Receivables and recovery glossary — the terms of B2B collection and enforcement in India, in one sentence each.

A

Accounts receivable

Money owed to a business by customers for goods or services already supplied on credit. More

Acknowledgement of debt

A written statement, signed by the debtor, admitting the debt. Made before the limitation period ends, it starts a fresh three-year period (Section 18, Limitation Act). More

Ageing

Sorting unpaid invoices by how long they have been overdue, usually in 30-day bands. The older the band, the harder the recovery. More

Arbitration

A private process in which an arbitrator, chosen under the contract, decides the dispute. The award is enforced like a court decree. More

Authorised officer

The officer of a bank or financial institution who takes the statutory steps under the SARFAESI Act: notices, possession and sale. More

B

Bad debt

A receivable that will not be collected and is written off in the accounts. More

C

Commercial court

A court that hears commercial disputes of ₹3 lakh or more under the Commercial Courts Act, 2015, after pre-institution mediation. More

Counterparty

The business that owes the money. Kenstone Capital uses the word instead of "target". More

Credit control

The policies and routine a business uses to decide who gets credit, on what terms, and how overdue accounts are chased. More

D

Days sales outstanding (DSO)

The average number of days a business takes to collect payment after a sale: accounts receivable ÷ credit sales × days in the period. More

Debt Recovery Tribunal (DRT)

The tribunal that hears recovery claims of banks and financial institutions and challenges to SARFAESI measures under Section 17. More

Debtor validation

Checking that a debtor company is still operating, and who runs it, before effort is spent pursuing it. More

Demand notice

A formal written demand for payment setting out the debt and what will follow. It comes before almost every legal route. More

Direct payment

A payment the debtor makes straight to the creditor after an agency is involved. Most collection agreements charge the success fee on it. More

Dispute

A disagreement over quality, delivery, price or quantity that the debtor gives as a reason not to pay. A genuine pre-existing dispute blocks an IBC Section 9 petition. More

F

Facilitation Council

The state Micro and Small Enterprises Facilitation Council, which conciliates and then arbitrates delayed-payment claims by micro and small suppliers. More

Field collection

A documented visit to the debtor's business premises, during business hours, to resolve an overdue account. More

Foreign award

An arbitration award made in a New York Convention country that India has notified. It is enforced in India under Part II of the Arbitration and Conciliation Act. More

L

Limitation period

The time within which a claim must be filed. For most unpaid invoices in India it is three years. More

M

MSME Samadhaan

The government portal through which a registered micro or small supplier files a delayed-payment claim against a buyer. More

N

Non-performing asset (NPA)

A loan whose interest or principal has been overdue beyond the period set by the Reserve Bank of India, usually 90 days. More

O

Operational creditor

Under the Insolvency and Bankruptcy Code, a creditor owed money for goods or services supplied. It can file a Section 9 petition. More

P

Part-payment

A payment on account of a debt. Made by the debtor before the limitation period ends and acknowledged in writing, it starts a fresh period (Section 19, Limitation Act). More

Pre-institution mediation

Mediation that must be tried before filing a commercial suit, unless urgent interim relief is sought (Section 12A, Commercial Courts Act). More

Promise to pay (PTP)

A debtor's commitment to pay a stated amount by a stated date, recorded so that a broken promise can be followed up. More

R

Reciprocating territory

A country whose superior courts' money decrees India executes directly under Section 44A of the Code of Civil Procedure, such as the UK, Singapore and the UAE. More

Reserve price

The minimum price, fixed by the authorised officer after valuation, below which a secured asset will not be sold under SARFAESI. More

S

SARFAESI Act

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which lets secured lenders enforce security without going to court. More

Section 13(2) notice

The SARFAESI demand notice giving a borrower 60 days to pay before the lender enforces its security. More

Section 14 order

A magistrate's order under the SARFAESI Act helping a lender take physical possession of a secured asset. More

Section 138

The offence, under the Negotiable Instruments Act, of a cheque returned unpaid for insufficient funds, if the drawer does not pay within 15 days of a notice. More

Section 9 petition

An operational creditor's application under the Insolvency and Bankruptcy Code to start insolvency against a company owing ₹1 crore or more. More

Skip tracing

Lawful work to find a debtor that has gone quiet: current addresses, directors and contact points. More

Success fee

A fee calculated as a percentage of the amount actually recovered. More

Summary suit

A fast civil suit under Order 37 of the Code of Civil Procedure for a fixed sum due under a written contract or similar instrument. More

Symbolic possession

The first stage of possession under SARFAESI: a possession notice delivered, affixed on the property and published in newspapers. More

T

Tail period

A period after an engagement ends during which a success fee remains payable on amounts the debtor pays. More

U

Udyam registration

The government registration that classifies a business as a micro, small or medium enterprise. More

W

Write-off

Removing a debt that will not be collected from the receivables in the accounts. More

Definitions describe the general position in India and are not legal advice. Kenstone Capital is not a law firm.