TAMIL NADU MERCANTILE BANK LTD.versusSTATE THROUH DEPUTY SUPERINTENDENT OF POLICE AND ANR.

                  [2013] 12 S.C.R. 411


         TAMIL NADU MERCANTILE BANK LTD.                       A
                             v.
   STATE THROUH DEPUTY SUPERINTENDENT OF
                  POLICE AND ANR.
       (Criminal Appeal No 1958 of 2013 etc.)
                                                               B
                  NOVEMBER 20, 2013

      [R.M. LODHA AND SHIVA KIRTI SINGH, JJ.]

    CODE OF CRIMINAL PROCEDURE, 1973:
                                                               c
      s.482 - Quashing of criminal proceedings - Respondents-
accused defrauding the Bank in collusion with Bank officials
- Charge-sheet against respondents-accused and Bank
officials for offences punishable u/ss 406, 409, 420 and 120-
B /PC filed - High Court quashing criminal proceedings 0
against non-bank officials-accused respondents - Held: High
Court erred in interfering with criminal proceedings on the
ground that bank could recover the loss caused by fraud
through orders of Debt Recovery Tribunal or through the
proceedings under the Negotiable Instruments Act or civil E
proceedings -- Even if the accused voluntarily at a later stage
settles the monetary claim, that cannot be made a ground to
 quash the criminal proceedings unless the well established
principles for exercise of power u/s 482 are made out --
 Criminal proceedings can continue even if the a/legation
 discloses a civil dispute also - It is only when the dispute is F
 purely civil in nature but still the party chooses to initiate
 criminal proceedings, criminal proceedings may be quashed
 - In the instant proceedings, it is not a case requiring
 interference in exercise of power u/s 482 - The proceedings
 cannot be termed as an abuse of the process of court G
 because the a/legations if accepted in entirety are most likely
 to make out criminal offence alleged against accused-
  respondents -- The interest of justice is also not attracted in
  the instant case to warrant interference with the criminal
                               411                                H
    412     SUPREME COURT REPORTS            [2013] 12 S.C.R.


A proceedings - Judgment of High Court set aside - Penal
  Code, 1860 - ss. 406, 409, 420 and 120-B.

        An FIR was registered against 10 accused persons
   for offences punishable u/ss 406, 409, 420 and 120B IPC.
   Accused' nos. 1 to 5 were Managing Diree:tor/Managing
8
   Partner/Director/Proprietor of different private limited
   companies and partnership firms etc. and accused nos.
   6 to 10 were Managers and officials of the appellant Bank.
   The allegations against the accused were that they
C defrauded the appellant Bank of Rs. 2.51 Crores. The
   modus operandi of the accused as alleged was that
  accused nos. 1 to 5 would present cheques drawn in
  their favour to the appellant Bank knowing well that the
  drawers of the said cheques did not have sufficient funds
  in their accounts. Thereafter the accused Branch Manager
D and other officials, in the garb of arrangement known as
  'Local Bill Discounting' would credit the cheque amounts
  to the current accounts of the drawees who would
  immediately withdraw the amounts. The charge-sheet
  was filed against all the 10 accused. Accused nos. 1 to 5
E filed petitions u/s 482 Cr P C and the High Court quashed
  the criminal proceedings against them holding, inter alia,
  that the dispute was of a civil nature, and the Bank could
  recover the loss through Debt Recovery Tribunal or
  through proceedings under Negotiable Instruments Act.
F
       Allowing the appeals, the Court

       HELD: 1.1 In A. Ravishanker Prasad & Ors., this
  Court reiterated the settled propositions of law which
  permit exercise of inherent power u/s 482 Cr.P.C. (i) to
G give effect to an order under the Code; (ii) to prevent
  abuse of process of the court and (iii) to otherwise secure
  the ends of justice. It was reiterated that such
  extraordinary power should be exercised sparingly and
  with great care and caution. [para BJ [418-B-D]
H
TAMIL NADU MERCANTILE BANK LTD. v. STATE THR. DEP. 413
           SUPERINTENDENT OF POLICE

      CBI vs. A Ravishanker Prasad & Ors. 2009(6) SCC 351     A
• relied on.

