Delayed payments are the single biggest threat to Indian MSMEs. The good news: the MSMED Act, 2006 gives you strong legal tools to recover your money — with compound interest at three times the RBI bank rate.
Here's how to use them.
What the MSMED Act says
Section 15 of the MSMED Act makes it mandatory for buyers to pay MSME suppliers within 45 days of acceptance of goods or services. If the buyer delays, they owe compound interest under Section 16.
That interest is three times the RBI bank rate, compounded monthly. In 2026 that works out to roughly 19.5% per annum — significantly more painful than any bank overdraft.
Step 1: Make sure you are registered on Udyam
You can only claim MSMED Act benefits if you have a valid Udyam Registration Number on the date of supply. Register for free at udyamregistration.gov.in.
Step 2: Send a formal notice
Draft a legal notice under the MSMED Act with:
- Invoice details and delivery proof
- Date on which 45 days expired
- Interest calculation at 3x RBI bank rate
- 15-day deadline to pay or respond
UdyamSathi can generate this notice for you in under a minute — in English or Hindi — ready to send over email and WhatsApp.
Step 3: File a reference with MSEFC
If the buyer still doesn't pay, file a reference with your state's Micro and Small Enterprise Facilitation Council (MSEFC) on samadhaan.msme.gov.in.
The MSEFC will first attempt conciliation. If that fails, the dispute goes to arbitration — which is binding on both parties. The law requires the whole process to finish within 90 days.
Step 4: Enforcement
An MSEFC award has the same force as a court decree. If the buyer still doesn't pay, you can attach their bank accounts or property through execution proceedings.
Interest calculator
For every ₹1 lakh delayed by 6 months, you can claim roughly ₹9,750 in additional interest alone. That's often enough to make the buyer settle quickly.
Automate it
UdyamSathi tracks every invoice, sends polite reminders at 30 days, drafts the legal notice at day 45 and files your MSEFC reference if the buyer still doesn't respond. All on WhatsApp, all in your language.
Don't let delayed payments kill your business. The law is on your side.