Appeal Against MSME Order – Section 19 of MSMED Act
MSME Law Notes by NB Associates
Appeal against MSME order here we mean and discuss ‘an order arising out of the statutory arbitration proceeding under MSME Act’.
The MSME claim proceeding under MSME Act ultimately culminates into an Arbitration proceeding under section 18(3) of the MSMED Act.
The arbitration proceeding under MSMED Act can either be conducted by the MSME Facilitation Council or it may delegate the arbitration proceeding to any institution facilitating alternate dispute resolution. Such an institution appoints an arbitrator to adjudicate the dispute.
We are the leading Law firm/Lawyers providing comprehensive MSME legal consultancy to our clients. We also help and legally assist our clients in the recovery of dues or outstanding.
Clients may contact us at the given number for any legal consultancy.
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So what is an Appeal against MSME order.
A Micro and Small enterprise can file an MSME claim against its buyer, if the buyer fails to make payment of the dues within a period of 15 (Fifteen) days of the date of the delivery of the goods or services.
Such a claim can be filed before the concerned MSME facilitation council through the online portal MSME Samadhan.
We have already published an article on MSME claim/court procedure and you can visit it by clicking here.
So, the MSME claim is finally adjudicated in an Arbitration proceeding conducted either by the MSME facilitation council or an arbitrator appointed.
A party aggrieved with any order, decree or award passed under this arbitration proceeding can file an appeal under section 19 of the MSME Act.
Section 19 of the MSME Act provides that an application for setting aside a decree, award or order made by the council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the council, can be filed.
Section 18(3) of the Act provides the council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration.
Section 18(3) of the Act further provides that the provisions of the Arbitration and Conciliation Act, 1996 apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 7 of that Act.
Under the provisions of the Arbitration and Conciliation Act, 1996 an objection or appeal against the award passed by the arbitrator can be filed under section 34 of the Arbitration and Conciliation Act, 1996.
Thus, an appeal against the MSME order can be filed under section 34 of the Arbitration and Conciliation Act, 1996 read with section 19 of the MSMED Act.
19. Application for setting aside decree, award or order.—No application for setting aside any decree, award or other order made either by the Council itself 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:
Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.
Section 19 of the MSMED Act provides that no application for setting aside any decree, award or other order made under the provisions of section 18(3) can be filed unless the appellant (who is not a supplier) has deposited with the court 75 % of the award amount.
Thus no Appeal against MSME order can be entertained in court unless 75% of the award amount is deposited in the court.
Section 19 of the MSMED Act further provides that the court can order such deposited amount to be paid to the supplier. Such an order by the court can be made if the court thinks it is reasonable under the circumstances and such order can be passed subject to such conditions as the court think fit.
Thus, section 19 of the MSMED Act provides the following:
1. An appeal against the order, decree or award under the proceeding started under section 18(3) / Arbitration proceeding can be filed.
2. No such appeal can be entertained by the court unless the appellant (not being a supplier) deposits with such court a sum equivalent to 75 % of the award amount.
3. Such deposited amount can be released to the respondent/supplier on such terms as the court may deem fit.
In an arbitration proceeding started under section 18(3) of the MSMED Act, the provision of the Arbitration and Conciliation Act, 1996 applies to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 7 of that Act.
Section 18(3) reads as under:
18. Reference to Micro and Small Enterprises Facilitation Council.—
(1)
(2)
(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 7 of that Act.
Under the provisions of the Arbitration and Conciliation Act, 1996 an objection or appeal to the award passed by the arbitrator can be filed under section 34 of the Arbitration and Conciliation Act, 1996.
Thus, an appeal against MSME order can be filed under section 34 of the Arbitration and Conciliation Act, 1996 read with section 19 of the MSMED Act.
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Section 16 of MSME Act, 2006: Interest on Delayed Payments, Three Times RBI Bank Rate and Monthly Compounding
Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) is one of the most important provisions protecting micro and small enterprises against delayed payments. It imposes a statutory obligation on buyers to pay interest when they fail to make payments within the period prescribed under Section 15 of the Act.
Under Section 16 of the MSME Act, a buyer who delays payment must pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India (RBI). This interest liability applies notwithstanding anything contained in an agreement between the buyer and supplier or any other law in force.
The provision gives MSME suppliers a significant legal remedy against buyers who withhold payments beyond the prescribed period. It also prevents buyers from avoiding statutory interest merely by relying on contractual provisions that prescribe a lower rate of interest.
For businesses dealing with MSME suppliers, understanding Section 16 is essential because delayed payments can result in substantial interest liability in addition to the original invoice amount.
This article explains Section 16 of the MSMED Act, its legal interpretation, the applicable interest rate, monthly compounding, the relationship with Section 15, and the remedies available to MSMEs for recovering outstanding payments.
Section 16 of the MSMED Act, 2006 deals with the date from which and the rate at which interest becomes payable when a buyer delays payment to a micro or small enterprise.
