Statutory interest under MSMED Act requires specific computation of compound interest with monthly rests.

The petitioner, a registered "Small Enterprise" under the MSME Development Act, 2006, supplied UPVC pipes to the Public Health Engineering (PHE) Department of Assam.

Following non-payment, a prior writ [WP(C) No. 2776/2018] and subsequent contempt proceedings [Cont. Cas(C) No. 516/2018] led to a Memorandum of Understanding (MoU) for payment of Rs. 5.35 Crores.

The petitioner alleged further defaults regarding subsequent work orders from 2020-2021 and eventually withdrew from the MoU on 04.04.2025 due to continued non-payment.

The petitioner approached the High Court seeking a direction for the release of outstanding dues plus statutory interest under the Act of 2006.

The State contested the maintainability of the writ, citing the availability of an alternative remedy under Section 18 of the Act.

1. Whether the High Court should entertain a writ petition for recovery of dues when an alternative remedy exists under Section 18 of the MSME Act, 2006.

2. Whether the petitioner is entitled to statutory compound interest with monthly rests under Section 16 for delayed payments.

Sections 15, 16, 17, and 18 of the Micro, Small and Medium Enterprises Development Act, 2006: Section 15 mandates payment within 45 days of acceptance; Section 16 imposes a statutory liability for compound interest with monthly rests at three times the bank rate for defaults.

Garg Poly Industries & Others v. State of Assam & Others (2026 (1) GLT 1): Held that a writ is maintainable when the state disputes the very MSME status of an entity.

V.K. Patel & Others v. Simplex Infrastructure Ltd. (2024 SCC Online Cal 6617): Defined "monthly rests" as a staggered, fluid calculation where interest is compounded at the prevailing bank rate at the end of each month.

The Court observed that while Section 18 provides for conciliation and arbitration, the petitioner’s status as a small enterprise must first be verified to trigger the high statutory interest rates under Section 16.

Referring to Garg Poly Industries, the Court noted that factual determinations regarding the exact dates of supply, acceptance, and the varying RBI bank rates over time are essential for calculating "monthly rests," which cannot be performed directly by the Writ Court.

The court reasoned that since the calculation requires a detailed evidentiary exercise (e.g., determining the "appointed day" under Section 2(b)), the matter should first be verified by the Departmental authorities based on a detailed claim from the petitioner.

The Court clarified that if a fundamental dispute arises during this verification, the parties must then revert to the MSME Facilitation Council.

The respondent is directed to verify the claims, including the petitioner's status and delivery timelines, and make payments within 4 months; if rejected, a speaking order must be issued.

If the parties fail to reach an agreement after this verification, they must approach the MSME Facilitation Council under Section 18.

Interest for the 4-month verification period was ordered to be frozen, provided the parties eventually agree on the claims.