MSME Samadhaan and Delayed Payments: 45-Day Rule, ODR, 43B(h)

If you are a micro or small enterprise and a buyer has not paid you within 45 days, Indian law gives you three things: a right to interest at three times the RBI bank rate, a government dispute route that does not need a civil suit, and a tax rule that nudges buyers to pay on time. This guide explains the 45-day rule, how MSME Samadhaan has moved to the new MSME ODR portal, how to file a case step by step, and what Section 43B(h) means for the businesses that owe you money.

The 45-Day Rule in Plain Words

Chapter V of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 deals with delayed payments. The core rule is in Section 15. The buyer must pay the supplier on or before the date agreed in writing. If there is no written agreement, the buyer must pay before the “appointed day”, which works out to 15 days from the day the buyer accepts (or is deemed to accept) the goods or services. And whatever the agreement says, the agreed period can never exceed 45 days from acceptance.

Situation	Payment deadline
No written agreement on credit period	15 days from acceptance or deemed acceptance
Written agreement says 30 days	30 days from acceptance
Written agreement says 60 or 90 days	Capped at 45 days; the longer term does not override the Act
Buyer raises a written objection about quality or quantity within 15 days	Clock runs from the date the defect is fixed and goods or services are accepted

“Deemed acceptance” matters. If the buyer does not raise any written objection within 15 days of delivery, the law treats the goods or services as accepted on the delivery date. So keep proof of delivery: e-way bills, signed delivery challans, courier tracking, or email confirmation for services.

Who is protected and who is not

Only a “supplier” in the sense of the Act gets these rights. That means a micro or small enterprise with a valid Udyam Registration. Since 1 April 2025, a micro enterprise is one with investment up to Rs 2.5 crore and turnover up to Rs 10 crore, and a small enterprise is one with investment up to Rs 25 crore and turnover up to Rs 100 crore. Our Udyam registration guide covers the limits and the filing process.

In a July 2026 clarification reported by Taxguru, the Finance Ministry confirmed that the 43B(h) tax rule applies only to micro and small enterprises, and not to medium enterprises or to traders. Retail and wholesale traders can register on Udyam for priority-sector lending, but that registration does not bring the delayed-payment protection with it.

Interest on Late Payment: How Much the Buyer Owes

Section 16 of the Act says that if the buyer misses the deadline, it must pay compound interest with monthly rests, from the appointed day, at three times the bank rate notified by the Reserve Bank of India. This interest is payable regardless of anything in your contract that says otherwise. Section 23 adds that the buyer cannot claim this interest as a deductible expense for income tax.

Worked example (illustrative)

Say a micro enterprise in Rajkot supplies machined parts worth Rs 2,00,000 to a larger manufacturer. The purchase order says 45 days. The buyer pays four months after the 45-day deadline. To keep the maths simple, assume the RBI bank rate at the time was 5.5% a year. (Check the actual rate for your period on the RBI website; it changes with monetary policy.)

• Three times the bank rate: 16.5% a year, or about 1.375% a month.
• Compounded monthly for four months: Rs 2,00,000 multiplied by (1.01375 to the power of 4, minus 1), which comes to roughly Rs 11,200.
• So the buyer owes the principal plus about Rs 11,200 of statutory interest, even if the PO was silent on interest.

Most small suppliers never claim this interest because they worry about losing the customer. That is a business decision only you can make, but you should at least know the number before you negotiate.

MSME Samadhaan Is Now the MSME ODR Portal

For years, the Ministry of MSME’s MSME Samadhaan portal was where suppliers filed delayed-payment cases against buyers. Those applications went to the Micro and Small Enterprises Facilitation Council (MSEFC) of the relevant state. When we checked the portal in October 2026, it showed 2,56,892 applications filed in total, involving about Rs 31,693 crore of payable amount.

The same portal now carries a notice that all new delayed-payment applications are filed on the MSME Online Dispute Resolution (ODR) portal at odr.msme.gov.in. According to the ICAI journal’s review of MSME payment reforms, filing on the ODR portal became mandatory from 15 October 2025. A PIB research note from August 2026 says the ODR portal was launched in June 2025 and that 161 MSEFCs now operate across states and union territories.

