1. M/s PCH Marketing Pvt. Limited v. 1. Union of lndia

Petition under Article 226 oI the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to lssue an appropriate Writ(s), Order(s) and/or Direction(s) and More particularly in the nature of Writ of Mandamus.- (i) Declarlng/Strike down the Section 154 of Code of Criminal Procedure as illegal, unconstitutional and ultra vires of Articles 14, 19 & 21 of the Constitution insofar as it may be construed as an,obligation on part of the Police/CBl to register a case even on any nebulous information disclosing commission purported cognizable offence(s), (ii) As a supplement as well as alternative, this Honble Court may be pleased to may be read down and/or read into Section 154 Cr.P.C. and hold that the ,3B1, Police or any investigating agency by way of a preliminary enquiry or otherwise prior to the registration of a case on the accusations disclosing a purport€rd cognizable offence must necessarily look into material facts and relevant r;ircumstances which must go into the mind making formation of such investigating agencyiCBl, (iii) To call for records relating to FIR RC0782021E0006 of 2021 dated 16.12.2021 registered under Sections 42O,468,471,1208 of IPC and Sections 13(2), rlw 13(1Xd) PC Act and set aside the same, including all ':onsequential proceedings arising therefrom as the very registration of case comrnencement of investigation is a blatant and gross abuse of the process of law being contrary to the mandate of Section 17A of the Prevention of Corruption Act as also violative of the procedure established by law. lA NO: 1 OF 2022 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed ln support of the petition, the High Court may be pleased to Stay all further proceedings arising out of FIR RCO782O21E0006 of 2021 dated 16.12.2021 registered under Sections 420, 468, 471, 12OB of IPC andSections 13(2), rlw 13(1)(d) PC Act on the file of Respondent No. 4, i.e., Central Bureau of lnvestigation, Bank Securities & Frauds Cell, Bangalore. Counsel for the Petitioner: SRI VIKRAM CHOWDARY, SR. COUNSEL REP. FOR SRI N. NAVEEN KUMAR Counsel forthe Respondent No.1 & 2: SRI GADI PRAVEEN KUMAR (Dy. SOLICITOR GENERAL OF INDIA) Counsel for the Respondent No.3 & 4: - - - - Counsel for the Respondent No.5: SRI N. MANOHAR REDDY The Court made the following: ORDER 'r, THE HONOURABLE SMT. JUSTICE K. SUJANA WRIT PETITION .No.45O2O of 2022 OBDER: This Writ Petition is filed for the following relief "to issue an appropriate Writs Orders and f or Directions and More particularly in the nature of Writ of Mandamus i). Declaring/ Strike down the Section 154 of Code of Criminal Procedure as illegal unconstitutional and uitra vires of Articles 14, 19 and 2l of the Constitution of India insofar as it may be construed as an obligation on part of the Police/CBI to register a case even on any netrulous information disclosing commission purported cognizable offences. ii) As a supplement as well as alternative, this Hon'ble Court may be pleased to may be read down and/or read into Section 154 Cr.P.C and hold that the CBI, Police or any investigating agency by way of a preliminary enquiry or otherrrise prior to the registration of a case on the accusations disclosing a purported cognizable offence must necessarily look into material facts and relevant circumstances which' must go into the mind making formation of such investigating agerLcy I CBI. iii). To call for records relating to FIR:RCO782O21EOOO6 of 2O2l dated 16'12'2021 z sr(sJ W.P.N0.45020 of 2O22 registered under Sections 42O, 468, 471, 72OE\ of IPC and Sections 13(21, r/w 13(1) (d) of PC Act :rnd set aside the same including all consequential proceedings arising there from as the very reg,is;tration of case commencement of investigation is a blatant and gross abuse of the process of law being contrary to the mandate of Section 17A of the Prevention of Corruption Act as als,c violative of the procedure established by law ; and iv) pass any other or further orders."

