Where to File a Money Recovery Suit When the Debtor Is in Another City

Where can you sue a debtor who's in another city?

Two places are open to you under Section 20 of the Code of Civil Procedure, 1908. The first is wherever the defendant actually and voluntarily lives, runs its business or personally works for gain. The second is wherever the cause of action arose, in whole or in part. Translate that into a recovery case. The debtor's city is always on the table. Yours is on it only when a real piece of the deal took place there.

Say you're a Delhi supplier and your buyer is in Lucknow. You can always sue in Lucknow. You can sue in Delhi too if, say, you accepted the purchase order in Delhi, or the buyer's transporter collected the goods from your Delhi warehouse, or the contract had the buyer paying into your Delhi account. Once you've picked the city, the value of the claim decides which court there hears it.

It's often more useful to know what doesn't count. Having your registered office in Delhi doesn't, on its own, give Delhi courts jurisdiction. Nor does raising invoices from Delhi. Nor does sending the legal notice from there. Courts look at where the facts you have to prove took place. Where you happen to sit doesn't matter. Once the forum is fixed, the case moves through the usual stages of a money recovery suit.

The jurisdiction rules you'll actually run into

Where does the cause of action arise when an invoice goes unpaid?

A cause of action is the bundle of facts you must prove to win. For the price of goods or services, there are usually four. A contract was made. You did your part. Payment fell due. It wasn't paid. Every one of those facts happened somewhere. If even one happened in your city, part of the cause of action arose there, and Section 20(c) lets you sue there.

Where was the contract made? Wherever the acceptance took effect. The Supreme Court held in Bhagwandas Goverdhandas Kedia v Girdharilal Parshottamdas (1966) that a contract made by instant communication, like a phone call, is concluded where the acceptance is heard, which is where the offeror receives it. Email purchase orders run on the same reasoning. It all turns on who offered and who accepted, and that's not always obvious. Go through the email chain carefully first.

Performance tends to be your strongest anchor. If goods were delivered in your city, for instance on ex-works terms with the buyer's transporter picking up from your factory, part of the cause of action arose there. The same goes for services performed at your office. Remote work is trickier. Think of software built in Gurugram for a client in Pune. Courts have treated the place of performance as relevant, but the defendant will argue the work was 'delivered' in its own city. Expect that. Back your plea with documents showing where the work was really done.

Does the place of payment bring the case to your local court?

Often, yes, if the place of payment was agreed. When the contract, the purchase order or the accepted invoice terms require payment at your office, or into your bank account in your city, the failure to pay there is part of the cause of action. Courts have generally accepted jurisdiction on that footing. The better your proof that the buyer agreed to those terms, the safer you are.

If nothing was agreed about where to pay, it's murkier. Section 49 of the Indian Contract Act, 1872 says that when no place is fixed, the promisor has to ask the promisee to appoint a reasonable place and perform there. Some courts have read that, along with the old English rule that a debtor must seek out his creditor, as putting payment in the creditor's city. Others have held back. Past RTGS payments into your local account help show a course of dealing. They don't settle the point.

Our advice is plain. Don't build jurisdiction on the place of payment alone if you can help it. Pair it with contract formation or delivery in your city wherever the facts allow. And if payment really is your only link, ask yourself honestly whether a jurisdiction fight is worth the months it'll take. Filing in the debtor's city may be the cleaner route.

Suing a company that has offices in several cities

Companies get a rule of their own. The Explanation to Section 20 treats a corporation as doing business at its sole or principal office in India and, for a claim that arises where it keeps a subordinate office, at that office. The Supreme Court decision that matters is Patel Roadways v Prasad Trading Co (1991). Where the claim arose at a branch, the suit belongs at the branch. You aren't allowed to choose the head office city only because the registered office sits there. The exception is when some part of the cause of action also arose at the head office.

Picture a Mumbai-headquartered retailer whose Delhi branch placed your order, took delivery in Delhi and was meant to pay you from there. Your suit lies in Delhi. The retailer can't insist on Mumbai. Flip it round, though. If you only ever dealt with the head office in Mumbai, a showroom in Connaught Place doesn't give Delhi courts jurisdiction. The MCA record shows a company's registered office. Its GST registrations list its principal and additional places of business in each state.

