2011 (5) TMI 908 - SC - Indian Laws

Supreme Court Upholds Decision on Chargesheet Appeal, Emphasizes Seriousness of Economic Offences

The Supreme Court upheld the decision of the High Court to not quash the Chargesheet against the appellant and other directors of the Company for offences ... Whether the power which independently lies with this Court to quash the criminal proceedings pursuant to the compromise arrived at, should at all be exercised? Issues Involved:1. Quashing of the Chargesheet under Section 482 of the Cr.P.C.2. Allegations of criminal conspiracy, forgery, and fraud against the appellant and others.3. Repayment of the loan and its impact on criminal liability.4. Application of precedents, particularly the Nikhil Merchant case.Issue-wise Detailed Analysis:1. Quashing of the Chargesheet under Section 482 of the Cr.P.C.:The appellant sought to quash the Chargesheet filed against him and other directors of the Company under Sections 120B, 420, 409, 468, and 471 of the IPC. The High Court declined to quash the Chargesheet, stating that the repayment of the loan to Punjab & Sind Bank (PSB) did not exonerate the accused from the offences committed. The Supreme Court affirmed this view, emphasizing that the inherent powers of the High Court under Section 482 of the Cr.P.C. should be exercised sparingly and only in extraordinary cases to prevent abuse of the process of law or to secure the ends of justice.2. Allegations of criminal conspiracy, forgery, and fraud against the appellant and others:The Chargesheet alleged that the Company, through its directors, conspired with Chartered Accountants to fraudulently obtain hire purchase advances from PSB by submitting forged documents, including fake purchase orders and invoices. The funds were then diverted for non-business purposes, and fictitious bank accounts were used to encash the pay orders issued by PSB. The Supreme Court noted that the gravamen of the allegations involved a systematic fraud on the bank and the public exchequer by claiming depreciation on non-existent machinery.3. Repayment of the loan and its impact on criminal liability:The appellant argued that since the Company had repaid the loan along with interest, no loss was caused to PSB, and therefore, no offence was committed. The Supreme Court rejected this argument, stating that repayment of the loan does not absolve the accused of criminal liability for the offences of forgery, fraud, and conspiracy. The Court emphasized that the offences committed were serious economic offences against society, and mere repayment of the loan could not exonerate the accused.4. Application of precedents, particularly the Nikhil Merchant case:The appellant relied heavily on the Supreme Court's decision in Nikhil Merchant v. Central Bureau of Investigation, where criminal proceedings were quashed following a compromise between the parties. The Supreme Court distinguished the present case from Nikhil Merchant, noting that the latter involved the Court's powers under Article 142 of the Constitution, which allows for quashing of criminal proceedings in exceptional cases. The Court held that Nikhil Merchant does not establish an absolute proposition that criminal proceedings should be quashed whenever a civil dispute with criminal facets is settled between the parties. The Court also referred to the decision in Rumi Dhar v. State of West Bengal, which declined to quash criminal proceedings in a similar fact situation, reinforcing that serious economic offences against society should not be quashed merely because the dues have been paid.Conclusion:The Supreme Court dismissed the appeal, holding that the Chargesheet disclosed the commission of offences by the appellant and others and that the repayment of the loan did not exonerate them from criminal liability. The Court directed the trial court to proceed with the case expeditiously without being influenced by any observations made by the High Court or the Supreme Court on the merits of the Chargesheet.