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MSME Samadhaan — Delayed Payment Recovery FAQs
These FAQs explain delayed-payment rights and dispute resolution under Chapter V of the MSMED Act, including supplier eligibility, Udyam status, acceptance and payment deadlines, statutory interest, the current MSME ODR filing route, MSEFC conciliation and arbitration, limitation, award challenge, enforcement, tax and corporate-reporting issues.
Important scope note. Eligibility is transaction- and status-sensitive. The supplier’s activity, registration and reclassification history, supply dates, limitation position and current precedent must be checked before reliance. Since 15 October 2025, new delayed-payment references are filed through the MSME ODR Portal; the older Samadhaan system remains relevant to legacy cases and transition. The Supreme Court registration-precondition issue referred in NBCC remains unsettled pending larger-Bench determination.
A. Eligibility, Udyam Status and Supplier Qualification
MSME Samadhaan is the Ministry of MSME’s delayed-payment portal and remains relevant to the legacy case ecosystem and transition to the newer system. However, all new delayed-payment references have been filed on the MSME Online Dispute Resolution (ODR) Portal from 15 October 2025. The portal does not itself decide the statutory dispute: the Section 18 MSMED Act mechanism is administered through the concerned Micro and Small Enterprises Facilitation Council (MSEFC) and, where applicable, the institution or centre to which the matter is referred.
Chapter V is framed for a “supplier” within the statutory scheme, which principally concerns qualifying micro or small enterprises. A medium enterprise is not ordinarily within the Section 2(n) supplier definition for this delayed-payment remedy. Classification, registration history, the activity carried on and the dates of the relevant supplies should therefore be checked before filing.
From 1 April 2025, a micro enterprise is one whose investment in plant and machinery or equipment does not exceed ₹2.5 crore and turnover does not exceed ₹10 crore. A small enterprise has investment not exceeding ₹25 crore and turnover not exceeding ₹100 crore. A medium enterprise has investment not exceeding ₹125 crore and turnover not exceeding ₹500 crore. Both the investment and turnover criteria must be considered under the current classification framework.
No. An Udyam certificate is important evidence of registration and classification, but it does not by itself answer every Chapter V eligibility question. The enterprise must also fit the statutory supplier framework, the claimed activity must be eligible, and the relevant transaction and registration history must support the special remedy.
No. The Government decision that allowed specified retail and wholesale trades under NIC Codes 45, 46 and 47 to register on Udyam expressly restricted their benefits to Priority Sector Lending. Current Ministry delayed-payment guidance likewise states that trading activity under those codes is not eligible for the delayed-payment provisions. The enterprise’s actual activity and registration particulars should therefore be checked rather than treating the Udyam certificate alone as proof of Chapter V eligibility.
Yes, a qualifying micro or small enterprise rendering services can fall within the MSMED Act framework. The actual service supplied, the enterprise’s registration and classification, and the transaction giving rise to the unpaid amount should be documented. The fact that the business does not manufacture goods does not by itself exclude it.
Potentially, subject to the transition rule and the facts. The 18 October 2022 Udyam amendment allows an enterprise that is upwardly reclassified to continue the non-tax benefits of its previous category for three years from the upward change, and Ministry material identifies delayed-payment benefits among such non-tax benefits. For a particular Section 18 reference, the reclassification date, transaction dates, registration history and current Council or court position should still be checked.
No single nationwide categorical answer should be assumed. Courts have taken differing approaches to works and composite contracts, and recent 2026 High Court decisions themselves reflect that divergence. The contract should be examined to determine the goods or services supplied, the enterprise activity, the statutory supplier relationship and the governing precedent in the relevant jurisdiction before relying on Section 18.
The point remains legally unsettled at Supreme Court level. Silpi Industries had been widely read as requiring qualifying registration before the relevant transaction for the special MSMED benefit. In NBCC (India) Ltd. v. State of West Bengal, decided in January 2025, a two-Judge Bench rejected a restrictive reading of Section 18 and referred the registration-precondition issue for authoritative determination by a larger Bench. As of August 2026, courts were still recording that the larger-Bench issue remained pending. Registration date, contract date, supply dates and controlling precedent should therefore be checked in every live matter.
It should not be treated as an automatic retrospective cure. Earlier Supreme Court authority treated later registration as prospective for relevant transactions, while the 2025 NBCC decision questioned the restrictive approach and referred the broader registration-precondition issue to a larger Bench. With that issue still pending in 2026, a claim should be screened transaction-by-transaction and against the current binding position in the relevant forum.
B. Acceptance, Payment Deadlines and Statutory Interest
It is ordinarily the day of actual delivery of the goods or rendering of the services. If the buyer raises a written objection regarding acceptance within fifteen days, the statutory definition can shift the day of acceptance to the day on which the supplier removes that objection.
