[Opinion] ROC Imposes Rs. 16.9 Lakhs Penalty on Company and MD for Non-Filing of e-Form MSME-1 & Non-Reporting of MSME Dues

Prof R Balakrishnan – [2024] 158 taxmann.com 448 (Article)

1. Micro, Small and Medium Enterprises Development (MSMED) Act 2006

The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs and the Act also seeks to facilitate the development of these enterprises and enhance their competitiveness. The act also protects the Micro. Small and Medium Enterprises for getting their payment well within the date and in case of delay, the buyer has to make payment with interest. Besides the above protection, there is also a disclosure requirement in section 22 of the MSMED Act that the buyer need to disclose the unpaid amount with interest in the annual statements of the company. The act further provides that the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues are actually paid to the small enterprise.

Relating to the determination of dues to Micro, Small and Medium Enterprises, payable to MSME, the same is required to be determined by identifying the Micro, Small and Medium Enterprises based on the information available with the Company. It is obligatory and mandated by law that necessary disclosures are required to be made in the annual financial statement of the company as per the provisions of the MSMED Act.

2. The relevant provisions of the Companies Act 2013 on this matter

As per the provisions of sub-section (1) of section 405 of the Companies Act, the Central Government may, by order, require companies generally, or any class of companies, or any company, to furnish such information or statistics with regard to their or its constitution or working, and within such time, as may be specified in the order.

Sub-section (2) of section 405 of the Companies Act 2013 states that every order under sub-section (1) shall be published in the Official Gazette and may be addressed to companies generally or to any class of companies, in such manner, as the Central Government may think fit and the date of such publication shall be deemed to be the date on which requirement for information or statistics is made on such companies or class of companies, as the case may be.

Sub-section (3) of section 405 of the Companies Act 2013 states that for the purpose of satisfying itself that any information or statistics furnished by a company or companies in pursuance of any order under sub-section (1) is correct and complete, the Central Government may by order require such company or companies to produce such records or documents in its possession or allow inspection thereof by such officer or furnish such further information as that Government may consider necessary. Further to the above, sub-section (5) of section 405 of the Companies Act 2013, states that where a foreign company carries on business in India, all references to a company in this section shall be deemed to include references to the foreign company in relation, and only in relation, to such business.

Click Here To Read The Full Article