What Happens After Filing an MSME ODR Complaint?
After an MSME files a delayed-payment complaint on the MSME ODR Portal, the buyer is electronically notified and gets an opportunity to respond. The case can then enter a short voluntary pre-MSEFC settlement process; if no settlement is reached or either party opts out, it moves into the formal Micro and Small Enterprises Facilitation Council (MSEFC) process—conciliation first and arbitration if conciliation fails.
Filing the complaint does not automatically create an order for payment. The supplier should continue monitoring the portal, preserve evidence, respond to buyer objections, reconcile any part-payments and prepare for the formal MSEFC stage if settlement does not occur.
Since 15 October 2025, all new delayed-payment cases are being filed through the MSME ODR Portal, according to the Ministry of MSME’s 2025–26 Annual Report.
MSME ODR Process After Filing: Quick Overview
| Stage | What happens |
| 1. Complaint filed | Portal creates the delayed-payment case |
| 2. Buyer notified | Claim and supporting documents are electronically communicated |
| 3. Buyer response | Buyer may file a brief reply and documents |
| 4.Digital Guided Pathway | Voluntary system-generated assessment may assist settlement |
| 5.Unmanned Negotiation | Buyer and supplier can negotiate directly online |
| 6. Settlement | Case closes if agreed terms resolve the dispute |
| 7. MSEFC stage | Formal statutory proceedings begin if settlement fails |
| 8. Conciliation | Council or ADR institution attempts settlement |
| 9. Arbitration | If conciliation fails, a binding adjudication follows |
| 10. Award / enforcement | Award is issued and can be enforced if unpaid |
The ODR Portal is designed as an end-to-end digital system, covering filing through final dispute resolution and tracking.
Step 1: What Happens Immediately After You Submit the Complaint?
The portal sends an automated communication to both the MSE seller and the buyer.
Under the official ODR Guidelines, proceedings at the pre-MSEFC stage begin when an automated communication is sent through:
- SMS/text message; and
- email, where provided.
The buyer is also sent the supplier’s delayed-payment application and supporting documents.
This makes the accuracy of the buyer’s:
- legal name;
- email address;
- mobile number; and
- supporting transaction details
particularly important.
A wrong buyer email or incorrect legal entity can cause avoidable delay.
Step 2: How Long Does the Buyer Have to Reply?
The ODR Guidelines give the buyer three days from receipt of the automated communication to file a brief reply and supporting documents at the voluntary pre-MSEFC stage.
The buyer can respond to matters such as:
- whether the goods or services were supplied;
- whether invoices were accepted;
- amounts already paid;
- quality disputes;
- credit notes;
- contractual payment terms; and
- the amount allegedly remaining due.
Does no reply mean the MSME automatically wins?
No.
A failure to respond within this short pre-MSEFC window does not automatically convert the claim into an award.
If the dispute ultimately reaches arbitration, the supplier still needs to establish its claim through documents and evidence. The ODR Guidelines do, however, permit arbitration to proceed in the buyer’s absence after the tribunal is satisfied that notice has been effectively served and due process has been followed.
Step 3: What Is the Digital Guided Pathway?
The Digital Guided Pathway (DGP) is a voluntary pre-MSEFC process intended to help the parties understand the dispute and explore settlement before formal proceedings.
Unless the parties opt out within the prescribed three-day period, the ODR Guidelines contemplate an AI-enabled pathway analysing the facts entered by the parties and generating a probable outcome based on the dispute information and legal precedents.
This probable outcome is not an arbitral award.
Its practical purpose is to help both sides assess questions such as:
- Is the principal amount really disputed?
- Is the buyer merely seeking more time?
- Are only some invoices disputed?
- Is the statutory-interest exposure becoming significant?
- Is settlement commercially sensible?
The pre-MSEFC process remains voluntary and confidential.
Step 4: What If the Digital Guided Pathway Does Not Settle the Case?
The parties may move into Unmanned Negotiation, another voluntary online settlement process.
The ODR Portal facilitates direct negotiations between the supplier and buyer without a negotiator or mediator running the discussions.
The parties may exchange:
- documents;
- settlement proposals;
- payment schedules; and
- revised settlement terms.
The proceedings are intended to remain confidential.
Example
The MSME claims:
Principal: ₹20 lakh
Statutory interest: ₹4 lakh
The buyer admits the ₹20 lakh principal but cannot pay immediately.
The parties might settle on:
- ₹10 lakh immediately;
- ₹5 lakh after 30 days;
- ₹5 lakh after 60 days; and
- an agreed treatment of interest.
If agreement is reached, the portal can generate a settlement agreement for execution.
How Long Does the Pre-MSEFC Stage Last?
