For many MSME owners, a large, unpaid invoice can be the difference between growth and financial distress. The pain of a delayed payment is compounded by the knowledge that pursuing it through lengthy litigation can drain your time and resources. The Micro, Small and Medium Enterprises Development (MSMED) Act of 2006, and specifically the MSME Samadhaan portal, was designed to address this very issue. It offers a powerful, fast-track mechanism for MSMEs to recover delayed payments, often with a significant interest component.
This guide, authored by a commercial disputes lawyer with deep experience in the Chennai legal system, will walk you through the entire process—from who qualifies to what to expect at the Council meeting. By the end, you will have a clear understanding of the steps involved and how to leverage this system effectively. If you’re a business owner struggling with delayed payments, understanding this legal tool is crucial.
Who Qualifies and What is the Interest?
To file a case on the MSME Samadhaan portal, your business must have a valid Udyam Registration. The registration must have been active on the date the transaction occurred. The Supreme Court has clarified this in a 2022 judgement, emphasising that the supplier’s MSME status is crucial for the period of the transaction. You can check the eligibility criteria on the Udyam portal.
The MSMED Act mandates that a buyer must pay an MSME supplier within 45 days of the acceptance of goods or services. If they fail to do so, Section 16 of the Act kicks in. The buyer becomes liable to pay interest at a rate that is three times the bank rate notified by the Reserve Bank of India, compounded monthly.
MSME Delayed Payment Interest Calculator (as per Section 16)
Let’s assume the current bank rate is 6%. The interest rate would be 3 x 6% = 18%. This interest is compounded monthly.
- Principal Amount: ₹5,00,000
- Payment Due Date: January 1, 2024
- Actual Payment Date: January 1, 2025
- Number of Months Delayed: 12 months
You can use online calculators to get a precise figure, but the formula is powerful. The interest amount in this example would be approximately ₹95,000. This is a significant incentive for buyers to pay on time and a strong leverage point for MSMEs.
Filing on the MSME Samadhaan Portal: Documents & Process
The MSME Samadhaan portal is designed to be user-friendly, but a successful filing requires careful preparation. Here’s a checklist of the documents you must have ready:
- Udyam Registration Certificate
- Invoices & Work Order: All relevant invoices and the work order or purchase order.
- Bank Account Statement: Proof that the payment has been delayed.
- Legal Notice (Optional but Recommended): A copy of the legal notice sent to the buyer.
- Goods Receipt Note (GRN) or Proof of Delivery: Evidence that the goods or services were delivered and accepted.
Once you have these documents, you can file the application online. After filing, the portal automatically sends an email to the buyer, and the case is referred to the respective Micro and Small Enterprise Facilitation Council (MSEFC) with msme council jurisdiction. In Chennai, this would be the Tamil Nadu MSEFC.
What to Expect at the Council
The Council’s primary objective is to facilitate a conciliation process between the parties within a period of 90 days. A representative from the Council will hear both sides. If a settlement is reached, it is recorded. If conciliation fails, the Council itself can act as an arbitral tribunal or refer the dispute to a different arbitration institution.
- Key Insight: Many buyers believe an arbitration clause in the contract supersedes the MSME Samadhaan process. However, the Supreme Court in Silpi Industries Pvt. Ltd. v. Kerala State Road Transport Corporation (2021) and subsequent cases has clarified that the MSMED Act is a special legislation. Therefore, even if a contract has an arbitration clause, the MSME Samadhaan process is a valid and preferred route.
The Role of a Lawyer & Common Questions
While the MSME Samadhaan portal is accessible to all MSMEs, navigating the Council proceedings can be complex. Having a lawyer from a firm like Aran Law, which has handled commercial disputes in forums like the Commercial Division of the Madras High Court, can make a significant difference.
- A lawyer can ensure your application is comprehensive and error-free, preventing technical dismissals.
- During conciliation, an advocate can present your case clearly and professionally, including the accrued interest claim.
- Should the case proceed to arbitration, a lawyer is essential to represent your interests.
Registration Timing Jurisprudence
A recent trajectory of Supreme Court decisions has been a key development for MSMEs. The Court has clarified that to avail the benefits of the MSMED Act, the supplier must have been registered as an MSME on the date of the transaction. If the registration was obtained after the goods were supplied or services rendered, the Act’s provisions, including the high-interest rate, may not apply. This highlights the importance of timely Udyam registration.
Execution of the Award/Decree
The final order of the Council, whether it’s a conciliation agreement or an arbitral award, has the force of a court decree. This means it can be directly enforced under the Code of Civil Procedure, 1908.
An execution petition is filed in a civil court to recover the amount. The court can order the attachment of the buyer’s assets, freezing of bank accounts, or other measures to satisfy the decree.
Frequently Asked Questions (FAQs)
No. The MSME Samadhaan portal is exclusively for businesses that have a valid Udyam Registration and qualify as a Micro, Small, or Medium Enterprise under the Act.
The portal is designed for supplier claims. A buyer cannot file a counter-claim on the Samadhaan portal itself. They must raise any disputes during the conciliation or arbitration process.
Yes. A notice for cheque bounce under Section 138 of the Negotiable Instruments Act is a criminal proceeding and can be initiated concurrently with the MSME Samadhaan process. This is a common strategy for a swift resolution.
Government bodies and PSUs are also liable under the MSMED Act, and an MSME can file a case against them on the portal. The process and legal principles remain the same.
An MSME Samadhaan proceeding can run in parallel with the Insolvency and Bankruptcy Code (IBC). A conciliation process or arbitration initiated by the MSME Council does not, in itself, constitute a ‘dispute’ that would prevent a creditor from initiating an IBC proceeding, provided other conditions are met.
Don’t Navigate This Alone: Get Expert Legal Advice
The MSME Samadhaan process can be a powerful tool, but like any legal proceeding, it requires a clear strategy. Our team, led by Shanmugapriya, can help you with every step—from ensuring your documentation is perfect to representing your interests before the Council in Chennai.
Contact Aran Law for a Professional Assessment Visit Our Debt Recovery Services Page
About the Author: Shanmugapriya is an accomplished Advocate of the Madras High Court with over a decade of experience. She specializes in commercial disputes and debt recovery, with extensive experience across key forums, including the Commercial Courts, the National Company Law Tribunal, and arbitration panels. She is known for her practical, results-oriented approach and deep understanding of Indian commercial law.
About Aran Law: We are a boutique litigation and arbitration firm based in Chennai. Our approach is to provide clients with a clear and honest assessment of their case. We focus on a pragmatic strategy and tireless advocacy across the courts of Tamil Nadu, including the Commercial Courts and NCLT Chennai. We do not make any guarantees about outcomes; we offer a transparent process and dedicated legal representation.
Representative Matters:
- Successfully represented an MSME in a Samadhaan case, securing the principal amount and the entire accrued interest.
- Negotiated a favorable settlement during a Council meeting, preventing a long and drawn-out arbitration.
- Assisted clients with the execution of Samadhaan arbitral awards in the City Civil Court Commercial Courts in Chennai.
Disclaimer
This blog post provides general information and does not constitute legal advice. The outcome of any legal matter depends on its specific facts and circumstances. You should seek tailored legal advice before taking any action. This content is for informational purposes only, as per the rules of the Bar Council of India.
