Registered as MSME After the Supply? Can You Still Use the MSME Council?

Many small businesses learn about the MSMED Act only when a buyer stops paying. They then register on the Udyam portal and approach the MSME Facilitation Council, only to be told by the buyer that they were not registered when the contract was signed or when the goods were supplied, so the council has no jurisdiction. This objection is one of the most common in MSME council cases, and the law on it is not settled.

This guide is for suppliers who registered late, and for buyers facing council claims from such suppliers. In short: the MSMED Act's benefits, including the right to approach the council under Section 18 and compound interest under Section 16, are given to a "supplier", defined as a micro or small enterprise that has filed its memorandum, now done through Udyam registration; in Silpi Industries (2021) and Mahakali Foods (2022), the Supreme Court indicated that a party must be a supplier on the date of the contract to claim those benefits; in NBCC (India) v State of West Bengal (January 2025), a two-judge bench took a broader view and referred the conflict to a larger bench, which has not yet decided it as of October 2026; and claims for supplies made after registration remain on firm ground.

Until a larger bench decides, the date of registration compared with the dates of the contract and each supply is the key fact in every case.

The short answer

If you registered on Udyam before the contract, your claim is on firm ground. If you registered after the contract but before some supplies, claims for supplies made after registration are on reasonably firm ground, and claims for earlier supplies are uncertain. If you registered after all the supplies, the buyer will argue, relying on Silpi and Mahakali, that you were not a supplier and the council cannot act; you will argue, relying on NBCC, that registration is not a precondition. A larger bench of the Supreme Court has been asked to resolve the conflict. Councils and High Courts are handling the objection case by case in the meantime.

Registration timing and likely position

What Silpi and Mahakali said

In Silpi Industries v Kerala State Road Transport Corporation (2021), the Supreme Court, dealing with counter-claims and limitation in MSME council arbitrations, also observed that to seek the benefit of the MSMED Act, the seller should have been registered under the Act on the date of entering into the contract, and that a party could not claim benefits for supplies made before registration. In Gujarat State Civil Supplies Corporation v Mahakali Foods (2022), a three-judge bench held that the MSMED Act overrides arbitration agreements in the contract, and in its conclusions indicated that a party who was not a supplier as defined on the date of the contract could not seek benefits as a supplier, and that registration could not be used to claim benefits retrospectively.

Buyers have relied on these statements to object to council jurisdiction wherever registration came after the contract. Many councils and High Courts accepted the objection after 2022.

Common situations

What NBCC v State of West Bengal said

In NBCC (India) Ltd v State of West Bengal (January 2025), a two-judge bench considered whether an unregistered enterprise could approach the council under Section 18. It took the view that Section 18(1) allows "any party to a dispute" with regard to amounts due under Section 17 to make a reference, and that registration is not a precondition to approaching the council, while noting that the benefits under the Act's chapter on delayed payments may depend on being a supplier. Recognising the conflict with Silpi and Mahakali, the bench referred the question to a larger bench.

Until the larger bench decides, both views have Supreme Court support. Councils and courts have been reaching different results depending on the facts, the wording of the decisions relied on, and the date of registration. For suppliers, NBCC gives a real argument where earlier there seemed to be none. For buyers, the objection remains worth raising.

If you are a supplier who registered late

The 2026 amendment

The MSMED (Amendment) Act, 2026 replaced the registration provision in Section 8 with a free, voluntary registration on a national platform, and this part came into force on 15 October 2026. Other parts of the amendment, including changes to the council procedure in Section 18 and to deposits under Section 19, have not yet been brought into force. Whether and how the new registration provision affects the question of supplies made before registration is not yet clear, and suppliers should not assume that the amendment resolves the conflict. For now, Silpi, Mahakali and the NBCC reference remain the governing authorities.

Contract date or supply date?

Even on the earlier view, there is a question whether the relevant date is the date of the contract or the date of each supply. Silpi referred to the date of entering into the contract. But many supply relationships run on a master agreement or rate contract followed by individual purchase orders, each of which may be a separate contract. A supplier who registered after the master agreement but before particular purchase orders can argue that each purchase order is a fresh contract, so that those supplies are covered. Buyers argue that the master agreement governs.

