Criminal Prosecution for Recovery Actions Based on Unverified Material Constitutes Gross Abuse of Process

The Petitioner, MD CEO of HDFC Bank, sought quashing of FIR No. 0818/2025 and a Magistrate’s order directing its registration under Sections 406, 409, and 420 of the IPC

The dispute arose from decade-long recovery proceedings initiated by HDFC Bank against Splendour Gems Ltd., involving an outstanding debt of over ₹65 crores

The complainant (Respondent No. 3), a trustee of Lilavati Kirtilal Mehta Medical Trust, alleged that former trustees (Accused 1-7) colluded with HDFC Bank and Phoenix ARC officials to misappropriated Trust funds, citing a photocopy of an unverified cash diary entry showing a ₹2.05 crore payment to the Petitioner

The complainant further alleged this "fraudulent litigation" caused the death of his father, the original guarantor

Despite police reports stating that identical issues were covered in existing FIRs and that the Bank’s actions were pursuant to judicial orders, the JMFC, Bandra, directed the registration of new FIRs

1. Whether the criminal proceedings initiated by the complainant constitute an abuse of the process of law intended to obstruct legitimate debt recovery

2. Whether the allegations in the complaint and the photocopy of the cash diary entries prima facie disclose the essential ingredients of criminal breach of trust (Sec. 406/409) or cheating (Sec. 420)

3. Whether the investigation should be transferred to the Central Bureau of Investigation (CBI)

The court primarily applied the inherent powers of the High Court under Section 482 of the CrPC (now Section 528 BNSS) and Article 226 of the Constitution to prevent the abuse of the process of any Court

It relied on the landmark principles in State of Haryana v. Bhajan Lal, which permit quashing when proceedings are "manifestly attended with malafide" or maliciously instituted for wreaking vengeance

The court also considered Imran Pratapgarhi v. State of Gujarat, holding that there is no absolute bar on quashing an FIR at a nascent stage if no offence is made out on the face of the record

The court applied the high threshold for transferring cases to the CBI, noting such orders should not be passed mechanically

The Court observed that the FIR was a "counterblast" to legitimate recovery proceedings that had already attained finality through the Debt Recovery Tribunal and the High Court

The Court found the complainant’s reliance on a photocopy of a handwritten cash diary insufficient to trigger a criminal investigation against bank officials who were merely discharging their duties to recover public money

The Court noted that the complainant had a personal vendetta against the Bank, blaming them for his father's demise, but found that the Bank’s actions were lawful executions of judicial orders

It reasoned that failing to interfere at this stage would allow the criminal process to be used as a tool for harassment and would deter financial institutions from pursuing legal recovery

Regarding the CBI transfer, the Court held that the Economic Offences Wing (EOW) was competent to investigate and that the request for transfer was premature

The Court held that the prosecution lacked bona fides and was an abuse of process

The petitions for transfer of investigation to the CBI (WP Nos. 3227 and 3313 of 2025) were dismissed as premature and unnecessary