How to File a Recovery Suit for a Friendly Loan

What counts as a friendly loan, and why the label matters

A friendly loan is money lent to someone you know, usually without security, often without interest, and on trust rather than paper. Typical cases are a friend's medical emergency, a relative's business that needed cash, a colleague's flat booking, or a wedding. The lender is not in the business of money-lending, and the borrower is not a customer.

The label matters for three reasons. First, a personal loan of this kind is normally not a 'commercial dispute' under the Commercial Courts Act 2015, so the suit goes to an ordinary civil court and the mandatory pre-institution mediation under Section 12A generally does not apply. A loan between two traders for business purposes may be different, and should be checked.

Second, borrowers in Delhi sometimes argue that the lender is an unregistered money-lender, relying on the Punjab Registration of Money-Lenders Act 1938 as it applies in Delhi, which can bar suits by unregistered money-lenders. That law is aimed at people who carry on lending as a business. An isolated loan to a friend is generally not money-lending business, but if you have lent to many people at interest, tell your lawyer at the start.

Third, the label shapes interest. A friendly loan is often interest-free, and courts will not invent a rate the parties never agreed. Interest can still be claimed from the date of a written demand and during the suit, as explained below.

Can you file a money suit without agreement?

Yes. A money suit without agreement is common, and courts decide such cases every day on other evidence. Indian contract law does not require a loan to be in writing. The question at trial is simple: did the plaintiff give the money, and was it a loan to be repaid? The borrower usually does not deny receiving the money; he says it was something else.

The strongest proof is a bank trail: NEFT, RTGS, IMPS or UPI transfers from your account to the borrower's, or a cheque you issued that he encashed. Next come the borrower's own words: messages asking for the loan, thanking you for it, promising to repay, or asking for more time. An email that says 'I will return the Rs 6 lakh by Diwali' is often more useful than a formal agreement.

Electronic evidence needs to be produced properly. Under Section 63 of the Bharatiya Sakshya Adhiniyam 2023 (old Section 65B of the Evidence Act), a certificate is required for electronic records such as WhatsApp chats, emails and call recordings. Keep the phone or device on which the messages are stored, export the chat with dates, and do not delete or edit anything.

Cash loans are harder. You will need to show where the cash came from (a withdrawal from your bank around the date, sale of an asset), and witnesses or messages that refer to the loan. Courts do decree cash loans, but the borrower's denial carries more weight when there is no paper trail.

Three years: the time limit and how it gets extended

For money lent, the Limitation Act 1963 gives three years. Article 19 covers money payable for money lent, and Article 21 covers money lent under an agreement that it is payable on demand; in both, time runs from the date the loan is made. So a loan given on 10 March 2024 must generally be sued on by 10 March 2027, even if you only asked for the money in 2026. If a fixed repayment date was agreed in writing, the calculation can be different, so give your lawyer every document that mentions a date.

The period can be extended in two main ways. Under Section 18, a written acknowledgment of the debt signed by the borrower before the three years expire starts a fresh period from the date of the acknowledgment. Under Section 19, a part payment made before expiry starts a fresh period from the date of payment, provided the payment is acknowledged in writing or in the handwriting of the person making it. Bank transfers of instalments are useful evidence of part payment.

If the debt is already time-barred, a written and signed promise to pay it is still enforceable as a new contract under Section 25(3) of the Indian Contract Act 1872. A fresh cheque or a signed letter agreeing to pay the old amount can do this. A verbal promise cannot.

When Advocate B.K. Singh checks a friendly loan file, he first lays out every transfer, message and payment on a single dated sheet, because the case often turns on whether a single WhatsApp message in the third year amounts to an acknowledgment. If the deadline is close, the suit should be filed first and the paperwork improved later.

Ordinary suit or summary suit under Order 37?

Most friendly loan cases are filed as ordinary money suits. The borrower files a written statement, the court frames issues, both sides lead evidence, and the court decides. This takes time, but it is the right route when the proof is a mix of transfers, messages and witnesses.

Order 37 of the Code of Civil Procedure provides a faster summary procedure, but only for certain claims: suits on bills of exchange, hundis and promissory notes, and suits for a debt or liquidated sum arising on a written contract, an enactment or a guarantee. A cheque is a bill of exchange, so a dishonoured cheque for the loan amount usually allows an Order 37 suit. So does a signed promissory note or a written loan agreement.

