How to File an MSME Delayed Payment Claim on ODR Portal

To file an MSME delayed payment claim, a micro or small enterprise with a valid Udyam Registration lodges an online reference against the buyer on the MSME Samadhaan portal, now routed through the MSME ODR portal at odr.msme.gov.in. The claim invokes Sections 15 to 19 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, under which the buyer must pay on or before the agreed date, and where there is no agreement, within 45 days of accepting the goods or services. On default the buyer owes compound interest, with monthly rests, at three times the Reserve Bank of India bank rate, which is 16.50 percent a year at the June 2026 bank rate of 5.50 percent. The reference goes to the Micro and Small Enterprise Facilitation Council (MSEFC) for conciliation and, failing that, arbitration, and must be decided within 90 days. There is no government filing fee. This guide covers eligibility, the step-by-step filing, a worked interest computation in rupees, and the 75 percent pre-deposit a buyer must make to appeal.

What Is the MSME Delayed Payment Mechanism?

The MSME delayed payment mechanism is a statutory recovery process under Sections 15 to 24 of the MSMED Act, 2006 that lets a micro or small enterprise claim overdue dues from a buyer, with compound interest, through a state Facilitation Council. It exists because small suppliers rarely have the leverage to chase large buyers, so the law fixes a hard payment deadline and a punitive interest rate to shift that balance.

Before this framework, a small supplier with an unpaid invoice had only two poor options: write off the amount or sue in a civil court, where recovery could take years and legal costs often exceeded the dues. The MSMED Act replaced that with a focused, low-cost forum. A registered micro or small enterprise now files a single online reference, and a state council with a statutory 90-day deadline directs the buyer to pay. The interest is not contractual but fixed by statute, so a buyer cannot bury a low or zero interest clause in a one-sided supply agreement.

The mechanism has two operational faces. The MSME Samadhaan portal, launched in 2017, was the original single window for filing. From 2025, the Ministry of MSME added the MSME ODR portal, an online dispute resolution layer that runs an automated negotiation first and only then escalates to the council. Both feed the same legal forum, the Micro and Small Enterprise Facilitation Council, and apply the same provisions of the Act. The change is procedural, designed to settle more disputes earlier and online, rather than a change to the underlying rights.

Samadhaan Versus the New ODR Portal

The Samadhaan portal and the ODR portal are not competitors; the ODR portal is the next stage in the same system. The MSME ODR portal went live on 27 June 2025, and from 15 October 2025, new delayed payment references are filed through it rather than directly on Samadhaan. The key addition is a structured, online attempt at negotiation and conciliation before the dispute reaches a contested hearing, which suits low-value invoices where a quick settlement beats a drawn-out arbitration.

Who This Guide Is For

This guide is written for owners and finance teams of micro and small enterprises that sell goods or services on credit and face buyers who pay late. It assumes you have an active Udyam Registration, or can obtain one, and an invoice that is overdue beyond the Section 15 deadline. It covers the supplier side of the process: how to compute the claim, file it, and follow it through conciliation, arbitration, and enforcement. It does not cover the buyer's defence strategy beyond explaining how the buyer can contest a claim.

Who Is Eligible to File a Delayed Payment Claim?

Eligibility is the first gate, and it is strict. The protection in Sections 15 to 24 of the MSMED Act, 2006 is reserved for micro and small enterprises. A medium enterprise cannot file a delayed payment claim as a supplier, even though it is registered on Udyam. The classification turns on investment in plant and machinery or equipment and on annual turnover, as revised by the government notification effective 1 April 2025.

Three conditions must hold together for a valid claim. First, the supplier must be a micro or small enterprise. Second, it must hold a valid Udyam Registration that was active when the supply was made, because the right attaches to the registered status at the time of supply, not merely on the date of filing. Third, the transaction must be a supply of goods or services for which payment is genuinely overdue beyond the Section 15 deadline. Miss any one of these and the council will not entertain the reference.

A common question is whether the buyer's size matters. It does not. The MSMED Act binds any buyer, whether a large private company, a government department, or a public sector undertaking. The protection is defined by the supplier's status, not the buyer's. This is what makes the mechanism powerful: a single proprietor with an active Udyam number can pursue a multinational buyer through the same free forum, and references against central ministries and CPSEs are additionally visible to those bodies for proactive settlement.

The 45-Day Rule and the Appointed Day (Section 15)

Everything in a delayed payment claim turns on a single date: the appointed day. Section 15 of the MSMED Act, 2006 fixes when payment is due, and the day after that deadline is when the supplier's interest right begins. Getting this date right is the foundation of a clean claim, because the entire interest computation flows from it.

