Recovering an unpaid invoice from an Indian company need not mean years in an ordinary civil suit. Indian law offers several faster routes: insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC), summary procedures in the commercial courts, a statutory regime for micro and small suppliers, and arbitration. Foreign creditors have two further options: executing a judgment from their home court, or enforcing a foreign arbitral award. The right choice turns on three questions. Is the debt genuinely disputed? Where are the debtor’s assets? What does the contract say?
Why do recoveries in India take so long?
Court backlogs are part of the answer. Route selection is the other part, and that part is within the creditor’s control. A creditor who files an ordinary suit over an undisputed invoice commits to a full trial it may not need. A creditor who issues an insolvency notice over a genuinely disputed claim invites dismissal. Much of the delay follows from matching the wrong remedy to the debt.
The cost of delay is rarely limited to the unpaid amount. Commercial contracts are often back-to-back or linked to other contracts, so a receivable held up in one transaction strains liquidity along the chain. Over a long enough period, the loss can equal or exceed the original debt.
Should a creditor begin with a legal notice?
Two notices carry legal consequences in a recovery: the demand notice under Section 8 of the IBC, which must precede an insolvency application, and the mediation request under Section 12A of the Commercial Courts Act, 2015, which must usually precede a commercial suit. Both are discussed below. A general lawyer’s notice demanding payment is not a precondition to either route.
A general notice still has a cost worth weighing. Its reply records the debtor’s position in writing. In Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd (2017), the Supreme Court held that an insolvency application fails where the debtor shows a genuine dispute that existed before the IBC demand notice. A creditor who may later use the IBC should therefore decide early which notice to send first.
Can a supplier use insolvency proceedings to recover an unpaid invoice?
Yes, if the debt is at least INR 1 crore (10 million) and is not genuinely disputed. An operational creditor may apply to the National Company Law Tribunal (NCLT) under Section 9 of the IBC to start a corporate insolvency resolution process against an Indian company or limited liability partnership. An operational debt is a claim connected with the provision of goods or services; money lent is a financial debt, pursued under Section 7 instead.
Foreign operational creditors are not excluded from the IBC merely by reason of their foreign status. In Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674, the Supreme Court held that a lawyer could issue a Section 8 demand notice on behalf of an operational creditor and that the certificate contemplated by Section 9(3)(c) is directory rather than a mandatory condition precedent. The Court specifically held that a foreign operational creditor cannot be shut out merely because its banker is not a “financial institution” within Section 3(14) of the Code.
In Consolidated Construction Consortium Ltd. v. Hitro Energy Solutions Pvt. Ltd., (2022) 7 SCC 164, the Supreme Court further held that an advance paid pursuant to a contract for the supply of goods or services, where the goods or services are not supplied and the advance becomes repayable, may constitute an “operational debt”, enabling the payer to qualify as an operational creditor.
These principles remain subject to the ordinary requirements of Sections 5(20), 5(21), 8 and 9. In particular, the debt must constitute an “operational debt” within Section 5(21), and the insolvency process cannot ordinarily be invoked where a genuine pre-existing dispute exists. In K. Kishan v. Vijay Nirman Company Pvt. Ltd., (2018) 17 SCC 662, the Supreme Court held that a timely Section 34 challenge to an arbitral award demonstrates continuation of a pre-existing dispute, at least until the adjudicatory process under Sections 34 and 37 is exhausted. The Court, however, recognised that a clearly time-barred or otherwise untenable Section 34 challenge may not have that effect.
The process starts with the Section 8 demand notice. The debtor has 10 days to pay, or to point to a dispute that existed before the notice arrived. If it does neither, the creditor may apply. Amendments in force since 26 May 2026 change the procedure in two respects. First, before applying, an operational creditor must submit its financial information to an information utility; the debtor must authenticate it within the period the regulations specify, and if the debtor does not respond, the information is deemed authenticated. Second, the NCLT must decide the application within 14 days of receiving it and, if it does not, must record its reasons in writing. Admission carries severe consequences for the debtor: the board loses control of the company and an insolvency professional takes over its management.
