132171

IN THE HIGH COURT FOR THE STATE OF TELANGANA

AT HYDERABAD

THURSDAY, THE SEVENTEENTH DAY OF SEPTEMBER

TWO THOUSAND AND TWENTY SIX

PRESENT

THE HONOURABLE SRI JUSTICE N.TUKARAMJI

CRIMINAL PETITION NO: 8877 OF 2023

Between:

Dr.V.Raja Gopal Reddy, S/o. Late C.V.Subba Reddy, aged about 64 Yrs., Occ:

Retired Employee (lndian Bank) R/o. Flat No.308, A-Block, Sri Mahalakshmi

Meadows, Lakdikapool, Hyderabad.

...PETITIONER/ACCUSED NO. 7

AND

1. State of Telangana, Rep.by its Sppcial Public Prosecutor for C B l., High

Court Hyderabad.

2. The Zonal Manager, Hyderabad Zone, lndian Bank, Vigilance Cell, 4th Floor'

Liberty Plaza, Himayathnagar, Hyderabad - 500 029

...RESPONDENTS

Petition under Section 482 of Cr.P.C praying that in the circumstances stated

in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased

to quash C.C No.'16 OF 2014 on the file of Principal Special Judge for CBI Cases,

Hyderabad to the extent of the petitioner/accused No.7 herein.

l.A. NO: 2OF 2023

Petition under Section 482 oI Cr.P.C praying that in the circumstances stated in

the Memorandum of Grounds of criminal Petition, the High court may be pleased to

grant interim stay of all further proceedings in c.c.No. 16 of 2014 on the file of

Principal special Judge for cBl cases, Hyderabad including the appearance of the

petiioners/accused No. 7 herein, pending disposal of the above criminal petition.

This Petition coming on for hearing, upon perusing the Memorandum of

Grounds of criminal Petition and upon hearing the arguments of sri Raja sripathi

Rao,seniorCounselonbehalfofSriGAdityaGoud'AdvccateforthePetitioner

andSrisrinivasKapatia,theSpecialPublicProsecutorforCBlonbehalfofthe

Respondent No. 1 and of Sri Hemanth Kumar Vemuri' lounsel on behalf of

Sri Srinivas Survi, Advocate for the Respondent No 2'

The Court made the following: ORDER

IN THE HIGH COURT FOR THE STATE OF TELANGANA

AT HYDERABAD

THE HONOURABLE SRI JUSTICE N.TUKARAMJI

CRIMINAL PETITION No.8877 OF 2023

(CNR No. HBHC01 0459292023)

DATE: 17.09.2026

Betwee n

Dr V Rala Gopal Reddy

P et it io n e r/Acc u s ed No. 7

AND

The State of Telangana, Represented by its Special Public

Prosecutor for CBl, High Court for the State of Telangana at

Hyderabad, and another

Respondents

ORDER

This Criminal Petition is filed under Section 482 of the Code of

Crimrnal Procedure Code.

.1973

(Cr P C ) seeking quashment of the

proceedrngs agarnst the pettttoner rn C.C No 16 oI 2014 pendrng on the file

of the learned Princrpal Special Judge for CBI Cases, Hyderabad

2 The petitioner is arrayed as Accused No. 7 in the aforesaid Calendar

Case, facing accusations for the offences punrshable under Sections 120-B

read with Sections 420. 409, 467, 468 471 ol lhe lndran Penal Code, 1860'

42O.4Og ofthe lndian Penal Code 1860 (lPC) Secttons 13(1Xd) 13(2) read

wrth Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act)

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3 Heard Mr Raja Sripathi Rao learned Senror C:unsel argued on

behalf of Mr G.Aditya Goud, learned counsel for the petilioner, Mr Snnivas

Kapatia, learned Special Public Prosecutor for Centrai Bureau of

lnvestigation (CBl) representing respondent No 1-CBI and Mr Hemanth

Kumar Vemuri, learned counsel, argued on behalf of Mr Srinivas Survr.

