A.The Petition:

2.1. The gist of the information is that M/s Air Carnival Private Limited, represented by its Directors S. Irud a y a n a t h a n (A1), the petitioner herein, and his wife, Mrs. Lima Rose (A2), applied for a loan by offering to create an equitable mortgage of its immovable property measuring 3.75 acres along with a building on S.F.Nos. 298/1 and 298/3 in Myleripalayam Village, 2/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Madukkarai Taluk, Coimbatore District. The Directors also acted as personal guarantors. Based on the application dated 04.06.2016, a term loan of Rs. 4.90 Crores was granted along with a bank guarantee, a sum of Rs. 3.05 Crores on 01.06.2016; an overdraft facility of Rs. 4.70 Crores on 27.10.2016; and a temporary overdraft of Rs. 1.00 Crore on 31.03.2017, totaling Rs. 13.65 Crores. The loan account was classified as 'Non-Performing Asset' (NPA) on 29.06.2017 and was reported as a fraudulent account on 27.11.2019. The company and its Directors wilfully and dishonestly defrauded the Bank by conspiring to divert and siphon the loan amount, causing wrongful loss of Rs.

13.65 Crores to the Bank and wrongful gain to themselves.

2.2. After an investigation, the final report was submitted. The report states that the 2 Director, M r s . Li m a Ros e, had no criminal intent or nd knowledge regarding the mentioned transaction, and therefore her name is omitted. It also states that there was no criminal intent or knowledge on the part of the public servants/bank officials concerning the transactions, and the provisions of the offences under the Prevention of Corruption Act, 1988 , were dropped. Furthermore, it explains that initially, while the petitioner, Irud a y a n a t h a n , operated his business as a proprietorship, he showed higher contributions when he transitioned to a partnership, whereas the contributions 3/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 of the other partners were minimal. Later, when the partnership was converted into a company registered under the Companies Act, 2013 , the property offered as security remained in his personal name and was not transferred to the company's name.

2.3. Further, by availing the loans on the specified dates, the company did not adhere to its original plan, and the primary sureties in the form of goods that should have been created were not created. On the other hand, the loan proceeds were siphoned off to other accounts to create four Fixed Deposits, which were subsequently used as margin money for bank guarantees. Subsequently, several bank guarantees were obtained in favor of M/s Anjali Hotels Private Limited, M/s Airports Authority of India, Coimbatore, Air India Air Transport Services Limited, New Delhi, ATR Eastern Support Private Limited, Singapore. Additionally, the loan amount was diverted to other institutions such as M/s Coimbatore Marine College, Mangalore Marine College, and Technology. However, the accused failed to repay the principal and interest, leading to the accounts being classified as NPA. In the meantime, the company went into liquidation and is now represented by the Official Liquidator. The matter is currently pending before the National Company Law Tribunal, Chennai. Therefore, finding that the 4/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 offence under Section 420 of IPC is made out, the final report has been filed.

2.4. It is stated that, in the meantime, by a communication dated 12.01.2022, Canara Bank offered to accept a sum of Rupees 12 Crores as full and final settlement, on the condition that the amount be paid in installments within the specified timeline, with the final installment of Rupees 3 Crores to be paid on or before 31.03.2022. In addition, the legal expenses and CIRP/liquidation expenses were also to be paid. It is explicitly mentioned in the offer that the account will be considered closed only after all direct and indirect liabilities in the name of the firm/borrower/guarantors are settled. It is further stated that the One Time Settlement will not affect ongoing criminal proceedings initiated by the CBI/Police authorities. The One-Time Settlement (OTS) will be without prejudice to the rights of the CBI/Police to investigate or prosecute and shall not hinder the continuation or resolution of any pending criminal proceedings, if any.

2.5. The petitioner is said to have completely paid the loan amount of Rs.12 Crores on 02.03.2022, and there are no dues whatsoever to the Bank, with the civil liability amicably settled. However, due to the clause originally 5/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 contained in the memorandum of understanding, the Bank is not coming forward to join in the filing of application for compounding under Section 320 of Cr.P.C. Therefore, contending that the entire action does not constitute any criminal offence and that the settlement of dues amicably should be considered, and the proceedings be quashed.

