Charge searches, litigation history and payment behaviour — what to verify before extending open credit.
Identity and standing
Confirm the exact legal entity: CIN or LLPIN, registered office, directors and their other directorships, and whether the company's filings with the Registrar of Companies are current. Chronic non-filing is an early distress signal.
Charges and encumbrances
A charge search shows which lenders already hold security over the assets. If everything of value is charged to a bank, your unsecured invoice sits at the back of a long queue.
Litigation and default history
Search the courts, the DRTs and the NCLT for pending matters, and look for prior Section 138 complaints. A pattern of cheque dishonour tells you more than any financial statement.
Payment behaviour and references
Ask two existing suppliers about average days to pay. Combine that with GST filing regularity and the last two years of financials to set a credit limit you can defend internally.
Set terms, then review them
Write the limit down, review it every six months, and stop supply automatically when exposure crosses it. Most bad debts are not sudden — they are a limit nobody re-checked.
This note is general information on Indian law and not legal advice on your matter. For advice on a specific account, speak with us at +91 73300 22222.