Nikhil Merchant v. Central Bureau of lnvestigationl

Counsel for the Petitioner: Sri Deepak Misra Counsel for the Respondent: Sri T. Srujan Kumar Reddy, SC FOR CBI The Court made the following: ORDER THE HON'BLE SRIJUSTIC E E.V.VENUGOPAL CRIMINAL REVISION CASE No.94 OF 2023 ORDER: 1 This crimina[ revision case is fited under Sections 397 and 401 of Cr.P.C. aggrieved by the order dated O5'7'2019 passed by the [earned lll Additionat speciat Judge for cBl cases, Hyderabad inCrt.M.P.No.7-53of2019inC'C'No'4of2007'whereunderthe learned Judge dismissed the said petition fited by the petitioner/A.9 under Section 239 Cr'P'C' seeking discharge from the proceedings. 2 Heard Sri Deepak Misra, learned counsel for the revision petitioner and Sri T.Srujan Kumar Reddy, the learned standing counsel for CBl, and perused the record' 3 The facts unfold that the petitioner who is claiming to be proprietor of M/s. Mareechi Computers, avaited housing toan from Syndicate Bank, Boraganda branch, to a tune of Rs'10'00 takhs and as on the date of fiting of the charge sheet, it was atteged that the outstanding loan amount was Rs'1 1'21 '471/' that the petitioner faited to pay the outstanding dues' The further attegation is that the bank vatuer had cottuded with various borrowers inctuding the petitioner and inflated the area 2 of ftat and its market vatue so as to get more loan and the vatue of the ptot owned by the petitioner is Rs.6.00 lakhs onty, however, by inftating the rate by Rs.4.00 lakhs, the petitioner secured loan of Rs.10.00 lakhs and subsequently the petitioner committed defautt. I 4 lt is further atteged that the petitioner apptied for demand loan of Rs.2.00 takhs on 12.12.2003 from Syndicate Bank for domestic purpose to which loan A.6 stood as guarantor. The petitioner ctaimed himsetf to be the Director of M/s. Rupa lnformatics Ltd, and proprietor of M/s. Mareechi Computer Services and he has enctosed copies of lT returns for the years 2001-02 to 2003-04 showing income tax of Rs.75,578/-, Rs.93,682/- and Rs.1,91 ,0631- paid for the above three years respectivety atong with the photocopies of lT returns of the A.6 (guarantor). The said loan amount was disbursed to the joint account of 4.6, A.8 and A.9 (petitioner herein) and that the name of the petitioner was inctuded as joint operator of this SB account just before sanctioning of the loan. 5 The further allegation [evelled against the petitioner was that the petitioner was not an income tax assessee, similarly, A.6 atso did not pay any income tax for the years 2001-02 and did not I I 3 fite returns for the next two years and that either M/s. Rupa lnformatics Limited or M/s. Mareechi Computer Services did not fite any returns nor paid any tax for the years 2001 -02 to 2004-05 respectivety. During investigation it was further reveated that no firm by name M/s. Mareechi Computer Services existed at the given address. lt was the further case of the prosecution that the 6 petitioner apptied for Housing Loan of Rs.10.00 lakhs, to which [oan, A.14 stood as guarantor. ln this transaction atso, the petitioner ctaimed himself to be the Director of M/s. Rupa lnformatics Ltd, and proprietor of M/s. Mareechi Computer Services and he has enctosed copies of lT returns for the years 2001 -02 to 2003-04 showing income tax. A'14 atso furnished photocopies of income tax for the said period showing payment of income tax for two Years. 7 The CBI further submitted that as per the investigation copies of lT returns of accused Nos.9 and 14 were fake and they were not assessees and as per the statement of Assistant Commercial Tax Officer, Sanathnagar, Hyderabad and M/s. Rupa lnformatics Ltd., did not fite any returns or paid any tax for the years 2001-02 to 2004-05 and M/s. Mareechi Computer SeMc-es I I I I I I 4 atso did not file any returns nor paid any tax during the years 2001-07 to 2004-05 and as per the investigation no firm by name M/s.Mareechi Computer Services is existed at the ptace mentioned. Hence the prosecution atteged that the petitioner along with the other accused entered into criminal conspiracy and cheated the bank by using forged documents as genuine. 8 White the matter was pending before the [earned trial Court, the petitioner fited Crt.M.P.No.253 of 7019 in C.C.No.4 of 2007 seeking discharge from the prosecution. However, the learned tria[ Court, by the impugned order, dismissed the petition. Hence the present criminal revision case. 9 The contention of the [earned counsel for the petitioner is that the trial Court faited to see that the entire grievance of the I bank was onty with regard to non-payment of outstanding dues which the petitioner has utt'imatety satisfied and the same was affirmed by the bank atso. lt is further submitted that the petitioner genuinely owned the ptot which was mortgaged to the bank at the time of availing the loan and that for recovery of the dues, the bank initiated proceedings under SARFAESI Act and hence the allegation that the bank was cheated is absotutety fatse, so also, it is not the case of the prosecution that the I f \ I I t 5 mortgaged ass€,t was not genuine property and the bank has lost the opportunity of reatising its dues by setting the mortgaged asset. He further submitted that it is not even the case of the prosecution that the titte deeds of the property are fake and fatse documents and that the bank has sustained toss due to furnishing fake property in mortgage. lt is his further contention that the learned triat Court faited to see that the intention of the petitioner at the time of entering into the loan transaction with the bank was never to cheat the bank by not repaying the loan amount since at the time of avaiting the [oan amount the petitioner had parted with his valuabte property by conferring atl rights in favour of the bank to deal with the said property and as such the questi,rn of bank sustaining any [oss woutd not arise. '10 He further submitted that the learned trial Court faited to see that the valuation of the mortgaged property was done by the approved vatuer of the bank who works at the instructions of the bank and for the benefit of the bank and as such question of the petitioner entering into conspiracy with the valuer for inftating the value of the mortgaged asset woutd not arise and in any event the nrarket value of the mortgaged asset is much more than the toan tiabitity. J 6 11 lt is the predominant contention of the learned counsel for the petitioner that though the repayment of the loan amount witt not exonerate the petitioner from crimina[ liability, in this case as per the tiability of the petitioner as per the charge sheet is non-payment of outstanding dues and further the [oan was futly secured by way of mortgage of genuine property and further during the pendency of trial the bank has not onty accepted the repayment but also issued no due certificate and as such the learned trial Court ought to have discharged the petitioner from criminaI prosecution instead of dismissing the discharge petition. 12 ln support of his above contentions, the learned counsel for the petitioner relied on the foltowing judgments; 1) Nikhil Merchant v. Central Bureau of lnvestigationl, 2; Order dated

