The COVID-19 induced lockdown pushed many businesses towards cash crunch and bankruptcy. Some businesses genuinely suffered due to crashing of the Indian economy. However, some other businesses under the guise of COVID-19 induced lockdown and economic slowdown, deferred payments with no intention to pay later.

For a business to run properly, it is of utmost importance to not transfer the unpaid amount to the bad debts section and rather, file a recovery lawsuit to recover the same as it would facilitate the transfer of assets.

What is a recovery lawsuit?

A recovery lawsuit is a method to recover debt from a debtor who is reluctant to pay such debt. A recovery lawsuit is usually filed under Order IV of the Code of Civil Procedure, 1908.

Further, the creditor i.e. the plaintiff must ensure that such suit is filed within a period of 3 years from the date when cause of action arose.

Where to file a recovery lawsuit?

The place where a recovery lawsuit should be filed depends on the following:

1. Place where the defaulter resides,
2. Place where the defaulter carries on his business,
3. Place where the cause of action arose.

While the deciding the place where a recovery lawsuit should be filed, the value of the amount claimed by way of such lawsuit should also be considered. Such debt value determines whether the suit should be filed in the concerned district court, high court, and so on.

Documents required for a recovery lawsuit

While filing a recovery lawsuit, it is important to annex a proof of such debt and the reluctance of the defaulter to repay such debt.

A promissory note, transaction history of bank account, a contract, or any other such document which proves that the defaulter received money. Further, it is not necessary but if there is a proof regarding reluctance of the defaulter in repaying the debt, it would build the credibility the court will assign to the lawsuit.

Process after filing of a recovery lawsuit

Like every other suit, a recovery lawsuit also institutes upon the filing of a plaint.

After the filing of a plaint, a recovery lawsuit commences and progresses through the following stages:

1. Issuance of summons,
2. Written Statement,
3. Framing of issues,
4. Trial,
5. Arguments,
6. Judgment.
7. Execution.

Conclusion

It is important for businesses to recover their bad debts to prevent the situation of cash crunch. When the debtor/defaulter shows his reluctance to repay the debt, a recovery lawsuit should be filed before the appropriate court, keeping in mind territorial and pecuniary matters.

The plaint of such recovery lawsuit should be accompanied by such documents that prove that the defaulter owes money and he is reluctant to repay the same. Further, a recovery lawsuit involves several stages like issuance of summons, written statement, framing of issues, trial, arguments, and so on.