REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL Nos.  1080-1085    OF 2009. (Arising out of SLP (Crl.) Nos.8854-57 of 2008)

Central Bureau of Investigation                   ... Appellant

Versus

A. Ravishankar Prasad & Others                    ... Respondents

J U D G M E N T  

Dalveer Bhandari, J.

1. Leave granted.

2. The Central Bureau of Investigation is seriously aggrieved  

by the judgment of  the High Court of judicature at Madras  

dated 30.4.2008 by which the High Court has quashed the  

entire criminal proceedings and CC Nos.80, 81 and 82 of 2001  

against  the  respondents  herein  namely,  A.  Ravishankar  

Prasad and A. Manohar Prasad.

3. According to the appellant, the respondents herein have  

committed  serious  offences,  such  as  forgery,  fabrication  of

documents and using the said documents as genuine. The  

respondents, A. Ravishankar Prasad and A. Manohar Prasad  

also entered into conspiracy with the Chairman and Managing  

Director and other officials of the Indian Bank, Chennai with  

the  object  of  cheating  the  Indian  Bank  in  the  matter  of  

recommending/sanctioning/disbursing huge credit facilities in  

the form of :

“(1) Letter of Credit (LC);

(2) Open Cash Credit (OCC)

(3) Secured- Temporary Overdrafts (SOD/TOO)

(4) Bank Guarantee (BG)

(5) Blocked Loan; and (6) Taking over of liabilities from other banks and  

other branches of Indian Bank without proper  appraisal,  without  following  banking  norms,  beyond  the  delegated  powers  and  without  ensuring the end use of the funds in the name  of  M/s  Ravishankar  Films  Pvt.Ltd.,  M/s  Gemini  Arts  Pvt.Ltd.,  M/s  Gemini  Pictures  Circuit Pvt.Ltd. and M/s Prasad Properties and  Investments  Pvt.Ltd.  represented  by  respondent  no.1  A.  Ravishankar  Prasad  and  respondent  no.2  A.  Manohar  Prasad  who  fraudulently  produced  false  documents  through their employees and used the same as  genuine and defrauded the Indian Bank huge  amounts running into hundreds of crores and  obtained pecuniary  advantage  for  themselves  and others.”

4. On completion of investigation charge-sheets were filed  

and  four  cases  were  registered  against  M.  Gopalakrishnan,  

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formerly  CMD,  Indian  Bank,  Chennai  and  other  public  

servants,  bank  officials  and  A.  Ravishankar  Prasad  and  A.  

Manohar Prasad and their group concerns under section 120-

B read with section 420 and section 13(2) read with section  

13(1)(d) of Prevention of Corruption Act, 1988.

5. On 28.3.2007 the  respondents  herein  have  settled  the  

entire outstanding dues by paying an amount of Rs.157 crores  

during March 2007 and the petitions before the Debt Recovery  

Tribunal, Chennai have been dismissed as settled out of court.

6. Respondent nos.1 and 2 had preferred application under  

section 482 of the Cr.P.C. before the High Court of Madras, to  

quash the proceedings against them contending inter alia that  

the  witnesses so far  examined by the  prosecution have not  

stated anything against the respondents. It is also urged that  

the  respondents  had  entered  into  a  compromise  with  the  

Indian Bank and have settled the entire outstanding dues and  

legal charges to the bank on the recovery certificate issued to  

the DRT,  Chennai.   In this view of  the matter,  proceedings  

against the respondents need to be quashed.

7. In  pursuance  of  the  show cause  notice  issued  by  the  

High Court, the CBI contended that the cases were registered  

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on  the  basis  of  written  complaint  filed  by  the  General  

Manager, Indian Bank, Chennai.  It was submitted that the  

active trial in the case was in progress and 92 witnesses have  

already  been  examined.  The  CBI  also  urged  that  the  

settlement of the loan transactions between the parties would  

not absolve the respondents herein from the criminal liability.  

According to the CBI, the Madras High Court without properly  

scrutinizing  the  materials  produced  by  the  prosecution  

quashed the proceedings against the respondents.   

