C.B.I vs A.Ravishankar Prasad & Ors

A. Ravishankar Prasad & Others ... Respondents

JUDGMENT

Dalveer Bhandari, J.

1. Leave granted.

2. The Central Bureau of Investigation is seriously aggrieved

by the judgment of the High Court of judicature at Madras

dated 30.4.2008 by which the High Court has quashed the

entire criminal proceedings and CC Nos.80, 81 and 82 of 2001

against the respondents herein namely, A. Ravishankar

Prasad and A. Manohar Prasad.

3. According to the appellant, the respondents herein have

committed serious offences, such as forgery, fabrication of 2

documents and using the said documents as genuine. The

respondents, A. Ravishankar Prasad and A. Manohar Prasad

also entered into conspiracy with the Chairman and Managing

Director and other officials of the Indian Bank, Chennai with

the object of cheating the Indian Bank in the matter of

recommending/sanctioning/disbursing huge credit facilities in

the form of :

"(1) Letter of Credit (LC);

(2) Open Cash Credit (OCC) (3) Secured- Temporary Overdrafts (SOD/TOO) (4) Bank Guarantee (BG) (5) Blocked Loan; and (6) Taking over of liabilities from other banks and other branches of Indian Bank without proper appraisal, without following banking norms, beyond the delegated powers and without ensuring the end use of the funds in the name of M/s Ravishankar Films Pvt.Ltd., M/s Gemini Arts Pvt.Ltd., M/s Gemini Pictures Circuit Pvt.Ltd. and M/s Prasad Properties and Investments Pvt.Ltd. represented by respondent no.1 A. Ravishankar Prasad and respondent no.2 A. Manohar Prasad who fraudulently produced false documents through their employees and used the same as genuine and defrauded the Indian Bank huge amounts running into hundreds of crores and obtained pecuniary advantage for themselves and others."

4. On completion of investigation charge-sheets were filed

and four cases were registered against M. Gopalakrishnan, 3

formerly CMD, Indian Bank, Chennai and other public

servants, bank officials and A. Ravishankar Prasad and A.

Manohar Prasad and their group concerns under section 120-

B read with section 420 and section 13(2) read with section

13(1)(d) of Prevention of Corruption Act, 1988.

5. On 28.3.2007 the respondents herein have settled the

entire outstanding dues by paying an amount of Rs.157 crores

during March 2007 and the petitions before the Debt Recovery

Tribunal, Chennai have been dismissed as settled out of court.

6. Respondent nos.1 and 2 had preferred application under

section 482 of the Cr.P.C. before the High Court of Madras, to

quash the proceedings against them contending inter alia that

the witnesses so far examined by the prosecution have not

stated anything against the respondents. It is also urged that

the respondents had entered into a compromise with the

Indian Bank and have settled the entire outstanding dues and

legal charges to the bank on the recovery certificate issued to

the DRT, Chennai. In this view of the matter, proceedings

against the respondents need to be quashed.

7. In pursuance of the show cause notice issued by the

High Court, the CBI contended that the cases were registered 4

on the basis of written complaint filed by the General

Manager, Indian Bank, Chennai. It was submitted that the

active trial in the case was in progress and 92 witnesses have

already been examined. The CBI also urged that the

settlement of the loan transactions between the parties would

not absolve the respondents herein from the criminal liability.

According to the CBI, the Madras High Court without properly

scrutinizing the materials produced by the prosecution

quashed the proceedings against the respondents.

8. The High Court has given undue weightage to the

settlement entered between the bank and the respondents.

