Debt Recovery in India


One major problem which businesses, banks & individuals in India are facing is the problem of debt recovery. A majority of businesses, banks & individuals in India have problems recovering money back from their borrowers. Unlike banks with their well-established recovery machinery & laws, 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.

The procedure for debt recovery:

  • The first step in the process of money recovery will be to send a legal notice to
    the defaulter.
  • If you still don’t receive the payment, you can go for one of these options; Summary Suits, Negotiable Instruments Act, Criminal case or Insolvency and Bankruptcy Code.

Summary Suits:

The most common civil remedy for debt recovery 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 is 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 defendant has raised a triable issue.

Negotiable Instruments Act:

Another option for debt recovery is the Negotiable Instruments Act, 1881, which only deals with the recovery of money arising from instruments such as bills of exchange or cheques. 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 payment within 15 days from receiving the notice, the payee has the right to file a criminal complaint u/s 138 of Negotiable Instruments Act against the defaulter.

If convicted, the accused can be imprisoned for a period of up to two years and can also
be fined an amount up to twice the amount of the cheque issued.

Also Read: Cheque Dishonour-A step-by-step guide for legal recourse

Insolvency & Bankruptcy Code, 2016:

The Insolvency and Bankruptcy Code, 2016 has emerged as one of the fastest debt recovery mechanisms in India. The recovery rate for cases resolved under the IBC has
outpaced other resolution mechanisms such as the Debt Recovery Tribunal, Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, and Lok Adalat.

The Insolvency and Bankruptcy Code (IBC), which came into effect in 2016, provides for a time-bound and market-linked resolution of stressed assets. In case, the resolution does not happen, the company concerned goes for liquidation. Credible threat of the IBC process that a company may change hands has changed behaviour of the debtors. Thousands of debtors are settling defaults in early stages of the life cycle of a distressed asset.

It has shifted the balance of power to the creditor from the borrower. The fear of losing
assets to a failed resolution process has instilled a sense of urgency and seriousness among defaulters.


Recovery of outstanding debt or dealing with bounced cheques can cause agony. To help you recover your debt, Easy Kanoon has a team of experienced debt collection lawyers who can provide you with tailor-made solutions specific to your needs. Email us at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.