Case: STATE REP. BY INSPECTOR OF POLICE, CHENNAI Vs. M/S. INTEK ENG. &amp; SER. P. LTD. &amp; ORS

3. The brief facts of the case are that the respondents are facing prosecution for the offences under Section 120-B read with Sections 420 and 471 of the Indian Penal Code (hereinafter referred to as IPC). The same has arisen as a result of a loan transaction between the first respondent and the Indian Overseas Bank (hereinafter called the Bank). On the non-clearance of the loan amount/dues, a complaint was preferred by the Bank on having reason to suspect the commission of the offences referred to supra. An FIR was registered in R.C. No. 5E of 2006. After investigation, the report under Section 173 of the Cr.P.C. was filed informing commission of offence under the aforesaid sections. It is the case of the appellant that the dispute between the Bank and A-1 borrower company (respondent No.1 herein) has been brought to an end on the payment of a sum of RS. 68,00,000/- (rupees sixty eight lakhs only ). On receipt of such sum, the Bank vide letter dated 18.3.2009 had informed the appellants that they would withdraw the case filed in the Court.4. After concluding that no case under the Prevention of Corruption Act is involved, the High Court also ascertained from the Public Prosecutor (CBI cases) that the dues payable to the bank by the first respondent Company stood duly paid, the High Court placed reliance upon the judgment of this Court in the case of Nikhil Merchants v. Central Bureau of Investigation [2008 (9) SCC 677 ], wherein this Court had observed at paragraph No. 3 that the dispute involved between the parties had overtones of a civil dispute with certain criminal facets and further observed that the question required to be answered was whether the power which independently lies with the Apex Court to quash the criminal proceedings pursuant to the compromise arrived at between the parties should at all be exercised. Thereafter extracting paragraph 24 from the said judgment and after referring to clause 11 of the consent terms in the compromise petition filed in the suit compromise arrived between the first respondent Company and the Bank in the said case, the High Court felt that this is a fit case where mere technicality should not be allowed to stand in the way of quashing the criminal proceedings. The High Court was of the view that the continuance of the same after the compromise arrived at between the parties would be a futile exercise. Following the rationale of the decision of this Court in the case of Nikhil Merchants (supra) the Madras High Court exercised its power under Section 482 of the Cr.P.C. and quashed the proceeding in C.C. No. 3186 of 2007 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Chennai.

Court's reasoning:
7. After hearing learned Additional Solicitor General for the appellant and learned senior counsel appearing for the respondents, we are of the view that this Court in the case of State of Tamil Nadu v. R. Vasanthi Stanley and Another as adverted to the State of Maharashtra v. Vikram Ananthrai Doshis case and Gian Singh v. State of Punjab, the learned senior counsel contends that citing paragraph 14 from Vikram Ananthrai Doshis case and also para 26 from the said judgment and CBI v. Maninder Singh which have clearly held that a grave criminal offence that has the potentiality to create a dent in the financial health of the institutions, is not to be quashed on the ground that there is delay in trial or the principle or parameter, for that would amount to destroying the stem cells of law and order in many a realm and further strengthen the marrows of the unscrupulous litigations should not have to be conceived of.8. In view of the above, three Judge Bench judgment Gian Singh v. State of Punjab has been referred to examine the powers of the High Court under Section 482 of the Cr.P.C. for quashing the criminal proceedings on the basis of a compromise in respect of matters of financial institutions including banks. This Court has held that the borrowers, after availing finance by creating mortgage on the base of certain documents which, as alleged, are forged, ingeniously adopt the same modus operandi to avail the benefit from a number of banks, who in due course, facing the problem, set the criminal law machinery in motion by lodging different FIRs. The borrowers subsequently entered into settlements in an adroit manner and paid the amount. Thereafter, they knocked at the doors of the High Court seeking exercise of inherent jurisdiction under Section 482 of the Cr.P.C. or the extra ordinary jurisdiction under Article 226 of the Constitution for quashing of the criminal proceedings. The High Court, in the instant case quashed the same on the ground that continuance of criminal proceedings after the settlement have taken place between the Bank and first respondent would be a fruitless exercise. Applying the legal principle laid down in the case of State of Tamil Nadu v. R. Vasanthi Stanley and Anr. to the fact situation and accepting the submission made by the learned Additional Solicitor General as legal and valid and based on legal principles laid down by this Court in the aforesaid case, we have to set aside the impugned order for quashing the criminal O.P. No. 6128/2009 on the file of learned Additional Chief Metropolitan Magistrate Egmore, Chennai and we reject the submission made by learned senior counsel on behalf of the respondents, as the said submissions are contrary to the latest two judgments, referred to supra, that is State of Tamil Nadu v. R. Vasanthi Stanley and Another as well as in the case of CBI v. Maninder Singh.