The settlement has absolved the respondents at the most from

the civil liability but as far as criminal liability under section

120-B read with section 420 IPC is concerned, the

respondents share the charges with the Chairman and the

Managing Director and other officials of the Bank. Therefore,

quashing of the complaint against the respondents was wholly

unwarranted and against the settled position of law. The High

Court did not comprehend the ratio of the series of judgments

of this court and erroneously quashed the proceedings. 5

9. The High Court ought to have appreciated that quashing

of the criminal proceedings against the respondents herein

would also have grave impact and repercussion on the

criminal proceedings pending against the Chairman and the

Managing Director and other officials of the Bank under

section 120-B read with section 420 IPC and section 13(2)

read with section 13(1)(d) of Prevention of Corruption Act,

1988.

10. Before we examine the legal position, it has become

imperative to recapitulate some averments and material

incorporated in the charge-sheet filed against the respondents.

The charges incorporated that during the course of

investigation the complicity of some public servants and

private persons have come to notice and their names have

been included in the list of accused persons. In the charge-

sheet it is incorporated that the senior bank officials in order

to favour respondents A. Ravishanker Prasad and A. Manohar

Prasad representing various companies have defrauded the

bank.

11. The respondents obtained pecuniary advantage for

themselves and for the accused persons mentioned above, 6

causing huge wrongful loss to the Indian Bank T. Nagar (BOT)

Branch to an extent of Rs.5935.65 Lakhs as on 16.6.1997 by

M/s Ravishankar Films Pvt. Ltd. (A-12) (now M/s Ravishankar

Industries Pvt. Ltd.) and to an extent of Rs.750 Lakhs

(excluding interest) to the Indian Bank Kotturpuram Branch,

Chennai in the account of M/s Tamil Nadu Video Corporation

to the tune of Rs.675 Lakhs (excluding interest) to Indian

Bank, Alwarpt Branch, Chennai in the account of M/s Media

Communication Services to the tune of Rs.725 Lakhs

(excluding interest) to Indian Bank, Abhiramapuram Branch,

Chennai in the account of M/s Sri Balaji Finance and

Investments to the tune of Rs.700 Lakhs (excluding interest) to

Indian Bank, Peters Road Branch, Chennai in the account of

M/s Kalyani Audio Enterprises (as on 29.5.1997) and thereby

A-1 to A-31 have committed offences punishable under

sections 120(B) read with sections 420, 467, 468, 471 Indian

Penal Code and section 13(2) read with section 13(1)(d) of

Prevention of Corruption Act, 1988.

12. In furtherance of aforesaid criminal conspiracy in the

course of the same transactions, A. Ravishankar Prasad (A-10)

vide letter dated 20.8.90 addressed to the Branch Manager,

Indian Bank, T. Nagar (BOT) Branch, Chennai requested for 7

the following credit limits viz., Open Cash Credit (OCC) facility

of Rs.390 Lakhs, Medium Term Loan (MTL) of Rs.60 lakhs and

Letter of Credit (LC) of Rs.100 lakhs in favour of M/s

Ravishankar Films Pvt.Ltd. (A-12) (now changed its name as

M/s Ravishankar Industries Pvt.Ltd).

13. In furtherance of aforesaid criminal conspiracy based on

the letter of A-10, S. Ravindran (A-13) the then Branch

Manager, without undertaking any pre-sanction verifications

about the credit worthiness of the company has recommended

for an Open Cash Credit (OCC) facility of Rs.390 lakhs,

Medium Term Loan (MTL) of Rs.60 lakhs and Letter of Credit

(LC) of Rs.100 lakhs in favour of M/s Ravishankar Films

Pvt.Ltd. (A-12). While forwarding the proposal, he exaggerated

information about the profile of the company. While this

proposal was pending for sanction, V.R. Chidambaram (A-30),

the then Zonal Manager of Indian Bank, Chennai had

permitted an ad hoc TOD facility of Rs.50 lakhs on 25.10.90

over phone, without ascertaining the requirement of the firm

for such huge funds. However, S. Ravindran (A-13) released

the entire amount of Rs. 50 lakhs on 24.10.90 itself. This

amount was disbursed by S. Ravindran (A-13) to the sister

concerns of M/s Ravishankar Films Pvt.Ltd. (A-12) as per the 8

request of the Directors of the company A. Ravishankar Prasad

(A-10) and A. Manohar Prasad (A-11) and while doing so he

failed to ensure proper end use of the banks funds.

