Wholesale and retail traders are eligible for Udyam Registration (Office Memorandum of 2 July 2021), but the Ministry of MSME specified that the benefits are restricted to priority-sector lending. Traders are not treated as "suppliers" of goods manufactured or services rendered for Sections 15 to 18 of the MSMED Act, so they cannot claim three times bank rate interest or file delayed-payment references on MSME Samadhaan. A trader recovers dues through a legal notice, Section 138 (for cheques), a summary suit or arbitration.
How trader eligibility works in India
The MSMED Act defines an enterprise by reference to manufacture or production of goods, or rendering of services. Trading, buying and reselling without processing, is neither. In 2021 the government permitted traders to register on Udyam so that banks could count loans to them as priority-sector lending, but the Office Memorandum made clear that other benefits, including delayed-payment relief, were not extended. Councils check the NIC code on the Udyam certificate; a certificate showing only wholesale or retail trade codes will not support a reference.
- Pure trader (buys and sells unchanged goods): no Samadhaan.
- Trader who also repacks, grades, assembles or processes: may qualify for those supplies.
- Distributor providing logistics, warehousing or marketing services under contract: may qualify as a service provider for the service fee.
Why it matters for getting paid
Choosing the wrong forum wastes months. A trader who files on Samadhaan may wait for a hearing only to be told the Council lacks jurisdiction. The right tools for traders are a strong legal notice, Section 138 for bounced cheques, a summary suit on invoices and ledger, and the Commercial Courts Act for claims above ₹3 lakh. Interest is claimed under the contract or the Interest Act rather than Section 16.
How FundRaksha uses it
FundRaksha checks the client's actual activity, not just the Udyam certificate, before choosing the route. Traders get the civil and NI Act strategy; manufacturers and service providers get the MSMED route. Both get a dedicated advocate within 24 hours and pay 30% only on recovery. Many of the 700+ businesses FundRaksha has got paid are traders and distributors.
Worked example (hypothetical)
A Delhi electronics wholesaler is owed ₹9,00,000 on invoices, with two cheques of ₹4,50,000 each returned "funds insufficient" on 10 January. As a trader it cannot use Samadhaan. Its advocate sends a Section 138 notice on 20 January (within 30 days); the buyer has 15 days from receipt to pay. If unpaid, complaints are filed in February, and under Section 143A the court may order interim compensation of up to 20% of each cheque, ₹90,000 each. In parallel the notice demands contractual interest at the 18% stated on the invoices, about ₹1,62,000 for a year on ₹9,00,000 (simple).
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.