MSMED Act, 2006 · Sections 15 to 24
If you are a micro or small enterprise, your buyer has to pay within the agreed credit period, and that period can never exceed 45 days from acceptance. After that, Section 16 makes the buyer pay compound interest with monthly rests at three times the RBI Bank Rate. Today that is 17.25% a year, and no contract clause can waive it.
I help suppliers turn overdue invoices into a documented claim, file it on the MSME ODR portal, and see it through conciliation and arbitration before the Micro and Small Enterprises Facilitation Council (MSEFC).
Every further month unpaid adds about ₹15,096 to what the buyer owes.
Illustration at 3 × today's RBI Bank Rate (5.75%). Councils differ on which date's Bank Rate applies; the calculator lets you choose.
Section 15 and Section 2(b)
The clock starts on the day the buyer accepts your goods or services, not on the invoice date. If the buyer raises no written objection within 15 days of delivery, the delivery day itself counts as acceptance.
Delivery of goods or completion of the service, or the day a written objection raised within 15 days is resolved.
Without a written credit term, payment is due before the "appointed day", the day after 15 days from acceptance.
A written agreement can fix any date up to 45 days. A contract that says 60, 90 or 120 days is cut down to 45.
Compound interest with monthly rests runs from the day after the due date, "notwithstanding anything contained in any agreement".
Eligibility
Four things decide it. Most suppliers know the answers in a minute.
Both limits must be met. Cross either one and the enterprise moves up a category.
| Category | Investment | Turnover | Protected? |
|---|---|---|---|
| Micro | ≤ ₹2.5 cr | ≤ ₹10 cr | Covered |
| Small | ≤ ₹25 cr | ≤ ₹100 cr | Covered |
| Medium | ≤ ₹125 cr | ≤ ₹500 cr | Not covered |
Notification S.O. 1364(E) dated 21 March 2025. The MSMED (Amendment) Act, 2026 writes this investment-and-turnover test into Section 7. The limits stay as notified by the Centre.
Your leverage
Chapter V of the MSMED Act was written for the supplier who cannot afford a long fight. These are the provisions that do the heavy lifting in a negotiation, and in front of the Council.
Three times the Bank Rate, from the day after the due date until payment. On a long delay, compounding adds up fast.
Section 16Interest is due "notwithstanding anything contained in any agreement", and Sections 15 to 23 override any other law.
Sections 16 and 24The Facilitation Council where you are located has jurisdiction, even if the buyer sits in another state.
Section 18(4)You can approach the Council even if the contract names a private arbitrator or another seat.
Mahakali Foods (SC, 2022)A buyer who wants a court to set aside the award must first deposit 75% of it. Courts treat this as mandatory.
Section 19 · Tirupati Steels (SC, 2022)A buyer cannot deduct late payments to micro and small suppliers until they are actually paid, and can never deduct the Section 16 interest.
Section 23 · s.43B(h) / s.37(2)(g) Income-tax ActAudited buyers must disclose unpaid MSE dues and interest every year. That disclosure can also help on limitation.
Section 22 · Sonali Power (SC, 2025)The Limitation Act does not bar conciliation. A time-barred claim can still be referred and settled, though arbitration on it would be barred.
Sonali Power (SC, 2025)The process
New applications are filed on the MSME Online Dispute Resolution (ODR) portal, which replaced Samadhaan for fresh filings. The legal forum is still your state's Facilitation Council.
Reconcile the ledger, match invoices to delivery and acceptance proof, compute interest invoice by invoice, and check limitation.
Apply with your Udyam number, buyer details, invoices and the amount due with interest. Filing is online.
A voluntary pre-Council stage: a guided outcome estimate and unmanned online negotiation, closed within 15 days (30 with consent).
The Council, or an institution it appoints, conciliates. A signed settlement is binding and enforceable.
If conciliation fails, the Council arbitrates or refers the case. The Arbitration Act applies, and the award binds the buyer.
The award is executable like a court decree. A buyer who challenges it must first deposit 75%.
