2017 (7) TMI 1436 - SC - Indian Laws

Supreme Court Overturns Discharge Decisions, Emphasizes Criminal Liability

The Supreme Court set aside the lower courts' decisions to discharge accused persons in a case involving criminal conspiracy, cheating, and forgery ... Criminal conspiracy - forgery and use of forged documents - cheating by inducing a bank to part with funds - discharge under Section 239 CrPC improper where prima facie case is made out - One Time Settlement does not extinguish criminal liability - inherent jurisdiction to quash criminal proceedings under Section 482 CrPC - ends of justice versus abuse of process - distinction between civil settlement and criminal liability - compoundable and non compoundable offences - relevance to quashingDischarge under Section 239 CrPC improper where prima facie case is made out - criminal conspiracy - forgery and use of forged documents - cheating by inducing a bank to part with funds - Validity of the trial court's order discharging the accused and upholding of that order by revisional and High Courts. - HELD THAT: - The Court found the trial court's conclusion that forged documents were not alleged and that there was no collusion to cheat the bank to be palpably incorrect and perverse. Material placed on the charge sheet discloses allegations and documentary material of forged purchase orders, fabricated sale contracts on the company's letterhead, false lorry receipts and diversion of bank funds in multiple specified instances, which, prima facie, establish a case of cheating and conspiracy to induce the Bank to disburse working capital. The trial court had relied heavily on the One Time Settlement and treated the matter as predominantly civil, but the Supreme Court held that the existence of settlement and civil recovery does not negate prima facie criminal allegations where charge sheet materials disclose fabrication and a systemic modus operandi to defraud the bank. The discharge order thus amounted to an impermissible exercise akin to quashing under inherent jurisdiction without adjudicating the materials on record. [Paras 13, 17, 22, 29, 30]Order of discharge by the trial court and its affirmance by the revisional court and High Court set aside; matter restored for framing of charges and trial.One Time Settlement does not extinguish criminal liability - distinction between civil settlement and criminal liability - compoundable and non compoundable offences - relevance to quashing - inherent jurisdiction to quash criminal proceedings under Section 482 CrPC - ends of justice versus abuse of process - Legal effect of the One Time Settlement (OTS) and civil compromise on the continuance of criminal proceedings. - HELD THAT: - The Court reiterated that civil settlement/OTS settles only civil liability and cannot, by itself, erase criminal liability where prima facie criminality is made out. Reliance on precedents was used to distinguish cases in which quashment was appropriate from those involving systemic financial fraud and fabricated documentation affecting public financial interest. The Court held that the trial court and courts below erred in treating the OTS as dispositive of criminal proceedings; guidance from prior decisions requires scrutiny of the nature and gravity of offences and whether the case is overwhelmingly civil in character before quashing. Here, the charge sheet disclosures reflect a social and financial wrong beyond a private civil dispute. [Paras 17, 18, 19, 20]OTS is not a bar to criminal prosecution; civil compromise does not automatically justify quashing or discharge where prima facie criminal allegations of forgery, cheating and conspiracy exist.Discharge under Section 239 CrPC improper where prima facie case is made out - inherent jurisdiction to quash criminal proceedings under Section 482 CrPC - ends of justice versus abuse of process - Direction for further proceedings and final disposition of remand. - HELD THAT: - Having set aside the orders of discharge, the Supreme Court directed the trial court to frame charges and proceed to trial, observing that the Supreme Court's observations are prima facie and based on the charge sheet and shall not influence trial on merits. The Court emphasised that the trial court is free to record findings after full trial; however, in view of the nature of allegations and volume of material in the charge sheet, the matter must be tried expeditiously. [Paras 29]Charges to be framed and trial to be concluded in accordance with law within one year from the date of the order.Final Conclusion: The orders discharging the accused were set aside; the Supreme Court held that the One Time Settlement does not extinguish criminal liability where prima facie material of forgery, cheating and conspiracy exists, and directed framing of charges and expeditious trial to be completed within one year. Issues Involved:1. Discharge of accused persons by the trial court.2. Allegations of criminal conspiracy, cheating, and forgery.3. One Time Settlement (OTS) and its impact on criminal liability.4. Examination of material evidence by lower courts.5. Applicability of legal precedents in quashing criminal proceedings.Issue-wise Detailed Analysis:1. Discharge of Accused Persons by the Trial Court:The trial court discharged the accused persons on the grounds that there was no allegation of forged documents causing loss and that the One Time Settlement (OTS) indicated no intention to cheat the bank. The court opined that the dispute was of a civil nature and that the bank had already exhausted civil remedies. This discharge was upheld by the revisional court and the High Court.2. Allegations of Criminal Conspiracy, Cheating, and Forgery:The Central Bureau of Investigation (CBI) alleged that the accused entered into a criminal conspiracy to cheat the Bank of Baroda by availing various credit facilities using false documents as genuine. The investigation revealed that the accused misused funds amounting to several crores and did not repay the bank. Specific instances included the misuse of Export Packing Credit (EPC) and other facilities, submission of fake export orders, and non-compliance with the required documents for releasing funds.3. One Time Settlement (OTS) and Its Impact on Criminal Liability:The trial court heavily relied on the OTS to discharge the accused, suggesting that the settlement indicated no intention to defraud. However, the Supreme Court opined that the OTS only addressed civil liability and could not wipe out criminal liability. The court emphasized that the OTS could not be used to negate the criminal charges of conspiracy, cheating, and forgery.4. Examination of Material Evidence by Lower Courts:The Supreme Court found that the lower courts did not adequately examine the materials placed on record along with the charge sheet. The trial court's finding that there was no material indicating collusion to cheat the bank was deemed incorrect and perverse. The Supreme Court noted that there was overwhelming evidence of forged documents and misuse of bank funds, which the trial court failed to consider.5. Applicability of Legal Precedents in Quashing Criminal Proceedings:The Supreme Court referred to several precedents to emphasize that criminal proceedings involving serious allegations of fraud and forgery could not be quashed merely based on a civil settlement. Cases like Gian Singh v. State of Punjab and Anr., Ashok Sadarangani v. Union of India and Ors., and Rumi Dhar v. State of West Bengal and Anr. were cited to support the view that criminal liability persists despite civil settlements. The court highlighted that such cases have a societal impact and cannot be treated as private disputes.Conclusion:The Supreme Court set aside the orders of the trial court, revisional court, and High Court, directing the trial court to frame charges and proceed with the trial. The court clarified that the observations made were prima facie and based on the charge sheet, and the trial court should not be influenced by these findings while deciding the case on merits. The appeal was allowed, and the trial was to be concluded within a year.