Criminal Case Cannot Continue In Hope Of Finding Offender When No Prima Facie Offence Is Disclosed: Bombay High Court

The Bombay High Court has held that an investigating agency cannot continue a criminal investigation merely in the hope of discovering unknown accused persons when the preliminary enquiry does not disclose the commission of any prima facie offence. The Court observed that the machinery of criminal law cannot be set in motion to conduct a roving and fishing inquiry where the material collected during the preliminary enquiry itself fails to reveal deception, conspiracy, or fraudulent conduct.

A division bench of Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad was hearing a writ petition filed by GTL Infrastructure Limited seeking quashing of the First Information Report registered by the Central Bureau of Investigation on 16 August 2023 alleging offences under Section 120-B read with Section 420 of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The FIR was registered against the company along with “unknown public servants and unknown others” following a preliminary enquiry initiated in relation to alleged financial irregularities in availing credit facilities from a consortium of nineteen banks and financial institutions.

The Court noted that the audit report did not establish any diversion of funds and recorded that transactions in the company's accounts were not indicative of unusual or abnormal dealings. The Court observed that the preliminary enquiry had continued for nearly two years, but the CBI had failed to identify any specific individual involved in the alleged conspiracy. The FIR had been registered against “unknown” public servants and “unknown” private persons, and even during the proceedings, the investigating agency stated that it was still examining the material and had not formed an opinion regarding culpability.

In this context, the Court held that such an approach was legally impermissible. It observed that a preliminary enquiry is intended to determine whether sufficient material exists to register a regular case and proceed with investigation. If the enquiry does not disclose the commission of a cognizable offence or identify individuals responsible for wrongdoing, the investigative process cannot be continued merely to search for possible offenders. It observed:

“… the machinery of the criminal justice system cannot be put in motion for making a roving inquiry. The CBI cannot be permitted to continue with the investigation in this matter in the hope that some day it may identify the offender where no offence is disclosed… The continuance of criminal proceedings against the GTLIL cannot be permitted on the ground that the Investigating Officer may some day find the real culprits and form an opinion to file a charge sheet.”

The Court further emphasised that the allegations essentially related to commercial decisions taken by a consortium of banks regarding restructuring and assignment of debt. Such decisions, taken after due deliberation and in accordance with regulatory guidelines, cannot be treated as criminal conduct in the absence of evidence of fraud, collusion, or dishonest intention at the inception of the transaction.

Accordingly, the High Court quashed the FIR registered by the CBI and allowed the writ petition filed by GTL Infrastructure Limited.

Case Title: GTL Infrastructure Limited v. Central Bureau of Investigation & Anr. [Writ Petition No. 3632 of 2024]

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