Supreme Court Quashes Criminal Proceedings in Commercial Dispute After Settlement: Suresh C. Singal vs. State of Gujarat (2025)

Introduction

Date of the Judgment: April 16, 2025

Citation: 2025 INSC 495

Judges: Abhay S. Oka, J. and Augustine George Masih, J.

When can a settlement in a commercial dispute lead to the quashing of criminal proceedings? The Supreme Court of India recently addressed this crucial question in a case involving allegations of fraud and forgery related to Letters of Credit. The Court examined whether continuing criminal proceedings after a settlement between a bank and the accused parties would be an abuse of the legal process.

The core issue revolved around whether criminal charges, initially filed by the Central Bureau of Investigation (CBI) for offences under the Indian Penal Code and the Prevention of Corruption Act, could be quashed following a One-Time Settlement (OTS) between the involved parties and the Bank of Maharashtra. The resolution of this issue hinged on determining the extent to which the High Court could exercise its powers under Section 482 of the Code of Criminal Procedure (CrPC) and Article 226 of the Constitution to prevent injustice.

The judgment was delivered by a bench comprising Justice Abhay S. Oka and Justice Augustine George Masih.

Case Background

Between 1998 and 2005, the Bank of Maharashtra sanctioned multiple credit facilities to the Appellants, Suresh C. Singal & Ors., recognizing their strong financial standing. However, starting in June 2005, the Appellant companies encountered financial difficulties due to adverse market conditions, including the 2004 Surat floods. This downturn led the bank to classify their loans/credit facilities as Non-Performing Assets (NPA).

Subsequently, the Bank of Maharashtra initiated applications before the Debt Recovery Tribunal, Ahmedabad (DRT), to recover the outstanding debt.

During the pendency of these recovery proceedings, the Central Bureau of Investigation (CBI), acting on reliable information, registered FIR No. RC 13(E)/2008-CBI on December 8, 2008. This FIR named the Appellants, proforma Respondents 3 and 4, and the Branch Manager of the Bank of Maharashtra, alleging offences punishable under Sections 420, 467, 468, and 471 read with Section 120B of the Indian Penal Code (IPC), as well as Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act).

Timeline

Date	Event
1998-2005	Bank of Maharashtra sanctioned multiple credit facilities to the Appellants.
June 2005 onwards	Appellant companies faced a financial crunch due to adverse market conditions.
2008	Loans/credit facilities classified as Non-Performing Assets (NPA). Bank of Maharashtra filed applications for recovery of debt before the Debt Recovery Tribunal, Ahmedabad (DRT).
December 8, 2008	CBI registered FIR No. RC 13(E)/2008-CBI against the Appellants and others.
December 27, 2008	One Time Settlement proposal communicated to the Appellants.
April 12, 2010	Revised/extended compromise proposal finalized.
May 27, 2010	CBI filed a chargesheet under Section 120B read with Sections 419, 420, 467, 468, and 471 IPC.
June 8, 2010	Original Application, as preferred by the Bank before the DRT was disposed of.
April 11, 2011	No Dues Certificate issued to the Appellants by the Bank of Maharashtra.
July 4, 2011	Proceedings before the DRT ultimately stood disposed of.
November 15, 2011	Appellants discharged by the Additional Chief Judicial Magistrate, CBI Court No.2, Ahmedabad (Rural), Mirzapur.
July 9, 2015	Revision petition filed by CBI accepted by the learned Sessions Judge, Ahmedabad, setting aside the discharge order.
May 5, 2017	Gujarat High Court dismissed the Appellants’ petition seeking quashing of the FIR and chargesheet.

Course of Proceedings

In light of the settlement with the Bank and the receipt of a “No Dues Certificate,” the Appellants filed an application for discharge under Section 239 of the Code of Criminal Procedure, 1973, before the Additional Chief Judicial Magistrate, CBI Court No.2, Ahmedabad (Rural), Mirzapur. This application was accepted, and the Appellants were discharged on November 15, 2011.

The CBI challenged this order by filing a revision petition before the learned Sessions Judge, Ahmedabad. On July 9, 2015, the Sessions Judge accepted the revision petition and set aside the discharge order. The Appellants then challenged this order before the High Court of Gujarat, seeking to quash the FIR and the resulting chargesheet. The High Court dismissed their petition on May 5, 2017, leading to the present appeal before the Supreme Court.

