When an Indian Supplier Will Not Deliver or Refund: Your Real Options

This guide is for the buyer who has already got into trouble: an advance paid and nothing shipped, goods that arrived unusable and a supplier who has stopped answering, or a delivery so late that the order no longer has value.

The honest opening point is that your position is largely determined by decisions made before the dispute — the payment structure, the contract terms, the evidence you happen to have kept. But most buyers have more options than they think, and the order in which you use them matters enormously.

Before anything else: assemble the evidence

Every escalation route below asks for the same material. Gathering it first saves repeating the work and, more importantly, tells you honestly how strong your position is.

The commercial agreement. The purchase order, proforma invoice, sales contract or whatever documents the deal. What was agreed on specification, quantity, price, delivery date and payment terms.

Proof of payment. Bank advice showing amount, date, and the beneficiary account name. Note whether the beneficiary name matches the contracting entity — a mismatch is significant both for your case and for understanding what happened.

The full correspondence. Emails, WhatsApp exchanges, call notes. Export the chat rather than screenshotting it; a continuous exported record is far more persuasive than selected images.

The supplier's identity. Their Import Export Code, GSTIN, company registration number and registered address. If you did not collect these at onboarding, they can usually be reconstructed from their invoice and letterhead.

Technical evidence, where quality is the issue. The specification, the approved or golden sample, inspection reports, photographs with scale references, laboratory results, and a defect rate from a proper sample rather than an impression.

Quantified loss. The amount paid, the cost of replacement, and any demonstrable consequential loss such as a cancelled onward order or a penalty you incurred. A number is worth more than a description of inconvenience at every stage of every process described below, and it is the first thing any adjudicator will ask for.

Step one: the formal written demand

Before any external channel, send one properly constructed demand. A surprising proportion of disputes resolve here, because until this point the supplier may have been treating the matter as a commercial disagreement rather than a formal claim.

A demand letter should:

• Identify both parties by full legal name and registration number
• Set out the contract, the payments made and the obligations unmet, with dates
• State the specific remedy sought — refund of a stated amount, shipment by a stated date, replacement, or a defined credit
• Set a deadline, typically seven to fourteen working days
• State clearly what you will do next if it passes
• Attach the evidence

Send it by email and, where you can, by courier to the registered address. Address it to a named director rather than to your sales contact, because your sales contact may be the person whose problem this is.

Keep the tone commercial. Whatever you feel, the audience for this letter is eventually a Regional Authority, an arbitrator or a bank, and they will read intemperate language as weakness.

Step two: the DGFT trade grievance channel

The Directorate General of Foreign Trade — the body that administers India's foreign trade policy and issues Import Export Codes — operates a channel through which international buyers can raise grievances against Indian exporters.

How it works. Filings are made through the DGFT portal, under the services section covering quality and trade complaints. A filing generates a Unique Reference Number, which lets you track the matter. The case is then evaluated by the jurisdictional Regional Authority, or routed via the relevant Indian Mission abroad.

What it can and cannot do. It is not a court. It cannot award you damages, and it will not enforce a contract. What it does is create official visibility of the dispute with the authority that administers the exporter's ability to export at all, and it frequently produces a response where months of direct chasing produced none.

How to file well. Complete, factual, quantified, with documents attached. A filing that reads as a grievance is weaker than one that reads as a documented account of a contractual failure with a specific unmet obligation.

Realistic expectations. Response times vary and this is an administrative process, not a fast one. Treat it as pressure and official record rather than as a remedy in itself, and run it in parallel with other routes rather than waiting for it.

Step three: understand your actual leverage

This is the part most foreign buyers miss.

An Indian exporter cannot legally ship commercial consignments without an active Import Export Code. It is issued by the DGFT and it is the operational licence for their entire export business — every customer, every shipment, not just yours.

That matters because it changes the shape of the conversation. A foreign buyer sending emails is, from the exporter's side, a problem confined to one relationship. A documented grievance sitting with the authority that administers their IEC is a problem that touches everything they do.