The provision creates a mandatory statutory interest obligation.
In substance, Section 16 provides that where a buyer fails to make payment as required under Section 15, the buyer becomes liable to pay compound interest with monthly rests to the supplier.
The interest must be calculated at three times the bank rate notified by the Reserve Bank of India.
The provision contains an overriding clause. Consequently, the buyer cannot ordinarily avoid statutory interest by relying on a contractual agreement prescribing a lower interest rate.
| Particulars | Legal position |
|---|---|
| Governing legislation | MSMED Act, 2006 |
| Relevant provision | Section 16 |
| Beneficiary | Eligible micro and small enterprise supplier |
| Person liable | Buyer |
| Interest rate | Three times RBI-notified bank rate |
| Nature of interest | Compound interest |
| Compounding frequency | Monthly rests |
| Commencement | Appointed day or day immediately following the agreed payment date, as applicable |
| Overriding effect | Overrides inconsistent contractual provisions and other laws |
Official statutory text: Section 16 of the MSMED Act – Income Tax Department.
Section 16 prescribes interest at three times the bank rate notified by the Reserve Bank of India.
The applicable formula is:
MSME Statutory Interest Rate = 3 × RBI Bank Rate
For example, if the RBI bank rate is 5.50%, the statutory interest rate under Section 16 will be:
5.50% × 3 = 16.50% per annum.
However, the actual rate depends on the RBI bank rate applicable during the relevant period. Therefore, suppliers should verify the RBI notifications before preparing an interest calculation.
The RBI announces different monetary policy rates. These include the repo rate, bank rate, standing deposit facility rate and marginal standing facility rate.
For calculating interest under Section 16, the relevant benchmark is the bank rate notified by the RBI, not the repo rate.
Using the repo rate instead of the bank rate may result in an incorrect statutory interest calculation.
One of the most significant features of Section 16 is its requirement of compound interest with monthly rests.
This means that interest is calculated at monthly intervals and added to the outstanding amount for subsequent interest calculations.
The statutory provision does not prescribe simple interest. It specifically requires compound interest with monthly rests.
| Particulars | Simple interest | Compound interest |
|---|---|---|
| Calculation basis | Original principal | Principal plus accumulated interest |
| Interest accumulation | Does not compound | Compounds periodically |
| Monthly rests | Not applicable | Applicable under Section 16 |
| MSME statutory requirement | No | Yes |
The difference becomes substantial when payment remains outstanding for several years.
For example, if a buyer delays payment of ₹10 lakh, the interest liability under Section 16 can increase considerably because interest accumulates through monthly compounding.
Therefore, an MSME supplier should prepare its claim using the statutory method rather than applying a simple annual interest formula.
The commencement date of statutory interest depends on Section 15 of the MSMED Act and the payment agreement between the parties.
Section 15 provides that a buyer must make payment on or before the date agreed upon in writing. If there is no written agreement, the buyer must make payment before the appointed day.
The agreed payment period cannot exceed 45 days from the date of acceptance or deemed acceptance of goods or services.
Section 16 determines the date from which interest becomes payable.
Where the parties have not agreed upon a payment date in writing, interest becomes payable from the appointed day.
The appointed day generally means the day immediately following the expiry of 15 days from acceptance or deemed acceptance of goods or services.
Where the parties have agreed in writing to a payment period within the statutory maximum, interest becomes payable from the date immediately following the agreed payment date.
For example:
Section 15 does not permit the parties to agree upon a payment period exceeding 45 days from acceptance or deemed acceptance.
A contractual payment period exceeding 45 days cannot ordinarily postpone the statutory payment obligation.
Accordingly, the statutory payment deadline must be determined by applying the 45-day maximum, and interest may become payable from the day immediately following that deadline.
Sections 15 and 16 must be read together.
Section 15 establishes the buyer’s obligation to make payment within the prescribed period. Section 16 creates the statutory interest liability when the buyer fails to comply with that obligation.
The provisions operate together as follows:
| Provision | Subject | Legal effect |
|---|---|---|
| Section 15 | Liability of buyer to make payment | Prescribes the payment deadline, subject to the 45-day maximum |
| Section 16 | Date and rate of interest | Imposes compound interest at three times RBI bank rate |
| Section 17 | Recovery of amount due | Makes the buyer liable to pay principal and statutory interest |
| Section 18 | Reference to MSEFC | Provides the statutory dispute resolution mechanism |
| Section 19 | Application for setting aside award | Requires a 75% deposit by a non-supplier appellant, subject to the statutory provision |
A supplier seeking recovery should establish the payment default under Section 15 before claiming interest under Section 16.
No, not ordinarily.
Section 16 begins with a non obstante clause. It expressly provides that the statutory interest obligation applies notwithstanding anything contained in an agreement between the buyer and supplier or any law in force.
Therefore, a contractual clause prescribing interest at 9%, 12% or 15% per annum cannot ordinarily replace the statutory rate where Section 16 applies.
