Appeal against the order dismissed the quash petition
2. The present appeal challenges the final judgment and order dated 1st September 2017 passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, whereby the High Court dismissed the Criminal Petition No. 5778 of 2016 filed by the accused persons, including the appellants herein, under Section 482 of the Code of Criminal Procedure, 1973 (“CrPC.” for short) thereby seeking quashing of the charge-sheet in C.C. No. 16 of 2014 on the file of Principal Special Judge for CBI Cases, Nampally, Hyderabad (“trial Court” for short).
Case of the prosecution
3. Shorn of details, the case of the prosecution is as given below.
Group loan was secured by Accused no.1 and the collateral security executed by accused no 3 & 4
3.1 K. Suresh Kumar (Accused No. 1), the Sole Proprietor of M/s Sirish Traders, a firm engaged in processing of Uradh Dhall, was granted various credit facilities in the group loan account by the Indian Bank, Osmanganj Branch, Hyderabad (“respondent No. 2 Bank” for short). The credit facilities were secured by collateral security executed by the accused persons including the present appellants who are Accused No. 3 & 4.
Group loan account was declared as non-performing asset
3.2 Since the borrowers/mortgagors (Accused Nos. 1-5) failed to service the interest and re-pay the dues, the group loan account was declared a Non-Performing Asset on 31st March 2010.
An application was filed before DRT
3.3 To realize the outstanding amount, the respondent No. 2 Bank filed an Original Application being OA No. 253 of 2010 before the Debts Recovery Tribunal, Hyderabad (“DRT” for short) for recovery of amounts due.
It was found out that the title documents executed were not original and same were fake
3.4 During the pendency of the proceedings before the DRT, the respondent No. 2 Bank came to know that some of the title documents executed by the accused persons by virtue of which equitable mortgage was created were not original documents, rather the same were fake, forged and fabricated.
Respondent lodged written complaint and BCI took investigation
3.5 The respondent No. 2 Bank, accordingly, lodged a written complaint dated 3rd September 2012. Based on the said complaint, the Central Bureau of Investigation – Economic Offence Wing (CBI-EOW) Chennai registered an FIR No. RC.14/E/2012 dated 15th September 2012.
CBI filed final repot (charge sheet) for IPC and PC Act offences
3.6 The CBI-EOW Chennai after investigation prima facie found that offences punishable under Sections 120-B read with 420, 409, 467, 468 and 471 of Indian Penal Code 1860 (“IPC” for short) and Section 13(1)(d) and 13(2) of the Prevention of Corruption Act 1988 (“PC Act” for short) have been committed. The CBI filed charge-sheet dated 27th December 2013 in the trial Court and prayed that the trial Court take cognizance of the said offences committed by the accused persons.
Accused/Borrowers settled the amount of rs. 3.8 crores when the proceeding is pending before DRT
3.7 Since the proceedings before the DRT were still pending, the borrowers/mortgagors (Accused Nos. 1-5) approached the respondent No. 2 Bank for settlement of the amount due regarding the group loan accounts. To that effect, a One Time Settlement (“OTS” for short) dated 19th November 2015 of Rs. 3.8 crores was offered to the respondent No. 2 Bank for settling all the dues. The same was accepted by the respondent No. 2 Bank. The OTS amount was paid, and the respondent No. 2 Bank issued a No Dues Certificate dated 21st November 2015 to the borrowers/guarantors.
Based on the settlement accused were seeking quash of charge sheet filed by the CBI
3.8 When the matter stood thus, the Accused Nos. 1 to 5, including the present appellants, filed a Criminal Petition bearing No. 5778 of 2016 on 18th April 2016 before the High Court under Section 482 CrPC seeking quashing of the charge-sheet filed before the trial Court by the CBI.
3.9 During the pendency of the Criminal Petition before the High Court, the DRT vide order dated 4th May 2016, recorded that the matter has been settled as per the OTS and disposed of the OA as settled, in full satisfaction of the dues of the respondent No. 2 Bank.
The High Court dismissed the quash petition in a case involving a group loan secured by accused no.1 and collateral security executed by accused no. 3 & 4. The case involved IPC and PC Act offences, and the accused sought a quash of the charge sheet filed by the CBI. The court ruled that the charges are crimes against society and a compromise settlement would not impact the criminal proceeding. The accused appealed the compromised settlement, arguing that the continuation of criminal proceedings would be futile due to the compoundable nature of cheating offenses under Article 142 of the Constitution and the application of B.S.Joshi case principles.
