N.S. GNANESHWARAN ETC.versusTHE INSPECTOR OF POLICE & ANR.

                 [2025] 5 S.C.R. 667 : 2025 INSC 787

                      N.S. Gnaneshwaran Etc.
                                  v.
                    The Inspector of Police & Anr.
               (Criminal Appeal No(s). 2871-2872 of 2025)
                                 28 May 2025
              [Vikram Nath* and Sandeep Mehta, JJ.]


                           Issue for Consideration
       Whether the criminal proceedings against the appellants for offences
       u/s.120B r/w ss.420, 468, 471, Penal Code, 1860 and u/s.13(2) r/w
       s.13(1)(d), Prevention of Corruption Act, 1988 ought to be quashed.

                                  Headnotes†
       Code of Criminal Procedure, 1973 – s.482 – FIR on the basis
       of complaint filed by the respondent no.2-Bank against the
       appellants alleging that the accused persons caused wrongful
       loss of Rs.25.89 lakhs to the Bank – In identical cases on the
       same set of transactions, a settlement was arrived at between
       the principal accused and the Bank – Appellants sought
       quashing of the criminal proceedings pending against them,
       High Court dismissed the petitions – Interference with:
       Held: Admittedly, dispute between the parties had culminated in
       a comprehensive One Time Settlement wherein the Bank had
       received the entire outstanding amount – Recovery proceedings
       before the Debt Recovery Tribunal were dismissed as settled,
       and no residual claim survives – Further, in identical proceedings
       against the appellants, the charge sheets were quashed by
       High Court taking note of the settlement reached in the recovery
       proceedings – SLPs thereagainst were dismissed by this Court thus,
       appellants are entitled to the same relief – There is no continuing
       public interest to allow the matter to proceed further – Criminal
       proceedings pending against the appellants, quashed – Penal
       Code, 1860 – ss.420, 468, and 471 – Prevention of Corruption
       Act, 1988 – s.3(2) r/w s.13(1)(d). [Paras 7-10]

                                  List of Acts
       Code of Criminal Procedure, 1973; Penal Code, 1860; Prevention
       of Corruption Act, 1988.

* Author
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                                  List of Keywords
       Quashing; Criminal proceedings; Dispute settled; Wrongful loss to
       the Bank; Fraudulent diversion of funds sanctioned; Identical cases;
       Same set of transactions; Settlement arrived; One Time Settlement
       (OTS); Bank received the entire outstanding amount; Debt Recovery
       Tribunal; Recovery proceedings; Recovery proceedings before
       the tribunal settled; No residual claim; Settlement reached in the
       recovery proceedings; No continuing public interest; Pending
       criminal proceedings quashed.

                              Case Arising From
       CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No(s).
       2871-2872 of 2025
       From the Judgment and Order dated 19.11.2024 of the High Court
       of Judicature at Madras at Madurai in CRLOP(MD) Nos. 586 and
       595 of 2024

                           Appearances for Parties
       Adv. for the Appellants:
       K. Krishna Kumar.
       Advs. for the Respondents:
       Sabarish Subramanian, Vishnu Kant, Ms. Rajnandini, Ms. Shikha
       Bharti.

                  Judgment / Order of the Supreme Court

                                     Judgment

       Vikram Nath, J.

1.     Leave granted.
2.     The present appeals arise out of order dated 19.11.2024 passed by
       the Madurai Bench of the High Court of Madras in Crl. O.P. (MD)
       Nos. 586 and 595 of 2024, whereby the High Court dismissed the
       petitions filed by the appellants under Section 482 of the Code of
       Criminal Procedure, 19731, seeking quashing of criminal proceedings


1    CrPC.
[2025] 5 S.C.R.                                                        669

            N.S. Gnaneshwaran Etc. v. The Inspector of Police & Anr.


      initiated against them for offences under Section 120B read with
      Sections 420, 468, and 471 of the Indian Penal Code, 18602, and
      under Section 13(2) read with Section 13(1)(d) of the Prevention of
      Corruption Act, 19883.
3.    The facts relevant to the present appeals are as follows:
      3.1. The appellants herein are arrayed as accused nos. 3 and 6
           in C.C. No. 16 of 2006, arising out of FIR No. RC MA1 2005
           0020, registered on the basis of a complaint dated 27.04.2005
           lodged by the respondent no.2 – Bank. It was alleged that the
           accused persons caused wrongful loss to the Bank to the tune
           of Rs.25.89 lakhs, leading to the filing of the charge sheet
           against nine accused, including the appellants.
      3.2. The allegations against appellant no.1, N.S. Gnaneshwaran,
           are that he was instrumental in orchestrating the fraudulent
           diversion of funds sanctioned to M/s Vinayaka Corporation.
           He is alleged to have facilitated the encashment of multiple
           cheques drawn from the fraudulently obtained credit limit, using
           a network of relatives, employees, and fictitious identities. It
           is further alleged that he forged signatures and diverted the
           funds through various accounts linked to his family members
           and associates.
      3.3. Appellant no.2, N.S. Madanlal, the brother of Gnaneshwaran,
           is alleged to have assisted in the scheme by operating a Bank
           account in the name of Bharathi Traders along with his wife,
           through which cheques were deposited and funds withdrawn.
           He is also accused of physically filling in cheques and ensuring
           their credit and encashment as part of the larger conspiracy to
           siphon off funds from the Bank.
      3.4. Parallel to the criminal proceedings, the Bank initiated recovery
           proceedings in O.A. Nos. 186 of 2005 and 5 of 2006 before the
           Debt Recovery Tribunal, Chennai4, which were later renumbered
           as T.A. Nos. 16 and 57 of 2007.


