Lekha

Guides · MSME

What an MSME supplier can do about a delayed payment

When a buyer misses the 45-day deadline, a registered micro or small supplier has real remedies: statutory interest under Section 16, and a reference to the Micro and Small Enterprise Facilitation Council through the MSME Samadhaan portal.

What can a supplier do when a buyer pays late?

A supplier can charge statutory interest under Section 16 from the appointed day and, if the buyer still does not pay, refer the dispute to the Micro and Small Enterprise Facilitation Council through the MSME Samadhaan portal for conciliation and, failing that, arbitration.

The interest runs at three times the RBI Bank Rate, compounded with monthly rests, and the Council's award carries the same interest. The remedy is statutory — it does not depend on a clause in the purchase order.

Must the supplier be registered to claim?

Yes. The delayed-payment protection under Sections 15 and 16 belongs to an enterprise registered on the Udyam portal as micro or small at the time of the supply.

A supplier that was unregistered when it supplied cannot invoke the MSMED remedies for that bill — though registering protects future supplies from then on.

How does the Facilitation Council process work?

The Council first tries to settle the dispute by conciliation; if that fails, it takes the matter up as an arbitration and makes an award, which is meant to be decided within 90 days of the reference.

A buyer who wants to challenge the award in court must first deposit 75% of the amount, under Section 19 — a high bar that discourages appeals used only to delay payment.

Can a no-interest clause in the order defeat the claim?

No. Section 16 applies notwithstanding anything in the agreement between the parties, so a clause promising a lower rate, or no interest at all, cannot override the statutory interest.

This is what makes the 45-day rule hard-edged: neither the interest nor the appointed day can be bargained away, whatever the purchase order says.

How does a ledger support a claim?

A ledger supports a claim by recording the date of acceptance, the due date, and the running age of every bill — the evidence a supplier needs to fix the appointed day and compute the interest owed.

Lekha ages each receivable against the MSME 45-day clock and flags the overdue ones, so you know which buyers to chase. It records and tracks; it does not replace your accountant or file the claim for you.

How an MSME supplier recovers a delayed payment

  1. Confirm your MSME registration. Check that your enterprise was registered on the Udyam portal as micro or small at the time of the supply — the protection under Sections 15 and 16 depends on it.
  2. Fix the appointed day. Identify the due date under Section 15 — the agreed period capped at 45 days, or 15 days without a written agreement — and treat the day after it as the appointed day, when interest starts.
  3. Compute the interest and raise a demand. Work out the Section 16 interest — three times the RBI Bank Rate, compounded with monthly rests — and send the buyer a statute-cited demand for the principal and the interest.
  4. Refer the dispute to the Facilitation Council. If the buyer still does not pay, file a reference against the unpaid invoice with the Micro and Small Enterprise Facilitation Council through the MSME Samadhaan portal.
  5. Let the Council conciliate or arbitrate. The Council first attempts conciliation and, failing settlement, arbitrates and issues an award that carries the same Section 16 interest.

Questions

Where does a supplier file a delayed-payment claim?
With the Micro and Small Enterprise Facilitation Council of the state, filed online through the MSME Samadhaan portal run by the Ministry of MSME.
Is there a time limit for the Council to decide?
The reference is filed online against a specific unpaid invoice, and the Council is meant to decide it within 90 days. Confirm the current procedure for your state.
Can a supplier still claim interest after the buyer pays the principal?
Yes. The Section 16 interest accrued for the period of delay is a separate statutory due and survives payment of the principal amount.

This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.

Keep reading