Debt collection in Pakistan

The debt collection procedure in Pakistan begins with an assessment of the debtor’s solvency, scope of activity, business history, availability of documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy to be employed 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 by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order 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 limitation period. The limitation period for debt collection is 3 years. The limitation period is interrupted if the debtor makes a partial payment of the debt. After the interruption, the limitation period begins to count again.

Judicial debt collection in Pakistan is carried out through the ordinary and simplified judicial process.

The ordinary judicial process is carried out by filing a claim in court. The claim must be drafted in such a way as to provide a basis for a final decision on the disputed issues and prevent further litigation on these issues. If the claim complies with the procedural requirements, the court enters information about it in the register of civil claims and issues a summons requiring the debtor to appear in court and respond to the claim on the specified day.

The summons must be served on the debtor within 15 days of its issue. Upon receipt of the summons, the defendant is obliged to appear in court and present all documents in his possession that he intends to refer to in support of his response. The defendant may, and if the court requires, is obliged to submit a written statement of his objection before the first hearing of the case, or within the period set by the court, but not more than thirty days.

On the appointed day, the parties must appear in court in person or through their representatives. In the event of the defendant’s failure to appear, the court has the right to make a unilateral decision or to re-summon the defendant. In addition, the court has the right to oblige the debtor to appear and, to ensure this, may take the following measures: issue an arrest warrant; seize and sell his property; impose a fine; oblige them to provide guarantees for their appearance in court, and in case of refusal, to take them into custody.

If the parties appear, at the first hearing of the case the court, after reading the complaint and written statements, if any, and after questioning the parties, determines on what essential provisions of fact or law the parties disagree. If the parties have no disagreements on questions of law and fact, the court may immediately make a decision. If there are disagreements, the court proceeds to formulate and record the questions on which the correct decision of the case apparently depends. 

If, after formulating the questions, the court is convinced that no additional arguments or evidence, other than those that the parties can immediately present, are required on those questions that may be sufficient to resolve the claim, and that no injustice will arise as a result of immediate consideration of the claim, the court may make an appropriate decision. If the findings are insufficient to make a decision, the court postpones further hearing of the case and sets a date for the presentation of additional evidence or additional arguments required in the case. After considering the additional evidence and arguments, the court holds deliberations and makes a final decision.

The simplified procedure is used to collect debts based on bills of exchange and checks. To implement this procedure, the creditor must file a claim with the court in the form for the simplified process. In this category of cases, the debtor does not have the right to appear in court and defend against the claim without the leave of the judge. By default, if the debtor does not apply to the court for leave to defend against the claim, the allegations in the statement of claim are considered admitted by the debtor, and the plaintiff is entitled to receive a decision in his favor.

If there are substantial grounds, the court, upon the defendant’s application, grants him the right to appear and defend against the claim on the basis of affidavits disclosing facts that the court considers sufficient to support the application. Leave to defend may be granted unconditionally or subject to such conditions as the deposit of funds in court, the provision of security, or otherwise as the court considers appropriate. In case of grant of leave to defend the claim, the further procedure will be the same as for claims filed in the ordinary course.

An appeal against the judgment of the District Court may be made to the High Court within ninety days from the date of the judgment. An appeal against the judgment of the High Court may be made to the Supreme Court of Pakistan within sixty days from the date of the judgment. No appeal can be made to the Supreme Court if the amount of the debt is less than PKR 50,000. Also, an award made by the court with the consent of the parties is not subject to appeal. The judgment of the Supreme Court is final and cannot be appealed further.

Once the judgment has become final, the creditor should initiate enforcement proceedings. The judgment can be brought for enforcement within 12 years. Under the enforcement of the judgment, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizure of the movable and immovable property of the debtor with subsequent sale; seizure and confiscation of securities, arrest of the debtor and his detention until the debt is repaid.

An alternative option for debt collection is the bankruptcy procedure of the debtor. The creditor has the right to initiate this procedure if the following conditions are met: 1) the amount of the debt is not less than 500 rupees, payable either immediately or at a certain time in the future; 2) the debtor committed an act of bankruptcy within three months preceding the opening of the bankruptcy procedure.

According to the provisions of the Bankruptcy Act, the following acts are considered to be acts of bankruptcy: 1) the debtor transfers his property or any part thereof to a third party; 2) the debtor transfers his property or any part thereof with the intention of causing damage to or delaying the payment of debts to his creditors; 3) the debtor leaves Pakistan or hides from creditors; 4) if any part of the debtor’s property has been sold in execution of any judgment for the purpose of paying a debt; 5) the debtor notifies any of his creditors that he has suspended or is going to suspend payments on his debts; 6) the debtor files a petition for bankruptcy against himself; 7) the debtor is imprisoned in execution of any judgment for the purpose of paying a debt.

As part of the bankruptcy procedure, if the debtor’s assets are insufficient to fully satisfy the claims of creditors, it is possible to set aside the debtor’s transactions made with the intent to cause damage to creditors. Such transactions should include, in particular: 1) any disposal of property without valuable consideration; 2) any transaction in which the debtor’s counterparty knew that the debtor was in a state of bankruptcy; 3) giving preference to one creditor over others. As a result of the cancellation of the above actions and 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 for international debt collection in Pakistan, 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 PAKISTAN

21.10.2024

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