Micro, Small, and Medium Enterprises (MSMEs) are vital to India’s economic growth as they accelerate economical growth as well as provides opportunities for employment for local youth.  However, MSME often faces challenges in receiving timely payments for goods and services provided.

To resolve the issue of timely recovery of funds, the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 was enacted, establishing a pathway and quick recovery of delayed payments through the Micro and Small Enterprises Facilitation Council (MSEFC) at various states and districts across India.

MSEFC is only quasi–judicial organization which direct to pay the delayed payments with 3 times of bank rate of interest. It also compels the payment within stipulated time of 45 days from date of receipt of goods / services. However, it is pertinent to note that, the complaint has to be filed within 3 years from the date the amount becomes due for payment.

MSEFC has two level dispute resolution system which includes;

1. Conciliation at first level to resolve disputes between amicably between the Parties.
2. Arbitration at second level, when conciliation fails, the Council can proceed with Arbitration to adjudicate the matter on merit and evidences.

Steps in Money Recovery Suit through MSEFC:

1. Udyam Registration is mandatory before issuing of invoices and filling complaint before MSEFC.
2. Prepare Documentation with all relevant documents, including purchase orders, invoices, delivery challans, and communication records etc. are essential for fast proceeding.
3. File Application through the MSME Samadhaan Portal, providing details of the delayed payment and attaching the necessary documents and claim statement. After scrutiny, removal of objections, the Case gets approvals and thereafter the hard copies of all relevant documents in four sets are required to be submitted in the MSEFC office.
4. MSEFC Proceedings as stated above, it follows issuance of notice to other party for appearance, then try for conciliation between the parties and lastly resort to Arbitration to decide the case.
5. Award and Enforcement of an award in favor of the Petitioner can be enforced as a decree by filing Execution Petition / Darkhast at District Court.

Hence, for quick recovery of money from your suppliers, it is recommended to register the unit under MSME Act and have Udyam Adhar Registration in hand.