Under Section 2(b) read with Section 15 of the MSMED Act, if there is no written agreement on when payment is due, a buyer must pay a micro or small enterprise within 15 days of the day of acceptance or deemed acceptance. From day 16, Section 16 interest at three times the bank rate, compounded monthly, applies.
How the 15-day rule works in India
The Act asks one question: is there a written agreement on the payment period? A purchase order with "payment terms: 45 days", a signed contract, or even a clear term printed on an invoice that the buyer has accepted may qualify; a WhatsApp message is arguable; a trade custom or a verbal promise is not. If the answer is no, payment is due 15 days after acceptance. If the buyer raises a written objection within 15 days of delivery, acceptance is postponed until the objection is resolved, and the 15 days run from then.
Why it matters for getting paid
Much of India's MSME trade in textiles, agri-commodities, hardware and job work runs on ledgers without written credit terms. Suppliers assume they have no legal leverage; in fact they have the strictest version of the Act. Each invoice in a running account is due 15 days after its delivery, and interest runs on each from day 16. For a buyer who has carried a ₹20 lakh khata balance for a year, the statutory interest is substantial.
How FundRaksha uses it
When a client has no written terms, FundRaksha's advocate applies the 15-day rule invoice by invoice, builds the interest table and sends it with the legal notice within 24 hours. Buyers who believed they had an open-ended arrangement usually come to the table. 700+ businesses have been paid through this process; the fee is 30% of recovery.
Worked example (hypothetical)
A micro Surat yarn trader-manufacturer supplies ₹3,00,000 on 1 October on a verbal "pay when you can" basis. Deemed acceptance is 1 October; the appointed day is 16 October. The buyer pays on 16 April, six months late. Assuming a bank rate of 6.5% (19.5% a year, 1.625% a month), six months of monthly compounding gives interest of about ₹30,500 (₹3,00,000 × (1.01625^6 − 1)). The supplier can claim this amount even after receiving the principal.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.