Learn how MSME sellers can recover pending marketplace payments, understand legal rights, documents, and remedies with guidance from MSME Lawyers.
Online marketplaces are one of the most popular business solutions being implemented by thousands of Indian MSME sellers. Small manufacturers, traders, handicraft businesses, retailers and service providers across India are selling their products online to customers. Businesses have started depending on revenue from online sales to help cover expenses each month, pay their dedicated teams, restock inventory and function as a normal operating business.
Successful or not, sales can be promised through the platform but late settlements, payments being placed on hold, frozen accounts, unjust deductions, dispute adjustments, returns or disappeared money can cause a cashflow problem for MSMEās.
Whether you operate your business in Delhi NCR, are an entrepreneur in Gurugram, vendor in Mumbai or own a store in Bengaluru India; if youāre selling at brick-and-mortar retail stores or on online marketplaces your business could be affected by not receiving money from sales.
Once you have several hundred to thousands or even lakhs of rupees pending in your online marketplace account; it stops becoming an āaccounting problemā and your business starts to suffer.
MSME Sellers have legal rights when conducting business transactions including what youāre owed. Itās important to understand your rights as a businessman.
The more you know, the better equipped you will be to understand your situation as a seller before it becomes a bigger problem.
Understanding Contract Law, invoice agreements, Terms and conditions of your agreement with that platform, Electronic evidence (conversation/transcripts) about your transactions, late payments, deductions and Commercial Debt recovery are all important when navigating through your owed settlement.
BK Singh & Associates understand the happenings behind commercial disputes for not being able to collect payments. We help MSME Sellers understand what your agreement means. Each case is different based on the facts and circumstances of the situation, your documents, agreement terms and relationship with that platform.
MSMEās working capital is generally tied. Vendor invoices / payments by most small scale industry follow fixed payment cycles to manage the cost of production, vendor payments, salaries, gst etc.
Delayed payments by marketplaces cause difficulties in real life such as ā
Some believe that the problems faced due to sales made on marketplace platforms are āBusiness disagreementsā which have no legal recourse. This is partly true and untrue. The courses of remedy available would depend on the contract entered into by the parties, the nature of sale, the value in controversy, documents exchanged & evidence that can be led.
Analysis has to be done to determine whether the late payment is due to a contractual dispute, freezing of account, disputed deductions/refund offsets or genuine disagreements on business terms.
As MSME sellers operate their business in Delhi NCR, Maharashtra, Karnataka, Tamil Nadu, Telangana, Gujarat, UP and many other states. Collection of dues in a timely manner is important.
BK Singh Advocate works with MSMEās struggling with business payment and collections.
Escrowed marketplace payment refers to the money which is supposed to be paid to the seller but isnāt released even after the completion of sale/delivery of order against which payment is pending according to agreement.
There could be legitimate reasons related to account verification/reconciliation or there could be disputes by either party pertaining to deductions/refunds/charges etc or non-performance of agreed contract.
Hence, it is imperative that MSME sellers try to figure out the actual reason for late payment. Some of the things a seller needs to refer back to, in order to find the reason for payment delay ā
Sellers often tend to follow up multiple times but sometimes tend to overlook recording the entire dispute conversation. Note down everything as it might help you prove your case later on if there are no copybacks and you need to claim your payment.
With a proper legal assessment of your situation, you will be able to identify whether you are dealing with a simple commercial reason, a contractual disagreement, MSME buyer non-payment problem or if you have to file a recovery suit.
MSME sellers selling on marketplaces might have legal rights depending on the agreement terms, supply & payment terms. Enforcement of pending dues would generally depend on contract terms, supporting documents & governing laws.
The seller would initially want to ascertain whether the amount is actually payable, whether any deduction was allowed under the contract and whether platform has deviated from agreed payment terms.
A lot of MSME sellers feel perplexed because multiple parties are involved in marketplace sales i.e. the buyer placing the order, the seller who makes the supply, the platform who collects the payment and different terms which apply to settlement/adjustments.
The legal standpoint would vary depending on :
Analysing records properly would help pinpoint the correct recovery mechanism.
Marketplace payment claim must be supported with Business records. Various payment claims go south when sellers continue to respond with just chat/conversation/platform message/chat. There is no document backing their claims.
Following are some :
| Document | How its useful? |
|---|---|
| Seller agreement with marketplace | Terms of Business |
| Purchase Orders, Invoices | Terms and condition of Purchase agreed upon |
| Proof of Delivery | Proof that you have delivered the supply |
| Payment settlement report | Find if any amount is due |
| Email/chat messages | Conversation trail |
| GST invoices/Tax receipts |
Seller should also document all the disputed deductions,cancellation of orders/returns deductions .etc Keep mail trail of all discussions related to payment release.
BK Singh Advocate advises MSMEs Always Keep the documents related to the transaction. When it comes to payment disputes Documentary proof becomes the soul of your Payment recovery battle.
MSMED ACT, 2006 does provide certain reliefs to eligible micro and small enterprises if they have received any delayed payment for any supplies made to a buyer.
Kindly note that applicability of MSMED would be determined on facts and circumstances of each transaction. Elements such as nature of arrangement between parties, whether parties to transaction have entered into supplier and buyer relationship as defined under MSMED Act, whether MSME Sellers are registered under MSMED Act. Nature of Transaction being entered into etc. Would go into determination of same. It would not be correct to assume that since the sale is taking place on a marketplace, all disputes relating to payment would fall under MSMED Act and be entitled to seek reliefs offered therein.
