K. BHARATHI  DEVI & ANR. Vs STATE OF TELANGANA & ANR.

 Case Citation:

 IN THE SUPREME COURT OF INDIA
 CRIMINAL APPELLATE JURISDICTION
 Criminal Appeal No. 004113-004113 of  2024
 [Arising out of Special Leave Petition (Criminal) No. 4353 of 2018]

K. BHARTHI DEVI AND ANR. …APPELLANT(S)
VERSUS
 STATE OF TELANGANA & ANR. …RESPONDENT(S)

Presiding judge: Justice B.R. GAVAI

Introduction:

This case involves a criminal appeal filed by K. Bharthi Devi and another against the State of Telangana concerning allegations of financial misconduct related to a loan from the Indian Bank. The appeal arises from a Special Leave Petition challenging the decisions made by lower courts regarding the criminal charges against the appellants. This summary explores the facts, legal issues involved, arguments from both sides, and the Court’s ruling.

Facts of the Case:

K. Suresh Kumar (Accused No. 1), the sole proprietor of M/s Sirish Traders, was granted various credit facilities by the Indian Bank, Osmanganj Branch, Hyderabad. These facilities were secured by collateral executed by the accused persons, including the present appellants, K. Bharthi Devi (Accused No. 3) and another (Accused No. 4).

Due to the failure of the borrowers to service their debts, the group loan account was declared a Non-Performing Asset (NPA) on March 31, 2010. To recover the outstanding amount, the bank filed an Original Application (OA No. 253 of 2010) before the Debts Recovery Tribunal (DRT) in Hyderabad.

During the DRT proceedings, the bank discovered that some title documents used to create an equitable mortgage were forged. Consequently, the bank lodged a complaint on September 3, 2012, leading to the Central Bureau of Investigation (CBI) registering an FIR on September 15, 2012. The CBI’s investigation revealed potential violations of multiple sections 120-B , 420, 409, 467, 468 and 471  of the Indian Penal Code (IPC) and Section 13(1)(d) and 13(2) of  the Prevention of Corruption Act.

Despite the ongoing proceedings, the borrowers approached the bank for a One Time Settlement (OTS), which was accepted on November 19, 2015, leading to the issuance of a No Dues Certificate by the bank on November 21, 2015. Subsequently, the appellants filed a Criminal Petition (No. 5778 of 2016) in the High Court seeking to quash the CBI’s charge-sheet.

The High Court dismissed the petition, ruling that the private settlement did not negate the gravity of the charges, which involved the use of fraudulent documents to embezzle public money.

Issues Involved:

The key issues that arose in this case include:

1. Nature of the Offence: Whether the allegations against the appellants can be classified as primarily civil in nature, despite being framed as criminal charges.
2. Impact of Settlement: Whether the settlement between the bank and the borrowers affects the continuation of criminal proceedings against the appellants.
3. Role of the Appellants: Whether the appellants had any active involvement in the alleged criminal activities.
4. Judicial Discretion: The extent to which the courts can exercise discretion under Section 482 of the CrPC to quash criminal proceedings based on the nature of the dispute.

Rules of Law Involved :

The case involves several legal principles and rules:

1. Section 482 of the Criminal Procedure Code (CrPC): This section allows the High Court to exercise its inherent powers to prevent abuse of the process of the court or to secure the ends of justice. It is relevant when considering whether to quash criminal proceedings.
2. Compounding of Offences: Certain offences can be compounded, meaning the victim and the offender can settle the matter without the need for criminal prosecution. The nature of the offence (compoundable vs. non-compoundable) plays a significant role in determining whether the proceedings can be quashed.
3. Judicial Precedents: The Court referenced previous judgments, including Duncans Agro Industries Ltd. and Nikhil Merchant, which address the quashing of criminal proceedings in light of civil disputes and settlements.
4. Assessment of Criminal Liability: The Court must assess whether the facts of the case indicate a likelihood of conviction. If the chances of conviction are deemed remote or bleak, it may justify the quashing of proceedings.

