Bad debt is the debt where loan, credit line or accounts cannot be recovered either in part or whole. It means when the enterprise or the asset that becomes owed to repay, cannot do so anymore, there arises a need to recover debt.
Debt Recovery Laws:
Recovery of Debts Due to Banks & Financial Institutions Act 1993:
Under this Act India has established 39 Debt Recovery Tribunals and 5 Debt Recovery Appellate Tribunals for expeditious adjudication and recovery of debts due to matters connected with Bank & Financial Institutions & for matters connected therewith.
Enforcement of Security Interest & Recovery of Debts Laws & Miscellaneous:
It has been observed that disputes are not being resolved within a stipulated period of 6 months which has consequently resulted in the disposal & high pendency of cases before DRTs. This Act was enacted to solve the issue of efficiency in disposal of cases.
The Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act 2002:
This Act regulates reconstruction of financial assets & security interest to provide for a central database of security interests created on property matters. This Act permits secured creditors to take over collateral security which is assisted by District Magistrate who has jurisdiction over security in case of debtor’s default.
Consolidated Laws:
There are many forums for debt recovery due to which creditors have faced confusion thinking where to approach:
Insolvency & Bankruptcy Code:
This is consolidation of existing insolvency laws which is umbrella legislation to remove multiple forums for providing clear path to justice . This Act has brought amendment in 11 other amendments including Companies Act, SARFAESI Act and DRT Act.
Debt Recovery-MSME Act:
The MSMED Act 2006 provides a legal framework for regulation & smooth functioning of such enterprises . This Act provides speedy dispute resolution mechanism between MSME & buyer.
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Limitation:
This Act is silent on the applicability of limitation but, for claiming due amount from buyer, supplier shall bring an action under Act at earliest.
Remedies Available For Debt Recovery:
Civil Remedy:
An aggrieved party can send legal notice to debtor for initiating a civil suit.
Criminal Remedy:
An aggrieved person can file an FIR in the local police station and proceedings will be set in motion.
Out of Court Settlement:
This is the quick & efficient way for the aggrieved party to recover the money.
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