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2014 (9) TMI 1268 - SC - Indian LawsQuashing the criminal proceeding following the settlement between the parties - Financial Fraud with Bank - Onus on superior court to proceed to analyse the factual score - Exercise of inherent jurisdiction bestowed upon it Under Section 482 of the Code of Criminal Procedure or Under Article 226 of the Constitution of India, to quash the criminal proceeding solely on the ground that the parties have entered into a settlement and, therefore, the continuance of the criminal proceeding would be an exercise in futility, or the substantial cause of justice warrants such quashment to make the parties free from unnecessary litigation with the assumed motto of not loading the system with unfruitful prosecution. HELD THAT - It is not a simple case where an accused has borrowed money from the bank and diverted it somewhere else and, thereafter, paid the amount. It does not fresco a situation where there is dealing between a private financial institution and an accused, and after initiation of the criminal proceedings he pays the sum and gets the controversy settled. The expose' of facts tells a different story. As submitted by the learned Counsel for CBI the manner in which the letters of credits were issued and the funds were siphoned has a foundation in criminal law. Learned Counsel would submit that it does not depict a case which has overwhelmingly and predominantingly civil flavour. The intrinsic character is different. Emphasis is laid on the creation of fictitious companies. In this context, we may usefully refer to a two-Judge Bench decision in Central Bureau of Investigation v. Jagjit Singh 2013 (10) TMI 1427 - SUPREME COURT wherein the court being moved by the CBI had overturned the order of the High Court quashing the criminal proceeding and in that backdrop had taken note of the fact that accused persons had dishonestly induced delivery of the property of the bank and had used forged documents as genuine. We are in respectful agreement with the aforesaid view. Be it stated, that availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud. The ultimate victim is the collective. It creates a hazard in the financial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation. The cleverness which has been skillfully contrived, if the allegations are true, has a serious consequence. A crime of this nature, in our view, would definitely fall in the category of offences which travel far ahead of personal or private wrong. It has the potentiality to usher in economic crisis. Its implications have its own seriousness, for it creates a concavity in the solemnity that is expected in financial transactions. It is not such a case where one can pay the amount and obtain a no due certificate and enjoy the benefit of quashing of the criminal proceeding on the hypostasis that nothing more remains to be done. The collective interest of which the Court is the guardian cannot be a silent or a mute spectator to allow the proceedings to be withdrawn, or for that matter yield to the ingenuous dexterity of the accused persons to invoke the jurisdiction Under Article 226 of the Constitution or Under Section 482 of the Code and quash the proceeding. It is not legally permissible. Ex consequenti, the appeal is allowed, and the order passed by the High Court is set aside. The trial shall proceed in accordance with law
Issues Involved:
1. Scope of inherent jurisdiction under Section 482 of the Code of Criminal Procedure and Article 226 of the Constitution of India. 2. Quashing of criminal proceedings based on settlement between parties. 3. Nature and gravity of offenses, particularly those involving financial fraud and forgery. 4. Impact of such offenses on society and public interest. 5. Judicial precedents regarding quashing of criminal proceedings in cases of financial and commercial disputes. Detailed Analysis: 1. Scope of Inherent Jurisdiction: The central issue is the extent to which a superior court can use its inherent jurisdiction under Section 482 of the Code of Criminal Procedure or Article 226 of the Constitution to quash criminal proceedings based on a settlement between parties. The judgment emphasizes that such jurisdiction should be exercised with caution, particularly in cases involving serious offenses like financial fraud and forgery, which have broader societal implications. 2. Quashing of Criminal Proceedings Based on Settlement: The judgment critically examines whether the High Court was justified in quashing the criminal proceedings solely on the basis that the parties had settled the matter. The High Court had quashed the proceedings, citing a "No Due Certificate" issued by the bank after the settlement. However, the Supreme Court highlighted that the settlement does not automatically justify quashing proceedings, especially when serious criminal allegations are involved. 3. Nature and Gravity of Offenses: The judgment delves into the nature of the offenses, which include forgery, fabrication of documents, and criminal conspiracy to obtain loans fraudulently. The Supreme Court noted that these offenses are not merely private disputes but have significant public interest implications. The fraudulent activities involved creating fictitious companies and siphoning funds, which are serious offenses that cannot be overlooked simply because a settlement has been reached. 4. Impact on Society and Public Interest: The Supreme Court emphasized that offenses involving financial fraud and forgery have a harmful effect on society and public trust in financial institutions. Such crimes are not just against the bank but affect the broader public, including the bank's customers. The judgment underscores that the collective interest of society must be protected, and allowing such proceedings to be quashed would undermine public confidence in the judicial system. 5. Judicial Precedents: The judgment references several landmark cases to support its conclusions. It cites decisions like *Rumi Dhar v. State of W.B.*, *Central Bureau of Investigation v. A. Ravishanker Prasad*, and *Gian Singh v. State of Punjab*, which establish that criminal proceedings involving serious offenses should not be quashed merely based on settlements. The Court also distinguished the present case from others where the nature of the offenses was predominantly civil. Conclusion: The Supreme Court set aside the High Court's order quashing the criminal proceedings, directing that the trial should proceed in accordance with the law. The judgment clarifies that while settlements can be a factor in quashing proceedings, they are not determinative in cases involving serious criminal allegations with broader societal impacts. The Court's observations are specific to the context of adjudicating the justifiability of quashing the criminal proceedings and do not influence the merits of the trial itself.
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