     1.2 Criminal proceedings can continue even if the
allegation discloses a civil dispute also. It is only when
the dispute is purely civil in nature but still the party 8
chooses to initiate criminal proceedings, the criminal
proceeding may be quashed. For such purpose also the
court, save and accept in very exceptional
circumstances, would not look to any document relied
upon by the defence. In the instant case, the High Court C
erred in interfering with criminal proceedings on the
 ground that the bank could recover the loss caused by
fraud through orders of Debt Recovery Tribunal or
 through the proceedings under the Negotiable
 Instruments Act or civil proceedings. Even if the accused
 voluntarily at a later stage settles the monetary claim, that D
 cannot be made a ground to quash the criminal
 proceedings unless the well established principles for
 exercise of power u/s 482 Cr.P.C. are made out.[para 9·
 10] [418-E-H; 419·A·B]
                                                              E
    Monica Kumar (Dr.) vs. State of U.P. 2008 (9) SCR 943
= 2008 (8) SCC781 • relied on.

     1.3 On going through the relevant facts, particularly,
the charge- sheet, it is not a case requiring interference
in exercise of power u/s 482 Cr.P.C. The proceedings
                                                              F
cannot be termed as an abuse of the process of court
because the allegations if accepted in entirety are most
likely to make out criminal offence alleged against the
accused-respondents. The interest of justice is also not
attracted in the instant case to warrant interference with    G
the criminal proceedings. [para 12] [419-E-G]

    Rajeshwar Tiwari vs. Nanda Kishore Roy2010 (10) SCR
     =
 444 2010 (8) sec 442 • referred to.
                                                               H
    414      SUPREME COURT REPORTS             [2013) 12 S.C.R.


A      1.4 The High Court ought to have taken note of the
  fact thiit on two previous occasions the respondents
  accused failed to get any relief u/s 482 Cr.P.C. and they
  did not challenge the order passed by the High Court at
  the instance of the appellant bank for concluding the trial
B within a limited time. Therefore, the common judgment
  and order under appeal cannot be sustained in law and
  is set aside. [para 13-14] [419-G-H; 420·A·B]

                         Case Law Reference:

c         2009(6) sec 351        relied on            para 8
          2008 (9) SCR 943       relied on            para 10
          2010 (10) SCR 444      referred to          para 11

D       CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
    No. 1958 of 2013.

         From the Judgment and Order dated 17.09.2009 of the
    High Court of Madras in Criminal Original Petition No. 12646
    of 2007.
E
                                WITH

    Crl. A. No. 1959 of 2013.

      lndu Malhotra, ASG, Vivek Jain, Apoorva Bhumesh, N.
F Kumar, N. Sood, Kush Chaturvedi, Vikas Mehta for the
  Appellant.

      Siddharth Dave, R. Anand Padmanabhan, Pramod Dayal,
  A. Santha Kumaran, M. Yogesh Kanna, Geetha Kovilan for the
G Respondents.
        The Judgment of the Court was delivered by

        SHIVA KIRTI SINGH, J. 1. Leave granted.

H       2. By the common judgment and order dated 17.9.2009
TAMIL NADU MERCANTILE BANK LTD. v. STATE THR. DEP. 415
 SUPERINTENDENT OF POLICE [SHIVA KIRTI SINGH, J.]
in CRLOP No.12646/2007 and 18297/2009, the learned Single         A
Judge of the Madras High Court has allowed two petitions .both
under Section 482 of the Code of Criminal Procedure (for
brevity.P.C.) preferred by the respondents and quashed criminal
proceedings against some of the accused in Criminal Case
 No. 462 of 2004 pending before the learned Magistrate-II         B
Tiruppur for offences punishable under Sections 406, 409, 420
 and 120(b) IPC.

     3. Before granting relief to the five petitioners out of ten
accused, the High Court noted the relevant facts in brief which C
disclose that out of ten accused in the charge-sheet dated 20th
September 2004, the first five accused are Managing Director/
Managing Partner/Director/Proprietor of different private limited
companies, partnership firms/proprietary firms. Some of them
are related to each other and some are family friends. Accused
nos. 6 to 10 are Managers and Officials of Tamil Nadu D
Mercantile Bank Limited (hereinafter referred to as 'Bank'),
Tiruppur alleged to have colluded with the respondents in
perpetration of a fraud against the bank. They are not the
parties before this Court.
                                                                   E
     4. Considering the stage of the proceedings, it is not
necessary or desirable to go into the facts of the criminal case
in detail. It is sufficient to notice that the respondents accused
were operating current accounts with the bank from the year
2000. Allegedly a fraud was perpetrated by them in collusion F
with the Branch Manager of the appellant Bank and other
accused during the period September, 2002 and May, 2003
to the tune of Rs.2.51 crores approximately. The fraud was
discovered in June, 2003 after the erstwhile Branch Manager
of the appellant Bank was transferred and a new Branch G
Manager took over. On discovering the fraud the new Branch
Manager lodged a complaint with police station, Central Crime
 Branch, Coimbatore leading to First Information Report dated
 20th June 2003 bearing Crime No.13 of 2003 against the
 accused respondents and concerned officers of the Bank. H
    416      SUPREME COURT REPORTS              [2013] 12 S.C.R.


