Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATION

UNIVERSITY

Lucknow
Faculty of Law
PROJECT ON

EMERGING ECONOMICS
TOPIC

MICRO, SMALL & MEDIUM ENTERPRISES

DEVELOPMENT ACT, 2006
CLASS

B.COM LL.B (Hons.) 10THSEMESTER

Submitted by

PT. KRISHNA SWAROOP GAURAV

164140054
ACADMIC SESSION

2020-2021
Under the Supervision of

MISS SHAMBHAVI UPADHYAY.

Asst. Professor
 ACKNOWLEDGEMENT

This concept from several dimensions and angles. At every step in this research his
guidance played a pivotal role.

I would also like to thank my friend and colleague for providing me with various
useful inputs that helped me in the making of this project.

I would firstly like to thank my Course-In -Charge MISS SHAMBHAVI

UPADHYAY in assigning me this topic, researching on which was a challenging
but nevertheless interesting experience .It enabled me to analyze and understand

Lastly, I would like to thank my parents, family and friends whose enthusiastic
support and confidence in my abilities helped me in the making of this project.

PT. KRISHNA SWAROOP GAURAV

 INDEX
• Introduction of MSME……………1
• Meaning ……..1-2
• Definition ………2-4
• Aim & objective……….4-4
• Establishment of board……..4-5
• Establishment of Advisory Committee…….5-5
• Is registration of micro medium and small Enterprises
mandatory…………6-6
• Registration of micro small and medium enterprises
• Benefits of registration of MSME ………7-8
• Contribution of MSMEs in Country’s Economy at Current
Price …………..9-10
• Opportunities of MSME……..10-11
• Importance of MSME……….11-13
• Dispute under the MSME development act ……14-15
• Precautions……….14-15
• Conclusion………15-16
 MICRO, SMALL & MEDIUM ENTERPRISES
DEVELOPMENT ACT, 2006.
INTRODUCTION:-
MSME stands for Micro, Small and Medium
Enterprise (MSME), introduced by Government of India in
agreement with Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006 are entities engaged in the production,
manufacturing, processing or preservation of goods and
commodities.

MSME sector is considered as the backbone of Indian economy that

has contributed substantially in the socio-economic development of
the nation. It generates employment opportunities and works in the
development of backward and rural areas. As per the Government’s
annual report 2018-19, there are presently 6,08,41,245 MSMEs in
India. For your understanding let’s discuss some of the basics of
MSME, including its classification, features, role and importance in
socio-economic development of India.

MEANING OF MSME.
The Micro, Small and Medium Enterprises Development Act, 2006
aims at facilitating the promotion, development and enhancing the
competitiveness of micro, small and medium enterprises and for
matters connected therewith or incidental thereto.
 DEFINITION OF MICRO, SMALL & MEDIUM
ENTERPRISES

In accordance with the provision of Micro, Small & Medium

Enterprises Development (MSMED) Act, 2006 the Micro, Small
and Medium Enterprises (MSME) are classified in two categories:

a.) Manufacturing Enterprises:

The enterprises engaged in the manufacture or
production of goods pertaining to any industry specified in the first
schedule to the industries (Development and regulation) Act,
1951). The Manufacturing Enterprise are defined in terms of
investment in Plant & Machinery.

b.) Service Enterprises:

The enterprises engaged in providing or
rendering of services and defined in terms of investment in
equipment.

The limit for investment in plant and machinery /

equipment for manufacturing / service enterprises, as notified, vide
S.O. 1642(E) dtd.29-09-2006 are as under:
 MANUFACTURING SECTOR

Manufacturing sector Investment in plant &

machinery
Micro Enterprises Does not exceed 25 lakh rupees

Small Enterprises More than 25 lakh rupees but

does not exceed 5 crore rupees

Medium Enterprises More than 5 crore rupees but

does not exceed 10crore rupees

SERVICE SECTOR

Enterprises Investment in equipments

Micro Enterprises Does not exceed 10 lakh

rupees:
Small Enterprises More than 10 lakh rupees but
does not exceed 2 crore rupees
Medium Enterprises More than 2 crore rupees but does
not exceed 5 core rupees
 AIM AND OBJECT OF THE MSME ACT

