Distributor agreement in India: clauses, format and the law

The quick answer

A distributor agreement (also called a distributorship, distribution or dealer agreement) is the written contract in which a manufacturer or brand appoints a business to buy its products and resell them in a defined territory, on agreed prices, credit, targets and exit terms. In India it is an ordinary contract under the Indian Contract Act, 1872, but five other laws shape what it can say: the Competition Act, 2002 (exclusivity and resale prices), the MSMED Act, 2006 (45-day payment for micro and small suppliers), the CGST Act, 2017 (how scheme discounts are taxed), the Indian Stamp Act, 1899 (an unstamped agreement can't be used as evidence until duty and penalty are paid) and the Arbitration and Conciliation Act, 1996 (how disputes are settled). The clauses that cause most fights are territory, credit and payment, targets, stock return on exit, and termination notice.

The pages that rank for "distributor agreement" are mostly free templates written for the UK or US. This guide is for Indian manufacturers appointing distributors and for distributors and dealers asked to sign one. It covers the clauses, the Indian sections that override them, a format for your lawyer, the steps to signing, and where to find distributors, with Starleads' own counts. It is a practical guide, not legal advice: have a lawyer read the final draft.

Distributor, dealer, stockist, C&F agent or franchise: which agreement you need

Indian trade uses these words loosely, and the wrong label leads to the wrong contract. What decides it is who owns the stock and who carries the credit risk: a distributor buys and resells, so a bad debt in the market is theirs; a carrying and forwarding (C&F) agent only stores and dispatches your stock on commission, and you bill the customer.

This guide covers the first two rows, which is what most people searching "distributor agreement" or "dealer agreement" need. A dealership agreement uses the same skeleton as a distributor agreement, with more on display, after-sales service and warranty and less on onward distribution. If you are on the other side and want to become a distributor or dealer, our guides on how to become a distributor and how to get a dealership explain what brands ask for before they appoint anyone.

The clauses of a distributor agreement, one by one

A good distributor agreement is less about legal language and more about writing down the commercial deal precisely enough that two people who disagree later can open the document and find the answer. The table below lists the clauses that matter, what each one should say, and the dispute it prevents.

Two clauses deserve more thought than templates give them. Termination should give both sides a way out without proving a breach (a notice period that suits your trade, such as long enough for the distributor to sell down stock), plus a short list of events that end the agreement at once (non-payment beyond a set number of days, selling counterfeit or diverted goods, insolvency). Exit settlement should be written as arithmetic: which stock you take back, at what percentage of the invoice price, within how many days, and when the security deposit is returned after dues are adjusted. Most disputes are about the money left on the table when the relationship ends.

The Indian laws that override what you write

Parties can agree almost anything about price, territory and targets. But some sections of Indian law apply whatever the agreement says, and a template copied from a foreign site will not mention them. The section texts quoted below were read on Indian Kanoon, which reproduces the Acts as amended, on 28 October 2026.

Indian Contract Act, 1872: section 27 and non-compete clauses

Section 27 says that every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind "is to that extent void". Its only exception is for someone who sells the goodwill of a business and agrees not to carry on a similar business within reasonable local limits. A distributor agreement is not a sale of goodwill, so a clause stopping a distributor from dealing in competing products for years after the agreement ends is unlikely to be enforceable. A restriction that applies only while the agreement runs is usually written as an exclusivity clause, and that is judged mainly under the Competition Act instead. If a non-compete matters to your business, this is the clause to ask your lawyer about.

Competition Act, 2002: exclusive distribution and resale prices

Section 3(4) covers agreements between businesses at different levels of the supply chain, such as a manufacturer and its distributor. It names five kinds: tie-in arrangements, exclusive dealing agreements, exclusive distribution agreements, refusal to deal and resale price maintenance. These are not banned outright. They breach the Act only if they cause, or are likely to cause, "an appreciable adverse effect on competition in India". The definitions are worth reading because ordinary distributor clauses fall inside them: an exclusive distribution agreement includes any agreement to "allocate any area or market" for the sale of goods, and resale price maintenance includes any direct or indirect restriction that the distributor must resell at prices you set "unless it is clearly stated that prices lower than those prices may be charged". In practice, that last phrase is why careful agreements say the price list gives maximum or recommended resale prices and that the distributor is free to sell below them. If your products lead their category, take advice before writing hard territorial or price restrictions.

