Lending money to a friend is a common practice in personal relationships. However, when the friend fails to repay the borrowed sum, it can lead to strained relationships and legal disputes. In such situations, individuals may wonder about their legal options and the recourse available to them under the law.

This article provides a detailed legal analysis of the steps individuals can take to pursue the recovery of money lent to a friend, including relevant laws and sections applicable in India.

Understanding the Legal Framework

  1. Contract Law:
    When money is lent to a friend, an implicit contract is formed between the lender and the borrower. Even if there is no formal written agreement, the law recognizes verbal contracts, and the terms of the loan can be enforced.
  2. Indian Contract Act, 1872:
    The Indian Contract Act governs contracts in India and provides legal remedies in case of breach. Section 10 of the Act stipulates that agreements made by free consent of parties competent to contract, for lawful consideration and with a lawful object, are enforceable by law. Therefore, if a friend fails to repay borrowed money, it constitutes a breach of contract under the Indian Contract Act.
  3. Evidence Act, 1872:
    The burden of proof lies on the lender to establish the existence of the loan agreement and the terms thereof. The Evidence Act allows for the admission of oral and documentary evidence to prove the existence of the loan and the terms agreed upon.
  4. Limitation Act, 1963:
    The Limitation Act prescribes a limitation period within which legal actions must be initiated. According to the Act, the limitation period for recovery of money lent is three years from the date the loan becomes due.

Legal Actions Available

  1. Sending a Legal Notice:
    The first step in initiating legal action against a friend who refuses to repay borrowed money is to send a legal notice demanding repayment. The notice should clearly state the amount owed, the terms of repayment, and the consequences of non-compliance.
    • Section 3 of The Indian Contract Act, 1872: This section deals with communication, acceptance, and revocation of proposals. It provides the legal basis for sending a legal notice to the borrower demanding repayment of the loan amount.
  2. Filing a Civil Suit:
    If the friend fails to respond to the legal notice or refuses to repay the borrowed amount, the lender can file a civil suit for recovery of money in the appropriate court. The court will adjudicate the matter based on the evidence presented by both parties and issue a judgment accordingly.
    • Civil Procedure Code, 1908: The Civil Procedure Code governs the procedure for filing civil suits in India. Section 9 of the Code empowers civil courts to adjudicate disputes involving the recovery of money, including loans, and grant appropriate relief to the aggrieved party.
  3. Seeking Mediation:
    Mediation is a voluntary and confidential process in which a neutral third party facilitates communication and negotiation between the parties to resolve the dispute amicably. The parties may agree to settle the matter through mediation rather than resorting to litigation.
    • Section 89 of The Civil Procedure Code, 1908: This section empowers courts to refer disputes to alternative dispute resolution mechanisms, including mediation, conciliation, and arbitration, with the consent of the parties involved.
  4. Criminal Complaint:
    In certain cases of fraud or deceit, the lender may also have the option to file a criminal complaint against the friend under provisions of the Indian Penal Code, such as Section 420 (cheating) or Section 406 (criminal breach of trust). However, criminal action should only be pursued if there is sufficient evidence to establish criminal intent.
    • Indian Penal Code, 1860: The Indian Penal Code contains provisions related to various offences, including cheating (Section 415-420) and criminal breach of trust (Section 406), which may be applicable in cases involving non-repayment of borrowed money due to fraud or deceit.

Challenges and Considerations

  1. Preservation of Evidence: The lender needs to maintain documentation and evidence of the loan transaction, such as bank transfers, cheques, or written communication, to support their claim in court.
  2. Personal Relationship: Legal disputes involving friends can strain personal relationships and lead to emotional distress. Therefore, it is advisable to approach the matter with sensitivity and explore amicable resolution options before resorting to legal action.
  3. Costs and Time: Legal proceedings can be time-consuming and expensive. Lenders should consider the potential costs and time involved in pursuing legal action and weigh them against the likelihood of successful recovery.


While lending money to a friend may seem like a gesture of trust and goodwill, it is essential to safeguard one’s interests by documenting the transaction and clarifying the terms of repayment. In the event of non-repayment, Indian laws provide legal remedies, including sending a legal notice, filing a civil suit, seeking mediation, or pursuing criminal action in cases of fraud or deceit.

However, it is essential to carefully consider the implications of legal action and explore alternative dispute resolution mechanisms before initiating litigation. By understanding their rights and recourse under the law, individuals can effectively address disputes arising from unpaid loans and seek redress through the appropriate legal channels.

Adv. Khanak Sharma

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