Delhi High Court Seeks Response From MSME Facilitation Councils Alleged To Be Defunct

Section 18(1) of the MSME Act mandates that any party to a dispute may make a reference to the MSMEFC and Section 18(5) mandates that every reference made shall be decided within a period of 90 days from the date of making such a reference.

A Single Bench of Justice Rekha Palli was informed that MSME adjudication mechanism is supposed to be "extremely expeditious". However, due to overburdening of Council with Applications, it is currently processing Applications for delayed payments filed five years ago, i.e., in 2017-2018.

In this backdrop, the Court has ordered,

"it is deemed appropriate to first call for a Status Report from both the respondents setting out their pendency and the current time frame of processing applications. The said Status Report will clearly set out the vintage of the applications, the number of applications which are being disposed of every month and the reasons for the delay in processing the applications, if any."

The development comes on a petition filed by NK Kapur & Company Pvt. Ltd. through Advocates Ankur Mahindro and Rohan Taneja.

The Petitioner had moved an application for delayed payment of approximately Rs. 2 crore, before the MSME Samadhaan portal on February 5, 2021 but, despite the Section 18(5) of the MSME Act mandating that the reference to the MSMEFC being decided within 90 days of reference, no action was taken on the said application.

Thereafter, it was informed by the officials that the Council is currently processing Applications filed in 2017-2018 and it would process Petitioner's application chronologically, as per its turn.

"Delay in processing of the Application for Delayed Payment by the Respondent No. 1 has defeated the intention behind the enactment of the MSME Act i.e. to ensure expedited disposal of claims of the MSME in order to ensure that they are not starved from their payments on account of the prevalent delays in the justice delivery system," the Petitioner has alleged.

It is stated that as per the statistics available on the Website of MSME Samadhaan, a total of 7,569 applications have been filed across the State of NCT of Delhi and 6,122 out of the same (approximately 80%) are still pending. On the contrary, other states such as Maharashtra have around 10% applications pending and action has been taken on the remaining 90%.

"The Statistics for the State of NCT of Delhi reveal that the MSMEFC are virtually defunct and are proceeding at a snail's pace thereby defeating the purpose of the MSME Act of expeditious disposal," the plea states.

The High Court is therefore urged to lay down guidelines in order to ensure that all Applications filed before the MSMEFCs in the State of NCT of Delhi can be disposed within the statutory period of 90 days.

Standing Counsel Santosh Kumar Tripathi with Advocates Aditya P Khanna and Shashank Tiwari appeared for GNCTD.

The matter is fixed for hearing August 25.

Case Title: NK Kapur & Company Pvt. Ltd. v. MSME Facilitation Council & Anr.

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