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: You aren't obliged to attend a private conciliation notice unless it’s court-directed, but ignoring it isn’t wise. Hiring a lawyer who understands RBI digital-lending rules and debt negotiation is the single most effective step. EMI-based settlements are possible—they just require structured negotiation, not one-off calls.
Rohit Malhotra, a graphic designer in Indore, didn’t plan to get trapped. By early 2024, he’d taken three small loans from apps like CashKart and QuickLend—interest compounded at nearly 1% a day. Every month he borrowed fresh just to service the last. By August 2024, his salary vanished into repayments. Household expenses, his daughter’s school fees, even groceries—all got squeezed. The stress broke him. He stopped paying in November 2024. What followed was relentless. Calls to his office. Messages to his colleagues. Emails threatening legal action. After three months, the harassment receded. But in June 2025, two things landed. First, a demand notice from a law firm representing one lender. Second, a conciliation notice asking him to appear before a retired judge, sent by another. Rohit wanted to settle, but he couldn’t pay a lump sum. His earlier attempt to negotiate directly had failed. He approached the Chamber of Advocate Sudhir Rao. Advocate Sudhir Rao and his office examined the loan apps’ RBI registration status, the interest structures, and the conciliation notice’s legitimacy. They crafted a response challenging the usurious terms under Section 23 of the Indian Contract Act and citing RBI’s digital lending guidelines. Within weeks, the lenders agreed to a structured EMI plan—without any court appearance. Specialised handling made the difference.Key Facts of the Case
- The borrower took multiple short-term loans from digital lending platforms between January and May 2024.
- Interest rates exceeded 1% per day, which is unconscionable and likely violates RBI norms on fair practices.
- He stopped payments in November 2024 after his entire salary was consumed by repayment cycles.
- He received persistent harassment calls and messages to his workplace, references, and family.
- In June 2025, a legal demand notice and a separate conciliation notice from a retired judge were served on him.
- The borrower was willing to pay but only through reasonable monthly instalments, not a lump sum.
- He had made good-faith attempts to negotiate directly but was turned down.
- Advocate Sudhir Rao’s office identified that one lending app was not compliant with RBI’s digital lending circular, weakening the lender’s legal standing.
The Direct Legal Answer
Should you attend the conciliation meeting?
Not alone, and not without verifying the notice’s authority. Many conciliation bodies are private, not court-annexed. You can respond in writing, stating your willingness to settle, and propose an EMI plan. If it’s a genuine mediation effort, attending with your advocate can help. But walking in unprepared often leads to pressure tactics.
Do you need a lawyer?
Yes. A lawyer can scrutinise the loan’s legality, check if the lender is RBI-compliant, and frame a counter-response that shifts the negotiation power. Rohit’s case turned around only after legal representation.
Can you negotiate an EMI-based settlement?
Absolutely. It’s a commercial negotiation. Your advocate drafts a settlement proposal with clear payment milestones, waiver of excess interest, and a no-harassment clause. Lenders often agree when they see a legally sound and enforceable offer.
What’s the next practical step?
Document every harassment incident. Save screenshots, call recordings, and notice copies. Then consult a lawyer who regularly handles digital lending and debt recovery cases. Don’t ignore the notices; the silence can be treated as admission.
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.
Don’t try to out-argue recovery agents yourself. They’re trained to escalate. Let your lawyer handle all communication. Also, verify the lender’s RBI registration through the Sachet portal—unregulated entities lose a lot of leverage fast. A lawyer with domain experience will spot procedural violations in the notice itself, often turning the table early.
Applicable Sections of Law
- Section 23, Indian Contract Act, 1872 – Agreements with an object that is immoral, opposed to public policy, or defeats any law can be void. Unconscionable interest rates fall here.
- Section 16, Indian Contract Act, 1872 – Undue influence. When a lender dominates the borrower’s will, the contract can be set aside.
- Section 2(47), Consumer Protection Act, 2019 – Defines unfair trade practice. Harassment and coercive recovery tactics can be challenged under this provision.
- Article 19, Limitation Act, 1963 – A suit for money recovery is barred after 3 years from the date of default. This often dictates urgency in lender responses.
Limitation Period
For loan recovery, the limitation period is three years from the date of default, as per Article 19 of the Limitation Act, 1963. If the lender doesn’t file a suit within three years of the first unpaid instalment, the claim becomes time-barred. They can still demand payment, but a court won’t enforce it. This clock doesn’t pause during conciliation notices. So if your default dates back more than three years, your lawyer may raise limitation as a complete defence.
Interim Reliefs Available
If a lender files a recovery suit, you can seek an injunction against forceful recovery methods under Order 39 Rule 1 and 2 of the Code of Civil Procedure, 1908. In rare cases, when the lender’s actions are patently illegal, an ad-interim ex-parte injunction can stop harassment immediately. If the lender threatens to attach assets without a court order, you may apply for a stay or even seek appointment of a receiver only on strict terms. These interim measures buy time to negotiate a settlement without duress.
