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Author: Associate Runa Jasia

Lawyered is the perfect place to find answers to any legal issues you may have concerning non payment of invoices in India. We provide legal advice and action for those dealing with customers refusing to pay for work done or services rendered.

This article is for the situation and tells you what to do when a client doesn't pay in India? Or a customer refusing to pay for work done. As a client is an individual or company that receives a service from a professional person or organization in return for payment. Once the service provider has taken the time to complete the work given and deliver it, that's when flaky clients start giving excuses for delay in payment. The unfortunate part of this sad truth is that, more than often, one will be dealing with clients who refuse to pay for the services once all the work has been completed. It can feel downright depressing when somebody works hard to deliver an outstanding product or a service, and then that person gets burned. After all, the person who was operating on good faith and assumed that the clients would be honorable and honest.

In this article, we shall discuss the legal action for non payment of invoices in india, legal action against company for non payment in india, what to do if someone doesn't pay you for a service? Or, What to do when customer refusing to pay for work done? Or What to do when a client doesn't pay in india?

Nobody can ever guarantee that every single customer will pay the bill on time, but there are things one can do to keep late or missed payments to a minimum in the future.

(non payment of invoice law India)

If anyone's business operates on an invoicing system, they might be familiar with late payments and perhaps even not receiving payment. From lost bills to unexpected additional expenses that the customer could not afford, the reasons for such late or non-payments are several. However, regardless of the circumstances, an unpaid invoice(non payment of invoice law India) can hurt business. The company or the person needs to act or bring legal action(legal action for non payment of invoices in India) if they want to receive their money. Fortunately, the company doesn't have to sit back and wait for clients to comply with the payment terms. They can take action to speed up the payment process and finally get the cash or cheque. It is tough confronting clients with payment issues owing to money as a taboo topic which is not supposed to be discussed openly. Too often, freelancers avoid chasing non-payers merely because they don't want to come across as rude or feel embarrassed. However, any company can put some safeguards in place to guarantee that if this kind of client disrespects them and a dispute arises, that they are not left with any leverage to help in resolving the situation.

10 tips for dealing with clients who refuse to pay: (what to do when a client doesn't pay in India or what to do if someone doesn't pay you for a service or a customer refusing to pay for work done )

1.     Research the client

Before doing anything else, the company suffering from the situation where the client does not pay(what to do when a client doesn't pay in India? What to do if someone doesn't pay you for a serviceOr a customer refusing to pay for work done) must research about the background of the client. They could Google their name, ask their contacts if they know anything about their new prospect, and look if there are any similar complaints against them on those sites.

2.     Discuss before signing the contract

At the end of all the sweet and polite conversations with the clients, this is all a business deal. It's crucial for any company to discuss all the cost and the expected payment dates with the client and must mention all the payment conditions while signing the contract. Business is all about written proof. The company should say all the details regarding everything, even small ones too. 

3.     Send invoices right away.

With so many tasks on the plate as a business owner, it can be easy to lose track of a customer invoice. They may even forget to send one in the first place, and going after a client for payment on a bill the person never sent will only hurt the reputation. So, what to do when a client doesn't pay in india? What to do if someone doesn't pay you for a service? Or a customer refusing to pay for work done? It is advised to send an invoice for the non payment of invoice law India as soon as a job is completed and stay on top of it until it's closed out to avoid falling behind. 

4.     Send project completion summary from time to time

The manager or the person dealing with the clients on the upper management level must send project completion summary from time to time. This vigilance in work will remind the client that the company is keeping their promises and also this will act as a document of proof that the work was delivered on time.

5.     Invoice follow-ups

The company must immediately follow up the invoice for the non payment of invoice law India if they don't get any response from the clients soon or when dealing with clients who refuse to pay.

6.     Document everything

Everything discussed with the client must be drafted in an email. Any conversation happened in any other platform should not be considered. 

7.     Ask politely first

Where is dealing with clients who refuse to pay or do not pay on time or what to do when a client doesn't pay in India? Or what to do if someone doesn't pay you for a service? Or a customer refusing to pay for work done? Then Questions related to payment must be asked in a friendly manner first. Nobody should use any harsh or rude words. It can hurt the feelings of the client. Even if they are a little late there could be a reason behind it, specifically in a case where the relationship between the client and the company is old. Communicating regarding the late payment could help to solve the issue. 

8.     Charge Late Fees

Every business is always ought to charge late fees for unpaid invoices(non payment of invoice law India). It needs to set up a fee structure for defaults in payment that can be used on every client, ideally as a written policy in the contract invoices for the non payment of invoice law India. Such a step should be taken early, within 10 or 15 days after an invoice goes unpaid(non payment of invoice law India). The company can send a message beforehand that because the invoice has gone unpaid for so long which tends to non payment of invoice law India, add a late fee if it isn't paid within 48 hours, or something similar. These late fees have to be continuously tracked if the clients still haven't paid after a reminder or when dealing with clients who refuse to pay.

