• Unable to pay supplier. Criminal case possible?

I and my father are partners in our family business. Due to drastic downturn in the business environment, we had to shut down our factory. We have been unable to pay our suppliers for raw material procured. We have a lot of loan outstanding. Our factory and other properties have been mortgaged with our bank. There doesn't seem to be a way out for us to pay our lenders or suppliers.

One of these suppliers has threatened us with criminal case of cheating/forgery against us. We have been told that the supplier has good political connections and has even approached the police. There isn't any case of cheating or forgery against us as it was a business transaction and we couldn't pay due to adverse business conditions.

Can the police arrest us despite the case's weakness due to political pressures?

What measures should we take to prevent any arrest or detention?

We welcome any other advice that you may have for us.

Asked 6 years ago in Criminal Law
Religion: Hindu

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16 Answers

It is dispute of civil nature

2) if you fail to make payment supplier can file summary suit against you to recover its dues

3) no case of cheating is made out as you had no intention to deceive supplier

Ajay Sethi
Advocate, Mumbai
95215 Answers
7611 Consultations

5.0 on 5.0

If there is no record of any false document misappropriation or cheating then based on bills invoices supplies police cannot implicate you in criminal case this is pure civil matter.

if you and your father are a company then the party can go before nclt for insolvency proceeding if not then they have to file a summary recovery suit before the civil court but no criminal case can lie on these circumstances.

Shubham Jhajharia
Advocate, Ahmedabad
25514 Answers
179 Consultations

5.0 on 5.0

Dear Sir,

Police can be bribed and FIR for any offense can be registered. As a precautionary you can anticipatory bail even before filing of FIR. The relevant judgment is given below. You have challenge the FIR and get it quashed saying it is purely a contract based civil transaction. The High Court certainly quash such FIR. Till then you must be alert.


Anticipatory bail before FIR

Punjab-Haryana High Court

Gurbaksh Singh Sibia vs State Of Punjab on 13 September, 1977

Equivalent citations: 1978 CriLJ 20

Author: S Sandhawalia

Bench: S Sandhawalia, P C Jain, S Mital

Section 438 applies before the arrest is

made and, in fact, one of the pre-conditions of its application is that the person, who applies for

relief under it, must be able to show that he has reason to believe that "he may be arrested", which

plainly means that he is not yet arrested. The nexus which this distinction bears with the grant or

refusal of bail is that in cases falling under Section 437, there is some concrete data on the basis of

which it is possible to show that there appear to be reasonable grounds for believing that the

applicant has been guilty of an offence punishable with death or imprisonment for life. In cases

falling under Section 438 that stage is still to arrive and, in the generality of cases thereunder, it

would be premature and indeed difficult to predicate that there are or are not reasonable grounds

for so believing. The foundation of the belief spoken of in Section 437(1), by reason of which the

court cannot release the applicant on bail is, normally, the credibility of the allegations contained in

the First Information Report. In the majority of cases falling under Section 438, that data will be

lacking for forming the requisite belief. If at all the conditions mentioned in Section 437 are to be

read into the provisions of Section 438, the transplantation shall have to be done without

amputation. That is to say, on the reasoning of the High Court, Section 438(1) shall have to be read

as containing the clause that the applicant "shall not" be released on bail "if there appear reasonable

grounds for believing that he has been guilty of an offence punishable with death or imprisonment

for life". In this process one shall have overlooked that whereas, the power under Section 438(1) can

be exercised if the High Court or the Court of Session "thinks fits to do so, Section 437(1) does not

confer the power to grant bail in the same wide terms. The expression "if it thinks fit", which occurs

in Section 438(1) in relation to the power of the High Court or the Court of Session, is conspicuously

absent in Section 437(1). We see no valid reason for re-writing Section 438 with a 409 view, not to

expanding the scope and ambit of the discretion conferred on the High Court and the Court of

Session but, for the purpose of limiting it. Accordingly, we are unable to endorse the view of the

High Court that ancipatory bail cannot be granted in respect of offences like criminal breach of trust

for the mere reason that the punishment provided therefor is imprisonment for life. Circumstances

may broadly justify the grant of bail in such cases too, though of course, the Court is free to refuse

anticipatory bail in any case if there is material before it justifying such refusal.

