Legal Procedures for Recovery of Outstanding Amount of Foreign Entities and Individuals in Nepal

This article outlines the procedure applicable for the foreign companies and foreign individuals to recover outstanding amounts from Nepalese jurisdiction through individuals of entity located in Nepal. Recovery of the outstanding amount on various transactions including sales of goods and services, contractual transactions and credit transactions.

 

The following paragraph describes the available remedies for foreign individuals or entities aiming to recover outstanding amount from Nepalese jurisdiction:

 

2.1.1 Sales of Good 

In secured transactions, the standard practice involves utilizing a Letter of Credit (“L/C”) for the sale of goods. Transactions conducted without the use of L/C shall be addressed in accordance with the terms outlined in the agreement better the parties. Specifically, any disputes arising from such transactions will be resolved based on the dispute settlement mechanisms specified in the agreement, whether through court proceedings or arbitration.

 

Statute of Limitation: As per Section 562 of The National Civil (Code) Act, 2017 (2074) ) ( “The National Civil Code”), A person who is aggrieved from any act done or action taken under the Chapter of Sales of Goods may make a lawsuit within two years after the date of the accrual of the cause of action.

 

Special provision regarding compensation for contracts under the Chapter of Contracts of Sales of Goods:

(a) If the buyer rejects or refuses to accept goods, the seller can claim compensation based on the buyer's failure.

(b) Compensation is determined by the difference between the contract price and the market price if the goods are available in the market.

(c) If the seller fails to deliver goods as per the contract, the buyer can claim compensation.

(d) Compensation for non-delivery is based on the difference between the contract price and the market price if the goods are available in the market.

 

 

2.1.1 Sale of Service

In case of a breach of service, the aggrieved party can initiate the proceedings as outlined below:

1. If an agreement is available, disputes will be initiated according to the specified dispute settlement clause. This Dispute Settlement Clause may involve either arbitration as the chosen method of settlement or resolution through court proceedings. The dispute must be resolved in accordance with the provisions outlined in the agreement accordingly.

2. If there is no formal agreement in place to govern the service transaction, but there is an invoice recognizing service, the owed sum can still be recovered based on this invoice. In such cases, the invoice serves as an evidence document to initiate the case.

 

This practice is comparable to the concept of a deed understanding in the National Civil Code, which recognizes the validity of agreements based on documented evidence, even if a formal contract is not present.

According to Section 476 of the National Civil Code, the term "deed" encompasses any document that validates a transaction, including items such as cheques, bills, vouchers, and receipts. Therefore, generally, based on an invoice bill, the amount can be recovered from the relevant transaction source.

 

Interest rate: According to Section 478 of the National Civil Code, if the contract lacks a specified interest rate for the payment of interest, the creditor has the authority to collect interest from the debtor at a rate of ten percent of the principal per annum. It is important to note that while initiating a legal case, a demand for 10% interest may be made; however, the final decision rests with the court.

 

If there is a contract between a foreigner and a Nepali citizen regarding a loan amount for a specific purpose, in the event of a breach of contract, the foreigner has the right to seek recovery of the owed amount. A foreigner can recover the loan amount from Nepali citizens in accordance with the contract.

 

Before filing a case based on a dispute, one party can issue a caution notice (Legal Notice) to the other party, requesting them to make the payment within certain days. This cautionary notice serves as a formal communication, giving the other party an opportunity to address the issue and settle the matter before legal proceedings are initiated.  Kindly note, to intiate the  recovery case in Nepal, party should not be compuslory present in Nepal, parties can provide the POA to lawyers based in Nepal . On the ground of the POA, lawyers can intiate the court case.

 

If the agreement is silent on jurisdiction, it is advisable to initiate the case before the Nepalese court, especially when the company or individual is based in Nepali jurisdiction. This is particularly beneficial when dealing with matters involving property situated in Nepal, as the Nepalese court holds the authority to enforce decisions within the country through the party residing there, ensuring a more effective and enforceable resolution.

 

 

Date of Publication: 8 January 2023

 

Disclaimer: Bhandari Law and Partners is one of the leading law firm in Nepal  with team of best professional lawyers in Nepal.This article published on website of the law firm is just for information purpose only. It shall not be taken as the legal advice, advertisement, personal communication, solicitation or inducement. Bhandari Law and Partners or any of the team members of the firm shall not be liable for the consequence arising of the information provided. As the factual situation may be different on your case, thereof if you need further legal advice on the subject matter, please Contact Us.