MSME Samadhaan Portal: How to File a Delayed Payment Complaint

Delayed payments can create significant cash-flow challenges for micro and small enterprises, particularly when working capital is tied up in unpaid invoices. To address this issue, the Government of India provides a dedicated grievance mechanism through the MSME Samadhaan portal, enabling eligible enterprises to seek recovery of outstanding dues from buyers under the framework of the MSMED Act, 2006.

Where payments remain overdue beyond the timelines prescribed under the Act, micro and small enterprises may be entitled to seek recovery of the principal amount along with applicable interest. Understanding how the portal works, who is eligible to file a complaint, and what happens after submission can help businesses navigate the recovery process more effectively.

This article explains MSME payment recovery, eligibility requirements, payment timelines, the complete delayed payment complaint MSME process, documentation requirements, dispute-resolution stages, and the impact of payment delays under the applicable legal framework.

Who Can File a Complaint: Eligibility Criteria

Not every business qualifies to file a complaint through the MSME Samadhaan portal. Eligibility to use the MSME Samadhaan mechanism depends on the conditions prescribed under the MSMED Act and the applicable registration framework.

Eligibility generally applies where:

• The enterprise is a Udyam-registered micro or small enterprise.
• The business is engaged in manufacturing or service activities.
• The Udyam registration existed before the invoice date.
• The buyer is an eligible organisation, including a private company, public sector undertaking, government department, or large corporate.

Compliance with the applicable eligibility conditions forms an important part of the filing and verification process.

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, the payment timeline is governed by the provisions of the MSMED Act and applicable contractual arrangements, subject to the statutory framework.

Where payment remains outstanding beyond the applicable statutory period, the provisions of Section 16 of the MSMED Act provide for interest liability in accordance with the framework prescribed under the Act. 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.

Understanding Delayed-Payment Liability

Where payment remains overdue beyond the applicable statutory period, liability may include both the unpaid principal amount and the applicable interest calculated under Section 16 of the MSMED Act. The actual amount payable depends on factors such as the outstanding amount, duration of delay, and the RBI-notified bank rate applicable during the relevant period.

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

How Delayed Payment Interest Is Determined

The amount of interest payable under Section 16 of the MSMED Act depends on:

• Outstanding principal amount.
• Duration of the payment delay.
• The RBI-notified bank rate applicable during the relevant period.
• The compound-interest methodology prescribed under the Act.

Because these variables can change over time, the actual liability differs from case to case.

How a Complaint Is Typically Filed Through the MSME Samadhaan Portal

The filing process through the MSME Samadhaan portal typically involves a sequence of documentation, communication, and verification stages before the claim reaches the appropriate Facilitation Council for consideration.

Step 1: Send a Written Reminder

A written reminder is commonly used as an initial communication where payment remains outstanding beyond the expected due date.

A written reminder typically contains details such as:

• 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 the payment dispute continues, businesses often issue a formal notice referencing the applicable provisions and payment timelines 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

Supporting documentation generally forms part of the online application process and may 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

These documents are commonly reviewed during verification and dispute-resolution proceedings.

Step 4: File the Application on the MSME Samadhaan Portal

Applications are generally submitted through the MSME Samadhaan portal, where eligible enterprises provide their Udyam registration details, buyer information, invoice details, claim amount, and supporting documentation.

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.

A buyer seeking to challenge an MSEFC award is generally required under the MSMED Act to deposit 75% of the awarded amount before an appeal can proceed. This requirement often encourages early settlement.

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 the Tax Implications of Delayed Payments

The tax treatment applicable to delayed payments from buyers can be relevant in discussions relating to pending receivables. In certain circumstances, the provisions of Section 43B(h) of the Income-tax Act may affect the timing of deductions claimed by buyers purchasing goods or services from 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, that is, 45 days where there is a written agreement or 15 days where there is none, the timing of the buyer’s tax deduction may be affected in accordance with Section 43B(h), subject to the applicable legal provisions and facts of the case.

These provisions can affect the timing of tax deductions claimed by buyers and therefore form part of the broader compliance implications associated with delayed payments.

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.

In practice, awareness of these provisions may form part of discussions relating to pending receivables and payment timelines.

Note: 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. The resolution process may take time depending on the facts of the dispute and the workload of the concerned Facilitation Council.

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. Any financing arrangement is subject to the applicable loan terms, repayment obligations, lender assessment, and the borrower's financial circumstances.

Businesses facing temporary working-capital pressure may evaluate financing options available in the market, subject to lender assessment, documentation requirements, eligibility criteria, and applicable regulations.

Note: Loan eligibility, sanctioned amount, interest rate, tenure, and disbursal are subject to lender evaluation, documentation, regulatory requirements, and applicable policies.

Conclusion

Delayed payments can disrupt business operations, strain working capital, and affect day-to-day financial planning for micro and small enterprises. The MSME Samadhaan portal provides a formal mechanism through which eligible enterprises can pursue recovery of outstanding dues in accordance with the MSMED Act and the dispute-resolution process established under the law.

This article covered eligibility requirements, statutory payment timelines, documentation requirements, the filing process, dispute-resolution stages before the MSEFC, and the wider implications of delayed payments, including interest liability and relevant tax considerations. Since procedural requirements and legal interpretations can evolve, enterprises should rely on the latest official notifications, government resources, and professional guidance where required.

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