In today’s interconnected global marketplace, businesses often forge international relationships to remain competitive. However, these opportunities also come with risks, including potential scams from overseas partners. Common scenarios of scams/ frauds/ involving suppliers and service providers in India are –

1. Unpaid Goods

You received an order from an Indian buyer who promises to pay upon delivery and sends a 30% advance payment. Confident in the agreement, you ship the goods. However, once the goods reach the destination in India, the buyer refuses to pay the remaining amount, on one ground or the other citing quality issues. Despite your attempts to resolve the situation, the buyer remains uncooperative, leaving you with significant financial losses.

 

2. Unfulfilled Software or Web Development Contracts

An Indian software developer or company offers to create a mobile application or website at an attractive price. After taking an advance payment, the developer either delivers subpar work, demands additional money, or fails to complete the project altogether. Attempts to resolve the situation amicably prove fruitless, and you are left with an unfinished or unusable product.

 

Preventive Measures and Legal Steps

To safeguard your business from such scams, it is crucial to take proactive steps and seek legal recourse when necessary. Here are detailed precautions and actions you can take:

1. Thorough Vetting

– Verify Company Details: Check the company’s registration status and business licenses online. Reliable sources include the Ministry of Corporate Affairs (MCA) and the Import Export Code (IEC) in India.

– Obtain Aadhaar Details: Request the Aadhaar number (India’s unique identification number) of the individual or business representative. Aadhaar, managed by the Unique Identification Authority of India (UIDAI), is a 12-digit unique identifier that every Indian resident possesses. Verifying Aadhaar details can help confirm the identity of the person you are dealing with.

– MSME Registration: Ask for the company’s MSME (Micro, Small, and Medium Enterprises) registration details. MSME registration signifies a legitimate business entity under Indian law.

– Physical Verification: For high-value transactions, engage a lawyer to conduct a background check or physical verification of the business premises and operations.

 

2. Secure Payment Methods

 

• Escrow Services: Use escrow services to ensure that payments are secure and only released once both parties fulfill their contractual obligations.
• Payments in instalments: Structure payments in milestones, ensuring that each phase of the project or delivery is satisfactorily completed before the next payment is made.

 

3. Contractual Safeguards

– Digital Contracts: Enter into detailed digital contracts with clear terms and conditions. Ensure that all responsibilities, timelines, and quality standards are explicitly stated. Digital contracts are legally binding and provide a clear record of the agreement.

– Terms and Conditions: Clearly outline penalties for non-compliance, delays, or substandard work. This will provide a legal basis for claiming compensation or terminating the contract if necessary.

 

4. Communication and Documentation

– Record Conversations: Maintain a record of all communications, including emails, messages, and call logs. This documentation can serve as crucial evidence in case of disputes.

– Verify Consistencies: Ensure that the names and details in the bank account match those in the company records and identification documents. Discrepancies can indicate potential fraud.

 

 

Legal Recourses available in cases of fraud by Businessman

If you find yourself a victim of such scams, taking immediate legal action is essential:

1. Document Everything: Gather all relevant documentation, including contracts, communication records, payment receipts, and any evidence of the fraudulent activity.
2. Contact Legal Counsel: Engage a lawyer experienced in international trade and contract law. They can provide specific advice, draft demand letters, and represent you in arbitration or litigation if necessary.
3. Formal Demand Letter: Your lawyer can send a formal demand letter to the offending party, outlining the breach of contract and demanding resolution.
4. Arbitration and Litigation: If the issue remains unresolved, consider arbitration or litigation. Many international contracts include arbitration clauses, which can provide a faster and more cost-effective resolution than traditional court proceedings.
5. Filing a Criminal Case for Fraud: In cases of clear deception and fraudulent practices, consider filing a criminal case against the Indian party. Fraud is a serious offense under Indian law, and pursuing criminal charges can add pressure for the offending party to resolve the issue promptly.

 

Conclusion

Dealing with unresponsive suppliers, unpaid orders, and substandard service delivery can significantly impact your business. By taking preventive measures, verifying the credentials of your international partners, and seeking legal recourse when necessary, you can protect your business from such fraudulent practices. For personalized legal assistance and further guidance, do not hesitate to contact our firm. Our experienced attorneys are here to help you navigate these complex situations and safeguard your business interests.