Defective Machinery Imports from China? Expert Legal Strategies for Indian Importers to Sue Chinese Manufacturers & Suppliers to Recover Advance Payments-1 | Legal Steps for Indian Importers who have Received Defective Machinery from Chinese Manufacturers or Suppliers
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Last week, I encountered a machinery importer from Ludhiana who was visibly distressed as he had purchased CNC machines worth Rs. 2.7 Crores from a Ningbo-based manufacturer, and within just three weeks of installation, critical components failed. Upon failure of the machine, he called up the supplier, whose responses started growing evasive before a complete stop. More distressing was the fact that he had already paid an advance amount of Rs. 1.8 Crores. This is not an exceptional case, it’s a common plight of Indian importers dealing with Chinese manufacturers. I myself have handled more than 200 such disputes starting from 2020, and given my experience, there is a recurring pattern of fraud, and hence, there are certain proven legal strategies that work for Indian importers to recover their payments.
The Growing Crisis of Defective Chinese Machinery
The Directorate General of Foreign Trade (DGFT) has documented a concerning trend that the complaints pertaining to defective industrial machinery from China have increased by over 37% in the last fiscal year. Some of the common issues include:-
- Substandard components masked during initial testing
- Specifications differing from agreed-upon parameters
- Incomplete or overly technical user manuals
- Non-compliance with Indian Safety Standards
The Indian Embassy in Beijing has well documented a recurring fraud pattern and released an advisory in the same regard. I have faced the same scenario time and again in my legal practice. The scenario unfolds as follows:
“The Indian company makes a percentage of the total amount as an advance payment, after which the Chinese Company goes slow on communication and cites excuses such as failure to process advance payment on time, increase in raw material cost, issues on the supplier side, etc.
Step by Step Legal Guide for Indian Importers who have received Defective Machinery from Chinese Manufacturers or Suppliers
Step 1: Immediate Evidence Collection
Any sound legal strategy begins with proper documentation. Recently, I won a Rs. 4.2 Crore claim case solely because we meticulously documented evidence from day one.
Essential Documentation: –
- Comprehensive inspection reports by certified engineers
- Video documentation of machinery failures
- All communications with the supplier (WeChat, WhatsApp, Emails)
- Original Contract specifications and deviation reports
- Import documents and bank payment records
In the recently decided case, Bharat Electronics Ltd. vs. Shenzen Tech Co. (Delhi High Court, 2024) CS (Comm) 237/2024, the court was pleased to dismiss Rs. 4 Crore claim precisely because the electronic communications were not properly authenticated under section 65B of the Indian Evidence Act, 1872. We cannot make this mistake.
Personal Experience: A Surat-based textile machinery importer approached me with a Rs. 3.4 Crores dispute, we immediately engaged a court-approved technical expert to document the defects. This is especially crucial since, many times, Chinese manufacturers claim that the defect was during installation and not during manufacturing.
Step 2: Technical Assessment and Breach Establishment
A coherent and sound legal action establishes that: –
- The machinery fails to meet the contracted specifications
- Defects originated from manufacturing itself and not during installation or operations
- The supplier was notified within the warranty period
Recently, in Ravi Engineers vs. Dongfang Electric Corp. (Consumer Case No. 542/2024), the Hon’ble NCDRC awarded Rs. 1.7 Crores compensation because the Indian entity was able to legally establish manufacturing defects through expert testimony.
The BIS or third-party certifications can provide defect analysis reports which are admissible in the court.
Step 3: Strategic Legal Notice Drafting
A meticulously drafted legal notice prior to filing a civil suit is imperative since it ought to serve two purposes by establishing the seriousness of the claim and, in many cases, prompt a settlement from the opposite party.
Essential Elements of a Legal Notice
- Detailed chronology of transactions
- Specific Breach of Contract Terms
- Clear demand for refund/replacement
- Specified timeframe (typically 15 – 30 days)
- Explicit mention of legal consequences.
The legal notice should be sent over mail as well as registered post with acknowledgement due. In the case of Chinese Manufacturers, it is always advisable to send the Legal Notice in both the languages English and Mandarin to avoid claims of misunderstanding due to language. In a fairly recent case, M/s Tekno Electrics vs. Zhejiang Industrial Co. (Delhi High Court, 2025) FAO(OS) 112/2025, the Hon’ble Delhi High Court acknowledged this approach as ‘due diligence’
Step 4: Initiating Legal Action in Indian Courts
When the legal notices fail to yield results, formal legal actions are a necessity.
If the claim is under Rs. 3 Crores, a summary suit under Order XXXVII of CPC may be filed in the appropriate commercial court.
If the claim is over Rs. 3 Crores, a civil suit may be filed before the Commercial Division of the High Court.
In one of the landmark cases that I handled, Rajesh Exports vs. Guangdong Metals Ltd. (Delhi High Court, 2024) FAO(OS) 142/2024, Hon’ble Justice Pratibha Singh laid down that when the payment originates from an Indian bank and in exchange the goods are delivered to Indian ports, Indian Courts shall have full jurisdiction under section 20(c) of the Civil Procedure Code.
Authored by: Adv. Anant Sharma
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