A decorated war veteran in Chennai has been fighting a losing battle in recovering more than fifty lakh rupees from a real estate player. A young entrepreneur has been struggling to get his payments on his invoices of over a crore from a well funded start up that folded up. A recruitment firm has been unable to get the police to register a criminal case against another company which availed its services but failed to honour bills running into a few lakh rupees. While the retired army officer is yet to press charges, the recruitment company is considering filing a civil suit and the entrepreneur is vigorously pursuing criminal action. When it comes to recovery of dues, even when there is sufficient documentation, the usual and convenient refrain of debtors is this: ‘It’s a civil dispute. Go to court.’ The unsolicited advice stems from the assumption that judicial delays and legal costs may deter creditors from pursuing civil remedies. A person accused of non-payment cannot cherry pick the line of action to be taken against him! That’s the prerogative of the creditor, based on facts and circumstances.
About a decade ago when banks started using strong arm tactics to recover loans through outsourced agents and indiscriminately began filing criminal cases against borrowers, the Supreme Court had frowned upon such practices.The apex court in Mohamed Ibrahim Vs State of Bihar, noted “the growing tendency of complainants to give the cloak of a criminal offence to matters which are essentially and purely civil in nature, obviously either to apply pressure on the accused, or out of enmity, or to subject the accused to harassment.” Banks have their debt recovery tribunals. What does the common man have? Civil remedies aside, police action, however limited, cannot be discounted in cases of cheating, criminal breach of trust or criminal intimidation. The Supreme Court in Arun Bhandari Vs State of UP had observed that commercial transactions “may also contain ingredients of criminal offences and such disputes have to be entertained notwithstanding they are also civil disputes.”
In most commercial transactions that land up in police stations, the offence of cheating is invoked. Section 415 of the Indian Penal Code (IPC) does not merely define cheating as “deceiving” or “fraudulent or dishonest inducement” but also “any act or omission that is likely to cause damage in body, mind, reputation or property.” So unpaid bills leading to the creditor in turn facing the heat from vendors knocking on his doors will fit into this definition.
In a case where the complainant had stated that he was induced to believe that the respondent would honour payment on receipt of invoices, and realised later that after receiving the goods, the respondent sold them to others and still did not pay the money, the Supreme Court in Rajesh Bajaj Vs State Nct of Delhi held that “the crux of the postulate is the intention of the person who induces the victim by his representation and not the nature of the transaction.” The apex court disapproved of the High Court’s “hyper technical approach” and how it “sieved the complaint through a cullendar of finest gauzes for testing the ingredients under Section 415 IPC. Such an endeavour may be justified during trial, but certainly not during the stage of investigation. At any rate, it is too premature a stage for the High Court to step in and stall the investigation by declaring that it is a commercial transaction simplicitor wherein no semblance of criminal offence is involved.”
Making a fine distinction between a mere breach of contract and cheating, the Supreme Court in Bhajan Lal ruled that “it depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct. In State of Kerala Vs Pareed Pillai, the apex court held that fraudulent or dishonest intention must be shown shown right at the beginning of the transaction.
Filing a summary civil suit for recovery of money under Order 37 of the Code of Civil Procedure is a feasible option when there is admitted liability. But when the liability is disputed and there are other aspects like intimidation, criminal action may be inevitable. That may not pass muster with a debtor. As they say, five minutes depends on which side of the bathroom door you are!
(The writer is a lawyer, columnist & author)...