Remote work has made a particular kind of dispute routine. Consider an Indian contractor engaged from India by a US-registered company under a written independent-contractor agreement, paid in foreign currency against invoices, whose payments simply stop. The agreement recites US governing law and perhaps US jurisdiction. The instinct is to assume the contract has been drafted into a jurisdiction the contractor cannot reach. That instinct is wrong on the front end and right on the back end: Indian courts will usually take the case, and Indian contract law will usually supply the remedy, but converting a decree into money from a defendant with no Indian assets is where the difficulty actually sits.
Does a US Governing Law Clause Shut the Door?
It does not close the courtroom, and it does not displace Indian law entirely. Indian private international law recognises broad party autonomy in the choice of governing law, respected irrespective of the connection between the chosen law and the contract. The autonomy is bounded:
"This autonomy is subject to two primary limitations: (1) the choice must be made in good faith and be legal, and (2) the choice should not derogate from the mandatory provisions of Indian law and should not be opposed to public policy of India."
The operative distinction is between substantive law, which governs the interpretation of the contract and the parties' obligations under it, and procedural law, which governs how the dispute is resolved in court. A US governing law clause directs an Indian court to apply US law to the former. It says nothing about the latter, and it cannot reach the overriding mandatory provisions of Indian law that apply because performance happened in India: exchange control under the Foreign Exchange Management Act, 1999 (FEMA), tax law, competition law, labour and wage protection statutes to the extent they apply, and public policy generally. Parties cannot contract out of non-derogable Indian statutes:
"An Indian court will apply the chosen foreign law to substantive contractual issues, but will refuse to enforce any provision or outcome that violates these overriding laws."
Where the agreement contains no express governing law clause, the court applies conflict-of-law principles, identifying the legal system with which the transaction has its closest and most real connection, an approach drawn from common law rules and influenced by authorities such as Dicey, Morris & Collins on the Conflict of Laws. In the absence of evidence proving the applicability of a foreign law, Indian law applies as the default. The practical effect is that foreign law must be pleaded and proved. Silence produces Indian law.
Where Can the Suit Be Filed?
Section 20 of the Code of Civil Procedure, 1908 is the primary basis on which Indian courts take jurisdiction over foreign defendants in contractual disputes. A suit may be instituted in a court within whose local limits:
"The defendant, or each of the defendant where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business or personally works for gain, or... the cause of action, wholly or in part arises."
For a contractor working remotely from India, three routes are available. The place of performance is India, so the cause of action arises in India. The place of breach is India, because that is where the contractor was entitled to receive payment, so non-payment is a breach occurring here. And if the foreign principal maintains any agent, representative or place of business in India, residence-based jurisdiction may also be established. The first two do not depend on the foreign company having any Indian footprint at all, which is what makes them useful.
Exclusive Jurisdiction Clauses
An exclusive jurisdiction clause nominating US courts will generally be respected, but only within limits. The chosen court must have inherent jurisdiction under Indian law, meaning it is one of several competent courts rather than a court conjured by the clause; the clause must be clear and unambiguous in its intent to exclude other competent courts; and enforcing it must not unlawfully oust the jurisdiction of all competent courts. The rule is settled:
"Parties cannot confer jurisdiction by agreement, but may choose one of a number of competent courts. The agreement to exclude other competent courts must be clear and unambiguous."
Where the clause selects a court with no connection to the contract or the parties, Indian courts may refuse to enforce it. Even where an exclusive US jurisdiction clause exists and the Indian court gives it weight, the contractor's residence in India and the place of performance in India remain available as alternative jurisdictional grounds.
What Is the Claim, and Is It a Wage Claim?
It is not a wage claim, and that misconception costs time. The Payment of Wages Act, 1936 applies only to "employed persons" in specified categories of establishment, factories, railways, industrial establishments and the like. It does not extend to independent contractors or freelancers, and a contractor cannot invoke it to recover unpaid dues.
The classification follows the familiar line. An independent contractor works under a contract for services, retains control over how the work is performed, is not subject to the principal's direct supervision, typically serves multiple clients, and bears the risk of profit and loss. An employee works under a contract of service, is subject to control and supervision, typically works exclusively for the employer, and receives wages as consideration. Where a written agreement engages a person expressly as an independent contractor and the relationship operates that way, labour statutes premised on employment are unavailable.
None of which prevents recovery. The Indian Contract Act, 1872 applies to all contracts, including those with foreign parties, when the dispute is litigated in India, and it supplies the remedy. Section 73 is the workhorse:
"When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach... Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach."
Under Section 73 the contractor can recover the principal sum of unpaid dues, interest on that amount from the date it fell due until payment, and any direct loss or damage caused by the non-payment. The qualifier at the end matters: remote and indirect loss is not compensable, so consequential complaints will not travel far.
Section 74 supplements this where the agreement stipulates a sum for breach. The party complaining of the breach is entitled, "whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named". Where the contract contains a liquidated damages or penalty clause covering non-payment, the contractor can claim up to the stipulated amount without proving actual loss.
