How to File a Money Recovery Suit? | Advocate J.S. Rohilla

Filing a money recovery suit in India is a legal process that allows an individual or entity to recover debts or dues from another party. This process is governed by the Code of Civil Procedure, 1908 (CPC), and other relevant laws depending on the nature of the debt. Below is a detailed explanation of the steps involved in filing a money recovery suit in India:

1. Understanding the Nature of the Debt

Before filing a money recovery suit, it is crucial to understand the nature of the debt and its legal implications. Debts can arise from various transactions, such as unpaid loans, delayed or non-payment for goods and services, breach of contract, dishonored cheques, or other financial obligations. For example, if the debt arises from a commercial transaction, the applicable laws might include the Indian Contract Act, 1872, and the Sale of Goods Act, 1930. On the other hand, if the debt involves a dishonored cheque, the provisions of the Negotiable Instruments Act, 1881, would be relevant.

In some cases, the debt might be secured by collateral, such as in the case of secured loans or mortgages. In such scenarios, the recovery process might involve different legal avenues, such as foreclosure or attachment of the collateral. Understanding the nature of the debt helps in determining the correct legal strategy and identifying the specific laws that apply to the case.

2. Legal Notices and Pre-Litigation Steps

Issuing a legal notice is a crucial pre-litigation step in the process of recovering money. The legal notice serves as a formal demand for the payment of the outstanding debt and provides the debtor with an opportunity to settle the matter without resorting to litigation. The notice should be drafted meticulously, mentioning all relevant details, including the amount due, the date on which the debt became payable, and any interest that has accrued on the unpaid amount.

The legal notice should also mention the consequences of non-payment, including the intention to file a lawsuit if the payment is not made within the specified period. This period usually ranges from 15 to 30 days, but it can vary depending on the nature of the transaction and the urgency of the matter. The notice should be sent via registered post or through a reliable courier service, with proof of delivery being retained. In some cases, especially those involving commercial transactions, sending a legal notice may be a mandatory pre-requisite before filing a suit, as it demonstrates the plaintiff’s willingness to resolve the matter amicably.

3. Jurisdiction and Limitation Period

Jurisdiction: The jurisdiction of the court where the suit is to be filed is determined by two factors: territorial jurisdiction and pecuniary jurisdiction. Territorial jurisdiction is based on where the cause of action arose, such as the place where the contract was executed, the goods were delivered, or the payment was to be made. Pecuniary jurisdiction is determined by the monetary value of the claim. For example, claims up to a certain amount may be filed in a Civil Judge’s Court, while higher-value claims must be filed in a District Court or High Court. In cases where the parties have an agreement specifying the jurisdiction, the suit must be filed in the court specified in the agreement.
Limitation Period: The Limitation Act, 1963, prescribes the time frame within which legal proceedings must be initiated. For money recovery suits, the limitation period is typically three years from the date the cause of action arose. However, certain factors may extend or reduce this period. For example, in cases of fraud or concealment of facts by the debtor, the limitation period may begin from the date of discovery of the fraud. Filing a suit after the expiration of the limitation period can result in the suit being dismissed by the court as time-barred, unless the plaintiff can demonstrate sufficient grounds for condoning the delay.

4. Drafting the Plaint

Drafting the plaint is one of the most critical steps in initiating a money recovery suit. The plaint is the primary legal document that outlines the plaintiff’s claim and forms the basis of the lawsuit. A well-drafted plaint should be clear, concise, and precise, covering all the necessary legal and factual details.

Title of the Suit: The title of the suit must clearly mention the name of the court in which the suit is being filed, the full names, and addresses of the plaintiff(s) and defendant(s). If the plaintiff is a company or an organization, the plaint should specify the legal status of the entity, such as a private limited company, partnership firm, or sole proprietorship.
Cause of Action: The cause of action is the set of facts or circumstances that give rise to the plaintiff’s right to sue. This section should include a detailed account of the events leading to the dispute, including the date on which the debt became due, the nature of the transaction, any promises or agreements made by the defendant, and the failure of the defendant to fulfill their obligations.
Jurisdiction: The plaint must explicitly mention the jurisdiction of the court, justifying why the chosen court has the authority to hear the case. This may involve citing the relevant legal provisions that confer jurisdiction on the court based on territorial and pecuniary factors.
Relief Sought: The relief sought section must clearly specify the exact remedy the plaintiff is seeking from the court. This could include the recovery of the principal amount, interest, costs incurred due to non-payment, and any other damages or compensations that the plaintiff deems necessary. It is important to quantify the relief sought, providing a clear breakdown of the amounts being claimed.
Verification: The plaint must conclude with a verification clause, where the plaintiff or an authorized representative swears that the contents of the plaint are true to the best of their knowledge, belief, and information. This verification must be signed and dated by the plaintiff and, in some cases, may require notarization.

5. Payment of Court Fees

Paying the appropriate court fees is an essential step in the filing process. Court fees are generally calculated as a percentage of the total amount claimed in the suit, and the exact percentage varies depending on the state and the nature of the claim. The Court Fees Act, 1870, governs the payment of court fees in India, and each state has its schedule of fees.

