How-To Guide · Commercial Recovery
How to Recover Unpaid Invoices Legally (2026)
An unpaid invoice is a debt, and Indian law gives a supplier several ways to recover it, some faster than an ordinary lawsuit. The right route depends on who you are and what you hold: a written invoice or contract opens a fast summary suit, a registered small business has a special MSME remedy with statutory interest, and a bounced cheque adds a criminal-side pressure point. The practical skill is matching the invoice to the quickest effective remedy and acting before the debt gets stale. A supplier who sends a proper demand notice, then chooses the summary suit, the Commercial Courts route or MSME Samadhaan correctly, recovers faster and at lower cost. This guide explains how to recover unpaid invoices legally in India step by step: the demand notice, each recovery route and when it fits, the interest you can claim, and the time limit. Last verified October 2026.
- Start with a notice: gather the invoice trail and send a written demand or legal notice before escalating.
- Summary suit: Order XXXVII of the Code of Civil Procedure lets you sue on a written contract or liquidated demand, with the defendant needing leave to defend.
- Commercial Courts: a commercial dispute of Rs 3 lakh or more goes to a commercial court, with pre-institution mediation under Section 12A where no urgent relief is sought.
- MSME Samadhaan: a registered micro or small supplier can claim payment plus compound interest at three times the RBI bank rate under the MSMED Act 2006.
- Cheque bounced?: add a Section 138 complaint, and remember recovery suits are generally subject to a three-year limitation.
01Start with the proof and a notice
Before any legal step, line up the proof that the invoice is due: the invoices themselves, the purchase order or contract, proof of delivery or of services rendered, and a ledger or account statement showing what is outstanding. A clean, acknowledged invoice trail is what makes the fast remedies available, because they depend on the debt being clearly a fixed, liquidated sum.
Then send a written demand notice, usually a lawyer's legal notice, setting out the invoices, the amount due, and a clear date by which to pay before you take action. Many buyers pay at this stage to avoid a suit or a Section 138 case, so the notice is both a legal precondition for some routes and a practical lever. For how to draft and serve it, see how to send a legal notice for recovery of money.
02Route 1: the Order XXXVII summary suit
For a straightforward unpaid invoice, the summary suit under Order XXXVII of the Code of Civil Procedure is usually the fastest civil route. It is available for suits on a written contract or for a liquidated money demand, which an invoice backed by a purchase order or contract typically is.
A summary suit flips the burden: the defendant cannot defend as of right. They must get the court's leave to defend, and if they have no real defence, you can get judgment quickly.
The advantage is speed. In a summary suit the defendant cannot simply contest the claim; they must apply for leave to defend, generally within 10 days of being served with the summons for judgment, and the court grants leave only if there is a genuine triable defence. If there is no real defence, you can obtain judgment without a full trial. For the mechanics and a plaint outline, see how to file a money recovery summary suit.
03Route 2: the Commercial Courts Act
Where the unpaid invoice arises from a commercial transaction and the amount is of specified value, currently Rs 3 lakh and above, the dispute is a commercial dispute under the Commercial Courts Act 2015 and goes before a commercial court or the commercial division. These courts run on tighter timelines and case management, which helps a creditor.
One step to plan for: unless you are seeking urgent interim relief, the Act requires pre-institution mediation under Section 12A before you file. So for a larger B2B invoice, factor in that mediation stage. A summary suit can itself be filed as a commercial suit where the value and nature qualify, combining the speed of Order XXXVII with the commercial court track.
04Route 3: MSME Samadhaan for small suppliers
If you are a registered micro or small enterprise, you have a powerful special remedy under the MSMED Act 2006. Section 15 requires a buyer to pay within the agreed date, and in any case within a maximum of 45 days of acceptance. If the buyer pays late, Section 16 entitles you to compound interest, with monthly rests, at three times the bank rate notified by the RBI, and this overrides any contrary term in the contract.
You enforce it by filing a reference on the MSME Samadhaan portal to the Micro and Small Enterprises Facilitation Council (MSEFC), which first attempts conciliation and then arbitrates the dispute, and is required to decide the reference within 90 days. The attraction is the statutory interest and a dedicated forum, which is why registered small suppliers should check this route first. The caution is that it is available only to enterprises registered as micro or small under the Act.
05Route 4: Section 138 if a cheque bounced
If the buyer gave you a cheque for the invoice and it bounced, you have an extra route alongside the civil recovery: a complaint under Section 138 of the Negotiable Instruments Act 1881. A bounced cheque is a criminal-side pressure point that often brings payment, because it carries the risk of a fine or imprisonment for the drawer.
