What are legal remedies against friendly loans?

810 votes

There are two ways to recover you money. One if by filing civil suit alomg with a criminal complaint another is if the cheque has bounced on presentation then you can file a cheque bounce case against your friend

Advocate Prashant Kumar LawRato

698 votes

A loan agreement even if not taken down in writing is still a legally binding contract although the proof of its terms may prove slightly challenging. The blank cheque mentioned by you is also an important piece of evidence. The defaulter can be sued by the by creditor for non payment provided the claim is not barred by limitation (in this case 3 years).

Additionally, if the aforesaid blank cheque was meant for the purpose of repayment in the event of default by the debtor then you may consider attempting to encash the cheque for the loan amount and if it bounces, consider an action under s. 138 NI Act and also a summary suit for recovery of amount.

Advocate Nikhil Sabharwal LawRato

522 votes

A STEP-BY-STEP GUIDE FOR LEGAL ACTION FOR A CHEQUE DISHONOURED.

Cheques are every common in almost all transaction such as payment of bills, fees, salary etc. a large number of cheques are processed in the bank on daily basis. Cheques are usually issued inorder to secure the proof of payment. Generally, it is recommended to issue only crossed “Account Payee Only” cheques to avoid its misuse.

The only payee can negotiate crossed and account payee cheque. Inorder to draw payment cheques are deposited in payee’s bank account.

The drawer is the author of the cheque and the person who favors the cheque is called payee. Nowadays cheque bounce is common and is considered as the criminal offense.

Following article contain the information what should be done if a cheque is bounced?

The drawee bank will immediately issue a ‘cheque return memo’ to the payee’s bank mentioning reason for non-payment if a cheque is dishonoured. Then the payee’s bank gives the memo and dishonoured cheque to the payee. The payee can resubmit the cheque within three months from the date on it if payee believes it will be not bounced again. However, if the cheque can’t be processed again then payee has the right to sue against drawee.

Payee can legally move against drawee only if cheques is issued for discharge of a debt or any other liability of the defaulter towards payee. Payee can’t move legally if cheques were issued as the gift.

According to negotiable instruments act, 1881, it is possible to file a case against dishonor of cheque. Dishonour of cheque is considered as a criminal offense and is punishable by imprisonment upto 2 years or with a monetary penalty.

Before moving legally payee gives a chance to repay the cheque amount immediately and this chance is given in form of written notice.

The payee has to send the notice within 30 days from the date of receiving a memo from the bank. The notice should contain the amount on the cheque to be paid to the payee. If the issuer fails to make payment the payee has right to file a criminal case under section 138.

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However, cheque dishonor complaint should be registered in a magistrate’s court within a month of the expiry of the notice period.

Requirement needed to move legally against cheques dishonour

• The cheque should have been drawn by the drawer on an account kept by him.

• The cheque should have been bounced because of insufficient funds in the drawer's account.

• The cheque is issued for discharge of a debt or legal liability. Punishment & penalty for cheque dishonour

The punishment prescribed for such an offense is either fine which may extend to twice the amount of the cheque or imprisonment for a term which may be extended to two years or both.

Advocate Prerna Jain LawRato