That consequence is where the leverage lies. The IBC is a resolution mechanism, not a debt recovery forum, but few solvent companies will risk losing control over a debt they cannot honestly contest. The limit is equally clear. Under Mobilox, the NCLT must reject the application if the debtor shows a plausible pre-existing dispute that is not spurious, hypothetical or illusory. Where a claim is genuinely contested, insolvency proceedings before the NCLT are the wrong tool.
Is there a faster route through the civil courts?
Yes. Where the claim concerns a commercial dispute, the Commercial Courts Act, 2015 provides a more structured and procedurally intensive route. In Gujarat, commercial disputes having a specified value of INR 3 lakh or more fall within the Commercial Courts regime. Ordinary mercantile disputes, including many supply and service contracts, may therefore be brought before the appropriate Commercial Court.
Before filing, the claimant must ordinarily attempt pre-institution mediation under Section 12A of the Act unless the suit contemplates urgent interim relief. In Patil Automation Pvt Ltd v. Rakheja Engineers Pvt Ltd (2022), the Supreme Court held that this requirement is mandatory and that a suit instituted without complying with Section 12A is liable to rejection under Order VII Rule 11.
If mediation fails, there are two important summary mechanisms. The first is a summary suit under Order XXXVII of the Code of Civil Procedure, 1908. It applies to specified classes of claims, including claims for debts or liquidated demands arising from written contracts and certain negotiable instruments. The defendant cannot defend the suit as of right and must obtain leave to defend. Leave cannot be refused unless the Court is satisfied that the defendant has no substantial defence or that the proposed defence is frivolous or vexatious, subject to the principles governing conditional or unconditional leave.
The second is summary judgment under Order XIII-A of the CPC, which applies to commercial disputes. An application may be made after service of summons and before the Court frames issues. The Court may grant summary judgment where the claimant or defendant has no real prospect of succeeding on the claim or defence and there is no other compelling reason why the matter should proceed to trial. In Reliance Eminent Trading and Commercial Pvt. Ltd. v. Delhi Development Authority (2026), the Supreme Court laid down detailed guidelines governing the exercise of this power and emphasised that a matter should not be sent to a full trial where the evidentiary and legal position makes such a trial unnecessary.
Importantly, these mechanisms are not mutually exclusive. The Supreme Court clarified in Reliance Eminent (2026) that the Order XIII-A summary-judgment procedure can also be applied to a suit instituted under Order XXXVII.
Both mechanisms reward preparation. A claim supported by signed contracts, delivery records, invoices, correspondence and balance confirmations may, depending on the defence and the documentary record, be capable of determination without a conventional full trial. In practice, the strength of a commercial recovery claim often depends heavily on the documentary record assembled before filing.
What if the supplier is a micro or small enterprise?
A supplier registered as a micro or small enterprise has a separate statutory route under the Micro, Small and Medium Enterprises Development Act, 2006. The buyer must pay within the agreed period, which cannot exceed 45 days from acceptance of the goods or services. Late payment attracts compound interest at three times the bank rate notified by the Reserve Bank of India. The supplier may refer the dispute to the Micro and Small Enterprises Facilitation Council, which first conciliates and, failing settlement, arbitrates. A buyer who wishes to challenge the resulting award must first deposit 75% of the amount awarded. The Act defines a supplier as a micro or small enterprise registered under it. Medium enterprises are excluded, and a foreign supplier can use the route only if it holds that registration.
Can a foreign creditor sue at home and enforce the judgment in India?
Yes, directly, only if the home court sits in a reciprocating territory. Under Section 44A of the Code of Civil Procedure, a money decree of a superior court in a territory notified by the Government of India may be executed by an Indian district court as if an Indian court had passed it. The notified territories include the United Kingdom, Singapore, Hong Kong, Malaysia, New Zealand, Bangladesh and, since January 2020, the United Arab Emirates. The United States, China and the member states of the European Union are not on the list.
Even for a notified territory, the debtor may resist execution on the grounds in Section 13 of the Code: for example, that the foreign court lacked jurisdiction, that the judgment was not given on the merits, or that the proceedings breached natural justice. A judgment from a non-reciprocating country cannot be executed directly at all. The creditor must file a fresh suit in India on the foreign judgment, which the Indian court treats as conclusive unless a Section 13 ground applies. That second round costs time, so a foreign creditor should check the reciprocity position before deciding to sue at home.