learned counsel for respondent No.2-lndian Bank/de factc complarnant

Factual matrix:

4 1 The prosecution case, in brief. is that Accused No 1, K Suresh

Kumar, the Proprietor of M/s PDM lndustries, rn consprracy with the other

accused. including the petitioner/Accused No 7. alleged y obtained various

credit facilrties from Respondent No.2-lndian Bank Ctsmangunj Branch,

Hyderabad by submrtting fake and forged trtle deeds, frrancial statements

invoices, net-worth certifrcates and other documents Thr: accused allegedly

obtained an Overdraft Cash Credit/Open Cash Credit (OCC) facility for [\//s

PDM lndustries up to a limit of Rs 4 50 Crores, a Housing Loan of Rs 40

Lakhs, an lndustrial [t/lortgage/Term Loan of Rs 50 Lakhs and Term Loans

in favour of M/s P S Educational Society aggregating to Rs 2.25 Crores

The rnvestigation further revealed that the sanctioned amounts were

wrthdrawn and transferred to other accounts and were subsequently utrlised

for purposes other than those for whrch the facilitres had been sanctroned

Certain non-existing firms were allegedly utrlised for routing funds and

creating artlficial business turnover

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4.2 lt rs further alleged that several title deeds offered as collateral

security were forged. Out of the 17 property documents examrned during the

investigation, 11 were found to be fake/forged The petitioner/Accused No 7

and Accused No 6 who were Bank officrals, allegedly failed to properly verify

the trtle documents. business transactrons. stock position, end-use of funds

and complrance wrth the condltlons attached to the sanctlons, thereby

facrlitating the sanction and disbursement of the loan facilities in furtherance

of the alleged conspiracy lt is further alleged that the Housing Loan of Rs.40

Lakhs was released wrthout proper stte verification and wlthout compliance

with the prescribed conditions. and that the funds were subsequently

diverted for other purposes. The accounts were thereafter classrfied as

Non-Performrng Assets (NPAs) ' on 31 03 2010 Followrng

adlu stm e nt/recove ry through SARFAESI proceedings, the total alleged

outstanding wrongful loss suffered by lndian Bank was calculated at

approximately Rs 7,17,96,5551 On the basis of the investigatron, the CBI

concluded that Accused Nos.1 to B had prima facre conspired to cheat

lndran Bank by resorting to forged documents, fraudulent loan transactions,

misuse/diversion of sanctioned funds and abuse of official position, thereby

causrng an alleged wrongful loss of approximately Rs.7 1B Crores to the

Bank

43The prosecution specrfically alleges that the petitioner/Accused No 7'

while servrng as Branch Manager of lndian Bank, osmangunj Branch,

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Hyderabad, acted in conspiracy with the other accused and facilitated the

fraudulent Ioan transactions. According to the prosecut on, the petitloner

failed to properly verify the title deeds, financial statemelts, statements of

assets and Iiabilities. invoices and other documents submitted by the

borrowers, notwithstanding that several documents offered as security were

subsequently found to be forged lt rs further alleged that the petrtioner farled

to ensure that the loan amounts were utilised for the purposes for which they

had been sanctioned The prosecution. therefore. crontends that the

petitioner failed to exercise the degree of diligence elpected of a Bank

official and that such acts and omissions enabled the alleged fraudulent

transactions and contributed to the wrongful loss caused to lndian Bank

Pleadings of the Petitioner:

5..1 Learned Senior counsel appearing for the petitioner submitted that

the petitioner/Accused No.7 served as Branch Manager of lndian Bank

Osmangunj Branch, Hyderabad, from27 07 2001 to 16 i)7 2006 During his

tenure, credrt facilities were extended to M/s. sirish Trad:rs/PDI\/ Industries.

