For most small businesses, the problem isn’t winning work — it’s getting paid for it. Delayed payments tie up working capital, stall growth, and force founders to chase invoices instead of customers. What many MSME owners don’t fully use is that Indian law gives a registered micro or small enterprise unusually strong rights to recover delayed payments — with interest. Here’s how it works, and how to get paid faster.
Your statutory right: the 45-day rule
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 (Sections 15–16) sets a hard limit on how long a buyer can take to pay. A buyer must pay a micro or small enterprise supplier on or before the date agreed in writing — and crucially, that agreed date cannot exceed 45 days from the day the goods or services are accepted (or deemed accepted). If there is no written agreement, payment falls due within 15 days.
The interest you’re owed when payment is late
Miss that deadline and the consequences are real. Under Section 16, a defaulting buyer is liable to pay compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank of India — calculated from the appointed day. This is a statutory penalty, not a negotiable term, and the buyer cannot even claim that interest as a deduction for income-tax purposes (Section 23). In practice, the interest clock is your strongest lever.
Who qualifies
- The supplier must be a micro or small enterprise with a valid Udyam registration — these delayed-payment protections are designed for them.
- The claim is about goods supplied or services rendered in the course of business.
- Keep your Udyam certificate, the invoice, the purchase order or work order, and proof of delivery and acceptance — they establish both the debt and the appointed day.
The MSME Samadhaan route (MSEFC)
To enforce these rights, you can file a reference on the MSME Samadhaan portal (samadhaan.msme.gov.in) against the buyer. The matter goes to the Micro and Small Enterprise Facilitation Council (MSEFC) in your state. The Council first attempts conciliation; if that fails, it conducts arbitration itself or refers it to an ADR institution — under the Arbitration & Conciliation Act, 1996. The resulting award is enforceable like a decree of a court.
The catch — and the faster alternative
The Samadhaan route is powerful, but it isn’t always quick. MSEFC councils carry their own backlogs, jurisdiction is tied to the supplier’s location, and timelines can stretch well beyond what a cash-strapped business can wait for. Where you need speed — or where your contract already contains a dispute-resolution clause — private online dispute resolution is often the faster path.
Through PDR Court, a delayed-payment dispute can be resolved entirely online: conciliation to reach a voluntary settlement, or arbitration for a binding award — typically in weeks, not years, with proceedings you can attend from your desk. See how it works for MSMEs and small businesses.
What to do today — a quick checklist
- Confirm your Udyam registration is active and classifies you as micro or small.
- Document the debt: invoice, PO or work order, and proof of delivery and acceptance.
- Send a written payment reminder that cites the MSMED Act deadline and the interest payable.
- Choose your route: file on MSME Samadhaan, or — for speed, or where a contract clause exists — lodge an online dispute and drive it to a fast, enforceable outcome.
You did the work. The law is firmly on your side about getting paid for it — and you don’t have to spend a year in a queue to enforce that.