The Supreme Court has dismissed the criminal proceedings in the case of N.S. Gnaneshwaran and others, versus Inspector of Police and others, in which there was a full settlement between the accused and the concerned bank. The Court held that no fruitful purpose would be served by continuing the suit, as the dispute had been fully resolved.
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The case arose out of allegations that the appellants had caused wrongful loss of ₹25.89 lakh to Canara Bank by fraudulently diverting sanctioned funds to M/s Vinayak Corporation. The Central Bureau of Investigation (CBI) registered an FIR and filed a chargesheet against nine persons including the appellants under Sections 120B, 420, 468 and 471 of the Indian Penal Code and Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988.
Subsequently, a one time settlement (OTS) was entered into by the main accused with Canara Bank for an amount of ₹52.79 lakh. Based on this settlement, the appellants approached the Madras High Court for quashing the criminal proceedings. However, the High Court dismissed the plea holding that criminal proceedings cannot be quashed merely on the basis of a lump sum settlement when a prima facie case exists.
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Aggrieved by the High Court's decision, the appellants appealed to the Supreme Court. A bench of Justices Vikram Nath and Sandeep Mehta heard the matter. The counsel for the appellants argued that the bank's recovery proceedings had been fully completed, there were no dues left, and it would be extremely unjust to continue with the criminal proceedings. He also argued that the Prevention of Corruption Act was not applicable, as the accused were private individuals, and not government servants.
On the contrary, the counsel for the State submitted that a settlement between the parties cannot automatically quash the criminal proceedings, especially when serious allegations such as fraud and criminal conspiracy are involved. He emphasised that a prima facie case was sufficient for trial proceedings and settlements should not interfere with criminal trials, especially at advanced stages.
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After considering the arguments, the Supreme Court found that no fruitful purpose would be served by continuing with the criminal proceedings as the dispute had been fully resolved. The Court noted:
"The recovery proceedings before the tribunal have been disposed of, and there is no remaining claim left."
Further, the Court highlighted that Canara Bank had not raised any objection to the closure of the case. Citing previous similar proceedings, where the High Court had similarly quashed the charge-sheets against the co-accused, and those orders had become final, the Court held that all the appellants were entitled to equality.
The Supreme Court emphasised that when a dispute is purely commercial and is settled after the offence, and no larger public interest is involved, criminal proceedings can be quashed. The bench concluded:
"As a settlement has been arrived at between the parties after the alleged commission of the offence, and there is no continuing public interest, we see no justification in allowing the case to proceed."
The Supreme Court allowed the appeals and quashed the pending proceedings.
Case Title: N.S. Gnaneshwaran & Others vs. The Inspector of Police & Another
Appearances
For petitioner : K Krishna Kumar
For Respondent : Vishnu Kant for R2 Bank; Sabarish Subramanian for R1
