Buyers Are Delaying My Bills: How Section 15 of the MSMED Act Helps

Late payments can leave small businesses struggling to pay staff and suppliers. Eligible micro and small enterprises may use the MSMED Act, 2006 to pursue overdue bills. Section 15 sets the payment timeline, Section 16 covers interest, and Section 18 provides a route to the Micro and Small Enterprises Facilitation Council (MSEFC).

What is the 45-day rule?

A buyer must pay by the date agreed in writing, and that period cannot exceed 45 days from acceptance or deemed acceptance of goods or services. If there is no written agreement, payment is due by the statutory “appointed day.” So, 45 days is the maximum permitted agreed period—not an automatic grace period for every invoice. If your contract says 15 or 30 days, that shorter deadline may apply.

Keep invoices, purchase orders, delivery or service records, acceptance proof, payment terms and written reminders.

Can you claim compound interest?

Under Section 16, a buyer who fails to pay as required by Section 15 is liable for compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. The start date depends on the written payment date or statutory appointed day. Do not guess a fixed percentage: calculate the claim using the relevant dates, applicable bank rate and any part-payments.

A qualifying supplier may claim the unpaid principal and applicable interest. Keep correspondence about any dispute.

Who is eligible?

These delayed-payment protections generally apply to eligible micro and small enterprise suppliers with valid Udyam Registration, subject to the Act and applicable rules. Do not assume medium enterprises or every trading activity is covered; some trading activities are excluded. Confirm your enterprise category, registered activity and eligibility before filing.

Registration is free through the official Udyam Registration portal. For help understanding business registration and compliance, visit Embark Corpserv and confirm the services available.

What should you do about overdue bills?

1. Prepare a statement. List invoice numbers, supply dates, invoice amounts, payments received and the outstanding balance.

2. Gather evidence. Keep purchase orders, invoices, delivery or service records, acceptance confirmations, emails, messages, bank statements and reminders.

3. Send a written demand. Identify the invoices and total due, state the agreed terms and request payment by a clear deadline. Keep proof of sending and delivery.

4. Check eligibility and dates. Verify Udyam details, registered activity, the date payment became due and the applicable limitation period. Seek legal advice if liability is disputed.

5. Consider the Council route. Eligible suppliers can submit a delayed-payment reference through the MSME Samadhaan portal. The portal facilitates filing; the relevant MSEFC considers the matter under the statutory process, including conciliation and, where required, arbitration. Filing does not guarantee immediate recovery.

For document guidance, contact Embark Corpserv.

Mistakes to avoid

• Relying only on phone calls instead of written records.

• Failing to connect invoices with delivery or service-acceptance proof.

• Assuming every enterprise category or activity qualifies.

• Using an unverified interest rate or incorrect due date.

• Treating Udyam registration as proof that every invoice is payable.

A clear document trail helps explain your claim to the buyer or Council.

FAQs

Is 45 days allowed for every invoice? No. The written period cannot exceed 45 days, but a shorter agreed deadline may apply. Without written terms, the appointed-day rule is relevant.

Does interest start after day 45? Section 16 interest applies when payment is not made as required under Section 15. The correct start date depends on the agreed date or appointed day.

Does Udyam registration guarantee recovery? No. Eligibility, transaction details, timing and evidence still matter. For business registration guidance, contact Embark Corpserv.

Conclusion

Payment delays can damage cash flow, but eligible micro and small enterprises may have remedies beyond reminders. Section 15 sets the payment timeline; Section 16 provides for monthly-compounded interest at three times the RBI-notified bank rate; and Section 18 offers a formal dispute-resolution route. Verify eligibility, preserve evidence and calculate the claim carefully. For business registration and compliance guidance, contact Embark Corpserv.

This article is general information, not legal advice. Confirm eligibility and procedure with a qualified professional or the relevant authority.