Criminal Case A 'Counterblast' To Debt Recovery: Bombay High Court Quashes FIR By Lilavati Trust Against HDFC Bank CEO
The Court held that criminal proceedings against financial institution officials for debt recovery, if driven by personal vendetta, amount to abuse of process.
Justice M.S. Karnik, Justice N. R. Borkar, Bombay High Court
The Bombay High Court has quashed the FIRs registered against Sashidhar Jagdishan, Managing Director and CEO of HDFC Bank, and officials of Phoenix ARC Private Limited by the Lilavati Trust. The Court observed that the criminal complaints, based on a photocopy of a cash diary, were strategically filed to obstruct a long-standing recovery process involving over ₹65 crores.
The Court held that though interference at an early investigation stage should be rare, evident personal vendetta justifies intervention, as continuation would amount to abuse of process.
A Division Bench of Justice M. S. Karnik and Justice N. R. Borkar allowed the writ petitions, however, dismissed the petitions seeking a CBI probe as premature and declined to express any opinion on the allegations against the former trustees. It observed, “We find that the impugned order amounts to a gross abuse of the criminal process, being founded on purely civil background and recovery proceedings that have already attained finality through orders of the DRT and this Court. The allegations, even if taken at face value, do not disclose any entrustment or dishonest inducement—essential ingredients of Sections 406, 409 or 420 of IPC…In our view the complaint is nothing but a counterblast to the recovery proceedings initiated and the materials on record do not at all justify an investigation into the claim made by the complainant. It is not possible for us to ignore the various orders passed by the competent Courts in the course of the recovery proceedings while coming to this conclusion”.
Senior Advocates Amit Desai, Ravi Kadam appeared for the petitioner and Senior Advocates Devadatt Kamat, Aabad Ponda, and Sudeep Pasbola appeared for the respondents.
The dispute traces back to 1995 when a consortium of banks, including HDFC, sanctioned loans to Splendour Gems Limited, a company managed by the family of the complainant, Prashant Mehta.
Following persistent defaults, a Recovery Certificate for approximately ₹14.74 crores plus interest was issued by the Debts Recovery Tribunal (DRT) in 2004.
After two decades of litigation and the issuance of arrest warrants against the guarantors, the complainant’s father, Mr. Kishore Mehta, passed away in May 2024. Subsequently, the complainant alleged that the bank’s unlawful pressure led to his father's death and produced a photocopy of a cash diary purportedly showing illegal payments made by former trustees of the Lilavati Kirtilal Mehta Medical Trust to bank officials, including the HDFC CEO.
Thereafter, the complainant initially approached the RBI, the Ministry of Finance, and the Minorities Commission, all of whom found no merit in the allegations. A previous attempt to register an FIR for culpable homicide was also dismissed by a Magistrate in 2024.
However, in April 2025, the complainant filed a fresh application under Section 175(3) of the BNSS. Despite a police report stating that identical issues were already under investigation, the Judicial Magistrate First Class (JMFC), Bandra, directed the registration of FIRs on May 31, 2025. The petitioners then moved the High Court seeking quashment.
The Court held that the criminal proceedings were manifestly attended with malafide and instituted with an ulterior motive to wreak vengeance for the bank's recovery efforts.
Applying the principles laid down in State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335, the Bench noted that the allegations of dishonest inducement or entrustment were absent, and the photocopy of a cash diary was insufficient material to trigger a criminal investigation against officials performing their duties. The Court highlighted that bank officials would be remiss in due discharge of their duty if they did not pursue recoveries.
“We are interfering at a very nascent stage of investigation, which as cautioned by the Hon’ble Supreme Court this Court should be extremely slow with. But a personal vendetta writ large on the face of proceedings for recovery is something which we strongly perceive as a reason for interference. Continuance of the investigation in these facts and circumstances would be nothing but be an abuse of the process of court. Undoubtedly, when circumstances justify and the allegations made in the complaint do constitute the ingredients of the offence, it definitely calls for a detailed investigation. But the complaint at the least should appear Bonafide”, the Bench noted.
“…The ripples of the strained relations between the family members who were and are managing the affairs of the trust are being felt by the petitioners. It is in such view of the matter, we have no hesitation even at such a nascent stage in concluding that this is not a bonafide complaint so far as the petitioners are concerned. To allow a prosecution of such a nature to continue in the present facts not only lacks bonafides but runs the risk of deterring recovery proceedings”, it further noted.
Cause Title: Sashidhar Jagdishan v. State of Maharashtra & Ors. (Neutral Citation: 2026:BHC-AS:21240-DB)
Appearances:
Petitioners: Amit Desai, Ravi Kadam, Senior Advocates, D.P. Singh, Charles De Souza, Advocates.
Respondents: Devadatt Kamat, Aabad Ponda, and Sudeep Pasbola, Senior Advocates.