Malicious criminal prosecution by a loan defaulter to evade recovery liability constitutes an abuse of process.

The Respondent (Liaquat Ali Khan), a partner in M/s Paradise Packers, availed credit facilities from the State Bank of India (SBI).

The loan account was declared a Non-Performing Asset (NPA) in 2010, leading to recovery proceedings under the SARFAESI Act and an order by the Debts Recovery Tribunal (DRT) holding the Respondent liable for ₹28,80,998

Following the recovery actions, the Respondent filed a complaint under Section 156(3) CrPC (later treated as a private complaint), alleging that bank officials (Petitioners) and an insurance agent forged his signatures on insurance proposal forms

He claimed the insurance policy contained an incorrect manufacturing description and lower valuation, which led to the rejection of his claim after a flood in 2010

Despite a police report stating no case was made out, the Judicial Magistrate First Class, Nahan, issued process against the Petitioners for offences under Sections 409, 465, 467, 468, 471, and 120-B of the IPC

This order was upheld by the Sessions Judge

The Respondent also initiated a parallel civil suit for recovery involving the same allegations of forgery

1. Whether the criminal proceedings against the bank officials and the insurance agent were maliciously instituted to evade loan liability and constituted an abuse of the process of law

2. Whether the material on record prima facie established the ingredients of criminal breach of trust and forgery under the IPC

The Court exercised its inherent powers under Section 482 CrPC (now Section 528 BNSS) to prevent the abuse of the process of any court and to secure the ends of justice

It relied on the principles established in State of Haryana v. Bhajan Lal, which allow quashing where proceedings are maliciously instituted with an ulterior motive for wreaking vengeance

Regarding substantive law, the Court applied Section 409 IPC (Criminal breach of trust by a banker) [para 33], Section 463/465 IPC (Forgery) [para 34], and Section 471 IPC (Using a forged document as genuine)

It further referred to Prashant Bharti v. State (NCT of Delhi) to emphasize that the High Court must quash proceedings if the accused's defense is based on indubitable facts that overrule the veracity of the allegations

The Court observed that the Respondent’s criminal complaint was a "clever ploy" initiated only after the bank took physical possession of assets under the SARFAESI Act

It found that the Petitioners, acting as bank officials, had a primary duty to insure mortgaged property to safeguard the public exchequer; thus, procuring a policy was an act in discharge of official duties, not a criminal act

The Court noted that the Respondent failed to prove "entrustment" of property to satisfy Section 409 IPC, as the assets were mortgaged and eventually legally seized for loan recovery

Regarding the forgery charges (Sections 465-471), the Court reasoned that the Petitioners derived no personal benefit from the alleged acts, as any insurance claim amount would have been adjusted against the bank's outstanding debt

The Court criticized the lower courts for ignoring the police report and the parallel civil proceedings, concluding that the dispute was essentially civil and the criminal machinery was being used as a weapon of harassment

The Court held that the allegations, even if taken at face value, did not constitute the charged offences and were manifestly attended with mala fides

The Court directed that the continuation of such proceedings would be a waste of judicial time and an abuse of law

All interim orders were vacated