MSME Samadhaan: How to Recover Delayed Payments

The MSME Samadhaan portal offers a streamlined process for Micro and Small Enterprises (MSEs) to recover delayed payments from buyers. It enables MSEs to file online applications with the Micro and Small Enterprise Facilitation Council (MSEFC), which then mediates and adjudicates these disputes. This mechanism is crucial for maintaining the financial health of MSEs, ensuring timely cash flow, and imposing statutory interest on delayed amounts.

What is MSME Samadhaan?

MSME Samadhaan is an online portal launched by the Ministry of Micro, Small and Medium Enterprises (MSME) to address the issue of delayed payments to Micro and Small Enterprises (MSEs). It provides a platform for MSEs to file applications for delayed payment recovery against buyers of goods or services. The portal facilitates the resolution of these disputes through the Micro and Small Enterprise Facilitation Council (MSEFC), established under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

The primary objective of MSME Samadhaan is to ensure that MSEs receive payments for their goods and services within the stipulated timeframes as per the MSMED Act, 2006. If payments are delayed, the Act mandates a penal interest, which the MSEFC can enforce. This initiative aims to improve the liquidity of MSEs, which are often disproportionately affected by delayed payments, thereby fostering a healthier business environment for them.

Who can file a complaint on MSME Samadhaan?

Only Micro and Small Enterprises (MSEs) that are registered under the Udyam Registration portal can file a complaint on MSME Samadhaan. Medium Enterprises are not eligible to use this portal for delayed payment recovery.

To be eligible, the enterprise must possess a valid Udyam Registration number. This registration certifies their status as a Micro or Small Enterprise as per the MSMED Act, 2006. The complaint must pertain to goods supplied or services rendered by the MSE to a buyer, where the payment has been delayed beyond the statutory period. The Act defines "appointed day" as the day following the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier. If there is a written agreement, the period can extend up to forty-five days.

What documents are required to file a complaint?

To file a complaint on MSME Samadhaan, you typically need your Udyam Registration number, invoices for the goods or services supplied, purchase orders, and any communication related to payment delays.

Here's a detailed list of common documents required:

• Udyam Registration Number: Mandatory for verifying the enterprise's status as a Micro or Small Enterprise.
• Invoices/Bills: Copies of all invoices or bills raised for the goods supplied or services rendered, clearly showing the date, amount, and details of the buyer.
• Purchase Orders/Work Orders: Copies of purchase orders or work orders received from the buyer, establishing the contractual agreement.
• Delivery Challans/Proof of Delivery: Documents confirming the delivery of goods or completion of services.
• Bank Statements: To show proof of partial payments, if any, and the outstanding amount.
• Correspondence: Any email, letter, or other communication exchanged with the buyer regarding the outstanding payment, including reminders and acknowledgements of debt.
• Agreement (if any): A copy of any written agreement between the supplier and the buyer, especially if it specifies payment terms.
• Affidavit: A self-attested affidavit confirming the truthfulness of the information and documents submitted.

How is interest calculated on delayed payments?

Under Section 16 of the MSMED Act, 2006, buyers are liable to pay compound interest with monthly rests on the delayed payment amount at three times the bank rate notified by the Reserve Bank of India.

The calculation of interest is a critical aspect of the MSMED Act, 2006, designed to penalise delayed payments and compensate MSEs adequately. Sec. 16 of the MSMED Act, 2006 states: "Where any buyer fails to make payment of the amount to the supplier, as required under section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any other law for the time being in force, be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times the bank rate notified by the Reserve Bank."

The "appointed day" refers to the date from which interest becomes payable. This is either 15 days from the date of acceptance of goods/services, or the date agreed upon in writing, which cannot exceed 45 days. The bank rate is the rate at which the Reserve Bank of India lends money to commercial banks. This high interest rate acts as a strong deterrent against delayed payments and ensures that MSEs are not financially crippled by buyers' non-compliance.

What is the role of the MSEFC?

The Micro and Small Enterprise Facilitation Council (MSEFC) is a quasi-judicial body established under the MSMED Act, 2006, responsible for conciliation and arbitration of delayed payment disputes filed by MSEs.

Upon receiving a complaint through the MSME Samadhaan portal, the MSEFC first attempts to resolve the dispute through conciliation. If conciliation fails, the Council proceeds to arbitrate the matter. The proceedings of the MSEFC are governed by the provisions of the Arbitration and Conciliation Act, 1996, with certain modifications. The Council has the power to issue directions to the buyer for payment of the outstanding amount along with the statutory interest. The decisions of the MSEFC are binding on both parties.

