Filing a delayed payment case on MSME Samadhaan — how it actually works

Updated 2026-10-24 · All guides

Most contractors who are owed money by a government department or a larger firm do nothing about it, because the alternative looks like a civil suit they cannot afford. If you are a registered micro or small enterprise, there is a cheaper route that most people never use: an online filing that goes to a statutory council, must be decided inside ninety days, and carries a penalty structure that strongly favours you.

This guide is the procedure. What the registration gets you more generally is in MSME benefits, and the contract-side precautions are in getting paid as a subcontractor.

Who can file

Do I qualify?

You need all of these:

• Udyam registration as a micro or small enterprise. Medium enterprises are outside the delayed-payment provisions. Check your category, because growing out of "small" quietly removes this.
• You supplied something. Goods delivered, or services rendered, and accepted.
• Payment is overdue beyond the statutory period below.
• You were registered at the time. Registering after the invoice does not ordinarily make that invoice eligible, which is the single best argument for registering before you need to.

Can a trading business file?

Generally no. The delayed-payment protection is built around enterprises that manufacture goods or provide services, and trading-only businesses are usually excluded. If you are part manufacturer and part trader, which invoices qualify is a real question and worth advice before filing.

When exactly does payment become overdue?

Two figures, and people quote the wrong one constantly:

• 15 days from acceptance, where there is no written agreement on the payment period.
• Up to 45 days, where there is a written agreement — and 45 is the ceiling. An agreement cannot lawfully stretch it to 90.

So "we pay in 90 days, it is our policy" is not a defence. It is an agreement the statute does not permit.

What counts as "acceptance"?

Acceptance of the goods or services, which may be deemed rather than express — a buyer who takes delivery and says nothing within the objection window does not get to postpone the clock indefinitely by never signing anything. If your buyer's practice is to go quiet, keep the delivery acknowledgement, because that is where the clock starts.

Filing

Step by step

1. Confirm your Udyam registration is live and shows the right category and the right entity name.
2. Assemble the invoices, each with its date, the delivery or completion date, and the acknowledgement of receipt.
3. Send a written demand first, if you have not. It costs nothing, it occasionally works, and it establishes that you asked. Email is fine. Messaging apps alone are weak evidence before a Council.
4. File online at samadhaan.msme.gov.in, using your Udyam credentials. The application is against a specific buyer and specific invoices.
5. Attach the documents — invoices, proof of delivery or acceptance, the agreement or purchase order, and your demand letter.
6. It goes to the Facilitation Council for the state or union territory concerned.
7. Attend when called. A case where the applicant does not appear goes nowhere.

What does it cost?

Filing on the portal costs nothing. Representation, if you choose to be represented, costs what you agree. Compared with a civil suit for the same sum, the gap is large, and that gap is the point of the mechanism.

Do I have to sue first, or instead?

No. This exists so that a small supplier does not have to start with a civil suit.

What happens after you file

Conciliation first

The Council first tries to settle it. Many cases end here, because the buyer's position once a statutory body is asking is different from its position when only you were asking.

Then arbitration

If conciliation is terminated without a settlement, the Council either takes up the dispute as arbitration itself or refers it to an alternate dispute resolution institution. From that point the Arbitration and Conciliation Act 1996 governs, and the outcome is an arbitral award — final, binding and enforceable like any other.

The ninety days

Section 18 requires a reference to be decided within ninety days. Treat it as the standard to hold the Council to rather than a guarantee: in practice cases run longer, and a polite written reminder quoting the section is a reasonable thing to send.

What can I actually recover?

The principal, and compound interest with monthly rests at three times the RBI bank rate under section 16, running from the day payment fell due. Compounded monthly at three times the bank rate, that is well above commercial lending rates, which is what makes the claim worth bringing on sums that would otherwise not justify the effort.

The two things that give this teeth

The buyer must deposit 75 per cent before it can appeal

This is the provision worth knowing before you decide whether to bother. Under section 19, a buyer challenging the award must pre-deposit 75 per cent of the awarded amount with the court.

The Supreme Court has held that requirement to be mandatory, not directory — the leading decision being Gujarat State Disaster Management Authority v. Aska Equipments (2021), reaffirmed since. High Courts have applied it to challenges generally, not only to one narrow form of appeal.

What it means practically: the usual tactic of appealing to make a small supplier give up becomes expensive at the moment of filing. The courts have left themselves room to allow the deposit in instalments where paying at once would cause undue hardship, so it is not absolute — but the default is that an appeal costs the buyer 75 per cent up front.

Your buyer's tax deduction depends on paying you on time

Since the Finance Act 2023 inserted section 43B(h) into the Income-tax Act, with effect from assessment year 2024-25, a buyer can claim a deduction for what it owes a micro or small enterprise only in the year it actually pays, where payment runs past the section 15 limit. Delay the payment past year end and the buyer loses the deduction for that year.

Note that section numbering is in transition: the Ministry of Finance has indicated this corresponds to section 37(2)(g) of the Income-tax Act 2025. Your buyer's accountant will know it by whichever number applies.

Why this matters to you: it gives somebody inside the buyer's organisation a reason to pay you that has nothing to do with goodwill. A reminder sent in February that mentions your Udyam registration is read differently from one sent in July.

Before you file, and before you need to

• State your Udyam registration number on every invoice. The protection is much easier to invoke when the buyer cannot claim it did not know what it was dealing with.
• Get delivery acknowledged in writing, every time. The clock starts at acceptance, and acceptance is a document.
• Re-check your category as turnover grows. Crossing from small to medium removes all of this, and the first you may hear of it is a rejected application.
• Do not treat Samadhaan as the nuclear option. Filing is a procedural step, not a declaration of war, and most cases settle at conciliation. The relationship you are protecting by not filing is often with a buyer who is not paying you.

The short version

If you are a registered micro or small enterprise and you are owed money past 15 days — or 45 where you have it in writing — you can file online, for free, against a buyer who must answer before a statutory Council within ninety days, recover compound interest at three times the bank rate, and watch any appeal cost them 75 per cent of the award up front. Register before you need it, put the number on your invoices, and get delivery acknowledged in writing. Those three habits are what make the remedy available when you want it.