Buyer Not Paying Within 45 Days? How MSMEs & Manufacturers Recover Stuck Payments + Interest

1. The Short Answer

2. Does the 45-Day Rule Cover You? Check These Four Things

• You are micro or small, not medium. The delayed-payment protection in Sections 15 to 24 of the MSMED Act, 2006 applies to micro and small enterprises only.
• You are a manufacturer or service provider. Traders can hold a Udyam certificate, but the government has clarified that it is for priority-sector lending only; traders do not get the delayed-payment protection.
• You registered before the supply. In Silpi Industries v. KSRTC (2021), the Supreme Court held that a supplier cannot claim these benefits for contracts made before it registered. Registering now still protects your future supplies. See our Udyam registration guide.
• The buyer can be almost anyone. Private companies, firms, proprietors, PSUs and government buyers are all covered by the payment deadline. (The Section 43B(h) tax rule below applies only to business buyers.)

Not covered? You can still recover the bill and any interest your contract allows through a notice and the regular court process. See how to recover an unpaid invoice.

3. How the 45-Day Clock Actually Works

The clock starts from the day the buyer accepts the goods or services. If the buyer raises no written objection within 15 days of delivery, the law treats the supply as accepted on delivery (deemed acceptance). From there:

• If you agreed a credit period in writing (purchase order, contract, invoice terms the buyer accepted), the buyer must pay by that date, but the period cannot exceed 45 days. A PO saying “90 days credit” is capped at 45 days for this purpose.
• If there is no written agreement on credit period, the buyer must pay within 15 days.

So “30 days credit, paid at 120” means at least 75 days of statutory interest are already running.

4. Claiming Interest at 3x the Bank Rate

Under Section 16, once the due date passes, the buyer must pay compound interest with monthly rests at three times the bank rate notified by the RBI. This applies even if your invoice says nothing about interest, and any contract term giving a lower rate does not override it. For illustration only: if the bank rate were 6%, the rate would be 18% a year, compounded every month. Always use the bank rate in force for your period.

Two more points buyers dislike: under Section 23 the buyer cannot deduct this interest as an expense for income tax, and companies must disclose amounts and interest owed to micro and small suppliers in their financial statements, which auditors check.

To work out what you are owed, check your overdue MSME interest with this calculator on LegalRecovery.in.

5. The Buyer's Tax Problem: Section 43B(h)

Since the Finance Act, 2023, Section 43B(h) of the Income-tax Act, 1961 has said: if a business buyer owes money to a micro or small enterprise and does not pay within the MSMED Act time limit, it cannot deduct that purchase as an expense in that year. It gets the deduction only in the year it actually pays. The same rule continues under the new Income-tax Act, 2025.

In plain words, an unpaid bill to you increases the buyer's taxable profit for the year, so they pay tax on money they have not even spent yet. For a company or firm, that can be roughly a quarter to a third of your bill amount in extra tax for that year (the exact figure depends on their tax rate). It is a timing cost, not a permanent penalty, but finance teams take it seriously, especially near 31 March, when the year's books close.

Note that this rule is about the buyer's tax, not a payment to you. It helps you because it gives the buyer's CFO a reason to clear your bill first. LegalRecovery.in has a detailed explainer on the Section 43B(h) MSME payment rule.

6. Step 1: A Lawyer's Notice Addressed to the CFO

Purchase managers can delay a bill for months. Finance heads and auditors cannot ignore a statutory interest claim. Address the notice to the buyer company and mark it to the CFO or accounts head, and include:

• your Udyam number, category (micro/small) and date of registration;
• each invoice, delivery date, acceptance date and due date under Section 15;
• principal outstanding and Section 16 interest calculated to date;
• a reminder of the Section 43B(h) disallowance and the disclosure duties for MSME dues;
• a deadline (7 to 15 days) and notice that you will file before the MSME Facilitation Council if unpaid.

Send it by email, Speed Post and WhatsApp, and keep delivery proof.

7. Step 2: MSME Samadhaan and the Facilitation Council

If the notice deadline passes, file your claim online on the MSME Samadhaan portal. It goes to the Micro and Small Enterprises Facilitation Council (MSEFC) of your state under Section 18. The Council first tries conciliation. If that fails, it arbitrates (or refers the case to an arbitration institution), and the Act requires the award within 90 days of the reference.

• Your local council. The case is heard by the council where you, the supplier, are located, even if the buyer is in another state.
• It overrides arbitration clauses. The Supreme Court held in Gujarat State Civil Supplies Corp. v. Mahakali Foods (2022) that the Council route applies even if your contract has a private arbitration clause.
• The 75% deposit. Under Section 19, a buyer who wants to challenge the Council's award in court must first deposit 75% of the awarded amount. This makes stalling expensive.
• Time limit. File within three years of the due date to be safe; the Limitation Act applies to the arbitration stage.

In practice many councils take longer than 90 days because of backlogs, which is why the notice stage matters.

8. Legal Notice vs MSME Samadhaan: Which Is Faster?

The practical answer: send the notice first, and keep your Samadhaan papers ready to file the day its deadline passes.

9. Frequently Asked Questions