How Startups Can Use Commercial Courts to Recover Dues From Large Clients

Can a startup really take a big client to a commercial court?

Yes. That's the kind of claim these courts were built for. If a company took your goods or services under a contract and owes you Rs 3 lakh or more, you have a commercial dispute under Section 2(1)(c) of the Commercial Courts Act, 2015. How big the client is doesn't change anything legally. A listed company with 40 people in its legal department gets the same 120-day outer limit to file its written statement as anyone else, and its witnesses work to the same case management timetable as yours.

Big clients also have one thing small debtors often don't. They can pay. A decree against a shell trader in Karol Bagh can take years to execute, because there's nothing there to attach. A decree against a company with bank accounts, money owed to it by its own customers, and lenders and auditors watching its books usually gets paid, often before execution even starts. For a startup weighing whether a suit is worth it, that changes the sums quite a bit.

What actually decides how it goes is rarely the client's size. It's three things on your side of the table. Can your papers prove the work was ordered and accepted? What does the client's contract say about disputes? And do you count as a micro or small enterprise under the MSMED Act, 2006? We'll go through those one by one, and then set out the order of steps that tends to get startups paid.

Why big clients pay startups late, and what that means in law

Most late payment by large companies isn't someone deciding to cheat you. It's process. Your invoice has to match a PO line. That PO has to have budget left in it. The business head who hired you has to confirm a goods receipt or service acceptance in the ERP, and the vendor portal has to show your bank details as verified. Then someone leaves, or a cost centre gets frozen, and your invoice sits in a queue nobody feels responsible for. Payment terms of 60 or 90 days, pushed on every vendor as policy, quietly turn into 200 days.

In law, almost none of that matters unless your contract makes it matter. If the agreement says invoices are payable 45 days from receipt, an internal approval chain doesn't push the due date back. But if payment is conditional on written acceptance, or on an invoice raised through the portal against a valid PO, a missing acceptance or PO is a real defence. Fix that before you sue.

This also decides which route you take. A claim held up by internal process, where nobody ever complained about your work, is close to an admitted debt. Admitted debts move quickly in court. A claim where the client complained in writing about quality before the payments stopped is a genuine dispute. It'll be fought like one.

Startup recovery of dues: which route suits your claim?

There are five realistic routes. Most startups end up using two or three of them one after another, not just one. The first is a legal notice from an advocate, sent to the company's registered office and also to the people who actually sign off payments, setting out the invoices, the contract terms and the interest. It's cheap. It puts things on record. And it lands with the legal team, who often have more power to close the matter than procurement does.

Route two is the MSME Facilitation Council, under Section 18 of the MSMED Act. Only micro and small suppliers get in. The council tries conciliation, and if that fails it arbitrates, and the interest runs at three times the RBI bank rate. Route three is the commercial suit, but with a gate in front of it. Section 12A of the Commercial Courts Act makes you try pre-institution mediation first, unless you genuinely need urgent interim relief. Route four is a summary suit under Order XXXVII of the Code of Civil Procedure, a quicker type of commercial suit for claims based on a written contract or a fixed sum, where the defendant can't defend at all without first getting leave. Route five is arbitration. With a binding arbitration clause in the client's contract, it's the only one you've got.

Insolvency under the Insolvency and Bankruptcy Code isn't on that list for most startups. You need a default of at least Rs 1 crore against a company, the case fails if the client shows a dispute that existed before your demand notice, and against a big solvent client it's rarely the right tool. Our note on when insolvency is better than a recovery suit covers the narrow cases where it does fit. For a straight comparison of notice, suit and MSME Council, read the routes for recovering unpaid invoices in India. And for how we run these claims day to day, see our unpaid invoice recovery page.

The routes side by side for a startup: time, cost, fit

Does being an MSME help a startup against a big client?

It can help a lot, if you qualify and registered in time. Since 1 April 2025, a micro enterprise is one with up to Rs 2.5 crore invested in plant, machinery or equipment and turnover up to Rs 10 crore. A small enterprise can have investment up to Rs 25 crore and turnover up to Rs 100 crore. Service businesses count, not just manufacturers. So most SaaS, design, data and consulting startups are micro or small. Registering on the Udyam portal is online and free.

Qualify, and four sections start working for you. Section 15 caps the credit period. Your buyer has to pay on the date you agreed in writing, and that date can't be more than 45 days after it accepted (or is deemed to have accepted) what you supplied. No agreed date? Then it's 15 days. Section 16 puts compound interest on late money, with monthly rests, at three times the Reserve Bank of India's notified bank rate. You can't sign that away, even if the client's template tries. Section 18 lets you take the dispute to the Micro and Small Enterprises Facilitation Council, and the MSME Samadhaan portal lets you file online. Section 19 is the sting. If the buyer loses before the council and wants to challenge the award in court, it must first deposit 75 percent of what was awarded. And the Supreme Court has said the MSMED Act route prevails even over an arbitration clause in the contract.