Legal Framework

The legal framework relevant to this case includes several sections from the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988 (PC Act). These provisions outline the offences for which the Appellants were initially charged:

Section 420, IPC: This section deals with cheating and dishonestly inducing delivery of property. It punishes acts where someone deceives another person, leading them to part with their property or valuable security.
Section 467, IPC: This section pertains to forgery of valuable security, will, or authority to adopt a son, which involves creating a false document with the intent to cause damage or injury.
Section 468, IPC: This section addresses forgery for the purpose of cheating, which involves creating a false document with the intention of deceiving someone.
Section 471, IPC: This section covers using as genuine a forged document or electronic record, knowing it to be forged and intending to cause damage or injury.
Section 120B, IPC: This section deals with criminal conspiracy, which involves an agreement between two or more persons to do an illegal act or a legal act by illegal means.
Section 13(2) read with Section 13(1)(d), PC Act: These sections relate to criminal misconduct by a public servant, specifically if a public servant abuses their position to obtain for themselves or any other person any valuable thing or pecuniary advantage.

Arguments

Arguments by the Appellants:

The dispute was essentially of a civil/commercial nature, initiated by the Bank through applications before the DRT, and it stood settled with the dues having been paid by the Appellants.
Continuation of criminal proceedings after the settlement of the civil liability would be oppressive and an abuse of the process of law.
The chances of conviction are very bleak, especially since the allegations against the Bank Manager were found to be unsubstantiated, leading to the dropping of charges under the PC Act.
The Bank had no grievance, and neither an FIR was registered nor any criminal proceedings initiated against the appellants by the Bank of Maharashtra. The FIR was registered suo motu by CBI.
The sanctioned principal amount was ₹14.20 Crores, and the amount paid to the Bank was ₹19.67 Crores, an extra amount of ₹5.47 Crores. No wrongful loss was caused to the Bank, and all payments due in respect of the Letters of Credit stand paid.
All norms and practices applicable in banking laws and regulations were duly followed during the transactions, and no violations were recorded.
The Court, in exercising its powers under Section 482 of CrPC 1973 and Article 226 of the Constitution of India, should quash the proceedings, which would be just and equitable.

The counsel for the appellants relied on several decisions of the Supreme Court, including:

Central Bureau of Investigation, ACB, Mumbai v. Narendra Lal Jain and Others
Gian Singh v. State of Punjab and Another
Gold Quest International Private Limited v. State of Tamil Nadu and Others
B.S. Joshi and Others v. State of Haryana and Another
Central Bureau of Investigation, SPE, SIU (X), New Delhi v. Duncan’s Agro Industries Ltd., Calcutta
Nikhil Merchant v. Central Bureau of Investigation and Another
Narinder Singh and Others v. State of Punjab and Another

These cases support the argument that disputes primarily civil or financial in nature, where the matter stands settled between the parties and the aggrieved party has no objection, can be quashed to prevent undue hardship and abuse of process.

Arguments by the CBI:

Merely because a compromise has been entered into between the accused party and the Bank, substantial criminal charges pending adjudication cannot be quashed.
The offences committed have a harmful effect on the public and threaten the well-being of society, shaking the trust of common citizens in banks and financial institutions.
A fraud was played upon the Bank of Maharashtra, leading to the loss of a huge amount through a complex chain of Letters of Credit obtained upon forged documents.
The accused persons entered a criminal conspiracy to cheat the Bank of Maharashtra in sanctioning the 624 Letters of Credit in favor of the Companies owned by the Appellants to the tune of ₹14.20 crores and thereafter diverting the funds into the accounts of fictitious suppliers.
This is not merely a dispute in the nature of civil/financial implications but has a wider ramification.

The counsel for the CBI relied on the judgments of the Supreme Court in:

Central Bureau of Investigation v. Jagjit Singh
State of Maharashtra v. Vikram Anantrai Doshi and Others
Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai and Others v. The State of Gujarat and Others

These cases argue that economic offences have implications beyond mere private disputes, affecting the financial and economic well-being of the State.

