KCCI urges Centre to amend Insolvency and Bankruptcy Code in the interest of MSMEs

President of KCCI M. Ganesh Kamath writes letter to Union Minister for Finance Nirmala Sitaraman seeking amendment

October 05, 2022 04:27 pm | Updated October 06, 2022 09:05 am IST - MANGALURU

Kanara Chamber of Commerce and Industry (KCCI). Mangaluru, has demanded that MSMEs should be included in clause (b) of sub-section 1 of Section 53 and brought on par with the workmen’s due.

Kanara Chamber of Commerce and Industry (KCCI). Mangaluru, has demanded that MSMEs should be included in clause (b) of sub-section 1 of Section 53 and brought on par with the workmen’s due. | Photo Credit: M.A. Sriram

Kanara Chamber of Commerce and Industry (KCCI), Mangaluru has urged the Union government to amend the Insolvency and Bankruptcy Code, 2016 and include Micro, Small and Medium Enterprises (MSMEs) under Clause (b) of sub-section 1 of Section 53 on par with the workmen’s dues. It is in the interest of survival of MSMEs, the chamber said.

In a letter dated September to Union Minister for Finance and Corporate Affairs Nirmala Sitaraman, the president of KCCI  M. Ganesh Kamath said the MSMEs are the backbone of the Indian economy, and the special schemes initiated by the government have been much appreciated as they have provided timely finance and assistance to MSMEs.  

“When MSMEs do business with some Limited Liability Companies that are later referred to the National Company Law Tribunal (NCLT), they stand no chance of recovering their dues. This is because MSMEs do not have the resources or the expertise to analyse their customers’ creditworthiness. As a result, MSMEs believe such entities would honour their commitment and have the capability of meeting their financial obligations. In such a situation, MSMEs have little bargaining power in dealing with corporate customers,” he said. 

In the interest of the MSMEs, there is an imperative need for the Insolvency and Bankruptcy Code, 2016, to be amended by giving preference to MSMEs in the waterfall mechanism of distribution of assets. It is generally felt that MSMEs should be included in clause (b) of sub-section 1 of Section 53 and brought on par with the workmen’s due. These benefits should be available for all the pending cases before the NCLT and National Company Law Appellate Tribunal (NCLAT), the letter said.

“Unless this is done, the survival of MSMEs caught in the web of companies that have gone to NCLT is challenging. We, as a chamber, have a first-hand experience of the stress the MSMEs undergo as we deal with several cases that come for arbitration at our arbitration centre, which are referred vide the MSMED Act, 2006 for arbitration or settlement,” the president said.

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