2    IPC.
3    PC Act.
4    DRT.
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       3.5. The High Court, vide order dated 07.01.2023, allowed the
            petition under Section 482 CrPC filed by accused no.7, who is
            the wife of appellant no.1, and quashed the FIR insofar as it
            pertained to her. The said order was assailed before this Court
            by way of Special Leave Petition, which came to be dismissed
            on 26.03.2021.
       3.6. In identical cases being C.C. Nos. 13 of 2006 and 151 of 2010,
            which were initiated by the Central Bureau of Investigation (CBI)
            against the appellants and other accused based on the same
            set of transactions, a settlement was arrived at between the
            principal accused and the Bank for an amount of Rs.52,79,000/-.
            Taking note of this compromise, the High Court proceeded to
            quash the proceedings against the accused on the ground of
            parity, and extended similar relief to the appellants herein vide
            order dated 26.09.2022.
       3.7. Subsequently, the Bank floated a One Time Settlement (OTS)
            scheme, which was availed of by the main borrowers, namely
            accused nos. 4 and 5. Upon full repayment of the dues, the Bank
            recorded its satisfaction in the pending recovery proceedings,
            which were dismissed as settled vide order dated 15.12.2023.
            Thereafter, the Debt Recovery Certificates were recalled, and
            No Dues Certificates were issued to the borrowers.
       3.8. In view of the settlement, the appellants moved the High Court
            under Section 482 CrPC seeking quashing of the criminal
            proceedings pending against them.
       3.9. However, the High Court, vide the impugned order, dismissed
            the petitions on the ground that the stage of trial was advanced
            and held that the criminal proceedings could not be quashed
            merely on the basis of the OTS when a prima facie case was
            made out.
       3.10. Aggrieved by the said decision, the appellants are before us
             in the present appeals.
4.     We have heard the learned counsel appearing for the parties and
       carefully perused the material on record.
5.     The learned counsel for the appellants submits that the dispute in
       question arises out of a commercial transaction which has since been
[2025] 5 S.C.R.                                                           671

        N.S. Gnaneshwaran Etc. v. The Inspector of Police & Anr.


     amicably resolved through a One Time Settlement scheme extended
     by the Bank. It is contended that the recovery proceedings initiated
     by the Bank have been fully settled, no dues remain, and the Bank
     has formally issued certificates recording its satisfaction. It is further
     urged that the appellants are similarly placed to other co-accused
     against whom proceedings have already been quashed, and that the
     continuation of proceedings in the present matter would amount to
     unfair treatment. Additionally, it is submitted that the offences under
     the Prevention of Corruption Act are not attracted in the case of
     the appellants, who are private individuals and not public servants.
6.   On the other hand, learned counsel for the respondents contends that
     the settlement of dues or compromise between the parties does not
     automatically warrant quashing of criminal proceedings when serious
     allegations involving fraud and criminal conspiracy are made out. It
     is submitted that the existence of a prima facie case is sufficient to
     warrant trial and that private settlements should not interfere with
     criminal prosecution, especially at an advanced stage.
7.   Having considered the submissions of both sides and examined the
     record, we are of the view that no useful purpose would be served
     by continuing the criminal proceedings in the present matter. The
     dispute has, admittedly, culminated in a comprehensive One Time
     Settlement under which the Bank has received the entire outstanding
     amount. The recovery proceedings before the tribunal have been
     dismissed as settled, and no residual claim survives. The Bank has
     not raised any objection to the closure of the matter and has issued
     formal acknowledgments of satisfaction.
8.   Further, in identical proceedings filed by the CBI against the appellants
     in C.C. Nos. 13 of 2006 and 151 of 2010, the charge sheets were
     quashed by the High Court after taking note of the settlement reached
     in the recovery proceedings. The special leave petitions preferred by
     the State being SLP (Crl) No. 711 of 2021 and SLP (Crl) No. 825 of
     2021 challenging the said quashing were dismissed by this Court,
     rendering the orders final. Since the facts and legal position are the
     same in the present matter, we see no reason why the appellants
     should not be given the same relief.
9.   In our view, allowing the present criminal proceedings to continue
     would serve no meaningful purpose, particularly when the dispute
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       between the parties has already been resolved through a full and
       final settlement. The settlement between the parties having taken
       place after the alleged commission of the offence, and there being
       no continuing public interest we see no justification for allowing the
       matter to proceed further.
10. In view of the above discussion, we find it appropriate to quash the
    proceedings pending in C.C. No. 16 of 2006 against the appellants
    herein. Consequently, the appeals are allowed.
11. Pending application(s), if any, shall stand disposed of.

       Result of the case: Appeals allowed.




       †
           Headnotes prepared by: Divya Pandey