A According to the allegations, the fraud was based upon a
  simple modus operandi. The accused presented cheques
  drawn in their favour to the Tiruppur Branc:h of the Bank for
  encashment knowing well that there was not enough balance
  in the accounts of the drawers because the cheques were
B drawn by parties known to them. Thereafter, the Branch
  Manager, in the garb of understanding or arrangement known
  as 'Local Bill Discounting' credited the accounts of the accused
  presenting such cheques before they were sent to the drawee
  bank for clearance. Immediately on the account being credited
c with the cheque amount, such amount was withdrawn. Later,
  when the cheques returned unhonoured on account of
  insufficient balance, the accused, for clearing the debt used to
  deposit similar cheques for even higher amounts. Against such
  cheques also the accounts of the accused were credited with
D higher amounts and the money used to be withdrawn. Due to
  repeat of such trick several times, by the time the fraud was
  discovered, the Trippur Branch had been defrauded to the tune
  of appoximately Rs.2.51 crores. According to the charge-sheet,
  accused Senthil Kumar presented 1278 cheques during the
  period, accused Sanjay presented 99 cheques, accused
E Murugananthan presented 90 cheques, accused K.M.M. Murali
  presented 6 cheques and accused Mahamuni presented 3
  cheques.

        5. On the basis of FIR, Police initiated investigation and
F ultimately filed a charge-sheet on 20th September, 2004
  against ten persons as noted earlier. But prior to that, the
  accused respondent and some others filed a petition under
  Section 482 Cr.P.C. for quashing of the FIR. On filing of reply
  by the informant that petition filed on 7.6.2004 was withdrawn.
G After the charge-sheet, on 18.10.2004 the accused
  respondents along with other accused filed another petition
  under Section 482 Cr.P.C for quashing of the FIR. That was
  dismissed on 9.2.2005 taking note of the charge-sheet already
  submitted. That order was not challenged. The concerned
H petitions which have been allowed by the High Court were filed
 TAMIL NADU MERCANTILE BANK LTD. v. STATE THR. DEP. 417
   SUPERINTENDENT OF POLICE [SHIVA KIRTI SINGH, J.]
in the year 2007 and 2009 respectively seeking quashing of A
the entire criminal proceedings but without disclosing any fresh
cause of action. In the petition of 2007, the High Court initially
granted interim stay but the appellant bank intervened, got
 impleaded and succeeded in vacation of the stay order on
 13.9.2007. Thereafter the appellant filed a criminal original B
 petition No.28663 of 2007 seeking orders for expediting the
 trial of the criminal case No.462 of 2004. The High Court
 allowed that prayer on 20th September 2007 and directed to
 complete the trial within four months. This order was also not
  challenged by the accused respondents.                           c
     6. A perusal of the judgment and order under appeal
shows that the High Court has been persuaded to quash the
criminal proceedings against the accused respondents mainly
on the grounds that :
                                                                   D
     (1) The dispute between the Bank and the accused
     respondent is of civil nature,
     (2) Although some of the alleged fraudulent operations
     were performed by the accused in the name of a company        E
     viz. Shri Deepadharani Yarns Pvt. Ltd., the company has
     not been arrayed as an accused while three of its Directors
     are so arrayed, and         ·

     (3) The bank has a remedy for recovering the money in
     question for which it has obtained an order of the DRT and    F
     can also take recourse to proceedings under Section 138
     of the Negotiable. Instruments Act or civil proceedings.

      7. On behalf of the appellant all the three aforesaid grounds
 for exercise of inherent power under Section 482 of the Cr.P.C G
 have been seriously assailed. It has been contended by the
 learned counsel for the appellant that the practice of the bank
 to permit overdraft facility to credit worthy customers cannot be
  equated with simple civil contracts and agreements. In the latter
  case, a party may not be permitted to initiate criminal H
     418       SUPREME COURT REPORTS               [2013] 12 S.C.R.