The normal pre-MSEFC stage is designed to finish within 15 days from filing.
If it has not concluded by the 15th day, it terminates unless both parties consent to continue.
With mutual consent, it may continue for up to another 15 days.
Therefore, the maximum contemplated pre-MSEFC period is:
15 days + maximum 15-day extension = 30 days.
This short timetable is intended to prevent informal negotiations from delaying formal recovery indefinitely.
What Happens If the Parties Reach a Settlement?
If a settlement is executed, the delayed-payment application can be closed to the extent of the parties covered by the settlement.
The ODR Guidelines provide for the settlement record to be maintained on the Portal.
Where payment is to be made over time, the system can send compliance reminders.
For settlements reached during Unmanned Negotiation, if the agreed terms are not complied with, the Guidelines contemplate the case record being forwarded to the concerned MSEFC for formal dispute-resolution proceedings.
Practical advice
Do not withdraw simply because the buyer says:
“We will pay next month.”
Record the settlement properly.
A payment plan should identify:
- admitted principal;
- interest treatment;
- payment dates;
- instalment amounts;
- bank details;
- consequences of default; and
- whether the claim closes only after full payment.
Step 5: What Happens If Settlement Fails?
The complaint moves into the formal MSEFC stage if the parties fail to settle or opt out of the pre-MSEFC process.
The official Guidelines expressly state that failure or opt-out leads to the formal statutory dispute-resolution process.
At this stage, the parties may also have to disclose whether another court or tribunal proceeding involving the same subject matter is:
- pending;
- already decided; or
- previously initiated.
That is why the MSME should disclose related:
- arbitration;
- civil recovery proceedings;
- insolvency proceedings; or
- other litigation
rather than assuming the ODR case exists in isolation.
Step 6: What Does the MSEFC Do First?
Under the currently operative Section 18 of the MSMED Act, the MSEFC first conducts conciliation itself or refers the matter to an ADR institution for conciliation.
If conciliation succeeds, the dispute ends in settlement.
If conciliation fails, the Council:
- takes up the dispute for arbitration itself; or
- refers it to an institution or centre providing ADR services.
Section 18 specifically applies the Arbitration and Conciliation Act, 1996 to these stages.
Why do some ODR materials say “conciliation/mediation”?
The ODR Guidelines use both terms.
However, the Mediation Act, 2023 was only partly brought into force. The 9 October 2023 notification brought specified sections into force but did not activate Section 62 and the Seventh Schedule that would substitute the MSMED Act’s Section 18 conciliation framework.
Accordingly, for the current operative statutory framework checked for this article, conciliation under the Arbitration and Conciliation Act remains the safer legal description.
What Happens If Conciliation Succeeds?
A properly executed conciliation settlement is powerful.
Sections 73 and 74 of the Arbitration and Conciliation Act provide that a signed conciliation settlement is:
- final and binding on the parties; and
- given the same status and effect as an arbitral award on agreed terms.
For the MSME, this means the objective should not simply be obtaining a verbal promise.
The settlement should clearly record what must actually be paid.
Step 7: What Happens If Conciliation Fails?
The dispute proceeds to statutory arbitration.
At the first arbitration stage, the supplier may be permitted to:
- adopt the claim/application already filed; or
- file a fresh formal claim with supporting documents.
The buyer is also given an opportunity to present its defence.
The dispute then typically moves through:
claim → defence → evidence → hearings → final submissions → award.
What Documents Become Important During Arbitration?
By this stage, the MSME should have a clean evidence bundle containing:
- Udyam registration;
- agreement/purchase order;
- invoices;
- delivery challans;
- GRNs;
- e-way bills;
- service completion records;
- acceptance emails;
- ledger;
- bank statement;
- part-payment details;
- credit notes;
- payment reminders;
- balance confirmations;
- email acknowledgments;
- interest calculation; and
- relevant correspondence.
Do not assume that merely uploading an invoice at the initial ODR stage proves every element of the claim.
Can the Buyer Ignore the Arbitration?
Ignoring notices does not necessarily stop the proceedings.
The ODR Guidelines provide that if the buyer fails to appear, the arbitral tribunal may proceed in the buyer’s absence after satisfying itself that the online notice/summons was effectively served and applicable due process was followed.
The supplier must still prove:
- the transaction;
- supply/performance;
- liability;
- outstanding principal; and
- interest claimed.
Non-participation is not a substitute for evidence.
Step 8: What Happens When the Arbitration Ends?
The tribunal may issue a reasoned arbitral award.
The ODR Guidelines contemplate:
- online final arguments/submissions;
- a reasoned award;
- electronic signing/stamping as permissible;
- communication of the award to the parties; and
- portal tracking of compliance.