When the debtor company is in another state altogether, service, mediation and execution each get harder. Our guide on suing a company based in another state deals with those inter-state points. This page sticks to one question: which court has territorial jurisdiction.

What does a jurisdiction clause actually do?

No agreement can give a court jurisdiction it doesn't have. What parties can do is take two or more courts that already have jurisdiction under Section 20 and agree to go to only one of them. That's been the law since A.B.C. Laminart v A.P. Agencies (1989). Swastik Gases v Indian Oil Corporation (2013) went a step further. A clause naming one competent court excludes the rest even if it never says 'only' or 'exclusive'. Pick a city with no link at all, though, where nothing in the cause of action happened and neither side does business, and the clause fails.

Most of our files have two clauses that contradict each other. Your invoice carries the line 'subject to Delhi jurisdiction'. On the buyer's side, the purchase order, or that vendor registration form you filled in to get empanelled, says 'courts at Pune alone shall have jurisdiction'. The winner is whichever clause actually forms part of the contract. If your line appears only on invoices raised after the deal was done, courts often see it as your one-sided statement. The buyer never signed up to it. A purchase order you accepted, or a vendor agreement you signed, is a different matter. That usually binds you.

When Advocate B.K. Singh opens a recovery file against an out-of-town buyer, the first things he asks for are the back of the purchase order and the vendor registration papers. Big buyers' standard terms very often name their own city. Suppliers remember the line on their own invoice. They forget the page they signed months earlier. If the buyer's clause is valid, it decides the forum, and you want to find that out before drafting, not after an objection.

Suing at home or in the debtor's city: the trade-offs

Which court inside that city takes the suit?

City first, then value. A dispute arising from a commercial transaction with a specified value of Rs 3 lakh or more is a commercial suit. Delhi splits these at Rs 2 crore. Up to that figure, the suit goes to the District Judge (Commercial Court) in the district courts. Above it, to the Commercial Division of the Delhi High Court. A proposal to raise that limit has been under consideration, so check where it stands today. Each district court complex in Delhi has its own territory. Tis Hazari isn't Saket, and Saket isn't Karkardooma. Which complex you go to depends on the district where the defendant does business or where the cause of action arose. The list is on our page on Delhi's district commercial courts.

UP and Haryana work differently. Their High Courts don't hear suits on the original side. So whichever court is designated as the Commercial Court for the district takes the suit, however big it is, and appeals go to the Allahabad High Court or the Punjab and Haryana High Court. Our guide on filing a commercial suit in Noida, Ghaziabad and Gurugram covers the NCR districts. Claims below Rs 3 lakh go to the ordinary civil court of the right pecuniary grade in that place.

Court fee changes from state to state. Delhi follows the Court Fees Act, 1870 as amended for Delhi. Uttar Pradesh and Haryana have their own schedules. On a big claim the gap can be real money, so compare before you decide. Our guide on the court fee for a recovery suit in Delhi shows how the Delhi figure is worked out. For any other state, check the current schedule.

Section 12A mediation with a debtor in another city

Distance doesn't get you out of pre-institution mediation. Unless your suit really needs urgent interim relief, you must apply for mediation under Section 12A of the Commercial Courts Act, 2015 before you file. The application goes to the legal services authority designated for the place where you plan to sue. It sends notice to the debtor. Many authorities let parties join sessions online.

Out-of-town debtors ignore that notice more often than not. If the debtor doesn't respond or doesn't show up, the mediator issues a non-starter report and you file the suit with it. The time spent in mediation, up to three months plus a further two if both sides agree, is left out when limitation is counted. One caution. If you later realise you picked the wrong city, look hard at the first city's mediation report before relying on it in the second.

Working out where to file, step by step

1. Put a place against every fact

   Note where the order was placed and accepted, where the goods or services were delivered, where payment was due and where past payments actually landed. Against each, write down the document that proves it.

2. Read every jurisdiction clause you can find

   Look at your invoice, the buyer's purchase order including the back page, any supply agreement, and any vendor registration or onboarding form. Then decide which of them is really part of the contract.

3. Confirm the debtor's addresses

   Get the registered office from the MCA portal, places of business from the GST registration, and branch addresses from letterheads or the debtor's website. For a firm or an individual, confirm both the residence and the place of business.

4. Check value and court

   Work out the specified value, including interest where that's allowed, and identify the competent court in each city open to you. Compare the court fee in each state while you're at it.

