Indian police have arrested Mohit Goel, the founder of a firm which claimed to sell the world's cheapest smartphone, on charges of fraud.

The owner of Noida-based company - Ringing Bells in the outskirts of New Delhi was detained last Thursday.

"Mohit Goel, the Director of Ringing Bells company which had announced Freedom 251 smartphones at an extremely low price was arrested on allegations of fraud," a police official in Uttar Pradesh said.

The Freedom 251 phone, touted as the world's cheapest, priced at 3.7 US dollars (INR 251) went on pre-sale in February last year on the company's website. While many customers got their phones, Ringing Bells is accused of not fulfilling all of its orders. 

Goel's arrest comes after a complaint filed by the owner of Ghaziabad-based Ayam Enterprises alleging that Ringing Bells "defrauded" it of 24,022 US dollars by not providing phones.

Ayam Enterprises alleged that Goel had threatened them with life if they asked for repayment of the money.

Police officials said they would investigate similar complaints which have been filed against the company in Uttar Pradesh.

Ahead of its sale many people raised questions around the firm's business model questioning how it could offer smartphones on such cheap rates.

A leader from ruling Bhartiya Janta Party (BJP) Kirit Somaiya registered a case of cheating against the owners alleging the company was running a ponzi scheme to offer smartphones at prices that are below their cost of production.

The BJP leader had also approached the telecom ministry and India's telecom regulator on the issue.

(Source: Xinhua)