2024 (10) TMI 212 - SC - Indian Laws

Criminal conspiracy - Recovery of amounts due - compoundable offences - settlement between the parties - whether the continuation of the criminal proceedings against the present appellants would be justified or not? - HELD THAT - In the case of Nikhil Merchant 2008 (8) TMI 966 - SUPREME COURT this Court was considering a civil dispute with certain criminal facets. The matter also involved offences which were not compoundable in nature. This Court therefore considered the question as to whether the criminal proceedings could be quashed under Article 142 of the Constitution of India on the basis of compromise even where non-compoundable offences are involved. This Court found that though the offence punishable under Section 420 of the IPC was compoundable under sub-section (2) of Section 320 CrPC with the leave of the Court the offence of forgery was not included as one of the compoundable offences - This Court specifically noted that though it is alleged that certain documents had been created by the appellant therein to avail of credit facilities beyond the limit to which the Company was entitled the power of quashing could be exercised. This Court found that in view of a compromise arrived at between the Company and the Bank it was a fit case where a technicality should not be allowed to stand in the way of quashing of the criminal proceedings. This Court found that in view of the settlement arrived at between the parties continuance of the same would be an exercise in futility. The facts in the present case are similar to the facts in the case of Sadhu Ram Singla and others 2017 (2) TMI 1530 - SUPREME COURT wherein a dispute between the borrower and the Bank was settled. In the present case also undisputedly the FIR and the chargesheet are pertaining to the dispute concerning the loan transaction availed by the accused persons on one hand and the Bank on the other hand. Admittedly the Bank and the accused persons have settled the matter. Apart from the earlier payment received by the Bank either through Equated Monthly Instalments (EMIs) or sale of the mortgaged properties the borrowers have paid an amount of Rs.3, 80, 00, 000/- under OTS. After receipt of the amount under OTS the Bank had also decided to close the loan account. The dispute involved predominantly had overtures of a civil dispute. This was a fit case wherein the High Court ought to have exercised its jurisdiction under Section 482 CrPC and quash the criminal proceedings - The impugned judgment and order passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh is quashed and aside - Appeal allowed.

Summary

Issues Involved:

1. Whether the continuation of criminal proceedings against the appellants is justified after a settlement between the bank and the accused.
2. The role of inherent powers under Section 482 of the CrPC in quashing criminal proceedings in light of a civil settlement.
3. The applicability of precedents regarding quashing criminal proceedings in cases with civil disputes.

Detailed Analysis:

1. Continuation of Criminal Proceedings Post-Settlement:

The core issue was whether criminal proceedings should continue against the appellants after a settlement between the bank and the accused. The appellants argued that the charges against them were primarily civil in nature, arising from a loan transaction dispute with the bank, which had been settled through a One Time Settlement (OTS). The bank confirmed the settlement and closure of the loan account, which suggested that the dispute had civil overtones. The Supreme Court observed that the continuation of criminal proceedings would be oppressive and prejudicial to the appellants, given the settlement and the lack of a specific role attributed to them in the chargesheet.

2. Inherent Powers Under Section 482 CrPC:

The judgment extensively discussed the exercise of inherent powers under Section 482 of the CrPC. The Supreme Court emphasized that these powers are distinct from the power to compound offences under Section 320 of the CrPC. The inherent power can be exercised to quash proceedings to secure the ends of justice or prevent abuse of the court's process. The Court reiterated that in cases where disputes predominantly bear a civil flavor, especially those arising from commercial transactions, the High Court can quash criminal proceedings if the parties have amicably settled their disputes. The judgment referenced several precedents, including *Gian Singh v. State of Punjab* and *Narinder Singh v. State of Punjab*, which support the quashing of proceedings in such contexts.

3. Precedents on Quashing Proceedings in Civil Disputes:

The judgment analyzed various precedents where the Supreme Court had quashed criminal proceedings in cases with a civil nature. In *Duncans Agro Industries Ltd.*, the Court held that even if an offence of cheating was constituted, it was compoundable, and a settlement effectively amounted to compounding the offence. Similarly, in *Nikhil Merchant*, the Court quashed proceedings involving non-compoundable offences due to a civil settlement. The judgment highlighted the principle that in cases with civil disputes, the possibility of conviction is often remote, and continuing proceedings would be futile. The Court concluded that the present case, involving a settled loan dispute, fit within this framework, warranting the quashing of proceedings.

Conclusion:

The Supreme Court allowed the appeal, quashing the High Court's judgment and the criminal proceedings against the appellants. The Court recognized the civil nature of the dispute, the settlement reached, and the lack of substantial evidence against the appellants, affirming the application of precedents supporting the quashing of proceedings in such circumstances.