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CAIIB Paper 4 BRBL Module C Unit 2 : The Micro, Small And Medium Enterprises Development Act, 2006 (New Syllabus)
IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “The Micro, Small And Medium Enterprises Development Act, 2006”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.
In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module C (IMPORTANT ACTS/LAWS & LEGAL ASPECTS OF BANKING OPERATIONS – PART B) Unit 2 : The Micro, Small And Medium Enterprises Development Act, 2006, Aspirants must go through this article to better understand the topic, The Micro, Small And Medium Enterprises Development Act, 2006 and practice using our Online Mock Test Series to strengthen their knowledge of The Micro, Small And Medium Enterprises Development Act, 2006. Unit 2 : The Micro, Small And Medium Enterprises Development Act, 2006
The Micro, Small and Medium Enterprises Development Act, 2006 was enacted to facilitate the promotion and development and enhancing the competitiveness of micro, small and medium enterprises
The Act became operational from October 2nd 2006. In accordance with the provision of MSMED Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two classes:
- Manufacturing Enterprises: 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.
- Service Enterprises: The enterprises engaged in providing or rendering of services.
National Board For Micro, Small And Medium Enterprises (NBMSME)
- The Board provides representation to all sections/segments connected to MSMEs including Associations of Micro, Small and Medium manufacturing and service enterprises, women enterprises, Central Ministries, States representing different regions of the country, trade unions, etc.
- The NBMSME normally consists of 47 members of which 18 are ex-officio members. The head office of board is in Delhi.
Functions of the Board
- Examining the factors affecting the promotion and development of MSMEs and review the policies & programs of the Central Government in regards to facilitating the promotion & development & enhancing the competitiveness of such enterprises and the impact thereof on such enterprises.
- Making recommendations on matters referred to it by the Central Government which, in the opinion of that Government, is necessary or expedient for facilitating the promotion and development and enhancing the competitiveness of the micro, small and medium enterprises.
- Advice the Central Government on the use of the Fund or Funds constituted under section 12 which states “There shall be constituted, by notification, one or more Funds to be called by such name as may be specified in the notification and there shall be credited thereto any grants made by the Central Government under section 13”
- Section 7(2) of the MSMED Act, 2006 provides for constitution of Advisory Committee for MSME, under the Chairmanship of the ‘Secretary, Ministry of Micro, Small and Medium Enterprises.’
- The Advisory Committee usually comprises of five officers of the Central Government having experience in matters relating to Micro, Small and Medium Enterprises, three representatives of State Governments and one representative each from Micro, Small and Medium Enterprise associations.
- The Member Secretary of NBMSME is also the Member Secretary of Advisory Committee.
Functions of the Advisory Committee
- To examine matters referred by the NBMSME concerning promotion and development of MSME sector and enhancing its competitiveness.
- To provide advice to the Central Government on issues related to the promotion, development and enhancement of competitiveness of micro, small and medium enterprises, which include issues concerning Credit Facilities, Procurement Preference Policy, Constitution and Administration of Funds, etc.
- To provide advice to the State Governments on issues relating to notifying any rule made to carry out the provisions of the MSMED Act-2006 including the composition of Micro, Small Enterprises Facilitation Councils etc. as provided under section 30.
- Recommend or advice Central Government or State Governments or the Board, in connection with the classification of a class/es of enterprises after taking into consideration the level of employment, investments, need of higher investment in plant and machinery or equipment for technology upgradation, employment generation and enhanced competitiveness and international standards for classification of small and medium enterprises.
Memorandum Of Micro, Small And Medium Enterprises
- Section 8 of the statute provides for filing of the memorandum of micro, small or medium enterprise with such authority as may be specified by the State or the Central Government, by the person desirous of commencing such enterprise.
- The form of the memorandum, the procedure of its filing and other matters shall be such as may be notified by the Central Government after obtaining the recommendations of the Advisory Committee in this behalf.
- The authority with which the memorandum shall be filed by a medium enterprise shall be such as may be specified, by notification, by the Central Government.
- The State Government shall, by notification, specify the authority with which a micro or small enterprise may file the memorandum.
Delayed Payments To Micro And Small Enterprises
Chapter 5 of the statute deals with the issue of delayed payment by buyers of products/ services from MSMEs.
- Liability of buyer to make payment: As per the provisions of Section 15 “Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the date agreed upon between him and the supplier in writing, 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.
- Date from which and rate at which interest is payable. As per Section 16, where a buyer fails to make payment to the supplier, the buyer shall, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank.
Micro And Small Enterprises Facilitation Council
The Micro and Small Enterprise Facilitation Council is set up under Section 20 of the Act and is required to be established by State Governments. ‘at such places, exercising such jurisdiction and for such areas, as may be specified in the notification.’
Composition of the Council
The composition of the members of the council shall consist of not less than three but not more than five members to be appointed from amongst the following categories, namely:
- Director of Industries, or any other officer not below the rank of such Director, in the Department of the State Government having administrative control of the small scale industries
- One or more office-bearers or representatives of associations of micro or small industry or enterprises in the State.
- One or more representatives of banks and financial institutions lending to micro or small enterprises
- One or more persons having special knowledge in the field of industry, finance, law, trade or commerce.
The person appointed under clause (i) of sub-section (1) shall be the Chairperson of the Micro and Small Enterprises Facilitation Council.
Reference to Council
- Where any amount due to a Micro or Small Enterprise is not paid in time or there is a dispute involving such transactions, the parties may refer the matter to the ‘Facilitation Council’ under the provisions of Section 18 of the Act.
- On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or center providing alternate dispute resolution services.
- Micro and Small Enterprises Facilitation Council or the center providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
- Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.
Setting aside decree, award or order
- In Section 19 of the statute, there are provisions that, No application for setting aside any decree, award or other order made either by the Council itself or by any institution or center providing alternate dispute resolution services, shall be entertained by any court unless the appellant has deposited with it seventy-five per cent of the amount in terms of the decree, award.
Disclosures And Penalty For Contravention Of The Provisions Of The Statute
Any buyer, who is required to get his annual accounts audited under any law for the time being in force, is required to furnish additional information in his annual financial statements.
This additional information would pertain to
- The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year.
- The amount of interest paid by the buyer in terms of section 16, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year.
- The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act
- The amount of interest accrued and remaining unpaid at the end of each accounting year
- The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise.
In terms of Section 27
Whoever intentionally contravenes or attempts to contravene or abets the contravention of any of the provisions contained in sub-section (1) of section 8 or sub-section (2) of section 26, shall be punishable—
- In the case of the first conviction, with fine which may extend to rupees one thousand; and
- In the case of second or subsequent conviction, with fine which shall not be less than rupees one thousand but may extend to rupees ten thousand.
Where a buyer contravenes the provisions of section 22, he shall be punishable with fine which shall not be less than rupees ten thousand.