Who can use these provisions
The delayed-payment provisions of the Micro, Small and Medium Enterprises Development Act, 2006 protect suppliers that are micro or small enterprises. Holding a valid Udyam registration is important when invoking them.
The 45-day rule
Under Section 15, a buyer must pay a micro or small supplier on or before the agreed date, which cannot exceed 45 days from acceptance of goods or services. Where there is no written agreement, payment is due within 15 days.
Interest on delayed payment
If the buyer fails to pay in time, Section 16 makes the buyer liable to pay compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank of India — regardless of any contrary agreement.
The Facilitation Council
Under Section 18, the supplier may refer the dispute to the Micro and Small Enterprises Facilitation Council. The Council first attempts conciliation. If that fails, it takes up the dispute itself as arbitration or refers it to an institution. Applications can be filed online through the MSME Samadhaan portal.
If the buyer wishes to challenge an award, Section 19 requires it to deposit 75% of the awarded amount first.
Keep your paperwork ready
- Udyam registration certificate
- Purchase orders, invoices and delivery or acceptance records
- Ledger statement and payment history
- Correspondence and reminders sent to the buyer
Practical tips
- Mention payment terms within 45 days in every purchase order or invoice
- Send written reminders — they help establish the timeline
- Consider a legal notice before approaching the Council
- Check limitation: claims should not be left for years
About the author
Advocate Vivekanand
Founder & Principal Advocate, Vivekanand Law Firm · MA (English), MBA, LL.B., Author. Full profile
This article is general legal information, not legal advice. It does not create an advocate–client relationship. Legal provisions referred to should be verified for your specific situation and the date of the events concerned.