MSMED Act, 2006: the 45-day rule for micro and small suppliers

This matters when the seller is a micro or small enterprise with Udyam registration, which covers many manufacturers appointing distributors. Section 15 requires the buyer to pay on the date agreed in writing, and adds that the period agreed "shall not exceed forty-five days from the day of acceptance or the day of deemed acceptance". Where nothing is agreed, payment is due by the "appointed day", which section 2 defines as the day after 15 days from acceptance; goods are deemed accepted if the buyer raises no written objection within 15 days of delivery. Section 16 then makes a late buyer liable for compound interest with monthly rests at three times the bank rate notified by the Reserve Bank, "notwithstanding anything contained in any agreement". Under section 18, either party can refer a dispute about such dues to the Micro and Small Enterprises Facilitation Council, which tries conciliation and then arbitration.

For the agreement this means three things. A micro or small manufacturer should write credit days of 45 or fewer from delivery, because a longer period in writing doesn't hold. A distributor buying from such a manufacturer should know that the statutory interest applies even if the agreement says nothing about interest. And both sides should record Udyam status in the agreement, since it decides whether these sections apply at all. Note that the definition of "supplier" in section 2 covers micro and small enterprises, not medium ones.

CGST Act, 2017: scheme discounts must be agreed in advance

Distributor schemes (quantity discounts, quarterly target incentives, turnover rebates) are often settled months after the goods were invoiced. Section 15(3) of the CGST Act lets a post-supply discount reduce the taxable value only if it was "established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices", and the buyer reverses the matching input tax credit. In plain terms: put the scheme structure in the agreement or in a scheme circular issued before the sales, and issue credit notes against specific invoices. The same section, in sub-section (2)(d), includes "interest or late fee or penalty for delayed payment" in the value of supply, so interest you charge a distributor for late payment is part of the taxable value. Discuss both points with your CA when you draft the payment clause.

Indian Stamp Act, 1899: stamp it before you need it

Section 35 says an instrument chargeable with duty that is not duly stamped can't be admitted in evidence or acted upon. It can be admitted on payment of the duty and a penalty, which can be ten times the deficient duty. Stamp duty on agreements is set by each state's stamp law, so the amount depends on where the agreement is executed; check your state's current schedule or ask the stamp vendor or your lawyer, and execute the agreement on e-stamp paper of the right value rather than plain paper.

Arbitration and Conciliation Act, 1996: write the clause properly

Section 7 requires an arbitration agreement to be in writing, either as a clause in the contract or a separate agreement, and accepts an exchange of letters or electronic communication that records it. A useful clause names the seat (the city whose courts supervise the arbitration), the language, the number of arbitrators and, if you want one, an arbitral institution. A clause that only says "disputes will be settled by arbitration" invites a second dispute about how.

Distributor agreement format: a skeleton you can adapt

Here is a distributor agreement format in the order most Indian agreements follow. Use it as a checklist for your lawyer or to read a draft a brand has sent you. A dealership agreement format follows the same order, with the dealer's display, service and warranty duties added under clause 9.

1. Title, date and place of execution (the place decides which state's stamp duty applies).
2. Parties: legal names, constitution (company, LLP, partnership, proprietorship), registered address, GSTIN, PAN, CIN or LLPIN, Udyam number if any, and the person signing with their authority (board resolution or partner authority).
3. Background (recitals): what the brand makes and why it is appointing the distributor.
4. Definitions: products, territory, price list, schemes, secondary sales, effective date.
5. Appointment: exclusive or non-exclusive, products and territory as schedules, channels included and kept back.
6. Relationship: principal-to-principal; the distributor buys and resells on its own account.
7. Orders, delivery and risk: order process, delivery terms, freight, transit insurance, when ownership and risk pass, short supply and damage claims within a stated number of days.
8. Prices, MRP and schemes: price list as a schedule, notice for changes, resale prices as maximum or recommended, scheme structure and claim deadlines.
9. Distributor's obligations: minimum stock, outlet coverage, salesmen, storage, first-expiry-first-out, monthly reports, no sales outside the territory if agreed.
10. Brand's obligations: supply, marketing support, training, warranty, policy for damaged, near-expiry and expired goods.
11. Payment and security: credit days (45 or fewer if the seller is micro or small), credit limit, security deposit or bank guarantee and the interest paid on it if any, late payment interest, right to hold supplies.
12. Targets and review: how targets are fixed each year and what follows a shortfall.
13. Trademarks and confidentiality: limited permission to use the brand; confidentiality of prices and customer data.
14. Data and compliance: each party's responsibility for licences in its business (for example drug, food or other trade licences where the product needs them), GST compliance and lawful marketing.
15. Term, renewal and termination: term, renewal, notice without cause, immediate termination events.
16. Consequences of termination: stock buy-back formula, settlement of claims, return of deposit, removal of signage, handover of retailer lists.
17. Liability and indemnity: caps, product liability, third-party claims.
18. Force majeure, notices and assignment: addresses and email IDs for notices; no assignment without consent.
19. Governing law and disputes: Indian law, arbitration seat and rules, courts with jurisdiction.
20. Schedules and signatures: products, territory map or PIN list, price list, scheme circular, security deposit receipt; signatures with two witnesses.

