Govt introduces Bill in RS to tackle payment delays faced by MSMEs

The government on Tuesday introduced a Bill in the Rajya Sabha that seeks to tackle the issue of delayed payments to micro small and medium enterprises (MSMEs) by prescribing timelines to ensure faster adjudication of disputes, provide recovery of the settlement agreement, and address their liquidity issues.

Union Minister for MSMEs Jitan Ram Manjhi introduced the Micro Small and Medium Enterprises Development (Amendment) Bill, 2026 in the Rajya Sabha. The Bill seeks to amend The Micro, Small and Medium Enterprises Development Act, 2006.

"This legislation was framed in 2006, therefore there is a need for reforming it and making additions," the minister said.

 

Notably, the proposed legislation seeks to empower courts to order payment of at least 50 per cent of the awarded amount to MSME suppliers, if the application to set aside an order is pending for more than six months.

It also seeks to provide recovery of the mediated settlement agreement or the arbitral award as arrear of land revenue.

The Bill also proposes to decriminalise offences regarding contravention of certain provisions, replacing conviction-based fines with graded penalties by including warning at the first instance. It provides for notifying a national digital platform for free and voluntary registration of micro, small and medium enterprises.

Another key provision of the Bill aims to address liquidity issues of MSMEs by mandating all central public sector enterprises to route the settlement of invoices through the Trade Receivables Discounting System for procurement of goods and services from them.

A provision has also been made empowering states to adopt similar provision for their public sector enterprises.

The provisions also include facilitating state governments to establish additional Micro and Small Enterprises Facilitation Council by rationalising their composition, apart from prescribing timelines to ensure faster adjudication of delayed payment disputes of micro and small enterprises.

Over the years, the micro, small and medium enterprises landscape has undergone a change due to technological advancements, emergence of information technology enabled systems and changing legal landscape, which requires that the Act be amended to facilitate growth of micro, small and medium enterprises, the Bill stated.

It further said the proposed amendments look to incentivise the growth of MSMEs, enable them to scale up and become champions of growth.

"This will augment Ease of Doing Business and promote compliance. The Bill seeks to achieve the above objectives," stated the Bill.

According to the Bill, the mediated settlement agreement or arbitral award may be recovered as an arrear of land revenue by the state government through district collector or deputy commissioner or any such authority notified by the state where assets of the buyer are located.

It proposes that the amount determined as the mediated settlement or arbitral award shall constitute a valid and legally enforceable debt and is liable to be recognised under provisions of the Insolvency and Bankruptcy Code, 2016.