The right route depends almost entirely on what paperwork you have. Choose it deliberately, because the wrong forum costs years.
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A legal notice setting out the debt, the basis, the amount, and a deadline. It is not legally compulsory for most claims but it does three useful things: it produces payment in a large number of cases, it fixes the date of demand for interest, and it becomes evidence of the acknowledgement or refusal.
Money is owed. Which route is actually open to you?
- A cheque was given and bounced? Section 138 complaint, plus a civil claim. The criminal route carries the shorter deadlines, so it drives the diary.
- A written contract, invoice or promissory note, and the sum is fixed? Summary suit under Order XXXVII. The defendant must seek leave to defend.
- You are a micro or small enterprise and the buyer is a company? The MSMED Act reference to the Facilitation Council, which carries statutory interest and conciliation before arbitration.
- The contract has an arbitration clause? A Section 21 notice invoking arbitration, not a suit.
- The debtor is a company and the debt crosses the statutory threshold? Insolvency proceedings, which is leverage rather than a recovery mechanism.
- Nothing in writing at all? An ordinary money suit, where the evidence burden is entirely yours.
The routes
- Summary suit under Order 37 CPC. Available on bills of exchange, hundis, promissory notes, and suits on a written contract, an enactment, or a guarantee for a debt. Its power is that the defendant cannot defend as of right; they must apply for leave to defend, and leave is refused where there is no genuine triable issue. This is by far the strongest civil route if your claim is documented.
- Section 138 NI Act, if a cheque was issued and dishonoured. Criminal pressure plus interim compensation of up to 20 percent under Section 143A.
- MSME Samadhaan, if you are a registered micro or small enterprise supplying goods or services. Compound interest at three times the RBI bank rate and a fast statutory route.
- The MSMED provisions behind that route are worth naming. Section 15 requires the buyer to pay on or before the agreed date and, in any event, within a period that cannot exceed forty five days from the day of acceptance or deemed acceptance. Section 16 then imposes compound interest with monthly rests at three times the bank rate notified by the Reserve Bank, overriding anything the contract says. Section 18 lets either party refer the dispute to the Micro and Small Enterprises Facilitation Council, which first attempts conciliation and, failing that, takes the dispute to arbitration itself or refers it out, with the Arbitration and Conciliation Act, 1996 applying as if there were an arbitration agreement.
- Arbitration, if the contract has a clause. Often faster than a suit, though the fees are your own.
- Insolvency under the IBC, where the debtor is a company and the default is at least one crore rupees. A powerful lever, but it is not a recovery mechanism and should not be used purely as one.
- Ordinary civil suit, where the claim is undocumented and needs evidence. Slowest, but the only route where oral evidence can establish a debt that was never written down.
Under the Limitation Act, 1963, the ordinary period for a suit for money is three years from when the amount became due. A written, signed acknowledgement of the debt before the period expires starts a fresh three years under Section 18, and part payment has a similar effect under Section 19. Get an acknowledgement in writing every year on a long-running dues account. This one habit saves more claims than any other.
Both sections have conditions that are easy to fall foul of. Section 18 requires the acknowledgement to be in writing, signed by the party or by an agent duly authorised, and made before the period expires; an acknowledgement given after limitation has run does not revive anything. The good news is how generous the rest of it is: the acknowledgement is enough even if it omits the exact nature of the right, even if it says the time for payment has not yet come, even if it is coupled with a refusal to pay or a claim of set-off, and even if it is addressed to somebody other than the creditor. A signed balance confirmation, an audited statement of accounts, or an email from a duly authorised person accepting the figure will usually do.
Section 19 is narrower than people assume. Part payment restarts the clock only where the payment was made before the period expired and an acknowledgement of the payment appears in the handwriting of, or in a writing signed by, the person making it. A bank transfer with no covering letter, no email and no entry signed by the payer may therefore fail to save the claim. Ask for a line in writing with every part payment.
Winning is not the same as recovering
A decree is only useful if it can be executed. Before you sue, ask what you will attach: bank accounts, salary, immovable property, receivables. Ask for an attachment before judgment where there is a real risk of the assets disappearing, because after the decree is often too late.
Execution is its own proceeding, and it is where most money is actually lost. Attachment of a bank account, a garnishee order against someone who owes the debtor money, attachment and sale of immovable property, and in the right case arrest and detention, are all available, and each has its own procedure and its own delay. Our guide on the execution of a decree sets out what to file and in what order. Plan the execution before you file the suit, not after you win it.