How Long Is the Window, and Is There a Faster Route?
The limitation period for a suit to recover money due on a contract is three years, and the source research fixes the trigger date as "when the money was to be returned as stated in the Contract/Agreement/Cheque". The clock therefore starts on the date payment fell due under the contract, not on the date the contractor gave up on being paid. Three years is generous, but the trigger is set by the contract's own payment terms, which is a reason to identify it precisely at the outset rather than at the point of filing.
On speed, Order XXXVII of the CPC provides a summary procedure where the claim is clear and undisputed. The advantage is structural: the defendant has only ten days to apply for leave to defend rather than the usual thirty for a written statement, and if no prima facie defence is shown the court may grant judgment summarily, avoiding a full trial. The route suits an unambiguous written agreement where the amount is not genuinely contested. Where the foreign principal disputes quantum or raises defences such as breach by the contractor or set-off, a regular suit is the realistic path.
Service of summons on a foreign defendant is the point of friction, effected through the Central Government's diplomatic channels where the destination state is a signatory to the Hague Convention on Service of Judicial Documents, through an authorised agent in India where the company has one, or by newspaper publication where personal service is not possible.
Is a Legal Notice Mandatory?
No. Section 80 CPC requires notice before suit only against the Government or a public officer acting in an official capacity. It has been read to "apply only in respect of acts of public officers done in their official capacity", and it does not apply to suits against private companies, foreign or domestic. There is no statutory pre-suit notice requirement here.
Sending one is nonetheless the better practice. A formal notice demands payment on the record, creates evidence that demand was made before litigation, opens a settlement window, and can support the damages case by showing the defendant knew of the breach. It should state the claim and the amount and fix a date for payment, typically fifteen to thirty days out.
What if the Contract Has a US Arbitration Clause?
Then the analysis inverts, and the suit is the wrong instrument. Where a valid arbitration agreement exists, Indian courts must refer the parties to arbitration if a lawsuit is filed, "as mandated by Section 8 (for domestic arbitration) and Section 45 (for foreign-seated New York Convention arbitration) of the Arbitration Act". For an arbitration seated outside India, Section 45 of the Arbitration and Conciliation Act, 1996 governs, and the court will refer the parties provided the agreement is valid and the seat is in a state party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. The United States is a signatory, so a US-seated clause is enforceable under Indian law. Filing in an Indian court in the face of such a clause produces a stay, not a hearing.
What the contractor does not lose is access to Indian interim relief. Under Section 9 of the Arbitration Act, "Indian courts can grant interim relief before, during or after arbitral proceedings, before an award is enforced": attachment of any assets the foreign principal holds in India, an injunction against dissipation, and orders preserving evidence. The practical sequence is to initiate the arbitration at the agreed seat while applying separately to an Indian court under Section 9 for protective relief over any Indian assets.
There is a known gap. An interim order made by a foreign-seated tribunal cannot be directly enforced by Indian courts; "in foreign-seated arbitrations, the only avenue available for parties is to apply through a fresh application for interim relief from Indian courts under section 9". A favourable interim order abroad therefore has to be re-litigated as a fresh Section 9 application here.
Does FEMA Complicate Recovery?
Not materially, but it disciplines the receipt. FEMA governs foreign exchange transactions in India, including payments received by Indian residents from foreign companies. Three requirements attach to an inward remittance for services. The contractor's bank must issue a Foreign Inward Remittance Certificate (FIRC) for each inbound remittance, proving that foreign funds were received and converted into rupees. The bank will require supporting documentation: a copy of the contract, invoices for services rendered, evidence of the work performed, and the purpose of the transaction. And the transaction must be routed through an Authorised Dealer bank, which verifies the contractor's details, confirms receipt and reports to the RBI.
Non-payment itself creates no FEMA obligation, because no funds were received and there is nothing to report. The consequence is forward-looking: any sum recovered through litigation or settlement must still come through an AD bank with an FIRC obtained, and the contract, invoices and correspondence should be retained to evidence the legitimacy of the receipt when it lands.
Can the Contractor Post About It?
This is where the temptation and the exposure meet. Publishing an account of non-payment on LinkedIn or comparable platforms carries defamation risk under Sections 499 and 500 of the Indian Penal Code, 1860, which define defamation and attach criminal penalties, and which apply to online posts. The source research puts the risk squarely: a common assumption is that posting true facts cannot be defamatory, but it treats truth alone as an incomplete answer under Indian law where publication is made with intent to damage reputation or with reckless disregard for the consequences. Section 66A of the Information Technology Act, 2000, which previously criminalised offensive online content, has been largely struck down and is not a live route.
The fair comment defence exists but is narrowly construed. It requires that the statement be a comment rather than an assertion of fact, that it concern a matter of public interest, that it rest on true underlying facts, and that it be made without malice. Non-payment by a company may qualify as a matter of public interest where it affects multiple parties or the public, but that is a proposition to be established, not assumed.
