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Section 25: Scheme for closure of business of MSMEs

Micro, Small and Medium Enterprises Development Act, 2006 • Official Statutory Text & Practice Guide

MSME Law
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MSEFC Facilitation Council
Act 27 of 2006
Section 24 All 32 Sections of MSMED Act Section 26
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Enterprise Sec 2

Legal Commentary & Landmark Judgments: Section 25

Section 25 empowers the Central Government to formulate and notify schemes providing simplified, expeditious, and humane mechanisms for the closure of business and exit of micro, small, and medium enterprises.

  • Statutory Business Exit Framework: Provides statutory enablement for fast-track exit schemes, voluntary strike-off procedures, and asset disposal mechanisms tailored to MSMEs.
  • Balancing Creditor & Entrepreneur Rights: Aims to mitigate personal promoter ruin, prevent protracted liquidation under general corporate laws, and provide clear procedures for settling tax and utility liabilities upon closure.
  • Interplay with IBC & Companies Act: Serves as a complementary administrative mechanism alongside corporate insolvency processes, particularly for proprietorships, partnerships, and small corporate entities.
Key Landmark Precedents:
  • Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC 17: The Supreme Court emphasized that Indian commercial law mandates a balance between corporate restructuring, expeditious exit of unviable businesses, and creditor recovery.
  • Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407: Clarified that specialized statutory codes governing enterprise closure and revival must ensure economic assets are not locked in non-functional entities indefinitely.
Courtroom Practice & Strategic Litigation Guidance:

Where an MSME client seeks business closure without undergoing onerous winding up under the Companies Act or liquidation under IBC, explore whether administrative fast-track exit schemes notified under Section 25 apply to streamline surrender of licenses, tax registrations, and statutory dues.

Section 24 All 32 Sections of MSMED Act Section 26