C.Submissions of the learned counsel:

3. Heard, M s . K a d a m b r i Sure s h , the learned counsel appearing on behalf of the petitioner. Firstly she would submit that the amount was borrowed after furnishing due security. There was never an intention to cheat the bank. It was a failed venture and thus the account slipped into NPA. The petitioner had made all earnest efforts and has settled the loan amount. Except for the brief period of default, there was no dishonest intention for the petitioner. The learned counsel would rely upon various Judgments of the Hon'ble Supreme Court of India, more specifically K.Bharthi Devi V. State of Telangana1 and N.S.Gnaneshwaran Vs. Inspector of Police & Anr.2 and would submit that the proceedings are liable to be quashed.

1 (2024) INSC 750 2 (2025) SCCOnLine SC 1257 6/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 3.1. Per contr a, Mr. K. Sriniv a s a n , the learned Special Public Prosecutor, would submit that the legal position in this regard has not been altered by the Hon'ble Supreme Court of India, and he would rely upon a set of judgments to argue that, in cases involving bank fraud, the Court should not invoke jurisdiction under Section 482 of Cr.P.C. based on a subsequent settlement. In fact, when the money originally borrowed is sanctioned for specific purposes such as purchasing tools, kits, and equipment, which serve as primary security for the loan, diverting funds for a different purpose and then defaulting completes the offence of cheating.

3.2. The learned counsel appearing on behalf of the 2 nd respondent/Canara Bank submitted that the entire dues of the Bank have been settled, and the Bank has no serious objections in considering the petition for quashing. However, in view of the clause in the memorandum of One Time Settlement, there was no mandate for the Bank to file a compounding application before the Trial Court.

D.Consideration and Findings:

4. This case was heard along with the connected Crl.O.P.Nos.30938 and 30939 of 2024 whereby, this Court considered the arguments made by the 7/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 learned counsel on either side at length and already all the Judgments relating to the quashing of cases on settlement of the dues amicably with the Bank, especially in bank fraud cases have been considered and the following conclusions are arrived at in respect of the legal position and the same is reproduced as under :

Thus at best was an exercise of extraordinary power under Article 142 of the Constitution of India

2. 14.03.1988 Mahesh Chand and This is the case of an offence under section ors. Vs. State of 307 the accused was a practicing lawyer, the Rajasthan parties settled the issue again after [1990 Supp (1)SCC conviction, the same was set aside and the trial was permitted and allowed to record the 681] compromise and compound the offence. The decision in Y.Suresh Babu cited (supra) was also referred. Thus it can be seen that this can also be treated as exercise of power under Article 142 of Constituion of India.

3. 09.07.1996 Central Bureau of The Hon’ble supreme court was considering Investigation,SPE, SIU the quashing of First Information report for (X), New Delhi Vs. the offences under section 409, Duncan Agro 420,467,468,471 of the IPC . The allegations Industries Ltd., 8/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations Calcutta inter alia where that when there has been transferor company and transferee company, [(1996) 5 SCC 591] it was represented to the bank as if the earlier charge has been completely satisfied while no repayment was made, by making other false representation the credit limit was sanctioned. A stock worth about Rs. 12 Crores were also fraudulently disposed of without payment to the bank and also same hypothecated to the bank after considering the various ingredient to be proved under section 420 of Indian Penal Court, the Hon’ble supreme court of India held that basically it was a matter of civil dispute since the bank has already filed suits and the issue was compromised upon receiving payments and considering the time lack that the First Information report lodged in the year 1987 and no action has been taken as against the erring official of the bank the High Court was right in quashing the FIR.

4. 04.05.1999 Surendra Nath The Three Judges bench of the Supreme Mohanty and Anr. Vs. court of India, held the earlier judgment in State of Orissa Suresh Babu itself states that it shall not be [(1999) 5 SCC 238] treated as a precedent. Further held that the Judgments in Ram Pujan and Ors. Vs. State of Uttar Pradesh (1973) 2 SCC 456 and Mahesh Chand and ors. Vs. State of Rajasthan 1990 Supp (1)SCC 681 cited (Supra) were not in accordance with law and held that the offences can be compounded if only they are covered under table I or table II under Section 320 of the Code of Criminal Procedure.