Where the buyer does not make a written objection regarding acceptance within fifteen days from delivery of the goods or rendering of the services, the statute treats the actual delivery or service date as the day of deemed acceptance. The buyer’s contemporaneous written objections can therefore be important evidence in a delayed-payment dispute.
Section 15 requires payment before the “appointed day”. The appointed day is the day immediately following the expiry of fifteen days from the day of acceptance or deemed acceptance. In practical terms, the statutory framework does not permit an indefinite payment period merely because the contract is silent.
No, not for the purpose of Section 15. Where the supplier and buyer agree on a payment date in writing, the agreed period cannot exceed forty-five days from the day of acceptance or deemed acceptance. A clause providing sixty, ninety or one hundred twenty days does not displace the statutory ceiling.
Section 16 provides compound interest with monthly rests at three times the bank rate notified by the Reserve Bank. It runs from the appointed day where there is no agreed date, or from the date immediately following the agreed payment date where a valid written payment period applies.
The statutory formula is three times the RBI bank rate, so the applicable bank rate may change during a long delay period. A reliable calculation should therefore be invoice-wise and rate-period-wise rather than apply one guessed percentage to the whole claim.
Section 16 contains a non-obstante clause and imposes the statutory interest liability notwithstanding an agreement between buyer and supplier or other law. A contractual clause stating “no interest” should therefore not automatically be treated as defeating Section 16 where Chapter V validly applies.
Late payment of principal does not necessarily erase the statutory interest that accrued during the delay. The supplier should calculate the period between the statutory or agreed due date and the actual principal payment and determine the remaining Section 16 interest claim.
Every receipt should be mapped against the relevant invoice and date. The principal outstanding, period of delay and statutory interest should then be recalculated transparently. A single lump-sum interest figure without an invoice and payment schedule is vulnerable to challenge.
Section 23 of the MSMED Act makes the statutory interest payable or paid under Section 16 non-deductible in computing taxable income. For Tax Year 2026–27 onward, the Income-tax Act, 2025 is the operative income-tax statute, and the current tax forms separately recognise the Section 23 interest disallowance. Earlier periods and transitional treatment should be checked under the law applicable to that period.
C. Current Filing Route, MSEFC Jurisdiction and Conciliation
From 15 October 2025, all new delayed-payment references are filed through the MSME Online Dispute Resolution (ODR) Portal rather than as fresh filings on the legacy Samadhaan portal. The claimant should complete the current ODR filing with the required Udyam or eligible registration and transaction material; the matter then proceeds within the statutory MSEFC framework. State or Union Territory Council practice and current portal requirements should still be checked before filing.
Section 18(4) gives jurisdiction to the Facilitation Council, or the alternate-dispute-resolution institution or centre acting under its reference, where the supplier is located even if the buyer is elsewhere in India. The current ODR scheme likewise ties territorial routing to the MSE supplier’s location in its Udyam or eligible registration record. The legally relevant supplier location and current Council practice should be confirmed before filing.
Generally no where the statutory MSMED mechanism validly applies. In M/s Harcharan Dass Gupta v. Union of India, decided in May 2025, the Supreme Court held that the Section 18(4) supplier-location mechanism and the MSMED Act’s overriding effect prevailed over a contrary contractual arbitration-seat arrangement. The supplier must still satisfy the threshold requirements for invoking Chapter V.
Generally no. Supreme Court authority treats the MSMED Act as the special legislation governing qualifying delayed-payment disputes and gives the Section 18 mechanism overriding effect over a private arbitration arrangement. Once the statutory mechanism validly applies, the contractual arbitration clause does not simply displace it.
Section 18(2) requires conciliation. The Council may conduct the conciliation itself or refer it to an institution or centre providing alternate-dispute-resolution services. The conciliation provisions of the Arbitration and Conciliation Act apply through the statutory incorporation made by Section 18.
If conciliation terminates without settlement, Section 18(3) requires the dispute to move to arbitration. The Council may itself take up the arbitration or refer it to an institution or centre. The Arbitration and Conciliation Act then applies as if the arbitration were pursuant to an arbitration agreement.
Yes. Supreme Court authority has held that the special MSMED statutory scheme overrides the ordinary Section 80 restriction in the Arbitration and Conciliation Act for this purpose. The Council can conduct conciliation and, if settlement fails, itself take up arbitration or make the statutory reference contemplated by Section 18(3).
Yes. Silpi Industries held that a counterclaim and set-off are maintainable in arbitration under Section 18(3). The buyer should plead the counterclaim properly and support it with evidence; a vague quality complaint or ledger adjustment is not a substitute for a legally proved counterclaim.
Not automatically. Defects, rejection, delay, short supply and service-performance disputes can form part of the arbitral merits. Delivery records, inspection reports, written objections, rejection notes, credit notes and correspondence should be preserved because they may affect principal liability, counterclaim and interest.
