Ashok Sadarangani & Anr vs Union Of India & Ors

whether an offence which is not compoundable under the

provisions of the Criminal Procedure Code, 1973, hereinafter

referred to as the "Cr.P.C.", can be quashed in the facts

and circumstances of the case.

2 2. The writ petitioner No.1, Ashok Sadarangani, opened a

Current Account No.314 in the name of his proprietary

concern, M/s. Internat Impex, Mumbai, with the Bank of

Maharashtra, Overseas Branch, Mumbai. The said account was

subsequently converted by the Bank into Cash Credit Account

No.3 and Cash Credit facility of Rs.125 lacs, Import Letter

of Credit facility of Rs.100 lacs, Bank Guarantee facility

of Rs.20 lacs and Forward Contracts upto a limit of Rs.300

lacs, were sanctioned and such decision was conveyed to the

Petitioner No.1 by the Bank by its letter dated 7th July,

1999. On 16th October, 1999, the Bank sought additional

collateral security of Rs.56 lacs from the Petitioner No.1,

who, on 29th December, 1999, submitted a Lease Deed dated 29th

December, 1999, in respect of an immovable property leased

to M/s. Nitesh Amusements Pvt. Ltd. by Shri Homi D. Sanjana

and his family members, through their Constituted Attorney,

Shri Kersi V. Mehta. The Petitioners herein were Directors

of the aforesaid company.

3 3. In December, 2000, six irrevocable Import Letters of

Credit for a total sum of Rs.188.01 lacs were opened by the

Bank of Maharashtra on behalf of M/s. Internat Impex,

Mumbai, for import of "houseware items & rechargeable

lanterns" and "velvet four-way and upholstery materials".

The documents relating to the said Letters of Credit,

including Bills of Lading, Invoice and Bills of Exchange,

were accepted and collected by the Petitioner No.1 on behalf

of the firm from the Bank and he undertook to make payment

on the due date. However, the Petitioners defaulted in

payment of their liability of about 188 lacs towards the

Bank. On 10th April, 2003, R.C.No.3/E/2003/CBI/EOW/MUM in

Case No.3/CPW/2004, was registered at the behest of the Bank

of Maharashtra. On 30th June, 2003, on the complaint of the

Union Bank of India, Special Case No.3 of 2004, in CBI Case

R.C.No.8/E.2003/MUM, was registered by the Central Bureau of

Investigation, hereinafter referred to as "CBI", against the

Petitioners alleging that they had secured the credit

facilities by submitting forged property documents as

collaterals and utilized such facilities in a dishonest and

4

fraudulent manner by opening Letters of Credit in respect of

foreign supplies of goods, without actually bringing any

goods but inducing the Bank to negotiate the Letters of

Credit in favour of foreign suppliers and also by misusing

the Cash Credit facility.

4. Charge-sheet was filed in the said Special Case No.3 of

2004 on 14th January, 2004. At about the same time, a

criminal case, being No.236 of 2001, was registered against

Shri Kersi Mehta and others under Section 120-B, r/w 465,

467, 468 and 471 of the Indian Penal Code, hereinafter

referred to as the "IPC". The said case was registered

primarily on the accusation that Shri Kersi Mehta, in

connivance with the Petitioner No.1, had sought to sell or

dispose of the property belonging to Shri Homi D. Sanjana,

situated at Kandivli and Aksha and that the Powers of

Attorney dated 11.1.1996 and 24.1.1999, which had been used

by Shri Kersi Mehta in the transactions, were not genuine.

5. In 2000 a Civil Suit, being S.C. Suit No.4849 of 2000,

was filed by Shri Homi D. Sanjana, in the City Civil Court

5

at Bombay, against Shri Kersi Mehta and various Government

authorities, in which the relief sought for was for a

direction upon Shri Kersi Mehta to deliver up to the Court

the said two Powers of Attorney for cancellation of the

same.

6. It is a matter of record that, although, the Petitioner

No.1 has surrendered and is on bail and facing trial, the

Petitioner No.2 is yet to be arrested in connection with the

case.

7. While the criminal case against the Petitioners was

proceeding, the Union Bank of India wrote to the Petitioner

No.1 on 27th September, 2010, offering a One-Time Settlement

of the disputes relating to the transactions in question.

Subsequently, on 27th September, 2010, a compromise proposal

relating to the transaction between the Petitioners and the

Bank was also mooted by the Asset Recovery Branch at Mumbai

of the Bank of Maharashtra and a communication was addressed

to the Petitioner No.1, which, however, made it clear that

such compromise should not be construed as settlement of

6

criminal complaints/investigations/ proceedings pending in

the court against the borrowers/guarantors. As has been

submitted during the course of hearing of the writ petition,

pursuant to such offer of One-Time Settlement, dues of both

the Banks have been cleared by the Petitioners and they

have, therefore, entered into a compromise with the

Petitioners indicating that they had no further claim

against the Petitioners.

