Debt recovery from a public limited company

You can approch the facilitation Councils which have been establish for the welfare of MSMEs

File a recovery suit alongwith interest accrued therefrom. 

You can file Civil Lawsuit under Order 37 of C.P.C. (Summary Suit) for recovery of your dues.
If the amount you are claiming is less than Rs. 20 Lakhs you can file a suit at District Court within your district or place where the business activity occured. Above Rs. 20 Lacs, you have to approach High Court. This will depend upon the pecuniary jurisdiction of civil courts in your State.
Advocate will guide you on the Pecuniary Limits of Civil Courts in your State.

Summary Suits are a speedy method of litigation compared to other civil cases. In the Suit, make Managing Director/Chairman/proprietor/Promoters of the Company as Respondents in the Suit along with the Company.

As far as Interest on your unpaid dues are concerned that shall be governed by Section 34 of Civil Procedure Code(CPC). If the company gave you work-order or signed a contract in order to avail your services, then Summary Suit is the best option. Criminal Case is also possible but that would be a long-drawn legal battle. 
In case your work-order/contract is silent or does not mention any rate of interest in the event of delayed payment, then Courts will award you interest of minimum 6% p.a. But if you engage a good lawyer who can convince the Court that your case is a Commercial Transaction involving a business Activity, then Courts might grant you interest at a higher rate than 6% per annum.

A passage from Section 34 of Code of Civil Procedure, 1908 says :
"Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions".

Make a list of movable and immovable property of the Company and its Promoters as this will help you in executing the Court Order/Decree if you win the Case.

But I would also like to appriase you of few facts before going for a Civil Lawsuit :
1st Scenario : You win the case Ex-Parte and the Opposite Party doesn't appeal against the District Court Judgement in the High Court, then the Order becomes final & binding and can be directly executed by attachment & sale of movable or immovable property of the Debtor/Debtor Company. (This is the fastest possibility to recover your money).

2nd Scenario : You win the case Ex-Parte and the Opposite Party appeals against the District Court Judgement in the High Court, then you get into Round 2 of the Court battle. Whoever loses the Case in High Court has an option to Appeal in Supreme Court. Round 3 of your Court Battle at Supreme Court. (This is again a long drawn battle). But nonetheless you will be awarded interest on your principal sum due throughout. Supreme Court's Order will be final & binding.
If you are in the State of Andhra Pradesh you can recover Legal Fees charged by your Advocate to some extent as per A.P. Advocate's Fee Rule Act, 2010.
In case of other states you have check with your advocate regarding laws or acts for recovery of Lawyer's Fee from Debtors.

Total Time taken to resolve your dispute via Civil Case, if it concludes at Supreme Court will take around 8-10 Years depending upon the Backlog of Cases in your State.

As far as option of filing criminal case is concerned, you can file an FIR under Sections 406,420,120-B,34 of I.P.C. against the Company, its Promoters, Directors & Head of Department dealing with Purchase.

Approach a Lawyer who is well versed in Civil Litigation because its a specialized domain of law and quite different from Criminal Law. In my experience I have noted that Criminal Lawyers are not well versed with Civil Laws and Procedure and may make some mistakes pertaining to procedures which can delay or prolong your case. But that is with an expection, you may come across a Lawyer who is well versed in both fields.

PS: Lawyer's Fee will be around 10-15% of the Principal Amount claimed in the Suit at one stage (i.e.) 10% at District, another 10% at High Court and 10% at Supreme Court.

As per the Facts stated by you, I doubt whether Arbitration will be possible with a Company who is reluctant to reply to your emails and whose Managing Director refuses to meet you.

Arbitration or Conciliation is an option when both parties have an active communication between them and disputes pertains to some clauses in the Contract or counter-claims against each other.
Although Arbitration is a cheaper method to resolve disputes but in your case I don't think it would work considering the Attitude of the Debtor-Company & its Managing Director.

File a Summary Suit under Order 37 of the Code of Civil Procedure for recovery of your dues along with costs & interest.

Thank you Tushar Jha, it was veryelaborative explanation.. thank you once again.. Can we plead these cases party-in-person ?? instead of hiring a law firm..@ 10% of principal to lawyer as fees..thats very exhorbitant fee to pay lawyers.. pls reply. Thanks once again.