Two warnings. Medium enterprises aren't covered by these sections, so a startup with turnover above Rs 100 crore can't use them. And it isn't settled whether a supplier that registered only after signing the contract can use Section 18 for that contract. The Supreme Court has sent that question to a larger bench. If you aren't registered, do it now, so your future contracts at least are covered. Our comparison of DIAC arbitration and the MSME Council explains how the council works in Delhi.

What a big client's finance team actually pays attention to

Some rules outside the courtroom make a large company's own books look worse when it sits on a small supplier's invoice. Naming them correctly in your notice often does more than any threat. The rule earlier in Section 43B(h) of the Income-tax Act, 1961, carried into the Income-tax Act, 2025 that applies from April 2026, lets a buyer deduct amounts owed to micro and small enterprises beyond the Section 15 time limit only in the year it actually pays them. Get your chartered accountant to confirm the current provision before you quote it.

There's more. Companies owing micro and small enterprises for over 45 days have to report those dues to the Registrar of Companies in a half-yearly MSME Form 1 return. Companies with turnover above Rs 250 crore have been required to get onto a Trade Receivables Electronic Discounting System (TReDS) platform, where suppliers can discount accepted invoices. And under GST law, a buyer that hasn't paid a supplier within 180 days of the invoice date has to reverse the input tax credit it took on that invoice until it does pay.

Use all this with care. These facts go in a notice as accurate statements of what the client is obliged to do. They aren't threats to complain to the authorities, which can backfire badly. They also explain why an invoice sometimes jumps the queue once the client's auditors spot it. If the client has short-paid you by deducting more tax than it should have, our guide on recovering GST and TDS shortfalls from a customer deals with that.

Read the client's contract before the notice goes

The contract almost always comes from the client's side. A startup signs it fast, because the logo on the deck matters more than clause 19. Then the money stops, and suddenly five clauses run your life. One is the dispute clause. Court or arbitration, and in which city. Another is exclusive jurisdiction, wording like 'courts at Mumbai alone', which usually keeps you in that city's courts provided they had jurisdiction to begin with. Look for set-off or withholding language too, since it can let the client knock penalties or service credits off your bills. An acceptance clause may say nothing is payable until someone signs off. And the notice clause gives the exact address a legal notice must reach, or it may not count.

Read the statement of work and the PO terms as well. A lot of large companies attach general terms to every PO with a single line, and those terms can carry an arbitration clause the main agreement doesn't have. Find one, and the claim belongs in arbitration. A court suit will be stayed the moment the client applies. Our note on the contract clauses that decide court cases later goes through each of these, and the IT and software contract disputes page covers the clauses that matter for SaaS, licensing and development work.

What to pull together before the notice goes out

• The master services agreement, statement of work, order form or subscription agreement, signed by both sides
• Purchase orders and any PO amendments, and the general terms they point to
• Every unpaid invoice, with its e-invoice reference number (IRN) where there is one, and proof you uploaded it on their vendor portal
• Anything showing they accepted the work, like the UAT sign-off, the go-live email, or a milestone confirmation
• Proof they've been using it. Login reports, dashboards, API call logs, timesheets, the email where you handed over deliverables
• Change requests, and the emails where the client okayed the extra work
• Your ledger for the client and a statement of account listing each invoice, its due date and what's been paid
• Entries in your Form 26AS or Annual Information Statement showing TDS the client deducted on your invoices
• Every email, chat and call note where someone on their side admitted the dues or promised to pay
• Your Udyam registration certificate. The registration date matters
• A board resolution authorising a director or officer to sign the notice, the mediation application and the plaint
• A Section 63 Bharatiya Sakshya Adhiniyam certificate for the emails, chats and system records, signed by whoever controls them

What the client will say first, and the papers that answer it

In a startup's recovery file, the first thing Advocate B.K. Singh looks at is the acceptance trail. 'Your deliverables were never accepted' is the defence a big company grabs first. And startups often have excellent proof of acceptance without realising it. A UAT sign-off email from the client's project manager. A go-live announcement on the client's own intranet that someone forwarded to the founder. Months of usage logs with hundreds of the client's staff logging in every day. Collect it before anyone at the client is asked to remember what happened.

The second check is quieter, but it often settles things. When a large company deducts TDS on your invoice and deposits it, that shows up in your Form 26AS or Annual Information Statement. The entry tells the court the client booked your invoice as a liability in its own accounts. Put it next to a balance confirmation, or an email from accounts payable saying the invoice is 'approved and in the payment run', and a supposedly disputed claim starts to look admitted.

