Latest news with #MSEFCs
Mint
13 hours ago
- Business
- Mint
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.
Mint
23-04-2025
- Business
- Mint
Micro, small businesses shy away from state-run delayed payment resolution, avail litigation instead
New Delhi: Micro and small enterprises that face delayed payment issues from large businesses are shying away from resolving their disputes at the Micro and Small Enterprises Facilitation Councils (MSEFCs) and approaching courts instead to secure payments. MSEFCs are state-run councils where micro and small businesses can file complaints against debtors and resolve the issue through arbitration and conciliation. However, with a low success rate, high costs, and long timelines for out-of-court dispute resolution, businesses are turning towards courts, where they can file civil suits to recover their payments. Also Read | Small firms fear new MSME definitions favour giants, cry foul These councils were established in 2017 in state capitals and other metropolitan regions under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. State governments must establish MSEFCs under the MSMED Act. As of March 2023, there were 152 MSEFCs in the country. One issue pushing them towards the courts is the lack of enforcement of MSEFC decisions. "The secret ingredient is fear. If a small business wants to secure delayed payments from the larger businesses it supplied to, litigation is more likely to yield results," said Prem Khandelwal, chief financial officer, Wit and Chai Group, a Pune-based media consultancy and registered small enterprise. Khandelwal clarified that while he was satisfied with how MSEFCs operated, the lack of enforcement was a major concern that pushed his firm to resolve delayed payment issues through the courts. Data provided by the government's MSEFC dashboard on the Samadhaan portal showed that of the 233,000 applications filed by micro and small enterprises from 2017 till date, about 27% were rejected by the MSEFC, nearly 25% were yet to be viewed by the MSEFC, and only one in every five such applications was disposed of by the MSEFC—all indicating a capacity crunch. "There is a dire need to build capacity in Facilitation Councils under the MSMED Act 2006, to reduce challenges to arbitral awards and enable faster dispute resolutions," said Vinod Kumar, president of the industry association India SME Forum, which has over 98,000 member MSMEs. He added that besides MSEFCs, the only other option for MSMEs to resolve delayed payment disputes is litigation. "Prolonged civil litigation not only intensifies financial difficulties but also takes a toll on the mind space and productive time of the entrepreneur," said Kumar. But there is a catch to this shift in strategy. According to India SME Forum's Kumar, only a handful of MSMEs can move the courts to secure delayed payments, as most such businesses cannot afford long-drawn litigation due to the high cost of legal services and the massive pendency in Indian courts. Indian courts are currently battling a massive pendency of over 60 million lawsuits. Legal practitioners explained that the procedure within an MSEFC involves getting parties together for conciliation first, followed by arbitration if required. While conciliation and arbitration are both out-of-court dispute resolution methods involving a third party, a conciliator facilitates discussion among parties to reach a mutually agreeable solution, which may or may not be legally enforceable. Arbitration involves both parties pleading their arguments to an arbitrator, who provides a legally enforceable award. The crucial aspect of this process is that even after a party secures a legally enforceable arbitral award, it has to go to court to enforce it. These awards are often challenged, making litigation inescapable. Some MSMEs could, therefore, want to skip MSEFCs and directly move courts instead, said one New Delhi-based legal practitioner specialising in MSME disputes, requesting anonymity. The shift in strategy by some MSMEs comes when the Union ministry of MSME plans to roll out a new online dispute resolution (ODR) portal for delayed payment disputes. Mint reported on 12 March that the government has started training MSEFC officials to use the ODR portal to expedite the dispute resolution process. The portal will host MSEFCs, arbitrators, and aggrieved MSMEs and conduct all MSEFC procedures online, allowing more parties to resolve their disputes using arbitration and conciliation faster. Vinod Kumar of India SME Forum said MSEFCs are the best solution for resolving delayed payment disputes, and introducing ODR would aid the process. "MSEFCs are the best solution for recovering dues for Micro and Small enterprises, and introducing ODR and automation mechanisms will ensure more structured arbitration or conciliation processes. It will also improve the efficiency of MSEFCs and reduce the involvement of civil courts that are already highly burdened," he said. First Published: 23 Apr 2025, 07:36 PM IST
