Summary
The Supreme Court refused to quash a CBI FIR and chargesheet under Sections 409, 420 and 120B IPC and Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act against company directors and bank employees, holding that a one-time settlement with the bank recorded in consent terms before the DRT does not justify quashing where the bank suffered loss of public money and offences under a special statute like the PC Act are invoked.
Issues
- Whether criminal proceedings involving alleged bank loan fraud can be quashed under Section 482 CrPC on the basis of a settlement between the borrower and the bank recorded in consent terms before the Debt Recovery Tribunal.
- Whether the principle in Gian Singh v. State of Punjab on quashing after compromise applies to economic offences and offences under the Prevention of Corruption Act.
Provisions considered
- Section 482, Code of Criminal Procedure, 1973The inherent power to prevent abuse of process or secure the ends of justice was invoked to quash the FIR and chargesheet on the strength of the settlement. The Court held the High Court rightly declined to exercise it given the loss to the public exchequer and the invocation of the PC Act. (¶¶ 2, 14, 18, 19)
- Section 320, Code of Criminal Procedure, 1973Referred to, through Gian Singh, to distinguish the High Court's inherent power to quash on compromise from the criminal court's power to compound offences. (¶ 14)
- Section 13(2) read with Section 13(1)(d), Prevention of Corruption Act, 1988Invocation of this special statute was a decisive factor: quashing offences under the PC Act on settlement would have a grave impact on society at large, and Gian Singh itself excludes such offences from compromise-based quashing. (¶¶ 2, 14, 18)
- Sections 409, 420 and 120B, Indian Penal Code, 1860Offences alleged in the FIR concerning diversion of loan funds and reduction of the value of mortgaged collateral; treated as part of an economic offence affecting a public sector bank, not a purely private dispute. (¶¶ 2, 5, 18)
Held
- The Gian Singh principle permitting quashing of predominantly civil, commercial disputes on settlement does not extend to offences of moral turpitude under special statutes like the PC Act or offences by public servants in that capacity, where a settlement between offender and victim has no legal sanction; the present case was distinguishable on that basis. (¶¶ 13, 14, 15)
- Economic offences form a class apart: they affect the financial health of the country and public confidence, and the High Court is justified in declining to quash proceedings involving financial fraud even after settlement, as recognised in Parbatbhai Aahir and R. Vasanthi Stanley. (¶¶ 16, 17)
- Since the bank admittedly suffered a loss of about Rs. 6.13 crores, causing substantial injury to the public exchequer, and the PC Act was invoked, quashing would affect society at large and not merely the parties; the consent terms before the DRT did not warrant quashing. (¶ 18)
- The High Court committed no error in refusing to exercise its inherent jurisdiction under Section 482 CrPC to quash the FIR and chargesheet. (¶¶ 18, 19)
Result
Appeals dismissed; the High Court's refusal to quash the FIR and chargesheet affirmed.