VHT Rama Rao vs State of Telangana - 2025 Supreme(Telangana) 2274

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2025 Supreme(Telangana) 2274

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
E.V. VENUGOPAL, J.
VHT Rama Rao – Appellant
Versus
State of Telangana – Respondent
Crl. RC No.94 of 2023
Decided On : 19-02-2025

Advocates Appeared:
For the Appellant : Deepak Misra
For the Respondent: T. Srujan Kumar Reddy (SC for CBI)

Important Points

In bank loan fraud cases involving misrepresentation of financial status, if the loan is fully repaid, a no-due certificate is issued, and the mortgaged property was genuine, continuing criminal proceedings may be considered an abuse of process and the accused may be discharged.

Subject

Criminal Law - Bank Frauds

Act Referred

CRIMINAL PROCEDURE CODE: S.239, S.397, S.401
INDIAN PENAL CODE: S.120(b), S.420, S.471

Headnote

(A) Code of Criminal Procedure, 1973 - Sections 397, 401 and 239 - Indian Penal Code, 1860 - Sections 120-B, 420 and 471 - Discharge from prosecution - Loan availed based on alleged misrepresentation of financial status and inflated valuation of mortgaged property - Loan subsequently repaid in full and no-due certificate issued by the bank - Where the mortgage asset was genuine and the monetary loss has been made good, continuing the criminal proceedings would be a futile exercise and an abuse of the process of law. (Paras 11, 14, 15 and 16)

(B) Criminal proceedings - Quashing/Discharge - In cases involving disputes over credit facilities where the accounts are settled and the bank has no further claims, technicalities should not obstruct the quashing of proceedings, especially when the dispute has overtones of a civil nature with criminal facets. (Para 14)

Facts of the case:
The petitioner availed loans from a bank, allegedly by submitting forged income tax returns and representing himself as the proprietor and director of non-existent firms. It was further alleged that the market value of the mortgaged property was inflated through collusion with a bank valuer. The petitioner sought discharge from the proceedings. During the pendency of the trial, the petitioner repaid the outstanding dues, and the bank issued a no-due certificate.

Findings of Court:
The court observed that the loan was fully secured by the mortgage of genuine property and the bank has accepted repayment and issued a no-due certificate. Following the principles laid down by the Supreme Court, the court found that continuing the trial would be a waste of judicial time and public money.

Issues: Whether the petitioner is entitled to discharge from criminal prosecution under Sections 120-B, 420, and 471 of the IPC after the full repayment of the loan and issuance of a no-due certificate by the bank.

Ratio Decidendi: When the substantive grievance of the bank is the non-payment of dues, and such dues are settled, and where the mortgage asset was genuine, the continuation of criminal proceedings for misrepresentation of financial status to obtain credit is deemed an abuse of the process of law.

Result: Criminal Revision Case allowed; petitioner discharged.

Legal Category Hierarchy

ORDER :

E.V.VENUGOPAL, J.

CRIMINAL REVISION CASE No.94 OF 2023

1 This criminal revision case is filed under Sections 397 and 401 of Cr.P.C. aggrieved by the order dated 05.7.2019 passed by the learned III Additional Special Judge for CBI cases, Hyderabad in Crl.M.P.No.253 of 2019 in C.C.No.4 of 2007, whereunder the learned Judge dismissed the said petition filed by the petitioner/ A.9 under Section 239 Cr.P.C. seeking discharge from the proceedings.

2 Heard Sri Deepak Misra, learned counsel for the revision petitioner and Sri T.Srujan Kumar Reddy, the learned standing counsel for CBI, and perused the record.

3 The facts unfold that the petitioner who is claiming to be proprietor of M/ s. Mareechi Computers, availed housing loan from Syndicate Bank, Boraganda branch, to a tune of Rs.10.00 lakhs and as on the date of filing of the charge sheet, it was alleged that the outstanding loan amount was Rs.11,21,471/ - and that the petitioner failed to pay the outstanding dues. The further allegation is that the bank valuer had colluded with various borrowers including the petitioner and inflated the area of flat and its market value so as to get more loan and the value of the plot owned by the petitioner is Rs.6.00 lakhs only, however, by inflating the rate by Rs.4.00 lakhs, the petitioner secured loan of Rs.10.00 lakhs and subsequently the petitioner committed default.

4 It is further alleged that the petitioner applied for demand loan of Rs.2.00 lakhs on 12.12.2003 from Syndicate Bank for domestic purpose to which loan A.6 stood as guarantor. The petitioner claimed himself to be the Director of M/ s. Rupa Informatics Ltd, and proprietor of M/ s. Mareechi Computer Services and he has enclosed copies of IT returns for the years 2001-02 to 2003-04 showing income tax of Rs.75,578/ -, Rs.93,682/ - and Rs.1,91,063/ - paid for the above three years respectively along with the photocopies of IT returns of the A.6 (guarantor). The said loan amount was disbursed to the joint account of A.6, A.8 and A.9 (petitioner herein) and that the name of the petitioner was included as joint operator of this SB account just before sanctioning of the loan.

5 The further allegation levelled against the petitioner was that the petitioner was not an income tax assessee, similarly, A.6 also did not pay any income tax for the years 2001-02 and did not file returns for the next two years and that either M/ s. Rupa Informatics Limited or M/ s. Mareechi Computer Services did not file any returns nor paid any tax for the years 2001-02 to 2004-05 respectively. During investigation it was further revealed that no firm by name M/ s. Mareechi Computer Services existed at the given address.

6 It was the further case of the prosecution that the petitioner applied for Housing Loan of Rs.10.00 lakhs, to which loan, A.14 stood as guarantor. In this transaction also, the petitioner claimed himself to be the Director of M/ s. Rupa Informatics Ltd, and proprietor of M/ s. Mareechi Computer Services and he has enclosed copies of IT returns for the years 2001-02 to 2003-04 showing income tax. A.14 also furnished photocopies of income tax for the said period showing payment of income tax for two years.

7 The CBI further submitted that as per the investigation copies of IT returns of accused Nos.9 and 14 were fake and they were not assessees and as per the statement of Assistant Commercial Tax Officer, Sanathnagar, Hyderabad and M/ s. Rupa Informatics Ltd., did not file any returns or paid any tax for the years 2001-02 to 2004-05 and M/ s. Mareechi Computer Services also did not file any returns nor paid any tax during the years 2001-02 to 2004-05 and as per the investigation no firm by name M/ s.Mareechi Computer Services is existed at the place mentioned. Hence the prosecution alleged that the petitioner along with the other accused entered into criminal conspiracy and cheated the bank by using forged documents as genuine.

8 While the matter was pending before the learned trial Court, the