MSME Delayed Payment Legal Notice Format (MSMED Act)
An MSME delayed payment notice is a demand by a micro or small supplier asking a buyer to pay overdue invoices with statutory interest under the MSMED Act, 2006. The buyer must pay within the agreed period, capped at 45 days from acceptance; after that, compound interest at three times the RBI bank rate runs automatically.
When to send this notice
Use this notice when your enterprise is registered as micro or small (Udyam registration) on the date of supply, you supplied goods or services to a buyer, and payment is overdue beyond the agreed credit period or 45 days, whichever is earlier. It sets out the statutory interest and warns of a reference to the Micro and Small Enterprises Facilitation Council (MSEFC).
Statutory basis
Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 requires a buyer to pay a micro or small supplier on or before the agreed date, which cannot exceed 45 days from the day of acceptance or deemed acceptance; if there is no agreement, payment is due within 15 days. Section 16 makes the buyer liable for compound interest with monthly rests at three times the bank rate notified by the Reserve Bank, notwithstanding any contrary agreement. Under Section 18 either party may refer the dispute to the MSEFC, which conciliates and, if that fails, arbitrates; under Section 19 a buyer challenging an award must first deposit 75% of the awarded amount. Medium enterprises do not get the Section 15-16 protection.
[ON THE LETTERHEAD OF THE SUPPLIER OR ITS ADVOCATE] By Registered Post A/D & Email Date: [DD/MM/YYYY] To, [Name of Buyer Company] [Registered Office Address] Attn: [Managing Director / Head of Accounts] Subject: Demand for payment of overdue invoices with interest under Sections 15 and 16 of the Micro, Small and Medium Enterprises Development Act, 2006. Sir/Madam, Under instructions from my client, [Supplier Name], a [micro / small] enterprise holding Udyam Registration No. [UDYAM-XX-00-0000000] (copy enclosed), I serve upon you the following notice: 1. That my client supplied [goods / services] to you against your purchase order no. [PO Number] dated [DD/MM/YYYY], as detailed below: Invoice No. | Invoice Date | Date of Acceptance | Amount (Rs.) [___] | [___] | [___] | [___] [___] | [___] | [___] | [___] 2. That you accepted the supplies without objection. Under Section 15 of the Act, payment was due on or before the agreed date, which in no case could exceed forty-five (45) days from acceptance. 3. That a principal sum of Rs. [Principal Outstanding] remains unpaid beyond the statutory period. 4. That under Section 16 of the Act you are liable to pay compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India, from the due date until payment. Interest computed up to [DD/MM/YYYY] amounts to Rs. [Interest Amount] (computation enclosed). I therefore call upon you to pay Rs. [Principal Outstanding] together with interest of Rs. [Interest Amount] and further interest until payment, within fifteen (15) days of receipt of this notice, failing which my client shall refer the dispute to the Micro and Small Enterprises Facilitation Council under Section 18 of the Act and take such other action as is available in law, at your cost. Enclosures: Udyam certificate; invoices; proof of delivery/acceptance; interest computation. [Authorised Signatory / Advocate Name] [Contact]
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How to send this legal notice
From draft to proof of delivery and the next legal step.
Confirm your Udyam registration and that the enterprise was micro or small on the date of supply.
List each invoice with its date of acceptance and the agreed credit period (capped at 45 days).
Compute compound interest with monthly rests at three times the RBI bank rate for each invoice.
Send the notice with the Udyam certificate, invoices and interest computation by Registered Post A/D and email.
If unpaid within 15 days, file a reference with the MSEFC (for example through the MSME Samadhaan portal).
Track the conciliation and any arbitration stage, and any Section 19 challenge by the buyer.
Frequently asked questions
Who can send an MSME delayed payment notice?
A supplier registered as a micro or small enterprise at the time of the supply. Medium enterprises and traders without a valid registration on the relevant date are generally outside Sections 15-16, so check your registration date first.
Can the buyer contract out of MSME interest?
No. Section 16 applies notwithstanding anything in the agreement, and the credit period cannot be extended beyond 45 days from acceptance by contract.
Is a legal notice mandatory before approaching the MSEFC?
Not strictly, but a notice with an interest computation is recommended. It records the demand, often prompts payment, and supports the reference to the Facilitation Council.
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