Micro, small and medium enterprises enjoy a statutory recovery mechanism that is faster and more favourable than an ordinary civil suit. The chamber of Advocate Manish Jha advises MSMEs on delayed-payment recovery and represents both suppliers and buyers in Facilitation Council proceedings and the litigation that follows.
The MSMED Act, 2006 Route
Under the Micro, Small and Medium Enterprises Development Act, 2006, a buyer who fails to pay a registered supplier within the agreed period — which the Act caps at forty-five days from acceptance of goods or services — becomes liable to pay compound interest at three times the bank rate notified by the Reserve Bank, compounded monthly.
- Udyam registration — the supplier's registration as a micro or small enterprise underpins the claim, so registration status and its date should be verified before proceedings begin.
- MSME Samadhaan — the delayed-payment reference is filed online through the Samadhaan portal, which places the dispute before the Micro and Small Enterprises Facilitation Council of the relevant state.
- Facilitation Council — the Council first attempts conciliation; failing settlement, it arbitrates the dispute itself or refers it to institutional arbitration, and the resulting award is enforceable like any arbitral award.
- Buyer's challenge — a buyer seeking to challenge the award must comply with the statutory pre-deposit of seventy-five per cent of the awarded amount, a significant protection for suppliers.
A statutory demand notice before invoking the Council often produces payment by itself — see legal notices and replies. For unpaid operational debts above the IBC threshold, the NCLT route may also merit consideration.
Chamber Address
Advocate Manish Jha
E-397, 4th Floor, Tagore Garden Extension,
New Delhi – 110027
Phone: +91 98738 50301
Email: legal@advocatemanishjha.com
When writing about an MSME recovery, please mention your Udyam registration number and date, the buyer's details, the invoices with dates of acceptance of goods or services, the outstanding amount, and any correspondence about the delay. These details determine both the interest computation and the correct Facilitation Council.
Frequently Asked Questions
What interest can an MSME claim on delayed payment?
The MSMED Act, 2006 entitles a registered supplier to compound interest, compounded monthly, at three times the bank rate notified by the Reserve Bank of India, running from the date payment fell due. Payment cannot be contractually deferred beyond forty-five days from acceptance, whatever the purchase order says.
How is a Samadhaan reference filed?
The supplier files the delayed-payment reference online on the MSME Samadhaan portal with Udyam registration details, invoices and proof of delivery or acceptance. The reference goes to the Micro and Small Enterprises Facilitation Council, which first attempts conciliation and, failing settlement, decides the dispute through arbitration.
Can the buyer simply appeal and delay payment?
A buyer challenging a Facilitation Council award must first deposit seventy-five per cent of the awarded amount as a statutory precondition, and courts may release part of the deposit to the supplier during the challenge. This pre-deposit requirement substantially discourages tactical challenges aimed only at delay.
Does Udyam registration matter for old invoices?
Yes. The supplier's status as a registered micro or small enterprise, and the date of registration relative to the supply, bear directly on maintainability of the reference. Enterprises should register on the Udyam portal promptly and keep the certificate current, since the statutory protections attach to registered suppliers.