N.S. Gnaneshwaran Etc. vs. The Inspector Of Police

2025 INSC 787
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS. OF 2025
(@ SLP (CRL) NOS. 17481-17482 OF 2024)

N.S. GNANESHWARAN ETC. …APPELLANT(S)
VERSUS
THE INSPECTOR OF POLICE & ANR. …RESPONDENT(S)

J U D G M E N T

VIKRAM NATH, J.
1. Leave granted.
2. The present appeals arise out of order dated 19.11.2024
passed by the Madurai Bench of the High Court of Madras
in Crl. O.P. (MD) Nos. 586 and 595 of 2024, whereby the
High Court dismissed the petitions filed by the appellants
under Section 482 of the Code of Criminal Procedure,
1
1973 , seeking quashing of criminal proceedings initiated
against them for offences under Section 120B read with
Sections 420, 468, and 471 of the Indian Penal Code,

1
CrPC.
Digitally signed by
SONIA BHASIN
Date: 2025.05.29
10:39:24 IST
Reason:
Signature Not Verified
SLP (CRL) NOS. 17481-17482 OF 2024 Page 1 of 8


2
1860 , and under Section 13(2) read with Section 13(1)(d)
3
of the Prevention of Corruption Act, 1988 .

3. The facts relevant to the present appeals are as follows:
3.1. The appellants herein are arrayed as accused nos. 3 and
6 in C.C. No. 16 of 2006, arising out of FIR No. RC MA1
2005 0020, registered on the basis of a complaint dated
27.04.2005 lodged by the respondent no.2 – Bank. It was
alleged that the accused persons caused wrongful loss
to the Bank to the tune of Rs.25.89 lakhs, leading to the
filing of the charge sheet against nine accused, including
the appellants.
3.2. The allegations against appellant no.1, N.S.
Gnaneshwaran, are that he was instrumental in
orchestrating the fraudulent diversion of funds
sanctioned to M/s Vinayaka Corporation. He is alleged
to have facilitated the encashment of multiple cheques
drawn from the fraudulently obtained credit limit, using
a network of relatives, employees, and fictitious
identities. It is further alleged that he forged signatures

2
IPC.
3
PC Act.
SLP (CRL) NOS. 17481-17482 OF 2024 Page 2 of 8


and diverted the funds through various accounts linked
to his family members and associates.
3.3. Appellant no.2, N.S. Madanlal, the brother of
Gnaneshwaran, is alleged to have assisted in the scheme
by operating a Bank account in the name of Bharathi
Traders along with his wife, through which cheques were
deposited and funds withdrawn. He is also accused of
physically filling in cheques and ensuring their credit
and encashment as part of the larger conspiracy to
siphon off funds from the Bank.
3.4. Parallel to the criminal proceedings, the Bank initiated
recovery proceedings in O.A. Nos. 186 of 2005 and 5 of
4
2006 before the Debt Recovery Tribunal, Chennai ,
which were later renumbered as T.A. Nos. 16 and 57 of
2007.
3.5. The High Court, vide order dated 07.01.2023, allowed
the petition under Section 482 CrPC filed by accused
no.7, who is the wife of appellant no.1, and quashed the
FIR insofar as it pertained to her. The said order was

4
DRT.
SLP (CRL) NOS. 17481-17482 OF 2024 Page 3 of 8


assailed before this Court by way of Special Leave
Petition, which came to be dismissed on 26.03.2021.
3.6. In identical cases being C.C. Nos. 13 of 2006 and 151 of
2010, which were initiated by the Central Bureau of
Investigation (CBI) against the appellants and other
accused based on the same set of transactions, a
settlement was arrived at between the principal accused
and the Bank for an amount of Rs.52,79,000/-. Taking
note of this compromise, the High Court proceeded to
quash the proceedings against the accused on the
ground of parity, and extended similar relief to the
appellants herein order dated 26.09.2022.
vide
3.7. Subsequently, the Bank floated a One Time Settlement
(OTS) scheme, which was availed of by the main
borrowers, namely accused nos. 4 and 5. Upon full
repayment of the dues, the Bank recorded its
satisfaction in the pending recovery proceedings, which
were dismissed as settled vide order dated 15.12.2023.
Thereafter, the Debt Recovery Certificates were recalled,
and No Dues Certificates were issued to the borrowers.
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3.8. In view of the settlement, the appellants moved the High
Court under Section 482 CrPC seeking quashing of the
criminal proceedings pending against them.
3.9. However, the High Court, vide the impugned order,
dismissed the petitions on the ground that the stage of
trial was advanced and held that the criminal
proceedings could not be quashed merely on the basis of
the OTS when a prima facie case was made out.
3.10. Aggrieved by the said decision, the appellants are before
us in the present appeals.
4. We have heard the learned counsel appearing for the
parties and carefully perused the material on record.
5. The learned counsel for the appellants submits that the
dispute in question arises out of a commercial transaction
which has since been amicably resolved through a One
Time Settlement scheme extended by the Bank. It is
contended that the recovery proceedings initiated by the
Bank have been fully settled, no dues remain, and the
Bank has formally issued certificates recording its
satisfaction. It is further urged that the appellants are
similarly placed to other co-accused against whom
proceedings have already been quashed, and that the
SLP (CRL) NOS. 17481-17482 OF 2024 Page 5 of 8


continuation of proceedings in the present matter would
amount to unfair treatment. Additionally, it is submitted
that the offences under the Prevention of Corruption Act
are not attracted in the case of the appellants, who are
private individuals and not public servants.

6. On the other hand, learned counsel for the respondents
contends that the settlement of dues or compromise
between the parties does not automatically warrant
quashing of criminal proceedings when serious allegations
involving fraud and criminal conspiracy are made out. It is
submitted that the existence of a prima facie case is
sufficient to warrant trial and that private settlements
should not interfere with criminal prosecution, especially
at an advanced stage.
7. Having considered the submissions of both sides and
examined the record, we are of the view that no useful
purpose would be served by continuing the criminal
proceedings in the present matter. The dispute has,
admittedly, culminated in a comprehensive One Time
Settlement under which the Bank has received the entire
outstanding amount. The recovery proceedings before the
tribunal have been dismissed as settled, and no residual
claim survives. The Bank has not raised any objection to
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the closure of the matter and has issued formal
acknowledgments of satisfaction.

8. Further, in identical proceedings filed by the CBI against
the appellants in C.C. Nos. 13 of 2006 and 151 of 2010,
the charge sheets were quashed by the High Court after
taking note of the settlement reached in the recovery
proceedings. The special leave petitions preferred by the
State being SLP (Crl) No. 711 of 2021 and SLP (Crl) No. 825
of 2021 challenging the said quashing were dismissed by
this Court, rendering the orders final. Since the facts and
legal position are the same in the present matter, we see
no reason why the appellants should not be given the same
relief.
9. In our view, allowing the present criminal proceedings to
continue would serve no meaningful purpose, particularly
when the dispute between the parties has already been
resolved through a full and final settlement. The
settlement between the parties having taken place after the
alleged commission of the offence, and there being no
continuing public interest we see no justification for
allowing the matter to proceed further.
10. In view of the above discussion, we find it appropriate to
quash the proceedings pending in C.C. No. 16 of 2006
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against the appellants herein. Consequently, the appeals
are allowed.

11. Pending application(s), if any, shall stand disposed of.

………………………………..J.
[VIKRAM NATH]



………………………………..J.
[SANDEEP MEHTA]

NEW DELHI;
MAY 28, 2025

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