The micro, small, and medium enterprises (MSME) ministry is exploring a plan for the Centre to have powers to empanel private online dispute resolution (ODR) firms to address cases of delayed payments, according to two officials familiar with the matter. In June of this year, the ministry launched a dedicated ODR portal for MSMEs to quickly resolve delayed payment disputes, aiming to help small businesses file claims digitally, monitor their cases, and recover dues from large firms, governments, and public sector units in a transparent and efficient manner.
Under existing law, state governments hold the authority to empanel private ODR firms. Now, the MSME ministry is considering a similar arrangement for the central government, enabling it to also empanel private ODR service providers, as per the officials who requested anonymity.
Currently, as per law, only state governments have the power to empanel private firms for resolving delayed payment disputes. But more needs to be done. The government is considering adding more powers for the central government to also empanel firms and resolve disputes faster,” stated one official. The second official mentioned that the government has begun working on the proposal, although it may take some time before concrete changes are implemented.
Queries sent via email to the MSME ministry remained unanswered by press time. Delayed payment cases occur when MSME suppliers to large corporations have dues pending for over 45 days since delivery. According to Section 18 of the MSME Development Act, 2006, the Micro and Small Enterprises Facilitation Council (MSEFC) established by state governments can either handle the delayed payment dispute themselves or refer the matter to an institution providing alternative dispute resolution (ADR) services. In these instances, they can empanel private institutions to resolve disputes.
The MSME ministry seeks to establish a similar mechanism at the central level. However, private institutions offering dispute resolution services are scarce in northeastern states and even in tier-II and III cities across the country, posing another challenge, according to P. Madhava Rao, registrar of Hyderabad-based Amika Arbitration and Mediation Centre. There, it is a challenge for state governments to identify ADR institutions,” he remarked. Rao suggested that since the central government has initiated the MSME ODR portal, it should take the lead in empaneling private ODR firms and providing guidance to states.
This proposal emerges against the backdrop of state-level facilitation councils not achieving positive outcomes. Reports indicate that they have yet to address about a quarter of the more than 250,000 claims raised by MSMEs, with less than a tenth being resolved amicably.
