In short. If a business owes you money and won't pay, you can sue it for the amount, plus interest and your costs. That's a money recovery suit. Unpaid suppliers file them, so do service firms with a stuck final bill, and people who lent money to a company and never saw it again. Above Rs 3 lakh, you first go through mediation and then to a Commercial Court. Expect a year at least if the other side fights. Before anything else, find out when your three years run out, and put the invoices, ledger and emails in one folder.
Is this your situation?
- Every time you call, the buyer's accounts team says the payment is "in process". That was in March.
- The client signed off on your work, used it for months, and found problems with it only when the last invoice came due.
- You lent money or paid an advance to another business on trust. Nothing has come back.
- They've admitted the balance in an email, or signed a ledger confirmation, and still haven't paid a rupee.
- The part payments stopped a while ago, and now you're not sure if you're still within time.
- You sent a legal notice. Either nobody replied, or the reply was two lines denying everything.
- You've heard the debtor is shifting stock or money to a sister concern.
What this kind of suit actually does
Strip away the legal language and a recovery suit asks the court for one thing: an order, called a decree, saying the defendant must pay you. The decree covers the principal, interest up to the day you file, interest while the case runs and after it ends, and what the case cost you. On its own the decree doesn't put money in your account. What it gives you is the right to go after the debtor's bank accounts, property and the money its own customers owe it.
Once the claim reaches Rs 3 lakh, a business debt becomes a commercial suit under the Commercial Courts Act, 2015. Those courts are stricter about documents and deadlines, and on the whole that works in favour of a creditor with good papers. Smaller claims go to the ordinary civil court. How the Commercial Courts work in general is on our commercial court page. This page stays with the money claim: putting it together, proving it, keeping it safe and collecting it.
We don't reach for the regular suit every time. If your claim sits on a signed contract, a cheque or an invoice the buyer has admitted, a summary suit is usually quicker, because the defendant can't defend at all unless the court gives it permission. The regular suit is what we use when the buyer will dispute some of the amount, when part of the claim is damages, or when the paperwork has gaps a summary suit won't tolerate.
Where the right to be paid comes from
Indian Contract Act, 1872 and Sale of Goods Act, 1930
It starts with the contract. If you sold goods, Section 55 of the Sale of Goods Act lets you sue for the price once the goods became the buyer's property and the buyer wrongly won't pay. Services and works contracts work the same way: you claim the agreed price for work done, and Section 73 of the Contract Act covers loss caused by the breach. People are often surprised that no signed agreement is needed. Section 70 makes anyone who accepts goods or services that weren't meant to be free pay for them.
Limitation Act, 1963
Most money claims have to be filed within three years. When those three years start depends on what you're claiming. For goods sold with no fixed credit period, it's the delivery date (Article 14). For work done, it's when the work was finished (Article 18). For a loan, it's the day the money was lent (Article 19). Compensation for breach runs from the breach (Article 55), and anything that fits nowhere else falls under Article 113. A written acknowledgment signed by the debtor (Section 18), or a part payment (Section 19), restarts the clock, as long as it comes before time runs out.
Section 34, Code of Civil Procedure and the Interest Act, 1978
Interest is worked out for three separate periods. For the period before the suit, you get the contract rate, if there is one. If there isn't, the Interest Act lets the court give interest from the date of a written notice in which you demanded it. From filing until the decree, and from the decree until you're paid, Section 34 of the CPC lets the court award a reasonable rate. In commercial matters that rate can go above 6 percent, though normally not past the contract rate, or, where there's no contract rate, what nationalised banks charge on commercial loans.
Sections 15 to 18, MSMED Act, 2006
Registered micro and small enterprises get special protection. Their buyers have to pay within the agreed period, and that period can't be longer than 45 days from acceptance. Pay late and the buyer owes compound interest, with monthly rests, at three times the RBI bank rate. That's a lot of interest. The supplier can claim it in a suit, or take the dispute to the MSME Facilitation Council under Section 18.
