Remedy available with Suppliers in case of default in payment by debtor
- When it can be said that there is default in payment?
Default is the failure to repay a debt including interest or principal on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments. Individuals, businesses, and even countries can fall prey to default if they cannot keep up their debt obligations. Default risks are often calculated well in advance by creditors.
- What are the remedies that are available to the supplier in case of default in payment?
In such case if supplier is registered under MSME Act:
The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs); (Section 15- 24). State Governments hasestablished Micro and Small Enterprise Facilitation Council (MSEFC) for settlement of disputes on getting references/filing on Delayed payments. Further this supplier can also avail remedy such as adopting traditional civil court procedure, or applying to NCLT by following the procedure laid down under Insolvency and bankruptcy code.
In cases where entity is not registered under MSME Act or registered as medium enterprise:
Any enterprise supplier can avail remedy such as adopting traditional civil court procedure, or applying to NCLT by following the procedure laid down under Insolvency and bankruptcy code.
Provided that in both the case if amount involved in default is less than Rs. 1 Lakh then supplier will not be eligible to apply to NCLT for recovery of the same.
- What are frequently asked question in relation to application under MSME E-Samadhan?
Who can apply?
Any Micro or small enterprise having valid Udyog Aadhar (UAM) can apply.
From where we can apply?
samadhaan.msme.gov.inis the official website from where we can apply for it.
What will be the procedure that will be carried out after applying for this remedy?
- Entrepreneur filed the application online to respective council after 15 days council will take action on the application
- Thereafter online intimation will be sent to both entrepreneur and respondent by email.
- Council can approve the entrepreneur application and convert such application into case. or it can reject such application
- In case if such application is converted into the case then in such situation both the party will be intimated through SMS or Email by the authority
- After all the procedure council will update case hearing status and Entrepreneur can view the application/case status by entering there Udyog Aadhaar No. or Application No. or Case No.
- What are the form that are required to be filed in case supplier applies under Insolvency and Bankruptcy Code, 2016?
Generally, there are two types of creditor one being financial creditor and other being operational creditor; Financial creditor means any person to whom a financial debt is owned and includes a person to whom such debt has been legally assigned or transferred and Operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. They are suppliers of good or services to any company or operational debtor.
Application by financial creditor:
- A financial creditor, either by itself or jointly, can make an application for initiating the corporate in solvency resolution process against a corporate debtor under section 7 of the Code in Form 1.
- Where the applicant under sub-rule (1) is an assignee or transferee of a financial contract (i.e. when debtor are been transferred by original supplier to third party for recovery of the same or for any other reason.) the application shall be accompanied with a copy of the assignment or transfer agreement and other relevant documentation to demonstrate the assignment or transfer.
- The applicant will be required to dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor.
- In case the application is made jointly by financial creditors, they may nominate one amongst them to act on their be half.
Application by Operational creditor:
1) An operational creditor shall deliver to the corporate debtor, the following documents,namely:
- A demand notice in Form 3; or
- A copy of an invoice attached with a notice in
2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of the Code, may be delivered to the debtor at the registered office;
(a) By hand, registered post or speed post with acknowledgement due;or
(b) By electronic mail service to a whole-time director or designated partner or key managerial personnel, if any, of the debtor.
An operational creditor, will be required to make an application for initiating the corporate insolvency resolution process against a corporate debtor under section 9 of the Code in Form 5, accompanied with documents and records required therein.