WELCOME TO ANALYSIS ON
RECOVERY PROCESS &
ENFORCEMENT OF INDIA LAW
Written by:
Sandigdha Mishra, ADV.
PAYDIRT PROFESSIONALS
OVERVIEW :
► CAUTION TO BE TAKEN AS A FINANCE DEPARTMENT.
► RECOVERY OF DEBTS – LEGAL FRAMEWORK IN INDIA.
► PROCESS INVOLVED IN RECOVERY:-
❖ RECOVERY U/S 138 OF NEGOTIABLE INSTRUMENT ACT, 1881.
❖ SUMMERY SUIT U/O 37 OF CIVIL PROCEDURE CODE, 1937.
❖ ORDINARY SUIT OF RECOVERY UNDER CIVIL PROCEDURE CODE, 1908.
❖ RECOVERY OF DEBT U/S 362 OF COMPANIES ACT, 2013.
❖ WINDING UP PETITION U/S 433 & 434 OF COMPANIES ACT, 1956.
❖ RECOVERY OF DEBT UNDER CRIMINAL COMPLAINT UNDER INDIAN PENAL
CODE, 1860.
❖ RECOVERY OF DEBT THROUGH ARBITRATION UNDER ARBITRATION AND
CONCILIATION ACT, 1996.
CAUTION TO BE TAKEN AS A FINANCE DEPARTMENT:-
To recover a debt, finance department should do proper documentation and ensure that:
► Agreement should be properly executed.
► Scope of work (SOW) must be signed by both the parties with all payment terms.
► Purchase order should be obtained.
► In case of delivery of service Sign off (Acknowledgement of Service) should be obtained.
► In case of delivery of products delivery challan should be obtained.
► Invoice should be sent in time and acknowledgement of receipt of invoice should be
obtained.
► Collection against the invoice should be made within the credit period.
► In case of non recovery of the debt steps should be taken through legal department.
DEBT RECOVERY – LEGAL FRAMEWORK IN INDIA
Indian Legal system encompasses varied legal provisions for recovery of debt where it is not
feasible in ordinary course of business.
⚫ Summary suits under Order XXXVII of the Code of Civil Procedure, 1908.
⚫ Ordinary suits for recovery, under Civil Law.
⚫ Filing of criminal complaint under Section 138 of Negotiable Instruments Act, 1881 for
dishonor of any cheque issued by borrower to the bank in discharge of legally
enforceable liability.
⚫ Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of
outstanding amount as under Arbitration Agreement / clause in the loan documents, in
cases where the Recovery of Debts due to Banks and Financial Institutions Act, 1993 is
not applicable.
⚫ Initiation of criminal action in addition to civil proceedings for prosecution and
punishment as per the Indian Penal Code and other laws where debt is also tainted with
fraud, cheating, misfeasance etc.
PROCESS INVOLVED IN RECOVERY:-
► RECOVERY U/S 138 OF NEGOTIABLE INSTRUMENT ACT, 1881:
In case of cheque we can claim the benefit of section 138 if the cheque is dishonored due to insufficiency
of fund or stop payment made by the drawer. Cheque should be deposited within a period of three months
and Legal notice should be filed within a period of 30 days from the date of dishonor of instrument.
► SUMMERY SUIT U/O 37 OF CIVIL PROCEDURE CODE, 1908:
Summary suit can be laid when the suit is on the basis of a bill of exchange, hundi or pro-note or when
the suit is for recovery of a debt arising on a written contract or guarantee. In case of summary suit liability of
defendant (defaulter) is apparent and there is no way to deny.
► ORDINARY SUIT OF RECOVERY UNDER CIVIL PROCEDURE CODE, 1908:
In case of absence of agreement, contract, cheques, pro-notes etc. we may go for ordinary suit but in
such suit the defendant (defaulter) has the right to contest his liability.
► RECOVERY OF DEBT U/S 362 OF COMPANIES ACT, 2013:
In case of sale of assets and recovery of debts due to company, the Official Liquidator shall expeditiously
dispose of all the assets whether movable or immovable within sixty days of his appointment. The Official
Liquidator shall serve a notice within thirty days of his appointment calling upon the debtors of the company
or the contributories, as the case may be, to deposit within thirty days with him the amount payable to the
company. Where any debtor does not deposit the amount under sub-section (2), the Central Government
may, on an application made to it by the Official Liquidator, pass such orders as it thinks fit.
► WINDING UP PETITION U/S 433 & 434 OF COMPANIES ACT, 1956.
Winding up petition may be filed in case where the company is unable to pay its debt. Section 434(1) of the
Companies Act, 1956 lists three circumstances where a company is deemed to be unable to pay its debts:
a. if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred
rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post
or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three
weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the
creditor.
b. if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is
returned unsatisfied in whole or in part; or
c. if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining
whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective
liabilities of the company.
► RECOVERY OF DEBT UNDER CRIMINAL COMPLAINT UNDER INDIAN PENAL CODE, 1860:
FIR may be filed on the ground of breach of trust to recover any debt.
► RECOVERY OF DEBT THROUGH ARBITRATION UNDER ARBITRATION AND CONCILIATION ACT, 1996.
We can also go for Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of outstanding amount as under Arbitration Agreement i.e. where arbitration clause is there in the agreement.
