Betrayed by My Gym Business Partner: How Should I Handle This Fraud Situation?

Good morning Sir/Ma'am, I am Rajesh Rathod from Pune. By profession, I am a Gym Trainer and also the co-owner of Body Lab Gym in partnership with a Business Partner (BP) since July 2018.

Initially, before starting the gym, BP and I invested a total of Rs 11,00,000/- approximately 50% each to buy gym equipment, advertise, and design the interior.

Average Monthly Income/Profit and Expenditure

Income: 65,000
Expense: 55,000
Profit: 10,000

The main source of income for us was personal training which we provided.

Issues/Fraud Being Faced

1. After a few months of starting the gym, BP introduced his brother Papa (my best friend) as a trainer, but it was not required as we already had a few students in the gym who were also used as trainers.
2. The rent amount of Rs 17,000/- was paid each month from the gym. However, BP lied to me and was taking 6,000/- into his pocket without my knowledge by only paying 11,000, which I recently discovered.
3. The gym equipment was purchased for Rs 7,00,000/-, however, the actual amount paid by BP was Rs 6,50,000/-, so he pocketed 50,000 without my knowledge.
4. I was out for a month recently, during which his brother (Papa) pocketed Rs 6,000 by intentionally miscalculating, which can be seen in the register.
5. Each month, the profit was not distributed equally among us. The amount was kept with BP, and he always said we had to pay rent, advertise, etc.
6. I asked him multiple times to open a joint current account and make an agreement, but he always postponed intentionally and never got one done.
7. My brother and I were planning to buy land for which BP had brought a deal. He said the land was costing 22 lakhs, but I recently learned that the owner was selling it for 16 lakhs. Being such a dear friend and co-owner of the gym, he was trying to defraud me, which I never imagined.

About BP

1. BP has been in the profession of a physical trainer for the last 10 years, and I was a gym enthusiast for the last 5 years before starting the gym.
2. BP was a close friend of my brother, and Papa (BP's brother) was my best friend.
3. BP approached me to open a gym in partnership, which I then discussed with my brother and Dad, who provided me Rs 4 Lakhs (took a personal loan) and 2 Lakhs (from Dad) for the initial investment.
4. BP assured me that together we would do wonders by doing well in this gym and then opening a chain of gyms.

Wrong Intentions of BP

1. A few days after opening the gym, BP used to not come to the gym regularly and got engaged in his own personal training.
2. He intentionally didn’t get the agreement done and the current account opened.
3. He secretly opened a new gym with the same brand in another area without informing me.
4. The amount invested in a chit fund Rs 25,000/- per month up to 2 Lakhs, I was never involved in that.
5. Now he has humiliated me and told me that he has the vision to open a chain of at least 10 gyms and I was not his partner. He claimed he built the gym alone and asked me not to come to the gym. How dare he say that? I have lost all faith and will never trust anyone so blindly again.

Present Options

1. Option 1: BP is asking me to name an amount and get rid of the gym forever.
2. Option 2: File an FIR against him, but I only have a Shop Act license and PAN Card on BodyLab gym in both our names and nothing else.

What should I do? Please guide me. If option 1, then how much should I quote him? And if option 2, then how should I proceed further?

Thanks in advance.

[Phone Number Removed For Privacy-Reasons]
[Email Removed For Privacy Reasons]

Dear Rajesh Rathod,

You have given your narrative. However, please note the following:

a) This is a forum for HR professionals. They raise their work-related issues. This forum is not for giving advice on issues between business partners.

b) Nevertheless, you have given your side of the story. We need to listen to the other side also. Unless we know both sides, we cannot form opinions.

c) You had written your post by disclosing your business partner's name. I had to edit the whole post to withhold the name of your business partner.

Anyway, the following are the paragraph-wise comments:

d) Before starting a business, did you make a proper business agreement? If yes, has it been mentioned how the records of expenditure will be maintained?

e) While taking the business premises on rent, was a rental agreement made with the landlord? If yes, how come you did not see the rental agreement?

f) When the capital equipment was purchased, were you not involved in the selection and further negotiations with the suppliers of the equipment? Did you not check the invoice before clearing the payment to them?

g) If Papa has done a miscalculation, and if it is discovered at a later stage, then the calculations can be set right now. What is the problem?

h) You have written "Each month the profit was not distributed equally among us, the amount was kept with BP and he used to always say we have to pay rent, do advertisement, etc." Why did you allow the bills to be passed without your verification?

i) You have written "I asked him multiple times to open a joint current account and make an agreement but he always postponed intentionally and never got one done." This is the root cause of all the troubles.

Final comments: In life, we do commit mistakes. Nevertheless, while making an investment, one should consult lawyers and chartered accountants to avoid disputes. Business investment cannot be done on blind trust. The following Nitishloka holds perfectly true in your case:

न विश्वसेदविश्वस्ते विश्वस्ते नातिविश्वसेत्। विश्वासाद्भयमभ्येति नापरीक्ष्य च विश्वसेत्॥ - विदुर नीति (38:9)

अर्थ – जो विश्वसनीय नहीं हैं, उस पर कभी भी विश्वास न करें। परन्तु जो विश्वसनीय हैं, उन पर भी अधिक भरोसा न करें। ऐसा विश्वास संकट उत्पन्न कर सकता है।

English meaning: One should not trust those who should not be trusted. Those who can be trusted should not be trusted too much. Hardships created by such trust can destroy the roots.

You have tossed two options and asked which is the better one. As you do not have incontrovertible evidence of the malpractices of your business partner, I recommend you execute Option 1.

Thanks,

Dinesh Divekar