A.Ravishankar Prasad v. M/s.Ravi Shankar Films(P) Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 30.4.2008.CORAMTHE HON'BLE MR.JUSTICE M.JEYAPAULCrl.O.P.Nos.4764 to 4767 of 20081. A.Ravishankar Prasad2. A.Manohar PrasadPetitioners 1 and 2 in all the four casesM/s.Ravi Shankar Films(P) Ltd.,rep. By A10 and A11all are having office atNo.3, Sarangapani Street,T.Nagar, Chennai 600 017. III Petitioner in Crl.O.P.No.4764 of 2008M/s.Gemini Arts (P) Ltd.,rep by A5, A6 and A7all are having office atNo.3, Sarangapani Street,T.Nagar, Chennai 600 017. III Petitioner in Crl.O.P.No.4765 of 2008M/s.Gemini Pictures Circuits (P) Ltd.,rep by A.Ravishankar Prasadall are having office atNo.3, Sarangapani Street,T.Nagar, Chennai 600 017. III Petitioner in Crl.O.P.No.4766 of 2008M/s.Prasad Properties &Investments (P) Ltd.,rep by A4 and A5all are having office atNo.3, Sarangapani Street,T.Nagar, Chennai 600 017. III Petitioner in Crl.O.P.No.4767 of 2008vs. https://hcservices.ecourts.gov.in/hcservices/ State by Superintendent of Police,C.B.I., Banking Securities &Fraud Cell, Bangalore. Respondent in all the four casesCriminal Original Petitions filed under section 482 Cr.P.C. seekingto call for the records relating to C.C.Nos.71, 80, 81 and 82 of 2001respectively on the file of the learned Additional Special Judge for CBICases, Chennai and quash the entire proceedings against the petitioners. For petitioners: Mr.K.Asokan, Senior Counsel for M/s.Gita AsokanFor respondent : Mr.N.Chandrasekaran, Special Public Prosecutor for CBICOMMON ORDERCriminal Original Petition No.4764 of 2008 is filed by A10A.Ravishankar Prasad, A11 A.Manohar Prasad and A12 M/s.RavishankarFilms Private Limited represented by A10 and A11 in C.C.No.71 of 2001; Criminal Original Petition No.4765 of 2008 is filed by the verysame two accused figuring as A5 and A6 and A8-M/s.Gemini Arts (P)Limited represented by A5, A6 and A7 in C.C.No.80 of 2001;Criminal Original Petition No.4766 of 2008 is filed by the verysame two accused figuring as A5 and A6 and A7-M/s.Gemini PicturesCircuits (P) Limited represented by A.Ravishankar Prasad in C.C.No.81 of2001; andCriminal Original Petition No.4767 of 2008 is filed by the verysame two accused figuring as A4 and A5 and A6-M/s.Prasad Properties &Investments (P) Limited represented by A4 and A5 in C.C.No.82 of 2001 seeking quashment of the aforesaid criminal proceedings initiatedagainst them. 2. The petitioners in Criminal Original Petition No.4764 of 2008have been charged under sections 120B read with 420, 467, 468 and 471 ofthe Indian Penal Code and sections 13(2) read with 13(1)(d) of thePrevention of Corruption Act, 1988. The petitioners in Criminal OriginalPetition No.4765 of 2008 have been charged under sections 120B readwith 420 of the Indian Penal Code and sections 13(2) and 13(1)(d) of thePrevention of Corruption Act, 1988. The petitioners in CriminalOriginal Petition No.4766 of 2008 have been charged under sections 120Bread with 420, 467, 468 and 471 of the Indian Penal Code and sections 13(2) and 13(1)(d) of the Prevention of Corruption Act, 1988. Thepetitioners in Criminal Original Petition No.4767 of 2008 have beencharged under sections 120B read with 420, 468 and 471 of the IndianPenal Code and under sections 13(2) and 13(1)(d) of the Prevention ofCorruption Act, 1988. https://hcservices.ecourts.gov.in/hcservices/

3. As the parties are same and the charges similar, all the fourcases are taken up for common disposal.4. The sum and substance of the plea of the petitioners found inall these petitions seeking quashment is as follows:-i) Some of the witnesses have been examined in all the cases, but,they have not spoken anything against the petitioners during the courseof trial. The Indian Bank had several non per performing assets duringthe year 1990. The petitioners were invited to take over the sinkingGemini Group and turn around its business. Petitioners 1 and 2 availedloan and credit facilities from Indian Bank and have now successfullyturned around the business inspite of the fact that the Bank has beenputting spokes at every stage of the development of the Company. ii) The Indian Bank released advertisements in the newspapersputting the general public on warning about the purchase of office spacefrom the Gemini Group. As the claim of the Bank in the warning noticewas wrong, petitioners 1 and 2 approached the City Civil Court atChennai and filed O.S.No.8922 of 1996 on 9.7.1996. When petitioners 1and 2 offered the properties to be sold by the Bank, the Bank had takena stand that they were not in the