Kishan Dutt Kalaskar
Advocate, Bangalore
6136 Answers
487 Consultations

4.8 on 5.0

Firslty, Sir, I pray to God for you ke well being very soon in the future.

Secondly, yes it was a business transactions either contracted on paper or implied which normally happens in business.

Thirdly, but yes there are chance that Police may file case against you as they may put the case in a way that police also initially get agree with them.

Fourthly, if you happen to face any such situation then please abscond from the scene and apply for Anticipatory Bail as If get arrested then would be problem for you.

Fifthly, chances may be high in your case for Anti. Bail.

Good Luck...!

Sanjay Baniwal
Advocate, South Delhi
5474 Answers
13 Consultations

5.0 on 5.0

1. No Criminal case lies for defaulting in repaying loans or for not paying the supplies.

2. They shall have to file Money Suit against you to get a decree for attaching your properties for selling those properties to recover the said amounts. In extreme cases, even after the decree is passed, arrest warrant can be issued for not honouring the decree.

3. However, it will take years for them to get the said decree from the Court.

4. You can file a petition for declaring you insolvent to avoid being so harassed legally but such declaration of insolvency will deprive you from few civic rights.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

yes they can lodged complaint against you under section 406,420 ipc but you ll get relief even if fir lodged against you as it is also civil matter that too for recovery

Tarun Budhiraja
Advocate, Rohtak
379 Answers

4.8 on 5.0

If you have a reason to believe that you may be arrested on accusation of having committed a non-bailable offence, though it may not be true, you have the right to apply for an anticipatory bail in the Sessions Court or High Court.

In common language, it is a direction to release a person on bail, even before the person is arrested.

Siddharth Jain
Advocate, New Delhi
6303 Answers
102 Consultations

5.0 on 5.0

Dear Sir, if you are under apprehension you have to take anticipatory bail from jurisdiction court and also you have to write police complaint before jurisdictional police station, you have every right to protect yourself by filing police complaint

C. V. Jadhav
Advocate, Bangalore
545 Answers
18 Consultations

4.7 on 5.0

In Chapter VI of the Sale of Goods Act, which relates to suits for the Breach of a Contract. It shall be divided roughly, into 3 parts

I) Seller’s Remedies against Buyer – Sections 55 and 56

II) Buyer’s remedies against Seller – Sections 57, 58 and 59

III) Remedies available to both buyer and seller – Sections 60 and 61

The paper is structured in a section by section format, wherein the sections, as divided under the various heads are described and explained individually.

Seller’s remedies against buyer

The suits that may be instituted by the seller against the buyer under the Act can be roughly divided into two types

i. Suit for Price

ii. Damages for non-acceptance

i. Suit for Price

Section 55 (1) Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.

(2) Where under a contract of sale the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract.

From the above section, it can be seen that except as provided by sub-section (2), the seller can only sue for the payment when the property has passed to the buyer. The passing of the property depends upon certain conditions, and if these conditions are not fulfilled, he cannot sue for the payment under this section.

Where goods are sold for a particular amount and the payment has to be made partly in cash and partly in kind, the default if made in kind entitles the seller to sue for the remainder of the price.

So seller can file case against you in Civil Court and not in criminal court.