14. The charge-sheet annexed with the paperbook running

from pages 78 to 191 gives details of the clandestine dealings

and systematic fraud committed by the respondents in

collusion with the bank officials. By recapitulating all details

we would unnecessarily burden this judgment. Regarding

investigation of this case, we would like to observe that this

case seems to be one of the very few well-investigated cases.

In this case, details and particulars regarding respective

individual roles of the respondents in receiving pecuniary

advantages from the bank officials in a clandestine manner

have been enumerated. By no stretch of imagination, it can be

said that allegations in the complaint and charge-sheet taken

at their face value do not constitute offences alleged.

15. Undoubtedly, the High Court possesses inherent powers

under section 482 of the Code of Criminal Procedure. These

inherent powers of the High Court are meant to act ex debito

justitiae to do real and substantial justice, for the

administration of which alone it exists, or to prevent abuse of 9

the process of the court. Inherent power under Section 482

Cr.P.C. can be exercised in following category of cases:

(i) to give effect to an order under the Code;

(ii) to prevent abuse of the process of court, and

(iii) to otherwise secure the ends of justice.

This court time and again has observed that the extraordinary

power under section 482, Cr.P.C. should be exercised

sparingly and with great care and caution. The court would be

justified in exercising the power when it is imperative to

exercise the power in order to prevent injustice. In order to

understand the nature and scope of power under section 482

Cr.P.C. it has become necessary to recapitulate the ratio of the

decided cases.

16. Reference to the following cases would reveal that the

courts have consistently taken the view that they must use the

court's extraordinary power only to prevent injustice and

secure the ends of justice.

17. We have largely inherited the provisions of inherent

powers from the English jurisprudence, therefore the

principles decided by the English courts would be of relevance

for us. It is generally agreed that the Crown Court has

inherent power to protect its process from abuse. The English 10

courts have also used inherent power to achieve the same

objective.

18. In Connelly v. DPP [1964] AC 1254, Lord Devlin while

dealing with similar provisions under the English law stated

that where particular criminal proceedings constitute an

abuse of process, the court is empowered to refuse to allow the

indictment to proceed to trial.

19. Lord Salmon in DPP v. Humphrys [1977] AC 1 stressed

the importance of the inherent power when he observed that it

is only if the prosecution amounts to an abuse of the process

of the court and is oppressive and vexatious that the judge has

the power to intervene. He further stated that the court's

power to prevent such abuse is of great constitutional

importance and should be jealously preserved.

20. In R.P. Kapur v. State of Punjab (1960) 3 SCR 388, this

Court summarized some categories of cases where inherent

power can and should be exercised to quash the proceedings:

(i) where it manifestly appears that there is a legal bar against the institution or continuance of the proceedings;

(ii) where the allegations in the first information report or complaint taken at their face value 11

and accepted in their entirety do not constitute the offence alleged;

(iii) where the allegations constitute an offence, but there is no legal evidence adduced or the evidence adduced clearly or manifestly fails to prove the charge.

21. The powers possessed by the High Court under Section

482 of the Code are very wide and the very plenitude of the

power requires great caution in its exercise. The court must be

careful to ensure that its decision in exercise of this power is

based on sound principles. The inherent power should not be

exercised to stifle a legitimate prosecution. The High Court

should normally refrain from giving a prima facie decision in a

case where all the facts are incomplete and hazy; more so,

when the evidence has not been collected and produced before

the court and the issues involved, whether factual or legal, are

of such magnitude that they cannot be seen in their true

perspective without sufficient material. Of course, no hard and

fast rule can be laid down with regard to cases in which the

High Court will exercise its extraordinary jurisdiction of

quashing the proceedings at any stage.

