Once negotiation and a legal notice haven't worked, the next decision is where to pursue the claim. Choosing well can save months and a great deal of money. Here is how we think about it.
Start with four questions
- What does the contract say? An arbitration clause usually decides the forum. An exclusive jurisdiction clause may fix the court.
- How strong and clear is the evidence? A signed contract, invoices and an acknowledgment of the debt point to faster, summary routes.
- Who is the debtor? A company, a firm, an individual or a government body, and whether it is solvent.
- How much is at stake? Value thresholds open or close certain forums.
The main options compared
Cheque bounce complaint (Section 138, NI Act)
Best when: you hold a dishonoured cheque and acted within the deadlines. Why: the criminal liability creates strong pressure to settle, and interim compensation of up to 20% can be ordered. It can run alongside a civil claim.
Summary suit (Order XXXVII, CPC)
Best when: the debt is a fixed sum based on a written contract, invoice or bill. Why: the defendant must obtain leave to defend, so weak defences are filtered out early.
Commercial suit (Commercial Courts Act, 2015)
Best when: the dispute is commercial and worth ₹3 lakh or more. Why: strict timelines, case management and summary judgment. Note that pre-institution mediation is mandatory unless you need urgent interim relief.
Arbitration
Best when: the contract has an arbitration clause, or both parties agree. Why: it is private and flexible, and the award is final with only limited grounds of challenge. Interim relief is available under Section 9. Costs include the arbitrator's fees, which matter for smaller claims.
MSME Facilitation Council (MSMED Act, 2006)
Best when: you are a registered micro or small enterprise supplying to a buyer. Why: the council attempts conciliation and then arbitration. Compound interest at three times the RBI bank rate is payable, and a buyer challenging the award must first deposit 75% of the amount.
Insolvency (IBC) before the NCLT
Best when: the debtor is a company, the default is ₹1 crore or more, and the debt is undisputed. Why: the threat of losing control of the company often brings a settlement. Caution: it is not a recovery forum. A genuine pre-existing dispute leads to rejection, and in a full insolvency an operational creditor may recover little.
A practical rule of thumb
- Dishonoured cheque? Start with Section 138, and consider a parallel civil claim.
- Arbitration clause? Arbitrate, and seek Section 9 interim relief if assets are at risk.
- Registered MSME? The Facilitation Council is often the most cost-effective route.
- Clear, documented debt with no clause? A summary suit or commercial suit.
- Large, undisputed debt owed by a company? A Section 8 IBC demand notice may bring payment, but plan for what happens if it doesn't.
Don't forget enforcement
A decree or award is only as good as your ability to enforce it. Before choosing a forum, consider where the debtor's assets are and whether you need interim protection, such as attachment before judgment or a Section 9 order, to stop them disappearing.
Unsure which applies to you? Talk to a debt recovery lawyer.
Frequently asked questions
Can I pursue more than one route at the same time?
Sometimes. A cheque bounce complaint and a civil suit can run in parallel. But you generally can't pursue the same claim in both a court and arbitration, or in multiple civil forums.
Which route is fastest?
It depends on the facts, but cheque bounce complaints and summary suits often lead to the quickest settlements for clear, documented debts.
This page is general information about Indian law as of 15 October 2026, not legal advice. Every case turns on its own facts. Please speak to a lawyer before acting on it. See our disclaimer.
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