Mr. Sameer Verma, a government contractor based in the city of Anandgarh, runs a small but successful firm, “Verma Constructions.” Having completed several projects for the state government, he secured a new six-month contract for infrastructure development. The project required an upfront working capital of approximately ₹15 lakhs for materials and labour. The government’s payment was due only upon the project’s completion.

To avoid the high-interest rates and prepayment penalties of formal bank loans, Mr. Verma opted for private financing. He took a loan of ₹15 lakhs from a local financier, Mr. Rakesh Choudhary, based on a verbal agreement. The understanding was that Mr. Verma would repay the principal amount along with a pre-decided “profit share” of ₹2 lakhs within six months, once he received the project payment.

However, due to unforeseen administrative delays, the government payment was postponed by a few weeks. Seizing this opportunity, Mr. Choudhary began harassing Mr. Verma. He started demanding ₹25 lakhs, claiming exorbitant interest rates and penalties that were never discussed. The demands were soon followed by threatening phone calls and visits from unknown individuals to Mr. Verma’s office and home, causing immense distress to him and his family.

Advice in such cases

When faced with such illegal pressure and extortion tactics disguised as loan recovery, it is crucial to act strategically and within the bounds of the law.

• Gather all evidence related to the transaction. This includes bank statements showing the receipt of the loan amount, any messages, emails, or call recordings (where legally permissible) of your conversations with the financier.
• Do not give in to threats or make any further payments under duress, as this can be interpreted as an admission of their claims.
• Document every instance of harassment, including the dates, times, and nature of the threats. Note down details of any individuals who visit or call you.
• 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

Applicable Sections of Law

The actions of the financier may attract several criminal provisions under the Bharatiya Nyaya Sanhita, 2023 (BNS).

• Section 326 of BNS (Extortion): If the financier is putting you in fear of injury to compel you to pay more money than was agreed upon, it amounts to extortion.
• Section 351 of BNS (Criminal Intimidation): Threatening you or your family with injury to person, property, or reputation constitutes criminal intimidation.
• Depending on the state, laws regulating money lending might also be applicable, especially if the financier is charging an exorbitant rate of interest without a proper license.

If you are the complainant

As the person being harassed, you are the complainant and should take the following steps:

• File a First Information Report (FIR) at your local police station detailing the threats, harassment, and extortion attempts. Provide all the evidence you have collected.
• Preserve all forms of communication with the financier as evidence for the police investigation and potential court proceedings.
• Your lawyer can also file a private complaint before a Magistrate under Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) if the police do not register an FIR.
• 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

Your safety and that of your family are paramount. The law is on your side when you are a victim of criminal acts.

• Approach the police immediately. Do not wait for the threats to escalate. Your complaint can serve as a deterrent.
• Inform your family and trusted friends about the situation. Avoid being alone, especially if the threats are of a physical nature.
• Let your lawyer handle all further communication with the financier. This prevents you from being manipulated or further intimidated.
• 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

Initially, the police might perceive the issue as a simple “money dispute” or a civil matter. It is important to clearly articulate the criminal elements involved, such as extortion, threats, and harassment. When you go with a lawyer, the police are more likely to understand the gravity of the criminal offenses and register an FIR under the appropriate sections of the BNS. They will then investigate the complaint, record statements, and collect evidence to substantiate your claims against the accused financier.

FAQs people normally have

Is a verbal loan agreement legally valid?
Yes, a verbal agreement is considered a valid contract under Indian law. However, the challenge lies in proving its exact terms and conditions, such as the interest rate and repayment schedule, in a court of law.

Can I be arrested for not repaying an informal loan?
Failure to repay a loan is primarily a civil wrong, not a criminal one. You cannot be arrested for simply defaulting on a loan. However, the financier can file a civil suit for recovery of the money. The criminal aspect only arises when there is an element of cheating from the inception or when the recovery methods involve extortion, intimidation, or harassment.

What if the financier files a false cheating case against me?
This is a common pressure tactic. If a false criminal case is filed, you have the right to seek anticipatory bail. Your lawyer can also file a petition in the High Court to quash the false FIR by presenting evidence that the matter is purely civil in nature.

What evidence is required?

To build a strong case, the following evidence is crucial:

• Bank account statements showing the transaction of the loan amount from the financier’s account to yours.
• Any written communication, including WhatsApp chats, SMS messages, or emails, discussing the loan, its terms, or the demands for repayment.
• Audio or video recordings of threatening conversations, if any.
• The testimony of any person who was a witness to the original agreement or the subsequent threats.
• Details of the individuals who have been threatening or harassing you.

How long will the investigation take?

A police investigation into a criminal complaint of this nature can take anywhere from a few weeks to several months, depending on the complexity and the evidence available. The subsequent court proceedings, both for the criminal case against the financier and any potential civil suit for recovery, can be lengthy and may take a few years to reach a final resolution. However, the initiation of criminal proceedings often puts a stop to the immediate harassment and illegal recovery tactics.

Advocate Sudhir Rao, Supreme Court of India