Legal Notice for Recovery of Money

Law
07-Jun-2024
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Lending and borrowing money is necessary for market circulation and investment in an economy. Lenders have the right to file a Legal Notice for Money Recovery if borrowers refuse to repay their loans, which could be owed by banks, institutions, companies, organizations, or people. 

The procedure used to reclaim the money that is in danger is quite straightforward. Before going to court, these disagreements are usually settled through mediation.

People occasionally suffer large losses as a result of not knowing their options and rights. Some people are unable to seek remedies even when they are aware of their rights due to insufficient legal assistance.

What is a Legal Notice for Recovery of Money?

When one party notifies another in writing that they intend to take legal action if the disagreement cannot be settled respectfully, this is known as a legal notice.

In terms of money recovery, a legal notice is a warning to the party in default to pay their debts within a certain amount of time, or else the party that is being wronged will file a lawsuit.

When to Send a Notice for Recovery of Money? 

It is necessary to send a legal notice for money recovery when

  • Despite several warnings, the defaulting party has not repaid a loan or debt. 
  • A financial transaction involves a breach of contract or commitment.
  • At the expense of the harmed party, the defaulting party has unfairly profited.

Where to File a Notice for Recovery of Money?

The aggrieved party may initiate a lawsuit to recover damages if the defaulting party does not answer to the legal notification or does not perform their obligations within the allotted period. The following factors should guide the notice's submission in the proper court:

Territory Jurisdiction

It is crucial to determine if a defaulter is under the court's jurisdiction before filing a case against them. With this kind of jurisdiction, a court's jurisdictional boundaries are clearly defined and listed. As a result, the Court is unable to assume or use any jurisdiction that is outside of its borders.

The following territorial jurisdictions are where a suit may be lodged in accordance with the "Code of Civil Procedure, 1908":

  • where the defendant, who defaulted on payments, resides.
  • where the accused makes his money or has a business.
  • where the action's linkage begins. (in full or in part)

Pecuniary Jurisdiction

The term "pecuniary" refers to financial matters. This kind of jurisdiction attempts to determine whether a court of law can hear cases involving that kind of money or suit value.

For instance, the Kolkata City Civil Court and Calcutta High Court have a pecuniary jurisdiction of between Rs. 10 lakhs and Rs. 1 crore. Nonetheless, before initiating a lawsuit, the first territorial jurisdiction and then the financial jurisdiction are taken into consideration.

Statutes Governing Recovery of Money Cases

In India, money recovery cases are subject to several regulations, including:

The Code of Civil Procedure, 1908

Order 37 of CPC, 1908, the most "go-to" method for money recovery, requests that a borrower file a summary notice. The Honourable Court will assume that the plaintiff's allegations are genuine. It compensates the defendant who is in default if he fails to show up in court within ten days of the lawsuit date.

Negotiable Instrument Act, 1881

This act primarily focuses on situations in which you are attempting to collect money from your employer after their check bounces. Section 138 of the Act imposes criminal and civil culpability on the drawing of a check who, on the face of it, had no intention of making a payment and draws a rejected check.

Indian Penal Code, 1860

The following sections of the IPC may be applied in specific situations:

Section 415: When someone forces another person into giving them property through fraud or deception, that person is guilty of cheating. Cheating carries a maximum sentence of one year in jail, a fine, or both.

Section 403: A person commits a crime when they deceitfully take another person's property and utilize it for their own gain. The punishment consists of a fine, two years in jail, or both.

Section 405: This occurs when someone deceitfully appropriates or transforms another person's property for their personal gain. In this instance, the individual is entrusted with the property.

The Indian Contract Act, 1872

If a party defrauds another party or an indemnitor is unable to carry out the contract because of potential insolvency on their part. Section 73 of the Act which outlines loss damages for contract breaches may be taken into account.

Companies Act, 2013

A firm that defaults may be sued under this Act. These could be corporate conflicts involving unpaid contractual payments or class actions, in which a group files a lawsuit to recoup debts.

Under Section 127, investors may pursue damages if a company neglects to pay dividends. A winding-up petition may result from Section 212, which is triggered by complaints made to the Serious Fraud Investigation Office.

Under Section 272, creditors who have not received payment for their debts may bring a winding-up petition. Lawsuits alleging corporate officers liable for fraud or unjust property withholding are also permitted under Sections 447 and 451.

Various instances where Recovery of Money arises 

Several circumstances may lead to money recovery, including:

Recovery of Money from Employee 

If an employee absconds with the money, a civil investigation will be initiated, and a show-cause notice will be sent to their home. If the employee doesn't respond after two or three notices, disciplinary action will follow according to the organization's procedures. This process allows the employee to refute the accusation.

It is possible to serve a legal notice for money recovery if it is established that the employee has left. The employer is entitled to receive the money-back if the employee doesn't answer or put up a defense. Legal action will be taken.

Recovery of Money from the Employer

When an employee owes the business money in the form of advances, loans, or overdue pay. Before suing, the worker must provide the employer with a legal notice requesting the unpaid wages. The business might then choose to reply in denial or accept the notice.

Recovery of Money from Tenants

When the tenant does not pay any rent at all despite one providing property as rent. The right to retrieve the money that the renter owes the property owner thereafter exists.

In compliance with the conditions of the rental agreement, the landlord may serve a legal notice to collect the overdue rent if the tenant defaults on the rent.

Recovery of Money from Dealers

In business, supply, demand, and the delivery chain drive economic prosperity. Distribution and dealerships manage operations, often requiring deposits via post-dated or advance cheques.

