The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 outlines provisions for Delayed Payment to Micro and Small Enterprises (MSEs) under sections 15 to 24. The Act mandates the establishment of Micro and Small Enterprise Facilitation Councils (MSEFCs) by state governments to mediate disputes relating to delayed payments (Sections 20 and 21).
Upon reviewing the case presented by an MSE unit, the relevant MSEFC will instruct the buyer unit to pay the due amount plus interest as detailed under the MSMED Act 2006.
Any micro or small enterprise holding a valid Udyam Registration is eligible to apply.
Under the Act, the buyer is obliged to pay compound interest, calculated monthly, to the supplier at a rate triple the bank rate determined by RBI if payment for goods or services is not made within 45 days of acceptance (Section 16). It is the responsibility of state governments to notify the Authority for filing the Entrepreneur Memorandum, outline the Rules of the MSEFC, and establish the MSEFCs. All States/UTs have done so in line with the provisions of the MSMED Act 2006. Any case referred to an MSEFC must be resolved within ninety days from the date of filing (Section 19).
The implementation of the Act’s provisions is the responsibility of the MSEFC, chaired by the Director of Industries of the state or union territory overseeing the MSE units. State governments and UTs are requested to ensure regular MSEFC meetings and timely decision-making within the mandated 90-day period.
MSME Samadhaan Portal – A Government Initiative
The Ministry of MSME has launched an online application system enabling supplier MSE units to file a case against the buyer before the pertinent MSEFC of their State/UT. These applications are accessible to MSEFC Council members, central ministries, departments, CPSEs, and state governments for proactive action.
Steps to Lodge a Delayed Payment Claim Online