When a company owes you money, the forum you choose can matter as much as the strength of your claim. An insolvency petition can bring a defaulter to the table in weeks, or drag you into a long process where you recover very little. A commercial suit gives you a decree but may take years to execute. A bank has options under the Recovery of Debts and Bankruptcy Act and SARFAESI that a supplier does not.
There is no "best" route for everyone. This page sets out the main options side by side, so you can see which one fits your amount, your documents and the debtor's situation, and why we sometimes advise clients not to go to the NCLT at all.
हिंदी में सारांश
किसी कंपनी से बकाया वसूलने के कई रासà¥à¤¤à¥‡ हैं — IBC के तहत NCLT में दिवाला याचिका (₹1 करोड़ या ज़à¥à¤¯à¤¾à¤¦à¤¾), बैंकों के लिठDRT और SARFAESI, कमरà¥à¤¶à¤¿à¤¯à¤² कोरà¥à¤Ÿ में मनी सूट या समरी सूट, आरà¥à¤¬à¤¿à¤Ÿà¥à¤°à¥‡à¤¶à¤¨, और चेक बाउंस केस। सही रासà¥à¤¤à¤¾ रकम, कागज़ात, विवाद की पà¥à¤°à¤•à¥ƒà¤¤à¤¿ और करà¥à¤œà¤¼à¤¦à¤¾à¤° की आरà¥à¤¥à¤¿à¤• हालत पर निरà¥à¤à¤° करता है। गलत रासà¥à¤¤à¤¾ चà¥à¤¨à¤¨à¥‡ से समय और पैसा दोनों बरà¥à¤¬à¤¾à¤¦ हो सकते हैं।
Is this your situation?
- A company owes you money and you are deciding what to do next
- You are unsure whether the amount is large enough for insolvency
- The buyer has raised complaints about your goods, and you fear a "dispute" defence
- You hold a cheque that bounced as well as unpaid invoices
- Your contract has an arbitration clause
- You are a bank or NBFC with secured and unsecured exposure
- You suspect the debtor is shifting assets and want something fast
The main routes at a glance
| Route | Who can use it | Minimum amount | Typical speed | Main risk |
|---|---|---|---|---|
| Insolvency (IBC, NCLT) | Financial and operational creditors | Default of Rs 1 crore | Admission in weeks to months | Low recovery if the company is truly insolvent; rejected if there is a pre-existing dispute |
| DRT (RDB Act) | Banks and notified financial institutions | Rs 20 lakh | 1 to 3 years for a recovery certificate | Backlog at some tribunals |
| SARFAESI | Banks and financial institutions with security | Rs 1 lakh, with conditions | Possession in months | Borrower challenges before DRT |
| Commercial suit | Any creditor | Rs 3 lakh for Commercial Courts | 1 to 3 years; strict timelines help | Execution can be slow |
| Summary suit (Order 37) | Creditors with written contracts, invoices or cheques | No minimum | Faster if leave to defend is refused | Leave granted if defence is plausible |
| Arbitration | Parties with an arbitration clause | No minimum | 12 to 18 months for most awards | Cost of tribunal; challenge to award |
| Cheque bounce (Section 138 NI Act) | Holder of a dishonoured cheque | No minimum | 1 to 3 years | Criminal process; compensation tied to the cheque |
When each route makes sense
Insolvency, when the debt is clear and large
If the default is Rs 1 crore or more, there is no record of the debtor disputing it before your demand, and the debtor is a running company that would hate to lose control, insolvency is often the fastest way to get paid. See Section 9 for suppliers and Section 7 for lenders.
A suit, when there is a dispute
If the buyer complained about quality or delays before your demand, the NCLT will likely reject an insolvency petition. A commercial suit, or a summary suit on clear documents, is then the safer route. Our sister site covers summary suits.
DRT and SARFAESI, for banks
Banks with security can take possession under SARFAESI and recover through DRT. Many banks use these alongside, or instead of, the IBC when they want to recover from specific assets rather than resolve the whole company.
