What To Do If Someone Is Not Returning Your Money In India?

Have you ever lent money to a friend or acquaintance, only to face delays and excuses when trying to get it back? This is a common problem many people encounter when lending money without a formal agreement, trusting that kindness and goodwill will ensure repayment. Unfortunately, lenders often find themselves in tough situations if the borrower refuses to return the money.

If you’re facing a similar issue and are wondering what to do if someone is not returning your money in India, don’t worry! In this article, we’ll walk you through the legal steps you can take to recover your money, along with a step-by-step process under the Indian Penal Code (IPC).

Let’s dive in and explore your options!

Understanding The Legal Frameworks

When it comes to lending money to friends, family members, or acquaintances in India, then, it's important to be aware of the legal frameworks that can help you recover money if they fail or refuse to repay. Here are the most relevant laws and processes to know:

1. Indian Contract Act, 1872

The Indian Contract Act is a law that explains how all legal agreements, including loan agreements, work in India. It includes what makes a contract valid and what to do if someone breaks the contract, especially when it comes to lending money. Here are some key points to understand about the Indian Contract Act of 1872:

What Makes A Contract Valid?

A contract is a promise between two or more people that is enforceable by law. This means both parties agree on the terms and conditions of the agreements and must follow them.

Essential Parts Of A Valid Contract

Some of the essential parts to make an agreement valid, especially loan agreements, are:

• Offer and Acceptance: One person (the lender) offers to lend money to another person (the borrower), and both agree.
• Consideration: In a loan agreement, the money is the consideration from the lender while the borrower promises to pay it back on a fixed duration.
• Competent Parties: Both people must be legally able to enter a contract. Which means they should be at least 18 years old and of sound mind.
• Lawful Object: The main purpose of the loan must be legal, and if the borrower used that money for illegal activities, then the contract is not valid.
• Free Consent: Both parties should agree without any pressure or misunderstanding when accepting the agreement; if anyone is forced, then the contract can be canceled.

Also Read : Essentials of a valid contract

2. Negotiable Instruments Act, 1881

The Negotiable Instruments Act of 1881 is a law in India that mainly deals with financial documents like cheques and promissory notes. Here's how it works:

Bounced Cheques

• What happens: If someone gives you a check that bounces, which means there's not enough money in their bank account to cover it.
• Legal action: You can take legal action against the person who wrote the cheque under Section 138 of this law because bouncing a cheque is a crime.
• Consequences: If the borrower doesn't pay you back after the cheque bounces, then you can file a complaint against them. They could face penalties, such as fines or even jail time, which makes this law an effective way to get their money back.

Also Read : How to Escape From Cheque Bounce Case?

Steps To Take

• Send a legal notice: If the cheque bounces, you can send a legal notice to the borrower within 30 days of the bounce. refer to our detailed guide on how to send a legal notice.
• Wait for the payment: After they receive the notice, the borrower has 15 days to pay you back.
• File a complaint: If they still don't pay after the notice, then you can go to court and file a complaint to recover your money.

Also Read : Legal notice for cheque bounce

3. Civil Procedure Code, 1908

If you decide to recover your money through a civil suit, then the Civil Procedure Code of 1908 is a law that outlines how civil cases are handled in court. Here's how this law works in money recovery cases:

What it covers: This law deals with civil cases that are disputes between individuals or organizations for money claims, property disputes, and contracts.

Filing a case: If someone owes you money and isn't paying you back, then you can file a civil case against them as per the Civil Procedure Code, 1908 law.

Court procedures: The code outlines how the court should conduct the proceedings, including:

Notice: The person you are suing (the defendant) must be informed about the case and given a chance to respond before the trial begins.

• Hearings: The court will schedule a hearing where both parties can present their arguments and evidence.
• Judgment: After reviewing the case in detail, the court will make a decision. If you win, then the court will order the borrower to pay back the money they owe.

Appels: If either side is not satisfied with the court's decisions, then they can appeal to a higher court to review the case.

Importance

• Fair process: The Civil Procedure Code ensures that everyone has a fair chance to present their case in court.
• Clear guidelines: It provides clear guidelines for how civil cases should be handled and makes the legal process more efficient.

What Are The Legal Steps When Someone Has Not Returned Your Money?

Here are the legal steps that you can take if someone has not returned your money:

Step 1. Gathering Evidence

Before taking legal action to get your money back from the borrower, the very first step is to gather all the essential evidence to make your case stronger. Some documents like agreements, receipts, and emails confirming the loan. This evidence helps in court trials to determine the real transaction from the lender. Plus, if you face some additional expenses or damages due to non-payment, then you can gather proof of those as well.

If you’re confused about which legal route to take, use this simple decision tree. Start by checking what proof you have (UPI/bank transfer, WhatsApp chats, emails, receipts, promissory note, or any written acknowledgement). The stronger your proof, the faster and cleaner the recovery process usually becomes.