The petitioner personally sanctioned the initial occ limil of Rs 15 Lakhs on

12Og 2OO1 Thereafter the OCC limit was enhanced to Rs 40 Lakhs, Rs 70

Lakhs and Rs.150 Lakhs respectively by the circle officr-., Hyderabad since

the enhanced lrmits were beyond the delegated powers of the petitioner lt

was submitted that the loan proposals were prepared by the credrt officer

and were supported by legal opinions valuation reports and other requisite

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documents. According to the petttioner, his role was confined to forwarding

the proposals to the crrcle off rce for conslderatron and sanctron. insofar as

the enhanced limits were concerned lt was further submitted that the

Housing Loan of Rs 40 Lakhs was sanctioned by the circle office and not by

the petitroner

5.2. lt is the further case of the petitioner that subsequent audits and

tnspections conducted in relation to the concerned accounts did not disclose

any trregulaflty, diversron or stphontng of funds attributable to him The stock

Audit, Branch lnspections, statutory audrts and staff Accountability Studies

allegedly did not fasten any accountabilrty upon the petitioner, and the staff

accountability was recorded as 'Nil" T6e petrttoner was relieved from the

Branch rn July, 2006. Even thereafter the circle offrce continued to deal

with the accounts and the credit facilities and subsequently enhanced the

OCC limit to Rs 300 Lakhs rn 2OO7 and to Rs.450 Lakhs in 2009 The

accounts ultimately became NPAs only rn the year 2010, several years after

the petitioner had ceased to function as the Branch Manager of the said

Branch lt is further pleaded that the record rndicates that the Bank's Panel

Advocates had certtfted the genurneness of the title documents relating to

the securities offered The petitioner also relies upon the fact that the Bank

subsequentlyrecoveredsubstantialamountsthroughoneTimeSettlement

(oTS),saleofpropertiesandrepaymentoftheloanSltiSalsostatedthat

proceedings against the co-accused. namely Accused Nos 6 and B' were

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quashed by this Court, while proceedings against Accused Nos.3 and 4

were quashed by the Hon'ble Supreme Court

5.3. The petitioner relies upon the aforesaid circumstarces to contend that

the mater al on record does not disclose any specific act on his part, beyond

the sanction of the initral OCC facility of Rs 15 Lakhs within the scope of his

delegated authority and the foruuarding of the subsequent proposals to the

competent Circle Office, which could establish his crininal culpability in

respect of the alleged transactions. According to the petrtioner, the material

relied upon by the prosecution does not attribute to him any specific act of

forgery, fraudulent representation, diversion or siphoning of funds, or any

other overt act demonstrating his participation in the allel;ed conspiracy. His

contention is that his official role in processing or forwarding the loan

proposals, without more, cannot constitute sufficient material to establish

crimrnal culpability

5.4. ln support of his submissions, learned Senior Courrsel placed reliance

upon Susanta Kumar Dalei @ Susantha Kumar Dalai y Stale of Odisha

(Vigilance), 2026 INSC 510 to contend that general, vague and omnibus

allegations, without identification of a specific role or overl act attributable to

an individual accused cannot, by themselves, justify the continuation of

criminal proceedings against such accused. lt is submitted that, at the stage

of discharge or quashing, the Court is not required to undertake a detailed

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appreciation of the evidence, so as to determine whether the prosecution will

ultimately succeed at tnal Rather the cou( is required to examine whether

the matenal on record dtscloses sufficlent materlal or grave suspicion

connecting the partrcular accused with the alleged offences. Applying the

said principle, learned Senior Counsel contends that the petitioner's mere

status as Branch Manager and his role in forwarding proposals cannot

constitute sufficient material establishing criminal culpability in the absence

of specific matelal demonstrating knowledge, dishonest intention, forgery or

partrcrpatron tn the alleged consplracy

Reliance is also placed upon Vijay Kumar Kela and another v' Central

Bureau of lnvestigation and another,202-6 INSC 588, to contend that' where

a bankrng transactton has been substantrally completed or settled pursuant

to approved terms and the Bank has received the settlement amount, the

continuation of crrminal proceedrngs may, in appropriate circumstances, be

examined from the perspecttve of abuse of the process of law, particularly

where the possrbrlity of quashrng the proceedings has otherwrse become

remote. Learned Sentor Counsel, therefore. submits that, since the amounts

were recovered by the Bank pursuant to the oTS, full satisfaction was

recorded before the DRT. and the basic ingredrents of the alleged offences

are not made out against the petitioner, continuation of the criminal

proceedings against him would amount to an abuse of the process of law'