This is not a threat to make casually or crudely, and it should never be dressed up as one. It is simply the reason that formal escalation through official Indian channels carries weight that direct pressure does not, and it is why step two is worth doing properly even though it awards you nothing directly.

Two adjacent sources of leverage:

Export promotion councils. Most sectors have one — spices, engineering, textiles, gems and jewellery, chemicals, marine products. Membership matters commercially to exporters because councils facilitate their access to buyers, trade fairs and certain incentive schemes, so a documented complaint lodged with the relevant council is noticed in a way that a private email is not.

Their bank. If you paid by telegraphic transfer, the receiving bank has a relationship with the exporter and a regulatory interest in that relationship being conducted properly. A formal, factual letter to the branch, copied to their compliance function, is occasionally effective and costs no more than a stamp and an hour of drafting.

Step four: arbitration

Where your contract contains an arbitration clause, this is usually your best formal route.

Why arbitration rather than court. Indian civil litigation is slow. Multi-year timelines are routine for commercial matters, and for most disputes the delay and cost exceed the amount at stake — which is precisely why an unresponsive supplier may be comfortable ignoring you. Arbitration is materially faster, and an award is enforceable.

Institutional arbitration. Bodies such as the Indian Council of Arbitration administer commercial arbitrations under established rules, with panels experienced in trade disputes. Institutional arbitration is generally preferable to ad hoc for a foreign party, because the rules, the appointment process and the administration are all defined in advance.

Cross-border enforcement. India is a party to the New York Convention on the recognition and enforcement of foreign arbitral awards, which is the mechanism by which an award obtained in one member state can be enforced in another. This is the reason a well-drafted arbitration clause is worth more to a foreign buyer than a jurisdiction clause pointing at their own courts — a judgment from your home court may be difficult to enforce against Indian assets, while an arbitral award has a defined route.

If you have no clause. You can still agree to arbitrate after a dispute arises, but a supplier who is ignoring you has no incentive to consent. This is the single strongest argument for including a clause in every purchase agreement: it costs nothing when relations are good and cannot be obtained when they are not.

Step five: litigation, and when it is worth it

Court remains available and is occasionally right — where the amount is large enough to justify multi-year exposure, where you need an injunction, or where there is no arbitration clause and the counterparty has attachable assets.

If you go this route, take Indian counsel, understand the timeline honestly before you commit, and be realistic about recovery. For most disputes under a moderate value, the commercially sane answer is to pursue the administrative routes, extract what you can through negotiation, write off the remainder, and fix the process that allowed it.

That is an unsatisfying conclusion and it is the correct one more often than buyers want to hear.

Working out what kind of dispute you actually have

Buyers tend to describe every failure as the same thing. The routes above work differently depending on which of four situations you are in, and identifying yours changes what to do first.

Non-delivery after payment. Money paid, nothing shipped, supplier unresponsive. The clearest case and the one where formal escalation works best, because the obligation is unambiguous and the evidence is simple. Move quickly — the longer an entity has been unresponsive, the more likely it has other problems.

Delivery of non-conforming goods. Goods arrived and are wrong. Harder, because the supplier will argue the goods conform and you will be arguing about specification, sampling and inspection method. Your position depends almost entirely on documentation: a golden sample, an agreed defect classification, an independent inspection report. Without those, you are two opinions apart.

Short shipment or substitution. Fewer goods than invoiced, or different goods. Evidentially strong if you have an independent tally at loading or a proper arrival inspection, weak if you have only your own count.

Chronic delay causing loss. No breach of specification, just lateness that destroyed the commercial value. The hardest to recover on without a liquidated damages clause, and the strongest argument for including one.

The practical point: the first two need different evidence and different arguments, and treating a quality dispute like a non-delivery — demanding a full refund on a container of goods you are holding — usually stalls a negotiation that could have settled at a discount.

Negotiating a settlement, which is how most of these end

The realistic outcome of the majority of disputes is a negotiated settlement, not a formal award. Approaching it deliberately produces better results than escalating and hoping.

