Supreme Court Quashes Criminal Proceedings in Settlement Agreement Dispute: State Trading Corporation of India Ltd. vs. Global Steel Holding Limited (2019)

Date of the Judgment: March 12, 2019

Citation: M.A. No. 320 of 2019 in Civil Appeal No. 11907 of 2018

Judges: Hon’ble Mr. Justice Abhay Manohar Sapre and Hon’ble Ms. Justice Indu Malhotra

Can a settlement agreement between parties extinguish criminal proceedings initiated based on the same underlying dispute? The Supreme Court addressed this issue in a case involving the State Trading Corporation of India Ltd. and M/s Global Steel Holding Limited & Ors., where a settlement was reached, and the court was asked to quash related legal actions. This case explores the extent to which a settlement can resolve not only civil but also criminal liabilities arising from the same set of facts.

Case Background

The case involves a dispute between the State Trading Corporation of India Ltd. (STC) and M/s Global Steel Holding Limited (GSHL) and others. This dispute arose from a Settlement Agreement dated November 15, 2010, and a further Settlement Agreement dated May 17, 2012. STC had initiated various legal proceedings against GSHL, including criminal complaints and winding-up proceedings, due to alleged breaches of these agreements.

The parties eventually reached a settlement, and the respondents were required to pay Rs. 600 crores towards interest at 8% per annum by February 28, 2019. Upon this payment being made, the parties sought the Supreme Court’s intervention to quash all related legal proceedings.

Timeline

Legal Framework

The Supreme Court exercised its powers under Article 136 and Article 142 of the Constitution of India to quash the proceedings. Article 136 grants the Supreme Court special leave to appeal, while Article 142 empowers the Supreme Court to pass orders necessary for doing complete justice in any cause or matter pending before it.

Arguments

The Senior Counsel for the State Trading Corporation of India, Mr. D.A. Dave, stated that the amount of Rs. 600 crores, payable by the Respondents towards interest at 8% per annum by 28th February 2019, had been paid. Consequently, all liabilities under the Settlement Agreement dated 15.11.2010, and the Further Settlement Agreement dated 17.05.2012, stood fully satisfied. It was also stated that there was no further claim of the Appellants against the Respondents arising out of the said Agreements.

Mr. Kapil Sibal, Senior Advocate for the Respondents, confirmed the payment and sought the quashing of all related proceedings.

The State Trading Corporation of India also stated that it would not prosecute the Winding-Up proceedings instituted by it against GSHIL in the Isle of Man Court, since the amounts due and owing to it under the Agreements stood satisfied.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in this order. However, the implicit issue before the Court was:

1. Whether the Court should quash the various proceedings arising from the settlement agreements, given that the dues have been fully paid and the parties have settled their dispute.

Treatment of the Issue by the Court

Authorities

The Supreme Court did not cite any specific cases or legal provisions other than Article 136 and Article 142 of the Constitution of India in this order.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the fact that the parties had reached a settlement, and the respondents had fully satisfied their financial obligations. The Court’s emphasis was on ensuring that the settlement was given full effect and that no further legal proceedings would hinder the resolution achieved by the parties. The court also took into account that the State Trading Corporation of India had no further claims against the respondents.

Logical Reasoning

Key Takeaways

• ✓ When parties reach a settlement and fully satisfy their obligations, the Supreme Court may quash related legal proceedings, including criminal proceedings, to ensure complete justice.
• ✓ The powers under Article 136 and Article 142 of the Constitution of India can be used to give effect to settlements and bring finality to disputes.
• ✓ This case highlights the importance of settlement agreements in resolving complex commercial disputes and the willingness of the court to enforce such settlements.

Directions

The Supreme Court directed the following:

• ✓ Quashed the FIR lodged by CBI.
• ✓ Quashed the ECIR by the Enforcement Directorate.
• ✓ Quashed the Show Cause Notice issued by the High Commission of India, London.
• ✓ Quashed any Look Out Notice issued against Mr. Pramod Mittal or his family.
• ✓ Quashed eleven complaints under Section 420 and 409 of the Indian Penal Code, 1860 pending before the Metropolitan Magistrate, Patiala House Courts, New Delhi.

Development of Law

The ratio decidendi of this case is that when parties settle their disputes and fulfil their obligations under a settlement agreement, the Supreme Court can exercise its powers under Article 136 and Article 142 of the Constitution of India to quash related proceedings, including criminal proceedings. This reinforces the principle that settlements should be respected and enforced to bring finality to disputes.

Conclusion

The Supreme Court’s decision in State Trading Corporation of India Ltd. vs. M/s Global Steel Holding Limited & Ors. demonstrates the court’s willingness to give effect to settlement agreements by quashing all related proceedings, including criminal complaints. This decision underscores the importance of upholding settlements and ensuring that parties are not burdened with further legal action after fulfilling their obligations. The judgment reinforces the court’s commitment to using its constitutional powers to achieve complete justice and bring finality to disputes.