8. The  High  Court  has  given  undue  weightage  to  the  

settlement  entered  between  the  bank  and  the  respondents.  

The settlement has absolved the respondents at the most from  

the civil liability but as far as criminal liability under section  

120-B  read  with  section  420  IPC  is  concerned,  the  

respondents  share  the  charges  with  the  Chairman  and the  

Managing Director and other officials of the Bank.  Therefore,  

quashing of the complaint against the respondents was wholly  

unwarranted and against the settled position of law.  The High  

Court did not comprehend the ratio of the series of judgments  

of this court and erroneously quashed the proceedings.

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9. The High Court ought to have appreciated that quashing  

of  the  criminal  proceedings  against  the  respondents  herein  

would  also  have  grave  impact  and  repercussion  on  the  

criminal proceedings pending against the Chairman and the  

Managing  Director  and  other  officials  of  the  Bank  under  

section 120-B read with  section 420 IPC and section  13(2)  

read  with  section  13(1)(d)  of  Prevention  of  Corruption  Act,  

1988.

10.  Before  we  examine  the  legal  position,  it  has  become  

imperative  to  recapitulate  some  averments  and  material  

incorporated in the charge-sheet filed against the respondents.  

The  charges  incorporated  that  during  the  course  of  

investigation  the  complicity  of  some  public  servants  and  

private  persons  have  come to  notice  and their  names  have  

been included in the list of accused persons.  In the charge-

sheet it is incorporated that the senior bank officials in order  

to favour respondents A. Ravishanker Prasad and A. Manohar  

Prasad  representing  various  companies  have  defrauded  the  

bank.

11. The  respondents  obtained  pecuniary  advantage  for  

themselves  and  for  the  accused  persons  mentioned  above,  

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causing huge wrongful loss to the Indian Bank T. Nagar (BOT)  

Branch to an extent of Rs.5935.65 Lakhs as on 16.6.1997 by  

M/s Ravishankar Films Pvt. Ltd. (A-12) (now M/s Ravishankar  

Industries  Pvt.  Ltd.)  and  to  an  extent  of  Rs.750  Lakhs  

(excluding interest) to the Indian Bank Kotturpuram Branch,  

Chennai in the account of M/s Tamil Nadu Video Corporation  

to  the  tune  of  Rs.675  Lakhs  (excluding  interest)  to  Indian  

Bank, Alwarpt Branch, Chennai in the account of M/s Media  

Communication  Services  to  the  tune  of  Rs.725  Lakhs  

(excluding interest) to Indian Bank, Abhiramapuram Branch,  

Chennai  in  the  account  of  M/s  Sri  Balaji  Finance  and  

Investments to the tune of Rs.700 Lakhs (excluding interest) to  

Indian Bank, Peters Road Branch, Chennai in the account of  

M/s Kalyani Audio Enterprises (as on 29.5.1997) and thereby  

A-1  to  A-31  have  committed  offences  punishable  under  

sections 120(B) read with sections 420, 467, 468, 471 Indian  

Penal  Code  and  section  13(2)  read  with  section  13(1)(d)  of  

Prevention of Corruption Act, 1988.

12. In  furtherance  of  aforesaid  criminal  conspiracy  in  the  

course of the same transactions, A. Ravishankar Prasad (A-10)  

vide letter dated 20.8.90 addressed to the Branch Manager,  

Indian Bank, T. Nagar (BOT) Branch, Chennai requested for  

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the following credit limits viz., Open  Cash Credit (OCC) facility  

of Rs.390 Lakhs, Medium Term Loan (MTL) of Rs.60 lakhs and  

Letter  of  Credit  (LC)  of  Rs.100  lakhs  in  favour  of  M/s  

Ravishankar Films Pvt.Ltd. (A-12) (now changed its name as  

M/s Ravishankar Industries Pvt.Ltd).

