One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.
Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.
Rohan Gupta was a fresh graduate from Nagpur who had joined a Pune-based technology startup, VeloxGrid Solutions, as an intern in early July 2024. The offer letter clearly stated a monthly stipend of Rs. 12,000, and he had completed his internship through December 2024 with consistent positive feedback from the founder, Arvind Sehgal. When December ended, Arvind assured Rohan that all six months of pending stipend would be cleared by February 2025, claiming the company was awaiting a client payment from a Bengaluru-based partner firm.
February came and went. Then March 2025. Each time Rohan followed up, Arvind said the same thing — funding was around the corner, it's not a big amount, just a few more weeks. Rohan had the original offer letter, the internship completion certificate signed by Arvind, and a long chain of WhatsApp messages clearly acknowledging the outstanding dues. He had already sent two polite emails demanding payment, both of which were acknowledged but never acted upon. Frustrated, he consulted a general practitioner first, whose approach did not move things forward meaningfully.
He then approached Advocate Sudhir Rao. A formal legal notice was served under the Indian Contract Act, 1872 and the Specific Relief Act, 1963, supported by the documentary evidence Rohan had preserved. The structured legal approach, combining a well-drafted notice with clear invocation of civil remedies, brought Arvind Sehgal to the table promptly. The matter was resolved with full payment of the outstanding stipend within weeks of the notice being served — an outcome that had remained elusive for months before specialised handling.
Advice in Such Cases
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
Preserve All Evidence Immediately: Don't delete any WhatsApp messages, emails, or voice notes exchanged with the founder or HR. Screenshot everything and store copies in a secure location — on email or cloud. Courts and negotiating parties both respond strongly to contemporaneous documentary evidence.
Send a Formal Legal Notice First: Before filing any suit, a formal legal notice under the Indian Contract Act, 1872 is often the fastest route to resolution. Many startups, when faced with a properly drafted legal notice citing specific statutory provisions, choose to settle rather than face civil proceedings. And here's the thing — the tone and citations in that notice matter enormously.
Don't Wait Too Long: Limitation clocks start running from the date of breach or non-payment. Delays reduce your options and can complicate your legal position. Stipend recovery matters involving specific contractual terms benefit significantly from advocates who regularly handle employment and contract disputes, since procedural nuances around money recovery suits are often unfamiliar to general practitioners.
Applicable Sections of Law
This is a civil matter, primarily involving breach of a contractual obligation to pay agreed stipend. The relevant legal provisions include:
- Section 37, Indian Contract Act, 1872: Obligation of parties to perform their respective promises under a contract.
- Section 73, Indian Contract Act, 1872: Compensation for loss or damage caused by breach of contract — the defaulting party must make good the loss.
- Section 20, Specific Relief Act, 1963: Discretionary power of court to order specific performance of a contract, including payment obligations.
- Order 37, Code of Civil Procedure, 1908: Summary suit procedure for recovery of money due on a written contract — applicable where the offer letter constitutes a written agreement for payment of stipend.
Jurisdiction — Where to File the Case
Jurisdiction. That's the first practical question, and getting it wrong costs time. For recovery of unpaid stipend, jurisdiction lies with the civil court based on two factors. First, territorial jurisdiction: the suit may be filed either where the contract was executed (i.e., where the offer letter was accepted), where the defendant resides or carries on business, or where the cause of action arose. Second, pecuniary jurisdiction: amounts up to Rs. 3 lakhs typically fall within the jurisdiction of a Civil Judge (Junior Division); higher amounts before a Civil Judge (Senior Division) or District Court. Filing in the correct court from the outset prevents procedural delays and avoids later objections on jurisdiction grounds.
Limitation Period
Don't sleep on this. Under the Limitation Act, 1963, the limitation period for filing a suit for recovery of money based on a written contract is three years from the date on which the payment became due. In this case, the clock started from the agreed payment date (around January 2025). Missing this window can be fatal to your case. A condonation of delay application under Section 5 of the Limitation Act, 1963 is possible in certain circumstances but is neither guaranteed nor easy to obtain. Act well within time.
Interim Reliefs Available
In civil recovery proceedings, interim reliefs can be decisive in preventing the defendant from quietly moving assets before a judgment lands. Frankly, this is where many claimants fail to act early enough. Relevant reliefs include:
- Attachment Before Judgment under Order 38, Rule 5, CPC: Where there is reason to believe the defendant may remove or dispose of assets to defeat a decree, the court may attach those assets provisionally at an early stage.
- Temporary Injunction under Order 39, Rules 1 and 2, CPC: Restraining the company from transferring or encumbering its assets pending final disposal.
- Status Quo Orders: Courts in money recovery suits sometimes pass status quo orders on company assets upon a prima facie showing, preserving the financial position until hearing.
Seeking these reliefs early can significantly strengthen your negotiating position and ensure that a favorable judgment translates into actual recovery.
If You Are the Victim
- Compile all documents immediately — offer letter, completion certificate, all written communications, and any bank records showing partial payments or their absence.
- Send a formal legal notice through an advocate before approaching the court. Many disputes are resolved at this stage alone when the notice is specific and cites applicable provisions.
- File a Summary Suit under Order 37, CPC if the amount is determinable and based on a written contract — this is faster than a regular civil suit.