real estate business. The Bankneither took up the property for sale nor permitted petitioners 1 and 2to go in for sale of the properties. The golden opportunity of sale ofthe property and settlement of all the loans was sabotaged by release ofthe aforesaid advertisement by the Indian Bank. iii) The Bank, thereafter, laid recovery applications before theDebt Recovery Tribunal (DRT) and obtained several interim orders. TheDRT suggested a settlement by which the Bank would recover its dueswithout crushing the industry and its business. It also directed theparties to work out their remedies before the DRT itself. Petitioners1 and 2 offered to agree for a settlement and accordingly, a compromisememo dated 21.11.2000 was filed before the DRT. As per the terms of thecompromise, petitioners 1 and 2 paid rupees ten crores in twoinstalments in time by sale of one of the properties. But,unfortunately, the Bank refused to release the title deeds to enablepetitioners 1 and 2 to hand it over to the buyer. iv) Then, petitioners 1 and 2 rushed to the DRT and sought forreturn of the title deeds of the property. DRT directed the Bank toreturn the title deeds. Thereafter, petitioners 1 and 2 received orderof attachment on 12.2.2002 from the Tribunal on the application made bythe Indian Bank attaching items 2, 18 and 19 of the annexure to thecompromise memo. Interim debt recovery certificate dated 11.12.2001 forrecovery of Rs.113 crores together with interest at 13% per annum waspassed by the DRT. v) Petitioners 1 and 2 at all times were ready and willing tocomply with the terms of compromise. But, they were prevented fromcomplying with the terms. Now, petitioners 1 and 2 have settled theirentire outstanding dues and legal charges to the Bank on the recoverycertificate issued to the DRT, Chennai. The Bank also filed a memorecording the full satisfaction of the decree passed by the DRT. The https://hcservices.ecourts.gov.in/hcservices/ Tribunal also passed an order on 9.4.2007 based on the memo filed by theparties. Thereafter, the respondent registered the first informationreport against the bank officials and the petitioners. vi) The main allegations against the petitioners found in the FIRare that they received facilities from the Indian Bank without propersanction, they diverted funds to the Group Companies by floating fourbenami Partnership Firms and they also offered intangible securities ascollateral. None of the witnesses examined has spoken to the possibleinvolvement of the petitioners in the offences alleged. The petitionershave already spent as many as seven years in the Trial Court. It maytake about another five or six years for the Trial Court to conclude thetrial of the case and pass a verdict. The prosecution can never besuccessful in its case with the materials available on record. Theentire matter is basically civil in nature. Borrowing money and payingit back is nothing but a part of commercial venture. The delay inpayment of outstanding dues has occasioned the launching of prosecution.Therefore, the petitioners have sought for quashment of the criminalproceedings in C.C.Nos.71, 80, 81 and 82 of 2001.5. The stand of the respondent-CBI taken in the counter filed bythem in Criminal Original Petitions 4764 to 4767 of 2008 is as follows:-i) The cases were registered on 27.6.1998 on the basis of a writtencomplaint given by the General Manager, Vigilance Department, IndianBank, Chennai. The active trial in the case is in progress and many ofthe witnesses have been examined. Even before formal sanction wasaccorded to the third petitioner Company, the former Chairman andManaging Director of Indian Bank sanctioned loan and released the loan.He had also sanctioned and permitted other advances at T.Nagar Branch,Chennai and the Board had ratified all interim sanctions accorded by theformer Chairman and Managing Director and approved the limitssanctioned. Several letter of credits and Bank guarantees were issuedby K.R.Muralidharan, the then Branch Manager, T.Nagar Branch with thepermission of the former Chairman and Managing Director. The Board hadratified all such sanctions permitted by the Chairman and ManagingDirector. ii) After a gap of four years, petitioners 1 and 2 have floatedbenami partnership firms for the purpose of availing facilities fromIndian Bank and diverted the same to other group concerns. All theaccounts of the petitioners were become bad by January 1996 and theaccounts were classified as non performing assets as on 31.3.1996. iii) The Bank filed a suit in May/June 1997 before the DRT, Chennaifor