5. 13.03.2003 B.S. Joshi and Others For the first the Hon’ble supreme court Vs. State of Haryana ofIndia considered the issue in detail. It and Another considered the parameters laid down by the [(2003) 4 SCC 675] constitution bench in State of Haryana and 9/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations Ors. Vs. Ch. Bhajan lal and Ors. 1992 Supp (1)SCC 335 and took note of the fact that the extraordinary powers under section 482 of the code of Criminal Procedure can be exercised to secure the ends of Justice. The court considered the earlier judgement in State of Karnataka Vs. L,Muniswamy and Ors. 1977 2 SCC 699 where the exercise of power can be made,if the materials are inadequate. Thereafter more specifically considering the issue involved is that of family affair and that not compounding the offences such as 498A would be counter productive and act against the interest of women expressly laid down the law that the High Court in exercise of its inherent powers can quash the criminal proceedings or First Information Report or Complaint and Section 320 of the code does not limit or affect the powers under section 482 of the Code.

6. 20.08.2008 Nikhil Merchant Vs. The Hon’ble Supreme Court of India was Central Bureau of considering the quashing of a charge sheet Investigation and Ors. laid for offences under section 120B r/w [( 2008 ) 9 SCC 677] section 420,467,468,471 and Sections 5(2) , 5(1) d of Prevention of Corruption Act,1947 and under section 13 (2) and 13 (1) (d) of Prevention of Corruption Act,1988 and after considering the judgments in Duncan’s Agro and B.S. Joshi (cited supra) the Supreme Court considered that a compromise has been arrived between bank and the company. The dues are settled and the bank does not have any further claim in that background if certain documents are forged to have been created by the company in order to avail credit facilities beyond the limit to which the company was actually entitled to, the dispute has overtone of a civil dispute with certain 10/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations criminal facets. The court held that in view of the compromise and the terms the criminal proceeding can be quashed.

7. 16.10.2008 Manoj Sharma Vs. The Hon’ble Supreme Court of India was State and Others considering quashing of a FIR under Section [(2008) 16 SCC 1] 420, 468, 471 r/w 34 and Section 120B of Indian Penal Code, 1860. After considering that the De facto complainant compromised the issue, the Supreme court held that the dispute is of private nature in such cases pragmatic view can be taken and proceedings be quashed.

8. 08.04.2009 Rumi Dhar Vs. State of The Hon’ble Supreme Court of India was West Bengal and Ors. again considering the dismissal of the [2009 (6) SCC 364] discharge application on the ground that parties have settled the issue. It is a case where it is alleged that the overdrawal benefit granted and availed without furnishing the security and the individuals and the officials of the bank were prosecuted Under Section 120B , 420 , 467 , 468 and 471 of Indian Penal Code . The parties were repaid the entrie amount and further no due to the bankeventhough the Duncan’s Agro and Nikhil Merchant cited (Supra)were brought the notice of the Supreme Court of India. The Supreme Court of India held that it would not direct quashing of a case involving crime against society and thus directed the proceedings be continued.

9. 24.09.2012 Gian Singh Vs. State of This is the case in Three Judges bench of Punjab Supreme Court of India concerned with the case where the petitioner is convicted under [(2012) 10 SCC 303] Section 420 and 120B of Indian Penal Code and considered the issue in detail. Firstly, it held that the line of Judgments holding the 11/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations view that when section 320 of Code of Criminal Procedure,1973 holds only certains offences can be compoundable then if non compoundable offences are quashed under section 482 the same would run counter to section 320 and therefore the inherent powers should not be exercised in violation of section 320 is not a correct legal position. It held that the exercise of power namely Compounding and quashing under section 482 are different exercises and section 320 will not bar the exercise of power. It expressly held that the view taken in Simrikihia V. Dolley Mukerjee and chhabi mukerjhee and Ors. 1990 (2) SCC 437;

Dharam paul and Ors. V. Ram Shri and Ors .

(1993) 1 SCC 435; Arun Shankar Shukla Vs. State of Uttar Pradesh and Ors. 1999 6 SCC 146 ; Ishwar Singh V. State of Madhya Pradesh (2008)15 SCC 667 does not lay down the correct position of law. Secondly, it held that the Judgment in B.S. Joshi and Others V. State of Haryana and Another [(2003) 4 SCC 675;Nikhil Merchant v.

