A mid-sized Bangalore manufacturer was hit with an Rs 18.58 lakh adjudication order last year — for missing three consecutive MSME Form 1 filings. The next deadline is 30 April 2026, exactly 20 days from today. If your company buys anything from a Udyam-registered supplier and owes them money past 45 days, you are in scope. Most CFOs do not know this form exists.
Under Section 405 of the Companies Act, 2013 read with the Specified Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Order, 2019, every company that has received goods or services from a Micro or Small enterprise and has any payment pending beyond 45 days on the last day of the half-year must file Form MSME-1 within 30 days of that half-year ending. That means the October 2025 to March 2026 cycle is due 30 April 2026.
The Problem: A Form Almost Nobody Tracks
Most private company finance teams track three MCA deadlines religiously — AOC-4, MGT-7 and DIR-3 KYC. Form MSME-1 sits below the radar for three reasons:
- It is half-yearly, not annual. Two deadlines per year (31 October and 30 April) means it falls off quarterly close calendars.
- It is trigger-based, not automatic. A company only has to file if it has an overdue MSME payment on the cut-off date. Teams assume silence means compliance.
- It depends on vendor master hygiene. You cannot file accurately unless you know which of your vendors are Udyam-registered Micro or Small enterprises. Most accounts payable systems do not capture Udyam status as a mandatory field.
The result is that hundreds of specified companies miss the filing every cycle, and MCA has started adjudicating in bulk. The Rs 18.58 lakh penalty on a listed Indian manufacturer in 2024 was not an outlier — it was the first of a wave. Multiple ROC offices have issued show-cause notices under Section 206(1) for MSME-1 defaults in Q1 2026.
What the Law Actually Says
Section 405(4) of the Companies Act, 2013 sets the penalty structure. It is one of the more painful provisions in the Act because it applies to both the company and each officer in default, and has a per-day continuing default rider.
| Default | Company Penalty | Per Officer in Default | Daily Add-on | Cap |
|---|---|---|---|---|
| Failure to file Form MSME-1 | Rs 20,000 | Rs 20,000 | Rs 1,000 per day of continuing default | Rs 3,00,000 |
For a company with three directors, two cycles missed, and a 120-day delay on each, the math is:
- Company: Rs 20,000 base + Rs 1,000 x 120 days = Rs 1,40,000 per cycle
- Three officers in default: Rs 20,000 + Rs 1,000 x 120 = Rs 1,40,000 per officer, per cycle
- Total per cycle: Rs 1,40,000 + (3 x Rs 1,40,000) = Rs 5,60,000
- Two cycles missed: Rs 11,20,000
And that is before the cap kicks in at Rs 3 lakh per party per filing. The larger the board and the longer the delay, the faster the numbers escalate.
Who Is a Specified Company — And Who Is an MSME Supplier?
The obligation applies to every company, whether private or public, Indian or foreign-subsidiary, listed or unlisted, as long as two conditions are met. First, the company has received goods or services from an MSME supplier. Second, payment to that supplier remains outstanding for more than 45 days from the date of acceptance or deemed acceptance.
A supplier qualifies as an MSME only where the supplier is classified as a Micro or Small enterprise under the Udyam Registration framework. Medium enterprises are explicitly excluded from the 45-day payment trigger under the MSMED Act, 2006. So the first practical step is to scrub your vendor master against Udyam classification.
Nil Returns Are Not Required
The MCA has clarified that companies with no outstanding MSME supplier payments beyond 45 days at the close of the half-year do not need to file a Nil return. This is one of the few instances under the Companies Act where silence is legally safe — provided your position is documented.
What You Must Do in the Next 20 Days
Five steps, each tied to a specific internal owner.
- Pull the AP ageing as of 31 March 2026. Finance owns this. Filter every vendor with an outstanding balance. The ageing bucket to flag is “46 days and above”.
- Match the ageing against Udyam status. For each flagged vendor, check the Udyam portal to confirm whether they are Micro, Small, or Medium. Only Micro and Small matter. If your vendor master already captures Udyam status, this takes 30 minutes. If not, budget 3 working days and assign a junior analyst.
- Collect the reason-for-delay for every eligible line item. Form MSME-1 requires you to state the reason payment is overdue — disputed invoice, pending delivery acceptance, internal approval workflow, cash flow constraint. The wording matters. Do not write “oversight” or “administrative delay” — those are adjudication triggers.
