Case: CENTRAL BUREAU OF INVESTIGATION Vs. HARI SINGH RANKA

the appellant herein in order to avail of credit facilities beyond the limit to which the Company was entitled. The dispute involved herein has overtones of a civil dispute with certain criminal facets. The question which is required to be answered in this case is whether the power which independently lies with this Court to quash the criminal proceedings pursuant to the compromise arrived at, should at all be exercised? 31. On an overall view of the facts as indicated hereinabove and keeping in mind the decision of this Court in B.S. Joshis case (supra) and the compromise arrived at between the Company and the Bank as also clause 11 of the consent terms filed in the suit filed by the Bank, we are satisfied that this is a fit case where technicality should not be allowed to stand in the way in the quashing of the criminal proceedings, since, in our view, the continuance of the same after the compromise arrived at between the parties would be a futile exercise. 32. We, therefore, set aside the order passed by the High Court dismissing the petitioners revision application No.49 of 2003 in Special Case No.80 of 1998 and quash the proceedings against the appellant. The appeal is accordingly allowed. 24. In Ashok Sadaranganis case (supra) offence was registered by the CBI. Allegation was that they had secured the credit facility by submitting forged documents as collected, and utilized such facilities in a dishonest and fraudulent manner by obtaining letters of credit in respect of foreign suppliers of goods without actually bringing any goods but inducing the bank to negotiate letters of credit in favour of the foreign suppliers and also by exercising the cash credit facility. 25. This court has considered the various decision in Sushil Suris case (supra) and Gyan Singhs case (supra). This court also considered whether when the dispute has been settled by the bank, the continuance of criminal proceedings would be a futility. This court distinguished the decision of Nikhil Merchant (supra) as the case projected larger conspiracy then this court refused to grant the relief in the prayer of quashing of the case. 26. In Sushil Suri v. Central Bureau of Investigation & Anr. [(2011) 5 SCC 708] this court made following observations; 23. It is manifest from a bare reading of the Charge sheet, placed on record, that the gravamen of the allegations against the appellant as also the co-accused is that the Company, acting through its directors in concert with the Chartered Accountants and some other persons: (i) conceived a criminal conspiracy and executed it by forging and fabricating a number of documents, like photographs of old machines, purchase orders and invoices showing purchase of machinery in order to support their claim to avail hire-purchase loan from PSB; (ii) on the strength of these false documents, PSB parted with the money by issuing pay orders & demand drafts in favour of the Company; and (iii) the accused opened six fictitious accounts in the banks (four accounts in Bank of Rajasthan and two in Bank of Madura) to encash the pay orders/bank drafts issued by PSB in favour of the suppliers of machines, thereby directly rotating back the loan amount to the borrower from these fictitious accounts, and in the process committed a systematic fraud on the Bank (PSB) and obtained pecuniary advantage for themselves. Precise details of all the fictitious accounts as also the further flow of money realised on encashment of demand drafts/pay orders have been incorporated in the Charge-sheet. Additionally, by allegedly claiming depreciation on the new machinery, which was never purchased, on the basis of forged invoices, etc. the accused cheated the public exchequer as well. This court considered the modus operandi noted in afore-extracted para 23. Considering the allegations that accused had obtained pecuniary benefit by producing forged documents. The case was dismissed and the trial court was directed to decide the case expeditiously. The facts of the instant case are more or less similar. 27. Learned senior counsel appearing on behalf of the respondents has relied upon the decision of this court in Sadhu Ram Singhs case (supra), OTS was arrived at between the parties in the wake of that High Court had exercised the power of quashing, which order has been upheld by this Court. The case was registered under Sections 120-B/420/467/468/471 of the IPC read with Section 469 I.P.C. It was a case in which it could not be corroborated by the evidence that the company had been using credit facility against the hypothecation of the stock, which stock was lying at the port. It was found that the respondent company had fraudulently obtained higher limits which appear to be forged and false. The facts of Sadhu Ram Singhs case (supra) were totally different. Loss of the stock could not be established was one of the main consideration and facts were not similar. As laid down in Gyan Singhs case (supra) itself the power of quashing a criminal case has to be exercised considering the nature of allegation and facts and circumstances of each case. Thus, the decision in Gyan Singhs case (supra) fails to serve cause espoused by the accused. 