Arbitration And MSME's Tuff: Can Interest Rates Under The MSME Act Survive Outside Of Section 18 Proceedings?

In a dynamic commercial ecosystem of India as it is today, delays in payments to micro, small and medium enterprises ("MSMEs") are a normal challenge. The Micro, Small and Medium Enterprises Development Act, 2006 ("Act") introduced a well thought of regime to curb such delays by imposing a statutory interest rate of three times the bank rate notified by the Reserved Bank of India under Section 16 of the Act for any buyer who fails to make payment within the agreed or stipulated timelines. This mechanism motivates the facilitation framework of the MSME Act wherein Section 15 creates the liability of the buyer, Section 16 mandates interest, Section 17 facilitates recovery and Section 18 delineates the mechanism for reference to the Micro and Small Enterprises Facilitation Council ("Facilitation Council").