The gradations matter. A statement of verifiable fact, that payment has not been received since a stated date despite repeated requests, sits at the lower end of risk, though a company may still sue if it can show reputational damage. Characterisations, calling a company fraudulent or dishonest, sit at the higher end, because they travel beyond what the facts support. The conservative course is to keep off social media while the dispute is live, since posting during active litigation invites the argument that the purpose was to prejudice the case.
Why Enforcement Is the Real Problem
A decree is not money. Section 44A CPC allows a decree of a court in a "reciprocating territory", meaning any country the Central Government has declared by notification in the Official Gazette to be a territory whose courts grant reciprocal treatment to Indian decrees, to be executed as if passed by an Indian court. As at July 2026, the United States has not been so notified. India and the United States have no reciprocal enforcement treaty.
Everything then turns on where the assets are. If the foreign company holds Indian assets, execution in India is straightforward in principle: the court can attach them, order their sale, or issue a garnishee order directing an Indian bank holding the company's funds to pay the decree amount. If it holds no Indian assets, execution in India is not possible, and the contractor must take the decree to a US court, seek recognition there, and only then enforce against US assets. US courts will consider whether India grants reciprocal treatment to US decrees, and the absence of reciprocity is a ground on which recognition may be refused. Compared with the route available between reciprocating territories, the process for a non-reciprocating territory is, as the research notes, "protracted and cumbersome".
This should shape strategy rather than be discovered at the end of it. Where the defendant has no Indian assets, the value of an Indian decree is contingent on a second proceeding in a jurisdiction under no obligation to honour it. That contingency is what gives settlement, or a negotiated payment plan reached during the litigation, its commercial logic.
Practical Takeaways
- A US governing law clause does not oust Indian jurisdiction. Section 20 CPC supplies jurisdiction where performance and the breach occurred in India, which for a remote contractor is ordinarily both.
- The claim lies under Sections 73 and 74 of the Indian Contract Act, 1872, for the principal, interest from the due date and costs, not under the Payment of Wages Act, 1936, which does not reach independent contractors.
- Limitation is three years from the date payment fell due under the contract. Fix that date early.
- Section 80 CPC notice is not required against a private foreign company, but send a formal legal notice anyway, allowing fifteen to thirty days, to create evidence of demand and open a settlement window.
- Check the arbitration clause before filing. A valid US-seated clause means a suit will be stayed and referred; initiate arbitration instead and apply separately under Section 9 for interim relief over Indian assets.
- Recovered sums must be routed through an Authorised Dealer bank with an FIRC. Retain the contract, invoices and correspondence for both the claim and the FEMA file.
- Avoid public posts while the dispute is live. Truth is not a complete shield, and characterisations such as "fraudulent" carry the sharpest exposure under Sections 499 and 500 IPC.
- Assess enforcement before litigating. The United States is not a reciprocating territory under Section 44A CPC; if the defendant holds no Indian assets, the decree will need separate recognition proceedings in the United States, which is a reason to price settlement seriously.
Key Authorities
- Code of Civil Procedure, 1908, Section 20 - territorial jurisdiction lies where the defendant resides or carries on business, or where the cause of action wholly or in part arises. Source
- Indian Contract Act, 1872, Section 73 - compensation for loss or damage naturally arising from breach; no compensation for remote and indirect loss. Source
- Indian Contract Act, 1872, Section 74 - where a sum is named in the contract for breach, reasonable compensation not exceeding that sum, whether or not actual loss is proved. Source
- Code of Civil Procedure, 1908, Order XXXVII - summary suit procedure; ten days for leave to defend, and summary judgment absent a prima facie defence. Source
- Code of Civil Procedure, 1908, Section 80 - pre-suit notice required only against the Government or public officers acting officially; inapplicable to private companies.
- Code of Civil Procedure, 1908, Section 44A - decrees of courts in notified reciprocating territories are executable in India as Indian decrees; the United States is not notified.
- Arbitration and Conciliation Act, 1996, Sections 8, 45 and 9 - mandatory referral to arbitration where a valid agreement exists (Section 45 governing foreign-seated New York Convention arbitration), and interim relief from Indian courts before, during or after arbitral proceedings. Source
- Limitation - three years for a suit to recover money due on a contract, running from the date the money was to be paid under the agreement. Source
- Payment of Wages Act, 1936 - applies to "employed persons" in specified establishments; does not extend to independent contractors.
- Foreign Exchange Management Act, 1999 - inward remittances for services must be routed through an Authorised Dealer bank, with an FIRC issued and documentation retained.
- Indian Penal Code, 1860, Sections 499 and 500 - defamation and its punishment, applicable to online publication; fair comment is a narrowly construed defence.
- New York Convention, 1958 - the United States is a signatory, making US-seated arbitration agreements enforceable under Indian law.
This analysis reflects the law as at July 2026. It is published for general information and does not constitute legal advice.