22. This Court had an occasion to deal with the concept of

inherent powers in State of Karnataka v. L. Muniswamy & 12

Others (1977) 2 SCC 699. The court again reiterated that the

wholesome power under Section 482 Cr.P.C. entitles the High

Court to quash a proceeding when it comes to the conclusion

that allowing the proceeding to continue would be an abuse of

the process of the court or that the ends of justice require that

the proceeding ought to be quashed. The High Courts have

been invested with inherent powers, both in civil and criminal

matters, to achieve a salutary public purpose. A court

proceeding ought not to be permitted to degenerate into a

weapon of harassment or persecution. The court observed in

this case that ends of justice are higher than the ends of mere

law though justice must be administered according to laws

made by the legislature. This case has been followed in a large

number of subsequent cases of this Court and other courts.

23. In another leading case State of Haryana & Others v.

Bhajan Lal & Others 1992 Supp. (1) SCC 335, this Court in

the backdrop of interpretation of various relevant provisions of

the Cr.P.C. under Chapter XIV and of the principles of law

enunciated by this Court in a series of decisions relating to the

exercise of the extraordinary power under Article 226 of the

Constitution of India or the inherent powers under Section

482 Cr.P.C. gave the following categories of cases by way of 13

illustration wherein such power could be exercised either to

prevent abuse of the process of the court or otherwise to

secure the ends of justice. Thus, this Court made it clear that

it may not be possible to lay down any precise, clearly defined

and sufficiently channelised and inflexible guidelines or rigid

formulae and to give an exhaustive list to myriad kinds of

cases wherein such power should be exercised:

(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

14 (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.

(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

24. This Court again in Janata Dal v. H. S. Chowdhary &

Others (1992) 4 SCC 305 observed that in what

circumstances the inherent powers should be exercised:-

"132. The criminal courts are clothed with inherent power to make such orders as may be necessary for the ends of justice. Such power though unrestricted and undefined should not be capriciously or arbitrarily exercised, but should be exercised in appropriate cases, ex debito justitiae to do real and substantial justice for the administration of which alone the courts exist. The powers possessed by the High Court under Section 482 of the Code are very wide and the very plentitude of the power requires great caution in its exercise. Courts must be careful to see that its decision in exercise of this power is based on sound principles."

15 25. The learned counsel for the respondents submitted

written submissions and relied on some of the decided cases of

this court.

26. The decision in Central Bureau of Investigation, SPE,

SIU(X), New Delhi v. Duncans Agro Industries Ltd.,

Calcutta (1996) 5 SCC 591 was relied upon by the learned

counsel for the respondents. The court observed that for the

purpose of quashing the complaint, it is necessary to consider

whether the allegations in the complaint prima facie make out

an offence or not. It is not necessary to scrutinize the

allegations for the purpose of deciding whether such

allegations are likely to be upheld in the trial. Any action by

way of quashing the complaint is an action to be taken at the

threshold before evidences are led in support of the complaint.

For quashing the complaint by way of action at the threshold,

it is, therefore, necessary to consider whether on the face of

the allegations incorporated in a complaint or F.I.R., a

criminal offence is constituted or not.

27. In this case, the court further held that looking to the

facts of the case it appears that after completion of civil suit 16

further investigation in connection with complaints may not be

expedient. In concluding para, it was observed as under:-

"In the facts of the case, it appears to us that there is enough justification for the High Court to hold that the case was basically a matter of civil dispute. 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 prima facie 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".

28. The tenor of the judgment indicates that quashing of the

complaint would depend on the facts of the each case.

29. In Union of India & Others v. B.R. Bajaj & Others

(1994) 2 SCC 277 the court after examining this court's

judgment in Ch. Bhajan Lal's case (supra) observed that at

the stage of FIR the court should refrain from interfering when

the FIR discloses commission of a cognizable offence.

