MSME : MCA Notification Gives More Power To The ACT.

Here I would like to provide the brief note on MCA notification Dated 22/01/2019

However it is MCA Notification which is for Companies Act,2013 but here we should go through the MSMED Act,2006 also to derive the total impact, applicability and reasons to the Notification

MSME covers only Manufacturers and Service providers, therefore, all the enterprises that are registered under MSME or having UAM No. must be either Manufactures or Service provider, they shall not be retailer/ trader.

Section 15. Liability of buyer to make payment.—Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

There is Important Definitions as per MSMED ACT,2006, which are relevant for the calculation of date from which dues shall be considered outstanding and the meaning of supplier is also relevant as Specified Company for which filing is mandatory should know about the dealers who are MSME.

Appointed Day- 

Meaning of Appointed Day: The day following immediately after the expiry of the period of fifteen days from the date of acceptance or the day of deemed acceptance of any goods or any services.

The Day of Acceptance-  (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 of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;

The Day of Deemed Acceptance - means, where no objection is made in writing by the buyer regarding acceptance of goods or services within 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 services.

Let us understand with the help of an example:

A couple of reasons for any objection could be defective goods, replacement of good, not of specified quality or out of range goods, not as per the order made, quantity or lot is not as per specifications or many more.

Supplier means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of section 8, and includes,—

(i)                  the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956);

(ii)                the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956);

(iii)               any company, co-operative society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises;

Categorisation of Micro/ Small and Medium Enterprises on the basis of its investment in Plant and Machinery and Equipment.

*while calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices and such other items as may be specified, by notification, shall be excluded.

* MSME can be any class or classes of enterprises, whether proprietorship, Hindu undivided family, an association of persons, co-operative society, partnership firm, company or undertaking.

Section 16. Date from which and rate at which interest is payable.—
Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the 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 may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.

A brief Historical background of Registration under MSMED Act, 2006

Earlier when this Act was enacted it was an offline submission of Entrepreneurship Memorandum-I or Entrepreneurship Memorandum-II, but via

 Notification No. S.O. 2576(E). Dated 18/09/2015:

offline filing and submission was shifted to Online Registration under Udyog Aadhaar through portal and within same day Enterprise will get its UAM No.

*the Udyog Aadhaar Memorandum shall be filed on self-declaration basis, and no supporting document is required to be uploaded or submitted while filing the Udyog Aadhaar Memorandum.

*for making an application on behalf of any association of person/ body corporate, an Individual shall first Sign up using his Aadhar as OTP will be received on the Individual’s Mobile no. linked to Aadhaar.

MCA Notification S.O. 368(E) Dated 22nd January 2019

“The Central Government has directed that all companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty-five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (hereafter referred to as “Specified Companies”), shall submit a half yearly return to the Ministry of Corporate Affairs stating the following:

(a) the amount of payment due; and

(b) the reasons of the delay;

Every specified company shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification.

The time period for filing of Return: 1 Month

Initial Return: 1 month from the date of this Notification i.e. every specified Companies who has buy any goods or services and not paid dues for more than 45 days as on date of this notification shall file return within 1 month i.e. 22^nd February 2019.

October to March- 30^th April

April to September- 30^th October.

However MSMED ACT, 2006 is a Special Act for MSME’s but this return shall be filed to MCA not to MSME authority.

But there was no return format provided under the said Act, hereby Companies Act via its notification Dated: 22/01/2019 has synchronised the MSME Act with Companies Act for compliance of other Acts as well.

·         Notification doesn’t cover Medium Enterprises, as it is applicable only for Micro and Small enterprises.

·         Buyer shall file Form MSME Form 1.

·         It is not a one time return introduced by the MCA rather it is half yearly return.

·         Details of Outstanding dues shall be provided

·         Return should be filed by Companies, Not the business Registered under MSME

Reason For Notification

Under the MSMED Act, 2006 two of the provisions were already provided, likewise

Further in Harmony to MSMED Act, 2006 requirement of filing form is only if the delayed payment exceeds 45days.

ABOUT THE AUTHOR

Shefali Gupta: Economics Honours Graduate from Delhi University and Qualified Company Secretary, Currently working as Legal Analyst with SVR & Co. - Company Secretaries 

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