Then look for the client's real objections, if there are any, in writing from before the payments stopped. Complaints that first appear in a reply to your legal notice carry much less weight than ones raised during the project. If there were earlier complaints, deal with them honestly in your notice and plaint. The judge will read them anyway.

From overdue invoice to filed suit: the order that usually works

The timelines here are typical for Delhi NCR. They're not promises. A well-prepared file moves faster at every stage.

1. Reconcile and make a statement of account (week 1)

   Match each invoice to its PO, due date and any part payment. Move anything genuinely disputed into a separate column. Check the claim is inside the three-year limitation period, counted from each invoice's own due date.

2. Escalate once, in writing (weeks 1 to 2)

   Write to the client's finance head and to the business head who hired you, attaching the statement of account and listing the invoice numbers and your Udyam status. Ask for a payment date. Keep it short and factual. This email will end up as an exhibit.

3. Send the legal notice (weeks 2 to 3)

   Get an advocate to send a notice to the registered office and to the notice address in the contract, claiming principal and interest and giving 15 to 30 days. Use a method you can prove later, like speed post plus email.

4. Pick the forum (months 1 to 2)

   If you're a registered micro or small enterprise, look seriously at the MSME Facilitation Council. If you're not, or the council route looks shaky, apply for Section 12A mediation before the Legal Services Authority for the court where you'll sue.

5. Take mediation seriously (months 2 to 6)

   Big clients often send their legal team to mediation with authority to settle. Walk in with a clear number, a payment schedule you can live with and a default clause. A Section 12A settlement has the status of an arbitral award and can be enforced like a decree.

6. File the suit (once you have the mediation report)

   A fixed sum under a written contract with clean acceptance goes as a summary suit, while disputed deliverables or amounts mean an ordinary commercial suit. Attach every document now. Late documents need the court's leave.

7. Ask for interim protection only if the facts are there

   Attachment before judgment under Order XXXVIII Rule 5 is meant for a defendant trying to put assets out of reach. A big solvent client rarely is. Don't ask for it as a pressure tactic.

8. Execute the decree if you have to

   Most large companies pay once there's a decree. If they don't, execution against bank accounts and receivables is usually straightforward against a company that's still trading.

Our money recovery suit page goes through the court stages in more detail, hearing by hearing.

Where to sue when the client's head office is in another city

A client headquartered in Mumbai or Bengaluru doesn't automatically drag you there. Section 20 of the Code of Civil Procedure lets you sue where the defendant carries on business, or where the cause of action arose wholly or in part, meaning where the contract was signed or accepted, where you delivered the services, or where payment was due. If a company's regional office in Gurugram or Okhla hired you and received your work, you can often sue it in the NCR. The exception is an exclusive jurisdiction clause naming one of those competent courts. That will usually bind you.

With the city settled, the amount picks the court. Delhi sends commercial suits worth up to Rs 2 crore to the District Judge (Commercial Court) of the relevant district, at Saket, Tis Hazari, Karkardooma and so on. Bigger claims, above Rs 2 crore, go to the Commercial Division of the Delhi High Court. There's a pending proposal to raise that district ceiling. Check the figure on the day you file. In Noida, Ghaziabad, Gurugram and Faridabad, it's the court designated as the Commercial Court for that district. Our guide on filing a commercial suit against a company in another state covers serving summons on an out-of-state defendant and how it appears.

Summary suit or ordinary commercial suit for your invoices?

A summary suit under Order XXXVII is the fast lane. For the right claim, it works very well against a big client. It covers claims for a debt or liquidated demand arising on a written contract, among other categories. The defendant has to enter appearance within 10 days of service. Then, once you serve the summons for judgment, it has 10 days to apply for leave to defend. Since IDBI Trusteeship Services v. Hubtown (2016), leave is refused where the defence is frivolous or vexatious, and where it's plausible but doubtful the court can attach conditions, such as depositing the amount in court. That's where it bites. Tell a large company to deposit Rs 50 lakh before it can defend, and it often decides to settle.

Before Advocate B.K. Singh puts a subscription or retainer claim into Order XXXVII, he wants one thing answered. Did the client sign something that fixes the number? Or can the client haggle over hours, milestones and sign-offs? Take a SaaS order form, signed, for 200 seats at Rs 3 lakh a month. That's about as clean a summary suit as you'll find. A development project billed on time and material, with the client saying half the hours were padded, is a different animal. Squeeze it into Order XXXVII and the client walks away with unconditional leave to defend, which is the last thing you want. That kind of claim does better as an ordinary commercial suit. Once the documents are on record, you can still ask for summary judgment under Order XIII-A. Our summary suit page lists the documents that qualify.

