The Recovery of Loans

The accepted practice is for people to approach civil courts for relief in respect of civil offences and for criminal offences to be tried in criminal courts. In addition to this, no one can be sent to gaol because of having committed a civil offence. Neither can people be jailed merely because they are unable to repay debts. This has been accepted not only at the national level but has in fact been enshrined in international covenants which have been signed by a vast majority of the world’s countries.

However, there are times when some financial entities and assorted money lenders have been accused of trying to turn civil wrongs into criminal offences by abusing the legal process. In all probability
this is done to pressurize borrowers to repay money.

The method which is apparently usually used is to accuse the borrower of having cheated and having committed a criminal breach of trust. Both cheating and criminal breaches of trust are offences under the Indian Penal Code, the former in the infamous Section 420 and the latter in Section 406.

High Courts are of course empowered to stop this from happening and frequently do. In the case of Alpic Finance v. Sadasivam, the Supreme Court upheld the order of the High Court quashing a criminal complaint against a borrower under such circumstances.

Also, although lawyers often use the ‘cheating and criminal breach of trust’ template, it is unclear exactly how it is possible to be guilty of both offences at the same time considering that, as the Madras High Court held in the 1936 case of R v. McIver, the two are incompatible. One rests on an intention to deceive while the other rests on a foundation of trust, so to speak.

Even if it is somehow possible to commit the offences simultaneously, the fact remains that civil wrongs are not to be disguised as criminal offences, and ordinarily, it should be possible to prevent this from happening by approaching the High Court.

source:http://lawmatters.in/content/the-recovery-of-loans

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