Similarly, the absence of an interest clause in the purchase order or commercial agreement does not, by itself, remove the statutory liability.
Assume that a purchase order contains the following condition:
“Interest on delayed payment shall be payable at 9% per annum.”
If the supplier is eligible for protection under the MSMED Act and the buyer defaults under Section 15, the statutory rate under Section 16 will ordinarily prevail over the contractual rate.
The buyer cannot simply rely on the contractual provision to avoid the higher statutory interest.
This principle makes Section 16 an important protective provision for eligible MSME suppliers.
Courts have repeatedly recognised the special nature of statutory interest under Section 16.
Court: Delhi High Court
Date: 6 July 2023
Case: W.P.(C) 13754/2019 and connected matter.
The Delhi High Court examined the statutory provisions governing delayed payments under Sections 15, 16 and 17 of the MSMED Act.
The Court explained that Section 16 contemplates three essential features:
The judgment reinforces that the interest calculation must follow the statutory formula and not an ordinary contractual interest calculation.
This decision is particularly relevant when preparing MSME interest claims and challenging incorrect interest calculations.
Read the Delhi High Court judgment.
Court: Delhi High Court
Case: W.P.(C) 11233/2021.
The Delhi High Court considered the statutory payment obligations and the protection available to micro and small enterprises under Sections 15 to 18 of the MSMED Act.
The Court recognised that the statutory framework provides for payment within a maximum period of 45 days and imposes a higher rate of interest in case of default.
The decision is relevant for understanding the relationship between the contractual payment terms and the statutory obligations under the MSMED Act.
The Supreme Court, in its judgment dated 17 July 2025, examined the statutory recovery framework under Sections 16, 17 and 18 of the MSMED Act.
The judgment discusses how the statutory interest under Section 16 forms part of the amount recoverable under Section 17 and the remedies available under Section 18.
It is relevant to understanding the relationship between statutory interest and the MSME dispute resolution mechanism.
Read the Supreme Court judgment.
Yes.
Section 16 creates a statutory obligation independent of an express contractual interest clause.
The supplier does not necessarily need to establish that the buyer agreed to pay interest in the purchase order or commercial agreement.
The supplier must, however, establish that:
Once the statutory conditions are satisfied, interest becomes payable in accordance with Section 16.
The calculation of interest under Section 16 requires consideration of the principal amount, the date of default, the applicable RBI bank rate and monthly compounding.
Assume the following:
| Particulars | Details |
|---|---|
| Outstanding invoice | ₹10,00,000 |
| RBI bank rate (illustrative) | 5.50% |
| Statutory interest rate | 16.50% |
| Interest period | 12 months |
| Compounding | Monthly |
The monthly rate is:
16.50% ÷ 12 = 1.375%.
The illustrative formula is:
[
A=P\left(1+\frac{r}{12}\right)^{12}
]
Where:
For ₹10 lakh at a constant illustrative rate of 16.50%:
| Particulars | Amount |
|---|---|
| Principal | ₹10,00,000 |
| Interest after 12 monthly periods | Approximately ₹1,77,900 |
| Total amount | Approximately ₹11,77,900 |
This is only an illustration. Actual calculations must account for the RBI bank rate applicable during each relevant period, exact monthly rests, the statutory commencement date and any part-payments.
Where the RBI bank rate changes, the calculation should reflect the applicable rate at the relevant monthly rests rather than automatically using one fixed rate for the entire claim.
Sections 15 to 18 of the MSMED Act specifically protect micro and small enterprise suppliers in the delayed-payment framework.
The statutory definition of supplier and the registration requirements must be examined before claiming the benefit of Section 16.
A medium enterprise should not assume that it can claim statutory delayed-payment interest under Section 16 merely because it holds an Udyam registration.
The classification of the enterprise and the nature and timing of the relevant registration are important considerations.
The eligibility of traders requires separate consideration.
The Government has issued directions permitting Udyam registration for certain wholesale and retail traders, but their benefits under the MSMED Act have been restricted in relevant government directions.
A trader should not assume that registration alone automatically creates an entitlement to statutory delayed-payment interest under Section 16.
The nature of the business, applicable government directions and judicial precedents should be examined before initiating an MSME recovery claim.
An eligible supplier can pursue recovery through the statutory mechanism under the MSMED Act.
The supplier may issue a demand notice identifying:
The supplier should collect its Udyam registration, purchase orders, invoices, delivery records, acceptance documents, ledger statements and payment correspondence.
The supplier may initiate proceedings before the competent Micro and Small Enterprises Facilitation Council under Section 18.
The MSME Samadhaan portal provides an online facility for submitting delayed-payment references.
Official portal: https://samadhaan.msme.gov.in/
The Council initially undertakes conciliation or refers the dispute to an appropriate institution or centre.
If conciliation fails, the Council may take up the arbitration itself or refer the dispute to an institution or centre for arbitration under the statutory framework.
