MSME · Provision
How an unpaid micro or small supplier takes a buyer to the MSME Facilitation Council: conciliation first, then arbitration, a decision due in 90 days, and the 75% deposit a buyer needs to challenge it. (Section 18, Micro, Small and Medium Enterprises Development Act, 2006.) In force since 2 October 2006 · Text checked against India Code on 26 October 2026.
Quick Statutory Answer
Section 18 of the MSMED Act, 2006 lets any party to a dispute over an amount due under section 17, in practice a micro or small supplier whose buyer has not paid, refer it to the Micro and Small Enterprises Facilitation Council, notwithstanding any other law. The Council first conducts conciliation, itself or through an ADR centre, under sections 65 to 81 of the Arbitration and Conciliation Act, 1996. If that fails, it arbitrates, or refers the dispute to a centre to arbitrate, as if the parties had an arbitration agreement. The Council where the supplier is located has jurisdiction over a buyer anywhere in India, and every reference is to be decided within ninety days. A buyer who wants a court to set the award aside must first deposit 75% of it under section 19.
Enter your own figures in the calculator on this page: MSME interest calculator, under Micro, Small and Medium Enterprises Development Act, 2006, s.16.
18. Reference to Micro and Small Enterprises Facilitation Council.— (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. (4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. (5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference.
| Stage | What happens | Provision |
|---|---|---|
| Reference | Any party to a dispute over an amount due under section 17 refers it to the Council | s.18(1) |
| Conciliation | By the Council, or an ADR institution it refers the matter to, under sections 65 to 81 of the Arbitration and Conciliation Act | s.18(2) |
| Arbitration | If conciliation fails, the Council arbitrates or refers the dispute to an ADR centre, as if there were an arbitration agreement | s.18(3) |
| Jurisdiction | The Council where the supplier is located, against a buyer anywhere in India | s.18(4) |
| Time limit | The reference is to be decided within 90 days of being made | s.18(5) |
| Challenging the award | The buyer must first deposit 75% of the amount awarded with the court | s.19 |
75% deposit first. No court will entertain a buyer's application to set aside the Council's award until 75% of the amount awarded is deposited (s.19).
The section that lets a party to a dispute over an amount due under section 17, usually a micro or small supplier whose invoices are unpaid, refer it to the Micro and Small Enterprises Facilitation Council. The Council conciliates first and, if that fails, arbitrates, and the reference is to be decided within ninety days.
Yes. Under section 18(4) the Council where the supplier is located has jurisdiction over a buyer located anywhere in India.
Section 18(5) says every reference shall be decided within ninety days of the date on which it is made.
The Act provides for it. The Council first conducts conciliation, or has an ADR institution conduct it, under section 18(2); arbitration follows under section 18(3) only if conciliation is not successful and ends without a settlement.
By applying to a court to set it aside under the Arbitration and Conciliation Act. Under section 19 of the MSMED Act no court will entertain the application unless the buyer has first deposited 75% of the amount awarded, and the court may pay part of the deposit to the supplier while the application is pending.
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