Quick answer: You generally have three years to sue for an unpaid invoice in India. For goods, the clock usually starts on delivery, or when the agreed credit period ends. For services, it starts when the work is done. A signed written acknowledgment of the debt before the deadline gives a fresh three years.
A supplier who waits too long loses the right to sue, even when the invoice is genuine. The limitation period for unpaid invoices in India is short, and many claims die quietly while the buyer promises “payment next week”. This guide explains the deadline, the start date, the ways to extend it and the special rules for MSME suppliers.
Contents
- What is the limitation period for unpaid invoices?
- When does the clock start?
- How acknowledgment and part-payment extend time
- Limitation under the MSMED Act
- Key judgments
- A worked example
- Other recovery routes
- What to do when the deadline is close
- How startups can benefit under the MSME Act
- Common mistakes
- FAQ
What is the limitation period for unpaid invoices in India?
The Limitation Act, 1963 sets the deadline. Most invoice claims fall under a three-year period. The exact article depends on what you sold and on the payment terms.
| Type of claim | Article | Period | Usual start date |
|---|---|---|---|
| Price of goods sold and delivered, no fixed credit period | Article 14 | 3 years | Delivery of the goods |
| Price of goods sold and delivered on fixed credit | Article 15 | 3 years | End of the credit period |
| Price of work done at the buyer’s request, no time fixed for payment | Article 18 | 3 years | Completion of the work |
| Other money claims with no specific article | Article 113 (residuary) | 3 years | When the right to sue accrues |
Courts apply these articles to the facts. A single supply contract can raise more than one question, so a lawyer should read the invoices, purchase orders and emails before you rely on a date.
Limitation bars the remedy, not the debt itself. The buyer still owes the money, but the court will not enforce it once the period has run, if the buyer raises the defence.
When does the clock start?
The start date is the most disputed point. It differs for each type of supply.
- One-off delivery, no credit term: time usually runs from delivery.
- Credit period agreed: time usually runs from the day the credit period ends. A “net 60 days” term moves the start date forward by sixty days.
- Services or work done: time usually runs from completion of the work, not from the date you raise the invoice.
- Repeat supplies on a running account: this is the hardest case. Each delivery may carry its own clock.
The Bombay High Court dealt with repeat supplies in Vijaykumar Satishchandra & Co. v. Malpani (reported as decided in December 1995). According to a published commentary, the court treated each delivery as a separate cause of action, because the parties had no agreed account system. The older invoices were therefore time-barred even though newer ones were not. High Courts have taken different views on how part-payments affect a running account, so treat this area as fact-specific.
How acknowledgment and part-payment extend the limitation period
The Limitation Act allows a fresh period in two situations. The first is a written acknowledgment of liability, signed by the buyer, made before the original period ends. The second is a part-payment, subject to the conditions in Section 19.
These tools help only if you act before the deadline. An acknowledgment made after the debt is already time-barred does not revive the old right to sue. A fresh written promise to pay a time-barred debt may still bind the buyer as a contract, but that is a separate legal route.
Good acknowledgments share four features:
- They are in writing and signed by the buyer or an authorised officer.
- They name the debt or the invoices clearly.
- They admit liability, not merely that an account exists.
- They carry a date before the limitation period ends.
Balance sheets sometimes show a creditor’s balance. Courts examine such entries case by case. We discuss this in our article on balance sheet acknowledgment of debt.
Limitation under the MSMED Act, 2006
If you are a micro or small supplier, Chapter V of the MSMED Act, 2006 gives you a fast route through the Facilitation Council. The buyer must pay within the agreed time, which cannot exceed 45 days. Delayed payment attracts compound interest at three times the RBI Bank Rate, with monthly rests. Read our full guide on MSME payment recovery in India for the process.
Does limitation still apply? Yes, partly. The Supreme Court answered this in two stages.
- In Silpi Industries v. Kerala State Road Transport Corporation (2021), a bench of Ashok Bhushan and R. Subhash Reddy, JJ. held that the Limitation Act applies to arbitration under Section 18(3) of the MSMED Act.
- In Sonali Power Equipments Pvt. Ltd. v. Chairman, Maharashtra State Electricity Board (2025 INSC 864, reported July 2025), a bench of P.S. Narasimha and Joymalya Bagchi, JJ. held that the Limitation Act does not apply to conciliation under Section 18(2). A time-barred claim can therefore go to conciliation, and a settlement reached there is valid. The Court also held that the Act does apply to arbitration under Section 18(3).
The Court added that courts must test a buyer’s balance sheet disclosure of unpaid dues under Section 22 case by case. They must also ask whether it amounts to an acknowledgment. Do not assume that such a disclosure restarts the clock.
The practical lesson is simple. File the Council reference early, because a late arbitration claim faces a limitation defence. Conciliation remains open even for older dues, but it needs the buyer’s cooperation.
Key judgments at a glance
| Case | Court | What it decided |
|---|---|---|
| Silpi Industries v. KSRTC (2021) | Supreme Court | Limitation Act applies to Section 18(3) arbitration; buyer may also raise a counter-claim before the Council. |
| Sonali Power Equipments v. Chairman, MSEB (2025 INSC 864) | Supreme Court | No limitation bar on Section 18(2) conciliation; limitation applies to Section 18(3) arbitration. |
| Vijaykumar Satishchandra & Co. v. Malpani (1995) | Bombay High Court | Each delivery on credit gave its own cause of action under Article 14, absent an account system (per a published commentary). |
A worked example (illustrative)
A Delhi component maker delivers goods to a buyer on 10 January 2024. The invoice allows 30 days’ credit, so the credit period ends on 9 February 2024. Under Article 15, the three-year period then runs from that date. The supplier must file by about 9 February 2027.
