Udyam Registered? Your Client Has 45 Days to Pay You

What do Sections 15 and 16 of the MSMED Act actually say?

Section 15 provides that where a micro or small supplier supplies goods or renders services, the buyer must pay on or before the date agreed in writing. Where there is no written agreement on payment, the buyer must pay before the 'appointed day', which Section 2 defines as the day after fifteen days from acceptance or deemed acceptance. In any case, the agreed period cannot exceed forty-five days from acceptance or deemed acceptance.

That fifteen-day default is the part most people miss. A freelancer with no written payment term is not left with an open-ended wait. The statute fills the gap with a short deadline, and a client that has never agreed anything in writing is in a weaker position than one that agreed thirty days.

Section 16 provides that a buyer who fails to pay on time is liable to pay compound interest with monthly rests, from the day after the agreed date or from the appointed day, at three times the bank rate notified by the Reserve Bank of India. Section 16 applies notwithstanding anything in an agreement between the parties, so the rate is not something a client can negotiate down in its purchase order. Section 17 makes the buyer liable for the principal plus that interest.

What counts as acceptance, and when does the clock start?

The forty-five days run from acceptance or deemed acceptance, not from your invoice date. The Act ties these to delivery. Ordinarily, the day of acceptance is the day the goods are delivered or the services are rendered. If the buyer objects in writing within fifteen days of delivery, acceptance is the day you remove the objection. If no written objection arrives within fifteen days, the day of actual delivery is treated as the day of deemed acceptance.

The practical consequence is that a clean delivery record matters. Send the final files or the completed work by email, state the date of delivery, and keep the reply or the silence. An email that says 'Delivered today: final logo files in PDF, PNG and SVG formats as per the brief dated 3 March' is ordinary discipline, and it is what turns the provision from theory into a date you can point at.

A vague complaint on a call is not a written objection. If a client later says they were unhappy all along, the question will be whether they objected in writing within fifteen days of delivery.

How the deadline works in common situations

Can a client insist on 90-day payment terms?

A client can ask, and many large companies send purchase orders with 60, 90 or 120-day terms as standard. Against a registered micro or small supplier, the forty-five-day ceiling in Section 15 applies regardless of what the purchase order says. The longer term does not displace the statutory maximum.

That changes the negotiation. A freelancer asked to accept ninety-day terms is not simply being asked to wait; they are being asked to accept a term that, if they are registered, does not displace the statutory position. Saying so calmly, in writing, when the term is proposed, is a very different conversation from chasing an overdue invoice three months later.

A clause you can propose: 'The Supplier is registered as a micro enterprise under Udyam Registration No. [number]. Payment shall be made within 30 days of acceptance or deemed acceptance and in any event within the period required by Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006. Delayed payments attract interest under Section 16 of that Act.' Most finance teams will recognise the wording and route your invoices accordingly.

A worked example in rupees

Suppose you are a registered micro enterprise and deliver a website on 1 June. The client raises no written objection, so 1 June is the day of deemed acceptance. Your contract says thirty days. Payment of your ₹2,00,000 invoice is due by 1 July. If your contract had said ninety days, the deadline would still be forty-five days from 1 June, which is 16 July.

Now assume the client pays three months late. For illustration only, take a bank rate of 5.5 per cent. Three times that is 16.5 per cent a year, compounded monthly, which is about 1.375 per cent a month. Over three months the interest on ₹2,00,000 comes to roughly ₹8,400. Over a year it would be about ₹35,600. Check the bank rate actually notified by the RBI for your period, because it changes with monetary policy.

Most clients have never seen this calculated. A short email showing the figure tends to move an invoice up the queue faster than a fourth reminder.

Registration is the condition

The protection attaches to a supplier that is a registered micro or small enterprise, and registration in India is through the Udyam portal. A freelancer who has not registered is not within the framework, however small their operation. Medium enterprises are also outside Sections 15 and 16.

Timing matters as much as registration. The Supreme Court has held that a supplier generally cannot claim the MSMED benefits under a contract entered into before it registered. So registering after a client has defaulted does not reach back to that work. If you invoice businesses in India and you are not registered, registering now protects your next project, not your last one.

Registration is free, done online, and based on self-declaration using Aadhaar and PAN. For an individual freelancer it is a short exercise.

Pressure points beyond interest

The Act and related rules give buyers other reasons to pay on time. Section 22 requires a buyer that must get its annual accounts audited to disclose in those accounts the amounts it owes to micro and small suppliers beyond the time allowed, along with the interest. Section 23 provides that interest payable under the Act is not allowed as a deduction when the buyer computes its taxable income.

Companies registered with the Ministry of Corporate Affairs must also file a half-yearly return, known as MSME Form 1, reporting dues to micro and small suppliers that remain unpaid beyond forty-five days. For the years governed by the Income-tax Act, 1961, Section 43B(h) also restricted a buyer's deduction for payments to micro and small enterprises made late. Ask an accountant how the corresponding provision operates under the Income-tax Act, 2025.

You do not need to cite all of this to a client. It helps to know that their finance team has reasons of its own to clear your invoice.

Does the MSMED Act apply to every client?

The Act defines a buyer broadly as anyone who buys goods or receives services from a supplier for consideration, which covers companies, firms, LLPs and government bodies. In practice the protection is most useful against Indian businesses with finance teams that recognise the Act.

It is less useful against an individual hiring you for a personal project, and enforcing an Indian award against a client based abroad raises separate questions. If most of your work is for overseas clients, the Act will matter less to you than a clear contract with an upfront deposit.

How to use it without escalating

Section 18 provides the Facilitation Council route, and the Supreme Court has held that it can be used even where your contract has its own arbitration clause. Under Section 19, a buyer who wants to challenge an award or order against it must first deposit seventy-five per cent of the amount awarded. That deposit requirement is one reason the route carries weight.

How long the process takes, and how the Council in your State operates, varies. Whether escalation is right in your situation is worth advice, but knowing the route exists changes how the earlier conversation goes.

• Put your Udyam number on your proposal, contract and every invoice.
• Confirm delivery in writing and note the date.
• On the due date, send a polite reminder stating the due date under the contract and Section 15.
• Two weeks later, send a second note with the interest calculated under Section 16.
• If the client still does not pay, file on the MSME Samadhaan portal, which routes the claim to the Micro and Small Enterprises Facilitation Council for your State.
• The Council first tries conciliation and, if that fails, takes up the dispute itself as an arbitration or refers it to an arbitration institution.