Legal options to recover money trapped in formal transaction

IN THIS article I would summarize legal options to recover money trapped in commercial transactions, personal loans, and dishonoured cheques, etc.

1. A Summary Suit, contemplated under Order XXXVII of Civil Procedure Code, 1908, in the High Court or District Court, can be filed for the recovery of money trapped in commercial transactions, personal loans, dishonoured cheques, Bills of exchange, Promissory Notes (Hundies).

2. In cases of dishonoured cheques, criminal proceedings may be initiated by Issuing statutory Notice under Section 138 of Negotiable Instrument Act 1881, followed by filing riminal Complaint to the Judicial Magistrate / Metropolitan Magistrate.

3. In cases of dishonoured cheques, where the cheque was given by an individual or by a proprietorship firm or by a Partnership firm, Insolvency proceedings may be initiated against them in the High Court or in the District Court. Insolvency proceedings can also be initiated against above persons in certain other circumstances, discussed in later part of this essay.

4. In cases of dishonoured cheques, where the cheque was given by A Private or Public Limited Company, Winding up Petition / proceedings may be initiated against the said Company, by issuing a Statutory Notice u/s 433 / 434 / 439 of the Companies Act, 1956, followed by Winding up Petition in the High Court.

5. Depending upon the facts of each case, a complaint to Police by way of FIR or private Complaint, under section 200 read with section 190 of CrPC, 1973, to Judicial Magistrate / Metropolitan Magistrate, can be filed, of the offence of cheating / criminal breach of trust / mischief, against the said individual / proprietor / partners / officials of the Company.

Discussed below briefly are remedies discussed hereinabove:

SUMMARY SUITS:

As observed by Gujrat High Court- “The sheer purpose of enacting Summary Suits is to give impetus to commerce and industry by inspiring confidence in commercial population that their causes in respect of money claims of liquidate amounts (ascertained amount) would be expeditiously decided and their claims will not hang on for years blocking their money for a long period. Navinchandra Babulal Bhavsar versus Bachubhai Dhanabhai Shah AIR 1969 Gujrat 124 (128) DB.

Summary Suits are contemplated under Order XXXVII (Order 37) of Civil Procedure Code of 1908, and is a very powerful and expeditious remedy provided under the law for recovering money, which is routinely trapped in commercial transactions and in contracts.

The procedure contemplated by Order 37 of CPC constitutes a clear departure from usual procedure. According to usual procedure, every defendant has a right to defend his case in the manner best suited to him. The Summary procedure is a powerful weapon in the hands of Court to shut out frivolous defences which are raised in commercial causes with a view to prolong the litigation. Kocharabhai ishwarbhai patel versus Gopal bhai C patel AIR 1973 Gujrat 29 (31)

The underlying public policy behind Order 37 is the expeditious disposal of suits of commercial nature. Bankyag B G Agarawal versus Bhagwanti Mehji 2001 (1) Bom LR 823 (DB)

The provisions of this Order 37 are enacted to ensure that the defendants doesn’t prolong the litigation by raising untenable and frivolous defences. K R Kesavan versus The South Indian Bank Ltd AIR (37) 1950 Madras 226 (228) DB

The provisions of Order 37 are enacted by Parliament to discourage litigants from coming forward with untenable pleas with the object of delaying admitted liabilities and prolonging the inevitable decree. Dena Bank versus M/s Gladstone Lyall & Co 87 Bombay Law Reporter 477 (480).