TaxTMI 
TaxTMI 
2026 (7) TMI 1858
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....cate Private Limited (JESPL)/respondent No.2, lodged a complaint before the Deputy Commissioner of Police, Detective Department, Central Crime Station, Hyderabad City, stating that JESPL is a Company incorporated under the Companies Act, 1956, and availed multiple equipment loans from petitioner No.1-SREI Equipment Finance Limited since 2008. It is submitted that the parties entered into a One Time Settlement (OTS)-cum-Restructuring Agreement/ Settlement Agreement ("2015 Settlement") with effect from 01.10.2015, under which, a total settlement amount of Rs.13,50,00,000/- was agreed with interest at 13% per annum. Out of the said amount, an amount of Rs.8,00,00,000/- was already paid by the end of 2016, leaving a principal outstanding of Rs.5,50,00,000/- only. 2.2. It is stated that in or around mid-2017, petitioner No.1 induced respondent No.2, through deliberate misrepresentation, to execute a fresh Loan Agreement No. 136475 dated 01.07.2017 ("2017 Loan Agreement") for a notional amount of Rs.19,53,00,000/- It is submitted that petitioner No.1 categorically and falsely represented that 2017 Loan Agreement was merely for its internal accounting and regulatory compliance, and tha....
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....ntinued to act consistently with 2015 Settlement while simultaneously maintaining parallel fabricated accounts under 2017 Loan Agreement, despite nothing being payable thereunder. The series of communications and statements of account were regularly furnished under 2015 Settlement and a separate statement of account was simultaneously maintained under the closed 2017 Loan Agreement. Petitioner No.2 regularly requested and sent statements referring to the "settlement account". Vide email dated 27.06.2021, petitioner No.1 provided a calculation sheet acknowledging the settlement amount of Rs.13,50,00,000/- and a balance of only Rs.40,07,289/- as on 31.07.2021, which clearly shows that 2015 settlement governed the relationship between the parties. 2.6. It is also stated that acting upon the assurances and inducements of petitioner Nos.1 and 2, respondent No.2 continued to make payments under 2015 Settlement in good faith and also offered to pay the balance amount of approximately Rs.40 lakhs, to which petitioner No.1 did not respond. It is further contended that the e-mails relating to 2015 Settlement continued till July 2021, whereas the Statement of Account pertaining to 2017 Loa....
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....d 02.09.2020, petitioner No.2 sent an Excel spreadsheet titled "SREI Payments Recon.xlsx" to respondent No.2's Chairman. This spreadsheet contains two simultaneous accounts: Sheet-1 being a "Settlement Account" with principal of Rs.13,50,00,000/- from October 2015 at 13% per annum, and Sheet-2 contains payment breakdowns. Cross-referencing this with petitioner No.1's internal Settlement of Account for Contract No.136475 and the Settlement of Account filed with the Company Petition reveal that beyond doubt the fraudulent simultaneous duel crediting of the same payments in two separate accounts, which clearly constitute fraudulent and falsification of accounts. 2.10. It is further stated that the e-mail attachments reveal that the same payments were adjusted in two separate accounts by using the same instrument numbers, one pertaining to 2015 Settlement and the other to the alleged loan account, thereby indicating fabrication of accounts. Although the loan account stood closed on the very same day, petitioner No.1 subsequently relied upon the said account in the IBC proceedings, while simultaneously adjusting the same payments towards 2015 Settlement, which evidences dual-acco....
