The MSEFC is a state-level council, usually chaired by the Director or Commissioner of Industries, with members from banks, industry associations and the legal field. It first conciliates between supplier and buyer and, if that fails, either arbitrates the dispute itself or refers it to an arbitration institution. Its award is enforceable like a court decree.
How the Council works in India
Each state (and some larger states, more than one region) has a Council run from the Industries department. References arrive through the MSME Samadhaan portal or in physical form. The Council issues notice to the buyer, fixes a conciliation hearing and tries to get the parties to agree a payment plan. If conciliation fails it records that and moves to arbitration under the Arbitration and Conciliation Act, 1996, as if the parties had an arbitration agreement. The arbitral award states the principal and the Section 16 interest.
A buyer who ignores the Council risks an ex parte award. A buyer who wants to challenge the award must first deposit 75% of it, and the court may release a portion of that deposit to the supplier while the challenge is pending.
Why it matters for getting paid
The Council sits where the supplier is, so a Surat textile unit does not have to travel to a Kolkata buyer's courts. There is no court fee on the claim, the interest is statutory and the 75% deposit rule removes the buyer's usual tactic of appealing to delay. For small manufacturers this is the most favourable forum in Indian law. Find your state's Council on the state pages or on samadhaan.msme.gov.in.
How FundRaksha uses it
FundRaksha has handled Samadhaan references for suppliers across India, part of the ₹50 Cr+ of invoices the company has worked on. The advocate prepares the statement of claim with a month-by-month interest table, attends conciliation (where most buyers settle) and conducts the arbitration if they do not. The 30% success fee applies only on recovery.
Worked example (hypothetical)
A Hyderabad engineering unit files a ₹6,00,000 claim with the Telangana Council. Payment was due on 1 March; the reference is filed on 1 September, six months late. Assuming a 6.5% bank rate, three times is 19.5% a year, 1.625% a month. Six months of monthly compounding gives roughly ₹60,900 interest (₹6,00,000 × (1.01625^6 − 1)), so the claim is about ₹6,60,900 and keeps growing until payment. At conciliation the buyer offers the principal plus half the interest; the supplier accepts and is paid within 30 days.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.