How to recover your money?

Remedies to recover your money!

I know how it feels like, loosing your hard earned money! Get it back, ASAP!

Unlike banks with their well established recovery machinery, the common man can hardly boast such resources. However, if you are ready to battle it out, there are multiple provisions in the law to help you out.

Civil remedies

The most common civil remedy for recovering money is Order 37 of the Civil Procedure Code, which allows a creditor to file a summary suit. Compared to normal suits, summary suits are disposed of faster. Once the suit is instituted and the summons are issued, the defendant has 10 days to make an appearance, failing which the court assumes the plaintiff's allegations to be true and, accordingly, awards the plaintiff. If the defendant makes an appearance, the court accepts his defence only if it is convinced that it is substantial to the case in question.

The summary procedure applies to all suits for recovery of money that arise from written agreements. This could be promissory notes and contracts, bills of exchange or cheques, so long as the plaintiff seeks to recover specific debt. Where the matter How to recover pending dues concerns penalties or any other uncertain amount, one cannot file a summary suit.

Another option is the Negotiable Instruments Act, 1881, which only deals with the recovery of money arising from instruments such as bills of exchange or cheques. The Act contains several sections, each outlining the procedure for recovering money under a specific instrument. For instance, Section 138 explains the procedure to deal with a bounced cheque, whereby a legal notice is to be sent to the defaulter within 30 days of receiving the cheque return memo. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under this Section.

However, the complaint should be registered in a magistrate's court within a month of the expiry of the notice period, otherwise your suit will be time barred. In other words, it will not be entertained by the court unless you show sufficient and reasonable cause for delay. On receiving the complaint, along with an affidavit and the relevant paper trail, the court will issue summons and hear the matter. If found guilty, the defaulter can be punished with a prison term of two years and/or a fine, which can be as high as twice the cheque amount.

Criminal proceedings

You also have the option of initiating criminal proceedings against the defaulter under the Indian Penal Code, 1860. You can either file a case of criminal breach of trust or cheating, or even mischief (see Sections under which..). However, criminal proceedings usually take a long time to conclude. So you may end up wasting valuable time and effort in court to recover your dues,

Out-of-court options

One of the fastest and most economical ways of recovering money is to opt for an out-of-court settlement, such as arbitration or conciliation, provided that the other party is also willing to settle in this manner. If the matter is referred to an arbitrator, the latter hears both the parties and passes an award binding on both. The award can only be appealed on three grounds.

One, if it is invalid, two, if the defendant is not given adequate time to present the case, and three, if he was not given notice about the arbitrator's appointment. In fact, if a proposal by an inter-ministerial group set up last year to look into policy and legislative changes to tackle the large number of pending cases is accepted, then the cases of dishonoured cheques will have to be decided only through arbitration, conciliation or settlement by lok adalats.

Apart from these options, you can also choose to file a winding-up petition against a client if he is not able to pay the debts. Of course, the debt in question must be specific and cannot pertain to arbitrary penalties.

Better safe than sorry

In order to avoid all these problems, it's best to take some precautions at the outset. Experts recommend a written contract between the parties involved. The contract must contain details of the transaction in clear terms, including the date on which the amount was lent and the exact principal amount and the interest, if any.

If the amount is to be returned in instalments, mention the exact amount and the repayment dates. 

Make sure that you and the borrower sign the document, without which it will not have any significance. Ideally, as a safety measure, have the document executed on a stamp paper and get it registered, though this is not mandatory,

Happy learning and Sharing.