Full Text
HIGH COURT OF DELHI
JUDGMENT
NARENDRA GOEL .....Petitioner
SUBHASH CHAND GUPTA @ SUBHASH GUPTA .....Petitioner
For the Petitioners : Mr. Mukesh Vatsa, Adv. (through VC)
Mr. Sanjay Relan & Mr. Sushant Dahiya, Advs. For the Respondents : Mr. Rajesh Kumar, SPP with Mr. Changez Khan & Ms. Mishika Pandita, Advs. for CBI
Mr. Ajay Shanker, Adv. for PNB (through VC)
1. The present petitions are filed under Section 482 of the Code of Criminal Procedure, 1973 (‘CrPC’) essentially seeking quashing of the crime no. BD1/2003/E/0001, registered at Police Station CBI BC & FC, New Delhi.
2. The brief facts of the case are as follows:
2.1. On the basis of a complaint dated 26.05.2003, the case was registered in the year 2003 for offences under Section 120B of the Indian Penal Code, 1860 (‘IPC’) read with Sections 420, 467, 468, 471 and 477A of the IPC and Section 13 (2) of the Prevention of Corruption Act, 1988 (‘PC Act’) read with Section 13(1)(d) of the PC Act against officials of M/s. Haryana steel & alloys Ltd. (hereafter ‘M/s. HSAL’), including the petitioners, and concerned officials of the Branch Office, Sonepat Main, Punjab National Bank.
2.2. It is alleged that the accused persons entered into a criminal conspiracy and fraudulently falsified the financial data/ records of M/s. HSAL and thereby cheated the Punjab National Bank, Sonepat Branch to the extent of ₹18,71,07,884.95/- (inclusive of interest upto 18.02.1999). The petitioner Narendra was the Managing Director of M/s. HSAL from 26.11.1977 to 15.06.1999 and Accused No.2 – Mahendra Malu (since deceased) was the Executive Director of M/s. HSAL. They were found to be the ultimate beneficiary of the defrauded amount.
2.3. It is the case of the prosecution that M/s. HSAL was availing credit facilities from New Bank of India, which later merged with the Punjab National Bank (that is, the complainant Bank). M/s. HSAL informed the Bank that it was to undertake an expansion, for which IIBI had sanctioned a term loan of ₹630 lakhs, and requested for enhancement of fund-based facility up to ₹950 lakhs and non – Fund based facilities up to ₹1025 lakhs. The limits were finally sanctioned on 26.02.1998. It is alleged that M/s. HSAL got Fund Based limits enhanced by 2 ½ times on the basis of misrepresentation about its affairs. M/s. HSAL submitted balance sheet with false figures, which were duly signed by the accused persons. The limits were enhanced envisaging the expansion, however, the same was not carried out, despite which, M/s. HSAL utilized the enhanced facilities. It is alleged that M/s. HSAL misrepresented its performance before the Bank, falsified records, created bogus book debt entries in the books, etc. Amounts were shown to be due from certain sundry debtors in the books of M/s. HSAL, however, it was found that the said sundry debtors were not existing.
2.4. It is alleged that the petitioner Subash had written a letter dated 16.10.1997 to the Chief Manager, Punjab National Bank, Sonepat informing that IIBI had agreed in principle to finance modernization cum expansion programme. Subsequently, by letter dated 12.11.1997, the petitioner Subash informed the complainant bank of the term loan sanctioned by IIBI and how the same wasn’t adequate. Allegedly, the petitioner Subash fraudulently submitted CMA data and balance sheets to the complainant bank on the basis of which the credit facilities were enhanced. It is further alleged that on the instructions of the petitioner Subash, false journal vouchers were created which affected the amount of sundry debtors and creditors in the stock statements submitted to the complainant bank. It is alleged that the stock statements were signed by the petitioner Subash.
2.5. It was found during investigation that the petitioner Narendra and accused Mahendra did not deposit the sale proceeds with the bank in violation of the CC (Hypothecation) Agreement, and they also raised bogus and non-existing sundry debtors in violation of the agreement.
2.6. The chargesheet was filed in the year 2005 only against the officials of the accused company, including the petitioners, for offences under Sections 420, 467, 468, 471 and 477A of the IPC.