If You Are the Victim
- File a complaint with the RBI’s Sachet portal if the lender is unregulated or violates digital lending guidelines.
- Report harassment to the local police under Section 351 BNS (criminal intimidation) if threats are made.
- Approach the Consumer Forum for deficiency in service and unfair trade practices.
- Keep a diary with dates, names of callers, and content of messages—chronology wins cases.
- Never transfer any token amount without a written settlement agreement vetted by your lawyer.
Documents You Must Keep Ready
- Aadhaar card and PAN card
- Loan agreements or sanction letters (if any)
- Bank statements showing all repayments made
- Screenshots of the loan apps and their terms
- Call recordings and WhatsApp messages from recovery agents
- Photographs of any physical notices received
- Employment ID and salary slips to show repayment capacity
- The demand notice and conciliation notice received
What Evidence Is Required?
- Digital loan transaction records: proof of disbursement and repayment schedules.
- Communication trail: emails, SMS, and app notifications showing threats or harassment.
- Call detail records (CDR) from your mobile operator reflecting frequency and timing of harassment calls.
- Bank statements evidencing the exact interest deducted—this helps demonstrate excessive rates.
- Employment verification to establish that you were contacted at your workplace.
- Medical records or psychologist notes if the stress led to health issues—relevant for civil claims.
- Printouts from RBI’s website showing the lender’s non-compliance, if applicable.
How Courts Typically Approach Such Cases
Judges are increasingly alert to predatory digital lending. When a borrower appears with evidence of usurious interest and workplace harassment, courts often direct both parties to mediation. They rarely order lump-sum payment against a salaried individual with genuine intent to pay. The court’s first instinct is to stop the harassment and structure a workable payment plan. And here’s the thing—if the lender isn’t RBI-compliant, the court may even restrain recovery proceedings altogether. This shift in judicial attitude has changed the game for borrowers who seek legal help early.
Timeline of Legal Process
- Receipt of notice to consultation: 1–5 days. Don’t delay; get a lawyer’s opinion immediately.
- Response to notice: 7–15 days. Your advocate drafts a reply, proposing settlement or contesting legality.
- Negotiation phase: 2–6 weeks. Back-and-forth on EMI amount, waiver, and terms.
- If suit filed: Plaint -> Summons -> Written Statement (30–90 days) -> Evidence -> Arguments -> Judgment (typically 12–18 months from filing, but settlement can happen much earlier).
- Execution of settlement deed: Once terms are agreed, a compromise deed is signed; if court-annexed, it’s recorded under Order 23 Rule 3 CPC.
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?
Most loan default cases never reach a courtroom. Settlement through correspondence is the norm. You can opt for private mediation or, if a suit is already pending, the court may refer the matter to mediation under Section 89 of the Code of Civil Procedure. A well-drafted compromise deed, signed by both parties, extinguishes the dispute entirely. Even after a conciliation notice, a private settlement is possible. The key is to ensure the settlement document contains a full and final discharge clause and a non-harassment covenant. Your lawyer will ensure it’s legally watertight.
Common Mistakes People Make
- Ignoring the notice: Silence can be construed as admission of liability. Always respond, even if to deny.
- Paying token amounts without paperwork: This revives limitation and creates a new promise to pay under Section 25 of the Contract Act, often without securing a settlement.
- Handling negotiations personally: Recovery agents record calls and use your statements against you. Let your lawyer be the buffer.
- Not verifying the lender’s RBI status: Many apps operate illegally. If you don’t check, you miss the strongest defence.
- Engaging a lawyer who rarely handles digital lending disputes: These cases involve specific RBI circulars, consumer law tactics, and procedural shortcuts that a general practitioner may overlook. Domain experience directly affects how fast and favourably the matter resolves.
- Destroying evidence: Deleting messages or call logs weakens your harassment claims. Preserve everything.
FAQs People Normally Have
Is the conciliation notice from a retired judge legally binding?
Not unless it’s issued by a court or statutory authority. Many private conciliation bodies use former judges to lend credibility, but their orders aren’t enforceable like a court decree. Attend with counsel, but know you can walk away if terms are unreasonable.
Can I be arrested for not repaying a loan?
No. Default on a loan is a civil wrong, not a crime. Unless there’s evidence of fraud from the outset—like submitting fake documents—police cannot arrest you. Harassment for recovery violates RBI guidelines.
What if the loan app is not registered with RBI?
That’s a big red flag. Unregulated entities can’t enforce unfair terms in court. Your lawyer will use this to push for a drastic reduction in claimed dues and an immediate halt to recovery tactics.
How long do these cases take to resolve?
Out-of-court settlements can wrap up in 4–6 weeks. If a suit is filed and contested, expect 10–14 months, but most settle much sooner once legal positions are clearly laid out.
This article is general legal information, not legal advice. Consult a qualified advocate about your specific situation.
Advocate Sudhir Rao, Supreme Court of India