How the ODR process works

The ODR portal runs a dispute in two broad stages:

1. Pre-MSEFC stage (voluntary). A digital guided pathway and an online negotiation step, where the buyer is notified and can settle without the council getting involved.
2. MSEFC stage (statutory). If there is no settlement, the case goes to the state’s facilitation council under Section 18 of the Act. The council first tries conciliation or mediation, and if that fails it takes up arbitration or refers it to an institution. Section 18(5) asks the council to decide a reference within 90 days.

If the council’s award goes against the buyer and the buyer wants to challenge it in court, Section 19 requires the buyer to first deposit 75% of the awarded amount. That deposit rule is a big reason buyers take MSEFC awards seriously.

How to File a Delayed Payment Case: Step by Step

The screens on government portals change from time to time, so treat the following as the general flow rather than a click-by-click map.

1. Confirm you qualify. You need a valid Udyam Registration showing micro or small status, and the supply should be of goods or services (not pure trading).
2. Collect your documents. Gather everything listed in the checklist below before you log in.
3. Send a written reminder first. Email the buyer with the invoice numbers, due dates, amounts outstanding and a reference to Section 15 and 16 of the MSMED Act. Give a short deadline, such as seven days. This often settles things and it becomes evidence if it does not.
4. Register on the ODR portal. Use your Udyam number and the mobile number or email linked to it to log in with an OTP.
5. Enter buyer details. Legal name, GSTIN, PAN if you have it, registered address, and a contact person’s email and phone. Under Section 18(4), the council of the state where the supplier is located generally hears the case.
6. Enter claim details. List each invoice with its date, amount, date of acceptance, amount received, and amount due. Claim interest under Section 16 separately.
7. Upload documents and submit. Keep the acknowledgement number.
8. Take part in negotiation or conciliation. Hearings are largely online. Be ready to share ledgers and answer the buyer’s objections.
9. Track the case. Follow up through the portal, and keep your email and phone active for notices.

Document checklist

Document	Why it matters
Udyam Registration certificate	Proves you are a micro or small “supplier”
Purchase order, work order or contract	Shows the agreed credit period
Tax invoices	Amount and date of each supply
Delivery proof (challan, e-way bill, LR, service completion email)	Fixes the acceptance date
Buyer’s ledger or your account statement	Shows part payments and the balance
Reminder emails and any replies	Shows you asked, and whether the buyer disputed quality
Bank statements for payments received	Supports the interest calculation

Section 43B(h): Why Buyers Now Care About the 45 Days

The Finance Act, 2023 added clause (h) to Section 43B of the Income-tax Act, 1961. It says that any amount a business owes to a micro or small enterprise, if paid later than the Section 15 limit, can be deducted as an expense only in the year it is actually paid. ICAI’s journal notes that it applies from assessment year 2024-25, that is, for the financial year 2023-24 onwards.

The practical effect shows up at year-end. Suppose a buyer owes your firm Rs 5 lakh on 31 March and that amount is already past the 45-day limit. The buyer cannot claim that Rs 5 lakh as an expense for that year. It pays tax on a higher profit and gets the deduction only in the year it pays you. Many finance teams therefore clear MSE dues before 31 March.

India’s new Income-tax Act, 2025 came into force on 1 April 2026. The Finance Ministry clarification reported by Taxguru states that the corresponding provision in the new Act is Section 37(2)(g). Your buyer’s CA may refer to either number depending on the year.

Other disclosure rules that work in your favour

• Section 22 of the MSMED Act: a buyer whose accounts are audited must disclose, in its annual accounts, the principal and interest unpaid to micro and small suppliers at year-end and the interest paid during the year.
• Form MSME-1: companies that owe micro and small suppliers beyond 45 days report these dues to the Ministry of Corporate Affairs through a half-yearly return.