Often yes where they arise from the same supplier-buyer relationship or connected course of dealings, subject to the Council’s procedure and the facts. The application should contain an invoice schedule showing order, delivery or service date, acceptance date, due date, principal, part-payments and interest calculation.
D. Arbitration Procedure, Limitation and Claim Evidence
Section 18(5) states that every reference shall be decided within ninety days from the date of making the reference. It is a statutory expedition requirement, but the existence of the provision does not justify promising a ninety-day award in practice. Council workload, service, conciliation, evidence and arbitration procedure can affect actual duration.
Potentially yes after valid service and a proper opportunity to participate, subject to the applicable arbitration procedure. The supplier must still prove the claim. An absent buyer does not convert unsupported invoices or calculations into evidence automatically.
A properly concluded conciliation settlement under the incorporated Arbitration and Conciliation Act framework has a binding legal status and should clearly state the principal, interest treatment, payment schedule, default consequences and full-and-final settlement terms. The parties should not rely on informal oral settlement discussions alone.
No. The online system facilitates filing, routing, case management or legacy tracking. Legal consequences arise from the statutory proceedings, a valid conciliation settlement, or an arbitral award or order—not from the mere creation of a portal application or reference number.
Keep the current Udyam certificate and historical registration material; purchase order or contract; invoices; delivery, e-way, service and acceptance records; buyer objections; GST and ledger material; bank statements; acknowledgments and part-payments; correspondence; invoice-wise principal and interest computation; buyer entity and address proof; authorisation; and evidence of service.
No. In M/s Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board, decided on 17 July 2025, the Supreme Court held that the Limitation Act does not apply to conciliation under Section 18(2). A debt that is time-barred as an arbitral claim may still be taken into conciliation and resolved by a valid settlement because expiry of limitation ordinarily bars the remedy rather than extinguishing the debt.
Yes. Sonali Power Equipments held that the Limitation Act applies to arbitration under Section 18(3) through the Arbitration and Conciliation Act. A claim that can be discussed and settled in conciliation can therefore still fail at the arbitration stage if the arbitral claim is time-barred.
Work invoice by invoice and identify the relevant due date, payment history, written acknowledgment, part-payment and any legally excludable period. Do not assume that filing on the ODR or Samadhaan system revives a stale arbitral claim. A limitation review should be completed before the matter moves from conciliation to arbitration.
Possibly, but not automatically. Sonali Power Equipments confirms that a Section 22 disclosure or balance-sheet entry must be examined case by case to determine whether it satisfies the statutory requirements of an acknowledgment under the Limitation Act. The wording, notes, qualifications and timing of the entry can be decisive.
Yes, where the statutory requirements of the Limitation Act are satisfied and the act occurs within the relevant period. Preserve signed confirmations, emails, settlement letters, ledger confirmations, payment records and the date of each acknowledgment rather than relying on a later oral assertion.
E. Award Challenge, Pre-Deposit, Enforcement and Insolvency
The principal post-award challenge is under Section 34 of the Arbitration and Conciliation Act, subject to its grounds and limitation framework. The MSMED Act adds the special Section 19 pre-deposit requirement for an appellant other than a supplier.
Where an appellant other than the supplier seeks to set aside a decree, award or order covered by Section 19, the court cannot entertain the application unless seventy-five per cent of the amount in terms of that decree, award or order is deposited in the manner directed by the court. The Supreme Court has treated this pre-deposit requirement as mandatory.
The mandatory statutory pre-deposit cannot ordinarily be waived merely because of hardship. Supreme Court authority recognises, however, that a court may permit the seventy-five per cent amount to be deposited in instalments where the circumstances justify that accommodation. The precise directions depend on the case.
Yes. The proviso to Section 19 permits the court to order that such percentage of the deposited amount as it considers reasonable be paid to the supplier, subject to conditions it considers necessary. Release is therefore discretionary, not automatic.
Section 19 expressly frames the pre-deposit condition for an appellant “not being a supplier”. A supplier’s own challenge should therefore not be treated as subject to the same statutory seventy-five per cent condition, though ordinary court requirements and the facts of the proceeding still apply.
Ordinarily no. The Supreme Court has emphasised the statutory Section 34 challenge route and the Section 19 deposit structure, and has rejected the use of writ proceedings as a routine way to bypass those remedies. Constitutional writ jurisdiction is not abolished, but it remains exceptional and should not be assumed merely by describing an objection as jurisdictional.
An arbitral award is enforceable under the Arbitration and Conciliation Act in the manner of a decree once the statutory enforcement conditions are met. Enforcement planning should identify the buyer’s bank accounts, movable and immovable assets, receivables, corporate status and any competing insolvency or security interests.
