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Synopsis

The Supreme Court has said that in a case under a special statute like the Prevention of Corruption Act, quashing of offences under the said Act would have a grave and substantial impact not just on the parties involved, but also on the society at large.

A bench of Justices Vikram Nath and Prasanna B Varale upheld the Bombay High Court's order which refused to quash the criminal proceedings against employees of the public sector bank State Bank of India and directors of M/s Sun Infrastructure Pvt Ltd for offences punishable under Sections 409, 420 and 120B of the Indian Penal Code, along with Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 and the consequent chargesheet filed by the CBI.

The SBI in 2014 sanctioned a loan amount of Rs 50 Cr to the company, which defaulted in repayment in 2017 with an outstanding dues of Rs 23.86 Cr. The bank started recovery proceedings before the Debt Recovery Tribunal which settled the matter with the payment of Rs 15 Cr.

The bank filed a complaint with the CBI alleging diversion of Rs 25 Cr.

The appellants filed a petition under Section 482 CrPC on the grounds of settlement of dues and dropping of disciplinary proceedings among others before the High Court which on July 26, 2023, dismissed their plea.

Before the apex court, the appellants contended that a compromise was arrived in the DRT. They also said there was a delay in registration of the present FIR as the complaint was lodged by the bank on October 30, 2019 but the FIR was registered on July 24, 2020 by the CBI.

The bank employees said that the charges against them were dropped in disciplinary proceedings. They also said the allegations in the complaint pertained to an act that was committed after they were relieved from their position and the new officer took charge of the said post, which was recorded in the departmental inquiry.

They also contended there was no allegation of bribery against them.

On the contrary, the CBI counsel said the mere delay in lodging of the FIR ipso facto would not affect the merits of the case. The counsel further submitted that the settlement as arrived at between the bank and the accused persons would not absolve the appellants from the criminal offences which they had committed.

The bank's counsel submitted that there were serious allegations of fraud and cheating levelled against the appellants in the FIR and a loss had been caused to the bank which ultimately was dealing with public money. The property of a lesser value was valued at exorbitant rates which was offered as security for the loan sanctioned. Further, there was diversion of funds which was also a criminal offence. It was further submitted that a perusal of the FIR did not lead to the conclusion that no cognizable offence was made out against the appellants. Moreover, under clause 15 of the consent terms, it was agreed between the parties that the criminal proceedings and the charges would continue as per law.

The counsel also said when a settlement was arrived at between the creditor and debtor, the offence committed as such did not come to an end. Furthermore, in view of the misconduct, the disciplinary authority imposed a major penalty of reduction to a lower stage in the time scale of pay on the appellant employees.

Citing Parbatbhai Aahir vs State of Gujarat and Anr (2017), the court pointed out that it has been observed that, economic offences involving financial and economic well-being of the state have implications that lie beyond the domain of a mere dispute between the private disputants. The High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance, the court had then said.

Thus, it can be concluded that economic offences by their very nature stand on a different footing than other offences and have wider ramifications. They constitute a class apart. Economic offences affect the economy of the country as a whole and pose a serious threat to the financial health of the country. If such offences are viewed lightly, the confidence and trust of the public will be shaken, the top court had then further observed.

The court also made a "profitable reference" to the judgment in State Vs R Vasanthi Stanley (2015), which said the offence that has the potentiality to create a dent in the financial health of the institutions is not to be quashed on the ground that there is delay in trial or the principle that when the matter has been settled it should be quashed to avoid the head on the system. That can never be an acceptable principle or parameter, for that would amount to destroying stem cells of law and order in many a realm and further strengthen the marrow of unscrupulous litigations. Such a situation should never be conceived of.

In the instant case, the bench pointed out, it was on record that consent terms were submitted by the parties before the DRT. It also noted admittedly, the bank had suffered losses to the tune of Rs 6.13 Crores approximately.

"Hence, a substantial injury was caused to the public exchequer and consequently it can be said that public interest has been hampered," the bench said.

The bench opined that keeping in view the fact that in the present case, a special statute i.e. PC Act had been invoked, it was of the view that quashing of offences under the said Act would have a grave and substantial impact not just on the parties involved, but also on the society at large. "As such the High Court committed no error in declining to exercise its inherent powers in the present case, thereby refusing to quash the criminal proceedings", it held.

The court thus dismissed the appeals, saying the High Court was justified in not exercising its jurisdiction under Section 482 of CrPC.

Case Title: Anil Bhavarlal Jain & Anr Vs The State of Maharashtra & Ors