What to do when someone has not returned your money?

Last Updated at: Jun 26, 2020
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What to do when someone has not returned your money
While settling a recent appeal, the Supreme Court of India has observed that a cheque bounce complaint (under section 138 of the Negotiable Instruments Act) cannot be quashed if disputed facts are involved.

 

People lend money because they have the confidence that the borrower will duly return it. But it is important for the lender has to make a gentle reminder about the repayment of loan often. The lender may suggest a certain plan to the person who got money for repayment. If a person has still not fully returned the money then the lender has to send a letter stating the loan date, the exact amount borrowed and also the repayment terms. The letter should be certified and should demand a response. If none of the steps works out, then he has to consult a lawyer and file a suit against the person who has not repaid.

The lender should lend the money only after signing the promissory note or the loan agreement which consist of the terms and conditions. In case of default in the payment of money, the lender can approach the court and file a civil suit for recovery of money or a criminal suit for fraud/ breach of the agreement.

The different ways of recovering money from loan defaulters

Civil suit

The lender can file a civil suit for recovering the money he owed through promissory note or loan agreement. He can do so under Order 37 of CPC which allows the lender to file a summary suit. This suit consists of an important declaration stating the specific relief the lender pleas and the relief should not be beyond the ambit of the order as final relief.

The first step is drafting the summary suit and then it should be summoned to the person who borrowed money. The court requires certain documents to be produced before them along with the copy and summons. Once the suit is filed, the defendant will be asked to appear before the court within 10 days. If the person fails to appear, the lender has to produce the summons that had been sent earlier and then the court orders him to send another summon. If the person has any defence he can claim before the court, if not the court assumes the lender’s allegation as true and rewards the judgment accordingly.

The creditor can also lodge a complaint under the Negotiable Instrument (NI) Act. This may only be charged for someone who did not return the money the lender lent from checks, exchange bills, etc. In case the person has returned the money through cheque to the lender and later if it is found that the cheque has been bounced, the lender can file a suit under Section 138 of NI Act. Here the person has to repay within 30 days.  The lender will file a criminal case against the individual if the later fails. If the court finds them guilty, it will imprison the person for two years and they must pay the double amount of the cheque they issued.

Criminal suit

The lender has to prove that the person had committed criminal breach of trust and had not returned the money. So he can file a suit under Section 420 of IPC as the person whom he had to lend the money has cheated him and also under Section 406 of IPC for Criminal Breach and if the court finds guilty, the person will be imprisoned and has top repay the money he borrowed. In general, for the cases filed under this section, the court takes a long time.

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Out of court settlement

The lender may opt for out of court settlement for recovering the money dues through arbitration, conciliation or Lok Adalat. This is one of the quickest and most cost-efficient ways to recover. For out of court settlement both the parties should be willing and has to appear for the hearing. The arbitrators generally hear from both the parties and the award will be given. Once if the award is pronounced they cannot appeal unless few cases. Such case includes if the award is invalid or the person cannot repay within the specified time.

India’s money recovery situation

This is the age of start-ups that specifically boosts the country’s growing economy for financial independence. It is a shame that more than 90% of funded start-ups are closing off during the first five years of their business due to negative inflow of cash, that is to say, problems with the recovery of the capital.   In most cases, people struggled to recover a substantial sum of money from debtors, which resulted in company failure or other financial instabilities, due to lack of good legal protection and cautious legal advice.

  • Sending a legal notice is one of the main moves towards money recovery in India. The legal notice is usually issued by a lawyer to solicit settlement on behalf of its client. The following must be included in a legal notice:
  • the notice sender’s name, description and location details 
  • Cause of Action Details
  • the monetary relief requested by the notice sender
  • The gist of the claimed relief

Steps involved in Drafting a Legal Notice

  • The legal notice should be drawn up in a specific and proper letterhead of a lawyer.
  • It will include the lawyer’s addresses and contact information.
  • The legal notice along with the date of its issuance is issued to the other party. Also, it includes the name, address and contact information of the individual to whom the legal notice is issued.
  • Since the client sends the money recovery legal notice, their name and other details must be shared as well.
  • In the notice, it should be clear how your right was breached by the other party’s actions. The actions might include any act or omission. You must also mention what you want from it for this matter. A certain path and a time limit must be given to the other group.
  • The lawyer and the sender must sign the notice (with date).