MSME Conciliation & Arbitration Support
When a delayed-payment dispute is referred to the Micro & Small Enterprise Facilitation Council under Section 18 of the MSMED Act, 2006, it moves through conciliation and, if that fails, into arbitration governed by the Arbitration & Conciliation Act, 1996. We prepare your pleadings, represent you at hearings and see the matter through to the award — for suppliers seeking recovery and buyers defending a claim.
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What Is MSME Conciliation & Arbitration?
A plain-language explanation before the stage-by-stage detail.
It is the formal dispute-resolution route for unpaid MSME dues. Instead of going straight to court, the Facilitation Council first tries to settle the matter by conciliation, and if that fails it becomes an arbitration that ends in a binding award. We run the process for you at every stage.
Section 18 of the MSMED Act, 2006 allows any party to a dispute under Section 17 to refer it to the Micro & Small Enterprise Facilitation Council. The Council conducts conciliation under Sections 65 to 81 of the Arbitration & Conciliation Act, 1996; if conciliation is not successful, it either takes up the dispute for arbitration or refers it to a centre providing alternate dispute-resolution services, and the 1996 Act applies as though the arbitration were pursuant to an arbitration agreement under Section 7(1) of that Act.
The Micro & Small Enterprise Facilitation Council (MSEFC), constituted by the State Government under Section 20 of the MSMED Act, exercises jurisdiction over disputes where the supplier is located within its State, irrespective of where the buyer is located.
A reference under Section 18 is required to be decided within 90 days from the date of making it. A conciliation settlement has the status of an arbitral award on agreed terms; an arbitral award is binding and enforceable, subject to the limited challenge route under the 1996 Act.
Quick Facts
Is This Service Right for You?
Ideal for
- Micro and small suppliers with unrecovered delayed-payment dues
- Suppliers whose Samadhaan reference has moved to the Council
- Buyers who have received notice of an MSEFC reference
- Enterprises seeking a structured settlement before arbitration
- Parties needing pleadings and representation at Council hearings
- Businesses wanting an enforceable award rather than prolonged litigation
You may need this if
- Payment remains unpaid despite reminders and a recovery notice
- Your delayed-payment dispute has been referred to the MSEFC
- You have been called to conciliation or arbitration by the Council
- You need a statement of claim or defence prepared professionally
- You want representation through hearings up to the award
- You are considering, or facing, enforcement or a challenge to an award
Not sure if you need this?
Talk to an Expert →Why the Section 18 Route Matters
The Facilitation Council route is faster and more focused than ordinary litigation, but it still runs on the arbitration rulebook. Well-prepared pleadings and disciplined hearings decide the outcome.
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01
Conciliation First
Section 18 requires the Council to attempt conciliation before arbitration. A well-framed position at this stage can produce a binding settlement quickly, saving both sides the time and cost of a contested arbitration.
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02
Arbitration on Failure
If conciliation does not succeed, the Council takes up the dispute for arbitration, and the Arbitration & Conciliation Act, 1996 governs pleadings, evidence, hearings and the award. Procedural discipline here is decisive.
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03
Statutory 90-Day Window
A reference is to be decided within 90 days of being made. The compressed timeline rewards parties who come prepared with complete pleadings and documentary evidence from the outset.
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04
Enforceable Award
The process ends in a settlement with the force of an award, or an arbitral award that is binding and enforceable — a far cleaner outcome than an unresolved civil claim.
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05
Supplier-State Jurisdiction
The Council where the supplier is located has jurisdiction regardless of where the buyer sits, and virtual hearings are common — so the forum is accessible from anywhere in India.
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06
Interest Rides Along
A Section 18 claim typically carries the Section 16 delayed-payment interest — compound with monthly rests at three times the RBI bank rate — so the amount at stake is often much larger than the principal alone.
Simple, Transparent Pricing
Custom quote for your case
Fees depend on your business type and scope. Get a clear, itemised quote upfront — no hidden professional charges, government fee billed at actuals.
Who Can Apply?
