Are you struggling to recover your own money from someone? Don't worry! Here we have a complete guide on how and when to write a legal notice for money recovery.
A report by Inc42 says that a survey was conducted by the IBM Institute for Business Value in collaboration with Oxford Economics. India has a strong entrepreneurial spirit, but 90% of startups fail during the first five years. Why?
Therefore, a legal notice for money recovery must be written before starting the recovery lawsuit. By settling the dispute out of court, you can occasionally spare yourself the time and expense of a lawsuit. If the litigation continues, the legal notice also grants you authority over the debtor in front of the court.
What is a Legal Notice for Money Recovery?
A “Legal notice” is a formal notification from one party to the other, alerting them to make their required payment within a certain period of time. The party (sender) that is owed the money has the right to take legal action to recover their money if the addressee doesn’t respond appropriately within the allotted period.
When Should You Write a Legal Notice for Money Recovery?
The following circumstances need recovery litigation. In these situations, you could think about drafting a legal notice to strengthen your position against the debtor party in the court. Who knows? You may receive your money before even turning to the court.
Suppose a cheque from your debtor bounces because there is insufficient or no money in their account. In that case, you can immediately send a legal notice for money recovery to the debtor within 30 days of receiving the return memo from the respective bank.
Under Section 138 of the Negotiable Instruments Act, 1881, sending legal notice for a cheque bouncing is mandatory. The person who gets a bounced cheque will then have 15 days to file a lawsuit against the other party if there’s no appropriate response from their side.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 also demands sending a legal notice to the debtor before officially filing recovery litigation.
You can file a lawsuit against your tenant only if you have the lease agreement signed by both parties. If your tenant has not paid you rent for several months, which has become quite an amount, you can begin your recovery litigation by writing a legal notice. If your lease contract says that the tenant must pay rent by the end of every month(or specified period), you can file a lawsuit against him for violating the contract under the Indian Contract Act, 1872.
If an employee has not received his salary from the employer, he can file a lawsuit against the employer. If a labourer is not a labourer, he can sue his employer under the Payment of Wages Act, 1936. If the employee is not a labourer but works in another rank, he can sue his employer under the Code of Civil Procedure, 1908. The employee should send a legal notice for the recovery of salary.
Money Recovery from an Absconder
If an employer has previously sent show cause notifications to a potential absconder who has stolen the firm’s money, the employer has the right to sue him. It is now appropriate to launch legal action by serving a legal notice. The legal notice will provide the employee with a period of opportunity to defend himself before being forced into court.
Loan Recovery from Friends and Relatives
It is generally advisable to execute a loan agreement before lending money to friends and family to prevent disagreements later. The lender has the right to sue them if they break the terms of the agreement by failing to repay the loan in full within the allotted time. In this situation, sending them a legal notice is the moral thing to do first.
Steps to Follow
Step 1: Contact a Lawyer
A lawyer is a person who typically issues legal notice on behalf of their client to enter negotiations. The legal notice can’t be transferred to the debtor unless it is signed and sent by authorised legal personnel. It is, therefore, necessary to contact an expert lawyer to help you proceed with writing the legal notice and eventually with the recovery case.
Step 2: Share Details With Your Lawyer
Sharing every detail of the money you owe is important to draft the recovery notice. Your lawyer must know every picture angle to draw legal notice effectively.
Step 3: Prepare Documentation needed
Documents which need to be prepared may include:
- Loan agreement in case of loan recovery
- Lease agreement in the event of lease recovery
- Bounced cheque
- Employee/Employer contract with the details of money owed to one party
- Any other proof of money owed/lent, for example, affidavits etc.
Step 4: Draft a Money Recovery Legal Notice
If you are a lawyer or a person with sufficient knowledge of legal terms, you may write a legal notice for money recovery on your own. Otherwise, you should ask your lawyer to draft the notice on your behalf.
Elements of the Draft
- Name and address of the lawyer or law firm
- The name and address of the sender of the notice
- Information on the purpose of the notice
- Detailed information on when and how the addressee got the money from the lender
- The exact amount of money as claimed by the notice’s sender
You can check out the proper legal notice format for money recovery here.
Step 5: Proofread and Sign it
After the draft is prepared, the final step is proofreading by both the sender and the lawyer. It’ll ensure no irrelevant details in the draft. Then the final step is signing the draft. Signatures of both sender and the lawyer are required.
Things to Remember
- The recovery draft must be in easy and understandable language. It must be written according to legal terms.
- It should be sent through a registered postal service, and the sender must keep the proof (receipt).
- All facts and figures must be mentioned accurately.
- The notice should be concise but cover all the necessary information.
Our guide has probably helped you write a legal notice for money recovery. It’s absolutely fine if you are a lawyer and can write the notice using the abovementioned steps. However, if you require legal services with drafting and delivering your recovery notice, get in touch with VakilSearch immediately.
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