In a significant ruling, the Supreme Court of India reaffirmed that criminal cases predominantly of a civil nature, particularly those arising from commercial or financial disputes, should be quashed if the parties have amicably resolved their differences. The judgment was delivered by a bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan in K. Bharthi Devi & Anr. v. State of Telangana & Anr., where the Court quashed the criminal proceedings against two women involved in a bank fraud case.
Background of the Case:
The appellants, K. Bharthi Devi (Accused No. 3) and another (Accused No. 4), were implicated in a loan fraud case involving K. Suresh Kumar, the sole proprietor of M/s Sirish Traders. The company had secured loans from the Indian Bank, Osmanganj Branch, Hyderabad, but failed to repay, leading the bank to declare the loan as a Non-Performing Asset in 2010.
During recovery proceedings, it was discovered that several title documents used to secure the loan were forged. The bank filed a complaint with the Central Bureau of Investigation (CBI), and the CBI filed a charge sheet under various sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act. The appellants were accused of conspiring with their husbands, Accused Nos. 1 and 2, in the fraudulent loan scheme.
However, the appellants sought to quash the criminal charges based on a One-Time Settlement (OTS) agreement between the borrowers and the bank. Despite the settlement, the High Court dismissed their petition, leading to the appeal before the Supreme Court.
Key Legal Issues:
1. Civil vs. Criminal Nature of Dispute: The appellants argued that the case predominantly involved a civil dispute between the bank and the borrowers, which had been settled through the OTS agreement.
2. Active Role of Appellants: The appellants contended that they had no active role in the fraudulent activities, and their involvement was primarily due to their familial relationship with Accused Nos. 1 and 2.
Supreme Court’s Observations:
The Supreme Court observed that the criminal proceedings involved a predominantly civil nature, arising from a financial transaction between the bank and the borrowers. Citing previous judgments such as Duncans Agro Industries Ltd. v. CBI and Nikhil Merchant v. CBI, the Court reiterated that where a civil dispute is settled amicably, criminal proceedings should not be allowed to continue, as they would serve no meaningful purpose.
Justice B.R. Gavai, speaking for the bench, stated:
“The criminal cases having overwhelmingly and predominatingly civil character, particularly those arising out of commercial transactions, should be quashed when the parties have resolved their entire disputes among themselves.”
The Court further noted that no specific or active role was attributed to the appellants in the fraudulent acts. Their involvement was incidental to their relationships with the primary accused, and continuing the criminal proceedings against them would cause undue oppression and prejudice.
The Court’s Decision:
In view of these observations, the Supreme Court quashed the criminal proceedings against the appellants in C.C. No. 16 of 2014, pending before the Principal Special Judge for CBI Cases, Nampally, Hyderabad. The bench ruled that the continuation of the case would be unjust, given the settlement between the bank and the borrowers, and the appellants’ limited involvement.
Case Details:
– Case No.: Criminal Appeal No. _______ of 2024 (Arising out of SLP (Criminal) No. 4353 of 2018)
– Appellants: K. Bharthi Devi & Anr.
– Respondents: State of Telangana & Indian Bank
– Bench: Justice B.R. Gavai and Justice K.V. Viswanathan
– Counsel for Appellants: Shri Dama Seshadri Naidu
– Counsel for CBI: Shri Vikramjeet Banerjee (ASG)
– Counsel for Bank: Mr. Himanshu Munshi
