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

Our office received a query from a young individual, Mr. Rohan Verma, from the city of Chandpur. He had taken a small loan of approximately ₹2,000 from a digital lending application named ‘InstaCredit Now’. Facing difficulty in repayment, he was contemplating a peculiar strategy. His question was purely hypothetical: if he failed to repay and a recovery agent contacted him, what would be the legal repercussions if a family member informed the agent that Mr. Verma had passed away?

He was curious whether such a claim would stop the recovery calls or if the company would demand official proof, like a death certificate. More importantly, he wanted to understand the potential legal trouble this could create for him and the person making the false claim. This scenario, while seemingly minor due to the small loan amount, touches upon significant legal principles of fraud and misrepresentation.

Advice in such cases

Engaging in deceit to evade a legal obligation, regardless of the amount, is ill-advised and carries legal risks. Here is our professional advice:

• Never provide false information to a lender or their recovery agents. Claiming a borrower is deceased when they are not is a fraudulent act.
• Openly communicate with the lending company if you are facing financial hardship. Many lenders have provisions for restructuring payments or offering a settlement.
• Understand that digital loan agreements are legally binding contracts. Non-payment will negatively impact your credit score, affecting future financial opportunities.
• Do not involve family or friends in any deceptive act, as they could also face legal consequences for abetting the fraud.
• 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

Providing false information about a borrower’s death to evade loan repayment is not a trivial matter and can attract criminal charges under the Bharatiya Nyaya Sanhita, 2023 (BNS).

• Section 318 of the Bharatiya Nyaya Sanhita, 2023 (BNS) – Cheating: This is the primary section that would apply. By falsely representing the borrower’s death, you are dishonestly inducing the lender to stop recovery efforts, which they would not do if they knew the truth. This act causes wrongful loss to the lender and wrongful gain to the borrower. Punishment can include imprisonment for up to three years, a fine, or both.
• Section 316 of the BNS – Cheating by Personation: If another person calls the lender pretending to be a relative of the borrower to make the false claim, they could be charged under this section, which carries a similar punishment.
• In addition to criminal proceedings, the lending company can also initiate civil proceedings for the recovery of the loan amount, along with interest, penalties, and legal costs.

If you are the complainant

If you are the lending company (‘InstaCredit Now’ in this scenario) and you suspect a borrower has made a false claim of death:

• Preserve all evidence, including the recorded phone call where the claim was made, the loan agreement, KYC documents, and all communication history.
• Conduct a preliminary verification. This can be done by checking social media profiles or using other digital means to ascertain if the person is alive.
• File a formal police complaint detailing the fraudulent act and citing the relevant sections of the BNS.
• 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.
• Simultaneously, you can proceed with civil recovery actions against the borrower.

If you are the victim

If you are the borrower (like Mr. Verma) who has made such a false claim and are now facing potential legal action:

• Immediately cease all false communications. Do not double down on the lie.
• Attempt to contact the lender to negotiate a settlement for the outstanding loan. Resolving the underlying civil dispute can sometimes mitigate the severity of the criminal complaint.
• Do not ignore any legal notices or summons from the police or court.
• 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. An experienced advocate is essential to guide you through the legal process, explore options like anticipatory bail if needed, and represent you in court.

How the police behave in such cases

Initially, the police might view a loan default as a civil matter. However, the moment an element of fraud, such as a false declaration of death, is introduced with evidence, it becomes a criminal case. Upon receiving a complaint from the lender with prima facie evidence (like a call recording), the police are likely to register a First Information Report (FIR) under Section 318 of the BNS. Their investigation will involve verifying the borrower’s KYC details, tracing the number from which the false information was conveyed, and formally verifying the borrower’s life status with municipal records. They will then proceed to question and potentially arrest the accused.

FAQs people normally have

• Will the recovery calls stop if I say the borrower is dead?
  No, not permanently. The lender’s standard procedure would be to ask for an official death certificate to close the loan account. When you fail to produce it, they will become suspicious and may escalate the matter, including launching an investigation.
• Can they file a criminal case for a small amount like ₹2,000?
  Yes. The criminal offence is ‘cheating’, and the law does not specify a minimum amount for this crime to be committed. While a company might not find a civil suit for ₹2,000 cost-effective, filing a criminal complaint costs them very little and serves as a deterrent to other potential defaulters.
• What is the worst-case scenario?
  The worst-case scenario is a criminal conviction for cheating. This could lead to imprisonment, a fine, and a permanent criminal record. Additionally, your credit score will be ruined, making it nearly impossible to get loans or credit cards in the future.

What evidence is required?

For the complainant (lender), the key evidence includes:

• The digital loan agreement signed by the borrower.
• The borrower’s KYC documents (Aadhaar Card, PAN Card, etc.).
• Account statements showing the loan disbursal and default.
• Recordings of phone calls or copies of messages where the false claim of death was made.
• Any evidence proving the borrower is, in fact, alive.

How long will the investigation take?

The duration of an investigation can vary. Verifying whether a person is alive is a relatively quick process for law enforcement. If an FIR is filed, the police are mandated by the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) to complete the investigation and file a chargesheet in a time-bound manner. However, the subsequent court trial can be a lengthy process, potentially lasting for several months or even years depending on the court’s caseload and the complexity of the case.

Advocate Sudhir Rao, Supreme Court of India