Getting the number right
The amount in your plaint will be picked apart in cross-examination, so it has to be built from the documents and nothing else. Take each invoice or disbursement, subtract every payment and credit note, and what's left is the principal. If the account ran both ways, with purchases and payments going back and forth, prepare a reconciled ledger and be ready to explain any entry in it. Judges get irritated, quickly and visibly, when the figure keeps changing between the legal notice, the mediation application and the plaint.
Then interest. Work it out invoice by invoice from each due date, at the contract rate if you have one. An interest clause printed on your invoices carries more weight when the buyer accepted years of invoices on those terms without objecting. If the clause first showed up on the final bill, it carries much less. With no agreed rate, claim interest from the date of the legal notice in which you asked for it. If you're a registered micro or small supplier, the MSMED rate will almost always beat whatever the contract says. Our guide on how much interest you can claim goes through the arithmetic.
One technical point catches people out. Under Section 12 of the Commercial Courts Act, interest up to the filing date counts towards the value of the suit, and the value decides both the court and the court fee. A claim sitting close to Rs 3 lakh, or close to the Rs 2 crore line between Delhi's district courts and the High Court, needs careful sums. Ask for costs in the plaint too. In commercial suits, Section 35 of the CPC makes it the normal rule that the loser pays the winner's costs, and that can include court fees and reasonable lawyer's fees.
Advocate B.K. Singh usually asks clients to work out the figure twice: once from their own ledger, and once from what the debtor has said in emails and confirmations. The two figures rarely match. Whatever the gap is, that's the defence you'll face, and it's much better to find it before you file than in the witness box.
Which route fits your claim
| Route | Good fit when | What happens | Watch out for |
|---|---|---|---|
| Regular recovery suit | Part of the debt is disputed, you're also claiming damages, or the papers have gaps | Full trial with witnesses; one to three years after filing is normal | Strict rules on disclosing documents and meeting deadlines; you can be ordered to pay costs if the claim is weak |
| Summary suit (Order XXXVII CPC) | The claim rests on a written contract, cheque, promissory note or admitted invoice | The defendant needs the court's permission even to defend, so the case can finish early | Not for damages or uncertain amounts; the drafting has to follow the Order exactly |
| MSME Facilitation Council (Section 18, MSMED Act) | You were a registered micro or small enterprise at the time you supplied | Conciliation first, then arbitration by the Council | To challenge the award, the buyer has to deposit 75 percent of it; your registration date matters |
| Cheque bounce complaint (Section 138, NI Act) | The buyer paid you with a cheque that bounced | A criminal complaint that runs alongside any civil suit | The notice must go within 30 days of the bank's return memo; the deadlines don't bend |
| Insolvency petition (IBC) | A company owes Rs 1 crore or more; for trade dues, there can't be an earlier dispute | Filed before the NCLT | It's a process for all creditors together, not a way to collect your debt; see ncltlawyers.in |
The three-year limit, and what restarts it
Plenty of clients think the clock starts again with every reminder they send. It doesn't. It runs from the date the Limitation Act fixes for your kind of claim, which is usually the due date or the date of delivery or completion. A buyer who has kept you hanging on phone promises for two and a half years hasn't given you a single extra day.
What does restart it is an acknowledgment in writing, signed by the debtor or someone authorised for it, made before the three years are up. It doesn't have to give an exact figure. It does have to admit that money is still owed. Depending on the wording, that can be a balance confirmation, an email from the buyer's accounts team reconciling the account, a letter asking for more time, or a reply to your notice that admits part of the amount. A part payment made before the deadline also restarts the period, but you need written proof of it, such as a bank entry you can link to the account.
Your own ledger is where people slip. A running balance in your books admits nothing on the debtor's behalf. There is a special rule for genuinely mutual, open and current accounts, where both sides buy from and sell to each other: time runs from the end of the year in which the last entry was made. Most trade accounts aren't like that, though. Our guide on the time limit to recover unpaid dues goes through the common situations one by one.
