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Crime or Commerce? When a Business Deal Becomes Cheating in Bangladesh

A failed business deal is not a crime. It becomes one only when there was dishonesty from the very start, or when someone dishonestly deals with property that was never theirs. The Supreme Court of Bangladesh has drawn this line in case after case, and it decides most disputes over unpaid loans, supplies, advances and land sales.

The line matters to both sides. If you have been cheated, the criminal law can help, but only if the facts fit the offence. Otherwise the case collapses and your real remedy is delayed. If you have been dragged into a criminal case over what is really a contract dispute, the law gives you ways to end the case and to hold the complainant to account.

This article explains the provisions, the tests the courts apply, the leading decisions, and the remedies open to each side.

The legal provisions

Criminal breach of trust: Penal Code, sections 405–409. A person commits criminal breach of trust when, "being in any manner entrusted with property, or with any dominion over property", he dishonestly misappropriates it, converts it to his own use, or uses or disposes of it in breach of the law or of the contract governing the trust (s.405). The punishment is up to three years' imprisonment, a fine, or both (s.406). Heavier punishment applies to carriers and warehouse-keepers (s.407), clerks and servants (s.408), and public servants, bankers, merchants and agents (s.409).

Cheating: Penal Code, sections 415–420. A person cheats when, by deceiving someone, he fraudulently or dishonestly induces that person to deliver property, or to do or omit something he would not otherwise do, causing or likely to cause harm (s.415). Simple cheating is punishable under s.417. Cheating that dishonestly induces delivery of property, or the making or destroying of a valuable security, carries up to seven years' imprisonment and a fine (s.420). Two illustrations to s.415 mark the boundary:

Illustration (f): A intentionally deceives Z into believing that A means to repay money Z lends him, not intending to repay it. A cheats.

Illustration (g): If A takes an advance on a promise to deliver indigo plant he never means to deliver, A cheats. But if A, at the time of taking the money, intends to deliver, and afterwards breaks the contract, he does not cheat but is liable only to a civil action.

Dishonoured cheques: Negotiable Instruments Act, 1881, sections 138–141. A cheque returned unpaid for insufficient funds is a separate statutory offence. The holder must serve a written demand notice within 30 days of learning of the dishonour. If the drawer does not pay within 30 days of receiving the notice, a complaint may be filed within the following month. The punishment is up to one year's imprisonment, a fine of up to three times the cheque amount, or both. An appellant must deposit at least 50% of the cheque amount before appealing (s.138A).

Forgery: Penal Code, sections 463–471. Making or using false documents is a distinct offence. It must be specifically alleged and proved. A forgery label cannot be added to a money claim as decoration.

Bank and financial-institution debts: Artha Rin Adalat Ain, 2003. A bank's claim against a defaulting borrower is a civil claim, recovered through the Artha Rin Adalat and execution against the security.

The two questions the courts ask

1. Was property entrusted? Breach of trust needs property that still belongs to the complainant while the accused holds it: goods pledged, money held as agent, deposits in a bank's custody. A loan or a price paid under a sale is different. Once paid over, it belongs to the recipient. "In a transaction of loan the loan giver does not retain any control over the loan amount … it becomes the personal money of the loanee" (Shamsul Alam v. A.F.M. Hassan, 40 DLR 46). "The question of entrustment … does not arise" (Md. Reazuddin Ahmed v. State, 49 DLR (AD) 64).

2. Was there deceit at the start? Cheating needs a dishonest intention when the money or property changed hands. A later failure to perform, however serious, is a breach of contract. The Appellate Division put it this way in Prof. Dr. Motior Rahman v. State, 3 SCOB [2015] AD 1: "The vital factor … is whether at the time of agreement there was intention to carry out the terms of the contract or not. If … the failure to fulfill the terms of the agreement was the subsequent event, the offence of cheating cannot be said to have been committed. It would only be a case of breach of contract." Intention is judged from the whole course of dealing, including what happened afterwards.

Applied to common transactions:

Decisions holding the dispute was commercial

In each of these cases the High Court Division or the Appellate Division ended the prosecution because the facts disclosed only a civil liability.

Long business relationship. In Syed Ali Mir v. Syed Omor Ali, 42 DLR (AD) 240, dues arose on settling accounts after years of trade. Such a claim "cannot form the basis of any criminal proceeding, much less for cheating … To hold otherwise would be to ignore the realities of business transactions and to encourage civil claims to be brought into criminal courts under some contrivance for the purpose of putting pressure for re-payment."

Part payment of a supply bill. In Dewan Obaidur Rahman v. State, 4 BLC (AD) 167, a contractor paid part of a bill for building materials and withheld the rest. The obligation was "of civil nature" and the proceeding was quashed. See also Abdul Rauf v. State, 53 DLR 283: "As some payments were made … it cannot be said that there was any initial intention of deception."

No refusal to pay. In Md. Rafique v. Syed Morshed Hossain, 50 DLR (AD) 163, the FIR did not say the accused had denied the balance, and alleged no initial deception. The quashing was upheld.

