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HIGH COURT OF DELHI
MANMOHAN SINGH, J.
Sanjay Bhandari - Petitioner
Versus
Central Bureau of Investigation - Respondent
CRL.M.C. No. 5798 of 2014 & Crl. M.A. No. 19744 of 2014
Decided On : 29-06-2015
Petitioners sought quashing of proceedings against them in a criminal case, based on a settlement arrived at between the petitioners and the complainant bank. The settlement was recorded in a consent decree passed by the Debt Recovery Tribunal (DRT). The prosecution alleged that the petitioners, who were directors of a company, had obtained credit facilities from the bank by concealing material facts and that the bank manager had colluded with the petitioners to release the credit limits without proper approvals. The petitioners contended that the dispute was primarily civil in nature and that the settlement had been arrived at in accordance with the Reserve Bank of India's (RBI) One Time Settlement (OTS) Scheme, which excluded cases of willful default, fraud, and malfeasance. The trial court had refused to quash the proceedings, holding that the power to quash proceedings on the ground of compromise between the parties was only with the High Court under Section 482 of the Code of Criminal Procedure (CrPC).
Fact of the Case:
The petitioners, who were directors of a company, were charged with obtaining credit facilities from a bank by concealing material facts and colluding with the bank manager to release the credit limits without proper approvals. The dispute was primarily civil in nature and a settlement had been arrived at between the petitioners and the complainant bank, which was recorded in a consent decree passed by the Debt Recovery Tribunal (DRT). The trial court refused to quash the proceedings, holding that the power to quash proceedings on the ground of compromise between the parties was only with the High Court under Section 482 of the Code of Criminal Procedure (CrPC).
Finding of the Court:
The High Court held that the dispute was primarily civil in nature and that the settlement had been arrived at in accordance with the Reserve Bank of India's (RBI) One Time Settlement (OTS) Scheme, which excluded cases of willful default, fraud, and malfeasance. The Court also noted that the trial had been proceeding for over 20 years and that no useful purpose would be served by continuing the prosecution. The Court further held that the petitioners were burdened with the cost of Rs. 5 lac, which shall be deposited with Prime Minister’s National Relief Fund within twelve weeks from the date of the order.
Issues: 1. Whether the dispute between the petitioners and the complainant bank was primarily civil in nature? 2. Whether the settlement arrived at between the petitioners and the complainant bank was valid and binding? 3. Whether the trial court erred in refusing to quash the proceedings against the petitioners? 4. Whether the petitioners were entitled to the relief of quashing of proceedings under Section 482 of the Code of Criminal Procedure (CrPC)?
Ratio Decidendi: The High Court held that the dispute between the petitioners and the complainant bank was primarily civil in nature and that the settlement arrived at between the parties was valid and binding. The Court also held that the trial court erred in refusing to quash the proceedings against the petitioners, as the continuation of the prosecution would serve no useful purpose. The Court further held that the petitioners were entitled to the relief of quashing of proceedings under Section 482 of the Code of Criminal Procedure (CrPC), as the settlement had been arrived at in accordance with the RBI's OTS Scheme and the trial had been proceeding for over 20 years.
Final Decision: The High Court quashed the proceedings against the petitioners, arising out of the criminal case, and directed the petitioners to deposit a cost of Rs. 5 lac with the Prime Minister’s National Relief Fund within twelve weeks from the date of the order.
Key Points: - The settlement between bank and company, recorded via DRT consent decree and RBI OTS, can lead to quashing if ends of justice and no public interest are harmed (!) (!) (!) . - The Court discusses Gian Singh framework: quashing allowed for civil/commercial disputes with remote likelihood of conviction, excluding heinous, violent, or public-statute offences like PC Act cases (!) (!) - (!) . - Comparisons with NL Jain, Nikhil Merchant, and Narinder Singh establish that consent/decree and bank exoneration can justify quashing when the dispute is civil/financial and not willful default or malfeasance; however, Doshi/Duncan lines caution against simplistic application in more serious offenses (!) - (!) . - The RBI OTS scheme excludes willful default, fraud, malfeasance; reliance on OTS must show compliance with its terms and that the bank has exonerated the accused in letters/consents (!) - (!) (!) . - The High Court ultimately quashed the proceedings due to prolonged trial and civil nature of the dispute, ordering a cost deposit to PMNRF (!) - (!) .