Section 15 requires a buyer to pay a micro or small supplier on or before the date agreed in writing. Where the two parties have not agreed a date, the buyer must pay within 45 days of the day the buyer accepts the goods or services. Critically, even when there is a written agreement, the credit period cannot run beyond 45 days from the day of acceptance. So a supply agreement promising payment in 90 days is legally read down to 45 days for the purpose of the appointed day. This standalone definition is the heart of the whole regime: 45 days is the ceiling, not just a default.

How Acceptance and Deemed Acceptance Work

Acceptance fixes the start of the 45-day clock, so the Act defines it carefully. The day of acceptance is the day the buyer actually accepts the goods or services. If the buyer objects in writing about the goods or services within 15 days of delivery, the day of acceptance shifts to the day the objection is resolved. But if the buyer raises no written objection within those 15 days, deemed acceptance applies under Section 2(b), and the delivery date itself counts as acceptance. This stops a buyer from indefinitely delaying the clock by simply staying silent.

The practical sequence is straightforward once you map it. Delivery happens, the 15-day objection window opens, and if the buyer says nothing, acceptance is deemed on the delivery date. The 45-day payment period then runs from that date. On the 46th day, if the invoice is still unpaid, the appointed day has arrived and interest begins to accrue under Section 16. A supplier who records the delivery date and keeps the goods receipt note has, in effect, locked the appointed day in evidence.

How Much Interest Can You Claim? (Section 16)

The interest provision is what gives the MSMED Act its bite. Section 16 states that where a buyer fails to pay within the Section 15 period, the buyer is liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India. This is a statutory rate that overrides any contract: even a clause specifying a lower rate, or no interest at all, is displaced by the three-times-bank-rate figure.

The bank rate is the RBI's published rate, distinct from the repo rate. As of June 2026, the RBI bank rate is 5.50 percent, so the delayed payment interest rate is 16.50 percent a year. Because the multiplier of three is fixed but the bank rate moves with monetary policy, the effective rate changes whenever the RBI revises the bank rate. Always confirm the bank rate on the day you prepare the computation, then apply the fixed multiplier of three. The table below shows how the rate is derived.

Compound Interest With Monthly Rests Explained

Monthly rests mean the interest is added to the principal at the end of each month, and the next month's interest is charged on that larger balance. This compounding makes a long delay expensive fast. At 16.50 percent a year, the monthly rate is 1.375 percent. A delay of a few months produces interest close to the simple-interest figure, but as the delay stretches over a year or more, the gap widens sharply and the interest can become a substantial fraction of the principal. The worked example later in this guide puts exact rupee figures on this effect.

The Tax Sting for Buyers (Section 43B(h))

The cost of delay does not stop at interest. Two tax provisions reinforce the Act. Under Section 23 of the MSMED Act, 2006, the interest a buyer pays on a delayed payment is not deductible when computing income under the Income Tax Act. Separately, Section 43B(h) of the Income Tax Act allows a buyer to deduct a payment to a micro or small enterprise only in the year it is actually paid, if it is paid beyond the Section 15 limit. An amount left unpaid within 45 days is added back to the buyer's taxable income for that year. Together these provisions give buyers a strong financial reason to clear micro and small supplier dues on time, a point worth raising in conciliation.

Step-by-Step: How to File the Delayed Payment Claim

The full process runs across 8 steps, from confirming eligibility to receiving the award and enforcing or appealing it. Filing itself takes under a day once the documents are ready, while the council's decision must follow within 90 days of the reference.

Before you start, keep your Udyam certificate, the unpaid invoices, the purchase order, and proof of acceptance open beside the portal, and prepare the interest computation in advance. The steps below assume a single supplier filing against one buyer; the same flow applies where multiple invoices are bundled into one reference, provided they share the same buyer.

Step 1: Confirm Eligibility and Udyam Registration

Verify that your enterprise is a micro or small enterprise and that your Udyam Registration was active on the supply date. Pull up the Udyam certificate and confirm the classification. A medium enterprise cannot file as a supplier, so check the investment and turnover figures against the thresholds. If you are not yet registered, complete Udyam Registration first, but be aware that registering after the supply can weaken a claim for that earlier transaction. This eligibility check decides whether the council can even hear your reference.