Arbitration, if the contract says so
If your contract has a valid arbitration clause, a money claim will usually go to arbitration. An arbitration clause does not, however, stop an insolvency petition where the debt is undisputed.
Cheque bounce, as a lever
A bounced cheque gives you a criminal remedy under Section 138 of the NI Act, which can run alongside civil recovery. It works well as pressure, but compensation is limited to the cheque.
A notice first, almost always
Whatever the route, a well-drafted notice often brings payment. For operational creditors planning insolvency, the Section 8 demand notice is compulsory.
Five questions that decide the route
1. How much is owed, and to whom?
Below Rs 1 crore of default, insolvency against a company is not available. Below Rs 3 lakh, the Commercial Courts do not apply and an ordinary civil suit is used.
2. Is there a paper trail of a dispute?
Insolvency is unsuitable where the debtor raised a genuine dispute before you demanded payment. Suits handle disputed claims; the NCLT does not.
3. Is the debtor solvent?
If the company is profitable and simply delaying, the threat of insolvency usually works. If it is genuinely broke, insolvency may lead to a resolution plan that pays operational creditors very little, and you may be better off with whatever security or guarantee you hold.
4. Do you have security or a guarantee?
Secured lenders can enforce security. Personal guarantees given by promoters can be pursued through a personal guarantor insolvency or a suit against the guarantor.
5. What is your goal?
Some clients want money quickly and are open to a discount. Others want a decree they can execute over time. Others want the company resolved. The answer changes the route.
How we choose the route with you
Read the documents and the emails
We go through contracts, invoices, ledgers and, most importantly, the correspondence. The emails usually reveal whether a "dispute" defence exists.
Check the debtor
We look at the company's filings on the MCA portal, its charges, its litigation history and any insolvency cases already pending against it.
Give you a written note of options
A short note sets out the two or three realistic routes, with timelines, costs and risks for each. We recommend one and explain why.
Start with the right notice
For insolvency, a Section 8 demand notice. For a suit, a legal notice under the Contract Act. For a cheque, the statutory notice under Section 138. Each has its own timeline.
File, and keep the alternatives open
If the first route stalls, for example if a dispute surfaces, we move to the next without losing time.
Documents that help us advise
The transaction
- Contract, purchase orders, loan agreement
- Invoices, delivery proof, disbursal records
- Security documents and guarantees
The debt
- Ledger and statement of account
- Balance confirmations or acknowledgments
- Record of part payments
The relationship
- Emails and letters about payment
- Any complaint, rejection note or counter-claim
- Earlier notices and replies
The debtor
- Company name and CIN
- Any cheques received (bounced or otherwise)
- Information about pending cases against the debtor
Two creditors, two routes
Here's a made-up example. Two suppliers were owed money by the same Gurugram company. The first, a chemicals supplier, was owed Rs 1.6 crore and had a clean record: delivery receipts, balance confirmations, no complaints. The second, a machinery vendor, was owed Rs 2.1 crore, but the buyer had written to it months earlier about a breakdown and a pending warranty claim.
For the first supplier, we sent a demand notice under Section 8 and filed a Section 9 petition before NCLT Chandigarh. The company settled before admission. For the second, we advised against insolvency, because the warranty dispute pre-dated any demand. We filed a commercial suit instead and sought an order for deposit of part of the amount, which the court granted after pre-institution mediation failed.
Mistakes creditors make when choosing a route
- Going straight to insolvency on a disputed claim: the NCLT rejects petitions where a genuine dispute existed before the demand. You lose months and money.
- Filing several cases without a plan: a suit, an arbitration and an insolvency petition on the same debt can contradict each other and invite objections of abuse of process.
- Ignoring the arbitration clause: a suit filed in breach of an arbitration clause can be referred to arbitration at the first hearing.
- Waiting too long: limitation runs from the due date. Negotiations do not stop the clock unless the debtor acknowledges the debt in writing.
- Overlooking guarantees and security: personal guarantees and mortgaged property are often the most valuable sources of recovery, yet many creditors forget to pursue them.
- Treating a cheque bounce case as a full recovery tool: it is useful pressure, but compensation is linked to the cheque, and the case takes time.