If you have proof (UPI/transfer/messages/loan agreement):

1. Step 1: Send a legal notice / demand letter (usually 7–15 days)
   Give a clear repayment deadline and mention that legal action will follow if payment is not made. In many cases, this alone works because it creates a formal record and pressure to settle.
2. Step 2: File a police complaint (only if cheating/fraud indicators exist)
   Use this route if the borrower took money with dishonest intent, gave false promises, used forged identity/details, or misused money entrusted for a specific purpose. If it’s a genuine repayment delay with no criminal intent, police may treat it as a civil dispute.
3. Step 3: File a civil recovery case / summary suit (often faster if documents exist)
   If the borrower still doesn’t pay, a civil recovery suit is the standard route to legally recover money. Cases move faster when there is clear documentary proof (written acknowledgement, promissory note, bank trail, etc.).

How to Identify Cheating/Fraud Indicators (When Police Complaint Makes Sense)

• False promise from the start: they never intended to repay and kept making excuses immediately.
• Misrepresentation: lied about job, assets, urgent emergency, or repayment capacity to obtain money.
• Multiple victims: borrowed from several people using a similar story.
• Money entrusted for a purpose but misused: e.g., money given to pay a fee, buy a product, or invest, but diverted.
• Avoidance behaviour: switched off phone, blocked you, changed address, threatened you after taking money.

What If You Only Have Verbal Proof?

Even if there is no written agreement, you can still proceed if you have supporting material like messages, call recordings (where legally permitted), witnesses, or bank transfer trail. Start by gathering and organising proof (screenshots, bank statements, payment references, chat exports). A lawyer can help you draft a notice that properly records the facts and strengthens your position.

(Disclaimer): This guide is for general information. Whether your matter is a civil dispute or a criminal offence depends on the facts (intention, representations, and proof). For case-specific advice, consult a lawyer with your documents.

Step 2. Open Communication

Once you've all the evidence, starting with a polite approach is recommended. First, you should talk to the person who owes you. Understand their side of the story, why they don't pay back the amount, and what's the misunderstanding causing a delay in repayment. When you clearly discuss things and come up with a reasonable plan to pay back, then you may not need to proceed with a legal trial. However, if the borrower refuses to pay, then there's only one legal way left to recover your money after you have tried to resolve the issue peacefully.

Step 3. Send A Demand Letter

When talking to the borrower doesn't work, then it's time to send a formal demand letter that explains all the details about the debt, how much the borrower owes you, terms of the loan, and a deadline to pay back the amount and the possible consequences if the borrower doesn't pay back before the assigned deadlined. Sending a demand letter is a polite and professional way to start legal matters about recovering your money and may have legal consequences that encourage the borrower to pay back.

Step 4. Consultation with An Attorney

If you've tried open discussion and sent formal demand letters to the borrower but didn't get a positive response, then it's time to consult with an experienced debt recovery attorney (lawyer) who can guide you to the best solutions to recover your money and suggest further steps to take. An attorney is an experienced person who knows what steps to take to get the work done and ensure further legal processes will be smoother and faster.

Step 5. File A Civil Suit

Now, it's time to file a lawsuit in civil court. It's a good idea to hire an attorney for this because they can better handle the lawsuit. Plus, an attorney will help you prepare for the lawsuit case, collecting evidence and making strong arguments in front of the judge that will make your case stronger. However, there's a time limit for filing a lawsuit known as the statute of limitations, so make sure to file a lawsuit before that time runs out.

Step 6. File A Criminal Suit

If the borrower not only refuses to pay back your money but also deceives or cheats you, then you can file a criminal case based on Section 20 of the Indian Penal Code (IPC) for cheating and Section 406 of the IPC for criminal breach of trust. These laws imply when someone borrows money with the intent to defraud you. If the court finds the borrower guilty, then the borrower could face jail time and be required to pay back the money. However, criminal cases take more time to resolve in court.

Step 7. Settlement Outside Of The Court

There's also one alternative way to recover money, i.e., out-of-court settlement. You can choose to go to an out-of-court settlement, where you and the borrower must agree to this process and attend a hearing, where an arbitrator listens to both sides and makes a final decision. Once a decision is made, then it's final, and there's no option to appeal. This approach is preferred to take the case faster and less costly to court.

Steps Involved In Drafting A Legal Notice

Sending a legal notice is one of the essential parts for the lender to formally ask the borrower to demand repayment. Here are the steps involved in drafting a legal notice

• It must be written on the lawyer's letterhead with their contact details.
• Include the date, the borrower's name, address, and contact information.
• State the lender's details and explain how the borrower's actions violate the lender's rights.
• Clearly mention the amount owed by the borrower, the relief being sought, and the deadline for repayment.
• Finally, both the lawyer and the lender must sign and date the notice.