Keep numbers that change every year (prices, targets, schemes) in schedules the agreement refers to, and say how and with what notice they change.

How to appoint a distributor and sign the agreement, step by step

1. Define the territory and the economics first. Decide how many distributors the market needs, which towns each will cover, and the margin, credit and scheme budget you can afford. Write this as a one-page term sheet before anyone drafts a contract.
2. Build a shortlist. Look for businesses that already sell to the retailers or institutions you want, without a directly competing brand. Trade associations, existing dealers' references and contact lists by industry and city all help; the next section shows what Starleads' data holds.
3. Check each candidate. Confirm the GSTIN is active and the legal name matches, look up the company or LLP on the MCA records, ask for bank references, visit the godown, and ask two or three retailers they supply. Our guide to free company look-ups in India shows how to check MCA, GST and Udyam details.
4. Share the term sheet, not the contract. Agree territory, exclusivity, credit, deposit, targets and exit terms in plain language. Most of the negotiation happens here.
5. Draft from the term sheet. Use the skeleton above. Put the price list, territory and scheme rules in schedules.
6. Get it read. A lawyer for the contract, a CA for the GST treatment of schemes, credit notes and interest. Starleads' data has 67,756 lawyers and legal firms and 47,994 chartered accountants and tax consultants if you need to find one in your city.
7. Stamp and sign. Buy e-stamp paper of the correct value in the state of execution, print the agreement on it, and have authorised signatories sign each page with witnesses. Keep scanned copies on both sides.
8. Collect the deposit properly. Take any security deposit by bank transfer to the company's own account and issue a receipt that refers to the agreement clause.
9. Start and review. Review targets, stock and outstanding monthly for the first quarter, and record changes in writing (the agreement should name the email IDs used for notices, so there is no argument about whether a change was communicated).

Signing advice for distributors: never pay an "agreement fee", "registration fee" or deposit to a personal account or to someone you met only through an advert. Real brands meet you, check your market and take money into the company's own bank account against a written agreement. Our guide on becoming a distributor lists the warning signs.

Where to find distributors and dealers to sign up

An agreement is only as good as the business on the other side. Starleads sells Excel lists of businesses by industry, state and city. The figures below are counts of contacts in Starleads' data, not an official census of Indian distributors, and were checked on the list pages and the Insights page on 28 October 2026.

• The suppliers and distributors list holds 1,01,800 contacts in 32 states and 362 cities. 96% have a mobile number, 26% an email address and 70% the contact person's name. The largest counts are in Maharashtra (30,835), Delhi (16,918) and Karnataka (14,722).
• The dealers and traders list holds 93,784 contacts across 34 states and 580 cities, with a mobile number for 79% and an email for 25%. Maharashtra (36,763), Tamil Nadu (9,544) and Telangana (8,912) lead.
• Trade-specific dealer lists are often a better start than a general list, because the dealer already stocks your category: electrical goods, wires and switchgear dealers (47,975 contacts, 87% with a mobile), plastic products dealers (29,361), inverter, UPS and battery dealers (27,293) and tiles, marble and granite dealers (24,745).
• For food and consumer goods, the food processing and FMCG list (18,029 contacts, 69% with a mobile) shows the makers whose distributors you would be competing with or working alongside.

Live from our Suppliers & Distributors list: 1,01,800 contacts in 362 cities, 96% with a mobile number and 26% with an email address. Most are in Mumbai, Delhi, Bengaluru, Pune and Jaipur.

Suppliers and distributors by city

• Mumbai 21,302 contacts · 20% email · 95% mobile ₹499
• Bengaluru 14,465 contacts · 23% email · 99% mobile ₹499
• Pune 8,508 contacts · 27% email · 98% mobile ₹499
• Jaipur 6,722 contacts · 19% email · 97% mobile ₹499
• Surat 3,667 contacts · 27% email · 99% mobile ₹499
• Vadodara 2,662 contacts · 20% email · 97% mobile ₹499
• Ludhiana 2,513 contacts · 22% email · 98% mobile ₹499
• Chennai 2,131 contacts · 26% email · 90% mobile ₹499
• Ghaziabad 1,540 contacts · 19% email · 99% mobile ₹499
• Gurugram 1,535 contacts · 24% email · 98% mobile ₹499
• Noida 1,493 contacts · 26% email · 98% mobile ₹499
• Kota 1,413 contacts · 8% email · 100% mobile ₹499

