To give an idea of how worse the situation was, the fellow would ask the employees to spy on me for mundane things like connecting to internet. Later verbal accounts of people, suggest that he used my caste as a device in manipulating them.
Nevertheless, I'm really grateful to the person for showing true colors so early instead of many years and dollars (or rupees) later.
Throwing out good code after putting 2+ years of time and money was nearly soul crushing. Yet, it turned to be a better decision when I realized that I could create a superior and totally different product. Now, instead of me worrying for getting sued, the fellow who cheated me has to carry that burden all the time. That leaves me more freedom to focus on the real needs of my users.
Besides, with this experience under the belt, OP will surely get a better co-founder if s/he continues to keep working.
Edited: grammar.