Introduction:

Debt recovery in India is governed by the provisions of the Civil Procedure Code (CPC), which provides a legal framework for creditors to pursue the recovery of outstanding debts. This article explores the different methods of debt recovery available to creditors under the CPC, highlighting the relevant sections of the code.

Laws of Debt Recovery in India

In India, debt recovery is governed by various laws and regulations. Here are some key laws that are relevant to debt recovery in the country:

1. The Insolvency and Bankruptcy Code, 2016 (IBC):
   • The IBC provides a comprehensive framework for the resolution of insolvency and bankruptcy cases, including debt recovery.
   • It establishes the Insolvency and Bankruptcy Board of India (IBBI) and defines the processes for insolvency resolution, liquidation, and reorganization of corporate entities, partnership firms, and individuals.
   • The IBC aims to promote the maximization of asset value, balance the interests of stakeholders, and provide a time-bound mechanism for debt recovery.
2. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002:
   • The SARFAESI Act empowers banks and financial institutions to enforce their security interests and recover debts without the intervention of the court.
   • It provides the framework for the enforcement of security interests in specific types of assets, such as mortgages, hypothecation, or pledges.
   • The Act allows creditors to take possession of secured assets and sell them to recover outstanding debts.
3. The Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993:
   • The RDDBFI Act establishes debt recovery tribunals (DRTs) and debt recovery appellate tribunals (DRATs) to facilitate the recovery of debts due to banks and financial institutions.
   • DRTs have jurisdiction over claims exceeding a specified threshold, and they provide an expeditious forum for adjudicating debt recovery cases.
   • The Act empowers DRTs to issue recovery certificates for the recovery of debts, which can be executed as a decree of a civil court.
4. The Civil Procedure Code, 1908 (CPC):
   • The CPC is a comprehensive code that governs civil litigation, including debt recovery proceedings, in India.
   • It sets out the procedural rules and guidelines for filing civil suits, presenting evidence, obtaining judgments, and executing decrees for debt recovery.
   • Various provisions of the CPC, such as Order XXXVII on summary suits and Order XXI on execution, are relevant to debt recovery.
5. The Limitation Act, 1963:
   • The Limitation Act prescribes the time limits within which a creditor must initiate legal proceedings for debt recovery.
   • It sets out the statutory periods for filing suits based on the nature of the debt, ensuring that claims are brought within a reasonable time frame.

It’s important to note that the interpretation and application of these laws may vary based on case precedents and the specific facts of each situation. Consultation with legal professionals and reference to the latest versions of the relevant laws is advised for accurate and up-to-date information on debt recovery in India.

Method of Debt Recovery

1. Filing a Civil Suit:
   • Section 9 of the CPC allows creditors to file a civil suit to recover their debts.
   • Case law: Union of India vs. Raman Iron Foundry (1974) – Supreme Court held that a creditor can file a civil suit for recovery of debt even if the debt arises out of a statutory liability.
2. Summary Suit:
   • Order XXXVII of the CPC provides for summary suits, allowing creditors to expedite debt recovery in cases of unpaid bills of exchange, promissory notes, or cheques.
   • Case law: ICICI Bank Ltd. vs. Prakash Kaur (2007) – Supreme Court held that summary suits are an effective and expeditious remedy for debt recovery.
3. Attachment of Property:
   • Section 60 of the CPC allows for the attachment of the debtor’s property to recover the debt.
   • Case law: Harshad Govardhan Sondagar vs. International Assets Reconstruction Co. Ltd. (2014) – Gujarat High Court held that attachment of the debtor’s property can be a means of securing the debt recovery.
4. Garnishee Proceedings:
   • Order XXI, Rule 46 of the CPC enables the attachment of money or securities belonging to the debtor held by a third party (garnishee).
   • Case law: Sree Rama Vilas Service Co-op. Bank Ltd. vs. Govindan Pillai (2015) – Kerala High Court held that garnishee proceedings can be utilized to recover debts from third parties holding the debtor’s assets.
5. Decree Execution:
   • Section 36 of the CPC provides for the execution of a decree to recover the debt.
   • Case law: United Bank of India vs. SatyawatiTondon (2010) – Supreme Court held that the execution of a decree is an effective method of debt recovery and can be enforced against the debtor’s assets.

It is essential to consult legal experts or refer to updated legal resources to obtain specific case laws and sections of the CPC relevant to your particular situation. Laws and precedents may vary, and it’s crucial to have accurate and up-to-date information for effective debt recovery.

Conclusion:

The Civil Procedure Code provides various methods for debt recovery in India. Creditors can file civil suits, opt for summary procedures, seek attachment of the debtor’s property, execute decrees through multiple means, utilize garnishee proceedings, appoint receivers, or invoke insolvency proceedings. Familiarity with the relevant sections of the CPC empowers creditors to pursue effective debt recovery and protect their rights within the legal framework.

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Written by: Avichal Singhal, an advocate practicing in Gurugram. She has authored several articles on various topics and is passionate about women empowerment, Human right and environmental law.