DARSANSINGH SAINI vs STATE OF ODISHA
- Court
- Odisha High Court
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT,
CUTTACK
Date: 01-Jul-2026 17:56:51
IN THE HIGH COURT OF ORISSA AT CUTTACK
CRLMC No. 4465 of 2024
(In the matter of an application under Section 528 of B.N.S.S., 2023
read with Section 482 of the Code of Criminal Procedure, 1973.)
Darsansingh Saini …. Petitioner(s)
-versus-
State of Odisha and Orissa Khadi
and Village Industries Board
…. Opposite Party (s)
Advocates appeared in the case through Hybrid Mode :
For Petitioner(s) : Mr. Sailaza Nandan Das, Adv.
For Opposite Party (s) : Mr. Tej Kumar, ASC
Mr. Sashi Bhusan Jena, Adv.
Mr. Abhinash Swain, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-15.05.2026
DATE OF JUDGMENT:-25.06.2026
Dr. Sanjeeb K Panigrahi, J.
1.
The petitioner has filed the present CRLMC seeking quashing of the
order of cognizance dated 06.05.2010 passed by the learned S.D.J.M.,
Bhubaneswar in G.R. Case No. 1723 of 2003 arising out of Kharavela
Nagar P.S. Case No. 123 dated 21.05.2003. By the said order, cognizance
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
was taken for offences under Sections 406, 409, 468, 471, 418, 120-B read
with Section 34 IPC against the petitioner and other accused persons.
I. F ACTUAL M ATRIX OF THE C ASE :
2.
The brief facts of the case are as follows:
(i) The criminal case originates from a written report lodged by the
Secretary, Orissa Khadi and Village Industries Board, alleging cheating,
fraud and criminal misappropriation in relation to loans sanctioned
under the Consortium Bank Credit Loan Scheme.
(ii) The prosecution case is that funds under the scheme were routed
through the Odisha Khadi and Village Industries Board for promotion
of village industries, and loans amounting to ₹ 1,69,00,000 were
sanctioned to 26 beneficiaries through Khurda Central Co-operative
Bank. The amounts were allegedly disbursed in favour of suppliers of
plant and machinery, but investigation revealed that machinery was not
actually supplied, the demand drafts and cheques were encashed, and
the loan amounts were allegedly misappropriated without
establishment of the proposed industrial units.
(iii) So far as the present petitioner is concerned, the allegation is that he
availed a loan of ₹ 6,50,000 for installation of a Voltage Stabiliser Unit
over Plot No. MIG-68, Patrapada, Bhubaneswar, under a project with
estimated cost of ₹ 10,00,000. The loan was sanctioned by OKVIB and
released through Khurda Central Co-operative Bank, whereafter a
demand draft of ₹ 6,49,712 was issued in favour of Reliance Enterprisers,
Bangalisahi, Cuttack, towards supply of plant and machinery.
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
(iv) During investigation, it was allegedly found that no such industrial unit
was established at the proposed site and no machinery was supplied.
Though one communication from Khurda Central Co-operative Bank
indicated that the petitioner had installed the unit, the physical
verification report of the Deputy Secretary, OKVIB dated 21.10.2000
allegedly recorded that no unit existed at the site. It was also alleged
that no account existed in the name of Reliance Enterprisers,
Bangalisahi, Cuttack, thereby suggesting use of fabricated documents
and false declarations for securing disbursement.
(v) The investigating agency examined several witnesses, including
officials connected with OKVIB and the loan process, whose statements
allegedly supported the prosecution version regarding non-
establishment of the unit, fabrication of documents and fraudulent
withdrawal of loan amounts. Upon completion of investigation,
Charge-sheet No. 079 dated 13.04.2010 was submitted against about 40
accused persons, including the petitioner, and the learned S.D.J.M.,
Bhubaneswar took cognizance on 06.05.2010.
(vi) It is also an admitted circumstance from the opposite parties’ materials
that a certificate proceeding, namely Certificate Case No. 101 of 2001,
had been initiated for recovery of dues from the petitioner. The
petitioner subsequently deposited ₹ 29,90,351 on 06.09.2024 towards the
loan dues. The present CRLMC has thereafter been filed seeking
quashing of the FIR, charge-sheet, cognizance order and consequential
criminal proceeding.
