BHEL, the doyen of PSUs, faltering payment, MSMEs cry for a robust mechanism for realisation of delayed payments
New Delhi, Apr 13 (KNN) The delayed payment issue which leads to closure of MSME units is considered so “unimportant” by the large organizations like BHEL that even after a decade they not only are still ignoring the payment but are also ignoring the legal notices sent to them by their suppliers.
The aftermath of delaying payments to MSE suppliers is well acknowledged by the Ministries and Banks but the provisions such as Facilitation Councils, MSMED Act still lack teeth to make the buyers pay their dues to the smaller companies.
One such case has been brought up by a MSE supplier Teknow Consultants & Engineers Pvt Ltd where Bharat Heavy Engineering Limited (BHEL), a Rs 20,000 crore PSU, has not cleared its payment to the company.
Teknow is a Rs 5 crore company and a registered MSMEs.
Talking to KNN, Shishir Gupta, Director, Teknow Consultants & Engineers Pvt Ltd, said, “BHEL is holding an amount of Rs.14,98,578 due to the company, since 2009.”
The entrepreneur rued that the large companies don’t even bother to respond to the crying of MSMEs for payment of ‘small’ amounts.
The amount in question is held by BHEL towards final payment for two contracts, since prior to 2009.
Gupta mentioned that when BHEL turned a deaf ear to his repeated missives, the company sent a "Legal Notice" to BHEL on November 30, 2016 under provisions of the MSME laws.
“BHEL did not even reply to the Legal Notice which clearly shows that how these big companies treat the MSMEs ” cried Gupta.
“this shows how large organisations like M/s BHEL are illegally leveraging the money belonging to the helpless MSMEs as many of them cannot afford to either start a fight to recover their dues from BHEL,” the entrepreneur said.
BHEL had issued two work orders in 2004 under Kaithal Project and Patiala Project to Teknow Consultants & Engineers. On completion of the work, Teknow had submitted its final bill to BHEL which was approved by the buyer.
However, despite the approval, several reminders and finally the legal notice the payment to the supplier is still outstanding.
Adding on to all the woes, the Rs 2 lakh Earnest Money deposited by the SME to BHEL is also outstanding with the large player.
One of the key problems forcefully turning the MSME suppliers into NPAs is the vicious cycle of bad payments by their large buyers and their run against time to fight the cases in the court and at the same time struggle to repay loans to the banks before they term them as ‘bad loans’.
While the Government has made provisions under the MSME Development Act, 2006 to enforce payment to micro and small enterprises on time, very few entrepreneurs ask for the legal measures due to the enormous delay in the legal process.
Under the section 19 of the Act, MSME sellers have to be paid within 45 days from the date of supply. Failing that, they are entitled to penal interest, which would be three times the bank rate fixed by the Reserve Bank of India.
Moreover, there is no deduction applicable for penal charges paid by companies under the Income-Tax Act, which further increases the financial burden on them.
In case the MSME supplier is not paid within 45 days, it can go to the state government’s arbitration set up named as MSE Facilitation Council. If the buyer wants to challenge an award decided in favour of the MSME in a court of law, it will have to deposit at least 75 per cent of the award amount upfront.
The provision is meant to ensure that an MSME’s viability is not impacted during pendency of the case.
The big buyers use their financial muscles to drag the cases in lower and higher courts and prolong the payment even after appropriate court orders.
The delayed payment to MSME suppliers, which might not be a big amount for the buyers, blocks the entire capital flow to the MSMEs financial ecosystem making it difficult for them to even repay their loans. Thus most of the units stuck in the bad cycle of delayed payments get declared as NPAs by the banks.
Recently, a Socio-Economic Outlook 2017 of Telangana highlighted that decline in growth rate of MSMEs is largely due large enterprises defaulting in payments to the MSE vendors on the one hand and on the other, the ineffective delayed payment redress mechanism, with the governments, PSUs and judiciary not adequately and appropriately responding to the arbitration mechanism of the MSE Facilitation Council. (KNN Bureau)