How a claim moves, from day 46 to money in the bank

The route at a glance

Since the ODR portal took over fresh filings, every new claim starts online. The legal forum has not changed: the Micro and Small Enterprises Facilitation Council (MSEFC) of the state where you are located, using the procedure in Section 18 of the MSMED Act and the Arbitration and Conciliation Act, 1996.

1. 1

   Payment overdue

   Day 46 onwardsSections 15 and 16

   Interest starts running from the day after the due date.

2. 2

   Claim file and demand letter

   Your office

   Invoice-wise schedule, proof of acceptance, interest working, limitation check. A demand letter is optional but often settles the matter.

3. 3

   Application on the MSME ODR portal

   odr.msme.gov.in

   Udyam or UAP login, buyer details, invoices, amount due with interest, documents.

4. 4

   Pre-MSEFC stage (voluntary)

   15 days, extendable to 30

   Guided outcome estimate and unmanned negotiation. Either side can opt out.

5. 5

   Conciliation before the Council

   Section 18(2)

   Settlement if possible. A signed settlement is binding.

6. 6

   Arbitration and award

   Section 18(3)

   Statement of claim, defence, evidence, hearing, reasoned award.

7. 7

   Challenge only after a 75% deposit

   Section 19A&C Act s.34

   A buyer who wants the award set aside must first deposit 75% of it in court.

8. 8

   Recovery

   A&C Act s.36

   The award is executed like a civil-court decree, and under the 2026 amendment, once notified, it can also be recovered as arrears of land revenue.

1. Before you file

Most of the work, and most of the outcome, is decided here.

• Fix the acceptance date for every invoice. It is the date of delivery or completion, or, if the buyer objected in writing within 15 days, the date the objection was removed. The invoice date is not the test.
• Fix the due date. The agreed credit period, capped at 45 days, or 15 days if nothing was agreed in writing.
• Compute interest invoice by invoice at three times the Bank Rate with monthly rests. The calculator produces a schedule you can attach.
• Reconcile the ledger with the buyer's payments, TDS, credit notes and deductions, so the principal figure survives cross-examination.
• Check limitation, and look for balance confirmations, emails and part-payments that extend it.
• Check your registration: category, date and address. The address decides which Council hears you.

2. Filing on the MSME ODR portal

The Ministry of MSME launched the MSME ODR portal on 27 June 2025 under the RAMP programme. MSME Samadhaan now directs new applicants there, and applications already filed on Samadhaan continue to be tracked on Samadhaan.

Per the Ministry's ODR scheme guidelines, an application typically contains:

• your name, Udyam or UAP number, email and mobile, with your legal representative's details and authority if you use one;
• the buyer's name, email and mobile, with an undertaking that they are correct;
• brief facts, with the work order or agreement, invoices and other documents;
• payments received, and the amount still due, with due dates and interest under the Act;
• your signature and identity proof.

The portal pulls your key details from Udyam or UAP. Micro and small enterprises can apply for one-time financial assistance of up to ₹4,000 (up to ₹2,000 for documentation and up to ₹2,000 for Council application fees) after the case concludes, under the scheme as it runs to 2026-27.

3. The pre-MSEFC stage: a quick, voluntary settlement window

Once you file, the portal notifies the buyer automatically. The buyer can reply within three days. Unless either party opts out, two informal processes follow, sequentially or on their own:

The whole stage must finish within 15 days of filing, extendable by another 15 days only with both parties' consent. A settlement is signed online and the portal tracks compliance. If the buyer defaults on it, the full record goes to the Council.

4. Conciliation before the Facilitation Council

If there is no settlement, or a party opts out, the case enters the statutory stage. Under Section 18(2) the Council either conciliates itself or refers the dispute to an institution providing alternative dispute resolution services. Sections 65 to 81 of the Arbitration and Conciliation Act apply.

• The portal issues an e-signed notice with the date, time and link. Under the guidelines the first date is fixed within 7 days of the conciliator's appointment.
• Institutions are allotted from a state-wise directory on a round-robin basis, which reduces forum shopping.
• The guidelines aim to finish conciliation within 90 days.
• A settlement signed by the parties and authenticated by the conciliator has the same status as an arbitral award, so it is enforceable.

Conciliation is also where old claims can still be recovered: the Supreme Court held in Sonali Power (2025) that the Limitation Act does not apply to it.

5. Arbitration and the award

When conciliation fails, Section 18(3) requires the Council to take up the dispute for arbitration itself or refer it to an institution. The whole Arbitration and Conciliation Act then applies, as if the parties had signed an arbitration agreement.

• Conciliation must come first. A Council order passed without conciliating and then arbitrating is a nullity (Jharkhand Urja Vikas Nigam, 2021, a Rajasthan Council case).
• Same Council, both roles. The Council that conciliated may arbitrate (Mahakali Foods). A five-judge bench is re-examining this in TANCEM.
• Jurisdiction objections go to the tribunal first. Registration date, works contract and similar objections are decided by the Council under Section 16 of the Arbitration Act.
• The buyer may counter-claim, for example for quality defects or liquidated damages (Silpi Industries).
• Limitation applies to arbitration, generally three years from the due date unless extended.
• A buyer who stays away after being validly served can be proceeded against, and the award passed in its absence.

The award is reasoned, signed and shared on the portal. Interest under Section 16 usually runs until actual payment.

6. If the buyer challenges the award

A buyer can apply to set the award aside under Section 34 of the Arbitration Act, normally within three months of receiving it, extendable by 30 days for sufficient cause. Section 19 of the MSMED Act adds a filter that does not exist in ordinary arbitration:

No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre … shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order …Section 19, MSMED Act, 2006

• The deposit is mandatory. A court may at most allow it in instalments for genuine hardship (Goodyear, Aska Equipments, Tirupati Steels).
• Pending the challenge, the court may release part of the deposit to you.
• A buyer cannot side-step the deposit with a writ petition (India Glycols, 2023). How absolute that bar is now sits before a five-judge bench (TANCEM, 2025).

7. Recovery

Once the time to challenge has passed, or a challenge fails, the award is enforced under Section 36 of the Arbitration Act as if it were a decree of a civil court. You file an execution petition where the buyer or its assets are, and the court can attach bank accounts and property.

The 2026 amendment adds two stronger tools once notified. Section 18A makes a mediated settlement or award recoverable as arrears of land revenue, through the District Collector where the buyer's assets are, and declares the amount a debt recognisable under the Insolvency and Bankruptcy Code.

Timelines in one table

In practice many Councils take longer than 90 days, because of hearing calendars, service of notice and adjournments. The 2026 amendment responds with stage-wise limits, more Councils and online hearings.

What the 2026 amendment changes in this process

Full summary of the Amendment Act and its status

What slows cases down, and how to avoid it

• Notices that never reach the buyer. Verify contacts before filing.
• Invoices without acceptance proof. Match every invoice to a delivery or completion document.
• Jurisdiction fights. Registration dates, category changes and works-contract objections. Address them in the claim itself.
• Limitation on old invoices. Gather acknowledgments, or use conciliation for the time-barred part.
• Loose interest numbers. Wrong start dates or rates invite disputes. Compute invoice by invoice.
• Unanswered counter-claims. Prepare the reply on quality and deductions before the buyer raises them.