Yes, you can plead your case in person.
You have to submit your case mentioning that your are representing yourself in the Case.
Section 32 of the Advocates Act, 1961 authorizes a person to represent himself.

If opposite party raises any objection to that, then give the Court citation of a Bombay High Court Judgement where a Plaintiff represented himself invoking Section 32 of the Advocates Act, 1961.
Citation to be used : Mrs. Prabha P. Shenai vs. Ispat Industries Ltd on 9 March, 2016
Here's the link to the above case decided by Hon'ble Bombay High Court : https://indiankanoon.org/doc/33362628/

Party-in-Person can appear in the case. But remember few things while doing that :-
1. Never ever Argue with a Judge.
2. When making submission to the Court be as humble as possible.
3. Don't be intimidated if Judge cross-questions you on the facts of the case or any legal provisions. If you are unsure of any thing don't utter falsehood under any circumstances. Just humbly reply to the Judge that you will check up the facts and revert. And do revert by next date.
4. Never raise your voice or shout in the Court under any circumstances. If Judge becomes angry by your behaviour, he can even punish you for Contempt of Court. Be humble and respectful to the Court & Judge even if the case is going against you. Please remember you always have an option to appeal to a Higher Court.
5. Attach all bills & copy of emails along with your case and mark them as exhibits while drafting your petition. So, that Judge can easily locate the corroborating documents in your case file.
6. If the case goes to Supreme Court of India only then engage a counsel. At District Court level & High Court Level you can argue your case in person.

Remember one thing Public Limited company engages a Lawyer for free, yes for free. You heard it right ! FREE ! You will ask how. The Lawyer's Fee payable by the Company or its Managing Director is paid from Share-Holders & Investors money. No M.D. or CEO pays to the lawyer from his own pocket if the Case is against the Company. Company will engage big law firms with an array of Lawyers dressed in pricey suits. They will even pay Rs. 1 Lakh per hearing to them at High Court Level rather than paying you. These are the odds which you are up against.
But if your facts are true & correct, the law is at your side. Judge has to consider the facts of your case and decide on merits.
Company will most likely try to put the blame on you and also file a counter-reply to your petition blaming you for some mistake. This is a Common Practice by Company Advocates. 
This has happened in a case when a Kingfisher Airlines Pilot filed a case for recovering her dues from the Company at Delhi High Court. If you read that Judgement you will find that Kingfisher Airlines(Company) blamed the pilot for non-performance as reason for non-payment of her salary & dues. Refer to Delhi High Court Judgement in case of Natasha Gupta vs. The Kingfisher Airlines Ltd. on 7 March, 2014
Read this : https://indiankanoon.org/doc/188421069/
However, Hon'ble Delhi High Court dismissed the claims of Kingfisher Airlines and gave the Verdict in favour of Pilot Natasha Gupta.

Now, the question arises why does Company fight such case where they have geniune liability to pay dues to someone. The Answer to that is they (Public Limited Company) engages a Lawyer for Free at the Cost of Investors & Share-Holders Money.

Hi,

I'm back after a very long time. Well the case is actually for my father. He owns the workshop and i posted the query on his behalf. 

The developments until now..well after writing for more than 10 months, the company VP at last responded over email this month stating that they have no obligation to pay my father a single rupee citing adjustment of advances and deficiency of services. As you know if you read my post from beginning, there is another set of POs for 30Lakhs which are work-in-order stage for which we received 25% advance. VP says since we did not deliver the Work-in-progress orders and 25% advances are paid for those POs that amount is adjusted into outstandings and they dont need to pay any money. And all the POs will automatically get cancelled.

I dont have PO cancellation letter or email from company mgmt but VP claims he dont need to send cancellation emails. This VP states after 16 months!! insane and shocking on how he can say like that..

Well my question is

1. We approached POlice to file criminal complaint..they say it is civil dispute and they will not register FIR. Police say that I need to register a Private complaint in court and only after court gives order they will register FIR.. Is this true?

2. There is also an argument that I cannot file private complaint in court unless i send a lawyer notice first to the company management.. pls give tell if this true..is it necessary for me to send lawyer notice first?

