MSME 45-Day Rule: Recover Your Unpaid Dues Fast

If a big company owes your small business money and hasn't paid in 45 days, the law is firmly on your side. You can claim compound interest and file a recovery case — here's how to actually do it.

Here's what happened: The MSMED Act mandates that buyers must pay micro and small enterprise suppliers within 45 days of accepting goods or services — or within 15 days if no written agreement exists.. Overdue payments attract compound interest at three times the RBI bank rate, calculated on a monthly basis — making delayed payment legally expensive for the buyer.. Section 43B(h) of the Income Tax Act now disallows tax deductions for buyers who fail to pay MSME dues within the stipulated timeline, adding a direct tax penalty on top of interest liability..

What you should do: Document every delivery: keep signed acknowledgements, purchase orders, and email confirmations — your MSEFC filing depends on proving the acceptance date.. Issue a formal written payment demand to the buyer the moment the 45-day window closes, referencing the MSMED Act — this creates a legal paper trail before you file.. File your recovery application at your state's MSEFC portal (most states have an online form) — the process is free, and the council must conclude conciliation within 90 days of reference..

Register your business on the Udyam portal before filing — only Udyam-registered micro and small enterprises can legally invoke MSMED Act protections and MSEFC jurisdiction.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.