Decide your walk-away before you start. What is the least you will accept, and what will you do if you do not get it? A negotiation without that number decided in advance drifts.

Separate the money from the relationship. If you intend to keep buying, say so, because a supplier who believes the relationship is over has no reason to concede anything. If you do not, do not pretend otherwise to extract a settlement — it rarely works and it damages your standing with the councils and channels above.

Offer a structure, not just a demand. A full refund is often genuinely impossible for a small exporter with the money already spent on material and wages. A credit against a future order, a partial refund staged over two months, replacement at cost, or a discount on the goods you are holding are all things a supplier can actually do. Options get settled; ultimatums get ignored.

Put the settlement in writing and make it final. A signed settlement agreement, stating the amount, the timing, the mechanism and that it resolves the matter in full, prevents the dispute resurfacing.

Watch your own position too

Two things weaken a buyer's case more often than they realise, and both are worth checking honestly before escalating.

Did you accept the goods? In many legal systems, taking delivery, using the goods, or waiting an unreasonable time before complaining can be treated as acceptance and can limit your remedies. Inspect promptly and reject promptly if you are going to reject.

Did you contribute? Late approvals, a changed specification, a delayed letter of credit or an unpaid balance all give the supplier a defence. If you are in the wrong on any of these, know it before you put a demand in writing, because it will be raised.

Recovering from a distance: the practical constraints

Three realities shape what is achievable for a foreign buyer.

Small amounts are rarely worth formal pursuit. Below a certain value — and the threshold is higher than most buyers expect once counsel, arbitration fees and management time are counted — the commercially rational answer is to extract what you can, write off the rest and fix the process. That is a real answer, not a failure.

Enforcement needs assets. An award or judgment is worth what you can collect against. An exporter with no attachable assets, or one that has already ceased trading, is not a good target for expensive process regardless of the merits.

Time works against you. Evidence degrades, people leave, entities dissolve. If you are going to escalate, do it while the file is fresh and the counterparty still exists.

None of that means give up early. It means calibrate the effort to the value and the prospects, rather than pursuing a matter on principle at a cost that exceeds the loss.

The insurance question

Two mechanisms are worth knowing about before you need them.

Trade credit insurance covers a seller against buyer default, so it protects the exporter rather than you. It is mentioned here because it explains why some Indian exporters are relaxed about offering credit terms, and because the equivalent product for buyers is thinner.

Buyer-side protection comes mainly from the payment instrument rather than an insurance policy. A documentary letter of credit is the strongest, because the bank pays only against conforming documents. Some card and escrow arrangements offer protection at smaller values. For most trade-sized transactions, the letter of credit is the mechanism.

Preventing the next one: the four decisions that matter

Every dispute above is easier to prevent than to resolve, and the prevention is four decisions taken at order stage.

1. Payment structure. This is the big one. A large advance against a proforma invoice transfers all leverage to the supplier at the moment the money lands. The alternatives:

• Documentary letter of credit with an inspection certificate and, where relevant, a certificate of analysis as required presented documents. The bank enforces your conditions.
• Documents against payment through banks, so title moves with payment.
• Modest advance, balance against independent inspection. Twenty to thirty percent on order, seventy to eighty against a clean inspection certificate from an inspector you appointed and paid.

2. An arbitration clause. Institution, seat, number of arbitrators, language, governing law. Four lines.

3. Verified counterparty identity. Confirm the IEC, GSTIN and company registration resolve to the same legal entity as the quotation *and the bank account*. An account-name mismatch is the single most reliable early signal of trouble, and checking takes minutes. Our supplier verification guide sets out the full four-layer process.

4. Inspection before payment release. Appointed and paid by you, never by the seller. Our guide to sample versus bulk production covers the inspection sequence.

Writing the contract terms that make this recoverable

Everything above is easier if four clauses exist. All four are short, none is contentious at order stage, and none can be added afterwards.

Arbitration. Name the institution, the seat, the number of arbitrators, the language and the governing law. This is the single most valuable clause available to a foreign buyer, because it converts an unenforceable position into one with a defined route and a cross-border enforcement mechanism.

