One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.
Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.
TL;DR: If a loan company or recovery agent calls you claiming you are listed as a "friend" or "reference" for someone else's unpaid loan, you have zero legal liability unless you signed as a guarantor or co-borrower. You are not responsible for someone else's debt. Block such calls, send a written notice to the company demanding they stop harassment, and file a police complaint if threats persist. Your Aadhaar details being misused is a separate issue, but it does not make you a debtor.
Key Facts of the Case
- The client never signed any loan agreement, guarantee deed, or surety bond for anyone.
- The finance company's recovery agent contacted the client solely because the client's name and Aadhaar number were provided by the actual borrower as a "personal reference."
- No money was ever transferred to the client's account, nor did the client use the financed phone.
- The client had no pre-existing relationship with the finance company — no account, no credit card, no loan.
- The client filed a police complaint for criminal intimidation and harassment after repeated threatening calls.
- The office of Advocate Sudhir Rao sent a legal notice to the finance company, demanding cessation of all communication with the client.
- The finance company eventually apologised and confirmed in writing that the client had no liability.
The Direct Legal Answer
Being listed as a "reference" or "friend" on a loan application does not create any legal obligation on your part. Under the Indian Contract Act, 1872, a valid contract requires offer, acceptance, and consideration — none of which apply to you here. You are not a party to the loan contract.
Recovery agents often use coercive tactics — threats, name-calling, even calls to your employer. That behaviour is illegal. The Reserve Bank of India's Fair Practices Code prohibits such harassment. You can file a complaint with the RBI Ombudsman and also approach the local police.
As for Aadhaar misuse: if the borrower shared your Aadhaar without your consent, that could be a separate offence under the Aadhaar Act, 2016 and the Information Technology Act, 2000. But it does not make you liable for the loan. Period.
Advice in Such Cases
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 to 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.
Do not engage in lengthy arguments with recovery agents on the phone. Simply tell them you are not the borrower, not a guarantor, and demand they stop calling. Then block the number.
Keep a record of all calls — save voicemails, take screenshots of missed calls, note the date and time. This evidence is critical if you need to file a complaint.
Matters involving loan recovery harassment and third-party liability are best handled by advocates who regularly deal with banking and financial laws. The procedural nuances — from drafting the right legal notice to approaching the RBI Ombudsman or filing a criminal complaint — are often missed by general practitioners, which can delay resolution.
Applicable Sections of Law
Under the Bharatiya Nyaya Sanhita, 2023 (BNS), Section 318 (criminal intimidation) and Section 308 (extortion) directly apply if the caller threatens you with harm, arrest, or false criminal complaints. Under the Indian Contract Act, 1872, Section 25 (agreements without consideration) makes it clear you cannot be held liable for a debt you never agreed to. The Information Technology Act, 2000, Section 66C (identity theft) applies if the borrower misused your Aadhaar. The RBI Fair Practices Code and the Recovery Agents Guidelines also provide a regulatory framework to stop harassment.
Punishment and Penalties
Under Section 318 BNS, criminal intimidation is punishable with imprisonment up to two years, or fine, or both. Section 308 BNS (extortion) carries punishment up to seven years and fine. If the recovery agent uses abusive language or threats, it may also amount to a cognizable offence. The offence under Section 318 BNS is bailable and compoundable with the victim's consent. Recovery agents found violating RBI guidelines face regulatory action, including blacklisting by banks.
Jurisdiction — Where to File the Case
For criminal complaints of intimidation or extortion, file an FIR at the police station in whose jurisdiction you received the threatening call or where you reside. If the police refuse to register the FIR, approach the Superintendent of Police under Section 173(4) BNSS, or file a private complaint before the Judicial Magistrate First Class under Section 175(3) BNSS. For complaints against the finance company's conduct, you can approach the RBI Ombudsman in the state where the company's registered office or branch is located.
What if Police Refuse to File FIR?
Police sometimes brush off harassment from recovery agents as a "civil matter." Not true. Here's what to do:
- Write a detailed complaint to the Superintendent of Police under Section 173(4) BNSS, attaching call logs and messages. The SP must issue directions to the SHO.
- If still no action, file a private complaint before the Magistrate under Section 175(3) BNSS. The Magistrate can order an investigation.
- As a last resort, file a writ petition before the High Court under Article 226 of the Constitution, seeking directions to the police.
- Also file a complaint on the National Cyber Crime Reporting Portal (cybercrime.gov.in) if the threats involved digital communication.
Rights of the Accused
Even if you are wrongly accused (e.g., the finance company falsely claims you are a guarantor), you have fundamental rights:
- Right to remain silent — you cannot be compelled to be a witness against yourself under Article 20(3) of the Constitution.
- Right to legal representation under Article 22(1) — you must have access to a lawyer.
- Right to be produced before a Magistrate within 24 hours of arrest under Section 65 BNSS.
- Right to a copy of the FIR and to know the grounds of your arrest under Section 66 BNSS.
- Right to apply for anticipatory bail under Section 482 BNSS if arrest is threatened.
Bail Provisions
Threat-based offences under Section 318 BNS are bailable. That means bail is a matter of right, not discretion, once you appear before the Magistrate. If you anticipate arrest on false allegations, you can apply for anticipatory bail under Section 482 BNSS before the Sessions Court or High Court. The court will typically grant such bail if the case appears baseless — especially if you were never a party to the loan. Regular bail under Section 480 BNSS can be sought if arrested. The key is filing a strong application showing no prima facie case against you.
Quashing of FIR / Case
If a false FIR is lodged against you (e.g., the finance company claims you abetted the borrower's default), you can approach the High Court under Section 528 BNSS to quash the proceedings. Grounds for quashing include: the complaint does not disclose a cognizable offence, it is frivolous or an abuse of process, or the matter has been settled. Case law — such as State of Haryana v. Bhajan Lal, 1992 — lays down the categories where quashing is appropriate. This is a powerful remedy if the allegations against you are entirely baseless.