2. The brir:f facts of the case are that petitioner No.l was incorporated rvith Sri Hazur Singh as its Managing Dir,:ctor. The Hazur Singh son i.e. Sri S.Sutinder Singh/ petitioner No.2 and petitioner No.2t wife Smt.Komal Singh/petitioner No.3 are being the key promoters of the petitioner No.1 company and the same is in the businessi of distribution of consumer electronic rloods i.e. Mobiles, Ele<:tronics, Home appliances items etc. in tht: State of Andhra Pradesh. For its smooth busiriess operations, petitioner No.1 companl, had been availing banking facilities lrom the erstwhile Canara Bank which was later taken over by the State Bank of India. Subsequently, SBI sanctioned a cash credi: of Rs.80 crores and the same was enhanced by the Bank by way of renewals by seeing the rapid growth of the petitioner No.1 Cornpany to Rs.206 crores,. When petitioner No.1 company got gravely impacted I 3 SKSJ w.P.No.45020 of 2022 and various losses were incurred' SBI restructured the loan by transferring/adjusted some portion of working capital to term loan and applied recovered interest and the total limit sanctioned was Rs. 16O crores. Since, the renewal and restructuring proposed by the bank was not viable, under such circumstances the account of the petitioner No.1 company was classihed as NPA retrospectively w.e.f 31.03.2014. Subsequently, petitioner No'1 company requested Stressed Assets Management Branch (SAMB)' Secunderabad for OTS of the dues and the SAMB accepted PCHMPL's offer to pay Rs.78 crores towards full and final settlement of total dues amounting to Rs'210'44 crores as on 30.11.2016 on terms and conditions as mentioned in the letter' A joint Memorandum of Compromise was frled by the complainant bank and the petitioner No.1 company in terms of Section 22 of th,e Recovery of Debts due to Bank and F inancial Institution Act' 1993 before the Debt Recovery Tribunat Hyderabad and thereby all the pending dues between the parties had accorded a complete closure' The petitioner No. 1 company requested SAMB for extension of period for payment of the balance amount of Rs'28'1O Crores and the same request has been accepted by the appropriate authority of the complainant bank and directed the petitioner No' 1 company to pay the balance compromise amount of Rs'28' 1O crores along with interest for the delayed period in accordance with the letter' 4 SKSJ W.P.No.45020 of 2022

3. Subsequently, No Dues Certificate has been issued to petitioner No.1 by the SAMB and the proceedings initiated before the DRT, Hyderabad was also not pressed by the SAMB. Subsequently to issue "No Dues Certihcate" ald withdrawing I.A. filed befcrre the DRT-II Hyderabad for the recovery of dues, but SBI vide letter dated 13.12.2021 requested the CBI BSFB, Bangalore to register a FIR against petitioner No. 1 company and its promoters /<lirectors for fraud, cheating and other offences. Upon such complaint CBI proceeded to register the impugnerl FIR for the offences unCer Sections 12O read wrt}:. 42O, 468, 471 of{PC and Sections 13121, r/w 13(1) (d) of PC Act against the petiticners.

4. Heard Sri Vikram Chowdary, learned Senior Counsel represeniinlI Sri N.Naveen Kumar, learned counr;el for the petitioncr:s zrnd Sri Manohar Reddy Nandyala, learned counsel for respondenl No.5.

5. Learncd counsel for the petitioners contendeC that CBI respondent No.4 has acted as a mere rubberstamp and post office of the b:rnk w,hile mechanically registering impugned FIR with a single fine observation, which is reads as under: "Dte allegations in the complaint disclose that ccmmission of offence s ". q 5 SKSJ W.P.No.45O20 of 2022

