Supreme Court Quashes Criminal Proceedings Following Bank Settlement.
28 May 2025
Banking Law >> Business & Commercial Law | Corruption >> Criminal Law | Forgery >> Criminal Law
The Supreme Court of India has quashed criminal proceedings against two appellants, N.S. Gnaneshwaran and N.S. Madanlal, in a case involving alleged fraud and criminal conspiracy with a bank. The decision, which came after a One Time Settlement (OTS) between the principal accused and the respondent-Bank, overturned an earlier order from the Madurai Bench of the Madras High Court.
The appellants were accused in C.C. No. 16 of 2006 of orchestrating a fraudulent diversion of funds amounting to Rs. 25.89 lakhs from the bank through M/s Vinayaka Corporation. Allegations against Gnaneshwaran included facilitating fraudulent cheque encashment and forging signatures, while Madanlal was accused of assisting the scheme through a bank account under 'Bharathi Traders'. The charges included offences under the Indian Penal Code (IPC) for criminal conspiracy, cheating, forgery, and using forged documents, as well as provisions of the Prevention of Corruption Act.
The Supreme Court noted that the core dispute stemmed from a commercial transaction that had been fully settled through an OTS scheme. The bank had received the entire outstanding amount, and recovery proceedings before the Debt Recovery Tribunal were dismissed, with "No Dues Certificates" issued to the borrowers.
Crucially, the Court highlighted that in identical proceedings initiated by the Central Bureau of Investigation (CBI) against the appellants and other co-accused (C.C. Nos. 13 of 2006 and 151 of 2010), the High Court had already quashed the charges, a decision upheld by the Supreme Court itself. Citing the same facts and legal position, the Supreme Court found no reason to deny the appellants similar relief in the current case.
The Court concluded that continuing the criminal proceedings would serve "no meaningful purpose" since the underlying financial dispute had been completely resolved. The settlement between the parties, occurring after the alleged commission of the offence, and the absence of any continuing public interest were key factors in the Supreme Court's decision to quash the proceedings.