TaxTMI 
TaxTMI 
2026 (6) TMI 2
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....f the Debts Recovery Tribunal? 3. The above question arises in the context of a challenge by the appellants to the order dated 05.07.2024 passed by the High Court of Chhattisgarh ('High Court') in Cr.M.P. No. 1361 of 2023 (Vijay Kumar Kela & Anr. Vs. CBI & Anr.). Prefatory facts 4. For proper adjudication of the question framed, it would be appropriate to briefly narrate the relevant facts. 4.1. Appellant No. 2 was established as a proprietary trading concern in the year 1998 dealing in agricultural inputs like fertilizers and other allied products. Elder brother of appellant No. 1 late Parmanand Kela had established appellant No. 2 firm and was managing the affairs of the said firm. Following the death of late Parmanand Kela, appellant No. 1 became the sole proprietor of the firm. 4.2. Erstwhile proprietor Parmanand Kela had applied to the UCO Bank on 28.07.2006 for extending cash credit facility of fund based limit to the extent of Rs. 50 Lakhs and non-fund based limit i.e. letter of credit to the extent of Rs. 1 crore in the name of appellant No. 2. After examining the proposal and on due consideration, cash credit facility of fund based limit to the extent of Rs.....
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....n the parties and fixed 07.10.2015 for submitting compliance with regard to the compromise settlement. 5.1. Following the same, appellants paid the settlement amount to the UCO Bank pursuant to which the latter issued no dues certificate dated 30.09.2015 certifying that the cash credit account of appellant No. 2 was settled pursuant to a compromise and that payment was received in terms of the approved compromise. 5.2. By order dated 27.10.2015, DRT dismissed OA No. 355/2011 as withdrawn in view of the fact that the entire compromise amount had been deposited by the appellants which was acknowledged in the application dated 27.10.2015 filed by the UCO bank before the DRT. 6. After more than 2 years, on 27.02.2018, the Zonal Head of UCO Bank, Raipur Zonal Office submitted a written complaint to the Superintendent of Police, Central Bureau of Investigation (CBI), New Delhi stating that appellants, more particularly appellant No. 1, in collusion with certain officials of the Bank had defrauded the UCO Bank by diverting the funds of the Bank made available to the appellant firm to the account of appellant No. 1. It was further alleged that by entering into the settlement, appe....
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....istrate dated 20.02.2023 whereby charges have been framed. The quashing petition was registered as Criminal MP No. 1361 of 2023. The said petition was contested by the respondents 9.1. By the impugned order dated 05.07.2024, the High Court dismissed the criminal petition prima facie observing that appellants with a fraudulent intention got released two valuable properties which were mortgaged with the Bank by substituting it with encroached property and had also enhanced the credit limit by submitting forged audit reports which was issued by the chartered accountant. 10. Assailing the aforesaid impugned order dated 05.07.2024, the instant special leave petition came to be filed by the appellants. On 13.12.2024, notice was issued. Submissions 11. Dr. Vineet Kothari, learned senior counsel appearing for the appellants submits that the impugned order is unsustainable both in law as well as on facts. As such, the same is liable to be set aside and quashed. 11.1. He submits that the High Court failed to appreciate the fundamental issue as to the jurisdiction of CBI to investigate the complaint of UCO Bank and thereafter to prosecute the appellants. Referring to Section 6 ....
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....AESI Act. UCO Bank approached the DRT for realization of its dues. In the course of the DRT proceedings, a compromise settlement was arrived at between the parties whereafter appellants paid the settled amount following which a no dues certificate was issued to the appellants by the UCO Bank. Accepting the same, DRT closed all proceedings pending before it which were instituted at the instance of the UCO Bank. After almost two and a half years of such closure following settlement, UCO Bank approached the CBI alleging fraud in availing the cash credit (loan facility) and in the substitution of the mortgaged properties by another property which was an encroached property. The Special Judicial Magistrate without application of mind and in a mechanical manner framed charges against the appellant No. 1 under Sections 420 and 471 IPC. Interestingly, the concerned Bank officials were given a clean chit by the CBI. Notwithstanding the same, the High Court declined to quash the criminal proceedings by taking the prima facie view that the appellants with a fraudulent intention got released two valuable properties which were mortgaged with the bank by substituting it with an encroached proper....