Appellants’ Arguments :

Aggrieved by the High Court’s decision, the appellants (Accused Nos. 3 and 4) filed the present appeal. They argued that:

• Lack of Active Role: The appellants contended that they played no active role in the alleged crimes. K. Bharthi Devi is the wife of Accused No. 2, and the other appellant is the wife of Accused No. 1. They argued that the chargesheet does not attribute any significant involvement to them.
• Settlement with the Bank: The appellants emphasized that the matter was settled with the bank. They paid a total amount of ₹7,78,25,143, and the bank also recovered ₹1,07,54,000 through the auction of mortgaged properties. Furthermore, during the DRT proceedings, ₹3,80,00,000 was paid under the OTS, leading to the closure of the loan account.
• Futility of Proceedings: Continuing the proceedings against them would be futile, as the bank had received the owed amount and closed the account. The appellants argued that pursuing the case would cause them unnecessary hardship.

Respondents’ Arguments :

The learned Additional Solicitor General (ASG), representing the CBI, countered the appellants’ claims by asserting:

• Criminal Liability Remains: The ASG argued that the settlement between the bank and the borrowers does not absolve the accused of their criminal liability. The High Court correctly dismissed the petition under Section 482 of the CrPC, as the allegations involved serious offences.
• Specific Roles in Chargesheet: The ASG pointed out that the chargesheet attributes specific roles to Accused No. 1 (K. Suresh Kumar), with allegations of criminal conspiracy involving the present appellants. Thus, the appellants could not simply distance themselves from the charges.
• Legal Precedents: The ASG referenced previous judgments to argue that the nature of the offences was serious and not merely civil in character, thus justifying the continuation of criminal proceedings.

Judicial Observations :

The Supreme Court noted the following critical points in its observations:

• Similarity to Previous Cases: The Court found that the facts in this case were similar to those in Sadhu Ram Singla, where a dispute between the borrower and the bank was settled. The Court recognized that the FIR and chargesheet pertained to the loan transaction between the accused and the bank, and that the matter had been resolved amicably.
• Nature of the Dispute: The Court observed that the dispute was predominantly civil in nature, especially since the parties had settled the matter. The payment made by the borrowers under the OTS and the closure of the loan account were significant factors.
• Possibility of Conviction: The Court concluded that the possibility of conviction was remote. In light of the complete settlement, continuing the criminal proceedings would subject the accused to undue oppression and prejudice.
• Quashing of Proceedings: The Court emphasized that it was a fit case for quashing the criminal proceedings under Section 482 of the CrPC, given the circumstances surrounding the dispute.

Conclusion :

The Supreme Court ultimately allowed the appeal, quashing the High Court’s judgment and the criminal proceedings against the appellants. The ruling highlighted several key aspects:

1. Civil Nature of Dispute: The Court recognized that when parties resolve their issues privately, particularly in disputes that are primarily civil in nature, it is reasonable for the courts to dismiss related criminal charges.
2. Settlement Implications: The Court underscored that a complete settlement between the parties can significantly impact the assessment of criminal liability, especially when the financial institution has been compensated.
3. Judicial Discretion: The ruling reinforces the principle that courts can exercise discretion to quash criminal proceedings in cases where the continuation of such proceedings would lead to injustice, particularly when the parties have amicably resolved their disputes.
4. Legal Precedents Reinforced: This case reaffirms the legal precedents that support the quashing of criminal charges in the context of civil disputes, ensuring that individuals are not unduly burdened by legal proceedings when they have already settled their issues.

In summary, the Supreme Court’s decision reflects a balanced approach to criminal and civil law, emphasizing the importance of settlements and the need to prevent unnecessary legal burdens on individuals when disputes can be resolved amicably.

References :

(2024) supreme court of india. Available at: https://www.sci.gov.in/judgements-judgement-date/             (Accessed: 13 October 2024).