A Company Isn't Paying My Invoice: Notice, Summary Suit, IBC or Arbitration?

An unpaid invoice from a company customer is one of the most common commercial disputes in India, and one of the most mishandled. Businesses tend to spend months on phone calls and reminder emails, then jump to the first remedy they hear about — often a cheque bounce complaint or an insolvency threat — without checking whether it fits their facts. The right route depends on four things: the documents you hold, whether your contract has an arbitration clause, whether the customer is genuinely disputing the bill, and whether the customer has assets worth chasing.

Step One: What Does Your Paper Trail Show?

Before choosing a forum, assemble the purchase order or contract, delivery challans or proof of service, invoices, e-way bills, statements of account, and every email or message in which the customer acknowledged the amount or raised an objection. A written, signed acknowledgment of the debt is valuable twice over: it is strong evidence, and under Section 18 of the Limitation Act an acknowledgment made before limitation expires gives you a fresh limitation period. Money recovery suits are generally subject to a three-year limitation period from when payment fell due, so check your dates first.

What Are the Main Routes to Recovery?

The usual options, roughly in order of escalation, are:

• Legal notice and negotiated settlement
• Criminal complaint under Section 138, if a cheque has bounced
• Summary suit under Order 37 of the CPC
• Ordinary commercial suit under the Commercial Courts Act
• Arbitration, if the contract has an arbitration clause
• MSME Facilitation Council reference, for micro and small suppliers
• Insolvency application under Section 9 of the IBC

1. Legal notice and settlement

A formal legal notice is almost always the right first step. It fixes the amount and the demand date, supports a claim for interest and costs, and is a mandatory step before a Section 138 complaint. Many disputes end here once the customer's own advisers see that the paper trail is strong. Our guide to a legal notice for recovery of money explains what it should contain.

2. Section 138 complaint

If the customer paid by cheque and it bounced, a complaint under Section 138 of the Negotiable Instruments Act is quick to start and carries real pressure, but it is a criminal proceeding with strict statutory deadlines, not a recovery decree. Read our note on cheque bounce and civil recovery options before choosing between the two.

3. Order 37 summary suit

Where the claim is a fixed sum due under a written contract, a purchase order backed by invoices, or a promissory note, a summary suit is designed to skip the long trial: the defendant cannot even file a defence unless the court grants leave. For genuinely undisputed invoices it is usually the strongest civil route — see our explanation of the Order 37 summary suit.

4. Ordinary commercial suit

If the claim involves disputed accounts, damages or unliquidated amounts, an ordinary suit before the commercial court is the proper vehicle where the dispute is a commercial dispute of the Specified Value (currently ₹3 lakh) under the Commercial Courts Act, 2015. Unless urgent interim relief is genuinely needed, you must first complete pre-institution mediation under Section 12A, or the plaint can be rejected.

5. Arbitration

If the contract contains an arbitration clause and the defendant objects in time, the civil court will ordinarily refer the parties to arbitration. Check the clause carefully — the seat, the number of arbitrators, and any pre-arbitration negotiation step — before filing anything elsewhere. An award can be enforced like a decree, but the process is only as fast as the parties' conduct allows.

6. MSME Facilitation Council

Micro and small suppliers have an additional statutory remedy: a delayed payment claim before the MSME Facilitation Council, with interest at three times the RBI bank rate, compounded monthly.

7. IBC Section 9

An operational creditor can seek to start insolvency against a company that defaults on a debt of ₹1 crore or more. But the Supreme Court has repeatedly said the Insolvency and Bankruptcy Code is not a debt-recovery mechanism, and a genuine dispute defeats the application. See our guide to IBC Section 9 for operational creditors.

Which Route Should You Choose?

These rules of thumb usually hold:

• Undisputed fixed sum under a written contract: Order 37 summary suit
• Customer paid by a cheque that bounced: Section 138 complaint, with a civil claim in parallel
• Genuine dispute over quality, quantity or rates: ordinary commercial suit or arbitration
• Arbitration clause in the contract: arbitration, unless the clause is invalid or waived
• Micro or small enterprise supplier: MSME Facilitation Council
• Undisputed debt of ₹1 crore or more and a solvent but unwilling customer: IBC Section 9, used with care

Can the Customer Actually Pay?

A decree is only as good as the debtor's ability to pay. Before spending on litigation, run a quick check on the company's MCA21 filings — registered office, directors, charges created over assets, and recent annual returns — and look for signs of distress. A pending insolvency process triggers a moratorium that freezes recovery suits, so confirm the company is not already in one. Where assets are being dissipated, courts can in suitable cases order attachment before judgment, although the threshold is high.

What Should You Avoid?

Two mistakes recur. First, converting a civil debt into a police complaint for cheating or breach of trust; courts have repeatedly cautioned against using criminal law to pressure payment in what is essentially a contractual dispute, and complaints of that kind are often quashed. Second, waiting. Limitation runs against you quietly, and delay gives the debtor time to move assets or slip into insolvency.

The right sequence for your invoice depends on the contract, the documents and the debtor's position, and a short document review usually makes the choice clear. Our Commercial Disputes practice advises businesses on recovery from notice through execution, and you can request a consultation to discuss your matter.