After obtaining an enforceable award, the supplier may initiate appropriate execution proceedings for recovery of the principal amount and statutory interest.
A buyer who defaults on payment to an eligible MSME supplier may face several legal and financial consequences.
Statutory interest liability: The buyer becomes liable to pay compound interest at three times the RBI bank rate with monthly rests.
MSME Facilitation Council proceedings: The supplier may initiate statutory proceedings for recovery of the outstanding amount and interest.
Arbitral award: The dispute may result in an arbitral award directing the buyer to pay the principal and statutory interest.
75% pre-deposit requirement: Under Section 19, a buyer or other appellant who is not the supplier must deposit 75% of the amount in terms of the award or order before a court entertains an application to set it aside, subject to the statutory requirements.
Financial and litigation costs: The buyer may also incur legal expenses and other costs associated with defending and complying with the proceedings.
An MSME supplier should maintain proper documentary evidence before initiating recovery proceedings.
The following documents are generally relevant:
A proper invoice-wise interest statement is particularly important because the amount and commencement date may differ for individual invoices.
Section 16 of the MSMED Act, 2006 prescribes statutory interest payable by a buyer who fails to make payment to an eligible micro or small enterprise within the period prescribed under Section 15.
The interest rate is three times the bank rate notified by the RBI. The rate changes when the applicable RBI bank rate changes.
Section 16 expressly provides for compound interest with monthly rests.
Where the MSMED Act applies, the statutory rate under Section 16 generally prevails over an inconsistent contractual interest rate.
Interest becomes payable from the appointed day or the date immediately following the agreed payment date, as applicable under Sections 15 and 16.
Yes. Section 15 does not permit the written payment period to exceed 45 days from acceptance or deemed acceptance of goods or services.
The buyer may raise genuine disputes concerning the supply, quality, quantity or amount payable. The Council or arbitral tribunal will examine the merits. A supplier must establish its entitlement to the principal amount before claiming the associated statutory interest.
Section 16 overrides inconsistent contractual provisions concerning statutory interest. The separate statutory dispute resolution framework under Section 18 must also be considered. An ordinary arbitration clause does not automatically prevent an eligible supplier from invoking the MSMED Act.
Yes, subject to the applicable limitation requirements and the merits of the underlying claim. The supplier must calculate the interest for the relevant period using the applicable RBI bank rates and monthly compounding.
Yes. A buyer may challenge an award in accordance with the Arbitration and Conciliation Act, 1996 and applicable law. Section 19 of the MSMED Act requires a non-supplier appellant to deposit 75% of the award amount as a condition for entertaining an application to set aside the award.
Section 16 of the MSMED Act, 2006 provides a powerful statutory remedy to micro and small enterprises facing delayed payments. It requires buyers to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India.
The provision operates alongside Sections 15, 17 and 18. Together, these sections establish payment deadlines, statutory interest liability and a mechanism for recovery through the Micro and Small Enterprises Facilitation Council.
For suppliers, a proper understanding of Section 16 can significantly strengthen an MSME payment recovery claim. For buyers, timely payment and careful compliance with the MSMED Act can help prevent substantial statutory interest liability and prolonged litigation.
Businesses should therefore review their MSME transactions, contractual payment terms and outstanding invoices to ensure compliance with the statutory payment framework.
NB Associates – Advocates & Legal Consultants
NB Associates provides legal assistance in MSME delayed-payment disputes, Section 16 interest claims, MSME Samadhaan proceedings, MSME Facilitation Council matters, commercial arbitration and recovery of outstanding payments.
Our legal team assists suppliers and buyers with:
Phone: 9811899279
Email: mail@nbassociates.net
Client may contact NB Associates for legal assistance concerning Section 16 of the MSME Act and recovery of delayed payments.
Payment terms for MSME – MSME Payment terms
MSME Law Notes by NB Associates
Micro & Small (MSEs) are the backbones of the Indian economy. Their growth and success are essential for economic development.
However, one of the biggest challenges that MSEs face is managing their cash flow. Cash flow management is vital for the survival and success of any business, but it is even more critical for MSEs, which often have limited resources and access to financing.
We are the leading Law firm / Lawyers providing comprehensive MSME legal consultancy to our clients. We also help and legally assist our clients in the recovery of dues or outstanding.
Clients may contact us on the given number for any legal consultancy.
Contact no : 9811899279
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was introduced by the Government of India to provide support and promote the growth of Micro, Small and Medium Enterprises (MSMEs). One of the key provisions of the Act is to ensure timely payment of dues to MSMEs.
The Act has mandated certain payment terms for MSMEs, which are as follows:
1. The buyer is required to make payment to the supplier maximum of 45 days from the date of acceptance or the deemed acceptance of goods or services.
2. In case of a delay in payment, the buyer is required to pay interest to the supplier at the rate which is 3 times of prevailing rate of the Reserve Bank of India (RBI) for the period of delay.
