Kotak Mahindra Bank Ltd. vs State of Punjab

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(P&H) 1824

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Manjari Nehru Kaul, J.
Kotak Mahindra Bank Ltd. – Appellant
Versus
State of Punjab & Anr. – Respondents
CRM-M No. 36788 of 2017
Decided On : 12-07-2023

Advocates appeared:
For the Parties :Mr. R.S. Cheema Senior, Advocate, Mr. Arshdeep S. Cheema, Mr. Satish Sharma, Mr. Amit Rana Sr. DAG, Punjab, Mr. Vineet Sehgal

Headnote:(A) Indian Penal Code, 1860 - Section 420 - Quashing of FIR - The petitioner sought to quash an FIR under Section 420 IPC against the Bank, claiming a lack of intention to deceive, asserting a civil dispute instead - Court found that essential ingredients for an offence were missing as there was no evidence of deception or delivery of property. (Paras 2, 10, 26)

(B) Judicial Discretion - A Judicial Magistrate is obligated to provide cogent reasons when rejecting a cancellation report from an investigation - Merely disagreeing with the report is insufficient for further investigation. (Paras 9, 10)

(C) Inherent Powers of High Court - The powers under Section 482 Cr.P.C. must be exercised cautiously to prevent abuse of the Court process and ensure justice. (Paras 11, 12)

Facts of the case:
The Bank provided advisory services, which the complainant initiated, but failed to secure funds leading to DRT proceedings against him. The complainant later filed an FIR alleging cheating after failing to follow through on settlement offers.

Findings of Court:
The FIR was quashed due to lack of necessary criminal elements, finding the matter to be essentially civil.

Issues: The main issues addressed included whether the FIR implicated deception as outlined in Section 420 IPC, and if it was a legitimate civil dispute mischaracterized as criminal.

Ratio Decidendi: The court held that mere disagreement with the investigation did not justify ordering further investigation without sufficient legal grounding, determining that the FIR lacked substantive evidence of an offence.

Result: Petitioner’s application allowed; FIR quashed.

Table of Content
1. factual circumstances of the case (Para 1 , 2 , 4 , 14)
2. nature of allegations and complainant's behavior (Para 3 , 5 , 8 , 20)
3. judicial observations on previous orders (Para 6 , 7 , 9 , 10 , 11 , 13)
4. legal standards for quashing firs (Para 12 , 22 , 23)
5. implications of criminal proceedings being malafide (Para 16 , 26 , 27)
6. court's final ruling on the matter (Para 28)

Judgment

Mrs. Manjari Nehru Kaul, J.

The petitioner, Kotak Mahindra Bank Limited (hereinafter referred to as, ‘the Bank’) is seeking quashing of FIR No.159 dated 31.12.2010 (Annexure P-23) under Section 420 IPC registered at Police Station Cantonment, Amritsar City along with all consequential proceedings arising therefrom including order dated 10.05.2017 (Annexure P-32) passed by the learned Judicial Magistrate 1st Class, Amritsar, vide which the cancellation report submitted by the investigating agency had not been accepted and further investigation had been ordered.

2. Learned senior counsel to lay a challenge to the FIR in question as well as to the impugned order, has inter alia submitted:-

(i) That the petitioner is a banking division of Kotak Mahindra Group and provides a number of financial services through its various divisions, which function independently of each other. One of the divisions of the Bank, Corporate Advisory Group (for short, ‘CAG’), was engaged in providing financial advisory services to Corporates. The services of CAG were only advisory in nature and did not envisage providing any financial assistance or any guarantee.

(ii) That another division of the Bank, Asset Reconstruction Division (for short, ‘ARD’), was into the business of purchasing Non-Performing Assets (for short, ‘NPA’) from banks and financial institutions, and their resolution. The same was being done by ARD as per the guidelines of Reserve Bank of India (for short, ‘RBI’) and laws of the land. Thus, evidently both CAG and ARD being separate divisions were performing distinct functions and their functions were not only independent but did not even overlap each other.

(iii) That in the month of June 2006, CAG was approached by respondent No.2 (hereinafter referred to as, ‘the complainant’) for providing advisory services qua the debts owed by the complainant to the Centurian Bank of Punjab Limited (for short, ‘CBOP’) and other banks. Qua the defaults made in repayment of loan, DRT proceedings were also initiated in the year 2007, against the complainant by the CBOP, for recovery of more than Rs. 33,95,07,968.00.

(iv) That on 17.04.2007, an engagement letter was issued by CAG to the complainant, who paid an upfront fee of Rs. 2.00 lacs to CAG. The scope of engagement of CAG was limited to an advisory role and in rendering assistance to the complainant in tying up with investors to meet the funding for One Time Settlement (for short, ‘OTS’). In the meantime, CAG was informed by the complainant that he was also negotiating with CBOP and was in the process of arriving at OTS for its debts. CAG was also requested by the complainant to look for investors for infusing funds in the said regard. However, despite best and earnest efforts by CAG, it was unable to find any investor, who was willing and ready to infuse funds as desired by the complainant. Acting in good faith, CAG informed the complainant about the ARD and suggested that it could explore the possibility of a buyout of the debts of the Company of the complainant by ARD itself. It was a mere suggestion given to the complainant by the CAG in its advisory capacity. Subsequently, vide email dated 18.09.2007, the complainant was also admittedly apprised that in case any transaction was to be made with ARD, it would be independent of the terms entered into between the parties vide letter dated 17.04.2007 and the CAG would still continue to act in its advisory capacity, to which the complainant put in a request for the terms of the proposal. Thereafter, it was only on the complainant giving a green