A freelancer who is registered on Udyam can ask the Micro and Small Enterprises Facilitation Council to recover delayed payment under Section 18 of the MSMED Act, 2006, usually through the MSME Samadhaan portal. It carries no court fee and provides compound interest at three times the RBI bank rate, but the Supreme Court has tied the benefit to being registered when the contract was made.
The Micro and Small Enterprises Facilitation Council is a state-level body set up under the MSMED Act, 2006 to resolve delayed-payment disputes between micro or small suppliers and their buyers. MSME Samadhaan is the Government of India portal through which such references can be filed and tracked online.
It is meant to be a faster and cheaper route than a civil suit. The Council first attempts conciliation and, if that fails, the dispute goes to arbitration under the Arbitration and Conciliation Act, 1996.
Yes, if you are a registered micro or small enterprise supplying services, which includes a sole proprietor freelancer holding an Udyam registration. The Act covers a “supplier” who has filed a memorandum or registered under the Act, and delayed payment for services is within the scheme.
The condition that decides most cases is timing. In Silpi Industries v. Kerala SRTC (2021), the Supreme Court held that the supplier must be registered on the date of entering into the contract. A later decision, NBCC (India) Ltd v. State of West Bengal (2025), disagreed and referred the question to a larger bench, so the position is not fully settled. Plan on the stricter view.
No court fee is payable for the reference. Section 15 requires payment within the agreed time, capped at 45 days from acceptance, and Section 16 provides compound interest with monthly rests at three times the bank rate notified by the RBI. Under Section 19, a buyer who challenges the award must first deposit 75% of the awarded amount.
Together these change the economics of a small claim. A debt that would not justify a suit can still be pursued, and the deposit requirement gives the buyer a reason to settle.
Udyam registration is free on the official portal, udyamregistration.gov.in, and uses your Aadhaar and PAN details. For a sole proprietor it usually takes minutes once the documents are in hand.
Register before you sign the contract you may later want to enforce, not after a client stops paying. Under the strict reading of Silpi, registering after the contract does not make that contract eligible, so the value of the registration is mostly for future work.
The general order is: confirm you hold a valid Udyam registration that predates the contract; gather the agreement, invoices, proof of delivery and proof of non-payment; send the buyer a demand notice and note the date; then register on the portal and file a reference with the Facilitation Council that has jurisdiction over the supplier's location.
The form asks for your Udyam details, the buyer's details, the invoice amounts and dates, and the documents. The portal and its requirements change, so follow the current screens and instructions rather than any fixed checklist.
The Council issues notice to the buyer and calls the parties for conciliation. Section 18 contemplates the Council deciding the matter within 90 days of the reference, though in practice timelines vary by state and workload.
If conciliation fails, the Council itself or an institution it refers the matter to acts as arbitrator, and the award is enforceable as a decree. A buyer who wants to challenge it must meet the 75% deposit condition first.
Eligibility is the main risk: if your registration postdates the contract, the buyer can raise this as a defence, and the law on this point is still being settled. The buyer may also argue the Act does not apply to your kind of supply, or dispute the amount.
It is also slower than a demand and not a guaranteed route to payment. Treat it as a strong option for eligible freelancers, and keep a civil suit under Order XXXVII CPC as your fallback. The steps to raise a dispute show how the options fit together.
Service providers can use it. The MSMED Act covers micro and small enterprises engaged in manufacturing and in providing services, provided they hold the required registration.
No. A supplier can file a reference in its own name. A lawyer is optional, and is more useful if the buyer contests eligibility or the matter proceeds to arbitration.
It is risky. Under Silpi Industries (2021) the supplier must be registered when the contract is made, and later registration is not treated as covering that contract. A larger bench is reconsidering the point, but you should not rely on that.
Section 16 of the MSMED Act provides compound interest with monthly rests at three times the bank rate notified by the RBI, on the amount unpaid after the permitted period.