MSME (Micro Small and Medium Enterprises)
In today’s dynamic economic landscape, Micro, Small, and Medium Enterprises (MSMEs) form the backbone of industrial and service-sector growth in India. Yet, these enterprises often face a chronic challenge—delayed payments from large corporate buyers. The MSME Development Act, 2006 was enacted to protect small vendors from payment delays and ensure a more equitable business environment.
With recent changes to the MSME classification norms, compliance under the Act has gained renewed importance. This article delves into the revised definitions, key obligations, and consequences of non-compliance that businesses must now navigate.
*Revised MSME Classification (Effective from 1st April 2025)
Composite Criteria: Investment in Plant & Machinery/Equipment and Annual Turnover
| Classification | Micro | Small | Medium |
| Manufacturing Enterprises and Enterprises rendering Services | Investment in Plant and Machinery or Equipment: Not more than Rs. 2.5 crore; and
Annual Turnover not more than Rs. 10 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs. 25 crore; and
Annual Turnover not more than Rs. 100 crore |
Investment in Plant and Machinery or Equipment: Not more than Rs. 125 crore; and
Annual Turnover not more than Rs. 500 crore |
*As per Notification dated 21st March 2025 issued by the Ministry of Micro, Small and Medium Enterprises.
Key Compliance Mandates under MSME Act, 2006:
| Section/
Notification |
Compliance Mandate |
| 15 | Liability of buyer to make payment
Payment to MSME suppliers must be made on or before the agreed date in writing, which shall not exceed 45 days from the date of acceptance/deemed acceptance.
|
| 16 | Date from which and rate at which interest is payable
Notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, delay in payment beyond the permitted period attracts compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India.
|
| 17 | Recovery of amount due
The buyer is liable to pay the due amount with interest as prescribed under Section 16.
|
| 22 | Requirement to specify unpaid amount with interest in the annual statement of accounts
Where a buyer is required to get their accounts audited, they must mandatorily disclose the following information in their annual statement of accounts: Unpaid Amounts, Delayed Payments, Interest Payable, Accrued but Unpaid Interest and Carry Forward Interest. |
| Notification No S.O. 368(E) 22nd January, 2019
|
The Specified Companies (Furnishing of information about payment to Micro and Small enterprise suppliers) Order, 2019
Every specified company is required to file a return in MSME Form I, disclosing the details of outstanding dues to micro and small enterprises. The return must be filed by 31st October for the period April to September, and by 30th April for the period October to March.
|
Key Insight from Adjudication Orders of the Registrar of Companies, Ministry of Corporate Affairs
The enforcement landscape around MSME compliance is evolving, with the Registrar of Companies (ROC) adopting a stringent stance on defaults related to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 and associated provisions under the Companies Act, 2013. A prominent area of focus is the filing of MSME Form I, which mandates disclosure of dues payable to micro and small enterprises.
Adjudication orders issued by ROCs across various jurisdictions reveal an increasing number of penal actions being taken against companies for non-compliance — particularly for failure to submit half-yearly MSME returns or for submitting incorrect or incomplete information in the returns
Non- Compliance Snapshot
| S. No | Company | Nature of non-compliance | Section Breached | Penalty Imposed |
| 1 | Samsung R&D Institute India-Bangalore Private Limited | Failure to file MSME Form I for the periods April-September 2022 and October 2022-March 2023 within the prescribed timelines | Section 405 of the Companies Act, 2013 | ₹11,67,000 |
| 2 | Blissful garments Private Limited | Non-filing of MSME Form I from April 2021 onwards, despite outstanding dues to MSME suppliers | Section 405 of the Companies Act, 2013 | ₹16,09,000 |
| 3 | Stanley OEM Sofas Limited | Non- filing of MSME Form I for the FY 2019-20 and 2020-21 | Section 405 of the Companies Act, 2013 | ₹1,60,000
|
*Source: Adjudication Orders issued by the Registrar of Companies (ROC)
Insight: MSME Disclosure- MSME Reporting Lapses Come at a Cost
To sum up, MSME compliance—especially the timely filing of Form I—is something companies can no longer afford to overlook. The penalties imposed in recent cases clearly show that delays or misses, even if unintentional, come at a steep price. A little attention to timelines and reporting accuracy can go a long way in staying out of the penalty net. After all, it’s better to file on time than explain why you didn’t.
CS Suresh Pandey
Practising Company Secretary
SPG & Associates
9968300649
Coming Up in Edition 04:
Audit, NRC, SRC and Beyond: Statutory Committee Framework under Indian Corporate Laws
