Delayed Payment Interest Calculator — MSMED Act, 2006
A buyer who fails to pay a registered micro or small enterprise within the statutory period owes interest at three times the RBI bank rate, compounded monthly — and it is not negotiable by contract. Enter the invoice details to see what has accrued under Section 16 of the MSMED Act, 2006.
AdvoMitra is a legal technology platform and is not a law firm. These tools and drafts are provided for general information. They are not legal advice, and no template fits every situation — have an advocate review anything you intend to rely on.
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What the MSMED Act gives a small supplier
Section 15 requires a buyer to pay a micro or small enterprise within the period agreed, and in any event within 45 days of accepting the goods or services. A contract fixing a longer period is void to that extent.
Section 16 fixes the consequence: compound interest, with monthly rests, at three times the bank rate notified by the Reserve Bank. There is no discretion to award less, and the parties cannot contract out of it.
The interest is not deductible by the buyer for income tax purposes, which is often what finally moves a reluctant payer.
How to enforce it
The remedy is a reference to the Micro and Small Enterprises Facilitation Council in the state where the supplier is located. The Council first attempts conciliation; if that fails, it takes up arbitration itself or refers it to an institution.
The Council must dispose of the reference within 90 days. A buyer challenging the award must deposit 75% of the amount before the court will entertain the application — a significant deterrent to appeals brought purely for delay.
Udyam registration at the time the supply was made is what establishes the claim. Registration obtained afterwards generally does not help for past invoices.
Before you file
Assemble the purchase order, the invoice, proof of delivery or acceptance, the Udyam registration certificate, and any correspondence acknowledging the debt.
A demand letter setting out the Section 16 calculation resolves a meaningful proportion of these disputes without a reference, because the buyer can see what the interest is costing.
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