3. My father wants to fight this case as "Party-in-Person" so can he directly file private complaint in court w/o sending lawyer notice?

4. Can my father directly send notice to the company mgmt instead of lawyer notice? Pls guide me here

5. My father's age is 68 years. So if he will fight party in person is there a possibility of case getting disposed faster. Lawyers tell this will take atleast 3-5 years.. 

I'll comeback for civil case queries as I'm collecting questions.

Thanks,

I'll come back incase I have more queries. Thanks in advance for everyone who respond.

Hari

Hello, 

We filed police complaint last month. Nothing happened past 1 month at the police station I dont even know if the police have called the MD/CFO/VP. The police are very rude to my father and me. They repeatedly ask me in loud voice - who are you? whenever I go to police station to find the outcomes.

While I keep a watch on Police case let me tell you - we have'nt filed recoevry suite yet as the lawyer tells me that I'll need to deposit 10% of the claim amount in the court for my petition to get accepted.

Meanwhile, I also read about MSMED act and read in this forum that I can approach them for recovery of dues with compound interest. My father's firm is registered under MSMED act.

My questions:

1) Is recovery suite different from MSMED? If yes, which one is suggested? Can both be filed independently? If no, please give me some info and point me to some articles where i can read.

2) If there any way to write complaints against the MD/VP/CFO and Board of Directors to the NSE/BSE?

3) There appeared an article that the company is in talks to a leading NBFC for complete debt restructuring loan - some 800 Crore rupees. Is there any way that I can write to NSE/BSE and bankers to preempt me and I get first preference to payout before them?

4) Where can i file and write complaints against this company? I really want to shame this company. They have really abused and threatened my father along with police. If nothing happens with police i plan to followup with SP office next time. I want to show them that a small person can really bring this large and arrogant company to its knees.

Appreciate your replies. Thanks for the previous people who helped me with replies. This forum is my strength. Thank you.

 

Please find the below answers your questions.

Your questions were :-
1) Is recovery suite different from MSMED? If yes, which one is suggested? Can both be filed independently? If no, please give me some info and point me to some articles where i can read.
Answer :
Recovery suit is the ultimate legal remedy for enforcing a debt. Yes, you need to pay around 8-10% of the amount claimed through lawsuit in the Court as 'Cost of Suit or Court Fees' only then the court will admit your case. However, this court-fees can recovered by you if the Court gives a judgment in your favour. The debtor-company would be ordered by the court to pay you the court-fees along with principal and interest, if you succeed in the lawsuit against the Company. MSMED Act will only be a pre-litigation step to get your dues from a company. Even in the below link, winding-up petition is recommended as a remedy which again is a legal process. Winding-up petitions are filed directly in the High Court with the Official Liquidator (Company Law Bench), if the amount due from any company exceeds a sum of Rs. 1 Lakhs.
Refer Section 271(2)(a) of the Companies Act, 2013 for more details.
See this link for recovery procedure under MSMED Act :
https://www.isspa.org/uploads/laws/pdfs/16_pdf.pdf

2) If there any way to write complaints against the MD/VP/CFO and Board of Directors to the NSE/BSE?
Answer : NSE/BSE is in no way concerned with the debts of a company due to any creditor. There is no point writing any complaints to NSE or BSE. The whole effort would be futile and pointless.

3) There appeared an article that the company is in talks to a leading NBFC for complete debt restructuring loan - some 800 Crore rupees. Is there any way that I can write to NSE/BSE and bankers to preempt me and I get first preference to payout before them?
Answer : In no way NSE/BSE or SEBI would ask bankers to show any kind of preferrential treatment to your dues. Corporate debt restructing (CDR) mechanism is a different game altogether.
Anyways even if you file any case against the company, the debt due to the Government agencies have priority over all other debts.
Hon'ble Supreme Court of India has held in one of its judgment [in the Case of Union of India Vs. Somasundram Mills (P) Ltd.] that, “It is a general principle of law that debts due to the State are entitled to priority overall other debts. If a decree holder brings a judgment-debtor's property to sale and the sale-proceeds are lying in deposit in court, the State may, even without prior attachment exercise its right to priority by making an application to the executing court for payment out. ”

