Recovery of due amount under the MSMED, 2006


Status as on- 27/06/2023

As per the latest data available as of 04.01.2023, a total number of 65,23,067 enterprises were classified, consisting of 36,75,597 enterprises registered under the Manufacturing category and 94,18,101 enterprises registered under the Service sector under the MSMED Act, 2006.

Now coming towards the specific benefits as provided to the MSME or Udyam Registered units under the MSMED Act, one of the major reliefs is the recovery of outstanding Money. Now the question arises, how a unit registered under MSME can recover the money as per the provisions of the Act? What are the liabilities of the buyer to make a payment towards the MSME registered unit?

If we see the provisions of Section 15 of MSMED Act, 2006, the buyer shall make the payment on or before the date agreed upon between him and the seller in writing, or where there is no such agreement on this behalf, the payment shall be made before the appointed day. Further, it must be noted that in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.

In case of default as per the provisions of Section 16 of MSMED Act, 2006, if any buyer fails to make payment as per the stipulated time, the buyer shall also be liable to pay compound interest with monthly rests to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at three times of the bank rate notified by the Reserve Bank along with the Principal Amount due.

After reading the provisions for the safeguard of sellers registered under the MSMED Act, 2006 the question arises who will be the appropriate authority to pass such orders so that the above-discussed provisions can be implemented and the interest of sellers can be safeguarded?

Moving forward, to the provisions of Section 18 of the MSMED Act, 2006 any party to a dispute may, with regard to any amount due under Section 17, make a reference to the Micro and Small Enterprises Facilitation Council (“MSFEC” or “Council”).

Further, once the Council receipts the reference the Council shall either itself conduct conciliation or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996.

In case, the conciliation as initiated is not successful and stands terminated without any settlement between the parties the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in subsection (1) of section 7 of that Arbitration and Conciliation Act, 1996.


At the last, it can be concluded that the MSMED Act, 2006 provides consequential relief to the sellers who are registered under the Act and for more information in this regard you may share the queries at


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