Defences big clients raise, and how you answer them

• "There's no purchase order", or "the PO is exhausted". Show the emails where they asked for the work and then accepted it. A contract can be formed through conduct and correspondence. The PO is an internal control, unless your agreement makes it a condition of payment.
• "The invoice was never uploaded on the portal." Produce the portal screenshots, the submission emails and the TDS entries. If it genuinely never went in, upload it now and let the clock restart. Don't sue on it.
• They've set off service credits or penalties. Check whether the contract allows set-off at all, and whether they ever raised the credit in writing at the time. Penalties nobody claimed or proved don't wipe out an invoice.
• "We never accepted the work." Lean on deemed acceptance under the contract, plus the UAT sign-offs, the go-live messages and the usage logs.
• They point to an arbitration clause. If it's real, go to arbitration instead of fighting it. Or use the MSME Council, if you qualify.
• "Your claim is time-barred." Count three years from each invoice's due date. Balance confirmations and part payments recorded in writing can stretch it.
• The manager who asked for the extra work had no authority, they say. Show that the client used that work, paid similar invoices before, or approved them through its normal channels.

Will suing a big client wreck the relationship? And when shouldn't you sue?

Founders worry about this more than the law, and fair enough. In practice the people who stopped paying you are rarely the ones who pick future vendors, and procurement teams see legal notices every week. A polite, accurate notice followed by mediation is normal commercial behaviour. It isn't a declaration of war. Plenty of relationships carry on after a settled dispute. Some even end up with better payment terms, because both sides now know the paperwork counts.

Sometimes suing is the wrong call, and we'll say so. Below Rs 3 lakh, there's no commercial suit. The claim sits in the ordinary civil court, and the money may not justify the years, so the MSME Council or a firm offer to settle could serve you better. Was your own delivery shaky, with the client's complaints on email at the time? Then you're in for a real contest, and you'll probably recover less. If they're offering most of it now, take a hard look. Giving up a slice can cost less than a year and a half of a founder's attention. Last one. If the client looks like it's in trouble, read its filings before paying court fee. A decree against a company drifting towards insolvency isn't worth much.

What recovery costs a startup, and how long it takes

The statutory costs are predictable enough. Court fee on a money suit is ad valorem on the amount claimed, under the state's court fee law, and that differs between Delhi, Uttar Pradesh and Haryana. Check the current schedule for your claim value before you budget. Section 12A mediation has a modest fee set by the Legal Services Authority. A reference to the MSME Facilitation Council is cheap to file. On top of that you've got process fees, certified copies, and the hours of whoever puts together the statement of account and the electronic evidence certificate.

As for us, we talk fees in the first meeting and put them in writing, one stage at a time. You'll know what the notice costs, what mediation costs and what the suit costs before you sign up for any of it. Now the part founders like. For commercial disputes, the Commercial Courts Act replaced Section 35 of the Code, and these courts are noticeably more willing to make the losing side pay your actual costs. Against a client with a much bigger legal budget, that counts. Our note on what actual costs are in a commercial court and who pays them explains it. On interest, you have three options. The rate in your contract. The rate the court allows under Section 34 of the Code. Or, if you're a registered micro or small supplier, three times the RBI bank rate under the MSMED Act.

On time, plan for three to five months in mediation. A summary suit that goes your way at the leave stage takes six to eighteen months. A fought ordinary suit in Delhi NCR takes one to three years. Frankly, most of the delay in startup cases comes from the startup's own side. Missing documents, a founder who's left, an employee whose phone had all the chats. Sort those out first.

Mistakes founders make while chasing an unpaid client

The costliest one is carrying on delivering for months without being paid, because the account feels too important to lose. Each month adds to the dues. It also weakens the argument that non-payment was a breach serious enough to stop work. Put a written condition on continued service early. Clear the oldest invoices by a set date, or service pauses as the contract allows.

Close behind are three others. Issuing a 'no dues' certificate during a vendor renewal. Taking credit notes to fix a portal error. Signing a settlement letter marked 'full and final' in return for a part payment. Any of these can later be used to show you gave up the balance. Then come the evidence mistakes. Negotiating only through WhatsApp voice notes, letting an account manager walk out with the only copy of the client's emails, not exporting usage logs before the client's access gets switched off. Against a big client, your documents are your case. Keep them in one place from the first overdue invoice.

What to do this week

Get the contract, POs, invoices and acceptance emails into one folder. Make a statement of account. Check your Udyam status, and the date you registered, because that date can matter more than you'd think. Read the dispute clause before anyone fires off an angry email. If the oldest invoice is getting close to three years past its due date, start mediation or the MSME Council reference now. Limitation won't wait for the client's next payment run. Our unpaid invoice recovery team can usually tell you in one meeting which route suits your claim.

If you'd like someone to go through your contract, invoices and emails before you act, send the papers to Advocate B.K. Singh's team through the contact page.