Introduction:
If we talk about India, money disputes, like giving money as a friendly loan, are very common. This type of loan is given to friends, relatives, or any non-person without entering into an agreement or any kind of written notes. The trust factor is very high in this transaction; at the time of repayment of the loan, they are trying to avoid paying us. It is a result that breaks down the relationship. Here in this article, we explore how to recover a friendly loan that is given to a friend or relative without any agreement. So please stay tuned and read below.
Can We Recover Money Given to a Friend without an Agreement in India?
The simple answer is yes. Indian law does not prevent anyone from recovering money that is given without an agreement. To determine this question, the court may observe the intentions, conduct, and circumstances of the transaction. There are legal procedures that you need to follow to recover money given to a friend without an agreement.
What is a Friendly Loan?
A friendly loan means money given to a close friend, relative, or known person on the basis of trust and relationship. Such a loan can be given without a loan agreement or promissory note. That type of loan can be given via cash or bank transfer, and commonly the interest on this loan is not counted because as a friendly loan. The Friendly loan is also legally recognised under the law, but it becomes a hard task for the lender when the party denies repayment of the loan.
Is Giving Money Without an Agreement a Fault?
The answer to this question is NO. There is no illegality to giving money without an agreement in India. But if you enter into such a type of transaction, you may unknowingly be leading a particular risk. People commonly enter into this type of transaction because they trust the borrowers, don’t want to follow any compliances, and sometimes the lender tries to avoid any legal precaution due to a lack of seriousness. With no less to say, a legal dispute has begun over the recovery of money after that.
Is the Oral Loan Legally Valid in India?
The answer to this question is yes because, under the provisions of the Indian Contract Act, there is no need for a written agreement for the purpose of validity in India. There are some exemptions to this provision, such as any contract related to real estate, or a sum of rupees or a long-term lease that may need to be written and registered under the provisions of law. Most commonly, a loan agreement between friends and relatives does not need to be in written form for validity purposes.
Such a type of loan is considered legally valid if the money is actually given with the intention of repayment and the loan is not covered under the gift. But if a legal dispute arises, the lender must prove that fact in a court of law.
How to Prove Money Given Without Agreement in Court?
To prove that money is given without an agreement, you need to collect certain cumulative evidence. Because, by the way of justice, God relies on such types of documents. Some of the basic documents or evidence are listed below.
Bank Transfer or UPI Records:
Bank statements or UPI records openly show that the money is transferred to the borrower’s account. It becomes strong evidence in a court of law to prove that you owe money.
WhatsApp Chats, Messages, Email Records:
You need to gather such types of electronic evidence as WhatsApp chats, messages, and email records, which are part of the discussions between you and borrowers related to the request for money, terms and time of repayment of money, or any other excuse that is accepted by the money given from you as a friendly loan. These types of electronic evidence are legally valid under the law, and the court can also rely on it to believe that the transaction actually occurred between you and the borrower.
Witnesses Evidence:
The witnesses play a crucial role in proving the loan transaction between you and the borrowers. You can examine persons who know about the loan transaction. The court can determine from this type of evidence that the transaction is really executed and the money is owed.
Partial Repayment Proof:
Collect the evidence if the borrower repaid you a small amount, which may be helpful to confirm that what is known really exists.
Conduct of Borrowers:
The conduct of borrowers is also considered by the court, such as whether they repeated the excuse for the repayment, whether they admitted the transaction or whether they used tactics of delaying payment.
What Happens When Money is Given in Cash?
It is a difficult task for you to prove that a friendly loan is given in cash; however, it is not impossible. For that, you need to take appropriate evidence such as cash Withdrawal Entries from the lender’s bank, witnesses who are present during the loan payment, and the borrower’s financial condition and conduct.
Legal Steps for Recovery of Money from a Friend Without Agreement:
There are some legal steps that you need to follow for the recovery of money without an agreement:
Sending Legal Notice:
This is the first and crucial step that you need to follow before you take any further legal action, firstly you need to send a legal notice to the Borrower.
In a legal notice, you must demand the unpaid amount within a specific time. You clearly mention the loan details. Lastly, you need to warn the borrower that legal action will be taken against him if he tries to avoid repayment of your loan within the period which is given under the legal notice. Most of the disputes are settled at this stage. Because the borrower also does not need to lead any unnecessary legal disputes.
What to Do If the Borrower Ignores the Legal Notice?
Ignoring a legal notice is becoming harmful for the borrower. It supports the lender’s case, implying bad intention and dishonesty on the part of the borrower. After this conduct, it helps the lender to claim the unpaid loan amount, interest and legal costs. The court may also treat it as an adverse interference against the borrowers.
What are the Legal Remedies Available for the Recovery of Money?
There are certain legal remedies available for the recovery of money given without an agreement in India.
Civil Suit for Recovery of Money:
Under the provisions of the Civil Procedure Code, a civil suit can be filed against the borrower for the recovery of money. Under the civil suit, the lender can pray to the court for the principal amount, interest, and legal expenses that occurred due to the unpaid loan by the borrowers.
Summary Suit for the Recovery of Money (Order 37 of CPC):
If the lender has any written document, such as a written acknowledgement, check, or promissory note. Filing a summary suit is a speedy option for the lender.
Cheque Bounce Case (whether it is applicable):
This remedy is applicable only when the borrower issues a cheque, it is bounced or not cleared by the bank. The lender can also follow the criminal remedy against the cheque.
Can a Borrower File a Criminal Case for Recovery of a Friendly Loan?
Money lending disputes are covered under civil nature offences. Criminal action can be applicable if the lender strongly believes that the borrower intentionally cheated him by making a false promise to repay the loan. However, converting a civil nature dispute into a criminal offence depends on the circumstances and the facts of each case.
What is the Limitation Period for the Recovery of a Friendly Loan?
A money suit for recovery of money must be filed within the limitation period, which is prescribed under the Limitation Act. This is generally cunted three years. If the lender can file after that period, they can file a delay application with the court; it can be allowed if a genuine reason is shown by the lender.
The Common Mistake Made by Lenders:
Sometimes lenders cannot take it seriously; it results in a big mistake when the party tries to ignore repaying the friendly loan. Some of the common mistakes are not sending up a legal notice, following only verbal demands, wrongly believing in vague promises, and not saving the chat or electronic records related to the friendly loan. It may create more difficulties to prove that money is given as a friendly loan without entering into a written agreement.
