Quick answer
Under Section 15 of the MSMED Act, a buyer must make payment for goods or services within the agreed period, which cannot exceed a maximum of 45 days from the date of acceptance. If there is no written agreement, the payment must be made within 15 days. If the buyer fails to pay within this timeline, they are liable to pay compound interest to the supplier at three times the bank rate notified by the RBI, compounded monthly. Claims are filed online on the MSME Samadhaan portal (samadhaan.msme.gov.in) and are adjudicated by the state MSEFC.
Quick Answer
Delayed payments are the biggest hurdle for micro and small enterprises in India. To protect small businesses, the Government of India enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. The Act imposes strict statutory payment deadlines on buyers and establishes a dedicated recovery portal, MSME Samadhaan. If a buyer fails to pay within the statutory window, the MSME supplier can file a claim before the Micro and Small Enterprises Facilitation Council (MSEFC). At Inamdar Legal, we help suppliers verify registration dates, draft legal notices, and compile online claims on the Samadhaan portal.
Under Section 15 of the MSMED Act, a buyer must make payment for goods or services within the agreed period, which cannot exceed a maximum of 45 days from the date of acceptance. If there is no written agreement, the payment must be made within 15 days. If the buyer fails to pay within this timeline, they are liable to pay compound interest to the supplier at three times the bank rate notified by the RBI, compounded monthly. Claims are filed online on the MSME Samadhaan portal (samadhaan.msme.gov.in) and are adjudicated by the state MSEFC.
- Statutory payment limit: Maximum 45 days (with agreement) or 15 days (without agreement).
- Interest penalty: Three times the RBI bank rate, compounded monthly (under Section 16).
- Udyam Requirement: The supplier must have a valid Udyam registration prior to the invoice date.
- Portal filing: Free online filing on samadhaan.msme.gov.in, managed by state MSEFC.
The 45-Day Payment Rule under MSMED Act
Section 15 of the MSMED Act override all private agreements between buyers and suppliers. Even if a buyer signs a contract stating that payments will be made in 90 days, the law overrides this contract and caps the payment window at exactly 45 days. The countdown begins from the 'day of acceptance' (the day goods are delivered or services are completed). If the buyer raises any written objection regarding the quality of goods/services within 15 days, the countdown pauses until the objection is resolved.
Reconciling the 3x RBI Bank Rate Interest
Section 16 of the Act mandates the payment of interest for delayed payments. The interest rate is calculated as three times the RBI repo rate (or bank rate). Unlike general civil interest, this rate is compound interest, calculated monthly. It is a mandatory statutory penalty, and tax authorities do not allow buyers to claim this interest payment as a business expense, making it a severe penalty for defaulters. We help suppliers compile interest calculation sheets based on RBI rates to attach with their claims.
Comparison of Recovery Channels in India
MSME Samadhaan provides a specialized, low-cost recovery route compared to other legal channels:
| Feature / Parameter | MSME Samadhaan (MSEFC) | NCLT (IBC Insolvency) | Civil Suit (Order 37 CPC) |
|---|---|---|---|
| Minimum Debt Limit | No minimum limit | Rs. 1 Crore | No minimum limit |
| Government Filing Fee | Nil (Free portal) | Rs. 2,000 | Graded percentage (up to 7-10% of claim) |
| Interest Rate | 3x RBI rate (compounded monthly) | Generally contractual or NIL | Contractual or 6-9% simple interest |
| Udyam Certificate | Mandatory before invoice date | Not required | Not required |
| Timeline to Decision | 90-180 days (arbitration rules) | 1 to 2+ years | 2 to 5+ years |
The Critical Prerequisite: Udyam Registration Date
The most common mistake suppliers make is filing a Samadhaan claim based on invoices dated before they registered for an MSME/Udyam certificate. The Supreme Court (in *Silpi Industries v. Kerala State Road Transport*) ruled that the benefits of the MSMED Act apply only prospectively. This means you can only claim the 3x interest and MSEFC jurisdiction for transactions executed *after* your Udyam registration date. If you supplied goods in January but registered for Udyam in March, the January invoices cannot be recovered via the Samadhaan portal.
Step-by-Step Samadhaan Claim Process
Filing a claim on the portal follows this sequence: Step 1: Dispatch a Demand Notice Send a formal 15-day demand notice to the buyer referencing Section 15 of the MSMED Act. This notice establishes that a formal dispute exists. Step 2: Online Portal Upload Log onto samadhaan.msme.gov.in using your Udyam number. Upload up to 3 invoices, proof of supply (transport bills/delivery memos), and a copy of the demand notice. PDF files must be under 1 MB. Step 3: Council Review and Conciliation The state MSEFC reviews the application. If accepted, it issues a notice to the buyer. The council first attempts 'Mutual Conciliation' to settle the matter. If conciliation fails, the council initiates formal arbitration under the Arbitration and Conciliation Act, 1996, and passes an enforceable award.
State-Specific Notes: Gujarat MSEFC Council
For businesses in Surat, the council is the Gujarat MSEFC, which operates under the Commissionerate of Industries in Gandhinagar. Due to the massive volume of cases from Surat's textile and engineering sectors, the Gujarat MSEFC has established sub-councils at district levels (such as the Surat District MSEFC). Hearings are conducted online or at the Surat collector office. We help local MSMEs compile the required 'Certificate of Supplier' and coordinate representation during council hearings.
How Inamdar Legal Helps with Your MSME Claim
Inamdar Legal provides comprehensive remote drafting and claim preparation support. We handle the process from Surat for clients pan-India. Our services include: 1. We audit your invoices and Udyam certificate dates to verify claim eligibility. 2. We draft and send the statutory MSME demand notice with exact interest calculations. 3. We organize and format your invoices, ledgers, and delivery receipts into portal-compliant PDF folders. 4. We compile the online petition on the Samadhaan portal and draft written statements for the conciliation/arbitration stages. To begin, the client provides: (1) Udyam registration certificate, (2) Unpaid invoices and matching delivery proof, (3) Buyer details (address and GSTIN).
When to Review This
- B2B buyer has not paid invoices within 45 days of supply
- Want to claim statutory 3x RBI compound interest on delayed bills
- Need to prepare the claim folder for samadhaan.msme.gov.in
- Verification of Udyam registration dates for transactional eligibility
Disclaimer
This guide is based on public records and procedures available as of the date of publication. It is not legal advice. Rules, fees, and timelines are subject to change by government authorities. Consult a qualified advocate to review your specific documentation. Inamdar Legal is based in Surat, Gujarat, and provides remote support across India.