Quick answer: If you are a Udyam-registered micro or small manufacturer or service provider, a business buyer must pay you within the date agreed in writing (never more than 45 days from acceptance) or, with no written agreement, within 15 days. If they pay late, they owe compound interest with monthly rests at three times the RBI bank rate. As of October 2026, new cases are filed on the government’s MSME ODR portal (odr.msme.gov.in), which replaced MSME Samadhaan for fresh filings.
Who is protected
The delayed-payment rules sit in Sections 15 to 24 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. They protect a “supplier”, which the Act defines as a micro or small enterprise that has filed its memorandum, today meaning Udyam Registration.
| You are… | Covered? |
|---|---|
| Micro or small manufacturer with Udyam | Yes |
| Micro or small service provider with Udyam | Yes |
| Udyam-registered trader (retail or wholesale only) | No, a 2021 ministry Office Memorandum excludes traders from the delayed-payment provisions |
| Medium enterprise | No |
| Not registered on Udyam | Generally no (see the note below) |
Classification since 1 April 2025: micro means investment up to ₹2.5 crore and turnover up to ₹10 crore; small means investment up to ₹25 crore and turnover up to ₹100 crore.
Timing of registration matters. In Silpi Industries (2021), the Supreme Court held that registration must exist on the date of supply; it does not cover supplies made before you registered. In January 2025, a two-judge bench in NBCC v. State of West Bengal took a softer view and referred the question to a larger bench, which had not ruled as of early 2026. Practical lesson: register on Udyam before you start supplying.
What the law gives you
- Payment deadline (Section 15): pay on the date agreed in writing, capped at 45 days from the day of acceptance or deemed acceptance. With no written agreement, payment is due within 15 days.
- Acceptance: the day goods are delivered or the service is rendered. If the buyer objects in writing within 15 days, acceptance is the day you remove that objection.
- Interest (Section 16): on late payment, compound interest with monthly rests at three times the bank rate notified by the RBI, from the due date. This is far above normal commercial rates, which is why buyers take it seriously. Check the current bank rate on rbi.org.in when you calculate.
- Award protection (Section 19): a buyer who challenges a Facilitation Council award in court must first deposit 75% of the amount.
- Tax pressure on the buyer (Section 43B(h), Income-tax Act): from assessment year 2024-25 (financial year 2023-24), a buyer cannot claim a tax deduction for amounts owed to a micro or small supplier that are paid after the Section 15 deadline. The deduction is only allowed in the year it is actually paid. Interest paid under the MSMED Act is not deductible either. This makes many larger buyers pay on time near year end.
The 2026 amendment. Parliament passed the MSMED (Amendment) Bill, 2026 in August 2026. According to the PIB factsheet, it sets timelines (mediation within 90 days of first appearance, referral to arbitration within 30 days if mediation fails, award within 90 days of pleadings closing), requires courts to release at least 50% of an award to the supplier if a challenge is pending more than six months, lets awards be recovered as arrears of land revenue, and requires Central PSUs to settle MSME invoices through TReDS. Commencement dates for different parts are being notified in stages, so check whether a provision is in force when you file. The reports we read do not show any change to the 45-day limit or the interest rate.
Documents to keep ready
- Udyam Registration Certificate (showing manufacturing or services)
- Purchase order, contract or any written agreement on payment terms
- Tax invoices with dates
- Delivery challans, e-way bills, signed receipts or service completion proof
- Emails or WhatsApp messages confirming delivery, acceptance or payment promises
- Ledger or statement of account showing what is outstanding
- Copies of reminders and any legal notice you sent
How to file a delayed-payment case
- Send a written reminder quoting the invoice, due date and Section 15 and 16 of the MSMED Act. Many disputes end here.
- Go to the MSME ODR portal (odr.msme.gov.in), launched in June 2025. Since 15 October 2025, MSME Samadhaan does not take new filings; old Samadhaan cases continue there.
- Register with your Udyam number. The portal pulls in your enterprise details. Check that name, PAN and contact details match.
- Enter the claim: buyer’s name and address, invoice numbers, supply dates, agreed terms and the amount due, then upload documents.
- Pre-MSEFC stage (optional): the portal offers a guided negotiation step before the case goes to the Council. Use it if the buyer is likely to talk.
- MSE Facilitation Council (MSEFC): your state’s Council, chaired by the Director of Industries, takes up the case. It first tries to settle the matter through conciliation or mediation. Hearings can be held by video conference.
- Arbitration: if settlement fails, the Council arbitrates or refers the case to an arbitration provider. The award is enforceable like a court decree.
- Enforce: if the buyer still does not pay, you can execute the award. A buyer who wants to challenge it in court must deposit 75% first.
