Chairperson delegate presiding power to another official or member under administrative exigencies?

Answer: No, but the meeting/proceeding can take place if the Coram of three members is complete. Members can elect the Chairperson and proceed further, mentioning why the Chairperson could not attend the hearing.

9. Is there a provision for a Member Secretary as a Council member, and can they act as a member in case of any exigency?

Answer: Yes, the Member Secretary acts as the Registrar of MSEFC and as a judge when sitting in the Council.

10. Is a legal notice necessary before filing a case in the Council?

Answer: No, a legal notice is not necessary.

11. Can a claim be filed for interest alone if the claimant has already received the principal dues?

Answer: Yes, a claim can be filed for interest alone.

12. Can receivables due before the enactment of the Act be adjudicated by the Council?

Answer: Only claims under Section 6 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act, 1993, if pending before IFC or Civil Courts, can be considered. However, liberty of the court is to be obtained on earlier claims to approach the MSEFC.

13. Can the Council impose a penalty if the applicant makes a false claim?

Answer: No, the petition will be rejected summarily.

14. Can the grace period given to MSEs for registration be considered while entertaining a claim?

Answer: No, it is not a hurdle in the matter of the claim.

15. Can receivables from the buyer, such as advance deposits, EMD, and statutory deposits other than for the supply of goods and services, be claimed in the Council’s claim?

Answer: Yes, it is included in the total due amount.

16. Should the Council decide on contract breaches between buyers and suppliers, such as rejecting goods for quality issues and refusing payment to the supplier?

Answer: The MSMED Act of 2006 does not cover breach of contract. If goods are rejected for genuine quality concerns within 15 days of receipt, the rejection should be communicated to the supplier immediately.

17. How is penal interest calculated? Is it monthly or quarterly?

Answer: Penal interest is calculated on a monthly compounding basis.

18. Can the jurisdiction of a State Council be extended to a district where no council is available?

Answer: Yes.

19. Does a Council member have the power to dissent in proceedings and insist on recording it in the minutes?

Answer: Yes, the member can dissent and it should be recorded. However, the majority decision prevails.

20. If conciliation conducted by the Council fails, can the Council automatically proceed with arbitration?

Answer: Bombay High Court has taken a diverse view, but the Supreme Court says that conciliation and arbitration are legally vested functions of the Council.

21. Is it necessary for the full Council to conduct conciliation?

Answer: No.

22. Is it sufficient for the Chairman or any member to participate in conciliation?

Answer: Yes.

23. Are members of the MSEFC participating in conciliation barred from being members in arbitration proceedings?

Answer: No. It is not commercial conciliation or analysis of various contractual liabilities. It is simple arbitration to ensure compliance with Section 16 of the MSMED Act of 2006.

24. Who has the power to constitute additional Councils?

Answer: The State government has the power under Section 20 of the MSMED Act of 2006.

25. What is the process for executing an award and the role of the Council in assisting the claimant?

Answer: The procedure is outlined in Section 36 of the Arbitration and Conciliation Act of 1996.

26. Does the Council have the power to review, revise, or amend its own award?

Answer: No. Once the final award is given, it becomes “functus officio,” meaning it has no relation to the award.

27. Can a government department as a buyer be brought before the Council?

Answer: Yes.

28. When the Council receives notice from an appellate court to represent as a witness, what procedure should be followed?

Answer: The Council is not required to appear in any court as it is only a formal party.

29. Is there a pecuniary jurisdiction limit for State and District Councils?

Answer: No.

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