Payment recovery glossary: every term explained

MSME Samadhaan explained: the online portal where Udyam-registered micro and small suppliers file delayed-payment claims with interest at 3x the bank rate

The MSE Facilitation Council explained: the state body under Section 20 of the MSMED Act that conciliates and arbitrates delayed-payment claims by micro and small suppliers.

The Micro, Small and Medium Enterprises Development Act, 2006 explained: classification, Udyam registration and the delayed-payment protections in Sections 15 to 24

Section 15 of the MSMED Act 2006 explained: a buyer must pay a micro or small supplier by the agreed date, never later than 45 days from acceptance, or 15 days if nothing is agreed.

Section 16 of the MSMED Act explained: compound interest at three times the RBI bank rate, with monthly rests, on payments to micro and small suppliers made after the due date.

Section 18 of the MSMED Act explained: how a micro or small supplier refers a delayed-payment dispute to the Facilitation Council, the conciliation and arbitration stages and the 90-day target.

The MSME 45-day payment rule explained: the maximum credit period a buyer can take when paying a micro or small enterprise, where it comes from, and what happens on day 46.

The MSMED Act 15-day rule explained: when no credit period is agreed in writing, a buyer must pay a micro or small supplier within 15 days of acceptance

Udyam Registration explained: the free, online MSME registration that gives micro and small suppliers access to MSME Samadhaan, Section 16 interest and Section 43B(h) protection.

The Indian MSME definition explained: how investment and turnover thresholds classify micro, small and medium enterprises, and why only micro and small get delayed-payment protection.

Section 43B(h) explained: a buyer can deduct an expense for goods or services from a micro or small enterprise only in the year it is actually paid, if paid beyond the MSMED Act time limit.

MSME Form 1 explained: the half-yearly return specified companies must file with the Registrar of Companies, listing payments to micro and small suppliers outstanding for more than 45 days.

Section 22 of the MSMED Act explained: buyers whose accounts are audited must disclose unpaid principal and interest owed to micro and small suppliers in their annual financial statements.

Trader eligibility under the MSMED Act explained: wholesale and retail traders can register on Udyam for credit purposes but are excluded from the delayed-payment protections of Sections 15 to 18.

Section 138 NI Act explained: when a bounced cheque becomes a criminal offence, the 30-day notice, 15-day payment window, one-month complaint deadline and punishment up to 2 years.

Cheque bounce notice explained: the written demand a payee must send within 30 days of the return memo under Section 138 NI Act, what it must contain, how it is served and what happens next.

Cheque return memo explained: the bank document stating why a cheque was dishonoured, the common return reasons, and why the date you receive it starts the Section 138 clock.

Drawer, drawee and payee explained: who issues a cheque, which bank pays it and who receives it, and why these roles decide who can be prosecuted under Section 138 NI Act.

Section 141 NI Act explained: when a company's cheque bounces, the company and every person in charge of its business can be prosecuted under Section 138

Section 143A NI Act explained: the court can order the drawer of a bounced cheque to pay the complainant up to 20% of the cheque amount as interim compensation within 60 days, before the trial ends.

Section 148 NI Act explained: a drawer convicted under Section 138 who appeals can be ordered to deposit at least 20% of the fine or compensation within 60 days, and the court may release it to the complainant.

Stop payment explained: when a drawer instructs the bank not to honour a cheque, the return memo reads "payment stopped by drawer"

Post-dated cheque explained: a cheque bearing a future date, payable only from that date, valid for three months after it

Legal notice explained: a formal written demand sent by an advocate before legal action, what it must contain, how it is served and why it recovers most B2B dues without a court case.

Demand notice explained: a formal written demand for payment that is a legal precondition under Section 138 NI Act and Section 8 IBC, and the opening step in contractual recovery

E-notice explained: a legal notice served by email, WhatsApp or other electronic means, its validity under Indian law, how receipt is proved, and why it is sent alongside registered post.

Registered Post AD explained: the India Post service that returns a signed acknowledgement card, why it is the standard way to serve legal notices, and the legal presumption of service it creates.

Reply to legal notice explained: the debtor's written response to a demand, what admissions, disputes and silence each mean for recovery, and how to use the reply as evidence.

Summary suit explained: the fast-track civil procedure under Order XXXVII CPC for recovering fixed sums on written contracts, invoices, cheques and promissory notes, where the buyer must get leave to defend.

Civil recovery suit explained: the ordinary court action to recover a debt under the CPC, where it is filed, court fees, stages from plaint to decree, and when to prefer a summary suit or Samadhaan instead.

The Commercial Courts Act, 2015 explained: dedicated courts for commercial disputes of ₹3 lakh and above, mandatory pre-institution mediation, strict timelines and summary judgment

Specified value explained: how the value of a commercial dispute is computed under Section 12 of the Commercial Courts Act, the ₹3 lakh minimum, and what it means for where a supplier files a recovery suit.

