Debt collection in India is common between two businesses (B2B) when one of the companies fails to meet its obligations. Although most cases involve business to business situations, in some situations it may be needed to collect debts from a client (B2C).
Our team of Indian lawyers answers some of the most common questions about recovering due debts in India and why it is helpful to work with a team of experts. In case you need to recover a debt in another country, for example in Poland, we recoomend our partners – DebtCollectionPoland.eu.
We can also give you details about immigration to India.
What is non-judicial debt collection?
Debt collection in India can take place outside of a court of law. This is a preferred method, if possible, because of the lowers costs implied and the fact that (in some cases) the entire process may be faster compared to commencing the litigation proceedings. The common steps are the following:
- Send a reminder: the business can send an invoice payment reminder, with the payment details.
- Send a notification: this is the first notification of the undue payment and can be sent via e-mail.
- Contact: contacting the debtor can be useful, especially if an unpredicted situation of which the creditor was unaware since took place.
- Final notice: if the creditor cannot be persuaded to pay the due debt amicably, then the court proceedings can be commenced.
What is judicial debt collection?
Legal or judicial debt collection is the process that takes place in court. Our lawyers in India who specialize in litigation can help you with debt collection.
There are several options when choosing to take the case to court and the procedural differences appear when discussing different types of debts, for example creditor debts as opposed to debts that are owed to banks or other financial institutions.
A creditor who wishes to recover debts in India, for example a company that has unpaid debts from another legal entity, can commence a commercial lawsuit under the Commercial Courts Act. In this case, debt collection in India takes place before a competent civil court for commercial matters.
Banks and financial institutions are subject to other laws. In this case, the Debts Recovery Tribunal is the one to provide for a quick solution for lenders and borrowers and it functions under the Recovery of Debts and Bankruptcy Act 1993. For banks in India seeking to recover debts from their clients, the Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act 2002 is the one that allows them to recover secured debts from the borrowers. In this particular case, Court intervention is not needed during the first stage.
It is common for commercial disputes that include a debt over 300,000 INR to be considered a commercial dispute and to be brought in front of the Commercial Courts. When a bank is involved, more specifically when a bank or financial institution is the one to commence the proceedings and the case in front of a Debt Recovery Tribunal, the amount should be at least 2 million INR.
It is advisable to select the services offered by a debt collection agency in India when dealing with litigation matters as a team of experts will be able to provide you with the most suitable solutions in your case.
What are the steps of court debt collection in India?
A certain process is followed by the creditor who wishes to recover due debts in India. Part of these mandatory issues concern the pre-action conduct which includes sending the legal notice to the debtor. This is done before the legal proceedings are commenced. When banks attempt to recover debts the must first declare the bank account a non-performing assets and serve a legal pr demand notice before starting any recovery proceedings in court.
In some situations, it may be mandatory to resort to mediation, however, this is not always the case. Working with a debt collection agency in India is essential during all of the court debt collection stages, including when drafting the claim document, as it is drafted according to the Code of Civil Procedure rules.
Once the claim has been filed with the competent court, the summons can be issued to the debtor. The service of the summons is performed as per the Code of Civil Procedure and certain formalities are followed. After this step, the debtor has a period of 30 days in most cases to offer his response. In some cases, it can be extended, however, a maximum period is provided for. The process of debt collection in India also includes steps such as the admission of documents (submitted by both parties), the examination and cross-examination of witnesses, as well as hearing the final arguments. When the creditor obtains a judgment in his favor, he can then proceed to enforce the said judgment. If the debtor still refuses to pay, the court may order that his assets and/or property are seized.
What method should be used?
Amicable debt collection is usually the preferred method because it allows the creditor to maintain a positive business relation and a professional relation with the customers. However, when non-contentious solutions are no longer profitable for the business, then litigation can be taken into consideration.
When the two parties have signed an arbitration agreement, debt recovery can take place according to the arbitration proceedings and under the Arbitration and Conciliation Act 1996. It should be noted that in those cases in which the agreement between the two parties included an arbitration clause, this is the mandatory route for solving due debts between the parties. Our team of lawyers in India can give you more details about these mandatory requirements for arbitration and assist you if you wish to include such as clause in an existing agreement.
If you are looking for a suitable methid for debt collection as a foreign national, our immigration lawyers in India can provide additional information in your case.
How can an Indian law firm help me?
Our attorneys in India have extensive experience in local and international debt collection. They can evaluate your case and outline a debt collection strategy that will allow you to cultivate a positive business relationship.
When working with our team you can recover the due debts in time. It is useful to know that certain limitation periods apply. One advantage of seeking specialized legal advice and services from a debt collection agency in India is that you will be able to recover the debt within the three-year period that is prescribed in most of these cases in the Limitation Act and in the other relevant laws that regulate the procedure of debt collection.
According to the Department of Financial Services, there are 39 Debts Recovery Tribunals and 5 Debts Recovery Appellate Tribunals operating in India. The available data shows the following number of cases handled by these over the years:
- 25,031 original applications filed between 2016 and 2017;
- 30,884 cases in the year 2017-2018;
- 37,669 cases between 2018 and 2019.
We also provide debt collection services to non-residents, as well as those who have obtained Indian residency, based on their prolonged stay in the country. You can also reach out to us if you have any questions about issues concerning your temporary residency and the applications that are mandatory for foreigners who wish to remain in India while our team assists with debt collection.
We are also here to assist foreign nationals in other matters, such as those related to all matters concerning the process to immigrate to India. You can reach out to us if you have questions.
Our lawyers in India can also help you if you are a business owner looking for more details about Indian citizenship. The naturalization option is the route most often available to foreign nationals, especially if they are not married to an Indian citizen at the time of their application. A lengthy prior residence in the country (twelve years) applies in this case and our team can give you more details.
Contact our law firm in India for more information about the legal services we provide for debt collection in India, as well as other services for resident and non-resident businesses.
Our team also provides other types of services, such as those required by foreign nationals interested in immigration to India. Our relocation specialists are able to answer questions about visas and residence permits according to the applicant’s purpose of stay. With our help, you will be able to apply for a work, business, or study permit as fast as possible and by submitting all the needed documents.
Our lawyers in India can also help you if you are a business owner looking for more details about Indian citizenship by investment.