MSME Samadhaan: how to recover delayed payment from large companies through the MSCI complaint process

A delayed MSME payment carries compound interest at three times the RBI bank rate — about 18.75% p.a. as at August 2026 — which turns a ₹40 lakh invoice left unpaid for 120 days into a ₹42.56 lakh claim. The recovery route is the MSME Samadhaan portal (samadhaan.msme.gov.in), which routes the claim to the state Micro and Small Enterprises Facilitation Council (MSCI) for conciliation and then arbitration. The whole reference is targeted to conclude within 90 days under s.18 MSMED Act 2006.

What the law actually requires

Section 15 sets the payment clock. When a supplier delivers goods or services to a buyer, the buyer must pay within the period in a written agreement, capped at 45 days — or, where there is no written agreement, within 15 days of acceptance or deemed acceptance. s.15 MSMED Act 2006. The countdown starts from the day the supply is accepted, not from the invoice date on its own.

Section 16 prices the delay. If the buyer does not pay within the s.15 period, compound interest runs on the unpaid amount from the day after it fell due, with monthly rests, at three times the bank rate notified by the RBI. At a 6.25% bank rate that is 18.75% p.a. — an order of magnitude above the 12-18% most corporates pay on their own working-capital debt, which is why the statutory route is a real negotiating lever, not a formality.

Sections 17 and 18 create the council route. Under s.17, a supplier may recover an unpaid amount by application to the Micro and Small Enterprises Facilitation Council (MSCI) — the conciliation-and-arbitration body set up in every state. Under s.18, the Council first acts as conciliator (s.18(2)); if conciliation fails, it arbitrates itself or refers to an arbitration institution (s.18(3)), and the arbitration provisions of the Arbitration and Conciliation Act 1996 apply (s.18(4)). The statutory target is for the dispute to be decided within 90 days of reference. The Council's award is binding and can be executed like a court decree.

Three eligibility and timing rules decide whether a claim sticks:

• Only micro and small enterprises — not medium — can use the MSCI route, and only with a live Udyam registration. A supplier without a Udyam number has no s.15/s.16 protection.
• File within 3 years. The claim is a suit for money, so the 3-year limitation under the Limitation Act 1963 runs from the date the amount became due. A complaint filed at 3 years and 1 day is dead.
• No civil court in parallel. s.24 bars civil courts from jurisdiction over matters the Council is empowered to decide — the MSCI is the forum, not the district court.

The buyer's parallel disclosure. The same overdue MSME payables surface on the buyer's side: a buyer that is a "specified company" under the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order 2019, as amended by S.O. 2670(E) dated 22 July 2024, must file Form MSME-1 half-yearly with the ROC — by 31 October for the April-September half and 30 April for the October-March half — disclosing amounts payable to MSME suppliers outstanding beyond 45 days. For a supplier this matters because a buyer under that Order cannot quietly park an overdue invoice; it is on the buyer's statutory record.

What changed FY 2025-26

• The Form MSME-1 net is wider. The July 2024 amendment lowered the specified-company thresholds, so a larger population of large buyers must report overdue MSME payables to the ROC half-yearly. More buyers are therefore on record with overdue MSME dues than ever before.
• s.43B(h) ITA 1961 is the silent enforcer. A buyer who leaves an MSME invoice unpaid past 45/15 days loses the income-tax deduction until payment (AY 2024-25 onwards). By FY 2025-26 that cost is routine, so Samadhaan claims increasingly target genuinely contested invoices rather than slow payment — the buyer's delay now has two prices: 18.75% compound interest to the supplier and deferred tax deduction to the treasury.
• The portal is the process. Samadhaan filing, buyer notification and conciliation scheduling all happen online, with automatic reminders to the buyer. The practical path from complaint to conciliation is weeks, not months.

Worked example: TechCore Pvt Ltd

TechCore Pvt Ltd (Small, Udyam-registered) supplies software licences to a large listed corporate buyer under a written agreement allowing 45 days' credit.

Interest under s.16 — compound interest with monthly rests at 18.75% p.a. (monthly rate 1.5625%):

The claim is ₹42,55,921 — principal ₹40,00,000 plus ₹2,55,921 of statutory compound interest (~6.4% of principal in four months). Note the compounding: had the buyer paid simple interest at 18.75% on the same delay, the number would be ₹2,46,575; the monthly rests add about ₹9,346, which is exactly why s.16 uses monthly rests.

Samadhaan path for TechCore:

If the buyer is a specified company, the same ₹40,00,000 appears in its Form MSME-1 half-yearly return — giving TechCore documentary proof of the buyer's own acknowledgment of the overdue amount.

Step-by-step: file a Samadhaan complaint

• Confirm eligibility — Udyam-registered micro or small enterprise; the debt is for goods/services supplied; payment is beyond the s.15 limit.
• Assemble the invoice file — invoice, delivery/challan or acceptance proof, the written agreement (if any), and the buyer's PAN/GSTIN.
• File on samadhaan.msme.gov.in with the authorised signatory's Aadhaar; the portal generates an application reference.
• Watch the buyer notification — the portal alerts the buyer automatically; a buyer response often follows.
• Attend conciliation before the MSCI; settle on payment terms with the interest computed, or let it proceed to arbitration.
• Track to award — the Council arbitrates within the 90-day reference period; the award is enforceable under the A&C Act 1996.

FAQ

Who can file on the Samadhaan portal?
Only Udyam-registered micro and small enterprises that have supplied goods or services to a buyer and not been paid within the s.15 period. A medium enterprise is outside the MSCI route, and an unregistered supplier has no s.15/s.16 protection.

What interest applies to a delayed payment?
s.16 MSMED Act 2006: compound interest with monthly rests at three times the RBI bank rate — about 18.75% p.a. as at August 2026 — running from the day after the amount became due. The rate moves with the bank rate, so it must be recomputed at the date of claim.

How long do I have to file?
3 years from the date the amount became due, under the Limitation Act 1963. The MSCI and the courts treat a late claim as time-barred, so file before the 3-year mark even if the buyer is still negotiating.

Do I need a written agreement to get the 45-day limit?
No. 45 days is the maximum the parties may agree, and it binds whether the agreement is written or implied. Without any written agreement, s.15 defaults to 15 days from acceptance. Either way, s.16 interest applies to the delay beyond the applicable limit.

What does the MSCI actually do with my complaint?
It first conciliates under s.18(2) — the practical window is about 30 days. If conciliation fails, the Council arbitrates (s.18(3)) with a 90-day statutory reference period, and its award is binding and enforceable under the A&C Act 1996.

Our buyer is a large company. Can it just ignore the MSCI?
No. If the buyer is a specified company under the Specified Companies Order 2019 (as amended July 2024), the overdue amount must be disclosed in Form MSME-1 to the ROC half-yearly. And the s.43B(h) deduction is deferred until payment — so a buyer that ignores a valid claim carries both the 18.75% compound interest and the tax disallowance.

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Sources

• MSMED Act 2006 — s.15 (payment period), s.16 (compound interest at 3× bank rate), s.17 (recovery through Facilitation Council), s.18 (conciliation and arbitration), s.24 (bar on civil court jurisdiction)
• Arbitration and Conciliation Act 1996 — applied to MSCI arbitration by s.18(4) MSMED Act 2006
• Limitation Act 1963 — 3-year limitation on recovery of money
• Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order 2019, as amended by S.O. 2670(E) dated 22 July 2024 (Form MSME-1 half-yearly return)
• MSME Samadhaan portal — samadhaan.msme.gov.in (Ministry of MSME)
• s.43B(h) Income-tax Act 1961 (deferred deduction for unpaid MSME payables)

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