MSME Samadhaan Portal: How to File a Delayed Payment Complaint

MSME payment recovery becomes easier when eligible businesses use the MSME Samadhaan portal under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. Udyam-registered micro and small enterprises can file a delayed payment complaint MSME against buyers who fail to pay within the prescribed timeline. If payment remains overdue beyond the applicable 45-day or 15-day limit, the buyer becomes liable to pay the outstanding amount along with compound interest under the Act. This guide explains who can file, how the payment timelines work, the complete Samadhaan filing process, the documents required, and what to expect after submitting a complaint.

Who Can File a Complaint: Eligibility Criteria

Not every business qualifies to file a complaint through the MSME Samadhaan portal. Before beginning the process, confirm that your business meets the eligibility requirements prescribed under the MSMED Act.

You are generally eligible if:

• If you are Udyam-registered micro or small enterprise: Medium enterprises are generally not eligible to access delayed-payment remedies available under Sections 15 to 24 of the MSMED Act through the MSME Samadhaan portal. The delayed-payment protection framework is intended for eligible micro and small enterprises holding a valid Udyam Registration.
• If your business is engaged in manufacturing or providing services: Trading-only businesses are generally excluded in line with the Ministry of MSME Office Memorandum dated 15 December 2017.
• If your Udyam registration existed before the invoice date. Registration obtained after issuing the invoice does not ordinarily make that invoice eligible for a claim.
• The buyer can be any organisation, including a private company, public sector undertaking, government department, or large corporate.

Checking these conditions before filing helps avoid unnecessary delays or rejection of the application.

The 45-Day (and 15-Day) Payment Rule Explained

The MSMED Act sets clear timelines for buyers to pay Udyam-registered micro and small enterprises. Which timeline applies depends on whether a written agreement exists between the parties.

Under Section 15 of the MSMED Act, 2006, buyers cannot extend payment beyond these statutory limits, even if a contract specifies a longer credit period.

Once the payment becomes overdue, Section 16 requires the buyer to pay compound interest, compounded monthly, at three times the bank rate notified by the Reserve Bank of India (RBI). The interest continues until the outstanding amount is paid in full. In addition, such interest is not allowable as a deduction while computing the buyer’s taxable income under the Income-tax Act.

Illustrative Example

Suppose an MSME issues an invoice for ₹5,00,000 under a written contract. If the buyer fails to pay within 45 days and the amount remains unpaid for another three months, the buyer becomes liable for:

• Outstanding principal of ₹5,00,000
• Compound interest under Section 16 of the MSMED Act calculated at three times the RBI-notified bank rate

The actual amount payable depends on the RBI bank rate applicable during the period of default.

Illustrative disclaimer: Interest calculations depend on the prevailing RBI-notified bank rate and the actual delay. The example is for educational purposes only.

Illustrative Cost of Delayed Payment

The table below assumes an illustrative RBI bank rate of 6%, resulting in an interest rate of 18% per annum, compounded monthly. It demonstrates how the liability can increase when invoices remain unpaid.

Important: The figures shown are purely illustrative and assume a hypothetical RBI-notified Bank Rate of 6% solely for explanatory purposes. Actual interest liability may vary depending on the applicable RBI Bank Rate, exact period of delay, and facts of the case.

How to File a Complaint on MSME Samadhaan: Step-by-Step

The Samadhaan filing process is fully online and helps eligible micro and small enterprises seek recovery of overdue payments without first filing a civil suit. Once the application is submitted, the concerned Micro and Small Enterprises Facilitation Council (MSEFC) takes up the matter for dispute resolution.

Step 1: Send a Written Reminder

Begin by sending the buyer a written reminder mentioning:

• Invoice number
• Invoice date
• Outstanding amount
• Original payment due date
• Request for immediate payment

Email generally serves as acceptable written evidence. Messaging applications alone may not provide sufficient documentary support if the matter proceeds before the MSEFC.

Step 2: Send a Formal Notice

If payment is still outstanding, issue a formal notice referring to the applicable payment timeline under the MSMED Act.

The notice should include:

• Outstanding invoice amount
• Applicable 15-day or 45-day payment deadline
• Interest payable under Section 16
• Reasonable time to clear the dues

Keeping a copy of this notice strengthens your documentary record.

Step 3: Gather Supporting Documents

Collect all documents before starting the online application.

These generally include:

• Udyam Registration Certificate
• Invoice copies
• Purchase order or written agreement
• Delivery proof or service completion evidence
• Reminder emails
• Formal notice
• Bank statement showing non-receipt of payment

Preparing these documents beforehand helps complete the application without interruptions.

Step 4: File the Application on the MSME Samadhaan Portal

Visit https://samadhaan.msme.gov.in and sign in using your Udyam registration credentials.

Complete the online form by providing:

• Enterprise details
• Buyer details
• Invoice details
• Amount claimed
• Supporting documents

Review every entry carefully before submitting the application.

Step 5: Complaint Is Sent to the MSEFC

After submission, the portal automatically forwards the application to the appropriate Micro and Small Enterprises Facilitation Council (MSEFC) based on jurisdiction.

