Debt Collection Agency India
Amicable collections India
1. General information
Cosmopolite Collections have been actively involved in amicable debt collections for the last years. We now have a local team to collect in India. We follow proven principles of negotiations. By keeping in close contact with debtors, we are able to evaluate genuine cash flow problems and stalling excuses for non-payment. Field visits and face-toface meetings with the debtors are an integral part of our collection initiatives.
1.2. Local agents
We do have local agents in almost all major cities in India and also in neighbouring countries, such as Pakistan and Sri Lanka. Our local agents are fully equipped to conduct field visits and face-to-face meetings with the debtor, and if necessary, they also do skip trace services. Indian courts generally award interest from 8% to 9% per year, unless another number is agreed between the creditor and the debtor in an agreement or arrangement clearly specifying the rate of interest to be charged to the overdue amount. It is not customary for debtors in India to pay interest on the debt amount, especially for recoveries in the amicable phase. Thus, in pre-legal recoveries, the chances of recovering interest is very low.
1.3. Debt collection costs
It is not customary for debtors in India to pay collection costs, especially in recoveries in the amicable phase. Thus, in pre-legal recoveries, collection costs are not payable by the debtors. However, while passing a judgment, Indian courts may order the debtor to reimburse the legal or collection costs to the creditor.
1.4. Prescription
The Limitation Act, 1963 governs the period of prescription. The limitation period is three years from the due date of an invoice; however, this gets extended for another period of three years on each acknowledgment of debt by the debtor.
1.5. Accepted and most common payment methods
The most common payment methods include payment by wire transfer and payment by drafts or banker’s cheques.
1.6. Types of companies
The following are the most common forms of business entities: Sole proprietorship This type of entities is owned by a sole proprietor. The proprietor of a sole proprietorship entity has unlimited liability to pay all the business’ debts. Partnership firm A partnership firm in India is governed by the Partnership Act, 1932. Two or more persons can form a partnership subject to a maximum of members. Partners of a firm have unlimited business liability. Private limited company A private limited company is considered a separate legal entity from their shareholders. A private limited company can be formed with the help of a minimum of two members, and the liability of a shareholder is limited to the unpaid value of their share capital. Public limited company A public limited company can be formed with the help of a minimum of seven members, and the liability of their shareholders is also limited to the unpaid value of their share capital.
1.7. Sources of information
Tools to investigate the debtor’s financial situation include physical searches, enquiries at the location of the debtor, public registers, local sources and news and enquiries from the court.
2. Retention of title
The retention of title principle is when a negative lien is retained at times that prohibits the debtor from disposing of or dealing with the plant and machinery or goods, for which full payment has not been made. Restrictions are also imposed upon the creation of a charge over the plant and machinery or goods delivered when payment has not been made for such items. A charge for the plant and machinery or goods should be created and filed before the Registrar of Companies, and it is also recommended that retention of title may be specifically stipulated by contract. The local circumstances make it extremely difficult to recover possession of delivered goods for the unpaid price, and consequently most suppliers insist upon advance payments, letters of credit or other negotiable instruments.
3. Safeguarding measures
Safeguarding measures include taking an acknowledgment of the debt from the debtor and a promise to pay (it does not require notarisation). Furthermore, a charge or lien on the goods supplied or other assets is another way to safeguard the interest of the supplier. Likewise, a bank guarantee (from a reputable bank) may also be obtained.
4. Legal collections
4.1. General information
Whilst Cosmopolite Collections maintain a high success rate with amicable recoveries, if necessary, we have the ability to initiate legal action and arrive at a successful conclusion via court. Whether or not to initiate legal action and which particular type of proceedings should be initiated depend on the facts of each individual case. In India, legal proceedings are generally protracted in nature and can be initiated immediately after the amicable collection fails. There is a need to issue a prior notice before initiating a recovery under section 138 suit. New law of the National Company Law Tribunal (NCLT), helping set winding-up proceedings on a fast track.
4.2. Legal system
India’s judicial system has the Supreme Court of India at the top, which is also the highest court of India. It is followed by 21 high courts of the respective states with district judges sitting in district courts and magistrates of second class and civil judges (junior division) at the bottom of the judicial system’s hierarchy. Now for corporate cases, we also have NCLT courts.
4.3. Required documents
India’s judicial system has the Supreme Court of India at the top, which is also the highest court of India. It is followed by 21 high courts of the respective states with district judges sitting in district courts and magistrates of second class and civil judges (junior division) at the bottom of the judicial system’s hierarchy. Now for corporate cases, we also have NCLT courts.