2.7. Subsequently, the OA filed by the complainant bank against the accused company was withdrawn vide order dated 15.05.2006, passed in OA No. 539/2001 by the learned Debts Recovery Tribunal, Chandigarh, in view of the compromise between the parties whereby the matter was settled for an amount of ₹425 lakhs.
2.8. In order dated 26.04.2019, the submission of the learned counsel for the complainant bank was recorded to the effect that the loan has been settled. The parties also sought time to approach this Court for quashing the case.
3. The learned counsel for the petitioners submitted that the matter has already been settled by way of a onetime settlement and the complainant bank has also withdrawn the matter filed by it before the learned Debt Recovery Tribunal, Chandigarh after having received the agreed settlement amount.
4. They submitted that although the complainant bank does not wish to prosecute the accused persons any further, however, the present complaint could not be settled as Section 477A of the IPC is non-compoundable in nature.
5. They submitted that the allegations are purely of a civil nature but a criminal color was attributed to the complaint to facilitate speedy recovery of unpaid dues from the accused company.
6. They submitted that the alleged transactions pertain to the period from the year 1993 to 1999, however, there has been a significant delay in filing of the complaint and the investigation has also taken many years, despite which, the prosecution has been unable to find any concrete material to implicate the present petitioners.
7. They submitted that no purpose would be served by prolonging the present case when the complainant bank has amicably settled the matter and does not wish to pursue the case. They placed reliance on the judgments in the cases of Tarina Sen v. Union of India & Anr.: 2024 INSC 752, K. Bharthi Devi v. State of Telangana: (2024) 10 SCC 384 and CBI v. Sadhu Ram Singla: (2017) 5 SCC 350.
8. The learned counsel for the petitioner Narendra submitted that the accused company has been subjected to SARFAESI action and the management had changed hands many years before lodging of the complaint which led to the present FIR.
9. The learned counsel for the petitioner Subhash additionally submitted that no offence under Sections 420/477 of the IPC is made out against the said petitioner as it is established on record that he was never a member of the board of the accused company and the balance sheet is prepared by auditors and approved by the Board. He submitted that merely because the petitioner Subhash signed the balance sheet as statutorily required, the same would not make him liable.
10. He further submitted that the general vouchers were admittedly not prepared by the petitioner nor is there any evidence to show that the entries so made were false entries. He submitted that the entries were not made by the petitioner Subhash but by accounting clerks as per prevailing practice and there is no allegation of any criminal intent on part of the petitioner of embezzling or siphoning off funds so as to make a case under Section 477A of the IPC against him.
11. The learned counsel for Respondent No.2/ complainant bank reaffirmed the settlement between the parties and submitted that the complainant bank has no objection if the present complaint is quashed.
12. The learned Special Public Prosecutor for Respondent No.1/ CBI vehemently opposed the quashing of the complaint on the basis of settlement. He submitted that the matter was settled by the bank for a nominal amount of ₹425 lakhs against the cheated amount which was to the tune of more than ₹18 crores (inclusive of interest upto 18.02.1999).
13. He submitted that the “No Dues Certificate” issued by the complainant bank after the OTS only liquidates the civil liability of the accused persons and mere repayment of loan under settlement cannot be a basis of exonerating the accused persons from the criminal liability for the offences under IPC. He placed reliance on the judgment passed in the case of Daya Engineering Works (Sleeper) Ltd. v. CBI: 2019 SCC OnLine Del 10336 where this Court had refused to quash an FIR on the basis of the One Time Settlement by finding the same to be merely towards satisfaction of civil liability.
14. He submitted that the inherent power of the Court to quash criminal proceedings ought not to be exercised in a matter of this nature which involves allegations of defrauding a bank by misrepresentation and falsification of accounts. He relied upon the judgment in the case of CBI v. Maninder Singh: (2016) 1 SCC 389 to buttress his argument.
ANALYSIS
15. Offence under Section 420 of the IPC is compoundable in nature whereas the other alleged offences are non-compoundable in nature.
