How to Recover Outstanding Business Dues Through Commercial Courts

Vikrant D. Shetty

Jun 8

10 min read

Updated: Aug 26

Commercial court building representing business dues recovery in India

Businesses owed unpaid invoices or unrecovered loans in India can recover dues through the Commercial Courts Act, 2015, which established a dedicated forum with fixed timelines and streamlined procedure for disputes above a specified value of Rupees three lakh. Before 2015, comparable suits often took a decade or more in the ordinary civil courts. The specified value determines the forum: claims up to Rupees ten crore go to the Commercial Court at the City Civil Court, and higher claims go to the Commercial Division of the Bombay High Court. This article sets out the practical steps for recovery, from choosing the forum to executing a decree.

Before 2015, a commercial suit would wind its way through the civil courts for years, sometimes a decade or more. The Commercial Courts Act created a dedicated forum with strict timelines, a cap on adjournments, and procedural innovations borrowed from international best practices. For disputes involving a 'specified value' of Rs. 3 lakh or above, this framework now applies across most Indian states, including Maharashtra.

This article walks you through the practical steps of using the commercial courts machinery to recover your dues, from choosing the right forum to executing a decree. We have also addressed common mistakes businesses make that delay or derail recovery proceedings.

The Legal Framework: How Commercial Courts Work in India

Which Court Should Hear a Commercial Recovery Suit?

The Commercial Courts Act, 2015 (as amended in 2018) established commercial courts at the district level and commercial divisions in High Courts. In Mumbai, commercial disputes with a specified value exceeding Rs. 10 crore are filed in the Commercial Division of the Bombay High Court under its Original Side jurisdiction. Disputes between Rs. 3 lakh and Rs. 10 crore go to the Commercial Court at the City Civil Court. For banking and financial institution claims against borrowers, the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993 may be a more efficient forum, especially where the claim exceeds Rs. 20 lakh. Choosing the wrong forum can lead to a plaint being returned or transferred. That alone can cost you months.

Is Mediation Mandatory Before Filing a Commercial Suit?

Unless you are seeking urgent interim relief, Section 12A of the Commercial Courts Act mandates that parties attempt mediation before filing a commercial suit. This is handled by the relevant authority designated under the Legal Services Authorities Act, in Mumbai typically the Bombay High Court Mediation and Conciliation Centre. The mediation window is three months, extendable by two months with consent. If mediation fails or the opposite party refuses to participate, you receive a failure report that allows you to proceed with filing. We have seen clients treat this as a bureaucratic hurdle to clear. That is a mistake: in some cases, a well-conducted mediation session has recovered dues faster and cheaper than litigation. That said, where the debtor is clearly using mediation as a delay tactic, courts have been receptive to that argument at the hearing stage.

Step 3: Filing a Strong Plaint

A commercial suit plaint is not a formatted letter of grievance; it is a technical document that must comply with Order VII of the Code of Civil Procedure, 1908, as adapted by the Commercial Courts Act. All documents relied upon must be filed along with the plaint itself; you cannot introduce documents piecemeal later. We regularly encounter businesses whose accounting records, invoices, and correspondence are scattered across email threads and informal messages, all of this needs to be organised, authenticated, and annexed at the outset. A poorly drafted contract can significantly weaken your case even if the underlying debt is clear. We have written separately about contract drafting mistakes that create litigation risks. They are worth reviewing before you reach this stage.

Step 4: Attachment Before Judgment

One of the most powerful pre-trial remedies available in commercial suits is an application for attachment before judgment under Order XXXVIII, Rule 5 of the CPC. If you can show, through documents, bank statements, or other evidence, that the defendant is attempting to dissipate, conceal, or remove assets to frustrate a potential decree, the court may order the freezing of those assets before the trial concludes. In our experience, courts in Mumbai have granted attachment orders in recovery suits where there is contemporaneous documentary evidence of asset transfers, sudden write-offs, or fund diversions by the defendant. The key is moving quickly and presenting cogent material at the first hearing. An attachment order changes the dynamics of litigation. Debtors who were previously stonewalling often become willing to settle once their bank accounts are frozen.

When Can a Creditor Obtain Summary Judgment Under Order XIII-A?