What changed in 2025 and 2026
Time limits for mediation (90 days) and awards (90 days after pleadings), recovery of awards as arrears of land revenue, at least 50% released to the supplier if a challenge is pending over six months, and TReDS settlement for central PSUs. Provisions start on notified dates.
Filing channelSamadhaan now points new applicants to odr.msme.gov.in, launched on 27 June 2025. Cases already filed on Samadhaan continue there.
7 Oct 2026RBI raised the repo rate to 5.50%, taking the Bank Rate to 5.75%. Three times that is 17.25% a year, up from 16.50%.
TaxUnder the Income-tax Act, 2025, in force from 1 April 2026, late payments to micro and small suppliers are still deductible only when actually paid.
Case law
Chapter V overrides the Arbitration Act, so a private arbitration clause does not stop a reference to the Council. It also let the Council that conciliated go on to arbitrate, a point a larger bench is now re-examining.
What it meansLimitation does not apply to conciliation, so old claims can still be settled. It does apply to arbitration. Section 22 disclosures may extend time, case by case.
What it meansNot being registered before the contract should not bar a reference under Section 18. The question went to a larger bench because earlier rulings point the other way.
What it meansA buyer cannot dodge the 75% deposit by filing a writ petition. The challenge lies under Section 34, after deposit. A five-judge bench is now re-examining how absolute that bar is.
What it meansHow I can help
The portal makes filing look simple. Claims fail on the details: the wrong acceptance date, missing proof of delivery, a registration date that hands the buyer an objection, or a claim filed after limitation.
Registration history, activity, buyer, acceptance dates and limitation, checked before you file, with a plain answer on fit and risk.
An invoice-wise schedule of principal, due dates and Section 16 interest, tied to ledgers, GST records and delivery proof.
Application, document index and pleadings prepared and filed, with every notice and hearing tracked.
Negotiation positions grounded in the interest the law allows and the buyer's tax and disclosure exposure.
Statement of claim, evidence and written submissions, and appearance as your authorised representative where the Council's rules allow it.
Watching for the 75% deposit on any challenge, and coordinating with your advocate on execution and recovery.
Free download
Eligibility, the 45-day rule, a worked interest example, the ODR and Council process on one page, the 2026 amendments, the case law that matters, and a document checklist.
8 pages · A4 · Law and rates checked on 12 October 2026
Common questions
For new applications, no. The Samadhaan portal now tells applicants to file on the MSME ODR portal (odr.msme.gov.in). Applications already filed on Samadhaan continue to be tracked there. Either way the case is decided by the Facilitation Council of the state where you are located.
Yes. Section 15 says the agreed period can in no case exceed 45 days from acceptance or deemed acceptance, and Section 16 interest applies notwithstanding any agreement. For a micro or small supplier, interest runs from day 46.
Yes. Interest under Section 16 accrues for every month of delay, and Section 17 makes the buyer liable for it. You can claim the interest alone, as long as the claim is within limitation for arbitration. Even an older claim can go to conciliation.
Not necessarily, but it is the most contested point in this area. Earlier Supreme Court decisions held that registration after the contract helps only for later supplies. In 2025 the Court said registration is not a precondition to a reference and sent the question to a larger bench. Get the dates reviewed before filing.
The Act sets a 90-day target from the reference, and the 2026 amendment adds stage-wise limits. In practice, timing depends on the Council's workload and on the buyer. Many cases settle at conciliation once the buyer sees the interest figure.
No. Filing on the ODR portal is open to every eligible enterprise, and the Ministry even reimburses up to ₹4,000 of documentation and Council fees. Professional help is worth it when the amounts are large, the paperwork is messy, or the buyer is likely to contest jurisdiction, limitation or quality.
Start with your invoices
Whether the MSMED route fits, roughly what the interest comes to, and what is missing from the file.
General information only, not legal advice. Work starts after a written engagement setting out scope and fees. Share confidential documents only after we agree how.