Money Recovery Cases : A Complete Legal Guide

Money Recovery Cases : A Complete Legal Guide, In the present period, financial transactions—whether formal or informal—are an inseparable part of personal, business, and institutional dealings. When someone fails to repay a lawful debt, the rightful creditor is entitled to initiate legal proceedings for money recovery.

This article provides a comprehensive guide to money recovery cases —explaining their types, legal provisions, mandatory notices, pre-conditions, remedies, and filing procedure.

🧾 1. What is a Money Recovery Case?

A money recovery case is a legal action initiated by a creditor (individual, company, or institution) to recover an amount lawfully owed by a debtor. It may arise from unpaid loans, dishonoured cheques, breach of contract, default in payment of goods/services, or corporate liabilities.

🧩 2. Types of Money Recovery Cases

Money recovery litigation can be broadly classified into the following categories:

⚖️ 3. Applicable Laws and Provisions

Below are the main laws governing different types of recovery cases:

✅ A. Negotiable Instruments Act, 1881 – Section 138 (Cheque Bounce)

If a cheque is returned unpaid due to insufficient funds or closure of account, legal remedy lies under Section 138 of the NI Act.

• Ingredients:
  
  • Legally enforceable debt
    
  • Cheque drawn and dishonoured
    
  • Legal notice within 30 days
    
  • Non-payment within 15 days of notice
    
• Punishment:
  Up to 2 years’ imprisonment, fine up to twice the cheque amount, or both.
  

✅ B. Code of Civil Procedure, 1908 – Order IV Rule 1 & Order 37

In civil recovery suits, particularly for personal loans or unpaid invoices, a suit is filed under CPC.

• Order 37 (Summary Suit): For fast-track disposal of recovery cases with documentary proof.
  
• Limitation: 3 years from the date of default.
  

✅ C. Indian Contract Act, 1872

In cases of default arising from contracts, sections relating to breach of contract (Sections 73, 74) are invoked along with CPC.

✅ D. SARFAESI Act, 2002 (For Banks/NBFCs)

Allows secured creditors to recover dues without court intervention under Section 13.

• Applies to: Banks and financial institutions with secured interest
  
• Notice: 60-day demand notice under Section 13(2)
  
• Action: Take possession of property under Section 13(4)
  

✅ E. Insolvency and Bankruptcy Code (IBC), 2016

Corporate creditors can initiate insolvency proceedings before NCLT for defaults.

• Section 7 – Financial creditors
  
• Section 9 – Operational creditors
  
• Notice Requirement: 10-day demand notice (Section 8 for operational creditors)
  

✅ F. Section 80 of Civil Procedure Code

When recovering money from a Government Department, a 60-day notice is mandatory before filing a civil suit.

📬 4. Notice Periods Before Filing Money Recovery Cases

📌 5. Pre-requirements Before Filing a Money Recovery Case

Before approaching any court or tribunal, the following steps should be fulfilled:

1. Establish a Legally Enforceable Debt: There must be valid documentation such as agreements, invoices, or emails.
   
2. Issue a Legal Notice: As per applicable law.
   
3. Wait for the Notice Period: The debtor must be given the stipulated time to respond.
   
4. Limitation Check: File within 3 years unless a special limitation applies (e.g., IBC).
   

🛠️ 6. Remedies Available in Money Recovery Cases

The following remedies are generally available to creditors:

• Filing a Civil Suit for recovery of money
  
• Summary Suits under Order 37 CPC
  
• Complaint under Section 138 NI Act
  
• SARFAESI Action for banks
  
• Corporate Insolvency Proceedings (IBC)
  
• Attachment of property before judgment (Order 38 Rule 5 CPC)
  
• Execution of Decree through court once recovery decree is passed
  

🧾 7. How to File a Money Recovery Case

A. Filing a Civil Suit for Recovery

• Jurisdiction: Based on:
  
  1. Where defendant resides or works
     
  2. Where cause of action arose
     
  3. Where payment was to be made
     
• Court:
  
  1. If amount is less than ₹3 lakhs → Civil Judge (Junior Division)
     
  2. ₹3 lakhs to ₹20 lakhs → Senior Division
     
  3. Above ₹20 lakhs → District Court / Commercial Court
     
• Procedure:
  
  1. Send legal notice
     
  2. Draft a plaint (mentioning facts, evidence, relief sought)
     
  3. Pay court fees (based on claim amount)
     
  4. File in appropriate court
     
  5. Attend hearings and trial
     
  6. Obtain decree and initiate execution
     

B. Filing a Case under Section 138 NI Act

• File complaint in Magistrate Court within 30 days after expiry of 15-day notice.
  
• Attach cheque copy, return memo, legal notice, and proof of delivery.
  

