Case: Nikhil Merchant Vs. C.B.I.

2. Central Bureau of Investigation (hereinafter referred to as "CBI") filed a charge sheet against five accused persons under Section 120B read with Sections 420, 467, 468, 471A Indian Penal Code read with Sections 5(2) and 5(1)(d) of the Prevention of Corruption Act, 1947 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. In the said charge sheet, the appellant herein was made accused No.3 and the Company, in respect of which he was the former Managing Director, M/s. Neemuch Emballage Ltd., Mumbai, was made the accused No.4. The other three accused are officials of the Andhra Bank.3. The accused No.4-Company was granted financial assistance by the Andhra Bank, Opera House Branch under various facilities. On account of default in repayment of the loans, the Bank filed a suit for recovery of the amount payable and in addition, on 19th December, 1995, a complaint was made by the General Manager and the Chief Vigilance Officer of the Bank on the basis whereof investigations were undertaken by the CBI, which filed the above-mentioned charge sheet in the Court of the Special Judge on 30th December, 1998. The allegations under the charge sheet indicate that the accused persons conspired with each other in fraudulently diverting the funds of the Andhra Bank. Offences alleging forgery were also included in the charge sheet. The above-mentioned suit between the Company and the Bank, to which the appellant herein was also a party, was disposed of on a compromise arrived at between the parties which was reduced into writing, and was filed in the suit. On the basis of the consent terms, the suit was compromised upon the defendants agreeing to pay the amounts due as per the schedule mentioned in the consent terms. What is of importance in this case is clause 11 of the consent terms, which reads as11. Agreed that save as aforesaid neither party has any claim against the other and parties do hereby withdraw all the allegations and counter allegations made against each other.Consequent upon the compromise of the suit and having regard to the contents of Clause 11 of the consent terms, the appellant herein filed an application for discharge from the criminal complaint, in respect of which charge sheet had been filed by the CBI. The said application was rejected by the Special Judge (CBI), Greater Bombay, by his order dated 11th December, 2002, which came to be challenged by the appellant before the Bombay High Court in Cr.R.A. No.49/2005, along with several other writ petitions filed by the other accused.5. Before the High Court, it was urged that since the subject matter of the dispute had been settled between the appellant and the Bank, it would be unreasonable to continue with the criminal proceedings which had been commenced on a complaint filed on behalf of the Bank having particular regard to clause 11 of the consent terms by which the parties had withdrawn all claims against each other. It was submitted that the learned Special Judge had erred in rejecting the appellants prayer for discharge from the criminal case. In support of the aforesaid contentions made on behalf of the appellant before the High Court, reference was made to the decision of this Court in the case of Central Bureau of Investigation vs. Duncans Agro Industries Ltd., [1996 (5) SCC 591 ] wherein on the basis of facts similar to the facts of this case, this Court had held that even if an offence of cheating is prima facie made out, such offence is a compoundable offence and compromise decrees passed in the suits instituted by the Bank, for all intents and purposes, amount to compounding of the offence of cheating. This Court accordingly, upheld the order of the High Court quashing the criminal complaint after the civil action had been compromised between the parties.6. Apart from the said decision, reliance was also placed on another decision of this Court in the case of B.S. Joshi and Ors. Vs. State of Haryana & Anr., [2003(4) SCC 675] wherein while dealing with the proceedings under Sections 498-A and 406 Indian Penal Code involving matrimonial disputes and offences, this Court held that even though the provisions of Section 320 of the Code of Criminal Procedure would not apply to such offences, which are not compoundable it did not limit or affect the powers under Section 482 and the powers conferred on the High Courts and the Supreme Court under Articles 226 and 136 of the Constitution of India. Referring to the decision of this Court in State of Haryana vs. Bhajan Lal, [1992 Suppl. (1) SCC 335]  this Court observed that the categories indicated in the said case which warranted exercise of power under Section 482 Cr.P.C. were only illustrative and not exhaustive. This Court ultimately held that the High Court in exercise of its inherent powers can quash criminal proceedings or a FIR or complaint and Section 320 Cr.P.C. does not limit or affect the power of the High Court under Section 482 of the Code.7. After considering the said decision in the light of the submissions made on behalf of the respective parties, the High Court took the view that in the Duncans Agro case (supra) thisCourt was considering the situation involving Section 420 IPC which was compoundable under Section 320(2) Cr.P.C., while in the instant case, the charge sheet was also under Sections 467, 468, 471-A IPC along with the provisions of the Prevention of Corruption Act, which were non-compoundable. The High Court, therefore, held that neither of the said two cases would have application to the facts of this case and rejected the appellants prayer for discharge from the criminal cases.8. This appeal has been filed against the said order of the High Court rejecting the appellants prayer for discharge from the criminal complaint.

Reasoning:
Having carefully considered the facts of the case and the submissions of learned counsel in regard thereto, we are of the view that, although, technically there is force in the submissions made by the learned Additional Solicitor General, the facts of the case warrant interference in these proceedings.21. The basic intention of the accused in this case appears to have been to misrepresent the financial status of the company, M/s Neemuch Emballage Limited, Mumbai, in order to avail of credit facilities to an extent to which the company was not entitled. In other words, the main intention of the company and its officers was to cheat the Bank and induce it to part with additional amounts of credit to which the company was not otherwise entitled.22. Despite the ingredients and the factual content of an offence of cheating punishable under Section 420 IPC, the same has been made compoundable under Sub-section (2) of Section 320 Cr.P.C. with the leave of the Court. Of course, forgery has not been included as one of the compoundable offences, but it is in such cases that the principle enunciated in B.S. Joshis case (supra) becomes relevant.23. In the instant case, the disputes between the Company and the Bank have been set at rest on the basis of the compromise arrived at by them whereunder the dues of the Bank have been cleared and the Bank does not appear to have any further claim against the Company. What, however, remains is the fact that certain documents were alleged to have been created by 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?24. 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.25. 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.