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REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL ORIGINAL JURISDICTION

WRIT PETITION (CRL.) No.26 OF 2011

ASHOK SADARANGANI  & ANR. … PETITIONERS   

             VS.

UNION OF INDIA & ORS.     …  RESPONDENTS

J U D G M E N T

ALTAMAS KABIR, J.

1. The issue which has been raised in this writ petition is  

whether  an  offence  which  is  not  compoundable  under  the  

provisions of the Criminal Procedure Code, 1973, hereinafter  

referred to as the “Cr.P.C.”, can be quashed in the facts  

and circumstances of the case.    

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2. The writ petitioner No.1, Ashok Sadarangani, opened a  

Current  Account  No.314  in  the  name  of  his  proprietary  

concern,  M/s.  Internat  Impex,  Mumbai,  with  the  Bank  of  

Maharashtra, Overseas Branch, Mumbai. The said account was  

subsequently converted by the Bank into Cash Credit Account  

No.3 and Cash Credit facility of Rs.125 lacs, Import Letter  

of Credit facility of Rs.100 lacs, Bank Guarantee facility  

of Rs.20 lacs and Forward Contracts upto a limit of Rs.300  

lacs, were sanctioned and such decision was conveyed to the  

Petitioner No.1 by the Bank by its letter dated 7th July,  

1999.   On  16th October,  1999,  the  Bank  sought  additional  

collateral security of Rs.56 lacs from the Petitioner No.1,  

who, on 29th December, 1999, submitted a Lease Deed dated 29th  

December, 1999, in respect of an immovable property leased  

to M/s. Nitesh Amusements Pvt. Ltd. by Shri Homi D. Sanjana  

and his family members, through their Constituted Attorney,  

Shri Kersi V. Mehta.  The Petitioners herein were Directors  

of the aforesaid company.  

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3. In  December,  2000,  six  irrevocable  Import  Letters  of  

Credit for a total sum of Rs.188.01 lacs were opened by the  

Bank  of  Maharashtra  on  behalf  of  M/s.  Internat  Impex,  

Mumbai,  for  import  of  “houseware  items  &  rechargeable  

lanterns”  and  “velvet  four-way  and  upholstery  materials”.  

The  documents  relating  to  the  said  Letters  of  Credit,  

including Bills of Lading, Invoice and Bills of Exchange,  

were accepted and collected by the Petitioner No.1 on behalf  

of the firm from the Bank and he undertook to make payment  

on  the  due  date.   However,  the  Petitioners  defaulted  in  

payment of their liability of about 188 lacs towards the  

Bank.  On 10th April, 2003, R.C.No.3/E/2003/CBI/EOW/MUM in  

Case No.3/CPW/2004, was registered at the behest of the Bank  

of Maharashtra.  On 30th June, 2003, on the complaint of the  

Union Bank of India, Special Case No.3 of 2004, in CBI Case  

R.C.No.8/E.2003/MUM, was registered by the Central Bureau of  

Investigation, hereinafter referred to as “CBI”, against the  

Petitioners  alleging  that  they  had  secured  the  credit  

facilities  by  submitting  forged  property  documents  as  

collaterals and utilized such facilities in a dishonest and

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fraudulent manner by opening Letters of Credit in respect of  

foreign  supplies  of  goods,  without  actually  bringing  any  

goods  but  inducing  the  Bank  to  negotiate  the  Letters  of  

Credit in favour of foreign suppliers and also by misusing  

the Cash Credit facility.

4.  Charge-sheet was filed in the said Special Case No.3 of  

2004  on  14th January,  2004.   At  about  the  same  time,  a  

criminal case, being No.236 of 2001, was registered against  

Shri Kersi Mehta and others under Section 120-B, r/w 465,  

467,  468  and  471  of  the  Indian  Penal  Code,  hereinafter  

referred to as the “IPC”.  The said case was registered  

primarily  on  the  accusation  that  Shri  Kersi  Mehta,  in  

connivance with the Petitioner No.1, had sought to sell or  

dispose of the property belonging to Shri Homi D. Sanjana,  

situated  at  Kandivli  and  Aksha  and  that  the  Powers  of  

Attorney dated 11.1.1996 and 24.1.1999, which had been used  

by Shri Kersi Mehta in the transactions, were not genuine.

5. In 2000 a Civil Suit, being S.C. Suit No.4849 of 2000,  

was filed by Shri Homi D. Sanjana, in the City Civil Court

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at Bombay, against Shri Kersi Mehta and various Government  

authorities,  in  which  the  relief  sought  for  was  for  a  

direction upon Shri Kersi Mehta to deliver up to the Court  

the  said  two  Powers  of  Attorney  for  cancellation  of  the  

same.