6. He further submits that where a borrower enters into a One Time Settlement (OTS) and honorably pays his dues to the satisfaction of the bank and "No Dues Certificate" is issued to him' it would tantamount to a breach of sovereign commitment in case criminal proceedings are initiated much after the settlement/ closure of such accounts' The commercial transactions in our country are governed by principles of equity and justice apart from the rule of law. The commercial understanding between thebankandtheborrowermustbeaccordedahighlevelof sanctity. The present case depicts an extremely sordid state of affairs where one wing of State Bank of India has actively and aggressively entered into a settlement with petitioner No' 1 company and another wing (SAMB)/respondent No'5 has acted in an absolutely contrary manner and based upon stale {indings of some purported forensic audit (kept under wraps and never shared with the petitioners), chose to register a case much after the matter was settled, closed and accorded a quietus for all intents and purposes'

7. The petitioners availed loan from SBI on O5'O2'201O and cash credit limit of Rs.8O crores and a Bank Guarantee limit of Rs. 1O crores and on O4.08'2O10 vide renewal' SBI enhanced credit limit of Rs. I 08 crores and Bank Guarantee was left unchanged lo Rs.1o crores. Thereafter, the oflrcials of SBI approached petitioner 6 SKSJ w.P.No.45020 ot 2022 No. 1 company constantly encouraged it to avail more lc,ans with the intent to meet the bank's lending targets are met. Lirnits were increased frorn time to time and SBI earned interest. On

14.O5.2O11, the credit facility enhanced to Rs. 148cr,:res. On

07.O9.2O71, ttre credit facility enhanced to Rs.175 crores. On

25.1O.2012, the SBI also enhanced credit facility to Rs.2Ct6 crores. In the year, 2OI4, Lhe State of Andhra Pradesh was bifurc ated into two parts :rrLd due to administrative and other probl':ms, the petitioner No. I company suffered a lot. Due to the same, the petitioner No.l company got gravely impacted on various losses. On 28.O4.2014, SBI restructured the loan by transferringT'adjusted some portion of working capital to term loan and applied recovered interest. By way of renewal with restructuring, the total limit sanctioned w,ar; Rs.16O crores. On 29.10.2014, the bank took a drastic action and the account of the company was clas;sihed as NPA retrospe<: t ively w.e.f 31.O3.2014.In.2O15 various effrrrts were made by th.e petitioner No. I company to improve the business functioning b1- taking on more dealerships of other mobile companies, bul. unfortunately all in vain. Therefore, the petitioner No.1 companl' approached SBI for a One Time Settleme nt (OTS) and it is acc,epted on 72.01.2O17 - The petitioner No. 1 company offers to pal, lls;.78 crores towards full and linal settlemen t of total dues amourrting of Rs.21O.44 crores. Or O2.O2.2O 17, a Joint *7" -1 sl(sJ w-P.N0.45020 of 2022 Memorandum of Compromise was filed by the complainant Bank and the bank withdrawn the case from the Debts Recovery Tribunal (DRT)

8. He further submitted that later the Bank letter dated l3.l2.2}lg subsequent to issuing nNo Dues Certihcate" and withdrawing IA hled before the DRT-II, Hyderabad for the recovery ofdues,butSBlvidealetterdatedl3'12'2olgrequestedtheCBI' BSFB, Bangalore to register FIR against petitioner No'1 company and its promoters / directors for fraud, cheating and other offences' which is against the settled rules of law and judgment of Hon'ble Apex Court in CBf Vs. DuncaLns Agro Industries Ltdf it was held as under: "The Banks had already filed suits for recovery of the dues of the Banks on account of credit facility and the said suits have been compromised on receiving the payments from the companies concerned. Even if an offence of cheating is pima /acie constituted, such offence is a compoundable offence and compromise decrees passed in the suits instituted by the Banks for all intents and purposes, amount to compounding of the offence of cheating". ' lrsse 1s scc sst L* SKSJ w.P.,vo.45020 0t 2022

9. He rel.ied upon the judgment of Hon,ble Apex Court in Nikhil Merchant a'. CBP, it was held as under:

30. "The disputes between the Company and thr: Bank have been set at rest on the basis of the compromise arrived at by them where under the dues of the Bank have been cleared ald the Bank do,:sr not appear to have any further claim against the company.