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....r banking channel and maintaining total transparency. Bank officials had personally visited the property before accepting substitution; further, Bank's own officials had conducted the valuation. The substitution was approved by the competent authority of the UCO Bank. He submits that property substitution took place when the loan account was still operational and was not termed as NPA. In such circumstances, learned senior counsel submits that the High Court fell in grave error in dismissing the quashing petition of the appellants. Therefore, the impugned order is liable to be set aside and quashed. Consequently, the chargesheet dated 27.11.2018 and the order of the Special Judicial Magistrate dated 20.02.2023 framing charges being wholly unsustainable in law as well as on facts are also liable to be set aside and quashed. 12. Per contra, Mr. Rajkumar Bhaskar Thakare, learned Additional Solicitor General appearing for the first respondent-CBI submits that the High Court had rightly rejected the petition filed by the appellants under Section 482 CrPC. He submits that prima facie, a triable offence is made out against the appellants and, therefore, there is no reason why the crimi....
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.... of Rs. 800 lakhs (cash credit of Rs. 300 lakhs + letter of credit of Rs. 500 lakhs). 12.6. During the renewal and enhancement of credit facilities, UCO Bank substituted the above two mortgaged properties with a new collateral property in the form of an open plot of land situated at Boriyakhurd, Raipur admeasuring 1,78,784.65 sq. feet which stood in the name of appellant No. 1 and was valued at Rs. 625 lakhs by the Bank's approved valuer M/s Amit Associates on 15.11.2008. This property, as per the legal research report dated 19.12.2008, was purchased by appellant No. 1 vide registered sale deed dated 16.10.2006. The valuer Amit Singh of M/s Amit Associates mentioned in his valuation report that the above property was occupied by appellant No. 1 and the credit facilities were guaranteed by the appellant No. 1 himself. The allegation is that the borrower i.e. appellant No. 1 substituted the existing mortgaged properties with a highly over-valued encroached property in a planned way. 12.7. Mr. Thakare submits that investigation has revealed that the photocopy of audit report dated 27.10.2006 of M/s Mohan Traders (appellant No. 2) for the period from 01.04.2005 to 31.03.2006 purp....
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....issued notice under Section 13(2) of the SARFAESI Act on 05.02.2011, it could not take physical possession of the mortgaged property as the said property was found to be occupied by some encroachers. 12.15. Thus, on the basis of forged copies of audit reports submitted by appellant No. 1, appellant No. 2 was able to get renewal and enhancement of cash credit limit, firstly from Rs. 50 lakhs to Rs. 200 lakhs and non-fund based limit from Rs. 100 lakhs to Rs. 300 lakhs and again from Rs. 200 lakhs to Rs. 300 lakhs in so far fund based limit is concerned and for non-fund based limit from Rs. 300 lakhs to Rs. 500 lakhs from the UCO Bank. 12.16. Learned Additional Solicitor General submits that investigation was carried out in accordance with law whereafter a chargesheet was filed before the Special Judicial Magistrate on 29.11.2018 against appellant No. 1 under Sections 420 and 471 IPC. Learned Magistrate took cognizance of the offence against the appellant No. 1 on the same day and thereafter framed charge against appellant No. 1 on 20.02.2023 under Sections 420 and 471 IPC. 12.17. Thus, Mr. Thakare would submit that there is a clear triable case made out against appellant No....
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....ot of land at Changorabhata, PH No. 105, Ward No. 67, Khasra Nos. 221/1-2-3-4-6-8-10-11-12-16, admeasuring 90,000 square feet, valued at Rs. 210 lakhs; and also the personal guarantee of appellant No. 1. The above valuations were carried out by UCO Bank's empanelled valuer M/s Amit Associates. 15.4. Finally, the credit facilities were further enhanced on 30.01.2009 whereby the fund based limit i.e. cash credit was enhanced to Rs. 300 lakhs from Rs. 200 lakhs; and the non-fund based limit i.e. letter of credit was enhanced to Rs. 500 lakhs from the earlier Rs. 300 lakhs. The final enhancement also was secured by way of primary security in the form of hypothecation of stocks and book debts with floating charge over all current assets. For collateral security, appellants substituted the earlier plots of land by one open diverted plot of land situated at Mauza and Village Boriyakhurd, Raipur bearing Khasra Nos. 1/2, 1/3, 1/4, 1/10, 1/15, 1/16, 2/2, 3/2 and PC No. 118, admeasuring 178784.65 square feet. The aforesaid substituted property was valued twice, firstly by the UCO Bank's empanelled valuer M/s Amit Associates and secondly, by Shri S.K. Chetal, approved valuer and chartered a....
