MSME Delayed Payments in India: Understand the 45-Day Rule and MSE-ODR Process

1. What is the 45-day payment rule?

Section 15 of the MSMED Act addresses the buyer's obligation to pay an eligible micro or small enterprise for goods supplied or services rendered. Where a payment date is agreed in writing, the agreed period cannot exceed 45 days from the day of acceptance or deemed acceptance. Where there is no written agreement, the Act's appointed-day provisions apply.

The exact due date depends on the transaction, acceptance or deemed acceptance and statutory definitions. Keep delivery and acceptance records so the timeline can be assessed accurately.

2. What happens when an eligible buyer delays payment?

Section 16 provides for compound interest with monthly rests on delayed payments at three times the bank rate notified by the Reserve Bank of India, subject to the statutory conditions. This is a legal provision, not a guarantee that a disputed invoice will be paid automatically.

Before relying on the provision, check whether the supplier and transaction are covered, whether the goods or services were accepted, whether the payment period has expired and whether the outstanding amount is supported by records.

3. Who can use the delayed-payment mechanism?

The relevant statutory remedy is directed at eligible Micro and Small Enterprises. The Ministry's guidance identifies Udyam registration as important for using the delayed-payment mechanism, subject to applicable eligibility and procedural requirements.

Do not assume that every business describing itself as an MSME qualifies for every MSE-specific remedy. Check the enterprise classification, registration details, supply date and current official instructions. If eligibility is unclear, obtain professional advice before filing.

4. Which official portal should an MSME check?

The Ministry of MSME has provided online mechanisms for delayed-payment cases. The Ministry's Annual Report 2025–26 records that new delayed-payment cases have been filed through the newer MSME ODR Portal with effect from 15 October 2025. Older material may still refer to MSME Samadhaan, so check the current instructions before starting a new application.

Official resources include the MSME ODR Portal at https://odr.msme.gov.in/, the MSME Samadhaan portal at https://samadhaan.msme.gov.in/ and the Ministry of MSME at https://msme.gov.in/. Follow the current portal's eligibility, document and filing instructions.

5. Documents and evidence to organise

• Udyam Registration Certificate and enterprise details.
• Purchase orders, work orders or written contracts.
• Tax invoices and invoice references.
• Delivery challans, goods-receipt records or service-completion evidence.
• Proof of acceptance, where available.
• Emails, letters and written communication with the buyer.
• Account statements showing the outstanding balance and any part-payments.
• Invoice-wise outstanding statement, credit notes and relevant demand correspondence.

6. Practical steps before pursuing a complaint

First, reconcile the outstanding amount invoice by invoice. Record invoice date, value, payments received, balance and relevant delivery or acceptance date. Next, collect purchase orders, delivery evidence and written confirmations. Contact the buyer in writing with invoice references, the amount due and a reasonable payment request, and retain proof of communication.

Then check statutory eligibility and review the current MSE-ODR Portal process. If the buyer disputes quality, quantity, acceptance, delivery or contract terms, consult a qualified legal professional before proceeding. Keep copies of all submissions and acknowledgements.

7. How can MSMEs reduce future payment delays?

• Use written purchase orders and service agreements.
• Agree payment terms before accepting an order.
• Issue accurate invoices promptly.
• Record delivery and acceptance clearly.
• Reconcile receivables and follow up on overdue invoices in writing.
• Review customer credit risk before accepting large orders.
• Maintain a cash-flow plan so one delayed payment does not stop operations.

8. How FIN.SWITCH can support MSMEs

Delayed payments can create working-capital pressure and disrupt business growth. FIN.SWITCH supports businesses with MSME and business documentation, funding-readiness guidance, project reports, compliance and business setup assistance, and digital business infrastructure.

Our role is to help businesses understand requirements and organise practical next steps. FIN.SWITCH is not a lender, does not adjudicate payment disputes and cannot guarantee recovery, legal outcomes or government approvals.

Frequently asked questions

What is the maximum payment period? For covered supplies by eligible micro and small enterprises, the agreed period cannot exceed 45 days from acceptance or deemed acceptance. The statutory calculation depends on the facts and applicable provisions.

Can an MSME claim interest? Section 16 provides for compound interest with monthly rests at three times the RBI-notified bank rate, subject to statutory conditions.

Is Udyam registration important? Yes, registration and enterprise eligibility are important to the delayed-payment mechanism. Check current official requirements.

Is Samadhaan the only portal for new cases? No. The Ministry's 2025–26 Annual Report records the move of new cases to the MSE-ODR Portal from 15 October 2025. Check the official portal for current instructions.

Does filing guarantee recovery? No. Filing does not guarantee a favourable decision or immediate payment. The competent authority considers the case and evidence.

Should businesses retain purchase orders and delivery records? Yes. Orders, invoices, delivery and acceptance records, and buyer correspondence can help establish the facts.