Mentoassociates.com – Legal Articles

• The Micro, Small and Medium Enterprises Development Act (MSMED) (hereinafter referred to as Act) provides a very quick and effective means of money recovery for micro and small enterprises. Section 15 to 25 of chapter V of the act covers the same. These special privileges are for micro and small enterprises. A small enterprise growing to medium can also avail these remedies for getting the delayed payments. 

• A small enterprise, if engaged in manufacture or production of goods, is one where the investment in plant and machinery is more than 25 lakh rupees but does not exceed 5 crore rupees. In the case of an enterprise engaged in providing services, it will be treated as a small enterprise where the investment is more than 10 lakhs rupees but does not exceed 2 crore rupees. 

• A micro enterprise is an enterprise engaged in the manufacture and production of goods and where the investment in plant and machinery does not exceed 25 lakh rupees. In the case of an enterprise engaged in providing or rendering of services, for a micro enterprise, the investment in equipment shall  not exceed 10 Lakh rupees. 

• As per section 15 of the act, if a supplier supplies any goods or renders any services to any buyer, the buyer shall make payment on or before the date agreed upon between him and the supplier in writing or when there is no agreement in this behalf, before the appointed day. Here a supplier means a micro or small enterprise. As per section 2(b) of the act, the appointed day means the day following immediately after the expiry of the period of 15 days from the day of acceptance or the day of deemed acceptance of any goods or services by a buyer from a supplier. The period agreed between the supplier and buyer, in writing, shall not exceed 45 days from the day of acceptance or the day of deemed acceptance.

• As per section 16 of the act, if a buyer fails to make payment of the amount to the supplier as required under the act, the buyer shall be liable to pay compound interest with monthly rests to the supplier on that amount from the time of the appointed day or from the date immediately following the date agreed upon at 3 times the bank rate notified by RBI. If the claimant has received the principal already, the claim can be filed for interest alone. 

• As per section 18 of the act, if a supplier has a dispute with a buyer, in regards to any amount due, he may make a reference to the micro and small enterprises facilitation council (MSEFC)(hereinafter referred to as Council). On receipt of a reference, the council shall either itself conduct conciliation in the matter or refer the matter for conciliation to an institution providing ADR(Alternate Dispute Resolution ) services. The provisions of the delayed payments under the act, are not applicable to foreign buyers. Even a government department as a buyer can be proceeded against in the council. 

• MSME Samadhan portal is a portal where micro and small enterprises can file their applications online regarding delayed payments. For the purpose of applying to the MSEFC, the micro or small enterprise shall have a valid UDYAM registration. The application filed online will be forwarded automatically to the concerned MSEFC which will take action on the application. The claim should be submitted in hard copy also. 

• To file an application on MSME samadhan portal, work order is compulsory. In case the purchase order is oral, an affidavit to that effect is to be submitted. A legal notice by the supplier to the buyer is not necessary before filing the case in the council. 

• If the conciliation under section 18 is not successful, the council shall either itself take up the dispute for arbitration or refer it to an institution or centre providing ADR services. For the purpose of this conciliation and arbitration, the jurisdiction of the MSEFC or the Alternate Dispute Resolution centre will be the supplier’s jurisdiction and the buyer can be located anywhere in India. Every reference to MSEFC under section 18 shall be decided within a period of 90 days from the date of making such a reference. An award passed by the MSEFC can be executed under section 36 of the arbitration and conciliation act, 1996.

• If a person wants to set aside the decree, award or order passed by the MSEFC, then they can file the application before the jurisdictional court under section 34 of the Arbitration and Conciliation Act 1996. If it is by the buyer, then he needs to deposit 75% of the amount in terms of the decree award or the order as a condition for filing the setting aside application. Furthermore, the court considering the application to set aside the decree, award or order, shall order a reasonable percentage of the amount deposited to be paid to the supplier. 

• As per section 22 of the act, where any buyer is required to get his annual accounts audited, under any law, such buyer shall furnish several information about the principal and interest amount due to any supplier at the end of each accounting year and several other connected information. If anybody intentionally contravenes the provisions of section 22, he shall be liable with fine which shall not be less than 10 thousand rupees. 

• If the buyer is claiming rejection of goods for quality deficiencies, then the rejection should be genuine within 15 days of the receipt of the goods and its immediate communication to the supplier. 

The Karnataka Court Fees and Suits Valuation Act, 1958 regulates the fees payable in courts in the state, to balance justice and financial responsibility. An important provision under the Act is refunds and exemptions from court fees. This aims to remove unnecessary financial burdens and is especially true in cases of repayment, withdrawal or procedural release. The Act also empowers State Government to remit fees either wholly or partially to foster inclusivity and fairness. The percentage of the amount to be refunded differs based on the circumstances, which can be further understood by the below mentioned sections of the Act.

1.  Refund in case of delay in presentation of plaint or delay in payment of court fees (Section 63)

When a plaint or memorandum of appeal (hereafter referred to as only plaint) is rejected on the following grounds

• Delay in re- presentation
• Fee paid on the plaint is deficient and deficiency is not made good within the allowed time granted by the court
• The delay in payment is not condoned and the plaint is rejected consequently.

The amount of one half the total fees, 50%, paid will be refunded on the grounds of delay in presentation of the plaint for the reasons stated above.