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
II. S UBMISSIONS O N B EHALF O F T HE P ETITIONER :
3. The Learned Counsel for the Petitioner earnestly made the following
submissions in support of his contentions:
(i) The petitioner appears to contend that the dispute essentially arises out
of a loan transaction under the Consortium Bank Credit Loan Scheme
and that the matter has substantially lost its criminal character after
repayment of the dues. The petitioner relies upon the fact that the
outstanding amount was deposited in the certificate proceeding and
seeks to project that once the loan liability has been cleared with
interest, continuation of the criminal proceeding would serve no useful
purpose.
(ii) The petitioner’s principal attempt is to characterize the case as one of
civil liability or loan recovery rather than criminal prosecution. On this
footing, the petitioner appears to argue that the allegation, at its highest,
concerns non-payment or irregular utilization of a loan amount, for
which recovery proceedings had already been initiated and concluded
by payment, and therefore the criminal proceeding should not be
permitted to continue merely as a punitive extension of a financial
dispute.
(iii) The petitioner also appears to rely upon the long passage of time. The
FIR was lodged in 2003, the charge-sheet was submitted in 2010,
cognizance was taken on 06.05.2010, and the quashing petition has been
pursued much later. The petitioner would therefore contend that the
prosecution suffers from serious delay, that continuation of the
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
proceeding after such lapse of time would be oppressive, and that the
delay in investigation and prosecution causes prejudice to the accused.
(iv) The petitioner further appears to dispute the existence of dishonest
intention at the inception. Since the offence of cheating or criminal
misappropriation requires criminal intent and not merely breach of
contractual obligation, the petitioner’s implied stand is that the material
does not conclusively show that he entered into the transaction with a
fraudulent design from the beginning, and that issues regarding
establishment of unit, utilization of loan, release of funds and
repayment are matters arising out of implementation of the scheme.
(v) The petitioner also seeks to invoke the inherent jurisdiction of the High
Court under Section 482 Cr.P.C. on the ground that allowing the
proceeding to continue would amount to abuse of process of court. The
broad submission is that where the loan has been repaid, recovery has
been effected, and the proceeding is pending for an inordinate period,
the High Court should exercise its inherent power to secure the ends of
justice by quashing the criminal proceeding.
UBMISSIONS N EHALF F HE PPOSITE ARTIES
III. S O B O T O P :
4. The Learned Counsel for the Opposite Parties earnestly made the
following submissions in support of his contentions:
(i) The State and the Odisha Khadi and Village Industries Board oppose
the CRLMC by contending that the case is not a simple loan default or
civil dispute, but a case of planned fraud involving public funds under
a Government-sponsored self-employment scheme. According to them,
the petitioner and other accused persons allegedly acted in conspiracy
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
with suppliers and bank officials, obtained sanctioned loans on the basis
of false representations, and misappropriated funds without
establishing the industrial units for which the loans were granted.
(ii) The opposite parties specifically contend that the petitioner was not
merely an isolated borrower, but one of the beneficiaries of a fraudulent
mechanism. A loan of ₹ 6,50,000/- was sanctioned in his favour for
setting up a Voltage Stabiliser Unit, but investigation allegedly revealed
that no such unit was ever established and no machinery was supplied.
They further allege that the petitioner introduced 18 other similarly
placed beneficiaries who also availed loans and failed to establish
industrial units, thereby showing a wider pattern of conspiracy and
misuse of the scheme.
(iii) The opposite parties rely heavily upon documentary material collected
during investigation, including the sanction order, release letter, seizure
lists, demand draft details, correspondence of Khurda Central Co-
operative Bank, physical verification report dated 21.10.2000, and
communications showing that no account existed in the name of
Reliance Enterprisers. According to them, these materials prima facie
establish that fabricated documents and false declarations were used to
secure disbursement of the amount.
(iv) The State contends that repayment of the amount in 2024 does not erase
criminal liability. According to the opposite parties, the offence, if made
out, was complete at the stage when public money was allegedly
obtained through deception and misappropriated. Subsequent
repayment may be relevant for recovery, mitigation or sentencing, but
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Date: 01-Jul-2026 17:56:51
cannot be treated as a ground to quash prosecution for cheating,
forgery, criminal breach of trust and conspiracy, particularly when the
allegation concerns public money and a welfare scheme.
