Section 14 in The Interest On Delayed Payments To Small Scale And Ancillary Industrial Undertakings Act, 1993
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/691Statement of Objects and Reasons.-A policy statement on small scale industries was made by the Government in Parliament. It was stated at that time that suitable legislation would be brought to ensure prompt payment of money by buyers to the small industrial units.2. Inadequate working capital in a small scale or an ancillary industrial undertaking causes serious and endemic problems affecting the health of such undertaking. Industries in this sector have also been demanding that adequate measures be taken in this regard. The Small Scale Industries Board, which is an apex advisory body on policies relating to small scale industrial units with representatives from all the States, governmental bodies and the industrial sector, also expressed this view. It was, therefore, felt that prompt payments of money by buyers should be statutorily ensured and mandatory provisions for payment of interest on the outstanding money, in case of default, should be made. The buyers, if required under law to pay interest, would refrain from withholding payments to small scale and ancillary industrial undertakings.3. An Ordinance, namely, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992, was, therefore, promulgated by the President on the 23rd September, 1992.4. The Bill seeks to replace the said Ordinance and to achieve the aforesaid objects.Amendment Act 23 of 1998-Statement of Objects and Reasons.-The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 regulates the procedure for payment of interest on delayed payments to small scale and ancillary undertakings. Though the Act has been in operation for a period of five years, the problem of delays in payment of outstanding dues to the small scale industrial units continues unabated. There have been widespread discussions on the provisions of the Act among the various interest groups including the Departments of State Governments dealing with industries, banks and Small Industry Associations. The general consensus emerged from such discussions is that certain amendments to the Act are necessary in order to make it more effective so that the aims and objectives of the Act are achieved.2. The existing Act is not applicable to the Central or State public sector undertakings, such as, the National Small Industries Corporation (NSIC) and the State Small. Industries Development Corporations (SSIDC). Since both the aforesaid Corporations have been playing an important role in marketing of SSI products, it is proposed to amend the definition of "supplier" so as to bring within the scope, the aforesaid Corporations.3. Section 3 of the Act stipulates that a buyer is required to make payment on or before the agreed date to small scale supplier of goods or services. Where the credit period is not specified in the agreement, the payment is to be made within 30 days from the date of the acceptance of goods or services. It has been noticed that buyers tend to prescribe a credit period of 240-360 days. This defeats the purpose of the Act. It is, therefore, proposed to amend Section 3 of the Act by specifying a period of 120 days as the maximum period of credit.4. Section 4 of the Act states that buyers shall be liable to pay interest to the suppliers on outstanding dues beyond the appointed day at a rate which is five per cent. points above the floor rate. The Reserve Bank of India, in its new credit policy, has changed the system of prescribing floor rates for the purpose of lending by banks for the loans exceeding Rs. 2 lakhs. The banks are now free to fix the Prime Lending Rate for loans. This change in interest rate policy has necessitated a change in determining the penal rate of interest in the Act. It is proposed to fix the penal rate of interest at one and a half times of the Prime Lending Rate of the State Bank of India.5. Under section 6 of the Act, the outstanding amount together with the interest is recoverable (in case of dispute) by way of a civil suit. It is proposed to provide an alternative mechanism of arbitration and conciliation apart from section 6 to resolve the disputes under the Act. For this purpose, State Governments are proposed to be authorised to set up one or more "Industry Facilitation Councils" for the purpose of arbitration and conciliation. These Councils shall act as arbitrators or conciliators for settling disputes between SSI suppliers and buyers. This aims at facilitating resolution of disputes between the two parties amicably.6. The Bill seeks to achieve the above objects.[2nd April, 1993]Received the assent of the President on 2.4.1993 and published in the Gazette of India, Extraordinary, Part II, Section 1, dated 3.4.1993.An Act to provide for and regulate the payment of interest on delayed payments to small scale and ancillary industrial undertakings and for matters connected therewith or incidental thereto.Be it enacted by Parliament in the Forty-fourth Year of the Republic of India as follows:-