Ganesh Kadam
Advocate, Pune
12940 Answers
256 Consultations

4.9 on 5.0

Buyers remedies against seller

The suits that may be instituted by the buyer against the seller can be roughly divided into three types

i. Damages for non-delivery

ii. Remedy for breach of warranty

iii. Specific Performance

i. Damages for Non- Delivery

Section 57 – Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

When the property in the goods has passed, the buyer, provided that he is entitled to the immediate possession, has all the remedies of an owner against those that deal with the goods in a manner inconsistent with his rights. If, therefore, the seller wrongfully re-sells them, he may sue the seller in trover, and also against the second buyer, though as against him the rights may be cut down by the provisions in sections 30 and 54.

In the case of non-delivery, the true measure of damages will be the difference between the contract price and the market price at the time of the breach. The market value of the goods means “the value in the market, independently of any circumstances peculiar to the plaintiff (the buyer)”[viii].

Where he, the seller, is guilty of breach of an agreement to sell, the following remedies may be available to the buyer:

(i) The buyer may sue for damages for non-delivery under section 57 of the Sale of Goods Act

(ii) In case the price has been paid by the buyer, he may recover it in a suit for money had and received for a consideration which has totally failed[ix].

Where however the buyer has failed to prove the alleged damages caused due to short supply of goods by seller and has also not served to seller a notice under Section 55 of the Indian Contracts Act, the buyer cannot claim damages.

III) Specific Performance

Section 58- Subject to the provisions of the Specific Relief Act, 1877, in any suit for breach of contract to deliver specific or ascertained goods, the court, may, if it deems fit, on the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on the payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price, or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree.

Ganesh Kadam
Advocate, Pune
12940 Answers
256 Consultations

4.9 on 5.0

Dear Client,

No criminal case but civil dispute. IF FIR filed under political pressure, file Writ in court to quash FIR.

Yogendra Singh Rajawat
Advocate, Jaipur
22714 Answers
31 Consultations

4.4 on 5.0

The police generally act on the pressures i.e., political or money or any other background other than the rules framed for dealing with such cases.

Therefore on the namesake complaint on cheating charges/offences, the police may register a FIR and may arrest, at least to satisfy their political mentors.

If there is a summon from police, first you obtain anticipatory bail and then attend the inquiry session.

T Kalaiselvan
Advocate, Vellore
85416 Answers
2239 Consultations

5.0 on 5.0

To answer your question very bluntly;

Yes the Police can arrest you despite the case being of civil nature.

To prevent arrest you can approach the Sessions Court or High Court, as the case may be, for Anticipatory Bail. For this certain prerequisites must be met.

Your case is more in the nature of a civil matter and there are remedies available to your secured creditors and other lenders, suppliers, etc. under civil law. With the help of legal arguments you will have to demonstrate the same.

To make out a case of cheating and forgery, the supplier would have to satisfy the Judge. These things have to be contested in Court appropriately. Instead their lawyer may consult them to go for Insolvency or for the Banks to move the Debt Recovery Tribunal.

Have you issued any cheques that have returned dishonoured? It could give rise to a cause for action under Section 138 Negotiable Instruments. Please ensure you reply to all/ any legal Notices they send.

Seoula Vas
Advocate, Greater Mumbai
1 Answer
1 Consultation

Not rated

This is my response to you:

1. Make sure you give them a fixed time and date to make the payment;

2. If they don't agree then ask them for some more time;

3. If they agree, make sure you get their confirmation on a written paper;

4. If they file a case of cheating or forgery and or any other case, then you can apply for anticipatory bail in the sessions court;

5. Once you get anticipatory bail, you are not under the risk of being arrested;

6. But once you approach the court, the court will require you to pay within a fixed time;

7. If you are not able to pay then the court can order your assets to be seized.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

you file a suit against the suppliers for threatening etc in criminal court and also apply for bankruptcy

Anwar Zaidi
Advocate, Mira Bhayandar
231 Answers

4.5 on 5.0

If they file FIR against you then you can seek Anticipatory bail from the court. Basically it is a civil transaction but police under influence file fir.

Prashant Nayak
Advocate, Mumbai
32164 Answers
185 Consultations

4.1 on 5.0

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