Order XIII-A, introduced by the Commercial Courts Act, allows a party to apply for summary judgment after the written statement has been filed but before framing of issues. If you can show that the defendant has no real defence, no genuine dispute on facts, just delaying tactics, the court can decide the matter without a full trial. A client of ours, a Mumbai-based pharmaceutical distributor, successfully obtained a summary decree within four months of filing against a defaulting retailer who had no substantive defence but kept raising procedural objections. Summary judgment is underused in India, partly because lawyers are unfamiliar with Order XIII-A, and partly because it requires very clean documentary evidence. But where the facts are clear and the debt is well-documented, it can slash the recovery timeline dramatically.

Step 6: Executing the Decree

Winning a decree is only half the battle. Execution proceedings under Order XXI of the CPC are where many businesses get stuck. Once a decree is passed, you must identify executable assets, bank accounts, immovable property, receivables, shares, and file an Execution Application before the court. Commercial courts have relatively simplified execution procedures compared to regular civil courts, and judges have started taking a stricter view of judgment-debtors who try to delay execution through repeated objections. In Mumbai, tracing assets through public registries, MCA filings, and bank enforcement mechanisms has become a key part of execution strategy. Where the debtor company is insolvent or has no executable assets, an application before the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 may be the more appropriate route.

Why Preparation Determines Recovery Speed

The Commercial Courts Act has genuinely improved business recovery in India, but it works best for those who enter the process well-prepared. A clearly documented debt, a solid paper trail, and a strategy that combines interim relief with a realistic understanding of the timeline will outperform the approach of simply filing a suit and waiting. If you are dealing with a disputed or unrecovered amount exceeding Rs. 3 lakh, the commercial court is almost always a better forum than a regular civil suit.

Frequently Asked Questions

What is the minimum claim value to qualify as a commercial dispute under the Commercial Courts Act?

The Commercial Courts Act, 2015 applies to disputes with a specified value of Rupees three lakh or more, a threshold set by the Act itself though states may notify a higher figure. Claims below this specified value fall outside the commercial courts framework and are heard as ordinary civil suits, without the Act's fixed timelines and streamlined procedure.

How long does mediation take before a commercial suit can be filed?

Pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 must ordinarily be completed within three months, extendable by a further two months with the consent of both parties. If mediation fails or a party refuses to participate, the mediating authority issues a failure report, and the claimant can then proceed to file the commercial suit.

When can a claimant skip mandatory pre-institution mediation?

A claimant seeking urgent interim relief, such as an order restraining the defendant from dissipating assets, is exempt from the mandatory pre-institution mediation requirement under Section 12A of the Commercial Courts Act, 2015. This exception exists because urgent relief would be defeated by the delay a mediation process would otherwise require.

What evidence is needed to obtain an attachment before judgment?

An application for attachment before judgment under Order XXXVIII, Rule 5 of the Code of Civil Procedure, 1908 requires the claimant to show, through documents such as bank statements, asset transfer records, or correspondence, that the defendant is attempting to dispose of or conceal assets with the intention of obstructing or delaying execution of a future decree. Bare apprehension without supporting material is generally not sufficient.

What is the difference between a summary judgment under Order XIII-A and a regular trial?

A summary judgment under Order XIII-A of the Code of Civil Procedure, 1908, as introduced by the Commercial Courts Act, 2015, allows a court to decide a commercial suit without a full trial where the defendant has no real prospect of successfully defending the claim and there is no other compelling reason for the matter to proceed to trial. It significantly shortens litigation for cases with clear documentary evidence and no genuine factual dispute.

What is the limitation period for filing a suit to recover outstanding business dues?

A suit to recover money due under a contract must generally be filed within three years from the date the debt becomes due and payable, under the Limitation Act, 1963. Businesses that delay pursuing recovery risk losing the right to sue altogether once this period lapses, which makes prompt action, including a timely legal notice, an important part of any recovery strategy.

What can a creditor do if the debtor company has no assets to execute a decree against?

Where a judgment debtor company has no traceable executable assets or is insolvent, a creditor may need to pursue proceedings before the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, rather than continuing execution under Order XXI of the Code of Civil Procedure, 1908. This route allows the creditor to participate in the insolvency resolution process as a financial or operational creditor, depending on the nature of the debt.

