MSME Samadhaan: How a Small Supplier Recovers Payment Delayed Beyond 45 Days

You delivered the goods. The buyer took them, used them, and stopped answering your calls. Three months later your invoice is still open, and every reminder feels like begging for your own money. If you are a micro or small supplier, the law does not leave you in that position. It gives you a fixed deadline, a steep interest rate, and a forum built for exactly this fight.

Short answer: Under sections 15 to 18 of the MSMED Act, 2006, a buyer must pay a micro/small supplier within the period agreed in writing, capped at 45 days from acceptance. Late payment attracts compound interest at three times the RBI bank rate, and the supplier can file on the MSME Samadhaan portal to the Facilitation Council in the supplier's state.

Who can actually use this protection?

Only a micro or small enterprise that is a "supplier" under the Act. That definition is the first gate, and it trips up two groups of readers. Medium enterprises are not covered by Chapter V of the Act, even though they hold Udyam registration. They recover delayed payments through a civil suit, a commercial suit, or the arbitration clause in their contract. Wholesale and retail traders also fall outside Chapter V, because the Ministry's 2 July 2021 memorandum brought traders onto Udyam for priority-sector lending only, not for the Act's other benefits.

One point is genuinely unsettled, and I will not smooth it over. The Supreme Court in Silpi Industries held that an enterprise must be a supplier on the date of the contract, while a later decision in NBCC read the reference provision more widely and referred the question to a larger Bench. If you registered on Udyam after signing the contract, take advice on your own facts before filing. Contracts signed after your registration date do not carry this problem.

What is the 45-day rule, exactly?

Section 15 sets two clocks. If you and the buyer agreed a payment date in writing, the buyer must pay on or before that date, and the agreed period cannot exceed 45 days from the day of acceptance or deemed acceptance. If nothing was agreed in writing, payment is due before the appointed day, which is the day after 15 days from acceptance or deemed acceptance. Acceptance is deemed to have happened if the buyer raises no written objection within 15 days of delivery.

Read that again, because it kills the most common buyer argument. A purchase order that says "payment in 90 days" does not buy the buyer 90 days. The Act caps the agreed period at 45 days, and a contract clause cannot stretch it. The same applies to interest: section 16 says the buyer pays compound interest with monthly rests at three times the RBI-notified bank rate, notwithstanding anything in any agreement between the parties. Your buyer cannot contract out of it.

Take a plain example. You supply goods worth ₹4,00,000, accepted on 10 August, with 45 days agreed in writing. The due date is 24 September. From 25 September, interest runs on the unpaid ₹4,00,000 at three times the RBI bank rate, compounded monthly, until the buyer actually pays. Check the RBI's notified bank rate for the period when you calculate the claim, because the rate moves over time and the claim must use the rate that applied.

What does the buyer lose by delaying?

Three things, and suppliers usually know only the first. First, the interest above, which keeps compounding monthly instead of sitting flat. Second, under section 43B(h) of the Income-tax Act, 1961, a buyer that has not paid a micro or small supplier within the MSMED Act timeline cannot claim the deduction for that expense until the year it actually pays. That turns a supplier's unpaid invoice into the buyer's tax problem. Third, under section 22 of the MSMED Act, a buyer must disclose the principal and interest due to micro and small suppliers in its audited annual accounts. Delay leaves a paper trail in the buyer's own books. Companies that file MSME-1 half-yearly returns face the same disclosure from the other side, which is why the buyer-side return and the supplier-side complaint often arrive in the same filing season. I covered the buyer-side return in MSME Form 1: the 31 October half-yearly return explained.

How do you file on MSME Samadhaan?

File on the MSME Samadhaan portal (samadhaan.msme.gov.in) using your Udyam registration number and the mobile number and email linked to it. Before you start, gather the file the Council will actually ask for: the purchase order or agreement, the invoice, proof of delivery or service completion, any written acceptance, and your reminders. A claim built on WhatsApp messages alone is weaker than one backed by an invoice, a delivery challan, and a short paper trail of follow-ups.

