Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 04.12.2024
+ W.P.(CRL) 596/2023, CRL.M.A. 5489/2023, CRL.M.A.
7035/2023, CRL.M.A. 8350/2023 and CRL.M.A. 10182/2023
GARDENIA INDIA LIMITED .....Petitioner
Through: Mr.Mohit Mathur, Sr. Advocate with
Mr.Amitabh Narendra, Mr.Mritunjay
K. Singh, Mr.Sahas Garg, Mr.Mayank
Sharma, Mr.Harsh Gautam,
Mr.Deepal Goel, Mr.Sanit Singh and
Mr.Vignesh Ramanathan, Advocates
Versus
CENTRAL BUREAU OF INVESTIGATION AND
ANR .....Respondents
Through: Mr.Atul Guleria, SPP for CBI with
Mr.Aryan Rakesh and Mr.Pankaj
Kumar, Advocates
AND
+ W.P.(CRL) 2169/2023 and CRL.M.A. 20207/2023
GARDENIA INDIA LIMITED AND ORS. .....Petitioners
Through: Mr.Mohit Mathur, Sr. Advocate with
Mr.Amitabh Narendra, Mr.Mritunjay
K. Singh, Mr.Sahas Garg, Mr.Mayank
Sharma, Mr.Harsh Gautam,
Mr.Deepal Goel, Mr.Sanit Singh and
Mr.Vignesh Ramanathan, Advocates
Versus
CENTRAL BUREAU OF INVESTIGATION & ORS. .....Respondents
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 1 of 13
Through: Mr.Atul Guleria, SPP for CBI with
Mr.Aryan Rakesh and Mr.Pankaj
Kumar, Advocates
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
JUDGMENT (ORAL)
1. The present petition has been filed under Articles 226 and 227 of the
Constitution of India on behalf of the petitioners praying for quashing of
FIR in RC No. ‘RC2232023A0003’ dated 21.02.2023 registered under
Sections 420/120B IPC and 13(2) read with 13(1)(d) of the Prevention of
Corruption Act, 1988 at P.S. Anti-Corruption (AC-V), New Delhi.
2. Briefly stated, petitioner Nos. 1, 4 and 5 are the companies
incorporated under the Companies Act, 1956. Petitioner No. 2 and 3 are the
Ex-Director/Guarantors of the petitioner No.1 company. Petitioner No.1
availed certain project specific term loan facilities from the respondent No. 2
bank 2013 onwards for developing real estate projects. However, since the
construction could not be completed on time, the accounts of the petitioner
No.1 were declared Non-performing Assets (‘NPAs’).
Respondent No.2 initiated proceedings under the SARFAESI Act and
filed OA No. 596 of 2016 before the Debt Recovery Tribunal (DRT) for
recovery of Rs.84,27,80.863/- and also lodged a criminal complaint against
the petitioners with respondent No.1 Agency.
3. Learned Senior Counsel for the petitioner submits that the impugned
FIR has been registered on 21.02.2023 in contravention of the orders dated
14.10.2022 and 18.10.2022 passed by this court in W.P(C) No. 11599 of
2022 titled M/s Gardenia India Ltd. vs. Reserve Bank of India & Ors.
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 2 of 13
wherein the petitioner had challenged declaration of its account as fraud.
Vide aforesaid orders, the petitioner No.1 was granted interim protection
whereby the Court had restrained the respondent No.1/ respondent No.2
from taking any action against the petitioners. He has raised questions about
the conduct of respondent No.1 by contending that despite being well aware
of interim protection being granted to petitioners they proceeded in the
registration of the FIR. To buttress this contention, reliance has been placed
on their letter dated 29.12.2022 seeking clarifications from respondent No.2
whether to proceed further with its complaint dated 23.08.2022 to which the
Bank vide reply dated 11.01.2023 had requested CBI to await the final
outcome of the Writ Petition. He submits that despite this clear indication
from the respondent No.2 bank, respondent No.1 proceeded with the
registration of the FIR. It is further submitted that even thereafter, when this
Court vide judgment dated 17.04.2023 in W.P. (C) No. 11599/2022 had
already set aside the order classifying the petitioners' bank accounts as
‘fraud.’, respondent No.2 for reasons known best to them decided to keep
the criminal proceedings pending.
4. It is next contended that even the Forensic Audit of the loan accounts
of petitioner No.1 company was also conducted by a firm hired by the
respondent No.2. In the said audit, no incriminating findings or opinion was
recorded against the petitioner No. 1. In fact, it is submitted that the audit
report explicitly records that no fraud was found in the transactions of
petitioner No. 1.