The Act aims at facilitating the promotion and development and

enhancing the competitiveness of small and medium scale
enterprises and seeks to:
• Provide for statutory definitions of "small enterprise" and
"medium enterprise".
• Provide for the establishment of a National Small and
Medium Enterprises Board, a high-level forum consisting
of stake holders for participative review of and making
recommendations on the polices.
ESTABLISHMENT OF BOARD
"Board" means the National Board for Micro, Small and Medium
Enterprises established under section 3 of the MSMED Act 2006.
The head office of the Board is at Delhi.

ESTABLISHMENT OF ADVISORY COMMITTEE

The Central Government can by notification, constitute an
Advisory Committee.
IS REGISTRATION OF MICRO, SMALL AND
MEDIUM ENTERPRISES MANDATORY?
Registration of the micro or small or medium enterprises is
replaced with the filling of Memorandum.
• The Registration of micro or small enterprises (both
manufacturing and rendering of service) or medium
enterprise engaged in providing or rendering of services
is important but discretionary or optional.
 • However, a medium enterprise engaged in the
manufacture or production of goods has to compulsorily
register under the Act.
Taking into consideration the benefits available under the Act, it is
recommended that every enterprise be it minor, small or medium
must opt for the registration.
REGISTRATION OF MICRO, SMALL AND MEDIUM
ENTERPRISES
All classes of enterprises, whether Proprietorship, Hindu undivided
family, Association of persons, Co-operative society, Partnership
firm, Company or Undertaking, by whatever name called can apply
for the registration and get qualified for the benefits provided under
act.

Any person who intends to establish a micro, small or medium

enterprise at his discretion may file the memorandum of micro,
small or, as the case may be, of medium enterprise with such
authority as may be specified by the State Government under sub-
section(4) or the Central Government under sub-section (3) of the
Act.

Provisional Registration:
Provisional registration is granted to a unit at its
pre-investment period to enable it to take necessary steps to apply
for financial credit, land or an industrial set, water, power or
telephone connections, etc.
Permanent / Final Registration:
provisionally registered industrial unit when it is
about to go into production is to apply for grant of Permanent
Final Registration. An existing and functioning industrial unit is
eligible to apply for Permanent / Final Registration without going
into provisional registration processes.
The Micro and Small Enterprises should mention/get printed on
their letter heads, supply order sheets, invoices, bills and other
relevant documents, the MSMED Registration/Entrepreneurs
Memorandum (EM) Number allotted by a competent authority, so
that there remains an identification of being an MSE supplier.
BENEFITS OF REGISTRATION OF MSME

If a micro or small enterprise files a memorandum with District

Industries Centre (DIC) of its area, then it stands to gain many
benefits.
• Easy finance availability from Banks, without collateral
requirement;
• Protection against delay in payment from Buyers and
right of interest on delayed payment;
• Preference in procuring Government tenders;
• Stamp Duty and Octroi benefits;
• Concession in electricity bills;
• Reservation policies for manufacturing/production
through conciliation and arbitration;
• Reimbursement of ISO Certification Expenses;
• Moreover with the enactment of the Act, the interest on
delayed payments to small scale and ancillary Industrial
Undertaking Act, 1993 is repealed with effect from
October 2, 2006.
 Contribution of MSMEs in Country’s Economy at
Current Price

MSME Share of
Total Gross Share of
Gross Growth
Year Value MSME in Total GDP MSME in
Value (%)
Added GVA (%)
Added
GDP (in %)

