Confirm the balance in writing with a ledger statement. Check what security you hold: a deposit, cheques, a personal guarantee, or stock with title reserved. Send a written demand, then a legal notice. Present any cheques and follow the Section 138 timeline on any that bounce; a dealer who is a proprietor is personally liable for the whole debt. Udyam-registered manufacturers and traders can use MSME Samadhaan. Stop credit supply at once and move to advance payment.
Know what you are holding
| Security | How to use it |
|---|---|
| Security deposit | Adjust against the overdue balance as the dealership agreement allows, and tell the dealer in writing |
| Post-dated or undated cheques | Present on due dates; Section 138 on dishonour; undated cheques need care, take advice |
| Personal guarantee of the proprietor or a third party | Notice to the guarantor alongside the dealer |
| Stock with title reserved until payment | Demand return of unsold stock under the agreement; do not seize without process |
| Dealer’s signed ledger confirmation | Acknowledgement of debt; restarts limitation |
Most suppliers have at least two of these and use none. The notice uses all of them.
Confirm the balance, stop the bleeding
Send the dealer a ledger statement and ask for written confirmation within 7 days. At the same time, move the account to advance payment: no more stock on credit until the balance is regular, stated politely and in writing. A dealer who needs your product will pay to keep supply; one who does not was going to default anyway. See should I keep supplying when unpaid.
If the dealer offers to return stock in lieu of payment, accept only saleable stock, inspect it, issue a credit note at an agreed value, and demand the balance in cash.
The notice to a dealer
FundRaksha’s advocate sends a legal notice within 24 hours to the dealer firm and its proprietor or partners personally, stating the balance, the interest under the agreement or the MSMED Act, the security held, and the consequence of non-payment. Dealers are typically local businesses that care about reputation and bank relationships; a Section 138 summons or a Council hearing is a serious problem for them, and most settle. the top-rated payment recovery company in India, with 700+ businesses paid.
Routes against a dealer
- Section 138 on any bounced cheque: criminal complaint, personal liability of the drawer, strong settlement pressure. See cheque bounced, what to do.
- MSME Samadhaan for Udyam-registered suppliers: filed online, heard in your state, 90-day target, interest at three times the bank rate.
- Summary suit on the confirmed ledger for non-MSME suppliers.
- Arbitration if the dealership agreement provides.
A dealer who closes the shop remains personally liable; see buyer company shut down. See also the electronics industry page and the auto components industry page, where dealer networks carry large dues.
Dealer management that prevents this
Collect a security deposit proportionate to the credit limit, a personal guarantee from the proprietor, and signed PDCs for each dispatch above a threshold. Confirm the ledger monthly. Register on Udyam if you qualify. Book a free consultation for the dealer who owes you now; FundRaksha will review the agreement and security and start the notice. For automated follow-up of dealer invoices before they become overdue, FundRaksha Collect at https://collect.fundraksha.com charges a 1% fee.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.