Non-payment or delayed payment by companies is one of the most common legal problems faced by individuals, businesses, suppliers, and service providers in India. Whether the amount arises from unpaid invoices, breach of contract, loans, or dishonoured cheques, Indian law provides multiple legal remedies to recover money from a company.
This article explains how to recover money from a company in India, the available legal options, timelines, and the most effective course of action depending on the nature of your claim.
Common Situations Where Money Recovery Issues Arise
Money recovery disputes against companies usually arise in the following situations:
-
Unpaid invoices or outstanding dues
-
Breach of contract or non-performance
-
Loan or advance not repaid
-
Consultancy or service fees unpaid
-
Dishonoured cheques issued by the company
-
Refunds not processed despite contractual obligation
In such cases, timely legal action is crucial to protect your rights.
Step 1: Issuing a Legal Notice for Recovery of Money
The first and most important step is sending a legal notice to the company.
Purpose of Legal Notice
-
Formally demands payment
-
Puts the company on legal notice
-
Creates documentary evidence
-
Often leads to settlement without litigation
What a Legal Notice Should Contain
-
Details of the transaction
-
Amount due with breakup
-
Legal basis of the claim
-
Time period for payment (usually 7–15 days)
-
Consequences of non-payment
Many recovery disputes get resolved at this stage itself.
Step 2: Filing a Civil Suit for Recovery of Money
If the company fails to comply with the legal notice, a civil suit for recovery can be filed before the appropriate civil court.
Types of Civil Recovery Suits
1. Summary Suit (Order 37 CPC)
Applicable where:
-
Liability is clear
-
Amount is fixed
-
Based on written contracts, invoices, or cheques
Summary suits are faster than regular suits as the defendant cannot defend without court permission.
2. Ordinary Civil Suit
Filed when:
-
Disputed facts exist
-
Detailed evidence is required
-
Claim is not covered under Order 37
Reliefs That Can Be Claimed
-
Principal amount
-
Interest
-
Damages
-
Litigation costs
Step 3: Cheque Bounce Case under Section 138 NI Act
If the company issued a cheque which got dishonoured, you can initiate criminal proceedings under Section 138 of the Negotiable Instruments Act.
Key Features
-
Mandatory legal notice within 30 days
-
Criminal liability on company and responsible directors
-
Strong pressure tactic for recovery
-
Possibility of compensation and fine
Cheque bounce cases are highly effective in ensuring payment.
Step 4: Insolvency Proceedings under IBC (For Corporate Debtors)
If the default amount crosses the minimum threshold prescribed under law, insolvency proceedings can be initiated before the NCLT.
Who Can File?
-
Operational Creditors
-
Financial Creditors
Key Points
-
Insolvency is not a recovery suit, but an effective leverage
-
Corporate Insolvency Resolution Process (CIRP) is initiated
-
Management of company shifts to Resolution Professional
-
Often results in settlement before admission
This remedy is especially useful in large corporate defaults.
Step 5: Arbitration Proceedings (If Clause Exists)
If the agreement contains an arbitration clause, disputes must be referred to arbitration.
Advantages
-
Faster resolution
-
Confidential proceedings
-
Enforceable arbitral award
Arbitration awards are executable like court decrees.
Step 6: Execution of Decree or Award
Obtaining a favourable judgment is not the end. Execution proceedings are required to actually recover money.
Execution Methods Include
-
Attachment of bank accounts
-
Attachment of movable and immovable property
-
Garnishee proceedings
-
Arrest in exceptional cases
Effective execution strategy is crucial for actual recovery.
Can Directors Be Personally Liable?
Generally, companies are separate legal entities. However, directors can be held liable in cases of:
-
Cheque bounce cases
-
Fraud or misrepresentation
-
Personal guarantees
-
Statutory violations
Proper legal drafting determines liability exposure.
Limitation Period for Recovery of Money
-
Civil recovery suits: 3 years from date of cause of action
-
Cheque bounce cases: Strict statutory timelines
-
Acknowledgment of debt can extend limitation
Delay can defeat even a genuine claim.
Common Mistakes to Avoid in Recovery Cases
-
Delaying legal action
-
Sending poorly drafted notices
-
Filing wrong type of case
-
Ignoring jurisdiction issues
-
Not preserving documentary evidence
Strategic planning is essential from day one.
Why Legal Assistance Is Important in Recovery Matters
Money recovery against companies involves:
-
Procedural compliance
-
Strategic forum selection
-
Director liability analysis
-
Execution planning
A lawyer ensures speed, compliance, and maximum recovery.
Conclusion
Recovering money from a company in India requires a structured legal approach. Depending on the facts, remedies may include legal notices, civil suits, cheque bounce cases, insolvency proceedings, or arbitration.
Early legal intervention significantly increases the chances of successful recovery and settlement.
FAQs – Recovery of Money from Company in India
Q1. Can I recover money without going to court?
Yes, through legal notice, negotiation, or settlement.
Q2. Is insolvency a recovery tool?
Legally no, but practically it is an effective pressure mechanism.
Q3. Can interest be claimed in recovery cases?
Yes, contractual or reasonable interest can be claimed.
Q4. Can recovery be made from company bank accounts?
Yes, through execution proceedings after decree or award.