13. In furtherance of aforesaid criminal conspiracy based on  

the  letter  of  A-10,  S.  Ravindran  (A-13)  the  then  Branch  

Manager,  without undertaking any pre-sanction verifications  

about the credit worthiness of the company has recommended  

for  an  Open  Cash  Credit  (OCC)  facility  of  Rs.390  lakhs,  

Medium Term Loan (MTL) of Rs.60 lakhs and Letter of Credit  

(LC)  of  Rs.100  lakhs  in  favour  of  M/s  Ravishankar  Films  

Pvt.Ltd. (A-12).  While forwarding the proposal, he exaggerated  

information  about  the  profile  of  the  company.   While  this  

proposal was pending for sanction, V.R. Chidambaram (A-30),  

the  then  Zonal  Manager  of  Indian  Bank,  Chennai  had  

permitted an ad hoc TOD facility of Rs.50 lakhs on 25.10.90  

over phone, without ascertaining the requirement of the firm  

for such huge funds.  However, S. Ravindran (A-13) released  

the entire  amount of  Rs.  50 lakhs on 24.10.90 itself.   This  

amount was disbursed by S.  Ravindran (A-13)  to the  sister  

concerns of M/s Ravishankar Films Pvt.Ltd. (A-12) as per the  

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request of the Directors of the company A. Ravishankar Prasad  

(A-10) and A. Manohar Prasad (A-11) and while doing so he  

failed to ensure proper end use of the banks funds.

14. The charge-sheet annexed with the paperbook running  

from pages 78 to 191 gives details of the clandestine dealings  

and  systematic  fraud  committed  by  the  respondents  in  

collusion with the bank officials. By recapitulating all details  

we  would  unnecessarily  burden  this  judgment.   Regarding  

investigation of this case, we would like to observe that this  

case seems to be one of the very few well-investigated cases.  

In  this  case,  details  and  particulars  regarding  respective  

individual  roles  of  the  respondents  in  receiving  pecuniary  

advantages from the bank officials  in a clandestine manner  

have been enumerated.  By no stretch of imagination, it can be  

said that allegations in the complaint and charge-sheet taken  

at their face value do not constitute offences alleged.

15. Undoubtedly, the High Court possesses inherent powers  

under section 482 of the Code of Criminal Procedure.  These  

inherent powers of the High Court are meant to act ex debito  

justitiae  to  do  real  and  substantial  justice,  for  the  

administration of which alone it exists, or to prevent abuse of  

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the process of the court.  Inherent power under Section  482  

Cr.P.C. can be exercised in following category of cases:

(i) to give effect to an order under the Code;  

(ii) to prevent abuse of the process of court, and  

(iii) to otherwise secure the ends of justice.  

This court time and again has observed that the extraordinary  

power  under  section  482,  Cr.P.C.  should  be  exercised  

sparingly and with great care and caution.  The court would be  

justified  in  exercising  the  power  when  it  is  imperative  to  

exercise the power in order to prevent injustice.  In order to  

understand the nature and scope of power under section 482  

Cr.P.C. it has become necessary to recapitulate the ratio of the  

decided cases.   

16. Reference  to  the  following  cases  would  reveal  that  the  

courts have consistently taken the view that they must use the  

court’s  extraordinary  power  only  to  prevent  injustice  and  

secure the ends of justice.  

17. We  have  largely  inherited  the  provisions  of  inherent  

powers  from  the  English  jurisprudence,  therefore  the  

principles decided by the English courts would be of relevance  

for  us.  It  is  generally  agreed  that  the  Crown  Court  has  

inherent power to protect its process from abuse. The English  

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courts  have  also  used  inherent  power  to  achieve  the  same  

objective.  

18. In  Connelly v.  DPP [1964] AC 1254, Lord Devlin while  

dealing with similar provisions under the English law stated  

that  where  particular  criminal  proceedings  constitute  an  

abuse of process, the court is empowered to refuse to allow the  

indictment to proceed to trial.  

19. Lord Salmon in DPP v.  Humphrys [1977] AC 1 stressed  

the importance of the inherent power when he observed that it  

is only if the prosecution amounts to an abuse of the process  

of the court and is oppressive and vexatious that the judge has  

the  power  to  intervene.  He  further  stated  that  the  court's  

power  to  prevent  such  abuse  is  of  great  constitutional  

importance and should be jealously preserved.