-:Thank you:-
RECOVERY PROCESS &
ENFORCEMENT OF INDIA LAW
Written by:
Sandigdha Mishra, ADV.
PAYDIRT PROFESSIONALS
OVERVIEW :
► CAUTION TO BE TAKEN AS A FINANCE DEPARTMENT.
► RECOVERY OF DEBTS – LEGAL FRAMEWORK IN INDIA.
► PROCESS INVOLVED IN RECOVERY:-
❖ RECOVERY U/S 138 OF NEGOTIABLE INSTRUMENT ACT, 1881.
❖ SUMMERY SUIT U/O 37 OF CIVIL PROCEDURE CODE, 1937.
❖ ORDINARY SUIT OF RECOVERY UNDER CIVIL PROCEDURE CODE, 1908.
❖ RECOVERY OF DEBT U/S 362 OF COMPANIES ACT, 2013.
❖ WINDING UP PETITION U/S 433 & 434 OF COMPANIES ACT, 1956.
❖ RECOVERY OF DEBT UNDER CRIMINAL COMPLAINT UNDER INDIAN PENAL
CODE, 1860.
❖ RECOVERY OF DEBT THROUGH ARBITRATION UNDER ARBITRATION AND
CONCILIATION ACT, 1996.
CAUTION TO BE TAKEN AS A FINANCE DEPARTMENT:-
To recover a debt, finance department should do proper documentation and ensure that:
► Agreement should be properly executed.
► Scope of work (SOW) must be signed by both the parties with all payment terms.
► Purchase order should be obtained.
► In case of delivery of service Sign off (Acknowledgement of Service) should be obtained.
► In case of delivery of products delivery challan should be obtained.
► Invoice should be sent in time and acknowledgement of receipt of invoice should be
obtained.
► Collection against the invoice should be made within the credit period.
► In case of non recovery of the debt steps should be taken through legal department.
DEBT RECOVERY – LEGAL FRAMEWORK IN INDIA
Indian Legal system encompasses varied legal provisions for recovery of debt where it is not
feasible in ordinary course of business.
⚫ Summary suits under Order XXXVII of the Code of Civil Procedure, 1908.
⚫ Ordinary suits for recovery, under Civil Law.
⚫ Filing of criminal complaint under Section 138 of Negotiable Instruments Act, 1881 for
dishonor of any cheque issued by borrower to the bank in discharge of legally
enforceable liability.
⚫ Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of
outstanding amount as under Arbitration Agreement / clause in the loan documents, in
cases where the Recovery of Debts due to Banks and Financial Institutions Act, 1993 is
not applicable.
⚫ Initiation of criminal action in addition to civil proceedings for prosecution and
punishment as per the Indian Penal Code and other laws where debt is also tainted with
fraud, cheating, misfeasance etc.
PROCESS INVOLVED IN RECOVERY:-
► RECOVERY U/S 138 OF NEGOTIABLE INSTRUMENT ACT, 1881:
In case of cheque we can claim the benefit of section 138 if the cheque is dishonored due to insufficiency
of fund or stop payment made by the drawer. Cheque should be deposited within a period of three months
and Legal notice should be filed within a period of 30 days from the date of dishonor of instrument.
► SUMMERY SUIT U/O 37 OF CIVIL PROCEDURE CODE, 1908:
Summary suit can be laid when the suit is on the basis of a bill of exchange, hundi or pro-note or when
the suit is for recovery of a debt arising on a written contract or guarantee. In case of summary suit liability of
defendant (defaulter) is apparent and there is no way to deny.
► ORDINARY SUIT OF RECOVERY UNDER CIVIL PROCEDURE CODE, 1908:
In case of absence of agreement, contract, cheques, pro-notes etc. we may go for ordinary suit but in
such suit the defendant (defaulter) has the right to contest his liability.
► RECOVERY OF DEBT U/S 362 OF COMPANIES ACT, 2013:
In case of sale of assets and recovery of debts due to company, the Official Liquidator shall expeditiously
dispose of all the assets whether movable or immovable within sixty days of his appointment. The Official
Liquidator shall serve a notice within thirty days of his appointment calling upon the debtors of the company
or the contributories, as the case may be, to deposit within thirty days with him the amount payable to the
company. Where any debtor does not deposit the amount under sub-section (2), the Central Government
may, on an application made to it by the Official Liquidator, pass such orders as it thinks fit.
► WINDING UP PETITION U/S 433 & 434 OF COMPANIES ACT, 1956.
Winding up petition may be filed in case where the company is unable to pay its debt. Section 434(1) of the
Companies Act, 1956 lists three circumstances where a company is deemed to be unable to pay its debts:
a. if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred
rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post
or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three
weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the
creditor.
b. if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is
returned unsatisfied in whole or in part; or
c. if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining
whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective
liabilities of the company.
► RECOVERY OF DEBT UNDER CRIMINAL COMPLAINT UNDER INDIAN PENAL CODE, 1860:
FIR may be filed on the ground of breach of trust to recover any debt.
► RECOVERY OF DEBT THROUGH ARBITRATION UNDER ARBITRATION AND CONCILIATION ACT, 1996.
We can also go for Arbitration proceedings under Arbitration & Conciliation Act 1996, for recovery of outstanding amount as under Arbitration Agreement i.e. where arbitration clause is there in the agreement.
-:Thank you:-
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