In a summary suit, the defendant cannot defend as of right. He must first enter appearance and then apply for leave to defend within the short time the rules allow after service of the summons for judgment. If he shows no real defence, the court can decree the suit without a full trial; if he raises a plausible defence, leave may be granted, sometimes on condition of depositing part of the amount. Our guide on how summary suits work in Delhi High Court explains the procedure, which district courts follow in the same way.

If your proof is only messages and transfers, without a cheque or written contract, Order 37 is generally not available. Choosing it wrongly wastes months, because the court can direct the suit to proceed as an ordinary one.

The law behind loan recovery in Delhi

Which court hears a loan recovery suit in Delhi

Two questions decide the court: where, and how much. On place, Section 20 CPC allows the suit where the borrower resides or works for gain, or where the cause of action arose wholly or partly. If you transferred the money from your Delhi bank account and the borrower lives in Noida, you may have a choice between Delhi and Gautam Buddh Nagar, and the choice is worth discussing.

On value, most friendly loans are well below Rs 2 crore and go to the Delhi district courts, before a Civil Judge or a District Judge depending on the amount. Suits above Rs 2 crore at present go to the original side of the Delhi High Court; a proposal to raise that limit is pending, so check the current limit. Larger recovery claims are covered on our page on money recovery suits in the Delhi High Court.

Each Delhi district has its own civil courts: Tis Hazari, Saket, Patiala House, Karkardooma, Rohini and Dwarka. The right district is the one within whose area the borrower lives or the cause of action arose. Plaints are now e-filed, and many hearings in civil matters can be attended by video, which helps lenders who live outside Delhi.

Step by step: how to file a recovery suit for a friendly loan

This is the usual sequence for a friendly loan below the High Court's pecuniary limit, filed in a Delhi district court.

1. Collect and organise the proof

   Download bank statements showing the transfers, export the WhatsApp chats and emails, list witnesses and note every repayment received. Make a dated chronology. This is also when you check limitation.

2. Send a legal notice

   A legal notice demanding repayment within a fixed time, with interest from the date of the notice, is not compulsory but is almost always worth sending. It fixes the date for interest under the Interest Act, and the borrower's reply, or silence, often helps at trial. Send it by registered post, email and WhatsApp.

3. Draft the plaint and value the suit

   The plaint states the loan, the dates, the proof, the demand and the amount due, with interest claimed. Court fee is ad valorem on the amount claimed; check the current court fee schedule for Delhi, and see our guide on court fees in Delhi High Court for how fees are worked out. Attach the documents and a statement of truth or verification.

4. File and get summons issued

   The plaint is e-filed in the district court with jurisdiction. After scrutiny, it is registered and summons are issued to the borrower. In an Order 37 suit, the summons is in the special form the Order prescribes.

5. Pleadings and admission of documents

   The borrower files a written statement, normally within 30 days, extendable within limits. You may file a replication. Documents are admitted or denied. If the borrower admits the debt, you can ask for judgment on admission under Order 12 Rule 6.

6. Mediation and evidence

   Many civil courts refer money disputes to the court's mediation centre. If there is no settlement, issues are framed, evidence is filed by affidavit and witnesses are cross-examined.

7. Decree and execution

   After arguments, the court passes a decree with interest. If the borrower does not pay, you file an execution petition to attach his bank accounts, salary or property.

How long a friendly loan suit takes and what it costs

Documents to gather before you file

Interest: what you can claim on an interest-free loan

If you agreed an interest rate, in writing or clearly in messages, claim it. If the loan was interest-free, you generally cannot claim interest for the period before you demanded the money. Under the Interest Act 1978, the court may allow interest from the date of a written notice that demanded the money and stated that interest would be claimed, at a reasonable rate. This is one more reason the legal notice should say so expressly.

During the suit (pendente lite) and after the decree until payment, the court can award interest under Section 34 CPC. For non-commercial matters, future interest is usually not more than 6 per cent a year unless the parties agreed a higher rate. Courts in Delhi decide the rate case by case, and lenders should not expect market rates on a friendly loan.

Avoid inflating the claim with interest you cannot justify. An exaggerated claim increases court fee, invites an argument that the whole case is unreliable, and makes settlement harder.

Cash loans and the income-tax angle

Income-tax law restricts taking or repaying loans of Rs 20,000 or more in cash. Under the Income-tax Act 1961 these were Sections 269SS and 269T, with penalties under Sections 271D and 271E; similar restrictions continue under the Income-tax Act 2025, which applies from 1 April 2026. The penalty for accepting such a cash loan falls on the person who accepted it, not on the lender.