recovery of its dues. The four bogus partnership firms haveutilised the credit facilities for their sister concerns. Substantialloss had been caused to the Bank on account of the facilities enjoyed bythe petitioners and the bogus partnership firms. Investigation wouldreveal that the petitioners were parties to the criminal conspiracy tocheat the Indian Bank, T.Nagar Branch, Chennai. iv) With the misrepresentation, they also inducted the bank to partwith huge funds in the form of Open Cash Credit, Working Capital Demand https://hcservices.ecourts.gov.in/hcservices/ Loan, Overdraft against Book Debts, Inland Bills, Letter of Credit andDeferred Payment Guarantee. The evidence let in and the documentsexhibited so far would prove the conspiracy of the Bank officials in thematter of recommending, sanctioning and disbursing of various facilitiesto the petitioners. False and fabricated documents were submitted bythe petitioners for release of the funds from the Bank. v) Civil liability is a different one from criminal liability.Settlement of dues by the petitioners to the Bank would not absolve thepetitioners from the criminal liability. All the facilities sanctionedby the Bank are for specific genuine trade activities, but, thepetitioners have submitted bogus information, false and fabricateddocuments and induced the Bank to release the facilities and laterdiverted the funds to the Group Concerns and utilised for their personalneeds and for the purpose not known to the Bank. Therefore, thepetitions seeking quashment are liable to be dismissed. 6. Learned Senior Counsel appearing for the petitioners in CriminalOriginal Petition Nos.4764 to 4767 of 2008 would submit that there wasno diversion outside the sister concerns of the petitioners. Asettlement was arrived at between the petitioners and the Indian Bankbefore the DRT and the entire amount was already paid with interest andlegal charges. There was no intention to cheat the Bank at theinception of the loan transaction. Even before launching theprosecution, the Indian Bank had already approached the DRT seeking torecover the amount due from the petitioners. No witness has attributedanything against these petitioners during the course of evidence. Thetransaction between the petitioners and the Bank is essentially civil innature. Therefore, continuance of the criminal proceedings as againstthe petitioners is only an exercise in futility. 7. Learned Special Public Prosecutor for Central Bureau ofInvestigation would vehemently contend that it is unfair to plea forquashing the entire criminal proceedings when the trial is at a crucialstage. Settlement of the loan transaction between the parties will notabsolve the petitioners from other criminal liabilities. When the trialis in progress, in all fairness, the superior court should permit theTrial Court to continue the trial proceedings and pass necessaryverdict. The petitions have been filed seeking quashment late in pointof time. Therefore, he would submit that quashing of the proceedingswill not be in the interest of justice. 8. The main charges framed as against the petitioners are that theyreceived pecuniary advantage as loans and advances causing heavy loss tothe Indian Bank. They also induced the co-accused to press into servicecertain documents for availing loan facilities. They also did not madethe payments on due dates. In C.C.No.71 of 2001, there are 30 accused.53 charges have been framed as against the aforesaid 30 accused. Thetrial has begun about seven years ago and 21 witnesses have so far beenexamined out of 93 witnesses cited. In C.C.No.80 of 2001, there are https://hcservices.ecourts.gov.in/hcservices/ totally eight accused, who face 12 charges. So far 42 witnesses havebeen examined. In C.C.No.81 of 2001, 14 charges have been framed againsteight accused. 18 witnesses have so far been examined. In C.C.No.82 of2001, so far 11 witnesses have been examined. All the witnesses so farexamined have spoken to about the banking procedure in sanctioning theloan and the lapse committed by the Bank officials in extending loanfacilities sought for by the petitioners. They have not deposed to thecharges of conspiracy, cheating and forgery of documents. 9. The Supreme Court, in STATE OF DELHI v. GYAN DEVI (2000 SCC(Cri) 1486) has held that the High Court should not exercise theinherent jurisdiction under section 482 of the Code of CriminalProcedure except for strong reasons to hold that in the interest ofjustice and in order to avoid the abuse of the process of court thecharge needed to be quashed. Further, the aforesaid exercise of thepower should be confined to exceptional cases and rare occasions. TheHigh Court should have sifted the available medical evidence inexercise of its jurisdiction under section 482, and quashed the chargeon the ground that in view of the said evidence, the charge in questioncould not have been framed by the Trial Court. 