MSME Payment Delayed Beyond 45 Days? MSME Samadhaan, Interest and the MSEFC

Late payment is one of the most common problems small suppliers in Delhi NCR face. Manufacturers, contractors, IT service firms and traders deliver on time, and then wait months for the invoice to be cleared. Parliament addressed this in Chapter V of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). It gives micro and small suppliers a fixed payment deadline, a high rate of interest on delay, and a special forum to recover the money. This guide explains how those rules work and what the courts have said about them.

Who can use the MSMED Act’s delayed-payment protection?

The protection is for a “supplier”, which Section 2(n) of the Act defines as a micro or small enterprise. Medium enterprises are not covered by the delayed-payment chapter. Since 1 April 2025, the classification limits are:

• Micro: investment up to ₹2.5 crore and turnover up to ₹10 crore.
• Small: investment up to ₹25 crore and turnover up to ₹100 crore.
• Medium: investment up to ₹125 crore and turnover up to ₹500 crore.

Most suppliers register on the Udyam portal, and the MSME Samadhaan portal asks for a Udyam number to file a complaint online. Whether a supplier who registered after signing the contract can still use the Facilitation Council is discussed below.

What is the 45-day rule under Section 15?

Section 15 says the buyer must pay on or before the date agreed in writing with the supplier. If there is no written agreement on a date, the buyer must pay before the “appointed day”, which Section 2(b) defines as the day after 15 days from acceptance (or deemed acceptance) of the goods or services.

The key protection is the proviso: even if the parties agree in writing, the agreed period can never exceed 45 days from the day of acceptance or deemed acceptance. A purchase order that says “payment in 90 days” does not extend this limit.

How much interest can a supplier claim for late payment?

Under Section 16, a buyer that does not pay as required by Section 15 must pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. Interest runs from the appointed day or from the day after the agreed date. Section 16 applies “notwithstanding anything contained in any agreement”, so a contract clause waiving or lowering this interest does not override it. Section 17 makes the buyer liable for the principal amount together with this interest.

Because the bank rate changes from time to time, check the RBI’s current rate when you calculate a claim.

How do you file a delayed-payment complaint on MSME Samadhaan?

MSME Samadhaan (samadhaan.msme.gov.in) is the Ministry of MSME’s online delayed-payment portal. In outline:

1. Log in with your Udyam registration number and the mobile number and email linked to it.
2. Enter the buyer’s details and the unpaid invoices.
3. Upload the purchase or work orders and the invoices.
4. Submit the application. It is forwarded to the Facilitation Council of your State or Union Territory, which issues notice to the buyer.

Keep proof of delivery or completion, any written acceptance, and all correspondence about the payment. Under Section 18(4), the Council where the supplier is located has jurisdiction, even if the buyer is located elsewhere in India.

What does the Facilitation Council do with your complaint?

Section 18 sets out a two-stage process:

1. Conciliation: the Council either conducts conciliation itself or refers the parties to an alternative dispute resolution centre. Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 apply.
2. Arbitration: if conciliation fails, the Council takes up the dispute for arbitration itself or refers it to an arbitration institution. The Arbitration and Conciliation Act then applies as if there were an arbitration agreement between the parties.

Section 18(5) says every reference should be decided within 90 days of being made. In practice timelines vary with each Council’s workload.

In Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., (2023) 6 SCC 401, the Supreme Court held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act. A supplier can approach the Council under Section 18 even if the contract contains its own arbitration clause.

Can the buyer challenge the Council’s award?

Yes, but with a condition. Under Section 19, a court will not entertain an application to set aside the Council’s award unless the party challenging it (other than the supplier) first deposits 75% of the awarded amount. The court may allow part of this deposit to be paid to the supplier while the challenge is pending. This makes delaying tactics expensive for buyers.

Is there a time limit, and does late registration matter?

Time limit: In Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, 2025 INSC 864, the Supreme Court held that the Limitation Act, 1963 does not apply to conciliation under Section 18(2), but does apply to arbitration under Section 18(3). The Court noted that expiry of limitation does not extinguish the debt itself, so an old claim may still be settled in conciliation. If you want the option of an arbitral award, do not wait: file well within the limitation period.