Central Bureau of Investigation and Ors. [( 2008 ) 9 SCC 677]; Manoj Sharma Vs. State and Others (2008) 16 SCC 1 , Shiji alias PAPPU and Others V. Radhika and Ors. (2011)10 SCC 705, Kulwinder Singh and Ors. Vs. State of Punjab and Anr. ( 2007) 4 CTC 769, Abasaheb Yadav Honmane Vs. State of Maharashtra 2008 2 Mah LJ 856 and Madan Mohan Abbot Vs. State of Punjab (2008)4 SCC 582 holding that the powers under section 482 can be exercised for quashing the even the non-compoundable offences under certain circumstances and the correct view.

If then consider the dictum in Nikhil 12/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations Merchant, Manoj Sharma Etc., and the contra opinion expressed in Rumi Dhar V. State of West Bengal and Ors. 2009(6) SCC 364;

Ashok Sadurangani Vs. Union of India 2012 (11) SCC 321 and laid down the law in paragraph 58 and 61 of the Judgment. Thus essentially it held that while no category can be prescribed heinous and serious offences of mental depravity, murder, rape, dacoity cannot be quashed. Even the victim or the victim’s family settled the issues. Similarly compromise between victim and the offender under Special law of Prevention of corruption Act or the offences committed by the public servant cannot be quashed. The criminal cases having overwhelmingly and predominantly civil flavor particularly of they arise from commercial financial mercantile civil partnership are like transactions and the offences arising out of matrimony relating to dowry are family disputes which are all basically private an personal in nature and if the parties have resolved the dispute considering that because of the possibility firstly the conviction is remote and bleak and the continuation of the case would put the accused in great oppression and prejudice to the accused despite full and complete settlement and compromise with the victim. Thus, essentially to prevent abuse of process despite settlement and to secure the ends of justice if it is appropriate the High Court within its jurisdiction to quash the criminal proceedings.

10. 01.10.2013 Central Bureau of The Hon’ble Supreme Court of India was Investigation Vs. Jagjit considering the prayer to quash the final Singh report for alleged offences under Section 420 [(2013) 10 SCC 686] and 471 of the Indian Penal Code with allegations of obtaining loan with forged documents and further investigation revealing involvement of officials under Section 13(2) r/w 13(1)(d) of Prevention of Corruption Act,1988 . The Hon’ble SC held that the offences when committed in relation with banking activities including under Section 420 and 471 have harmful effect on the public and threaten the wellbeing of the society. Thus would be offences involving moral turpitude committed by the public servants therefore cannot be quashed.

11. 28.02.2014 CBI, ACB, Mumbai Vs. The Three Judges bench of the Hon’ble Narendra Lal Jain and Supreme Court of India was concerned with Ors. the case where 2 charge sheet were filed [2014 (5) SCC 364] under Section 120B , 420 of Indian Penal Code and Section 5(2) and 5 (1) d of Prevention of Corruption Act, 1947 whereby it is alleged that inflated figures of the credit worthiness of the companies were represented and higher amounts of loans were obtained from the bank. After noting down the principles laid down in Gian Singh and considering that the civil liability of the accused to pay the amount to the bank to settle amicably and bank having no subsisting grievance held that the proceedings would likely to become oppressive and partake the character of same prosecution and therefore it would be appropriate to invoke the jurisdiction under Section 482 of Code of Criminal Procedure.

12. 19.09.2014 State of Maharashtra Considering the case of obtaining of credit Vs. Vikram Anantrai facilities where the accused persons 14/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations Doshi, concealed the facts relating to their dues outstanding and mislead the bank by [(2014) 15 SCC 29] furnishing wrong statements, the Hon’ble Supreme Court of India concluded that such financial frauds cannot be termed as a personal wrong. The society is the ultimate victim as the offences are grave creating a dent in the economic spine of the nation an held that such offences cannot be quashed . The view taken in Gopakumar B. Nair V. CBI and Ors. (2014) 5 SCC 880 was followed. The judgment in Narinder singh and Ors. V. state of Punjab and Ors. (2014) 6 SCC 466 where the Hon’ble Supreme court of India delineated the procedure/factors to be considered and followed by the High Court pursuant to Gian Singh’s case was also reiterated.

13. 28.08.2015 Central Bureau of In a case of offences under Section Investigation Vs. 420,467,468,471 r/w Section 120B of Indian Manider singh Penal Code the Supreme Court considering [(2016) 1 SCC 389] the fact that the forged documents of FBP Etc., were submitted to availed credit facilities held that financial forgery being well planned with an eye on personal profit regardless of not considering the society cannot be quashed on compromise. The view taken in Vikram Anantrai’s case was reiterated.

