How To Send Legal Notice Under MSME Act

Any Indian business that transacts in products or services and has completed the online registration process with the MSME department is considered to be an established MSME. Micro, small, and medium-sized enterprises are the three groups into which the Indian government has divided MSME enterprises.

• A micro business, defined as one with a turnover of no more than five crore rupees and an investment in plant, machinery, or equipment of no more than one crore rupees;
• A small business with a maximum investment in plant and equipment of ten crore rupees and a maximum annual revenue of fifty crore rupees;
• A medium-sized business with a maximum investment in plant, machinery, or equipment of fifty crore rupees and a maximum annual revenue of 250 crore rupees.

MECHANISMS FOR RESOLVING DISPUTES                                      

According to the provisions of the MSMED Act, 2006, the seller unit may file a lawsuit against the buyer unit before the Micro and Small Enterprise Facilitation Council for the recovery of the amount when the buyer does not make payment or delays the payment of the seller after purchasing goods or services from the seller.

The case or lawsuit may be filed online and after any unit’s case has been accepted, the MSEFC contacts both units and their advocates or lawyers to present their positions and arguments. The MSEFC will then make a decision on that particular case. The application should be properly written in order to comply with the Act’s requirements. After reviewing the situation, the MSEFC gave the buyer unit instructions to follow the MSMED Act of 2006’s regulations for payment of the outstanding balance, interest, and compound interest.

Follow-Up Actions

• If the recipient fails to respond or comply within the specified time, consider taking legal action under the MSME Act.
• Consult with a legal professional to proceed with filing a case in the appropriate court or authority.

Step-by-Step

The Ministry of Micro, Small, and Medium Enterprises created the MSME SAMADHAN online platform to give MSEs access to an online dispute settlement system. MSEs have the option to submit an online application about postponed payments through their solicitors or advocates. Once submitted, the application is instantly routed through the internet to the relevant Micro and Small Enterprise Facilitation Council (MSEFC) for processing.

• Legal Notice: The seller must issue a demand or legal notice to the buyer, through an advocate or legal counsel, before submitting an application to the MSEFC, explicitly outlining the P.O./Agreement date, the Invoice Date, the Invoice Amount, the Date of Delivery of Goods or Services, and the Due Date for Payment. The warning should be properly written to highlight all of the counterparty’s failures.
• Online Application Filing: There are no court fees associated with submitting an online application to MSEFC. The MSEFC procedures are entirely online and independent.
• Arbitration: The MSEFC has monthly meetings where claims for delayed payments are considered by the Council/Arbitrator if the buyer of goods and services refuses to pay within 45 days of the date of notification.
• Award: In a court of law, the MSEFC award is enforceable.

HOW SHOULD WE ARRIVE?

The seller of goods and services who is registered under the MSMED Act of 2006 must adhere to the necessary compliances listed below in the regular course of business in order to have a solid and tenable legal case against the buyer of goods and services.

• Purchase order or Agreement: A proper purchase order (PO) or agreement between the buyer and seller must precede any commercial transaction. It must be made very clear in the PO or Agreement party description section that the seller is an MSME registered business. Additionally, a Purchase Order is required to submit an application through the MSEFC Samadhan Portal. In the event that the PO is said, a properly written affidavit must be presented to the Council.
• Every invoice issued by the seller must explicitly state that the vendor is an MSME registered business.
• Delivery and Acceptance – The seller must notify the customer through email or letter when the goods or services are delivered, and the seller must keep a record of such deliveries. The buyer may be asked by the vendor to confirm receipt of the goods or services. However, 15 days from the date of delivery of the goods or services shall be recognised as presumed acceptance if no acceptance is made by the buyer.

Important Points to Note:

• Time Limit: Ensure that the notice is sent within the statutory time limit for claiming dues under the MSME Act.
• Documentation: Maintain all relevant documents such as invoices, delivery challans, and communication related to the transaction.

Prepare the Legal Notice

• Header: Include the name and contact details of the sender (plaintiff) and the recipient (defendant).
• Subject: Clearly state that it is a legal notice under the MSME Act.
• Details: Specify the details of the transaction, such as invoice number, date of supply, amount due, and the date by which payment should have been made.
• Demand: Clearly demand the payment of the due amount within a specified period (usually 15-30 days from the receipt of the notice).
• Consequences: Mention the consequences of non-compliance, such as legal action under the MSME Act.

Sending the Notice

• Mode: Typically, legal notices are sent via registered post with acknowledgment due (AD) or through courier with proof of delivery.
• Receipt: Keep a copy of the notice and the delivery receipt for your records.
• Acknowledgment: Once the notice is received, the recipient has a specific period (as mentioned in the notice) to respond or comply.

By following these steps, you can effectively send a legal notice under the MSME Act, emphasizing your rights as a micro, small, or medium enterprise to receive timely payment for goods or services provided. If you are unsure about the specific legal requirements or implications, consulting with a lawyer specializing in commercial law or MSME matters is advisable.

Drafting Considerations

• Ensure the language is clear, concise, and professional.
• Avoid making any false accusations or statements.
• Seek legal advice if needed to ensure the notice is legally sound.

While filing MSME legal notice, NCLT filing procedure can be followed and compliance for professional should be done. Lead India Law offers information, legal services, and free legal advice online to solve the issue. Talk to a lawyer and ask a legal question will provide the finest counsel in this situation.