Arbitration under MSME Act
Sub-section 3 of Section 18 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides that where the conciliation fails under the provisions of the Act, the Micro & Small Enterprises Facilitation Council (MSEFC) shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration.
Sub-section 4 of Section 18 of the MSMED Act, 2006 provides that the MSEFC or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
There is a mechanism, namely Trade Receivable Discounting System (TReDS) working as per the guidelines issued by RBI. It is an electronic platform for facilitating the discounting of trade receivables of MSMEs through multiple financiers. Government of India has also instructed Central Public Sector Enterprises and all companies with a turnover of Rs. 500 Crore or more to get themselves on-boarded on TReDS.
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