Criminal investigation into commercial loan defaults unsustainable absent evidence of dishonest intent at inception.

The Petitioner, GTL Limited, sought the quashing of an FIR registered by the CBI on January 21, 2023, under Section 120-B r/w 420 of the IPC and Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988.

The CBI alleged that the Petitioner fraudulently obtained credit facilities of ₹4760.01 crores from a consortium of 24 banks and siphoned funds to vendor-entities.

However, earlier inquiries by the CBI in 2018 had been closed because the lender banks (Joint Lender Forum) refused to classify the account as "fraud".

The Petitioner contended that it had repaid ₹5543 crores against a principal of ₹3164 crores and that the Income Tax Settlement Commission had already reached a finding that the vendor purchases were genuine.

Despite a 18-month Preliminary Enquiry (PE), the CBI filed the FIR against "unknown" persons, failing to identify any specific accused.

Whether a criminal investigation for cheating and corruption can be permitted to continue when the FIR is lodged against "unknown" persons following an extensive Preliminary Enquiry that failed to identify any specific offender or evidence of dishonest intent.

Whether the Court should exercise its inherent power to quash an FIR when the underlying transactions were treated as bona fide commercial decisions by the consortium of banks and regulatory authorities like the RBI and Ministry of Finance.

The Court applied the definition of 'Cheating' under Section 415 of the IPC, highlighting that a mere breach of contract does not constitute cheating unless fraudulent intent existed at the inception.

It relied on *Hridaya Ranjan Prasad Verma v. State of Bihar*, which distinguishes between civil liability and criminal intent.

Regarding the Prevention of Corruption Act, the Court noted the protective umbrella of Section 17A for public servants (bank officials).

It further adhered to the principles of *Rashmi Kumar v. Mahesh Kumar Bhada*, which permit the quashing of proceedings when substantial allegations are wiped out by uncontroverted documents to prevent a miscarriage of justice.

The Court observed that the CBI’s Preliminary Enquiry lasted 18 months and involved the collection of 52 documents, yet the agency remained unable to name a single specific accused or prove collusion.

The Court found that the lender banks, in their commercial wisdom, had explicitly decided not to declare the account as "fraud," a decision communicated to the RBI and the Ministry of Finance.

The Court reasoned that since the Petitioner had made substantial repayments and the Income Tax Settlement Commission had verified the vendors, the CBI’s allegations of "bogus purchases" were displaced by unimpeachable records.

It noted that an investigation cannot be a "roving and fishing inquiry" conducted in the perpetual hope of identifying an offender when the primary facts suggest a failed business risk rather than criminal misconduct.

The Court answered the issues in the affirmative, stating that the machinery of justice cannot be put in motion for a roving inquiry against "unknown" persons when identifying details are readily available in corporate records.

Consequently, the High Court allowed the Writ Petition and quashed FIR No. RC2192023E0003.