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Methods for Debt Recovery
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Methods For Debt Recovery

Civil Remedy
Criminal Remedy
Out of Court Settlement
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    Debt recovery is, when a loan continues to go unpaid, and a creditor hires a third party, known as a collection service or Consultant, to focus on collecting the due debt from the debtor.

    There are several steps in the debt recovery process and it is important to know what to expect when you are contacted by a debt recovery agent. In fact, a financial debt can become an ugly situation, thus legislatures have established an elaborated debt recovery process and ensure that consumers are protected from harassing debt recovery practices.

    Civil Remedy: For civil remedy, the parties aggrieved may send a legal notice to the debtor for initiation of civil proceeding against them for the recovery of the due debts. It includes sending notice to the debtor for the due amount and on completion of limitation period of legal notice and then filing a complaint to initiate civil proceedings under Negotiable Instruments Act, Civil Procedure Code or Insolvency and Bankruptcy Code.

    Criminal Remedy: For criminal remedy an aggrieved party may file an FIR against the debtor in the local police station having jurisdiction over the matter, and thus the proceedings will be set in motion. Once adequate evidences have been gathered and are taken up on record, criminal proceedings can be initiated under Indian Penal Code for quick disposal of matter.

    Out of Court Settlements: For a quick and efficient settlement, the aggrieved party may resolve the dispute and amicably settle the matter through mediation, arbitration or negotiation. For higher monetary value contracts, the best way to settle the matter and differences is through alternative dispute mechanism, such as Arbitration or Mediation or Conciliation. These methods are most effective against corporates entities as the matters can be resolved very expeditiously and amicably without furthering the losses they would normally have to bear without having to resort to the tedious and prolong court process.

    Document Required

    Document Required

    Contract agreement entered between the parties- if any.
    Invoices / Purchase Orders raised by the party.
    Cheque issued- by the Debtor.
    Email conversations/ Whatsapp Chat- related to acknowledgement of such Debt.
    Any other document- in case of a corporate or financial entity.

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      Various Laws and sections for Recovery the recovery of Bad Debt

      There are Number of Laws present, one need to decide as to which law is applicable and what are the options and remedies available. Recoveries of Debt as per our jurisdiction are as follows:

      Indian Contract Act, 1872
      Negotiable Instruments Act, 1881
      Code of Civil Procedure, 1908
      Recovery of Debts Due to Banks and Financial Institutions (RDDBFI Act), 1993
      Arbitration and Conciliation Act, 1996
      Insolvency and Bankruptcy Act, 2016
      Micro, Small & Medium Enterprises Development (MSMED) Act, – 2006
      The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002
      Debt Recovery Tribunal.


      Alternately Call our Legal Expert Now For Free Consultation at 09599653306

      Frequently Asked Questions on Recovery of Shares
      What Is Recovery Of Debt?

      When a loan, credit or accounts receivable either in part or whole, is due and the debt cannot be recovered, it is called bad debt. Subsequently when such bad debts are recovered through means legally available is called recovery of bad debt.

      What Are The Methods For Debt Recovery Laid Down Under Indian Constitution?

      There are various means to recover debts; some are legal, while others are not. Non-legal means to recover debt may include the calling the client repeatedly for such recovery or hiring commission agents for recovering debts. Legal methods of debt recovery include:

      Sending a legal notice to the debtor for initiating a civil suit for debts due or damages.

      Lodging an FIR in the respective local police station having jurisdiction over the matter, when the case is serious.

      Initiating dispute resolution process under Arbitration and conciliation Act for the recovery.

      What Are The Laws For Debt Recovery?

      There are various classifications of Debt and the remedy varies according to such classification-


      For Individual Recovery– one may proceed to file a Civil Suit in their respective Jurisdictional Courts.

      Individuals and Body corporates also have an option to proceed with Negotiable Instrument Act, Section 138 for recovery, if the cheque issue for such due amount is not honored by the respective bank.


      For Body Corporates- They may file complaint under Insolvency and Bankruptcy Law, if the debt is 1crore or above;

      If the Enterprise is registered under MSME, they have an option to file a complaint under MSME- facilitation center for the recovery from other Corporate Entities.


      For Banking Financials– They may proceed under SARFAESI Act, Where security interest has been created either on movable or immovable properties.

      Simultaneously an application under DRT may also be filed for recovery of dues under RDDBFI Act of 1993 for recovery of debts due to banks and other financial institutions.

      How Can An Advocate Help?

      Since the process of debt recovery entails so many legal processes, and has so many overlapping laws governing, a lawyer can only help in filing of such summary suits, application under DRT, or filing application before NCLT under IBC. The formalities associated with the recovery process differ according to the choice of the category forum and jurisdiction. Consequently, only a lawyer will be able to guide the creditor through the appropriate route for recovery of debt i.e. how to file a summary suit before a civil court, or should the creditor file an application before the Tribunals and if he should file an application before a tribunal, which is the appropriate jurisdictional.

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