5. It is further submitted that the petitioners and the respondent No.2
have finally arrived at a settlement and no purpose would be served by the
continuation of the proceedings arising out of the impugned FIR. To buttress
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 3 of 13
this contention, it is submitted that the petitioners have entered into a One-
Time Settlement (OTS) with the Bank which was also approved by the
Competent Authority vide communication dated 28.06.2023. It is stated that
petitioner No. l has deposited the entire settlement amount of Rs.67.20
crores with respondent No.2 within the stipulated time. Consequently,
respondent No.2 has issued a settlement certificate dated 06.12.2023 stating
that the entire loan account had been fully settled and that it had no further
grievance against the petitioners.
Lastly, it is stated that invocation of provisions of PC Act by
respondent No.1 is unjustified as there is no allegation of offence under the
provisions of Prevention of Corruption Act ( PC Act ), given that the
complaint explicitly states that no adverse involvement of any bank official
was identified during the internal investigation or the forensic audit.
6. Per contra , Learned SPP for CBI submits that considering the
complaint received by the CBI itself discloses commission of a cognizable
offence, the CBI has well within its rights to register the impugned FIR. He
further submits that merely because the petitioner has chosen to challenge
the civil process to dispute the declaration of its account as 'fraud' cannot be
allowed to obstruct the progress of a criminal complaint. The committee
thereafter again declared the account as fraud. He further submits that
offences with respect to Prevention of Corruption Act,1988, ought not to be
treated at par with offences arising out of inter-personal disputes as they are
offences against the society and the State. Therefore, it is contended that
merely because the respondent no. 2 has settled the dispute by receiving
back the outstanding loan amount, the FIR cannot be quashed and an offer
of settlement should not become the basis of any interference in the
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 4 of 13
investigation of respondent No.1. In this regard, reliance has been placed
upon the decision of the Supreme Court in Gian Singh v. State of Punjab &
Anr. reported as (2012) 10 SCC 303 , Gopakumar.B.Nayar v. CBI reported
as (2014) 5 SCC 800 and State of Maharashtra v. Vikram Anantrai Doshi
reported as (2014) 15 SCC 29 .
Additionally, it is submitted that investigation so far has revealed
involvement of bank officials/public servants in unlawful disbursal of funds
from the bank, which funds were subsequently misused by the Petitioner
Company. During investigation, role of certain bank officials has been
investigated and though approval under Section 17-A of the Prevention of
Corruption Act, 1988 against two bank officials has been declined by the
competent authority, the same is pending against other officials.
7. During the course of arguments, learned counsel for the respondent
No. 2, on instructions, submitted that nothing remains due from the
petitioners. He also confirms the factum of an OTS having been entered into
by the parties, all accounts having been settled and states that a ‘Settlement
Certificate’ has also been issued by the bank. He further submits that the
recovery certificate was withdrawn and an affidavit to the aforesaid effect
was also filed in the proceedings initiated before DRT.
8. In Rejoinder, learned Senior counsel for the petitioner contends that
the reliance by respondent No.1 on the decision rendered in Vikram
Anantrai Doshi (Supra) is misplaced for in the said case, there was no
forensic audit giving clean chit. The declaration of petitioner’s account as
fraud by the committee is in teeth of the forensic audit report prepared by
Chartered Accountant firm hired by itself.
9. In the present case, admittedly, the borrower/petitioners and the
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 5 of 13
lender/Respondent No.2 bank have arrived at a settlement. The entire
liability has been settled and all dues have been cleared by the petitioners.
As such, respondent no.2/bank has already issued a settlement certificate
dated 06.12.2023. The recovery suits have been formally withdrawn and the
affidavits have been filed to confirm that Respondent No.2/bank has no
outstanding dues against the petitioners. Respondent No.1 has, however,
decided to continue investigation in the impugned FIR despite the settlement
between the parties.
When this Court had granted interim protection to the petitioners, the
respondent No.1 vide letter dated 29.12.2022 specifically asked respondent
No.2 bank whether the agency should proceed with the criminal complaint
lodged by the respondent No.2. The Bank vide letter dated 11.01.2023 had
requested the Respondent No. 1 to await the final outcome of the writ
petition. Proceeding to ignore the response of the Bank, respondent No.1
registered the impugned FIR on 21.02.2023.
Another thing to be kept in mind is the respondent No.2 bank
appointed Mukesh Raj & Co to perform forensic audit of the petitioner No.1
company. The Forensic Audit report records that no fraud has been found in
the transactions of petitioner No.1 company.
Concededly, respondent No. 2 has also declined to grant sanction
against its two officials as per the mandate of Section 17-A, as the
investigation so far has not revealed any involvement of bank officials or
public servants in the unlawful disbursal of funds from the bank.
10. It is now settled position of law that criminal cases having an
overwhelmingly and predominately civil flavour, especially those arising out
of commercial transactions ought to be quashed when the parties have
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 6 of 13
resolved their entire dispute by themselves. What is to be seen is whether
such quashing would meet the ends of justice or would prevent the abuse of
process of law. The Court considering quashing also has to examine whether
the possibility of conviction is remote and bleak and whether continuation of
criminal proceedings would put accused to great oppression, prejudice and
injustice.
