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CS Professional · Arbitration, Mediation and Conciliation · Introduction to Conciliation and its Importance for MSMEs

Kaveri Packaging, a micro enterprise, supplied goods to Orion Ltd. Their written agreement says Orion will pay within 90 days of the day of acceptance of the goods. Under section 15 of the MSMED Act, 2006, how does this clause stand?

The 90-day clause conflicts with section 15 of the MSMED Act, 2006. Its proviso states that in no case may the period agreed in writing exceed forty-five days from the day of acceptance or deemed acceptance, so the longer period cannot stand.

  1. AIt is valid, because parties are free to agree any period in writing
  2. BIt is valid only if Kaveri Packaging signs it on stamp paper
  3. CIt conflicts with the proviso, because the period agreed in writing can in no case exceed forty-five days from acceptance or deemed acceptanceCorrect
  4. DIt is valid, but the period is counted from the date of invoice rather than acceptance

Explanation

Section 15 requires payment by the agreed date, but its proviso says the period agreed in writing shall in no case exceed forty-five days from the day of acceptance or deemed acceptance. A 90-day period exceeds that limit. The freedom-of-contract option ignores the proviso.

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