Sunil Sharma Vs Hero Fincorp Limited & Another (Supreme Court of India)
Loan Default & Contract Breach Not Criminal Breach of Trust -No Entrustment, No Mens Rea- Supreme Court Stops Criminalisation of Commercial Loan Disputes
Background & Loans
- Appellant was Director of Benlon India Ltd.
- Hero Fincorp gave three loans:
- ₹12.25 cr (24-10-2014)
- ₹10 cr (06-02-2015)
- ₹15 cr (10-02-2016)
- Machinery purchased using first two loans; major fire on 02-03-2016 destroyed machinery worth ₹180 cr.
- Third loan of ₹15 cr (25-02-2016) was converted into unsecured / corporate loan — Hero did not object till 2018.
Subsequent Events
- Benlon repaid ₹26.92 cr out of ₹37.25 cr before default due to IBC proceedings initiated by another creditor.
- Forensic audit by IRP found no diversion of funds → entire claim of Hero admitted.
- Hero initiated multiple actions:
– 32 NI Act 138 complaints (later withdrawn)
– Arbitration
– ARFAESI recovery & sale of collateral
– Complaint to EOW
Criminal Proceedings
- EOW Report (28-08-2019): No cognizable offence, recommended closure per alita Kumari v. State of Uttar Pradesh (2014) 2 SCC 1.
- CMM refused FIR; revisional court upheld this.
- Delhi HC reversed & ordered registration of FIR for criminal breach of trust (Section 406 IPC).
- Appellant approached Supreme Court.
Supreme Court’s Analysis
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