Time spent in Section 12A mediation doesn't count towards the three years, which helps. Still, don't plan to file in the last week. Registry objections and court holidays can use up that margin faster than you'd think.
How the case moves, start to finish
These steps are for a commercial recovery suit of Rs 3 lakh or more. Below that figure, the ordinary CPC applies, without the commercial-court changes and without compulsory mediation.
Reconcile the account
Match up invoices, payments, credit notes and debit notes. Settle the principal and work out interest invoice by invoice. Check who the debtor is legally, and whether it's still in business.
Send a legal notice
The notice sets out the amount, what it's for, the interest you want and a deadline to pay. Where the contract is silent on interest, this notice is the written demand the Interest Act needs. Our page on the legal notice for recovery covers what to put in and what to keep out.
Go to pre-institution mediation
Apply to the Legal Services Authority under Section 12A. If the debtor doesn't turn up, you get a non-starter report and can file. If it turns up and settles, the settlement signed by both of you and the mediator has the force of an arbitral award. The details are on our mediation page.
File the plaint and all your documents
The plaint sets out the transactions, the amount, how you worked out interest and why this court can hear the case, verified by a statement of truth. Every document you have goes in with it, along with the mediation report. Court fee is paid on the claim value.
Ask for protection if the money is at risk
If the debtor is getting rid of assets, apply along with the plaint for attachment before judgment under Order XXXVIII Rule 5, or for an injunction. You'll need evidence. A worry, however reasonable, isn't enough.
The defence and documents stage
The defendant has at most 120 days from service to file its written statement and any counter-claim. After that, each side inspects the other's documents and admits or denies them on affidavit.
Case management, evidence and judgment
The court frames the issues and sets a timetable. Your witnesses, usually your accounts head and whoever dealt with the buyer, file affidavits and are cross-examined. After arguments, the court gives its judgment with interest and costs.
Execution
If the debtor doesn't pay under the decree, you file for execution to attach its accounts, receivables or property. Plan for this at the very start, not once the decree is in your hand.
How long each stage takes, and what it costs
| Stage | Usual time | Costs besides the lawyer's fee |
|---|---|---|
| Reconciliation and legal notice | One to three weeks, plus whatever time the notice gives | Courier and photocopies |
| Section 12A mediation | Up to 3 months, plus 2 more if both sides agree; a non-starter report can come sooner | Rs 1,000 to apply, and a one-time mediation fee of Rs 15,000 to Rs 75,000 depending on the claim, split equally under the 2018 Rules (check the current figures) |
| Filing and first hearing | A few weeks after filing, depending on registry objections | Ad valorem court fee on the claim, under the state's court fee law; see the court fee guide for Delhi and check the current schedule; process fee for summons |
| Written statement | 30 days, stretchable to 120 days from service | Nothing for you as plaintiff |
| Documents, issues and case management | Usually two to six months | Certified copies, and translations if any document isn't in English or Hindi |
| Evidence and arguments | Often one to two years, depending on the court | A local commissioner's fee if evidence is recorded before one; travel for witnesses |
| Execution | Courts are meant to finish execution within six months as a rule; in reality it depends on what the debtor owns and what objections it files | Process fees; valuation and auction costs if property is sold |
Which court to file in
Two things decide the court: how much you're claiming, and where. In Delhi, commercial claims from Rs 3 lakh up to Rs 2 crore go to the District Judge (Commercial Court) at Tis Hazari, Saket, Patiala House, Karkardooma, Rohini or Dwarka. Anything above Rs 2 crore goes to the Commercial Division of the Delhi High Court. There has been talk of changing that Rs 2 crore limit, so check where it stands before you file. In Ghaziabad, Gautam Buddh Nagar, Gurugram and Faridabad, the court designated as the district's Commercial Court hears these suits whatever their value.
