Customer Not Paying Your Invoices? How to Get Paid

Your customer has stopped paying. What now?

Think of unpaid invoice recovery as a ladder. A written reminder. A lawyer's legal notice. Pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. Then a suit in the Commercial Court. Most disputes end on the first two rungs. The ones that climb higher usually involve a customer with a real cash problem, or one that has decided to find out whether you'll actually sue.

Order matters here. Send a legal notice before you've reconciled the ledger, and it may quote the wrong figure. The customer will throw that mistake back at you for the rest of the case. File a suit without mediation and it can be thrown out at the very start. So the first two weeks are quiet, boring work. You collect papers, fix the exact amount, check the limitation date and decide which route fits.

There are side roads too. A registered micro or small supplier can go to the MSME Facilitation Council. If you're holding a bounced cheque, you also have a criminal remedy. A big unpaid debt from a company may justify insolvency proceedings. Each comes with its own rules, and choosing the wrong one burns months. We go through each choice below, in plain terms.

Start with what you can actually prove

Judges don't hand out money to whoever is owed it. They give it to whoever can prove it. Your invoice, on its own, is a paper you typed up yourself. It starts to carry weight when the customer's own paper sits next to it, like their PO or work order, a challan or GRN signed at their gate, the e-way bill, the e-invoice IRN, or any message where they accept the goods or the figure. Quite often the most useful thing in the whole file is an email from their side saying 'will clear by month end'.

Advocate B.K. Singh's first request on an unpaid invoice file is your ledger for that customer, exactly as your accountant keeps it. His second is any balance confirmation they've ever signed or emailed back. That confirmation pulls double duty. It proves the debt. And because Section 18 of the Limitation Act, 1963 treats a signed written acknowledgment as a fresh start, you get a new three years counted from its date.

Look hard at the holes. Maybe goods went out on a phone call. Maybe nobody signed for them, or the customer wrote in about quality back when it happened. You can still win. You just won't win quickly, because that's a trial case, with witnesses, and not a summary one. Better to know it now. It changes how hard you push in mediation and what figure you'd sensibly settle for.

From the first reminder to a decree

This is the usual order for an unpaid invoice claim of Rs 3 lakh or more in Delhi NCR. Some steps overlap. Urgent cases can skip mediation.

1. Reconcile the account

   List every invoice on one sheet. For each, put its date, amount and due date, then knock off payments and credit notes until you reach a closing balance. If the customer ever confirmed a balance, check your sheet against it. Anything past two and a half years old goes to the top of the pile.

2. Send one last business reminder

   A short, polite email from your accounts head, with the statement attached and a fixed date for payment, often works where months of phone calls didn't. Stick to facts. Don't threaten. And don't offer a discount in writing at this stage unless you really mean it.

3. Serve a legal notice

   Your lawyer's notice recites the deal, lists the invoices, states the amount and interest, and gives a deadline (15 days is normal). Send it to the registered office by speed post or courier. Email it too. Our page on the legal notice for recovery of business dues explains what should go in it.

4. Apply for pre-institution mediation

   For Rs 3 lakh and above, with nothing urgent to stop, the next stop is the District Legal Services Authority and a Section 12A mediation application. The rules give it three months. Both sides can agree to two more. There's more on mandatory mediation before a commercial suit.

5. File the commercial suit

   If mediation fails, or the customer never turns up, you get a non-starter report and file. Depending on your papers, that's either a summary suit under Order 37 or a regular money recovery suit. Every document goes in upfront, with a statement of truth.

6. Push for an early judgment

   A summary suit already forces the defendant to seek leave before it can defend. In a regular commercial suit, an Order XIIIA application for summary judgment does similar work when the defence has no real prospect. Both aim at the same thing. No long trial over facts nobody seriously disputes.

7. Execute the decree

   Until it's enforced, a decree is just paper. Execution under Order XXI CPC means attaching the judgment debtor's bank accounts, receivables or property. Plan for it from day one. Note down the customer's bank, its assets and who else it sells to.

You can ask for interim protection along the way, too. If the customer is moving assets, an application for attachment before judgment under Order XXXVIII Rule 5 can go in with the suit. In that situation the suit may be filed without waiting for mediation.

Which route fits your unpaid invoice

• A legal notice on its own. This is enough where the customer is solvent, the debt is clear and the silence is just a cash-flow game. Plenty of these settle within weeks of a properly drafted notice.
• Summary suit under Order 37. For a debt or liquidated (fixed) amount under a written contract, backed by documents the customer signed or accepted. The defendant can't defend without the court's leave.
• Regular commercial suit. You'll need this when the claim depends on oral orders, disputed deliveries or quality complaints, or when you're claiming damages over and above the invoice value. It's slower. It copes with messy facts, though.
• MSME Facilitation Council. Open to micro and small suppliers registered under the MSMED Act, 2006, against buyers who pay later than the agreed period, which is capped at 45 days. The interest is steep, and challenging the award costs the buyer a lot.
• Cheque bounce case. If the customer's cheque bounced, the criminal remedy under Section 138 of the Negotiable Instruments Act runs on its own short deadlines. That process is explained on chequebouncelawyer.com. A civil suit can run alongside it.
• Insolvency against a company. When a corporate customer owes Rs 1 crore or more and the debt isn't disputed, an operational creditor can apply under the Insolvency and Bankruptcy Code. Be clear on what it is. It's a collective remedy, not a collection tool, and any pre-existing dispute kills it. ncltlawyers.in covers that route.

