Recovering Money From Debtors as an MSME: The ODR Portal, MSMED Act Interest and Your Legal Options (2026)

If a buyer hasn't paid you within the legal timeline, you are not stuck waiting — Indian law gives registered Micro and Small Enterprises one of the strongest statutory recovery mechanisms available to any category of business in the country. Compound interest at three times the RBI Bank Rate, a 90-day dispute resolution deadline, and a buyer who can't even claim a tax deduction on the amount owed to you — the MSMED Act, 2006 stacks the odds in your favour. This guide walks through exactly how MSME debtor recovery works in 2026, including a filing-portal change that has quietly made several older guides on this topic outdated.

Which Government Portal Do You Actually File On Now — Samadhaan or ODR?

This is the single most important update for 2026, and it's the detail most older articles get wrong.

As of 15 October 2025, MSME Samadhaan (samadhaan.msme.gov.in) stopped accepting new delayed-payment complaints. By a Ministry of MSME order dated 3 October 2025, all fresh delayed-payment references must now be filed exclusively on the MSME Online Dispute Resolution (ODR) Portal at odr.msme.gov.in, which was launched on 27 June 2025. Samadhaan still exists online, but only as:

• A migration bridge and status-tracking archive for cases filed before 15 October 2025.
• A redirect point for anyone landing there looking to file a new complaint.

If you're filing today, go straight to odr.msme.gov.in. Any guide that walks you through "filing on Samadhaan" for a new case is describing a process that no longer accepts new entries.

What Legal Right Do MSMEs Have to Recover Delayed Payments?

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, specifically Sections 15 to 24, creates a statutory right to timely payment for any Udyam-registered micro or small enterprise supplying goods or services — a right that overrides any contrary term in a private contract.

Section 15 — the payment deadline:

• If there's a written agreement on credit period, the buyer must pay by the agreed date — but that agreed period cannot legally exceed 45 days from the date of acceptance (or deemed acceptance) of goods or services.
• If there's no written agreement, payment is due within 15 days.
• Goods or services are "deemed accepted" if the buyer doesn't communicate a rejection within 15 days of delivery.

Section 16 — the interest that runs automatically:

• Once the payment deadline passes, the buyer becomes liable for compound interest at three times the RBI-notified Bank Rate, compounded with monthly rests.
• With the Bank Rate at 5.50% following the RBI Monetary Policy Committee's 3–5 August 2026 meeting, this works out to 16.50% per annum nominal, or roughly 17.8% effective annually after monthly compounding.
• This interest accrues automatically from the day after the due date — you don't need to send a demand notice or a reminder for it to start running, and it overrides any lower interest rate written into your contract.

Section 23 — the sting for the buyer: interest paid or payable under Section 16 is explicitly not tax-deductible for the buyer. Combined with Section 43B(h) of the Income Tax Act (below), this makes delaying payment to an MSME genuinely expensive, not just legally risky.

How Does the Section 43B(h) Income Tax Rule Increase Buyer Pressure?

This is one of the biggest practical levers MSMEs gained in recent years, and it works entirely through the buyer's own tax return rather than through you filing anything.

Under Section 43B(h) of the Income Tax Act (applicable from FY 2023-24 onward; the corresponding provision becomes Section 37(2)(g) of the Income-tax Act, 2025 from 1 April 2026):

• If a buyer's payment to an eligible micro or small enterprise remains overdue and unpaid on 31 March of the financial year, the buyer cannot claim that expense as a tax deduction for that year.
• The disallowed amount gets added back to the buyer's taxable income, increasing their tax outflow — sometimes substantially, if multiple MSME payables are outstanding.
• Unlike most other Section 43B clauses, paying before the ITR filing due date does not rescue the deduction — the deduction only becomes available in the year the payment is actually made.
• Tax auditors are required to report unpaid MSME dues in Form 3CD of the tax audit report, meaning this isn't something a buyer can quietly ignore — it surfaces in their own statutory audit.
• Importantly, your registration under the MSMED Act is what matters, not the buyer's — this provision protects any eligible micro or small enterprise supplier, and any written agreement promising a credit period beyond 45 days is legally void to that extent.

Practical takeaway: if a buyer is dragging their feet near financial year-end, reminding them (in writing) that the unpaid amount will be disallowed under Section 43B(h) is often a faster lever than starting formal proceedings — most CFOs and tax auditors take this seriously well before 31 March.

Step-by-Step: How Do You File a Delayed Payment Recovery Claim in 2026?

1. Confirm your Udyam registration predates the invoice. This is a strict eligibility rule — if your Udyam registration date is later than the disputed invoice, that invoice falls outside the Act's protection. Register early, before you raise your first invoice to a new buyer.
2. Send a written reminder, then a formal notice. A written reminder referencing the MSMED Act payment timeline is the standard first step; email is generally treated as acceptable written evidence, while messaging-app chats alone are often not sufficient documentation if the matter later goes before the Facilitation Council.
3. Register on the MSME ODR Portal (odr.msme.gov.in) using your Udyam number and mobile number.
4. File your claim, attaching purchase orders, invoices, delivery/acceptance proof, and your payment reminder/notice.
5. Online negotiation/mediation stage first. The claim goes through an online conciliation attempt before escalating further.
6. Escalation to the Micro and Small Enterprise Facilitation Council (MSEFC) if mediation fails — the state-level council handles conciliation and, where needed, arbitration, in place of a regular civil court.
7. MSEFC must dispose of the case within 90 days of reference, under Section 18 of the Act — a statutory timeline most private commercial litigation simply doesn't offer.
8. If the buyer appeals an MSEFC award, they must first deposit 75% of the awarded amount with the appellate court before the appeal is even entertained — a strong practical deterrent against frivolous appeals.