The court fee must be paid at the time of filing the plaint, and the amount should be accurately calculated based on the claimed sum, including any interest or additional damages being sought. If the plaintiff underpays the court fees, the court may not accept the plaint or may direct the plaintiff to make up the shortfall before proceeding with the case. In cases where the plaintiff is indigent and unable to afford the court fees, an application can be made to proceed as a “pauper” or “indigent person,” allowing the suit to be filed without the payment of court fees.

6. Filing the Suit

Once the plaint is drafted and the court fees are paid, the suit is ready to be filed in the appropriate court. The plaintiff must submit the plaint along with several copies, depending on the number of defendants and the requirements of the court. Each copy of the plaint must be accompanied by supporting documents that substantiate the plaintiff’s claim.

Supporting Documents: The documents submitted along with the plaint serve as evidence of the plaintiff’s claims. These can include agreements, contracts, promissory notes, invoices, receipts, emails, letters, bank statements, and any other relevant documents. Each document should be carefully labeled and referenced in the plaint.
Filing Process: The plaint and accompanying documents are submitted to the court’s filing section. The court officials will review the documents to ensure that all necessary formalities have been complied with, such as proper stamping, payment of court fees, and submission of the requisite number of copies. Once the court is satisfied with the filing, it will assign a case number to the suit and list it for a preliminary hearing.

7. Service of Summons

After the suit is filed, the court issues summons to the defendant, notifying them of the lawsuit and directing them to appear in court on a specified date. The summons serves as an official notice to the defendant, informing them of the allegations against them and providing them with an opportunity to defend themselves.

Mode of Service: The summons can be served through various means, including personal delivery by the court’s process server, registered post, courier service, or electronic means such as email, depending on the court’s rules and the circumstances of the case. In some instances, especially when the defendant is evading service, the court may order substituted service, such as publication of the summons in a newspaper.
Acknowledgment of Service: The defendant is required to acknowledge receipt of the summons. This acknowledgment can be in the form of a signed delivery receipt, an affidavit of service by the process server, or a return receipt from the postal or courier service. If the defendant fails to acknowledge the summons or evades service, the court may proceed with the case ex-parte, meaning the case will be decided in the absence of the defendant.

8. Written Statement by the Defendant

Upon receiving the summons, the defendant must file a written statement, which is their official response to the allegations made in the plaint. The written statement is a crucial document that outlines the defendant’s defenses, admissions, and counterclaims.

Content of the Written Statement: The written statement should address each allegation made in the plaint, either admitting or denying the claims. The defendant may also raise legal defenses, such as the suit being time-barred, lack of jurisdiction, or failure to fulfill certain conditions precedent. The defendant may also include a counterclaim if they believe that the plaintiff owes them money or damages.
Time Limit: The defendant is required to file the written statement within 30 days from the date of receipt of the summons. However, the court may grant an extension of up to 90 days in exceptional circumstances, provided the defendant can show sufficient cause for the delay. Failure to file the written statement within the prescribed time may result in the court proceeding with the case based on the plaintiff’s claims alone.

9. Replication by the Plaintiff

If the defendant raises new facts, defenses, or counterclaims in the written statement, the plaintiff has

the right to file a replication. The replication is a formal reply to the defendant’s written statement, addressing the new points raised and reaffirming the plaintiff’s position.

Purpose of Replication: The replication allows the plaintiff to clarify any misunderstandings, rebut the defendant’s defenses, and strengthen their case. For example, if the defendant claims that the suit is time-barred, the plaintiff can use the replication to explain why the limitation period does not apply or why the delay should be condoned.
Filing the Replication: The replication should be filed within the time frame specified by the court, usually within 15 to 30 days after receiving the written statement. Like the plaint and written statement, the replication must be verified by the plaintiff or an authorized representative.

10. Framing of Issues

After the pleadings (plaint, written statement, and replication) are complete, the court will proceed to frame the issues. Issues are specific questions of law or fact that the court needs to resolve to decide the case. The framing of issues is a critical step, as it sets the parameters for the trial.

Types of Issues: The issues framed by the court can be of two types: issues of fact and issues of law. Issues of fact pertain to disputes about what actually happened, such as whether the defendant defaulted on a payment or whether the plaintiff fulfilled their contractual obligations. Issues of law involve the application of legal principles to the facts of the case, such as whether the suit is barred by limitation or whether the contract was legally enforceable.
Role of the Parties: Both the plaintiff and the defendant have the opportunity to suggest issues that they believe should be addressed by the court. The court will consider these suggestions, along with its understanding of the case, to frame the final set of issues. Once the issues are framed, the trial will proceed based on these issues, and both parties will present their evidence and arguments accordingly.

11. Evidence Stage

The evidence stage is where both parties present their evidence to support their respective claims and defenses. The evidence can be in the form of oral testimony, documents, and other material evidence.