30. In B.S. Joshi & Others v. State of Haryana &

Another (2003) 4 SCC 675 the court reiterated the legal

position that the court's inherent powers have no limit but

should be exercised with utmost care and caution. Inherent

powers must be utilized with the sole purpose to prevent the 17

abuse of the process of the court or to otherwise secure the

ends of justice. In exercise of inherent powers, proper

scrutiny of facts and circumstances of concerned case are

absolutely imperative.

31. In Nikhil Merchant v. Central Bureau of Investigation

& Another (2008) 9 SCC 677, this court while relying on the

aforesaid judgment in B.S. Joshi's case (supra) observed that

on overall view of the facts the court was satisfied that

technicality should not be allowed to stand in the way of

quashing of the criminal proceedings.

32. In Jagdish Chanana & Others v. State of Haryana &

Another 2008 (4) Scale 411 this court observed as under:-

"The fact that a compromise has indeed been recorded is admitted by all sides and in terms of the compromise the disputes which are purely personal in nature and arise out of commercial transactions, have been settled in terms of the compromise with one of the terms of the compromise being that proceedings pending in court may be withdrawn or compromised or quashed, as the case may be. In the light of the compromise, it is unlikely that the prosecution will succeed in the matter. We also see that the dispute is a purely personal one and no public policy is involved in the transaction that had been entered into between the parties. To continue with the proceedings, therefore, would be a futile exercise."

18 33. In Madan Mohan Abbot v. State of Punjab (2008) 4

SCC 582 in which one of us (Bedi, J.) was the author of the

judgment observed as under:-

"We need to emphasise that it is perhaps advisable that in disputes where the question involved is of a purely personal nature, the court should ordinarily accept the terms of the compromise even in criminal proceedings as keeping the matter alive with no possibility of a result in favour of the prosecution is a luxury which the courts, grossly overburdened as they are, cannot afford and that the time so saved can be utilized in deciding more effective and meaningful litigation. This is a common sense approach to the matter based on ground of realities and bereft of the technicalities of the law."

34. In a recently delivered judgment of this court in Smt.

Rumi Dhar v. State of West Bengal & Another JT 2009 (5)

SC 321, this court approved the observations of the Special

Judge. The observations of Special Judge are set out as

under:-

"The learned Special Judge in his order dated 16.12.2006 rejected the contention raised on behalf of the appellant herein, stating:

"I have gone through the record, citation and considered the circumstances. It is true that the accused has put a good gesture by paying of the dues of the bank but I am at one with the Ld. PP that this payment cannot exonerate the accused from a prima facie charge. If I allow this, then I may have to swallow in a case of 19

bribery that the accused has paid back the amount to the sufferer the amount received as bribe. It is a question of trial whether there was any criminal intention on the part of this Lady accused in this crime. The criminal intention is to be inferred from the evidence to be adduced by the prosecution. Simply because the money has been returned, I cannot shut the mouth of the prosecution from adducing evidence against this accused. Thus, I do not like to pass any order in favour of the accused. The prayer for discharge of accused no. 7, Rumi Dhar stands rejected. Let the case proceed. Fix 7.2.07 for consideration of charge. The sureties must produce all the accused persons on that date."

35. The facts of the instant case are quite akin to Rumi

Dhar (supra)'s case. In the instant case, the charge-sheet

clearly reveal substantial material on record making a clear

case under section 120-B read with section 420 IPC against

the respondents and their connivance with the bank officials.

36. The High Court in the impugned judgment has

misunderstood and misapplied the ratio of the three-Judge

Bench of this court in Inder Mohan Goswami & Anr. V.

State of Uttarachal & Ors. 2007(12) SCALE 15 to the facts

of this case. One of us (Bhandari, J.) was the author of the 20

said judgment. The ratio of the said judgment is in para 24 at

at page 25 which reads as under:-

"Inherent powers under section 482 Cr.P.C. though wide have to be exercised sparingly, carefully and with great caution and only when such exercise is justified by the tests specifically laid down in this section itself. Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the Court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the Statute."

