MSME Award Appeal here we mean and discuss Appeal against the order, decree or Award arising out of the statutory arbitration proceeding under MSME Act. There have been challenges to this provision in courts, where the contentions were raised that this provision is not mandatory and there can be deviation by the Appellate court. Thus, the Supreme Court has made it clear that the provision of section 19 of the MSME Act is mandatory in nature..    

MSME Supplier payment terms – under MSME Act

Author- admin
Date:May 26, 2023

MSME Supplier payment terms

MSME Law Notes by NB Associates

The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 is an Indian legislation that aims to promote, develop, and enhance the competitiveness of micro, small, and medium enterprises (MSMEs).

While the act provides various provisions for the growth and support of MSMEs, it does not specifically define payment terms for suppliers under the act.

Payment terms between MSMEs and their buyers are typically determined through mutually agreed-upon contracts or agreements. However, there are certain limitations imposed by the Act.

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.

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It is important to note that the MSMED Act contains provisions related to the delayed payment of dues to MSME suppliers by the buyer.

These provisions are intended to protect the interests of MSMEs and ensure timely payment.

Here are the key aspects related to payment terms and delayed payments under the MSMED Act:

Payment Due Date

The act states that the buyer must make payment to the MSME supplier for the goods or services within the agreed-upon period mentioned in the contract.

If there is no specific payment period mentioned, the buyer is required to make the payment within fifteen days from the date of acceptance of goods or services.

If there is any agreed period, and the period is more than 45 days, then the payment must be made within 45 days.

If there is any agreed period, and the period is more than 45 days, then the payment must be made within 45 days.

If there is an agreed period, and the period agreed is more than 15 days and less than 45 days than the payment is to be made within the agreed period.

Interest on Delayed Payment

If the buyer fails to make payment to the MSME supplier within the specified time, the buyer is liable to pay compound interest with monthly rests to the supplier. The interest rate for delayed payments is three times the bank rate notified by the Reserve Bank of India, whichever is lower.

Read here – RBI Bank rate for MSME notified from time to time.


Buyers are required to disclose their outstanding payment obligations to MSMEs in their annual financial statements, including the amount of dues as per section 22 of the Act.

Facilitation Council

The act establishes Micro and Small Enterprise Facilitation Councils at the district and state levels to provide assistance in the settlement of disputes related to delayed payments.

MSME suppliers can approach these councils to seek redressal for delayed payments.

It’s important to consult the MSMED Act directly or seek legal advice for a comprehensive understanding of the provisions related to payment terms and delayed payments.


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