6. It is a matter of record that, although, the Petitioner  

No.1 has surrendered and is on bail and facing trial, the  

Petitioner No.2 is yet to be arrested in connection with the  

case.   

7. While  the  criminal  case  against  the  Petitioners  was  

proceeding, the Union Bank of India wrote to the Petitioner  

No.1 on 27th September, 2010, offering a One-Time Settlement  

of the disputes relating to the transactions in question.  

Subsequently, on 27th September, 2010, a compromise proposal  

relating to the transaction between the Petitioners and the  

Bank was also mooted by the Asset Recovery Branch at Mumbai  

of the Bank of Maharashtra and a communication was addressed  

to the Petitioner No.1, which, however, made it clear that  

such  compromise  should  not  be  construed  as  settlement  of

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criminal  complaints/investigations/  proceedings  pending  in  

the  court  against  the  borrowers/guarantors.   As  has  been  

submitted during the course of hearing of the writ petition,  

pursuant to such offer of One-Time Settlement, dues of both  

the  Banks  have  been  cleared  by  the  Petitioners  and  they  

have,  therefore,  entered  into  a  compromise  with  the  

Petitioners  indicating  that  they  had  no  further  claim  

against the Petitioners.   

8. It is in this background that a separate application was  

made  in  the  writ  petition,  being  Criminal  Misc.  Petition  

No.1110  of  2012,  for  stay  of  further  proceedings  in  

R.C.No.3/E/2003/CBI/EOW/ MUM filed by the CBI and pending  

before  the Additional  Metropolitan Magistrate,  19th Court,  

Esplanade, Mumbai, and also Special Case No.3 of 2004 in CBI  

Case RC No.8/E/2003/MUM filed by the CBI before the Special  

Judge at Mumbai, together with Criminal Case No.236 of 2001,  

registered  with  Kherwadi  Police  Station,  Bandra  (East),  

Mumbai.  The same has also been taken up for consideration  

along with the writ petition for final disposal.

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9. Appearing in support of the writ petition, Shri Mukul  

Rohatgi, learned Senior Advocate, submitted that the issue,  

which has fallen for consideration in the writ petition, has  

been considered in great detail in several decisions of this  

Court.  Learned counsel submitted that in some cases this  

Court  had  exercised  its  powers  under  Article  142  of  the  

Constitution of India to quash proceedings which were not  

compoundable,  but  the  common  thread  which  runs  through  

almost all the judgments is that the power to interfere with  

even non-compoundable cases was not doubted, but the same  

was required to be used very sparingly and only in special  

circumstances.   

10. Shri Rohatgi submitted that the facts of this case are  

almost identical to the facts of the case in Nikhil Merchant  

Vs.  Central Bureau of Investigation & Anr. [(2008) 9 SCC  

677], which was decided on 20th August, 2008.  Shri Rohatgi  

submitted that as far back as in 1996, a similar issue had  

come for consideration before this Court in  Central Bureau  

of Investigation, SPE, SIU(X), New Delhi Vs.  Duncans Agro

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Industries Ltd., Calcutta [(1996) 5 SCC 591], in which the  

provisions of Section 320 Cr.P.C. were considered in regard  

to offences which constituted both civil and criminal wrong,  

including the offence of cheating.  In the said case, this  

Court  while  considering  the  aforesaid  issue  held  that  

compromise  in  a  civil  suit  for  all  intents  and  purposes  

amounted  to  compounding  of  the  offence  of  cheating.  

Furthermore, in the said case, the investigations had not  

been  completed  even  till  1991,  even  though  there  was  no  

impediment to complete the same.  Having further regard to  

the fact that the claim of the Bank had been satisfied and  

the suit instituted by the Banks had been compromised on  

receiving their dues, this Court was of the view that the  

complaint  and  the  criminal  action  initiated  thereupon,  

should not be pursued any further.

11. Shri Rohatgi then referred to the decision of this Court  

in  Nikhil  Merchant’s  case  (supra),  to  which  one  of  us  

(Kabir, J.) was a party.  In the said case, what was urged  

was that though an offence may not be compoundable, it did

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not  take  away  the  powers  of  this  Court  to  quash  such  

proceedings in exercise of its inherent jurisdiction  under  

Article  142  of  the  Constitution,  and  even  Section  320  

Cr.P.C. could not fetter such powers, as had been earlier  

held in B.S. Joshi Vs. State of Haryana [(2003) 4 SCC 675].  

