We all live in an economic world where our focus is to build our business and
profession and take it to the new heights. But one of the major concerns of all
the Businesses, Startups and Professionals is how to deal when a client / debtor
/ customer asks for credit and most of the times, we aren't able to do necessary
exercise of due diligence about such client / debtor / customer either on
account of lack of ignorance, negligence, lack of knowledge and resources ; or ;
with a narrow objective of improving our sales and turnovers.
Unlike banks or big corporates, the primary focus of the medium scale
businesses, startups and professionals is to bring in business without much
focusing on the financial standings of the Clients. Lack of such required due
diligence, many a times, leads to mounting of huge bad debts or delay in
payments which acts as a slow poison for any business and adversely impacts
future growth of resources and opportunities. There is a saying in German
Proverb which says, "He Who Is Quick To Borrow Is Slow To Pay
Asking for a debt to be repaid is an uncomfortable but sometime necessary part
of being a business owner.
These following steps may help as a guide for recovering an overdue payment:
- Always Raise Tax Invoice:
Whenever, you provide any service or supply goods / products to any client /
debtor / customer, first and foremost step to be taken is to consideration is to
always raise an 'Invoice' against such supply of goods or service and charge
applicable tax onto the Client. After supplying of such goods or services, it is
advisable to always take an acknowledgement on such invoice from your Client.
The company seal / stamp of your client along with the signature of the
authorized person also becomes important in case your client is a company or an
entity having separate corporate legal personality.
Raising an invoice and charging the applicable tax on the same, will make the
amount to be recovered a legally enforceable debt and acknowledgement of
receiving on the invoice confirms that client has accepted such goods or service
being provided or supplied under the terms and conditions of such Invoice.
It is also advisable to put points / highlights / clauses in respect of interest
on delayed payments, place of delivery and jurisdiction of courts as per your
convenience. Although such highlights may not sound very important on ears but
plays very important role in case of any future recovery proceedings.
- Continuous Follow Ups
This, can be done through sending continuous letters through speed posts,
emails, WhatsApp Chats for confirming the amount due and for confirming the
amount due. Once a confirmation of an outstanding amount is received, the
confirming party becomes liable to pay for the debt and cannot afterwards take a
- Send a Demand Letter
If the Client is still dilly dallying from making the payments due, send a
written Demand Letter to the Client directing the Client to clears the dues
within the prescribed time, otherwise he would have to face the legal
What To Do When The Party Refuses To Pay Its Dues And Remedies Available Through Courts
Written By: Advocate Vipul Lamba
Civil Suit For Recovery Under Order 37 Of Code Of Civil Procedure, 1908The most common civil remedy for recovering of money is suit for recovery of
money under Order 37 of the Civil Procedure Code, 1908. The Suit under Order 37
of the Civil Procedure Code is called Summary Suit, which can be filed when
there is written agreement between the parties and acknowledgement of debt by
the other party.
Once the Suit is instituted in the Court, and the Court has
issued a summons to the Defendant, then the defendant has to make an appearance
within 10 days in the Court and if the Defendant fails to make appearance then
the Court assumes that the plaintiff's allegations are true and accordingly
awards the plaintiff. If the defendant makes an appearance, then the defendant
has to satisfy that he has a defence and only when the Court is convinced that
there are some triable issues, then only leave to defend is granted otherwise
the Suit is Decreed in favour of the Plaintiff.
Commercial Suit Under Commercial Courts Act, 2015Commercial Dispute as defined under Commercial Courts Act, 2015 are the Suit
which arises out of Commercial Transactions between the parties and includes
ordinary transactions of merchants, bankers, financiers and traders, agreements
relating to immovable property used exclusively in trade or commerce, agreements
for sale of goods or provision of services.
Thus, for recovery of money arising
out of commercial transactions, the Commercial Suit are maintainable over other
types of recovery suits. Under this type of suit also the disposal is summary in
nature and the Court only goes into the trial or evidence only when it appears
that there are issues which can be resolved after the parties lead the evidence,
otherwise Court give its Judgment after going through the pleadings and
documents filed in support of the pleadings by both the parties.
Section 138 Of Negotiable Instruments Act: Dishonourment Of Cheque
Giving goods and Services on Credit after taking the Blank Signed Cheques from
the parties, is most prevalent practice for giving the goods or services on
credit. Once the Cheque issued by a party Dishonours for any reason including
but not limited to insufficient funds, payment stopped by the Drawer or for any
other reason, then the issuing party is liable to prosecuted for an Offence
under Section 138 of the NI Act, which in itself is a penal provision and issuer
of the Cheque if found guilty may be punished for the imprisonment which may
extend to two years along with the fine which may be double the amount of Cheque
For instituting a Cheque Bounce case under Section 138 of the NI Act a defined
procedure has to be followed. Firstly, a legal notice for dishonourment of the
Cheque has to sent to the drawer within 30 days of the dishonourment of the
Cheque and then if no payment is received within 15 days of the receipt of the
legal demand notice, then the Complaint has to be filed in the Court within 30
days from the date of expiry of 15 days. The recovery of money through
dishonoured Cheque is the fastest way to recover as the drawer has fear of
imprisonment and in 90% of the Cases the drawer of the Cheques settles the
dispute and makes the payment.
Hope this Article is helpful to you for how to safeguard your money and how to
get the same recovered through Court of Law.
, Delhi High Court
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