Merely repaying fraudulently obtained funds does not absolve a party of criminal liability in bank fraud cases.

ORDER

The petitioners herein are a registered company and its Directors, and they have alleged to have defrauded the Central Bank of India, Coimbatore. A case has been duly registered and investigated by the first respondent for offences U/s.120(B) r/w 420 and 420 I.P.C.

2. The final report of the C.B.I. has been filed and the accused persons have now approached this Court with the present petition for quashing final report on the ground that the entire loan dues have been settled in OTS and NOC too has been issued by the 2^nd respondent.

3.1 The CBI has filed its counter, but not the 2^nd respondent. The allegation of the prosecution is that the first petitioner is a developer of villas, and that it had obtained a loan of Rs.5.0 crores for purchase of construction materials necessary for the construction of 26 houses/villas inter alia on the security of an equitable mortgage created over its immovable property. This amount was not utilised fully as only 3 or 4 incomplete villas alone are available, and that substantial loan amount was diverted for other purposes. On 12.04.2018, the loan itself was declared NPA and on 03.11.2018, the loan account was declared fraud. And the second respondent bank had suffered a wrongful loss of about Rs.6.07 crores. A FIR came to be registered against the petitioners and two others plus an unknown public servant (presumably a bank official) for offences under Sec.120B r/w Sec.420 IPC and Sec.13(2) r/w Sec.13(1)(d) PCA

3.2 After completing the investigation, a final report has been laid in which the CBI had dropped the name of the 6^th accused in the FIR and also the 'unknown' public servant, for offences under Sec.120B r/w 420 IPC.

4. Be that as it may, M/s Shriram City Union Finances, a financial creditor of the petitioner-company, had instituted a CIRP before the NCLT, Chennai, and a Resolution Professional was appointed by the Committee Creditors. The first petitioner being a MSME, it participated in the resolution process and offered an OTS with a view to revive the company. While this application was rejected by NCLT, the petitioner moved NCLAT, and it allowed the offer fo OTS. This Order of NCLAT was challenged by the Resolution Professional before the Hon'ble Supreme Court and it directed that the resolution offer of the first petitioner be considered but within a period of two months.

5. As part of the scheme, the second respondent bank was offered Rs.3,36,89,685/- about 50% of the loan liability when the loan account of the first petitioner was declared NPA and fraud. On 25.03.2024, this amount was paid too.

6. It is in this backdrop, the second respondent had addressed a communication dated 22.05.2024 to the CBI about the closure of loan account of the first petitioner following the OTS approved by it. On 04.06.2024, the Regional Office of the second respondent bank addressed a communication to CBI for release of documents which were produced as securities by the first petitioner, but it underscored that “the criminal proceedings shall continue and the criminal complaint will not be withdrawn.

7. Heard both sides. The loan dues which the petitioners owed to the second respondent, as stated above, was settled at around 50% of the total amount due, and the fact remained that the remaining 50% represented the public money, and that would mean that the public had eventually lost the money. It is in this scenario, the petitioners seek to quash the final report laid by the CBI. Admittedly, since the first petitioner is a MSME and some of its promoters and Directors continued to be in the management of the affairs of MSME, they will not be entitled to a relief against prosecution under Sec.32A of IBC., Now