Supreme Court Quashes Criminal Proceedings Against Appellants in Bank Fraud Case

Last Updated: 03-10-2024 02:36:32pm
Supreme Court Quashes Criminal Proceedings Against Appellants in Bank Fraud Case

In a recent judgment, the Supreme Court of India has quashed criminal proceedings against K. Bharti Devi and another accused in a bank fraud case involving forged documents used to secure loans.

The proceedings, which related to a loan from Indian Bank, were initially initiated following the bank's discovery that certain title documents used to secure the loan were forged and fabricated. Despite reaching a one-time settlement agreement (OTS) with the bank, the criminal proceedings continued and the accused subsequently appealed before the court.

The background to the case is regarding K.Suresh Kumar, the sole owner of M/s Sirish Traders, had availed a loan from Indian Bank secured by a security provided by the plaintiff.When the loan account became a non-performing asset (NPA), the bank filed a case before the Debt Recovery Tribunal (DRT).During the ongoing DRT proceedings, the bank discovered irregularities which led to the involvement of the Central Bureau of Investigation (CBI) and charges were filed under several sections of the Indian Penal Code and Prevention of Corruption Act.

Nevertheless, the appellants used an OTS to pay their debts with the bank during the trial, and as a result, the bank issued a No Dues Certificate. In spite of this, the appellants' request to have the criminal proceedings quashed was denied by the Hyderabad High Court of Judicature, which held that the settlement did not release them from criminal responsibility for the false documents. The appellants went to the Supreme Court because they were upset.

The Supreme Court, in its judgment, held that the dispute primarily arose from a civil transaction, and given that the appellants had settled the matter with the bank, the continuation of the criminal proceedings would be an exercise in futility. The Court stated:

"The possibility of conviction is remote and bleak. Continuation of the criminal proceedings would put the accused to great oppression and prejudice."​

The Court further noted that the appellants, being the wives of the primary accused, had played no significant role in the fraudulent activities, and therefore, the charges against them should be quashed. The Court emphasized that where disputes overwhelmingly bear a civil flavor, particularly in commercial or financial matters, criminal proceedings should not continue if the underlying issues have been resolved through settlement.

This ruling reinforces the judiciary's approach of distinguishing between civil and criminal liabilities, especially in cases where the primary conflict is financial in nature and has been settled amicably between the parties involved.

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TAGS: Supreme Court quashed criminal proceedings bank fraud Indian Penal Code Prevention of Corruption Act One-Time Settlement civil dispute Indian Bank Debt Recovery Tribunal.


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