Litigation Check Before Giving a Customer Credit Terms (2026)

Use Case · Trade Credit · Customer Onboarding

Updated for 2026 · Claw Editorial

Giving a customer credit terms is a short-term unsecured loan in all but name: you ship first and get paid in 30, 60 or 90 days, and if they do not pay, you join the queue of creditors. A litigation check tells you, before you set that limit, whether the customer is already being chased by other suppliers and lenders, whether its promoter has cheque bounce cases, or whether an insolvency petition is pending. That is the difference between a limit you set with your eyes open and one you set blind. This page explains why the check belongs in the credit decision, what to look for, how to run it on the customer and its people, and how to read what comes back. Last verified October 2026.

01Why this check belongs in the credit decision

Trade credit is often extended on a GST number, a few trade references and a gut feel. Those checks confirm the customer is real and trades, but they do not tell you the customer is already short of cash. Litigation is the early sign of that. If several suppliers have sued the same buyer for unpaid invoices, or its promoter faces cheque bounce complaints, you are looking at a payer who has already stopped paying others.

Running the check before you set the limit lets you decide the terms with real information: offer a smaller limit, ask for advance or a bank guarantee, insist on secured payment, or decline open credit. A litigation check answers a different question from a credit bureau check; see litigation check versus credit check. The two together give you both the payment history and the live disputes.

02Who to search

A customer that defaults is often a company whose promoters are the real risk, so search both:

• The customer company, including former names and any merged or demerged entities.
• Promoters and directors as individuals, since cheque bounce complaints and personal guarantees attach to them.
• Group and connected companies, where distress in one entity reaches the customer you are supplying.

Confirm the correct legal names and director identification numbers from Ministry of Corporate Affairs records first, so the search runs against the right identities.

03What to look for

You are looking for the signals that the customer may not pay:

• Recovery suits by other suppliers, which show the buyer is already not paying its trade creditors.
• Cheque bounce complaints under Section 138, especially a cluster, which is a direct payment-failure signal.
• Insolvency and winding-up: an NCLT petition means you could be an unsecured creditor in a process that pays little.
• Recovery and SARFAESI action by lenders, which shows the customer is short of money.
• Enforcement against promoters as individuals, such as invoked guarantees.
• Consumer and quality disputes at volume, which can point to a business under strain.

A customer that three other suppliers have already sued for unpaid bills is telling you how your invoice will be treated. The limit you set should reflect that, not ignore it.

04How to run the check

Customer disputes can sit in district and civil courts, magistrate courts for cheque bounce, the NCLT, Debt Recovery Tribunals and consumer commissions. Each has its own portal, so a complete search by hand, across the customer and its promoters, is slow, and a sales or credit team onboarding many buyers cannot do it one portal at a time.

1. Fix the identities. Confirm legal names, former names and director IDs from MCA records.
2. Search every forum, not just the customer's home district, for each name.
3. Pull the payment-risk matters forward, recovery suits, cheque bounce and insolvency, by party, forum, stage and amount.
4. Record the search, the names and forums covered and the date, so the credit file can stand behind the limit.

For a large customer the search is worth doing carefully by hand. For a book of many small accounts, a litigation-intelligence tool that searches a list of names across courts at once gives the coverage and speed a manual search cannot. To map every case tied to the customer, see how to find all litigation against a company.

05Reading the result honestly

Keep two honest limits in view. A clean result means nothing was found in these registries, on the date searched, under the names searched; it is not proof that no case exists, so it carries a date and a scope, not a guarantee. And because Indian names repeat, a hit may belong to a different buyer, so a weak name match should be confirmed before it cuts a customer's limit.

The risk also changes over time. A customer that was clean when you onboarded can slide into distress as the relationship grows and the outstanding balance rises, so for your larger accounts the better practice is to keep a watch running, not to check once. See how to monitor a counterparty's litigation continuously.

06Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

For this check Claw runs a dedicated service called ClawScore (clawscore.clawlaw.in), its litigation and criminal-risk intelligence line. You give it a name, a customer, a promoter, or a whole account list, and it returns every matter it finds across 9,102 courts, benches and forums in one scored Excel workbook, with results in under 5 seconds, drawing on 30 crore+ judgments, with Supreme Court decisions from 1950 and High Court decisions from 1990.

The workbook has four parts: a Summary that puts a ClawScore risk band on the customer (Clean, Low, Moderate or High), a Matters sheet listing each case by forum, case number, parties, status and amount, a Related parties sheet that pulls in directors and guarantors, and a Coverage sheet recording what was searched. Every finding carries a match confidence, and anything below 80% is flagged so you can confirm it is really your customer and not a similar name. ClawScore runs three checks, company litigation, individual litigation and criminal background, and with constant monitoring you can keep your receivables book under daily, weekly or monthly review, so new filings, changed movement and closed matters on your larger accounts reach the credit team early. Claw does not use your case documents to train its AI models.

Read it honestly. "Nothing on record" means nothing was found in these registries, on the date searched, under the names searched, not that no case exists; a low match confidence means the name may belong to someone else; and none of this is legal advice, so weigh the material findings with your credit team.

Create a FREE Claw account to run a litigation check on a customer before you set a credit limit, and use case search across Indian courts to surface payment-risk matters first.

07Sources and further reading

• eCourts (court case status): ecourts.gov.in
• Ministry of Corporate Affairs (company and director records): mca.gov.in
• National Judicial Data Grid (official government portal): njdg.ecourts.gov.in
• Claw: clawlaw.in

This page is general information, not legal or credit advice. The weight of any finding depends on the facts, so take advice from your legal and credit teams before you act.

08Frequently asked questions