Plaintiff’s Evidence: The plaintiff presents their evidence first. This usually begins with the examination-in-chief of the plaintiff’s witnesses, where they provide oral testimony supporting the plaintiff’s claims. The witnesses may include the plaintiff, employees, experts, or any other individuals who have knowledge of the facts of the case. During the examination-in-chief, the plaintiff’s counsel will ask questions to elicit favorable testimony. The defendant’s counsel then has the opportunity to cross-examine the witnesses to challenge their credibility and the accuracy of their statements.
Defendant’s Evidence: After the plaintiff’s evidence is closed, the defendant presents their evidence following the same procedure. The defendant’s witnesses will provide testimony to support the defendant’s defenses, and the plaintiff’s counsel will have the opportunity to cross-examine them.
Documentary Evidence: In addition to oral testimony, both parties may submit documentary evidence, such as contracts, invoices, emails, bank statements, and other relevant documents. These documents are marked as exhibits and form part of the court’s record. The court may also consider other forms of evidence, such as expert reports, photographs, and electronic records.

12. Final Arguments

Once the evidence is recorded, the case moves to the final arguments stage. During this stage, both parties present their legal arguments, summarizing the evidence and explaining how the law applies to the facts of the case.

Plaintiff’s Arguments: The plaintiff’s counsel will present their case first, highlighting the evidence that supports their claims and explaining why the court should grant the relief sought. This may involve citing relevant legal precedents, statutory provisions, and principles of law that favor the plaintiff’s position.
Defendant’s Arguments: The defendant’s counsel will then present their arguments, challenging the plaintiff’s case and explaining why the court should dismiss the suit or reduce the amount claimed. The defendant may argue that the plaintiff has failed to prove their case, that the suit is time-barred, or that the plaintiff’s claims are exaggerated or unfounded.
Rebuttal: In some cases, the plaintiff’s counsel may be allowed to present a rebuttal, addressing any new points raised by the defendant’s counsel during their arguments. This is usually brief and focuses on countering the defendant’s final arguments.

13. Judgment

After hearing the final arguments, the court will reserve its judgment. The judgment is the court’s final decision on the case, based on the evidence and arguments presented by both parties.

Contents of the Judgment: The judgment will contain a detailed analysis of the issues framed by the court, the evidence presented by both parties, the legal principles applied, and the court’s findings on each issue. The judgment will conclude with the court’s decision, either granting or dismissing the plaintiff’s claims.
Relief Granted: If the court finds in favor of the plaintiff, it will pass a decree ordering the defendant to pay the amount due, along with any interest and legal costs. The court may also grant other forms of relief, such as damages, specific performance, or injunctions, depending on the nature of the case. If the court finds in favor of the defendant, the suit will be dismissed, and the plaintiff may be ordered to pay the defendant’s legal costs.

14. Execution of Decree

If the court’s judgment is in favor of the plaintiff and the defendant fails to comply with the decree, the plaintiff can initiate execution proceedings to enforce the judgment. Execution is the process by which the court ensures that the decree is carried out and the plaintiff receives the relief granted.

Modes of Execution: The court may order various modes of execution, depending on the circumstances of the case. This can include the attachment and sale of the defendant’s property, garnishment of the defendant’s bank accounts or salary, and the appointment of a receiver to manage the defendant’s assets. In some cases, the court may also order the arrest and detention of the defendant if they willfully refuse to comply with the decree.
Application for Execution: The plaintiff must file an application for execution in the same court that passed the decree. The application should specify the mode of execution sought and provide details of the defendant’s assets or sources of income that can be attached or garnished. The court will then issue necessary orders to enforce the decree, and the execution proceedings will continue until the plaintiff’s claim is satisfied.

15. Appeals

If either party is dissatisfied with the judgment, they have the right to file an appeal in a higher court. The appeal process allows the aggrieved party to challenge the judgment on legal or factual grounds.

Grounds for Appeal: An appeal can be filed on various grounds, such as errors of law, incorrect interpretation of evidence, procedural irregularities, or new evidence that was not available at the time of the trial. The appellate court will review the trial court’s judgment and may either uphold, modify, or overturn the decision.
Time Limit: The time limit for filing an appeal is governed by the Limitation Act, 1963, and varies depending on the type of case and the court in which the appeal is to be filed. For example, an appeal to a District Court or High Court must generally be filed within 30 to 90 days from the date of the judgment, while an appeal to the Supreme Court may have a different time frame.
Appellate Process: The appellate court will conduct a review of the trial court’s proceedings, considering the grounds of appeal, the evidence on record, and the arguments of both parties. The appellate court may also allow the parties to present additional evidence or arguments, especially if new facts have come to light. The appellate court’s decision may result in the judgment being affirmed, modified, or set aside, and the case may be remanded to the trial court for a fresh hearing if necessary.

Conclusion

Filing a money recovery suit in India is a complex and multi-step process that requires a thorough understanding of the legal framework, meticulous documentation, and strategic litigation. From issuing a legal notice to executing a court decree, each stage of the process demands careful attention to detail and adherence to legal procedures. Given the potential challenges and complexities involved, it is advisable to seek professional legal counsel to ensure that the suit is filed and pursued effectively. With the right approach and legal expertise, a money recovery suit can be a powerful tool for recovering debts and enforcing financial obligations in India.

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

Advocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)

Contact: 88271 22304