Notices · MSME

MSME Facilitation Council notice: reply format, and what a buyer must do

A micro or small supplier says you paid late and has referred the claim to the Council. The interest runs at three times the RBI bank rate, and an award is hard to challenge.

Quick Statutory Answer

A notice from an MSME Facilitation Council means a micro or small supplier has referred a delayed payment to it under section 18 of the MSMED Act. Section 15 caps payment at 45 days from acceptance, and section 16 makes the buyer pay compound interest at three times the RBI bank rate from the appointed day. The Council first tries conciliation, then arbitrates; an award is to be made within 90 days, and section 19 requires 75% of it to be deposited before it can be challenged.

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At a glance

What For this notice
Sent by The Micro and Small Enterprises Facilitation Council of the state, on a supplier’s reference
Under Sections 15 to 19, MSMED Act 2006
Reply in A written reply to the Council, and appearance at conciliation
Deadline The date given in the Council’s notice
If ignored Arbitration and an award; to challenge it you must first deposit 75% of the amount awarded

MSME Facilitation Council (MSEFC) notice reply format

A fill-in format: replace every [bracket] with your own facts and delete what does not apply. Copy it, or download it in Word, free.

From

[Legal name of the business] GSTIN: [GSTIN] [Principal place of business]

Date: [DD/MM/YYYY]

To

The Micro and Small Enterprises Facilitation Council [State] [Address]

Subject: Reply of the respondent (buyer) in Case No. [case number] — [name of the supplier] v. [name of your business]

Respected Sir/Madam,

1. The respondent submits its reply to the reference made by [name of the supplier] under section 18 of the MSMED Act, 2006, and denies the claim except to the extent specifically admitted.

Supplier's status

2. [If contested:] The claimant was not a micro or small enterprise on the date of the contract, [date], because [reason — for example, its Udyam registration is dated [ ] / it is registered as a trader / it was a medium enterprise]. The protection of sections 15 to 17 is therefore not available to it.

Amounts admitted

3. Invoice No. [ ] dated [ ] for Rs. [amount] was paid on [date] by [mode], reference [ ]. [Repeat for each.]

Amounts disputed

4. Invoice No. [ ] dated [ ] for Rs. [amount] is not payable because [the goods were rejected on [date] by [letter / GRN] / the services were deficient as recorded in [ ] / the quantity supplied was [ ]].

Interest

5. [If disputed:] The interest claimed is not computed from the correct appointed day and date of acceptance. The respondent's computation is enclosed.

Prayer

6. The respondent requests that the claim be rejected to the extent disputed, and is willing to explore a settlement at conciliation [on the admitted amount / on the following terms: [ ]].

Enclosures

Purchase order / contract with the payment term Delivery challans, goods receipt notes and any rejection letters Ledger of the supplier's account [Evidence of the supplier's category on the contract date]

Thanking you, For [Legal name of the business] [Name of authorised signatory] [Designation] Place: [Place]

Why you may have received it

  • You paid a micro or small supplier more than 45 days after accepting the goods or services — or later than the shorter period agreed.
  • The supplier is registered on Udyam and filed a reference, usually through the MSME Samadhaan portal.
  • A dispute over quality or quantity was never raised in writing at acceptance, so the goods or services are treated as accepted.

How to reply, step by step

  • Check the supplier’s Udyam registration and category on the date of the contract. The Act’s payment protection is for micro and small enterprises, not medium ones.
  • Work out the principal outstanding, the date of acceptance and the date of each payment, and compute the interest the claim should carry.
  • File a written reply by the Council’s date: what is admitted, what is disputed, and why — rejection of goods, deficient services, or payment already made.
  • Attend the conciliation. A settlement there is usually far cheaper than the award that follows a failed conciliation.
  • If the matter goes to arbitration, present your defence fully there. The award is difficult and expensive to set aside afterwards.

What to attach

  • The purchase order or contract, with the agreed payment term.
  • Delivery challans, goods receipt notes and any written rejection or objection.
  • A ledger of the supplier’s account, with every payment and its date.
  • Evidence of the supplier’s category on the contract date, if you contest it.

If you do not reply

  • Conciliation fails and the Council arbitrates, with or without your side of the story.
  • Section 16 interest compounds with monthly rests, and section 24 gives the Act overriding effect over the contract.
  • Under section 19 an application to set aside the award is entertained only after you deposit 75% of the amount awarded.
  • Late payment to micro and small suppliers can also cost you the tax deduction for that expense until it is actually paid.

How to structure the reply

  • Reference: the Council’s case number, the supplier, and the invoices in question.
  • Admitted amounts, with payment details.
  • Disputed amounts, each with the reason and the document that proves it.
  • Any objection to the supplier’s status as a micro or small enterprise on the contract date.
  • Your interest computation, if you dispute theirs.
  • Willingness to settle at conciliation, if that is your position.

Common questions

What is the time limit to pay an MSME supplier?

The period agreed in writing, but never more than 45 days from the day of acceptance or deemed acceptance, under section 15 of the MSMED Act. Without a written agreement, payment is due before the appointed day under section 2(b).

What interest does a buyer pay on a delayed MSME payment?

Compound interest with monthly rests at three times the bank rate notified by the RBI, from the appointed day, under section 16. Section 24 gives this overriding effect over anything in the contract.

Can I challenge an MSME Council award?

Yes, but under section 19 no court will entertain an application to set it aside unless you first deposit 75% of the amount awarded. That is why the conciliation and arbitration stages matter most.

Does the MSMED Act protect medium enterprises?

No. The payment provisions in sections 15 to 17 protect micro and small enterprises. A supplier that was a medium enterprise on the contract date cannot use them.

Other notices

Before you rely on this

An explanation of the rules, not advice on your notice. The date printed on your notice governs, and a demand of any size deserves a CA or an advocate before you reply.