Micro, Small and Medium Enterprises Development Act, 2006 Chapter V

Where any supplier, supplies any goods or renders anyservices to any buyer, the buyer shall make payment therefor on or before thedate agreed upon between him and the supplier in writing or, where there is noagreement in this behalf, before the appointed day:

Provided that in no case the period agreed upon between thesupplier and the buyer in writing shall exceed forty-five days from the day ofacceptance or the day of deemed acceptance.

Where any buyer fails to make payment of the amount to thesupplier, as required under section 15, the buyer shall, notwithstandinganything contained in any agreement between the buyer and the supplier or in anylaw for the time being in force, be liable to pay compound interest with monthlyrests 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 ofthe bank rate notified by the Reserve Bank.

For any goods supplied or services rendered by the supplier,the buyer shall be liable to pay the amount with interest thereon as providedunder section 16.

(1) Notwithstanding anything contained in any other law forthe time being in force, any party to a dispute may, with regard to any amountdue under section 17, make a reference to the Micro and Small EnterprisesFacilitation Council.

(2) On receipt of a reference under sub-section (1), theCouncil shall either itself conduct conciliation in the matter or seek theassistance of any institution or centre providing alternate dispute resolutionservices by making a reference to such an institution or centre, for conductingconciliation and the provisions of sections 65 to 81 of the Arbitration andConciliation Act, 1996(26 of 1996) shall apply to such a dispute as if theconciliation was initiated under Part III of that Act.

(3) Where the conciliation initiated under sub-section (2) isnot successful and stands terminated without any settlement between the parties,the Council shall either itself take up the dispute for arbitration or refer toit any institution or centre providing alternate dispute resolution services forsuch arbitration and the provisions of the Arbitration and Conciliation Act,1996(26 of 1996) shall then apply to the dispute as if the arbitration was inpursuance of an arbitration agreement referred to in sub-section (1) of section7 of that Act.

(4) Notwithstanding anything contained in any other law forthe time being in force, the Micro and Small Enterprises Facilitation Council orthe centre providing alternate dispute resolution services shall havejurisdiction to act as an Arbitrator or Conciliator under this section in adispute between the supplier located within its jurisdiction and a buyer locatedanywhere in India.

(5) Every reference made under this section shall be decidedwithin a period of ninety days from the date of making such a reference.

No application for setting aside any decree, award or otherorder made either by the Council itself or by any institution or centreproviding alternate dispute resolution services to which a reference is made bythe Council, shall be entertained by any court unless the appellant (not being asupplier) has deposited with it seventy-five per cent of the amount in terms ofthe decree, award or, as the case may be, the other order in the manner directedby such court:

Provided that pending disposal of the application to setaside the decree, award or order, the court shall order that such percentage ofthe amount deposited shall be paid to the supplier, as it considers reasonableunder the circumstances of the case subject to such conditions as it deemsnecessary to impose.

The State Government shall, by notification, establish one or more Micro and Small Enterprises Facilitation Councils, at such places, exercising such jurisdiction and for such areas, as may be specified in the notification.

(1) The Micro and Small Enterprise Facilitation Council shall consist of not less than three but not more than five members to be appointed from among the following categories, namely:--

(i) Director of Industries, by whatever name called, or any other officer not below the rank of such Director, in the Department of the State Government having administrative control of the small scale industries or, as the case may be, micro, small and medium enterprises; and

(ii) one or more office-bearers or representatives of associations of micro or small industry or enterprises in the State; and

(iii) one or more representatives of banks and financial institutions lending to micro or small enterprises; or

(iv) one or more persons having special knowledge in the field of industry, finance, law, trade or commerce.

(2) The person appointed under clause (i) of sub-section (1) shall be the Chairperson of the Micro and Small Enterprises Facilitation Council.

(3) The composition of the Micro and Small Enterprises Facilitation Council, the manner of filling vacancies of its members and the procedure to be followed in the discharge of their functions by the members shall be such as may be prescribed by the State Government.

Where any buyer is required to get his annual accountsaudited under any law for the time being in force, such buyer shall furnish thefollowing additional information in his annual statement of accounts, namely:--

(i) the principal amount and the interest due thereon (to beshown separately) remaining unpaid to any supplier as at the end of eachaccounting year;

(ii) the amount of interest paid by the buyer in terms ofsection 16, along with the amounts of the payment made to the supplier beyondthe appointed day during each accounting year;

(iii) the amount of interest due and payable for the periodof delay in making payment (which have been paid but beyond the appointed dayduring the year) but without adding the interest specified under this Act;

(iv) the amount of interest accrued and remaining unpaid atthe end of each accounting year; and

(v) the amount of further interest remaining due and payableeven in the succeeding years, until such date when the interest dues as aboveare actually paid to the small enterprise, for the purpose of disallowance as adeductible expenditure under section 23.

Notwithstanding anything contained in the Income-tax Act, 1961(43 of 1961), 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 provisions of sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

Notwithstanding anything contained in any law for the time being in force, the Central Government may, with a view to facilitating closure of business by a micro, small or medium enterprise, not being a company registered under the Companies Act, 1956(1 of 1956), notify a Scheme within one year from the date of commencement of this Act.