This is on MICRO SMALL AND MEDUIM ENTERPRISES ACT

1. KUMAR & KUMAR
Advocates

2. Kumar & Kumar
Advocates
MSME - Legal Aspects and
MSMED Act

3. • MSMEs form the backbone of Indian economy.
• They contribute almost 29% towards the country’s GDP and are one of the
largest employers in India.
• The livelihoods of 11.1 crore people depend on this sector.
• Towards realizing the government’s mission of a $5 trillion economy by
2024, the GDP contribution of this sector needs to go up to 50 per cent.
WHY ARE MSMEs SO IMPORTANT??
Kumar & Kumar
Advocates

4. Why was the Micro, Small & Medium Enterprises Act,
2006 enacted?
• The world all over saw a shift from “Industries” to “Enterprises”
• For facilitation of promotion and development of Micro, Small & Medium
Enterprises in India to achieve higher productivity to remain in the fast
globalizing era.
• To enhance the competitiveness of Micro, Small & Medium Enterprises in the
Indian economy.
• There was no legal framework to cater to the needs, development and
sustenance of of Micro, Small & Medium Enterprises. Thus, the Act envisaged
a single legal framework.
(Infact, there was no recognition even given to a Medium
Industry/Enterprise until the MSME Act, 2006 )
• The MSMED Act, 2006, empowers the Central and State Government to notify
preference policies, in respect of procurement of goods and services that are
produced and provided by MSMEs.
Kumar & Kumar
Advocates

5. Revised Classification applicable w.e.f 1st July 2020
Composite Criteria: Investment in Plant & Machinery/equipment and
Annual Turnover
Classification Micro Small Medium
Manufacturing
Enterprises and
Enterprises
rendering
Services
Investment in
Plant and
Machinery or
Equipment:
Not more than
Rs.1 crore and
Annual
Turnover not
more than Rs. 5
crore
Investment in
Plant and
Machinery or
Equipment:
Not more than
Rs.10 crore and
Annual
Turnover not
more than Rs.
50 crore
Investment in
Plant and
Machinery or
Equipment:
Not more than
Rs.50 crore and
Annual Turnover
not more than Rs.
250 crore
Kumar & Kumar
Advocates
Classification of Micro, Small & Medium Enterprises

6.  A major benefit of setting up an MSME is that one
can acquire a loan without collateral. Various fin-
tech companies and NBFCs lend money to MSMEs
and lend money to such enterprises.
 The Electrical Bills that MSMEs are entitled to are
comparatively lower,
 Also, MSMEs get subsidies on Patent registration, as
a way to motivate them to innovate and work on
novel projects continuously.
Benefits Of Setting Up An MSME?
Kumar & Kumar
Advocates

7. To avail benefits of MSME - UDYAM
REGISTRATION – From 01st July 2020
Registration process….
•Udyam Online Registration Portal
•No Fee !
•Aadhaar Number required
•GSTIN & PAN
Kumar & Kumar
Advocates

8. MSMED Act, 2006 & PUBLIC PROCUREMENT
POLICY, 2012
• The Micro, Small and Medium Enterprises Development Act,
2006 (the said Act) was introduced as beneficial legislation, on
16-6-2006. The aim of the Act has been to protect the MSME
sector and ensure its growth.
• Another step taken towards protecting the interest of MSME
sector has been the introduction of the Public Procurement
Policy, 2012 (PPP)
• The Public Procurement Policy was notified under the
MSMED Act, 2006, with objective to promote and develop
MSMEs.
Kumar & Kumar
Advocates

9. Initially the Policy mandated every Central
Ministry/Department/PSUs (including sub-
contracts) for a minimum procurement of 20% of
goods and services which are produced or provided
by MSMEs.
By an order of the Central Government dated
09.11.2008, the percentage of minimum procurement
was increased to 25%. Out of this total of 25%, 4% is
earmarked for procurement from MSMEs owned by
SC/ST entrepreneurs and 3% from MSMEs owned by
women.
What is Procurement Preference Policy??
Kumar & Kumar
Advocates

