Quick answer: No. If you are a registered Micro or Small enterprise, Indian law caps the payment period at 45 days — even if both sides signed an agreement saying 60, 90 or 120 days. Any clause stretching payment beyond 45 days is simply not enforceable against you, and once the deadline passes, the buyer automatically starts owing you interest.

Why do so many business owners believe long credit periods are legal?

Because in most areas of business, a signed contract is the final word. If you agree to 90-day terms with a client, you generally assume you have to live with it. Big buyers know this, and many use their bargaining power to push small suppliers into long payment cycles as a condition of getting the order.

But payments to Micro and Small enterprises are one of the rare areas where the law deliberately overrides private contracts. Section 15 of the MSMED Act, 2006 (the main law protecting small businesses in India) says a buyer must pay a registered Micro or Small supplier within the agreed time — and that agreed time can never exceed 45 days from the date of acceptance of goods or services.

What if there is no written agreement at all?

Then the window is even shorter. Without a written agreement, the buyer must pay within 15 days of accepting your goods or services. In plain terms: no paperwork does not mean no protection — it actually means the buyer has less time, not more.

What are the actual payment deadlines?

Situation	Maximum time the buyer gets to pay
No written agreement between you and the buyer	15 days from acceptance of goods/services
Written agreement says 30 days	30 days (as agreed)
Written agreement says 45 days	45 days (the legal maximum)
Written agreement says 60 / 90 / 120 days	Still only 45 days — anything beyond is not enforceable

What happens the moment the buyer crosses the deadline?

Three things start working in your favour automatically — you do not need any clause in your invoice or contract for these:

First, the buyer starts owing you compound interest at 3 times the RBI bank rate, compounding every month — for example, at an RBI bank rate of 5.50%, this works out to 16.5% per year (always verify the current bank rate before calculating). Second, that interest is a pure loss for the buyer — under Section 23 of the MSMED Act, they cannot claim it as a business expense to reduce their taxes. Third, you get the right to take the matter to the MSME Facilitation Council — a fast-track dispute body — instead of fighting a long court case.

What should you do if a buyer insists on 90-day terms?

You can still take the order — many small businesses do, to keep the relationship. But go in knowing your rights: the 45-day ceiling protects you regardless of what the purchase order says, the interest clock runs from day 46 whether or not you demand it immediately, and you can raise a claim later if the relationship sours. Keep your Udyam registration active and dated before the transaction, and keep delivery proof — those two things decide whether this protection actually applies to you when you need it.

Frequently Asked Questions

Q. Does this 45-day rule apply to every business?

A. No. It applies when the supplier is a registered Micro or Small enterprise engaged in manufacturing or services. Medium enterprises and pure traders generally fall outside this specific protection.

Q. Can I waive my right to interest to keep a client happy?

A. The law is designed so that the interest applies regardless of any agreement. Practically, many suppliers choose not to demand it — but the right itself does not disappear.

Q. Does the buyer need to be a large company for this to apply?

A. No. The rule applies to any buyer — large company, small firm, even another MSME — as long as you, the supplier, are a registered Micro or Small enterprise.

Q. From when is the 45 days counted — invoice date or delivery date?

A. From the day of acceptance. If the buyer raises no written objection within 15 days of delivery, the day of actual delivery itself is treated as the day of deemed acceptance — so in practice the clock usually runs from the delivery date, not the invoice date.

About the author: Advocate Praveen Siinghhal is a Delhi-based lawyer with 25+ years of experience in MSME payment recovery, commercial disputes and business legal protection. He advises MSMEs and business owners on unpaid dues, legal notices, MSME Facilitation Council claims and recovery strategy.

Disclaimer: This article is for general information only and is not legal advice. Laws, RBI bank rate, tax treatment, portal procedures and case law may change from time to time. Please verify the current position or consult a professional before acting on any specific claim.