Registration after the contract: Earlier Supreme Court decisions, including Silpi Industries v. Kerala State Road Transport Corporation, (2021) 18 SCC 790, were read as saying that a supplier must be registered when the contract was made. In NBCC (India) Ltd. v. State of West Bengal, 2025 INSC 54, a two-judge bench took the view that registration is not a precondition for a reference under Section 18, but referred the question to a three-judge bench. The issue is therefore not finally settled.

What is the Delhi NCR position?

Suppliers in Delhi, Noida and Ghaziabad file through the same MSME Samadhaan portal, and the application goes to the Facilitation Council for the place where the supplier is located: a Delhi Council for Delhi-based units and a Uttar Pradesh Council for units in Gautam Buddh Nagar and Ghaziabad.

The Delhi High Court has recently applied NBCC. In M/s TPL-KIPL Joint Ventures v. Micro and Small Enterprise Facilitation Council, District Magistrate West, GNCTD, 2026:DHC:9282, the Court held that registering as an MSME after the contract was executed did not bar the reference to arbitration under Section 18, and dismissed the buyer’s writ petition. Until the Supreme Court’s larger bench decides the point, this is a useful precedent for Delhi suppliers.

Are there other ways to recover the money?

The Facilitation Council is not the only route. Depending on the amount and the facts, a supplier may also consider:

• A legal notice demanding payment with Section 16 interest, which often prompts settlement.
• A summary or commercial suit for recovery in a civil or commercial court.
• An insolvency application under Section 9 of the IBC as an operational creditor, where the default meets the threshold.
• A cheque bounce complaint under Section 138 of the Negotiable Instruments Act, if the buyer issued a cheque that was dishonoured.

For buyers, there is also a tax angle. Under Section 43B(h) of the Income-tax Act, 1961, an amount payable to a micro or small enterprise beyond the Section 15 time limit is deductible only in the year it is actually paid. Section 23 of the MSMED Act separately provides that the interest paid under the Act is not deductible. Buyers should check the current provisions with their tax adviser.

Need help?

We advise suppliers and buyers on MSMED Act claims, Facilitation Council proceedings and commercial recovery. See our money recovery lawyer in Noida page, the Commercial Law practice page, or contact Adv. Mridul Jindal.

Frequently asked questions

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

No. Under the proviso to Section 15 of the MSMED Act, the period agreed in writing cannot exceed 45 days from acceptance or deemed acceptance of the goods or services.

What interest is payable on delayed MSME payments?

Compound interest with monthly rests at three times the bank rate notified by the RBI, from the date payment fell due (Section 16). A contract clause cannot reduce it.

Can a medium enterprise file on MSME Samadhaan?

The delayed-payment chapter protects “suppliers”, defined as micro and small enterprises. Medium enterprises are not covered by Sections 15 to 18 and will usually need to use ordinary civil, commercial or arbitration remedies.

Does an arbitration clause in my contract stop me from going to the Facilitation 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.

Sources

• Micro, Small and Medium Enterprises Development Act, 2006: Sections 2(b), 2(n), 15–19, 22–24 (India Code)
• Ministry of MSME, revised classification criteria effective 1 April 2025
• MSME Samadhaan portal, Ministry of MSME (samadhaan.msme.gov.in)
• Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., (2023) 6 SCC 401
• Silpi Industries v. Kerala State Road Transport Corporation, (2021) 18 SCC 790
• NBCC (India) Ltd. v. State of West Bengal, 2025 INSC 54
• Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, 2025 INSC 864
• M/s TPL-KIPL Joint Ventures v. MSEFC, District Magistrate West, GNCTD, 2026:DHC:9282 (Delhi High Court)
• Income-tax Act, 1961: Section 43B(h)

Related guides

• Unpaid Invoices? Using Section 9 of the IBC as an Operational Creditor
• Someone Owes You Money? 5 Legal Ways to Recover It in India
• Legal Notice in India: How to Send One and How to Reply

This article is general legal information, not legal advice for your specific case. Law and procedure change; please consult an advocate before acting.