The law behind an invoice claim

Summary suit or regular suit?

When the debt rests on a written contract and the amount is fixed, the summary suit is the quicker road. Invoices qualify where the buyer signed or accepted them, where there's a signed purchase order with an agreed rate, or where the ledger has been confirmed in writing. Courts look at the whole bundle, not just the invoice format. A bare invoice the buyer never acknowledged is weak ground for Order 37. Expect leave to defend to be granted quickly.

The advantage is real, though. The defendant in a summary suit has no automatic right to defend. It must show a substantial defence, or at least a triable issue, and the court can make leave conditional on depositing the amount or part of it. Lots of buyers settle once the summons for judgment arrives. A deposit order hurts more than paying.

Go for a regular commercial suit where your claim includes things a summary suit can't carry, like damages for wasted production, or where the facts are genuinely in dispute. It's still quicker than an ordinary civil suit. Commercial procedure fixes a hard 120-day limit for the written statement, demands full disclosure of documents and allows summary judgment. Our guide comparing a summary suit with a regular suit puts the two side by side.

The MSME route, if you're a registered micro or small supplier

Registered as a micro or small enterprise on the Udyam portal, and supplying to a buyer who pays late? The MSMED Act gives you a strong option. You file a reference with the MSME Facilitation Council in the state where you're located. The Council tries conciliation first. If that fails, it arbitrates itself or sends the matter to an institution. You don't need Section 12A mediation for this route.

Two provisions put the squeeze on the buyer. Section 16 interest runs at three times the RBI bank rate, compounded with monthly rests, and over two or three years that adds up fast. Then there's Section 19. A buyer who wants to challenge the Council's award in court has to deposit 75 percent of the awarded amount first. Big buyers know this. A reference often brings them to the table.

It has limits. Medium enterprises don't get the interest benefit. Courts have held that registration taken after the contract may not cover supplies made before it, so check your registration date against your purchase orders. Councils can be slow, and how slow depends a lot on the state. If speed matters more to you than the interest rate, a summary suit may still be the better tool.

Which court: commercial or not, value, and place

Three questions decide the court. Is this a commercial dispute? Supply and service contracts between businesses nearly always are, under Section 2(1)(c) of the Commercial Courts Act. Is the specified value Rs 3 lakh or more? That's the principal plus interest claimed up to filing, worked out under Section 12 of the Act. Under Rs 3 lakh, you file an ordinary civil suit, which can still be a summary suit.

And which place? Section 20 CPC lets you sue where the defendant carries on business, or where the cause of action arose wholly or in part. That could be where the order was placed, where the goods were delivered, or where payment was due. Plenty of purchase orders carry an exclusive jurisdiction clause. Courts generally enforce it if the chosen court also has some link with the contract. So turn the PO over and read the small print on the back.

In Delhi, commercial suits up to Rs 2 crore go to the District Judge (Commercial Court) at the district court complexes, Saket, Patiala House, Tis Hazari, Karkardooma, Rohini and Dwarka among them. Suits above Rs 2 crore go to the Commercial Division of the Delhi High Court. There's been a proposal to raise the district limit since late 2025. Check the current figure before you file. In Ghaziabad, Gautam Buddh Nagar, Gurugram and Faridabad, the suit goes to whichever court is designated as the district's Commercial Court. Our page on which commercial court will hear your case goes deeper into the value rules.

How long each stage takes, and what it costs

Papers to pull together before you do anything

GST and tax points that get a buyer's attention

You've probably already paid GST on the invoice, even though the customer hasn't paid you a rupee. That's money out of your own pocket. It belongs in the claim. Now look at the buyer's side. A registered buyer that took input tax credit on your invoice has to reverse it if the value and tax aren't paid within 180 days of the invoice date, under the second proviso to Section 16(2) of the CGST Act. Mentioning this in correspondence is perfectly legitimate. It often works.

Don't hand out credit notes casually in the middle of a dispute. One you raised just to keep the relationship sweet can later be read as your admission that the amount wasn't due. If you agree a commercial adjustment, put it in a signed settlement, with the reason, before any credit note goes out.

Big buyers also feel pressure from internal audit and from statutory reporting on delayed payments to micro and small enterprises. Their finance teams generally want disputed balances closed before year end. A notice timed to land a few weeks before a quarter or year closes is fair. And practical.