It had also been contended on behalf of the Union of India  

that the power under Article 142 of the Constitution was to  

be  exercised  sparingly  and  only  in  rare  cases  and  not  

otherwise.  The fact that such a power vested in the Supreme  

Court  under  Article  142  of  the  Constitution  or  the  High  

Court under Section 482 Cr.P.C. was never in doubt, only the  

manner of its application was in issue and it was held that  

such power was to be used sparingly in order to prevent any  

obstruction to the spring of justice. Taking an over all  

view of the facts in the said case and keeping in mind the  

decision in B.S. Joshi’s case and the compromise arrived at  

between the company and the Bank and the consent terms, this  

Court took the view that technicality should not be allowed  

to  stand  in  the  way  of   quashing  of  the  criminal  

proceedings,  since  the  continuance  of  the  same  after  the

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compromise had been arrived at between the parties, would be  

a  futile  exercise.   Reference  was  also  made  to  another  

decision of this Court in  Manoj Sharma Vs.  State & Ors.  

[(2008) 16 SCC 1], where following the decisions rendered in  

B.S. Joshi’s case and in Nikhil Merchant’s case (supra) and  

after  referring  to  various  other  decisions,  this  Court  

ultimately came to the conclusion that continuance of the  

criminal  proceedings  before  the  trial  court  would  be  an  

exercise in futility and, accordingly, quashed the same.     

12. To buttress his aforesaid submissions, Mr. Rohatgi then  

referred to and relied upon the decision in Shiji @ Pappu &  

Ors. Vs. Radhika & Anr. [(2011) 10 SCC 705], where also the  

question  of  quashing  of  proceedings  relating  to  non-

compoundable offences after a compromise had been arrived at  

between the rival parties, was under consideration. After  

examining the powers of the High Court under Section 482  

Cr.P.C., the learned Judges came to the conclusion that in  

the facts and circumstances of the case, the continuance of  

proceedings would be nothing but an empty formality and that

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Section  482  Cr.P.C.  in  such  circumstances  could  be  

justifiably invoked by the High Court to prevent the abuse  

of the process of law.  The learned judges, who decided the  

said case, took into consideration the decisions rendered by  

this Court in B.S. Joshi’s case, Nikhil Merchant’s case and  

also  Manoj  Sharma’s  case  (supra)  in  arriving  at  the  

aforesaid decision.   

13. Mr. Rohatgi submitted that application of the law as  

laid  down  in  the  Duncans  Agro  Industries’s  case,  and,  

thereafter,  in  B.S.  Joshi’s  case,  followed  in  Nikhil  

Merchant’s  case,  as  also  in  Manoj  Sharma’s  case  (supra),  

gave sufficient indication that the powers under Article 142  

of  the  Constitution,  as  far  as  the  Supreme  Court  is  

concerned,  and  Section  482  Cr.P.C.,  as  far  as  the  High  

Courts are concerned, could not be fettered by reason of the  

fact that an offence might not be compoundable but in its  

own facts was capable of being quashed.   

14. On the other hand, learned Additional Solicitor General,  

Shri  Mohan  Jain,  urged  that  even  if  the  Banks  and  the

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Petitioners had settled their disputes and had also entered  

into  a  compromise  settlement,  that  did  not  absolve  the  

Petitioners of the offence, which they had already committed  

under the criminal laws, which was explicitly indicated in  

the settlement itself.  Shri Jain submitted that the gravity  

of  the  offence  would  be  revealed  from  the  various  

transactions which were effected by the writ petitioners in  

order to camouflage their intention of offering as security  

a  property  in  respect  of  which  they  had  no  title.   As  

innocent as it may seem to be, it is more than a coincidence  

that  the  Petitioners  offered  as  security  a  leasehold  

property which had been acquired from one Shri Kersi Mehta,  

who  had  used  a  Power  of  Attorney  alleged  to  have  been  

executed by Shri Homi D. Sanjana and his family members and  

in respect whereof a criminal case had been filed by Shri  

Homi against the said Kersi Mehta and the writ petitioners.  

Shri Jain contended that the entire transaction was based on  

a fraud perpetrated on Shri Homi D. Sanjana and his family  

members and, in fact, no title to the property in question  

had ever passed to the Petitioners.