Section 138 runs on very strict deadlines, present the cheque in time, send a demand notice within 30 days of the dishonour memo, give 15 days to pay, and file within one month of the cause of action. Miss one and the case fails. For the exact clocks, see the Section 138 time limits, and for filing, see how to file a cheque bounce complaint. The Section 138 case and a civil recovery suit can run together.
06Interest and the time limit
You can usually claim interest on the unpaid invoice: the contractual rate if the invoice or contract stipulates one, and for a registered micro or small supplier the statutory MSMED interest described above, which is deliberately steep to discourage late payment.
The time limit matters. A suit to recover money is generally subject to a three-year limitation under the Limitation Act 1963, counted from when the amount became due or from a written acknowledgement of the debt. An acknowledgement of debt or a part-payment can reset the clock, so keep any email or letter in which the buyer accepts the dues. Do not let invoices age past the limit, because a time-barred debt is very hard to recover in court.
07Choosing the right route
Match the invoice to the remedy:
| Your situation | Best route |
|---|---|
| Registered micro or small supplier | MSME Samadhaan under the MSMED Act, for statutory interest and a dedicated forum |
| Clear invoice or written contract, liquidated sum | Order XXXVII summary suit for speed |
| Commercial dispute of Rs 3 lakh or more | Commercial Courts Act route, with pre-institution mediation if no urgent relief |
| Buyer gave a cheque that bounced | Section 138 complaint, alongside the civil suit |
These routes are not mutually exclusive. A small supplier holding a bounced cheque can pursue MSME Samadhaan and a Section 138 complaint together. The general goal is to pick the fastest route your facts allow and act well within the three-year limit. For the broader workflow of recovering money owed by a business, see how to recover unpaid dues from a client.
08Where Claw fits
Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.
Before you spend on a recovery suit, it pays to know whether the buyer is already being chased by others, because a debtor with many cases and bounced cheques may have little left to recover against. Claw tracks Section 138 and commercial recovery matters across 9,102 courts, benches and forums, with alerts when a new matter is filed, so you can watch a buyer for other recovery suits, Section 138 complaints and insolvency proceedings. An entity check on the buyer, through a case search across Indian courts by party name across every forum at once, can reveal a pattern of default before you extend credit or decide which route is worth the cost. Claw's Legal GPT lets you search 30 crore+ judgments, with Supreme Court decisions from 1950 and High Court decisions from 1990, returning results in under 5 seconds, so you can see how courts have handled summary suits and MSMED interest claims. Claw does not use your searches or documents to train its AI models. A clean search means nothing was found on the forums covered on the date searched under the names you used, a common name can hide a namesake, and this is general information, not legal advice.
09Sources and further reading
- India Code (Code of Civil Procedure, Commercial Courts Act 2015, MSMED Act 2006, Negotiable Instruments Act 1881): indiacode.nic.in
- MSME Samadhaan (delayed payment monitoring for micro and small enterprises): samadhaan.msme.gov.in
- eCourts (court case status): ecourts.gov.in
- Claw: clawlaw.in
This guide is general information, not legal advice. The right route and the exact interest turn on your facts and registration, so consult a recovery or commercial lawyer before you file.
10Frequently asked questions
What is the fastest legal way to recover an unpaid invoice?
For a clear invoice on a written contract or a liquidated sum, the Order XXXVII summary suit is usually fastest, because the defendant cannot defend as of right and must obtain leave to defend. A registered micro or small supplier can instead use MSME Samadhaan, which gives statutory interest and a dedicated forum that must decide within 90 days.
What is the MSME route for unpaid invoices?
Under the MSMED Act 2006, a registered micro or small supplier must be paid within a maximum of 45 days, and if the buyer pays late the supplier is entitled to compound interest at three times the RBI bank rate under Section 16. You enforce this by filing a reference on the MSME Samadhaan portal to the Facilitation Council, which conciliates and then arbitrates.
Can I file a case in commercial court for an unpaid invoice?
Yes, if it is a commercial dispute of specified value, currently Rs 3 lakh and above, it goes before a commercial court under the Commercial Courts Act 2015. Unless you need urgent interim relief, the Act requires pre-institution mediation under Section 12A before you file, so plan for that step.
What if the buyer gave a cheque that bounced?
Then you also have a Section 138 complaint under the Negotiable Instruments Act 1881, which can run alongside a civil recovery suit. It follows strict deadlines: present the cheque in time, send a demand notice within 30 days of the dishonour memo, allow 15 days to pay, and file within one month of the cause of action.
How long do I have to recover an unpaid invoice?
A suit to recover money is generally subject to a three-year limitation under the Limitation Act 1963, counted from when the amount fell due. A written acknowledgement of the debt or a part-payment can reset the clock, so keep any email or letter in which the buyer accepts the dues and do not let invoices age past the limit.