10. To the latter offence the ratio laid down in 9.S, Joshi u. State o;f Haryanc3, the compromise proceedings are quash'ed. He further subntitted that, in the present case, the issue be,tween the Bank and petitioner No.1 Company that there is no continuation of further proc(redings, as such, he prayed the Court to rluash the proceedings against the petitioners. As such, further proceedings are not necessary, in view of the terms of compromise between the parties and als;o the 1aw laid down by the Supreme Court in CBf us. Narendra Lal Jaina, it was hcld as under:

13."The civil liability of the respondents to pay the amount to the Bank has a-lready been settled amicably. The terms of such settlement have be,:n extra,:ted and no subsisting grievance of the Bank ' 1zoos1 s scc o;z '1zoo31a scc ezs.rnd 2oo3 scc (cri) 848 o (zorq) s scc :o+ vD 9 SKSJ w.P.No.4502O of 2022 in this regard has been brought to tJle notice of the Court. While the offence under Section 420 IPC is compoundable the offence under Section 120-B is not".

11. On the other hand, learned Special Public Prosecutor for CBI appearing on behalf of the respondent Nos'3 and 4 submitted that compounding the offence by paying a meagre amount is not a ground to quash the proceedings against the petitioners' In support of his contention, he relied upon the judgment of the Hon'lcleSupremeCourtinPrabatbhaiAa,hlraliasParbaitbh'ai Bhlm.slngbhai Karmur and ors. Vs Sto;te oJ GuJarat and Ants ' wherein at para 15 (x), it was held as under: "The economic offences involving the frnancial and economic well being of the State have implications which lie beyond the domain of a mere dispute between private disputants' The High Court would be justified in declining to quash where the offender is involved in an activity fraud or akin to a hnancial or economrc the act misdemeanour. The consequences of complained of upon the hnancial or economic system will weigh in the tralance'" ' ntn zotz sc a8a3 \: \_ .--"r&!lt:. i I 10 s(5J W.P.N0.45020 o12022 c

72. He also relied upon the judgment of the Hon'ble Supreme Court in Cen.tral Bureau ol Inestigation Vs. Hari Singh Ro,nka and others6,.,,rrherein at para No. 16 it was held as under: l.€r. "The OTS merely deals with the civil liabi lity that too by making of payment of Rs.25 crores whcreas outstanding liability was Rs.44 crores. Thc,u.gh, it was submitted that loss caused lr'as apF,r(rximately Rs. 13 crores. Be that as it may, we are not on the civil liability. Ultimately the amount which has been settled in OTS schetne cannot be legally sufhcient to wipe out the criminal liability of the accused persons. OTS coulcl wipe off only the civil liability of the accused not the criminal one."

13. In the present case, a perusal of the record discloses that the parties h,arre entered into compromise and settled th 3 amount for Rs.7B crores and outstanding amount of Rs.28. I O crores as on

30. 1 1 .2O 16 along with interest for the delayed period was agreed to be paid on certain terms and conditions as mentioned in the letter of payment serttlement by the petitioners. But the said amount was not paid as agreed in OTS. In Ishoo Ndrang Vs. The Sto,te ol u (zotg) re scc esz 2t-- {. 1-7 s(sJ W.P.No.45020 of 2022 Telangana and othetsT, wherein at para No.49, this Court held as under; "The total OTS payment done by the petitioner No.4 is only a small fraction of total dues. The allegation against the petitioner No'4 is that it has caused a massive loss of Rs. 182.99 crores to the public sector banks and the same is also specifically mentioned in the complaints. The said money ultimately belongs to the public and tax payers. Thus, pima facie, the petitioners have committed fraud not only against one or two banks, but against the public in general and it is a "Loan Fraud" and it is an economic offence."