Step 2: Establish the Appointed Day Under Section 15

Identify the exact appointed day for each invoice. Find the day the buyer accepted the goods or services, applying deemed acceptance if the buyer raised no written objection within 15 days of delivery. Add the agreed credit period, capped at 45 days, to reach the payment deadline. The day after that deadline, typically the 46th day from acceptance where there is no agreement, is the appointed day. Record this date for every invoice, because your interest claim runs from it and the council will scrutinise it.

Step 3: Compute the Principal and Interest Due

Total the unpaid principal across all overdue invoices against the buyer. Then compute interest under Section 16 at three times the current RBI bank rate, compounded with monthly rests, from each invoice's appointed day to the date of filing. At the June 2026 bank rate of 5.50 percent, apply 16.50 percent a year. Prepare a clear statement showing the principal, the appointed day, the rate, the compounding, and the running total. This computation is the core of the claim and should be precise to the rupee.

Step 4: Assemble the Supporting Documents

Gather the Udyam certificate, the invoices, the purchase order or supply agreement, proof of acceptance, the account ledger, and any correspondence recording the dispute. Save each as a clear, legible PDF, because the portal requires document uploads. Strong, organised evidence of the appointed day and the unpaid amount lets the MSEFC issue a quick direction. Disorganised or incomplete documents are the most common cause of avoidable delay, so prepare this file carefully before you begin the online filing.

Step 5: Register and File the Application Online

Log in to samadhaan.msme.gov.in, from where new references are now routed to the MSME ODR portal at odr.msme.gov.in. Enter your Udyam number, the buyer's details, the principal claimed, and the interest computed, then upload the invoices and the purchase order. Review every field against your documents before submitting. The application is automatically directed to the MSEFC of the state where your enterprise is registered, and you receive an acknowledgement with a reference number to track the matter.

Step 6: Attempt Online Negotiation and Conciliation

The ODR process first runs an automated negotiation stage, inviting the buyer to settle directly. If that fails, the MSEFC takes up conciliation under Sections 65 to 81 of the Arbitration and Conciliation Act, 1996, applied through Section 18 of the MSMED Act. Both sides present their position, and the council helps them reach a settlement. A settlement recorded here is binding and closes the matter without a contested arbitration. Approach this stage seriously, because a negotiated outcome is faster and preserves the buyer relationship.

Step 7: Proceed to Arbitration Before the MSEFC

If conciliation does not resolve the dispute, the MSEFC moves to arbitration. The council either acts as the arbitrator itself or refers the dispute to an arbitration institution, again under Section 18 read with the Arbitration and Conciliation Act, 1996. This is a binding adjudication: both parties file documents and arguments, and the council weighs the appointed day, the principal, and the interest. The reference must be disposed of within 90 days from the date it was made, which keeps the process far tighter than civil litigation.

Step 8: Receive the Award and Enforce or Appeal

The MSEFC passes an award directing the buyer to pay the principal with compound interest. This award is treated as an arbitral award under the Arbitration and Conciliation Act, 1996 and is enforceable as a decree of a civil court. If the buyer does not pay, the supplier applies to the court to execute it. To challenge the award, a buyer must first deposit 75 percent of the awarded amount with the court under Section 19, a condition that protects the supplier and discourages tactical appeals.

A Worked Example: Computing the Interest in Rupees

A concrete example shows how the appointed day and the compound interest translate into rupees. Assume a small enterprise, registered on Udyam, supplied machine parts worth ₹10,00,000 to a buyer with no written agreement on the payment date. The goods were delivered and accepted on 1 January 2026, and the buyer raised no objection within 15 days, so acceptance is fixed at the delivery date.

Fixing the Appointed Day

With no agreement, payment was due within 45 days of acceptance, that is, by 15 February 2026. The buyer did not pay. The appointed day is therefore 16 February 2026, the 46th day, from which interest begins to run under Section 16. The supplier files a reference after six months of default, on 16 August 2026, by which point the interest has compounded across six monthly rests.

Calculating the Compound Interest

The principal is ₹10,00,000 and the rate is 16.50 percent a year, or 1.375 percent a month. Compounding with monthly rests over six months gives a closing balance of about ₹10,85,388, so the interest component is roughly ₹85,388. Under simple interest the same period would yield ₹82,500, so compounding adds about ₹2,888 even in six months. The supplier therefore claims a principal of ₹10,00,000 plus interest of ₹85,388, a total of ₹10,85,388, in the reference.