Submissions Table

Main Submission	Appellants’ Sub-Submissions	CBI’s Sub-Submissions
Nature of Dispute	✓ Primarily civil/commercial. ✓ Dispute settled with dues paid. ✓ Bank has no grievance.	✓ Substantial criminal charges pending. ✓ Offences affect public trust and well-being. ✓ Wider ramifications beyond civil implications.
Prospects of Conviction	✓ Bleak chances of conviction. ✓ Bank Manager charges dropped.	✓ Fraud played on the Bank. ✓ Criminal conspiracy to cheat the Bank.
Financial Impact	✓ ₹19.67 Crores paid against ₹14.20 Crores principal. ✓ No wrongful loss to the Bank.	✓ Diversion of funds to fictitious suppliers.
Abuse of Process	✓ Continuation of proceedings is oppressive. ✓ Violates principles of justice and equity.	✓ Offences do not stand washed away with settlement. ✓ Accused must face the charges.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

What is the extent of the powers of the High Court under Section 482 CrPC and Article 226 of the Constitution to quash an FIR, chargesheet, and consequential proceedings?

Treatment of the Issue by the Court

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

Issue	How the Court Dealt with It	Brief Reasons
Extent of High Court’s powers to quash FIR, chargesheet, and consequential proceedings	The Court held that the High Court has the power to quash criminal proceedings in cases with predominantly civil character, especially when parties have resolved their disputes.	The Court emphasized that disputes of a commercial nature, where the aggrieved party (Bank) has no grievance and a settlement has been reached, should not lead to continued criminal proceedings. The Court noted that the possibility of conviction was remote and continuation of proceedings would be oppressive.

Authorities

The Court considered various cases and legal provisions to address the issue at hand:

Powers of the High Court under Section 482 CrPC:
- Sushil Suri v. Central Bureau of Investigation and Another, (2011) 5 SCC 708: This case laid down that the inherent jurisdiction of the High Court may be exercised to give effect to an order under the Cr.P.C., to prevent an abuse of the process of Court, and to otherwise secure the ends of justice. The power has to be exercised sparingly with great caution and care to do real and substantial justice.
Quashing of Criminal Proceedings in Cases with Civil Overtures:
- Central Bureau of Investigation, ACB, Mumbai v. Narendra Lal Jain and Others, (2014) 5 SCC 364
- Gian Singh v. State of Punjab and Another, (2012) 10 SCC 303
- Gold Quest International Private Limited v. State of Tamil Nadu and Others, (2014) 15 SCC 235
- B.S. Joshi and Others v. State of Haryana and Another, (2003) 4 SCC 675
- Central Bureau of Investigation, SPE, SIU (X), New Delhi v. Duncan’s Agro Industries Ltd., Calcutta, (1996) 5 SCC 591
- Nikhil Merchant v. Central Bureau of Investigation and Another, (2008) 9 SCC 677
- Narinder Singh and Others v. State of Punjab and Another, (2014) 6 SCC 466
- K. Bharthi Devi and Another v. State of Telangana and Another, (2024) 10 SCC 384: This recent judgment reiterated the principles for quashing criminal proceedings where the dispute predominantly involves civil aspects and a settlement has been reached.
Cases Cited by CBI:
- Central Bureau of Investigation v. Jagjit Singh, (2013) 10 SCC 686
- State of Maharashtra v. Vikram Anantrai Doshi and Others, (2014) 15 2 SCC 29
- Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai and Others v. The State of Gujarat and Others, (2017) 9 SCC 641: These cases were distinguished by the Court, emphasizing that the present case involved a commercial dispute with no continuing grievance from the Bank and a settlement in place.