10. The ratio laid down by the Supreme Court is that the inherentjurisdiction under section 482 of the Code of Criminal Procedure cannotbe exercised in a very crucial manner when materials are available forprosecuting the accused. Only in rare cases where there had been theabuse of the process of the courts, the court can interfere to quash thecriminal proceedings. 11. In STATE OF ORISSA v. SARAJ KUMAR SAHOO ((2006) 2 SCC (Cri)272), the Supreme Court has laid down that section 482 of the Code ofCriminal Procedure can be invoked to do real and substantial justice andnot to stifle the legitimate progress. True that no hard and fast rulecan be laid down as regards the case where such a power can beexercised, but, the High Court, being the Highest Court of State, shouldnormally refrain from giving decision in a case where the entire factsare incomplete and hazy. The High Court should not ordinarily embarkupon an enquiry as to the reliability of the evidence to sustain theallegations which is primarily the function of the Trial Judge. 12. In the instant case, the where Indian Bank had approached theDRT wayback in the year 1997 for the recovery of the outstanding duesfrom the petitioners who availed loan from them. But, it is found thatcriminal prosecution by the Bank has been initiated only in the year1998. The non-payment of the dues to the Bank by the petitionersinspite of the civil litigation launched by the Indian Bank hasbasically provoked the Indian Bank to launch the criminal prosecution asagainst the petitioners. In commercial ventures, borrowal, repaymentand failure to make due payments on account of certain fiscal exigenciesare quite common. Had the entire dues outstanding been paid by the https://hcservices.ecourts.gov.in/hcservices/ petitioners, the Bank would not have thought of launching prosecution asagainst these petitioners. In other words, if the petitioners hadsettled the entire dues before the DRT before launching the prosecutionby the Indian Bank, probably the petitioners would not have faced theordeal of the trial presently launched as against them. 13. The dispute between the Indian Bank and the petitioners hereinwas essentially civil in nature. The entire case of the prosecutionreflects prominently civil profile. The petitioners have availedtotally a sum of about 121 Crores from the Indian Bank. The petitionershad not run away from the civil liability. In fact, they had come outwith the alternative proposal for settlement of the dues long prior tothe prosecution launched by the Indian Bank. The petitioners havingadmitted their liability have clinched amicable settlement before theDRT and as a result of which a sum of Rs.157 crores including interestand legal charges were paid as one time settlement with penal intereston 28.3.2007. The Indian Bank also had filed full satisfaction memobefore the DRT, Chennai on 5.4.2007. In fact, the DRT, Chennai passedan order on 9.4.2007 approving the one time settlement and closed theapplications filed by the Indian Bank as withdrawn. The DRT, Chennaialso ordered release of the original documents pertaining to variousproperties mortgaged with the Bank by the petitioners. As such, therewas no loss to the Bank or to the public. 14. It has been observed by the Supreme Court in CENTRAL BUREAU OFINVESTIGATION v. DUNCANS AGRO INDUSTRIES LTD (1996 SCC (Cri) 1045) asfollows:-"In the facts of the case, it appears to us that thereis enough justification for the High Court to hold thatthe case was basically a matter of civil dispute. TheBanks had already filed suits for recovery of the duesof the Banks on account of credit facility and the saidsuits have been compromised on receiving the paymentsfrom the companies concerned. Even if an offence ofcheating is prima facie constituted, such offence is acompoundable offence and compromise decrees passed inthe suits instituted by the Banks, for all intense andpurposes, amount to compounding of the offence ofcheating. It is also to be noted that a long time haselapsed since the complaint was filed in 1987. It mayalso be indicated that although such FIRs were filed in1987 and 1989, the Banks have not chosen to instituteany case against the alleged erring officials