MSMEs blame litigation tangle, cost for being a segment killer

economictimes.indiatimes.com:

MSME representatives have called upon the government to take steps to reduce the cost of litigation for them. In a seminar organised recently by the Federation of Indian Micro and Small & Medium Enterprises (FISME), several industry observers raised the growing issue of MSMEs facing legal disputes, especially concerning supplies to government departments and public sector undertakings (PSUs). Time is of the essence for MSMEs when it comes to payments.

Small suppliers can be ruined if a large company does not pay them on time for the goods services received, said Prashant K Patel, President of FISME. The government is encouraging alternative dispute resolution mechanisms, including mediation, conciliation and arbitration, as the main tools for dispute resolution, but the pace of execution is still riddled with loopholes, he said.Parliament had passed the Mediation Bill in the monsoon session. Earlier, the government had amended the arbitration act to make this a feasible settlement route.

“Although the process of arbitration has become largely time-bound, MSME facilitation councils (MCFs) have failed to adhere to the timelines. Secondly, the intended benefits of alternative mechanisms have been largely nullified by frequent interventions across the process through courts, delaying the conclusion of the process. Thirdly, whether through commercial courts or higher courts, the execution of the award opens up the door to another case which can drag for years,” the FISME president said.