4.4. Legal dunning procedure
A recovery proceeding is instituted before the court. A recovery suit is filed against the debtor (both in case of a company or an unincorporated entity) in the territorial jurisdiction of the court where the debtor carries out their business. The prime objective of filing a recovery suit is to recover the debt amount. It is considered to be a protracted proceeding (generally taking between four and eight years for conclusion), and, in a recovery suit, the representative of the creditor (the supplier) has to appear before the court a few times for deposition. Furthermore, a recovery proceeding is more costly than a winding-up proceeding as it involves a high amount of court fees, which are deposited before the court. Different courts have different rates of court fees, calculated on the basis of the claim amount. In addition, all supporting documents must be filed as originals.
4.5. Lawsuit
A recovery suit is filed by the creditor before the court against the debtor for recovery of the debt amount. After the preliminary hearing, the court issues a notice to the debtor. The debtor appears before the court and thereafter files a written statement (reply to plaint). After that, at the evidence stage, witnesses of both the creditor and the debtor depose before the court, and their cross-examination is also carried out. After the evidence stage, the matter is argued and a judgment is passed by the court. Afterwards, the said judgment or decree is enforced against the debtor. In a winding-up proceeding, after the preliminary hearing, the judge issues a notice to the debtor company, giving them the liberty to file their reply. After the completion of pleadings, the judge hears the arguments and may admit the petition and appoint an official liquidator. The court then directs the publication of a notice in a local newspaper and thereby invites the creditors or shareholders of the debtor company to support or object to the winding-up proceedings and appear before the court on a fixed date. After such a hearing, the court passes a winding-up order. Basically the purpose of a winding-up proceeding is to wind up a company; however, it has been seen that after filing a winding-up petition, debtors generally resolve the matter amicably.
4.6. Appeal
A party to the suit who is adversely affected by the decree or order of the court can file an appeal against that order or judgment in an appellate court. It is the amount determined by the first court that determines the forum of appeal. If the forum of appeal is a high court, then an appeal is to be filed within 90 days from the date of the decree or order. If the forum of appeal is any other court, then an appeal is to be filed within 30 days from the date of the decree or order.
4.7. Debt collection costs
It is not feasible to give an estimate of legal costs as they depend on many factors, including the complexity of each case. Legal costs involve, inter alia, the followings: Court fees Different courts have different rates of court fees, calculated on the basis of the claim amount. Attorney fees Fees paid to lawyers for handling the matter and for appearing before the court. Process serving A nominal fee is paid towards the delivery of the court’s summons, notices and other similar documents to the concerned parties. Drafting Fees paid to lawyers for drafting plaints, petitions, applications, written statements or objections, replies, rejoinders and other miscellaneous documents. Publication costs Costs of the publication of the notices in the newspapers as directed by the court. Miscellaneous There are other miscellaneous expenses, such as the costs of a notary, photocopying, stamping fees and the likes.
4.8. Expected time frame
A recovery suit is protracted in nature and generally takes between two and five years for conclusion. A winding-up proceeding generally concludes in two to four years.
4.9. Interest and costs in the legal phase
It is up to the discretion of the judge whether or not to award interest and costs to the creditor, but courts in India, while passing judgments, are empowered to award interest and may also direct the debtor to reimburse legal or collection costs to the creditor.
5. Enforcement
A decree can be enforced by the delivery of any property specified in the decree, by attachment and sale or by sale without attachment of any property, by arrest and detention in a civil prison of the judgment debtor or in other manners as the nature of the relief may require. A decree can be executed by the court that passed it or by the court to whom it was forwarded for execution. A decree can be executed by filing an execution petition before the court. Furthermore, the limitation period for filing an execution petition is 12 years from the date of the decree. The estimated time for conclusion of an execution petition is two to four years. When the decree-holder makes an application for attachment of movable property belonging to the judgment debtor, the decree-holder has to also annex with the application an inventory of the property to be attached, containing a reasonably accurate description of the property. When an application is made for the attachment of any immovable property of the judgment debtor, it should contain an accurate description of such property.
6. Insolvency proceedings
6.1. General information
Bankruptcy laws in India, especially in case of sick companies (companies whose accumulated losses are equal to or exceed their net worth), are predominantly remedial and ameliorative. They empower the quasi-judicial body for this very purpose to make appropriate measures for the revival and rehabilitation of potentially viable sick industrial companies and for the liquidation of non-viable companies.
