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Section 15: Liability of buyer to make payment

Micro, Small and Medium Enterprises Development Act, 2006 • Official Statutory Text & Practice Guide

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Act 27 of 2006
Section 14 All 32 Sections of MSMED Act Section 16
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Buyer Sec 2 Supplier Sec 2 appointed day Sec 2

Legal Commentary & Landmark Judgments: Section 15

Section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 establishes an absolute statutory mandate requiring every buyer who purchases goods or avails services from a registered micro or small enterprise to make payment on or before the agreed date, subject to an inviolable statutory ceiling of forty-five days.

  • Core Legal Standard: Under Section 15, the legislature created a strict statutory timeline designed to curb late payments and liquidity crunches that systematically threaten micro and small enterprises.
  • Operational Mechanism: Where the parties have agreed in writing upon a payment date, the buyer must discharge the liability on or before that agreed date.
  • Procedural Rule: The proviso introduces a non-negotiable statutory cap: in no circumstance can the agreed credit period exceed forty-five days from the 'day of acceptance' or 'day of deemed acceptance'.
  • Penal Consequences & Liability: In the absence of any written agreement, Section 15 mandates payment before the 'appointed day'—defined under Section 2(b) as the day immediately following the expiry of fifteen days from acceptance or deemed acceptance.

The day of acceptance denotes the actual delivery of goods or rendering of services, or where an objection is raised in writing within fifteen days, the day such defect is formally cured by the supplier.

Key Landmark Precedents:
  • Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023) 6 SCC 401: The Supreme Court held that the provisions of Chapter V of the MSMED Act, including the Section 15 payment mandate and Section 18 dispute mechanism, have statutory primacy and override private agreements or general commercial laws, reflecting the legislative intent to provide unconditional economic protection to small enterprises.
  • Silpi Industries v. Kerala State Transport Corporation (2021) 18 SCC 790: The Supreme Court ruled that to claim the statutory benefits and remedies under Section 15 and Chapter V, the supplier must have been registered under the MSMED Act on the date of entering into the contract or supplying the goods/services; subsequent registration does not retroactively validate claims under the special statutory regime.
  • Shanti Conductors Pvt. Ltd. v. Assam State Electricity Board (2019) 19 SCC 529: A three-judge bench affirmed that the liability of the buyer under Section 15 arises by operation of law upon the delivery of goods or completion of services, and any withholding of payment beyond the statutory period automatically triggers interest liabilities under Section 16.
Legal Commentary:

Section 15 fundamentally alters freedom of contract in commercial transactions by nullifying standard corporate credit terms (such as 60, 90, or 120-day payment cycles) whenever dealing with registered MSMEs. Corporate buyers cannot contract out of the 45-day statutory limit. Furthermore, Section 15 operates in close tandem with Section 43B(h) of the Income Tax Act, 1961, which disallows deductions for payments due to micro and small enterprises unless actual payment is made within the time limit mandated by Section 15.

Section 14 All 32 Sections of MSMED Act Section 16