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MSME SAMADHAAN OR COMMERCIAL COURT – WHERE TO FILE YOUR RECOVERY CASE?

If you are an MSME (Micro, Small, or Medium Enterprise) in India and your clients or buyers are not paying on time, you might be confused between two legal options for recovery – the MSME Samadhaan mechanism under the MSMED Act, 2006, or filing a civil suit before the Commercial Court under the Commercial Courts Act, 2015.

In this video, we explain the key differences, applicable laws, benefits, and strategic considerations for choosing the most effective forum to recover your dues.

The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006, is a special statute enacted to protect MSMEs from delayed payments. The relevant legal provisions are:

1) Section 15: It mandates that any buyer who purchases goods or services from an MSME must make payment within 45 days of acceptance.

2) Section 16: If the buyer fails to pay within the stipulated time, they become liable to pay compound interest with monthly rests, calculated at three times the bank rate notified by the Reserve Bank of India.

3) Section 18: This section allows the aggrieved MSME to approach the Micro & Small Enterprises Facilitation Council (MSEFC), which attempts conciliation and, if it fails, proceeds with arbitration under the Arbitration and Conciliation Act, 1996.

An award passed under Section 18 is binding, enforceable as a civil decree, and can only be challenged under Section 34 of the Arbitration Act, provided the challenging party deposits 75% of the awarded amount upfront (Section 19 MSMED Act).

Under the Commercial Courts Act, 2015, civil suits involving commercial disputes valued above ₹3,00,000/- can be filed before designated Commercial Courts. However, as per Section 12A of the Act, the plaintiff is required to undertake Pre-Institution Mediation before filing the suit, unless they seek urgent interim relief.

The procedure in commercial suits follows the Civil Procedure Code (CPC), 1908, with specific timelines and a structured trial format, including filing of plaints, replies, evidence, and cross-examinations. While Commercial Courts have dedicated benches, the litigation process still takes considerable time and expense.

MSME Samadhaan vs. Commercial Court – Quick Comparison

Eligibility:
MSME Samadhaan is only for Udyam-registered MSMEs. Commercial Courts are open to all businesses.

Timeframe:
MSME cases resolve in 3–12 months. Commercial Court cases take 2–4 years or more.

Cost:
MSME Samadhaan has no court fee (nominal charges later). Commercial Courts require heavy ad valorem fees.

Lawyer Needed?
MSMEs can appear in person. In Commercial Courts, lawyers are almost always required.

Interest on Delay:
MSME Act gives ~30% p.a. (compounded). Commercial Courts offer 12–18% (simple interest).

Challenging Decision:
MSME award challenges need 75% pre-deposit. No such requirement in Commercial Court.

Enforcement:
MSME awards are fast and final (arbitration-based). Commercial Court decrees face longer appeal cycles.

In most ordinary payment recovery matters involving MSMEs, the MSME Samadhaan mechanism under the MSMED Act is clearly superior in terms of speed, affordability, interest benefits, and enforceability.

However, Commercial Courts remain relevant in complex, high-value, or non-MSME matters, and in cases where alternative reliefs (like injunctions) are required.

Choosing the right forum depends on your business status, the nature of your claim, and your desired outcome.
But if you’re a registered MSME, the law is designed to protect you — use it to your advantage.

If you’re facing a similar challenge or need legal assistance, reach out to our team of experts. We’re here to guide you through the process and help you recover your delayed payments.

MSME Legal Help - Anmol Bakshi, Advocate

Website - www.bakshiandassociates.com, www.msmelegalhelp.com

Mobile - 7982637108, 9873750515, 9811680103, 9811099501 and 9953030208.

E-mail ID - [email protected], [email protected], [email protected], anmolbakshiandassociates.com.

JAI GURU JI, SHUKRANA GURU Ji.

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