despiteallegations made against them in the FIRs. Consideringthat the investigations had not been completed till 1991even though there was no impediment to complete theinvestigations and further investigations are stillpending and also considering the fact that the claims ofthe Banks have been satisfied and the suits instituted https://hcservices.ecourts.gov.in/hcservices/ by the Banks have been compromised on receivingpayments, we do not think that the said complaintsshould be pursued any further. In our view, proceedingfurther with the complaints will not be expedient. Inthe special facts of the case, it appears to us that thedecision of the High Court in quashing the complaintsdoes not warrant any interference under Article 136 ofthe Constitution. We, therefore, dismiss theseappeals."15. The aforesaid observation squarely applies to the facts andcircumstances of the case. That was also a case where there was a suitfor recovery of the dues of the Banks from the accused. A compromisewas arrived at and as a consequence of which, a compromise decree wasalso passed in the suits instituted by the Banks. The Supreme Court haslaid down that for all intent and purpose, repayment of the amount as aresult of the compromise decree between the parties would amount tocompounding the offence of cheating. 16. The learned Special Public Prosecutor for Central Bureau ofInvestigation would submit that only in a case where the investigationwas pending, the Supreme Court was pleased to quash the entire criminalproceedings on the ground that dues were already settled by the accusedto the bank. But, in the considered opinion of this court, the aforesaidratio would squarely apply even in a case where the trial is pending. 17. The learned Special Public Prosecutor for Central Bureau ofInvestigation would refer to an authority reported in INSPECTOR OFPOLICE, Central Bureau of Investigation v. B.RAJA GOPAL AND OTHERS (2002(3) SUPREME 207) wherein the Supreme Court has held that when a trialwas in progress and reached almost the penultimate stage, the criminalproceedings as against the accused for offences under sections 420, 468and 471 of the Indian Penal Code should not be quashed on the groundthat there was a compromise between the Bank officials and the accusedand the disputed amount found due from the accused was paid later. TheSupreme Court has further observed that such a development may be aground for pleading mitigation of sentence at the final stage of trialof the case. 18. Firstly, it is found that the aforesaid proceedings seekingquashment was embarked upon by the High Court when almost all thewitnesses were examined. Secondly, it is found that the ratio laid downin DUNCANS AGRO INDUSTRIES case was not referred to in the aforesaidauthority pronounced later by the Supreme Court. In the case on hand,it is found that many of the witnesses will have to be examined yet.The petitioners have already faced trial for about seven long years. Itwill definitely take another two or three years for completion of the https://hcservices.ecourts.gov.in/hcservices/ trial of the case before the Trial Court. Therefore, this court heavilyrelies upon the decision rendered by the Supreme Court in DUNCANS AGROINDUSTRIES case. 19. It was not attributed that there was intention on the part ofthe petitioners to cheat the Bank at the very inception of the loantransaction. If there had been such an evil intention on the part ofthe petitioners in clinching the loan transaction with the Bank, theBank would have first laid the criminal complaint and thereafter plungedinto action for recovery of the dues. The Bank would not have firstapproached the civil court seeking recovery of the dues from thepetitioners. It is found that the criminal complaint has been lodged bythe Bank after a lapse of one year from the date of laying the civilsuit only out of frustration that they could not recover whopping duesfrom the petitioners even after the civil litigation was laid as againstthem. 20. It is also not a case of diversion of funds raised from theBank to a non-existent Company or to a Company totally unconnected withthe third petitioner Company. The materials collected would unerringlyshow that some of the funds had been used for the growth of the sisterconcerns of the third petitioner company. Sufficient security also hasbeen furnished by the petitioners in the form of immovable property forthe loan transaction they had clinched with the Indian Bank. 21. In STATE OF ORISSA v. DEBENDRA NATH PADHI (2005 SCC (Cri) 415),it has been held that the Trial Court shall consider only the materialsproduced by the prosecution and not the materials produced by theaccused at the time of framing the charges. 