The Ministry of Corporate Affairs (MCA) has amended the Specified Companies (Furnishing of information about payment to Micro and Small Enterprise suppliers) Order, 2019, imposing enhanced disclosure requirements on companies that hold outstanding payments to micro and small enterprise (MSE) suppliers beyond the statutory 45-day limit. The amended Order introduces a significantly expanded MSME Form-1 with granular reporting fields, requiring companies to furnish detailed information on payment timelines, outstanding amounts, and reasons for delay.
Background
The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) provides under Section 15 that where any buyer fails to make payment to a micro or small enterprise supplier within the period agreed upon, or in the absence of agreement within 45 days of acceptance of goods or services, the buyer is liable to pay compound interest at three times the bank rate notified by the RBI.
Despite this statutory protection, delayed payments to MSMEs have remained a persistent structural problem in the Indian economy. As per government estimates, outstanding delayed payments to MSMEs run into lakhs of crores, creating severe cash flow constraints for small businesses. The original 2019 Order required specified companies to file a half-yearly return disclosing outstanding payments, but the disclosure framework was considered inadequate to enable meaningful regulatory enforcement.
Key Provisions
The amended framework introduces the following enhanced requirements:
Expanded disclosure fields: The revised MSME Form-1 now requires companies to report not only the aggregate outstanding amount but also: the amount paid within 45 days, the amount paid after 45 days, the mode of payment, the amount outstanding for 45 days or less, the amount outstanding for more than 45 days, and specific reasons for delay in each case.
Half-yearly filing: Every specified company must file the return by 31 October for the April-September period and by 30 April for the October-March period. The filing timeline remains unchanged, but the depth of information required has substantially increased.
Applicability scope: The Order applies to all companies that have received goods or services from micro or small enterprises and have outstanding payments exceeding the 45-day limit under Section 9 of the MSMED Act. This covers both private and public companies across all sectors.
Portal migration: The MCA has migrated the MSME Form-1 filing to its V3 portal, requiring companies to adapt to the new digital filing infrastructure and ensure data accuracy in the updated format.
Implications for Practitioners
For corporate compliance teams and company secretaries, the amended Order significantly increases the compliance burden associated with MSME vendor management. Companies must now maintain granular payment tracking systems that capture the date of acceptance or deemed acceptance of goods and services — the trigger for the 45-day clock under Section 9 of the MSMED Act.
The requirement to provide reasons for delayed payment introduces an element of accountability that goes beyond mere numerical reporting. Companies that consistently cite systemic reasons — such as internal approval delays or cash flow constraints — may attract regulatory scrutiny, particularly where the pattern suggests wilful non-compliance with the statutory payment timeline.
Practitioners advising MSMEs should note that the enhanced disclosure creates a publicly accessible data trail that can strengthen claims before the Micro and Small Enterprises Facilitation Council. The granular payment data reported in MSME Form-1 can serve as documentary evidence in proceedings under Section 18 of the MSMED Act, reducing the evidentiary burden on small enterprise claimants.