37. The court in para 27 also observed that inherent power

should not be exercised to stifle a legitimate prosecution.

38. Let us consider the facts of this case and apply the ratio

of Goswami's case (supra) where facts are as follows:-

(I) allegations are that accused have committed serious offences such as forgery, fabrication of documents and used those documents as genuine;

(II) allegations are that accused/respondents herein, A. Ravishankar Prasad and A. Manohar Prasad have entered into a conspiracy with the Chairman and Managing Director and other officials of the Indian Bank, Chennai with the object of cheating the Indian Bank in 21

the matter of recommending, sanctioning, disbursing huge credit facilities running over hundreds of crores.

(III) Trial of all four cases are at advanced stage in which 92 witnesses have already been examined.

39. While applying the ratio of Goswami's case (supra), how

any court in its legitimate exercise of power under section 482

Cr.P.C. quash the proceedings against accused A.

Ravishankar Prasad and A. Manohar Prasad in the face of

aforesaid allegations. In the instant case, wrong application of

the ratio of the said judgment has led to grave miscarriage of

justice.

40. Careful analysis of all these judgments clearly reveals

that the exercise of inherent powers would entirely depend on

the facts and circumstances of the each case. The object

incorporating inherent powers in the Code is to prevent abuse

of the process of the court or to secure ends of justice.

41. Both English and the Indian courts have consistently

taken the view that the inherent powers can be exercised in

those exceptional cases where the allegations made in the first

information report or the complaint, even if are taken on their 22

face value and accepted in their entirety do not prima facie

constitute any offence or make out a case against the accused.

42. When we apply the settled legal position to the facts of

this case it is not possible to conclude that the complaint and

charge-sheet prima facie do not constitute any offence against

the respondents. It is also not possible to conclude that

material on record taken on face value make out no case

under section 120-B read with section 420 IPC against the

respondents. Prima facie, we are of the opinion that this is

one case where adequate material is available on record to

proceed against the respondents.

43. In our considered view it was extremely unfortunate that

the High Court in the impugned judgment has erroneously

invoked inherent power of the court under section 482 of the

Code of Criminal Procedure. The High Court ought to have

considered the entire material available to establish a case

against the respondents under section 120-B read with section

420 IPC. It is significant that the respondents and the other

bank officials share the charges under section 120-B read with

section 420 IPC. Quashing the charges against the 23

respondents would also have very serious repercussions on

the pending cases against the other bank officials.

44. In four cases, 92 witnesses have already been examined.

The trial of the case was at the advanced stage. At this sage,

the High Court has seriously erred in quashing the charges

against respondent nos.1 and 2.

45. Quashing the proceedings at that stage was clearly an

abuse of the process of the court. The court neither

considered the entire material nor appreciated the legal

position in proper perspective. The impugned judgment is

wholly unsustainable in law and is accordingly set aside.

Unfortunately, because of unnecessary interference by the

High Court under section 482 Cr.P.C. the trial of this case

could not be completed and concluded.

46. Before parting with the case we would like to observe that

mere re-payment of loan under a settlement cannot exempt

the accused from the criminal proceeding in the facts of this

case.

47. We would like to observe that any observations made in

this case have been made to decide the present case. The trial 24

court may decide the case without being influenced by any

observations made by this court.

48. In this view of the fact, in the interest of justice we direct

that the trial be now completed as expeditiously as possible.

The trial court is directed to conduct the trial on day to day

basis and parties are directed to cooperate with the trial court.

The trial court shall ensure that unnecessary adjournments be

avoided and trial be concluded as expeditiously as possible.

49. The appeals are consequently allowed and the impugned

judgment of the High Court is set aside. The appeals stand

disposed of accordingly.

....................................J. (Dalveer Bhandari)

....................................J. (Harjit Singh Bedi) New Delhi;

May 15, 2009