22. The present case is in the midway of trial. The admittedposition is that the petitioners have settled their dues as per thesettlement arrived at between them by the DRT. Firstly, no document isrequired for establishing an admitted fact. Secondly, the present caseis not at the stage of framing of the charges. Therefore, theaforesaid authority does not apply to the facts and circumstances of thecase. 23. The Supreme Court in AMAR CHAND v. SHANTI BOSE (AIR 1973 SC799) has held as follows:-"If the case of the accused was that the allegations inthe complaint do not constitute the offence complainedof or that the complaint has to be quashed for anyground available in law, they should have approached theHigh Court, at any rate, immediately after the chargeswere framed. The records disclose that it was the fourthaccused, who moved the High Court to quash theproceeding on March 17, 1969, earlier than the other https://hcservices.ecourts.gov.in/hcservices/ accused. Even by that date, several prosecutionwitnesses had been examined and they had also beencross-examined by the accused. Several items ofdocumentary evidence had already been let in during thetrial. Only two prosecution witnesses and a courtwitness remained to be examined. The proper course atthat stage to be adopted by the High Court was to allowthe proceedings to go on and to come to its logicalconclusion, on way or the other, and decline tointerfere with those proceedings."24. That was a case where a termination of the trial was short ofonly two witnesses on the side of the prosecution. Almost all the oraland documentary evidence had already been let in. In suchcircumstances, the Supreme Court observed that the High Court shouldhave allowed the proceedings to reach its logical end withoutinterfering therewith. 25. But, in this case, it is found that though the petitioners haveso far faced the trial for about seven long years, they will have toface the ordeal of trial for another two or three years for conclusionof the trial of the case. Therefore, it is not a case where thepetitioners have come before this court at the fag end of the trial ofthe case. When the witnesses have not spoken any thing about the roleof these petitioners and the materials exhibited also do not indicatethe involvement of these petitioners in any of the cases and thepetitioners have already settled the dues to the Indian Bank and theIndian Bank has also withdrawn the applications, the continuance of thetrial which is only an exercise in futility will be a harassment to thepetitioners. 26. It is relevant to refer to the observation made in INDER MOHANGOSWAMI v. STATE OF UTTARANCHAL ((2008) 1 SCC (Cri) 259) as under:-"The powers possessed by the High Court under Section482 of the Code are very wide and the very plenitude ofthe power requires great caution in its exercise. TheCourt must be careful to see that its decision inexercise of this power is based on sound principles.The inherent power should not be exercised to stifle alegitimate prosecution. The High Court should normallyrefrain from giving a prima facie decision in a casewhere all the facts are incomplete and hazy, more so,when the evidence has not been collected and producedbefore the Court and the issues involved, whetherfactual or legal, are of such magnitude that they cannotbe seen in their true perspective without sufficient https://hcservices.ecourts.gov.in/hcservices/ material. Of course, no hard-and-fast rule can be laiddown in regard to cases in which the High Court willexercise its extraordinary jurisdiction of quashing theproceedings at any stage."27. If the court comes to the decision that continuance of theprosecution would be a harassment to the accused, then the court willhave to go to the rescue of the accused at any stage of the proceedings. 28. In the above facts and circumstances, to secure the ends ofjustice, the entire criminal proceedings in C.C. Nos.71, 80, 81 and 82of 2001 as against these petitioners are quashed and consequently,Criminal Original Petition Nos.4764 to 4767 of 2008 are allowed. Sd/Asst. Registrar/true copy/Sub Asst.Registrarssk. To1. The Additional Special Judge for CBI Cases, Chennai.2. The Special Public Prosecutor, High Court, Chennai.3. The Superintendent of Police, CBI Banking Securities & Frauds Cell, Bangalore.+4 cc to M/s.Gita Asokan, Advocate, SR.No.26388.Pur (Co)krd / 5.5.08P.D. ORDER IN Crl.O.P. Nos.4764 to 4767 of 2008