Investment scam legal remedies: criminal and civil

By Advocate Panchanand Shaw, Bar Council of West Bengal · Published 2 Nov 2026 · Cyber law

An investment scam gives you two legal tracks, not one. The criminal complaint under section 318(4) of the BNS 2023 pursues punishment and gives the police power to freeze accounts; the civil recovery suit pursues the money through a decree. They answer different questions and can run together.

When an investment scam is discovered, the question that follows is not only who to report to but which remedy to pursue. There are two distinct legal tracks, and they answer different questions. The criminal track asks whether an offence was committed and, if so, what should happen to the person who committed it. The civil track asks who is holding your money and whether it can be ordered back to you. Filing on one track does not close the other; in most investment frauds both are worth considering, and the practical skill lies in sequencing them so that each strengthens rather than spoils the other.

The criminal track rests on section 318(4) of the Bharatiya Nyaya Sanhita, 2023, which punishes cheating that dishonestly induces a person to deliver property with imprisonment up to seven years and fine, together with section 66D of the Information Technology Act, 2000 where a computer resource was used to impersonate. The civil track rests on the law of contract, the law of restitution and, where the recipient took part in the deception, the law of tort. Both tracks can proceed at the same time. What must be avoided is using one to undermine the other — a settlement that quietly buries a criminal case, or a public accusation that makes a civil defendant out of a person who should be a witness.

The criminal remedy: what a prosecution can and cannot do

A first information report under section 173 of the Bharatiya Nagarik Suraksha Sanhita, 2023 sets the criminal process in motion. The investigating officer gathers the transaction trail, the communications and the platform records, and may arrest where the case and the evidence justify it. The case then travels to a magistrate or, where the cheating is part of an organised scheme, to a court trying offences under the Sanhita. The outcome, if the prosecution succeeds, is conviction and sentence — up to seven years under section 318(4), up to seven years for forgery used to cheat under section 336(3), and the penalties under the IT Act for identity misuse and personation.

What a prosecution cannot do, on its own, is put money back in the victim's account. Conviction is not an order for repayment. There are three restorative mechanisms inside the criminal process, and they operate in narrow circumstances.

Disposal of property under BNSS 498. Where property connected with the offence is produced before the court, the court may at the conclusion of the trial order its delivery to the person entitled to possession. This is the mechanism by which recovered cash or articles return to the victim. It depends entirely on something having been recovered and produced.
Compensation on a recommendation or an application. Under section 396 of the BNSS 2023, every State has a victim compensation scheme. Where the offender is not traced or identified and no trial takes place, the victim may apply to the State or District Legal Services Authority, which conducts an enquiry within two months and may award compensation. Where a trial does take place, the court may recommend compensation, and the Legal Services Authority decides the quantum.
Interim attachment and freezing during investigation. The investigating officer can request banks to freeze accounts and can seek orders in respect of property suspected to be proceeds of the fraud. This is where money is most often saved, and it is available only while the criminal case is live.

The criminal track therefore does two things well: it puts coercive power behind the search for the money, and it imposes consequences on the offenders. It does not guarantee repayment, and it moves at a pace the victim does not control.

The civil remedy: what a suit can and cannot do

A civil suit for recovery is directed at a defendant who holds or received the money. Its foundation is straightforward: the claimant paid money on a false representation, the defendant received it without any lawful basis, and the claimant is entitled to restitution. Where the defendant is a company, a firm, a merchant or an intermediary that collected subscriptions or investments, the suit is against an entity with a registered address and, potentially, assets.

The civil track has three advantages. It can be filed quickly once the defendant is identified. It permits an application for interim protection against disposal of assets, which is often more valuable than the final decree. And it can result in a money decree that is enforceable against the defendant's property, independently of whether a criminal conviction is ever obtained. Its disadvantage is equally clear: a decree is only as good as the defendant's solvency. Against a mule account holder who has no assets and who may be a victim of the same syndicate, a suit is usually an expense without a recovery.

Two practical points are often missed. First, limitation: a suit for recovery of money is governed by the Limitation Act, and the period runs from the date the right to sue accrues, so delay can extinguish the civil remedy even while the criminal case continues. Second, the standard of proof: a civil court decides on the balance of probabilities, which is a lower threshold than the criminal standard of proof beyond reasonable doubt. That difference is why a civil claim can succeed where a prosecution struggles, and why the same evidence should be preserved for both.

Both tracks at once: how the sequencing works

Filing both is lawful. A victim may lodge an FIR and also sue for recovery; the Constitution's protection against double jeopardy applies to repeated prosecution for the same offence, not to a civil claim for money. The risk is not legal, it is strategic. Four sequencing rules matter.

Preserve evidence before either filing becomes public. A civil notice or an aggressive demand letter can prompt the operators to delete accounts and move funds. The criminal complaint and the freeze request should precede any step that warns the defendant.
Do not let a civil settlement become a compromise of the criminal case. An agreement that the complainant will not pursue the FIR is not binding on the State; the prosecution is conducted by the State once the case is registered. Promising to withdraw a criminal complaint in exchange for money is both ineffective and risky.
Disclose every recovery in every forum. Money recovered through a freeze, a bank credit, a civil decree or a compensation order all address the same loss. Recovering twice for the same loss is unjust enrichment, and concealment destroys credibility.
Coordinate the evidence. The same chat exports, bank statements and platform records serve both proceedings. An electronic record tendered in court needs the certificate under section 63 of the Bharatiya Sakshya Adhiniyam, 2023, so preserve the original device and obtain the certificate once, properly, rather than reconstructing it later.

