People lend money because they belief that the borrower will return it without making any default but the lender have to suggest a certain plan to the person who got money for repayment. If a person still not willing to repay the money then the lender has to send a notice stating the loan date the exact amount borrowed and also the repayment terms for the recovery of money. The lender should lend the money only after signing the promissory note or the loan agreement which prescribes term and conditions for providing loan. In case where the person to whom loan is given makes default in the payment, the lender can approach the court and file a civil suit for recovery of money or a criminal suit for recovery of money or a criminal case for fraud, cheating or breach of agreement. The main problem arises when you give loan to a family member or a friend of yours, usually that debt is unsecured and is not easy to bound terms and conditions because it bring bitterness in your relations.

While lending money you must analyze the necessity of promissory note or a loan agreement. A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only on a certain person or the bearer of the instrument as defined under Negotiable Instrument Act, 1881. A promissory note incorporates simple terms and a conditions, it does note includes bulk of clauses like an agreement has it is just a single page document which has legal authenticity as per the Negotiable Instrument Act 1881. If the person, to whom loan is given, not returns the amount or partly paid the amount of loan or refuses to pay the whole or left over amount, the lender can file a civil suit for recovery of money or a criminal case. Apart from approaching the court the lender can go for out of court settlement.

Civil suit

On the basis of a promissory note or a loan agreement the lender can file a civil suit for recovery of money. The lender is allowed to file a summary suit under order 37 of Civil Procedure Court. Summary suits consist of declaration stating specific relief plead by the lender and the relief plead should not be ambit of the order as final relief.

Firstly, the suit has to be drafted and then summons are to be sent to the concerned party who borrows the debt. When the suit is filed then the defendant is asked to appear before the court, if the person fails to appear before the court then the court may assumes that the allegation made by the lender are true and accordingly passes the judgment. Apart from civil suit the lender can lodge a complaint under the Negotiable Instrument Act, 1881. He will only file complaint if the money is connected with exchanging bills and cheque. If the borrower had returned the money through the cheque and the same is bounced the lender can file a suit under Section 138 of the Negotiable Instrument Act, 1881.

Criminal case

The onus is on the lender to prove that the borrower of money has committed breach of trust and has no intention to pay back the money, under these circumstances the lender can file a criminal case under section 420 and section 406 of Indian Penal code 1860 and if the court found that the borrower had committed criminal breach of trust and cheated the lender, the court may order the imprisonment for a term which may extends to the seven years to the borrower and ask the borrower to repay the money of the lender with interest, if court thinks fit. Dishonest and fraud intentions of a person make him liable for criminal offence. Criminal breach of trust arises when the borrower agree to the terms and conditions of the agreement but has no intention to return the amount to the lender.

Out of court settlement

The lender, if of a view can also approach for out of court settlement for the recovery of unpaid debt through Arbitration, conciliation or Lok Adalat. An out of court settlement occurs when both the parties agrees upon the involvement of an arbitrator or a conciliator. Usually, these forms for recovery of debt money are speedy and more effective in comparison with civil or criminal suit. In the method of out of court settlement both the parties are ready or willing to present for the hearing and after hearing to both the parties the tribunal passes the awards. In most of the awards passed by the tribunals are no appealable. There shall no appeal lie against the awards passed by the arbitration tribunals. Mostly, in these matters parties prefer out of court settlement because the matters that results into criminal breach of trust or cheating takes long time to be settled in the courts.