No automatic stay should be assumed. Under the current Arbitration and Conciliation Act framework, the challenging party normally needs a separate stay order. The award holder should check the actual Section 34 and stay status before deciding whether to commence execution.
Admission of CIRP triggers the Insolvency and Bankruptcy Code moratorium and claims process, which can materially affect pending MSEFC arbitration, enforcement and recovery against the corporate debtor. The supplier should file or verify its claim with the IRP or RP within the insolvency process and coordinate the MSMED strategy with insolvency law.
The forum choice requires case-specific analysis. Where the Chapter V mechanism validly applies and Section 18 is invoked, the MSMED Act can override a contrary private arbitration arrangement. A supplier should not assume that an ordinary suit or contractual arbitration will carry every statutory feature of the MSEFC route, including Section 16 interest and the Section 19 pre-deposit. Eligibility, limitation, existing proceedings, contract terms and the relief sought should be reviewed before choosing or pursuing another route.
F. Buyer Tax, Corporate Reporting and Receivables Tools
For Tax Year 2026–27 onward, the Income-tax Act, 2025 applies. Section 37(2)(g) carries forward the delayed-payment deduction rule previously associated with Section 43B(h) of the 1961 Act: a sum payable to a micro or small enterprise beyond the Section 15 MSMED time limit is allowed on the prescribed actual-payment basis. Earlier periods remain subject to the law and transition provisions applicable to them.
Yes. Section 23 of the MSMED Act specifically disallows deduction of the interest payable or paid under Section 16. Current Income-tax Act, 2025 forms and rules separately identify both the Section 23 interest disallowance and the delayed-principal rule under Section 37(2)(g), so principal and statutory interest should be accounted for separately.
MSME Form I is the Companies Act reporting return for specified companies in relation to qualifying payments to micro and small enterprise suppliers. The 2024 amended framework focuses the filing obligation on specified companies with payments pending beyond forty-five days, and the current form captures the prescribed half-yearly information. A filed return can be useful evidence of what the company reported, but it is not itself an MSEFC award or conclusive proof of every element of the supplier’s claim.
Under the current Specified Companies reporting order, the regular half-yearly return is due by 31 October for the April-to-September period and by 30 April for the October-to-March period. The current MCA e-form and instruction kit should still be checked at the time of filing because the form fields and electronic process can change.
Where the statutory conditions apply, the buyer’s annual accounts must disclose specified unpaid principal and interest information relating to micro and small suppliers. These disclosures can become important evidence, but their effect as an acknowledgment for limitation purposes must be analysed case by case.
No. TReDS is an electronic receivables-financing mechanism used to facilitate financing of MSME trade receivables. Samadhaan is the older delayed-payment portal and case ecosystem, while new delayed-payment references have been filed through the MSME ODR Portal from 15 October 2025. Financing a receivable and resolving a disputed delayed-payment claim are different functions.
G. Matter Screening, Evidence Strategy and Practical Expectations
Check late or disputed registration; pure retail or wholesale activity registered only for Priority Sector Lending; medium classification; upward reclassification issues; transactions predating the relevant registration; limitation; missing delivery or service proof; disputed quality; undocumented oral orders; buyer insolvency; prior arbitration or litigation; related-party transactions; inconsistent GST or ledger records; and an unsupported first claim of statutory interest.
Potential issues include absence of Chapter V eligibility, limitation at the arbitration stage, non-supply, defective or rejected goods, deficient services, timely written objections, payments or credits not reflected by the supplier, contractual adjustments, counterclaims, lack of authority, incorrect interest calculations and insolvency-related restrictions. A buyer should not rely merely on a long contractual payment term exceeding Section 15.
For each invoice record the purchase order or contract, invoice number and date, delivery or service date, written objection if any, day of acceptance or deemed acceptance, agreed payment term, statutory due date, principal amount, every payment or credit with date, outstanding principal, applicable RBI bank-rate periods, Section 16 interest calculation and the supporting document reference.
Verify the enterprise’s historical and current Udyam status; confirm that it is a qualifying micro or small supplier for the transaction; check whether the activity is manufacturing, service, trading or a composite works activity; identify the contract and supply dates; calculate acceptance and payment deadlines; run an invoice-wise limitation review; preserve acknowledgments and part-payments; calculate Section 16 interest accurately; identify the supplier-location MSEFC and current ODR filing route; check prior arbitration, litigation and insolvency; prepare a complete evidence bundle and claim schedule; and explain that statutory interest and the Section 19 deposit create leverage but do not guarantee a quick award or actual recovery.
Related Information
If you have unpaid MSE invoices and need matter-specific review of eligibility, limitation, statutory interest, ODR/MSEFC filing or enforcement options, you may send a preliminary enquiry.
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Last reviewed: 12 September 2026