On place, Section 20 of the CPC lets you sue where the defendant lives or does business, or where any part of the cause of action arose. In a recovery case that can mean the place the contract was made, where you delivered the goods or did the work, or where you were supposed to be paid. A purchase order saying payment will reach your bank in Noida points quite strongly to Noida. A clause in the contract choosing the courts of one city will usually be followed, provided that city has some genuine link to the deal.
Claims under Rs 3 lakh go to the civil judge of the right value in the same area, and the Commercial Court rules don't apply. For a small claim that can actually be slower, because ordinary suits don't have the hard limit on filing a written statement.
The papers that prove what you're owed
The order and its terms
- The agreement, purchase order, work order, or the email accepting your quotation
- The rate contract or price list that applied at the time
- Terms printed on the invoice or order: credit period, interest, jurisdiction
- For loans: the loan agreement, board resolution, promissory note, and any security documents
Proof you delivered or did the work
- Tax invoices with GST details
- Delivery challans, e-way bills, transporter receipts, and goods receipt notes signed at the buyer's end
- Completion certificates, measurement sheets, acceptance emails, and user sign-offs
- For loans: bank transfer records showing the money reached the borrower
Proof of the balance
- Your ledger of the debtor's account, starting from the opening balance
- Bank statements showing receipts and part payments
- Balance confirmations, reconciliation statements, and TDS certificates (Form 16A) the buyer issued
- Credit notes and debit notes
Demands and replies
- Reminder emails and WhatsApp messages, with dates
- The legal notice, with postal or courier proof and the tracking report
- Any reply, especially one admitting part of the amount
- A Section 63 BSA certificate for electronic records, prepared along with the plaint
What the other side will argue
Recovery suits are rarely fought over whether the money was paid. Everyone knows it wasn't. The fight is over why. The excuses fall into a few familiar shapes, and how strong your suit is depends on whether your papers already answer them.
Quality comes up first, nearly always. The goods were bad, the work was shoddy. The best answer is usually what the buyer did. Did it send the goods back within a reasonable time, or use them, sell them on and keep placing orders? Months of silence followed by a complaint that appears only after the legal notice is a story judges have heard many times. Then there's short supply or non-delivery, which signed goods receipt notes, e-way bills and transporter records deal with. Sometimes the buyer says the person who placed the order had no authority to do so. The reply is simple: the company paid for that same person's earlier orders without a murmur.
Set-off and counter-claims are trickier. The buyer says you owe it liquidated damages for delay, or that it paid someone on your behalf. Read your contract's penalty and delay clauses before you file, not after. Limitation is the other usual defence, and the answer is the acknowledgment or part payment you've already found. One useful thing: if the buyer deducted TDS on your invoices and it shows in your Form 26AS, that supports your case that the buyer treated the invoice as money it owed.
Our guide on documents needed for a recovery suit sets out which papers answer which defence.
It plays out differently depending on who you are
- Suppliers and traders. On paper your claim is usually tidy: invoices, challans, a ledger. The trouble starts with a running account where payments weren't tied to particular invoices. Unless the buyer said otherwise, apply each payment to the oldest invoice, and say so in the plaint. For the early steps, see unpaid invoice recovery.
- Service providers, IT companies and contractors. Everything turns on acceptance. Keep the approval emails, ticket closures, measurement books and sign-offs. If the client changed the scope halfway through, collect every change request, because the fight will be about whether the extra work was ever ordered.
- Lenders and investors. If you lent to another business or placed an inter-corporate deposit, you recover it through a civil suit, not the DRT (that's for banks and financial institutions). Find out who signed for the borrower and whether they had authority, whether there's a promissory note or acknowledgment, and whether anyone stood guarantee. Our page on recovering business loans and advances deals with this.
- MSMEs. If you had Udyam registration when you supplied, weigh the Facilitation Council against a suit. You get the higher interest either way, but the Council is often cheaper, and the buyer has to deposit 75 percent of any award before it can challenge it.
