Sections 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 4, 5 and 6 complete the framework for the National Board for Micro, Small and Medium Enterprises. Section 4 lists when a member can be removed, section 5 says what the Board does, and section 6 leaves the Member-Secretary's powers to rules. All three are short, but they show that the Board is a policy and advisory body.
The Central Government may remove a member who has been adjudged insolvent, is of unsound mind and so declared by a court, refuses or becomes incapable to act, has been convicted of an offence involving moral turpitude, or has abused the position. For the last three grounds the member must first get a reasonable opportunity of being heard. The Board examines and reviews, recommends and advises, subject to the Central Government's general directions. The Member-Secretary's powers are as prescribed.
Section 4: removal of a member from the Board
Section 4(1) says the Central Government "may remove a member of the Board from it" if he:
| Clause | Ground |
|---|---|
| (a) | is, or at any time has been, adjudged as insolvent |
| (b) | is, or becomes, of unsound mind and stands so declared by a competent court |
| (c) | refuses to act or becomes incapable of acting as a member of the Board |
| (d) | has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude |
| (e) | has so abused, in the opinion of the Central Government, his position as a member as to render his continuance detrimental to the interests of the general public |
Two kinds of grounds
Grounds (a) and (b) are objective. An insolvency adjudication or a court declaration of unsound mind is a fact recorded by a court. Note the wording of clause (a): "is, or at any time has been". A past insolvency adjudication counts, not just a current one.
Grounds (d) and (e) turn on the opinion of the Central Government. For (d), the conviction is a fact, but whether the offence involves moral turpitude is for the Government to form an opinion on. For (e), the Government's opinion decides whether the abuse makes continuance detrimental to the general public. Ground (c), refusal or incapacity to act, is factual but needs a judgment about the member's conduct or capacity.
The hearing safeguard
Section 4(2) says, "notwithstanding anything contained in sub-section (1)", no member shall be removed on the grounds in clauses (c) to (e) unless he has been given a reasonable opportunity of being heard. The safeguard therefore does not apply to grounds (a) and (b), where the underlying fact comes from a court. The Act does not describe the form of the hearing; it says only that the opportunity must be "reasonable".
Section 5: functions of the Board
The Board performs its functions "subject to the general directions of the Central Government". Section 5 lists three.
- Clause (a): examine the factors affecting the promotion and development of micro, small and medium enterprises, and review the policies and programmes of the Central Government on facilitating promotion and development and enhancing competitiveness, and the impact of those policies on such enterprises.
- Clause (b): make recommendations on the matters in clause (a) or on any other matter referred to it by the Central Government which, in that Government's opinion, is necessary or expedient for facilitating promotion and development and enhancing competitiveness.
- Clause (c): advise the Central Government on the use of the Fund or Funds constituted under section 12.
Each function is about policy, not individual cases. The Board examines, reviews, recommends and advises. It has no power in section 5 to hear a complaint, to register an enterprise, or to order a buyer to pay. Those are handled elsewhere: the Facilitation Council for delayed payments under section 18, and the filing authority for the memorandum under section 8.
The link with the Advisory Committee
Under section 7(5), the Advisory Committee examines matters the Board refers to it in connection with the subjects in section 5 and furnishes its recommendations to the Board. So the Board can seek expert input before making its own recommendation to the Central Government. See our article on the Advisory Committee.
Section 6: powers and functions of the Member-Secretary
Section 6 is one sentence: "Subject to other provisions of this Act, the Member-Secretary of the Board shall exercise such powers and perform such functions as may be prescribed." The Member-Secretary is an officer not below the rank of Joint Secretary who is ex officio under section 3(3)(o), and also the ex officio Member-Secretary of the Advisory Committee under section 7(3). Section 29(2)(b) lets the Central Government make rules on these powers and functions. The Act itself lists none, so the exact duties depend on the rules made by the Central Government under section 29.
How the three sections work together
| Section | Question it answers | Who acts |
|---|---|---|
| 4 | When can a member be removed? | The Central Government |
| 5 | What is the Board for? | The Board, under the Government's general directions |
| 6 | What does the Member-Secretary do? | As prescribed by rules |
These are governance provisions. They do not impose a compliance duty on an enterprise, and there is no penalty in them. Enterprise-facing rules begin with the classification in section 7 and the memorandum in section 8. For an overview of the whole Act, see our introduction to the MSME Development Act 2006. If you are working on a governance or policy-facing matter and want to check how the Act applies, a legal consultation can help.
Practical examples
Example 1: a past insolvency. A person is nominated to the Board. Years earlier he was adjudged insolvent. Section 4(1)(a) applies to a person who "at any time has been" adjudged insolvent, so the Central Government may remove him, and section 4(2) does not require a hearing for this ground.
Example 2: abuse of position. A member uses his Board position to influence a scheme for his own firm. The Central Government forms the opinion that his continuance is detrimental to the public interest. It can remove him under clause (e), but only after giving him a reasonable opportunity of being heard.
Example 3: a referred matter. The Central Government refers a question on cluster development to the Board. Under section 5(b) the Board can make a recommendation on it, as the Government has referred it and considers it necessary or expedient.
Common mistakes
- Assuming every removal ground needs a hearing. Section 4(2) covers clauses (c) to (e) only.
- Expecting the Board to resolve an individual enterprise's complaint. Section 5 is about policy.
- Looking for the Member-Secretary's duties in the Act. They are left to rules under section 6 and section 29(2)(b).
Need help reading the MSMED Act for your situation?
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Key takeaways
- Section 4(1) lists five grounds for removal of a Board member by the Central Government.
- Section 4(2) requires a reasonable opportunity of being heard for grounds (c) to (e).
- Section 5 gives the Board three policy functions: examine and review, recommend, and advise on the Fund under section 12.
- The Board acts subject to the general directions of the Central Government.
- Section 6 leaves the Member-Secretary's powers and functions to be prescribed.
Read next
- Section 3 of the MSMED Act, 2006: The National Board for Micro, Small and Medium Enterprises
- Section 7 of the MSMED Act, 2006: Advisory Committee
- Section 7 of the MSMED Act, 2006: Classification of enterprises
- Introduction to MSME Development Act 2006
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.