28. Learned senior counsel has also relied upon CBI v. Narendra Lal Jain (2014) 5 SCC 364 in which also this court dealt with the question where quashing of criminal proceeding in respect of not compoundable offence on the basis of compromise is warranted. This court dealt with the offence under Section 420 I.P.C. which is a compoundable offence under Section 320 I.P.C. and other sections which were non-compoundable offence. The monetary loss suffered by the Bank has been mutually settled between the parties and both had accepted liability in this regard. The ratio of B.S. Joshis case (supra) and Nikhil Merchants case (supra) was applied and in the peculiar facts of the case, the order passed by the High Court was upheld. The facts of the instant case are totally different and quite serious.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. We have gone through the orders passed by the High court and the orders passed by the trial court and the revisional court. The order passed by the trial court indicates that it has treated the main offence being that of cheating and it has also been observed that there is no such allegation that documents are forged and pecuniary advantage has been obtained on that basis. The trial court had heavily relied upon the OTS. Its observation that forged documents had not been used to defraud the Bank in our opinion is a palpably incorrect and perverse finding and cannot be sustained. There is overwhelming material placed on record along with charge sheet which indicates that a large number of documents had been forged in the instant case and accused persons thereby have induced the Bank for disbursing the working capital limits to M/s. Modern Denim Ltd. The accused persons had availed credit facility from the Bank in 33 specific instances during the period 19th June 1998 to June 1999 by submitting forged purchase orders purportedly placed on M/s Modern Denim Ltd. by the foreign buyers.13. There is also the allegation supported by documents that sales contract (purchase order) were prepared on the letter head of M/s. Modern Denim Ltd. It is further the case of the prosecution that the advances obtained by the accused persons were never utilized for the purchase of the material thereto to execute the aforesaid purchase orders, but were diverted by the accused persons to liquidate the outstanding dues of M/s. Modern Denim Ltd. against the L.Cs which has devolved. The banks had suffered the loss of Rs. 599.08 lakhs in the aforesaid 33 instances where packing credit was availed on the basis of false and forged purchase orders.14. It was further alleged by the CBI that in the case of FBP/FBD facility the accused persons discounted 12 bills during the period March, 1997 to July, 1998 which were returned unpaid by the foreign banks and remained unrealised. The banks thereby suffered a loss to the tune of USD 629.410 = INR 2,47,56,323/-.15. It was further alleged by the prosecution that during the period 25.5.1999 to 12.08.1999, M/s. Modern Denim Ltd.- Accused No.13, submitted 24 Inland Bills for discounting to the Bank which was supported by the false and forged lorry receipt purportedly issued by M/s. Kalwania Carrying Corporation (Transport firm of Dharmpal A. Kalwania (A-4). The CBI alleged that no supply of materials (denim fabric) was made by M/s. Modern Denim Ltd. against the aforesaid 24 bills drawn on eight paper companies. The forged nature of the lorry receipt is evident from the fact that vehicle numbers were mentioned, the LR were found to be those of tractors and two wheelers, it was also the case of the prosecution that the facilities disbursed by the Bank were used to liquidate the remaining outstanding dues of the accused against the earlier L.Cs in these 24 instances the Bank suffered a loss to the tune of Rs. 1,61,51,052/-.16. It was further alleged by the CBI that M/s. Modern Denim Ltd. - Accused No.13, got established 17 letters of credit in favour of three paper suppliers during the period of 7.9.1997 to 12.8.1999. The aforesaid L.Cs were opened for supply of raw materials to M/s. Modern Denim Ltd. However, no supplies were made instead false documents purported to was submitted which were supported by false and forged lorry receipts issued by M/s. Kalwania Carrying Corporation. It was further alleged that aforesaid L.Cs were discounted by the accused persons. On the respective due dates M/s. Modern Denim Ltd. did not arrange funds for payment of the LCS. In the aforesaid 17 instances, the bank suffered a loss of Rs. 356.00 lakhs.17. In the aforesaid backdrop of facts, we take into consideration the effect of OTS. It is apparent that a large number of documents were filed by the CBI along with the Charge sheet. There are serious allegations in the instant case leveled against the accused persons of using fabricated documents whereas there was no supply or no such transactions took place. The letter head of M/s. Modern Denim Ltd.- Accused 13 had also been used. It passes comprehension how the trial court has given a clean chit that offence falls short of constituting the conspiracy under Section 120B I.P.C. The trial court has not cared to refer to the aforesaid various materials which have been alleged to be fabricated /forged and as to how the misuse of bank funds was made. In our considered opinion, in the facts of the instant case, the manner in which the trial court has discharged the accused persons, in spite of the overwhelming materials on record, could not be said to be legally justified order at all. The OTS merely deals with the civil liability that too by making of payment of Rs. 25 crores whereas outstanding liability was Rs. 44 crores though it was submitted loss caused was approx. 