When is arbitration the better route, and where is an award enforced?
Arbitration suits claims that need a full examination of evidence, where the IBC and summary procedures do not fit. For arbitrations seated in India, other than international commercial arbitrations, Section 29A of the Arbitration and Conciliation Act requires the award within 12 months of the completion of pleadings. The parties may extend that period by six months by consent; any further extension needs the court. International commercial arbitrations are asked to meet the same target but are not bound by it.
A foreign creditor may agree a foreign seat and a foreign governing law. An award made in a New York Convention country that India has notified is enforceable in India under Part II of the Act, and the grounds for refusing enforcement in Section 48 are narrow. Enforcement lies in the High Court rather than a district court: for a debtor with assets in Gujarat, that is the Gujarat High Court. Once the court is satisfied that the award is enforceable, the award is deemed a decree of that court. Unless the parties have agreed otherwise, Indian courts may also grant interim measures, including orders protecting assets, in support of an arbitration seated abroad.
How do the routes compare?
|
Route |
Available to |
Suited to |
Main limitation |
|
IBC, Section 9 |
Indian and foreign operational creditors owed INR 1 crore or more by an Indian company or LLP |
Undisputed debts owed by a solvent debtor |
Fails if the debtor shows a genuine pre-existing dispute; information utility filing required first |
|
Summary suit (Order XXXVII) |
Creditors holding a written contract, bill of exchange or similar document |
Liquidated debts proved by documents |
The debtor may obtain leave to defend |
|
Summary judgment (Order XIII-A) |
Parties to commercial disputes of INR 3 lakh or more |
Claims the documents answer, with no real defence |
Must be sought before issues are framed; not available in an Order XXXVII suit |
|
MSMED Act |
Micro and small enterprises registered under the Act |
Delayed payment by a buyer |
Not available to medium enterprises or unregistered suppliers |
|
Foreign decree (Section 44A) |
Holders of a money decree from a reciprocating territory |
Creditors who have already sued at home |
Decrees from other countries need a fresh suit in India |
|
Arbitration |
Parties to an arbitration agreement |
Claims needing a full examination of evidence |
Needs a workable clause; enforcement adds a further stage |
What should a creditor do before a dispute arises?
The speed of a recovery is usually decided when the contract is signed. Three steps shorten later proceedings:
- Draft a dispute resolution clause that fixes the seat, governing law, institution, number of arbitrators and language. A foreign supplier should choose a seat whose awards India will enforce.
- Keep a clean paper trail: signed purchase orders, delivery and acceptance records, invoices and periodic balance confirmations. This material decides whether a claim can proceed summarily or needs a trial.
- Act within time. A suit for the price of goods sold and delivered must be brought within three years under Articles 14 and 15 of the Limitation Act, 1963, and the Supreme Court held in K. Educational Services Pvt Ltd v Parag Gupta and Associates (2018) that the same period governs IBC applications. A written acknowledgement of the debt, signed before the period expires, starts it afresh, so a signed balance confirmation is worth obtaining.
Once a debt falls due, the order of decisions matters. A foreign creditor should settle the enforcement question first and the forum second, because a judgment India will not execute directly adds a second set of proceedings. For an undisputed debt of INR 1 crore or more, a demand notice under the IBC is often the quickest source of pressure. For a disputed claim, the realistic choice lies between a commercial suit with an early application for summary judgment and arbitration, depending on what the contract provides.
Key Sources
Macquarie Bank Ltd v Shilpi Cable Technologies Ltd, Supreme Court of India, 15 December 2017
Mobilox Innovations Pvt Ltd v Kirusa Software Pvt Ltd, Supreme Court of India, 21 September 2017
Kishan v Vijay Nirman Company Pvt Ltd, (2018) 17 SCC 662, Supreme Court of India, 14 August 2018
Patil Automation Pvt Ltd v Rakheja Engineers Pvt Ltd, Supreme Court of India, 17 August 2022
This article is for informational purposes only and does not constitute legal advice. The views expressed are those of the author. Specific legal matters should be referred to qualified advisers. Ravish Bhatt is an Advocate (Bar Council of Gujarat) and a non-practising Solicitor of England and Wales.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