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....and 340(2) read with 3(5) of the BNS. 3. Heard Sri N. Venkataraman, learned Additional Solicitor General of India, and Sri B. Narasimha Sharma, learned Additional Solicitor General of India, representing Sri N. Naveen Kumar, learned counsel for the petitioners, Sri D. Prakash Reddy, learned Senior Counsel representing Sri T.P.S. Harsha, learned counsel for respondent No.2, and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor for respondent No.1-State. 4. Submissions of Sri N. Venkataraman, learned Additional Solicitor General of India, on behalf of the petitioners: 4.1. Learned Additional Solicitor General of India submitted that the petitioners have not committed the alleged offences and have been falsely implicated in the present crime. The petitioners have not created or fabricated any document, as alleged by respondent No.2 in the complaint. Initially, the crime was registered for the offences under Sections 318(4) and 344 r/w 3(5) of the BNS. On 15.04.2026, petitioner No.2 was arrested and the learned Magistrate remanded him to judicial custody. Pursuant to the arrest of petitioner No.2, the offences under Sections 316(2), 336(3), 338 and 340(2) of t....
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.... Accordingly, the Loan Account of respondent No.2 was classified as non-performing assets (NPA) on 15.01.2020 and consequently, on 15.11.2021, petitioner No.1 issued demand notice under Section 13(2) of the SARFAESI Act calling upon respondent No.2 to pay a sum of Rs.28,17,48,804/- along with further interest from 13.11.2021. Pursuant to the said notice, respondent No.2 issued reply on 02.12.2021 denying the allegations made in the said notice stating that respondent No.2 had entered into a OTS in the year 2015 for an amount of Rs.13,50,00,000/-, wherein Rs.8,00,00,000/- was paid in 2016 and alleging that the account thereafter was restructured leading to the subject loan of Rs.19,53,00,000/-, which is devoid of any merit and contrary to the terms of 2017 Loan Agreement. 4.5. He further submitted that petitioner No.1 issued letter, dated 28.12.2021, denying the contentions raised by respondent No.2 in their reply letter, dated 02.12.2021, stating that the outstanding due as on June 2020 is only Rs.5.50 Crores. In spite of reminders, respondent No.2 has not taken steps to clear the outstanding debt in terms of 2017 Loan Agreement. 4.6. On 13.10.2023, petitioner No.1 issued a P....
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....nder Reddy and K. Priyamvada Reddy, and Deed of Hypothecation allegedly executed by K. Ravinder Reddy, are not genuine one and they are fabricated documents. Respondent No.2 filed the complaint with a malafide intention. 4.10. He further submitted that the transaction between petitioner No.1 and respondent No.2 are purely banking transaction, which is duly governed by the loan agreements and the terms contained therein. Even the allegations if taken at face value do not disclose mens rea or culpability on the part of petitioner No.1 or its employees. Respondent No.2 filed the complaint with a dishonest intention to evade lawful liability and to defeat the legitimate recovery proceedings initiated by petitioner No.1 by giving a criminal colour. 4.11. He further submitted that 2017 Loan Agreement and Deeds of Personal Guarantee dated 01.07.2017 were executed by respondent No.2 and that a Deed of Hypothecation was also executed to secure the above said Loan Agreement. After filing Company Petition under IBC before NCLT, respondent No.2 filed the present complaint after lapse of more than six years. At no point of time, respondent No.2 raised any allegation that the Deeds of Pers....
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....ondent No.2 has not executed the Deeds of Personal Guarantee and Deed of Hypothecation pursuant to the 2017 Loan Agreement and the said complaint is liable to be quashed on the ground of delay in lodging the complaint. Respondent No.2 filed the present complaint as a counter blast to the proceedings pending before the NCLT. Respondent No.2 did not raise any objection from 2017 till 2026. Respondent No.2 executed 2017 Loan Agreement on 01.07.2017 and K. Ravinder Reddy and K. Priyamvada Reddy have executed the Deeds of Personal Guarantee and Deed of Hypothecation. The transaction between the petitioners and respondent No.2 is a banking transaction. If any dispute arises out of 2017 Loan Agreement, dated 01.07.2017, respondent No.2 ought to have approached the competent Court, on the other hand, filed the present complaint by giving it a criminal colour, only with an intention to evade the liability. 5.2. The allegations levelled in the complaint that the signatures of K. Ravinder Reddy and K. Priyamvada Reddy in Deeds of Personal Guarantee and signatures of K. Ravinder Reddy in Deed of Hypothecation were forged. However, the said persons have not lodged any complaint. The present ....