Councils have looked at the documents closely: whether purchase orders were issued separately with their own terms, whether the master agreement fixed quantities and prices, and when the goods were delivered. A supplier with separate purchase orders dated after registration usually has a stronger case for those supplies.

Category on the supply date

The council route is available only to micro and small enterprises, not to medium enterprises. The classification depends on investment in plant and machinery or equipment and turnover, under the limits notified for the relevant period. The limits were revised with effect from 1 April 2025, so an enterprise's category may have changed over time. A supplier that was a medium enterprise at the time of the supply cannot use the council for those supplies, even if it is now small, and the converse is also argued.

The Udyam certificate records the category and is updated on the basis of tax returns. Suppliers should keep copies of their certificates as they stood on the relevant dates, and buyers should ask for them early.

How councils handle the objection

Councils are not bound by a single approach. Some decide the registration objection as a preliminary issue before conciliation; others take it up after conciliation fails, at the arbitration stage. Some have accepted claims for supplies after registration and rejected earlier ones; others have proceeded on the basis of NBCC and decided the whole claim. Where a council decides the objection in the supplier's favour, the buyer may raise it in a challenge to the award under Section 34, after making the 75% deposit required by Section 19. See challenge an MSME award.

Where a council rejects the claim for want of registration, the supplier can pursue the claim by ordinary arbitration, if there is an arbitration clause, or by a suit, subject to limitation. Time spent before the council may be excluded under Section 14 of the Limitation Act if the supplier pursued it in good faith, but this is not guaranteed, so suppliers should act promptly.

For buyers facing a late-registration claim

A buyer should raise the objection at the first opportunity, in its reply before the council, supported by the supplier's Udyam certificate showing the registration date and the contract and invoices showing the supply dates. It should also prepare a defence on the merits, because the council may not accept the objection. And it should weigh settlement: with the law unsettled, a long jurisdiction fight may cost more than a negotiated payment of the post-registration supplies. See MSME claim defence.

For suppliers: register early

For any supplier that is or may be a micro or small enterprise, registering on Udyam before entering into supply contracts removes this whole problem. Registration is free and online, and under the 2026 amendment remains voluntary, but the benefits of the delayed payment chapter depend on it. Include your Udyam number on quotations, purchase order acceptances and invoices, so that buyers know from the start that the 45-day payment rule applies. See Udyam registration and MSME 45-day rule.

Documents that decide the registration question

Because the outcome turns on dates, the documents matter more than the arguments. A supplier should gather its Udyam registration certificate, showing the date of registration and the classification; any earlier EM-II acknowledgment or Udyog Aadhaar Memorandum, with dates; the contract, master agreement or rate contract, and each purchase order with its date; delivery challans, e-way bills and goods receipt notes showing when each supply was made; and invoices showing the Udyam number where it was included. A buyer should ask for the same documents in its reply and check them closely, because certificates are sometimes updated, migrated or reclassified.

A short chronology, placing registration against each supply and invoice, is the most useful document in these cases. It lets the council, and later any court, see at a glance which claims are on firm ground and which are contested.

Limitation while the question is pending

A supplier that brings a council claim for all supplies, including those before registration, risks the council deciding later that it had no jurisdiction over the earlier ones. By then, the limitation period for those claims in an ordinary arbitration or suit may have run out. Section 14 of the Limitation Act excludes time spent prosecuting a claim in good faith in a forum without jurisdiction, but whether it applies depends on the facts and is not guaranteed.

The safer course, where the pre-registration supplies are large, is to protect them separately: by sending a Section 21 notice under the contract's arbitration clause, or by applying for pre-institution mediation before a commercial suit, while the council claim for post-registration supplies proceeds. See limitation for arbitration claims.

Mistakes to avoid

Suppliers: registering only after the dispute and assuming the benefits apply backwards; not including the Udyam number on invoices; filing a single undivided claim without a chronology; and letting limitation run on earlier supplies. Buyers: failing to raise the objection at the first stage; relying on the objection alone without a defence on the merits; and ignoring the possibility that the council will follow NBCC. On both sides, the uncertainty is a reason to consider settlement seriously.