Eligibility checklist
- A dispute exists over amount due or interest for a supply of goods or services
- The supplier is a micro or small enterprise with valid Udyam registration
- A reference under Section 18 has been, or can be, made to the MSEFC
- Invoice, acceptance and payment records are available to support the claim or defence
- The parties are willing to participate in conciliation before arbitration
Everything You Need. One Professional Team.
Case Assessment
Review the dispute, the invoices and the correspondence to gauge the strength of your claim or defence.
Reference & Registration
Prepare and make the reference to the Facilitation Council, or enter appearance where a reference is already filed against you.
Statement of Claim / Defence
Draft the pleadings — the claim with the interest computation, or the written defence and counter-claim.
Conciliation Representation
Represent you in the Council's conciliation sittings and negotiate towards a binding settlement on agreed terms.
Arbitral Pleadings & Evidence
If conciliation fails, file the arbitral pleadings, marshal documentary evidence and prepare witness material.
Hearings
Appear at the Council or arbitral hearings, physical or virtual, and argue the matter.
Award
Take the matter through to the settlement or the arbitral award and explain its terms and effect.
Post-Award Guidance
Advise on enforcement of the award, or on responding to a challenge under the 1996 Act.
What You’ll Receive
What We Need to Run the Matter
A strong reference is built on a clean paper trail. The clearer your invoice, acceptance and correspondence records, the stronger your position in conciliation and arbitration.
Claim & Transaction Records
- Udyam Registration Certificate of the supplier
- Invoice-wise ledger with dates, values and acceptance dates
- Purchase orders / supply agreements and delivery proof
- Delayed-payment interest computation under Section 16
Correspondence & Dispute Trail
- Payment reminders, recovery notices and replies
- Any written objection to goods or services and its resolution
- Bank statements showing payments and part-payments
- Existing MSME Samadhaan / MSEFC reference details, if any
File before the right Council
The reference lies before the Facilitation Council in the State where the supplier is located, irrespective of where the buyer is. We confirm the correct Council before filing.
Conciliation is a genuine stage
Section 18 requires conciliation to be attempted first. A constructive, well-documented position here often resolves the matter without a contested arbitration.
Arbitration rules apply
Once the dispute moves to arbitration, the Arbitration & Conciliation Act, 1996 governs pleadings, evidence, hearings and the award. Procedure is followed strictly.
Pre-deposit to challenge an award
Under Section 19, a buyer applying to set aside a Council award must ordinarily deposit 75% of the awarded amount — a significant deterrent to frivolous challenges.
Don’t have all the documents?
We’ll identify what your case needs →How the Section 18 Process Works
A stage-by-stage journey from reference, through conciliation, to arbitration and award.
Assess & prepare the reference
We review the dispute and prepare the reference to the correct Facilitation Council, with the claim and interest computation.
Council registers the dispute
The MSEFC takes the reference on record and issues notice to the other party to appear.
Conciliation
The Council attempts conciliation under the 1996 Act. We represent you and negotiate towards a settlement on agreed terms, which has the force of an award.
Arbitration on failure
If conciliation does not succeed, the Council takes up arbitration itself or refers it to an ADR institution, and the 1996 Act applies.
Pleadings, evidence & hearings
We file the arbitral pleadings, produce documentary evidence and appear at the hearings, physical or virtual, to argue the matter.
Award & next steps
The tribunal passes the award. We explain its terms and guide you on enforcement or on responding to any challenge.
Statutory Timelines You Should Know
| Stage | Expected Time |
|---|---|
| Reference to the MSEFC (Section 18) | Any time after the dispute arises |
| Conciliation stage | Conducted before arbitration |
| Arbitration on failure of conciliation | Under the Arbitration & Conciliation Act, 1996 |
| Decision on the reference | Within 90 days from the date of reference |
| Application to set aside an award (Section 19) | Subject to a 75% pre-deposit by the buyer |
These are statutory timelines under the MSMED Act, 2006, read with the Arbitration & Conciliation Act, 1996. Section 18(5) requires a reference to be decided within 90 days of being made. Actual scheduling depends on the Council's cause list and the conduct of the parties.
