Recovery of Pending Dues: Safeguarding Your Credits


By Vipul Lamba

October 10, 2022


We all live in an economic world where our focus is to build our business and profession and take it to new heights. But one of the major concerns of all the businesses, startups and professionals is how to deal when a client / debtor / customerasks for credit, as most of the times we aren’t able to do the necessary exercise of due diligence about such client / debtor / customer either on account of lack of ignorance, negligence, lack of knowledge and resources, or with a narrow objective of improving our sales and turnovers. Unlike banks or big corporates, the primary focus of medium scale businesses, startups and professionals is to bring in business without much focus on the financial standings of clients. Lack of such required due diligence, many a times, leads to mounting of huge bad debts or delay in payments which acts as a slow poison for any business and adversely impacts future growth of resources and opportunities. A German proverb appropriate to mention here is: ‘HE WHO IS QUICK TO BORROW IS SLOW TO PAY’.


Asking for a debt to be repaid is an uncomfortable but sometimes necessary part of being a business owner. These following steps may help as a guide for recovering an overdue payment :-


a. Always Raise Tax Invoice:


Whenever, you provide any service or supply goods / products to any client / debtor / customer, first and foremost step to be taken is to consideration is to always raise an ‘Invoice’ against such supply of goods or serviceand charge applicable tax onto the Client. After supplying of such goods or services, it is advisable to always take an acknowledgement on such invoice from your Client. The company seal / stamp of your client along with the signature of the authorized person also becomes important in case your client is a company or an entity having separate corporate legal personality.


Raising an invoice and charging the applicable tax on the same, will make the amount to be recovered a legally enforceable debt and acknowledgement of receiving on the invoice confirms that client has accepted such goods or service being provided or supplied under the terms and conditions of such Invoice.


It is also advisable to put points / highlights / clauses in respect of interest on delayed payments, place of delivery and jurisdiction of courts as per your convenience. Although such highlights may not sound very important on ears but plays very important role in case of any future recovery proceedings.


b. Continuous Follow Ups


This, can be done through sending continuous letters through speed posts, emails, WhatsApp Chats for confirming the amount due and for confirming the amount due. Once a confirmation of an outstanding amount is received, the confirming party becomes liable to pay for the debt and cannot afterwards take a contrary stand. 


c. Send a Demand Letter


If the Client is still dilly dallying from making the payments due, send a written Demand Letter to the Client directing the Client to clears the dues within the prescribed time, otherwise he would have to face the legal consequences. 






The most common civil remedy for recovering of money is suit for recovery of money under Order 37 of the Civil Procedure Code, 1908.  The Suit under Order 37 of the Civil Procedure Code is called Summary Suit, which can be filed when there is written agreement between the parties and acknowledgement of debt by the other party. Once the Suit is instituted in the Court, and the Court has issued a summons to the Defendant, then the defendant has to make an appearance within 10 days in the Court and if the Defendant fails to make appearance then the Court assumes that the plaintiff’s allegations are true and accordingly awards the plaintiff. If the defendant makes an appearance, then the defendant has to satisfy that he has a defence and only when the Court is convinced that there are some triable issues, then only leave to defend is granted otherwise the Suit is Decreed in favour of the Plaintiff.





Commercial Dispute as defined under Commercial Courts Act, 2015 are the Suit which arises out of Commercial Transactions between the parties and includes ordinary transactions of merchants, bankers, financiers and traders, agreements relating to immovable property used exclusively in trade or commerce, agreements for sale of goods or provision of services. Thus, for recovery of money arising out of commercial transactions, the Commercial Suit are maintainable over other types of recovery suits. Under this type of suit also the disposal is summary in nature and the Court only goes into the trial or evidence only when it appears that there are issues which can be resolved after the parties lead the evidence, otherwise Court give its Judgment after going through the pleadings and documents filed in support of the pleadings by both the parties. 




Giving goods and Services on Credit after taking the Blank Signed Cheques from the parties, is most prevalent practice for giving the goods or services on credit. Once the Cheque issued by a party Dishonours for any reason including but not limited to insufficient funds, payment stopped by the Drawer or for any other reason, then the issuing party is liable to prosecuted for an Offence under Section 138 of the NI Act, which in itself is a penal provision and issuer of the Cheque if found guilty may be punished for the imprisonment which may extend to two years along with the fine which may be double the amount of Cheque dishonoured. For instituting a Cheque Bounce case under Section 138 of the NI Act a defined procedure has to be followed. Firstly, a legal notice for dishonourment of the Cheque has to sent to the drawer within 30 days of the dishonourment of the Cheque and then if no payment is received within 15 days of the receipt of the legal demand notice, then the Complaint has to be filed in the Court within 30 days from the date of expiry of 15 days. The recovery of money through dishonoured Cheque is the fastest way to recover as the drawer has fear of imprisonment and in 90% of the Cases the drawer of the Cheques settles the dispute and makes the payment. 


Hope this Article is helpful in letting you know how to safeguard your money and how to get the same recovered through Court of Law. 


Vipul Lamba is advocate practicing in various Courts of Delhi. He specialises in Civil matters pertaining to Property Laws, Recovery of Money, Commercial Disputes, Arbitration and Cheque Bounce Matters. He can be contacted at and 9911725864.

Disclaimer: The views or opinions expressed are solely of the author.

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