Equity delivery based trading in India works on a T+2 rolling settlement cycle
Suppose if you bought some share from the seller the same share will come to your DP on T+2 day, if the seller has done short sell those share you can’t sell before the settlement, you need to wait till the stocks has to come to your DP, or else it will be penalty for both seller and buyer
If you buy shares, ideally you should get delivery on T+2 days (so if you buy on Monday, by wednesday it should be in your demat account), if you don’t get it on T+2 since the seller of the shares defaulted (bad delivery), exchange tries to buy it on the auction market on T+3 days and deliver it to your demat account. Assuming in those cases, where exchange can’t buy that stock even in the auction market, only then there is a cash settlment (typically in such cases the buyer gets more money than he had invested to buy the stock, this extra money is paid by the seller who had defaulted as penalty).