Recovery of dues under msme act

We are a registered MSME Unit. One of our past customer(Pvt. Ltd. Company) has not paid our dues which as per terms of the PO were payable by 10th February 2014 against a bill raised on 15 Dec. 2013. The customer had agreed in writing to settle the dues. However, subsequently, the customer reneged on his commitment & informed in writing that the dues are held back as a deposit towards guarantee & will be paid after conclusion of guarantee period. Under the PO the guarantee period was 3 years. The material was supplied in Dec. 2013, so the guarantee period got over in Dec. 2016.

All Our requests to the customer have not yielded any favourable response or action & there is a continous correspondence till Nov. 2017. Since litigation would be prolonged & expensive, we decided to make an application to MSEFC Arbitration Council for recovery of dues under MSME Act & applied accordingly in first week of Dec. 2017, after receiving last letter from customer on 30 Nov. 2017 that they will not entertain any correspondence in this matter.

However, our application was rejected. No reason has been officially conveyed, but we were told informally that it is due to limitation period of 3 years. Which means that we should have moved for arbitration by Dec. 2016. We were also told that the rejection is on the basis of a very recent judgement by the Hon. Supreme Court. However, my search has not yielded any such order.

My reading of the MSMED Act 2017 section 16 &18, gives an understanding that provisions of any other prevailing law do not apply for recovery of delayed payment under MSME Act. Moreover, since the client promised us payment after completion of guarantee period, we chose the option of waiting. Since the customer's last refusal to pay up was received on 30 Nov. 2017, it is not clear as how even the Limitation Act is applicable.

A clarification / opinion on this point would be highly appreciated.  




Is it that your application for arbitration was rejected or that the arbitrator rejected your application on the question of limitation? Any how, the facts posted suggests that the recovery of the amount is not hit by limitation.


Dear Sir,

Thanks for your reply. Under the new system, an application has to be uploaded online. The system generates a 15 days notice to the respondant party. The application is visible to the council after 15 days. Thereafter, if they accept the application, you are supposed to submit all the relevany documents to the council.

The system permits a max. of 3 purchase/work orders & equal no. of invoices.

In our case, we had uploaded a copy of the PO along with a copy of the unapid invoice. The PO is dated in Dec. 2013 & so is the bill. The system showed a message that the application is rejected. No explanations. So we approached the council. The concerned officer orally informed that the application is rejected since it is time barred under limitation period. Then, we pointed out that there is no such provision under MSME Act. Upon which, we were told that there is a very recent judgemnt & they are following the same. We requested  for a copy, which they assured will be provided after one week or so. 

My query is focused on 2 points.

1] Is the limitation applicable to delayed payments under MSME Act, when the law clearly does not sany anything of that sort.

2] How can limitation be invoked, if applicable, without verifying the supporting documents & merely going by the date on the bill, 




First of all, obtain the certified/attested copies of the relevant orders and proceed with an appeal/WP based on the those information.



You shoud have filed a section 34 application against the award which was passed against you. I hope you have done that within time limit of 3 months and 30 days of recivng the signed copies of the award. Yes limitation applies to MSMED Act 2006. You have a valid point your claim should have been accepted.

Saurendra Rautray

Rautray & Co

New Delhi





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