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....bmissions of Sri D. Prakash Reddy, learned Senior Counsel appearing on behalf of respondent No.2: 6.1. Learned Senior Counsel submitted that respondent No.2 availed multiple equipment finance facilities from petitioner No.1 from the year 2008. On 01.10.2015, petitioner No.1 and respondent No.2 entered into an OTS, under which, the liability was settled at Rs.13.50 Crores with interest @ 13% per annum to be paid around five years. As per the OTS, an amount of Rs.8 Crores was already paid by the end of 2016, leaving principal outstanding amount of Rs.5.50 Crores. 6.2. He further submitted that petitioner No.1 and respondent No.2 executed 2017 Loan Agreement on 01.07.2017 for a notional amount of Rs.19.53 Crores. Petitioner No.2 sent an excel spread sheet titled "SREI Payments Recon.xlsx" to respondent No.2's Chairman. Even after execution of 2017 Loan Agreement dated 01.07.2017, 2015 Settlement subsisted and respondent No.2 has regularly requested for the settlement of accounts. Vide e-mail dated 27.06.2021, petitioner No.1 provided a calculation sheet acknowledging the settlement amount of Rs.13.50 Crores and the balance is only Rs.40,07,289/- as on 31.07.2021, which clearly s....
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....above said contracts. The petitioners have mentioned in additional grounds about new Contract No.54095 for Rs.4,15,00,000/-, Contract No.94562 for Rs.5,00,00,000/- and Contract No.122845 for Rs.4,00,00,000/-. However, the above said contracts were not mentioned in the main memorandum of grounds. The petitioners only retained the Contract No.56574 for Rs.15,51,29,916/- and Contract No.104654 for Rs.3,91,00,000/- in additional grounds. The petitioners have not given any explanation for substitution of the contracts underlying 2017 Loan Agreement and they have been replaced with entirely new contracts, which were not mentioned in the original memorandum of grounds. 6.6. He further submitted that respondent No.2 availed multiple equipment loans from petitioner No.1 from 2008 and the parties have entered into OTS-cum-Restructuring Agreement/Settlement Agreement with effect from 01.10.2015, under which a total settlement amount of Rs.13,50,00,000/- was agreed with interest at 13% per annum. Out of the said amount, respondent No.2 has already paid Rs.8,00,00,000/- by end of 2016, leaving principal outstanding only Rs.5,50,00,000/-. 6.7. He further submitted that on 02.12.2021, respo....
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....said documents in favour of petitioner No.1. Based on the said fabricated documents, petitioner No.1 filed IBC proceedings before NCLT and claiming a huge amount of Rs.76,79,81,227/-. Hence, the allegations levelled in the complaint attract the ingredients of the offences under Sections 318(4), 344 316(2), 336(3), 338 and 340(2) read with 3(5) of the BNS. 6.12. He further submitted that the petitioners have filed the Xerox copy of the Deed of Hypothecation dated 01.07.2017 and colour Xerox copy of the very same document along with additional material memo dated 24.04.2026 and there is a vast variation in the two documents. In the Xerox copy of the Deed of Hypothecation, the name of the company mentioned as Janapriya Engineering Syndicate Pvt. Ltd. and in the tabular form, the name of equipment was mentioned as 'various assets as per list attached'. Whereas, in the colour Xerox, the party name was mentioned as Jayapriya Engineering Syndicate Ltd., and in the tabular form, the name of equipment was mentioned as '4 Nos. various assets + 26 Nos. various assets'. Hence, the investigation is very much required to ascertain the truth or otherwise and the petitioners are not entitled to....