- Startups. A lot of startup claims rest on emails and chats instead of signed contracts. That can work. Export the chats with dates, keep the original phone or account, and get the Section 63 certificate under the Bharatiya Sakshya Adhiniyam, 2023 ready.
- Large companies. If you have dozens of small debtors, set up a routine: one reconciled statement per debtor, one notice format, and a clear rule on which debts are worth taking to court. Some aren't, and that's fine.
- Delhi, UP and Haryana. The CPC procedure is the same in all three. Court fee schedules aren't, and listing practice in Delhi's district complexes is not the same as in Ghaziabad, Surajpur, Gurugram or Faridabad. Fix the value and the place before working out the court fee.
Keeping the money safe while you wait
A decree is only worth what the debtor still owns on the day you get it. If you can show the debtor is selling property, moving stock to a sister company or shutting bank accounts to defeat a decree, the court can order it under Order XXXVIII Rule 5 of the CPC to give security for your claim, and attach its property if it doesn't. The court will want specifics: a sale deed about to be registered, a board resolution, a public notice, a factory being closed down. A feeling that the debtor won't pay isn't enough. More on this on our page about freezing assets before judgment.
An injunction is sometimes the better fit, say to stop the debtor encashing a bank guarantee you gave, or selling particular goods that are still yours. Applications like these are taken up at the first hearing and can justify skipping mediation, but only if the urgency is real and clear from the plaint itself.
If the debtor paid with a cheque that bounced, a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 can run alongside your civil suit, and it often gets a reluctant debtor talking. The deadlines are unforgiving. The details are on chequebouncelawyer.com.
A made-up case: a Noida software firm and its unpaid last milestone
This example is invented, but files like it are common. A software company in Noida builds an inventory system for a Delhi distributor under a signed statement of work. The price is Rs 32 lakh, paid in four milestones. The distributor pays three of them, goes live in January 2025, and then refuses the last Rs 9.6 lakh, saying some reports were never delivered. For the nine months since go-live it has been using the system every working day.
The software company's file has a go-live email from the distributor's operations head thanking the team. It has a ticket log showing every report request closed, and server logs showing daily use. The statement of work provides 15 percent a year interest on late payments. With interest added up to the filing date, the claim is over Rs 3 lakh, so it's a commercial suit. The distributor is in Delhi and the contract picks Delhi courts, so once mediation fails, the suit goes to the commercial court of the Delhi district where the distributor does business.
A summary suit would be a poor bet here. The whole dispute is about whether the reports were delivered, and the distributor would probably get permission to defend. A regular suit lets the software company prove the ticket log and server records with a Section 63 certificate, which makes those facts hard to deny. The distributor then has to explain, in its written statement, why it used an "incomplete" system every day for nine months.
Mistakes we see again and again
- Trusting phone promises. They don't stop the clock. Get any promise in writing, even a two-line email.
- A notice and a plaint that don't match. If the notice demanded Rs 18 lakh and the plaint claims Rs 23 lakh with no explanation, the defendant will make that Rs 5 lakh the centre of the case.
- Suing a trade name. A proprietorship is sued through its proprietor, a partnership in the firm's name, a company by its registered name. Get it wrong and service is delayed, and execution can fail later.
- Hiding awkward documents. The credit note you forgot about, or the email where your manager admitted a delay, will come out anyway, from the other side. Better to disclose it yourself and explain it.
- No plan for collecting. The decrees that come to Advocate B.K. Singh for execution are hardest to recover when nobody checked the debtor's bank, property or customers before filing. A basic asset check at the start costs very little.
- Filing to frighten and then drifting off. Courts dismiss suits when the plaintiff stops turning up. Once you've filed, attend every date, or make sure your counsel does.
Turning the decree into money
When the decree comes, read the operative part closely: the principal, the interest rate for each period, and the costs. If the debtor doesn't pay on its own, you file an execution petition under Order XXI of the CPC. You can ask the court to attach the debtor's bank accounts, money its customers owe it, its movable property and its land. You can also ask that it be made to file an affidavit listing its assets.