14. 15.09.2015 State of Tamil Nadu In this case the Hon’ble Supreme Court of Vs. Vasanthi Stanley India was concerned with the fact situation and Ors. of quashing the pending criminal [(2016) 1 SCC 376] proceedings. Where the allegations of borrowing by submitting forged documents and were prosecuted under Section 120B , 406 , 420 , 467 , 468 and 471 of Indian Penal Code,1860 and the husband of the accused having died and the entire issues of the bank 15/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations having settled the court reiterated the law laid down on Vikram Anantrai Doshi and set aside the order of the High Court quashing the proceedings.

15. 16.02.2022 Kothari Polymers ltd. In this case the Hon’ble Supreme Court of And Ors. Vs. India was concerned with quashing of a First SIU(X)/SPE/CBI [2022 Information Report for alleged offence under SCC online SC 2078] Section 120B , 420 of IPC and 13(2) r/w 13(1)(d) of Prevention of Corruption Act,1988 .The allegation is that by making two sets of title documents in respect of same property without disclosing to the other bank, two banks wereapproachedand loans were obtained by playing fraud. The High Court dismissed the quash application on the ground that the offence has a serious impact on the society. The Supreme Court considered the fact that no permission was granted to prosecute the bank officers.

Considering the fact that the only family members alone were not prosecuted and that 18 years have elapsed, the Supreme court of India quash the prosecution on terms to make would the wastage of time of the prosecution agency by imposing a cost of Rs.25Lakhs on the appellant. The Hon’ble Supreme Court of India also held that the case is having predominantly civil character the courts may be liberal in accepting the settlement and quashing the criminal proceedings.

16. 03.10.2024 Tarina Sen Vs. Union The Hon’ble Supreme Court of India was of India and Anr. concerned about the quashing of the pending [2024 SCC Online SC criminal proceeding before the special Judge Bhubaneswarfor the offences under Section 2696] 120B, 420, 468,471 of Indian Penal Code and Section 13(2) r/w 13(1)(d) of Prevention of Corruption of Act,1988 . The allegations 16/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations were two car loans were advanced by the Manager of the bank for a sum of Rs.8,00,000/- and Rs.11,83,600/- without any security whatsoever only by getting post- dated cheques which bounced. Subsequently, the Court considered that the matter has been compromised between the borrowers and the bank. The amount settled under the One Time Settlement and the Loan account has been closed. Relying upon a similar judgment Special Leave Petition Crimianl No. 4353 of 2018 the Supreme Court held that the criminal proceedings would not be justifiable those further held that possibility of a conviction is remote and bleak and continuation of the proceeding would be oppressive.

17. 03.10.2024 K.Bharthi Devi V. State In this matter the Hon’ble Supreme Court of of Telangana India was considering a prayer to quash the [2024 INSC 750] final report for the offences under section 120B , 420 , 409 , 467 , 468 and 471 of Indian Penal Code and Section 13(2) r/w13(1)(d) of Prevention of Corruption Act,1988 . The facts are that various credit facilities were sanctioned by the bank. Subsequently the account was classified as Non-Performing Assets and an application to recover the amount was filed before the Debt Recovery Tribunal (DRT), Hyderabad. Pending the same it was found that the original documents which was deposited for creation of Equitable Mortgage were fake,forged and fabricated and hence the criminal case pending the DRT proceedings the borrower settled the amount by One Time Settlement. The petition to quash was dismissed by the High Court. The Hon’ble Supreme Court of India noting the earlier dicta and considering the law laid down in Gian Singh the Hon’ble Supreme Court consider both the line of 17/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations judgments where the allegations either constitute predominantly civil nature with criminal aspects and other cases where serious criminal offences are committed. The court found that the possibility of conviction is remote and bleak and the continuation of Criminal case would put the Accused in great oppression and prejudice by not quashing the criminal case.

The court also consider the earlier ruling in CBI Vs. Saadhuram Singhla 2007 (5) SCC 350 and came to the conclusion that possibility of conviction is remote and bleak and quash the proceedings by setting aside the judgment of the High Court.

