How to File an MSME Delayed Payment Complaint in India: ODR Portal Process Under the MSMED Act

Delayed payments remain one of the most persistent challenges facing micro, small, and medium enterprises in India. Late payments strain working capital, disrupt operations, and can push otherwise viable businesses toward insolvency. The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) established a statutory mechanism for suppliers to recover overdue amounts with interest. Until October 2025, complaints were filed through the SAMADHAAN portal at samadhaan.msme.gov.in, but that portal no longer accepts new filings. All fresh complaints must now be submitted through the MSME ODR Portal at odr.msme.gov.in. This article explains the legal framework, eligibility requirements, and the step-by-step process for using the new platform.

Legal Framework: MSMED Act Sections 15 to 18

Section 15 of the MSMED Act sets the payment timeline that every buyer must follow when purchasing from a micro or small enterprise. If a written agreement exists, payment must be made by the agreed date. Without a written agreement, the buyer must pay within fifteen days from the date of acceptance of goods or services. Regardless of what any agreement may state, the maximum permissible payment period is forty-five days from acceptance. Any contractual term exceeding this ceiling is unenforceable.

Section 16 addresses the consequences of delay. When a buyer fails to pay within the timeline prescribed under Section 15, compound interest becomes payable on the outstanding amount. The rate is set at three times the bank rate notified by the Reserve Bank of India, compounded on a monthly basis. This interest accrues for each day of delay beyond the forty-five-day maximum, making prolonged non-payment increasingly costly for the buyer.

Sections 17 and 18 create the enforcement mechanism. Section 17 establishes the buyer's liability to pay both the principal amount and the compound interest under Section 16. Section 18 provides the procedural route: a supplier can make a reference to the Micro and Small Enterprises Facilitation Council (MSEFC), which is constituted at the state level and has the authority to conduct conciliation and, if that fails, to refer the matter to arbitration.

Who Can File a Delayed Payment Complaint

Eligibility hinges on one primary requirement: valid Udyam Registration. A supplier must hold a current Udyam Registration Certificate to access the complaint mechanism. Enterprises that have not registered, or whose registration has lapsed, cannot file complaints under the MSMED Act. Registration can be completed online at the Udyam portal maintained by the Ministry of MSME.

The complaint mechanism applies to the supplier-buyer relationship. The supplier must be a micro or small enterprise as defined under the MSMED Act, and the goods or services must have been supplied in the ordinary course of business. This covers sole proprietorships, partnership firms, companies, and limited liability partnerships. Business owners planning to set up a new entity may want to understand how to register an LLP in India before applying for Udyam Registration, as the entity must first be legally constituted.

How to File a Complaint on the MSME ODR Portal: Step-by-Step Process

The SAMADHAAN portal at samadhaan.msme.gov.in stopped accepting new filings on October 15, 2025. All new complaints are now filed exclusively through the MSME ODR Portal at odr.msme.gov.in. Cases already pending on SAMADHAAN continue to be processed there, but no fresh filings are accepted on the old platform.

To begin, visit odr.msme.gov.in and register as a complainant. The registration process requires your Udyam Registration Number, which the portal uses to verify your enterprise classification. Ensure that your Udyam details, including enterprise name, PAN, and contact information, are accurate before proceeding.

Once registered, file a new complaint by providing transaction details: the buyer's name and address, invoice numbers, dates of supply, agreed payment terms, and the amount outstanding. Upload supporting documents including invoices, purchase orders, delivery challans, and any written agreements. Clear, well-organized documentation strengthens your case before the MSEFC.

After submission, the portal generates a unique reference number. You can monitor the status of your complaint through the portal dashboard. The MSEFC in the relevant state will receive the reference and initiate proceedings.

Interest Calculation Under Section 16 of the MSMED Act

The interest provision under Section 16 is among the most powerful protections available to MSME suppliers. The applicable rate is three times the bank rate notified by the RBI, compounded monthly. For example, if the RBI bank rate is 6.5%, the effective rate under Section 16 would be 19.5% per annum, compounded monthly. Interest accrues from the day following the expiry of the forty-five-day payment ceiling and continues until actual payment. Courts have upheld the mandatory nature of this interest, treating it as a statutory entitlement that cannot be waived by agreement. For enterprises dealing with chronic non-payment, the Supreme Court on debt recovery timelines provides additional context on how courts approach recovery disputes.

MSEFC Process and Timeline

When a supplier files a reference under Section 18, the MSEFC must dispose of the matter within ninety days. This statutory timeline reflects the legislative intent to provide fast-track resolution for MSME payment disputes. In practice, while some MSEFCs adhere closely to this timeline, delays can occur depending on case volume and party cooperation.

The MSEFC first attempts conciliation between the supplier and the buyer. If conciliation succeeds, a settlement is recorded and becomes binding. If conciliation fails, the dispute is referred to arbitration under the Arbitration and Conciliation Act, 1996. The resulting arbitral award carries the same enforceability as a civil court decree and can be executed through standard enforcement proceedings.

Challenging MSEFC Orders: The 75% Deposit Requirement

Section 19 of the MSMED Act imposes a significant condition on buyers seeking to challenge an MSEFC order. Before filing an application to set aside or modify the award, the buyer must deposit seventy-five percent of the awarded amount with the court. This pre-deposit requirement safeguards against frivolous challenges and ensures suppliers receive a substantial portion of their dues even while litigation is pending. For situations where non-payment is part of a broader pattern of financial distress, suppliers may consider exploring how to file a CIRP application under the Insolvency and Bankruptcy Code as an alternative or parallel recovery strategy.

Related Reading

For a deeper understanding of insolvency proceedings, see this analysis of NCLT insolvency proceedings for NCD default, which examines how tribunals handle admission of corporate insolvency resolution processes.

Employers and HR professionals dealing with compliance alongside MSME operations may also find it useful to review the recent EPF Scheme 2026 changes, which introduce updated obligations for employers under the social security framework.

Key Takeaways

The MSMED Act provides a robust framework for MSME suppliers to recover delayed payments, backed by mandatory compound interest at three times the RBI bank rate and fast-track dispute resolution through the MSEFC. With the transition from SAMADHAAN to the ODR Portal at odr.msme.gov.in, the filing platform has changed, but the underlying legal rights remain intact. Suppliers with valid Udyam Registration should act promptly when payments are delayed beyond forty-five days, file complaints with complete documentation, and take confidence from the seventy-five percent pre-deposit requirement under Section 19. The ninety-day statutory timeline for MSEFC decisions, combined with the enforceability of arbitral awards as civil court decrees, makes the MSMED Act one of the most effective recovery tools available to small businesses in India.