Can You File Against a Private Company, or Only the Government?

Yes — the MSMED Act covers both government and private buyers. You can file a delayed-payment claim against any private company, including large enterprises and listed companies, as long as you supplied goods or services under a genuine commercial transaction. For private-buyer disputes, keeping a written purchase order or agreement is what establishes the transaction formally when the case reaches the Facilitation Council — this is often the single document that determines how smoothly a claim proceeds.

For government buyers specifically, the same 45-day (with written agreement) or 15-day (without) timeline applies, and government dues are one of the largest sources of MSME payment backlog nationally.

Is There a Faster Route Than Waiting for an MSEFC Award?

If cash flow can't wait for a Facilitation Council process, two mechanisms are worth knowing:

TReDS (Trade Receivables Electronic Discounting System): an RBI-regulated digital platform (the three licensed operators are RXIL, M1xchange, and Invoicemart) that lets you discount an already-accepted invoice with competing financiers, receiving payment typically within one to two business days rather than waiting for the buyer's due date. It's not "recovery" in the legal sense — you're selling your receivable at a discount — but it converts a slow-paying accepted invoice into immediate working capital without collateral.

A pending legislative upgrade: the MSME Development Amendment Bill under discussion in 2026 proposes a new Section 15A that would require every Central Public Sector Enterprise to route MSME invoice settlement through an RBI-authorised TReDS platform, tighter 90-day mediation and arbitration deadlines, and — notably — a provision allowing a mediated settlement or arbitral award to be recovered as arrears of land revenue, with the amount also recognised as a legally enforceable debt under the Insolvency and Bankruptcy Code, 2016. If enacted, this would give MSMEs a materially stronger enforcement mechanism once an award is in hand, rather than having to separately sue to enforce it.

Common Mistakes MSMEs Make When Trying to Recover Dues

• Filing on the old Samadhaan portal expecting it to register a new complaint — since 15 October 2025, it doesn't accept fresh filings.
• Relying on WhatsApp or SMS as your only proof of a payment reminder. Put reminders and notices in writing over email, and keep the trail.
• Registering under Udyam after the invoice date and assuming past invoices are covered — they're not; only invoices raised after your registration date qualify.
• Agreeing to a written credit period beyond 45 days, assuming it's binding — under Section 15, any agreed period beyond 45 days is void to that extent, regardless of what the contract says.
• Not tracking Section 43B(h) leverage. Reminding a buyer, in writing, that unpaid dues will be disallowed in their tax computation near financial year-end is often a fast, low-cost way to get paid without escalating to the Facilitation Council.

Frequently Asked Questions

What is the maximum time a buyer can take to pay an MSME under Indian law? 45 days with a written agreement, or 15 days if there's no written agreement — measured from the date of acceptance (or deemed acceptance) of the goods or services, under Section 15 of the MSMED Act, 2006.

How much interest can an MSME claim on a delayed payment? Compound interest at three times the RBI-notified Bank Rate, compounded monthly, under Section 16 of the MSMED Act. With the Bank Rate at 5.50% (as of the August 2026 RBI MPC meeting), that works out to roughly 16.5% nominal, or about 17.8% effective per annum.

Where do I file a new delayed-payment complaint in 2026 — Samadhaan or ODR? The MSME ODR Portal at odr.msme.gov.in. MSME Samadhaan stopped accepting new filings from 15 October 2025 and now only serves as an archive and migration bridge for older cases.

Can I recover money from a private company, or only from government buyers, under the MSMED Act? Both. The Act applies to any buyer — government department, PSU, or private company (including listed companies) — that has delayed payment for goods or services supplied by a registered micro or small enterprise.

Does the buyer get a tax deduction if they delay paying an MSME? No, in two separate ways: the MSMED Act itself (Section 23) makes the interest non-deductible, and Section 43B(h) of the Income Tax Act disallows the underlying expense as a deduction if it remains overdue and unpaid at the end of the financial year.

How long does the Facilitation Council take to decide a case? The MSEFC is required to dispose of a referred delayed-payment case within 90 days, under Section 18 of the MSMED Act — a statutory deadline that regular civil litigation doesn't typically offer.

What happens if the buyer appeals an MSEFC award? They must deposit 75% of the awarded amount with the appellate court before the appeal will even be entertained — a significant financial deterrent against appealing purely to delay payment.

Is there a way to get paid faster than waiting for a Facilitation Council decision? Yes — TReDS lets you discount an already-accepted invoice with competing financiers for near-immediate payment (typically T+1 or T+2 days), though this is invoice financing rather than legal recovery of the original claim.

Sourcing note

This article reflects the MSMED Act, 2006, the Income Tax Act provisions, the RBI Bank Rate as of the August 2026 MPC meeting, and portal and filing status as of September 2026. Government portals, interest rates and pending legislative amendments change periodically — verify current filing procedure at odr.msme.gov.in, and confirm your specific interest calculation and tax treatment with a qualified professional before relying on this for a live dispute.