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15. Shri Jain submitted that in Rumi Dhar (Smt.) Vs. State  

of West Bengal & Anr. [(2009) 6 SCC 364], a Bench of two  

Judges  while  considering  the  maintainability  of  criminal  

action where the liability was both civil and criminal, had  

occasion  to  consider  the  effect  of  a  judgment  in  civil  

proceedings in respect of a loan obtained by fraud.    As an  

off-shoot of the aforesaid question, another question raised  

was regarding the continuance of the criminal proceedings  

after settlement and repayment of a loan, wherein it was  

held that where settlement is arrived at by and between the  

creditor  bank  and  debtor,  the  offence  committed  as  such,  

does not come to an end.  The judgment of a tribunal in  

civil proceedings and, that too, when it is rendered on the  

basis of the settlement entered into between the parties,  

would not be of much relevance in a criminal proceeding in  

view of the provisions of Section 43 of the Indian Evidence  

Act,  1872,  which  provides  that  judgments  in  civil  

proceedings will be admissible in evidence only for limited  

purposes. However, in deciding the said matter, the Bench

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took note of the decision in Nikhil Merchant’s case (supra),  

as  also  the  judgment  rendered  in  Duncans  Agro  Industries  

case  (supra).   While  considering  the  said  judgments,  the  

learned Judges ultimately observed that the jurisdiction of  

the Court under Article 142 of the Constitution of India is  

not in dispute, but that exercise of such power would depend  

on  the  facts  and  circumstances  of  each  case.   After  

referring to the decision in Nikhil Merchant’s case (supra),  

this Court also held that the High Court, in exercise of its  

jurisdiction under Section 482 Cr.P.C. and the Supreme Court  

in  terms  of  Article  142  of  the  Constitution,  would  

ordinarily direct the quashing of a charge involving a crime  

against society, particularly, when both quashing of a case,  

continuance  whereof  after  the  settlement  is  arrived  at  

between the parties, would be a futile exercise.  Reference  

was then made to another decision of this Court in  Sushil  

Suri Vs.  Central Bureau of Investigation & Anr. [(2011) 5  

SCC 708], in which the Bench was called upon to deliberate  

upon the very same issue, as has been raised in the present  

writ petition. In the said case, after discussing earlier

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decisions,  including  those  rendered  in  B.S.  Joshi’s  case  

(supra) and in  Nikhil Merchant’s case (supra), the Court,  

while placing reliance on the decision in  Rumi Dhar’s case  

(supra), observed that while the jurisdiction of the Court  

under Article 142 of the Constitution was not in dispute,  

the exercise of such power would, however, depend on the  

facts and circumstances of each case.

16. The learned Additional Solicitor General contended that  

having regard to the divergent views expressed by different  

Benches of this Court, when the same issue surfaced in Gian  

Singh Vs.  State of Punjab & Anr., SLP (Crl.) No. 8989 of  

2010,  wherein  the  decisions  in  B.S.  Joshi’s  case,  Nikhil  

Merchant’s case and  Manoj Sharma’s case (supra) came to be  

considered, the Bench comprised of two Judges, was of the  

view that the said decisions required reconsideration and  

directed that the matter be placed before a larger Bench to  

consider the correctness of the said three decisions.  Shri  

Jain urged that as the same issue which was involved in the  

present case was also the subject matter of the reference to

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a larger Bench, this Court should abstain from pronouncing  

judgment on the issue which was the subject matter in the  

said reference. Shri Jain urged that in the circumstances  

mentioned  hereinabove,  no  relief  could  be  given  to  the  

Petitioners on the writ petition and the same was liable to  

be dismissed.

17. Having carefully considered the facts and circumstances  

of the case, as also the law relating to the continuance of  

criminal  cases  where  the  complainant  and  the  accused  had  

settled  their  differences  and  had  arrived  at  an  amicable  

arrangement, we see no reason to differ with the views that  

had been taken in  Nikhil Merchant’s case or  Manoj Sharma’s  

case  (supra)  or  the  several  decisions  that  have  come  

thereafter. It is, however, no coincidence that the golden  

thread which runs through all the decisions cited, indicates  

that continuance of a criminal proceeding after a compromise  

has been arrived at between the complainant and the accused,  

would  amount  to  abuse  of  the  process  of  court  and  an  

exercise in futility, since the trial could be prolonged and

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ultimately, may conclude in a decision which may be of any  