18. 16.04.2025 Suresh C.Singhal and The Hon’ble Supreme Court of India was others Vs. State of concerned with quashing of the proceedings Gujarat and Ors. for Sections 420, 467, 468 and 471 read with [2025 SCC Online SC 120B of the Indian Penal Code , 1860 and it considered that the offences under section 788] 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act,1988, subsequently findings on the said offences were dropped. When the case was pending the appellant settled with bank and the bank issued No DueCertificate(NOC). The Supreme Court of India considered the fact that some of the offences being compoundable the same footing of the case Bharathi Devi held that the disputed involved is primarily civil nature. The aggrieved party if any would be the bank which has got no grievance. And the settlement is made in the early stages the High Court can exercise power under Section 482 of Code of Criminal Procedure,1973 by showing benovolence and the assessment of the circumstances and materials as mentioned and accordingly held 18/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 Sl. Date of Cause Title and Proposition No. Decision Citations that the High Court should have exercised the powers and quashed the proceedings.

19. 28.05.2025 N.S.Gnaneshwaran In this case the Hon’ble Supreme Court of Etc. Vs. Inspector of India was concerned with quashing of Police and Anr. proceedings for alleged offences under [2025 SCC Online SC Section 120B r/w 420, 467, 468, 471 of IPC and Section 13 (2) r/w13 (1) d of Prevention 1257] of Corruption Act,1988 . The allegationsin this case is that the accused after obtaining funds in respect of concern, through multiple transactions involving the network of fictitious identities diverted the funds pendency of the trial by way of One Time Settlement the issue was settled between the bank and petitioner. The application for quash was rejected on the ground that the trial has already begin. The Supreme Court considered that proceedings culminated into a comprehensive One Time Settlement by which the bank has received the outstanding amount and no residual claim surviving and the bank not raising any objections to the closure of the matter held that no meaningful purpose would be served particularly when the dispute between the parties have been resolved and quashed the proceedings.

30. Thus, from the detailed analysis of numerous decisions, it is evident that the law regarding the quashing of criminal cases involving non-compoundable offences, where parties allege settlement, has been clearly laid down by the Hon'ble Supreme Court of India in Gian Singh Vs. State of Punjab (cited supra). It is essential to refer to paragraph Nos. 58 and 61 of that judgment:

31. There is no quarrel over the proposition that the High Court will be well within its jurisdiction to quash the proceedings on compromise, if the offence is predominantly civil in nature, private in nature, completely settled between the parties with no claim subsisting and the continuance of the proceedings is a bleak prospect for the prosecution and would be oppressive on the accused to be continued, even after settlement. The power is to be exercised with a great amount of prudence and responsibility, to secure the ends of justice.

32. However, the question regarding the instances of various frauds committed by parties concerning banking transactions, obtaining loans, and defaulting on and subsequently settling them through methods like OTS, with the bank, has been addressed by the Hon'ble Supreme Court of India in the cases mentioned above. In some cases, cases were quashed, while in others, they were not. But a proper and combined reading of all the judgments cited above related to this subject shows that the common thread for the conclusion reached. It is not the classification or categorisation of the particular offence, such as 468, 471 of IPC , or offences under Section 120 B read with 420 of IPC which is paramount. Instead, it is the nature of the allegations that the Court must examine. By considering the facts and circumstances of each case, one has to determine whether the case involves a purely commercial or private transaction between the bank and the borrower, or if it has broader implications affecting society or the financial system as a whole.

33. In these cases, the nature of facts and circumstances 22/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 must be examined. First, the Court must be satisfied that the case is primarily commercial or civil in nature and that the criminal aspects are not of utmost depravity and seriousness, which could have a likely impact on society as a whole or the country's financial system. The second step involves assessing whether the case has been fully settled and whether the Bank has any remaining claims. If the case has reached a complete and final settlement and the bank has no pending claims, then the Court moves to the third step to evaluate whether continuing the prosecution is prudent and likely to succeed in prosecuting the accused. Additionally, the Court must consider whether continuing the proceedings would be unfair, oppressive, or constitute an abuse of the legal process, considering the nature of the settlement or compromise, the circumstances of the alleged default, efforts made by the accused, the time elapsed, and the stage at which quashing is requested. In the interest of justice, the Court may, in fit cases, decide to quash the proceedings. In appropriate cases, costs can also be imposed.” 4.1. Based on the above, examining the facts of the present case, it is clear that the only offense alleged is under Section 420 of the Indian Penal Code. Although the Bank has no serious objection, it has not explicitly agreed to join the petitioner in filing an application for compounding before the appropriate forum.

