Criminal proceedings may be quashed after bank settlement where forgery allegations lack prima facie material and conviction is remote.

The petitioner, a director and guarantor of M/s Umananda Rice Mill Pvt. Ltd., was accused, along with other directors, of conspiring with unknown bank officials and obtaining credit facilities from the State Bank of India through alleged misrepresentation, diversion of loan funds, and use of allegedly false documents.

The loan account subsequently became a non-performing asset, causing the bank an alleged loss of approximately ₹28.35 crores plus interest.

The CBI initially investigated offences under the Prevention of Corruption Act, 1988 and the Indian Penal Code, but ultimately exonerated the bank officials and filed a charge sheet against the petitioner and other private persons under Sections 120B/420 and 468/471 IPC.

During the pendency of proceedings before the Debt Recovery Tribunal, the borrower companies and the bank entered into one-time settlement arrangements, pursuant to which settlement amounts were paid and no-dues certificates were issued.

The bank also withdrew or disposed of the relevant recovery proceedings.

The petitioner therefore sought quashing of the FIR, charge sheet, and consequential criminal proceedings under the High Court’s inherent jurisdiction.

Whether criminal proceedings for offences under Sections 120B/420 and 468/471 IPC could be quashed merely because the bank and the borrower had entered into a one-time settlement and the loan account had been closed or treated as settled?

Whether the materials in the charge sheet disclosed the essential ingredients of forgery under Section 468 IPC, and whether any specific act of forging or using a forged document was attributable to the petitioner?

Whether, in the circumstances of the case, continuation of the criminal proceedings against the petitioner would amount to an abuse of the process of court?

The Court exercised its inherent jurisdiction under Section 482 of the Code of Criminal Procedure to prevent abuse of process and secure the ends of justice.

It applied the principle that serious economic offences, offences involving public money, and offences under the Prevention of Corruption Act ordinarily cannot be quashed solely on the basis of settlement or repayment, as recognised in Gian Singh v. State of Punjab, Rumi Dhar v. State of West Bengal, CBI v. Maninder Singh, State of Maharashtra through CBI v. Vikram Anantrai Doshi, and Sushil Suri v. CBI.

However, the Court also applied the exception that criminal proceedings arising predominantly from commercial, financial, or civil transactions may be quashed where the dispute has been settled, the possibility of conviction is remote and bleak, and continuation would cause oppression or abuse of process, as recognised in Nikhil Merchant v. CBI, CBI v. Duncan’s Agro Industries Ltd., CBI v. Sadhu Ram Singla, K. Bharathi Devi v. State of Telangana, and Vijay Kumar Kela v. CBI.

Regarding forgery, the Court relied on Mohammad Ibrahim v. State of Bihar, which held that execution of a document by a person claiming property as his own does not, by itself, constitute execution of a “false document” under Section 464 IPC unless the person falsely represents that the document was made or authorised by another person.

The Court acknowledged that settlement and repayment do not, by themselves, extinguish criminal liability for fraud or forgery involving public funds.

However, it found that the petitioner’s case materially differed from cases involving established fabrication, involvement of corrupt bank officials, or continuing loss to the public exchequer.

The CBI had exonerated all bank officials and had not established any offence under the Prevention of Corruption Act.

The charge sheet did not specifically allege that the petitioner forged any document, forged anyone’s signature, or represented that he was authorised by another person to execute a document.

The property alleged to have been re-mortgaged had been transferred by another individual, Prasenjit Halder, and not by the petitioner.

The documents had been submitted to and scrutinised by bank officials, empanelled advocates, and valuers before the loan facilities were sanctioned.

Applying the principle in Mohammad Ibrahim, the Court held that the allegations did not disclose the essential ingredients of forgery under Section 468 IPC.

In addition, the dispute had been settled through the bank-approved one-time settlement, recovery proceedings had been withdrawn or disposed of, and no-dues certificates had been issued.

In these circumstances, the possibility of conviction against the petitioner was considered remote and bleak, and continuation of the prosecution was held to be oppressive and an abuse of process.

It held that, although settlement ordinarily does not absolve an accused of serious economic offences, the present charge sheet did not disclose the essential ingredients of forgery or any specific fraudulent act attributable to the petitioner.

Considering the settlement with the bank, the absence of allegations against or prosecution of bank officials, the petitioner’s limited and unsupported attribution in the charge sheet, and the remote possibility of conviction, continuation of the proceedings would amount to an abuse of process.

The revision application was accordingly allowed, and the entire proceedings arising from FIR No. RCBSK2018E0001 of 2018, the charge sheet dated 30 November 2018, and the connected criminal case were quashed qua the petitioner.