The 2026 Amendment: What May Change

A PIB research note dated 11 August 2026 says Parliament passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 in August 2026. Among the changes it describes:

• Mediation to be completed within 90 days of the first appearance, referral to arbitration within 30 days if mediation fails, and an arbitral award within 90 days of pleadings being completed.
• Courts to direct payment of at least 50% of the awarded amount to the supplier if a challenge stays pending for over six months.
• Mediated settlements and awards made recoverable as arrears of land revenue through the district collector.
• Central public sector enterprises required to settle MSME invoices through TReDS.
• Some penalties decriminalised, with warnings for first instances.

New laws apply from the dates the government notifies. Before citing any of these provisions in a dispute, check whether the relevant section has come into force, or ask your CA or lawyer.

Practical Habits That Get You Paid Faster

Legal rights are useful, but most small businesses would rather never file a case. A few habits reduce the problem:

• Print your Udyam number on every invoice and quotation. It quietly reminds the buyer’s accounts team that 43B(h) applies.
• Write the credit period into the PO. If the buyer’s PO says 90 days, reply in writing that the MSMED Act caps it at 45.
• Get acceptance in writing. A one-line email saying “material received in good condition” fixes the clock.
• Use TReDS for large buyers. If your buyer is on a TReDS platform, you can discount the invoice and get paid early at a financing cost.
• Keep a receivables ageing sheet. Columns for invoice date, acceptance date, due date, days overdue and statutory interest. Review it weekly.
• Keep your registrations current. Udyam, GST and, if you are an eligible startup, DPIIT recognition are what buyers’ vendor teams and banks ask for first.
• Escalate in steps. Polite reminder at day 30, firm reminder at day 45, written notice citing the Act at day 60, ODR filing after that.

A short reminder email you can adapt

Subject: Payment overdue for Invoice 1042 and 1057

Dear Mr Sharma, our invoices 1042 (Rs 85,000, accepted 4 August) and 1057 (Rs 1,15,000, accepted 18 August) remain unpaid beyond 45 days. As a micro enterprise registered under Udyam (UDYAM-XX-00-0000000), we are entitled to payment within 45 days under Section 15 of the MSMED Act, 2006, and to interest under Section 16 for the delay. We request payment of the outstanding Rs 2,00,000 by 20 October. Please let us know if any document is pending from our side.

Frequently Asked Questions

Can a medium enterprise file on the MSME ODR portal?

The delayed-payment protections in Chapter V of the MSMED Act apply to micro and small enterprises as suppliers. Medium enterprises are not covered by these provisions, and the Finance Ministry has said 43B(h) does not apply to them either.

Is there a fee to file a delayed payment case?

Filing through the government portal has generally been free for suppliers. Check the ODR portal at the time of filing in case any fee applies to a particular stage, such as institutional arbitration.

Can I file if I sold goods before getting Udyam Registration?

Courts have generally looked at whether the supplier was registered when the contract was made. If you registered later, speak to a lawyer before filing, because the buyer may challenge the claim on this ground.

Does 43B(h) mean the buyer pays me interest?

No. 43B(h) only affects the buyer’s own income-tax deduction. The interest you are owed comes from Section 16 of the MSMED Act. The two work together, but they are separate rules.

Which state’s MSEFC hears my case?

Section 18(4) of the Act gives jurisdiction to the council of the state where the supplier is located, though buyers sometimes contest this. The portal routes cases based on the details you enter.

Do these rules apply to payments from government departments?

The MSMED Act defines a buyer broadly, and public sector buyers are covered. Central public sector enterprises are also pushed to use TReDS. Check with your CA for the specific buyer.

What to Do This Week

Pull out your receivables list and mark every invoice older than 45 days. Make sure your Udyam number is on your invoices, send firm written reminders, and calculate the statutory interest so you know your position. If a buyer still stalls, the ODR portal is a structured, low-cost route that does not need a civil suit. Rules and portals change, so confirm the latest position on the official MSME portals and with your chartered accountant before filing or making a tax claim.