Supreme Court quashes criminal proceedings after settlement in CBI case: CBI vs. B.B. Agarwal (2019)

Date of the Judgment: 18 February 2019

Citation: Not Available

Judges: Abhay Manohar Sapre, J., L. Nageswara Rao, J.

Can a criminal case be quashed when a related civil dispute has been settled? The Supreme Court of India addressed this question in a case involving allegations of fraud against two companies and their directors. The Court considered whether the settlement of a civil suit should halt the criminal proceedings arising from the same set of facts. This judgment clarifies the circumstances under which the High Court can exercise its powers under Section 482 of the Code of Criminal Procedure, 1973 to quash criminal proceedings. The judgment was delivered by a bench comprising Justices Abhay Manohar Sapre and L. Nageswara Rao.

Case Background

In 1992-93, the Central Bureau of Investigation (CBI) discovered that two companies, M/s New Beam Ferro Alloys Ltd. (NBFAL) and M/s West Coast Brewers & Distillers Ltd. (WCBDL), allegedly defrauded Punjab National Bank (PNB) of approximately Rs. 15 crores through their public issues. The CBI filed a criminal case against the directors of these companies and PNB officials under Section 120B read with Sections 409, 420, 468, 471 of the Indian Penal Code, 1860, and Section 13(2) read with Section 13(1)(c) and (d) of the Prevention of Corruption Act, 1988.

A charge sheet was filed against 12 accused persons, including six individuals and the two companies. During the pendency of the case, four individual accused died, and the names of WCBDL and Surlex Diagnostic Ltd. were removed from the list of accused. PNB also filed civil suits in the Bombay High Court to recover the outstanding dues from the companies and their directors, which were later transferred to the Debt Recovery Tribunal (DRT), Mumbai. During the pendency of these civil suits, PNB and the two companies reconciled their accounts and reached a one-time settlement on 06.06.2006. The DRT accepted the settlement on 11.05.2006, and the companies paid Rs. 12.20 crores to PNB, settling the dues.

Timeline

Course of Proceedings

The respondents, who were the accused in the criminal case, filed petitions in the High Court of Delhi under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the criminal proceedings. The High Court allowed the petitions and quashed the criminal proceedings, leading to the CBI filing appeals in the Supreme Court.

Legal Framework

The case involves several sections of the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988. Specifically, Section 120B of the Indian Penal Code, 1860 deals with criminal conspiracy. Section 409 of the Indian Penal Code, 1860 addresses criminal breach of trust by a public servant or banker, merchant or agent. Section 420 of the Indian Penal Code, 1860 pertains to cheating and dishonestly inducing delivery of property. Section 468 of the Indian Penal Code, 1860 deals with forgery for the purpose of cheating. Section 471 of the Indian Penal Code, 1860 addresses using as genuine a forged document. Additionally, Section 13(2) read with Section 13(1)(c) and (d) of the Prevention of Corruption Act, 1988, relates to criminal misconduct by a public servant. The High Court’s power to quash criminal proceedings is derived from Section 482 of the Code of Criminal Procedure, 1973, which allows the court to make orders to prevent abuse of the process of any court or otherwise to secure the ends of justice.

Arguments

The CBI argued that despite the settlement of the civil suits, the criminal case should proceed to its logical conclusion. They relied on the Supreme Court’s decision in Rumi Dhar (Smt.) vs. State of West Bengal & Anr., (2009) 6 SCC 364, to support their contention that the criminal case should not be quashed merely because a civil dispute has been settled. The CBI contended that the High Court should not have quashed the charge sheet at its threshold under Section 482 of the Cr.P.C.

The respondents, on the other hand, argued that with the settlement of accounts, the consent decree from DRT, and the payment of the entire sum, there was no live issue remaining to warrant the continuation of criminal proceedings. They argued that no criminality issue survives, and continuing the criminal trial would be an abuse of process.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

✓ Whether the High Court was justified in allowing the petitions filed by the respondents under Section 482 of the Cr.P.C. and quashing the criminal proceedings?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The following authorities were considered by the Court:

Judgment

The Supreme Court dismissed the appeals, upholding the High Court’s decision to quash the criminal proceedings. The Court agreed with the High Court that no criminality issue survived, and continuing the criminal trial would be an abuse of process. The Court emphasized that the parties had settled their accounts, obtained a consent decree from the DRT, and paid the entire sum due to PNB. Therefore, there was no justification to continue the criminal proceedings.

Authorities Viewed by the Court:

✓ Rumi Dhar (Smt.) vs. State of West Bengal & Anr., (2009) 6 SCC 364*: The Court distinguished this case and held that in the present case, there is no criminality issue surviving and continuing the criminal trial would be an abuse of process.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the fact that the parties had completely settled their civil dispute. The Court noted that the accounts were reconciled, a consent decree was obtained from the DRT, and the entire outstanding amount was paid to the bank. The Court observed that no criminality issue survived, and continuing the criminal trial would be an abuse of the judicial process. The Court’s decision was also influenced by the fact that the dispute was essentially of a civil nature, and the settlement had resolved all outstanding issues between the parties.

The Court considered the alternative interpretation that the criminal case should continue despite the settlement of the civil dispute, as argued by the CBI, relying on Rumi Dhar (Smt.) vs. State of West Bengal & Anr., (2009) 6 SCC 364. However, the Court rejected this interpretation, distinguishing the facts of the present case. The Court held that in the present case, there is no criminality issue surviving and continuing the criminal trial would be an abuse of process, therefore, the criminal proceedings were quashed.

The Supreme Court’s decision was based on the following reasons:

• The parties had settled their accounts.
• A consent decree was obtained from the DRT.
• The entire sum due to PNB was paid.
• No criminality issue survived.
• Continuing the criminal trial would be an abuse of process.

The Court quoted: “We are also of the view that there arises no occasion to prosecute the respondents as was rightly held by the High Court while quashing the criminal case against the respondents.” and “Indeed, it would be an abuse of process, as was rightly held by the High Court to which we concur.” and “In view of the foregoing discussion, we find no merit in these appeals. The appeals are accordingly dismissed.”

There were no dissenting opinions in this case as the judgment was unanimous.

Key Takeaways

• Criminal proceedings can be quashed under Section 482 of the Cr.P.C. if a related civil dispute has been fully settled.
• The settlement must include reconciliation of accounts, a consent decree from the appropriate authority, and full payment of dues.
• The Court will examine whether any criminality issue survives after the settlement.
• If no criminality issue survives, continuing the criminal trial would be an abuse of process.

This judgment has implications for cases where civil and criminal proceedings arise from the same set of facts. It clarifies that settlement of civil disputes can lead to the quashing of criminal proceedings if no criminality issue remains.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that when a civil dispute is settled with full payment and reconciliation, and no criminality issue survives, criminal proceedings arising from the same facts can be quashed to prevent abuse of process. This judgment clarifies the circumstances under which the High Court can exercise its powers under Section 482 of the Cr.P.C. to quash criminal proceedings. The court has distinguished the case of Rumi Dhar (Smt.) vs. State of West Bengal & Anr., (2009) 6 SCC 364 on the facts of the present case.

Conclusion

The Supreme Court dismissed the appeals filed by the CBI, upholding the High Court’s decision to quash the criminal proceedings against the respondents. The Court concluded that the settlement of the civil dispute, along with the full payment of dues, eliminated any basis for continuing the criminal trial. The Court emphasized that no criminality issue survived and that continuing the criminal proceedings would be an abuse of the judicial process.