Introduction
When a person or business entity lends money or provides goods/services and does not receive payment, they can file a civil suit for recovery of money. This suit is generally filed under the Code of Civil Procedure, 1908 (CPC) and follows a structured process.
In this article, we will cover:
- Legal remedies available for money recovery
- Step-by-step procedure to file a money recovery suit
- Time limits and necessary documents
- FAQs related to money recovery suits
Legal Remedies for Recovery of Money in India
The following legal options are available to recover money in India:
1. Filing a Civil Suit for Recovery of Money
- Filed under Order VII of CPC.
- A decree from the Civil Court allows the plaintiff (the person filing the case) to recover money from the defendant.
2. Summary Suit Under Order XXXVII CPC
- A faster way to recover money when there is written proof of debt (like a promissory note, invoice, bill of exchange, or written contract).
- The defendant gets limited grounds to contest the suit.
3. Criminal Action for Cheating (If Applicable)
- If the money was obtained fraudulently or dishonestly, a criminal complaint can be filed under Section 420 IPC (Cheating).
4. Filing a Complaint Under the Negotiable Instruments Act, 1881
- If a cheque was dishonored due to insufficient funds, the payee can file a case under Section 138 of the NI Act.
5. Insolvency and Bankruptcy Proceedings
- If the debtor is a company, money recovery can be initiated under the Insolvency and Bankruptcy Code (IBC), 2016 before the National Company Law Tribunal (NCLT).
Step-by-Step Procedure to File a Civil Suit for Money Recovery
Step 1: Sending a Legal Notice
Before filing a suit, it is advisable to send a legal notice to the debtor, demanding payment within a stipulated period (usually 15-30 days).
Contents of the Legal Notice:
- Details of the transaction.
- The total amount due.
- A deadline to pay (usually 15-30 days).
- Consequences of non-payment (filing of a civil suit).
If the debtor does not respond or refuses to pay, the creditor can proceed with a civil suit for recovery.
Step 2: Determining Jurisdiction
The suit must be filed in the appropriate court based on:
- Territorial Jurisdiction: The court where the defendant resides, carries business, or where the cause of action arose.
- Pecuniary Jurisdiction:
- Suits up to ₹3 lakh → Jurisdiction of Civil Judge (Junior Division).
- Suits above ₹3 lakh → Jurisdiction of District Court (depending on the state).
Step 3: Drafting the Plaint
A plaint is the formal document initiating the civil suit.
Essential Contents of a Plaint:
- Title of the suit (Plaintiff vs. Defendant).
- Cause of action (reason for filing the suit).
- Jurisdiction details (why the particular court has jurisdiction).
- Facts of the case (background, transactions, proof of debt).
- Relief sought (amount to be recovered, interest, damages, costs).
- Verification by the plaintiff.
Step 4: Payment of Court Fees
- The court fees are paid based on the amount being claimed, as per Court Fees Act, 1870.
- Each state has different court fee structures.
Step 5: Filing the Suit in the Civil Court
- The suit is filed before the relevant court along with supporting documents (invoices, promissory notes, emails, agreements, bank transactions, etc.).
- The court examines the plaint and issues a summons to the defendant.
Step 6: Appearance of Defendant and Filing of Written Statement
- The defendant must appear in court and file a written statement within 30 days of receiving the summons.
- If the defendant fails to respond, the court may pass an ex-parte order in favor of the plaintiff.
Step 7: Framing of Issues
- The court frames issues based on the pleadings.
- Both parties present their evidence and witnesses.
Step 8: Arguments and Judgment
- After hearing arguments, the court delivers its judgment.
- If the plaintiff wins, the court orders the defendant to pay the money with interest.
Step 9: Execution of Decree
- If the defendant refuses to pay, the plaintiff can file for execution under Order XXI CPC.
- The court may:
- Attach the defendant’s property, salary, or bank accounts.
- Order auction of assets.
- Issue an arrest warrant for non-payment.
Time Limit for Filing a Money Recovery Suit
As per the Limitation Act, 1963:
- The time limit to file a suit for recovery of money is 3 years from the date when the cause of action arises.
- If the limitation period expires, the case cannot be filed, unless the court allows it on valid grounds.
Frequently Asked Questions (FAQs)
Q1. What if the debtor refuses to accept the legal notice?
Even if the debtor does not accept the legal notice, the creditor can proceed with filing the suit. The court considers postal receipts and tracking reports as proof of sending the notice.
Q2. Can I recover money without written proof?
Yes, oral contracts are enforceable, but the plaintiff must provide other evidence like emails, witness statements, bank transactions, or previous conduct of payments.
Q3. How much court fee is required for filing a money recovery suit?
The court fee varies based on the amount being claimed and the state where the suit is filed. It is usually a percentage of the claim amount.
Q4. How long does a civil suit for recovery of money take?
- If filed under Order XXXVII (Summary Suit) → 6 months to 1 year.
- If filed as a regular suit → 2 to 5 years, depending on court workload.
Q5. Can I claim interest on the amount due?
Yes, the plaintiff can claim interest at a reasonable rate, depending on:
- Contractual terms (if any).
- Prevailing market interest rates.
- Court’s discretion.
Q6. Can I file a case against a company for non-payment?
Yes, money recovery suits can be filed against companies, partners, or directors (if personally liable).
Q7. What happens if the defendant does not appear in court?
If the defendant does not appear, the court may pass an ex-parte decree, allowing the plaintiff to recover the money.
Q8. Can the court seize the debtor’s assets if they do not pay?
Yes, under Order XXI CPC, the court can attach and sell the debtor’s assets to recover money.
Q9. Can I settle the dispute outside the court?
Yes, settlement through negotiation or mediation is allowed at any stage of the case.
Q10. What if the debtor files for bankruptcy?
If the debtor is declared insolvent, the plaintiff can still claim the debt through the Insolvency Court or NCLT (for corporate debtors).
Conclusion
A civil suit for recovery of money is an effective legal remedy if a person or business has not received payment for goods, services, or loans. The suit should be filed within 3 years with proper documents and legal procedures. To ensure a faster resolution, it is advisable to seek legal assistance for drafting and filing the case properly.
Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.
Adcocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)
Contact: 88271 22304