It is a settled law that whenever someone (company or individual) is indebted to multiple creditors, then in that case if any proceeds are received pursuant to the sale of debtor's movable or immovable properties, the same is to be distributed as follows in preferrential order :-

1. Central Goverment Dues (such as Income Tax dues, Custom Duty, Service tax, excise duty, PF dues)
    
2. State Government Dues (such as Sales Tax, Land Revenue, Commercial Taxes, Municipal Taxes)
    
3. Secured Creditors (such as money lent by Banks and NBFC or any secured creditor who has lent money on guarnatee)Salary of Workmen and Employees of the Company. Right of Secured creditor vis-a-vis employees salary dues are on Pari-passu basis.


4. Unsecured Creditors such as contractors, vendors, supplier, service providers to the company.

I guess since you are a vendor, you come under the classification of 'unsecured creditor' and your dues would be fourth according to the preferential order stated above.

As per Section 73(3) of the Code of Civil Procedure, any right of the Government in capacity of a creditor is protected.
Refer Section 73 of the Code of Civil Procedure : https://www.lawzonline.com/bareacts/civil-procedure-code/section73-code-of-civil-procedure.htm

4) Where can i file and write complaints against this company? I really want to shame this company. They have really abused and threatened my father along with police. If nothing happens with police i plan to followup with SP office next time. I want to show them that a small person can really bring this large and arrogant company to its knees.

Answer : If no action has been taken on the FIR filed by you then you can escalate the matter to the higher police officials in the district such as SP or SSP. But even after that if no action is taken by the police against company officials, then you can file a private criminal complaint in the Court under Section 200 of the Cr.P.C. praying for directions to be issued to the Police Department to carry out investigations in the case and submit the report in the Court. Do attach the copy of the FIR while filing the 'private criminal complaint' in the Court.

Furthermore, your efforts to shame the company would go in vain as often such huge defaulting company have thick-skinned promoters.
See the case of Kingfisher Airlines, how Mr. Mallaya is enjoying his life in United Kingdom leaving his creditors in the lurch.

 

Thank you very much Tushar Sir for your encouragement words and guidance.

Thanks again for checking on my post. I'll keep updating my story and it progresses.

One last question: Can I ask for interim relief to Court in Recovery Suite? If yes - how? If no - How do I force the Court to allow me based on merits?

Please read the digest of our dues which can be categorized into 4:

1) A set of orders from 2014-2016 worth 25L for which the company had accepted deliveries of materials and Delivery challens without dispute, also gave us C-forms.. This is FIRST category

2) One Purchase order for custom made industrial equipment worth 18L which had special delivery terms in the PO as "Delivery should be before Oct 18th 2015". We made the equipment ready as per PO terms and sent the Profroma Invoice to company in Oct 2015 itself. But the company refused to take delivery till date and said this PO is cancelled. I do not have any cancellation letter/email from company. They also did not dispute/reject my proforma Invoice for 18L to this particular PO till date, today....This is SECOND category.

3) One Purchase order for custom made industrial equipment worth 16L which had special delivery terms in the PO as "Delivery should be before Nov 15th 2015". We did not make the equipment fully ready but have paid for raw materials worth 9L, raw material is a large special grade steel tube weighing 7 Tons and other equipment (such as motors, seals etc) required to make this custom make industrial equipment. My supplier to whom I paid 9L for this steel tube is threatning me to sell this Steel tube as scrap if I dont pay him the remaining money. If these materials get sold as scrap, it would fetch only 90K and rest money is lost. 

We have already shared all communications which i had from my supplier to the company with whom i have dispute. I have sent them Proforma Invoices, shared my payment details to my suppliers for raw materials, QC certificates for the spl grade steel tube..all.. but they wont reply...this the THIRD category.

4. A set of PO worth 8L which this diputed company does not talk about. I have POs from them but they dont put in writing cancelling POs..i'm only said verbal....this is the FOURTH category.

The reason for asking interim relief- I would like to ask the Court for interim relief for the SECOND AND THIRD CATEGORY for which I stated above.