The MSEFC is mandated to dispose of every reference made to it within a period of ninety days from the date of making such a reference. This time-bound mechanism ensures swift resolution of disputes, which is vital for the survival and growth of MSEs.

How is an MSEFC order enforced?

An order passed by the MSEFC is deemed to be a decree of a civil court and is enforceable as such, allowing the MSE to initiate execution proceedings if the buyer fails to comply.

Sec. 19 of the MSMED Act, 2006 states: "No application for setting aside any decree, award or other order made by the Council or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court."

This provision significantly strengthens the position of MSEs, as it requires the buyer to deposit 75% of the awarded amount before challenging the MSEFC's order in court. This pre-deposit clause discourages frivolous appeals and ensures that MSEs receive a substantial portion of their dues even during the appeal process. If the buyer still fails to comply, the MSE can approach the appropriate civil court for execution of the MSEFC's order, similar to executing a court decree.

Comparison: MSME Samadhaan vs. Traditional Legal Recourse

Feature	MSME Samadhaan	Traditional Legal Recourse (Civil Suit)
Eligibility	Only Micro & Small Enterprises (Udyam registered)	Any individual or entity
Forum	Micro & Small Enterprise Facilitation Council (MSEFC)	Civil Courts
Process	Online application, conciliation, arbitration	Plaint filing, summons, evidence, arguments, judgment
Timeframe	Mandated 90 days for dispute resolution	Can take several years, depending on court backlog
Interest Rate	Compound interest @ 3x RBI bank rate	Simple interest, typically 6-12% per annum, at court's discretion
Pre-deposit for Appeal	Buyer must deposit 75% of awarded amount	No such mandatory pre-deposit for appeal
Cost	Minimal or no filing fees	Significant legal fees, court fees, and other expenses
Legal Expertise	Can be navigated with basic legal assistance	Requires extensive legal expertise
Enforcement	Order deemed as civil court decree	Judgment is a civil court decree

How SP & SC helps

Navigating the complexities of delayed payment recovery, especially with the legal nuances of the MSMED Act, can be challenging. SP & SC Legal and Taxation Services provides expert guidance and support for Micro and Small Enterprises in filing and pursuing claims through the MSME Samadhaan portal. Our team assists with documentation, application filing, representing your case before the MSEFC, and ensuring the effective enforcement of orders, helping you recover your dues efficiently. Visit our services page for more information: /services/legal-contracts/corporate-disputes

Frequently asked questions

What is the time limit for filing a complaint on MSME Samadhaan?

There is no specific statutory time limit mentioned in the MSMED Act, 2006, for filing a complaint regarding delayed payments. However, it is advisable to file the complaint as soon as the payment delay occurs, preferably within three years from the date the payment became due, to avoid potential arguments of delay or limitation under general law. Prompt action increases the chances of a quicker resolution.

Can a Medium Enterprise file a complaint on MSME Samadhaan?

No, only Micro and Small Enterprises that are registered under the Udyam Registration portal are eligible to file a complaint on MSME Samadhaan. Medium Enterprises, despite being part of the broader MSME category, are specifically excluded from this particular delayed payment redressal mechanism under the MSMED Act, 2006.

What if the buyer is also an MSME?

The MSMED Act, 2006, and the MSME Samadhaan portal apply irrespective of whether the buyer is an MSME or a large enterprise. If a Micro or Small Enterprise has supplied goods or services to any buyer, including another MSME, and payment is delayed, the supplier MSE can file a complaint against the buyer MSE. The provisions of the Act, including the penal interest, will still apply.

Can an MSEFC order be challenged?

Yes, an order passed by the MSEFC can be challenged in a higher court. However, as per Section 19 of the MSMED Act, 2006, if the appellant (the buyer) wishes to challenge the order, they must first deposit 75% of the awarded amount with the court before their appeal can be entertained. This provision acts as a significant deterrent against frivolous appeals.

How long does it take for a resolution through MSME Samadhaan?

The MSMED Act, 2006, mandates that the Micro and Small Enterprise Facilitation Council (MSEFC) must dispose of every reference made to it within a period of ninety days from the date of making such a reference. While this is the statutory target, actual resolution times can sometimes vary depending on the complexity of the case, cooperation from parties, and the workload of the specific MSEFC.