Legal & Compliance for Business
If you supply a small business, or buy from one, the clock starts at acceptance
Delayed payment is one of the biggest cash problems for micro and small businesses in India, and the law has had a specific answer to it since 2006: a time limit on payment, interest on delay, and a council that can hear the dispute. A tax rule added in 2023 gave buyers a further reason to pay on time. And the way a claim is filed has changed: the MSME Samadhaan portal now points new applications to the MSME ODR portal. This session explains all of it for both suppliers and buyers. It is awareness, not legal advice.
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The law gives small suppliers a time limit. It only helps those who know about it.
Many micro and small suppliers wait ninety days or more for payment from larger customers, and are reluctant to push for fear of losing the account. Many buyers, for their part, do not know that the payment period for these suppliers has a legal ceiling, or that late payment can have tax consequences for them.
As of October 2026 the provisions described here are in force, and the filing process has recently changed. Details such as eligibility, dates of registration and the treatment of particular transactions can be decided case by case. This session is general information for awareness. It is not legal advice, and it does not replace a qualified lawyer, company secretary or chartered accountant, who should be consulted about a specific situation.
What the session covers
37 topics across 7 areas. Seven parts, for suppliers and buyers. 6 apply to almost any business; the rest only in a particular case.
Who Is a Micro or Small EnterpriseThe protections attach to this status.5
- The classification is set under the Micro, Small and Medium Enterprises Development Act, 2006 by investment and turnover
- The Udyam portal shows the criteria in force from 1 April 2025: micro up to 2.5 crore rupees investment and 10 crore rupees turnover; small up to 25 crore and 100 crore; medium up to 125 crore and 500 crore
- Udyam registration is a government registration, and the portal states that it is free of cost and that no one should be paid for it
- The payment provisions discussed here protect micro and small suppliers, not medium ones
- Whether a supplier was registered when the contract was made can matter; ask a lawyer
Check the thresholds and the portal's current guidance at udyamregistration.gov.in.
The 45-Day Rule: Section 15The ceiling on how long a buyer can take.5
- The buyer must pay on or before the date agreed in writing
- Where there is no written agreement, payment is due before the Act's 'appointed day', which is 15 days after acceptance or deemed acceptance
- In no case can the period agreed in writing exceed 45 days from the day of acceptance or deemed acceptance
- The Act defines acceptance and deemed acceptance, which is why records of delivery and objection matter
- Why a written agreement, with a sensible period, helps both sides
Interest on Late Payment: Section 16Set by the Act, not by negotiation.5
- Where a buyer does not pay by the due date, the Act provides for compound interest with monthly rests
- The rate is three times the bank rate notified by the Reserve Bank of India
- Interest is calculated from the due date to the day of payment
- A courtesy waiver in an email may not settle the legal position; ask a lawyer
- Many suppliers never claim it; many buyers never budget for it
The Tax Link: Section 43B(h)Why finance teams now watch the 45-day mark.5
- Section 43B(h) of the Income-tax Act, 1961, inserted by the Finance Act, 2023, allows a buyer's deduction for sums payable to a micro or small enterprise beyond the section 15 period only when it is actually paid
- In a Rajya Sabha reply on 21 July 2026, the Ministry of Finance said it corresponds to section 37(2)(g) of the Income-tax Act, 2025, which applies from 1 April 2026
- It covers micro and small suppliers, not medium or large ones
- It is a matter of tax timing for the buyer, not a payment right for the supplier
- Buyers should ask their chartered accountant how it applies to their year-end
Confirm the current section, scope and any amendment with your chartered accountant.
Filing a Claim: From MSME Samadhaan to the ODR PortalCheck the official portals for the current process.6
- The MSME Samadhaan portal at samadhaan.msme.gov.in was launched in 2017 to monitor and file delayed-payment cases
- Its home page now carries a notice that new delayed-payment applications are to be filed at the MSME ODR portal, odr.msme.gov.in
- Reports state that the ODR portal opened in 2025 and that new filings moved there from 15 October 2025; confirm the position on the portals
- A reference goes to the Micro and Small Enterprise Facilitation Council under section 18, which may conciliate and then arbitrate
- The Act says a reference should be decided within ninety days; actual timing can differ
- The Samadhaan name is still widely used for the whole process, so you will hear both
Before You File, or RespondPaperwork and judgement.6
- The Udyam certificate and the order, delivery proof and acceptance records
- Invoices, ledger statement and correspondence about payment
- A written demand giving the buyer a chance to pay
- A realistic view of the relationship, the amount and the cost of the process
- Whether the buyer has a quality or other dispute
- For an award, the Act requires a buyer who challenges it in court to deposit 75% of the amount first
For Buyers: Staying on the Right SideIf it appliesIf you purchase from small suppliers.5
- Ask for the Udyam certificate and record the supplier's status
- Keep payment terms in writing, within the limit
- Record the date you accept goods and services
- Track due dates and pay on them, rather than on a fixed cycle that is longer
- Do a year-end check of amounts past the time limit, with your accountant
Supplier's quick checklist
- Is my Udyam registration current, and does it show micro or small?
- Is my payment term in writing, and within 45 days?
- Do I have proof of delivery and acceptance for every invoice?
- Which invoices are past due, and by how long?
- Have I asked in writing?
- Do I need advice before filing?
Buyer's quick checklist
- Which suppliers are micro or small, and how do I know?
- Are my terms with them within the limit?
- What is unpaid beyond the limit today?
- What does my accountant say about the tax effect?
- Do I have disputes I should raise in writing now?
How the session runs
Led by a facilitator, with a qualified lawyer or chartered accountant where the topic needs one. Hypothetical examples, clearly labelled, show how acceptance and due dates are counted for a supplier and a buyer. Participants check their own contracts or invoices against the limits, and note what they would gather before filing. Because the portals and rules can change, the facilitator points to the official portals and asks participants to check them before acting. Nothing in the session promises that any claim will succeed or that money will be recovered.
What your students leave with
- An understanding of who counts as a micro or small enterprise and why Udyam registration matters
- The 45-day and 15-day payment limits, and when each applies
- How interest on late payment is set in the Act
- How the tax rule in section 43B(h) affects a buyer who pays late
- Where a delayed-payment claim is filed today, and what a Facilitation Council does
- What to gather and ask a professional before filing or defending a claim
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
Know your status, keep your records, ask in writing, and check the portal for the current process.
Tell us who your students are and what stage they are at. Sessions are free for participants.