Interest you can claim on overdue invoices

Got a late-payment rate written into the contract or printed on the invoice? Use it, provided it isn't a penalty in disguise. No agreed rate means the court decides, under Section 34 CPC. For commercial dealings a judge can go higher than 6 percent, but normally won't cross the contract rate, or what nationalised banks charge on loans. Courts look at three separate stretches. Due date to filing. Filing to decree. Decree to the day you're paid.

A big interest figure also tells the buyer you're serious. Once 18 percent a year starts running from every due date, your money stops being a free loan for them, and their CFO can do that sum. Don't bank on getting the whole rate, though. Judges often trim it, so think of it as the ceiling. Our guide on how much interest you can claim on unpaid dues covers the rules, and the MSME rate, in more detail.

Where invoice recovery usually goes wrong

Waiting too long. That's the big one. Businesses keep supplying a slow payer, hoping the old dues will get cleared, and by the time they act the earliest invoices are time-barred. A running account only helps if there's a written acknowledgment or a part payment that genuinely restarts limitation. Payment against one specific later invoice doesn't always extend time for the older ones.

Next comes getting the figure wrong. Notices and plaints that forget credit notes, TDS the customer deducted, or goods sent back hand the defendant an easy line: the whole claim is inflated. Among the matters that come to Advocate B.K. Singh after a failed first attempt, a mismatch between the plaint figure and the supplier's own ledger is a common cause of delay.

Third, skipping mediation with no real case for urgency. Asking for an interim order just to dodge Section 12A doesn't work. Courts read the plaint as a whole and ask whether the urgency is genuine, as the Supreme Court explained in Yamini Manohar v. T.K.D. Keerthi (2023). And fourth, signing a cheque receipt or settlement letter marked 'full and final' when it isn't. Read every acknowledgment before you sign it.

How it changes from one kind of business to another

• Goods suppliers. Your best papers are the signed goods receipt and the e-way bill. Quality objections that show up after months of silence don't carry much weight. Objections made at the time of delivery are different, and you'll have to answer them with evidence.
• Service firms and agencies. Proving work is harder than proving delivery. Hold on to sign-offs, timesheets, deliverable emails and acceptance messages. A monthly retainer with a written scope makes a summary suit far more realistic.
• Micro and small enterprises. Check your Udyam registration date and category before anything else. If the MSMED Act applies, weigh the Council route against a summary suit before the notice goes, because the notice should cite the right law.
• Startups selling to large companies. Master service agreements often hide arbitration clauses, payment-on-acceptance terms and liability caps. Read the MSA before you pick a forum. The big buyer's own vendor portal records can be good evidence that it accepted your work.
• Large companies chasing distributors or dealers. You may already be holding security deposits, bank guarantees or post-dated cheques. Adjust them properly, in writing, and keep an eye on the termination and dispute clauses in the dealer agreement.

Delhi, UP and Haryana: what's different on the ground

Delhi has commercial courts in every district court complex. Its mediation set-up under the Delhi State Legal Services Authority is well established, with district-level authorities taking Section 12A applications. Most filing is electronic. For any Delhi claim, the first practical check is the value limit between the district courts and the High Court.

In Uttar Pradesh, claims against buyers in Noida or Greater Noida go to the commercial court for Gautam Buddh Nagar at Surajpur. Claims against Ghaziabad buyers go to the commercial court at the Ghaziabad district court. Appeals lie to the Commercial Appellate Division of the Allahabad High Court. In Haryana, Gurugram and Faridabad have commercial courts at District Judge level, with appeals to the Punjab and Haryana High Court.

Court fees aren't the same across the three states, since each has its own court fee law and schedule. If you're in one state and the buyer's in another, compare where the cause of action arose and which court works better for evidence and execution. Frankly, the court near the buyer's assets is often the more useful one.

This week's list

• Export the customer's ledger and mark the date of the oldest unpaid invoice.
• Find the last written balance confirmation or part payment. Note the date.
• Put the POs, signed challans, e-way bills and the 'payment next week' emails into one folder.
• Stop giving this customer credit until the account is settled or secured.
• If you're a micro or small enterprise, check your Udyam registration date and category.
• Look the customer up on the MCA and GST portals to confirm its legal name and address.
• Decide who in your company will stand in the witness box and prove the account.

When not to sue, and what to do instead

Not every unpaid invoice is worth a suit. If the customer has shut down and has nothing left, a decree may just be expensive paper. If the amount is small and the relationship matters more, a negotiated payment plan with post-dated cheques and a signed acknowledgment could serve you better. Weigh what you can realistically collect. What you're owed is a different number.

But if the customer is solvent and simply isn't paying, delay helps nobody except the customer. Act inside the limitation period. Follow the mediation rule unless the urgency is real. Pick the route your documents support. Our guide to documents for a recovery suit is a handy checklist before your first meeting. We discuss fees at that meeting and agree them in writing, stage by stage.

If you'd like your invoices, ledger and emails checked before you send a notice or file, share them with Advocate B.K. Singh's team through the contact page.