The Council reviews the complaint and issues notices to both parties for further proceedings.

Step 6: Conciliation Followed by Arbitration

The MSEFC first attempts to resolve the dispute through conciliation. The statutory target is to complete this stage within 90 days, although actual timelines can differ across states depending on case volume.

If conciliation does not lead to a settlement, the matter proceeds to arbitration, and the Council may pass a binding award.

Under Section 19 of the MSMED Act, a buyer seeking to challenge an award is generally required to deposit 75% of the award amount before an appeal can be entertained by the court, subject to applicable legal requirements.

Documents Required for the Samadhaan Filing

Before submitting your application, keep scanned copies of the following documents ready:

• Udyam Registration Certificate
• Original invoice(s) bearing your Udyam details
• Proof of delivery or completion of services, such as signed delivery challans, courier acknowledgements, or email confirmations
• Purchase order or written agreement, wherever available
• Bank statement showing that payment has not been received
• Copies of reminder emails and formal notices sent to the buyer

All supporting documents are uploaded digitally through the MSME Samadhaan portal, so physical submission is generally not required.

Understanding Section 43B(h) Tax Implications for Buyers

Before initiating proceedings through the MSME Samadhaan portal, some businesses review the potential tax implications applicable to delayed payments. One relevant provision is Section 43B(h) of the Income-tax Act, 1961, which may affect the timing of deductions available to certain buyers in relation to payments due to eligible micro and small enterprises.

From FY 2024-25, Section 43B(h) of the Income-tax Act, 1961 affects buyers that purchase goods or services from Udyam-registered micro and small enterprises. If payment is not made within the prescribed timeline under the MSMED Act, 45 days where there is a written agreement or 15 days where there is none, the buyer cannot claim that unpaid amount as a business expense deduction in that financial year. The deduction becomes available only in the year when the payment is actually made.

This creates an immediate tax consequence for the buyer, making delayed payment more expensive than many businesses expect.

Illustrative Example

Suppose a company owes ₹10 lakh to a Udyam-registered micro enterprise at the end of the financial year. If the payment remains overdue beyond the applicable statutory period, the buyer generally cannot deduct that ₹10 lakh as a business expense while computing taxable income for that year under Section 43B(h). The deduction shifts to the year in which the payment is eventually made.

For many MSMEs, mentioning this provision in a formal notice before beginning the Samadhaan filing process encourages constructive discussions and, in some situations, results in payment without the need for formal proceedings.

Disclaimer: Tax treatment depends on the facts of each case and applicable law. Businesses should consult a qualified tax professional for advice specific to their circumstances.

Managing Cash Flow While Your Complaint Is Pending

Although the Micro and Small Enterprises Facilitation Council (MSEFC) provides a structured dispute resolution process, the matter may still take several months to conclude depending on the complexity of the case and the workload of the concerned Council. During this period, delayed receivables can place pressure on day-to-day operations.

Businesses often need uninterrupted working capital to purchase raw materials, pay employee salaries, meet statutory obligations, and manage regular operating expenses. Waiting for the final award may not always be practical.

One financing option that some businesses consider is a business loan, subject to lender evaluation and documentation. Borrowed funds can help bridge temporary cash-flow gaps while the delayed payment dispute continues.

Where business owners have unencumbered gold jewellery available, a gold loan may also serve as a short-term funding option. Gold loans are secured against the pledged gold and are generally processed after valuation of the jewellery and completion of the lender’s documentation requirements. Because the loan is backed by collateral, it may help eligible borrowers access working capital without selling productive business assets. The loan amount, tenure, applicable interest rate, repayment options, and disbursal timeline vary across lenders and depend on factors such as the purity and value of the pledged gold, regulatory norms, and the lender’s internal assessment. Before borrowing, compare repayment obligations carefully and ensure the loan fits your cash-flow requirements.

Businesses facing delayed receivables may evaluate various funding alternatives to address temporary working-capital requirements while dispute-resolution proceedings remain ongoing. Depending on the circumstances, available options may include internal reserves, receivables management strategies, trade-credit arrangements, or financing solutions from regulated lenders like IIFL Finance. Any borrowing decision should be evaluated based on funding requirements, repayment capacity, applicable terms and conditions, and independent professional

Conclusion

Recovering overdue invoices is often essential for maintaining healthy business cash flow. The MSME Samadhaan portal provides Udyam-registered micro and small enterprises with a structured mechanism to seek recovery of outstanding payments together with the interest available under the MSMED Act. Understanding the eligibility criteria, the 15-day and 45-day payment rules, the required documents, the online filing process, and the tax implications under Section 43B(h) can help businesses respond more confidently when payments are delayed. Where a payment dispute temporarily affects working capital, suitable financing options such as business loans or gold loans, subject to lender evaluation and applicable terms, may help maintain business continuity while the dispute resolution process is underway.

Disclaimer : The information in this blog is for general purposes only and may change without notice. It does not constitute legal, tax, or financial advice. Readers should seek professional guidance and make decisions at their own discretion. IIFL Finance is not liable for any reliance on this content. Read more