Such eligible MSME Sellers would be able to file a complaint with Micro and Small Enterprises Facilitation Council (MSEFC), if they so desire.
You can reach out to BK Singh Advocate to understand if MSME payment related provisions would apply to your set of facts.
Others put off legal review until the last minute. They reason that if there is an issue with their marketplace activity they can just submit another support ticket and it will get resolved in due time. Serious delays can cause actual issues.
Donāt fall into these traps:
One of the first things to look at in any recovery matter is having access to an auditable paper trail. Transaction information for MSME sellers are not always centralized on the marketplace dashboard. Details can be dispersed over email threads, invoices, books of accounts, correspondence etc.
Maintaining proper records is important to establish proof of existence of a commercial relationship, supply of goods/services, amount due and attempts to recover the due amount.
Following are some of the Documents you should have:-
Nature of evidence will be different in different situations based on facts of the case. Proper analysis of the documents will help you understand whether the dispute is related to recovery under the contract, payment delays, adjustment issues or something completely different.
BK Singh Advocate helps MSMEs evaluate the documents you have and figure out the most appropriate legal remedy for your payment issue.
Legal notice is a mode through which any seller can raise his demand for payment. It mostly consists of association of business, amount overdue, documentary evidence and reason for demand.
- An ideal notice would also entail
Should clearly specify that you want the dispute to be settled otherwise you are likely to take further legal action.
Issuing a notice requires you to have a clear understanding of facts. False demands, unread documents and misinterpretation of terms can affect your future legal proceeding.
That is why itās always recommended for MSME sellers to consult a specialist prior to initiating legal proceedings against high value invoices, multiple invoices and contract related issues.
Non-obvious language like refund/return policy, penalty clause, commissions and set-off in payments are some verbose clauses present in marketplace agreements. There have been times when sellers have happily agreed to a set-off(not realizing at all whether set-off was permitted as per contract).
Legal due diligence can help you analyze :
Making & taking large payments is the reason most MSMEs approach for recovery. But sometimes there could be problems at initial stages which can be detected only through legal inspection.
BK Singh Advocate helps MSME business through commercial agreements, payments and legal advise on disputes.
MSME Lawyers can help you if you face issues with payment disputes, commercial recovery problems, contractual disputes and delayed payments from businesses.
A lawyer can review your agreements, the transaction documents, listen to you about the history of the dispute and provide advice on your legal options that are viable based on the facts.
If the payment dispute arises from a sale made on a marketplace, a lawyer can help a seller understand :-
Speak to a Lawyer. Each dispute is unique and depends on the facts. You may or may not have a claim or defense based on the agreements you entered into, evidence you have available, the law that applies and the conduct of both parties.
We have had clients from Delhi NCR, Noida, Gurugram, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Ahmedabad and other Indian cities reach out to our website to understand their legal rights.
BK Singh Advocate provides commercial and MSME legal services to help clients understand their disputes and payments issues from a practical standpoint.
Yes. A MSME seller can review agreements, raise collection of documents related to orders placed, send legal notice and pursue relevant legal remedies available in accordance with the facts.
MSMED Act can be applicable to any eligible dispute for delayed payments to MSME supplier. Facts of the transaction will decide the applicability of MSMED Act.
Yes. Marketplace can be sent legal notice by a seller for demanding the dues. Notice can be sent to demand payment formally and also inform them about what you are owed as per your documents.
Invoice, Order details, Delivery proof, Payment or Settlement reports, Agreement, Bank statements, Correspondence etc. are some of the important documents that can be used to recover pending payments.
It depends. Marketplace deductions can be challenged depending on agreement with marketplace, type of deductions, transactions & supporting documents, specific legal provisions etc.
Time required to recover dues can vary depending on the facts of dispute, supporting documents you have, cooperation from marketplace and forum you opt for the dispute resolution.
MSMEs may also explore the option of seeking remedy from Micro and Small Enterprises Facilitation Council (MSEFC) in India if transaction qualifies as per MSMED Act requirements.
Lawyer will not be required in every case. You may consult a lawyer to understand your documents,what remedies you can exercise and risks involved in taking the dispute forward.
Keep record of all your communications. Check your agreements and refer to the contract and legal remedies you have at your disposal according to facts.
BK Singh Advocate helps MSME sellers understand the business dispute and review the documents to understand the legal recourse available for receiving payments due from other businesses.
If youāre an MSME seller/vendor waiting to get paid by a marketplace, late payments can disrupt your cash flow. A few days delay can impact your inventory turnover, accounts payable to suppliers, payroll to employees, and cash for operations and financial planning.
Marketplaces allow MSMEs to grow their business. But business relationships should still be conducted at armās length.
That means having a clear understanding of the agreements you enter into and properly documenting those agreements. Just because you sell through an online marketplace doesnāt mean you can ignore late or missing payments.
Review your contracts, invoices, settlement reports and history of communication. The legal recourse you have available to you will depend on the specifics of why you havenāt been paid, who you are trying to collect from, and what documentation you have.
Speak directly with Advocate BK Singh at LEGAL365.
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