Speed is the entire premise of the delayed-payment machinery in the Micro, Small and Medium Enterprises Development Act, 2006. Interest runs at three times the bank rate, compounded monthly, precisely to make delay expensive; and Section 18(5) completes the design by directing that every reference made to a Micro and Small Enterprises Facilitation Council "shall be decided within a period of ninety days from the date of making such a reference". Any supplier who has actually litigated before a Facilitation Council knows the gap between that sentence and lived experience. This explainer looks at what the ninety-day rule covers, why references overrun it, and what a supplier — or a buyer facing a dormant claim — can lawfully do about the delay.
The statutory promise
Section 18 stacks a three-stage process into one forum. A party to a dispute over amounts due under Section 17 may refer it to the Facilitation Council. On receipt, the Council conducts conciliation itself or seeks the assistance of an institution, applying the conciliation provisions of the Arbitration and Conciliation Act, 1996. If conciliation fails, the Council takes up the dispute for arbitration — itself or through a referred institution — and the 1996 Act applies as if the arbitration were pursuant to an agreement under its Section 7. Section 18(5) then sets the tempo: every reference "shall be decided within a period of ninety days". The design intent is unmistakable — a small supplier should hold an enforceable award within a quarter, with compounding interest doing the persuasion in the meantime.
1. Reference
Filed — in practice through the MSME Samadhaan portal — with invoices, Udyam registration and the interest computation.
2. Conciliation
Section 18(2): Council-led or institutional; ends in settlement or a recorded failure.
3. Arbitration
Section 18(3): pleadings, hearing and award under the 1996 Act's machinery.
4. Decision
Section 18(5): the whole reference to be decided within ninety days — the benchmark against which delay is measured.
Where the clock actually leaks
Overruns cluster at predictable points. Registration triage: portal references await scrutiny and mutual-settlement windows before a first hearing is fixed. Open-ended conciliation: the statute contemplates conciliation as a stage with an end; in practice, adjournment-friendly conciliation without a recorded failure is the single largest consumer of time, and neither interest computation nor arbitral formality begins until it is closed. Buyer strategy: jurisdictional objections — to the supplier's registration status, to the Council's territorial competence, to the existence of an independent arbitration clause — are raised serially rather than together. Council bandwidth: Councils are administrative bodies with heavy dockets and part-time composition, and scheduling gaps of months between hearings are common. None of this changes the law; all of it changes the supplier's planning.
The supplier's levers
A supplier is not a passenger in the process. The reference should be filed complete — invoices, acceptance or deemed acceptance under Section 2(b), the appointed-day computation, ledger and correspondence — so that no adjournment can be attributed to the claimant. At the first hearing, ask the Council to fix a conciliation end-date and to record failure if the buyer offers nothing concrete; a minuted request costs nothing and builds the expedition record. Once arbitration commences, seek a procedural calendar. If the reference still drifts, the High Court's writ jurisdiction is the established remedy for directions to decide within a fixed time — relief courts grant readily because it enforces the statute's own tempo rather than overriding it. Throughout, remember the economics: Section 16 interest compounds monthly with the delay, and a well-documented claim grows stronger, not weaker, with the buyer's procrastination.
For buyers, the same clock reads differently: a reference that will likely end in an award carrying compound interest at three times the bank rate — followed by a seventy-five per cent pre-deposit as the price of challenge under Section 19 — rewards early, realistic settlement during conciliation more than almost any other commercial dispute. The cheapest day to resolve an MSMED claim is usually the first hearing.
The Delhi picture
References involving Delhi suppliers or buyers proceed before the Council constituted for the National Capital Territory, with filings routed through the Samadhaan portal and hearings increasingly conducted in hybrid mode. The practical counsel for both sides is identical: treat the ninety-day rule as the metronome — measure every stage against it, put every request for despatch in writing, and litigate the merits rather than the calendar wherever possible.
The chamber of Advocate Manish Jha advises suppliers and buyers in MSMED delayed-payment references, Facilitation Council proceedings and challenges before the High Court of Delhi. This article is for general information; it is not legal advice and does not create an advocate-client relationship.
Frequently Asked Questions
Does a decision after ninety days become invalid?
No. Courts have consistently treated the ninety-day stipulation as directory rather than mandatory — a legislative direction to proceed with despatch, not a guillotine that extinguishes the Council's jurisdiction. An award passed beyond the period remains valid; the timeline's force is felt through administrative accountability and through the courts' willingness to direct expedition.
What does the ninety-day clock include?
The reference under Section 18 first goes to conciliation under Section 18(2); if conciliation fails, the Council or its delegate institution takes up arbitration under Section 18(3), to which the Arbitration and Conciliation Act, 1996 applies as if under an arbitration agreement. The ninety-day direction in Section 18(5) addresses the reference as a whole — which is exactly why undifferentiated conciliation stages are the most common source of overrun.
Can a supplier do anything when a reference stalls?
Yes: press for termination of a failed conciliation and formal commencement of arbitration; make written requests for scheduling that create a record; and, where inaction persists, invoke the writ jurisdiction of the High Court seeking a direction for time-bound disposal — courts do issue such directions, since the statute itself fixes the expectation of despatch.
Does interest keep accruing during Council delays?
Yes. Statutory interest under Section 16 runs with time and compounds monthly regardless of how long the Council takes; delay before the forum increases, rather than dilutes, the buyer's exposure. Buyers facing weak defences should weigh this arithmetic when deciding between contesting a reference and settling it.