Debt Collection in Nepal

The debt collection process in Nepal begins with an assessment of the debtor’s solvency, business area, business history, availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the ability to dispute the debt. This assessment determines the strategy to be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice via mail, email, phone or instant messaging. This process involves intensive communication with the debtor to exert constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, then it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the statute of limitations. The statute of limitations for failure to fulfill any obligation is 2 years. The creditor loses the right to file a claim in court after the expiration of the said statute of limitations. At the same time, there is no statute of limitations for filing a claim in a case concerning a transaction concluded with the intention of obtaining rights to property, appropriating it or causing damage.

Nepalese law provides for judicial collection of debt in the general judicial procedure.

The usual judicial procedure is carried out by filing a statement of claim with the court, after which the court checks the claim’s compliance with the requirements of the law and, if so, registers the claim in the register. If the claim meets the requirements, the court issues the plaintiff a receipt for registration of the claim. Within three days from the date of registration of the claim, the court is obliged to send the procedural documents to the defendant for filing a statement of defense against the claim.

After receiving the procedural documents, the defendant has 21 days to file an objection to the claim. If the objection is filed after the expiration of the specified period, the court will not recognize such an objection and refuses to register it.

If the defendant has filed an objection in a timely manner and at the same time challenges the plaintiff’s right to file a claim, the court must hold a preliminary hearing before proceeding to examine the evidence, consider and issue a decision on the case. During the preliminary hearing, the court shall determine the issues of whether the plaintiff has standing to file the suit, whether the suit has been filed within the statute of limitations, and whether the court has jurisdiction to hear, try, and determine the case, and shall enter an order or judgment on these issues. If, during the preliminary hearing, the court finds that the defendant’s objections to the above issues are without merit, the court shall proceed to hear and determine the case.

The court shall examine the statement of claim, the statement of defense, and all documents filed by both parties on the date appointed for their appearance, after the filing of the statement of defense, and shall question the plaintiff and the defendant on any unclear points. During the examination or questioning, the court shall determine the issues on which the parties do not dispute and those on which there is a dispute. If, in determining the issues, it appears that the defendant has admitted the plaintiff’s claims, the court may enter judgment on the case immediately.

To resolve the disputed issues, the court conducts an examination of the evidence in the case and after all the circumstances of the case are clear to the court, the court concludes the proceedings and makes a decision within a month.

The decision of the trial court may be appealed to the High Court within 30 days from the date of notification of the party of such decision. The decision of the High Court may be appealed to the Supreme Court of Nepal within 45 days from the date of notification of the party of such decision, but provided that the contested decision raises important legal issues. The decision of the Supreme Court is final and cannot be further appealed.

After the court decision comes into legal force, the creditor should initiate the enforcement procedure. Within the framework of the enforcement of the court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating company shares.

In the event of signs of insolvency of the debtor, the option of liquidating the debtor should be considered. The debtor is insolvent when it is unable to pay all or part of the debts payable to creditors both at the present time and in the future, or a situation where the amount of the debtor’s liabilities exceeds the value of its assets. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intent to harm the creditors. Among such transactions, the following should be highlighted: transactions with preferential treatment concluded six months prior to the commencement of bankruptcy proceedings; transactions with preferential treatment concluded with affiliates of the debtor one year prior to the commencement of bankruptcy proceedings; transactions concluded below market value one year prior to the commencement of bankruptcy proceedings, if the debtor became insolvent as a result of such a transaction or other similar transactions; all fraudulent transactions (transactions related to the company’s assets, concluded with the purpose of deceiving the company’s creditors, delaying payments to them or infringing on their rights) concluded two years prior to the commencement of bankruptcy proceedings. As a result of the cancellation of the above transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Nepal, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY NEPAL

18.10.2024

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