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....the Deeds of Personal Guarantee and Deed of Hypothecation, and by using the same, they have filed an application before the NCLT. 7.3. In support of his contention, he relied upon the order of the Hon'ble Supreme Court in Vinod Kumar Pandey and another v. Seesh Ram Sain and others [2025 SCC OnLine SC 1951] wherein the Hon'ble Supreme Court held that whenever information placed before the authorities discloses the commission of a prima facie cognizable offence, registration of an FIR is mandatory, and the veracity or otherwise of the allegations is a matter for investigation, not a ground to refuse registration. The Court further emphasized that preliminary objections or parallel proceedings cannot be used to stifle criminal law at the threshold. Analysis : 8. Having considered the rival submissions made by the respective parties, the written submissions filed on behalf of the petitioners, dated 02.07.2026, the written submissions filed on behalf of respondent No.2, dated 08.07.2026, and upon perusal of the material available on record, it reveals that petitioner No.1 is a Non-banking Financial Institution within the meaning of the Companies Act, engaged in the business of ....
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....stated that on 21.01.2025, respondent No.2 got issued a reply to the letter dated 26.12.2024 and 02.01.2025 denying the averments made in the said letters. It is further stated that petitioner No.1 filed an application under Section 7 of the IBC before the NCLT, Hyderabad, against respondent No.2 claiming an amount of Rs.76,79,81,227/-. At that stage, respondent No.2 came to know that petitioner No.1 had filed the said application before the NCLT by relying upon forgery, fabrication and falsification of records, especially, Deeds of Personal Guarantee executed by K. Ravinder Reddy, Managing Director of respondent No.2, and K. Priyamvada Reddy, one of the Directors of the Company, as well as the Deed of Hypothecation read with the ROC Charge Form. According to respondent No.2, the said documents had never been executed by them and their signatures appearing thereon were forged. Upon knowing the same, respondent No.2 lodged the present complaint on 26.03.2026. Based on the said complaint, Crime No.61 of 2026 was registered initially for the offences under Sections 318(4) and 344 read with 3(5) of the BNS. Subsequently, offences under Sections 316(2), 336(3), 338 and 340(2) of the BNS....
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....e a total amount of Rs.76,79,81,227/- as on 03.10.2025. 11. It is the further case of petitioner No.1 that respondent No.2 executed 2017 Loan Agreement along with Deed of Hypothecation and Deeds of Personal Guarantee of K. Ravinder Reddy and K. Priyamvada Reddy. The Loan Agreement was executed for the purpose of consolidating the outstanding liabilities under the earlier credit facilities into a single loan account, consequent to which earlier contracts stood closed. Respondent No.2 acted upon 2017 Loan Agreement by making repayments thereunder till the year 2020, thereby acknowledging and confirming the existence and validity of the transaction entered in the year 2017. 12. It is also the specific case of the petitioners that at no point of time, respondent No.2 has not been made the allegation that any falsification of the accounts or the agreements had been executed under coercion or the Deed of Hypothecation and Deeds of Personal Guarantee were forged and fabricated documents and only after filing of the IBC proceedings before the NCLT, with a malafide intention and to obstruct the said proceedings, filed the present complaint and the same is clear abuse of the process of....
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....aining the final records and completing the documentation process. Consequently, the schedules forming part of the Loan Agreement and the Deed of Hypothecation came to be completed at different stages of the documentation process. While copies of the documents were furnished to the Borrower/respondent No.2 at the branch level at Hyderabad, the documents were thereafter transmitted to the Head Office at Kolkata, where the schedules were completed and maintained as part of the petitioner's records. On account of the said documentation process, the handwritten particulars appearing in the schedules are not identical in all copies. Though, the underlying transaction, the documents executed by the parties and the security created thereunder remain one and the same. It is relevant to mention that basing on the above said submissions/reasons, this Court cannot give any finding that the disputed documents are genuine one or otherwise, while exercising the powers conferred under Section 528 of the BNSS in the present proceedings. 17. It is also relevant to mention that whether respondent No.2 has availed the loan for an amount of Rs.19,53,00,000/- under the 2017 Loan Agreement dated 01.0....