If the assets are in another district or state, the decree can be sent to the court there for execution. In Rahul S. Shah v. Jinendra Kumar Gandhi (2021), the Supreme Court gave directions to speed up execution, including that execution should normally be decided within six months. Our guide on how to execute a decree goes through the options, and the objections debtors usually try.
The debtor has 60 days to appeal under Section 13 of the Commercial Courts Act. Filing an appeal doesn't stop execution by itself. The appeal court usually wants the decree amount, or a big part of it, deposited before it grants a stay.
Things you can do this week
- List the unpaid invoices or disbursements with their dates and amounts.
- Work out the limitation date for the oldest item and for the claim as a whole.
- Look for any written acknowledgment or part payment, and note its date.
- Get the bank statements and the debtor's ledger, and reconcile them.
- Check the debtor's exact legal name and address, and whether it's still trading.
- If you're an MSME, check the date of your Udyam registration.
- Collect delivery and acceptance proof for whatever the buyer is disputing.
- Don't supply anything more on credit to this buyer until it's sorted out.
How we take on a recovery
We start with the paperwork. Once we've read the contract, the account and the correspondence, we'll tell you which makes sense: a notice, mediation, a summary suit, a regular suit, the MSME route, or doing nothing at all. We'll also be honest about the risks on limitation and proof. Advocate Sadhna Singh works on recovery files with Advocate B.K. Singh, and where a suit has to be filed outside Delhi NCR the firm works with associate counsel there.
Fees are discussed at the first meeting and agreed in writing, stage by stage. Court fee, mediation fee and other costs are separate, and we explain each before it's incurred.
If you'd like your invoices, ledger and emails looked at before you decide anything, send them to Advocate B.K. Singh's team through the contact page.
Frequently asked questions
How long does a money recovery suit take in India?
If the other side contests it, a commercial recovery suit usually takes one to three years after mediation to reach judgment, depending on the court and the defence. A summary suit or an early settlement can be a good deal faster. If the debtor still doesn't pay, execution takes more time on top.
What is the time limit to file a recovery suit?
Generally three years under the Limitation Act, 1963, counted from when the payment fell due, the goods were delivered, the work was finished or the loan was given. A written acknowledgment or part payment before the three years end gives you a fresh three years. Time spent in Section 12A mediation doesn't count.
Can I claim interest in a recovery suit if the invoice does not mention it?
Yes, though on a different basis. The court can give interest from the date of a written notice demanding it, under the Interest Act, 1978, plus further interest under Section 34 of the CPC. Registered micro and small suppliers can claim three times the RBI bank rate under the MSMED Act.
Is a legal notice compulsory before a recovery suit?
Not against a private business. We'd still send one, because it fixes the amount, demands interest and sometimes gets you paid, or gets you an admission. Suing the government is different: a Section 80 CPC notice is required.
Can I file a recovery suit without a written agreement?
Yes. Purchase orders, invoices, delivery proof, emails and the payment history can prove both the contract and the debt. And under Section 70 of the Contract Act, a party that accepted goods or services that weren't meant to be free has to pay for them.
Which court do I file a recovery suit in Delhi?
For claims from Rs 3 lakh up to Rs 2 crore, the District Judge (Commercial Court) in the right Delhi district. Above Rs 2 crore, the Commercial Division of the Delhi High Court. Check the current limit before filing. Under Rs 3 lakh, the ordinary civil court.
What if the debtor company has no money?
Then the decree will be hard to collect, so check the debtor's property, bank accounts and customers before you file. If assets are being moved, ask for attachment before judgment. For larger debts owed by companies, insolvency may be an option, but remember it's a process for all creditors, not just you.
Can I file a cheque bounce case and a recovery suit together?
Yes. The Section 138 complaint under the Negotiable Instruments Act is criminal, the suit for the money is civil, and they can run side by side. A civil suit on a bounced cheque is often filed as a summary suit.