20. In R.P. Kapur v. State of Punjab (1960) 3 SCR 388, this  

Court  summarized some categories  of  cases where  inherent  

power can and should be exercised to quash the proceedings:

(i) where  it  manifestly  appears  that  there  is  a  legal bar against the institution or continuance  of the proceedings;

(ii) where the allegations in the first  information  report or complaint taken at their  face value  

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25. The  learned  counsel  for  the  respondents  submitted  

written submissions and relied on some of the decided cases of  

this court.

26. The decision in Central Bureau of Investigation, SPE,  

SIU(X),  New  Delhi v.  Duncans  Agro  Industries  Ltd.,   

Calcutta (1996) 5 SCC 591 was relied upon by the learned  

counsel for the respondents.  The court observed that for the  

purpose of quashing the complaint, it is necessary to consider  

whether the allegations in the complaint prima facie make out  

an  offence  or  not.  It  is  not  necessary  to  scrutinize  the  

allegations  for  the  purpose  of  deciding  whether  such  

allegations are likely to be upheld in the trial. Any action by  

way of quashing the complaint is an action to be taken at the  

threshold before evidences are led in support of the complaint.  

For quashing the complaint by way of action at the threshold,  

it is, therefore, necessary to consider whether on the face of  

the  allegations  incorporated  in  a  complaint  or  F.I.R.,  a  

criminal offence is constituted or not.

27. In this case, the court further held that looking to the  

facts of the case it appears that after completion of civil suit  

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further investigation in connection with complaints may not be  

expedient.  In concluding para, it was observed as under:-

 “In the facts of the case, it appears to us that there  is  enough justification for  the High Court  to hold  that the case was basically a matter of civil dispute.  The Banks had already filed suits for recovery of the  dues of the Banks on account of credit facility and  the said suits have been compromised on receiving  the payments from the companies concerned. Even  if an offence of cheating is prima facie constituted,  such  offence  is  a  compoundable  offence  and  compromise decrees passed in the suits instituted  by the Banks, for all intents and purposes, amount  to compounding of the offence of cheating”.

28. The tenor of the judgment indicates that quashing of the  

complaint would depend on the facts of the each case.

29. In  Union of India & Others v. B.R.  Bajaj & Others  

(1994)  2  SCC  277  the  court  after  examining  this  court’s  

judgment in  Ch. Bhajan Lal’s case (supra) observed that at  

the stage of FIR the court should refrain from interfering when  

the FIR discloses commission of a cognizable offence.

30. In  B.S.  Joshi  &  Others  v. State  of  Haryana  &  

Another (2003)  4  SCC  675  the  court  reiterated  the  legal  

position that  the  court’s  inherent  powers  have  no limit  but  

should be exercised with utmost care and caution.  Inherent  

powers must be utilized with the sole purpose to prevent the  

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abuse of the process of the court or to otherwise secure the  

ends  of  justice.   In  exercise  of  inherent  powers,  proper  

scrutiny  of  facts  and  circumstances  of  concerned  case  are  

absolutely imperative.

31. In Nikhil Merchant v. Central Bureau of Investigation  

& Another (2008) 9 SCC 677, this court while relying on the  

aforesaid judgment in B.S. Joshi’s case (supra) observed that  

on  overall  view  of  the  facts  the  court  was  satisfied  that  

technicality  should  not  be  allowed  to  stand  in  the  way  of  

quashing of the criminal proceedings.  

32. In Jagdish Chanana & Others v. State of Haryana &  

Another 2008 (4) Scale 411 this court observed as under:-

“The  fact  that  a  compromise  has  indeed  been  recorded is admitted by all sides and in terms of the  compromise the disputes which are purely personal  in nature and arise out of commercial transactions,  have been settled in terms of the compromise with  one  of  the  terms  of  the  compromise  being  that  proceedings pending in court may be withdrawn or  compromised or quashed, as the case may be.  In  the light of the compromise, it is unlikely that the  prosecution will succeed in the matter. We also see  that the dispute is  a  purely personal one and no  public policy is involved in the transaction that had  been entered into between the parties.  To continue  with  the  proceedings,  therefore,  would  be  a  futile  exercise.”

