Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings (Amendment) Act, 19981
| [Act 23 of 1998] | [August 10, 1998] |
An Act to amend the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993
Be it enacted by Parliament in the Forty-ninth Year of the Republic of India as follows:-
1 Received the assent of the President on Aug. 10, 1998 and published in the Gaz. of India, Extra., Pt. II, S. 1, dt. 11-8-1998, pp. 1-3, Sl. No. 38.
Prefatory Note-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 opposed 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.
1. Short title.-This Act may be called the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings (Amendment) Act, 1998.
2. Amendment of Section 2.-In the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (32 of 1993) (hereinafter referred to as the principal Act), in Section 2, in clause (f), for the words "or Union territory", the following shall be substituted, namely :-
"(i) Union territory and includes,-
(i) the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956);
(ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956).".
3. Amendment of Section 3.-In Section 3 of the principal Act, the following proviso shall be inserted, namely :-
"Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed one hundred and twenty days from the day of acceptance or the day of deemed acceptance.".
4. Substitution of new section for Section 4.-For Section 4 of the principal Act, the following section shall be substituted, namely :-
"4. Date from which and rate at which interest is payable.-Where any buyer fails to make payment of the amount to the supplier, as required under Section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at one-and-a-half time of Prime Lending Rate charged by the State Bank of India.
Explanation.-For the purposes of this section, "Prime Lending Rate" means the Prime Lending Rate of the State Bank of India which is available to the best borrowers of the bank.".
5. Amendment of Section 6.-Section 6 of the principal Act shall be renumbered as sub-section (1) thereof and after sub-section (1) as so renumbered, the following sub-section shall be inserted, namely :-
"(2) Notwithstanding anything contained in sub-section (1), any party to a dispute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of the matters referred to in that sub-section and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in sub-section (1) of Section 7 of that Act.".
6. Insertion of new Sections 7-A, 7-B and 7-C.-After Section 7 of the principal Act, the following sections shall be inserted, namely :-
"7-A. Establishment of Industry Facilitation Council.-The State Government may, by notification in the Official Gazette, establish one or more Industry Facilitation Councils at such places exercising such jurisdiction and for such areas, as may be specified in the notification.
7-B. Composition of Industry Facilitation Council.-(1) The Industry Facilitation Council shall consist of one or more members to be appointed from amongst the following categories :-
(i) Director of Industries by whatever name called or any other officer not below the rank of such Director, of the State Government;
(ii) representatives of banks and financial institutions;
(iii) office bearers or representatives of State Industry Associations; and
(iv) persons having special knowledge in the field of Industry, Finance, Law, Trade and Commerce.
(2) The person appointed under clause (i) of sub-section (1) shall be the Chairperson of the Industry Facilitation Council.
(3) The composition of the Industry Facilitation Council, the manner of filling vacancies among, and the procedure to be followed in the discharge of their functions by, the members shall be such as may be prescribed by rules by the State Government.
7-C. Laying of rules before State Legislature.-Every notification issued and every rule made by the State Government under this Act shall be laid, as soon as may be after it is issued or made, before the State Legislature.".