The interest is compounding interest at monthly rest.
These payment terms are applicable to all buyers, whether they are government agencies, public sector undertakings, or private companies.
When the parties i.e. the supplier and the buyer have not agreed on the period under which the payment is to be made by the buyer to the supplier, the payment has to be made within a period of 15 days of the delivery of the goods or services.
When the parties i.e. the supplier and the buyer have agreed on the period under which the payment is to be made by the buyer to the supplier, and that agreed period is within 45 days from the date of the delivery of the goods, then the payment has to be made within the agreed period of days of the delivery of the goods or services.
When the parties i.e. the supplier and the buyer have agreed on the period under which the payment is to be made by the buyer to the supplier, and that agreed period is more than 45 days from the date of the delivery of the goods, then the payment has to be made within 45 days of the delivery of the goods or services.
The Act also mandates the creation of a facilitation council at the district level to assist MSMEs in the settlement of disputes related to payment. This council is responsible for the following:
The MSME Act, of 2006 has provided a significant boost to the growth of MSMEs in India.
The mandatory payment terms have ensured that MSEs are paid on time, which has improved their cash flow and reduced their dependence on external financing.
The creation of facilitation councils has also provided MSEs with a platform to settle disputes related to payment in a timely and efficient manner.
In conclusion, the payment terms for MSMEs under the MSME Act, 2006 have played a crucial role in supporting the growth of MSMEs in India. It has ensured timely payment of dues, improved cash flow, and reduced the risk of non-payment. MSMEs should take advantage of the provisions of the Act and ensure that their buyers comply with the payment terms mandated by the Act.
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Mutual consent divorce section
Mutual consent divorce law notes by NB Associates
Here we will discuss Mutual consent divorce section.
Mutual consent divorce is a legal process by which a married couple seeks to end their marriage.
In India, the mutual consent divorce process is governed by various laws. The law varies depending on how the marriage happened. Basically, there are the following acts which deal with mutual consent divorce.
Hindu Marriage Act, 1955 – Applicable to Hindus
Special Marriage Act 1954 – Applicable to special marriages
Divorce Act 1869 – Applicable to Christians
Parsi Marriage and Divorce Act 1936 – Applicable to Parsis
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Section 13B of the Hindu Marriage Act 1955 contains provisions for mutual consent divorce for Hindus.
Section 13B provides that a petition for dissolution of marriage by a decree of divorce may be presented to the district court by both parties to a marriage together.
Section 28 of Special Marriage Act 1954
Section 28 of Special Marriage Act 1954 talks about mutual consent divorce for special marriages under Special Marriage Act 1954
Section 28 provides that petition for dissolution of marriage by a decree of divorce may be presented to the district court by both the parties to a marriage together.
Such petition can be presented on the grounds provided therein.
The divorce laws for Christian is provided under Section 10 of Divorce Act 1869.
Section 10A talks about mutual consent divorce in Christian.
Section 10A provides that petition for dissolution of marriage by a decree of divorce may be presented to the district court by both the parties to a marriage together.
Such petition can be presented on the grounds provided therein.
The provision of marriage & divorce for Parsis in India is governed by Parsi Marriage and Divorce Act, 1936
Section 32B of Parsi Marriage and Divorce Act 1936 talks about mutual consent divroce in Parsis.
Section 32B provides that petition for dissolution of marriage by a decree of divorce may be presented to the district court by both the parties to a marriage together.
Such petition can be presented on the grounds provided therein.
Mutual consent divorce can be a faster and less contentious process than a contested divorce, in which the spouses do not agree on the terms of the divorce and must go through a trial to resolve their issues. However, it is important to consult with a lawyer to ensure that your rights and interests are protected during the divorce process.
We help and assist our clients in mutual consent divorce. Our clients may contact us with the following numbers for any mutual consent divorce-related consultancy. The consultancy may be chargeable.
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Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
How can we help you in mutual consent divorce
How can we be contacted
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Payment to MSME – MSME Payment RulesRules
MSME Law Notes by NB Associates
The Government of India has implemented various rules and regulations to ensure timely payment to MSMEs (Micro, Small, and Medium Enterprises).
Here are some of the key rules related to the payment to MSMEs:
This act defines the timeframe for payment to MSMEs.
According to the act, the buyer is required to make payment to the MSME supplier maximum within 45 days of the acceptance of goods or services.
If the buyer fails to do so, they are liable to pay interest at three times the prevailing bank rate notified by RBI .
This policy mandates that at least 25% of the total annual procurement of goods and services by Central Ministries/Departments/Public Sector Undertakings (PSUs) should be from MSMEs.
This is an online platform that facilitates the financing of trade receivables of MSMEs through multiple financiers. It enables MSMEs to get their bills discounted at competitive rates and receive payment within a shorter timeframe.
This portal enables MSMEs to file their grievances related to delayed payments by buyers.
The portal also provides information on the status of their complaints.