A proceedings only on breach of terms of the agreement by the
   other party, unless it can be shown that the guilty party acted
   with dishonest or fraudulent intentions since the conception of
   the contract or agreement. But in the former case, a customer
   of Bank committing fraud will stand on a different footing.
B
         8. The aforesaid submission has merits. In the case of CBI
   vs. A. Ravishanker Prasad & Ors., 1 the accused respondents
   who were customers of a nationalized bank sought to justify the ·
   fraudulent transactions on the basis of agreements evident from
   letter of credit, open cash credit and also on the ground that
C loan had been repaid under a settlemen! and therefore, criminal
   proceedings on account of forgery, cheating, corruption etc.
  should not be permitted. This court set aside the order of the
   High Court interfering with a criminal proceeding and reiterated
  the settled propositions of law which permit exercise of inherent
D power under Section 482 Cr.P.C. (i) to givei effect to an order
  under the Code; (ii) to prevent abuse of process of the Court
  and (iii) to otherwise secure the ends of justice. It was reiterated
  that such extraordinary power should be exercised sparingly
  and with great care and caution.
E
        9. This judgment also supports the other submission on
  behalf of the appellant that the High Court erred in interfering
  with criminal proceeding on the ground that bank could recover
  the loss caused by fraud through orders of Debt Recovery
F Tribunal or through the proceedings under the Negotiable
  Instruments Act or civil proceedings. Even if the accused
  voluntarily at a later stage settles the monetary claim, that
  cannot be made a ground to quash the criminal proceedings
  unless the well established principles for exercise of power
G under Section 482 Cr.P.C. are made out.
         10. It is also a law settled by this Court and reiterated in
    the case of Monica Kumar (Dr.) vs. State of U.P. 2 that criminal

    1.   2009 csi sec 351.
H   2.   2008 (8) sec 781.
TAMIL NADU MERCANTILE BANK LTD. v. STATE THR. DEP. 419
  SUPERINTENDENT OF POLICE [SHIVA KIRTI SINGH, J.]
proceedings can continue even if the allegation discloses a civil     A
dispute also. It is only when the dispute is purely civil in nature
but still the party chooses to initiate criminal proceeding, the
criminal proceeding may be quashed. For such purpose also
the Court, save and accept in very exceptional circumstances
would not look to any document relied upon by the defence.            B

     11. In reply, learned counsel for the respondent accused
has placed reliance upon judgment of this Court in the case of
Rajeshwar Tiwari vs. Nanda Kishore Roy3, wherein this Court
quashed the criminal proceedings against the appellant which C
was initiated by private complainant by merely alleging that
acting on behalf of the employer the appellant had deducted a
particular amount wrongly as income tax from his monthly salary.
This Court foun'd that the employer was under statutory
obligation to deduct income tax and the allegation did not make
out a case for adjudication by the Magistrate on criminal side. D
In paragraph 29 of the report on which reliance has been
placed, only the established law has been reiterated that when
adequate materials are available to show that a proceeding is
of civil nature or that it is an abuse of process of court, the High
Court could be justified in quashing the same.                       E

      12. On going through the relevant facts, particularly the
charge- sheet, we find that it is not a case requiring
interference in exercise of power under Section 482 Cr.P.C.
The proceedings cannot be termed as an abuse of the process           F
of court because the allegations if accepted in entirety are most
likely to make out criminal offence alleged against the accused
respondents. The interest of justice is also not attracted in the
present case to warrant interference with the criminal
proceedings.                                                          G
     13. In our considered view, the High Court ought to have
 taken note of the fact that on two previous occasions the
 respondents accused failed to get any relief under Section 482

3.   201 o (SJ sec 442.                                               H
    420      SUPREME COURT REPORTS               [2013) 12 S.C.R.


A Cr.P.C. and they did not challenge an order passed by the High
  Court at the instance of the appellarit bank for concluding the
  trial within a limited time.

       14. For all the aforesaid reasons. we find and hold that the
  common judgment and order under appeal cannot be sustained
8
  in law and is fit to be set aside. We order accordingly.

       15. Appeals are allowed with a direction to the learned
  Magistrate to conclude the trial expeditiously in accordance with
  law without being influenced by any observations made in this
C order.

   R.P.                                         Appeals allowed.