8. It is in this background that a separate application was

made in the writ petition, being Criminal Misc. Petition

No.1110 of 2012, for stay of further proceedings in

R.C.No.3/E/2003/CBI/EOW/ MUM filed by the CBI and pending

before the Additional Metropolitan Magistrate, 19th Court,

Esplanade, Mumbai, and also Special Case No.3 of 2004 in CBI

Case RC No.8/E/2003/MUM filed by the CBI before the Special

Judge at Mumbai, together with Criminal Case No.236 of 2001,

registered with Kherwadi Police Station, Bandra (East),

Mumbai. The same has also been taken up for consideration

along with the writ petition for final disposal.

7 9. Appearing in support of the writ petition, Shri Mukul

Rohatgi, learned Senior Advocate, submitted that the issue,

which has fallen for consideration in the writ petition, has

been considered in great detail in several decisions of this

Court. Learned counsel submitted that in some cases this

Court had exercised its powers under Article 142 of the

Constitution of India to quash proceedings which were not

compoundable, but the common thread which runs through

almost all the judgments is that the power to interfere with

even non-compoundable cases was not doubted, but the same

was required to be used very sparingly and only in special

circumstances.

10. Shri Rohatgi submitted that the facts of this case are

almost identical to the facts of the case in Nikhil Merchant

Vs. Central Bureau of Investigation & Anr. [(2008) 9 SCC

677], which was decided on 20th August, 2008. Shri Rohatgi

submitted that as far back as in 1996, a similar issue had

come for consideration before this Court in Central Bureau

of Investigation, SPE, SIU(X), New Delhi Vs. Duncans Agro

8

Industries Ltd., Calcutta [(1996) 5 SCC 591], in which the

provisions of Section 320 Cr.P.C. were considered in regard

to offences which constituted both civil and criminal wrong,

including the offence of cheating. In the said case, this

Court while considering the aforesaid issue held that

compromise in a civil suit for all intents and purposes

amounted to compounding of the offence of cheating.

Furthermore, in the said case, the investigations had not

been completed even till 1991, even though there was no

impediment to complete the same. Having further regard to

the fact that the claim of the Bank had been satisfied and

the suit instituted by the Banks had been compromised on

receiving their dues, this Court was of the view that the

complaint and the criminal action initiated thereupon,

should not be pursued any further.

11. Shri Rohatgi then referred to the decision of this Court

in Nikhil Merchant's case (supra), to which one of us

(Kabir, J.) was a party. In the said case, what was urged

was that though an offence may not be compoundable, it did

9

not take away the powers of this Court to quash such

proceedings in exercise of its inherent jurisdiction under

Article 142 of the Constitution, and even Section 320

Cr.P.C. could not fetter such powers, as had been earlier

held in B.S. Joshi Vs. State of Haryana [(2003) 4 SCC 675].

It had also been contended on behalf of the Union of India

that the power under Article 142 of the Constitution was to

be exercised sparingly and only in rare cases and not

otherwise. The fact that such a power vested in the Supreme

Court under Article 142 of the Constitution or the High

Court under Section 482 Cr.P.C. was never in doubt, only the

manner of its application was in issue and it was held that

such power was to be used sparingly in order to prevent any

obstruction to the spring of justice. Taking an over all

view of the facts in the said case and keeping in mind the

decision in B.S. Joshi's case and the compromise arrived at

between the company and the Bank and the consent terms, this

Court took the view that technicality should not be allowed

to stand in the way of quashing of the criminal

proceedings, since the continuance of the same after the

10

compromise had been arrived at between the parties, would be

a futile exercise. Reference was also made to another

decision of this Court in Manoj Sharma Vs. State & Ors.

[(2008) 16 SCC 1], where following the decisions rendered in

B.S. Joshi's case and in Nikhil Merchant's case (supra) and

after referring to various other decisions, this Court

ultimately came to the conclusion that continuance of the

criminal proceedings before the trial court would be an

exercise in futility and, accordingly, quashed the same.

12. To buttress his aforesaid submissions, Mr. Rohatgi then

referred to and relied upon the decision in Shiji @ Pappu &

Ors. Vs. Radhika & Anr. [(2011) 10 SCC 705], where also the

question of quashing of proceedings relating to non-

compoundable offences after a compromise had been arrived at

between the rival parties, was under consideration. After

examining the powers of the High Court under Section 482

Cr.P.C., the learned Judges came to the conclusion that in

the facts and circumstances of the case, the continuance of

proceedings would be nothing but an empty formality and that

11 Section 482 Cr.P.C. in such circumstances could be

justifiably invoked by the High Court to prevent the abuse

of the process of law. The learned judges, who decided the

said case, took into consideration the decisions rendered by

this Court in B.S. Joshi's case, Nikhil Merchant's case and

also Manoj Sharma's case (supra) in arriving at the

aforesaid decision.

