'Would Cause Great Oppression, Extreme Injustice To Appellants…': SC Quashes CBI FIR In Bank Loan Case

New Delhi: The Supreme Court has quashed a CBI FIR in a bank loan case, against two accused and a company, saying that dispute cannot be said to be having criminal overtures, rather it is a purely civil in nature and continuation of criminal proceedings will put the appellants' to great oppression and prejudice.

A bench comprising Justices Abhay S. Oka and Augustine George Masih said that continuation of criminal proceedings would put the appellants' to great oppression and prejudice and extreme injustice would be caused to them by not quashing the criminal proceedings.

"It can safely be said that the criminal case which has been sought to be projected and proceeded with against the appellants' has an overwhelming and pre-dominant civil character arising out of pure commercial transaction where the parties have resolved their entire dispute amongst themselves," said the bench, in the verdict delivered on April 16. The appellants’ in the case are: Suresh C Singal, Sangeeta Singal, and Goodluck Synthetics Pvt. Ltd.

Justice Masih, who authored the judgment, said it all started with the transactions between the appellants’ and the Bank of Maharashtra and the dispute cannot be said to be having criminal overtures or aspects relatable to a crime. "It is purely a commercial transaction which has been entered into between two parties. No official of the bank has been found to be involved in wrongful issuance of Letters of Credit to the appellants' which is apparent from the fact that although initially the provisions under the PC Act were invoked but at the time of submission of the chargesheet, the name of the bank manager as well as the provisions of the PC Act are found to be not included," noted the bench.

Justice Masih said the proceeding for settlement was not only initiated but the finalisation thereof in the form of settlement took place prior to the filing of the chargesheet against the appellants’ by the CBI.

The appellants’ moved the apex court against the May 2017, order of the single judge bench of the Gujarat High Court, which dismissed their petition seeking quashing of the CBI FIR. "In cases where charge is framed but the evidence is not yet started or is at the infancy stage, the High Court may exercise its power by showing benevolence after prima facie assessment of circumstances and material mentioned," said Justice Masih, setting aside the High Court order.

The appellants’ contended before the bench that the sanctioned principal amount was ₹14.20 crores and the amount which has been paid in total to the bank is ₹19.67 crores, and an extra amount of ₹5.47 crores has been paid by them. They argued that no wrongful loss, therefore, can be said to have been caused to the bank and all payments due in respect of the Letters of Credit stand paid.

In the present case, between 1998-2005 Bank of Maharashtra sanctioned multiple credit facilities to the appellants’ due to their strong financial standing. Beginning June 2005 onwards, the appellant company faced a financial crunch due to adverse market conditions, including the 2004 Surat floods, leading to the bank classifying their loans/credit facilities as non-performing assets (NPA). The bank proceeded to file applications for recovery of the debt before the Debt Recovery Tribunal, Ahmedabad.

During the pendency of these proceedings, CBI on the basis of reliable information proceeded to register an FIR against the appellants', as well as the branch manager of the bank for offences punishable under Section 420, 467, 468 and 471 read with 120B of the IPC and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.

The bank accepted a one-time settlement proposal by the appellants’ in December 2008, and a revised compromise proposal was finally submitted and accepted by the parties leading to the finalisation of the terms on April 12, 2010. In April 2011, a no-dues certificate was issued to the appellants'. The bank further intimated that the names of the appellants' did not now appear in the CIBIL/RBI defaulters list. Meanwhile, in May 2010, the CBI filed a chargesheet in which no evidence was found against the branch manager of the bank, and he was dropped as an accused.

In the top court, the appellants’ argued that with the discharge of the civil liability, criminal proceedings should not be further continued and continuation of the criminal proceedings after the settlement of the civil liability would be oppressive.

The appellants’ counsel submitted that that the bank had no grievance, which would have been the aggrieved party. The counsel said neither FIR has been registered nor any criminal proceedings initiated against the appellants by the Bank of Maharashtra but the FIR was registered suo motu by CBI.

CBI’s counsel asserted that merely because a compromise has been entered into between the accused party and the bank, substantial criminal charges pending adjudication cannot be quashed, and the offences having been committed do not stand washed away with such settlements as has been entered into between the parties.

Quashing the CBI FIR, Justice Masih observed that cases where settlement has arrived at either immediately or in close vicinity after the alleged commission of offence and the matter is still under investigation, the High Court may be liberal in accepting the settlement to quash the criminal proceeding/investigation.

"No loss has been caused to the Bank as is apparent from the calculations presented by the appellants before this Court. Not only the principal amount has been returned but an amount over and above thereto, on the basis of the settlement, has been received by the Bank," said the top court.