16. It is well settled that the High Court while exercising its powers under Section 482 of the CrPC can quash offences which are noncompoundable on the ground that there is a compromise between the accused and the complainant. The Hon’ble Apex Court has laid down parameters and guidelines for High Court while accepting settlement and quashing the proceedings. In the case of Narinder Singh and others v. State of Punjab: (2014) 6 SCC 466, the Hon’ble Supreme Court had observed as under:
and exercising its power under Section 482 of the Code while accepting the settlement and quashing the proceedings or refusing to accept the settlement with direction to continue with the criminal proceedings:
29.1. Power conferred under Section 482 of the Code is to be distinguished from the power which lies in the Court to compound the offences under Section 320 of the Code. No doubt, under Section 482 of the Code, the High Court has inherent power to quash the criminal proceedings even in those cases which are not compoundable, where the parties have settled the matter between themselves. However, this power is to be exercised sparingly and with caution.
29.2. When the parties have reached the settlement and on that basis petition for quashing the criminal proceedings is filed, the guiding factor in such cases would be to secure:
(i) ends of justice, or
(ii) to prevent abuse of the process of any court.
29.3. Such a power is not to be exercised in those prosecutions which involve heinous and serious offences of mental depravity or offences like murder, rape, dacoity, etc. Such offences are not private in nature and have a serious impact on society. Similarly, for the offences alleged to have been committed under special statute like the Prevention of Corruption Act or the offences committed by public servants while working in that capacity are not to be quashed merely on the basis of compromise between the victim and the offender.
29.4. On the other hand, those 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.
29.5. While exercising its powers, the High Court is to examine as to whether the possibility of conviction is remote and bleak and continuation of criminal cases would put the accused to great oppression and prejudice and extreme injustice would be caused to him by not quashing the criminal cases.” (emphasis supplied)
17. The short question before this Court is whether the matter ought to be quashed on the basis of the settlement arrived at between the complainant bank and the accused persons.
18. The quashing has been opposed by the prosecution in the present case. It is argued that merely because the accused persons have settled the dispute with the complainant bank, the same alone is insufficient for quashing of the subject case as serious allegations have been made against the accused persons.
19. In this regard, this Court considers it apposite to refer to the recent judgments passed by the Hon’ble Apex Court, that have been relied upon by the petitioners.
20. In the case of K. Bharthi Devi v. State of Telangana (supra), while dealing with an FIR where it had been alleged that the accused persons had availed credit facilities from the bank on the strength of title documents which were fake, forged and fabricated, the Hon’ble apex Court was pleased to quash the FIR against the appellants therein. while dealing with similar facts where the bank had entered into a One Time Settlement with the accused persons, the Hon’ble Apex Court had observed as under:
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.
37. In para 61 of Gian Singh [Gian Singh v. State of Punjab, (2012) 10 SCC 303: (2012) 4 SCC (Civ) 1188: (2013) 1 SCC (Cri) 160: (2012) 2 SCC (L&S) 988], this Court observes that, in which cases power to quash the criminal proceeding or complaint or FIR may be exercised, where the offender and the victim have settled their dispute, would depend on the facts and circumstances of each case. However, the Court reiterates that the criminal cases having an overwhelmingly and predominatingly civil flavour stand on a different footing for the purposes of quashing. The Court particularly refers to the offences arising out of commercial, financial, mercantile, civil, partnership or such like transactions or the offences arising out of matrimony relating to dowry, etc. or family disputes where the wrong is basically private or personal in nature and the parties have resolved their entire dispute.
38. The Court finds that in such cases, the possibility of conviction is remote and bleak and continuation of the criminal case would put the accused to great oppression and prejudice and extreme injustice would be caused to him by not quashing the criminal case despite full and complete settlement and compromise with the victim. xxx
41. 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. xxx
43. The aforesaid view has consistently been followed by this Court in various cases including Gold Quest International [Gold Quest International (P) Ltd. v. State of T.N., (2014) 15 SCC 235: (2015) 4 SCC (Cri) 631] and Sadhu Ram Singla [CBI v. Sadhu Ram Singla, (2017) 5 SCC 350: (2017) 2 SCC (Cri) 535].
