Amith K (NA) 12 September 2013

Recovery of money by foriegn supplier - locus standi

I have a client in Singapore who supplied material to a customer (A Chemical Company) in India (Pune). The Customer has not made any payment towards the supply made. This material was supplied by my client on oral guarantee of one of his business friend from Canada. The customer was a cousin of this business friend.

There was some dispute between this business friend and his cousin (the customer) because of which they are no longer on good terms. To punish his cousin, the customer did not pay for the material supplied. My client has demanded the payment through his bank, to the bank of customer, however never got the payment. There has been no formal demand notice send to the customer.

My client doesn't want to come to India and file recovery suit against the customer, instead he is insisting his business friend to make payment, because it was on his word the material was supplied. The customer was not made party to this oral guarantee.

My query is

1) Can the business friend, based in Canada, file a recovery suit against the customer in India, after he makes the payment of the dues?

2) Can the customer take a stand that the guarantee was never given by my permission so I don't honour the contract between you and your friend?

3) What will be the procedure to recover the dues, if the business friend of my client wants to recover it after payment made to my client? (e.g. demand notice, authority letter etc.)

4) What are the Foreign Exchange rules voilation in this transaction if my client's friend wants to recover the dues? As he was not the supplier.

4) Any other solution you may suggest for recovery of the money, without involvement of my client

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3 Replies

T. Kalaiselvan, Advocate (Advocate) 12 September 2013

Mr. Amith,

If your client supplied material to your customer in India and if he possesses documentary proof for the same, he can very claim money through a recovery of money suit in India. The other people who are not directly involved in the supply and related transactions, are legally not entitled to claim money from the customer.

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Amith K (NA) 13 September 2013

Thanks for the reply.

However, as I mentioned in my query, my client doesn't want to get involved in legal case which is time consuming. They want their money fast and that is why they are asking their friend to honour the oral guarantee. Now how can this friend recover that money once he pays to my client is our problem?

T. Kalaiselvan, Advocate (Advocate) 13 September 2013

Dear Mr. Amith,

Certain things can be settled over a lunch-on meeting too, suppose your efforts manage to overcome the situation to save your client's money, alternately you can obtain a promissory note and a post dated cheque from your friend for the due amount and proceed with the settlement to your client, later on if your friend declines to pay, you may initiate action on the basis of pro-note and the cheque in your possession, exercise caution in all the steps being taken.