No Continuing Public Interest: Supreme Court Quashes Fraud & Corruption Case After Noting Settlement Between Bank & Accused
The Appeals before the Supreme Court were filed against the order dismissing the petitions filed by the accused appellants seeking quashing of the criminal proceedings initiated against them.
Justice Vikram Nath, Justice Sandeep Mehta, Supreme Court
The Supreme Court has quashed a case of corruption, cheating and fraud registered against two accused persons in light of the fact that a settlement had been arrived at between the Bank and the accused persons. It was further noticed by the Apex Court that there was no continuing public interest and the Bank had not raised any objection to the closure of the matter.
The Appeals before the Court were filed against the order passed by the Madurai Bench of the Madras High Court dismissing the petitions filed by the appellants under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of criminal proceedings initiated against them for offences under Section 120B read with Sections 420, 468, and 471 of the Indian Penal Code 1860, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.
The Division Bench of Justice Vikram Nath and Justice Sandeep Mehta held, “In our view, allowing the present criminal proceedings to continue would serve no meaningful purpose, particularly when the dispute between the parties has already been resolved through a full and final settlement. The settlement between the parties having taken place after the alleged commission of the offence, and there being no continuing public interest we see no justification for allowing the matter to proceed further.”
Factual Background
It was alleged that the accused persons had caused wrongful loss to the Bank to the tune of Rs 25.89 lakh. This led to the filing of the charge sheet against nine accused, including the appellants. It was alleged that the first appellant was instrumental in orchestrating the fraudulent diversion of funds sanctioned to one M/s Vinayaka Corporation and facilitating the encashment of multiple cheques drawn from the fraudulently obtained credit limit, using a network of relatives, employees, and fictitious identities. The second appellant, being the brother of the first appellant, was alleged to have assisted in the scheme and was also accused of physically filling in cheques and ensuring their credit and encashment as part of the larger conspiracy to siphon off funds from the Bank.
Parallel to the criminal proceedings, the Bank initiated recovery proceedings. The High Court allowed the petition under Section 482 CrPC filed by the wife of the first appellant. Subsequently, the Bank floated a One Time Settlement (OTS) scheme, which was availed of by the borrowers-accused persons. In view of the settlement, the appellants moved the High Court under Section 482 CrPC seeking quashing of the criminal proceedings pending against them. However, the High Court dismissed the petitions and held that the criminal proceedings could not be quashed merely on the basis of the OTS when a prima facie case was made out. Aggrieved thereby, the appellants approached the Apex Court.
Reasoning
On a perusal of the facts of the case, the Bench noted that no useful purpose would be served by continuing the criminal proceedings in the present matter. The dispute had culminated in a comprehensive One Time Settlement under which the Bank had received the entire outstanding amount. The recovery proceedings before the tribunal had been dismissed as settled, and no residual claim survived. The Bench also noted that the Bank had not raised any objection to the closure of the matter and had issued formal acknowledgements of satisfaction.
The Bench further found that in identical proceedings filed by the CBI against the appellants, the charge sheets were quashed by the High Court after taking note of the settlement reached in the recovery proceedings. The special leave petitions preferred by the State challenging the said quashing were dismissed by the Apex Court, rendering the orders final. “Since the facts and legal position are the same in the present matter, we see no reason why the appellants should not be given the same relief”, it said.
Thus, noting that allowing the present criminal proceedings to continue would serve no meaningful purpose, the Bench allowed the appeals and quashed the proceedings against the appellants.
Cause Title: N.S. Gnaneshwaran Etc. v. The Inspector of Police & Anr. (Neutral Citation: 2025 INSC 787)