13. Mr. Rohatgi submitted that application of the law as

laid down in the Duncans Agro Industries's case, and,

thereafter, in B.S. Joshi's case, followed in Nikhil

Merchant's case, as also in Manoj Sharma's case (supra),

gave sufficient indication that the powers under Article 142

of the Constitution, as far as the Supreme Court is

concerned, and Section 482 Cr.P.C., as far as the High

Courts are concerned, could not be fettered by reason of the

fact that an offence might not be compoundable but in its

own facts was capable of being quashed.

14. On the other hand, learned Additional Solicitor General,

Shri Mohan Jain, urged that even if the Banks and the

12

Petitioners had settled their disputes and had also entered

into a compromise settlement, that did not absolve the

Petitioners of the offence, which they had already committed

under the criminal laws, which was explicitly indicated in

the settlement itself. Shri Jain submitted that the gravity

of the offence would be revealed from the various

transactions which were effected by the writ petitioners in

order to camouflage their intention of offering as security

a property in respect of which they had no title. As

innocent as it may seem to be, it is more than a coincidence

that the Petitioners offered as security a leasehold

property which had been acquired from one Shri Kersi Mehta,

who had used a Power of Attorney alleged to have been

executed by Shri Homi D. Sanjana and his family members and

in respect whereof a criminal case had been filed by Shri

Homi against the said Kersi Mehta and the writ petitioners.

Shri Jain contended that the entire transaction was based on

a fraud perpetrated on Shri Homi D. Sanjana and his family

members and, in fact, no title to the property in question

had ever passed to the Petitioners.

13 15. Shri Jain submitted that in Rumi Dhar (Smt.) Vs. State

of West Bengal & Anr. [(2009) 6 SCC 364], a Bench of two

Judges while considering the maintainability of criminal

action where the liability was both civil and criminal, had

occasion to consider the effect of a judgment in civil

proceedings in respect of a loan obtained by fraud. As an

off-shoot of the aforesaid question, another question raised

was regarding the continuance of the criminal proceedings

after settlement and repayment of a loan, wherein it was

held that where settlement is arrived at by and between the

creditor bank and debtor, the offence committed as such,

does not come to an end. The judgment of a tribunal in

civil proceedings and, that too, when it is rendered on the

basis of the settlement entered into between the parties,

would not be of much relevance in a criminal proceeding in

view of the provisions of Section 43 of the Indian Evidence

Act, 1872, which provides that judgments in civil

proceedings will be admissible in evidence only for limited

purposes. However, in deciding the said matter, the Bench

14

took note of the decision in Nikhil Merchant's case (supra),

as also the judgment rendered in Duncans Agro Industries

case (supra). While considering the said judgments, the

learned Judges ultimately observed that the jurisdiction of

the Court under Article 142 of the Constitution of India is

not in dispute, but that exercise of such power would depend

on the facts and circumstances of each case. After

referring to the decision in Nikhil Merchant's case (supra),

this Court also held that the High Court, in exercise of its

jurisdiction under Section 482 Cr.P.C. and the Supreme Court

in terms of Article 142 of the Constitution, would

ordinarily direct the quashing of a charge involving a crime

against society, particularly, when both quashing of a case,

continuance whereof after the settlement is arrived at

between the parties, would be a futile exercise. Reference

was then made to another decision of this Court in Sushil

Suri Vs. Central Bureau of Investigation & Anr. [(2011) 5

SCC 708], in which the Bench was called upon to deliberate

upon the very same issue, as has been raised in the present

writ petition. In the said case, after discussing earlier

15

decisions, including those rendered in B.S. Joshi's case

(supra) and in Nikhil Merchant's case (supra), the Court,

while placing reliance on the decision in Rumi Dhar's case

(supra), observed that while the jurisdiction of the Court

under Article 142 of the Constitution was not in dispute,

the exercise of such power would, however, depend on the

facts and circumstances of each case.

16. The learned Additional Solicitor General contended that

having regard to the divergent views expressed by different

Benches of this Court, when the same issue surfaced in Gian

Singh Vs. State of Punjab & Anr., SLP (Crl.) No. 8989 of

2010, wherein the decisions in B.S. Joshi's case, Nikhil

Merchant's case and Manoj Sharma's case (supra) came to be

considered, the Bench comprised of two Judges, was of the

view that the said decisions required reconsideration and

directed that the matter be placed before a larger Bench to

consider the correctness of the said three decisions. Shri

Jain urged that as the same issue which was involved in the

present case was also the subject matter of the reference to

16

a larger Bench, this Court should abstain from pronouncing

judgment on the issue which was the subject matter in the

said reference. Shri Jain urged that in the circumstances

mentioned hereinabove, no relief could be given to the

Petitioners on the writ petition and the same was liable to

be dismissed.

