An
Article to clarify the doubt about non-filing MSME FORM I
At the outset, I would like to
thank you all for giving overwhelming love and support all the time over
different platforms. The present article is being written after reading number
of articles and opinion from Stave Consultancy, Khaitan & Khaitan and other
senior officers like Company Secretaries, Senior Advocates etc., who are having
rich experiences in their respective field. I hope you will like this article
like earlier ones.
Background:
Central Government has taken a
remarkable initiative in order to build the root level of Micro, Small and
Medium Enterprises ie., MSME. The step has been taken to further strengthen the
MSME sector by helping them to get the capital on times which will definitely
going to assist them to grow and sustain in long run.
As we all knows that Central
Government has issued Specified
Companies (Furnishing of Information about Payment to Micro and Small
Enterprise Suppliers) Order, 2019 (“Order”) on January 22, 2019.
The order has been issued under
Section 405 of the Companies Act, 2013 (“CA 2013”) wherein the Central
Government has been assigned power to direct companies to furnish
information/details and/or records/documents with regard to their or its
constitution or working, and within such time, as may be specified in the order.
Further, in the said order, the Central Government has
directed all companies who get supplies of goods or services from MSME ie.,
Micro, Small and Medium Enterprises and whose payment to MSME suppliers exceeds
45 days from the date of Acceptance or date of deemed Acceptance of goods or
services to file a half yearly return to Central Government stating the
following:
a). the amount of payment due; and
b). reason of the delay.
The aforesaid information is
required to be filled and filed in MSME Form 1 within 30 days from the date of
the present order ie., 21st of February 2019 and thereafter as follows:
a). For
the period April to September – on or before 31st October;
b). For the period October to March – on or before 31st April
b). For the period October to March – on or before 31st April
The above information you must
have read in most of the articles shared on various online portals already.
Now, coming to the main objective of the article which is what will happened if
I or anyone did not filed the MSME Form I or we can say what will be the
implication under the different Acts. Going forward, the implication of
non-filing of MSME Form I and not paying outstanding within time as stated
under the Act are mentioned in the provisions of the MSME Act and Companies Act
2013. Let’s discussed them in detailed manner:
Consequences
for not clearing the outstanding and filing of MSME Form I within the period:
A. Section 405(4) of the CA
2013 provides that in case the Company fails to comply with the order of the
Central Government or knowingly furnishes any information or statistics which
is incorrect or incomplete in any material respect, the company shall be
punishable with fine:
a. which may extend to 25000/-
and
b. every officer of the company
who is in default, shall be punishable with imprisonment for a term which may
extend to 6 months or with fine which shall not be less than 25000/- but which
may extend to 3 lakh rupees, or with both.
The aforesaid provision is only
applicable in our case if we fails to file the form only ie., MSME Form I
within the date as stated in the order. Here, we also need to understand the
relevant provisions of Micro, Small and Medium Enterprises Development Act,2006 (“MSMED Act”).
B. Section 15 of the MSMED Act
states that where any supplier, supplies any goods or renders any services to
any buyer, the buyer shall make payment therefore:
a). on or before the date
agreed upon between him and the supplier in writing or,
b). where there is no agreement in this behalf, before the appointed day [Section 2(b)].
b). where there is no agreement in this behalf, before the appointed day [Section 2(b)].
It
is further 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.
Further, Section 16 of the
MSMED Act penalise the buyer and provides that in case where he fails to make
payment of the amount to the supplier, as required under Section 15, he shall,
notwithstanding anything contained in any agreement between the him 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 maybe, from the date immediately following the date agreed
upon, at three times of the bank rate notified by the Reserve Bank.
Our
Understanding:
Section 15 talks about the
payment to be made to the MSME supplier. It provides that payment is to be made
within such time as may be agreed between the supplier and the buyer in written
ie., a contract or written document
Or
If not agreed, then it will be
taken as on or before appointed date ie,. within 15 days.
However, proviso to this
section clears that the time period is restricted to 45 days only this means
that it does not matter if you have a period in your contract more than 45
days, you have to clear your outstanding within a period of 45 days.
Further, in the event the Buyer
fails to make payment of the amount due to the supplier as provided in Section
15 the company shall be liable to pay compound interest with monthly rests to
the supplier at three times of the bank rate notified by the Reserve Bank of
India.
The interest shall be
applicable after the date mentioned in the agreement or if there is no
agreement then 45 (forty-five) days after the supply is complete.
Which
provision will prevail?
This question may come to your
mind that whether provisions of Companies Act will prevail over the provision
of MSMED Act.
It is to clarify that aforesaid
order issued by Central Government only states about filing of Form MSME 1 and
disrespecting the same will held you liable under Section 405 of the Companies
Act.
Further, Section 15 of the
MSMED Act provides that payment should be made within time otherwise provisions
of Section 16 will apply.
Hence, there is a clear cut understanding
about filing and paying and accordingly, provisions of respective Act shall
apply.
Other questions are always
welcome
Please be in touch at
info@trijuris.com
In view of the above
background, related sections of the Acts have been reproduced for your ease of
references:
Section
2 (59) of the CA 2013- “officer” “includes any director, manager or key
managerial personnel or any person in accordance with whose directions or
instructions the Board of Directors or any one or more of the directors is or
are accustomed to act”.
Section
2 (b) of MSME Act "Appointed day" means the day following immediately
after the expiry of the period of fifteen days from the day of acceptance or
the day of deemed acceptance of any goods or any services by a buyer from a
supplier.
Explanation.-
For the purposes of this clause,-
(i)
''the day of acceptance" means,-
(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;
(ii)
''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;
Section
2 (d) MSME Act "buyer" means whoever buys any goods or receives any
services from a supplier for consideration;
Section
2 (n) MSME Act "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;.
(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 la~ 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;
Section
7(1) MSME Act Notwithstanding anything contained in section 11 B of the
Industries of enterprises. (Development and Regulation) Act, 1951, the Central
Government may, for the purposes of this Act, by notification and having regard
to the provisions of sub-sections ( 4) and. (5), classify any class or classes
of enterprises, whether proprietorship, Hindu undivided family, association of
persons, co-operative society, partnership firm, company or undertaking, by
whatever name called,-
(a)
in the case of the enterprises engaged in the manufacture or production of
goods pertaining to any industry specified in the First Schedule to the
Industries (Development and Regulation) Act, 1951, as- 65 of 1951. as-
(i)
a micro enterprise, where the investment in plant and machinery does not exceed
twenty-five lakh rupees;
(ii)
a small enterprise, where the investment in plant and machinery is more than
twenty-five lakh rupees but does not exceed five crore rupees; or
(iii)
a medium enterprise, where the investment in plant and machinery is more than
five crore rupees but does not exceed ten crore rupees;
Section
7 (b) in the case of the enterprises engaged in providing or rendering of
services,
(i) a micro enterprise, where the investment
in equipment does not exceed ten lakh rupees;
(ii) a small enterprise, where the investment
in equipment is. more than ten lakh rupees but does not exceed two crore
rupees; or
(iii) a medium enterprise, where the investment
in equipment is more than two crore rupees but does not exceed five crore
rupees.
Explanation
1.-For the removal of doubts, it is hereby clarified that in calculating the
investment in plant and machinery, the cost of pollution control, research and
development.
Read article on registration of MSME at https://www.trijuris.com/msme-registration/
