Consequences of not filing form MSME-1
Form MSME-1 is a half yearly return that is required to be filed with Registrar of Companies in respect of outstanding payments to Micro, Small or Medium Enterprises (MSMEs). This obligation is in accordance with Order 2 and 3 dated January 22, 2019, issued under section 405 of the Companies Act, 2013 (Act). All companies receiving goods or services from MSME are obligated to submit this return if payments to these suppliers extend beyond forty-five days from the date of acceptance (or deemed acceptance) of the relevant goods or services. In addition to disclosing the amount of outstanding payments, companies are also mandated to provide reasons for any delays in payment. As a half yearly return, Form MSME-1 must be submitted by October 31st for the April to September period and by April 30th for the October to March period. Filing this form serves to protect the interest of MSMEs by ensuring that their receivables are accurately documented. It facilitates the identification of delayed payments and enables timely resolution.
Failure to submit this half yearly return may result in penalties as per the provisions of section 405 of the Act. The company and every officer of the company who defaults in complying with section 405 shall be liable to a penalty of twenty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of three lakh rupees.
A recent instance of a breach of the above-mentioned regulation has come to light. In this case, an MSME lodged a complaint with the Registrar of Companies (ROC) against a company that had previously procured goods from the said MSME. The complaint emphasized that due to a delay in payment to the MSME, the company was consequently required to submit Form MSME-1. Accordingly, the ROC, Kerala levied penalties on both the company and its Managing Director for the non-submission of the specified form within the due date.
In light of the aforementioned case, the significance of filing Form MSME-1 becomes evident. The timely submission of this form not only upholds the legal obligations between businesses but also protects the interests of MSMEs. Neglecting to file this form, as demonstrated in the aforementioned instance, can lead to penalties imposed by the ROC.
Disclaimer: The contents of this write up is based on the relevant provisions and as per the information existing at the time of preparation. In no event I shall be liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the above information.