Banks may no longer have to resort to sending goons to recover dues from people who default on their credit cards. A recent judgement of the Bombay High Court says they can file 'summary suits' for the quick recovery of dues arising out of credit card defaults. According to this judgement, a defaulter will have to pay a part or the whole of his dues before arguing the case in court.

Summary suits are usually filed for recovering dues arising from bills of exchange, promissory notes, hundies or in matters in which debt arises from a written contract or a guarantee. In a summary suit, the defendant is given a time of 10 days to file a response, after which the petitioner can ask the court to issue a decree.

These suits generally result in an absolute decree, or a part decree, by which the court asks the defendant to pay a part or all of the money and defend the case. Alternatively, the court may grant unconditional leave to the defendant by which the latter need not pay the disputed amount till the case reaches finality.

Summary suits can help faster recovery of dues in contrast to regular litigation, which drags on in courts for 10-15 years before a conclusion is arrived at.

The Bombay High Court passed this order in a suit filed by the Central Bank of India against a defendant, Manipur Vasant Kini. The Central Bank case was that Mr Kini owed the bank over Rs one lakh in dues.

In his defence, Mr Kini argued that transactions under a credit card were similar to a bank giving credit under the cash credit facility, and hence a summary suit was not maintainable. And as far as a service charge on credit cards was concerned, he felt that the onus was on the bank to prove that the payment was tantamount to a service charge since it was not attracting a service tax. He contended that what was construed as a service charge was actually in the nature of a penalty.

The court, in its order, rules that once a cardholder uses and signs the voucher of the seller, in effect he writes a contract under which an ascertained and liquidated amount becomes due and payable. Once the slip is signed, under the terms and conditions of the use of the credit card, the card holder agrees to pay the amount.