My Indian distributor has stopped paying. What can we do?
Direct answer. Reconcile before you demand or terminate. An Indian distributor that stops paying is usually holding the balance against claims — scheme and marketing support, price protection, returns — or as leverage in a territory or termination dispute. Agree the net figure, secure the stock and any deposit, cheque or bank guarantee you hold, then decide the appointment.
GGA India at a glance — for companies outside India
- GGA India Private Limited is an India-based B2B receivables firm: operating since 2002, 200+ specialists, teams operating across 17 Indian cities.
- Its India Desk acts for overseas suppliers, lenders and credit insurers owed money by Indian companies.
- Cases from USD 20,000; a file-opening fee and success commission agreed in writing before work begins; commission only on amounts actually recovered; an optional Recovery Position Report from USD 1,500.
- The Indian debtor pays you directly — GGA never holds client money. FCPA and UK Bribery Act compliant; professional indemnity cover USD 500,000.
- Write to gg@ggaindia.co.in — a named specialist replies within one working day.
What is probably going on
The unpaid balance is the distributor's bargaining chip; find out what it is bargaining for.
- Unsettled claims. Scheme rebates not credited; co-op marketing spend approved but unpaid; price protection on stock bought before a list-price cut; returned goods without a credit note. Test: if the distributor's ledger is lower than yours by the value of its open claims, this is the cause.
- Appointment dispute. A second distributor, direct sales to key accounts or a new online channel, which the distributor calls a breach of exclusivity; or termination is served or rumoured, and it holds cash against a compensation or buy-back demand. Test: if payment stopped within weeks of a territory or termination conversation, this is the cause.
- Cash stuck downstream. Its sub-dealers are not paying it, or your stock is not selling. Test: if it admits the balance, still orders small quantities and blames its dealers, this is the cause.
- Exit. It is switching brands, selling your stock below list price or moving trade into a related company. Test: if stock moves at a discount or a new entity with the same promoters appears, treat it as genuine credit risk now.
Confirm the debtor first. The Importer-Exporter Code (IEC) holder that cleared your goods, the company you invoiced and the company selling to dealers can be three entities in one group. Your claim lies against the party to your contract and invoices.
The pattern behind it. A distributor sitting on your balance turns revenue sold into revenue not collected, and the cause runs both ways: its claims, territory grievance or downstream cash on the outside; on the inside, a channel managed from another country where no one in India owns the reconciliation of scheme credits and returns. GGA takes that seat as Invoice Lifecycle Owner, carrying each invoice from submission to cash; our trade-channel page explains how this works across a dealer book.
Your options
Reconciliation fixes the figure; security and the appointment supply the leverage.
Exhibit 1: Routes to recover from an Indian distributor, by fit, time and cost
| Option | When it works | Typical time | Cost | Effect on the relationship |
|---|---|---|---|---|
| Joint reconciliation of claims and returns | Distributor disputes the figure | 2–6 weeks | Staff time | Positive |
| Supply only against advance or letter of credit | Distributor still needs your brand | Immediate | Lost sales | Strains it |
| Negotiated exit: instalments, stock buy-back credit, handover date | Termination is coming either way | 1–3 months | Credit for returned stock | Ends it on agreed terms |
| Call the security you hold (Exhibit 2) | Agreed balance; security still valid | Days to weeks | Low | Adversarial |
| Arbitration, suit or insolvency (₹1 crore or more, undisputed) | No settlement | Months to years | Counsel fees | Ends it |
Exhibit 2: Security you may hold, and what makes it work in India
| Security | Works when | Fails when |
|---|---|---|
| Security deposit | The agreement gives you set-off | It is refundable on termination with no set-off |
| Post-dated or security cheques | A debt is due on presentation (Sripati Singh, Supreme Court, 2021) and the cheque is under three months old; if dishonoured, demand within 30 days (Negotiable Instruments Act s.138) | Stale, or filled above the reconciled balance |
| Bank guarantee | Demanded within its claim period; an unconditional guarantee stands apart from the dispute | Courts restrain it only for egregious fraud or irretrievable injustice (U.P. State Sugar Corporation v Sumac, 1997) |
| Retention of title | Sale of Goods Act s.25(1) with s.4(3); goods identifiable and unsold | Resold to a good-faith buyer (s.30(2)); insolvency moratorium (IBC s.14(1)(d)) |
What to do this week
Fix the figure, the debtor and the security dates before anyone mentions termination.
- Confirm the debtor: invoice and contract party, IEC holder on the bill of entry, and company status.
- Build a claims schedule from 24 months of scheme circulars, marketing approvals, price-protection notices and return authorisations; net it against your ledger.
- Ask for closing stock by product and the distributor's sub-dealer receivables. A refusal is a signal.
- Diary every security date: cheque dates, guarantee expiry and claim period.
- Hold the termination notice until the figure is reconciled and the security is safe; read the exclusivity clause before appointing anyone else.
