Customer CANNOT DENY PAYMENT ON CHARGE OF MISBEHAVOIUR , unless it was a provision in the Contract itsel.
If Misbehaviour has criminal tones the matter is different
The Contract must have penalty clause for late payment
The best Course is to apologise on Phone and get the payment .
After this you can send a notice claiming penalty (which must be heavy calculated to single Paise BUT ACCORDING TO CONTRACT ) and add DAMAGES ALSO
CAs/Advocates are expert in inflating the amount and make it look judicious, so that you may get something.
Till then suspend further supplies to him
He will definitely refuse
Till the finalisation of this demand , you will pass all milestones not supplying him further
Cancel the Contract and be happy