MSME 2026 – Time bound Dispute Resolution for Faster Payments of MSMEs
STATEMENT OF OBJECTS AND REASONS
The Micro, Small and Medium Enterprises Development Act, 2006 (the said
Act) was enacted to provide for facilitating the promotion, development and
enhancing the competitiveness of micro, small and medium enterprises. Micro,
small and medium enterprises are the key drivers of economic growth, generate
employment and foster innovation. They contribute significantly to our Gross
Domestic Product, exports, and are the backbone of India’s economy.
2. Over the years, the micro, small and medium enterprises landscape has
undergone a change due to technological advancements, emergence of information
technology enabled systems and changing legal landscape which require that the
Act be amended to facilitate growth of micro, small and medium enterprises.
3. In view of the above, it is inter alia proposed to amend the said Act to––
(a) provide for notifying a national digital platform for free and
voluntary registration of micro, small and medium enterprises;
(b) address the liquidity issues of micro, small and medium enterprises
by mandating all Central Public Sector Enterprises to route the settlement of
invoices through Trade Receivables Discounting System for procurement of
goods and services from micro, small and medium enterprises. Provision has
also been made empowering States to adopt similar provision for their Public
Sector Enterprise;
(c) facilitate the State Governments to establish additional Micro and
Small Enterprises Facilitation Council by rationalising their composition;
(d) prescribe timelines to ensure faster adjudication of delayed payment
disputes of micro and small enterprises;
(e) provide recovery of the mediated settlement agreement or the arbitral
award as arrear of land revenue;
(f) empower the courts to order for payment at least fifty per cent. of the
awarded amount to the micro and small enterprises suppliers, if the application
to set aside decree, award or order is pending for more than six months;
(g) decriminalise of offences regarding contravention of certain
provisions, replacing conviction-based fines with graded penalties by
including warning at the first instance.
4. The proposed amendments shall incentivise the growth of the micro, small
and medium enterprises, enable them to scale up and become champions of growth.
This will augment Ease of Doing Business and promote compliance.
