A client hasn't paid your invoice

If you supplied goods or services and weren't paid, you can recover the money through a civil claim based on the contract, purchase order, invoices and correspondence.

Under the MSMED Act, 2006, a buyer must pay a micro or small enterprise supplier on or before the agreed date. The agreed period can't be more than 45 days from the day the buyer accepted, or is deemed to have accepted, the goods or services. Where there's no agreement, payment is due within 15 days (Section 15). If the buyer pays late, it must pay compound interest with monthly rests at three times the bank rate notified by the RBI (Section 16). Either party can refer the dispute to the Micro and Small Enterprises Facilitation Council (Section 18). The Council first tries to settle it, then decides it by arbitration or refers it to arbitration. The Supreme Court has held that the Limitation Act doesn't apply to the settlement stage but does apply to arbitration. Whether you count as a "supplier" can depend on your registration status. Courts have ruled on this in different ways.

The MSMED (Amendment) Act, 2026 adds timelines for the Council: mediation within 90 days, arbitration referral within 30 days after a failed mediation, and an award within 90 days of pleadings. It also lets awards be recovered as arrears of land revenue and requires a buyer who challenges an award to deposit 75% of it. These provisions take effect only from dates the central government notifies, so whether they apply yet can be checked in the Gazette. Separately, income-tax law limits when a business buyer can claim a tax deduction for amounts owed to a micro or small enterprise that it pays late.

For commercial disputes of ₹3 lakh or more, Section 12A of the Commercial Courts Act, 2015 requires pre-institution mediation before a suit, unless the suit asks for urgent interim relief. The Supreme Court has held this is mandatory.

1. The client, in writing. A reminder with the invoice, the due date and the amount creates a record.
2. Legal notice. A formal demand, usually sent through an advocate.
3. MSE Facilitation Council, through the MSME ODR portal (odr.msme.gov.in (opens in new tab)), for micro and small enterprises.
4. Pre-institution mediation through the Legal Services Authority, for commercial disputes of ₹3 lakh or more.
5. Commercial court or civil court. A recovery suit, or a summary suit under Order XXXVII of the Code of Civil Procedure where the claim is based on a written contract.
6. Arbitration, if the contract has an arbitration clause and the MSMED route isn't being used.