MSME Dispute Resolution & Receivable Recovery

Recovery services

What the law provides (MSMED Act, 2006)

• 45-day limit (s.15): a buyer must pay a micro or small supplier on the agreed date, which cannot exceed 45 days from acceptance (or deemed acceptance) of goods or services. Where there is no written agreement, the limit is 15 days.
• Compound interest (s.16): late payment attracts compound interest with monthly rests at three times the bank rate notified by the RBI.
• Facilitation Council (s.18): the supplier can refer the dispute to the state's Micro and Small Enterprises Facilitation Council (MSEFC), which conciliates and, failing settlement, arbitrates.
• Appeal deposit (s.19): a buyer challenging an award must first deposit 75% of the amount awarded.

Source: MSEFC note, Ministry of MSME (RAMP)

Who can use it

• Micro and small enterprises registered on Udyam as manufacturers or service providers, acting as suppliers.
• Traders and medium enterprises are not covered by these remedies.

Recent changes

• ODR is now the front door: from 15 October 2025, all new delayed-payment cases are filed on the MSME ODR portal (odr.msme.gov.in). MSME Samadhaan continues for legacy cases.
• Support for filing costs: under the MSE Scheme on ODR for Delayed Payments (2023-24 to 2026-27), an eligible MSE can receive one-time support of up to ₹4,000: ₹2,000 for documentation and ₹2,000 towards the MSEFC fee.
• Buyer-side tax impact: under Section 43B(h) of the Income-tax Act, 1961 (carried into the Income-tax Act, 2025), a buyer can deduct an amount due to a micro or small enterprise only in the year it is actually paid, if payment is made later than the MSMED Act limit.

Source: MSE Scheme on ODR for Delayed Payment: guidelines