Bank loans. Sadiul Alam v. State, 64 DLR (2012) 146 (taxi-cab import loan); Md. Mahbub Alam Khan v. State, 14 MLR (HCD) 197 (dairy-farm loan, where even selling the mortgaged cattle was held not criminal); and Md. Sababuddin Alam v. State, 74 DLR (2022) 170 (an LC facility of over Tk. 247 crore). In all three, the bank's claim was a civil one for the Artha Rin Adalat.

Cheque bounced on a bank loan. In M.A. Sukkur v. Md. Zahirul Haque, 23 BLT (AD) 76, "bouncing of cheque simpliciter does not ipso facto constitute any offence" under s.420. The bank had its civil case, and the prosecution was an abuse of process.

Agreement for sale of land. In Shafiullah Chowdhury v. State, 14 BLC (2009) 774, the seller took Tk. 2 crore in earnest money and later sold to another buyer. He had executed a power of attorney and an MoU along the way, so there was no deceit at the start. This was Illustration (g) territory, and the remedy was the buyer's suit for specific performance.

Large private loan. In Md. Atikur Rahman v. State, 25 ALR (HCD) 270 (2022), a Tk. 95 crore claim built up over seven years of lending, contracts and an MoU. The FIR was quashed. "Law will take its course on facts, not on the presumption of the complainant."

Missing goods in official custody. In A. Kader Zilani v. State, 67 DLR (2015) 130, a port shed-in-charge could not account for 2,310 kg of scrap but promised in writing to return it. "Mere failure to return back any property … is not misappropriation" without proof of dishonest intention. His conviction was set aside.

Decisions where the prosecution went ahead

The civil-dispute defence is not a blanket shield. The courts have refused to stop prosecutions where the facts showed deceit at the outset or a real trust.

Advance taken for a purpose never intended. In Sree Gopal Chandra Barman v. Md. Nasirul Hoque, 1 SCOB [2015] AD 35, the complainant sent Tk. 6 lakh for cloth to be supplied at Eid. The accused admitted receiving it, used it to repay his own bank loan, supplied nothing and refused repayment. The prima facie ingredients of ss.406/420 were made out.

Specific false promise inducing delivery. In Arifur Rahman v. Shantosh Kumar Sadhu, 46 DLR (AD) 180, two trucks of jute were delivered on a promise to pay the balance within three days. The promise, followed by refusal, disclosed an offence.

Cheques stopped after a settlement. In Haji Alauddin v. State, 6 ADC 165, post-dated cheques given after a salish were stopped by the drawer. This prima facie showed an intention to deceive. Samarendra Nath Das v. Md. Atique, 6 ADC 436 is similar.

Written undertaking dishonoured. In Md. Shafiqul Anowar v. State, 11 ADC 863, the Appellate Division refused to quash a case over a family loan where a written undertaking to repay was not honoured.

Pledged goods substituted. In Begum Anar Kali v. State (HCD, 27.01.2019), fertiliser pledged in the bank's godown was allegedly replaced with sand and rice husk. Pledged goods are entrusted property, and the trial continued.

Customer's money moved by bank officers. In Md. Abdul Momin v. State (HCD, 01.12.2021), bank officials allegedly used a customer's 96 signed cheques to move Tk. 3.18 crore. The High Court Division directed that the case proceed.

The common thread is that, in each case, there was either property belonging to someone else, or a dishonest intention that existed when the money was taken.

If you have been cheated: your legal recourse

Choose the remedy that fits the facts. A criminal case is right where there was deceit at the start or misuse of entrusted property. Where the real grievance is non-payment, a civil remedy recovers the money; a criminal case does not.

Criminal case for cheating or breach of trust. Offences under ss.406 and 420 are cognizable. You may lodge an FIR at the police station (CrPC s.154) or file a petition of complaint before the Magistrate (CrPC s.200). Set out the facts that show the offence: the false representation, when it was made, and how it induced you to part with money; or what was entrusted and how it was misused. A complaint that describes only an unpaid debt invites quashing.

Compensation through the criminal court. On conviction, the court may direct that all or part of a fine be paid to the victim as compensation (CrPC s.545).

Dishonoured cheque. Serve a written demand notice within 30 days of learning of the dishonour. If the drawer does not pay within 30 days of receiving it, file a complaint under NI Act s.138 within the following month. The deadlines are strict, and missing one is fatal to the case.

Civil suit for recovery. A money suit recovers the principal with interest. Where the claim rests on a negotiable instrument, a summary suit under Order XXXVII of the Code of Civil Procedure may be available. If the other side is disposing of assets, you can apply for attachment before judgment (Order XXXVIII). Limitation for most money claims is three years.

Specific performance. Where land or goods were contracted for, a suit under the Specific Relief Act, 1877 can compel performance, as the buyer did in Shafiullah Chowdhury.

Banks and financial institutions. Recovery lies in the Artha Rin Adalat, followed by execution against the mortgaged security.