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Learned Senior Counsel further placed reliance upon K Bharathi Devi

and another v Slale of Telangana and another, (2024) SCC 3g4, which

arose out of the very same Calendar Case, namely C.C No.16 of 2014. lt is

submitted that, in the said proceedings, the Hon,b e Supreme Court

considered the allegations against the concerned accrrsed and ultimately

quashed the proceedings against Accused Nos.3 and.l inter alia. on the

ground that the material on record did not attribut€ any specific and

independent culpable role to them

According to the petitroner. the said decrsion assL mes significance rn

the present case because, simrlarly. no specifrc act of forgery, fraudulent

representatron, diversron of funds or participation in the alleged conspiracy

has been attributed to the petitioner His role, accordrng to the petitioner, is

essentrally stated to have been confined to process nll and/or forwardrng

proposals to the competent authority.

5.5 On the strength of the aforesard facts and crrcrmstances. learned

Senior counsel appearing for the petitroner contends that the prosecutron

has failed to place any sustainable material connec;ting the petitioner

individually with the alleged offences According to the petitioner, the

materral on record, at its highest, demonstrates hrs offrcral rnvolvement rn the

processrng and fonrvarding of bankrng proposals, wher'-as the substantial

sanctions were made by the circle office and the sup,porting documents

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were scrutinrsed by the concerned officers and professional experts lt is

further submitted that the subsequent audits and tnspectrons did not attribute

any accountabllity to the petitioner and that the subsequent deterioratron of

the accounts occurred several years after he had ceased to be the Branch

Manager of the concerned Branch The petrtioner. therefore, contends that,

in the absence of spectfic and legally sustainable material disclostng his

individual rnvolvement, knowledge, dishonest intention or participation in the

alleged consprracy. conttnuatton of the crimtnal proceedings agarnst him

would amount to an abuse of the process of law Accordtngly, learned

Senior counsel seeks quashing of the proceedings against the petitioner in

the Calendar Case.

Pleadings of the Respondent No.1-CBl:

61 ln contrast, learned Special Public Prosecutor appearing for

Respondent No 1 CBI opposed the petitron and submitted that the petitioner

cannot be portrayed as a mere forwardrng officer. According to the learned

Special Public Prosecutor, the material collected during the investigation,

coupled with the evrdence already adduced before the trial court, discloses

the petitroner's acttve tnvolvement rn the processlng, recommendatlon and

sanction of the credit facilities extended to M/s. Sirish Traders/PDM

lndustries lt is submitted that, during the petitioner's tenure as Branch

lVlanager of lndian Bank. Osmangunl Branch, Hyderabad, he was directly

involved rn the processrng of credrt facrlitles aggregatlng to approxrmately

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Rs 3 05 Crores, compnsrng the OCC facility of Rs 15 Lakhs sancttoned in