(v) The opposite parties further argue that delay is not a valid ground for
quashing in the facts of the present case. The CID Crime Branch
explains that the delay in filing the charge-sheet was neither intentional
nor deliberate, but occurred because the case involved 40 accused
persons, multiple beneficiaries, bank officials, suppliers, voluminous
loan records, banking transactions, institutional documents and field
verification across different offices. Therefore, according to the State, the
complexity and magnitude of the investigation sufficiently explain the
time taken.
(vi) It is also contended that the petitioner remained silent for nearly
fourteen years after cognizance was taken and approached the High
Court only after being compelled by the court process and related
recovery proceedings. The opposite parties submit that such conduct
shows that the petition is not a bona fide challenge but an attempt to
avoid trial after belatedly clearing the financial liability.
(vii) The opposite parties finally submit that the High Court, while
exercising jurisdiction under Section 482 Cr.P.C., cannot conduct a mini-
trial or adjudicate disputed factual defences such as absence of
intention, repayment, utilization of loan or evidentiary sufficiency.
Since the FIR, charge-sheet, witness statements and documents disclose
prima facie allegations of cheating, forgery, conspiracy, criminal breach
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
of trust and misappropriation of public funds, the proceeding should be
allowed to continue and the CRLMC should be dismissed.
IV. J UDGMENT AND ANALYSIS :
5.
Heard Learned Counsel for the parties and perused the documents
placed before this Court.
6. The petitioner is prosecuted under Sections 406, 409, 468, 471, 418, 120-B
read with 34 IPC for alleged large‐scale fraud in loans disbursed under
a State self‐employment scheme. The scheme funds were routed
through the Odisha Khadi Board and disbursed via a co‐operative bank.
The present petitioner obtained ₹ 6.50 lakh to install a Voltage Stabiliser
Unit, but the investigating agency alleges that no unit was ever set up,
the equipment was not supplied, and forged documents were used to
withdraw the funds. The petitioner repaid the loan dues in September
2024 during a pending certificate recovery proceeding. He now seeks to
quash the FIR, charge‐sheet and cognizance order on the ground that
the loan dispute has been resolved, the delay in prosecution is
inordinate, and no dishonest intention was disclosed. In opposition, the
State and Khadi Board emphasize that this is not a mere civil debt but a
fraud on a government scheme involving conspirators and that
repayment of the loan cannot negate the offence once it is committed.
7.
The threshold question is whether this is a case where Section 482 CrPC
should be exercised to foreclose the prosecution. It is well‐settled that
inherent power under Section 482 is sparingly exercised and only to
prevent abuse of process or to secure justice. The Supreme Court has
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Location: ORISSA HIGH COURT,
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Date: 01-Jul-2026 17:56:51
cautioned that proceedings involving serious offences affecting public
interest cannot be quashed merely because money has been repaid.
1
8.
In State of Maharashtra through CBI v. Vikram Doshi the Court held
that financial frauds are social wrongs with grave impact and are not
erased by repayment. It is not such a case where one can pay the
amount and obtain a ‘no due certificate’ and enjoy the benefit of
quashing of the criminal proceedings. The Court held as follows:
“It is an accepted principle of handling of finance that
whenever there is manipulation and cleverly conceived
contrivance to avail of these kinds of benefits it cannot be
regarded as a case having overwhelmingly and
predominantingly of civil character. The ultimate victim is
the collective. It creates a hazard in the financial interest of
the society. The gravity of the offence creates a dent in the
economic spine of the nation. The cleverness which has been
skillfully contrived, if the allegations are true, has a serious
consequence. A crime of this nature, in our view, would
definitely fall in the category of offences which travel far
ahead of personal or private wrong. It has the potentiality to
usher in economic crisis. Its implications have its own
seriousness, for it creates a concavity in the solemnity that
is expected in financial transactions. It is not such a case
where one can pay the amount and obtain a “no due
certificate” and enjoy the benefit of quashing of the criminal
proceeding on the hypostasis that nothing more remains to
be done. The collective interest of which the Court is the
guardian cannot be a silent or a mute spectator to allow the
proceedings to be withdrawn, or for that matter yield to the
ingenuous dexterity of the accused persons to invoke the
jurisdiction under Article 226 of the Constitution or under
Section 482 of the Code and quash the proceeding. It is not
legally permissible. The Court is expected to be on guard to
1
2014 (15) SCC 29
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these kinds of adroit moves. The High Court, we humbly
remind, should have dealt with the matter keeping in mind
that in these kinds of litigations the accused when perceives
a tiny gleam of success, readily invokes the inherent
jurisdiction for quashing of the criminal proceeding. The
court’s principal duty, at that juncture, should be to scan
the entire facts to find out the thrust of allegations and the
crux of the settlement. It is the experience of the Judge
comes to his aid and the said experience should be used with
care, caution, circumspection and courageous prudence. ”
9.