4.2. The main allegation against the petitioner is that, immediately after receiving the loan, the funds were diverted from the original purposes stated in the loan application, such as purchasing tools and equipment. The entire loan amount was initially used to create Fixed Deposits and was later reallocated 23/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 for other purposes, including providing margin money for bank guarantees and transferring funds to other institutions related to the petitioner, including those associated with the marine college business. Therefore, the core allegation is that the petitioner acted dishonestly by misrepresenting the purpose for which the loan was obtained. Although the funds were meant for his other business ventures, a different purpose was declared in the loan application.

4.3. When the loan amount was disbursed in April 2016, July 2016, October 2016, and the final transfer of Rs. 1 Crore was sanctioned in March 2017, it is evident that in the very next quarter, on 29.06.2017, the account was classified as NPA. The original loan was obtained from the erstwhile Syndicate Bank, which later merged with Canara Bank. The statement of L.W.7 – Shri Ar u n Ras a p p a n , regarding the pending disbursement and utilization of the bank accounts, reads as follows:-

On being asked how the Term Loan of Rs 4.90 crores was disbursed to M/s Air Carnival Private Limited, I state that Shri S. Irudayanathan CMD of M/s Air Carnival Private limited requested to release the loan amount. I state that our Ganapathy Branch had released the amount of Rs 4.90 crores to Current account of M/s Air Carnival Private Limited. I state that Shri S. Irudyanathan submitted the request letter dated 07.06.2016 signed by him, addressed to The Branch Manager, Syndicate Bank, Ganapathy Branch, along with details of bills and invoices. I have identified his signatures on the request letter of the company. I further state that Shri S.Irudayanthan requested in the said letter that he had already made payments to various vendors of Rs 6.80 crores including margin money of the company. I further state that Shri S.Irudayanathan further requested in the latter that Rs 22,99,371/- was pending for making payment to other vendors and requested the Branch to make payments through RTGS/NEFT, for the purpose of making payments, Shri S.Irudayanathan enclosed details of suppliers/ vendors along with the request letter. (D.No.47).

On being asked, how these funds were utilized by the company, I state that our bank had disbursed Rs 4.90 crores on 06.06.2016, from Term Loan account having Alc No. T8QOSL5192560014 to the Current Account of M/s Air Carnival Private limited having account No. 61401010001118. I state that M/s Air Carnival Private Limited transferred an amount of Rs 2.00 crores to four Fixed Deposit of Rs 50.00 lakhs each. (50.00*4=200.00 lakhs). I further states that on 10.06.2016, M/s Air Carnival Private Limited transferred Rs 10.00 lakhs to M/s Coimbatore Marine College through RTGS, on 14.06.2016 transferred Rs 27.00 lakhs to M/s Coimbatore Marine College through RTGS. I further state that Rs 6.25 lakhs, Rs 9.85 lakhs, Rs 20.47 lakhs, and Rs 40.00 lakhs was debited on 01.07.2016 and used for the purpose of margin for issuance of four Bank Guarantee. (D.No.142 & D.No.222).

I was shown the bills/invoices/Proforma Invoices submitted by M/s Air Carnival Private Limited to the Ganapathy Branch of e-Syndicate Bank, namely (1) M/s Innerspace Interio dated 16.03.2016 for R$ 49,50,911/-, (2) M/s 25/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 IPC OM dated 19.04.2016 for Rs 67,64,050/- (3) M/s Mak Control Systems for Rs 15,60,000/- (4) M/s Mak Constol Systems for Rs 44,54,100/- (5) M/s IPC OM dated 19.04.2016 for Rs 67,64,050/- (Another Set, not repeated), (6) Copy of pro- forma invoice dated 18.05.2016 of M/s Evolution for Rs. 91,24,999-99, (7) Copy of Payment Receipt of Rs 7,50,911/- dated 21.06.2016 on the letter pad of M/s Elovution, (8) Letter addressed to Regional Office, Coimbatore written by Senior Branch Manager dated 28.06.2016 along with details of payments made to suppliers/vendors and a letter from M/s Air Carnival Private Limited addressed to the Branch Manager, Syndicate Bank, Ganapathy Branch along with details of payments made to suppliers/vendors duly signed by Chairman and Managing Director (9) Copy of Payment Receipt of Rs 42,00,000/- dated 01.03.2016 on the letter pad of M/s Elovution. I have gone through all the letters invoices / pro- forma invoices, and state that Shri S.Irudayanathan Chairman and Managing Director of M/s Air Carnival Private Limited submitted all documents to the Ganapathy Branch through the then Branch Manager during disbursement of the loan. I further state that Shri S.Irudayanathan Chairman and Managing Director of M/s Air Carnival Private Limited informed during the relevant period that he made payments to various vendors /suppliers for supply of goods and services. I further state that the then Branch Head Shri Tiyagarajan informed that he had visited the unit of M/s Air Carnival Private Limited and he was satisfied that goods were purchased/ Service were obtained for payments made by M/s Air Carnival Private Limited. .............

