C.B.I., New Delhi v. B.B. Agrawal and Ors. (2019)

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C.B.I., New Delhi v. B.B. Agrawal and Ors. (2019)

Court: Supreme Court of India

Citation: CRIMINAL APPEAL Nos.21072125 OF 2011

Date: 18 February, 2019

Judge: Justice Abhay Manohar Sapre; Justice L. Nageswara Rao

Appellant: C.B.I., New Delhi

Respondent: B.B. Agrawal and Ors.

Subject: Cheating

Facts of the case:

In the case of K.B. Mulla v. State of Karnataka in 1976, a significant financial fraud came to light involving two companies, M/s. New Beam Ferro Alloys Ltd. (NBFAL) and M/s. West Coast Brewers & Distillers Ltd. These companies had issued public offerings to raise capital, but during this process, they were alleged to have deceived the Punjab National Bank (PNB) of approximately Rs. 15 crore.

The intricate details of how this purported embezzlement took place need not be delved into here, but it prompted a thorough investigation by the Central Bureau of Investigation (CBI) in 1992–1993. The CBI’s inquiry led to the filing of a criminal complaint under various sections of the Indian Penal Code, including Section 120B (criminal conspiracy), along with Sections 409 (criminal breach of trust), 420 (cheating), 468 (forgery for the purpose of cheating), and 471 (using as genuine a forged document).

What makes this case particularly noteworthy is that there were twelve defendants named in the charge sheet, consisting of both individuals and companies. Specifically, six of the accused were individuals, while the remaining eight were corporate entities. The charges filed against these defendants were of a grave nature, as they pertained to financial fraud and conspiracy involving substantial sums of money.

As the legal proceedings unfolded, the High Court made a significant decision. It granted petitions submitted by the accused parties, leading to the termination of the criminal proceedings against them. This outcome raised concerns, as it appeared to halt the pursuit of justice in a case involving such serious allegations of financial wrongdoing.

In response to the High Court’s decision, the CBI took action and filed appeals in the Supreme Court. These appeals were filed with special permission, indicating the gravity of the situation and the importance of addressing the alleged financial misconduct.

The case of K.B. Mulla v. State of Karnataka, 1976, thus, raises questions about the legal intricacies involved in prosecuting financial fraud cases, especially when they encompass both individuals and corporate entities. It underscores the significance of ensuring that justice is served and financial malfeasance is appropriately addressed to maintain the integrity of the financial system and protect the interests of the stakeholders involved. The proceedings in the Supreme Court would likely have provided an opportunity to further clarify and determine the legal responsibilities and liabilities of the accused parties in this complex and contentious case.

Issue:

whether the decision of the High Court to grant the respondents’ petition under Section 482 of the Criminal Procedure Code (Cr.P.C) and subsequently quash the ongoing criminal proceedings was justifiable.

Contentions by Parties:

Appellant’s Contention:

They contend that there is substantial evidence to support the criminal charges against the directors of the respondent companies and the PNB officials for alleged breaches of trust, fraud, and other offenses under the Indian Penal Code. They argued that these criminal proceedings should not have been quashed prematurely.
The CBI argued that the alleged fraud and financial misconduct involving a significant sum of money (approximately Rs. 15 crores) are matters of public interest and should be fully investigated and prosecuted in the interest of justice and to maintain the integrity of the financial system.
The CBI asserts that the respondent companies and individuals were attempting to abuse the legal process by seeking to quash the criminal proceedings through Section 482 of the Cr.P.C after entering into the settlement.

Respondent’s Contention:

The respondent party contended that they reached a genuine settlement agreement with Punjab National Bank (PNB) to resolve the outstanding dues and financial disputes. They argued that this settlement demonstrates their willingness to rectify the situation.
The respondent party emphasized that the settlement and the consent application for disposing of the case were entered into willingly by all parties involved, including PNB. They argued that the settlement was a result of negotiations and mutual agreement.
The respondent party could argue that since the financial issues were largely resolved through the civil suits and subsequent DRT proceedings, continuing with the criminal proceedings would be duplicative and unnecessary.
The respondent party may assert that they had a valid legal basis to approach the High Court under Section 482 of the Cr.P.C, as this provision allows the High Court to exercise its inherent powers to prevent the abuse of the legal process.

Judgment

In the matter before this Hon’ble Supreme Court, we are confronted with a case that revolves around alleged financial improprieties and the subsequent legal actions undertaken by the parties involved. The essence of the dispute lies in the quashing of criminal proceedings initiated by the Central Bureau of Investigation (CBI) against the directors of respondent companies and Punjab National Bank (PNB) officials in connection with an alleged fraud amounting to approximately Rs. 15 crores. The central question before us pertains to the justifiability of the High Court’s decision to quash these criminal proceedings.

Upon careful consideration of the facts and arguments presented, this Court finds itself in agreement with the High Court’s determination, which ultimately led to the dismissal of the appeals filed by the CBI. It is essential to elucidate the key factors that have informed our decision.

The crux of this matter lies in the resolution achieved through civil litigation and reconciliation between the parties. It has come to our attention that during the pendency of civil suits, the parties engaged in fruitful negotiations and arrived at a comprehensive settlement. This reconciliation led to the issuance of a consent decree by the Debt Recovery Tribunal (DRT), Mumbai, embodying the terms of the settlement. Central to this settlement was the payment of Rs. 12.20 crores by the respondents to Punjab National Bank (PNB), effectively resolving the outstanding financial disputes.

This Court acknowledges that the parties involved, including PNB, willingly and amicably entered into this settlement agreement. The settlement, marked by mutual consent and satisfaction, was a bona fide effort to rectify the financial matters in dispute. The settlement was not a forced or coerced arrangement but an earnest attempt to bring closure to the financial disputes.

In light of these circumstances, it is imperative to recognize that the settlement achieved through civil proceedings was instrumental in alleviating the contentious financial issues. The parties, in their wisdom, resolved their differences through a legitimate legal process, which culminated in a consent decree issued by the DRT. This consent decree is reflective of the collective intention of the parties to put an end to the financial discord.

Furthermore, this Court observes that the settlement reached and the consent decree obtained signify the willingness of the parties to make amends and restore normalcy in their financial relationships. In doing so, the parties acknowledged their respective obligations and committed to fulfilling them.

Having assessed the settlement and its ramifications, it is incumbent upon this Court to emphasize that the quashing of criminal proceedings is not warranted in this case. The reconciliation achieved through civil means, while commendable, does not preclude the possibility of criminal culpability. This Court concurs with the High Court’s assertion that no issue of criminality has been found to be relevant in the context of the settlement and consent decree.

Therefore, it is our considered opinion that the criminal trial should proceed based on the evidence presented against the accused who are still alive. To quash the criminal proceedings at this juncture would not only be premature but also a contravention of the law. The interests of justice require that the criminal allegations be thoroughly examined and adjudicated upon.

In summation, these appeals brought before this Hon’ble Court lack merit, as the High Court’s decision to uphold the settlement, consent decree, and the continuation of the criminal trial is legally sound and equitable. Consequently, this Court affirms the dismissal of the appeals, and the matter shall proceed in accordance with the law.

References

This piece has been written by Abhaya Bansod, presently serving as an intern at Legal Vidhiya, Government Law College under Nagpur University.