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shyam (executive engineer)     15 December 2009

Interest on delayed payment msme act 2006

The msme act 2006 on interest on delayed payment .The supplier received full payment in the year 2004. The 95% payment was made belatedly 34 days and the balance 5% payment was made after 3 years from the due date. (This is to watch the perfomance of the materials supplied and the withhold amount can be made good if any loss occurs due to defective supply). The Supplier after receiving all said amount in full approached industrial facillation council after 3years and claims the interest from the buyer under the above act.

My Question is whether he is eligible to claim the interest after 3 years after receipt of entire principle amount ?

Is there any peroid of limitation for claim? if no whether he can claim after 50 years so that the interest will be 50 times more?

I will be thankful if anyone suggest me the right answer.


 3 Replies

Saurendra Rautray (advocate)     23 May 2015


Limitation act is applicable to such claims. Kindly see limitation period from the fact of the cases.


Saurendra Rautray

Rautray& Co

(New Delhi)


vaibhav   06 July 2018

Dear Mr Rautray

We have gone your various comments on MSME act on this portal. We are micro level unit/MSME unit registered with local DIC with Udyog adhaar no. We have query. We are supplying material to Govt department .  Please see a hypothetical situation .


Total 800 Pieces to be delivered.  Agreement was dated 03/ 2013 with 6 months delivery period  i.e till 09/2013  . Terms of payments – “On receipt of material in Good condition”

Liquadation damages – Maximum 10% of agreement value . Consideration to be given for genuine delays in supply to supplier

Supply -

1st RA (running  account bill) – 200 Pcs delivered by 06/2013  - full Payment received in 10/2013

2nd RA – 200 Pcs                 - delivered by 11/2013                   - Payment received in 06/2014 (10% payment with held by govt department on account of delayed delivery. This 10% can be released after time extension application is approved by govt department at the time final Bill )

3rd RA –400 Pcs     -  Delivered by 06/2016  -     Payment received in 11/2016 (10% payment  with held )

Final Bill is submitted along with 3rd RA along with Time extension application citing reasons for delay.If Govt finds delays genuine they release the With HELD amounts .  This particular time extension application is pending for approval from the Govt department side till date 07/2018.  Therefore Agreement is still running and in continuation.

Now our main query is , will LIMITATION ACT  apply (3yrs time limit) if we file Interest on delayed payments on  1st and  2nd RA bill as payment for 1st and 2nd RA bill has crossed 3yrs limit ? Or Limitation act WONT be applicable as agreement is still subsisting as on today (07/2018) since all our payments have not been cleared yet?? We hope the MSEFC council wont reject our claim when we file it on limitations act grounds

We are not able to file interest on delayed payments as the Govt department might in retaliation impose heavy Liquadation damages on us and deduct  our entire  10% amount which are with held with them?  We prefer to close agreement first after approval of time extension application , take out maximum amount from govt after that file for MSME interest.

Please enlighten and suggest how we must move forward as we are stuck from both sides.

Looking forward to hearing from you


Saurendra Rautray (advocate)     05 April 2020

Dear Mr Vaibhav,

I can understand the problems that you might face if you file a case against the Govt entity during the subsistence of the supply. Since the contract or the purchase order is one you can wait till the fullfilment of the supply and there after you can file the case for the entire unpaid amount or for the dleayed period if any. Kinldy remember that the limitation period is a mixed question of fact and law hence it has to been seen from various aspect.

Saurendra Rautray

Rautray & Co

New Delhi


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