In practice, MSME Form 1 is still treated by many companies as a routine filing something that can be pushed to the end. Recent ROC orders suggest that approach is no longer safe. Non-filing is increasingly leading to adjudication proceedings, penalties in lakhs, and in many cases, direct exposure for directors.
What exactly is MSME Form 1?
Answer: MSME Form 1 is a half-yearly return required from companies that have outstanding dues towards Micro or Small Enterprises (MSEs), where payments are delayed beyond 45 days from acceptance.
It has been introduced under Section 405 of the Companies Act, 2013.
When does it apply?
Answer: A company is required to file MSME Form 1 only if:
- It deals with Micro or Small Enterprises, and
- The payment to such vendors remains outstanding for more than 45 days
A few practical points that often get missed:
- Medium enterprises are not covered
- It is a trigger-based filing, not periodic by default
- There is no requirement to file a NIL return
Where companies are going wrong
Answer: The biggest issue is not delay—it is non-filing.
Once MSME Form 1 is not filed despite applicability, it moves beyond a simple compliance lapse.
ROCs are initiating adjudication under Section 454, issuing notices not just to the company but also to directors as officers in default.
This is where things start getting serious.
Penalty exposure is real
Penalties are typically imposed under Section 405(4) read with Section 450.
In most cases, the structure looks like:
- Rs.10,000 as base penalty
- Rs. 1,000 per day for continuing default
And this is applied to:
- The company, and
- Each officer in default
So the numbers escalate quickly, especially where delays run into months.
What recent ROC orders are showing
1. Adjudication Order Order ID: PO/ADJ/01-2026/CB/01335 dated Dated: 06/01/2026 for violation of Section 405 of the Companies Act, 2013 in the matter of NATRINAI VENTURES LIMITED ROC Coimbatore issued an adjudication order dated 06th January 2026, for violating Section 405 (1) of the Companies Act, 2013 for filing the MSME-1 form with a delay of 1192 days and 1011 days for the period ending 30/09/2021 and 31/03/2022 respectively. The Adjudicating Authority imposed a penalty of Rs. 3,00,000 each upon the company and two of the directors for default.
2. Samsung R&D Institute India Pvt. Ltd..
- Delay of 266 days for one period and 85 days for another
- Adjudication was initiated
- Total penalty imposed: around Rs.11.67 lakh
Even in more routine cases involving delays of around 90–100 days, penalties are touching:
- Rs.1.3–1.4 lakh for the company
- Around ₹1 lakh per director
So even a 3-month delay is no longer minor in monetary terms.
Recent adjudication orders passed by the Registrar of Companies are sending a very clear message MSME-1 is no longer a routine compliance and Delays, even for a few months, are now resulting in serious monetary penalties and adjudication proceedings.
One area where companies get caught easily
MSME compliance doesn’t exist in isolation. It directly links with financial statements.
Companies are required to disclose:
- Outstanding principal dues to MSMEs
- Interest payable and paid
- Accrued but unpaid interest
- Ageing of dues (within and beyond 45 days)
Now, if financials show MSME dues beyond 45 days, but MSME Form 1 is not filed, it creates a clear gap.
This is one of the most common triggers for scrutiny.
A practical risk many overlook
During:
- ROC scrutiny
- Statutory audit
- Due diligence
This mismatch is easy to identify and once identified, it becomes difficult to justify.
“Lack of vendor confirmation” is generally not accepted as a valid defence.
Practical challenges on the ground
From what is typically seen:
- Vendors do not give MSME declarations
- Incorrect classification between Micro, Small, and Medium
- Ageing is not tracked properly
- ERP systems are not aligned with compliance requirements
These are operational issues—but they don’t reduce legal exposure.
What actually helps
A few practical steps that make a real difference:
- Take MSME declarations from all vendors upfront
- Keep vendor master updated
- Monitor 45-day ageing closely
- Cross-check financial statement disclosures before filing
- Do a compliance review before due dates instead of after
In short:
- Applicable to: Companies dealing with MSE vendors
- Trigger: Dues outstanding beyond 45 days
- Frequency: Half-yearly (only if triggered)
- NIL return: Not required
- Consequence: Adjudication + penalties
- Penalty: RS.1,000 per day + base amount.
Recent adjudication orders clearly show a shift in approach.
MSME Form 1 is no longer being treated as a routine filing. Even moderate delays are attracting penalties, and prolonged defaults are crossing Rs.10 lakh with direct implications for directors.
My Closing thought
MSME compliance is now inter connected. What is disclosed in financial statements must align with what is filed with ROC and any gap between the two is not just a technical issue it is a starting point for adjudication.
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**This document is for educational purposes only and does not constitute legal advice.
Author : M/s Ronak Jhuthawat & Co, Practicing Company secretary Call: +91 98874 22212 | Email: compliancerjac@gmail.com
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