Which forum for which remedy

Remedy	Forum	What it produces	Main limitation
Criminal complaint for cheating	Police station, then magistrate or sessions court under the BNSS 2023	Investigation, freeze and attachment powers, conviction and sentence	Does not by itself order repayment to the victim
Recovery suit for money	Civil court of competent pecuniary jurisdiction	A money decree enforceable against the defendant's property	Depends on identifying a solvent defendant, and on limitation
Interim protection against disposal of assets	The civil court hearing the suit	An order restraining the defendant from dealing with assets	Must be applied for early, with evidence of the assets
Delivery of recovered property	The criminal court at the conclusion of trial, under BNSS 498	Return of recovered cash or articles	Requires recovery and production before the court
Victim compensation	State or District Legal Services Authority, under BNSS 396	A compensation award, decided within an enquiry of about two months	Modest quantum, and not a substitute for the loss
Bank liability claim	The bank's grievance process, then the RBI ombudsman	Reversal or liability allocation under the RBI's 2017 directions	Applies on its own terms mainly to unauthorised transactions

Consumer and regulatory angles

Where the scheme was sold through a regulated intermediary, a separate remedy may exist before a regulator. A person who solicited investments without registration, or who sold a product that no regulated entity could lawfully offer, may be exposed to action by the securities regulator, and a complaint to that regulator can produce an investigation that a private complainant cannot fund. Similarly, where a payment was collected through a payment aggregator or a merchant, the aggregator's own dispute process and the network's chargeback rules may be available. These routes are governed by the regulator's framework and by contract rather than by the criminal law, and the outcomes vary. The law is unsettled on how far a regulator will act on an individual complaint about a scheme that has already collapsed, so these should be treated as additional pressure points rather than as the primary remedy.

What decides whether the remedy is worth pursuing

Four factors decide the choice. The first is solvency: a remedy against a person with no assets is an academic exercise. The second is identification: a suit needs a named defendant with an address; a criminal case can proceed against unknown persons, which is one reason the criminal track is often started first. The third is time: limitation can bar the civil claim, and the criminal case may outlast the victim's patience. The fourth is the value of the loss against the cost of proceedings, which is an honest calculation every victim has to make.

Mistakes to avoid

Do not file a civil suit as a substitute for the criminal complaint on the assumption that it will recover the money faster; without the criminal track there is no freeze and no investigation. Do not promise to withdraw the FIR in exchange for a refund; the promise is unenforceable against the State and can be treated as an attempt to stifle prosecution. Do not accept a "refund" that is paid in instalments without a written and enforceable undertaking, and do not sign a release that waives all claims before the money has actually arrived. Do not allow the criminal case to be withdrawn on the ground that the parties have settled; a compounding application is not available for the cheating offence in the ordinary case. And do not let the civil notice go out before the freeze request, because the notice is the one document most likely to make the money disappear.

When to involve a lawyer

The decision that benefits most from advice is not whether to sue but when, and in what order. A cyber crime lawyer in Kolkata can map the criminal and civil tracks against the facts — which defendant is worth suing, what should be attached, what should be preserved, and which filing should come first. Where a recovery suit is the chosen route, a civil litigation practice handles the pleadings and the interim application. Nothing here guarantees a recovery. What it guarantees is that the remedy you choose is the one that fits the money you are trying to reach.

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Frequently asked questions

Can I file both a criminal complaint and a civil suit for an investment scam?

Yes. A criminal complaint for cheating and a civil suit for recovery of money address different questions and may proceed at the same time. The Constitution's protection against double jeopardy applies to repeated prosecution for the same offence, not to a civil claim for the same loss. Sequencing them carefully matters more than choosing between them.

What can a criminal court order a fraudster to pay back?

A conviction does not by itself order repayment. Under section 498 of the BNSS 2023 the court may deliver recovered property to the person entitled to possession at the conclusion of trial. Under section 396 a victim may also seek compensation from the State or District Legal Services Authority, including where the offender was never traced.

Which is faster, a criminal case or a civil recovery suit?

Neither is quick, but they move differently. The criminal track produces a freeze or attachment within days if the complaint is early, then takes months or years to conclude. A civil suit can be filed quickly and can obtain interim protection against disposal of assets, but the final decree comes after a trial.

What is the limitation period for suing to recover money lost in a scam?

A suit for recovery of money is governed by the Limitation Act, and time runs from the date the right to sue accrues. Delay can extinguish the civil remedy even while a criminal case continues, so the civil option should be assessed early. The exact period depends on the nature of the claim and should be checked on the facts.

Can I withdraw the FIR after the fraudster refunds my money?

No. Once registered, the criminal case is conducted by the State and a promise to withdraw it is not binding on the prosecution. Compounding is not available for cheating in the ordinary case. Taking a refund is not wrong, but it does not end the criminal proceedings, and a written settlement should be drafted with that in mind.

Is a civil suit useful against a mule account holder?

Rarely on its own. Mule account holders often have no assets and are sometimes victims of the same syndicate. A suit is more useful against a company, firm, merchant or intermediary that actually collected the money and holds assets, especially where interim protection against disposal of assets is obtained early.

Information for general guidance only and not legal advice. Provisions cited follow the Information Technology Act 2000, the Bharatiya Nyaya Sanhita 2023 and the Bharatiya Nagarik Suraksha Sanhita 2023.

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