Now suppose the buyer signs a letter on 1 December 2026 that admits the full amount is due. That signed acknowledgment, made before the deadline, can give a fresh three-year period from the date of the letter. If the buyer signs the same letter in March 2027, it comes too late to revive the claim.
The same supplier, if it qualifies as a micro or small enterprise, can also approach the Facilitation Council. The 45-day outer limit under Section 15 then governs when interest starts, while limitation governs how long the supplier can wait before filing. Our guide to interest on delayed payment to MSME suppliers explains the interest calculation.
Limitation and the other recovery routes
Each recovery route has its own timing rules. Check them together before you choose.
- Civil or commercial suit: the three-year period above applies. Commercial suits may also need pre-institution steps, so allow time.
- Summary suit: the same limitation applies, and the plaint must still be filed in time.
- Cheque bounce complaint: the Negotiable Instruments Act sets much shorter deadlines for the notice and the complaint. Check the dates the day the cheque returns. Our cheque bounce guide covers them.
- Insolvency petition: an operational creditor must also watch limitation. See our guide to the Section 9 IBC application.
- Facilitation Council: conciliation has no limitation bar, but arbitration does.
What to do when the deadline is close
- List every invoice with its delivery date, credit term and payments received.
- Mark the earliest deadline. Count three years from the start date for each invoice.
- Collect proof: purchase orders, delivery challans, e-way bills, GST returns and emails.
- Ask for a signed acknowledgment while the claim is still in time.
- Send a legal notice to record the demand. A notice does not stop the clock, so do not rely on it.
- File before the deadline. Choose the forum: a money recovery suit, a summary suit, or a Facilitation Council reference for MSME suppliers.
Keep a margin. Courts return plaints for defects, and a rejected filing close to the deadline can create avoidable risk.
How startups can benefit under the MSME Act
Many startups supply software, services or components to large buyers who pay late. A startup that holds an Udyam registration and qualifies as a micro or small enterprise can use the MSMED Act. From 1 April 2025, a micro enterprise has investment up to Rs 2.5 crore and turnover up to Rs 10 crore. A small enterprise has investment up to Rs 25 crore and turnover up to Rs 100 crore. A medium enterprise has investment up to Rs 125 crore and turnover up to Rs 500 crore.
Three steps help a startup:
- Register on Udyam before you sign the contract. Our note on Udyam registration after supply of goods explains why timing matters.
- Write a payment term of 45 days or less into every contract.
- Diarise limitation dates for each invoice, and file early.
Common mistakes
- Counting limitation from the invoice date instead of the delivery date or end of credit.
- Relying on a legal notice to stop the clock.
- Accepting a verbal promise instead of a signed acknowledgment.
- Pooling old and new invoices on a running account without checking each start date.
- Waiting for a settlement to finish while the deadline passes.
- Filing an arbitration claim late and assuming the MSME Act waives limitation.
Frequently asked questions
What is the limitation period for an unpaid invoice in India?
It is generally three years under the Limitation Act, 1963. The start date depends on delivery, the credit period or completion of the work.
Does sending a legal notice extend the limitation period?
No. A legal notice records your demand, but it does not stop the clock. Only a valid acknowledgment, part-payment or filing within time protects your claim.
Can I recover a time-barred invoice?
The debt still exists, but a court will not enforce it if the buyer pleads limitation. A fresh written promise to pay, or an MSME conciliation settlement, may still work.
Does the Limitation Act apply to MSME Facilitation Council cases?
It applies to arbitration under Section 18(3). It does not apply to conciliation under Section 18(2), according to the Supreme Court in Sonali Power Equipments.
Does a part-payment restart the limitation period?
It can, if it meets the conditions of Section 19 and the original period had not yet ended. High Courts differ on how this works on running accounts.
Does a balance sheet entry count as an acknowledgment of debt?
Sometimes. Courts examine the entry, its wording and its signature, so it is never automatic.
Sources and references
- LiveLaw: Limitation Act and MSMED conciliation and arbitration (Sonali Power, 2025)
- Verdictum: Sonali Power Equipments, 2025 INSC 864
- LiveLaw: Silpi Industries (2021)
- Law Commission of India, Report 89: Articles 14 to 22, Limitation Act, 1963
- CaseMine commentary: Vijaykumar Satishchandra & Co. v. Malpani
- TaxGuru: revised MSME classification limits (S.O. 1364(E), 2025)
Last updated: 9 November 2026
Talk to a lawyer about your unpaid invoice
Lex Pleaders, a law firm in Delhi NCR, advises MSMEs, startups, banks, NBFCs and businesses on recovery of dues and commercial disputes. WhatsApp or call 8595333579 (https://wa.me/918595333579) or write to lexpleadersindia@gmail.com to discuss your matter. Chamber No. 209, C.K. Daphtary Block, Supreme Court of India, New Delhi – 110001.
Disclaimer: This article offers general information only and does not constitute legal advice.