17. Having carefully considered the facts and circumstances

of the case, as also the law relating to the continuance of

criminal cases where the complainant and the accused had

settled their differences and had arrived at an amicable

arrangement, we see no reason to differ with the views that

had been taken in Nikhil Merchant's case or Manoj Sharma's

case (supra) or the several decisions that have come

thereafter. It is, however, no coincidence that the golden

thread which runs through all the decisions cited, indicates

that continuance of a criminal proceeding after a compromise

has been arrived at between the complainant and the accused,

would amount to abuse of the process of court and an

exercise in futility, since the trial could be prolonged and

17

ultimately, may conclude in a decision which may be of any

consequence to any of the other parties. Even in Sushil

Suri's case on which the learned Additional Solicitor

General had relied, the learned Judges who decided the said

case, took note of the decisions in various other cases,

where it had been reiterated that the exercise of inherent

powers would depend entirely on the facts and circumstances

of each case. In other words, not that there is any

restriction on the power or authority vested in the Supreme

Court in exercising powers under Article 142 of the

Constitution, but that in exercising such powers the Court

has to be circumspect, and has to exercise such power

sparingly in the facts of each case. Furthermore, the

issue, which has been referred to a larger Bench in Gian

Singh's case (supra) in relation to the decisions of this

Court in B.S. Joshi's case, Nikhil Merchant's case, as also

Manoj Sharma's case, deal with a situation which is

different from that of the present case. While in the cases

referred to hereinabove, the main question was whether

offences which were not compoundable, under Section 320 18

Cr.P.C. could be quashed under Section 482 Cr.P.C., in Gian

Singh's case the Court was of the view that a non-

compoundable offence could not be compounded and that the

Courts should not try to take over the function of the

Parliament or executive. In fact, in none of the cases

referred to in Gian Singh's case, did this Court permit

compounding of non-compoundable offences. On the other

hand, upon taking various factors into consideration,

including the futility of continuing with the criminal

proceedings, this Court ultimately quashed the same.

18. In addition to the above, even with regard to the

decision of this Court in Central Bureau of Investigation

Vs. Ravi Shankar Prasad & Ors. [(2009) 6 SCC 351], this

Court observed that the High Court can exercise power under

Section 482 Cr.P.C. to do real and substantial justice and

to prevent abuse of the process of Court when exceptional

circumstances warranted the exercise of such power. Once

the circumstances in a given case were held to be such as to

attract the provisions of Article 142 or Articles 32 and 226 19

of the Constitution, it would be open to the Supreme Court

to exercise its extraordinary powers under Article 142 of

the Constitution to quash the proceedings, the continuance

whereof would only amount to abuse of the process of Court.

In the instant case the dispute between the petitioners and

the Banks having been compromised, we have to examine

whether the continuance of the criminal proceeding could

turn out to be an exercise in futility without anything

positive being ultimately achieved.

19. As was indicated in Harbhajan Singh's case (supra), the

pendency of a reference to a larger Bench, does not mean

that all other proceedings involving the same issue would

remain stayed till a decision was rendered in the reference.

The reference made in Gian Singh's case (supra) need not,

therefore, detain us. Till such time as the decisions cited

at the Bar are not modified or altered in any way, they

continue to hold the field.

20. In the present case, the fact situation is different

from that in Nikhil Merchant's case (supra). While in Nikhil

20

Merchant's case the accused had misrepresented the financial

status of the company in question in order to avail of

credit facilities to an extent to which the company was not

entitled, in the instant case, the allegation is that as

part of a larger conspiracy, property acquired on lease from

a person who had no title to the leased properties, was

offered as collateral security for loans obtained. Apart

from the above, the actual owner of the property has filed a

criminal complaint against Shri Kersi V. Mehta who had held

himself out as the Attorney of the owner and his family

members. The ratio of the decisions in B.S. Joshi's case

and in Nikhil Merchant's case or for that matter, even in

Manoj Sharma's case, does not help the case of the writ

petitioners. In Nikhil Merchant's case, this Court had in

the facts of the case observed that the dispute involved had

overtures of a civil dispute with criminal facets. This is

not so in the instant case, where the emphasis is more on

the criminal intent of the Petitioners than on the civil

aspect involving the dues of the Bank in respect of which a

compromise was worked out.

21 21. In the different fact situation of this case and those

in B.S. Joshi's case or in Nikhil Merchant's case (supra),

we are not inclined to grant the reliefs prayed for in the

writ petition and the same is accordingly dismissed.

22. There will, however, be no order as to costs.

...............................................................J.

(ALTAMAS KABIR)

...............................................................J.

(J. CHELAMESWAR)

New Delhi

Dated: 14.03.2012