Micro, Small and Medium Enterprises Development Act 2006 (MSME Act) was legislated with the aim to promote and development of micro, small and medium enterprises.

An enterprise means an industrial undertaking or business concern, or establishment engaged in the manufacture of goods or engaged in providing services.

Section 7 of the MSME Act defines Micro, Small And Medium Enterprises engaged in Manufacturing and Services separately on the basis of the amount of investment in plant and machinery and amount of investment in equipment, along with turnover respectively, in the following manner:

In order to get the benefits as an MSME, one has to register under the MSME Act and get an Udyam Aadhaar Enrolment Certificate.

MSME Act provides that in case of delay in receipt of payment for the goods supplied or services rendered by a MSME, the MSME can file a complaint under Section 18 of the MSME Act before MSME Facilitation Council.

MSME Facilitation Council is established by the State Governments in their respective states.

As per the provisions of the MSME Act, the Facilitation Council has to pass an order within a period of 90 days for recovery of delayed payments.

Facilitation Council can either pass the order itself or make a reference appointing an arbitrator who has to pass an award within a period of 90 days and the Facilitation Council has to give effect to such award as an order passed by itself.

Setting aside of such an order or award is very difficult because in order to file an appeal to set aside the same, the buyer has to deposit 75% of the amount of the award before the court in advance.

Therefore, in most cases, the buyer either pays the entire amount or at least settles the terms of payment with the MSME for a reduced amount, if accepted by the MSME.

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