Case Law – Union of India (UOI) and Ors. Vs Willwood Chemicals Pvt. Ltd. And Ors(India Kanoon) Decided on 19-04-2022

2. Refund in case of remand (Section 64)

When a plaint or memorandum of appeal, which has been rejected by the lower court is ordered to be received, by the higher court or when a suit is remanded in appeal by the higher court for a fresh decision by the lower court, the court which made the order shall direct the refund to the appellant of the full amount of fee paid on the memorandum of appeal. Furthermore, when the

• whole decree is reversed, and the suit is remanded or
• if the remand is on second appeal, also on the memorandum of appeal in the first appellate court

then the court may direct the refund to the appellant of the full amount of fee paid on the memorandum of appeal.

No refund shall be ordered if the remand was caused due to an error made by the party.

If the order of remand does not cover the whole of the subject matter of the suit, the refund shall not exceed the amount paid originally on that part of the subject matter in respect of the suit that has been remanded.

Case Law – Manish Kumar vs Union of India (UOI) and Ors. ( India Kanoon) Decided  on 19 January 2021

3. Refund where Court reverses or modifies former decision on ground of mistake (Section 65)

If the court makes any mistakes on the face of record and an application for a review of judgment is admitted, and after rehearing the court reverses or modifies its previous decision on that ground, it shall direct the refund to the applicant the amount that exceeds the fees paid to what the needs to be paid, which is applicable in any court. If the amount to be paid rounds up 1000 due to the mistake and the original amount to be paid was 500, the difference that is 500 is the amount that will be refunded.

Case Law – P. N. Eswara Iyer vs The Registrar, Supreme Court Of India decided on 1 February, 1980 (India Kanoon)

4. Refund on settlement before hearing (Section 66)

When the court refers the parties to any of the ADR Methods– Alternate Dispute Resolution, and the dispute is settled, by the means of arbitration, conciliation, negotiation, etc., then seventy five percent of the court fees that was paid is refunded.

Originally only fifty percent of the fees was to be refunded until a recent amendment in the year 2020 which increased it to seventy five percent.

In cases which are not covered by the above-mentioned scenarios, a refund of seventy five percent of the court fees that was paid can be claimed when

• any suit is dismissed as it is settled out of court before evidence is recorded on the merits of claim.
• any suit is compromised on the comprise decree, before evidence is recorded on the merits of claim
• any appeal is disposed of before the commencement of hearing of the appeal

Case Law – Gayathri vs Indira Rajashekar decided on 14 July 2000 (India Kanoon)

5. Refund of fee paid by mistake or inadvertence (Section 67)

According to the Karnataka Court Fees and Suits Valuation Act, if a court fee is paid by mistake, the court can order a full refund of the fee paid. The plaintiff who paid the fees in error or inadvertence, should be refunded the entire amount paid mistakenly.

Unlike in some situations where a percentage of the court fee might be deducted upon refund, if the payment was clearly a mistake, the full amount should be refunded.

6. Instruments of Partition (Section 68)

If the final decree in a partition suit is engrossed on non-judicial stamps provided by the parties, the court will order a refund of the valued fee paid by the parties. The refund will be equal to the value of the non-judicial stamps provided by the parties.

When people go to court to divide property (a partition suit), they might need to pay a fee for the court process. Later, if the court decides the property division and writes the final decision on special non-judicial stamp paper (a type of official paper required for legal documents), the parties involved in the case might have provided those stamp papers themselves.

If that happens, the court will return to them the amount of money they paid earlier in court fees, equal to the value of the stamp paper they provided. Essentially, they get reimbursed for the cost of those stamp papers.

7. Exemption of certain Documents (Section 69)

Certain documents are exempt from being liable to pay court fees.

• Legal authorizations: written authorizations like mukhtarnama or vakalatnama by Armed Forces personnel, not the ones in civil employment or memorandums filed by advocates in criminal cases.
• Documents in Specific cases: Plaints filed in village courts and applications which are related to land revenue assessment before final confirmation.
• Irrigation and Land use: Applications for irrigation supply or cultivation extension and enhancement of rent or relinquishment of land.
• Witnesses and legal Proceedings: First application for summons of witness or production of evidence. Bail bonds, recognizances, and applications related to criminal proceedings.
• Petitions and Complaints: Petitions concerning offenses filed with police officers or village authorities.
• Forest and Government revenue: Applications related to cutting timber in Government forests.
• Appeals and Compensations against any municipal tax. Applications for compensation under property acquisition laws.
• Marriage and Religious matters: Petitions under Section 48 of the Indian Christian Marriage Act, 1872.
• Records of rights filed with plaints or applications.

8. Power to reduce or remit fees (Section 70)

the Karnataka Court-Fees and Suits Valuation Act, 1958 allows the State Government to reduce or remit all or part of the fees chargeable under the Act. This can be done by a notification in the official Gazette. However, the State Government cannot reduce or remit fees for specific classes of documents or for documents filed by a particular class of people. The remission may be granted based on public interest, financial hardship of litigants, or other justifiable reasons. The provision allows the government to ease the financial burden on litigants in deserving cases, ensuring access to justice for those who might otherwise struggle to afford court fees.

Authored by

ANUPA S

1st Semester BBA LLB (Hons)

Manipal Academy of Higher Education, Bangalore