Criminal Prosecution: The New Modus of Money Recovery

By April 11, 2017 December 20th, 2019 No Comments
Sumit Roy
“It takes a lifetime to build a good reputation, but you can lose it in a minute” said Will Rogers.
Filing of criminal cases for alleged non-payment of money under a commercial contract (ex. vendor agreements, supplier agreements or service contracts) seems to have become a trend today. The trend is also attributable to the fact that decision in a civil case, be it a case before the Court or a claim before the arbitral tribunal requires substantial time and cost for adjudication. Moreover, getting a decree or award does not end the story and the claimant, even if it eventually wins the claim, may as well get entangled in the whirlpool of appeals and review before the higher courts, thus making realization of money inconvenient.
Under such circumstances, lodging what is known as First Information Report or FIR with police for alleged cheating, criminal intention, fraud etc. seems more luring. The stigma of having a criminal case against you and the fear of getting arrested surpasses monetary inconvenience, thus making criminal cases one of the most preferred mode for recovery of monies.
In a cash crunched startup community, cases of companies defaulting on payments to third party vendors, employees and sometimes lessors have substantially increased. As a consequence thereto, the new modus of recovering money seems to be filing of criminal cases. Two cases which have recently come into light where the promoters of two prominent start-up companies were arrested on charges of fraud and non-payment of monies owed to the respective complainants were Ringing Bells (the 251 rupees mobile company) and Stayzilla. 
In both cases, it appears from the media articles that the criminal complaints were filed for money due for services and in other case, for non-supply of products. While it is true that both of the scenarios mentioned above fall within the ambit of a civil case, nonetheless, if allegations of cheating are averred, it will pull it within the purview of criminal justice system.  Mere allegations of cheating or fraud are not sufficient, the averments along with documents backing such allegations should be able to establish that the intent to cheat was present from the inception of the commercial transaction. If the necessary constituent of the offence is not shown in the FIR, it shall not stand before the court for very long.
If in the eventuality a FIR is lodged against the company and its promoters or employees, it is necessary that the FIR is approached with caution. The company may feel that the entire case is based upon false and frivolous facts or certain facts may have been averred to make out a criminal case, even though the same may not have transpired, however, a decision taken in haste will most likely than not be detrimental to the defense which the company is likely to put forward. Thus, it is necessary to strategize the legal options available and avail remedies which are best suited having regard to the facts and circumstances.
In many cases it has been seen that in zest to finish the criminal proceedings initiated by the FIR, propositions of settling the dispute amicably is explored. While amicable resolution of the dispute may be win-win for all, however, once the criminal justice is set in motion, the proposition of settlement should be handled with utmost caution. It should be ascertained as to when the talks for settlement should be invoked or responded to. Anticipating that paying the money in the beginning of the matter shall be a very good defense and thereafter, making payment of the money without any proper settlement arrangement may twist the case completely in the opposite direction, taking out of the picture certain defenses which otherwise may have been available.
Additionally, at all times one should cooperate with the investigative agency. It is necessary and one should not lose sight of the fact that the Court inevitably looks into the bona fides of the one seeking reliefs. Trying to evade the Police only leads to negative inference by the Court.
As mentioned, the legal options should be well assessed. The FIR may or may not have non-bailable offences. The offences under the Indian Penal Code, 1860 may be categorized as being bailable or non-bailable. A bailable offence is one where bail is granted as a matter of right, while in non-bailable offence grating of bail is at the discretion of the court. If the FIR only has bailable offences, then the first step is to surrender before the Court and to get bail. However, if the FIR discloses non-bailable offences, it incumbent that first an anticipatory bail is procured. An anticipatory bail is granted prior to surrendering before the court and ensures that the accused is released on bail when arrested subject such terms which the court deems fit and proper. There are instances when an accused may not be informed with the contents of the FIR and the Police instead of arresting the accused issues a notice to appear. Under such circumstances, before hurriedly appearing before the Police as directed, the anticipatory bail should be procured.    
Once bail or anticipatory bail as the case may be has been secured, one may approach the High Court seeking quashing of the FIR. It is however very important that the pros and cons of approaching the High Court is properly analyzed. If the FIR discloses no prima facie case, the High Court shall end the entire criminal proceedings and quash the FIR.
While initiating criminal prosecution may have become the new modus of money recovery, however, merely filing of an FIR does not establish the allegations leveled therein. Therefore, instead of considering the purported societal stigma associated with the criminal prosecution and giving into the demands, the legal options should be well explored and the criminal proceedings should be approached with substantive strategy. 

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