This code provides a time-bound and structured mechanism for the resolution of insolvency and bankruptcy cases of companies, including MSMEs.
Overall, these rules and regulations aim to provide a conducive environment for the growth and development of MSMEs by ensuring timely payment to them.
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Section 15 of MSME Act – What is Section 15 of MSME Act?
We will here discuss Section 15 of MSME Act.
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is an Indian legislation aimed at promoting and supporting the growth and development of micro, small and medium enterprises (MSMEs) in the country.
We are among the top Law firms / Lawyers providing legal consultancy related to MSME dues recovery and handling related cases Pan India.
For any kind of legal consultancy, our client may contact us at the following number or email id :
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Section 15 of the MSMED Act deals with the delayed payment to MSMEs by the buyer.
As per this section, buyer is liable to make payment to the supplier within a period of 15 days if there is not agreed date of payment or a maximum period of 45 days when period is agreed.
If a buyer fails to make payment for goods or services supplied by an MSME, the buyer shall be liable to pay compound interest with monthly rests to the supplier on the amount due, as per the rate notified by the Reserve Bank of India (RBI).
15. Liability of buyer to make payment.—Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
The followings are the essential ingredients of section 15 of MSME Act
1. Supplier supplying goods or services to any buyer.
2. Once goods or services are supplied, the buyer has to make payment to the supplier on or before the date agreed between the supplier and the buyer in writing.
3. if there is no agreement in writing stating the date before which the payment is to be made then the payment is to be made before the appointed day.
4. In no case the agreed period of payment between the supplier and buyer to exceed 45 days from the date of acceptance or deemed acceptance.
As per section 2(b) of MSME Act “appointed day” means the day following immediately after 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.
Thus the appointed day means the day immediately following the 15 days of the date of the acceptance of goods or day of the deemed acceptance of goods.
Section 2(b) of MSME Act reads as under:
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) __;
(b) “appointed day” means the day following immediately after 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.
As per Section 2(b) explanation the date of acceptance means :
(1) the day of the actual delivery of goods or the rendering of services; or
(1) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;
Section 2(b) explanation reads as under :
2. Definitions.—In this Act, unless the context otherwise requires,—
(a)___
(b) ___
Explanation.—For the purposes of this clause,— (i) “the day of acceptance” means,—
(a) the day of the actual delivery of goods or the rendering of services; or
(b) where any objection is made in writing by the buyer regarding the acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier.
Section 2(b) explanation (ii) provides that the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding the acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services.
So when no objection is made in writing by the buyer regarding the goods or services within 15 days of the date of delivery, the buyer shall be deemed to have accepted the goods or services.
Section 2(b) explanation (ii) reads as under
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) __
(b) __
Explanation.—
For the purposes of this clause,—
(i) “___
(ii) “the day of deemed acceptance” means, where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;
The buyer to pay compound interest @ 3 times the bank rate notified by RBI.
The interest is to be calculated from the date agreed upon between the buyer and supplier, or, in the absence of such agreement, the date after which the payment becomes due as per the provisions of section 16 of the Act.
This provision is aimed at safeguarding the interests of MSMEs, who often face financial difficulties due to delayed payments from buyers, and to encourage prompt payment by buyers.
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MSME rules for payment
MSME Law notes by NB Associates
MSME (Micro, Small and Medium Enterprises) rules for payment refer to the regulations and guidelines that govern the payment terms and conditions for transactions between MSMEs and their buyers.
The Indian Government has set up specific rules for payments to be made to MSMEs, which are outlined in the MSME Development Act, 2006.
As per the MSME rules, the buyer is required to make the payment to the supplier for the goods or services rendered within a maximum period of 45 days from the date of acceptance or the deemed acceptance of the goods or services.
In case of delay in payment, the buyer is liable to pay interest at a rate which is three times the bank rate notified by the Reserve Bank of India.
The MSME supplier can also file an application before the Micro and Small Enterprises Facilitation Council (MSEFC) in case of non-payment or delayed payment by the buyer.
If there is no agreed credit period between the supplier and the buyer then payment is to be made within 15 days.
If there is an agreed credit period which is within 45 days then the payment has to be made within the agreed credit period.
If there is an agreed credit period which is more than 45 days, then notwithstanding the agreement the payment has to be made within a period of 45 days.
Section 15 of the MSMED Act prescribes that the payment by the buyer has to be made before 15 days of the date of delivery and if there is any agreement this period should not exceed 45 days .
Section 15 reads as under :
15. Liability of buyer to make payment.—Where any supplier supplies any goods or renders any services to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day:
Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Section 16 of the MSMED Act provides that the buyer is liable to pay compound interest with monthly rest at the rate three times the bank rate notified by RBI.
Section 16 reads as under :
16. Date from which and rate at which interest is payable.—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 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 of the bank rate notified by the Reserve Bank.
If the payment is not made, the supplier can approach MSME Facilitation Council under sections 17 and 18 of the MSME Act for the recovery of the payment.