Is it better to sue in the commercial courts or approach the Debt Recovery Tribunal?

The choice depends on the nature of the claim: the Debt Recovery Tribunal under the Recovery of Debts and Bankruptcy Act, 1993 has jurisdiction over claims by banks and specified financial institutions against borrowers, typically where the claim exceeds Rupees twenty lakh, while other commercial creditors must proceed through the commercial courts under the Commercial Courts Act, 2015. Filing in the wrong forum can result in the plaint being returned, causing delay.

Which forum hears a commercial dispute depending on its specified value: the Commercial Court at the City Civil Court or the Commercial Division of the Bombay High Court?

The Commercial Courts Act, 2015 splits jurisdiction by specified value. Disputes with a specified value between Rupees three lakh and Rupees ten crore are filed before the Commercial Court constituted at the City Civil Court, Mumbai. Disputes exceeding Rupees ten crore go to the Commercial Division of the Bombay High Court, exercising its Original Side jurisdiction. Filing in the wrong forum can result in the plaint being returned or transferred, causing delay, so a creditor should calculate the specified value carefully before choosing where to sue, particularly where the claim sits close to the ten crore threshold.

What documents must a creditor file along with the plaint in a commercial suit?

Order VII of the Code of Civil Procedure, 1908, as adapted by the Commercial Courts Act, 2015, requires a party to file all documents relied upon along with the plaint itself at the time of institution. A creditor cannot introduce invoices, correspondence, or account statements piecemeal after filing. This makes early organisation of accounting records, signed invoices, delivery challans, and email correspondence essential before drafting the plaint, since evidence gathered later, however relevant, generally cannot be tendered without the court's specific leave, which commercial courts grant sparingly given the Act's emphasis on time-bound disposal.

What is the legal effect of an attachment before judgment order under Order XXXVIII, Rule 5 of the CPC?

An attachment before judgment order under Order XXXVIII, Rule 5 of the Code of Civil Procedure, 1908 freezes the defendant's specified property, preventing its transfer, sale, or encumbrance while the commercial suit remains pending. The defendant may apply to have the attachment varied or discharged by furnishing security or satisfying the court that no risk of dissipation exists. Property that remains attached at the time of decree gives the decree-holder priority in execution, since the debtor cannot have validly alienated it in the meantime. Courts in Mumbai have used this remedy to pressure debtors into early settlement.

At what stage of a commercial suit can a party apply for summary judgment under Order XIII-A of the CPC?

Order XIII-A of the Code of Civil Procedure, 1908, introduced by the Commercial Courts Act, 2015, permits an application for summary judgment only after the defendant has filed the written statement and before the court has framed the issues for trial. A creditor cannot seek summary judgment at the moment of filing the plaint, since the defendant must first have had an opportunity to disclose its defence. Once the written statement is on record, the applicant must show the opposing party has no real prospect of successfully defending the claim and that no other compelling reason requires a trial.

What categories of assets can a decree-holder pursue in execution proceedings under Order XXI of the CPC?

Once a commercial court passes a decree, a creditor may pursue execution under Order XXI of the Code of Civil Procedure, 1908 against bank accounts, immovable property, receivables owed to the judgment-debtor by third parties, and shares held by the debtor. An Execution Application must identify these assets before the same court that passed the decree. In Mumbai, creditors commonly trace executable assets through Ministry of Corporate Affairs filings, property registries, and bank enforcement mechanisms, since a judgment-debtor rarely volunteers a complete list of its own attachable property once a decree has been passed against it.

Which body conducts mandatory pre-institution mediation under Section 12A in Mumbai?

Section 12A of the Commercial Courts Act, 2015 requires a claimant to attempt mediation before filing a commercial suit unless urgent interim relief is sought. This mediation is conducted by the authority designated under the Legal Services Authorities Act, 1987, which in Mumbai is typically the Bombay High Court Mediation and Conciliation Centre. The claimant submits an application to that authority, and if the opposite party participates but the dispute is not resolved, or refuses to participate at all, the authority issues a failure report that allows the claimant to proceed to file the commercial suit.