Two lessons stand out. First, the interest keeps growing every month the buyer delays, so a one-year default on the same ₹10,00,000 would yield interest of about ₹1,78,068, nearly a fifth of the principal. Second, the statutory rate applies even if the original purchase order was silent on interest, because Section 16 overrides the contract. The longer a buyer stalls, the worse the position becomes, which is precisely the deterrent the Act intends.

How the MSEFC Decides a Reference (Section 18)

The Micro and Small Enterprise Facilitation Council is the heart of the recovery process. Section 18 of the MSMED Act, 2006 gives any party to a delayed payment dispute the right to make a reference to the council, which then resolves it in two stages: conciliation first, arbitration if conciliation fails. Both stages borrow directly from the Arbitration and Conciliation Act, 1996, which gives the process a settled legal footing.

The council is constituted by each state government under Sections 20 and 21 and is chaired by the state Director of Industries, who has administrative control over micro and small enterprises in that state. All 37 states and union territories have constituted their councils, so a supplier in any state can file. The reference goes to the council of the state where the supplier is located, not where the buyer sits, which keeps the forum convenient for the smaller party.

Speed is the design goal. Section 18 requires the council to dispose of every reference within 90 days from the date the reference is made. In practice, councils meet at intervals and a contested matter can take longer, especially where the buyer raises a genuine quality dispute or challenges the appointed day. Even so, the statutory deadline and the online filing route make this dramatically faster and cheaper than a civil suit, where the same recovery could take several years.

Enforcing the Award and the 75 Percent Pre-Deposit (Section 19)

An award in your favour is only useful if you can enforce it, and the Act is built to make enforcement realistic for a small supplier. The award the MSEFC passes is treated as an arbitral award under the Arbitration and Conciliation Act, 1996, which means it is enforceable as a decree of a civil court. If the buyer pays, the matter ends. If the buyer does not, the supplier files for execution and the court can attach the buyer's assets to recover the amount.

The most powerful protection sits in Section 19. If a buyer wants to challenge the award in court, the buyer (described as the appellant, not being the supplier) must first deposit 75 percent of the awarded amount with the court. No application to set aside the award is entertained until this pre-deposit is made. This is a deliberate barrier against tactical appeals: a buyer who wants more time cannot simply file a challenge and stall, because three-quarters of the money must be parked with the court up front.

The pre-deposit also helps the supplier's cash flow during the appeal. Courts may, on the supplier's application, order release of a part of the deposited amount to the supplier pending the outcome, on conditions the court sets. So even where a buyer appeals, the supplier is not left waiting empty-handed for years. This combination, an enforceable award plus a 75 percent pre-deposit to appeal, is what makes the MSMED route materially stronger than an ordinary contractual recovery.

How the ODR Portal Process Works End to End

The ODR portal reshapes the front end of the process without changing the legal core. A reference filed through odr.msme.gov.in flows through a structured digital sequence, each stage designed to resolve the dispute at the earliest possible point and only escalate what genuinely needs adjudication.

The sequence begins with online negotiation. Once the supplier files, the buyer is notified and invited to settle directly through the platform. Many straightforward cases, where the buyer simply delayed and does not dispute the dues, close here. If negotiation does not produce a settlement, the matter moves to conciliation before the MSEFC, a guided process under Sections 65 to 81 of the Arbitration and Conciliation Act, 1996. The council facilitates an agreement, and a settlement at this stage is binding. Only if conciliation fails does the dispute reach arbitration, the binding adjudication that ends in an enforceable award.

This staged design serves both parties. For the supplier, it offers a quick, low-friction path to recovery for the many cases that do not need a full hearing. For the buyer, it provides an early, structured chance to settle before costs and interest mount. Because every step is online and time-stamped, the process also creates a clean record that supports enforcement if the buyer later resists. The 90-day clock under Section 18 runs across these stages, keeping the overall timeline disciplined.

Common Issues and How to Resolve Them

A handful of issues account for most delayed payment disputes we encounter. Each has a clear path to resolution once the underlying rule is understood.

The Buyer Disputes the Quality of the Supply

A buyer often defends a delayed payment claim by alleging the goods or services were defective. The decisive question is whether the buyer raised a written objection within 15 days of delivery. If the objection was timely and genuine, the day of acceptance shifts to when the dispute is resolved, and the quality issue is decided in conciliation or arbitration. If the buyer stayed silent for more than 15 days, deemed acceptance applies and the late objection rarely defeats the interest claim.

The Buyer Claims a Longer Credit Period Was Agreed

Buyers frequently argue that a contractual credit period of 60 or 90 days postpones the appointed day. The Act caps the credit period at 45 days from acceptance for the purpose of the appointed day, so a longer contractual term does not extend the interest start date. Point the council to Section 15 and compute interest from the 46th day. A clause promising payment beyond 45 days is read down to the statutory ceiling.

