Case Law Details
N.S. Gnaneshwaran Etc. Vs Inspector of Police & Anr. (Supreme Court of India)
The appeals arose from an order of the Madurai Bench of the Madras High Court dismissing petitions filed under Section 482 CrPC seeking quashing of criminal proceedings for offences under Section 120B read with Sections 420, 468 and 471 IPC and the Prevention of Corruption Act, 1988. The proceedings originated from an FIR registered on the basis of a complaint by a bank alleging wrongful loss of Rs. 25.89 lakh, resulting in a charge sheet against nine accused, including the appellants.
The allegations against the first appellant were that he orchestrated the fraudulent diversion of funds sanctioned to a borrower by facilitating encashment of multiple cheques through relatives, employees and fictitious identities, forging signatures, and diverting funds through accounts of family members and associates. The second appellant was alleged to have assisted by operating a bank account through which cheques were deposited and funds withdrawn and by filling in cheques and facilitating their encashment as part of the alleged conspiracy.
Parallel recovery proceedings initiated by the bank before the Debt Recovery Tribunal (DRT) were subsequently settled. The main borrowers availed the One Time Settlement (OTS) scheme, the outstanding dues were fully repaid, the recovery proceedings were dismissed as settled, the recovery certificates were recalled, and No Dues Certificates were issued.
The appellants relied on earlier proceedings arising from the same set of transactions, where criminal cases instituted by the CBI had been quashed after a settlement with the bank. The High Court had also quashed proceedings against one co-accused and extended similar relief to the appellants in identical cases. However, the High Court declined to quash the present proceedings, holding that the trial had reached an advanced stage and that the existence of a prima facie case precluded quashing merely on account of the OTS.
Before the Supreme Court, the appellants contended that the dispute arose from a commercial transaction that had been fully resolved through the OTS, no dues remained payable, and the bank had acknowledged complete satisfaction. They also submitted that they were similarly situated to co-accused who had already obtained quashing of identical proceedings. It was further argued that the provisions of the Prevention of Corruption Act were not attracted to them as private individuals.
The respondents argued that settlement of dues did not automatically justify quashing criminal proceedings involving allegations of fraud and conspiracy, particularly when a prima facie case existed and the trial had substantially progressed.
The Supreme Court held that continuation of the criminal proceedings would serve no useful purpose. It noted that the dispute had culminated in a comprehensive OTS under which the bank had recovered the entire outstanding amount, the DRT proceedings had been dismissed as settled, no residual claim survived, and the bank had issued formal acknowledgements of satisfaction without objecting to closure of the matter.
The Court further observed that in identical proceedings arising from the same transactions, the High Court had already quashed the charge sheets after considering the settlement, and the Special Leave Petitions challenging those orders had been dismissed, rendering them final. Since the facts and legal position were the same, the appellants were entitled to the same relief.
Holding that there was no continuing public interest in prosecuting the matter after the full and final settlement and in view of the parity with identical proceedings already quashed, the Supreme Court allowed the appeals and quashed the criminal proceedings pending in C.C. No. 16 of 2006 against the appellants.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. The present appeals arise out of order dated 19.11.2024 passed by the Madurai Bench of the High Court of Madras in Crl. O.P. (MD) Nos. 586 and 595 of 2024, whereby the High Court dismissed the petitions filed by the appellants under Section 482 of the Code of Criminal Procedure, 19731, seeking quashing of criminal proceedings initiated against them for offences under Section 120B read with Sections 420, 468, and 471 of the Indian Penal Code, of the Prevention of Corruption Act, 19883.
3. The facts relevant to the present appeals are as follows:
3.1. The appellants herein are arrayed as accused nos. 3 and 6 in C.C. No. 16 of 2006, arising out of FIR No. RC MA1 2005 0020, registered on the basis of a complaint dated 27.04.2005 lodged by the respondent no.2 – Bank. It was alleged that the accused persons caused wrongful loss to the Bank to the tune of Rs.25.89 lakhs, leading to the filing of the charge sheet against nine accused, including the appellants.
3.2. The allegations against appellant no.1, N.S. Gnaneshwaran, are that he was instrumental in orchestrating the fraudulent diversion of funds sanctioned to M/s Vinayaka Corporation. He is alleged to have facilitated the encashment of multiple cheques drawn from the fraudulently obtained credit limit, using a network of relatives, employees, and fictitious identities. It is further alleged that he forged signatures and diverted the funds through various accounts linked to his family members and associates.
