Non receipt of payment...
Aarti
(Querist) 27 April 2014
This query is : Resolved
Dear Sir,
I own a proprietorship firm, making garments & supplying to corporates. In October last year, I supplied garments to a client whose parent company is listed on the stock market as well. The goods were supplied against Purchase orders and on the client's brand name.
In January we were informed that they were closing down their stores and returning back the material. Initially we were not ready to accept it as the garments were made on their brand name but since we were not getting any payment from their side, we accepted the same on the condition of all expenses paid (transportation & octroi) & delivered to our office.
Since that time, we have received goods only against 2 stores (totally supplied to 9 stores). They haven't closed down some of their stores and have kept their sales on due to which the stock to be returned is decreasing & outstanding amount constantly increasing but at the same time we haven't received a penny from them yet! The amount is worth lakhs but they're just not responding back.
Need to file my IT returns and not sure what amount of sales should I show! Plus need my stock & money back, its been past 6 months whereas our payment terms were 60 days!
Please suggest me what to do. Legal is an option I know but I want to keep it as the last option as the case can go on for years with no result. I'm a small entrepreneur and need the money for my cashflow!
Please guide. Thanks!
Devajyoti Barman
(Expert) 27 April 2014
If they refuse to make payment or return the unused articles then unfortunately legal option is the only tenable option if not the last one.
To start with a softer tone you may first try your luck by sending legal notice.
Rajendra K Goyal
(Expert) 27 April 2014
Send legal notice first.
For tax advise consult your tax consultant.
Aarti
(Querist) 28 April 2014
Thanks to all for your opinions.
The main issue is that the client is not refusing to pay or return the stock. They're just lingering the matter by a week everytime!
Some solutions I had in mind.. after researching the internet are:
1. Help from MSME organization through their "Delayed Payments Act" (http://www.dcmsme.gov.in/publications/policies/lframe.htm#Delayed). If anyone has more information in this regard, please guide.
2. Taking my case history to the media, i.e. Helplines formed by news & business channels who can help as media is the main power today. Suggestions invited on same.
3. Filing a petition of 'Winding up the company'. I have been told that through this petition the case will be fast tracked and not go on for years! But I don't know the limitations or drawbacks of same in which the petition can be dismissed. Somebody please guide.
Expert opinions on the above would be really appreciated to guide me through the process.
Thanks once again to all!
Prithvi Raj Sikka
(Expert) 29 April 2014
U must issue legal notice and file suit under order 37 CPC. You will get the case decided within 6 months and maximum 12 months.You can also claim interest of delayed payment as per provisions of Delayed payments Act being MSME unit.
U can also file winding up petition but if 3 years will lapse during proceedings from last cause of action then u can not get benefit for extension of limitation for filing recovery suit as recovery suit must be filed within 3 years from the date of last cause of action.
Prithvi Raj Sikka
lawjuris09@gmail.com
Aarti
(Querist) 30 April 2014
Dear Mr. Prithvi Raj.. Thanks a lot for your detailed opinion.
Can you please help me solve a few queries:
1. My firm is a proprietorship firm with proper & legal Shop Establishment Certificate & TIN certificates but is not specifically registered under the SME organization. Can I still avail the benefit of the 'Delayed Payments Act'? If yes, do you have any information as to how can I go about it?
2. Also, in continuation with the previous point, filing suit u/s 37 CPC as you said above AND working with the MSME under the Delayed Payments Act, can both of them go together in line or what do you think should be my modus of operandi?
3. Winding up petition, to my knowledge is a fast track process and my case is around 6 months old. My last email conversation with them has been just 10 days back. Do you still think this process is risky and it could take that much time??
Also, if possible, can you please share some valuable information regarding the reasons/situations in which my case can be dismissed??
Quick reply in this regard would be highly appreciated. Thanks!
T. Kalaiselvan, Advocate
(Expert) 30 April 2014
Expert Mr. Prithvi Raj Sikka has given a detailed explanation including proper provisions of law, despite that the author is raising more question on the basis of probabilities weighing pros and cons. The incidental queries are not to be raised, to be taken care of as and when one arises, which can be tackled by the experiences of the past and present.
Aarti
(Querist) 09 May 2014
Dear Mr. Kalaiselvan,
Please note that I am not raising any excess questions on the basis of probabilities.
I need to decide which route to take and just want to be sure of it, thus the questions arise on basis of that. Weighing pros & cons has to be a part of it as its a legal matter. I can't just take a step & then skip it when I feel.
I'm a complete naive & immature on these matters and hence have come to experts for guidance. Don't think that is wrong??
Still awaiting replies to my queries.
Thanks!
Prithvi Raj Sikka
(Expert) 09 May 2014
Aarti
I have given detailed opinion. There is no requirement for registration under SME unit.secondly if u will file winding up as winding up is not remedy for revolver. If during winding up proceedings 3 years limitation will expire then you can not file suit for recovery under order 37 CPC.
Saurendra Rautray
(Expert) 18 October 2014
Hi,
The goods that you have received back cannot be claimed. As rightly opined you can either file winding up against that corporate entity if its a company.
Secondly you can file your arbitration claim under MSMED Act if you full fill the criteria of being a SSI Unit registered with DIC or any other nodal agency as envisaged in the Act with filing of EM II. As opined by the experts it is difficult to tell you the time for such recovery. Before filing any such application you need to see the financial status of the company as opined by expert above.
Saurendra Rautray
Rautray& Co
HEAD OFFICE :Delhi : B3/18,Vasant-Vihar, New Delhi - 110 057
www.rautray.com
07042664338