This reflects the public policy that persons accused of cheating banks or
misappropriating public funds cannot escape trial by merely returning
money. It must be emphasized that offences like cheating, breach of
trust and forgery are against society and cannot be brushed aside as
purely private wrongs. Thus, repayment of dues, by itself, is not a
ground for quashing economic offence proceedings involving deceit
and public resources.
10. The offences alleged in the present case are cognizable, non-
compoundable and serious in nature. They include criminal breach of
trust, cheating, forgery, use of forged documents and criminal
conspiracy. Such allegations, particularly when they concern public
funds meant for a welfare and self-employment scheme, cannot be
treated as a mere private loan dispute. Public policy requires that
prosecutions of this nature should proceed to trial unless the materials
on record are plainly insufficient to disclose any offence.
11. In the present case, the FIR, charge-sheet, witness statements, bank
correspondence and physical verification reports disclose a prima facie
pattern of fraud. The allegation is not confined to default in repayment.
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The prosecution case is that loans were sanctioned, drafts were issued
in favour of the purported supplier Reliance Enterprisers, the drafts
were encashed, no machinery was supplied, no industrial unit was
found at the proposed site, and documents were allegedly fabricated to
secure disbursement of public money. In such circumstances, the
petitioner’s attempt to describe the matter as a simple loan transaction
overlooks the substance of the allegations.
12. At the stage of a petition for quashing, this Court cannot weigh the
evidence, compare rival documents, or test the probable defence of the
accused. The Court is only required to see whether the prosecution
materials, taken at their face value, disclose the ingredients of the
alleged offences. Since the materials presently available disclose a prima
facie case involving cheating, forgery, criminal breach of trust and
conspiracy, this Court is not persuaded to interdict the prosecution at
the threshold.
2
13.
Even in State of Haryana v. Bhajan Lal , the Supreme Court has held
that unless the allegations are frivolous, mala fide or legally untenable,
Section 482 should not be used to stifle a bona fide prosecution. Here,
the charge‐sheet discloses a prima facie case of organized fraud on a
welfare scheme. No provision of law bars the proceedings, nor is this a
case of mistaken identity or trivial allegation. The petition does not fall
into any category of cases where courts normally quash FIRs.
14. The petitioner’s main plea is that the loan liability has been cleared and
thus the criminal proceeding serves no purpose. He argues that
2
AIR 1992 SC 604
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repayment (through the certificate action) has extinguished any civil or
criminal liability. This contention cannot prevail. The precedent set
in Vikram Doshi (Supra) explicitly disallows treating repayment as
vitiating the offence. Likewise, no compromise was struck with the
complainant agency here that could invoke a bar to prosecution.
3
15. The case of Nikhil Merchant v. CBI held that quashing may be justified
if parties agree to a full and final compromise (Clause 11 settlement)
extinguishing all claims. The Supreme Court held as follows:
“On an overall view of the facts as indicated hereinabove
and keeping in mind the decision of this Court in B.S.
Joshi's case (supra) and the compromise arrived at between
the Company and the Bank as also clause 11 of the consent
terms filed in the suit filed by the Bank, we are satisfied that
this is a fit case where technicality should not be allowed to
stand in the way in the quashing of the criminal
proceedings, since, in our view, the continuance of the same
after the compromise arrived at between the parties would
be a futile exercise.”
16. But, as one can observe, in the abovementioned precedent, the bank was
a willing party and both sides agreed that no further action was needed.
By contrast, in this case the Khadi Board and State have not abjured
prosecution. In fact, they have pressed for continuation of the
prosecution. Hence it is evident that the petitioner did not enter an
amicable settlement. Rather, he was compelled to pay under the
certificate proceeding. Thus, no equitable “compromise” like in Nikhil
Merchant (supra) exists. In absence of an express waiver by the
3
AIR 2009 SUPREME COURT 428
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complainant, allegations of criminal intent/liability are not wiped out
merely by repayment.
