When an invoice goes unpaid, the legal question is rarely whether a remedy exists — it is which of several remedies to pick. A supplier holding a dishonoured cheque, an arbitration clause, Udyam registration and a claim above the insolvency threshold could, in theory, pursue five proceedings at once. In practice, each route has a distinct engine: some produce judgments, some produce pressure, and some produce both. This explainer maps the six main roads for recovering commercial dues and the considerations that should drive the choice.
The six routes at a glance
| Route | Best when | Watch out for |
|---|---|---|
| Commercial suit (Commercial Courts Act) | Disputed claims of ₹3 lakh+ arising from commercial relationships; documents need proving | Pre-institution mediation under Section 12A unless urgent interim relief is sought; strict pleading and disclosure discipline; 120-day outer limit for written statement |
| Summary suit (Order XXXVII CPC) | Liquidated sums on written contracts, invoices, cheques; weak defences | Leave to defend converts it into a full trial; claim must fit the Order strictly |
| Arbitration | A workable arbitration clause exists; confidentiality or technical subject matter matters | Tribunal fees; the award still needs enforcement; interim relief via Section 9 where assets are at risk |
| MSEFC / Samadhaan (MSMED Act) | Claimant was a registered micro or small enterprise at the time of supply | Threshold objections on status and registration timing; Section 19's 75% pre-deposit protects the award on challenge |
| Section 138 NI Act prosecution | A cheque for the debt has bounced | Strict timelines — notice within 30 days of the return memo, complaint within the statutory window; punishes dishonour rather than decreeing the debt, though interim compensation and compounding create settlement pressure |
| IBC Section 9 (operational creditor) | Undisputed operational debt of ₹1 crore or more against a company | A genuine pre-existing dispute defeats admission; insolvency is collective, not a personal recovery |
Three questions that usually decide the choice
Sequencing and parallel tracks
The routes are not mutually exclusive, and skilled sequencing extracts value from their differences. A common Delhi pattern: a comprehensive demand notice; a Section 138 complaint on the bounced cheque to establish a criminal timeline; and the civil or arbitral claim for the full account filed alongside, with the criminal settlement pressure funding the civil resolution. MSME suppliers add the Samadhaan reference, whose statutory interest at three times the bank rate compounding monthly usually dwarfs contractual interest and reshapes settlement mathematics. What sequencing cannot do is double-recover: payments received in any track must be credited across all, and settlements should record which proceedings stand withdrawn or compounded.
Limitation: the clock that runs through everything
Whatever the route, the underlying money claim is generally governed by a three-year limitation period, extendable by written acknowledgment or part-payment. Two traps recur. First, negotiating parties let the period lapse in good faith — a suit or reference filed on time with talks continuing costs little and preserves everything. Second, businesses assume the cheque prosecution keeps the civil claim alive; it does not. Each track has its own clock, and each must be watched.
The first-month checklist
Reconstruct the account: purchase orders, invoices, delivery proofs, ledger confirmations, and every acknowledgment bearing a date and signature.
Audit the leverage: cheques in hand, arbitration clause, Udyam status year-wise, debtor's corporate form and asset position.
Send a notice engineered for the chosen route — the Section 138, IBC and MSMED tracks each have notice requirements that a generic lawyer's letter can fumble.
Diarise limitation for the civil claim independently of every other proceeding.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
Can multiple recovery proceedings run in parallel?
Often, yes — a cheque-bounce prosecution and a civil or arbitral claim for the same debt can proceed simultaneously because they serve different ends, and an MSEFC reference has been held to coexist with Section 138 proceedings. But recoveries are adjusted: the creditor cannot pocket the same rupee twice, and settlement in one forum should expressly deal with the others.
Is the IBC a recovery tool?
Formally, no — insolvency is a collective proceeding, not a money-execution device, and tribunals discourage its use as a recovery lever. Practically, a Section 9 demand notice for an undisputed operational debt of ₹1 crore or more concentrates the debtor's mind like little else. The route fails, however, the moment a genuine pre-existing dispute is shown, so it suits clean, admitted debts only.
When is a summary suit the right choice?
When the claim rests on a written contract, invoice or negotiable instrument for a liquidated sum and the defence looks weak. Under Order XXXVII CPC the defendant must obtain leave to defend; if the defence is illusory, decree follows without a full trial. For claims of ₹3 lakh and above that qualify as commercial disputes, the Commercial Courts Act framework applies with its own summary judgment machinery under Order XIII-A.
Does a legal notice matter if litigation is inevitable?
Yes. A precise demand notice fixes the debt narrative, triggers statutory clocks (15 days under Section 138 NI Act; 10 days under the IBC route), interrupts nothing by itself under the Limitation Act but often produces an acknowledgment or part-payment that does, and is the cheapest settlement instrument available. Most recoveries in Delhi end at or shortly after the notice stage.