MSMED exposure, for buyers and suppliers alike
The MSMED Act 2006 sets out a payment timeline for buyers purchasing goods
or services from a registered micro or small enterprise, and imposes
compounded interest on late payment beyond that timeline, which the buyer
cannot contract out of. A large manufacturer that routinely delays payment to
small suppliers, on the theory that the supplier is unlikely to litigate over
it, can face a reference to the Micro and Small Enterprises Facilitation
Council, with interest exposure that accumulates faster than most buyers
expect. Conversely, a manufacturer that is itself a registered small
enterprise supplying to a larger buyer has a statutory remedy available for
its own delayed receivables, which is often underused simply because the
business does not realise it applies.
Labour compliance and industrial disputes
Manufacturing is one of the sectors most directly shaped by the Industrial
Disputes Act 1947, which governs retrenchment, layoff and the resolution of
disputes between employer and workmen through conciliation and industrial
tribunals. Retrenchment carried out without following the required notice
and compensation process is a common trigger for litigation, particularly
where the business has treated a workforce reduction as a straightforward
commercial decision rather than a process with specific statutory
requirements attached to it.
Factory licensing and environmental compliance
Operating a factory requires licensing tied to the specific premises and
the nature of the manufacturing activity, along with environmental consents
that depend on the industry and its emissions or effluent profile. These
approvals are not one-time events; they carry renewal and ongoing compliance
obligations, and lapses can result in closure orders or proceedings before
the National Green Tribunal, which tends to move faster and less forgivingly
than manufacturers who have not dealt with it before expect.
Product liability under the Consumer Protection Act
The Consumer Protection Act 2019 introduced a product liability framework
under which a manufacturer can be held liable for harm caused by a
manufacturing defect, a design defect, or inadequate warning, even where the
manufacturer had no direct contract with the injured consumer. This is a
meaningful shift from the older position, where liability generally followed
the chain of contract. Manufacturers selling through distributors and
retailers, with no direct relationship with the end consumer, are still
exposed if the product itself is defective, which makes quality control and
warning documentation a legal safeguard as well as a commercial one.
