MSME Delayed Payment: Filing on Samadhaan 2026

The delayed payment machinery in Sections 15 to 24 of the MSMED Act protects micro and small enterprises. Medium enterprises are outside it. So are pure retail and wholesale traders, because the provisions are built around a supplier of goods it manufactures or services it renders, even where the trader holds a valid Udyam registration.

That carve-out surprises people, and it is worth confirming your own position before building a recovery strategy on it.

Section 15 ties the payment period to the day of acceptance or deemed acceptance of the goods or services, not to the invoice date. Deemed acceptance is normally delivery of the goods or completion of the services. Where the buyer raises a written objection within fifteen days, the acceptance date shifts to when the objection is resolved.

A written agreement can set a shorter period, and a shorter period binds. What a written agreement cannot do is extend the period beyond 45 days. A contract specifying 60 or 90 day credit terms does not give the buyer 60 or 90 days for this purpose.

Interest runs from the appointed day at three times the bank rate notified by the Reserve Bank of India, compounded with monthly rests. It is not discretionary and it does not require a contract.

Section 23 then provides that this interest is not deductible in computing the buyer's income. So a buyer that pays late carries the interest as a pure cost with no tax relief, on top of the deduction deferral on the principal.

Confirm you were micro or small on the date of supply and that your Udyam registration was valid then.

Assemble the file: purchase order, invoices, proof of delivery or completion, correspondence, any written agreement on payment terms, and a computation of interest under Section 16.

File the reference on the MSME Samadhaan portal. Filing is free and the application routes to the facilitation council with jurisdiction.

The council attempts conciliation first, under Sections 65 to 81 of the Arbitration and Conciliation Act, 1996.

If conciliation fails, the council arbitrates or refers the dispute to an arbitral institution, and the reference is to be decided within ninety days under Section 18(5).

An award carries the force of a decree. A buyer wishing to challenge it must first deposit 75 per cent of the award under Section 19.

Whether the enterprise had to be registered before the contract and the supply is genuinely unsettled, and a buyer will raise it.

One line of authority holds that a party cannot acquire supplier status by registering after the event, so a later registration operates prospectively and covers only supplies made after it. On the other side, the Supreme Court in NBCC (India) Ltd. v. State of West Bengal, 2025 INSC 54, decided on 10 January 2025, held that a reference under Section 18 cannot be rejected merely because the enterprise had not filed a memorandum under Section 8.

The practical reading is unchanged by the split. A registration valid on the date of supply is a materially stronger position, and one obtained after the dispute arose invites a preliminary objection you will have to argue. Take a view on your own facts before filing rather than assuming either line applies.

Two things are worth knowing before you file. The ninety day limit in Section 18(5) is a statutory yardstick rather than a self-executing deadline, and councils do run beyond it. A late award is not void and the council does not lose jurisdiction.

Second, the deposit requirement under Section 19 is the provision that gives the process its commercial force. A buyer contemplating an appeal has to fund 75 per cent of the award to do it, which changes settlement behaviour well before an award is passed.

No. Filing a reference on the MSME Samadhaan portal is free. Costs arise only if you engage professional help to prepare the file and the interest computation, or to represent you through the conciliation and arbitration stages. Given the ninety day statutory timeline and the interest computation involved, most enterprises find it worth having the file prepared properly rather than assembling it in stages after the council raises queries.

The reference goes to the facilitation council with jurisdiction over the supplier, which in practice means the council of the state where your enterprise is located. Each state and union territory constitutes a council under Section 18, chaired by its Director or Commissioner of Industries.

Retail and wholesale traders can hold a Udyam registration, but that recognition is oriented to priority sector lending. The delayed payment provisions are framed around enterprises supplying goods they manufacture or services they render, so a purely trading enterprise should take advice before relying on them.

The statutory cap still applies. A written agreement can specify a period shorter than 45 days and that shorter period binds, but it cannot extend the period beyond 45 days from the day of acceptance or deemed acceptance. The statutory cap overrides the contract for this purpose, so a longer credit term does not protect the buyer from interest under Section 16 or from the deferral of its tax deduction.

A registration valid on the date of supply is by far the stronger position. Whether it is strictly essential is contested: in NBCC (India) Ltd. v. State of West Bengal, 2025 INSC 54, the Supreme Court held a Section 18 reference cannot be rejected merely for want of a Section 8 memorandum, while another line of authority treats later registration as prospective only. If yours lapsed or was never migrated from Udyog Aadhaar, deal with that first, because the buyer will raise it.