- Prepare and validate the e-form in MCA V3. Get your DSC-holder director ready. Form MSME-1 must be digitally signed by one director or CS and then authenticated by a practising professional. DSC renewals in April always create last-week panic.
- File by 25 April 2026, not 30 April. The MCA V3 portal historically slows under load in the last 48 hours of any filing window. Target 25 April as the internal deadline. Build in 3 working days of buffer for validation errors.
The Deeper Implication: MCA Is Using MSME-1 to Enforce the MSMED Act
According to CS Sapna Malpani, Form MSME-1 is not just a compliance form — it is a lever. The MSMED Act, 2006 creates the 45-day payment obligation, but it has weak enforcement teeth. By hardcoding the disclosure into the Companies Act through Section 405 and Form MSME-1, the MCA has created an audit trail of every large buyer that systematically delays MSME payments. That data feeds MSME Samadhaan grievance cases and, increasingly, adjudication notices under Section 206(1).
For funded startups with strategic vendor relationships, the stakes are higher. A pattern of MSME delays is a red flag in Series B and later due diligence. Investors read the Samadhaan portal and flag outstanding grievances as working-capital governance risks. A Rs 20,000 penalty is cheap; the real cost is the 30-day delay in closing a round while investor counsel asks for your MSME-1 filings from the last four cycles.
Key Takeaways
- File by 30 April 2026 for the October 2025 to March 2026 half-year. Twenty days left as of today.
- Penalty structure under Section 405(4): Rs 20,000 on the company plus Rs 20,000 on every officer in default plus Rs 1,000 per day of continuing default, capped at Rs 3 lakh per party.
- Trigger is 45 days of outstanding payment to any Micro or Small Udyam-registered supplier. Medium enterprises are out of scope.
- Nil return is not required — but you must be able to prove you had no eligible outstanding balance on 31 March 2026.
- Internal deadline should be 25 April 2026 to absorb V3 portal delays and DSC renewal risk.
Sources and References
- Companies Act, 2013 — Section 405(4) — penalty for default in furnishing information
- Specified Companies (Furnishing of Information about Payment to Micro and Small Enterprise Suppliers) Order, 2019 — MCA notification dated 22 January 2019
- Udyam Registration Portal — primary source for MSME classification
- Taxguru — Consequences of Non-Filing of MSME-1
- MMJC — Change in Form MSME-1 Disclosure Framework
Don’t Guess Your Exposure. Calculate It.
Not sure whether your company is a specified company under the MSME-1 rule? Use our free MCA Penalty Calculator to estimate the exact Section 405(4) exposure based on your AP ageing. Already past a missed cycle? Contact CS Sapna Malpani for a 30-minute confidential review before you file.
Frequently Asked Questions
What is Form MSME-1 and who has to file it?
Form MSME-1 is a half-yearly return under Section 405 of the Companies Act, 2013 and the Specified Companies Order, 2019. Every company that has received goods or services from a Micro or Small Udyam-registered supplier and has any outstanding payment beyond 45 days at the close of the half-year must file it with the ROC through the MCA V3 portal.
When is the MSME Form 1 deadline for April 2026?
For the half-year from 1 October 2025 to 31 March 2026, Form MSME-1 is due on 30 April 2026. The October cycle (for the April to September half-year) is due 31 October every year.
What is the penalty for not filing Form MSME-1?
Under Section 405(4) of the Companies Act, 2013, non-filing attracts Rs 20,000 on the company plus Rs 20,000 on every officer in default. In case of continuing default, an additional Rs 1,000 per day is levied, capped at Rs 3 lakh. Recent MCA adjudication orders have imposed penalties of up to Rs 18.58 lakh on companies that missed multiple filing cycles.
Do I need to file a Nil MSME-1 return?
No. If your company has no outstanding MSME supplier payments beyond 45 days at the close of the half-year, a Nil return is not required. You should, however, keep a documented internal memo from your finance team confirming the Nil position — the burden of proof is on the company if an adjudication officer asks later.
How do I know if a supplier is an MSME?
Ask every supplier for a current Udyam Registration Certificate and capture the classification (Micro, Small, or Medium) in your vendor master. The 45-day rule triggers only for Micro and Small enterprises, and only where the supplier was Udyam-registered on the date of acceptance of goods or services.
Written by CS Sapna Malpani, Practising Company Secretary, Bangalore. For a confidential MSME-1 exposure review, schedule a free consultation or email [email protected].