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33. In  Madan Mohan Abbot v. State of  Punjab (2008)  4  

SCC 582 in which one of us (Bedi, J.) was the author of the  

judgment observed as under:-

“We need to emphasise that it is perhaps advisable  that in disputes where the question involved is of a  purely personal nature, the court should ordinarily  accept the terms of the compromise even in criminal  proceedings  as  keeping  the  matter  alive  with  no  possibility of a result in favour of the prosecution is  a luxury which the courts, grossly overburdened as  they are, cannot afford and that the time so saved  can  be  utilized  in  deciding  more  effective  and  meaningful  litigation.  This  is  a  common  sense  approach to the matter based on ground of realities  and bereft of the technicalities of the law.”  

34. In a recently delivered judgment of  this court  in  Smt.  

Rumi Dhar v. State of West Bengal & Another JT 2009 (5)  

SC 321, this court approved the observations of the Special  

Judge.   The  observations  of  Special  Judge  are  set  out  as  

under:-

“The  learned  Special  Judge  in  his  order  dated  16.12.2006 rejected the contention raised on behalf  of the appellant herein, stating:

“I have gone through the record, citation  and considered the  circumstances.  It  is  true  that  the  accused  has  put  a  good  gesture by paying of the dues of the bank  but I am at one with the Ld. PP that this  payment  cannot  exonerate  the  accused  from a prima facie charge. If I allow this,  then I may have to swallow in a case of  

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bribery that  the accused has paid back  the  amount  to  the  sufferer  the  amount  received as bribe. It is a question of trial  whether there was any criminal intention  on the part of this Lady accused in this  crime.  The  criminal  intention  is  to  be  inferred from the evidence to be adduced  by the  prosecution.  Simply  because  the  money has been returned, I cannot shut  the  mouth  of  the  prosecution  from  adducing evidence against this accused.  Thus, I do not like to pass any order in  favour  of  the  accused.  The  prayer  for  discharge  of  accused no.  7,  Rumi Dhar  stands rejected. Let the case proceed. Fix  7.2.07  for  consideration  of  charge.  The  sureties  must  produce  all  the  accused  persons on that date.”

35. The  facts  of  the  instant  case  are  quite  akin  to  Rumi  

Dhar (supra)’s  case.   In  the  instant  case,  the  charge-sheet  

clearly reveal substantial  material  on record making a clear  

case under section 120-B read with section 420 IPC against  

the respondents and their connivance with the bank officials.   

36. The  High  Court  in  the  impugned  judgment  has  

misunderstood  and  misapplied  the  ratio  of  the  three-Judge  

Bench of  this court in  Inder Mohan Goswami & Anr.  V.  

State of Uttarachal & Ors. 2007(12) SCALE 15 to the facts  

of this case.  One of us (Bhandari, J.) was the author of the  

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said judgment.  The ratio of the said judgment is in para 24 at  

at page 25 which reads as under:-

“Inherent  powers  under  section  482  Cr.P.C.  though  wide  have  to  be  exercised  sparingly,  carefully and with great caution and only when  such  exercise  is  justified  by  the  tests  specifically  laid  down  in  this  section  itself.  Authority  of  the  court  exists  for  the  advancement of  justice.   If  any abuse of  the  process leading to injustice is brought to the  notice of the court, then the Court would be  justified  in  preventing  injustice  by  invoking  inherent  powers  in  absence  of  specific  provisions in the Statute.”

37. The court in para 27 also observed that inherent power  

should not be exercised to stifle a legitimate prosecution.

38. Let us consider the facts of this case and apply the ratio  

of Goswami’s case (supra) where facts are as follows:-

(I) allegations  are  that  accused  have  committed  serious  

offences such as forgery, fabrication of documents and  

used those documents as genuine;

(II) allegations  are  that  accused/respondents  herein,  A.  