Doing It Yourself vs TaxClue
Doing It Yourself
- File before the wrong Council or in the wrong jurisdiction
- Treat conciliation as a formality and miss a settlement opportunity
- Submit weak or incomplete pleadings under time pressure
- Overlook the Section 16 interest that should ride with the claim
- Fail to marshal documentary evidence for the hearing
- Miss the 75% pre-deposit condition when challenging an award
- Lose enforceability by mishandling arbitral procedure
With TaxClue
- Reference filed before the correct Facilitation Council
- Conciliation used strategically to settle where possible
- Complete, well-drafted pleadings and interest computation
- Documentary evidence organised for the hearings
- Representation from reference through to the award
- Clear advice on enforcement and any challenge
- Section 16 interest claimed alongside the principal
Skip the guesswork.
Let an expert handle it →Common Mistakes That Delay Your Application
TaxClue reviews your documents before filing to reduce avoidable errors.
Penalties & Consequences
What is at stake if you do not comply
- An unregistered MSME cannot use the MSEFC or Samadhaan route to resolve the dispute
- The buyer's delayed payment attracts compound interest at three times the RBI bank rate
- Weak pleadings under the 1996 Act can lead to an adverse award
- A buyer challenging the award must first deposit 75% of it under Section 19
Regulatory Updates 2025–26
- 2025: Delayed-payment claims are filed on the MSME Samadhaan portal and heard by the Micro & Small Enterprises Facilitation Council (MSEFC).
- 2025: Under the MSMED Act 2006, buyers must pay micro and small suppliers within 45 days, with interest at three times the RBI bank rate on delay.
Why Businesses Choose TaxClue
MSEFC Specialists
Section 18 references, conciliation and arbitration handled by a dedicated team.
Settlement-Minded
We use the conciliation stage to resolve matters efficiently where it serves you.
Arbitration Discipline
Pleadings, evidence and hearings run to the letter of the 1996 Act.
Integrated Interest Claim
Section 16 interest computed and claimed alongside the principal.
Through to the Award
Representation continues to the settlement or award, and beyond to enforcement.
Confidential
Your records and case strategy handled securely by professionals.
Your Documents Deserve Professional Care
- Case records and correspondence handled under confidentiality
- Access limited to the team representing you
- Communication over secure digital channels
- Documents retained only as long as needed for the matter
Frequently Asked Questions
What is Section 18 of the MSMED Act?
What is the difference between conciliation and arbitration here?
Which Facilitation Council has jurisdiction?
How long does the process take?
Is the outcome binding and enforceable?
Can the buyer challenge a Council award?
Does the claim include interest?
Do I need Udyam registration to use this route?
Can I move directly to the Council, or must I file on Samadhaan first?
What happens at the hearings?
Can you represent a buyer defending a reference?
What do you deliver?
How do I recover a delayed payment as an MSME through conciliation and arbitration?
Is a conciliation settlement legally binding?
What is the appointed day and why does it matter to the claim?
Can the same forum handle both conciliation and arbitration?
Is there a government fee for conciliation and arbitration before the council?
Official Sources & Legal References
Every statutory reference on this page — the forum, the conciliation-then-arbitration route and the timelines — is drawn from primary law. Verify directly:
- MSMED Act, 2006 — full textSections 17-19 (recovery, reference, application for setting aside) and Section 20 (MSEFC) · India Code
- Arbitration & Conciliation Act, 1996Conciliation (Sections 65-81) and arbitration provisions applied via Section 18 MSMED Act
- MSME Samadhaan PortalOfficial portal for delayed-payment references and Council proceedings
- Ministry of MSMEFramework for the Micro & Small Enterprise Facilitation Councils
Related Guides
MSME Conciliation & Arbitration Resources — All Free
Resolve Your MSME Payment Dispute
End-to-end support through Section 18 conciliation and arbitration — reference, pleadings, hearings and award — for suppliers pursuing recovery and buyers defending a claim. Free consultation, confidential.