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REPORTABLE

   IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APEPAL NO.  1958     OF 2013    (ARISING OUT OF SLP(CRL.)NO.7466 OF 2011)

TAMIL NADU MERCANTILE BANK LTD.  ... APPELLANT

    VS.

STATE THROUH DEPUTY SUPERINTENDENT  OF POLICE AND ANR.           ... RESPONDENTS

WITH

CRIMINAL APEPAL NO. 1959     OF 2013    (ARISING OUT OF SLP(CRL.)NO.1501 OF 2010)

TAMIL NADU MERCANTILE BANK LTD.  ... APPELLANT

             VS.

STATE AND ORS.               ... RESPONDENTS

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J U D G M E N T

SHIVA KIRTI SINGH, J

Leave granted.

2. By  the  common  judgment  and  order  dated  

17.9.2009  in  CRLOP  No.12646/2007  and  18297/2009,  

the learned Single 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  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 disclose that out of  

ten accused in the charge-sheet dated 20th September  

2004,  the  first  five  accused  are  Managing  

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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 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.

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 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,  

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2003  after  the  erstwhile  Branch  Manager  of  the  

appellant  Bank  was  transferred  and  a  new  Branch  

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.  

According to the allegations, the fraud was based  

upon  a  simple  modus  operandi.   The  accused  

presented  cheques  drawn  in  their  favour  to  the  

Tiruppur Branch of the Bank for encashment knowing  

well  that  there  was  not  enough  balance  in  the  

accounts of the drawers because the cheques were  

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  

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being credited 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 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  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 ultimately filed a charge-sheet  

on 20th September, 2004 against ten persons as noted  

earlier.  But prior to that, the accused respondent  

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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.  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 petitions which have been allowed by the  

High Court were filed in the year 2007 and 2009  

respectively  seeking  quashing  of  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 petition No.28663 of 2007 seeking  

orders  for  expediting  the  trial  of  the  criminal  

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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.  

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 :

(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 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 can also take recourse to  

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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 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  

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.

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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  loan  had  been  repaid  under  a  

settlement 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  power  

under Section 482 Cr.P.C. (i) to 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.  

1 2009(6) SCC 351

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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  

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  

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  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 chooses  

to  initiate  criminal  proceeding,  the  criminal  

proceeding may be quashed.  For such purpose also  2 2008 (8) SCC 781

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the  Court,  save  and  accept  in  very  exceptional  

circumstances would not look to any document relied  

upon by the defence.

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  

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  

found  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. 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  3 2010 (8) SCC 442

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abuse of process of court, the High Court could be  

justified in quashing the same.

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 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.

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 Cr.P.C. and they did  

not challenge an order passed by the High Court at  

the instance of the appellant bank for concluding  

the trial within a limited time.    

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14. For all the aforesaid reasons, we find and hold  

that  the  common  judgment  and  order  under  appeal  

cannot be sustained 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 order.  

………………………………………………J.     (R.M. Lodha)

…………………………………………………J.     (Shiva Kirti Singh)

New Delhi, November 20, 2013            

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