Pre-institution mediation explained: the mandatory mediation a plaintiff must attempt before filing a commercial suit of ₹3 lakh or more, unless urgent interim relief is sought

The 3-year limitation period explained: how long an Indian supplier has to sue for unpaid invoices under the Limitation Act, 1963, when it starts, and how acknowledgements and part payments extend it.

Acknowledgement of debt explained: a signed written admission of liability made before limitation expires restarts the 3-year period under Section 18 of the Limitation Act

Part payment under Section 19 of the Limitation Act explained: when a debtor pays part of the principal or any interest before limitation expires, a fresh 3-year period runs from the payment, if the payment is acknowledged in writing.

Arbitration clause explained: a term in a contract or purchase order that sends disputes to a private arbitrator instead of court, how it works under the Arbitration and Conciliation Act, 1996, and what it means for recovering dues.

Arbitral award enforcement explained: how an award (including a Facilitation Council award) is enforced as a decree under Section 36 of the Arbitration and Conciliation Act, the Section 34 challenge window and the deposit rules.

Conciliation explained: a structured settlement process with a neutral conciliator, the first mandatory stage of every MSME Facilitation Council reference, and how a conciliation settlement becomes binding.

Mediation explained: a confidential, facilitated negotiation now governed by the Mediation Act, 2023, how a mediated settlement agreement is enforced, and where mediation fits in recovering B2B dues.

Decree and execution explained: a decree is the court's formal order for payment; execution under Order XXI CPC is how it is enforced through attachment, garnishee orders, sale of property or arrest of the judgment debtor.

Garnishee order explained: a court order under Order XXI Rules 46 to 46I CPC directing a third party (usually a bank) that owes money to the judgment debtor to pay it to the decree holder instead

Attachment of property explained: the court order that freezes a debtor's movable or immovable property so it cannot be sold or transferred, available before judgment under Order XXXVIII Rule 5 and in execution under Order XXI.

The Interest Act, 1978 explained: when a court or arbitrator can award interest on a debt for the period before the suit, from the date of a written demand, at not more than the current rate of interest

Compound interest with monthly rests explained: interest is added to the principal every month and itself earns interest

The RBI bank rate explained: the rate at which the Reserve Bank lends against or rediscounts eligible instruments, how it differs from the repo rate, and why Section 16 of the MSMED Act fixes late-payment interest at three times this rate.

Pendente lite interest explained: the interest a court awards on a money claim for the period the suit is pending, under Section 34 CPC, plus pre-suit and post-decree interest and the commercial-transaction exception.

Running account explained: a continuous ledger of supplies and payments between a supplier and buyer without invoice-wise settlement, how limitation applies to it, and how to recover a running-account balance.

Khata or ledger explained: the traditional account book or software ledger that records a buyer's debits and credits, its value as evidence under Indian law, and how to make it strong enough to recover dues.

Statement of account explained: a dated summary of all invoices, credits, payments and the balance due from a buyer, how to prepare it so it stands up in a notice, Council hearing or court, and how it supports interest claims.

Ledger confirmation explained: a signed acknowledgement by the buyer of the balance shown in the supplier's ledger, why it restarts limitation under Section 18 of the Limitation Act, and how to obtain one.

Purchase order explained: the buyer's written order specifying goods, price, delivery and payment terms, why it is the contract on which a recovery claim rests, and what clauses to check before accepting one.

Proforma invoice explained: a preliminary bill or quotation issued before supply, how it differs from a GST tax invoice, when it has contractual effect, and why you cannot recover dues on a proforma alone.

GST tax invoice explained: the document a registered supplier must issue under Section 31 of the CGST Act, its mandatory contents under Rule 46, time limits, e-invoicing, and why it is the core evidence in recovering dues.

Bill of supply explained: the GST document issued for exempt supplies or by composition dealers instead of a tax invoice, its contents under Rule 49, and how it supports a recovery claim.

E-way bill explained: the electronic document required under GST Rule 138 for moving goods worth more than ₹50,000, what it contains, its validity, and why it is powerful proof of supply in a payment recovery case.

Delivery challan explained: the document that accompanies goods and is signed on receipt, when GST Rule 55 requires it instead of an invoice, and why a signed challan is the supplier's best proof of delivery.

Lorry receipt explained: the consignment note a goods transporter issues on taking charge of goods, its status under the Carriage by Road Act, 2007, and how suppliers use it to prove dispatch and delivery in recovery cases.

Goods receipt note explained: the buyer's internal document recording receipt and inspection of goods against a PO, why it is the strongest acceptance evidence under the MSMED Act, and how to obtain a copy.

Debit note explained: the GST document a supplier issues to increase the value or tax of an earlier invoice, versus the "debit notes" buyers raise to deduct amounts, and how each affects a payment recovery claim.

