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

Mr. Rohan Mehra, a young professional from a suburb of Mumbai, secured a personal loan of ₹7 lakhs from a non-banking financial company, “SwiftFin Capital,” for some personal expenses. He has been diligent with his Equated Monthly Instalments (EMIs) and has a clean repayment history. Recently, Rohan received an admission offer for a master’s program from a prestigious university in the Republic of Astoria. He is now concerned about whether his existing personal loan could create a legal hurdle for his plans to study abroad. He intends to continue paying his EMIs from Astoria but is unsure if SwiftFin Capital can restrict his travel until the loan is fully settled.

Advice in such cases

Navigating financial obligations while planning international travel requires careful planning to avoid legal complications.

• Review Your Loan Agreement: The first step is to thoroughly read the terms and conditions of your loan agreement. Some agreements may have clauses regarding international travel or change of residency.
• Inform the Lender: Proactively inform your lender about your travel plans. Provide them with your new contact details and assure them of your intent to continue repayments. This transparency can prevent misunderstandings.
• Automate Repayments: Set up an auto-debit facility from your Indian bank account to ensure that EMIs are paid on time without any manual intervention required from abroad.
• 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

A personal loan is fundamentally a civil contract between the borrower and the lender. The primary legal framework governing this is the Indian Contract Act, 1872. A failure to repay the loan is a breach of this contract.

In cases of default, the lender can initiate recovery proceedings under the Recovery of Debts and Bankruptcy Act, 1993, by approaching the Debt Recovery Tribunal (DRT).

A criminal element may be introduced if the lender can prove that the borrower took the loan with a dishonest intention to never repay it. In such a scenario, a complaint could be filed alleging cheating under Section 316 of the Bharatiya Nyaya Sanhita, 2023 (BNS). However, proving this fraudulent intent from the outset is very difficult, especially if regular payments were made initially.

If you are the complainant

If you are the lender (e.g., SwiftFin Capital) and you believe a borrower is planning to leave the country to evade loan repayment, your legal options are primarily civil.

• File a Civil Suit: You can file a suit for recovery of the loan amount in a civil court or the appropriate DRT.
• Seek an Injunction: You can request the court to issue an order restraining the borrower from travelling abroad pending the resolution of the case. However, courts grant such orders cautiously and require strong evidence that the borrower is a flight risk.
• File a Criminal Complaint: If you have concrete evidence of fraudulent intent (e.g., forged documents, immediate plan to abscond after loan disbursal), you can file a police complaint under Section 316 of the BNS. The police will then investigate the matter.
• 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 (like Mr. Mehra) and the lender is harassing you or illegally trying to prevent your travel without a court order, you have rights.

• Maintain Communication: Keep a record of all your communications with the lender where you have expressed your intention to continue repayments.
• No Automatic Travel Ban: Understand that a bank or NBFC cannot unilaterally stop you from travelling abroad. Only a court of law can issue such an order, or law enforcement agencies can issue a Look Out Circular (LOC) in specific, serious cases.
• Legal Action Against Harassment: If the lender’s recovery agents are resorting to harassment or threats, you can file a complaint against them.
• 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

The police generally do not intervene in cases of loan default, as it is considered a civil dispute. If a lender approaches the police with a complaint of non-payment, the police will likely advise them to approach a civil court for recovery. Police involvement only begins if there is a credible criminal complaint, such as one involving allegations of cheating, forgery, or criminal intimidation, supported by preliminary evidence. Even then, an arrest is not automatic, and the investigation will proceed as per the procedures laid down in the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

FAQs people normally have

Common questions in such situations include:

• Can my lender issue a Look Out Circular (LOC) against me? An LOC can typically only be issued by law enforcement agencies during a criminal investigation or on the direction of a court. A bank cannot issue an LOC on its own for a simple loan default.
• Will my loan affect my visa application? A personal loan is a financial liability but not a legal impediment for a visa. Visa authorities are more concerned with your ability to fund your education and living expenses abroad. A good repayment history can even be seen positively.
• What happens if I miss an EMI while I am abroad? Missing an EMI will lead to penalties, a negative impact on your credit score in India, and the lender initiating recovery proceedings against you and any co-signers or guarantors in India. It is crucial to maintain payments.

What evidence is required?

For the lender to take legal action, they would need:

• The original, signed loan agreement.
• Proof of loan disbursal to the borrower’s account.
• A detailed statement of accounts showing the outstanding amount and any defaults.
• Records of communication (notices, emails) sent to the borrower regarding the default.

For the borrower, important evidence includes:

• Proof of all EMI payments made.
• Copies of communication with the lender about travel plans and intent to repay.
• Admission letters and visa documents to prove the legitimate reason for travel.

How long will the investigation take?

A civil recovery suit in a court or DRT can be a lengthy process, often taking several years to reach a final decision. If a criminal complaint of cheating is filed, the police investigation under the BNSS will have its own timeline. The process involves collecting evidence, recording statements, and filing a final report (chargesheet or closure report) before the court. This can take anywhere from a few months to over a year, depending on the complexity of the case.

Advocate Sudhir Rao, Supreme Court of India