How can an MSME in Odisha recover delayed payments from a buyer?

MSME delayed payment in Odisha: the legal rule

MSME delayed payment in Odisha is governed by Chapter V (Sections 15 to 24) of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act), a central law. It protects a supplier that is a micro or small enterprise. Medium enterprises are not covered by these delayed payment provisions.

• Section 15 (time to pay): where the buyer and supplier have agreed a payment date in writing, the buyer must pay by that date, but the agreed period can never exceed 45 days from the day of acceptance (or deemed acceptance) of the goods or services. Where there is no agreement, the buyer must pay within 15 days of acceptance.
• Section 16 (interest): if the buyer pays late, it is liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India, from the appointed day, notwithstanding any agreement to the contrary.
• Section 17: the buyer is liable for the amount with that interest.
• Section 18: either party to a dispute over amounts due under Section 17 may make a reference to the Micro and Small Enterprises Facilitation Council.
• Section 19: a buyer who wants to set aside an award or decree of the Council must first deposit 75 per cent of the amount awarded.

"Acceptance" means the date the goods are delivered or services rendered, or, where the buyer raises a written objection within 15 days of delivery, the date the defect is removed. If no objection is raised in that period, acceptance is deemed on delivery.

Who can use the remedy

• The supplier must be a micro or small enterprise with a valid Udyam registration. The MSME Samadhaan portal accepts applications only from enterprises with Udyam registration.
• Since 1 April 2025, a micro enterprise is one with investment in plant and machinery or equipment up to Rs 2.5 crore and turnover up to Rs 10 crore; a small enterprise has investment up to Rs 25 crore and turnover up to Rs 100 crore.
• Retail and wholesale traders were allowed to register on Udyam in 2021 only for priority sector lending; they cannot use the delayed payment provisions.
• The buyer can be anyone who buys goods or services from the supplier for consideration: a private company, a government department, a public sector undertaking or a contractor.

Registration date: whether a supplier that obtained registration only after signing the contract can claim has been argued many times. In Silpi Industries v Kerala SRTC (2021) the Supreme Court indicated that the supplier should be registered when the contract is made; in NBCC (India) Ltd v State of West Bengal (January 2025) a two-judge bench took a wider view and referred the question to a larger bench. Check the current position before filing a claim on an older contract.

Step by step: filing on MSME Samadhaan

1. Collect the papers. Udyam registration certificate; purchase or work orders; invoices; delivery challans, acceptance or completion certificates; ledger statement of the buyer's account; correspondence and any written objections from the buyer; and proof of part payments.
2. Send a demand. A written demand or legal notice setting out each invoice, the due date and the interest claimed is not required by the Act, but it often produces payment and shows the buyer had notice.
3. Calculate the interest. Interest runs invoice by invoice from the day after the due date, compounded monthly at three times the RBI bank rate applicable for the period. Keep the working; the Council will check it.
4. File online on MSME Samadhaan using the Udyam number. Choose the buyer and enter each invoice. The application goes to the Facilitation Council of the State where the supplier is located, which for an Odisha enterprise is the Odisha MSEFC.
5. Track the case. The portal shows status. The Council registers the case and issues notice to the buyer. The application is also visible to the ministry, department or public sector body concerned, which may prompt payment before any hearing.

How the Odisha MSE Facilitation Council works

Under the Odisha Micro and Small Enterprises Facilitation Council Rules, 2020, the Director of Industries, Odisha is the Chairperson of the Council; the Rules allow the State to set up more than one Council if needed. The Council's notices and contact details are on the Directorate of Industries, Odisha website (under MSEFC).

1. Conciliation. The Council first conducts conciliation itself or refers the parties to an institution providing alternative dispute resolution. The conciliation provisions of the Arbitration and Conciliation Act, 1996 apply.
2. Arbitration. If conciliation fails, the Council takes up the dispute as arbitrator itself or refers it to an arbitration institution, and the Arbitration and Conciliation Act, 1996 applies as if there were an arbitration agreement.
3. Award. Section 18(5) requires every reference to be decided within 90 days of the reference. In practice cases can take longer; keep attending hearings and filing what is asked for.

The Supreme Court in Gujarat State Civil Supplies Corporation v Mahakali Foods (2022) held that the MSMED Act's Chapter V overrides a private arbitration clause in the contract, so a supplier can go to the Council even if the contract names another arbitrator. In Silpi Industries the Court held that the Limitation Act applies to arbitration under Section 18 and that a buyer may raise counter-claims there. Do not wait years before filing: claims older than three years from the due date may be time-barred (see the limitation period chart).

After the award

• The Council's award is enforced like a decree of a civil court under the Arbitration and Conciliation Act, by filing an execution petition before the competent court.
• A buyer may apply to set the award aside under Section 34 of the Arbitration and Conciliation Act within the time allowed, but must first deposit 75 per cent of the awarded amount (Section 19 MSMED Act). The court can release part of the deposit to the supplier while the challenge is pending.
• Buyers that are companies must disclose amounts owed to micro and small enterprises in their accounts and in half-yearly returns to the Ministry of Corporate Affairs. Under Section 43B(h) of the Income-tax Act, 1961, from the 2024-25 assessment year, a buyer could deduct payments to micro and small suppliers only in the year actually paid if they were late; check the corresponding rule under the Income-tax Act, 2025 for later years.

Other routes

The MSEFC route is optional. A supplier may instead file a civil suit for recovery (including a summary suit), or use the cheque bounce remedy if a cheque was given and dishonoured; see money recovery suits in Odisha and cheque bounce cases in Odisha. Where the buyer is a company that cannot pay, insolvency proceedings before the NCLT are a separate option with their own thresholds. The MSEFC route has advantages that a suit does not: statutory compound interest, the 90-day target and the 75 per cent pre-deposit.

Related work is described under civil litigation. If you cannot afford an advocate, see free legal aid in Odisha.

Frequently asked questions

Official sources

• Micro, Small and Medium Enterprises Development Act, 2006 (India Code)
• MSME Samadhaan: delayed payment monitoring system
• Odisha Micro and Small Enterprises Facilitation Council Rules, 2020 (DC-MSME)
• Directorate of Industries, Odisha
• Udyam Registration portal (Ministry of MSME)

General information, not legal advice. Every matter turns on its own facts and documents, and the law and official procedures change. Check the current position with the concerned office, or take advice on your own facts, before acting.