Litigation challenge for MSMEs: The Mediation Bill passed by Lok Sabha and Rajya Sabha during the monsoon session of the Parliament will reduce the cost of litigation for MSMEs, said Law Minister Arjun Ram Meghwal. Addressing a seminar on Reducing the Cost of Litigation for MSMEs, the minister noted that the “Government is seized of the concerns of MSMEs about lengthy and costly litigation and we shall push for resolution of disputes through Mediation centres all over India to reduce cost.”
The seminar was organized on Thursday by the MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME) and ‘Friends of MSMEs in Parliament’- a forum of Members of Parliament created to support MSMEs.
“Now that Mediation Bill is cleared and would be sent to President’s assent, the focus will shift to making Rules and the government will incorporate the suggestions that emerged during Seminar,” the minister added.
The feedback from MSMEs gathered by FISME highlighted difficulties in the appointment of arbitrators, interventions by higher courts post-award extending the process inordinately and difficulties in the execution of awards among major areas of concern for small businesses.
“The slow and inefficient judicial process in India negatively impacts entrepreneurship and MSMEs is no news. But you would be surprised at the cost it imposes on society. Prof Bibek Debroy had mentioned that legal reforms could enhance incremental GDP by 1.5 per cent every year. It is costing India close to Rs 4 lakh crore every year,” said Prashant K Patel, President, FISME.
Explaining the challenges, he noted that although the process of arbitration has become largely time-bound, MSME Facilitation Councils have failed to adhere to the discipline of timelines. Further, the concerns about arbitration costs especially for MSMEs remain. Also, the intended benefits of alternative mechanisms have been largely nullified by frequent interventions in the process through courts delaying the conclusion of the process. Moreover, whether through commercial courts or higher courts, the execution of the award opens up another case and can drag on for years.
To create a sense of urgency in resolving the matter faster, Patel, on behalf of FISME, suggested setting up a dashboard capturing data on cases running and those in arbitration, civil courts, high courts and the Supreme Court.
Convenor of the Forum Rajendra Agarwal, Member of Parliament assured MSMEs that they would be made part of the official consultation process in making of Rules for Mediation Act to incorporate their concerns including that of delayed payments.