'Banks Cannot Proceed Further If Loans are Cleared'

Published: 09th March 2015 06:07 AM  |   Last Updated: 09th March 2015 06:07 AM   |  A+A-

The Hyderabad High Court has quashed the criminal proceedings pending against the accused in a lower court on the ground that they had cleared the dues to the bank, and held that continuation of proceedings against them on other grounds would be a futile exercise.

Justice S Ravi Kumar passed this order on a petition filed by TB Shankar Rao and three others in a criminal case pending before the II Additional Special Judge for CBI cases, Nampally, Hyderabad. The CBI filed a charge sheet against the four petitioners and seven others for offences under IPC and also for offences under the Prevention of Corruption Act.

According to the charge sheet, the petitioners, with a dishonest intention, applied to Andhra Bank, Shamsheergunj branch in Hyderabad for loans for establishing poultry units and manufacturing poultry medicines without any lands. In connivance with the bank officials, they borrowed Rs 81.25 lakh as term loans and OCC. Availing the loan, they bought lands subsequently and offered them as security. Thus, they caused loss to the bank and made wrongful gain for themselves.

They were charged with offences only under IPC which are punishable under Sections 120-B, 420, 468 and 471. Of the 11 accused, five are public servants and bank officials, and the rest private persons. The petitioners are private persons.

The first of them, representing Sunita Poultry Farm, had obtained a term loan of Rs 23.75 lakh in 1995-1996 repayable in monthly instalments over a period of 84 months with a gestation period of one year after sanction of the loan. He paid instalments from February 1996 till December 1999. Thereafter, as per a final settlement with the bank, paid Rs 18.68 lakh between December 2002 and May 2003 and repaid the entire loan amount. The second petitioner obtained a loan of Rs 23.75 lakh during 1995-96 and commenced repayment in April 2006 and paid up to February 2000. As per settlement, he paid Rs 23.76 lakh between December 2002 and May 2003.

The third petitioner borrowed Rs 23.75 lakh during 95-96 and commenced repayment in  April 1996 and paid till March 2000. As per a final settlement, he paid Rs 23.76 lakh between December 2002 and May 2003.

The petitioners said the total loan amount  had been repaid by the end of May 2003 in pursuance of one-time settlement with the bank and the compromise was arrived at after a long correspondence between them  and the bank and, therefore, the allegation that loans had been obtained to cause loss to the bank and gain to the petitioners was not well founded. They commenced payment of EMI from the inception i.e. 1996 onwards and therefore, the allegation that the loans were obtained with dishonest intention at the inception was also not well founded, they said.

He said repayment schedule commenced in 1996 and even by the date of FIR, a substantial part of loan had been paid back. Had the intention of the petitioners been to cause loss to the bank, there would not have been repayment of substantial amount. The total amount obtained under different loan accounts was Rs 81.03 lakh and the total money paid by way of instalments was Rs 70.29 lakh and the amount paid after settlement was Rs 77.43 lakh, thus a total sum of Rs 147.72 lakh had been paid and all the loan accounts are cleared by the middle of 2003. There was absolutely no loss to the bank and, on the other hand, the entire loan amount with interest was repaid, he explained and urged the court to quash the proceedings against the petitioners.

CBI special public prosecutor said the allegations against the petitioners were in respect of serious offences of cheating and use of false and fictitious documents. Besides, there was also allegation of opening of fictitious accounts and that the petitioners, knowing fully well that the accounts were fictitious, had withdrawn the amounts. Mere repayment of loan would not absolve the petitioners of the offences, he argued.

Justice Ravi Kumar found that the loan amounts had been repaid partly by way of EMIs as agreed upon and the remaining under one-time settlement/compromise with the bank.

With regard to the point that whether the proceedings in the lower court were liable to be quashed or not, the judge said that going by Supreme Court’s observations in Gian Singh’s case it was clear that the criminal cases having overwhelmingly and predominantly civil flavour stood on a different footing for the purpose of quashing particularly the offences arising from commercial, financial, mercantile, civil and partnership or such like transactions or the offences arising out of matrimonial relating to dowry etc., or family disputes.

In Nikhil Merchant’s case, which was similar to the present case, the apex court had quashed the proceedings on the ground that the parties had cleared the bank loans. In that case also, the allegation against the accused was that they had availed credit by making false representation, and the offences levelled against them were under Sections 120-B, 420, 468 and 471 of IPC.  

In the present case also, it was clear that Andhra Bank had accepted a one-time settlement and, in pursuance of such settlement, the entire loan amount was paid and there was no grievance to the bank. As seen from the record, the total loan was Rs 81.03 lakh and the amount repaid was Rs 147.72 lakh, the judge noted.

Justice Ravi Kumar said, “I am of the view that continuation of the proceedings against the petitioners would be a futile exercise, therefore, to secure ends of justice, powers under Section 482 CrPC have to be exercised.”

Accordingly, the judge allowed the petition and quashed the proceedings pending against the petitioners before the trial court.

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