Sometimes, these cheques bounce due to insufficient funds or other issues. The chequeholder can reclaim the money by sending a legal or demand notice within 30 days of the bank's return memo.

Procedure of Sending a Legal Notice for Recovery of Money

  • Speak with an attorney: This will enable you to proceed with the process without any problems. To recover money, the lawyer could create a legal notice.
  • Collect all the appropriate data, including the debtor's name, contact details, and any messages or letters related to the debt.
  • Provide a copy of the legal notice to the debtor by accelerated post, registered mail, courier, or hand delivery. Make sure you get the debtor's signature attesting to receiving the notice. Clearly name each party to the lawsuit and make reference to each factual statement in your notification.
  • Keep Records: Save copies of the legal notice, any acknowledgments, courier or postal receipts, acknowledgments, or documentation of delivery. If you want to file a lawsuit, these documents will be crucial.
  • Debtor's Response: If the debtor accepts the amount owed, start a negotiation. If not, speak with your attorney and take legal action to get your money back.
  • Indicate the total amount owed and request complete payment within a fair time frame, often 15 to 30 days from the notice date.
  • Specify that noncompliance with the warning will lead to legal action, which can involve bringing a lawsuit in the relevant court.
  • Provide the sender's phone number and email address in your correspondence. The sender or their legal representative must sign and date the notice.

Format of Notice for Recovery of Money

For a legal notification to be effective and legitimate, it must be written in a certain way. The following is a thorough framework for a legal notice for money recovery, though you should speak with an attorney to tailor the notice to your particular situation:

 

Legal Notice

Ref. No……………. Dated ____, __________

 

REGD.A.D.

 

LEGAL NOTICE

 

To,

 

_____________

 

Dear Sir,

Pursuant to the instructions from and on behalf of my client ___________________, through its _____________, I do hereby serve you with the following Legal Notice: -

1- That my client is a ___________ firm/individual under the name and style of M/s ______________________.

2- That my client is engaged in the business of __________ of the ___ etc.

3- Against your valid and confirmed order my client did your job work from time to time on a credit basis as you have a running credit account in the account books of my client operated in due course of business.

4- That my client raised bills of each and every work performed for payment, although you have acknowledged the receipt of such bills raised by my client.

5- That inspite of acknowledging the liability of payment of the principal balance of Rs. _________/- you have miserably failed to make payment of the said amount due to my client from you deliberately with malafide intent, hence you are liable to pay the said principal balance amount of Rs. __________/- along with interest @ __% p.a. from the date of due till actual realization of the said sum as is generally and customarily prevailing in the trade usages, which comes to Rs. __________/-

6- That thus you are liable to pay the total amount of Rs. ________/- to my above-named client and my above-named client is entitled to recover the same from you.

7- That my client requested you several times through telephonic messages and by sending personal messages to your office for the release of the said outstanding payment, but you have always been delaying the same on one pretext or another and so far have not paid even a single paisa out of the said outstanding undisputed amount.

I, therefore, through this Notice finally call upon you to pay to my client Rs. __________/-. along with future interest @ __ % p.a. from the date of notice till actual realization of the said amount, together with notice fee of Rs. ____/- to my client either in cash or by demand draft or Cheque whichever made suits you better, within clear 30 days from the date of receipt of this notice, failing which my client has given me clear instructions to file civil as well as criminal lawsuit for recovery and other Miscellaneous proceedings against you in the competent court of law and in that event you shall be fully responsible for the same.

A copy of this Notice has been preserved in my office for record and future course of action.

 

(____________)

 

ADVOCATE

 

Period for filing a Notice for Recovery of Money 

After the date of the cause of action, a person has three years to file a case for a civil recovery claim. The purpose of this time frame is to prevent any limitations on the legal process. Considering the defaulter's residence area will establish the "jurisdiction" for initiating a case. Depending on the honorable court's jurisdiction and authority, it can be different.

What should one do if they receive a Legal Notice for Recovery of Money

The following things should be taken into account after obtaining a notice:

Read the notice carefully

It is essential to read the legal notice thoroughly in order to fully understand the issue and concerns raised by the sender. If there's any potential of an amicable conclusion to the disagreement, then one can initiate the conversation.

Contact a representative

Consulting a knowledgeable advocate is always necessary.

Informing the advocate

In order for him to write a good response, which will outline your side to the sender, the next important step is to offer him your version of events, including all pertinent dates, details, and incidents.

Sending the response

Once a response has been written, it is sent by courier or registered mail, and the post office receipt is kept. For use in upcoming communications, the advocate keeps a copy of the legal notification and the reply.

What happens as a result of ignoring a Legal Notice for Money

It is not illegal to ignore a notification; nonetheless, one must submit the information and defense points for the documentation. If the sender files a case without receiving a response, the court may render a verdict that is conclusively negative for the opposite party. A legal notice is the first step toward resolving a legal issue or disagreement.

Failure to heed one could result in the loss of a significant opportunity to resolve the matter. Negative credit reporting and other long-term effects on one's reputation and credit history could result from these problems. Legal notice senders may interpret the respondent's silence as uncooperative behavior that justifies extra-legal action, which would incur additional costs and fees related to litigation.

Conclusion

Legal notices have the potential to result in an out-of-court settlement, making them the most important step before launching a case. The quality of the lawyer’s writing and the significance of the content determine how effective it is. Legal notice may facilitate communication between the parties, sparing them the time and expense of going to court.