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....a), the Hon'ble Supreme Court held that the inherent jurisdiction of the High Court to quash criminal proceedings under Section 482 Cr.P.C. is extraordinary in nature and must be exercised sparingly, with great circumspection, and only to prevent abuse of the process of the Court or to secure the ends of justice. At the stage of quashing, the Court must proceed on the basis that the allegations in the FIR or complaint are true and examine only whether they prima facie disclose the commission of a cognizable offence. The Court cannot undertake an enquiry into the reliability, genuineness, or sufficiency of the allegations or evaluate the evidence. Unless the case falls within the well-recognized categories warranting interference, criminal proceedings should ordinarily be allowed to continue, and the investigation or trial should not be interdicted at the threshold. 20. In Neeharika Infrastructure Private Limited (supra), the Hon'ble Supreme Court held that the power to quash criminal proceedings under Section 482 CrPC is extraordinary and must be exercised sparingly and with great circumspection. An FIR is not an encyclopedia and need not contain every minute detail of the alleg....
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....stricted by importing the concept of locus standi, except where a specific statutory provision re-scribes an eligibility criterion for the complainant. 24. In Vasanth (supra), the High Court of Karnataka held that a person has the locus to initiate criminal proceedings where the alleged forged or fabricated document is used or intended to be used against him or otherwise affects his legal rights or interests. Even if the forgery pertains to a property or document not directly owned by the complainant, he is competent to lodge a criminal complaint if the forged document has been relied upon to prejudice his rights or has formed the basis of proceedings against him. 25. In Sharla Bazliel (supra), the Hon'ble Supreme Court held that where the FIR contains specific allegations of forgery, fraud, fabrication of documents, or criminal breach of trust, and the disputed documents or signatures are pending forensic or handwriting examination, the High Court should not exercise its inherent jurisdiction to quash the proceedings at a premature stage. Until the investigation, including scientific examination of the questioned documents, is completed, the criminal proceedings ought to be ....
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....act complained of is a forgery or where the circumstances themselves arouse suspicion, holding that persons dealing with a company must act with due caution and cannot blindly rely on ostensible authority when the transaction is tainted with irregularity. This principle was subsequently adopted and applied by the Hon'ble Supreme Court in M/s. MRF Limited v. Manohar Parrikar & Ors [(2010) 11 SCC 374] where the Court observed that when there exists "definite suspicion of irregularity" and the conduct of the concerned individual indicates active involvement in the fraudulent act, the doctrine ceases to operate. Applying the same, accused No.1, being an employee of respondent No.2 company, cannot be treated as a mere intermediary but is prima facie shown to have actively colluded in the fraudulent transactions alleged. The said doctrine was further clarified in Gunmala Sales (P) Limited v. Navkar Promoters (P) Limited & Ors [(2015) 1 SCC 103] wherein the Hon'ble Apex Court held that "it cannot be invoked to give a carte blanche to outsiders to avoid liability where the circumstances invite inquiry or suggest collusion". Hence, while bona fide outsiders dealing with a company in good fa....
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....remedies, particularly when the complaint is lodged belatedly, without any plausible explanation, and only after adverse proceedings have been initiated against the complainant. Such circumstances may legitimately indicate malafides, an ulterior motive, or an attempt to exert pressure or settle personal scores. Courts, in the exercise of their inherent jurisdiction, must prevent abuse of the criminal process and quash proceedings where the criminal law is employed as a tool of harassment rather than for the bona fide prosecution of a genuine criminal offence. 32. In ICICI Bank Ltd. (supra), the High Court of Bombay held that where a special statute provides a complete and efficacious mechanism for redressal of grievances, the criminal process ought not to be invoked by bypassing such statutory remedies, particularly when the complaint is lodged belatedly, without any plausible explanation, and only after adverse proceedings have been initiated against the complainant. Such circumstances may legitimately indicate malafides, an ulterior motive, or an attempt to exert pressure or settle personal scores. Courts, in the exercise of their inherent jurisdiction, must prevent abuse of t....