10. Delayed payments:
• Every or almost every organization faces the problem of delayed
realization of their bills. This leads to excessive financial constraints
which is one of the key reasons for their successive failure.
• MSME Act 2006 makes customers are liable to clear the invoices
within 45 days lest they will be subjected to heavy penalties.
• If the buyer fails to make payment of the amount to the supplier, he
shall be liable to pay compound interest with monthly interest to
the supplier on the amount from the appointed day or, on the date
agreed on, at three times the bank rate, as notified by the Reserve
Bank of India.
• In case of dispute with regards to any amount due, a reference shall
be made to the Micro and Small Enterprises Facilitation Council,
constituted by the respective State Government.
Major Issue that a MSMEs may have to
tackle…..!!!
Kumar & Kumar
Advocates

11. Post reference to Micro & Small Enterprises
Facilitation Council….
 Council will first Conciliate in the matter
 If the matter is not resolved through Conciliation then the
Council will itself take it up for Arbitration under the provisions
of the Arbitration and Conciliation Act, 1996.
 The Facilitation Council shall have jurisdiction to act as an
Arbitrator or Conciliator in a dispute between a supplier located
within its jurisdiction and a buyer anywhere in India.
 Every such reference made to the Council shall be decided
within a period of 90 days from the date of making such a
reference.
Kumar & Kumar
Advocates

12. Kumar & Kumar
Advocates
Nature of Disputes that can be referred to
MSME Council….
•Recovery of amount due for any Goods
supplied
•Recovery of amount due for any Services
rendered

13. How do you avoid certain Legal disputes
that may come up??
Contractual Disputes…..
Breach of contract can occur due to incorrect or incomplete execution of the contract.
It could damage the reputation of the business or could cost a business heavily. Being
on a safe side, a business contract should be followed sincerely. By keeping a dispute
resolution clause, using written contracts instead of oral contracts and keeping the
right information so that the situation can be dodged.
Kumar & Kumar
Advocates

14. Employment Disputes….
Employment Disputes can occur due to employee discrimination,
disagreements over salary or payment, maternity leave disputes, unfair
dismissal charges and disputes over-representation.
By encouraging open communication and resolution among the
employees, guiding and resolving their issues, in case the dispute is
among the employees then the story of each and every side should be
heard then the problem has to be solved, employees should be taught
about anti-discrimination laws; anti-discrimination programs should be
organized and policies should be made for the same, it could be
unintentional discrimination so the problem has to be analysed.
Kumar & Kumar
Advocates

15. Inter-Business Disputes….
Businesses can have disputes with each other due to the rights related to the
intrusion of intangible assets (patents, trademarks, etc.) or when a company
is hiring an employee from a competing company.
Professional Meditation or Legal Action could be required in such kinds of
disagreements.
Kumar & Kumar
Advocates

16. Partnership Disputes…..
It is the most common type of dispute. Mostly partnership disputes
occur when the details in the partnership agreement are not clear,
unclear authority share between partners and financial disputes.
A Partnership agreement should have clear-cut details which could be
done with the help of an advocate but first of all, the partners should
talk about their dispute and try to solve it.
In case the dispute between them worsens, they should seek legal
advice.
Kumar & Kumar
Advocates

17. AVR ENTERPRISES vs UNION OF
INDIA
In The High Court Of Delhi, New Delhi

18. M/s SILPI INDUSTRIES CASE vs KERALA
STATE ROAD TRANSPORT CORPORATION
IN THE SUPREME COURT OF INDIA

19. Snehadeep Structures Pvt. Ltd. vs Maharashtra
Small Scale Industries Development Corporation
Limited
Supreme Court Cases

20. In Conclusion……
 Get your contracts in order. If supplies done on the basis of
Purchase Orders, insist on your buyers to issue purchase
orders mentioning all terms and conditions of payment
appropriately.
 Fulfill all your compliances including UDYAM Registration,
GST, Form 1 etc. and avoid all penalties.
 Do not neglect any amount payable or receivable.
 Do not neglect any legal issues, act immediately.
 Avail the benefits of MSME Council, as it is free of cost and
time bound
 Apply under the category of MSME while applying for
tenders.
Kumar & Kumar
Advocates

21. Contact details:
Kumar & Kumar
Advocates
Central Chambers, F-113, 3RD Floor,
2nd Main, Gandhinagar,
Bengaluru – 560009
Ph: 22281509/22383279
Mobile Nos: 9980142365
: 9148587799
: 9845012510
Email: kumarandkumaradvocates@gmail.com
dutt_raghu@yahoo.com
Kumar & Kumar
Advocates

22. Thank you
Kumar & Kumar
Advocates