Supreme Court: One-Time Settlement With Banks Not A Ground To Quash Loan Fraud Case

Supreme Court: One-Time Settlement With Banks Not A Ground To Quash Loan Fraud Case

The Supreme Court of India (SC) refused a plea to quash a case registered by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (Act) over the loan fraud allegations in Telangana.

The SC Bench headed by CJI SA Bobde noted that the banks have agreed for One-Time Settlement (OTS) and added that it could not be a ground for quashing, or act as a defense in the trial, and hence it refused to entertain the petition filed by Narang (Petitioner) for quashing of the ED's case against him.

The Court noted that the total outstanding amount was above Rs 190 crore, which was settled in approx. Rs 66 crores. The Court accepted the request made by the Senior Advocate Mukul Rohatgi on behalf of the petitioner to delete the description as 'fraud' and 'cheat' in HC's judgment in view of the OTS settlement with banks.

On 22 December 2020, Telangana High Court (HC), while dealing with a batch of criminal petitions filed by the petitioner and others seeking to quash the criminal charges against them. It had noted that the banks' acceptance of OTS would not absolve the Petitioners.

The Court further stated in its order that "Such economic frauds adversely affect the financial and economic well-being of the Nation and have implications which lie beyond the domain of a mere dispute between Petitioner No. 4 and the above said banks, including Central Bank of India and Bank of Maharashtra."

It added, "The mere fact that the banks which are already under stress to clear the NPAs from their books accepted the OTS, will not absolve the petitioners from criminal charges."

The complainants' banks had also specifically incorporated in the acceptance of the OTS proposals terms and conditions that the acceptance of the same would not absolve the criminal liability of the Petitioners and that OTS and criminal liability were different and distinct.

The HC stated that the Top Court had categorically held in a case based on the economic offences that it was not proper for the HC to exercise its inherent powers under Section 482 Code of Criminal Procedure for quashing the FIRs/charge sheets.