07.11.2012 passed in Crt.P.No.7900 of 2009 by the erstwhite High Court of A.P, 3) Order dated 05.5.2020 passed in Crt.P.No.613 of 2013 by this High Court, 4) Order dated 22.9.2027 passed in Crt.R.C.No.489 of 2019 by this High Court. '1 3 On the other hand, Sri T.Srujan Kumar Reddy, the tearned standing counsel for CBI submitted that the petitioner herein claiming himsetf to be the Director of M/s. Rupa lnformatic.s -/: ( 'zoot 1zy Ao (crr.) ss, (sc) \ I I 7 Limited and proprietor of M/s. Mareechi Computer Services avaited roan from the syndicate Bank to a tune of Rs.2.00 takhs on 12.12.7003 from Syndicate Bank for domestic purpose A'6 stood as guarantor and that the petitioner also avaited [oan of q Rs.10.00 takhs to which toan, A. 14 stood as guarantor' ln both the cases the petitioner fited fake income tax returns of both A'6 and A.14. The petitioner was not an income tax assessee, so also the other guarantors. Neither the petitioner nor the firms to which he is ctaiming to be Director have ever fited income tax returns and that the firms have never existed' The petitioner avaited hous'ing toan by submitting fatse documents such as inftated vatuation report, fatse lT returns of himself and his guarantors and uttimatety faited to repay the loan and thereby committed the offences punishabte under Sections 120-8, 420 and 471 of lPC. He, accordingly, prayed to dismiss this criminaI revision case. The learned standing counse[ retied upon the fottowing judgments in support of his contentions: 1) Central Bureau of lnvestigation vs. Maninder Singh2, Z) Central Bureau of lnvestigation vs. Hari Singh Ranka', 3; lshoo Narang vs' State of Telangana rep. by its lnspector of Police, CBI/ACB, Hyderabada ' (20'16) I scc a89 r (2019) i6 scc 687 t 2020 SCC OnLine T:, 3456 j and 4) Order passed by this Court in Cr1.R.C.No.958 of 7019 a dated 10.4.7024. 14 ln Nikhit Merchant vs. Central Bureau of lnvestigation (1 supra) the Hon'ble Supreme Court held at para Nos.21 to 24 hetd as fotlows:

21. The basic intention of the accused in this case appears to have been to misrepresent the financial status of the company, M/s Neemuch Embattage Limited, Mumbai, in order to avail of credit facilities to an extent to which the company was not entitted. ln other words, the main intention of the company and its officers was to cheat the Bank and induce it to part with additional amounts of credit to which the company was not otherwise entitted.

22. Despite the ingredients and the factual content of an offence of cheating punishabte under Section 470 lPC, the same has been made compoundabte under Sub-section (2) of Section 320 Cr.P.C. with the leave of the Court. Of course, forgery has not been included as one of the compoundable offences, but it is in such cases that the principte enunciated in B.S. Joshi's case (supra) becomes retevant.