Overall, the MSME rules for payment are designed to ensure that MSMEs are paid on time for their goods or services and to promote their growth and development.
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MSME Arbitration Procedure: A Step Towards Speedy Resolution of Disputes
Micro and Small Enterprises (MSEs) form the backbone of the Indian economy. They contribute significantly to the country’s GDP and provide employment opportunities to a large section of the population. However, these enterprises often face a variety of challenges, including the non-payment of dues by their clients. Delayed payments lead to a severe cash crunch and hinder the growth and expansion of SMEs. To address this issue, the government introduced the MSME arbitration procedure.
The MSME arbitration procedure is a legal mechanism designed to resolve disputes between Micro and Small (MSEs) and their clients. It is a cost-effective and time-efficient alternative to traditional litigation. The procedure is governed by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, which was enacted to promote and develop (MSEs) in India.
Under the MSMED Act, a Micro or Small Enterprise can initiate the arbitration process against a buyer who has failed to make payment for the goods or services supplied within the stipulated time period.
The arbitration process is conducted by an arbitrator appointed by the Micro and Small Enterprises Facilitation Council (MSEFC). The MSEFC is a statutory body set up by the government to facilitate the resolution of disputes between MSMEs and their clients. The council has the power to appoint an arbitrator under section 18(3) of MSMED Act.
However, there is a process for the appointment of an arbitrator. The process starts with the filing of the claim with the MSME Facilitation Council, thereafter conciliation proceedings under section 18(2) of the MSMED Act, and once conciliation fails the provisions for the appointment of arbitrator by MSME Facilitation Council under section 18(3) of MSMED Act is triggered.
The MSME arbitration procedure is a speedy and efficient way of resolving disputes. The arbitrator is required to pass an award within 90 days of receiving the reference.
The award is final and binding on both parties and can only be challenged in court on limited grounds. This ensures that the dispute is resolved in a timely manner, and the MSME is not left waiting for an indefinite period to receive payment.
Another advantage of the MSME arbitration procedure is that it is a cost-effective alternative to traditional litigation.
The fees for the arbitration process are minimal, the stamp duty paid on arbitration award is also minimal, which reduces the overall cost of the process.
The procedure is also conducted in an informal manner, which makes it less intimidating for MSEs, who may not have extensive legal knowledge.
However, the MSME arbitration procedure is not without its challenges.
One of the main issues is the enforcement of the award. In many cases, the buyer may refuse to comply with the award, which leaves the MSME with no option but to approach the court for enforcement. This defeats the purpose of the arbitration process, which was designed to provide a speedy resolution of disputes.
Another challenge faced by MSMEs is the lack of awareness about the arbitration process. Many MSMEs are not aware of their rights under the MSMED Act, and they continue to suffer due to delayed payments. The government has taken several steps to increase awareness about the procedure, including the launch of an online portal for MSMEs to file their grievances. The portal provides information on the claim process and facilitates the resolution of disputes between MSMEs and their clients.
the MSME arbitration procedure is a step towards ensuring the timely resolution of disputes between MSMEs and their clients. It is a cost-effective and efficient alternative to traditional litigation and has the potential to benefit a large number of MSMEs in India. The government has taken several steps to increase awareness about the procedure and to address the challenges faced by MSMEs in enforcing the awards.
However, more needs to be done to promote the MSME arbitration procedure and to ensure that MSMEs are aware of their rights under the MSMED Act. The government can consider launching awareness campaigns to educate MSMEs about the benefits of the procedure and the steps involved in initiating the arbitration process. This will go a long way in promoting the use of the procedure and in reducing the number of delayed payments faced by MSMEs.
Furthermore, the government can consider setting up more MSEFCs across the country to facilitate the resolution of disputes between MSMEs and their clients. This will make the procedure more accessible to MSMEs in remote areas and will reduce the time taken to resolve disputes.
The MSME arbitration procedure is a significant development in the legal landscape of India. It provides a much-needed mechanism for MSMEs to resolve disputes with their clients and ensures that they receive timely payment for their goods and services.
The procedure has the potential to benefit a large number of MSMEs in India and can play a crucial role in the growth and development of the sector.
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MSME Samadhaan Procedure: Resolving Disputes and Ensuring Timely Payments for Indian MSMEs
Law Article by NB Associates
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was established by the Indian government to promote the growth of micro, small and medium enterprises (MSMEs) in the country.
One of the key provisions of the Act is the MSME Samadhaan scheme or MSME Samadhaan Procedure, which helps MSMEs receive timely payments from their buyers and reduce the number of pending disputes
In this article, we will delve into the details of the MSME Samadhaan procedure, including the application process, supporting documents, and dispute resolution mechanism.
We will also discuss the significance of the scheme for Indian MSMEs and how it can help them grow their businesses.
Under the MSME Samadhaan scheme or MSME Samadhaan Procedure, an MSME can file an application to claim unpaid dues against a buyer who is either a company or a limited liability partnership firm.
