If you are stuck in such a situation, here is what to do.

Mrs. Anjali Sharma, a resident of Rampur, was the owner of a thriving garment shop. Due to personal health issues, she decided to sell her well-established business to a Ms. Priya Verma. At the time of the sale, Ms. Verma expressed her inability to pay the entire sale price at once, citing financial constraints. An agreement was reached where Ms. Verma paid a portion of the amount upfront and promised to pay the remaining balance of ₹45,000 within a few months.

Nearly ten months passed, and Ms. Verma failed to run the business successfully. When Mrs. Sharma approached her for the outstanding payment, Ms. Verma flatly refused. Her justification was that since the business did not succeed under her management, she was not obligated to pay the remaining amount. She defiantly told Mrs. Sharma, “Do what you must, I will not pay.” This leaves Mrs. Sharma in a difficult position, seeking ways to recover her rightful money.

Advice in such cases

In a situation like this, the fundamental legal principle is that the success or failure of a business after its sale is the sole risk and responsibility of the new owner (the buyer). The seller’s right to receive the full, agreed-upon sale price is based on the contract of sale itself, not on the subsequent performance of the business. The buyer’s failure to pay the outstanding amount constitutes a clear breach of the sale agreement.

Applicable Sections of Law

This is primarily a civil matter governed by the following laws:

• The Indian Contract Act, 1872: The sale of the business is a legally binding contract. The refusal to pay the agreed amount is a breach of this contract, for which the seller can seek remedies.
• The Code of Civil Procedure, 1908: This code outlines the procedure for filing a civil suit for the recovery of money in the appropriate court.
• The Specific Relief Act, 1963: This Act provides for remedies to enforce contractual obligations.
• Bharatiya Nyaya Sanhita, 2023 (BNS): If it can be proven that the buyer had a dishonest intention to not pay the full amount from the very beginning, a criminal complaint for cheating under Section 316 of the BNS could potentially be filed. However, the most direct remedy is a civil suit.

If you are the complainant

If you are the seller in this scenario, you are the complainant or plaintiff. Here are the steps you should take:

• Gather all evidence: Collect any written sale agreement, emails, WhatsApp chats, or SMS messages where the debt is acknowledged. Bank statements showing the partial payment are also crucial pieces of evidence.
• Send a Legal Notice: The first formal step is to have a lawyer send a detailed legal notice to the buyer. This notice will state the facts, demand the outstanding amount along with interest for the delay, and warn of legal action if the payment is not made within a specified period (e.g., 15 or 30 days).
• File a Civil Suit: If the buyer ignores the legal notice or refuses to pay, you can file a civil suit for recovery of money in the civil court that has jurisdiction over the matter.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A Good lawyer can get the issues resolve in 7-10 days.

If you are the victim

As the victim (the seller who is owed money), it is important to act strategically:

• Stay Calm and Professional: Avoid getting into heated arguments or making threats. All your communication should be formal and documented.
• Preserve Communication: Save all text messages, emails, and call recordings (where legally permissible) with the buyer. Do not delete anything.
• Act Promptly: The law provides a limitation period for filing recovery suits, which is typically three years from the date the payment became due. Delay can weaken your case or even bar you from filing a suit.
• Follow Legal Advice: Once you have engaged a lawyer, follow their advice carefully and provide them with all necessary documents and information to build a strong case.

How the police behave in such cases

Since this dispute arises from a breach of a commercial transaction, it is considered a civil matter. If you approach the police, they will most likely inform you that they cannot intervene in a civil dispute and will advise you to approach the civil court. Police intervention is generally limited to criminal offenses. While you can try to file a complaint for criminal breach of trust or cheating, the police may be reluctant to register an FIR unless there is clear evidence of fraudulent intent from the outset, rather than a simple failure to pay later on.

FAQs people normally have

Can I file a police complaint for non-payment?
You can try, but the police will likely classify it as a civil dispute. A criminal complaint is only viable if you can prove a pre-meditated intention to cheat under Section 316 of the BNS.

Is a verbal agreement enough to file a case?
While a written agreement is always best, a verbal agreement is also legally enforceable. However, the burden of proving its existence and terms falls on you. Evidence like partial payment, witness testimony, and subsequent communication acknowledging the debt can be used to prove a verbal agreement.

Can I claim the money I spend on the court case?
Yes, when you file a civil suit, you can include the costs of litigation (including lawyer’s fees) in your claim. The court has the discretion to award these costs to you if you win the case.

What evidence is required?

To build a strong case for recovery, you will need:

• The contract or agreement of sale (written or evidence of oral agreement).
• Proof of partial payment received (bank statements, receipts).
• Any correspondence (WhatsApp, SMS, email) where the buyer acknowledges the transaction and the pending amount.
• Proof of the transfer of the business assets to the buyer.
• Names and details of any witnesses to the transaction or conversations about the payment.

How long will the investigation take?

In a civil suit, there is no “investigation” by the police. The process is one of legal proceedings in court, which includes filing the suit, the other party filing their reply, evidence being presented by both sides, arguments, and finally, a judgment. The duration of a civil suit in India can vary greatly depending on the court’s schedule, the complexity of the case, and procedural delays. It can take anywhere from a year to several years to get a final decree.

Advocate Sudhir Rao, Supreme Court of India