consequence to any of the other parties.  Even in  Sushil  

Suri’s  case  on  which  the  learned  Additional  Solicitor  

General had relied, the learned Judges who decided the said  

case, took note of the decisions in various other cases,  

where it had been reiterated that the exercise of inherent  

powers would depend entirely on the facts and circumstances  

of  each  case.   In  other  words,  not  that  there  is  any  

restriction on the power or authority vested in the Supreme  

Court  in  exercising  powers  under  Article  142  of  the  

Constitution, but that in exercising such powers the Court  

has  to  be  circumspect,  and  has  to  exercise  such  power  

sparingly  in  the  facts  of  each  case.   Furthermore,  the  

issue, which has been referred to a larger Bench in  Gian  

Singh’s case (supra) in relation to the decisions of this  

Court in B.S. Joshi’s case, Nikhil Merchant’s case, as also  

Manoj  Sharma’s  case,  deal  with  a  situation  which  is  

different from that of the present case.  While in the cases  

referred  to  hereinabove,  the  main  question  was  whether  

offences  which  were  not  compoundable,  under  Section  320

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Cr.P.C. could be quashed under Section 482 Cr.P.C., in Gian  

Singh’s  case  the  Court  was  of  the  view  that  a  non-

compoundable offence could not be compounded and that the  

Courts  should  not  try  to  take  over  the  function  of  the  

Parliament or executive.  In fact, in none of the cases  

referred  to  in  Gian  Singh’s  case,  did  this  Court  permit  

compounding  of  non-compoundable  offences.   On  the  other  

hand,  upon  taking  various  factors  into  consideration,  

including  the  futility  of  continuing  with  the  criminal  

proceedings, this Court ultimately quashed the same.    

18. In  addition  to  the  above,  even  with  regard  to  the  

decision of this Court in  Central Bureau of Investigation  

Vs.  Ravi Shankar Prasad & Ors. [(2009) 6 SCC 351], this  

Court observed that the High Court can exercise power under  

Section 482 Cr.P.C. to do real and substantial justice and  

to prevent abuse of the process of Court when exceptional  

circumstances warranted the exercise of such power.  Once  

the circumstances in a given case were held to be such as to  

attract the provisions of Article 142 or Articles 32 and 226

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of the Constitution, it would be open to the Supreme Court  

to exercise its extraordinary powers under Article 142 of  

the Constitution to quash the proceedings, the continuance  

whereof would only amount to abuse of the process of Court.  

In the instant case the dispute between the petitioners and  

the  Banks  having  been  compromised,  we  have  to  examine  

whether  the  continuance  of  the  criminal  proceeding  could  

turn  out  to  be  an  exercise  in  futility  without  anything  

positive being ultimately achieved.   

19. As was indicated in Harbhajan Singh’s case (supra), the  

pendency of a reference to a larger Bench, does not mean  

that all other proceedings involving the same issue would  

remain stayed till a decision was rendered in the reference.  

The reference made in  Gian Singh’s case (supra) need not,  

therefore, detain us.  Till such time as the decisions cited  

at the Bar are not modified or altered in any way, they  

continue to hold the field.   

20.  In the present case, the fact situation is different  

from that in Nikhil Merchant’s case (supra). While in Nikhil

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Merchant’s case the accused had misrepresented the financial  

status  of  the  company  in  question  in  order  to  avail  of  

credit facilities to an extent to which the company was not  

entitled, in the instant case, the allegation is that as  

part of a larger conspiracy, property acquired on lease from  

a person who had no title to the leased properties, was  

offered as collateral security for loans obtained.  Apart  

from the above, the actual owner of the property has filed a  

criminal complaint against Shri Kersi V. Mehta who had held  

himself out as the Attorney of the owner and his family  

members.  The ratio of the decisions in  B.S. Joshi’s case  

and in  Nikhil Merchant’s case or for that matter, even in  

Manoj Sharma’s case, does not help the case of the writ  

petitioners.  In  Nikhil Merchant’s case, this Court had in  

the facts of the case observed that the dispute involved had  

overtures of a civil dispute with criminal facets. This is  

not so in the instant case, where the emphasis is more on  

the criminal intent of the Petitioners than on the civil  

aspect involving the dues of the Bank in respect of which a  

compromise was worked out.

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21. In the different fact situation of this case and those  

in  B.S. Joshi’s case or in  Nikhil Merchant’s case (supra),  

we are not inclined to grant the reliefs prayed for in the  

writ petition and the same is accordingly dismissed.

22. There will, however, be no order as to costs.

………………………………………………………J.    (ALTAMAS KABIR)

………………………………………………………J.                      (J. CHELAMESWAR)

New Delhi Dated: 14.03.2012