.............” 4.4. One Par i p o o r a n a m , Senior Manager, who in his statement as L.W.15 states as follows with reference to obtaining of lease of Aircrafts:

Although the OTS proposal by the bank states that the settlement is not for the ongoing criminal case, it is important to note that the standard clause is included in all cases, as the bank cannot withdraw or compound because non-

compoundable offences are typically involved. Even in this case, offences under Section 120(B) and also the offence under Section 13(2) read with 13(1)(d) were initially alleged against the bank officials, but these charges were later dropped, leaving only the offence under Section 420 IPC against the petitioner.

4.10. Therefore, after careful consideration and review of the facts, the position tilts in favor of the petitioner, indicating that the entire episode is primarily commercial or civil in nature and does not impact society at large.

The civil dispute between the petitioner and the Bank has been amicably 29/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 resolved, with the bank explicitly stating that no amount is due. Based on the final report and collected materials, although there is evidence of siphoning funds, the question of whether the intent to cheat the bank was present from the outset would be difficult for the prosecution to prove to secure a conviction, especially if proper security was provided. More importantly, the diversion of funds initially was not to any external element but to the fixed deposit accounts with the bank itself. The period during which the loan was sanctioned, the fact that the petitioner’s venture quickly failed resulting in the entire loan being classified as a Non-Performing Asset (NPA), and the settlement reached on 02.03.2022 all suggest there was no deliberate delay or mala fide intent by the petitioner to prolong the matter. Rather, the petitioner sincerely attempted to settle the dispute amicably and swiftly with the bank.

Therefore, considering the full efforts toward settlement and compromise, continuing the prosecution may be deemed oppressive and unjust to the petitioner. Moreover, as per the dictum of the Hon'ble Supreme Court of India, the entire basis of the complaint leading to the prosecution is solely due to the petitioner’s default in amounts and causing the account to become an NPA.

Thus, the costs for prosecution and court fees should be imposed as per the ruling in Kothari Polymers Limited and Others Vs. CBI3 .

3 (2022) SCC Online SC 2078 30/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 4.11. The total loan amount in this case is Rs.13.65 Crores, and I am of the view that a cost of Rs.8 Lakhs should be imposed on the petitioner. Of this a sum of Rs.4 Lakhs should be paid to the 1st respondent / Central Bureau of Investigation towards prosecution expenses, and another Rs.4 Lakhs should be deposited to the credit of the Tamil Nadu Mediation and Conciliation Centre, High Court of Madras, Chennai – 104. The said fund shall be used for purchasing furniture, computers, and infrastructural facilities for the District Centres and Taluk Sub-Centres.

E.The Result:

5. In view thereof, this Criminal Original Petition is allowed on the following terms:-

https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024

(iii) Failing compliance of the above, this Criminal Original Petition shall stand dismissed.

(iv) The connected miscellaneous petition is closed.

Jer 07.07.2025 Neutral Citation : Yes/No To

1.The Chief Judicial Magistrate, Coimbatore.

2.The Superintendent of Police In-Charge Officer, CBI, Anti-Corruption Branch 'A' Wing, 3rd Floor, Shastri Bhavan No.26, Haddows Road, Chennai – 600 007.

3.The Public Prosecutor High Court of Madras.

https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm ) Crl.O.P.No.9815 of 2024 D.BHARATHA CHAKRAVARTHY. J, Jer Crl.O.P.No.9815 of 2024 and Crl.M.P.No.6799 of 2024 07.07.2025 33/33 https://www.mhc.tn.gov.in/judis ( Uploaded on: 08/07/2025 05:27:13 pm )