Hon’ble High Court rejected the petition stating that the charges are crimes against the society and mere settlement would not impact criminal proceeding
3.10 The High Court, however, vide the impugned final judgment and order dismissed the Criminal Petition filed by the Accused Nos. 1 to 5 holding that the settlement arrived at was only a private settlement and was not a part of any decree given by any court. The charges include the use of fraudulent, fake and forged documents that were used to embezzle public money and if these are proved, they would be grave crimes against the society as a whole and hence, merely due to a private settlement between the Bank and the accused, it cannot be said that the prosecution of the accused persons would amount to abuse of process of the court.
Accused preferred the present appeal
3.11 Aggrieved thereby, two of the accused persons (Accused Nos. 3 & 4) have filed the present appeal.
Arguments heard
4. We have heard Shri Dama Seshadri Naidu, learned Senior Counsel for the appellants and Shri Vikramjeet Banerjee learned Additional Solicitor General (“ASG” for short) appearing for the CBI, Ms. Devina Sehgal, learned counsel for the respondent No.1-State and Mr. Himanshu Munshi, learned counsel for the respondent No.2-Bank.
Analysing
Compromised settlement is not in dispute
11. The facts in the present case are not in dispute. It is not disputed that the matter has been compromised between the borrowers and the Bank. It is also not in dispute that, upon payment of the amount under the OTS, the loan account of the borrower has been closed.
Question of law: Whether the continuation of criminal proceedings would be justified?
12. Therefore, the only question would be, as to whether the continuation of the criminal proceedings against the present appellants would be justified or not.
14. A perusal of the chargesheet would reveal that the specific role is attributed to Accused No.1-K. Suresh Kumar. The allegations against the present appellants are that they were involved in criminal conspiracy with Accused No.1.
After compromised settlement the offence of cheating is compoundable
15. We may gainfully refer to the following observations of this Court in the case of Duncans Agro Industries Ltd., Calcutta ((1996) 5 SCC 591):
“26. After giving our careful consideration to the facts and circumstances of the case and the submissions made by the respective counsel for the parties, it appears to us that for the purpose of quashing the complaint, it is necessary to consider whether the allegations in the complaint prima facie make out an offence or not. It is not necessary to scrutinise the allegations for the purpose of deciding whether such allegations are likely to be upheld in the trial. Any action by way of quashing the complaint is an action to be taken at the threshold before evidences are led in support of the complaint. For quashing the complaint by way of action at the threshold, it is, therefore, necessary to consider whether on the face of the allegations, a criminal offence is constituted or not. In recent decisions of this Court, in the case of Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] , P.P. Sharma [1992 Supp (1) SCC 222 : 1992 SCC (Cri) 192] and Janata Dal [(1992) 4 SCC 305 : 1993 SCC (Cri) 36] , since relied on by Mr Tulsi, the guiding principles in quashing a criminal case have been indicated.
29. In the facts of the case, it appears to us that there is enough justification for the High Court to hold that the case was basically a matter of civil dispute. The Banks had already filed suits for recovery of the dues of the Banks on account of credit facility and the said suits have been compromised on receiving the payments from the companies concerned. Even if an offence of cheating is prima facie constituted, such offence is a compoundable offence and compromise decrees passed in the suits instituted by the Banks, for all intents and purposes, amount to compounding of the offence of cheating. It is also to be noted that a long time has elapsed since the complaint was filed in 1987. It may also be indicated that although such FIRs were filed in 1987 and 1989, the Banks have not chosen to institute any case against the alleged erring officials despite allegations made against them in the FIRs. Considering that the investigations had not been completed till 1991 even though there was no impediment to complete the investigations and further investigations are still pending and also considering the fact that the claims of the Banks have been satisfied and the suits instituted by the Banks have been compromised on receiving payments, we do not think that the said complaints should be pursued any further…………..”
[Emphasis supplied]
16. It could thus be seen that this Court in the case of Duncans Agro Industries Ltd found that the Banks had already filed suits for recovery of the dues of the Banks on account of credit facility and the said suits had been compromised on receiving the payments from the companies concerned. The Court found that even if an offence of cheating is prima facie constituted, such offence is a compoundable offence and compromise decrees passed in the suits instituted by the Banks, for all intents and purposes, amounted to compounding of the offence of cheating.
