Cheque Bounce, MSMED or NCLT — Which Recovery Route Applies to Your Case

Three separate Indian laws cover unpaid B2B dues, each with its own timeline and threshold. Filing under the wrong one wastes the statutory clock — here is how to tell which applies.

1. Was payment attempted by cheque, and did it bounce?

If yes: Section 138 of the Negotiable Instruments Act applies, regardless of your MSME status or the amount involved. This is a criminal route with a strict 30-day notice window from the return memo, and a 15-day grace period after that — it moves faster than a civil claim and carries the pressure of criminal prosecution.

2. Are you a registered MSME owed a B2B invoice, with no cheque involved?

If yes: Section 16 of the MSMED Act applies. This is a civil route available only to a registered MSME supplier, entitling you to statutory compound interest at roughly 20.25% p.a. on top of the principal, pursued through the MSME Samadhaan ODR facility. There is no minimum claim amount.

3. Is the debtor a company or LLP, and is the default ₹1 Crore or more?

If yes: an NCLT Section 9 demand notice under the IBC is available, regardless of your MSME status. This route threatens the debtor company with insolvency proceedings, which is often enough pressure to force settlement within the 10-day notice window — but it only applies above the ₹1 Crore threshold and only against a corporate debtor.

4. What if more than one applies?

They are not mutually exclusive. A registered MSME paid by a bounced cheque for ₹1.2 Crore can pursue the Section 138 criminal complaint and the Section 16 interest claim in parallel — one applies criminal pressure, the other recovers statutory interest — and could separately consider the NCLT route given the amount involved. Each serves a different purpose, and running them together is common practice, not double filing.