3.3. Appellant no.2, N.S. Madanlal, the brother of Gnaneshwaran, is alleged to have assisted in the scheme by operating a Bank account in the name of Bharathi Traders along with his wife, through which cheques were deposited and funds withdrawn. He is also accused of physically filling in cheques and ensuring their credit and encashment as part of the larger conspiracy to siphon off funds from the Bank.
3.4. Parallel to the criminal proceedings, the Bank initiated recovery proceedings in O.A. Nos. 186 of 2005 and 5 of 2006 before the Debt Recovery Tribunal, Chennai4, which were later renumbered as T.A. Nos. 16 and 57 of 2007.
3.5. The High Court, vide order dated 07.01.2023, allowed the petition under Section 482 CrPC filed by accused no.7, who is the wife of appellant no.1, and quashed the FIR insofar as it pertained to her. The said order was assailed before this Court by way of Special Leave Petition, which came to be dismissed on 26.03.2021.
3.6. In identical cases being C.C. Nos. 13 of 2006 and 151 of 2010, which were initiated by the Central Bureau of Investigation (CBI) against the appellants and other accused based on the same set of transactions, a settlement was arrived at between the principal accused and the Bank for an amount of Rs.52,79,000/-. Taking note of this compromise, the High Court proceeded to quash the proceedings against the accused on the ground of parity, and extended similar relief to the appellants herein vide order dated 26.09.2022.
3.7. Subsequently, the Bank floated a One Time Settlement (OTS) scheme, which was availed of by the main borrowers, namely accused nos. 4 and 5. Upon full repayment of the dues, the Bank recorded its satisfaction in the pending recovery proceedings, which were dismissed as settled vide order dated 15.12.2023. Thereafter, the Debt Recovery Certificates were recalled, and No Dues Certificates were issued to the borrowers.
3.8. In view of the settlement, the appellants moved the High Court under Section 482 CrPC seeking quashing of the criminal proceedings pending against them.
3.9. However, the High Court, vide the impugned order, dismissed the petitions on the ground that the stage of trial was advanced and held that the criminal proceedings could not be quashed merely on the basis of the OTS when a prima facie case was made out.
3.10. Aggrieved by the said decision, the appellants are before us in the present appeals.
4. We have heard the learned counsel appearing for the parties and carefully perused the material on record.
5. The learned counsel for the appellants submits that the dispute in question arises out of a commercial transaction which has since been amicably resolved through a One Time Settlement scheme extended by the Bank. It is contended that the recovery proceedings initiated by the Bank have been fully settled, no dues remain, and the Bank has formally issued certificates recording its satisfaction. It is further urged that the appellants are similarly placed to other co-accused against whom proceedings have already been quashed, and that the continuation of proceedings in the present matter would amount to unfair treatment. Additionally, it is submitted that the offences under the Prevention of Corruption Act are not attracted in the case of the appellants, who are private individuals and not public servants.
6. On the other hand, learned counsel for the respondents contends that the settlement of dues or compromise between the parties does not automatically warrant quashing of criminal proceedings when serious allegations involving fraud and criminal conspiracy are made out. It is submitted that the existence of a prima facie case is sufficient to warrant trial and that private settlements should not interfere with criminal prosecution, especially at an advanced stage.
7. Having considered the submissions of both sides and examined the record, we are of the view that no useful purpose would be served by continuing the criminal proceedings in the present matter. The dispute has, admittedly, culminated in a comprehensive One Time Settlement under which the Bank has received the entire outstanding amount. The recovery proceedings before the tribunal have been dismissed as settled, and no residual claim survives. The Bank has not raised any objection to the closure of the matter and has issued formal acknowledgments of satisfaction.
8. Further, in identical proceedings filed by the CBI against the appellants in C.C. Nos. 13 of 2006 and 151 of 2010, the charge sheets were quashed by the High Court after taking note of the settlement reached in the recovery proceedings. The special leave petitions preferred by the State being SLP (Crl) No. 711 of 2021 and SLP (Crl) No. 825 of 2021 challenging the said quashing were dismissed by this Court, rendering the orders final. Since the facts and legal position are the same in the present matter, we see no reason why the appellants should not be given the same relief.
9. In our view, allowing the present criminal proceedings to continue would serve no meaningful purpose, particularly when the dispute between the parties has already been resolved through a full and final settlement. The settlement between the parties having taken place after the alleged commission of the offence, and there being no continuing public interest we see no justification for allowing the matter to proceed further.
10. In view of the above discussion, we find it appropriate to quash the proceedings pending in C.C. No. 16 of 2006 against the appellants herein. Consequently, the appeals are allowed.
11. Pending application(s), if any, shall stand disposed of.
Notes:
1 CrPC.
2 IPC.
3 PC Act.
4 DRT.
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