6.2. Proceedings
Companies in India are governed by the following insolvency and restructuring regimes: Winding up or liquidation under the Companies Act 1956 Schemes of arrangement or compromise under the Companies Act Restructuring of sick companies in certain specified industries under the Sick Industrial Companies (Special Provisions) Act 1985. Winding up or liquidation is used to realise the debtor’s assets for distribution to their creditors and members. Although the other two methods can be categorised as corporate rescue mechanisms, schemes of arrangement and compromises are primarily designed for internal restructuring and reorganisation of the debtor. While winding up and schemes of arrangement are carried out under the aegis of the courts, the Board for Industrial and Financial Reconstruction has been set up for the restructuring or rescue of sick companies.
6.3. Required documents
For proper understanding of a case and for initiating legal action, all supporting documents pertaining to that case are required. Cosmopolite Collections require a power of attorney in our favour, duly signed and notarised by the creditor and the Indian High Commission in the client’s country. Further documents, such as sales contracts, purchase orders, pro forma invoices, commercial invoices, bills of lading or airway bills, statements of account, the entire correspondence exchanged between the creditor and debtor (letters or emails) and any other documents that may be relevant to the claim, are required.
6.4. Expected time frame and outcome
A winding-up proceeding generally concludes in two to four years. Further rehabilitation of a sick company takes a longer time; normally it concludes in a minimum of four to five years, but in more complex cases and where numerous creditors are involved, it has been seen that it may stretch even to seven years. The outcome of these proceedings generally depends upon the assets held by the company and their overall liabilities.
7. Arbitration and mediation
If the contract between the supplier and the debtor contains an arbitration clause, then arbitration proceedings will be initiated. Arbitration procedures are very similar to court proceedings. The only difference is that there are no hurdles of the strict rules of procedure or law of evidence, yet they are legally binding. After the claim is filed by the supplier and the debtor files their reply, the arbitrator may ask both parties to present evidence of their witnesses, and then, after hearing both parties, they decide the case and pass an award. Thereafter, the award needs to be enforced against the debtor. Mediation proceedings are another form of alternative dispute resolution (ADR); they are a way of resolving disputes between two or more parties with a concrete outcome. Typically, a third party – the mediator – assists the parties to negotiate a settlement. Generally, courts are also referring matters to mediators these days.
India is a country located in South Asia, with a population of around 1.4 billion people. The capital city of India is New Delhi, and the country is divided into 28 states and 9 union territories. India is a federal parliamentary democratic republic with a president as the head of state and a prime minister as the head of government. The official languages of India are Hindi and English, and the currency is the Indian Rupee.
Collecting business debts in India can be challenging for foreign businesses, as the legal system and procedures for debt collection may differ from those in other countries. It is generally advisable to seek the assistance of a local debt collection agency or lawyer who is familiar with the legal and cultural specifics of the country.
There are a number of debt collection agencies operating in India, and the industry has been present in the country for many years. One of the main credit bureaus in India is the Credit Information Bureau (India) Limited (CIBIL), which is a private company responsible for maintaining a database of credit information for individuals and businesses in the country. Some of the private credit reporting companies operating in India include Experian, Equifax, and TransUnion.
In India, debt collection laws are generally the same throughout the country, although local laws may also apply in some cases. It is therefore important for creditors to be familiar with the relevant laws and regulations in order to ensure that they are able to effectively collect their debts.
There are several benefits to using commercial debt collection services in India, including:
- Expertise in local laws and cultural norms: A local debt collection agency will have a thorough understanding of the legal and cultural specifics of India, which can be crucial for effectively collecting debts in the country.
- Access to local networks and resources: A local debt collection agency will have connections and resources within the local business community, which can be useful for tracking down debtors and collecting debts.
- Ability to negotiate settlements: A local debt collection agency may be able to negotiate settlements or payment plans with debtors in a way that is more effective than if the creditor were to try to collect the debt themselves.
- Improved recovery rates: A professional debt collection agency will have the expertise and resources to recover debts more effectively than an individual creditor might be able to on their own.
- Reduced risk of legal action: A local debt collection agency will be familiar with the legal procedures for collecting debts in Indonesia and can help creditors avoid the risk of legal action.
- Time-saving: Using a debt collection agency can save creditors a significant amount of time and effort, as the agency will handle the process of tracking down debtors and negotiating settlements on behalf of the creditor.
- Cost-effective: In many cases, using a debt collection agency can be more cost-effective than trying to collect debts on one's own, as the agency will handle the entire process and will typically only charge a percentage of the recovered amount.
- Our debt recovery agency has a very high success rate in Indonesia thanks to our multi-lingual debt collectors located in the country and our 24/7 online debt recovery report website.
