HARENDRA DVARKADAS PATEL vs STATE OF GUJARAT

Court
Gujarat High Court

R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL REVISION APPLICATION NO. 160 of 2010
FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE HASMUKH D. SUTHAR
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Approved for Reporting Yes No
✔
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HARENDRA DVARKADAS PATEL & ORS.
Versus
STATE OF GUJARAT
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Appearance:
MR RC JANI(357) for the Applicant(s) No. 1,2,3,4
MS MONALI BHATT, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE HASMUKH D. SUTHAR

Date : 05/05/2026
JUDGMENT
1. By way of present revision application under Sections 397
read with 401 of the Code of Criminal Procedure, 1973, the
applicants have prayed for quashing and setting aside the order
dated 10.02.2010 passed by learned Additional Senior Civil
Judge and JMFC, Patan in Criminal Case No.1490 of 2009.
2. Heard learned advocates for the respective parties.
3. Brief facts of the case are that The applicants, who are
guarantors of original accused Nos. 1 to 3, submit that the said
accused had availed financial facilities from the complainant
bank, including a term loan of Rs. 1.25 crore and an overdraft
facility of Rs. 3.90 crore, aggregating to Rs. 5.15 crore. It is
alleged that accused Nos. 1 to 3 opened and operated accounts
with other banks, namely Syndicate Bank, Axis Bank, Patan,
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
and Harij Nagrik Sahkari Bank Ltd., without informing the
complainant bank, and carried out certain transactions in
breach of the contractual terms. The complainant bank also
initiated proceedings under Section 13(2) of the SARFAESI Act,
2000 and issued notices, including for auction of mortgaged
properties, wherein the present applicants were also guarantors.
Subsequently, an FIR being C.R. No. I–Patan City Police Station
dated 13.03.2009 came to be registered under Sections 467,
468, 471, 406, 420 and 120B IPC, which upon investigation was
restricted to Sections 406, 420 read with Section 120B IPC. The
applicants thereafter preferred a discharge application below
Exh. 13 before the learned 3rd Additional Senior Civil Judge and
JMFC, Patan, which came to be rejected on the grounds that the
applicants were partners of the accused and had supplied false
documents. Being aggrieved by the said order, the present
revision application has been filed.
4. Learned advocate for the applicants submitted that the
applicants are merely guarantors of accused Nos. 1 to 3 and are
neither partners nor beneficiaries of the alleged transactions. It
was contended that the learned trial Judge committed an error
in rejecting the discharge application by wrongly observing that
the applicants were partners of the principal accused and had
supplied false documents, despite the investigation papers and
FIR indicating that original documents were produced before the
Investigating Officer and offences under Sections 467, 468 and
471 of the Indian Penal Code were not retained in the charge-
sheet. It was further submitted that the dispute arises out of a
loan transaction and is purely civil in nature, for which
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
proceedings under the SARFAESI Act, 2002 had already been
initiated by the complainant bank by taking mortgaged
properties under process of recovery. It was argued that mere
default in repayment of installments cannot give rise to criminal
prosecution under Sections 406 and 420 IPC, particularly when
substantial amounts had already been deposited with the bank.
It was therefore urged that continuation of the criminal
proceedings against the guarantors amounts to misuse of the
process of law and the applicants deserve to be discharged by
exercising revisional powers under Sections 397 and 401 Cr.P.C.
5. Learned APP appearing for the respondent–State opposed
the present application and submitted that sufficient material
has been collected during the course of investigation connecting
the applicants with the alleged offence. It was contended that the
applicants were not merely passive guarantors, but had actively
facilitated the transactions and execution of loan documents,
and therefore their role cannot be brushed aside at this stage.
Learned APP further submitted that the allegations disclose a
systematic act of cheating and criminal breach of trust causing
substantial financial loss to the complainant bank, and merely
because proceedings under the SARFAESI Act, 2002 have been
initiated, the criminal liability of the accused does not get
extinguished. It was argued that civil and criminal proceedings
can proceed simultaneously when the ingredients of criminal
offences are prima facie made out. Learned APP submitted that
the trial Court has rightly appreciated the material available on
record and rejected the discharge application, and therefore no
interference is warranted in exercise of revisional jurisdiction
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
under Sections 397 and 401 Cr.P.C.
6. Having heard the learned advocates appearing for both the
sides and upon perusal of the record, it appears that the
principal borrower, namely Mahendrabhai Amin, has expired.