44. The facts in the present case are similar to the facts in Sadhu Ram Singla [CBI v. Sadhu Ram Singla, (2017) 5 SCC 350: (2017) 2 SCC (Cri) 535] wherein a dispute between the borrower and the Bank was settled. In the present case also, undisputedly, the FIR and the charge-sheet 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.
45. Apart from that, it is further to be noted that in view of the settlement between the parties in the proceedings before 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. xxx
47. In the result, we find that this was a fit case wherein the High Court ought to have exercised its jurisdiction under Section 482CrPC and quash the criminal proceedings.” (emphasis supplied)
21. The said view was also adopted by the Hon’ble Apex Court in the case of Tarina Sen v. Union of India & Anr. (supra) where it was reiterated that once a compromise has been arrived at between the borrower and the Bank, the continuation of criminal proceedings would not be justifiable.
22. The dispute in the present case is also of a similar nature and thus, predominantly civil in character as the allegation against the accused persons is essentially that they made certain misrepresentations and falsified entries in name of bogus sundry creditors for the benefit of release of loan amount. In such circumstances, continuation of the proceedings against the petitioners will not be justified.
23. As noted above, the Bank has no remaining grievance against the petitioners. It is relevant to note that while the FIR was also registered for the offences under the PC Act, the chargesheet was ultimately only filed for the offences under the IPC and no bank official was charge sheeted.
24. Insofar as the quantum of settlement amount is concerned, this Court considers it apposite to take note of the decision in the case of CBI v. Sadhu Ram Singla (supra), which was also referred in the case of K. Bharthi Devi v. State of Telangana (supra). In the said case, it was alleged in the charge sheet that loss of ₹28.49 crores was caused to the complainant bank by way of false stock statements and forged bank guarantee. A One Time Settlement was arrived at between the complainant bank and the accused persons, under which sums of ₹6 crores and ₹1.25 crores were deposited. Even though the settlement amount was less than the alleged cheated amount, the Hon’ble Apex Court was still pleased to quash the proceedings by observing that after a compromise has been arrived at between the parties, continuation of proceedings would be an exercise in futility. In the present case, the alleged offences relate back to the year 1998 to 1999, for which, the FIR was registered only in the year 2003. The order dated 18.09.2019, passed by the learned Trial Court, indicates that while five months were granted to the accused persons to approach this Court, however, even arguments on charge had not taken place till then. One of the accused persons has already died and the proceedings have been abated against him. Considering the decision in CBI v. Sadhu Ram Singla (supra), this Court is not inclined to reject the present petitions merely because the settlement amount is less than the alleged loss suffered by the complainant bank, especially considering that the matter has proceeded at a snail’s pace before the learned Trial Court.
25. Undisputably, public money is involved in the present case. However, it cannot be ignored that the dispute in the present case was compromised by the complainant Bank in its commercial wisdom. Keeping the best interests of the Bank in mind, the decision of settling the dispute is taken by the concerned officials by weighing a myriad of variables. Once the aggrieved Bank has entered into a bona fide settlement for an amount that it deems to be sufficient, continuation of proceedings on account of doubt over sufficiency of the settlement amount would be an inutile exercise which would dissuade parties from taking initiative to settle the matters with the Bank. While the situation will be different in cases where the allegations have a overwhelming criminal characteristic, like if there was involvement of bank employees, in cases such as this one, where the dispute involved is predominantly civil in nature with only some criminal facets, the commercial decisions of the Bank ought not to be undermined.
26. In the facts of the present case, in the opinion of this Court, no useful purpose would be served by keeping the dispute alive and the same would amount to abuse of the process of Court. Continuation of the proceedings would only serve to waste even more judicial time on a case where the complainant bank itself does not wish to continue the proceedings. I am of the opinion that this is a fit case to exercise discretionary jurisdiction under Section 482 of the CrPC.
27. In view of the above, crime no. BD1/2003/E/0001 and all consequential proceedings arising therefrom are quashed.
28. The present petitions are allowed in the aforesaid terms. Pending application stands disposed of.
29. A copy of this judgment be placed in both the matters. AMIT MAHAJAN, J APRIL 22, 2025