Authority Consideration Table

Authority	How the Court Viewed It
Sushil Suri v. Central Bureau of Investigation and Another, (2011) 5 SCC 708 Supreme Court of India	Explained the scope and limitations of the High Court’s inherent powers under Section 482 CrPC.
Central Bureau of Investigation, ACB, Mumbai v. Narendra Lal Jain and Others, (2014) 5 SCC 364 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Gian Singh v. State of Punjab and Another, (2012) 10 SCC 303 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Gold Quest International Private Limited v. State of Tamil Nadu and Others, (2014) 15 SCC 235 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
B.S. Joshi and Others v. State of Haryana and Another, (2003) 4 SCC 675 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Central Bureau of Investigation, SPE, SIU (X), New Delhi v. Duncan’s Agro Industries Ltd., Calcutta, (1996) 5 SCC 591 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Nikhil Merchant v. Central Bureau of Investigation and Another, (2008) 9 SCC 677 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Narinder Singh and Others v. State of Punjab and Another, (2014) 6 SCC 466 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
K. Bharthi Devi and Another v. State of Telangana and Another, (2024) 10 SCC 384 Supreme Court of India	Relied upon to support the quashing of criminal proceedings in cases with civil overtures.
Central Bureau of Investigation v. Jagjit Singh, (2013) 10 SCC 686 Supreme Court of India	Distinguished; the Court noted that the present case involved a commercial dispute with no continuing grievance from the Bank and a settlement in place.
State of Maharashtra v. Vikram Anantrai Doshi and Others, (2014) 15 2 SCC 29 Supreme Court of India	Distinguished; the Court noted that the present case involved a commercial dispute with no continuing grievance from the Bank and a settlement in place.
Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai and Others v. The State of Gujarat and Others, (2017) 9 SCC 641 Supreme Court of India	Distinguished; the Court noted that the present case involved a commercial dispute with no continuing grievance from the Bank and a settlement in place.

Judgment

The Supreme Court allowed the appeal, quashing the criminal proceedings against the Appellants. The Court held that the High Court should have exercised its powers under Section 482 CrPC to quash the proceedings, given the primarily civil nature of the dispute and the settlement between the parties.

How each submission made by the Parties was treated by the Court?

Submission	How the Court Treated It
Appellants: The dispute is essentially civil/commercial and stands settled.	Accepted. The Court agreed that the dispute was primarily civil in nature and the settlement should be given weight.
Appellants: Continuation of criminal proceedings would be oppressive.	Accepted. The Court found that continuing the proceedings would be an abuse of process and cause undue hardship.
Appellants: Prospects of conviction are bleak.	Accepted. The Court noted that with the Bank Manager’s charges dropped, the likelihood of conviction was low.
CBI: Substantial criminal charges are pending and cannot be quashed.	Rejected. The Court held that in cases with predominantly civil character, criminal charges can be quashed.
CBI: Offences have a harmful effect on public trust.	Distinguished. The Court found that the settlement mitigated the impact on public trust in this specific case.
CBI: A fraud was played upon the Bank.	Not fully accepted. While acknowledging the allegations, the Court emphasized that the Bank had been compensated and had no further grievance.

How each authority was viewed by the Court?

Sushil Suri v. Central Bureau of Investigation and Another [CITATION]: Used to define the scope of the High Court’s powers under Section 482 CrPC.
Gian Singh v. State of Punjab [CITATION]: Used to support the principle that criminal proceedings with a predominantly civil flavor can be quashed.
K. Bharthi Devi and Another v. State of Telangana and Another [CITATION]: Used to reinforce the view that disputes with civil overtures should not be subjected to prolonged criminal proceedings when a settlement has been reached.
The cases cited by the CBI (Central Bureau of Investigation v. Jagjit Singh [CITATION], State of Maharashtra v. Vikram Anantrai Doshi [CITATION], and Parbatbhai Aahir v. State of Gujarat [CITATION]) were distinguished because in the present case, the Bank had no continuing grievance and a settlement was in place.

What weighed in the mind of the Court?

The Supreme Court’s decision to quash the criminal proceedings was influenced by several factors, primarily focusing on the nature of the dispute being commercial, the settlement reached between the parties, and the lack of ongoing grievance from the Bank. The Court also considered the unlikelihood of conviction and the potential for the continuation of proceedings to be oppressive.

