Growth Hindrance from Disputes: How Much More Growth Will We Sacrifice by Continually Chasing These Old Debts?

In India’s rapidly transforming economy, the growth hindrance from disputes is a growing threat that most businesses underestimate. Chasing old, unresolved debts locks up working capital, delays innovation, and puts strategic initiatives on hold. Whether you’re a startup, SME, or a large enterprise, legal battles over receivables have one thing in common: they stunt your potential.

Many companies in India have expansion plans delayed, revenue potential unfulfilled, and face market penetration challenges, all because valuable time and capital are spent litigating decade-old payment issues. It’s not just about recovering money it’s about the cost of missed opportunities.

The Real Cost: Growth Hindrance from Disputes

When Indian businesses engage in long-drawn debt recovery, they sacrifice much more than cash. They lose time, credibility, investor confidence, and operational momentum. The result? Stunted business growth.

Picture a mid-sized manufacturer stuck in a DRT case over a ₹4 crore payment. The amount could fund new machinery, hire skilled talent, or launch a new product line. Instead, it’s frozen in paperwork. This is the reality for many firms across sectors in India.

Why Do These Legal Disputes Occur So Often in India?

Weak Contracts and Ambiguous Agreements

Many Indian businesses still operate without robust, legally sound contracts. Without defined payment terms, dispute resolution clauses, or governing law, disagreements escalate quickly.

Legal Basis: The Indian Contract Act, 1872, mandates clarity around offer, acceptance, consideration, and lawful object yet these basics are often missing.

Judicial Backlogs and Procedural Delays

Indian courts are overburdened with over 3 crore pending cases, and even special tribunals like DRTs and NCLTs face congestion. As a result, even the Commercial Courts Act, 2015, meant to fast-track cases, fails to deliver timely relief.

Low Awareness of ADR (Alternative Dispute Resolution)

Despite the Arbitration and Conciliation Act, 1996, and Mediation Act, 2023, many businesses still choose litigation over arbitration or mediation, delaying resolution.

Enforcement Challenges

Winning a decree is only half the battle. Executing it in Indian courts can be painfully slow, and often, the losing party deliberately delays payment.

Relevant Laws and Sections Every Business Should Know

Insolvency and Bankruptcy Code (IBC), 2016

Offers time-bound insolvency resolution.
Case Law: In Piramal Capital and Housing Finance Ltd. v. 63 Moons Technologies Ltd. (2025), the Supreme Court upheld the primacy of creditors’ commercial judgment, streamlining dispute closure and asset revival.

Arbitration and Conciliation Act, 1996

Allows institutional or ad hoc arbitration.
Judgment Insight: DMRC Ltd. v. Delhi Airport Metro Express Pvt. Ltd. (2024) showed how procedural lapses can derail arbitration awards, highlighting the need for professionally drafted contracts.

Mediation Act, 2023

Mandates pre-litigation mediation in commercial disputes.
Encourages faster, amicable resolution especially for cross-border and B2B cases.

MSMED Act, 2006

Under Section 15 of the MSMED Act, buyers are required to make payments to MSMEs within 45 days of accepting goods or services. If they fail to do so, Section 16 allows the MSME to claim compound interest at three times the RBI’s notified bank rate. Additionally, Section 18 empowers aggrieved MSMEs to seek redressal through the Micro and Small Enterprises Facilitation Council (MSEFC), ensuring a faster dispute resolution process.

Negotiable Instruments Act, 1881 – Section 138

Covers dishonour of cheques.
Judgment: Shah Brothers Ispat Pvt. Ltd. v. P.M. Raghupathy (2021) confirmed that cheque bounce cases are subject to moratorium under IBC, showing the interconnected nature of debt laws.

Real-World Impact on Business Strategy

Here’s how these unresolved disputes cripple your business:

Expansion plans delayed: You can’t scale when you’re legally entangled.
Revenue potential unfulfilled: Locked cash can’t be used for innovation.
Strategic initiatives on hold: M&A, R&D, and product rollouts get shelved.
Market penetration challenges: Legal baggage limits investor interest and competitive edge.

Actionable Steps for Indian Businesses

Draft Smarter Contracts

Include specific clauses for payment terms, dispute resolution, jurisdiction, and arbitration.
Tip: Name institutions like MCIA (Mumbai Centre for International Arbitration) or ICA in your contract to avoid ambiguity.

Embrace ADR: Arbitration, Mediation, and ODR

Add ADR clauses in contracts.
Use Online Dispute Resolution (ODR) platforms for smaller claims.
Ensure compliance with the Mediation Act, 2023.

Conduct Pre-Contract Due Diligence

Assess vendor/client solvency, payment history, and existing litigation before you sign.

Leverage the MSMED Act (For MSMEs)

Use MSEFC for fast-track resolution of overdue payments, backed by statutory penalties.

Work with Legal Experts

Firms like LawCrust Legal Consulting bring preventive legal strategies, not just litigation support. Our hybrid legal consulting combines traditional legal frameworks with modern business sensibility.

Outlook: Evolving Legal Trends and What to Expect

2024–25 Reforms: The Draft Arbitration and Conciliation (Amendment) Bill limits court interference in arbitration.
Rise of Tech in Law: Virtual hearings and AI-based case management tools are improving efficiency.
India as an Arbitration Hub: Government initiatives aim to position India as a global arbitration destination.
Corporate Governance Push: Increased compliance scrutiny helps prevent disputes at the source.

About LawCrust Legal Consulting

LawCrust Legal Consulting, a subsidiary of LawCrust Global Consulting Ltd., is a trusted legal partner for NRIs and Indians across the globe. Backed by a team of over 70 expert lawyers and more than 25 empanelled law firms, we offer a wide range of legal services both in India and internationally. Our expertise spans across legal finance, litigation management, matrimonial disputes, property matters, estate planning, heirship certificates, RERA, and builder-related legal issues.

In addition to personal legal matters, LawCrust also provides expert support in complex corporate areas such as foreign direct investment (FDI), foreign institutional investment (FII), mergers & acquisitions, and fundraising. We also assist clients with OCI and immigration matters, startup solutions, and hybrid consulting solutions. Consistently ranked among the top legal consulting firms in India, LawCrust proudly delivers customised legal solutions across the UK, USA, Canada, Europe, Australia, APAC, and EMEA, offering culturally informed and cross-border expertise to meet the unique needs of the global Indian community.

How Long Can Indian Businesses Afford to Sacrifice Growth by Chasing Old Legal Disputes and Debt Recoveries?