23. ln the instant case, the disputes between the Company and the Bank have been set at rest on the basis of the compromise arrived at by them whereunder the dues of the Bank have been cleared and the Bank does not appear to have any further claim against the Company. What, however, remains is the fact that certain documents were alteged to have been created by the appettant herein in order to avail of credit facitities beyond the limit to which the Company was entitted. The dispute involved herein has overtones of a civi[ dispute with certain criminal facets. The question which is requ'ired to be answered in this case is whether the power which independentty lies with this Court to quash the criminat proceedings pursuant to the compromise arrived at, shoutd at atl be exercised?

24. On an overalt view of the facts as indicated hereinabove and keeping in mind the decision of this Court in B.S. Joshi's case (supra) and the compromise arrived at between the Company and ) th6 Bank as also Ctause 11 of the consent terms fited in the suit , fited by the Bank, we are satisfied that this is a fit case where technicatity shoutd not be altowed to stand in the way in the quashing of the criminal proceedings, since, in our view, the i / 9 continuance of the same after the compromise arrived at between the parties would be a futite exercise' 15 This Court in the order dated 05.5.2020 passed in Crt.P.No.613 of 2013 hetd that "Recentty in Central Bureau of lnvestigation, New Dethi v' B.B.Agarwat and others ((2019) 15 SCC 522) the Apex Court hetd as under: "12. The High Court was of the view that on resetttement of accounts, the parties obtained the consent decree from DRT and paid the entire sum, therefore, there is no [ive issue, which now survives. The High Court then examined the question as to whether the issue of criminatity is invotveci so as to attow the trial Court to continue on its merits. After examining this issue with reference to charges and documents, the High Court hetd that no criminatity issue is found invotved notwithstanding the settlement of the case between tie Parties. " ln the present case atso during pendency of the investigatior, the matter has been settted in terms of comprJmise and the entire amount has been paid' lt is also not in dispute that the de facto comptainant-bank has also issued certificates stating that there are no outstanding dues payabte by Shakti Steets and Arien Steets Limited. Considering the above settted law and atso taking into consideration the fact that entire case invotved default in repayment r:f debt to the bank and even before fiting of the charge sheet, the tiabil,ity to make good the monetary [oss suffe"red by the de facto comptainant-bank had been mutuatty settted between the parties and even though trial is commenced, but the materiat witnesses did not support the prosecution case and more time witt be consumed to conclude the trial which is of no use that resutts in waste of time of the Court and pubtic money, this Court finds that continuation of proceedings against the petitioners/A-1 to A-3 and A-9 would be an abuse of process of [aw. Accordingly, the Criminat Petition is altowed and the proceedings initi;ted against the petitioners/A-1 to A-3 and A-9 in t.C.t'lo.Z of ZOOI on the fite of the Speciat Judge for C.B.l. Cases, Hyderabad, are herebY quashed. I I ) { I 10 16 ln the tight of the aforesaid findings of this Court as we[[ as the Hon'ble Supreme Court in the cases cited supra, I am of the considered view that the petitioner herein atso stands on the same footing and entitted to the relief sought for. 17 ln the Order dated 22.9.2022 passed in Crt.R.C.No.489 of 2019 atso this High Court observed that when the substantive offences under IPC are not made out in the FIR and the comptaint, there is absotutely no ground to proceed against the private individuals for the offences under the P.C Act. 18 ln that view of the matter, the order dated 05.7.2019 passed by the learned lll Additionat SpeciaL Judge for CBI cases, Hyderabad in Crt.M.P.No.253 of 2019 in C.C.No.4 of 2007, is hereby set aside and the petitioner is discharged form the offences atteged against him in the above case. 19 The Criminal Revision Case is accordingty attowed. Miscetlaneous petitions if any pending shatt stand ctosed. //TRUE COPY// Sd/- I. NAGA LAKSHMI DEPUTY REGISTRAR SECTION OFFICER To, \ 1- The lll Additional SpeciaI Judge for CBI Cases, Hyderabad. (with recordS, if any) Z.Two'CCstothePublicProsecutor,HighCourtfortheStateofTelangana at Hyderabad. [OUT]

3. One CC to Sri Deepak Misra, Advocate [OPUC] 4. One CC to SRI Sri T. Srulan Kumar Reddy' SC FOR CBI [OPUC] 5. Two CD CoPies kam Lp- HIGH COURT DATED:1910212025 I ORDER CRLRC.No.94 ot 2023 1HE {'r4 B 5 tvAn 2025 ( c t) ua, t Dt F: a, s t' ..\+ ALLOWING THE CRIMINAL REVISION CASE w, fiAfi