C. SARFAESI Proceedings

• Bank/NBFC issues 60-day notice
  
• If dues not cleared → possession notice
  
• Can auction property without court intervention
  
• Borrower can appeal under Section 17 to Debt Recovery Tribunal (DRT)
  

D. IBC Proceedings

• File before NCLT
  
• Submit Form 5 (for operational creditors)
  
• Attach invoices, bank statements, legal notice
  
• Tribunal may admit or reject application
  

READ MORE: CPC Order 7 Rule 11: Rejection of a Plaint in Hindi,

National Crime Records Bureau (NCRB): India’s Crime Data Hub

📚 Important Case Laws on Money Recovery in India

1️⃣ K. Bhaskaran v. Sankaran Vaidhyan Balan

(1999) 7 SCC 510
This landmark case interpreted Section 138 of the Negotiable Instruments Act. The Supreme Court held that the notice of dishonour of cheque is mandatory and must be served to the drawer within the statutory time. The Court clarified five components constituting the offence –

1. Drawing of the cheque,
   
2. Presentation to the bank,
   
3. Return unpaid,
   
4. Demand notice, and
   
5. Failure to pay within 15 days.
   This case allowed flexibility in jurisdiction for cheque bounce cases, depending on where any of these acts occurred.
   

2️⃣ Mardia Chemicals Ltd. v. Union of India

AIR 2004 SC 2371
This was the first major constitutional challenge to the SARFAESI Act. Borrowers challenged the Act claiming it was arbitrary and violative of Article 14. The Supreme Court upheld the constitutional validity of the SARFAESI Act, except Section 17(2), which was struck down for being excessively burdensome on borrowers. This judgment empowered banks and financial institutions to take possession of secured assets without court intervention, making SARFAESI a strong tool for recovery.

3️⃣ Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.

(2017) 1 SCC 353
A landmark ruling under the Insolvency and Bankruptcy Code (IBC). The Supreme Court interpreted the term “existence of a dispute” in IBC. It ruled that if there is a genuine pre-existing dispute, the insolvency application by an operational creditor must be rejected. The judgment ensured that IBC cannot be misused as a tool for mere recovery of dues in disputed cases.

4️⃣ Bihari Chowdhary v. State of Bihar

AIR 1984 SC 1043
This case dealt with Section 80 of the Civil Procedure Code, which requires a notice to be served on the government before suing it. The Supreme Court held that the object of notice is to give the government an opportunity to settle the claim without litigation. The Court emphasized that valid notice with essential particulars is mandatory, but minor errors that don’t mislead the government won’t invalidate the notice.

FAQs on Money Recovery Cases

1. Can I file FIR for money recovery?

👉 Generally, no. Money recovery is a civil matter, not a criminal one. However, if fraud, cheating, or criminal breach of trust is involved, then an FIR under criminal sections may be registered.

2. What is the legal action for recovery of money?

👉 You can send a legal notice and file a civil suit for recovery under Order 37 CPC or general civil procedure, depending on the facts. Other remedies include NI Act (for cheque bounce), IBC, or SARFAESI, if applicable.

3. Can criminal case be filed for recovery of money?

👉 Only if the case involves cheating (Section 420 IPC/ Section 318 BNS) or criminal breach of trust (Section 406 IPC/Section 316 BNS). Otherwise, recovery is done through civil remedies.

4. What is the BNS section for recovery of money?

👉 No specific BNS section is dedicated to civil money recovery. However, if cheating or fraud is involved, Sections 316, 318, 319 of BNS 2023 may apply.

5. Can police help in money recovery?

👉 Not in civil disputes. Police can act only when there’s a criminal offense like fraud, cheating, or misappropriation. For normal loan disputes, go to civil court.

6. What is the court fee for a money suit?

👉 The court fee is based on the amount claimed and differs by state rules. For example, in Delhi, it’s approx. 1% to 4% of the suit amount.

7. How can I legally recover money from someone?

👉

• Send a legal notice
  
• File a civil suit under CPC
  
• Use NI Act for cheque cases
  
• Approach NCLT under IBC (if debt > ₹1 lakh for operational creditors)
  
• Use SARFAESI Act (if you’re a secured bank/lender)
  

8. What to do if someone is not giving money back?

👉 Send a legal notice first. If no response, file a civil recovery suit. If cheating is involved, lodge a police complaint or criminal complaint in magistrate court.

9. Can police take action in civil cases?

👉 ❌ No, police does not intervene in purely civil disputes. You must approach civil court for resolution.

10. Can I file a recovery suit after 3 years?

👉 ⛔ No, unless there is a valid reason or acknowledgement of debt. As per Limitation Act, recovery suits must be filed within 3 years from the date the debt became due.

🏁 Conclusion

Money recovery laws in India provide structured remedies to both individuals and financial institutions. However, the success of any recovery action depends on compliance with the correct procedure—issuing the required notices, maintaining documentation, choosing the right forum, and filing within the limitation period.