What to do when a customer does not pay an invoice in India
Last reviewed 22 October 2026. General information, not legal or tax advice.
Most late invoices get paid with a clear, persistent follow-up. A few need more. This is the usual path, from the gentlest step to the most serious. It is general information, not legal advice; speak to a lawyer before legal steps.
1. Check your own records first
Confirm the invoice, delivery or service proof, the agreed credit period and any part payments. Many “unpaid” invoices are really a missing delivery challan, a wrong amount or a payment not yet matched in your books.
2. Remind politely, and send a statement
Send reminders on WhatsApp and email listing every open bill and the total, with an easy way to pay, and ask for an expected payment date. A statement of account showing all invoices and receipts helps the customer’s accounts team reconcile and release payment. See payment reminders on WhatsApp.
3. Escalate inside the customer’s business
If the accounts team stalls, speak to the person who approves payments — often the owner or finance head. Ask what is holding the payment and agree a date in writing.
4. Use the MSMED Act if you are a registered micro or small enterprise
Buyers must pay registered micro and small suppliers within the agreed period, never more than 45 days, and owe compound interest at three times the RBI bank rate when they pay late. A firm reminder can say so. If that fails, you can file a reference on the MSME Samadhaan portal; the state’s Micro and Small Enterprises Facilitation Council then handles conciliation and, if needed, arbitration. Work out the interest with the MSME interest calculator.
5. Legal notice
A notice from a lawyer setting out the debt and a final date to pay often settles matters that reminders did not.
6. Legal routes
- Bounced cheque: a complaint under Section 138 of the Negotiable Instruments Act, within the strict timelines in the FAQ below.
- Commercial suit: for commercial disputes of a specified value (₹3 lakh or more), the Commercial Courts Act requires pre-institution mediation before filing, unless urgent relief is needed.
- Insolvency: only for undisputed debts of ₹1 crore or more.
Catching it early
The cheapest recovery is the one that never reaches step 4. Tagaada follows up on every open bill on schedule, tracks promised dates and flags broken promises and disputes to you early. For registered micro and small suppliers, it also prepares the MSME Samadhaan pack with Section 16 interest.
Frequently asked questions
Is there a time limit for recovering an unpaid invoice?
Yes. Under the Limitation Act, 1963, a suit for money owed on goods sold or services provided generally has to be filed within three years. An acknowledgement of the debt in writing or a part payment can restart the period. Ask a lawyer for your case.
Can I charge interest on late payments?
If you are a registered micro or small enterprise, Section 16 of the MSMED Act gives compound interest at three times the RBI bank rate on payments made after the agreed period (at most 45 days). Others can charge interest only if it was agreed in the contract or on the invoice terms.
What if the customer paid by a cheque that bounced?
Under Section 138 of the Negotiable Instruments Act, send a written demand within 30 days of the bank’s return memo. If the drawer does not pay within 15 days of receiving the notice, a complaint can be filed within one month after that.
Is insolvency an option?
For an undisputed operational debt of ₹1 crore or more, an operational creditor can apply under the Insolvency and Bankruptcy Code after a demand notice. It is a serious step and is not a debt-collection tool for disputed or small amounts.