Centre to launch online MSME dispute resolution portal on 27 June
NEW DELHI
:
The government is set to launch an online dispute resolution (ODR platform for small businesses to improve their ease of doing business on 27 June, according to two officials directly aware of the development.
'The MSME ODR portal has been tested, and dispute resolution using the portal has also begun during the testing phase," said one of the officials on the condition of anonymity.
The portal, a part of the government's World Bank-supported Raising and Accelerating MSME Performance (RAMP) scheme, is aimed at resolving delayed payment disputes by facilitating communication between debtors and micro and small enterprises (MSEs), said the second official.
Also Read: Bank loan sanctions to MSMEs for job creation down nearly a third in FY25
Mint first reported on 12 March that the government was going to digitize to dispute resolution for small businesses.
So far, micro and small enterprises facilitation councils (MSEFCs) have resolved disputes, especially those related to delayed payments. As of the date, 161 councils have disposed of over 52,000 cases involving transactions worth ₹9,241 crore, out of nearly 100,000 such complaints by MSEs.
Data on the micro, small, and medium enterprises (MSME) ministry's delayed payment monitoring system, Samadhaan portal, showed that more than 20 MSEFCs had not resolved a single case since their launch in 2017.
The data also showed a wide variance in MSEFCs' actions. While 27 MSEFCs saw not even a single case, a few councils, such as MSEFC Mumbai, MSEFC Pune, and MSEFC Gandhinagar, resolved a considerable number of cases.
MSEFC Mumbai resolved 4,625 matters involving about ₹750 crore out of the 7,756 cases it received. MSEFC Pune saw 6,956 complaints and resolved 5,271 of them, involving ₹223 crore. MSEFC Gandhinagar received 6,297 grievances and resolved 5,777 cases involving ₹809 crore, showed the data.
'As of the date, approximately 42% of the applications filed by MSEs are either yet to be viewed by MSEFCs or are at the consideration stage," said Krunal Modi, founding member and chief of staff, ODR platform Presolv360. 'One of the local MSEs recently shared with us that their first meeting was called by the concerned council after four months of filing the case. Additionally, our interactions with various MSEFCs have revealed that there is not only a manpower constraint but also a lack of physical infrastructure," he added.
Also Read: MSMEs call for relaxations in the new FEMA regulations for exports and imports
Under the procedure laid down in the MSME Development Act, 2006, micro and small businesses can approach these councils to seek payments from buyers that have been delayed longer than 45 days.
Private mediators
Interestingly, the new portal will allow private ODR service providers to be empanelled, putting into motion a key provision in the Act allowing MSEFCs to delegate cases to private institutions.
As per the powers given to an MSEFC under Section 18 of the Act, an MSEFC can either conduct arbitration and conciliation proceedings in cases filed or provide assistance to any institution that provides alternative dispute resolution services.
Alternative dispute resolution refers to any dispute resolution that takes place beyond courts. It includes procedures such as arbitration, mediation, and conciliation, where parties can resolve their issues speedily.
Independent or private institutions providing ODR services shall only provide services through the new portal, as stated in the 2 April guidelines for appointment of such firms.
The guidelines said these institutions should maintain a panel of arbitrators, mediators, and conciliators to resolve disputes on the portal.
MSEFCs are created and operated by state or Union territory governments, as per the MSME Development Act. These states will have to enter into agreements with private ODR service providers after seeking information related to their operations. State governments will gather information related to the private ODR firms' incorporation, as well as about fees charged, the number of disputes resolved through arbitration, mediation, or conciliation, the guidelines said.
More needs to be done
However, the model followed by MSEFCs may not follow a key principle of arbitration—party autonomy, according to experts.
'The ADR procedure laid down in the Act has an element of conflict of interest, where the MSEFC can itself refer the matter for arbitration without mutual consent of the parties. Also, there is no bar for the conciliator or mediator sitting as an arbitrator," said P. Madhava Rao, registrar at Hyderabad's Amika Arbitration and Mediation Council, which provides ODR services.
Also Read: MSME makeover: New definitions unlock bigger benefits, faster resolutions
'The main obstacle in the MSEFC ecosystem is the delay in resolving grievances and the presence of conflicts of interest," Rao added.
States will also have to ensure that the dispute resolution personnel from private ODR firms abide by the MSME Development Act and the Arbitration & Conciliation Act, 1996.
The Arbitration & Conciliation Act is currently undergoing reform, with the Union ministry of law and justice pushing for more institutional arbitration, Mint reported on 18 October 2024.
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