As you now know for the SECOND and THIRD category - i have the equipment ready past 1.8 years now..for which i pay monthly rent to store this special equipment. I want the court to instruct the company to take delivery of them on as is basis - and save me from incurring addl storage and electrical charges. My dad wants to close the industry as he is 68 years old now. Is this possible? How do I ask the court to help me here?

Thanks.

Replying Point-wise :

1. You can file summary suit under Order 37 of the Code of Civil Procedure in the court of competent jurisdiction claiming a principal sum of Rs. 25 Lacs plus interest and cost of suit.

2. For second query, you have to file Ordinary or Regular Civil Suit claiming liability of the Company towards cost incurred by you in completing the work. This case will be a separate case from the 1st one (i.e.) Summary Civil Suit. Furthermore, in this case (2nd one) the burden of proof will be on you to prove your case beyond reasonable doubt. Courts will not grant any interim relief forcing the opposite party to take delivery of the goods. Sale of Goods Act, 1930 would be applicable in the 2nd case.
Ordinary Civil Suit takes around 2-3 years to decide (average time).

3. No amount would be recoverable in this case. As mentioned by you that your firm failed to perform the job in time. This will give the opposite party (Company) to deny its liability. Please note this is my opinion, some lawyer will have to go into the specific details of the special delivery terms in the PO. Only after going through the terms and conditions of the Purchase Order one can give an advice on the same.

4. You have not elaborated the terms and conditions of this PO. Whether the job was completed or not ? Whether the company took delivery of the goods or not ? Only after a detailed information related to this query (4th one) I can comment anything.

Cost of additional storage and electricity charges are subject to court's discretion. In order to claim the 'cost of additional storage' and 'electricity charges' the burden of proof rests on you. Needless to say that if court accepts your contentions, it may grant a favourable order to recover the same from Opposite Party (Company).

Tushar Sir,

Thanks again for checking on my post. I've been to as many as 6 lawyers but none had your patience levels and gave me replies as gracious as you did. Thank you very very much. Infact they always sounded at their pessimistic best. You're the only person to give me confidence. I cannot thank you enough.

My queries again:

1. For the second query regarding Ordinary or Regular Civil Suit - Can I club this one along with summary suit under Order 37 of the Code of Civil Procedure and file one single petition before the court of law?

2. The terms & conditions for the 2nd query PO are as below - exact words as written in my PO

Ex rates: Ex-your godown
Sales tax : CST 2% against form C
Delivery period: Positively on or before 18.10.2015
Payment terms: 25% advance, 65% against Proforma Invoice & 10% against commisionssing

I received 25% advance. I sent them my proforma Invoice on Oct 15th 2015. They did not respond. They did not reject my PI tilldate. I've been seeking answers through multiple emails (more than 18 emails - marked to MD, CFO, VP as well)from them since 2015 but they never replied. I've also sent registered letters to all their Board of Directors and then subsequently followed them with a legal notice 2 months ago. No replies to them as well. So I guess there are sufficient reasons to prove their crime.

3. Your reply to point 3 have sank my heart to my boots as 9L loss is sure to give me heartattack. I received this PO exactly 10 days after the PO mentioned in 2nd query. Not to mention a set of POs before these dates worth 25L for which I've delivered them and yet to be paid. 

It is basic arthimetic - if you follow the order dates of every POs - how can i invest in the last order without being paid for the previous orders? I've already blocked my capital - 25+18L. Yes I got 25% advance and I used their advance plus additional money from side to buy raw material. The company is aware of this. I shared them my payments details made to my supplier (infact they themselves asked me as they doubted my version- it is on email from them), QC certificate, my supplier emails/letters ( 8 emails, 2 letters precisly) to me demanding payment.The MD/CFO/VP maintained stoic silence throughout. 

How can I be penalized for their inaction? What are my instruments to safeguard from exploitation of such large companies? They did not give me a single reason of cancelling POs inspite of me seeking information from them since 2015. The terms & conditions of this PO are the same mentioned in point 2.

So my question - How do i include this one also and file a single petition for points 1, 2 & 3.

4. For the remaining POs' - 8L I did not start production, just paid for raw materials which i reused them after selling them as scrap. I intent to ask to pay damages for my losses. Lets see how the court responds for this point.

I'm sorry for looping back again but I've so many questions and you're the only one to answer. Thank you very much

Regards,