IIA Comments on amendments in Interest on Delayed Payment Act, 1993.

The point wise comments submitted by IIA on the agenda for meeting with Secretary SSI, Government of India at Delhi on 18/10/2002 for further amendments in Interest on Delayed Payment Act.

 

Agenda Point IIA Comments
(a)    Reduction in maximum period of credit The period of one hundred twenty days stated in section 3 of Interest on Delayed Payment Act 1993 is too long. It should not be more than 30 days.
(b)    Charging a fixed penal rate for delayed payment. 18% fixed penal rate of interest may be decided with the liability of compound interest  (with monthly rests) on the amount due to the suppliers.
(c)    Disclosure in annual statement of account

There is a need for further amendment in the companies Act 1956 u/s 227(47A) as under:- “The Auditors Report should qualify separately the quantum of outstanding dues to the SSI and the interest @ 18% compounded monthly on the amount due to the supplier.” 

There could be a case where the buyer issues the Cheque/Draft towards the end of the financial year and it is not delivered to the supplier. In such cases the Annual Accounts will not reflect the outstanding payments. In order to plug this loop hole, the companies Act may also provide as under:-

“The auditor will seek confirmation from all SSI suppliers to whom payment has been made by Cheque/Draft and which, reflects as uncleared in the bank statement of the buyer as on 31st March 2002.”

 
(d)   Casting responsibility for disclosure and penalty for non-compliance under the Act.

Penalty for non-disclosure/incorrect disclosure of outstanding dues and interest in the Annual Accounts should be 2.5 times of the principal amount with interest not disclosed.

In order to make Section-9 of the Interest on Delayed Payment Act effective, it is essential that Sec. 43 (B) of the Income Tax Act be suitably modified/amended so as to disallow the interest payable.

 
(e)   Delay in deciding cases by the facilitation councils.

We need to look into the causes for delays. As per IIA views, delays are caused due to :-

1)  For Chairman IFC who is Commissioner & Director Industries, it is not a priority area and the meetings are called whenever he finds time.

2)  Writing the judgement of the cases require a hardcore professional. If the judgements are not drafted properly, there is a likelihood of these being challenged in the Court of Law and being dropped.

3)  Commissioner and Director Industries being a Government Official is not able to take strict actions against the Government Department where his senior may be heading the department.

IIA therefore suggests the following modifications/ amendments in the Act:-

1) The Chairman of IFC should not be a Government Officer. The Chairman so appointed should have complete knowledge of the Judicial proceedings.

2) Ministry of SSI, Govt. of India should monitor the progress of implementation of this Act through a Reporting System and lapses if any may be brought to the notice of the Prime Minister and the respective Heads of the State Government.