In a case such as the present one, where the FIR arises out of a dispute
concerning loan transactions availed by borrower accused and lender bank,
and the bank and accused arrive at an amicable settlement with the bank
duly receiving the settlement amount, the character of the dispute is
primarily civil in nature. Moreover, the settlement also means that the
possibility of conviction in such cases is bleak and continuance of
proceedings would amount to great oppression and prejudice.
11. The power of High Court under Section 482 Cr.P.C. to quash
proceedings in matters wherein non-compoundable offences are involved is
1
no longer res integra. The Supreme Court in B.S. Joshi v. State of Haryana
observed that Section 320 Cr.P.C. does not limit or control the powers
vested in High Court under Section 482 Cr.P.C., and the High Court is
empowered to quash criminal proceedings/FIR, even if non-compoundable
offences are involved.
12. Similar views were taken by the Supreme Court in Nikhil Merchant
2
(Supra) , Manoj Sharma v. State & Ors. and Shiji @ Pappu & Ors. v.
3
Radhika & Anr. In Shiji (Supra), it was observed that: -
“xxx
1
(2003) 4 SCC 675
2
(2008) 16 SCC 1
3
(2011) 10 SCC 705
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 7 of 13
17. It is manifest that simply because an offence is not
compoundable under Section 320 IPC is by itself no reason for
the High Court to refuse exercise of its power under Section 482
Cr.P.C. That power can in our opinion be exercised in cases
where there is no chance of recording a conviction against the
accused and the entire exercise of a trial is destined to be an
exercise in futility. There is a subtle distinction between
compounding of an offence by the parties before the trial court or
in appeal on one hand and the exercise of power by the High
Court to quash the prosecution under Section 482 Cr.P.C. on the
other. While a Court trying an accused or hearing an appeal
against conviction, may not be competent to permit compounding
of an offences based on a settlement arrived at between the
parties in cases where the offences are non-compoundable under
Section 320, the High Court may quash the prosecution even in
cases where the offences with which the accused stand charged
are non-compoundable. The inherent powers of the High Court
under Section 482 Cr.P.C. are nto for that purpose controlled by
Section 320 Cr.P.C.
18. Having said so, we must hasten to add that the plenitude
of the power under Section 482 Cr.P.C. by itself, makes it
obligatory for the High Court to exercise the same with utmost
care and caution. The width and the nature of the power itself
demands that its exercise is sparing and only in cases where the
High Court is, for reasons to be recorded, of the clear view that
continuance of the prosecution would be nothing but an abuse of
the process of law. It is neither necessary nor proper for us to
enumerate the situations in which the exercise of power under
Section 482 may be justified. All that we need to say is that the
exercise of power must be for securing the ends of justice and
only in cases where refusal to exercise that power may result in
the abuse of process of law. The High Court may be justified in
declining interference if it is called upon to appreciate evidence
for it cannot assume the role of an appellate court while dealing
with a petition under Section 482 of the Criminal Procedure
Code. Subject to the above, the High Court will have to consider
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 8 of 13
the facts and circumstances of each case to determine whether it
is a fit case in which the inherent powers may be invoked.
xxx”
4
13. It was also held in Sanjay Bhandari v. CBI and Gian Singh (supra)
that criminal proceedings arising from civil, commercial, or financial
disputes may be quashed where the compromise between parties renders the
possibility of conviction remote and continuation of the case would cause
undue prejudice to the accused.
14. Similarly, the Supreme Court of India in CBI, ACB, Mumbai v.
Narendra Lal Jain reported as (2014) 5 SCC 364 has reiterated:
“14. In the present case, having regard to the fact that the
liability to make good the monetary loss suffered by the Bank
had been mutually settled between the parties and the accused
had accepted the liability in this regard, the High Court had
thought it fit to invoke its power under Section 482 CrPC. We
do not see how such exercise of power can be faulted or held to
be erroneous. Section 482 of the Code inheres in the High
Court the power to make such order as may be considered
necessary to, inter alia, prevent the abuse of the process of law
or to serve the ends of justice. While it will be wholly
unnecessary to revert or refer to the settled position in law with
regard to the contours of the power available under Section 482
CrPC it must be remembered that continuance of a criminal
proceeding which is likely to become oppressive or may partake
the character of a lame prosecution would be good ground to
invoke the extraordinary power under Section 482 CrPC.”
15. Recently, the Supreme Court in Parbatbhai Aahir @ Prabatbhai v. The
5
State of Gujarat reported as, observed that criminal cases involving
offences which arise from commercial, financial, mercantile, partnership or
4
2015 (10) AD (Delhi)
5
(2017) 9 SCC 641
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 9 of 13
similar transactions may, in appropriate circumstances, be quashed where
the parties have resolved the matter.