How the routes can work together
In practice, recovery is rarely a single case. A typical sequence for a supplier might be: a legal notice, followed by a Section 8 demand notice if the debt is large and undisputed; a Section 9 petition if the buyer stays silent; and, if the buyer raises a genuine dispute, a commercial suit with an application for interim deposit. A cheque bounce complaint under Section 138 can run alongside a civil suit, because the two serve different purposes.
For lenders, a Section 7 petition against the borrower may run in parallel with a personal guarantor application against the promoters, and with SARFAESI action on mortgaged property, subject to the moratorium once the borrower is admitted. The order in which these steps are taken affects how much leverage you have in a settlement. We plan the sequence with you so that one remedy strengthens the next instead of blocking it.
If the debtor is already in insolvency, most of these routes are frozen and the only path is to file a claim with the resolution professional, while pursuing guarantors separately.
Checklist before choosing a route
- Confirm the amount due and whether it is at least Rs 1 crore
- Check whether the debt is financial or operational
- Check whether there is any dispute raised before your demand
- Check limitation and any acknowledgments that extend it
- Find out whether the debtor has assets worth pursuing
- Check whether you hold security that can be enforced under SARFAESI
- Check whether the contract has an arbitration clause
- Decide whether you want recovery of money or control of the company
Using two routes together
Some routes can run together; others cannot. A creditor can send a demand notice and file a civil or commercial suit, but once the debtor is admitted into CIRP, the moratorium stops the suit against the company. A bank can pursue SARFAESI enforcement and also file under Section 7, but admission stops the enforcement. Cheque bounce complaints against directors personally may continue during CIRP, as held in P. Mohanraj. Claims against guarantors can run in parallel.
The best combination depends on the facts. For a disputed trade debt, a commercial suit or arbitration may be the only realistic route. For an undisputed debt above Rs 1 crore owed by a solvent company that wants to stay out of insolvency, a demand notice often brings payment. For a debtor that is truly insolvent, filing a claim in the CIRP may be the only way to recover anything.
A supplier chooses a commercial suit
Here's a made-up example. A Gurugram supplier was owed Rs 80 lakh by a large buyer, which had raised quality complaints in writing before the supplier asked for payment. The amount was below the Rs 1 crore threshold, and the pre-existing dispute would anyway have defeated a Section 9 application.
We advised a commercial suit with a claim for interest, preceded by the mandatory pre-institution mediation. The mediation failed, the suit was filed, and the buyer later agreed to pay 85% of the amount with interest after the court refused to dismiss the suit.
Frequently Asked Questions
Is insolvency always faster than a civil suit?
Not always. It is faster when the debt is clear and undisputed. If the debtor shows a pre-existing dispute, the petition fails and you lose time.
Can I file insolvency and a suit at the same time?
You can pursue different remedies, but once a company is admitted into insolvency, a moratorium stops suits against it. Choose the order carefully.
Can a supplier go to DRT?
No. DRT is for banks and notified financial institutions under the Recovery of Debts and Bankruptcy Act. Suppliers use civil courts, arbitration or the NCLT.
What if my contract has an arbitration clause?
A money claim will usually be referred to arbitration. An insolvency petition can still be filed where the debt is undisputed and the default crosses Rs 1 crore.
Does a bounced cheque help in an insolvency case?
It is good evidence of the debt and of default. You can also file a Section 138 case, which runs separately.
Is there any risk in filing insolvency?
Yes. A frivolous or malicious petition can attract costs and, since 2026, a penalty of Rs 1 lakh to Rs 2 crore. If the company is genuinely insolvent, recovery may be low.
Do you handle suits as well as NCLT cases?
Our practice covers NCLT matters, and our network handles commercial suits and arbitration. We will tell you which route fits before you commit.
How are your fees decided?
By the route, the amount and the stage, agreed in writing. They never depend on the result.
Not Sure Which Route Fits Your Case?
Share the amount, the documents and the emails. We will give you a short written note of the realistic options and our recommendation.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Need help with Insolvency, DRT or Civil Suit - Which Recovery Route??
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