Related dealer and trade lists

• Suppliers & Distributors 1,01,800 contacts · 26% email · 96% mobile ₹1,999
• Dealers & Traders 93,784 contacts · 25% email · 79% mobile ₹1,999
• Electrical Goods, Wires & Switchgear Dealers 47,975 contacts · 40% email · 87% mobile ₹1,999
• Food Processing & FMCG 18,029 contacts · 40% email · 69% mobile ₹1,999

Every city, state and specialisation list costs ₹499 whatever its size; an All-India list with 10,000 or more contacts costs ₹1,999; each list page has 60 sample rows you can download free before paying. Where Starleads falls short: a list tells you a business exists and how to reach it, not its turnover, creditworthiness or which brands it already carries. That is what the checks in step 3 above are for. Our distributors database guide and traders list guide go deeper into finding and qualifying distributors.

Approaching distributors within TRAI's rules

Most distributor recruitment in India starts with a phone call or a WhatsApp message, and the sender's obligations apply even when the person you call is a business owner. TRAI's advice to senders (read on 28 October 2026) lists what a business must do before sending commercial communication in bulk: register as a principal entity, get a header assigned, register content templates, and register consent templates if it collects consent. It defines a promotional message or call as one "for which the sender has not taken any explicit consent from the intended Recipient". TRAI's preference registration page explains that people record their do-not-disturb choices through 1909 (SMS or call), an app or a web portal.

So before a calling campaign to a bought list: scrub the numbers against DND preferences, use registered headers and templates for bulk SMS, call during reasonable hours, stop at once when someone asks you to, and record who agreed to hear from you. Our guides to DND checks and DLT registration for SMS walk through the steps. Starleads sells business and professional contacts only, never lists of private individuals, and anyone in its data can ask to be removed.

Mistakes that turn into distributor disputes

• No written agreement at all. Many Indian distributorships run for years on an appointment letter and WhatsApp messages. When it ends, nobody can show what notice, buy-back or deposit terms were agreed.
• "Exclusive" in a conversation, not in the document. If exclusivity isn't written, assume it doesn't exist; if it is, write which products, which territory and which channels.
• A vague arbitration clause. Without a seat, language and number of arbitrators, the first months of any dispute go into arguing about the process.

Questions people ask about distributor agreements

What is the difference between a distributor agreement and a dealer agreement?

Both are buy-and-resell contracts. A distributor usually supplies retailers or institutions across a territory, so the agreement focuses on coverage, stock and onward credit. A dealer usually sells to end users, so a dealership agreement adds display, after-sales service, installation and warranty handling. The legal framework is the same.

Does a distributor agreement need stamp paper?

Stamp duty on agreements is set by each state, so check the current rate where you sign. The reason to get it right is section 35 of the Indian Stamp Act: an agreement chargeable with duty that isn't duly stamped can't be admitted in evidence or acted upon until the duty and a penalty, which can be ten times the shortfall, are paid. Signing on e-stamp paper of the correct value avoids that.

Can a brand stop a distributor from selling competing products?

During the agreement, an exclusivity clause is common and is judged under the Competition Act, which objects only where there is an appreciable adverse effect on competition. After the agreement ends, section 27 of the Contract Act makes agreements restraining a lawful trade void to that extent, with an exception only for the sale of goodwill, so a long post-termination non-compete is unlikely to hold.

Can a manufacturer fix the price at which a distributor resells?

It can publish an MRP and recommend resale prices. A clause requiring the distributor to resell only at the prices you stipulate, without clearly allowing lower prices, falls within the Competition Act's definition of resale price maintenance and is risky if it harms competition.

How many days of credit can a distributor agreement give?

Any number, unless the seller is a micro or small enterprise registered under the MSMED Act. Then the period agreed in writing can't exceed 45 days from acceptance of the goods, and late payment attracts compound interest at three times the RBI bank rate with monthly rests, whatever the agreement says.

Where can I get a distributor agreement format in Word or PDF?

Many sites offer free templates, but most are written for the UK or US. Use the skeleton in this guide as a checklist, start from a template drafted under Indian law, and have a lawyer adapt it to your products, state and commercial terms. Starleads doesn't sell agreement templates.

How do I find distributors to appoint?

Start from businesses that already sell your category to the retailers you want: trade associations, referrals from dealers, and contact lists by industry and city. Starleads' data has 1,01,800 suppliers and distributors and 93,784 dealers and traders; check each candidate's GST, MCA records, godown and references before signing.