16. A gainful reference in this regard may be made to the recent decision
8
of the Supreme Court in Tarina Sen v. Union of India wherein noting the
One Time Settlement entered into between the borrowers and the Bank, the
criminal proceedings initiated against the appellants under Sections 120-B,
420, 468, 471 IPC & Sections 13(2) read with 13(1) (d) of the PC Act, 1988
were quashed. The relevant extracts of which are reproduced hereinunder:
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 has also not been in dispute that,
upon payment of the amount under the OTS, the loan account of
the borrower has been closed.
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.
xxx
15. Relying on the earlier judgments of this Court, we have held
that in the matters 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, the
High Court should exercise its powers under
Section 482 CrPC for giving an end to the criminal
proceedings. We have held that the possibility of conviction in
such cases is remote and bleak and as such, the continuation of
the criminal proceedings would put the accused to great
oppression and prejudice.
17. On similar lines is another decision of the Supreme Court in
8
2024 SCC OnLine SC 2696
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 10 of 13
6
K.Bharthi Devi and Anr v. State of Telangana and Anr. wherein the Court
noted that:-
“34. 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.
Thus, in view of the above facts that the parties have resolved
their dispute and bearing in mind that no allegations of fraud
sustain, no useful purpose will be served in continuing with the
proceedings.
xxx
44. 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.
45. 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. ”
18. Pertinently, the decisions relied upon by learned Special Public
6
(2024) 10 SCC 384
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 11 of 13
Prosecutor on behalf of the respondent No.1/CBI are distinguishable as they
are primarily concerned with settlement sought to be effected in cases where
there are allegations of bank frauds. In those cases, there were specific
allegations of forgery and fraud against the accused persons. However, as
previously noted, the allegations of fraud against the petitioners are negated
in terms of the forensic audit which clearly states that though there may have
been instances of non-compliance with sanction terms or guidelines,
however, no fraud was found in the transactions spanning over two years
before and after the accounts being declared as NPAs. Moreover, the
decisions by the Supreme Court in Tarina Sen (Supra) and K. Bharthi Devi
(Supra) were rendered in context of bank-borrower disputes wherein taking
note of the factum of settlement and issuance of no dues certificate, the
criminal proceedings were quashed.
19. Keeping in mind the factum of the one-time settlement between the
parties, factum of no fraud being detected in the audit and in light of the
principles established in the aforenoted decisions, the present petition is
allowed and the FIR in RC No.2232023A003 and all consequential
proceedings emanating therefrom, are hereby quashed.
At this stage, learned counsel for the petitioner, on instructions,
submits that the petitioner is willing to voluntarily contribute a sum of Rs.30
lacs and to this effect, an affidavit has also been placed on record. Note is
taken of the said affidavit. Considering that the prayers are allowed, it is
directed that out of the aforesaid volunteered cost:
i) Rs. 15 lacs is to be deposited by the petitioner with 'Avlamban Fund
Scheme 2024', a scheme formulated to provide financial aid to the acid
attack victims (Account No. 43599660056 at State Bank of India, Tis Hazari
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 12 of 13
Branch, Delhi with IFSC SBIN0000726 & MICR Code 110002126),
ii) Rs.10 lacs is to be deposited with the Delhi State Legal Services
Authority (Account No.18580110053263, UCO Bank, Branch Rouse
Avenue, IFSC: UCBA0003364). The amount so deposited shall be utilized
by the Delhi State Legal Services Authority for providing
counselling/psychological support to POCSO victims requiring such
assistance,
iii) Rs. 2.5 lacs is to be deposited with Delhi High Court Bar Association
Sports Club (A/c No.15530110006412) and
iv) Rs 2.5 lacs is to be deposited with the Delhi High Court Staff Welfare
Fund.
20. Let the aforesaid amounts be deposited as directed within 6 weeks
from passing of the order and proof of deposit be submitted with the I.O.
21. Accordingly, W.P.(CRL) 2169/2023 is disposed of in the above
terms. Resultantly, W.P.(CRL) 596/2023 seeking stay on the complaint
proceedings initiated before respondent No.1 and directions to initiate no
coercive measures, would not survive following the quashing of RC
No.2232023A003 and is disposed of as infructuous.
22. The pending applications in both the petitions are also disposed of as
infructuous.
MANOJ KUMAR OHRI
(JUDGE)
DECEMBER 04, 2024
ga/na
Signature Not Verified
Digitally Signed
By:GAUTAM ASWAL
Signing Date:23.12.2024
15:11:00
W.P.(CRL) 596/2023 & W.P.(CRL) 2169/2023 Page 13 of 13