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....ular dated 04.08.2010. It was clarified that the offered compromise amount was not lower than the distress sale value of the securities available and the net present value of the future cash flow. However, the realizable value of the mortgaged properties was substantially reduced due to encroachment by slum dwellers. 15.8. The compromise proposal was approved by the Management Committee of the Board (MCB) in its meeting held on 30.03.2015 which had unlimited powers for approving settlement in terms of compromise. Following the above, the competent authority approved the compromise proposal on 30.03.2015 itself and this was informed by the competent authority to the UCO Bank, Raipur Main Branch vide letter of even date. 15.9. Thereafter, both the parties i.e. UCO Bank and the appellants submitted a joint application before the DRT in the pending OA No. 355 of 2011. It was stated therein that parties to the lis had already settled the matter out of court in terms of letter dated 30.03.2015 of the UCO Bank which was duly accepted by the appellants. The terms of the settlement were as under: 3. That defendants accept Rs. 425 lakhs (rupees four crore twenty five lakhs onl....
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....d been received in terms of the approved compromise. 15.12. OA No. 355/2011 was taken up by the DRT on 27.10.2015. It was noted in the record of proceedings that an application for withdrawal of the original application was filed by the applicant UCO Bank wherein it was stated that the defendants i.e. appellants had deposited the entire compromise amount of Rs. 4.25 crores on 31.09.2015; thus, the related loan account of the appellants stood liquidated. In the circumstances, prayer was made to allow the UCO Bank to withdraw the original application and for refund of the court fees. The said application was supported by an affidavit of Shri Sujoy Dutta, Chief Manager of UCO Bank, Raipur Main Branch. It was on that basis the DRT passed order dated 27.10.2015 dismissing OA No. 355/2011 on withdrawal. Relevant portion of the order dated 27.10.2015 reads thus: In view of the fact that the entire compromise amount has been deposited by the defendants as has been stated in the application dated 27-10-15 filed by the applicant bank which is supported by the officer of the bank, the instant OA stands dismissed as withdrawn. 15.13. Almost after two and a half years of the DRT puttin....
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....ank officials in this regard. 15.15. Vide order dated 20.02.2023, Special Judicial Magistrate framed charges against appellant No. 1 under Sections 420 and 471 IPC. 15.16. When the appellants sought for quashing of the chargesheet as well as the charge framing order, the High Court vide order dated 05.07.2024 rejected the same by holding as under: Perusal of documents available on record, prima-facie it appears that the petitioner firm with a fraudulent intention got released two valuable properties which was (sic) mortgaged with the Bank by substituting it (sic) with encroached property and also enhanced the credit limit by submitting the forged audit report which was issued by the Chartered Accountant, however, the same should not have been extended to him because as per the documents available on record, petitioner-firm is not entitled to get that much loan amount. The alleged audit report issued by the Chartered Accountant in respect of credit limit is fake/forged and invalid. Analysis and reasoning 16. It can be seen from the above that charges have been framed only against appellant No. 1 under Sections 420 and 471 IPC. None of the Bank officials....
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....ived. Thus, the sine qua non of Section 415 IPC is fraudulence, dishonesty or intentional inducement, and the absence of these elements would debase the offence of cheating. Referring to Mohammed Ibrahim, the Bench observed that for the offence under Section 420 IPC, there should not only be cheating but as a consequence of such cheating, the accused should also have dishonestly induced the person deceived to deliver any property to a person etc. Insofar as Section 471 IPC is concerned, the Bench again referred to Mohammed Ibrahim and observed that Section 471 IPC would be applicable when a person fraudulently or dishonestly uses as genuine any document or electronic record which he knows or has reasons to believe to be a forged document or electronic record. Unless the document is false and forged in terms of Section 464 IPC (making a false document) and 470 IPC (forged document or electronic record), the requirement of Section 471 IPC would not be met. 16.4. It may be mentioned that while Section 420 IPC is compoundable under Section 320 CrPC, Section 471 is not compoundable. 17. The question is, whether, in a case of this nature, the offences under Sections 420 and 471 IPC....