2011-
2622574 – 8106946 32.35 8736329 30
12

2012-
3020528 15.17 9202692 32.82 9944013 30.40
13

2013-
3389922 12.23 10363153 32.71 11233522 30.20
14

2014-
3704956 9.29 11504279 32.21 12467959 29.70
15

2015-
4025595 8.65 12566646 32.03 13764037 29.20
16

2016-
4405753 9.44 13841591 31.83 15253714 28.90
17

Under the Micro, Small and Medium Enterprises Development Act,

2006, Government of India established The National Board for
Micro, Small and Medium Enterprises (NBMSME) to examine the
factors affecting promotion and development of MSME. This board
also reviews the existing policies and suggests recommendations to
the Government for the growth of the MSME sector.
 Opportunities in MSME
The opportunities in the MSME industry are massive due to the
succeeding factors:
• Export Promotion and potential for Indian products
• Funding – Finance & Subsidies
• Government’s Promotion and Support
• Growth in demand in the domestic market
• Less Capital required
• Manpower Training
• Project Profiles
• Raw Material and Machinery Procurement
• Tooling & Testing support and much more.

Importance of MSME

MSME was launched in 2006 to become an integral part of the

supply chain for products and services; moreover, a creator of
large-scale employment opportunities in rural India. MSMEs
contribute to approximately 8% of India’s GDP, employs over 60
million people, has an enormous share of 40% in the exports market
and 45% in the manufacturing sector.
 DISPUTES UNDER THE MSME DEVELOPMENT
ACT
In case of disputes with regard to any amount due because of
delayed payment:

• the enterprises under the provisions of the Act may refer to

the Micro and Small Enterprises Facilitation Council
which would further itself conduct conciliation in the
matter
• and where the conciliation initiated is not successful and
stands terminated without any settlement between the
parties the council shall either itself take up the dispute for
arbitration or refer it to any institution or centre providing
alternate dispute resolution services.
• The Micro and Small Enterprises Facilitation Council or
the centre providing alternate dispute resolution services
shall have the same jurisdiction to act as an Arbitrator or
conciliator under this section in a dispute between the
supplier located within the jurisdiction and a buyer located
anywhere in India
The Act also has provision that every reference made under this
section shall be decided within a period of 90 days from the date of
making the reference.
Under section 19 of the Act, it has also been mentioned that no
Application for setting aside any decree/award, made by the
Council / referred Institution shall be entertained by any Court
unless the appellant (not being the supplier) has deposited with it
seventy-five percent of the amount in terms of the decree/ award.
Further, provided that pending disposal of the application to set
aside the decree, award or order, the court shall order that such
percentage of the amount deposited shall be paid to the supplier,
as it considers reasonable under the circumstances of the case
subject to such conditions as it deems necessary to impose.

PRECAUTIONS:

• Once the application is done under MSEFC, there is no

provision to withdraw the proceedings. Therefore, the
Buyer should ensure the best ways to resolve the disputes,
if any, instead approaching to MSEFC in the initial stages
of dispute.
• The Buyers need to ensure that the Buyer does not owe any
outstanding amount, including interest due to MSM
Enterprises for more than 15 days. Otherwise, the Buyer
needs to disclose this non-payment in the Annual
Financials of the Buyer.
• The Act provides for the payment of compound interest at
3 times the Bank Rate by the Buyer in case of failure to
make the payment within a maximum of 45 days from the
date of receipt of goods or services.
 CONCLUSION.
MSMEs are the backbone of a resilient national economy.
Prioritising their development is critical to the future of the country.
The government has come out with a variety of enabling
mechanisms over the last few years.
The role of MSME in economic
development of India can not be over looked. This is a sector with
small investment but significant contribution. For a country to grow,
the government should actively promote these enterprises.
 BIBLIOGRAPHY.
LEGISLATION:-
MICRO, SMALL & MEDIUM ENTERPRISES
DEVELOPMENT ACT, 2006

E- SOURCE:-
• https://www.helplinelaw.com
• https://www.paisabazaar.com/business-
loan/what-is-msme/
• www.Wikipedia.com
• https://www.drishtiias.com/daily-
updates/daily-news-editorials/msme-sector-
in-
india#:~:text=Conclusion,the%20future%
20of%20the%20country.