In this article, Karan Singh of JGLS discusses steps to take when a customer delays the payment. 

Introduction

Everyday businesses takes place between buyer and seller. There is a lot of competition in business these days and managing buyer and seller relationship are very difficult. A better relationship between both can be very beneficial for both the buyer and the seller. A better understanding of a buyer and a good performance by a seller can gain trust of each other. Having good communication from the starting of the relationship between the buyer and seller is most important in managing the relationship. Trust is also an important part of the relationship between buyer and seller but what if anyone breaks the trust. Even after years of business with each other, anyone can break the trust. Buyers break it when he does not pay the seller for the products or services he served to the buyer.

People take loans and do not pay the bank, some people take the services or products and then delay the payment. This is done even in well-settled business. Most of the people do not take any action and suffer loss. It’s better to do something than nothing. People should stand up for the payment which they work for. Business is done on trust but when trust breaks there are remedies that are available for all the people of India. Awareness is the most important. So, here we bring some steps that you should follow for getting that money that you worked for.

There are many ways by which the seller can ask for the payment. Like legally, without legal support or out of court settlements. These ways can be followed to ask a customer to make the delayed payment:

Steps to take before initiating legal proceedings if the buyer/customer delays the payment

• Before getting into the business with the customer. You should draft a contract which should sound legal. Contract is the best way to keep the payments safe. Draft a contract which covers all the situation that could arise with the customer. In the contract, seller can put the clause for non payment and other possibilities for the payment. You can also hire a lawyer or a CA for drafting a contract, as this can be a professional help.
• While drafting a contract, include an interest clause in the agreement. Including the interest clause will help the seller in getting the payment early as possible as the customer would be avoiding the burden of the interest. In the agreement, state the maximum rate of interest that can be charged and also include from what date the interest will be started.
• Do not ever provide credit to the first customer. You should always take care of not providing credit to the first customers as there is no relationship between the first customer and the seller. You can ask for advance through online payment or credit card. If you have offered to make the credit then drafting a contract is very important as the contract will be a proof for the credit. Giving credit is only possible if you have an evidence or proof, so that when time comes you can prove it in court.
• If the customer delays the payment then you should ask the customer politely and should not get angry. Ask for the payment politely as this will increase the chances of getting money without taking legal action.
• Follow up: You should always follow up the customer from time to time. Following up is a practice to remind the customer that he has to pay. Asking for your money is not a bad thing and one should ask for money timely as this will also increase the chances of getting the money back.

Legal Action

If everything fails, then you can go for legal actions. Below are all the legal actions that one can take if the customer is not paying up the money:

Remedies available under civil law:

• Order 37 of Civil Procedure Code: This order is a power given to the person who wants to recover his money. This order permits creditor to file a summary suit. This order comes under the speedier trial. Once the suit is filed and summoned. The defendant has only 10 days to defend the suit. If the defend does not show up, then the court accepts the plaintiff charges to be valid. Defendant can defend his suit by providing evidence and clearing the cross examination. If the court is satisfied that the credit it not taken by the defendant, then nothing will be given to the plaintiff but if it is proved by the plaintiff that the defendant has taken money and not paying it then defendant has to pay money to the plaintiff and punishment can be served to the defendant.
• Negotiable Instruments Act, 1881- This is act which deals with the non payment through cheque or bill of exchange etc. The act contains different sections for different instruments. Section 138 of Negotiable Instruments Act deals with the dishonour of cheque for insufficiency, etc., of funds in the account. If any customer delays the payment through cheque then the seller can file a suit against the customer under section 138 of Negotiable Instruments Act. Under 138, a legal notice is sent to the customer regarding the bouncing the cheque and if he does not pay within 30 days, then the seller can file suit against the customer under 138 Of NI Act regarding nonpayment of the payment.

Remedies under criminal law

• Section 406 covers criminal breach of trust under the Indian Penal Code: Under Section 406 of the Indian Penal Code. Seller can file a suit for breach of trust. Seller have to prove that the customer has breached his trust by not paying the money against the product or services provided. “Punishment for criminal breach of trust.—Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both”. Punishment is given to the person who breaches the trust.
• Section 417 of Indian Penal Code: This section deals with the cheating. Cheating can be in any sense between seller and buyer or between any two people.”Punishment for cheating.—Whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both”.
• Section 420 of Indian Penal Code: This section gives relief to the person who is being cheated by someone. This section also includes cheating same as section 417. This section can be one provision on which seller can take action for non payment from the customer.

Out Of Court Settlements

If the court proceedings are taking too much time. Then parties can go for the quickest and most simple methods for recovering money. That is to choose an out of court settlements. Like arbitration, mediation or conciliation. In this out of court settlements, both the parties are given chance to put their conditions in front of the arbitrator. Arbitrator helps to come to a settlement which can be accepted or rejected by any of the parties. If the parties reject the settlement then the case will again goes to the court for settlement. And if the parties accepts it then they have to follow that settlement.

So, these are the provision on which a seller can take legal action if the customer delays payment. All the legal action should be done by an advocate. You should always take professional help.

You Can Also Try Some Of The Points Mentioned Below

Prevention: Prevention is better than a cure. You should always relay the payment terms to the clients and all the related information about the payment should be on the invoice. Write the information of payment terms clearly on the invoices so that client/customer can read it.

Rewards for good payers: Rewards are best way to convey a message. If a customer is paying on time then reward the customer by giving discounts. This will make the customer pay on time on every transaction.

Negotiating: If a customer is paying late every time, then arrange a meeting and get in touch with him. Talk to him about the late payment and it is happening. Then figure out a solution which works for both of you.

Conclusion

Contract between the buyer and sellers the most important tool by which you can prove in the court about the non-payment. Customer should understand the consequence of non-payment and it can be done with the contract that is drafted before the business starts. If then also, he does not pay or delays then court is always there to rescue you. Feel free to approach the court for help. Court serves justice to people in every circumstance.

There are about lakhs of cases for non payment through cheque or any other instruments. Hire a lawyer if you have any problem related to non payment. If you are facing such a problem, don’t hesitate to call on the above paid link.