TaxTMI 
TaxTMI 
2026 (7) TMI 849
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....e company i.e.M/s.Star Agro Marine Exports Pvt.Ltd. and the second accused is the Managing Director of the first accused. The third accused is the Director of the first accused. The fourth accused is the Managing Partner of M/s.SK Chan Basha & Co. A5 is the partner of M/s.JK Fisheries and Managing Director of M/s.Chem Star International Pvt.Ltd.. A6 is a company represented by its Managing Director/A2. A7 is also a company represented by A5 as its Managing Director. They conspired together during the period 2012-2018 to cheat the complainant bank, fraudulently availed various credit facilities by making false representations and also by submitting fabricated, falsified and grossly inflated financial statements and stock and receivables statements and false sales and purchase invoices. Further, they deliberately diverted the loan funds for purposes other than those for which the facilities were sanctioned thereby causing a wrongful loss to the complainant to the tune of Rs. 284.84 crores and a corresponding wrongful gain to themselves. The first respondent registered FIR on the complaint lodged by the second respondent in RC21/2018 for the offences punishable under Sections 120(b) r....
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....eased to be liable for any offence prior to the commencement of Corporate Insolvency Resolution Process. Therefore, the defacto complainant is estopped from pursuing criminal prosecution. 3.1 The learned counsels for the petitioners further submitted that breach of contract would not give rise to an offence of cheating and it does only in those cases where there was deception at the very inception. If the intention to cheat developed later on, then the same cannot amount to cheating. Further, the allegations regarding breach of trust and forgery are essentially civil disputes regarding loan repayment and stock valuation. There is absolutely no proof or evidence regarding commission of the alleged offences. 4. On perusal of the counters and objections filed by the respondents and also on the submissions of the learned counsels for the respondents, it is revealed that, the crux of the allegations is that all the accused conspired together in order to cheat the defacto complainant, fraudulently availed various credit facilities by making false representations and also by submitting fabricated, falsified and grossly inflated financial statement. They also produced inflated stock ....
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....nant had received the share of Rs. 45.86 crores and issued no due certificate. That apart, the defacto complainant also proceeded against the guarantors and mortgagors before the Debt Recovery Tribunal-I, Chennai in TA.No.76 of 2022 and obtained recovery certificate in DRC.No.3 of 2025 for the recovery of Rs. 628.15 crores as on 27.02.2025. 5. The learned Special Public Prosecutor(CBI) vehemently contended that though it is a commercial transaction, the accused committed serious default in repaying the loan amount and cheated the public fund to the tune of Rs. 284.84 crores. Therefore, though the defacto complainant initiated proceedings against the guarantors and mortgagors, there is no bar to proceed with the criminal prosecution against the accused. In support of his contention, he relied upon the judgment of the Hon'ble Supreme Court of India rendered in Crl.A.No.661 of 2009 in the case of Rumi Dhar Vs. State of West Bengal dated 08.04.2009, wherein it was held that civil proceedings and criminal prosecution can proceed simultaneously and that the existence of civil remedies does not bar criminal action where the ingredients of the criminal offences are made out. He also rel....
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....ed that in order to bring home the charge for the offence under Section 420 of IPC: (i) the accused must have fraudulently or dishonestly made some false compromise. (ii) the defacto complainant must have acted on the strength of such false representation or compromise. 8. In the case on hand, the petitioners neither made any dishonest nor any fraudulent representation. Therefore, the offence under Section 420 of IPC is not at all made out as against the petitioners. 9. Further, though the first respondent filed final report for the offences under Section 120(b) r/w 420 & 420 of IPC, the trial court while taking cognizance stated that since no evidence related to the forgery was found, therefore the prosecution itself did not invoke charges under Section 468 and 471 of IPC. Thus it is clear that the settled position of law is that every breach of contract would not give rise to offence of cheating and it is only in those cases where there was deception at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. Therefore, the complainant is required to show that the accused had fraudulent or dishonest intentio....