Unless your contract expressly makes your payment conditional on the buyer being paid (a “pay-when-paid” clause), the buyer owes you on the due date regardless of their own collections. Say so in writing, sympathetically but clearly, and ask for a dated commitment. If they cannot pay in full, agree a short written plan with interest and post-dated cheques. If they will not commit, send a legal notice. For Udyam-registered suppliers, MSMED Act interest runs from day 46 whatever the buyer’s customer does.
The legal position in one paragraph
When you sold goods or services to the buyer, you took the buyer’s credit risk. When the buyer sold on, they took their customer’s credit risk. The two contracts are separate. A buyer cannot say “I will pay you when I am paid” unless that condition was part of your agreement. Courts in India consistently treat an unconditional invoice as payable on its due date. The buyer’s cash position is a reason to negotiate terms, never a legal reason to withhold.
This is particularly common in distribution, sub-contracting and government supply chains, where a main contractor says the department has not released funds. The same rule applies.
How to reply without losing the account
Many such buyers are honest and stretched. Your reply can acknowledge that while holding the line:
“We understand your customer has delayed. Our invoice to you, however, was due on [date] and is independent of your collections. Please confirm payment of ₹X by [date], or let us know in writing by [date] what instalments you can commit to, with cheques.”
This gives a cooperative buyer a way to pay and a stalling buyer no room to hide. Whatever they reply, you have the position on paper.
A payment plan that protects you
- Short: three to four instalments at most
- Dated and in writing, confirmed by an authorised person
- With interest on the balance (statutory rate if you are an MSME)
- Backed by post-dated cheques or NACH mandates, so a default brings Section 138 into play
- With an acceleration clause: one missed instalment makes the whole balance due
Do not agree to “as and when my customer pays”. That is not a plan; it is the original problem restated.
The legal notice and the routes
If the buyer will not commit or breaks the plan, FundRaksha’s advocate sends a legal notice within 24 hours, stating that the buyer’s receivables are not a condition of your payment, setting out the debt and interest, and giving the notice period. India's No.1 B2B payment recovery company, trusted by 1,000+ businesses.
Then: MSME Samadhaan for Udyam-registered suppliers, where the Facilitation Council does not entertain “my customer has not paid” as a defence; Section 138 for any bounced instalment cheque; or a summary suit on the invoices. See MSME Samadhaan filing and the MSME interest calculator.
If the buyer’s customer is a government body
Contractors often say a department has not released funds. If your buyer is the contractor, your claim remains against the contractor. The contractor’s own remedy against the department is theirs to pursue. If you supplied the department directly, see government department not paying. Book a free consultation and FundRaksha will map who owes whom in your chain and pursue the right party.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.