Reason	Percentage
Commercial Nature of Dispute	30%
Settlement between Parties	30%
Lack of Grievance from the Bank	20%
Unlikelihood of Conviction	10%
Oppressive Nature of Continued Proceedings	10%

Fact:Law Ratio

Category	Percentage
Fact (consideration of factual aspects of the case)	60%
Law (legal considerations)	40%

Logical Reasoning

Issue: Extent of High Court’s powers to quash FIR, chargesheet, and consequential proceedings

Flowchart:

Commercial Dispute Exists

↓

Settlement Reached Between Parties

↓

Bank Has No Continuing Grievance

↓

Unlikelihood of Conviction

↓

Continuation of Proceedings Would Be Oppressive

↓

High Court Should Exercise Powers Under Section 482 CrPC to Quash Proceedings

Key Takeaways

Criminal proceedings arising from commercial disputes can be quashed if the parties have settled and the aggrieved party has no further grievance.
The High Court has the power under Section 482 CrPC to prevent the abuse of legal processes in cases with a predominantly civil character.
The likelihood of conviction and the potential for oppression are important factors in determining whether to quash criminal proceedings.

Development of Law

Ratio Decidendi: Criminal proceedings arising out of commercial transactions, where the parties have settled their disputes and the aggrieved party has no further grievance, can be quashed by the High Court under Section 482 of the CrPC to prevent abuse of the legal process and ensure justice.

This judgment reinforces the principle that civil disputes should not be unduly criminalized, especially when a settlement has been reached and the aggrieved party has been compensated.

Conclusion

The Supreme Court’s decision in Suresh C. Singal & Ors. v. The State of Gujarat & Ors. underscores the importance of distinguishing between civil and criminal disputes, particularly in commercial transactions. By quashing the criminal proceedings, the Court emphasized that when a settlement is reached and the aggrieved party has no further grievance, continuing criminal proceedings would be an abuse of the legal process. This judgment reinforces the High Court’s power under Section 482 CrPC to prevent injustice and ensure that civil matters are not unduly criminalized.

Frequently Asked Questions (FAQ)

Question: Under what circumstances can criminal proceedings be quashed in commercial disputes?

Answer: Criminal proceedings arising from commercial disputes can be quashed if the parties have reached a settlement, the aggrieved party (e.g., the bank) has no further grievance, and the continuation of proceedings would be an abuse of the legal process. The court also considers the likelihood of conviction.
Question: What power does the High Court have to quash criminal proceedings?

Answer: The High Court has the power under Section 482 of the Code of Criminal Procedure (CrPC) to quash criminal proceedings to prevent the abuse of legal processes and ensure justice, especially in cases with a predominantly civil character.
Question: What factors does the court consider when deciding whether to quash criminal proceedings in a commercial dispute?

Answer: The court considers factors such as the commercial nature of the dispute, whether a settlement has been reached, whether the aggrieved party has any ongoing grievance, the likelihood of conviction, and whether the continuation of proceedings would be oppressive.
Question: What is Section 482 of the Code of Criminal Procedure (CrPC)?

Answer: Section 482 of the CrPC grants the High Court inherent powers to make orders necessary to give effect to any order under the CrPC, to prevent abuse of the process of any court, or otherwise to secure the ends of justice. This power is often used to quash criminal proceedings in appropriate cases.
Question: What is the significance of a “No Dues Certificate” in quashing criminal proceedings?

Answer: A “No Dues Certificate” issued by the aggrieved party (e.g., a bank) signifies that all dues have been cleared and the party has no further claims against the accused. This is a strong indicator that the dispute has been resolved, and continuing criminal proceedings may be an abuse of process.
Question: Can the CBI challenge the quashing of criminal proceedings after a settlement?

Answer: Yes, the CBI can challenge the quashing of criminal proceedings. However, the court will consider whether the dispute is primarily civil in nature, whether a settlement has been reached, and whether the aggrieved party has any ongoing grievance. If these conditions are met, the court may uphold the quashing of proceedings despite the CBI’s objections.
Question: What is the Prevention of Corruption Act, 1988, and how does it relate to commercial disputes?

Answer: The Prevention of Corruption Act, 1988, deals with offenses related to corruption by public servants. In commercial disputes, charges under this Act may be filed if a public servant (e.g., a bank official) is alleged to have abused their position for personal gain. However, if the main dispute is commercial and a settlement has been reached, the court may quash the proceedings even if charges under the PC Act are involved.

Source: Suresh C. Singal vs. State of Gujarat