Every day we are approached by sellers and service providers looking to recover money from defaulters under invoices they have raised. 9 out of 10 times the invoices don’t include some of the essential terms, which would make it much easier and cost-effective for the client to file legal proceedings to recover their invoice amount and also interest on that amount. Here are some points you ought to include in your invoices:
- “Subject to <city> jurisdiction”: Let’s say you have an office in Mumbai but supplied goods to a company which is located at Delhi. When the invoice is unpaid and you have to file a case, jurisdiction can be a problem. You would probably want to file in Mumbai, but the other company object that the case is supposed to go to Delhi because that’s where the goods were delivered and that’s where their company has their offices (as per law this would actually be a good defence!). If you mention “Subject to Mumbai Jurisdiction” then it improves the chances of your case in Mumbai being maintainable.
- Rate of Interest: Even when you win a case, you’ll get your entire invoice amount but you may not get any interest, or if you are lucky you might get a maximum interest of 6%. Unless there is a contract or invoice that provides for a higher rate of interest, it becomes very hard to claim it in court. Include something like “Interest @18% for payments received after ___ days from date of invoice”.
- Due Date: If there is a credit period then mention the due date of the invoice. If payment is supposed to be made immediately then the date of the invoice itself is the due date. This is important for clarity and also for something called “limitation”. For ordinary cases of recovery of money under an invoice the case has to be filed within three (3) years of the date the invoice is due. If you don’t mention the due date, the timer for the 3 year period will start ticking from the date of the invoice itself.
- “Disputes to be decided by sole arbitrator at <city>”: There is a shortage of judges in courts in India and cases take years, and sometimes decades, to reach a conclusion <Thareek pe Thareek…>. An arbitrator is a private individual who decides on your dispute, and whose decision is binding on the parties. Generally, cases before an arbitrator get done in 18 months. But currently appointing an arbitrator isn’t a very feasible option in India, if the money being claimed is less than 10 lakhs, so only put this in invoices of higher amounts.
- Reference to Purchase Order (if any): If the goods/services were supplied/provided pursuant to a purchase/work order then ensure that you make a reference to it so that it becomes easy for your lawyers and a Court of law to co-relate them.
Also, please remember to keep your invoices and delivery receipts carefully.
This article has been authored by Vikrant Shetty, Partner at Dhruve Liladhar & Co., Advocates, Solicitors & Notary.