advice required regarding loan agreement

irfan (Querist) 22 June 2009 This query is : Resolved
my friend require 1 lac for business expansion . i am ready to help him.
wheater i go for a loan agreement and take a cheque from him? .what clause and precaution should be mention in agreement to be in a safer side.

what is hundi paper ?
is legal value of hundi paper equals to a loan agreement??

kindly help

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sanjeev murthy desai (Expert) 22 June 2009
Dear mr. Irfan,

cheque is sufficient there is no need any loan agreement.

But as per Money lenders act you should be have the license to giving the money to others.

adv. rajeev ( rajoo ) (Expert) 22 June 2009
if u r a moneylender having moneylending license then you will have to take signatures on the loan application papers and on the application which you will sent to the Asst., REgistrar of Co-Opertive society( in Karnataka he is the authroised officer to issue money lending license)In karnatak it is form No:6. IN this you will have give the details of amount lent etc.,.
If you are not money lender you will have to take hand loan chit from your friend, it may be of Rs.50/- stamp paper or on the white paper affixing the revenue stamp.
Only cheque is not sufficient to prove the legally payable debt because in the recent supreme court decision to prove the legally payable debt cogent evidences are required.
In the hand loan chit you have to take a contention from ur frnd that " whenever you will demand hand loan amount will be repaid" This hand loan chit should not contain wordings regarding interest. If intetest is shown then it amounts to money lending.
So with due care lend the money.

A V Vishal (Expert) 22 June 2009
Irfan,

Since you are lending it on friendly basis, it is not necessary to hold a license for lending money. However, I suggest that you take a demand promissory note duly stamped and signed by your friend and a post dated cheque duly filled by the friend in his own writing. Further you can also charge nominal interest and there is no bar on showing the same in the Pronote.

irfan (Querist) 22 June 2009
thanks all of u
i want to charge 3% int. per month and he is ready......

what is demand promissory note(sample) ex a stamp paper??

A V Vishal (Expert) 22 June 2009
Dear Irfan

You cannot charge 3% interest it is illegal, you can charge say 18% P A legally putting it on paper.

PROMISSORY NOTE PROVIDING FOR INTEREST
I, Sri.______________________ S/o._____________________promise to
pay Sri.______________________ S/o._____________________ or order, on
demand, the sum of Rs.______ (Rupees___________________only) with interest
at the rate of ________ per cent. per mensem / annum from the date of these
presents, for value received.

Place:
Date: Signature.

Witnesses:

1.

2.

irfan (Querist) 23 June 2009
so what is the interest limit to be charged to be legal??

ex: 18 % p.a.above that it is illegal

what is hundi paper ?
is legal value of hundi paper equals to a loan agreement??

kindly reply