1. The petitioner have filed the present petition under Section 482 Cr.P.C for quashing of the proceedings pending against the petitioners, on the basis of settlement arrived at between the petitioners and the complainant bank arising out of R.C. No.4A/94/SIU(X) dated 23rd May, 1994, titled as 'CBI vs. N. Bhojraj Shetty & Ors.', being C.C. No.65/11, pending in the Court of Special Judge (CBI), Tis Hazari Courts, Delhi.
2. Brief facts of the case are that a case RC-4(A)/94/SIU(X) was registered on 23rd May, 1994 on the basis of a complaint dated 20th May, 1994 of Shri H. Vasant Shetty, DGM, Vijaya Bank, Zonal Office, New Delhi on the allegation that Vijaya Bank, R.K Puram Branch, New Delhi was defrauded to the tune of about Rs.46.99 lac approximately during 1987 to 1990 by the Director of M/s RKB Herbals Pvt. Ltd. in connivance with officers of Vijaya Bank in the matter of obtaining credit facilities to the tune of Rs.1 crore.
PROSECUTION CASE
3. The prosecution's case is that in the revised application, the accused company (A-5) did not disclose that its other unit i.e. Homeopathy unit at New Delhi was availing credit facility with another bank, namely, Indian Overseas Bank, Daryaganj Branch,New Delhi. Both the complainant bank and its officers were fully aware of such credit facilities.
3.1 Prosecution also alleges that co-accused Sh. N. Bhojraj Shetty (A-1), Branch Manager of the complainant bank colluded with (A-5) and released the credit limits without due approvals of the higher authorities of the bank.
3.2 The original application dated 2nd February, 1987 of M/s. RKB Herbals Private Limited was not processed further because of Non Obtention of the opinion of the previous lender i.e. the Indian Overseas Bank and also the fact that its Executive Director Shri Deepak Bhandari was a defaulter in the personal loan taken by him from Vijaya Bank, though Accused No.1 in conspiracy with the petitioners had favourably recommended the loan proposal of M/s. RKB Herbals Private Limited. When the petitioners could not succeed in getting the credit facilities, they in pursuance of the criminal conspiracy submitted another revised loan proposal dated 24th October, 1987 concealing the material fact of having obtained Working Capital facilities from Indian Overseas Bank. In furtherance of the criminal conspiracy, accused No.1 positively recommended the proposal of the petitioners and before the same was approved by the competent authority, he unauthorizedly and fraudulently released ad-hoc credit facilities to the tune of Rs.65 lakhs and thereby exposed the bank without securing its financial interest. In view of these facts, the contention of the petitioners cannot be accepted.
3.3 The petitioner No.1 in his capacity as proprietor of M/s Indian Herbs, 21, Okhla Industrial Area, Phase II, Scheme III, New Delhi-110020, opened a current account bearing No.338 in M/s UCO Bank, Delhi High Court Branch, New Delhi on 23rd March, 1989 and that the firm M/s Indian Herbs was fictitious and non-existent business concern, as the address shown in the said bank account application form was a shed of DSIDC, Okhla, Industrial Area, New Delhi, which was not owned/allotted to M/s Indian Herbs and as per the investigation, this shed was allotted to Sh. Deepak Bhandari (one of the Directors of accused company (A-5), and brother of petitioner No.1, for manufacturing of Homeopathic Medicines and ultimately this shed was then sold to one Sohan Lal Mittal on 6th July, 1989. In short, the prosecution's case in this respect is that no actual business was being run out of the said DSIDC shed during the year 1989 and the said account was opened for realizing payment from the complainant bank. It is further alleged that bogus invoices and hundis of M/s Indian Herbs were signed by the petitioner No.2 (A-4) as "S. Mehta" and therefore, both the petitioners cheated the complainant bank.
3.4 The Branch Manager (A-1) also failed to adhere to certain written instructions
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