2017 (7) TMI 1436 - SC - Indian Laws

Cheating - Criminal Conspiracy - Applications seeking discharge - discharge sought mainly on the ground that M/s. Modern Denim Ltd.-Accused No. 13 had since entered into One Time Settlement (OTS) with the bank and the allegation of forgery and use of forged documents as genuine were not raised by the bank in the proceedings before the Debt Recovery Tribunal, as such no case was made out against them - compoundable offence or not - Section 468, 471 201 Indian Penal Code - HELD THAT - The order passed by the trial court indicates that it has treated the main offence being that of cheating and it has also been observed that there is no such allegation that documents are forged and pecuniary advantage has been obtained on that basis. The trial court had heavily relied upon the OTS. Its observation that forged documents had not been used to defraud the Bank in our opinion is a palpably incorrect and perverse finding and cannot be sustained. There is overwhelming material placed on record along with charge sheet which indicates that a large number of documents had been forged in the instant case and Accused persons thereby have induced the Bank for disbursing the working capital limits to M/s. Modern Denim Ltd. In Rumi Dhar's case 2009 (4) TMI 999 - SUPREME COURT , this Court has observed that when settlement is arrived at between the creditors and the debtor, the offence, if committed, as such does not come to an end. Even a judgment rendered in the civil proceedings, when it is rendered on the basis of a settlement entered into between the parties, would not be of large relevance as per criminal offence required of Section 49 of the Evidence Act. The judgment of the civil court is admissible only for limited purposes. The order passed by the trial court affirmed by the revisional court and High court cannot be said to be sustainable. The impugned orders are thus set aside. Let the trial court frame the charges, and proceed further in accordance with law, and conclude the trial positively within a period of one year from today - appeal allowed.

Summary

Issues Involved:
1. Discharge of accused persons by the trial court.
2. Allegations of criminal conspiracy, cheating, and forgery.
3. One Time Settlement (OTS) and its impact on criminal liability.
4. Examination of material evidence by lower courts.
5. Applicability of legal precedents in quashing criminal proceedings.

Issue-wise Detailed Analysis:

1. Discharge of Accused Persons by the Trial Court:
The trial court discharged the accused persons on the grounds that there was no allegation of forged documents causing loss and that the One Time Settlement (OTS) indicated no intention to cheat the bank. The court opined that the dispute was of a civil nature and that the bank had already exhausted civil remedies. This discharge was upheld by the revisional court and the High Court.

2. Allegations of Criminal Conspiracy, Cheating, and Forgery:
The Central Bureau of Investigation (CBI) alleged that the accused entered into a criminal conspiracy to cheat the Bank of Baroda by availing various credit facilities using false documents as genuine. The investigation revealed that the accused misused funds amounting to several crores and did not repay the bank. Specific instances included the misuse of Export Packing Credit (EPC) and other facilities, submission of fake export orders, and non-compliance with the required documents for releasing funds.

3. One Time Settlement (OTS) and Its Impact on Criminal Liability:
The trial court heavily relied on the OTS to discharge the accused, suggesting that the settlement indicated no intention to defraud. However, the Supreme Court opined that the OTS only addressed civil liability and could not wipe out criminal liability. The court emphasized that the OTS could not be used to negate the criminal charges of conspiracy, cheating, and forgery.

4. Examination of Material Evidence by Lower Courts:
The Supreme Court found that the lower courts did not adequately examine the materials placed on record along with the charge sheet. The trial court's finding that there was no material indicating collusion to cheat the bank was deemed incorrect and perverse. The Supreme Court noted that there was overwhelming evidence of forged documents and misuse of bank funds, which the trial court failed to consider.

5. Applicability of Legal Precedents in Quashing Criminal Proceedings:
The Supreme Court referred to several precedents to emphasize that criminal proceedings involving serious allegations of fraud and forgery could not be quashed merely based on a civil settlement. Cases like Gian Singh v. State of Punjab and Anr., Ashok Sadarangani v. Union of India and Ors., and Rumi Dhar v. State of West Bengal and Anr. were cited to support the view that criminal liability persists despite civil settlements. The court highlighted that such cases have a societal impact and cannot be treated as private disputes.

Conclusion:
The Supreme Court set aside the orders of the trial court, revisional court, and High Court, directing the trial court to frame charges and proceed with the trial. The court clarified that the observations made were prima facie and based on the charge sheet, and the trial court should not be influenced by these findings while deciding the case on merits. The appeal was allowed, and the trial was to be concluded within a year.