Court’s Decision
The Patna High Court quashed the criminal proceedings against the petitioner, a senior bank officer, accused of sanctioning a cash credit loan of ₹1.3 crore by mortgaging joint family property without the informant’s consent, leading to allegations of cheating, forgery, and conspiracy. The Court held that no prima facie case was made out against the petitioner under Sections 420, 467, 468, 471, 120-B, read with Section 34 IPC, and found that continuing prosecution would serve no useful purpose since the loan dispute had been settled through a one-time settlement (OTS), following the principles laid down by the Supreme Court.
Facts
The informant alleged that his brother and sister-in-law, in conspiracy with the petitioner (then Chief Manager, PNB), fraudulently mortgaged joint family property without his consent to secure a ₹1.3 crore cash credit loan for their firm, Maa Vaishno Sales. Upon non-repayment, the property risked auction. The FIR alleged misuse of official position by the petitioner in facilitating the loan without proper verification of the property’s title. A chargesheet was filed under cheating, forgery, and conspiracy charges. Meanwhile, the loanee settled the loan via OTS, closed the loan in April 2023, and recovered property papers.
Issues
- Whether the allegations in the FIR disclosed a prima facie case under Sections 420, 467, 468, 471, 120-B IPC against the petitioner.
- Whether a criminal case should continue when the loan dispute has been fully settled through OTS.
- Whether a bank officer can be held liable for criminal prosecution when acting in official capacity following procedures without evidence of dishonest intention.
Petitioner’s Arguments
The petitioner argued that:
- The bank sanctioned the loan after due diligence, with no deficiencies reported by the empanelled advocate, valuer, or auditors.
- The petitioner acted on recommendations from subordinate officials and had no personal gain or dishonest intention.
- The informant’s brother (loanee) and the informant had conflicting interests, with the informant himself having taken loans on the same property.
- The FIR failed to disclose specific allegations of forgery, cheating, or conspiracy against the petitioner.
- The loan dispute had been settled via OTS and the property returned to the loanee, making continuation of prosecution futile.
Respondent’s Arguments
The informant opposed the quashing, arguing:
- The property was joint family property, and the petitioner, despite discrepancies flagged in the advocate’s report, sanctioned the loan.
- The petitioner was the final sanctioning authority and cannot escape liability by shifting blame to subordinates.
- The petitioner’s actions caused wrongful loss to the informant and demonstrated collusion with the loanee.
Analysis of the Law
The Court examined:
- Section 482 CrPC powers for quashing when proceedings amount to an abuse of process or when allegations do not disclose a prima facie offence.
- Requirements under Sections 420, 467, 468, 471 IPC that necessitate clear evidence of dishonest intention and the use of forged documents.
- Supreme Court precedents:
- Tarina Sen v. Union of India (2024): Criminal cases arising from financial disputes settled through OTS may be quashed if the dispute is private and the continuation of proceedings is unjustified.
- N.S. Ganeshwaran v. Inspector of Police (2025): Emphasised quashing criminal proceedings post-settlement where no public interest survives.
Precedent Analysis
- Tarina Sen (2024 SCC OnLine SC 2696): Held that continuation of criminal proceedings post-settlement in financial disputes amounts to oppression when conviction likelihood is remote.
- N.S. Ganeshwaran (2025 INSC 787): Reiterated that when OTS settles the dispute fully and there is no continuing public interest, criminal cases should be quashed.
- Both cases were directly applied to support quashing, ensuring consistency in the approach to post-OTS financial dispute prosecutions.
Court’s Reasoning
The Court found:
- No material evidence showing the petitioner had dishonest intention or abetted any forgery.
- No document was shown to have been knowingly used as forged by the petitioner.
- The petitioner acted within official duties based on subordinate recommendations, with no deficiency noted during sanction or audits.
- The loan dispute was private in nature and had been settled via OTS with the bank recovering the amount and closing the loan.
- Relying on Tarina Sen and N.S. Ganeshwaran, continuing prosecution would be an abuse of the judicial process.
Conclusion
The Patna High Court allowed the petition, quashing the order taking cognizance and all criminal proceedings arising from Agamkuan PS Case No. 99/2017 against the petitioner, observing that the dispute was settled, no prima facie offence was disclosed, and continuation would cause undue harassment.
Implications
- Reinforces the application of Tarina Sen and N.S. Ganeshwaran principles in quashing post-OTS criminal proceedings.
- Clarifies that criminal proceedings in settled financial disputes, absent dishonest intention or clear prima facie evidence, should not continue.
- Protects bank officials from harassment for bona fide official acts when due procedures are followed.
Brief Note on Cases Referred
- Tarina Sen v. Union of India (2024): Criminal proceedings post-financial settlement should be quashed if the dispute is private and prosecution is oppressive.
- N.S. Ganeshwaran v. Inspector of Police (2025): Criminal proceedings should not continue after OTS settlement in absence of public interest.
- Both decisions guided the High Court’s approach to protect the petitioner from continued prosecution in a settled matter.
FAQs
1. Does a financial settlement through OTS justify quashing a criminal case?
Yes, if the dispute is private, settled, and no public interest remains, as held in Tarina Sen and N.S. Ganeshwaran.
2. Can a bank officer be criminally liable for loan sanctions absent dishonest intention?
No, if the officer followed procedures, had no dishonest intent, and there is no evidence of personal gain or collusion.
3. What is the scope of High Court’s powers under Section 482 CrPC in such cases?
The High Court can quash proceedings to prevent abuse of process where allegations do not disclose an offence or where continuation is unjust post-settlement.
