If you are stuck in such a situation, here is what to do.

Mr. Alok gave a personal loan of Rs. 5 lakhs to his friend, Mr. Brijesh, who needed funds to expand his small electronics shop in the city of Alipur. They signed a simple promissory note stating the amount and an agreement to repay within one year. After the year passed, Mr. Brijesh started making excuses and eventually stopped taking Mr. Alok’s calls. Frustrated and feeling betrayed, Mr. Alok considered hiring recovery agents but was wary of the legal consequences. This situation is common, where personal loans between friends or relatives turn sour, leaving the lender in a difficult position.

Advice in such cases

When you find yourself in a situation where someone owes you money and is refusing to pay it back, it is crucial to act methodically and legally. Avoid resorting to threats, harassment, or strong-arm tactics, as these can lead to criminal charges against you. Instead, follow a structured legal path to reclaim your dues.

• Gather all documentation related to the loan, such as promissory notes, loan agreements, bank transfer details, cheques, or even digital communication like WhatsApp chats or emails where the loan is acknowledged.
• Maintain a calm and documented line of communication. Send formal reminders via email or registered post.
• Do not engage in public shaming or harassment, as this can weaken your legal position.
• Understand the distinction between a civil wrong (non-payment of a loan) and a criminal offense (cheating). Not every case of non-payment is a criminal act.

Applicable Sections of Law

The recovery of money is primarily governed by civil law, but criminal law can apply in specific circumstances.

• The Code of Civil Procedure, 1908: This is the primary legislation for recovering money. You can file a Summary Suit under Order XXXVII for a quicker resolution if you have a written contract, promissory note, or bill of exchange. If not, a regular Civil Suit for Recovery of Money can be filed.
• The Negotiable Instruments Act, 1881: If the borrower gave you a cheque that bounced due to insufficient funds, you can initiate proceedings under Section 138 of this Act, which is a criminal offense.
• Bharatiya Nyaya Sanhita (BNS), 2023: If you can prove that the borrower had a dishonest intention to not repay the loan from the very beginning, you can file a complaint for cheating under Section 318 of the BNS. Proving this initial intent is often challenging.

If you are the complainant

If you are the person who has lent the money (the creditor), here are the steps you should consider taking:

• Send a Legal Notice: The first formal step is to have a lawyer draft and send a detailed legal notice to the borrower. This notice outlines the facts, the amount due, and the legal action that will be taken if the payment is not made within a specified period (usually 15 or 30 days). A legal notice often prompts the borrower to settle the matter.
• File a Civil Suit: If the borrower does not respond to the legal notice, your next step is to file a civil suit for the recovery of the money in the appropriate court. The jurisdiction of the court depends on the amount of the loan and the location.
• Initiate Criminal Proceedings: If a cheque has bounced, you must send a legal notice within 30 days of the cheque bouncing, and if the payment is not made within 15 days of receiving the notice, you can file a criminal complaint under Section 138 of the Negotiable Instruments Act. If you have strong evidence of fraud from the outset, you can also file a police complaint for cheating.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If you are the borrower and are being harassed or threatened by the lender or recovery agents, you also have legal rights.

• Do Not Tolerate Harassment: Lenders and their agents cannot resort to intimidation, threats, or physical violence. Such actions constitute criminal offenses like criminal intimidation, assault, and extortion under the Bharatiya Nyaya Sanhita (BNS).
• Document Everything: Keep a record of any threatening calls, messages, or visits. If possible, record conversations (where legally permissible) or have witnesses.
• File a Police Complaint: If you are being threatened or harassed, you have the right to file a complaint (FIR) with the local police against the lender and/or their recovery agents.
• Respond to Legal Notices: If you receive a formal legal notice, do not ignore it. Consult a lawyer and draft a suitable reply, presenting your side of the story, whether it’s a dispute over the amount or a request for more time to pay.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Typically, the police view disputes over loan repayment as civil matters. If you go to the police to report non-payment of a loan, they will likely advise you to seek a remedy in a civil court. They are often reluctant to register an FIR for cheating unless you can provide clear and convincing evidence that the borrower’s intention was fraudulent from the very beginning. However, if your complaint involves threats, harassment, or bounced cheques, the police are more likely to take action and register an FIR or direct you on the correct criminal procedure.

FAQs people normally have

People involved in such disputes often have several questions about the process, evidence, and timelines.

What evidence is required?

Strong evidence is key to winning a recovery suit. The more documentation you have, the better your chances.

• Written Agreement: A formal loan agreement or promissory note is the strongest piece of evidence.
• Bank Records: Bank statements showing the transfer of money to the borrower’s account.
• Cheques: A copy of the cheque given as security or for repayment. A bounced cheque is very strong evidence.
• Digital Communication: WhatsApp chats, SMS messages, or emails where the borrower acknowledges the loan and promises to repay.
• Witnesses: Testimony from individuals who were present when the loan was given or who heard the borrower acknowledge the debt.

How long will the investigation take?

The duration of a money recovery case can vary significantly.

• Summary Suits (Order XXXVII): These are designed to be faster. If the defendant cannot show a valid defense, a decree can be passed relatively quickly, sometimes within a year.
• Regular Civil Suits: These are more time-consuming and can take several years to conclude, depending on the complexity of the case, the court’s workload, and the tactics employed by the opposite party.
• Criminal Cases (Section 138 or Cheating): These cases also follow their own timeline, which can be lengthy. However, the pressure of a criminal proceeding often encourages the accused to settle the matter out of court.

Advocate Sudhir Rao, Supreme Court of India