5. Find the debtor's assets

   Where are its bank accounts, stock, receivables and property? That decides how expensive execution gets if you sue somewhere else. Our guide on checking a debtor's assets before you sue will help.

6. Write a proper jurisdiction paragraph

   In the plaint, set out each fact that gives the chosen court jurisdiction, with dates and document references. A vague line like 'the cause of action arose within the jurisdiction of this court' is an open invitation to object.

7. File, serve and handle objections

   Delhi courts take e-filing of commercial suits. In commercial suits, summons can go by courier and email as well as through the court's own process. If the debtor objects to jurisdiction, press the court to decide it early. If the plaint has to move, you'd rather lose weeks than a year.

What happens if you've filed in the wrong court?

The court returns the plaint under Order VII Rule 10 so you can file it in the proper court. The defendant normally raises the objection in its written statement or in a separate application, and the court may take it up as a preliminary issue. If the plaint comes back, you refile in the right court, often paying court fee again, and the suit more or less starts afresh there. You can lose months.

Limitation is the real worry. Section 14 of the Limitation Act, 1963 excludes the time you spent pursuing a suit with due diligence and in good faith in a court that had no jurisdiction. Good faith depends on the facts. An arguable jurisdiction plea will usually pass. One that ignored an obvious exclusive clause may not. If you're close to the three-year limit, pick the safest forum. Convenience can wait.

If the defendant doesn't object early, it usually loses the point. Section 21 of the Code wants objections to the place of suing raised at the earliest opportunity in the trial court, and before issues are settled. An appeal court won't look at it later unless there's been a failure of justice.

Winning at home and collecting somewhere else

Winning in your city is half the job. The money still has to be collected wherever it is. Under Section 39 of the Code, the court that passed the decree can send it for execution to the court in whose area the debtor lives, does business or owns property. Section 39(4) shuts the other door. The decree-passing court can't itself execute against a person or property outside its local limits. Order XXI Rule 6 lists what travels with the transfer: a copy of the decree, a certificate that it hasn't been satisfied, and a copy of any execution orders. Our page on execution of decree takes you through it.

Transfer usually takes anything from a few weeks to a few months. Then execution carries on in the receiving court, with local counsel. Some assets, like money the debtor's own customers owe it, can sometimes be attached by orders sent to those customers wherever they are. Most attachments of bank accounts and property are cleaner in the court where they sit, though. Advocate B.K. Singh likes to map where the debtor's money actually is before choosing the forum. A home-city suit is often still the right call. The trial years are when convenience counts most. But the client should know from day one that execution will move.

Papers that show where your cause of action arose

Mistakes that get a plaint returned

• Relying on your own office address. Your place of business doesn't give jurisdiction for a suit you file. Only the defendant's does.
• Treating the legal notice as the cause of action. You sent it from your city and got no reply there. That doesn't make your city the place where the cause of action arose.
• Forgetting the buyer's purchase order terms. A clause you accepted on the buyer's paperwork often beats whatever's printed on your invoice.
• A one-line jurisdiction paragraph. Courts expect the plaint to spell out the specific facts, places and dates that give them jurisdiction. One line won't do.
• Adding a defendant just so you can sue at home. Joining some local party with no real role, to rely on Section 20(b), is easy to spot, and the plaint comes straight back.
• Leaving it too late. A jurisdiction fight near the end of limitation can cost you the whole claim if Section 14 protection is refused. Our guide on the time limit for recovering unpaid dues explains the clock.

Before you decide where to sue

Before money goes on a plaint, give your papers an hour. Write each fact of the deal next to the place it happened and the document that proves it. Hunt down every jurisdiction clause. Find out where the debtor keeps its assets. If home is clearly within jurisdiction and no valid clause points away, suing at home usually makes sense. If it rests on one thin fact, or a clause names the debtor's city, go there and line up local help. Whichever you pick, pick it with execution in mind.

Our page on the money recovery suit covers the whole process once the forum's fixed, and the guide on which commercial court will hear your case goes deeper into value limits. Frankly, a short look at the contract and emails by someone who drafts these plaints week in, week out often saves the months a returned plaint costs.

If you'd like your contract, purchase orders and delivery papers checked to see where your suit can go, send them to Advocate B.K. Singh's team through the contact page.