Costs and timelines
| Item | What we found |
|---|---|
| Filing on ODR portal | Any prescribed fee is shown at filing; we could not confirm an amount |
| Udyam registration | Free |
| Lawyer | Not required to file; useful for arbitration on large claims |
| Statutory time for Council | 90 days from reference under the original Act; the 2026 amendment sets 90 days for mediation plus 90 days for the award after pleadings |
| Real-world time | Often longer; over 2.5 lakh claims were reported pending at state level in 2025 |
| Limitation | The Supreme Court has held the Limitation Act applies to MSEFC arbitration, so do not let old invoices sit for years |
Other routes, and one that does not apply
- Legal notice: a lawyer’s notice demanding principal plus Section 16 interest often gets a response. It is also useful evidence later.
- Civil or commercial suit: possible, but slower and costlier than the Council for most small claims.
- Consumer forum: not for B2B dues. The Consumer Protection Act, 2019 excludes anyone who buys goods or services “for resale or for any commercial purpose”. A business buyer that does not pay you is not a consumer dispute.
- TReDS (to get cash now): Trade Receivables Discounting System platforms let you sell an invoice the buyer has approved to financiers who bid on it. The financing is without recourse to the MSME, and money can reach you within a few days. Platforms named on government pages include RXIL, M1xchange and Invoicemart. Companies with turnover above ₹250 crore and Central PSUs were required to onboard on TReDS by 31 March 2025, so ask large buyers to approve your invoices there. It works only when the buyer participates.
Common mistakes
- Starting supplies before getting Udyam, then trying to claim for older invoices.
- Udyam showing “trading” when you actually manufacture or provide services. Update the activity.
- No written payment terms, then arguing over when the clock started.
- Agreeing to 60 or 90 days in a PO. The law caps written terms at 45 days, but a long term in writing still invites disputes.
- Missing proof of delivery or acceptance.
- Waiting too long. Older claims face limitation objections.
How to prevent it
- Get a written PO or agreement with payment terms of 45 days or less from delivery.
- Print your Udyam number on every invoice and quotation.
- Add an MSMED Act clause to invoices, for example: “Supplier is a micro/small enterprise, Udyam No. UDYAM-XX-00-0000000. Payment is due within [X] days of acceptance as per Section 15 of the MSMED Act, 2006. Delayed payment attracts compound interest under Section 16.”
- Collect delivery acknowledgements (signed challan, email or photo with timestamp).
- Ask large buyers for their TReDS details before you take a big order.
- Mention Section 43B(h) politely to buyers who pay late before 31 March. Their accountant will understand.
For home-based and first-time founders: You do not need a lawyer to file, and the portal can be used from a phone with your Udyam number. If you supply corporates or PSUs, the law is genuinely on your side. Being organised with paperwork is what wins these cases.
FAQ
Q: My buyer and I agreed 60 days in writing. Can I still claim interest?
A: Section 15 says the written period can never exceed 45 days from acceptance. Interest under Section 16 runs once payment is late under the law. Get advice on the exact dates for your case.
Q: I am Udyam-registered as a trader. Can I file?
A: Not under the delayed-payment provisions. A 2021 ministry Office Memorandum excludes retail and wholesale traders.
Q: Is MSME Samadhaan still working?
A: Only for cases filed earlier. From 15 October 2025, new cases go on the MSME ODR portal.
Q: Which state’s Council hears my case?
A: Generally the Council where the supplier is located. The 2026 amendment ties jurisdiction to the supplier’s registered address.
Q: Can I file against a government department or PSU?
A: Yes. Government buyers, PSUs and private companies can all be buyers under the Act.
Q: Does Section 43B(h) help me directly?
A: Not directly. It hits the buyer’s tax bill, which gives them a strong reason to pay you on time.
Official links
- MSME ODR portal (new filings): https://odr.msme.gov.in
- MSME Samadhaan (older cases): https://samadhaan.msme.gov.in
- Udyam Registration: https://udyamregistration.gov.in
- PIB factsheet on MSMED (Amendment) Bill, 2026: https://pib.gov.in/FactsheetDetails.aspx?Id=150826
- RBI (current bank rate): https://www.rbi.org.in
- TReDS platforms: https://www.rxil.in, https://www.m1xchange.com, https://www.invoicemart.com
Last checked: October 2026. Rules, limits and fees change; confirm with the official source before you apply. This guide is general information, not legal, tax or financial advice.
Sources: MSME Samadhaan portal, Ministry of MSME (October 2026); PIB factsheet on MSMED (Amendment) Bill, 2026 (August 2026); LiveLaw (August 2026, January 2025, January 2026); Bar and Bench (2026); Vinod Kothari Consultants (October 2026); ICAI CA Journal (2025); Taxmann (November 2024 and FAQs on Section 15); ClearTax on Section 43B(h) (2026); The Week/PTI on ODR portal launch (June 2025); Consumer Protection Act, 2019, India Code; IndiaCorpLaw on Silpi Industries (July 2021); M1xchange (October 2026)
