Cases of Financial Frauds shall not be quashed on the ground of Compromise as it is a social wrong and it has immense societal impact: Supreme Court [Read the Judgment]
Hearing an appeal filed by State of Maharashtra against the judgment of the Bombay High Court, the Supreme Court held that High Courts should not quash FIR in cases of financial frauds where public is at a loss, even if there is a settlement.
The judgment written by Justice Dipak Misra, relied on the judgment delivered by the Supreme Court in CBI v Jagjit Singh [(2013) 3 SCC 686]“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.”
The present case arose when a case was registered after written complaint by the Chief Vigilance Officer, Bank of Baroda in 2006. Investigation revealed that a bank officer was involved in fraud and case under Section 120-B, Section 406, 20, 467, 468 and 471 IPC were registered against him and other accused persons.
The charge sheet that had been filed by the investigating authority also states that some persons made applications to Bank of Baroda for sanction of various credit facilities, stating that they wanted to induct the said bank as a new consortium member to replace the existing members, namely, the UTI Bank and the Federal Bank. They requested the said Bank to sanction 15% of the total Working Capital facility sanctioned by the consortium of Banks, so that, that much amount could be transferred to the UTI bank and Federal Bank to take over the existing liabilities with the said two banks.
Further investigation revealed that “account of the company, with the consortium of banks as well as the finance institutions, was highly irregular. In the application to the Bank, the accused persons concealed the fact relating to the dues outstanding against them. Thereafter, when asked for the outstanding position with the existing consortium members, the accused persons wilfully and with the criminal intent to mislead the Bank of Baroda, furnished wrong statements about the outstanding position by giving considerably lesser amount as outstanding than the actual.”
Meanwhile, while the case was pending, the accused Vikram Doshi,settled the disputes and paid Rs.42 lacs for settling the dispute. On that basis, Kotak Mahindra Bank issued a “no due certificate”.The said bank also confirmed that the guarantees issued by Vikram Doshi stood discharged.
After getting the no dues certificate, the accused approached the High Court under S. 482 of the Code of Criminal Procedure, and court ordered “Both the offices under Sections 406 and 420 are compoundable with the permission of the court. As already discussed here in above, the Bank has already given its No Due Certificate to the borrower i.e. ATCOM. It can clearly be seen that even if the matter is permitted to go for trial, no fruitful purpose would be served, except burdening the criminal Courts which are already over-burdened.”
To arrive at the same conclusion the High Court relied on the decision in Madan Mohan Abbot v. State of Punjab and distinguished the pronouncement in A. Ravishanker Prasad case.
Then State then preferred an appeal to the Apex Court.
Additional Solicitor General Pinky Anand submitted to the Court that High Court had erroneously opined that the remaining offences are 406 and 420 of IPC whereas the charge sheet, also included other offences against the accused persons. On the other hand, the counsel for the respondents claimed that the order of the High Court was correct.
Stating the point of law clearly, the judgment of the Supreme Court noted, “High Courthas the jurisdiction to quash a criminal proceeding under Section 482 of the Code in respect of non-compoundable offences barring certain nature of crimes.”
The Court then went through plethora of judgments on the issue, stating finally, “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 modus operandias narrated in the chargesheet cannot be put in the compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominantingly of civil character. The ultimate victim is the collective. It creates a hazard in thefinancial interest of the society. The gravity of the offence creates a dent in the economic spine of the nation. The cleverness which has been skilfully 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. Itsimplications have its own seriousness, for it creates aconcavity in the solemnity that is expected in financialtransactions. It is not such a case where one can pay theamount and obtain a “no due certificate” and enjoy the benefitof quashing of the criminal proceeding on the hypostasis thatnothing more remains to be done. The collective interest ofwhich the Court is the guardian cannot be a silent or a mutespectator to allow the proceedings to be withdrawn, or for thatmatter yield to the ingenuous dexterity of the accused personsto invoke the jurisdiction under Article 226 of the Constitutionor under Section 482 of the Code and quash the proceeding.It is not legally permissible.”
Stating the role of judiciary while dealing with such cases, the judgment states, “The Court is expected to be onguard to these kinds of adroit moves. The High Court, we humbly remind, should have dealt with the matter keeping in mind that in these kind of litigations the accused when perceives a tiny gleam of success, readily invokes the inherent jurisdiction for quashing of the criminal proceeding. The court’s principal duty, at that juncture, should be to scan the entire facts to find out the thrust of allegations and the crux of the settlement. It is the experience of the Judge comes to hisaid and the said experience should be used with care, caution,circumspection and courageous prudence. As we find in thecase at hand the learned Single Judge has not taken pains toscrutinize the entire conspectus of facts in proper perspectiveand quashed the criminal proceeding. The said quashmentneither helps to secure the ends of justice nor does it preventthe abuse of the process of the Court nor can it be also saidthat as there is a settlement no evidence will come on recordand there will be remote chance of conviction. Such a findingin our view would be difficult to record. Be that as it may, thefact remains that the social interest would be on peril and theprosecuting agency, in these circumstances, cannot be treatedas an alien to the whole case. Ergo, we have no other option but to hold that the order of the High Court is wholly indefensible.”
The Court allowed the appeal filed and the order of the High Court was set aside.