Also Read : Legal Notice for Recovery of Money

Can I File an FIR for Not Returning Money?

Yes—but only in specific situations. In India, an FIR is generally registered when there is a clear criminal element such as cheating, fraud, or criminal breach of trust. If it is only a repayment delay (a borrower is not paying back a loan), police often treat it as a civil dispute best handled through a legal notice and money recovery case in civil court.

When an FIR is Likely (Fraud/Cheating Indicators)

An FIR becomes more realistic when the facts suggest the person took money with a dishonest intention from the start, or used deception to obtain the money. Examples include:

• Fraudulent intent at the beginning: the person never intended to repay and used false promises to take money.
• Fake identity or false documents: wrong name/address, forged proofs, or misleading credentials used to gain trust.
• Repeated deception / pattern: the person has taken money from multiple people using a similar story or excuse.
• Money entrusted for a specific purpose but misused: e.g., money given for admission, fees, purchase, investment, or a task, but diverted.
• False representation of ability to pay: deliberate lies about salary, assets, business, or repayment capacity to induce you to give money.
• Avoidance after taking money: blocking calls, switching off phone, changing address, or threatening you after receiving funds.

When Police Usually Says “This Is a Civil Dispute”

Police commonly treat the matter as civil when the situation looks like a simple loan or friendly advance and the only issue is non-payment. Typical examples:

• You voluntarily lent money and the borrower initially acknowledged the loan but later delayed repayment.
• There is no clear proof of deception at the time of taking money.
• The dispute is about repayment terms, interest, timeline, or settlement—without fraud indicators.

In these cases, the stronger approach is usually: send a legal notice, then file a civil money recovery case (and if cheque was issued and bounced, a cheque bounce complaint may apply).

What to Write in Your FIR/Police Complaint (So It’s Taken Seriously)

If you believe there is cheating/fraud, your complaint should be factual and evidence-backed. Include:

• Exact amount, date(s) of payment, and method (UPI/bank transfer/cheque/cash with proof).
• Timeline of events: promises made, deadlines, reminders, responses, and avoidance.
• Proof: bank/UPI statements, chat screenshots, emails, call logs, receipts, any written agreement.
• Why you believe it is cheating/fraud: false promises, misrepresentation, fake identity, pattern, misuse of entrusted funds.
• Borrower details: name, address, phone number, workplace/business details (as available).

What If Police Refuses to Register an FIR? (Escalation Path)

If the police station refuses to register your FIR or does not act on your complaint, do not stop there. Follow this escalation path:

1. Submit a written complaint at the police station and ask for a receiving/diary number. Attach copies of your proof (bank/UPI statement + chats/emails).
2. Send the complaint to senior officers (e.g., SP/DCP) with your evidence and acknowledgment of the earlier submission. This establishes a paper trail.
3. Approach the Magistrate if required. You can seek directions for registration/investigation through the appropriate legal process (a lawyer can guide the correct procedural route based on your facts and jurisdiction).
4. Parallel option: Even while pursuing criminal action, you can still proceed with a legal notice and a civil recovery case for repayment.

Important (YMYL Note) : Whether an FIR is appropriate depends on the specific facts, intention at the time of borrowing, and available proof. This section is general information and not legal advice. For a strong complaint, consult a lawyer and share your documents before filing.

Some Important Precautions To Take

• Time Limits: As per the Limitation Act of 1963, the lender needs to file a lawsuit for money recovery within three years from when the debt is due.
• Legal Costs: Court cases come with lawyer fees and court charges. It's important to consider whether the legal costs are worth the amount you're recovering.

Punishment for Not Returning Money in India

In India, there are several legal consequences for not returning borrowed money, depending on the specific circumstances:

Criminal Penalties

Cheating and Fraud Charges

If a borrower intentionally deceives the lender or does not return money with fraudulent intent, they can face criminal prosecution under:

• Section 420 of the Indian Penal Code (IPC) for cheating
• Sections 421-424 of IPC for fraud4

Criminal Breach of Trust

Under Section 406 of the IPC, a person can be prosecuted for criminal breach of trust if they:

• Deliberately refuse to return borrowed money
• Misappropriate funds entrusted to them
• Potentially face imprisonment and mandatory repayment

Conclusion

Dealing with a borrower who refuses to return your money can be both stressful and complicated. However, knowing your legal options on what to do if someone is not returning your money in India can give you the confidence and tools you need to secure a recovery. Understanding the various legal frameworks and steps for debt recovery is essential, as well as knowing how an experienced debt collection attorney can support you through the entire process.We hope this article helps you understand everything about legal frameworks to recover money, legal ways to recover money, and important considerations. Now, it's your turn to hire an experienced debt collection attorney to help you in the entire legal process and recover your money faster.