Inspection and acceptance. State who inspects, against what standard, at what point, and that payment of the balance is conditional on a conforming certificate. This decides quality disputes before they start, by making the inspection result the operative fact rather than a matter of opinion.

Liquidated damages for late delivery. A stated amount per week of delay, capped. It gives a delay a price, which changes the supplier's incentives, and it removes the need to prove your loss.

Retention of title and risk. When title passes and when risk passes. Standard in most Incoterms but worth stating explicitly where you are paying in advance, because it determines whose goods they are if the supplier becomes insolvent while holding them.

Two further points that cost nothing. Name the exact legal entity on both sides, with registration numbers, so there is no argument later about who contracted. And specify the bank account in the contract, so a later change of account details is a contractual variation rather than an email.

Preventing the specific frauds

A minority of these situations are not commercial failures but deliberate. The patterns are consistent and each has a cheap check.

The entity that does not quite exist. A website, a directory listing, a free email address, and registrations that do not resolve. Check the IEC, GSTIN and company registration against public sources before paying anything.

The bank account in a different name. Occasionally legitimate — a group treasury entity, a factoring arrangement — and always worth documenting and verifying before, not during, payment. An account-name mismatch appearing late, with urgency attached, is the classic shape of payment diversion.

The changed bank details by email. A genuine and widespread fraud, sometimes perpetrated by a third party who has compromised one side's email rather than by the supplier at all. Verify any change of banking details by voice, on a number you already held, never on one supplied in the email requesting the change.

Manufactured urgency. Vessel closing today, price valid until this evening, container already booked. Time pressure exists to prevent verification. A real exporter will hold a price for the two days it takes you to check them.

The sample that is too good. A sample materially better than the grade you ordered is establishing an expectation the shipment will not meet. It is the reason sampling should move to an inspector you appointed.

Our supplier verification guide sets out the full four-layer check, and none of it takes more than an afternoon.

A practical escalation ladder

1. Assemble the evidence file completely.
2. Formal written demand to a named director, with a deadline and a stated next step.
3. If unresolved, file a DGFT trade grievance and retain the Unique Reference Number.
4. In parallel, notify the relevant export promotion council.
5. Consider a factual letter to the supplier's bank.
6. Where a clause exists, commence institutional arbitration.
7. Take Indian counsel on litigation only where the value justifies the timeline.
8. Whatever the outcome, change the payment structure before the next order.

Work down the ladder, not up it. Each step costs more than the last in time, money and relationship, and a surprising number of disputes resolve at step two once the supplier understands the matter has become formal.

The short version

Your leverage in a dispute with an Indian supplier is mostly decided before the dispute exists, by the payment structure and the contract. If you are already in one, work down the ladder rather than up it: complete evidence file, formal demand with a deadline, DGFT grievance with the reference number retained, export promotion council, then arbitration where a clause exists.

Understand the leverage you actually hold. An Indian exporter cannot ship commercially without an active Import Export Code, which means a documented grievance through official channels reaches something they care about in a way that a foreign email chain does not.

And be realistic. Most of these end in a negotiated settlement rather than an award, small amounts are rarely worth formal pursuit, and the durable fix is not a better lawyer but a payment structure that never puts you in this position again.

Where Katalyzon fits

We are not lawyers and nothing here is legal advice — a dispute involving real money deserves Indian counsel, and the arbitration clause in your contract deserves a lawyer's eye before you sign it, not after.

What we do is the work that makes this guide unnecessary: establishing who a counterparty actually is before you pay them, verifying registrations against evidence we can show you, and coordinating the inspection that releases your money only when the goods are right.

Post a requirement and our desk will scope it against suppliers whose identity and capability we have checked. Every brief is read by a person before anything is routed, and your details stay masked until you accept a quote.

For counterparty vetting, see our supplier verification guide. For how our verification tiers are defined and what evidence sits behind each one, our methodology and our note on what a supplier must show.