Proceedings for unlawful lending and exorbitant interest must be quashed when statutory ingredients are absent.

A complaint to the Superintendent of Police alleged that the petitioner and others charged interest of 4–5% per week. It stated that the complainant had borrowed ₹5 lakh from the petitioner in 2013–14, had paid approximately ₹2 crore over five years, and was being asked for a further ₹1 crore.

The Assistant Registrar of Cooperative Societies (ARCS) reported that the petitioner had held a money-lending licence, which expired on 31 March 2013, and indicated that proceedings could be initiated if supporting documents were produced.

Police registered a case under Sections 504 and 506 read with Section 34 IPC, Sections 38 and 39 of the Karnataka Money Lenders Act, 1961, and Section 4 of the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004. The petitioner sought quashing under Section 482 CrPC.

The State also informed the Court that a cheque-bounce case arising from cheques connected with an arecanut business had resulted in conviction, which was affirmed on appeal.

Whether the complaint and supporting material disclosed grounds to continue proceedings against the petitioner for the alleged offences under Sections 504 and 506 read with Section 34 IPC, Sections 38 and 39 of the Karnataka Money Lenders Act, and Section 4 of the Karnataka Prohibition of Charging Exorbitant Interest Act

Whether continuation of the criminal proceedings amounted to an abuse of process warranting exercise of the High Court’s inherent jurisdiction under Section 482 CrPC

Section 482 CrPC empowers the High Court to prevent abuse of the process of court and secure the ends of justice.

In Manoj Mahavir Prasad Khaitan v. Ram Gopal Poddar, (2010) 10 SCC 673, the Supreme Court stated that, although a court ordinarily does not determine the truth of allegations at the threshold, the High Court may intervene where allegations are so absurd that no reasonable person would accept them; Section 482 is a safeguard against injustice.

The alleged offences were under Sections 504 and 506 read with Section 34 IPC, Sections 38 and 39 of the Karnataka Money Lenders Act, 1961, and Section 4 of the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004.

The Court treated the complaint and the ARCS report as the foundational material for assessing the case. It found that the complaint did not attribute facts sufficient to support the IPC allegations of intentional insult or criminal intimidation.

Although the complaint alleged substantial interest payments and a further demand, the ARCS report noted the expired licence and contemplated proceedings if supporting documents were produced; the Court observed that no documents substantiating the alleged payments had been furnished.

The Court also considered the cheque-bounce proceedings and concluded that the criminal case was an attempt to exert pressure. On the material before it, it found the ingredients of the Money Lenders Act offences were not attracted and the allegation under the Exorbitant Interest Act was unsubstantiated.

It therefore considered quashing necessary to prevent abuse of process and miscarriage of justice.

It allowed the petition and quashed the proceedings initiated against the petitioner in Crime No. 210/2019.