13 crores. Be that as it may, we are not on the civil liability. Ultimately, the amount which has been settled in OTS Scheme cannot be legally sufficient to wipe out the criminal liability of the accused persons. The OTS could wipe off only the civil liability, of the accused not the criminal one. However, this may not be taken to be the ultimate conclusion on merits of the case, it would be open to the trial court to record any finding after the trial of the case.18. In Rumi Dhars case (supra), this court has observed that when settlement is arrived at between the creditors and the debtor, the offence, if committed, as such does not come to an end. Even a judgment rendered in the civil proceedings, when it is rendered on the basis of a settlement entered into between the parties, would not be of large relevance as per criminal offence required of Section 49 of the Evidence Act. The judgment of the civil court is admissible only for limited purposes.22. The principles laid down by this court in Gian Singh decision (supra) indicate that while exercising the power of quashing, when the offences are not compoundable, the facts and circumstances of each case have to be seen, and thereafter the power is to be exercised. In the instant case, considering the aforesaid principle and the facts and circumstances projected above, the power to discharge or that of quashment under Section 482 Cr.P.C. could not have been exercised at all. Where as the power of discharge exercised by the learned trial judge virtually amounts to the exercise of power under Section 482 Cr.P.C. which was not available to it and was totally uncalled for exercise that too without adverting to the materials on record.24. In Ashok Sadaranganis case (supra) offence was registered by the CBI. Allegation was that they had secured the credit facility by submitting forged documents as collected, and utilized such facilities in a dishonest and fraudulent manner by obtaining letters of credit in respect of foreign suppliers of goods without actually bringing any goods but inducing the bank to negotiate letters of credit in favour of the foreign suppliers and also by exercising the cash credit facility.25. This court has considered the various decision in Sushil Suris case (supra) and Gyan Singhs case (supra). This court also considered whether when the dispute has been settled by the bank, the continuance of criminal proceedings would be a futility. This court distinguished the decision of Nikhil Merchant (supra) as the case projected larger conspiracy then this court refused to grant the relief in the prayer of quashing of the case.26. In Sushil Suri v. Central Bureau of Investigation & Anr. [(2011) 5 SCC 708] this court made following observations;23. It is manifest from a bare reading of the Charge sheet, placed on record, that the gravamen of the allegations against the appellant as also the co-accused is that the Company, acting through its directors in concert with the Chartered Accountants and some other persons: (i) conceived a criminal conspiracy and executed it by forging and fabricating a number of documents, like photographs of old machines, purchase orders and invoices showing purchase of machinery in order to support their claim to avail hire-purchase loan from PSB;(ii) on the strength of these false documents, PSB parted with the money by issuing pay orders & demand drafts in favour of the Company; and(iii) the accused opened six fictitious accounts in the banks (four accounts in Bank of Rajasthan and two in Bank of Madura) to encash the pay orders/bank drafts issued by PSB in favour of the suppliers of machines, thereby directly rotating back the loan amount to the borrower from these fictitious accounts, and in the process committed a systematic fraud on the Bank (PSB) and obtained pecuniary advantage for themselves. Precise details of all the fictitious accounts as also the further flow of money realised on encashment of demand drafts/pay orders have been incorporated in the Charge-sheet. Additionally, by allegedly claiming depreciation on the new machinery, which was never purchased, on the basis of forged invoices, etc. the accused cheated the public exchequer as well.This court considered the modus operandi noted in afore-extracted para 23. Considering the allegations that accused had obtained pecuniary benefit by producing forged documents. The case was dismissed and the trial court was directed to decide the case expeditiously. The facts of the instant case are more or less similar.28. Learned senior counsel has also relied upon CBI v. Narendra Lal Jain (2014) 5 SCC 364  in which also this court dealt with the question where quashing of criminal proceeding in respect of not compoundable offence on the basis of compromise is warranted.This court dealt with the offence under Section 420 I.P.C. which is a compoundable offence under Section 320 I.P.C. and other sections which were non-compoundable offence. The monetary loss suffered by the Bank has been mutually settled between the parties and both had accepted liability in this regard. The ratio of B.S. Joshis case (supra) and Nikhil Merchants case (supra) was applied and in the peculiar facts of the case, the order passed by the High Court was upheld. The facts of the instant case are totally different and quite serious.