Credit note explained: the document a supplier issues under Section 34 of the CGST Act to reduce the value or tax of an earlier invoice for returns, discounts or deficiencies, the time limit for declaring it, and its effect on the amount recoverable.

Retention money explained: the percentage of each bill a client withholds until the work is complete and the defect liability period ends, how it is released, and how contractors recover retention that is never paid.

Security deposit explained: the earnest money and performance security a contractor or supplier gives to a client, when it must be refunded, how wrongful forfeiture is challenged, and how to recover an unreturned deposit.

RA bill explained: the periodic interim bill a contractor raises for work done to date, how it is measured, certified and paid less retention, and how to recover certified but unpaid RA bills with interest.

Measurement book explained: the record of joint measurements of work executed under a construction contract, who signs it, why it is the primary evidence of quantities in a payment claim, and what to do when measurements are refused.

Defect liability period explained: the period after completion during which a contractor must rectify defects at its own cost, its typical length, how it governs release of retention and security, and how to handle belated defect claims.

Bank guarantee explained: an independent undertaking by a bank to pay a beneficiary on demand, the main types (performance, advance, retention), how invocation works, why courts rarely stop it, and what suppliers should check before accepting one.

Letter of credit explained: a bank's undertaking to pay the supplier against compliant shipping documents, sight versus usance LCs, UCP 600, inland LCs in India, and what to check so the bank cannot refuse payment.

The 180-day ITC reversal rule explained: under Section 16(2) of the CGST Act, a buyer who does not pay the supplier within 180 days of the invoice must reverse the input tax credit with interest, and can re-claim it only after paying

GSTR-2B explained: the auto-drafted monthly input tax credit statement generated for every GST-registered buyer from its suppliers' GSTR-1 filings, and why it is independent evidence that the buyer received and recorded your invoices.

GSTIN verification explained: how to check a buyer's 15-digit GST number on the GST portal, what the result shows (legal name, status, registration date, filing history), and how it protects suppliers from credit risk and wrong-party notices.

MCA master data explained: the free public record on mca.gov.in showing a company's CIN, status, registered office, directors, paid-up capital, charges and filing history, and how suppliers use it to vet buyers and name the right parties in notices.

Struck-off company explained: how the Registrar removes a company from the register under Section 248 of the Companies Act, 2013, what it means for a supplier owed money, how to object or seek restoration under Section 252, and directors' continuing liability.

Operational creditor under IBC explained: how a supplier owed for goods or services can start insolvency against a company once the default is ₹1 crore or more.

Section 8 demand notice and Section 9 IBC application explained: how a supplier owed ₹1 crore or more asks the NCLT to start insolvency against a company.

NCLT explained: the tribunal that hears insolvency cases against companies under the IBC, how its benches and jurisdiction work, and what it means for suppliers.

IBC moratorium explained: how Section 14 freezes suits and recovery against a company once insolvency is admitted, and what an unpaid supplier should do next.

DSO explained: how many days a business takes on average to collect credit sales, how to calculate it, and how Indian suppliers bring it down

Ageing report explained: how it groups unpaid invoices by days overdue, how to read it, and when to escalate an old invoice

Bad debt write-off explained: when to write off an unpaid invoice, the tax deduction under Section 36(1)(vii), and why the debt is still legally recoverable.

Provision for doubtful debts explained: how businesses estimate likely losses on receivables, how it differs from a write-off, and why it is not tax-deductible.

Credit period explained: the days a buyer gets to pay, the 45-day cap for micro and small suppliers under the MSMED Act, and the Section 43B(h) effect on buyers.

Credit limit explained: the maximum one buyer may owe you at a time, how Indian SMEs set and enforce it, and why it is the cheapest form of debt recovery.

Credit note dispute explained: what to do when a buyer deducts from your invoice or demands a credit note you never agreed, and how to recover the short payment.

NACH e-mandate explained: how a buyer authorises automatic bank debits through NPCI, how suppliers use it for instalments and dues, and what if a debit fails.

UPI Autopay explained: recurring payment mandates approved once in any UPI app, how they work for business dues, and when a NACH mandate fits better.

Payment reminder explained: a documented request to pay before and after the due date, a schedule that works for B2B buyers, and when to send a legal notice.

Success fee explained: a recovery fee charged only as a share of money actually recovered, how FundRaksha's 30% Legal and 1% Collect fees work, with an example.

No recovery, no fee explained: nothing upfront, a fee only from money actually recovered, and what still costs money if a case goes to court

Dedicated advocate explained: one enrolled advocate who handles your recovery case from notice to settlement or court, and why continuity gets you paid sooner.

B2B debt collection explained: how Indian businesses recover unpaid invoices from other businesses, from reminders to legal notice and court, and what it costs.

Recovery agent vs advocate explained: who can send a legal notice, file a case and appear in court in India, and which to use for unpaid B2B invoices.