Under Article 142 of the Constitution even the non-compoundable offences are also could be quashed
17. In the case of Nikhil Merchant ((2008) 9 SCC 677)), this Court was considering a civil dispute with certain criminal facets. The matter also involved offences which were not compoundable in nature. This Court, therefore, considered the question as to whether the criminal proceedings could be quashed under Article 142 of the Constitution of India on the basis of compromise, even where non-compoundable offences are involved.
B.S.Joshi case principles should be applied in forgery (non-compoundable) cases
19. This Court found that though the offence punishable under Section 420 of the IPC was compoundable under sub-section (2) of Section 320 CrPC with the leave of the Court, the offence of forgery was not included as one of the compoundable offences. However, the Court found that in such cases the principle enunciated in the case of B.S. Joshi and others v. State of Haryana and another [(2003) 4 SCC 675] should be applied.
In view of the settlement arrived between the parties continuance of the same would be an exercise in futility
20. This Court specifically noted that though it is alleged that certain documents had been created by the appellant therein to avail of credit facilities beyond the limit to which the Company was entitled, the power of quashing could be exercised. This Court found that in view of a compromise arrived at between the Company and the Bank, it was a fit case where a technicality should not be allowed to stand in the way of quashing of the criminal proceedings. This Court found that in view of the settlement arrived at between the parties, continuance of the same would be an exercise in futility.
Similar view of Hon’ble Supreme Court 3 judge bench judgments
21. A similar view was again taken by 2 Judge Bench of this Court in the case of Manoj Sharma v. State and others9. 22. However, another 2 Judge Bench of this Court in the case of Gian Singh v. State of Punjab and another10 doubted the correctness of the view taken by this Court in the cases of B.S. Joshi (supra), Nikhil Merchant (supra), and Manoj Sharma (supra) and referred the matter to a larger Bench.
24. It could thus be seen that the learned 3 Judge Bench of this Court held that B.S. Joshi, Nikhil Merchant, and Manoj Sharma were correctly decided.
If in certain cases where the wrong is being settled between the parties amicably the High Court would be justified in quashing even offences are not compoundable
25. It has been held that there are certain offences which overwhelmingly and predominantly bear civil flavour having arisen out of civil, mercantile, commercial, financial, partnership or such like transactions or the offences arising out of matrimony, particularly relating to dowry, etc. or a family dispute, where the wrong is basically to the victim and the offender and the victim have settled all disputes between them amicably, the High Court would be justified in quashing the criminal proceedings, even if the offences have not been made compoundable.
31. It could thus be seen that this Court reiterates the position that the criminal cases having overwhelmingly and predominantly civil character, particularly those arising out of commercial transactions or arising out of matrimonial relationship or family disputes should be quashed when the parties have resolved their entire disputes among themselves.
33. The aforesaid view has consistently been followed by this Court in various cases including Gold Quest International Private Limited (supra) and Sadhu Ram Singla and others (supra).
Since the amount was settled the possibility of conviction is remote and bleak
34. The facts in the present case are similar to the facts in the case of Sadhu Ram Singla and others (supra) wherein a dispute between the borrower and the Bank was settled. In the present case also, undisputedly, the FIR and the chargesheet are pertaining to the dispute concerning the loan transaction availed by the accused persons on one hand and the Bank on the other hand. Admittedly, the Bank and the accused persons have settled the matter. Apart from the earlier payment received by the Bank either through Equated Monthly Instalments (EMIs) or sale of the mortgaged properties, the borrowers have paid an amount of Rs.3,80,00,000/- under OTS. After receipt of the amount under OTS, the Bank had also decided to close the loan account. The dispute involved predominantly had overtures of a civil dispute.
35. Apart from that, it is further to be noted that in view of the settlement between the parties in the proceedings before the DRT, the possibility of conviction is remote and bleak. In our view, continuation of the criminal proceedings would put the accused to great oppression and prejudice.
36. In any case, as discussed hereinabove, both the appellants have been arraigned as wives of the Accused Nos. 1 and 2. The specific role that was attributed in the chargesheet was pertaining to Accused No.1.
Case quashed
37. In the result, we find that this was a fit case wherein the High Court ought to have exercised its jurisdiction under Section 482 CrPC and quash the criminal proceedings.
Party
K. Bharthi Devi and Anr. … Appellant(S) versus State of Telangana & Anr … Respondent(S) – Criminal Appeal No. ________ of 2024 [Arising out of Special Leave Petition (Criminal) No.4353 of 2018] – 2024 INSC 750 – OCTOBER 03, 2024
Further study