14. Law laid down in the above case shows that mere payment of amount is not a ground for quashing proceedings, in the present case also petitioner offered to pay Rs.78 crores towards full and hnal settlement of total dues Rs.21O.44 crores which is only a 1/3'd of the liability and bank issued no due certificate and hled I'A' for withdrawal of DRT Proceedings.

15. Whereas, at this stage, it is pertinent to note the recent judgment of the Hon'lcle Supreme Court in Tarina Seu v' Union of 7 Criminal Petition Nos.3966, 3982 and 4272 of 2o2O -"rffi:attt .J."*. 72 . sK9J W.P.No.45020 of 2022 F India and Another8, wherein in paragraph No.l4 and 15, it is held as under

14. By a separate judgment of the even datc in Crimrnal App,:al arising out of Special Leave petition (Criminal) No. 435i1 of 2018 wherein similar facts arose for consideratiorr, we have held that when the matter has been compromised betuer-,n the borrower and Bank, the continuation of the criminal proceedings would not be justihable.

15. Iie lying on the earlier judgments of this Court, rve hirve held that in the matters arising out of commercial, financ al, mercarltile, civil, partnership or such like transactions or rhe offenccs arising out of matrimony relating to dowry, etc. or family disputes where the wrong is basicaily private or personal in nature and the parties have resolved thetr enLire dispute, the High Court should exercise its powers untler Secticn 482 CrPC for giving an end to thc criminal proceedings. We have held that the possibility o[ cor.rvicti]n in such cases is remote and bleak and as such, the conti:ruation of the criminal proceedings would put the accusel to great oppression and prejudice-"

16. In the light of the above Judgment, it is clear that in cases involving comnlercial, financial, or personal transactions, where parties have rersolved their disputes, the continuation of criminal proceedings is unjustifiable. In the present case, the parl.ies have resolved their disputes and considering the facts and circumstances of the case, this Court deems it fit to qllash the 3 2024 SCC OnLine sc 2696 13 s(sJ W.P.No.45020 of 2022 proceedings against the petitioner vide FIR:RC0782O2IEOOO6 of 2O2l dated 16.12.2021 registered under Sections 42O, 468, 471, 12OB ofIPC and Sections 13(21, r/w 13(1) (d) ofPC Act. 17 . Accordingly, this Writ Petition is allowed. There shall be no order as to costs Miscellaneous applications, if any pending, shall also stand closed- //TRUE COPY// SD/. MOHD. ISMAIL ASSIST NT REGISTRAR ECTION OFFICER

1. The Secretary, Union of lndia, Department of Law and Affairs, 3rd Floor, C- Wing, Lok Nayak Bhawan, Khan Market, New Delhi - 110003

2. TheBecretary, Union of lndia, Department of Home Affairs, North Block, New Delhi - 110003

3. The Director, Central Bureau of lnvestigation, Plot No. 5-8, 6th Floor, CGO Complex, Lodhi Road, New Delhi - 110003.

4. The birector, Central Bureau of lnvestigation, Bank Securities and Frauds Cell, No.36, Bellary Road, Ganganagar, Bangalore - 560032. Central Bureau of lnvestigation, BS and FB Bangalore.

5. The Deputy General Manager, State Bank of lndia, Stressed Assets Managdm6nt Branch, Secunderabad, 5th Floor, Rear Block of HMWSSB Compbund, H. No. 6-2-9'15, Khairtabad, Hyderabad. 6. One CC to SRI N. NAVEEN KUMAR, Advocate IOPUCI 7. One CC to SRI N. MANOHAR REDDY, Advocate [OPUC] 8. One CC to SRI GADI PRAVEEN KUMAR (Dy. SOLICITOR GENERAL OF To, \ rND|A) [OPUC] 9. Two CD Copies BN s HIGH COURT DATED:0410212025 \ ORDER WP.No.45020 of 2022 t) o 1 H*- Stt I ( 20 :r 2025 ( ( I ( * Dr ALLOWING THE WRIT PETITION WITHOUT COSTS 0fo' Y*