Amendment to the Interest on Delayed Payments to the Small Scale and Ancillary Industrial Undertakings Act,1993.
One of the major difficulties faced by Small Scale and Ancillary industrial units is in respect of timely receipt of their dues. In order to help SSI and Ancillary industrial units get payment in time for the supplies made by them and to provide for and regulate payments to & for matters connected therewith, or incidental thereto an Act had came inot operation from 2nd April, 1993. The salient features of the Act are as under:
i) Where on SSI unit supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the SSI unit in writing or where there is no agreement in this behalf, within 30 days from the date of delivery of goods/services.
ii Where the buyer fails to make payment in the preceding paragraph he is liable to pay interest to the supplier on that amount for the over due period at such rate which is five percent points above the floor rate for comparable lending. Floor rate here means the minimum rate stipulated by Reserve Bank according to the size of loan.
iii) The interest is payable on compounded basis (with monthly rests) at the rate mentioned at (ii) above.
iv) The amount as above shall be recoverable by the supplier from buyer by way of suits. No appeal against any decree shall be entertained by any court unless the appellant has deposited with the court sevently five percent of the amount in terms of decree.
v) The buyer is required to specify the amount together with interest in his annual statement of accounts as remains uppaid to any SSI unit at the end of each accounting year. The interest payable or paid by any buyer on the above account shall not be treated as deductible expense for the purpose of computation of his income under Income Tax Act,1961.
However, this act could not be effectively implemented. Hence Govt. of India have made amendment to the original Act on 10th August, 1998. The most important change that has been brought about by the Amendment Act is that the SSI suppliers can now approach the Industry Facilitation Council (IFC) for settlement of their disputes with the buyers in regard to delay in payment etc. of the supplies made by them. As provided under 7(a) of the amendment Act, the State Govt. have been empowered to constitute such councils with the composition and jurisdiction as provided under Secion 7(a),(b) & (c) of the amended Act. The Councils shall first make efforts to bring bount conciliation cannot be reached, the IFC shall act as an Arbitrator for settling disputes following the provisions of the Arbitration & Conciliation Act,1996.
Another important change introduced by the amendment is that no agreement between the buyer and the seller shall exceed 120 days. This has been done to eliminate the widely prevalent practive among buyers to force SSI suppliers to renew the agreement and extend the period of payment before the expiry of the agreement in order to avoid payment of interest on the amount dut. As a result of the amendments to Sections 3 and 4, the buyers are now legally bound to make payment of interest at the rate of 1.5 times the prime lending rate charged by the State Bank of India for any delay beyond the agreed period not exceeding 120 dyas.
In pursuance to Section 6 of the amended Act. Govt. of Orissa vide its Notification No.3/94 dated 17th Feb., 1999 have constituted an Industry Facilitation Council (IFC) at Cuttack with the following members:
1. Director of Industries, Orissa, Chairman Cuttack.
2. Managing Director,OSFC,Cuttack - Member
3. Managing Director, OSIC,Cuttack - -do-
4. Director,Export Promotion & Marketing, Orissa,Bhubaneswar. -do-
5. Representative/SBI (Circle Credit Officer) H.O ,SBI, Bhubaneswar. -do-
6. Representative/Uco Bank (Chief manager. Regional Office). -do-
7. Representative of Orissa Small Scale -do- Industries Association
8. Representative of Utkal Chambers of -do- Commerce & Industry
9. Representative of Orissa Assembly of -do- Small Scale and Medium Enterprises
10. Joint Director, Member Secretary Industries, Orissa, Cuttack.
This Committee shall have jurisdiction over the entire State.
Any SSI unit which has not received payment within 120 days from any buyer - whether in the public or the private sector - may write to the Director, Industries-cum-Chairman, IFC, Killa Maidan, Cuttack-753001 alongwith the following documents:
i) Copy of the purchase order/contract.
ii) Copy of the receipt challans.
iii) Details of the pending bills.
iv) In case raw materials have been supplied by the buyer or if the work is a works contract, then the final reconcilitation statement indicating the material account is also required to assess the clarity of the claims.
v) Statement of accounts indicating details of part bills/final bills/running bills vis-avis part payments received with dates etc. This will help in assessing the date from which balance payments are due.
vi) If possible, copies of MOMs drawn from time to time to cover deviations in purchase orders/extra quantities ordered /other problems faced/Acceptance of works executed etc. as and where applicable.
vii) Copy of the orders, if any, extending the delivery date of the P.O. to the supplier.