Every small supplier knows the phone call. “Sir payment Is processed. It will reach by Friday.” Which Friday? Nobody says. The MSMED Act, 2006 has an answer that doesn’t depend on anyone’s mood.
THE 45 DAY RULE YOUR BUYER FORGET
Under Section 15 of the Act, it requires the buyer to pay a micro or small supplier within 45 days. After that, the buyer owes compound interest at three times the RBI rate. You can claim it only if you hold a valid Udyam Registration that predates the disputed invoices, so register before you supply, not after the fight starts.
Please don’t let “we’re in a cash crunch” become your buyer’s financing strategy. You are not their bank.
BIG PROBLEM, SMALL DENT
The Economic Survey 2025-26 put money stuck in delayed MSME payments at ₹8.1 lakh crore. Formal claims since 2017 total only ₹55,244.31 crore which is under 7% of the problem.
2,56,896 applications were filed up to 31st December, 2025 in which 53,911 cases were disposed off involving about ₹14,638 crore. Provided 52,744 applications worth ₹8,397 crore hadn’t even been examined by the Councils.
A Lok Sabha reply puts it bluntly. Of 1,48,697 references between April 2022 and February 2026, 76,448 were still pending.
FORGET SAMADHAAN, GO TO THE ODR PORTEL
The Ministry decided that from 15 October 2025, all new delayed payment references must be filed on the MSME ODR Portal (odr.msme.gov.in), and Samadhaan now only redirects. The portal is free, and you can file without a lawyer.
Early results look promising. In Telangana, more than 800 cases had been filed via the ODR ecosystem by August 2026, with around 85 resolved. One proprietor reported filing in under an hour, with the buyer getting in touch within a week. A formal notice from a council gets a reply that months of follow up calls did not.
THE LAW JUST GOT A FACELIFT
The MSMED (Amendment) Act 2026, was notified on 13th August 2026 and follows:
- Mediation must finish within 90 days, reference to arbitration within 30 days of that, and the award within 90 days of completing pleadings.
- Section 18A lets the amount due be recovered as arrears of land revenue where the buyer’s assets are located. It is also treated as debt recognized under IBC
- The 75% pre deposit challenged to an award stays. If the challenged pends for more than 6 months, the court must release at least 50% of the deposit to the supplier.
- Jurisdiction now follows the supplier’s registered address.
WHAT THE COURTS SAID LATELY
In Sonali Power Equipments (2025), the Supreme Court held that the Limitation Act applies to arbitration under Section 18(3), and that time barred claims cannot even be sent for conciliation. A forgotten invoice does not stay alive forever.
The Madhya Pradesh High Court, in June 2026 set aside a ₹4.56 crore award because the council went to arbitration without first conducting and terminating conciliation. The Supreme Court has taken the same line, calling an arbitration skipping that steps a nullity.
The Supreme Court has held that a writ petition against a Facilitation Council award is not maintainable, because the remedy is Section 34 and it requires the 75% deposit.
YOUR BATTLE PLAN
1.Register on Udyam before you sign a contract.
2.Keep the Paper Trail such as PO, Invoices and signed proof of delivery. “He promised on Whatsapp” is not evidence.
3. Send a polite reminder, then a firm notice, once day 45-day passes.
4. File on odr.msme.gov.in, with the interest calculated at three times the bank rate.
5. Attend every conciliation sitting, A good award can die on procedural technicality.
6. After the award, use Section 18A for recovery once it is in force for your cases.
“Chasing payment is not rude. It is just late arithmetic.”
FREQUENTLY ASKED QUESTIONS
Q1. Who can use this law, my business or my customer’s?
The supplier must be a micro or small enterprise with a valid Udyam registration. Medium enterprises are not covered by the delayed payment provisions. The buyer can be any business, a company, or a government department or PSU.
Q2. My invoice is 50 days old. Can I file today?
Yes, if there is no written agreement with a different credit period. The law outer limit is 45 days from acceptance of goods or services. If your contract fixes a shorter period, that applies, and without a written agreement the appointed day is 15 days.
Q3.How much interest I can claim?
Compound Interest with monthly rests at three times the RBI rate, from the date payment fell due.
Q4. Do I need a lawyer? What does it cost?
Filing is free, and many suppliers represent themselves. A telengana casebook reports people finding online in under an hour and spending less than ₹1,000/-.
Q5. What if the buyer challenges the award in Court?
The buyer must deposit 75% of the award before the court will hear a challenge under Section 34.
Q6. What documents should I keep ready?
Udyam Registration certificate, PO or contract, Tax Invoices, Proof of Delivery or acceptance, Payment ledger