The Kanara Chamber of Commerce and Industry (KCCI) has urged the Union Finance Minister Nirmala Sitharaman to amend the Insolvency and Bankruptcy Code so that MSMEs (micro, small, and medium enterprises) receive preference in the waterfall mechanism of asset distribution.
In a letter to the minister, the President of KCCI, Ananthesh V Prabhu, said the claim of MSME must be treated similarly to the workmen’s dues. All cases currently pending before the NCLT or NCALT must be eligible for these benefits.
If this doesn’t happen, it will be difficult for MSMEs caught in the web of companies that have gone to NCLT to survive.
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“As a chamber that regularly hosts cases referred for arbitration or settlement pursuant to the MSMED Act of 2006, we can attest to the strain that small and medium-sized enterprises (SMEs) are under,” he said.
There is little hope for MSMEs to get paid their dues after doing business with Limited Liability Companies (LLC) that end up before the National Company Law Tribunal (NCLT), he said, adding these MSMEs lack the human resources and infrastructure to conduct customer-credit analysis.
When dealing with the Resolution Professional or the Committee of Creditors, MSMEs will be treated as operational creditors and will have very little leverage, he said.
“We humbly request that you take steps to amend the Insolvency and Bankruptcy Code of 2016 to include MSME dues under Clause (b) of Subsection 1 of Section 53 on par with the workmen’s dues,” Prabhu said.