What is the statutory interest rate for delayed MSME payments?

Under Section 16 of the MSMED Act 2006, any buyer failing to make payment within 45 days is legally mandated to pay compound interest with monthly rests at three times (3x) the Bank Rate notified by the Reserve Bank of India.

How does Section 43B(h) of the Income Tax Act penalize buyers who delay MSME payments?

Under Section 43B(h) inserted by Finance Act 2023, any sum payable by a buyer to a registered Micro or Small enterprise beyond 45 days (or 15 days without agreement) will be disallowed as a business expense and added back to the buyer's taxable income for that financial year.

MSME Legal Demand Notice Generator (Section 15 & 16 MSMED Act)

Claim Particulars

MSME Udyam & Defaulting Buyer Information

MSME Supplier Enterprise Name *

Udyam Registration Number *

Defaulting Buyer / Corporate Name *

Attention (Director / CEO / CFO) *

Buyer Registered Office Address *

Unpaid Invoice Number(s) *

Invoice Date *

Principal Amount Unpaid (₹) *

Current RBI Bank Rate (%) * Statutory 3x Multiplier: 20.25% p.a. compound

Cure Period Demand *

Statutory Notice Preview

MSMED Act S.15 & 16

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The Power of a Section 15 & 16 MSMED Demand Notice

Under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, Indian law provides small businesses with unprecedented recovery mechanisms that override standard civil court suits.

Mandatory 45-Day Cap: Section 15 states that in no case shall the period agreed upon between the supplier and the buyer exceed 45 days. Any contract clause stipulating 90 or 120-day credit is void as contrary to statutory law.

Compulsory 3x Compound Interest: Section 16 mandates interest at three times the RBI bank rate compounded monthly. This interest is mandatory and cannot be waived by contracts or arbitral discretion.

Section 43B(h) Income Tax Disallowance: The Finance Act 2023 enacted Section 43B(h), which disallows the buyer's purchases from taxable expenses unless paid within 45 days. Serving this notice immediately puts the buyer's tax filings and CFO at serious audit risk.

Mandatory 75% Deposit for Appeals: Under Section 19, if the buyer challenges an MSEFC award in court, they MUST pre-deposit 75% of the awarded amount into court before their petition can even be entertained.

Frequently Asked Questions on MSME Demand Notices

Do I need an advocate to sign this demand notice?

No. You can issue this statutory demand notice directly under the signature and seal of your Authorized Director, Partner, or Proprietor. However, you can also have your legal counsel issue it on their legal letterhead. The notice should be dispatched via Registered Post AD or Speed Post, and emailed simultaneously to the buyer's Board of Directors.

What should I do if the buyer does not pay after 15 days?

If the buyer fails to clear the outstanding dues within the demand window, you can file an online petition on the Ministry of MSME's Samadhaan Portal (samadhaan.msme.gov.in). The case is assigned to the state Micro and Small Enterprises Facilitation Council (MSEFC) which initiates conciliation and binding statutory arbitration.