17.
The petitioner has also raised the ground of delay in investigation and
continuation of the proceeding. It is true that, in an appropriate case,
unexplained and oppressive delay may have a bearing on the fairness of
the trial. However, delay by itself is not a sufficient ground to quash a
criminal proceeding unless the accused is able to show that real and
specific prejudice has been caused to his defence.
18.
In the present case, no such prejudice has been demonstrated. The case
involved nearly 40 accused persons, several beneficiaries, bank officials,
suppliers, loan records, correspondence between different offices, and
physical verification reports. The explanation offered by the
investigating agency that the investigation took time because of the
volume and complexity of the materials cannot be brushed aside at this
stage.
19.
It is also relevant that the petitioner did not approach this Court
immediately after cognizance was taken on 06.05.2010. The present
challenge has been brought after a long lapse of time. Such conduct
weakens the plea that the continuation of the proceeding is, by itself,
oppressive or unfair. There is also no material before this Court to show
that any witness has become unavailable, any relevant document has
been lost, or that the petitioner is otherwise unable to put forward his
defence because of the delay.
20. In a case involving alleged misuse of public funds under a
Government-sponsored scheme, the proceeding cannot be quashed
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merely on the ground that the charge-sheet was submitted belatedly or
that the matter has remained pending for a long period.
21.
The petitioner’s contention that no dishonest intention was proved at
the inception of the loan is a factual defence that cannot be adjudicated
on a quashing petition. The allegations have been made out prima facie;
whether they stand scrutiny is a matter for trial. It is not this Court’s
function to resolve disputed facts or weigh evidence under Section 482.
The FIR and statements on record at least raise a strong suspicion of
deliberate fraud. That some documents initially indicated the unit was
installed cannot outweigh the other contrary evidence at this stage. This
Court cannot quash on the hypothesis that the petitioner might have
entered the scheme in good faith. That goes to the merits of guilt, not to
the jurisdiction to try.
22.
Now, this Court must also examine whether continuing the prosecution
would amount to an abuse of process. The Supreme Court has warned
against quashing criminal cases involving public interest unless the
ends of justice clearly require it. Here, given the serious allegations of
misappropriation of government funds under a welfare scheme, it
cannot be said that allowing trial to proceed would be “oppressive” in
any unjust sense. On the contrary, denying trial might send a dangerous
signal that borrowers can escape liability by belated repayment.
23. The opposite parties contend that because this was public money,
prosecution should continue to uphold deterrence. I agree with this
contention. The High Court must be cautious to avoid becoming a
forum of exception where allegations of financial wrongdoing is
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condoned by technicalities. In Nikhil Merchant (supra) itself, the Court
observed that even after compromise, quashing is an exception and
depends on facts, and that it would not quash prosecutions of “crime[s]
against society” when a prima facie case exists. The victims or society
cannot be silent spectators simply because the accused returned the
money. These considerations go against the petitioner’s case.
24. In the end, the balance of convenience and public interest favours
denying relief. The petitioner entered into the loan scheme on terms of
setting up a project. It appears funds were diverted. The IR regularity
investigation has been completed and charges framed. Unless the
material on record fails to make out a prima facie offence, the court
should allow the prosecution to proceed. The petitioner’s payment of
dues occurred after the charges were set, not as part of any judicial
compromise that extinguished claims. There is no jurisdictional bar
(statutory or constitutional) to sustain this prosecution. In these
circumstances, Section 482 should not be used to quash a pending case
about public funds obtained by fraud.
ONCLUSION
V. C :
25. For the foregoing reasons, this Court is not satisfied that continuation of
the criminal proceedings would amount to abuse of process or violate
any settled principle of justice. The case at hand does not fall within any
exception entitling summary quashing.
26. Accordingly, the petition under Section 482 CrPC must be dismissed
and the FIR, charge‐sheet and cognizance order sustained. The criminal
trial shall be allowed to proceed on the charges and in accordance with
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law. It is clarified that the observations are only for deciding this
CRLMC and shall not influence the trial court.
27.
Interim order, if any, passed earlier stands vacated.
(Dr. Sanjeeb K Panigrahi)
Judge
Orissa High Court, Cuttack,
th
Dated the 25 June, 2026/
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