If You Are the Victim
- Do not pay any money. Do not negotiate. You have no liability.
- Block all numbers from which you receive threats. Do not engage in conversation.
- Document everything — call logs, text messages, emails, voice recordings if legal in your state.
- Send a legal notice to the finance company demanding cessation of harassment and removal of your data.
- File a police complaint for criminal intimidation, citing Section 318 BNS.
- Report the company to the RBI Ombudsman if the harassment continues.
Documents You Must Keep Ready
- Your Aadhaar card (to establish your identity and how it was misused)
- Call logs and screenshots of threatening messages
- Any letter or email from the finance company mentioning your name
- Affidavit stating you never consented to be a guarantor or reference
- Written legal notice sent to the finance company
- Copy of the police complaint or FIR, if filed
- Any communication from the actual borrower (if known) confirming you had no role
What Evidence Is Required?
- Call records from your mobile operator showing frequency and timing of calls
- Audio or video recordings of threats (ensure compliance with applicable laws on recording)
- Written correspondence (emails, WhatsApp messages, SMS) from the recovery agent
- A signed statement from the actual borrower confirming you were not a guarantor
- Your own sworn affidavit denying any contractual relationship with the finance company
- Any document showing the borrower used your name without your knowledge or consent
How the Police Behave in Such Cases
Police in India often dismiss third-party harassment by recovery agents as a "civil dispute" or "personal matter." They may refuse to register an FIR unless the threats escalate to physical harm or explicit demands for money. Persistence is key. If the SHO refuses, go to the SP. If the SP sits idle, file a private complaint before the Magistrate. The police attitude changes once a court order is involved. Having an advocate's letterhead behind your complaint also speeds things up considerably.
Timeline of Legal Process
- Day 1-3: Send legal notice to the finance company / file police complaint
- Day 3-7: Police may record your statement and issue a notice to the recovery agent
- Day 7-30: If police refuse action, approach SP (Section 173(4) BNSS) or file private complaint before Magistrate
- Day 30-60: Magistrate may order an investigation under Section 175(3) BNSS
- Day 60-90: Trial, if chargesheet is filed; otherwise case may be dismissed
- Day 90-180: If criminal case proceeds, accused (recovery agent) may seek bail; trial can take 6-12 months
- Parallel track: RBI Ombudsman complaint may be resolved in 3-4 months
How Long Will the Investigation Take?
If the police register an FIR, the investigation must be completed within 60 to 90 days in normal cases. A chargesheet must be filed within the period of remand granted by the court. For minor offences like criminal intimidation, investigations are usually quick — often resolved within 30 to 45 days — as the primary evidence is the call logs and recordings you provide.
Understanding the Costs
The total cost of a matter like this varies significantly from one case to the next — it depends on the complexity of the dispute, the forum involved, the number of hearings, and the specific facts of your situation. There is no single fixed figure that applies to everyone.
A professional advocate can give you an accurate estimate only after reviewing all your facts and documents in a consultation.
Can the Matter Be Settled Out of Court?
Yes. In many cases, a well-drafted legal notice from an advocate is enough to stop harassment. The finance company realises you are not a pushover and that pursuing you has no legal basis. Most companies prefer to avoid litigation. If the company agrees to remove your data and cease all contact, you can sign a settlement agreement — no payment required from you, of course. For criminal intimidation (Section 318 BNS), the offence is compoundable with the victim's permission. A compromise with the company's apology is often the quickest resolution. However, if the harassment involved serious threats or extortion, you may still choose to pursue the criminal complaint.
Common Mistakes People Make
- Paying money to the recovery agent out of fear. Resist. You have no liability.
- Engaging in arguments or shouting matches on the phone. Do not feed their provocation.
- Ignoring the calls and hoping it goes away. That rarely works — they escalate.
- Not documenting evidence. Without call logs, messages, or recordings, your complaint lacks teeth.
- Hiring an advocate who does not regularly handle banking or criminal intimidation cases. This domain involves specific procedural steps — like the correct format for a legal notice, RBI Ombudsman procedure, and evidentiary rules for call records — that a general practitioner may miss, delaying or weakening your case.
- Posting about the matter on social media. That can be used against you by the company's lawyers.
FAQs People Normally Have
Can I be forced to pay someone else's loan if I was only a reference?
No. A reference is not a guarantor or co-borrower. You have no legal obligation to pay. The company cannot take any legal action against you for recovery.
What if the recovery agent threatens to file a police case against me?
That is a bluff. Unless you are a guarantor or co-borrower, no police case stands. If they file a false complaint, you can seek quashing of the FIR before the High Court.
Is it illegal for someone to share my Aadhaar without permission?
Yes. Sharing Aadhaar without consent is prohibited under the Aadhaar Act, 2016 and can also attract action under the IT Act, 2000. You can file a complaint with the UIDAI.
Can the finance company mark my credit score as defaulter?
No. CIBIL and other credit bureaus only record defaults of actual borrowers. If they mark your name, you can approach the credit bureau's grievance cell and the RBI Ombudsman.
Do I need a lawyer to send a notice?
It helps. A legal notice on an advocate's letterhead carries weight. Companies take it seriously. Without a lawyer, your email or WhatsApp message may be ignored.
This article is general legal information, not legal advice. Consult a qualified advocate about your specific situation.
Advocate Sudhir Rao, Supreme Court of India
Facing a similar matter? Speak to a criminal advocate in Delhi — Advocate Sudhir Rao appears in bail, trial and appellate matters before the Delhi District Courts, the Delhi High Court and the Supreme Court of India.