2001, the enhanced limit of Rs40 Lakhs in 2002, Rs TO Lakhs in 2004 and

Rs.l 50 Crores in 2005. as well as a Housing Loan of Rs 40 Lakhs

sanctioned rn 2003. According to the CBl, merely ber;ause some of the

enhanced limrts were ulttmately sanctroned by the Crrcle Office the

petitioner cannot thereby completely dissociate rimself from the

transactions particularly when his role in processing and recommending the

proposals is specifically alleged by the prosecution

6 2 Learned Special Public Prosecutor further submrtted that the loans

were processed and recommended on the strength of trile deeds and other

documents which were subsequently iound to a substantial extent. to be

vague, forged and unreliable. According to the proser:ution, several tifle

documents furnished as collateral security were not genu ne and some of the

documents were also found to have been deposrted witr other Banks lt

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contended that, being the Branch Manager, the petitioner was under an

obligation to exercrse due diligence and to ensure verification of the

genuineness and validity of the securrties offered before recommending the

credit facilities and their subsequent enhancements The CBI submits that

the relevant question is not merely whether the petitioner possessed formal

authority to sanction a particular credrt limit. but whether notwithstanding the

limits of his delegated powers, he knowingly or neglig -.nily facititated the

processlng and recommendation of credit facilities on the basis of allegedly

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forged and unreliable documents. lt is further submitted that the petitioner

failed to rndependently venfy the trtle deeds and did not ensure compliance

with the prescribed banking procedure relating to verification of the

securities Particular emphasis is placed upon the manner in which the legal

oprnions were allegedly obtained Accordrng to the CBl, lnstead of the

Branch Manager forwarding the orlginal tltle documents through the

prescribed procedure to the Bank's Panel Advocate for independent

scrutrny. the borrower hrmself approached the Panel Advocate with

photocopies of the documents and obtarned the legal opinion The CBI

contends that such deviation from the prescribed procedure constitutes a

materral circumstance, which requires consideration while examining the

petitioner s conduct and the allegatron that he failed to exercise the requislte

degree of care and diligence expected of a Branch Manager while deaiing

with substantial public funds

6 3 lt rs further contended that, while enhancing the OCC facility from

Rs.70 Lakhs to Rs.1.50 Crores, the petitioner allegedly recommended the

enhancement wrthout disclosing or verifying that the properties offered as

secunty had already been mortgaged Accordlng to Respondent No

'1 -CBl,

the alleged suppression of, or fatlure to verify, the existence of prior

mortgages, when consrdered cumulatively with the other circumstances

concerntng the tttle documents and the manner rn whlch the credit faciltties

were processed, constitutes material which requires adiudication at trial and

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cannot be brushed aside at the stage of exercistng the nherent jurisdrctron

of this Court lt is also contended that the petttioner failed to ensure

compliance with the conditions governing the sanction a1d disbursement of

the credit facilities Such conditions allegedly included verification of the tiUe

deeds by the approved Advocate, valuatton of the secur€)d properties by the

Panel Engineer, conftrmation that the borrowers had not availed OCC

facilitres from other Banks and verification of the utilisaticn of the sanctioned

funds for the purposes for which the facilrties had been granted The CBI

submits that these safeguards were intended to protecl the Bank against

inter alia, the creation of multiple charges over the same properties and

misuse of the sanctioned funds The alleged farlure rtn the part of the

petitioner to ensure compliance with these condrtions according to the

prosecution, constitutes relevant material for assessrng his role and conduct

in the tra nsactrons.

6 4 lt is further submitted that the allegations are rot confined to the

material contained in the charge sheet but are also supported by evtdence,

which has already been recorded by the trial Court Learned Special

publrc

Prosecutor submitted that PW-2 deposed that, out of the 14 documents

examined 11 were fake and only three were genuine According to the

prosecution this evidence is corroborated by the testirlony of

pW-3

and

officiais of the Registration Department Learned specra publrc prosecutor

submits that the allegation concerntng the forged t tle documents rs,

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therefore, not founded merely upon the assertions contained in the charge