The Udyam Registration Came After the Supply

Where a supplier registered on Udyam only after the invoice fell due, the claim for that earlier supply is vulnerable. The protection attaches to the registered status at the time of supply. The cleanest fix is to ensure registration is in place before supplying on credit. For an existing dispute with a late registration, take professional advice on whether the specific facts still support a reference, because outcomes vary with the council and the evidence.

The Buyer Ignores the Award

If the buyer neither pays nor files a challenge with the 75 percent pre-deposit, the supplier should not wait. The award is enforceable as a civil court decree, so file an execution application and ask the court to recover the amount, including by attaching the buyer's assets. Prompt enforcement signals that the supplier will pursue recovery fully, which itself often prompts payment.

Practical Tips to Strengthen Your Claim

Beyond the legal mechanics, a few habits sharply improve recovery outcomes. They cost little and pay off when a buyer contests the dues.

Use the numbered checklist below before filing any reference, to confirm the claim is complete and the appointed day is defensible:

1. Is your Udyam Registration active for the supply period? Confirm the certificate covered the date of supply and classified you as micro or small.
2. Can you prove the day of acceptance? Keep the signed delivery note, goods receipt, or e-way bill, or rely on deemed acceptance after 15 days of silence.
3. Have you fixed the appointed day correctly? Apply the 45-day cap from acceptance, regardless of any longer contractual term.
4. Is the interest computed at three times the current bank rate? Use 16.50 percent at the June 2026 bank rate, compounded with monthly rests.
5. Are all documents saved as clear PDFs? Bundle the Udyam certificate, invoices, purchase order, proof of acceptance, and the ledger.
6. Have you sent a dated payment reminder? A written reminder after day 45 strengthens the record and may prompt payment without a reference.

How Delayed Payment Recovery Fits Wider MSME Finance

Delayed payment recovery is one piece of a broader cash flow toolkit for a small enterprise. A buyer who pays late strains working capital, and recovery through the MSEFC restores that capital with interest. But the same Udyam Registration that unlocks this remedy also opens other support, so it pays to see the recovery route alongside the financing options available to registered enterprises.

An enterprise waiting on overdue invoices often needs bridge finance in the meantime. Udyam-registered micro and small enterprises can access collateral-free credit and priority sector lending, and our guide on how to apply for an MSME loan in India walks through those schemes. Early-stage businesses pursuing growth capital can also look at the Startup India Seed Fund and broader seed funding routes. Keeping Udyam current is the common thread: it is the gateway to both the delayed payment remedy and these financing channels.

For companies on the buyer side, the discipline cuts the other way. Paying micro and small suppliers within 45 days avoids the Section 16 interest and the Section 43B(h) tax add-back, and keeps the half-yearly MSME Form 1 disclosure clean. Treating supplier payment timelines as a compliance item, rather than a discretionary cash management lever, is the simplest way to stay out of the delayed payment forum altogether. Our annual compliance guide for startups places this alongside the other recurring filings a growing business must track.

Related Resources

• Udyam Registration: the mandatory prerequisite that makes a micro or small enterprise eligible to file a delayed payment claim.
• MSME Registration: assistance for registering your enterprise as micro or small under the MSMED Act, 2006.
• How to Apply for an MSME Loan in India: bridge finance options while overdue invoices are recovered.
• How to Apply for the Startup India Seed Fund: growth capital for early-stage registered enterprises.
• Startup India Registration: recognition that unlocks further benefits for eligible enterprises.
• Annual Compliance Guide for Startups: where supplier payment discipline and MSME Form 1 fit the wider calendar.

Summary

Filing an MSME delayed payment claim is a structured, low-cost route for a micro or small enterprise to recover overdue dues with interest. Confirm your Udyam Registration and eligibility, fix the appointed day under Section 15 by applying the 45-day cap from acceptance, and compute compound interest under Section 16 at three times the RBI bank rate, which is 16.50 percent at the June 2026 bank rate of 5.50 percent. File the reference on the Samadhaan portal, now routed through the MSME ODR portal, and follow it through online negotiation, conciliation, and arbitration before the MSEFC, which must decide within 90 days. The award is enforceable as a court decree, and any buyer who appeals must first deposit 75 percent of the award under Section 19. Done with clean documentation, this process turns a stalled invoice into an enforceable, interest-bearing claim.