Court’s Decision
The Supreme Court allowed the appeal and set aside the judgment dated 12 November 2024 passed by the Patna High Court, which had quashed an FIR filed under Sections 420, 406, and 34 of the Indian Penal Code (IPC) on the grounds that it was a “counterblast” and “malicious.” The Court held that the High Court had ventured into issues requiring evidence-based adjudication and had erred by ruling on the petitioner’s intent and credibility at the threshold stage. It observed:
“Fraud, if any, whether perpetrated at the first instance of valuation, or later, is a matter which could be unearthed only after a trial based on the evidence led by the parties.”
Consequently, the FIR and all criminal proceedings arising therefrom were restored to the file of the concerned Magistrate. The Court clarified it was not expressing any opinion on the merits of the case and that guilt or innocence must be decided at trial.
Facts
The appellant, a businessman, had availed a gold loan of ₹7.7 lakhs on 22 July 2020 from the Bank of India, Motijhil Branch, by pledging 254 grams of 22-carat gold ornaments as security. Upon receiving a recall notice dated 7 October 2022 demanding ₹8,01,383.59 (inclusive of interest), the appellant claims to have repaid the amount on 31 March 2023. However, unbeknownst to him, the bank had conducted a revaluation of the pledged gold and deducted ₹1,500 towards valuation fees.
Subsequently, the appellant’s efforts to retrieve his pledged gold failed. According to the bank, the appellant defaulted on the repayment and thus the pledged gold became the bank’s asset. During revaluation, the gold was allegedly found to be spurious — mere gold plating on other metals. This led to the bank filing an FIR against the appellant on 22 May 2023 under Sections 420 and 379 IPC, citing fraudulent pledge of fake gold.
The appellant, in turn, moved an application under Section 156(3) CrPC, and an FIR was registered against the Branch and Credit Manager who oversaw the revaluation process. A chargesheet was filed against the bank officials on 30 September 2024. However, while the investigation was still ongoing, the respondents filed an application under Section 482 CrPC for quashing the FIR, which the High Court allowed.
Issues
- Whether the High Court erred in quashing the FIR at the initial stage without allowing the matter to proceed to trial.
- Whether the FIR filed by the appellant disclosed a prima facie case of criminal breach of trust and cheating, warranting further investigation and trial.
- Whether the High Court’s reliance on the alleged lack of affidavit under Priyanka Srivastava was factually and legally justified.
Petitioner’s Arguments
The appellant contended that the High Court had exceeded its jurisdiction under Section 482 CrPC by examining the merits and rejecting the complaint based on speculative conclusions. He argued that he had fully repaid the loan as of 31 March 2023 and that there was no outstanding liability justifying the bank’s retention and revaluation of the pledged gold. He alleged that the revaluation was done behind his back and violated the loan agreement terms, suggesting the possibility of tampering with the pledged gold while it remained in the exclusive custody of the bank.
He further submitted that his complaint under Section 156(3) CrPC was supported by an affidavit, contrary to the High Court’s finding. He also questioned why no FIR was lodged against the first valuer who had initially certified the pledged gold as genuine. Finally, the unilateral deduction and account charge by the bank without prior notice amounted to cheating and criminal breach of trust.
Respondent’s Arguments
The respondents asserted that the appellant’s loan account was classified as a Non-Performing Asset (NPA) on two occasions — first on 1 May 2021 and again on 30 April 2022. Though the account was temporarily regularized, the subsequent non-payment led to it being downgraded again. They contended that the payment made by the appellant was insufficient to regularize the loan account and that they were justified in revaluing the pledged gold.
The revaluation allegedly revealed that the gold was counterfeit, leading to the de-empanelment of the first valuer. The respondents stated that they were not involved in the original loan disbursal and were only present during revaluation. They accused the appellant of intentionally allowing the loan to default, knowing the gold was spurious. They also claimed that the appellant failed to respond to recall notices, including one dated 30 July 2022 that warned of auction proceedings.
Analysis of the Law
The Court reaffirmed the legal boundaries for exercising jurisdiction under Section 482 CrPC. Relying on Rajeev Kourav v. Baisahab (2020) 3 SCC 317, it emphasized that courts must limit their inquiry to whether the FIR discloses a cognizable offence and must not engage in evaluating the defence or weighing evidence. The Court observed:
“It is settled law that the evidence produced by the accused in his defence cannot be looked into by the court… if a prima facie case is made out disclosing the ingredients of the offence alleged, the Court cannot quash a criminal proceeding.”
The Supreme Court also cited Naresh Aneja v. State of U.P. (2025) 2 SCC 604 to underscore that:
“When considering an application under Section 482 CrPC, the court cannot conduct a mini-trial but instead is to be satisfied that prima facie the offences as alleged are made out.”
The Court found that the High Court had erred by examining the merits of the complaint, including the bank’s fraud prevention policies and the appellant’s alleged intent, which were matters of evidence requiring trial.
Precedent Analysis
- Priyanka Srivastava v. State of U.P., (2015) 6 SCC 287: The High Court erroneously relied on this decision to quash the FIR, holding that the Section 156(3) application lacked an affidavit. The Supreme Court clarified that an affidavit was in fact filed.
- Rajeev Kourav v. Baisahab, (2020) 3 SCC 317: Reiterated that courts must not delve into evidentiary analysis at the stage of quashing and must restrict themselves to a prima facie reading of the FIR.
- Naresh Aneja v. State of U.P., (2025) 2 SCC 604: Cautioned against treating Section 482 CrPC proceedings as a platform for mini-trials or factual inquiry.
Court’s Reasoning
The Court held that the High Court’s order suffered from serious infirmities. It observed that conclusions such as “ulterior motive” or “intention to cheat” require evidence and cannot be presumed at the quashing stage. It found that even though the appellant repaid the dues belatedly, the loan had been settled prior to the revaluation and therefore the subsequent retention of the gold warranted inquiry.
The Court noted that the gold remained in the bank’s custody throughout, and the possibility of internal tampering or collusion could not be ruled out without a trial. It was observed:
“In no circumstances can it be said that no prima facie case regarding commission of an offence, as alleged in the FIR, is made out from its perusal.”
Thus, the Court concluded that the FIR disclosed sufficient grounds for criminal proceedings, and the High Court had usurped the trial court’s role by assessing the complainant’s intent and the respondents’ defences prematurely.
Conclusion
The Supreme Court allowed the appeal and set aside the High Court’s quashing order. It held that the High Court had wrongly ventured into disputed factual questions and that the complaint disclosed a prima facie case fit for trial. The FIR and chargesheet were restored to the Magistrate’s court for continuation in accordance with law. The Court emphasized that it had not expressed any opinion on the guilt or innocence of the parties.
Implications
This judgment reinforces the principle that courts must not prejudge allegations at the FIR quashing stage and that factual issues, especially those involving fraud, must be tested through evidence in a trial. It protects the complainant’s right to seek redress through a criminal trial and ensures that the process of justice is not short-circuited by premature judicial interference.