Civil and criminal proceedings can run side by side where the facts genuinely disclose an offence. But filing a criminal case only to pressure payment is an abuse of process. It can expose the complainant to the consequences described in the next section.

If you have been falsely implicated: your legal recourse

Secure bail and appear. Do not let a warrant stand or a trial proceed in your absence.

Seek discharge at the charge hearing. If the police report or complaint discloses no offence, apply for discharge: CrPC s.241A before a Magistrate, or s.265C before a Sessions or Special Judge.

Apply to quash under CrPC s.561A. The High Court Division may quash a proceeding to prevent abuse of process. Under Abdul Quader Chowdhury v. State, 28 DLR (AD) 38, this includes cases where the allegations, "even if taken at their face value and accepted in their entirety, do not constitute the offence alleged," and cases where continuing the proceeding would be an abuse of the process of the court. A civil dispute presented as a crime is the classic example. The usual rule is that the application is made after cognizance is taken (Abdul Huque v. State, 60 DLR (AD) 1). Earlier interference is reserved for the rarest case (Syed Mohammad Hashem v. State, 48 DLR (AD) 87). The power extends even to setting aside a conviction where the facts do not constitute an offence (Sher Ali v. State, 46 DLR (AD) 67).

Appeal or revision. A conviction resting on a civil transaction can be set aside on appeal, as in Farhad Chowdhury v. State, 12 ALR (HCD) 321 and Kader Zilani.

Compensation from the complainant. When a Magistrate discharges or acquits an accused and finds the accusation "false and either frivolous or vexatious", he may order the complainant or informant to pay compensation to the accused (CrPC s.250).

Prosecution for false charge. Instituting criminal proceedings, or falsely charging a person with an offence, knowing there is no just or lawful ground, is itself an offence (Penal Code s.211). Giving false information to a public servant is an offence too (s.182). Where the false charge was made in court proceedings, the complaint is ordinarily made by that court (CrPC ss.195 and 476).

Civil suit for malicious prosecution. You can claim damages if the prosecution ended in your favour, was brought without reasonable and probable cause, was driven by malice, and caused you loss: to reputation, liberty or money, including legal costs. The suit must be filed within one year of the acquittal or other termination of the prosecution (Limitation Act, 1908).

How Justice Corner can help

We advise both sides of these disputes. For people who have been cheated, we assess whether the facts support a criminal case, a civil claim or both, and we draft complaints that will survive scrutiny. For those wrongly accused, we seek bail, discharge and quashing, defend at trial and on appeal, and pursue compensation and malicious-prosecution claims where the case was brought in bad faith. Early advice often decides the outcome. Contact Justice Corner for a consultation.

Securing your interests in complex commercial transactions

The cases above share a lesson: most losses, and most false prosecutions, trace back to how the deal was documented and secured at the start. Justice Corner works with businesses before, during and after high-value transactions so that their rights are clear and enforceable, and so that a dispute, if it comes, goes to the right forum.

Due diligence before you commit. We verify title to land and other property, existing mortgages and charges, company records, authority to sign, and the counterparty's litigation and Artha Rin exposure. A buyer who checks title first rarely needs a cheating case later.

Contracts that record the representations that matter. Cheating turns on what was represented when the money changed hands. We draft agreements that put the key representations, payment milestones and conditions in writing. If the other side was dishonest from the start, that can then be proved. If they were not, the contract gives you a clean civil claim.

Security that works without the criminal courts. We structure mortgages, pledges, hypothecation, personal and corporate guarantees, bank guarantees, escrow and post-dated cheques, so that you can recover from assets rather than rely on a promise.

Trade and bank finance. We advise exporters, importers and lenders on LC, back-to-back LC, PSC and other trade-finance documentation, lien arrangements over export proceeds, sanction letters, rescheduling and exit arrangements. These are the transactions most often turned into criminal cases when a relationship breaks down.

Dispute clauses chosen in advance. We provide for arbitration under the Arbitration Act, 2001, or for a chosen court, with notice, cure and accounting provisions. That keeps a disagreement commercial and resolvable.

Protecting directors and officers. We advise on board approvals, record-keeping and correspondence, so that individuals are not personally exposed when a company defaults. Where an anti-corruption or criminal inquiry starts, we advise from the first notice.

Acting quickly when a deal goes wrong. We send legal notices and take the steps that time limits demand, such as the cheque-dishonour deadlines. We apply for attachment before judgment where assets are at risk, choose between civil, criminal and Artha Rin routes on the facts, and document any settlement so it is binding and enforceable.

Defence and counter-measures. If a commercial counterparty uses the criminal process to apply pressure, we move for bail, discharge or quashing. Where the case was brought in bad faith, we pursue compensation and malicious-prosecution remedies.

This article is general information on the law of Bangladesh as at the date shown above. It is not legal advice. Statutes and procedure are amended from time to time, and every case turns on its own facts and documents.

Cases referred to