MSME Samadhaan: How to Recover a Delayed Payment Through the MSEFC (2026)

How-To · Delayed Payment Recovery

Updated for 2026 · Claw Editorial

A micro or small business that has supplied goods or services and is still waiting for payment is not stuck with a slow customer. Indian law gives it a special route. A registered micro or small enterprise can claim payment from a buyer who has not paid within 45 days, by filing an application on the MSME Samadhaan portal. The case goes to the Micro and Small Enterprises Facilitation Council (MSEFC) of the state, which first tries conciliation and then arbitration, and the buyer owes compound interest at three times the RBI bank rate. This guide walks through each step, in order, in plain English. Last verified: October 2026.

01Why delayed payment is a legal problem, not just a business one

For a small supplier, a delayed payment is rarely a small matter. It means salaries, raw material and loan instalments are paid from borrowed money while a larger buyer holds the cash. Many suppliers stay silent because they fear losing the customer.

The usual routes are slow and costly

A civil suit for recovery can take years and needs court fees and a lawyer. A legal notice may get a reply, or it may get silence. A cheque that bounces opens a separate remedy, which we cover in our guide to the Section 138 cheque bounce notice. But many delayed payments have no cheque at all, only an unpaid invoice.

The MSMED Act gives a faster, special route

The Micro, Small and Medium Enterprises Development Act, 2006 (the MSMED Act) puts a time limit on payment, adds heavy interest on late payment, and sends the dispute to a dedicated Facilitation Council. The MSME Samadhaan portal, run by the Ministry of MSME, is the online window to file such a case.

Under the MSMED Act, a buyer who does not pay a micro or small supplier within 45 days owes compound interest at three times the RBI bank rate, and the supplier can go straight to the state Facilitation Council.

02Who can use MSME Samadhaan

Only a micro or small enterprise supplier can file a Samadhaan case, and the buyer must owe money for goods supplied or services rendered. Eligibility is where many claims succeed or fail, so check it first.

• The supplier must be a micro or small enterprise. Medium enterprises are not covered by the delayed payment provisions. Registration is done through Udyam. If you are not yet registered, read how to get Udyam MSME registration.
• Registration timing matters. Courts have looked at whether the supplier was registered on the date the contract was made. A supplier that registered only after the supply may face an objection. Keep your registration date and contract date side by side.
• The buyer can be any buyer. It can be a company, a firm, a government body or a PSU. The Act speaks of “buyer” and does not limit it to large companies.
• The claim must be for goods or services. Money owed for other reasons, such as a loan, is not a supplier claim under these sections.

A written contract helps, but a purchase order, invoice and proof of delivery can also support the claim.

03The 45-day rule and the interest on late payment

The buyer must pay on or before the date agreed in writing, and the agreed period cannot be more than 45 days from the day of acceptance. This is the core of section 15 of the MSMED Act.

If there is no written agreement

Where there is no agreement, the buyer must pay within 15 days from the day of acceptance of the goods or services. If there is an agreement, the longest period allowed is 45 days.

Interest under section 16

If the buyer does not pay in time, the buyer must pay compound interest with monthly rests, at three times the bank rate notified by the Reserve Bank of India, from the day after the due date. Section 16 also says this interest overrides any lower rate in the contract.

Section 17 makes the buyer liable to pay both the principal and this interest. Section 23 adds that the buyer cannot deduct this interest as a business expense for income tax.

Because the bank rate changes, always take the rate from the RBI website for the period of delay. Do not copy a figure from an old blog.

04Step by step: how to file a delayed-payment case

The process has six clear steps. Follow them in order.

Step 1. Check eligibility and the amount

Confirm you are a registered micro or small enterprise, and list each unpaid invoice with its due date. Work out the principal and the interest to date. A tidy statement of account makes everything after this easier.

Step 2. Collect your documents

• Purchase order or contract
• Invoices and delivery proof, such as challans or e-way bills
• Proof that the buyer accepted the goods or services
• Your Udyam registration certificate
• Emails, letters and a legal notice asking for payment

Step 3. Register the case on MSME Samadhaan

Open the MSME Samadhaan portal at samadhaan.msme.gov.in, register as a supplier and file your application against the buyer. You give your details, the buyer’s details, the invoice and amount details, and upload documents. The portal sends the application to the MSEFC of the right state and keeps a record of the case status.

Step 4. MSEFC conciliation

Under section 18, the Council first conciliates. It calls both sides and tries to reach a settlement. Many cases end here, because a buyer facing heavy interest often agrees to pay. Attend each hearing, and keep your papers ready.

Step 5. Arbitration

If conciliation fails, the Council takes up the dispute for arbitration itself, or refers it to an institution that provides arbitration. The Arbitration and Conciliation Act, 1996 then applies as if the parties had agreed to arbitrate. The law expects a decision within 90 days of the reference, though in practice timelines vary by state.

Step 6. The award

The Council gives an award for the principal and the statutory interest. You can then move to enforce it. This is covered in the section on the award below.

If your dispute may also involve running a formal arbitration, see our guide to arbitration case management software in India.

05Mistakes that weaken a claim

Most failed claims fail on paperwork and timing, not on the merits. Watch for these points.

• No proof of acceptance. If the buyer says the goods were defective or never accepted, you need delivery and acceptance records.
• Registration gaps. Check the Udyam date against the contract date, as described above.
• Wrong or missing buyer details. A wrong legal name or address delays service of notice. Use the exact name from the contract and the MCA record.
• Ignoring limitation. The Limitation Act applies to the claim. Do not wait years before filing.
• Weak records of the dispute. If the buyer raised a quality complaint, keep your reply. The Council will look at both sides.

06After the award: how to enforce it or defend a challenge

An MSEFC award is treated as an arbitral award, so it can be enforced like a court decree under the Arbitration and Conciliation Act. If the buyer still does not pay, you file an execution application in the proper civil court.

The buyer can challenge, but must pay first

A buyer who wants to set aside the award must apply under section 34 of the Arbitration Act. Section 19 of the MSMED Act adds a condition: the court will not entertain the application unless the buyer deposits 75 percent of the awarded amount.

This pre-deposit is a strong protection for the supplier. It stops a buyer from delaying payment simply by filing a challenge.

Why the follow-up needs tracking

A case does not end when the award is passed. A section 34 petition, an appeal, a deposit order and an execution application can run in different courts, each with its own dates. Missing one hearing can cost you months. That is why suppliers and the lawyers who act for them keep the whole chain under one watch.

07Where Claw fits

Samadhaan is a filing you do yourself or through a lawyer. Claw does not file the portal application for you. Where Claw helps is after the filing, because a recovery proceeding turns into litigation: the MSEFC award, then any section 34 challenge, appeal or execution.

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

In practice, a lawyer or a company legal team can track the buyer’s court matters by party name, get hearing dates and cause list alerts by WhatsApp and email, and have Claw read a court order and set reminders for the next step. Claw has a free plan for individual advocates, with paid plans for teams. For the full recovery workflow that follows a default, see the post-default legal recovery workflow.

08Sources and further reading

• MSME Samadhaan portal (Ministry of MSME): samadhaan.msme.gov.in
• Ministry of MSME: msme.gov.in
• MSMED Act, 2006 (India Code): indiacode.nic.in
• RBI bank rate: rbi.org.in
• Claw: clawlaw.in

Last verified: October 2026. Confirm the current portal flow and statute text before relying on this page.

09Frequently asked questions