Cheque bounced? The Section 138 timeline, step by step
The strict deadlines under Section 138 of the Negotiable Instruments Act — and where you can file the complaint if you bank in Raipur.
Read article ↗For a small manufacturer or service provider, one large unpaid invoice can stall the whole business. The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) was written for exactly this situation. Here is how it works in practice.
1. Check that you qualify
The protections apply to micro and small enterprises that are suppliers. You should hold a valid Udyam registration, and your registration status around the time of supply matters. Medium enterprises do not get the same recovery route.
2. Know the deadline your buyer must meet
Under Section 15, the buyer must pay:
- on the date agreed in writing, which cannot be more than 45 days from the day the goods or services were accepted; or
- if nothing was agreed, within 15 days of acceptance.
3. Interest runs automatically
If payment is late, Section 16 entitles you to compound interest with monthly rests at three times the bank rate notified by the RBI. This is often much higher than the interest written into the invoice, and it changes the buyer’s incentive to settle.
4. Send a clear demand notice
A legal notice that sets out the principal, the statutory interest and a firm deadline resolves many matters without any further step.
5. Refer the dispute to the Facilitation Council
If the buyer still does not pay, you can refer the dispute to the Micro and Small Enterprises Facilitation Council (MSEFC) under Section 18. Claims can be filed online through the MSME Samadhaan portal.
The Council first tries conciliation. If that fails, it decides the dispute as an arbitration, and the Act asks it to finish within 90 days of the reference.
6. The award is hard to stall
A buyer who wants to challenge the award in court must first deposit 75% of the awarded amount (Section 19). That requirement discourages delaying tactics.
Documents to keep ready
- Purchase orders and contracts
- Invoices and delivery challans
- Proof of acceptance (GRNs, emails, acknowledgements)
- Ledger statement and any part payments
- Udyam registration certificate
The bottom line
The law gives micro and small suppliers real leverage, but it rewards those who keep good records and act early.
This article is general information, not legal advice. For advice on your situation, please contact us.