A suit for money recovery is a case initiated in the court of law in order to receive an unpaid debt.
Such suits are filed to claim what is rightfully and legally yours.
A legal notice must contain the following points:
Indian law provides various methods through which a legal action can be taken against the debtor in case he/she doesn’t pay the money even after the service of notice.
The most common and cheapest way is to initiate a suit is under Order 37 of the Civil Procedure Code, 1908. The peculiarities of this type of suit are as follows
Under the Negotiable Instruments Act a case can be filed in case of recovery of money relating to Cheques, Bills of Exchange etc.
For example, in case of a cheque bounce, a 15 day notice is served upon the defaulter. In case the money is still not paid, a suit under Section 138 can be initiated against the defaulter which is a criminal case. The time limit for such a case is 30 days from the notice of delivery of the 15 day notice.
In such a case the drawer of the cheque will be punished with:-
It is important to note that a case under the Negotiable Instruments Act is an alternative remedy to filing summary suit for recovery. The former is a criminal proceeding to punish the defaulter in case of cheque bounces and the latter is a civil remedy to recover money.
Indian laws provide a number of remedies to the creditors who are not paid the money which is rightfully theirs. In some cases, people are even cheated of their money. This is a punishable offence under the Indian Penal Code (IPC).
Following are the provisions under the IPC which can be invoked in such cases:
i. Cheating (Section 415): If someone by deceiving or by fraudulent methods makes the other person deliver any property to him/her, they shall be liable for cheating.
Example:A, by falsely pretending to be in the Civil Service, intentionally deceives Z, and thus dishonestly induces Z to let him have on credit goods for which he does not mean to pay. A cheats.
Punishment:Up to 1 year in prison or fine or both.
ii. Criminal Misappro priation (Section 403): Criminal Misappropriation is said to have occurred when a person dishonestly converts property of another person for his/her own use.
Example:A finds a purse with money, not knowing to whom it belongs; he afterwards discovers that it belongs to Z, and appropriates it to his own use. A is guilty of an offence under this section.
Punishment: Up to 2 years in prison or fie or both.
iii. Criminal Breach of Trust: (Section 405):Criminal Breach of Trust is said to have occurred when there is a dishonest misappropriation or conversion for own use of another’s property.
Example: A, being executor to the will of a deceased person, dishonestly disobeys the law which directs him to divide the effects according to the will, and appropriate them to his own use. A has committed criminal breach of trust.
The Difference between Criminal Misappropriation and Criminal Breach of Trust
The only difference between the two is that in the latter the offender was entrusted with the property in question.
Proceedings for debt recovery can also be instituted under the IBC Code, 2016 wherein the defaulters are dealt with the new stringent laws in a time bound manner (less than a year).
The provisions of the Code are applicable to companies, limited liability entities, firms and individuals (i.e. all entities other than financial service providers).
Recovery of money can be made is a person frauds (Section 17), misrepresents (Section 18) or when an indemnifier or a guarantor is unable to execute the contract due to complete cash crunch and a possible insolvency form his/her end, Section 73 of the Indian Contract Act can be invoked which provides for compensation of loss or damage by breach of contract.
If the defaulter is a company, a suit can be instituted under the Companies Act, 2013. Suits under this can be class action suits where a certain group of people representing a particular class institute a suit for recovery of debts due to them or in case of a business where debts are due in accordance with a contract.
With the rising problems in litigation in India, it is advisable to resort to out of court methods of settlement of issues such as arbitration, negotiation or conciliation etc. Generally, a clause to the same is added in the agreement between the parties. Out of court settlement is a cheaper, efficient and time conserving method of recovering debt.
The main provision that needs to kept in minding in arbitration is section 7 of the Arbitration and Conciliation Act, 1996 which is regarding arbitration agreement, without which the parties cannot approach an arbitral tribunal unless there is consensus between the parties.
The place of filing a case is decided by the pecuniary jurisdiction of the courts i.e. what is the monetary limit on the power of courts to hear a matter. Depending on the valuation of the suits, the appropriate forum is decided.
For example, the pecuniary jurisdiction of the Courts in Delhi areas follows:
It is essential to remember that the amount of pecuniary jurisdiction is different for all High Courts in India. This limit is decided by respective High Court Rules and in many states the High Court has no pecuniary jurisdiction. All civil suits go before the District Courts, and only appeals lie before the High Court.