Start with the documents, not the demand
A recovery claim is only as strong as its paper trail: the purchase order or contract, the invoices, proof of delivery or performance, the ledger and account statement, and the correspondence in which the debtor acknowledged the amount or raised (or failed to raise) a dispute. Before any notice is sent, reconcile the account and identify the earliest date of default — because limitation runs three years from each invoice’s due date (Article 14 or 15 of the Limitation Act), extended by acknowledgment in writing or by part payment.
The legal notice
A demand notice is not legally required for a suit, but it is the last opportunity to obtain an admission, to bring the debtor to the table, and — where a cheque has bounced — it is mandatory within 30 days under Section 138 of the NI Act. The notice should state the contract, the amount with a computation of interest, the documents relied on, and the consequences: suit, cheque-bounce prosecution, and, where the debtor is a company and the amount exceeds ₹1 crore, a demand notice under Section 8 of the IBC.
Which court and which procedure
A claim with a specified value of ₹3 lakh or more arising out of a commercial transaction is a “commercial dispute” under the Commercial Courts Act, 2015 and is tried by the Commercial Courts in the Delhi district courts, or by the Commercial Division of the Delhi High Court where the value exceeds ₹2 crore. The Act brings a stricter procedure: a statement of truth with the plaint, mandatory disclosure of all documents, a written statement within 30 days (extendable to a maximum of 120), case-management hearings, and time-bound trial.
Section 12A — mediation first
A commercial suit that does not contemplate urgent interim relief cannot be instituted unless the plaintiff has first exhausted pre-institution mediation under Section 12A, conducted through the Legal Services Authority (in Delhi, the DLSA mediation centres) within three months, extendable by two months with consent. The Supreme Court in Patil Automation v. Rakheja Engineers (2022) held the requirement mandatory, and a plaint filed in breach is liable to be rejected under Order VII Rule 11 CPC. If the defendant does not appear, the Authority issues a non-starter report, and the suit can be filed. A settlement reached in mediation has the status of an arbitral award on agreed terms and is enforceable as a decree.
The exception — urgent interim relief — must be genuine: a real need for an injunction, attachment before judgment or appointment of a receiver, pleaded and supported in the plaint. Courts have rejected plaints where the prayer for interim relief was a device to avoid mediation.
Summary suits and summary judgment
Where the claim is based on a written contract, a bill of exchange, a promissory note or a cheque, a summary suit under Order XXXVII CPC puts the defendant to the burden of obtaining leave to defend within ten days of service of summons for judgment; leave is refused where the defence is illusory. In commercial suits, Order XIIIA allows either party to apply for summary judgment after summons and before framing of issues, where the other side has no real prospect of success — a powerful tool in documented, undisputed-invoice cases.
Interim relief
- Attachment before judgment (Order XXXVIII Rule 5) where the defendant is about to dispose of property or remove it from the court’s jurisdiction to obstruct the decree.
- Temporary injunction (Order XXXIX) to restrain disposal of specific assets or the invocation of a bank guarantee where fraud or special equities are shown.
- Section 9 of the Arbitration Act for the same reliefs where the contract has an arbitration clause.
Interest
The contract rate, if any; failing that, the court’s discretion under Section 34 CPC. For MSME suppliers, Section 16 of the MSMED Act, 2006 provides compound interest at three times the bank rate on delayed payments, and Section 18 offers conciliation and arbitration through the MSE Facilitation Council — often a faster route than a suit for registered micro and small enterprises.
Fitting the other routes in
- Cheque bounce — a Section 138 complaint runs parallel to the suit and creates real pressure; the timelines are unforgiving.
- IBC — an operational creditor’s demand notice under Section 8 and an application under Section 9 are available where the debt is ₹1 crore or more and undisputed; the threat of insolvency often produces payment, but a genuine pre-existing dispute defeats the application.
- Arbitration — where the contract has an arbitration clause, the recovery proceeds by arbitration, with the court’s assistance under Sections 9 and 11.
Execution
A decree is executed under Order XXI CPC by attachment and sale of the debtor’s property, garnishee orders against the debtor’s bank accounts and receivables, and, in appropriate cases, arrest and detention in civil prison. Ask for the judgment-debtor’s affidavit of assets at the outset of execution.
Frequently asked questions
Can I skip mediation if the debtor has already refused to pay?
No. Refusal to pay is not urgency. Mediation is skipped only where the suit genuinely seeks urgent interim relief; otherwise the non-starter report from the Legal Services Authority is obtained, usually within a few weeks.
How long does a commercial recovery suit take in Delhi?
A summary suit or a suit decided on summary judgment can conclude within months; a contested commercial suit typically takes one to three years depending on the court and the evidence.
Is a WhatsApp acknowledgment of the debt enough to extend limitation?
An acknowledgment in writing signed by the debtor, made before the expiry of limitation, extends it under Section 18 of the Limitation Act; electronic messages can qualify if authorship and date are proved, with the certificate required for electronic records.
Can I recover legal costs?
Commercial courts award costs, including reasonable legal fees, to the successful party under Section 35 CPC as amended by the Commercial Courts Act; unreasonable conduct (refusing a reasonable settlement offer, unnecessary adjournments) is penalised in costs.
Talk about your matter
This article is general information. Your position depends on your documents and dates — call or WhatsApp to arrange a consultation.