Ravishankar  Prasad  and  A.  Manohar  Prasad  have  

entered  into  a  conspiracy  with  the  Chairman  and  

Managing Director and other officials of the Indian Bank,  

Chennai with the object of cheating the Indian Bank in  

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the  matter  of  recommending,  sanctioning,  disbursing  

huge credit facilities running over hundreds of crores.

(III) Trial of all four cases are at advanced stage in which 92  

witnesses have already been examined.

39. While applying the ratio of Goswami’s case (supra), how  

any court in its legitimate exercise of power under section 482  

Cr.P.C.  quash  the  proceedings  against  accused  A.  

Ravishankar  Prasad  and A.  Manohar  Prasad  in  the  face  of  

aforesaid allegations.  In the instant case, wrong application of  

the ratio of the said judgment has led to grave miscarriage of  

justice.

40. Careful  analysis  of  all  these  judgments  clearly  reveals  

that the exercise of inherent powers would entirely depend on  

the  facts  and  circumstances  of  the  each  case.   The  object  

incorporating inherent powers in the Code is to prevent abuse  

of the process of the court or to secure ends of justice.

41. Both  English  and  the  Indian  courts  have  consistently  

taken the view that the inherent powers can be exercised in  

those exceptional cases where the allegations made in the first  

information report or the complaint, even if are taken on their  

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face value and accepted in their  entirety do not prima facie  

constitute any offence or make out a case against the accused.

42. When we apply the settled legal position to the facts of  

this case it is not possible to conclude that the complaint and  

charge-sheet prima facie do not constitute any offence against  

the  respondents.   It  is  also  not  possible  to  conclude  that  

material  on  record  taken  on  face  value  make  out  no  case  

under  section 120-B read with section 420 IPC against  the  

respondents.  Prima facie, we are of the opinion that this is  

one case where  adequate  material  is  available  on record to  

proceed against the respondents.   

43. In our considered view it was extremely unfortunate that  

the  High Court  in  the  impugned judgment  has  erroneously  

invoked inherent power of the court under section 482 of the  

Code of  Criminal  Procedure.  The High Court  ought to  have  

considered  the  entire  material  available  to  establish  a  case  

against the respondents under section 120-B read with section  

420 IPC.  It is significant that the respondents and the other  

bank officials share the charges under section 120-B read with  

section  420  IPC.   Quashing  the  charges  against  the  

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respondents  would  also  have  very  serious  repercussions  on  

the pending cases against the other bank officials.   

44.   In four cases, 92 witnesses have already been examined.  

The trial of the case was at the advanced stage.  At this sage,  

the High Court has seriously erred in quashing the charges  

against respondent nos.1 and 2.   

45. Quashing the proceedings at that stage was clearly an  

abuse  of  the  process  of  the  court.   The  court  neither  

considered  the  entire  material  nor  appreciated  the  legal  

position in proper perspective.    The impugned judgment is  

wholly  unsustainable  in  law  and  is  accordingly  set  aside.  

Unfortunately,  because  of  unnecessary  interference  by  the  

High Court  under  section 482 Cr.P.C.  the trial  of  this  case  

could not be completed and concluded.   

46. Before parting with the case we would like to observe that  

mere re-payment of loan under a settlement cannot exempt  

the accused from the criminal proceeding in the facts of this  

case.   

47. We would like to observe that any observations made in  

this case have been made to decide the present case.  The trial  

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court  may decide the case without being influenced by any  

observations made by this court.

48. In this view of the fact, in the interest of justice we direct  

that the trial be now completed as expeditiously as possible.  

The trial court is directed to conduct the trial on day to day  

basis and parties are directed to cooperate with the trial court.  

The trial court shall ensure that unnecessary adjournments be  

avoided and trial be concluded as expeditiously as possible.  

49. The appeals are consequently allowed and the impugned  

judgment of the High Court is set aside.  The appeals stand  

disposed of accordingly.

..........……....................J.                                                         (Dalveer Bhandari)

..........……....................J.                               (Harjit Singh Bedi)

New Delhi; May 15, 2009

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