Recovery of Money from Debtors in India
Many businesses and individuals have at one particular time, sold goods and serve services to the customers / clients with an agreement or without agreement, that payment will be made at a later date or granted loans to debtors who even after several attempts of payment reminder have been made to recover the debts, refuse to pay their debts. Sometimes debtors are helpless when customers / clients refuse to pay amount to the debtors due to which debtor suffer a loss in his business.
If you have embracive chased a customer and there is still no sign of a payment, it’s time to consider the possible legal action you can take. Sometimes, there’s simply no choice but to escalate the matter further to ‘encourage’ a customer to pay. And there are no excuses for failing to make a payment.
Methods of Recovering a Company Debt.
Try to Speak to the Debtor Person
Sometimes a polite behavior may resolve the issues, so it’s always worth speaking to them in person before escalating the situation further.
Send Written Reminders, Keeping Record of Each
Send written reminders to the parties on periodic intervals with warning of legal action if you feel that’s a path you are prepared to go down.
Send a Legal Notice with Final Warning
Send a legal notice on debt recovery situations. This is essentially a final reminder/demand letter, which should confirm:
• exactly what monies are owed
• a clear timeframe (i.e. 15 days)
• what the consequences will be if they do not pay (i.e. type of legal action),
• You can also state that any proceedings which you will proceeds against him and also include a claim for Court fees and costs where applicable.
Legal Action if creditor failing to make a payment;
Civil Procedure Code Order XXXVII provides for the summary suit procedure. The provision has been made keeping in view certain suits, in order to prevent the unreasonable obstruction laid down by the defendant, who has no defence. Unlike other civil suits, the trial in summary suits begins after the court grants leave to the defendant to contest the suit. The court dealing with summary suits can pass the judgment in the favor of the plaintiff if (1) the defendant has not applied for leave to defend or if such application has been made but refused, or (2) the defendant who is permitted to defend fails to comply with the conditions on which the leave to defend was granted.
Rules under Order XXXVII related to summary suit under Civil Procedure Code are:
1. Courts and classes of suits to which the Order is to apply.
1(1) This Order shall apply to the following courts, namely:-
(a) High Courts, City Civil Courts and Courts of Small Causes; and
(b) other courts;
Provided that in respect to the courts referred to in clause (b), the High Court may, by notification in the Official Gazette, restrict the operation of this order only to such categories of suits as it deems proper, and may also, from time to time, as the circumstances of the case may require, by subsequent notification in the Official Gazette, further restrict, enlarge or vary, the categories of suits to be brought under the operation of this order as it deems proper.
(2) Subject to the provisions of sub-rule
(1), the order applies to the following classes of Suits, namely:
(a) suit upon bills of exchange, hundies and promissory notes;
(b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest arising-
(i) on a written contract; or
(ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt (other than a penalty; or
(iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only.
2. Institution of summary Suits.
(1) A suit, to which this Order applies, may, it the plaintiff desires to proceed hereunder, be instituted by presenting a plaint which shall contain,-
(a) a specific averment to the effect that the suit is filed under this Order;
(b) that no relief, which does not fall within the ambit of this rule, has been claimed in the plaint; and
(c) the following inscription, immediately below the number of the suit in the title of the suit, namely:-
(Under Order XXXVII of the Code of Civil Procedure, 1908)”.
(2) The summons of the suit shall be in form No. 4 in Appendix B or in such other Form as may , from time to time, be prescribed.
(3) The defendant shall not defend the suit referred to in sub-rule (1) unless he enters an appearance and in default of his entering an appearance the allegations in the plaint shall be deemed to be admitted and the plaintiff shall be entitled to a decree for any sum, not exceeding the sum mentioned in the summons, together with interest at the rate specified, if any, up to the date of the decree and such sum for costs as may be determined by the High Court from time to time by rules made in that behalf and such decree may be executed forthwith.
3. Procedure for the appearance of defendant.
(1) In a suit to which this Order applies, the plaintiff shall, together with the summons under rule 2, serve on the defendant a copy of the plaint and annexure thereto and the defendant may, at any time within ten days of such service, enter an appearance either in person or by pleader and, in either case, he shall file in court an address for service of notice on him.
(2) Unless otherwise ordered, all summonses, notices and other judicial processes, required to be served on the defendant, shall be deemed to have been duly served on him if they are left at the address given by him for such service.
(3) On the day of entering the appearance, notice of such appearance shall be given by the defendant to the plaintiff’s pleader, or, if the plaintiff sues in person, to the plaintiff himself, either by notice delivered at or sent by a prepaid letter directed to the address of the plaintiff’s pleader or of the plaintiff, as the case may be.
(4) If the defendant enters an appearance, the plaintiff shall thereafter serve on the defendant a summons for judgment in Form No. 4A in Appendix B or such other Form as may be prescribed from time to time, returnable not less than ten days from the date of service supported by an affidavit verifying the cause of action and the amount claimed and stating that in his belief there is no defence to the suit.
(5) The defendant may at any time within ten days from the service of such summons for It’s affidavit or otherwise d such facts as may be deemed sufficient to entitle him to defend , apply on such summons for leave to defend such suit, and leave to defend may be granted to him unconditionally or upon such terms as may appear to the court or judge to be just:
Provided that leave to defend shall not be refused unless the court-is-satisfied.*hat the facts disclosed by the defendant do not indicate that he has a substantial defence to raise or that the defence intended to be put up by the defendant is frivolous or vexatious:
Provided further that, where a part of the amount claimed by the plaintiff is admitted by the defendant to be due from him, leave to defend the suit shall not be granted unless the amount so admitted to be due is deposited by the defendant in court.
(6) At the hearing of such summons for judgment,-
(a) if the defendant has not applied for leave to defend, or if such application has been made and is refused, the plaintiff shall be entitled to judgment forthwith; or
(b) if the defendant is permitted to defend as to the whole or any part of the claim, the court or judge may direct him to give such security and within such time as may be fixed by the court of judge and that, on failure to give such security within the time specified by the court or judge or to carry out such other directions as may have been given by the court or judge, the plaintiff shall be entitled to judgment forthwith.
(7) The court or judge may, for sufficient cause shown by the defendant, excuse the delay the defendant in entering an appearance or in applying for leave to defend the suit.
4. Power to set aside decree
Under special circumstances, set aside the decree, and if necessary stay or set aside execution, and may give leave to the defendant to appear to the summons and to defend the suit, if it seems reasonable to the court so to do, and on such terms as the court thinks fit.
5. Power to Order bill, etc., to be deposited with officer of court.
In any proceeding under this Order the court may Order the bill, hundi or note on which the suit is founded to be forthwith deposited with an officer of the court, and may further Order that all proceedings shall be stayed until the plaintiff gives security for the costs thereof.
6. Recovery of cost of noting non-acceptance of dishonored bill or note.
The holder of every dishonored bill of exchange or promissory note shall have the same remedies for the recovery of the expenses incurred in noting the same for non-acceptance or non-payment, or otherwise, by reason of such dishonor, as he has under this Order for the recovery of the amount of such bill or note.
7. Procedure in Suits.
Save as provided by this order, the procedure in suits hereunder shall be the same as the procedure in suits instituted in the ordinary manner.