- If the startup has active investors or is registered with the Ministry of Corporate Affairs, those facts can be relevant to asset attachment applications.
- Do not make oral settlements or partial payments without getting a written acknowledgment. Verbal promises from founders have limited enforceability if later denied.
Documents You Must Keep Ready
- Aadhaar Card and PAN Card (identity proof)
- Original signed offer letter clearly specifying the stipend amount and payment schedule
- Internship completion certificate issued by the startup
- All email correspondence with the founder or HR acknowledging the dues
- WhatsApp chat exports (screenshots with timestamps) where payment promises were made
- Bank account statements showing absence of any stipend credit during the internship period
- Any voice or video recordings where the founder acknowledged the pending payment (if any)
- Copy of the startup's company registration details from the MCA portal
What Evidence Is Required?
- Primary Documentary Evidence: The signed offer letter is the single most important piece of evidence — it establishes the contractual obligation to pay.
- Acknowledgment of Debt: WhatsApp messages or emails in which the founder says "I will pay for sure" or "just waiting for funding" constitute acknowledgment of the debt and can reset limitation under Section 18 of the Limitation Act, 1963.
- Internship Completion Certificate: Confirms performance of the intern's obligations under the contract — critical to defeat any claim that services were not rendered.
- Bank Statements: Confirm absence of payment during the internship period.
- Witness Evidence: If any colleague or HR personnel is aware of the arrangement, their testimony may corroborate your claim.
- Company Registration Documents: Useful for identifying proper defendant party and assets available for potential attachment.
How Courts Typically Approach Such Cases
Civil courts in India treat written contractual obligations for payment with considerable seriousness. Where a signed offer letter exists and the defendant has acknowledged the dues in writing, courts generally find the plaintiff's case prima facie strong at the interim stage. Now, before you act, understand this: summary suit proceedings under Order 37, CPC allow courts to pass a decree relatively quickly unless the defendant demonstrates a triable issue. Courts do scrutinize whether demand was made and whether the defendant was given a reasonable opportunity to pay. Judges in commercial and civil divisions are increasingly efficient in money recovery suits, particularly where evidence is documentary and undisputed.
Timeline of Legal Process
- Week 1-2: Consult advocate, gather documents, send formal legal notice — often produces resolution without court proceedings.
- Week 3-4: If no response, file plaint in appropriate civil court. Court fee paid at this stage.
- Month 1-2: Court issues summons to defendant; defendant served.
- Month 2-3: Defendant files written statement or fails to appear; court frames issues.
- Month 3-6: Evidence stage — documents exhibited, affidavits filed.
- Month 6-9: Final arguments heard by both sides.
- Month 9-12: Judgment passed; if decree obtained, execution proceedings initiated.
- Post-Judgment: If defendant still defaults, execution petition filed for attachment and sale of assets. Appeals, if any, to High Court thereafter.
In practice, many stipend recovery matters are settled after the legal notice stage or soon after summons is issued — well before the case reaches trial.
Understanding the Costs
The total cost of a matter like this varies significantly from one case to the next — it depends on the complexity of the dispute, the forum involved, the number of hearings, and the specific facts of your situation. There is no single fixed figure that applies to everyone.
A professional advocate can give you an accurate estimate only after reviewing all your facts and documents in a consultation.
Can the Matter Be Settled Out of Court?
Yes. And honestly, in most stipend recovery disputes, settlement is the most practical outcome for both sides. Options include:
- Direct Negotiation via Legal Notice: A properly drafted notice frequently prompts payment without any further proceedings.
- Mediation: Courts can refer disputes to mediation under Section 89, CPC, and accredited mediation centres in most major cities now handle commercial and employment disputes efficiently.
- Lok Adalat: Pre-litigation Lok Adalats can hear and settle money recovery matters quickly, and any award passed is a decree of the court — enforceable and final with no appeal.
- Compromise Decree: If settlement is reached after filing, a compromise decree under Order 23, Rule 3, CPC can be recorded and is fully executable.
Settlement is advisable where the founder genuinely intends to pay but faces liquidity issues — litigation costs and business disruption often motivate quicker payment once legal proceedings begin.
Common Mistakes People Make
- Waiting too long to act: Many interns keep hoping for voluntary payment for months, unknowingly watching their negotiating options and documentation freshness diminish. Act promptly.
- Accepting oral promises as sufficient: "I'll pay next month" means nothing without written confirmation. Always get acknowledgments of pending dues in writing — an email reply is sufficient.
- Deleting chat histories: WhatsApp messages and emails acknowledging dues are often the strongest evidence. Deleting them, or failing to export and back them up, can seriously weaken the case.
- Signing acknowledgment or settlement documents without reviewing: Some founders offer informal settlement papers that waive future rights. Never sign anything without having your advocate review it first.
- Engaging an advocate without domain-specific experience in contract and money recovery matters: This type of dispute involves specific procedural choices — such as whether to file a summary suit under Order 37 CPC or a regular suit, when to seek attachment before judgment, and how to use written acknowledgments to reset limitation. A general practitioner unfamiliar with these nuances may pursue a slower or less effective route. Engaging an advocate who regularly handles employment contract and civil money recovery matters typically results in faster, more strategically sound outcomes.
- Going public on social media before legal proceedings:
Advocate Sudhir Rao, Supreme Court of India