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....llant in order to avail credit facilities beyond the permissible limit. This Court noted that the dispute involved had overtones of a civil dispute with certain criminal facets. In the circumstances of the case, this Court posed the question as to whether the power under Section 482 CrPC should be invoked to quash the criminal proceedings pursuant to the compromise arrived at? Taking an overall view of the matter and keeping in mind the compromise arrived at between the parties, this Court recorded its satisfaction that technicality should not be allowed to stand in the way of quashing of the criminal proceedings since continuance of the same after the compromise was arrived at between the parties would be a futile exercise. 19. The correctness of the view taken in Nikhil Merchant and two other cases was doubted by a subsequent coordinate Bench whereafter the matter was referred to a larger Bench. In Gian Singh Vs. State of Punjab (2012) 10 SCC 303, the appellant was convicted under Sections 420 and 120B IPC. During pendency of the appeal against his conviction, appellant filed an application for compounding the offence. Thereafter, appellant also filed a petition under Section ....
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.... the victim, the possibility of conviction is remote and bleak and, therefore, continuation of the criminal case would put the accused to great oppression and prejudice and extreme injustice would be caused by not quashing the criminal case despite full and complete settlement and compromise with the victim. On that basis, the Bench held that Nikhil Merchant and the other two cases were correctly decided. 20. In Narinder Singh Vs. State of Punjab (2014) 6 SCC 466, the appellant faced charges amongst others under Section 307 of the IPC. A compromise was arrived at between the appellant and the complainant pursuant to which the appellant had moved the High Court under Section 482 CrPC for quashing of the FIR. High Court refused to do so on the ground that one of the four injuries suffered by the complainant was serious in nature as per medical opinion. This Court held that offences under Section 307 IPC would fall in the category of heinous and serious offences; therefore, such offences are to be generally treated as crime against the society and not against the individual alone. Such cases should not ordinarily be quashed. The Bench reiterated what was held in Gian Singh and held....
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....enitude it has to be exercised (i) to secure the ends of justice, or (ii) to prevent an abuse of the process of any court. 16.5. The decision as to whether a complaint or first information report should be quashed on the ground that the offender and victim have settled the dispute, revolves ultimately on the facts and circumstances of each case and no exhaustive elaboration of principles can be formulated. 16.6. In the exercise of the power under Section 482 and while dealing with a plea that the dispute has been settled, the High Court must have due regard to the nature and gravity of the offence. Heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed though the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society. The decision to continue with the trial in such cases is founded on the overriding element of public interest in punishing persons for serious offences. 16.7. As distinguished from serious offences, there may be criminal cases which have an overwhelming or predomin....
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....of the FIR and the chargesheet and filed a writ petition before the High Court under Section 482 CrPC. However, High Court dismissed the said writ petition observing that the appellant had a substantive alternative remedy under the provisions of the CrPC. Posing the question as to whether the criminal proceedings should be quashed based upon a settlement arrived at between the parties as per the consent terms drawn and submitted before the DRT, a two-Judge Bench of this Court observed that in view of the fact that a special statute i.e. the PC Act had been invoked, quashing of offences under the said Act would not be justified. 23. In K. Bharthi Devi Vs. State of Telangana (2024) 10 SCC 384, the accused persons were granted various credit facilities by the Indian Bank which were secured by collateral security. As the accused persons failed to repay the dues, the loan account was declared as NPA and to realize the outstanding dues Indian Bank filed an original application before the DRT. During pendency of the proceedings before the DRT, Indian Bank lodged a written complaint before the CBI alleging that some of the title documents executed by the accused persons by virtue of whi....
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....ght to have exercised its jurisdiction under Section 482 CrPC and ought to have quashed the criminal proceedings, the Bench allowed the appeal, set aside the order of the High Court and quashed the criminal proceedings. 24. Applying the above principles to the facts of the present case, we find that in the pending proceedings before the DRT instituted by the second respondent-Bank, a negotiated compromise was arrived at between the parties. The settlement was approved by the competent authority of the respondent-Bank. Joint application was filed before the DRT by appellant No. 1 and respondent No. 2-Bank to place on record the settlement which was noted by the DRT and adjourned to a subsequent date to ensure compliance. Following the same, appellants paid the entire settlement amount whereafter the Bank issued no dues certificate to the appellants. Thereafter, on a further application by the respondent-Bank, the original application was dismissed as withdrawn by the DRT after noting that the claim to the outstanding dues were settled as per the compromise and the settlement amount was paid by the appellants whereafter no dues certificate was issued by the Bank. When the matter w....