Parties may also settle during arbitration itself. In that event, the tribunal may pass a consent award based on the settlement.
How Long Should the MSEFC Process Take?
Section 18(5) of the presently operative MSMED Act says:
every reference should be decided within 90 days from the date of making the reference.
However, courts have held that expiry of the 90-day period does not automatically terminate the MSEFC’s jurisdiction. The Delhi High Court has treated this timeline as directory rather than a rule that automatically kills the proceedings after day 90.
So do not assume:
“If 90 days pass, my case automatically ends.”
It does not.
What Happens If the Buyer Challenges the Award?
A buyer seeking to set aside an MSMED award faces the special Section 19 pre-deposit requirement.
Under the currently operative Section 19, a court cannot entertain the buyer’s challenge unless the buyer deposits 75% of the amount awarded, subject to the statutory framework.
The Supreme Court in Gujarat State Disaster Management Authority v. Aska Equipments Ltd., decided 8 October 2021, held that this 75% pre-deposit requirement is mandatory, although the court can in appropriate circumstances permit the amount to be deposited in instalments.
This is one of the strongest procedural protections available to a successful MSE supplier.
What If the Buyer Simply Does Not Pay the Award?
An arbitral award can be enforced under the Arbitration and Conciliation Act, 1996 in the same manner as a court decree once the applicable enforcement conditions are met.
Importantly, merely filing a Section 34 challenge does not by itself make an arbitral award unenforceable; a separate stay order is required under Section 36.
The supplier should therefore distinguish between:
winning the award and actually recovering the money.
If voluntary payment does not follow, enforcement may become necessary.
Has the MSMED Amendment Act, 2026 Changed This Process?
A major amendment has been enacted, but its commencement must be checked before treating its new procedure as operative.
The Micro, Small and Medium Enterprises Development (Amendment) Act, 2026, Act No. 16 of 2026, received Presidential assent on 13 August 2026.
It proposes significant changes including:
- specific mediation timelines;
- a 30-day transition after failed mediation;
- a 90-day period for making an award after pleadings;
- online dispute-resolution provisions;
- stronger recovery mechanisms; and
- revised Section 19 protections.
However, Section 1(2) expressly states that the Amendment Act comes into force only on a date or dates separately notified by the Central Government.
As of 25 September 2026, I did not identify an official commencement notification bringing those amended Sections 18–19 into force in the Gazette materials reviewed for this article.
Accordingly, the process described above uses the currently operative Section 18 and Section 19 framework, while flagging the 2026 amendments as forthcoming law requiring a fresh commencement check.
What Should an MSME Do Immediately After Filing?
Use this checklist:
- Save the ODR case/reference number.
- Monitor the registered email and mobile number.
- Confirm that the buyer details are correct.
- Preserve the exact claim and attachments filed.
- Prepare an invoice-wise outstanding schedule.
- Update the claim if part-payment is received.
- Review any buyer reply immediately.
- Decide your minimum acceptable settlement terms.
- Keep original delivery and acceptance evidence ready.
- Track limitation independently.
- Disclose related legal proceedings when required.
- Do not treat a promise to pay as completed recovery.
The supplier should keep one working file showing:
Principal claimed + payments received + current principal + interest + next procedural date.
Frequently Asked Questions
How soon is the buyer notified after an MSME ODR complaint is filed?
The Guidelines provide for automated electronic communication to the seller and buyer after filing, together with the application and supporting documents.
How long does the buyer have to reply?
At the pre-MSEFC stage, the Guidelines give the buyer three days from receipt of the automated communication to file a brief reply and supporting documents.
Is pre-MSEFC ODR compulsory?
No. The Digital Guided Pathway and Unmanned Negotiation processes are voluntary. Either party can opt out and proceed to the formal MSEFC stage.
How long does pre-MSEFC settlement take?
The normal period is 15 days from filing. With the consent of both parties, it may continue for up to another 15 days, making the maximum contemplated period 30 days.
What if the buyer does not respond?
The case does not automatically result in payment. If formal arbitration is reached and effective service has been established, the tribunal may proceed in the buyer’s absence after following due process.
What happens if negotiation fails?
The matter enters the formal MSEFC stage, which under the presently operative Section 18 involves conciliation followed by arbitration if conciliation fails.
Does an MSEFC case have to finish within 90 days?
Section 18(5) states that every reference should be decided within 90 days, but courts have held that missing this period does not automatically terminate the proceeding.
What if the buyer challenges an MSEFC award?
Under the current Section 19 framework, a buyer challenging the award must make the statutory 75% pre-deposit before its setting-aside application can be entertained. The Supreme Court has held this requirement mandatory.
