Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026

The Government introduced the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 (Bill No. LXXII of 2026) in the Rajya Sabha on July 28, 2026 and is currently under consideration. This note describes the Bill as introduced; its provisions may change in the course of passage. The Bill proposes amendments to the Micro, Small and Medium Enterprises Development Act, 2006 relating to registration of MSMEs, delayed payments, dispute resolution, penalties and rule-making powers.

Registration and Administrative Provisions

The Bill inserts a definition of “Development Commissioner” and substitutes references to an officer not below the rank of Joint Secretary with the Development Commissioner in clause (o) of section 3(3). It also substitutes sub-section (1) of section 7 to empower the Central Government to classify enterprises as micro, small or medium enterprises based on investment in plant and machinery or equipment and turnover, while excluding expenditure on pollution control, research and development, industrial safety devices and other notified items from investment calculations.

The Bill further substitutes section 8 to require the Central Government to notify a national digital platform for the free and voluntary filing of the memorandum for registration of MSMEs. State Governments may notify a State digital platform and extend benefits under their schemes to enterprises registered on the national platform. It also omits the reference to sub-section (1) in section 14(2). This is a change in status and not merely in medium: under the existing section 8(1), filing is discretionary for micro and small enterprises and for medium enterprises rendering services, but a medium enterprise engaged in the manufacture or production of goods is required to file. Filing would become voluntary across all categories. Registration would nonetheless remain the gateway to the delayed payment provisions, since section 2(n) defines a “supplier” by reference to an enterprise that has filed a memorandum under section 8(1). State Governments may notify a State digital platform and extend benefits under their schemes to enterprises registered on the national platform. It also omits the reference to sub-section (1) in section 14(2).

Settlement of Payments and Dispute Resolution

A significant part of the Bill strengthens the delayed payment framework.

It inserts section 15A requiring every Central Public Sector Enterprise procuring goods or services from MSMEs to settle invoices through a Reserve Bank of India-authorised Trade Receivables Discounting System (TReDS) platform. The Central and State Governments may notify other authorities, bodies or public sector enterprises to comply with the same requirement.

The Bill amends section 18 — as substituted by section 62 read with the Seventh Schedule of the Mediation Act, 2023 — by prescribing timelines for proceedings before the Micro and Small Enterprises Facilitation Council. Mediation must be completed within ninety days from the date fixed for first appearance, the Council must act within thirty days from the date of termination of the mediation, and the Council or the institution or centre providing alternative dispute resolution services must make the award within ninety days from the date of completion of pleadings. It also enables online mediation and arbitration through audio-video and other electronic means and clarifies that jurisdiction shall lie where the supplier’s official address, as per the registration made under section 8, is located, irrespective of the buyer’s location within India.

The Bill also inserts section 18A providing that a mediated settlement agreement or arbitral award made under section 18 may be recovered as an arrear of land revenue by the State Government, through the District Collector, Deputy Commissioner or other notified authority, where the buyer’s assets are located, and that the amount so determined constitutes a valid and legally enforceable debt liable to be recognised under the Insolvency and Bankruptcy Code, 2016.

Section 19 is substituted to retain the requirement of depositing 75% of the award amount before challenging an award or mediated settlement agreement, and requires the court, where the application has been pending for more than six months, to order payment to the supplier of a sum equivalent to at least 50% of the amount awarded, out of the sum deposited. The Bill also substitutes sections 20 and 21 relating to the establishment and composition of the Facilitation Council — which is to have not less than three and not more than five members, chaired by an officer not below the rank of Joint Director and including at least one member from the field of law — inserts section 22A requiring disclosure of invoices routed and settled through the TReDS platform, and provides that applications challenging awards shall be filed before the court within whose jurisdiction the supplier’s official address, as referred to in section 8, is located.

Penalties and Miscellaneous Amendments

The Bill substitutes the existing penalty framework under section 27 with a graded system of warnings and monetary penalties. Wilful furnishing of false information in the memorandum of registration filed under section 8, or failure to comply with section 26(2), would attract a warning at the first instance of non-compliance and a penalty of not less than ₹1,000 extending to ₹50,000 for the second or subsequent instances. Contravention of section 22 by a buyer would similarly attract a warning at the first instance and a penalty of not less than ₹10,000 extending to ₹50,000 for the second contravention, while a third or subsequent contravention is punishable with a fine of not less than ₹50,000 extending to ₹1 lakh. The penalties are to be increased by ten per cent of the minimum amount prescribed, after the expiry of every three years from the date of commencement of the amendment Act, as may be notified by the Central Government.

The Bill also inserts section 27A requiring the Central Government to appoint the Development Commissioner as the adjudicating officer, with no penalty to be imposed without a reasonable opportunity of being heard, provides an appeal to the Secretary to the Government of India in charge of the Ministry or Department concerned within thirty days of receipt of the order, to be disposed of within sixty days of filing, and provides that an unpaid penalty is recoverable as an arrear of land revenue, amends the Central and State rule-making powers under sections 29 and 30, and contains a saving provision preserving actions taken under the principal Act to the extent they remain consistent with the amended provisions.

Conclusion

The Bill proposes significant changes to the registration, payment, dispute resolution and enforcement framework under the MSMED Act, 2006. It introduces a national digital registration platform, strengthens the delayed payment mechanism through TReDS, prescribes timelines for dispute resolution, revises the framework governing Facilitation Councils and replaces the existing penalty regime with an administrative adjudication mechanism. If enacted, several provisions will require implementation through rules framed by the Central and State Governments. Clause 1(2) further provides that the amendment Act will come into force on such date as the Central Government may notify, with different dates permitted for different provisions — so enactment alone will not bring the amendments into effect, and the operative position will need to be tracked notification by notification.