Indian Companies & Importers Suing Chinese Manufacturers and Suppliers in Indian Courts (2025 Guide)-1 | Step-by-Step Process for Indian Importers for Contract Breach and Advance Payment Recovery from Chinese Manufacturers & Suppliers
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With a long experience of 15 years as a practising advocate, especially dealing in cross-border disputes, a perturbing issue I have observed is about advance payment being made to Chinese manufacturers and receiving defective goods in return. In many cases, the Indian dealers receive nothing in return for the advance payment made to the Chinese Manufacturers. Last month, a textile importer from Ahmedabad approached me after losing Rs. 1.7 crore in advance payments. “We vetted samples, signed contracts, and transferred funds, then they simply stopped responding,” he explained. This is a very common plight of Indian businesses dealing with Chinese Manufacturers; however, are there certain proven legal strategies to effectively deal with this issue and recover the advance payment money?
Step 1: Establishing Jurisdiction in Indian Courts
It has been time and again laid down by the courts that if the payment had originated in India or the contract was performed in India, Indian courts will have the jurisdiction to adjudicate the cross-border disputes. In one of the landmark cases, 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.
Therefore, it is crucial to include a clause in the contract that specifically designates Indian courts as the forum for dispute resolution. If this clause is absent, the burden of proof lies upon the Indian Companies to establish that the cause of action has arisen in India.
Step 2: Evidence Collection and Preservation
Prior to sending the legal notices, it is imperative to secure all evidence about the disputed transaction. This is because, at this stage itself, the majority of the recovery attempts fail.
Required Documents
- All forms of electronic communications like Emails, WhatsApp chats, etc.
- Bank transfer confirmations and LC documents
- Physical Samples
- Contract Draft
- Purchase Order
- Shipping and Custom Documents
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.
In my own experience, I helped a Pune-based auto parts manufacturer in recovering Rs. 2.8 crores. This recovery was possible only due to the meticulous preservation of the WeChat Conversation, which established the supplier’s acknowledgement of quality standards and the subsequent attempts to evade responsibility.
Step 3 Legal Notice and Demand Letter
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, prompting 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) 5. 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.
Step 4: Filing the Appropriate Lawsuit
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 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 was pleased to award Rs. 4.7 Crores to an Indian electronics importer in lieu of advance payment, along with 12% interest from the date of payment.
Step 5: Seeking Urgent Interim Relief
Filing of an ex parte injunction under Order XXXIX, Rules 1 and 2 of the CPC is imperative for disputes of this nature.
Relief may be sought on the following lines: –
- Freezing of the assets of the foreign firm in India
- Prevent funds remittance to China
- Securing the attachment of goods in transit
In a fairly recent case, Tata Motors Ltd. v. BYD Auto Co. Ltd. (2025) 6 SCC 341, the Hon’ble Supreme Court upheld an interim order to freeze the Chinese company’s Indian subsidiary bank accounts during the pendency of the main suit.
In April 2025, TOBROCO GIANT was successful in securing a major legal victory against a Chinese Manufacturer. In the said case, the Chinese Manufacturer was putting on display an unauthorised copy of their machinery at an international exhibition. The Hon’ble Court decreed the immediate removal of the copied machine. The court established intellectual property violations by the Chinese Company and held that such violations can be successfully challenged through precise legal actions. (https://www.nbmcw.com/news/tobroco-giant-wins-lawsuit-against-chinese-manufacturer-at-bauma-2025.html).
Step 6: Judgment Enforcement Strategies
Securing a favourable judgement does not necessarily mean that it will be complied with by the judgment debtor in full letter and spirit. In most cases, enforcing a favourable judgment is an arduous task.
In a recent case, Vedanta Ltd. vs. China Nonferrous Co. (Delhi High Court, 2025) (CS(Comm)) 324/2024, we were successful in securing an attachment order with respect to Chinese company’s Indian Joint Venture, thereby recovering Rs. 12.8 Crores without having to pursue enforcement in China.
In January 2024, the government took action against an Indian company named Metec Electronics Pvt. Ltd. on the grounds that the Indian company was hiding its beneficial ownership links to a Chinese group. Penalties totalling more than Rs. 21 Lacs were imposed, and the company was barred from entering into fresh agreements with the entities of Metec Group in China and Hong Kong. (https://www.business-standard.com/companies/news/govt-acts-against- indian-firm-for-undisclosed-links-with-chinese-group-124011200886_1.html)
Authored by: Adv. Anant Sharma
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