A subcontractor agreement in India is usually signed at the site office, in ten minutes, on a form the main contractor drafted. The machine owner is almost always the subcontractor in that room, and the money reaching the bank three months later depends on about six clauses in it. The one that matters most is rarely the rate.

Why the machine owner is the one reading this

The chain on most Indian projects runs client, then main contractor or EPC, then you. The client’s money and the client’s contract sit two steps away from your machine. Your contract with the main contractor is the only document that governs whether any of that money arrives. On government work, that main contractor also needs the department’s written approval to hand you the package at all, which is covered in subletting of contract.

That is also why the main contractor drafts it. The party that drafts allocates the risk, and on a standard subcontract form the risk lands on whoever brings the asset to site. Reading it properly is the cheapest protection available, and it takes longer than the ten minutes usually allowed for it.

The payment clause, and the words that shift the risk

Find the payment clause first. Look for whether payment is due on a date, on certification, or on the main contractor being paid by the client.

The third of those is a back-to-back or pay-when-paid arrangement, and it turns your invoice into a claim contingent on somebody else’s payment. Courts have taken these seriously. The Delhi High Court has held that parties who have entered into an agreement carrying a pay-when-paid clause are bound by its terms and cannot subsequently resile from them, and the same argument has been run in insolvency proceedings where a main contractor refused payment because the project authority had not released its own money. Subcontractors on major government projects have had to go to court to release payments held under back-to-back terms.

None of that makes such a clause impossible to live with. It makes it a thing to price. If your payment depends on a client you have no contract with and no visibility of, you are lending working capital against a risk you cannot assess. Ask for the main contract’s payment terms in writing, ask for a longstop date after which you are paid regardless, or price the delay into the rate.

What the courts have actually held on pay-when-paid clauses

The Delhi High Court rulings behind that are two single-judge decisions on writ petitions against public sector main contractors. In PSK Engineering Construction & Co v NPCC Ltd (6 February 2024) the clause said the contractor became entitled to payment only after NPCC received the corresponding payment from its client, and the Court held that a party who signed it knowing those terms “cannot challenge the very same contract”, adding that it was “not a case of unequal bargaining power”. In Kingston Enterprises v NBCC (India) Ltd (16 October 2024) NBCC accepted that ₹88.47 lakh was owed, and the Court still held that it fell due only when NBCC was paid by its client, saying such clauses are enforced “provided these clauses are clear and unambiguous”. Both petitions were dismissed with a civil suit or arbitration left open. PSK’s appeal was still pending at its last listing in 2026, and the Supreme Court issued notice on Kingston’s special leave petition in March 2025.

The wording decides how far that goes. In NPCC v Harvinder Singh & Co (23 April 2018) a Division Bench of the same court refused to read a less clearly drafted clause as letting the main contractor withhold payment merely because its own client had not paid, calling that reading “grossly unjust, inequitable and against public policy”, and the Supreme Court dismissed the appeal against it. A clause saying you are entitled to payment “only after” the main contractor is paid is a risk to price. A loose reference to back-to-back terms is not an automatic licence to hold your money.

Insolvency is a weak lever against a clear clause. In Imeco Ltd v BEML Ltd (9 August 2019) the National Company Law Appellate Tribunal held that a debt payable under a back-to-back clause “cannot be said to have been defaulted” until the event it depends on happens, and in Pravin Electricals v Akshaya Engineering Works (30 July 2025) it set aside an insolvency admission because the subcontract debt had “not yet crystallized” while the main contractor’s own account with the state power utility was still being reconciled.

If you are a registered micro or small enterprise

Section 15 of the MSMED Act 2006 requires a buyer to pay a micro or small enterprise for goods or services by the agreed date, and says the agreed period can “in no case” exceed forty-five days from acceptance or deemed acceptance. Section 16 adds compound interest with monthly rests at three times the Reserve Bank’s bank rate on late payment, “notwithstanding anything contained in any agreement”, and section 18 lets either party refer the dispute to the Micro and Small Enterprises Facilitation Council. Whether that overrides a pay-when-paid clause has not been squarely decided in any judgment we could find, so do not sign on the assumption that it does. It is still a real route for a registered machine owner, and chasing delayed government and EPC payments walks through how it is used.

The six clauses in a subcontractor agreement to read before the rate

Clause What to look for If it is missing
Scope and rate basis Per hour, per day, per cubic metre or lump sum, and what the rate includes Every dispute becomes about what was implied
Measurement and certification Who measures, who signs, how a dispute over quantity is settled The bill is whatever the site engineer says it is
Payment trigger and timeline A date or a certificate, not the main contractor’s own receipt You fund the project until someone else is paid
Deductions Retention percentage, ceiling, and the two release dates Money is cut with no agreed way to get it back
Idle time and standby Who pays when the site stops and the machine waits Your fixed costs run against zero revenue
Termination and demobilisation Notice, payment for work done, cost of taking the machine out Exit becomes more expensive than staying

The idle-time row is the one machine owners under-negotiate and then bleed on. A hired excavator standing for eleven days because the client has not handed over the alignment still carries an EMI, an operator’s wages and a site allowance. Whether that is your loss or the main contractor’s is a single sentence in the agreement.

If what you are really doing is hiring out a machine and operator rather than taking on a package of work, the standby, breakdown and fuel terms belong in an equipment rental agreement, and the work order issued against it should repeat them rather than leave them to the site.

Deductions: read them as a set, not one by one

A subcontract usually authorises several cuts from the same bill, and on paper each looks modest. Retention against defects, a percentage held as security deposit where the main contract passes one down, recovery of any advance, statutory deductions, and sometimes a contribution to site establishment.

Statutory deductions are the one item on that list you cannot negotiate away, and on machine work the main one is income tax deducted at source, which TDS on machinery hire charges explains. Make sure the agreement says which TDS rate applies and that the certificate will be issued, because that is money you claim back, not money you lose.

Add them up before you sign rather than after the first bill. The guide to retention money in construction contracts sets out how the retention half of that works and when it should come back. What the agreement must give you is the ceiling on each deduction and the date each is released, because a deduction with a percentage but no ceiling and no release date is not a deduction, it is a discount.

Measurement is what you will be arguing about

Payment disputes almost never start at the payment clause. They start at the measurement, weeks earlier, when nobody thought it mattered.

The agreement should say who records quantities, whether measurement is joint, and what happens when the two sides disagree. On public works this runs through the department’s own register, the measurement book. On a private subcontract there may be no register at all, in which case your own dated record, signed by the site engineer at the time, becomes the evidence. Owners who have chased money on delayed government and EPC payments generally lost time to reconstructing measurements they could have had signed on the day.

Agree the dispute route while everyone is friendly. Whether the agreement points to arbitration or to a court, and which city, decides what a claim will cost you to pursue — and a clause naming a distant forum can make a genuine claim uneconomic to bring.

Check payment triggers and deductions before the subcontract rate

Read the payment trigger, the deductions, the idle-time clause and the exit before you look at the rate, because a good rate on back-to-back payment terms is worse than a fair rate paid on certification. Get the scope measurable, get measurement signed on the day, and get every deduction capped with a release date. If the main contractor will not put the main contract’s payment terms in writing, that answer is itself the information you needed.

If you are bidding this work yourself rather than taking it second-hand, browse current tenders and project opportunities, and check what the machine behind the contract will cost to fund through equipment finance.

Rates, schemes, specifications and prices change — confirm current terms with the OEM, dealer, bank or insurer before deciding. Nothing here is legal advice on your contract; have a lawyer read the agreement before you sign it, and confirm the position with the main contractor in writing.