The application can be filed by the MSME if the payment is overdue for more than 45 days from the date of acceptance or the deemed date of acceptance of goods or services as per the agreement between the parties.
The application can also be filed for disputes arising from the supply of goods or services to the buyer.
The application for MSME Samadhaan can be filed online through the MSME Samadhaan portal or offline by submitting a physical application to the concerned authority. The portal provides a user-friendly interface for filing the application and tracking its status.
The application must include the details of the MSME, such as name, address, contact details, PAN number, GSTIN number, and bank account details. It should also include the details of the buyer, such as name, address, contact details, PAN number, and GSTIN number. The application should mention the amount due to the MSME and the date from which the payment was due.
The application must be accompanied by relevant documents supporting the claim, such as purchase orders, invoices, delivery challans, and any other document as required by the authority.
The application should also include a declaration stating that the information provided in the application is true and correct to the best of the applicant’s knowledge.
The concerned authority will issue a notice to the buyer within two days of receiving the application.
The notice will mention the details of the application and direct the buyer to file a reply within fifteen days from the date of receipt of the notice. The reply should include the reasons for non-payment or the dispute, along with supporting documents.
If the buyer fails to file a reply within the specified time or does not respond, the authority starts conciliation proceeding and if conciliation proceedings fails an arbitration proceeding.
The matter is adjudicated in arbitration proceedings and award is passed accordingly.
In some states authorities follows the following procedure:
when buyer fails to respond, the authority pass an ex-parte order in favor of the MSME. However, if the buyer files a reply, the authority will hear both parties and pass an appropriate order within sixty days from the date of receipt of the application.
The order passed by the authority is final and binding on both parties. If the buyer fails to comply with the order, the authority may issue a certificate of recovery to the district collector, who shall recover the amount due as arrears of land revenue.
The MSME Samadhaan scheme has been helpful for MSMEs in receiving timely payments and resolving disputes with their buyers.
The scheme has reduced the burden of pending dues on MSMEs and has provided a quick and efficient mechanism for resolving disputes.
With the implementation of the scheme, MSMEs can focus on their business growth and take up more business opportunities without the fear of delayed payments.
The scheme has also been instrumental in boosting the confidence of MSMEs and encouraging them to participate in government initiatives and schemes. MSMEs form the backbone of the Indian economy, contributing significantly to employment generation, exports, and GDP.
The timely payments and dispute resolution mechanism provided by MSME Samadhaan help MSMEs to grow their businesses and contribute more to the economy.
The MSME Samadhaan scheme has also been helpful in promoting the ease of doing business in India. The scheme provides a user-friendly portal for filing applications and tracking their status. The scheme has reduced the time and cost involved in resolving disputes and has provided a transparent mechanism for resolving disputes.
The MSME Samadhaan scheme or MSME Samadhaan Procedure has been a game-changer for Indian MSMEs, providing them with a quick and efficient mechanism for resolving disputes and receiving timely payments.
The scheme has reduced the burden of pending dues on MSMEs and has boosted their confidence in participating in government initiatives and schemes.
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MSME Facilitation Council Territorial Jurisdiction – Where it lies?
MSME Law Notes by NB Associates
According to Section 18(4) of the Micro, Small and Medium Enterprises Development Act, 2006, the Micro and Small Enterprises Facilitation Council (MSEFC) has the jurisdiction to act as an Arbitrator or Conciliator in a dispute between an MSME supplier and a buyer located anywhere in India, despite any other law in force.
However, the territorial jurisdiction of the MSEFC is limited to the state or union territory where the MSME supplier is located.
For instance, if an MSME supplier in Delhi has a dispute with a buyer in another state regarding delayed payment, the MSME can approach the MSEFC in Delhi for resolution.
We are among the top Law firms / Lawyers providing legal consultancy related to MSME dues recovery and handling related cases Pan India.
For any kind of legal consultancy, our client may contact us at the following number or email id :
Call us – 9811899279 | Email us – mail@nbassociates.net
It’s essential to note that the MSEFC is established under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, and it can only resolve disputes related to delayed payments to MSMEs. In case of other disputes or claims, MSMEs may have to approach other forums or authorities as per the applicable laws and regulations.
Thus, the MSME supplier can file the dispute claim in the jurisdiction where they are located, and the conciliation or arbitration proceedings will also take place in the same location.
In conclusion, Section 18(4) of the MSMED Act, 2006 provides the MSEFC with the jurisdiction to act as an Arbitrator or Conciliator in disputes between MSMEs and buyers located anywhere in India. However, the territorial jurisdiction of the MSEFC is limited to the state or union territory where the MSME supplier is located.
The MSEFC provides a mechanism for the speedy and cost-effective resolution of disputes related to delayed payments to MSMEs.
The MSEFC’s success in resolving disputes has been a significant boost to the MSME sector, and it has helped in promoting a culture of entrepreneurship and innovation.
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