The said borrower had availed loan facilities from the
complainant bank. Subsequently, for recovery of the outstanding
dues, the bank initiated proceedings under the SARFAESI Act,
2002, pursuant to which the mortgaged property came to be
auctioned. Initially, the complaint came to be lodged for offences
punishable under Sections 406, 468 and 471 of the Indian Penal
Code; however, during the course of investigation, the
Investigating Officer arrived at the conclusion that no case of
forgery was made out and, therefore, offences under Sections
468 and 471 IPC were not retained, and the charge-sheet came
to be filed only for the offences punishable under Sections 406
and 420 IPC.
7. The accused Nos. 2 to 5 preferred a discharge application
under Section 239 Cr.P.C. Upon perusal of the record, it appears
that the bank had sanctioned loan facilities aggregating to Rs.
5.15 crore, including a term loan of Rs. 1.25 crore, repayable in
18 quarterly installments. The amount was admittedly
withdrawn by accused No.1, who has now expired. The allegation
against the present applicants is that they entered into a
conspiracy with the principal accused and thereby committed
offences under Sections 406 and 420 IPC. However, it is an
undisputed position that the present applicants had merely
stood as guarantors and their properties were already subjected
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
to mortgage and recovery proceedings under the SARFAESI Act.
It further appears that certain installments had also been repaid
by the borrower. Prima facie, at the inception of the loan
transaction, there was no dishonest or fraudulent intention
attributable to the present applicants so as to constitute the
offence of cheating. The dispute, prima facie, appears to be civil
in nature. Nothing incriminating has been found in the
conscious possession of the present applicants, nor is there any
material to indicate that they siphoned off any amount or
transferred any hypothecated property over which the bank had
created a charge.
8. Mere failure on the part of the borrower to repay the loan
amount, in absence of any mens rea or dishonest intention,
cannot give rise to criminal prosecution against the present
applicants. Prima facie, this Court is of the opinion that a purely
civil dispute has been given the colour of criminality. Hence, the
application filed below Exhibit 13 in Criminal Case No.1490 of
2009 by the present applicants, who stood as guarantors,
deserves consideration. The concept of discharge in criminal
jurisprudence acts as a constitutional safeguard to ensure that
no person is subjected to the rigours of a criminal trial unless
the prosecution is able to disclose a prima facie case against
such person.
9. In the backdrop of the aforesaid discussion, the discharge
application filed by the present applicants-accused deserves to
be allowed. The object of the discharge mechanism occupies a
crucial place within the criminal justice system, as it acts as a
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
preliminary judicial filter before commencement of trial. Its
primary purpose is to ensure that only those cases which
disclose a legal and prima facie foundation proceed to trial,
thereby safeguarding the rights and liberty of the accused while
simultaneously preserving judicial efficiency. The mechanism
protects an individual from being unnecessarily subjected to the
ordeal of a full-fledged criminal trial when the prosecution
material fails to disclose even a prima facie case. Such safeguard
upholds the constitutional values of personal liberty and fair
procedure and prevents abuse of the process of law by filtering
out frivolous prosecutions at the threshold.
10. Even after the pronouncement in Priti Saraf & Anr .
(supra), the Hon’ble Apex Court, in the cases of Rikhab Birani &
Anr. v. State of Uttar Pradesh & Anr. reported in 2025 INSC
512, Rekha Jain v. State of Karnataka & Anr. reported in
2022 LiveLaw (SC) 468 and Vesa Holdings Pvt. Ltd. & Anr. v.
State of Kerala reported in (2015) 8 SCC 293 , has clarified the
legal position regarding the circumstances in which offences
under Sections 406 and 420 of the Indian Penal Code are made
out. Further, as held by the Hon’ble Supreme Court in Lalit
Chaturvedi and Others v. State of Uttar Pradesh and Another
reported in 2024 SCC OnLine SC 171, any attempt to settle civil
disputes and claims, which do not involve any criminal offence,
by applying pressure through criminal prosecution deserves to
be deprecated and discouraged.
11. Accordingly, the present revision application is allowed.
rd
The order dated 10.02.2010 passed by the learned 3 Additional
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R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
Senior Civil Judge and JMFC, Patan below Exhibit 13 in
Criminal Case No.1490 of 2009 is hereby quashed and set aside.
Consequently, the discharge application filed by the present
applicants stands allowed and the applicants are discharged
from the offences alleged against them. The bail bond, if any,
shall stand cancelled and the sureties shall stand discharged.
Rule is made absolute. Record and proceedings be transmitted
back to the concerned Court forthwith.
(HASMUKH D. SUTHAR,J)
Ali
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