A cash loan above that limit is not automatically unrecoverable in a civil suit. The issue is proof: where did the cash come from, and is the loan shown in your accounts or tax return? Some courts have been sceptical of cheque bounce cases built on large cash loans that the lender could not explain, and the same scepticism shows up in civil suits.

If you are planning a loan now, pay by bank transfer and send a short message recording that it is a loan and when it will be returned. That single habit decides most of these cases before they reach court.

If the borrower's cheque bounced

A dishonoured cheque gives you a second, independent remedy: a criminal complaint under Section 138 of the Negotiable Instruments Act 1881. The timelines are strict. The cheque must be presented within its validity, a legal notice must be sent within 30 days of receiving the bank's return memo, and the complaint filed within one month after the 15-day payment period expires. Our sister site on cheque bounce cases explains that procedure in detail.

The criminal case and the civil suit can run together, and the cheque also makes an Order 37 summary suit possible. Many lenders use the cheque case for pressure and the civil suit for actual recovery, because a civil decree can be executed against assets while the criminal case deals with punishment and compensation.

What usually does not work is a cheating FIR over an unpaid friendly loan. Police often treat it as a civil dispute, and where an FIR is registered, the borrower may seek quashing in the High Court on the ground that a breach of promise to repay is not cheating unless there was deceit at the start. Our page on quashing a cheating FIR over a money dispute explains how courts view this.

Getting your money safe before judgment

Lenders often fear that the borrower will sell his flat or empty his accounts while the suit drags on. Order 38 Rule 5 CPC allows the court to direct the defendant to furnish security, or to attach his property before judgment, but only on proof that he is about to dispose of or remove property with intent to obstruct the decree. It is not granted just because the claim is large or the borrower is unreliable.

If the borrower admits the debt in a reply notice, a message or his written statement, an application for judgment on admission under Order 12 Rule 6 can produce a decree for the admitted amount without trial. Many friendly loan cases also settle in court mediation or at a Lok Adalat, often in instalments; our guide on getting a case settled in Lok Adalat explains how that works and what a Lok Adalat award means.

If you have been sued for a friendly loan

Do not ignore the summons. A suit left undefended ends in an ex parte decree, which can be executed against your salary and property. In an Order 37 suit, the time to apply for leave to defend is short, and missing it can mean a decree without any hearing on merits.

Common defences are that the money was a gift, a share in a joint investment, repayment of an earlier debt the lender owed you, or that it has already been repaid in cash. Each needs evidence. A defence that the claim is time-barred is often the strongest, but only if no acknowledgment or part payment restarted the period.

If you do owe the money, an early offer of instalments through mediation usually costs far less than years of litigation and interest. Keep any repayment by bank transfer with a note of what it is for.

Mistakes that sink friendly loan claims

• Waiting for the borrower's good sense. Friendly loans often go time-barred because lenders spend three years asking politely.
• Deleting chats or changing phones. The borrower's messages are often the only proof that the money was a loan. Back them up.
• Suing in the wrong court. A suit filed where neither the borrower lives nor any part of the cause of action arose can be returned, losing time.
• Using Order 37 without a cheque or written contract. The suit may be converted to an ordinary one, after months.
• Filing an FIR instead of a suit. A cheating case over a plain unpaid loan rarely succeeds and can delay the civil remedy.
• Not tracing assets. A decree against someone with no traceable bank account, salary or property is hard to execute.

After the decree: making the borrower pay

A decree tells the borrower to pay; it does not pay you. If he does not comply, you file an execution petition under Order 21 CPC in the court that passed the decree. The court can attach bank accounts, attach part of the salary, attach and sell movable or immovable property, and in some cases order the judgment debtor to disclose his assets on affidavit. Our page on execution of decrees explains these steps, and our guide on executing a money decree against a company helps where the borrower ran his business through one.

Advocate B.K. Singh's practical advice to lenders is to note the borrower's employer, bank and any property address in the plaint itself and to keep updating them through the case, because the execution stage moves much faster when the court already has a trail to follow.

For claims above Rs 2 crore, see our page on recovery suits on the Delhi High Court's original side. If you would like advice on your own loan papers, or updates on the law on recovery, contact Advocate B.K. Singh.