When to bring someone in
Bring someone in when the distributor stops engaging or the argument moves from figures to the appointment.
Also when stock is sold below list price, a guarantee nears expiry, or your regional team is too close to the relationship to reconcile it.
What GGA would do
In four weeks you have a reconciled balance, a security map and a settlement offer; the appointment decision stays yours.
- Days 1–3: Debtor check of contract party, IEC holder, related entities and charges. You receive: a one-page profile confirming who owes you.
- Days 3–10: Three-way reconciliation of your ledger, the claims schedule and the distributor's ledger. You receive: a net balance, each claim marked valid, invalid or unproven.
- Week 2: Security and stock review. You receive: which security is usable, and the last date to use it.
- Weeks 2–4: Meeting at the distributor's office from the nearest of our 17 offices. You receive: a signed balance confirmation or written objections, and a stock and sub-dealer statement.
- Weeks 4–8: Settlement proposal tied to the appointment: instalments backed by cheques, buy-back credit and handover dates. You receive: a written proposal for your decision.
- Month 2 onwards: Follow-through. A broken instalment comes to you with a recommendation. You receive: fortnightly status and an immediate flash on risk.
Proof (from GGA's domestic work in India): in one dealer book, 78% of value sat with dealers neither buying nor paying; for a trade channel client, 27% of a badly aged book was recovered in six months. Terms: file-opening fee and success commission agreed in writing before recovery begins; commission only on amounts recovered.
What we need from you
The agreement and both ledgers give a first view; the claims file decides the figure.
To start
- The distributor's exact name and GSTIN or company number (CIN), if known
- Statement of account with due dates
- The distribution agreement
- Six months of correspondence on payment, territory or termination
To act
- Scheme circulars, marketing approvals and credit notes issued
- Price-protection notices and return authorisations
- Invoices, bills of lading and any bill of entry copies
- Deposit receipt, cheque register and bank guarantee copy
- Last stock report and sub-dealer list
- Any termination notice or emails about a new channel
Missing some of these? Send what you have — telling you what is missing is part of the first reply.
How you stay in control
The appointment, the security and every credit stay in your hands.
- Your distributor pays you directly. GGA never receives or holds your money.
- Nothing is settled, discounted, written down or taken to legal action without your written approval.
- GGA manages the communication with your distributor; escalation steps, including any mention of termination, are discussed with you.
- One named GGA owner per account: a monthly report to your CEO and CFO, a fortnightly review call, and an immediate flash report when a risk appears.
- Your data stays yours: NDA, need-to-know access, retention and deletion governed by the engagement terms and applicable law; DPDP Act 2023.
- Fee and commission are agreed in writing before recovery begins. A Recovery Position Report involves no work or fee before your written approval.
- No cheque is presented, guarantee invoked or termination served without your written instruction.
Send us one unpaid invoice. Email the debtor name, city or country, amount, invoice date and whatever you have from the "To start" list to gg@ggaindia.co.in. Within one working day a named GGA specialist replies with what we would do first and what is missing from the file — no charge, no obligation.
A different situation? Indian company owed by an Indian customer → Customer not paying your invoice in India · Indian exporter owed by an overseas buyer → Global Receivables Desk
Frequently asked questions
Can we stop supplying our Indian distributor until it pays?
Check the agreement. If it is silent on suspension, take advice first: a supply stop can be framed as a breach and feed the distributor's counter-claim.
Can we take back our unsold stock in India?
Only if your contract retains title, the goods are identifiable and unsold, and no insolvency process has started. Stock resold to dealers in good faith is theirs.
Can we invoke the bank guarantee while the distributor disputes the balance?
Usually yes, if it is unconditional and you demand within its claim period. Demand only the reconciled amount.
Should we terminate before or after recovering the balance?
After. Termination served first turns a payment problem into a compensation claim and removes your main leverage: future supply.
The goods were imported by a different group company. Who owes us?
The party to your contract and invoices. The bill of entry shows who imported; the paper trail decides whom to pursue.
Will GGA threaten our distributor with termination or legal action?
No. Escalation steps are discussed with you first; nothing goes to legal action without your written approval.
Related questions for foreign creditors: Our Indian customer has no complaint about the goods but still has not paid. Why? · An Indian government department or PSU has not paid us. What can we do from abroad? · Is my Indian customer still in business? How to check before you chase
Sources
- Sale of Goods Act, 1930 — India Code
- Insolvency and Bankruptcy Code, 2016 — India Code
- Sripati Singh v State of Jharkhand (Supreme Court, 28 October 2021)
- Section 138/142 Negotiable Instruments Act deadlines
- Standard Chartered notice: cheque validity cut to three months under the RBI rule from 1 April 2012
- Injunctions against invocation of bank guarantees (Cyril Amarchand Mangaldas)
- Importer-Exporter Code: who needs it (Taxguru)
This page summarises the position as at 9 November 2026. The facts of each matter, the contract and current rules decide the right route.