MSME Samadhaan: How to File a Delayed Payment Case and What to Expect

The Legal Framework: MSMED Act Section 15–23

Sections 15 to 23 of the Micro, Small and Medium Enterprises Development (MSMED) Act 2006 constitute one of the most powerful — and most underutilised — statutory protections available to Indian MSMEs. The legislative intent is clear: large buyers, whether corporate or government, shall not use their market power to delay payments to smaller suppliers.

Section 15 establishes the payment obligation: buyers must make payment to supplier MSMEs by the date agreed in writing, or within 45 days from the date of acceptance of goods or services if no date is agreed. Section 16 establishes the interest penalty: delayed payments attract compound interest at three times the bank rate notified by the Reserve Bank of India. Section 18 establishes the dispute resolution mechanism: the MSEFC (Micro and Small Enterprises Facilitation Council) in each state has jurisdiction over disputes arising from delayed payments.

Who Can File — and Against Whom

Who can file: Any enterprise holding a valid Udyam Registration Certificate at the time of supply of goods or services. This is a critical point — the registration must be valid at the time of the transaction, not just at the time of filing. If your Udyam registration was obtained after the supply was made, you may not be eligible to file for that specific transaction.

Against whom you can file: Any buyer — corporate entity, government department, PSU, or individual — who has not paid within the prescribed period. There is no minimum size threshold for the buyer. The Act applies regardless of whether the buyer is a listed company, a multinational, or a government body.

What you can claim: The principal outstanding amount plus compound interest at three times the RBI bank rate from the due date to the date of actual payment. As of mid-2025, the RBI bank rate is 6.5%, making the applicable interest rate 19.5% per annum, compounded monthly. For long-overdue invoices, the interest component can substantially exceed the principal.

How Compound Interest Is Calculated

Filing on the Samadhaan Portal: Step by Step

1. Access the portal

   Go to samadhaan.msme.gov.in. Register as a supplier using your Udyam Registration Number and mobile/email.

2. Enter buyer details

   Provide the buyer's name, address, GST number, and type of entity (corporate, government, PSU). The portal validates the buyer's PAN and GST details.

3. Enter transaction details

   For each invoice: invoice number, invoice date, supply date, agreed payment date, invoice amount, and amount actually paid (if any partial payment was made). The portal computes the outstanding principal and accrued interest automatically.

4. Upload supporting documents

   Purchase orders or work orders, delivery challans or proof of service delivery, invoices (GST invoices preferred), any written communication from the buyer acknowledging the supply or the debt, and your Udyam Registration Certificate.

5. Submit and obtain acknowledgement

   Upon submission, the portal generates an application reference number. The case is automatically assigned to the MSEFC of the state where the buyer is registered or located — in most Karnataka cases, this is Karnataka's MSEFC.

What Happens After Filing

The MSMED Act prescribes a two-stage resolution process: conciliation first, arbitration if conciliation fails.

Stage 1 — Conciliation: Karnataka's MSEFC notifies the buyer of the complaint and invites both parties to a conciliation proceeding. The MSEFC acts as a conciliator — not a judge — attempting to facilitate a mutually acceptable settlement. Most straightforward cases settle at this stage. Buyers, aware of the compound interest accruing daily and the enforceability of MSEFC awards, often prefer settlement over prolonged proceedings.

Stage 2 — Arbitration: If conciliation fails within 45 days, or if either party rejects conciliation, the MSEFC refers the case to arbitration. The Arbitration and Conciliation Act 1996 governs the arbitration proceedings. The MSEFC itself may function as the arbitral tribunal, or it may refer the case to an institution.

Karnataka MSEFC: What to Expect

Karnataka's MSEFC operates under the Joint Director of Industries (MSME) in Bengaluru. Based on MSME Central's experience with Karnataka MSEFC proceedings:

• First hearing notice is typically issued within 30–45 days of portal filing
• Conciliation hearings are held at the DIC office in Bengaluru for most cases
• Both parties may appear in person or through an authorised representative
• Bring original copies of all documents submitted on the portal to every hearing
• If the buyer does not appear despite notice, the MSEFC may proceed ex-parte
• Settlement agreements reached in conciliation are signed before the MSEFC and are binding

ODR Arbitration: When Conciliation Fails

The Online Dispute Resolution (ODR) framework, introduced through the MSME Samadhaan portal, provides a digital arbitration mechanism for cases that fail conciliation. ODR proceedings are conducted entirely online — hearing notices, submissions, and awards are all delivered digitally. This significantly reduces the time and cost of arbitration compared to traditional proceedings.

For Karnataka MSMEs, ODR arbitration has reduced average case resolution time from 18–24 months (for court-based recovery) to 6–9 months (for ODR proceedings). The arbitral award is enforceable as a decree of a civil court under Section 36 of the Arbitration and Conciliation Act.

Enforcing the Award

An MSEFC award or ODR arbitral award that goes unsatisfied by the buyer can be enforced through the civil court (District Court) having jurisdiction over the buyer's assets. The enforcement process involves filing an execution petition, and the court can attach and sell the buyer's movable or immovable assets to satisfy the award. The compound interest continues to accrue until actual payment is made.

Before You File: What to Prepare