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Anil Kr Garg (Business)     20 February 2010

Interest claim for delayed payments from Customers

In business, it is very common for customers to delay payments to suppliers despite clear payment terms mentioned in the purchase orders. Suppliers generally mention a condition of interest in their invoice for delays in payments duly stating rates like 18% p.a. or 24% p.a. In cases where a suit has to be filed for recovery, interest is included in the claim as well.

My experience is that courts allow the interest with principle but at very low rates. In some cases, I have seen simple interest @ 12% and in others, a disappointing, simple interest rate of 6%. Since this interest is not even compounded (which is to be borne by the supplier for his borrowings from banks), the effective rate is very low for the defaulter and infact, it is an incentive for him to avoid payment even after order of decree.

In one case, my customer finally paid the principal amount after a delay of 18 months. Now I want to sue him for overdue interest. Payment terms as per Purchase Orders are 60 days. My invoice carries a condition of overdue interest @ 18%, but the customer can always argue that he never agreed for interest.

Can I sue him successfully for this overdue interest? Pls advise.


Also, when I sent him a notice for winding up, he simply denied the liability and I was forced to file the winding up petition. After lot of resistance, customer paid up principal amount and highcourt insisted that I withdraw winding up petition which I did. Now, customer has owned up his liability but even under affidavit to Gujarat High Court, he had denied his liability. This way, he made false statements and the intention obviously was to rob me of my rights to file winding up petition under company law and to force me to go through a slower and costly route of civil suit. Can I now take some criminal proceedings against such customer for lying under oath as well?


Pls advise.


Thanking you,

Anil Garg




 2 Replies

TVD Rajkumar (Advocate)     20 February 2010

"Can I now take some criminal proceedings against such customer for lying under oath as well?"

see sections 340 CrPc, 181 IPC

V. VASUDEVAN (LEGAL COUNSEL)     21 February 2010

In this case, it is important to review the purchaser order of the customer and its terms and conditions. Since the supply is based on the purchase order, adding any interest or any other element in the invoice has no effect. Does the purchase order stipulates any period of payment or interest for any delay. Generally a purchase order provides for various terms like quality, acceptance etc. and where the supply is regular, delays tend to occur. While fair interest can be claimed by  a separate suit, the process is lengthy and expensive. 


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