The steps are short. Enter your enterprise details, the buyer's name and address, and each unpaid invoice with its date, amount, and date of delivery or acceptance. Upload the supporting documents. Submit, and the portal forwards the reference to the Micro and Small Enterprises Facilitation Council of the state where you, the supplier, are located, even if the buyer sits in another state. That jurisdiction rule matters: you do not have to chase the buyer to its home state.

What does the Facilitation Council do?

Think of it the way a village panchayat used to work, except with legal teeth. First it tries to settle the dispute. Section 18 says the Council either conducts conciliation itself or refers the parties to an institution or centre that provides alternative dispute resolution services. If conciliation fails, the Council takes the dispute up for arbitration itself or refers it to an arbitration institution, and the Arbitration and Conciliation Act, 1996 then applies as if the parties had agreed to arbitrate.

Two points in that second stage catch people out. An arbitration clause in the buyer's purchase order does not block you. In Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023), the Supreme Court held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act, so a supplier can approach the Council under section 18 despite a private arbitration clause. And section 18(5) says every reference should be decided within 90 days of being made. Treat that as the statutory target, not a promise: in practice, timelines vary with each Council's workload, so file early and keep your documents ready for the first hearing rather than assuming a quick order.

Can the buyer challenge the award?

Yes, but section 19 makes the challenge expensive to start. No court will entertain an application to set aside a Council award or order unless the appellant, other than the supplier, has deposited 75% of the amount awarded. Courts have allowed that deposit to be paid in instalments where genuine hardship is shown, but until the deposit is made, the challenge does not get heard. For a supplier, that deposit rule is the single most practical feature of the whole scheme: it stops a buyer from filing a challenge purely to buy another year.

Five mistakes that weaken a good claim

First, filing without proof of acceptance. An invoice alone proves you billed; a delivery challan, a signed gate pass, or a written acceptance proves the buyer received and kept the goods. Second, claiming as a medium enterprise or as a trader and learning at the Council stage that Chapter V never covered you. Third, accepting a 90-day payment term in writing and assuming the Act will still save you on day 46. It caps the term at 45 days, but do not sign a term you will have to litigate about. Fourth, waiting so long that the arbitration stage runs into limitation problems. Conciliation has no limitation bar after the Supreme Court's 2025 decision in Sonali Power, but the Limitation Act does apply once the reference reaches arbitration, so an old invoice filed late risks rejection at that stage. Fifth, forgetting the interest claim entirely and asking only for the principal. Interest at three times the bank rate, compounded monthly, is often the sum that brings a buyer to the settlement table.

What should you do this week?

Pull your receivables ageing and mark every invoice from a micro or small enterprise's own books that crossed 45 days from acceptance. Send one short written demand that names the invoice, the acceptance date, the due date under section 15, and the interest under section 16. Keep the tone firm and factual. If the buyer still does not pay, file the Samadhaan reference with the documents listed above, and diarise the Council's first date. If you are unsure whether your enterprise qualifies, or whether your registration date creates the unsettled Silpi problem, check before you file rather than after. You can work out the filing costs and the compliance calendar for the rest of the year on the compliance fee calculator, and if you are not yet Udyam-registered, start with MSME registration so the next invoice is covered from the start.

Frequently asked questions

Can a buyer and supplier agree to payment after 60 or 90 days?

No. Under section 15, the period agreed in writing cannot exceed 45 days from acceptance or deemed acceptance of the goods or services. A longer term in a purchase order does not override the Act.

What interest is payable on a delayed MSME payment?

Compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India, from the date payment fell due until actual payment, under section 16. A contract clause cannot reduce it.

Can a medium enterprise file on MSME Samadhaan?

No. Chapter V protects suppliers, defined as micro and small enterprises. A medium enterprise recovers delayed payments through a civil or commercial suit, or through the arbitration clause in its contract.

Does an arbitration clause in the contract stop a supplier from approaching the Council?

No. In Mahakali Foods (2023), the Supreme Court held that the MSMED Act prevails, so a supplier can approach the Council under section 18 despite a private arbitration clause.

How long does the Facilitation Council take?

Section 18(5) says every reference should be decided within 90 days of being made. That is the statutory target; actual timelines differ by Council workload and the facts of the case.