sheet but is supported by oral and documentary evidence. which is presently

berng tested before the trial Court. The prosecution accordingly contends

that the genurneness of the title deeds, the manner in which they were

produced and relred upon, complrance wrth the prescribed banking

procedures, and the petitioner's conduct and knowledge are all matters

requirrng apprecratton of evidence and ought not to be conclusively

determrned in proceedings seeking quashing of the criminal case

6 5 lt is further submitted that, when the acts and omissions attributed to

the petitroner are constdered cumulatrvely the conduct of the borrower and

the other accused, along wtth the surioundrng circumstances. discloses

materral suggesting hrs particrpation rn the alleged criminal conspiracy

Accordrng to the prosecution, the allegations raise questions as to whether

the petrtioner possessed knowledge of the fraudulent nature of the

documents, whether he acted with dishonest intention. and whether his

conduct formed part of the concerted course of action allegedly undertaken

by the borrowers and the other accused These questrons. according to the

learned special Publrc Prosecutor, are required to be assessed on the basis

of the entire evrdence and cannot appropriately be determined at the present

stage lt is further submitted that the trial has already substantially

progressed. out of 98 witnesses cited by the prosecution, 42 witnesses have

been examrned and 387 documents have already been marked. According

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to the learned Special Public Prosecutor, interference by this Court at such

an advanced stage would unnecessarily interrupt the trral Any assessment

of the evidence for the purpose of determining the truth or otherwrse of the

allegations, it is contended, would travel beyond the pernissible scope of the

present proceedings and would amount to an exercis,3 falling within the

domain of the trial Court

6.6 Learned Special Public Prosecutor also opposad the petitioner's

reliance upon the One Time Settlement (OTS) subseql ent recoveries and

the alleged satisfaction of the Bank's dues. lt is submitteC that settlement of

the Bank's monetary claims or recovery of amounts due does not, by itself,

automatically extrnguish criminal liability arising from allegations of

conspiracy, cheating, forgery, criminal breach of trust and criminal

misconduct According to the learned Special Public Prcsecutor, the Bank

received Rs.3.80 Crores under the OTS against alleged total dues of

approximately Rs 16 35 Crores and the settlement cor sequently nvolved

an alleged loss of approximately Rs 12 56 Crores. lt is, tl erefore, contended

that the OTS cannot be treated as wiping out the allegr:d criminality or as

converting the allegedly fraudulent transactions into a purely civ Idispute

6.7 In support of the aforesaid contentions, learned Specral Public

Prosecutor placed reliance upon CBI v. Sarvodaya Hiqhways Ltd, 2025

SCC OnLine SC 2598 and submrtted that, rn cases rnvoivrng serious

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economrc offences, fraudulent banking transactions and allegations

concerning forged or fabricated documents, mere settlement of the monetary

claims of the financial institution does not, by itself, extrnguish the criminal

proceedjngs. lt rs contended that the present case does not relate merely to

recovery of a debt, but lnvolves allegations of fraudulent conduct on the part

of the petitioner, misuse of the banking system and involvement of public

funds Therefore, according to the prosecution. settlement of the financial

lrability cannot constitute a ground. by rtself for quashing the criminal

proceedrngs.

Learned Specral Public Prosecutor further placed relaance upon Anil

Bhavarlal Jain v Slate o/ Maharashtia, 2024 SCC Online SC 3823,

wherern, accordrng to the submisslon, the Hon'ble Supreme Court held that

economrc offences havtng a serlous lmpact upon the publtc at large are

required to be constdered rndependently of the settlement of financial

liabilrty lt was further submitted that allegations rnvolving corruption, abuse

of bankrng transactions, cheating and other criminal offences cannot

ordinarrly be reduced to a dispute of a purely pnvate nature merely because

the financial instrtution has accepted settlement of its monetary claims

6.8. Further, referring to the order passed in Crrmrnal Petition No'5778 of

2016 concerning Accused Nos 1 to 5 in the same C C No 16 of 2014'

learned Special Public Prosecutor submitted that those accused had also

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sought quashing of the proceedings by relying upon the C)TS and setflement

