A purchase order (PO) is a commercial document issued by the buyer to the supplier specifying the goods or services, quantities, prices, delivery schedule, payment terms and other conditions. In contract law it is an offer under the Indian Contract Act, 1872; the supplier's acceptance (written confirmation, or performance by supplying) completes the contract. The PO's payment term fixes the due date for interest and limitation, subject for MSME suppliers to the 45-day cap in Section 15 of the MSMED Act.
How purchase orders work in India
The buyer raises the PO, often from its ERP, with a PO number that the supplier must quote on invoices, challans and e-way bills. The supplier confirms or starts supplying. Delivery against the PO is recorded by the buyer in a goods receipt note, which triggers invoice processing and payment on the agreed term. Disputes arise when the PO terms (quantity, specification, delivery window) are not matched by the supply, or when the buyer relies on a clause (inspection, penalty, set-off) the supplier never read. A PO that incorporates the buyer's standard terms by reference binds the supplier to those terms.
- Quote the PO number on every invoice and challan.
- Keep the PO, any amendments and the acceptance email together.
- Read the payment, inspection, penalty, arbitration and jurisdiction clauses before accepting.
Why it matters for getting paid
A PO proves the buyer ordered what you supplied at the price you invoiced. With delivery proof and the invoice, it supports a summary suit or a Samadhaan claim with little room for dispute. It also tells your advocate where and how the claim must be pursued, through its arbitration and jurisdiction clauses. See tax invoice, delivery challan, GRN and arbitration clause.
How FundRaksha uses it
FundRaksha's advocates read the PO first: payment term, acceptance mechanism, arbitration and jurisdiction, and any penalty or set-off clause the buyer may invoke. The notice is then framed to pre-empt those defences. FundRaksha has reviewed POs behind ₹50 Cr+ of invoices; the fee is 30% of recovery and the first consultation is free.
Worked example (hypothetical)
A Bhopal fabricator receives a PO for 200 steel racks at ₹5,000 each (₹10,00,000 plus GST), "payment 60 days from GRN, 1% penalty per week for late delivery, disputes to arbitration in Indore". Delivery is one week late; the buyer deducts 1% (₹10,000) and then pays nothing for five months. The fabricator is a small enterprise, so the 60-day term is read down to 45 days from acceptance under Section 15, and despite the arbitration clause it may go to the Facilitation Council. Interest, assuming a 6.5% bank rate (19.5% a year, monthly rests), on ₹9,90,000 for about 3.5 months is roughly ₹57,500. The notice concedes the ₹10,000 penalty and claims ₹10,47,500.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.