Corporate Client Refused to Pay ₹4.5 Crore and Filed a Criminal FIR to Avoid Making the Payment. We Proved It Was a Breach of Contract and Got the FIR Quashed.
What Was the Case
Our client was a mid-sized engineering and infrastructure company engaged in large-scale construction and civil works for over 20 years. Our client was hired by one of the renowned real estate company of Gurgaon's to construct structural civil works for a large commercial tower.
The total contract value was ₹14 crore, it includes structural work, external facade, and parking areas. Both companies signed a detailed contract with clear payment terms, and stages of work completion. Our client completed each stage of work. Before starting the next stage, the other company's project engineers checked the work and signed off on it every time. During the project, our client did extra work worth approx. ₹1.5 crore. This extra work was done based on written request emails sent by the real estate company.
Near the final stage of the project, the real estate company started facing financial crunch. They slowed down our client's payments and then stopped almost completely. When our client claimed the final outstanding amount of ₹4.5 crore, the real estate company refused to pay. They said the work quality was defective and not as per specification, even though their own site engineers had approved every stage in writing at the time.
This was clearly a case of breach of contract under the Indian Contract Act, 1872. As per Section 73 of this Act, if a party does not pay as agreed, it must pay the other side for the loss this causes.
But instead of resolving this through a civil dispute or arbitration (as mentioned in the contract), the real estate company filed a criminal complaint. The FIR was registered under Section 420 IPC / Section 318 of the Bharatiya Nyaya Sanhita, 2023 (cheating), and Section 406 IPC / Section 316(2) BNS (criminal breach of trust). As per the FIR, our client received crores of rupees in advance payment and never finished the work. But this was not true. The real estate company's own engineers had signed papers approving the work.
What Made This Case Difficult
- Where multi-crore amounts are involved, large companies sometimes use the tactic of filing an FIR to pressure small contractors, either into accepting a smaller settlement, or into giving up the dues completely.
- The contract had an arbitration clause. This clause said any dispute must first go through arbitration first. But the real estate company bypassed this rule and filed an FIR directly.
- The real estate company had a large legal team and significant financial resources, compared to our client's mid-sized firm
- The FIR news reached other developers in the Gurgaon construction market, causing damage to our client's business reputation and risking future contracts
- Our client's working capital was stuck in this one project. Because of the payment delay, it was difficult to pay its vendors and site staff.
- SPJ Advocates had to fight on many fronts at the same time. We had to defend the criminal complaint. We had to start the arbitration process, and we had to recover ₹4.5 crore. We had to do all this together, without losing focus on any one part.
How SPJ Advocates Handled It
Months 1–3 — Building the Documentary Record
- Studied the signed contract, all stage-wise completion certificates signed by the real estate company's own project engineers, emails for additional work ₹1.5 crore sent by the real estate company, and site work progress photographs and inspection reports from each stage
- Gathered internal emails in which the real estate company's project management team confirmed work quality and cleared each stage for payment
- Filed a detailed reply before the Police Investigating Officer with this complete documentary record, showing the work was genuinely completed and formally approved at every stage
Months 4–9 —Challenging the FIR and Starting Arbitration
- Filed a petition under Section 482 CrPC / Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, before the High Court, for FIR quashing
- We told the court that this was a business contract dispute, not a criminal offence. Both companies had already agreed to solve such disputes through arbitration, as written in their contract. We argued that criminal law cannot be used to pressurising a business partner into a settlement.
- At the same time, we filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 to start arbitration and appoint an arbitrator, as per contract terms.
- Placed the stage-wise approvals and change-order emails before the High Court, showing the "defect" claims were raised for the first time only after payment was refused, not during the project itself
- We presented stage-wise approvals and extra work-order emails to the High Court. We proved that the real estate company never complained about "defects" during the project. They only raised this complaint after they refused to pay.
- The High Court agreed that this was mainly a commercial dispute. The contract had an arbitration clause, so the matter should go through arbitration. The court also stayed the criminal proceedings for now, until the quashing petition was heard.
Months 10–17 — Recovering the Payment Through Arbitration
- Presented the full case before the appointed arbitral tribunal, relying on the signed milestone approvals, the change-order documents, and expert-backed cost calculations for the additional work
- We presented the complete case before the arbitration tribunal. We used the signed approvals, extra work-order documents, and cost calculations to show and prove the extra work done.
- The real estate company's "poor quality" claim was directly contradicted by its own engineers' who had earlier approved the work in writing. This significantly weakened the company's defence.
- At the same time, we continued settlement discussions with the real estate company's lawyers, because if the company challenged the arbitration result in court, it could take a long time to recover our client's money.
Months 18–24 — Final Settlement
- We negotiated a settlement that covered both the arbitration claim and the pending criminal FIR.
- The real estate company agreed to pay the outstanding amount of ₹4.5 crore, on the condition that no additional amount would be claimed for the delay in payment.
- As part of the same settlement, the company agreed not to oppose the petition to cancel the FIR. The High Court then officially cancelled the FIR.
The Result
The entire matter was resolved in 24 months. Our client recovered the full outstanding ₹4.5 crore. The High Court quashed the FIR completely, closing the criminal case with no charges against our client.
Breach of contract is a business problem. If someone broke the deal and filed a false FIR to escape paying you, call SPJ Advocates at +91-8920245815, We know how to deal with such situations.