9.     Stop Working

Even after multiple follow-ups, if there is no response from the clients' side, the company should stop working on their projects. Withdrawal of working terms, in such case, is necessary to avoid further payment defaults and capital imbalance.

10.  Take legal action (legal action for non payment of invoices in india)

Having covered any or every step aforesaid, if the client still does not pay, it's time to take some legal action against them, if the client is a company, then legal action against company for non payment in india (legal action for non payment of invoices in India). Putting the matters into the discretion of a judiciary authority is the ultimate option to excavate money from flaky clients.

Steps to take before bringing legal action for non payment of invoices in India

• Before getting into the business with the customer. You should draft a contract which should sound legal. Contract is the best way to keep the payments safe. Draft a contract which covers all the situation that could arise with the customer. In the contract, seller can put the clause for non payment and other possibilities for the payment. You can also hire a lawyer or a CA for drafting a contract, as this can be a professional help.

• While drafting a contract, include an interest clause in the agreement. Including the interest clause will help the seller in getting the payment early as possible as the customer would be avoiding the burden of the interest. In the agreement, state the maximum rate of interest that can be charged and also include from what date the interest will be started.

• Do not ever provide credit to the first customer. You should always take care of not providing credit to the first customers as there is no relationship between the first customer and the seller. You can ask for advance through online payment or credit card. If you have offered to make the credit then drafting a contract is very important as the contract will be a proof for the credit. Giving credit is only possible if you have an evidence or proof, so that when time comes you can prove it in court.

• If the customer delays the payment then you should ask the customer politely and should not get angry. Ask for the payment politely as this will increase the chances of getting money without taking legal action for non payment of invoices in India.

• Follow up: You should always follow up the customer from time to time. Following up is a practice to remind the customer that he has to pay. Asking for your money is not a bad thing and one should ask for money timely as this will also increase the chances of getting the money back.

Non payment of invoice law India

Remedies available under civil law:

• Order 37 of Civil Procedure Code: This order is a power given to the person who wants to recover his money. This order permits creditor to file a summary suit. This order comes under the speedier trial. Once the suit is filed and summoned. The defendant has only 10 days to defend the suit. If the defend does not show up, then the court accepts the plaintiff charges to be valid. Defendant can defend his suit by providing evidence and clearing the cross examination. If the court is satisfied that the credit it not taken by the defendant, then nothing will be given to the plaintiff but if it is proved by the plaintiff that the defendant has taken money and not paying it then defendant has to pay money to the plaintiff and punishment can be served to the defendant.

• Negotiable Instruments Act, 1881- This is act which deals with the non payment through cheque or bill of exchange etc. The act contains different sections for different instruments. Section 138 of Negotiable Instruments Act deals with the dishonour of cheque for insufficiency, etc., of funds in the account. If any customer delays the payment through cheque then the seller can file a suit against the customer under section 138 of Negotiable Instruments Act. Under 138, a legal notice is sent to the customer regarding the bouncing the cheque and if he does not pay within 30 days, then the seller can file suit against the customer under 138 Of NI Act regarding nonpayment of the payment.

 Remedies under criminal law:

• Section 406 covers criminal breach of trust under the Indian Penal Code: Under Section 406 of the Indian Penal Code. Seller can file a suit for breach of trust. Seller have to prove that the customer has breached his trust by not paying the money against the product or services provided. “Punishment for criminal breach of trust.—Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both”. Punishment is given to the person who breaches the trust.

• Section 417 of Indian Penal Code: This section deals with the cheating. Cheating can be in any sense between seller and buyer or between any two people.”Punishment for cheating.—Whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both”.

• Section 420 of Indian Penal Code: This section gives relief to the person who is being cheated by someone. This section also includes cheating, the same as section 417. This section can be one provision on which the seller can take action for non payment of invoice law India from the customer.

Out Of Court Settlements

If the court proceedings are taking too much time. Then parties can go for the quickest and most simple methods for recovering money. That is to choose an out of court settlements. Like arbitration, mediation or conciliation. In this out of court settlements, both the parties are given chance to put their conditions in front of the arbitrator. Arbitrator helps to come to a settlement which can be accepted or rejected by any of the parties. If the parties reject the settlement then the case will again goes to the court for settlement. And if the parties accepts it then they have to follow that settlement.

So, these are the provision on which a seller can take legal action(legal action for non payment of invoices in India) if the customer delays payment. All the legal action(legal action for non payment of invoices in India) should be done by an advocate. You should always take professional help.

Legal Action Against Company for Non Payment in India

If a company does not pay within the stipulated time, apart from previously mentioned legal actions, another legal action against company for non payment in India is the insolvency resolution process, which can be initiated against the company. Generally, such a process can be initiated by filing an application with the adjudicating authority, which is the National Company Law Tribunal or NCLT. 

Keywords: legal action for non payment of invoices in india, legal action against company for non payment in india, what to do if someone doesn't pay you for a service, customer refusing to pay for work done, what to do when a client doesn't pay in india

Refer our other related articles - "When The Client Decides To Not Pay For Services"