of the Bank s dues, but the proceedings were not quashed According to the

CBl, the satd decision demonstrates that tn the contex: of the very same

prosecution, the existence of an OTS cannot, by itse f, be regarded as

sufficrent to terminate criminal proceedings where the allegations concern

fake or forged documents and other acts constituting alk:ged crimrnality. As

regards the relief granted to the co-accused and the ple€ of parity raised by

the petitioner. learned special Public prosecutor

submittec that the petitioner

cannot claim panty as an automatic or absolute right lt is contended that the

orders relating to Accused Nos 3 and 4 and the proc(redrngs concern ng

Accused Nos.6 and B, were based upon the specific records and material

applicable to those accused. According to the prosecut on, the material in

the present case establishes that the petitioner had a definite role rn the

processing and recommendatton of the credit facilities lt rs, therefore,

submitted that the petitioner cannot derive an automat c benefit from the

orders passed in favour of the other accused, partlcularly when the nature

and extent of the material and allegattons agatnst each arccused have to be

examined independently

6.9. Learned Special Public Prosecutor appearing for Respondent No 1

accordingly submits that the charge-sheet material collected during the

investigatron. together with the evidence already recorced before the trial

Court, drscloses sufficient materral connecting the petrtroner with the alleged

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offences lt is, therefore, pleaded that the petitioner has failed to

demonstrate that the allegations against him are inherently improbable or

that the prosecutlon case is manifestly groundless, so as to warrant exercise

of the extraordinary/inherent lurrsdrction

of this Court. Learned Special Public

Prosecutor accordrngly prayed for dismissal of the petition and for permitting

the trial Court to proceed wtth the trial ln accordance with law

Pleadings of the Respondent No.2-lndian Bank:

7 1 Learned counsel appearing for Respondent No 2-lndian Bank, while

opposing the petttton. submttted that the petitioner was working as Branch

Manager during the relevant pertod and was involved in sanctioning and/or

recommending various credtt facrlities in'favour of M/s Sirish Traders/PDM

lndustries. including OCC limits and a Housing Loan The concerned loan

accounts were subsequently classifred as Non-Performtng Assets in the year

2010. lt is further submitted that, durlng the course of recovery proceedings

inrtiated under the SARFAESI Act, the Bank discovered that eleven (11)

documents relattng to five properttes offered as securlty were allegedly fake

or fabricated and that third-party claims were found to exist in respect of the

said properties. According to Respondent No.2-Bank, the documents in

question had been deposited with the Bank during the tenure of the

petitioner and the petttloner had sanctroned and/or recommended credlt

facilities relyrng upon the sard documents. lt is. therefore, contended that the

petitioner cannot now contend that his role was confined merely to

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fonvarding the proposals According to the Bank, as Branch Manager he

was responsible for exercising due diligence rn relation to the borrowers,

verifying the title documents and securities offered, and ensuring the

genuineness and validity of the propertres furntshed as co lateral securlty.

7 2 lt rs further submitted that in respect of the initral OCC facility of Rs 15

Lakhs the petitroner allegedly failed to obtarn the Banl, s legal oprnron rn

accordance with the prescribed procedure lt is alleged that rn relation to the

title documents, the borrower himself approached the Panel Advocate with

photocopies of the documents and obtained the legal opinion The Bank

contends that such a procedure was contrary to the applicable banking

procedure With regard to the Housing Loan, the Bank further contends that

the petitroner allegedly recommended the facrlity aga ns,t a property which

had already been mortgaged to the Bank

7 3 lt is further alleged that the petitioner failed to ccnduct the requisite

srte verification and that the loan amount was released in four stages without

obtaining the necessary work-completion certificah:s. According to

Respondent No.2-Bank, these circumstances drsclose deviations from the

prescribed procedure and are relevant to determrnrng the petrtioner's role

and responsibrlrty in the alleged transactions lt is furtht:r pleaded that, by

virtue of his position as Branch Manager, the petiti,tner had a direct

responsibrlity to verify and ascertain the credentials of the borrower, the

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genuineness of the title documents, the authority and validity of the

sanctions, and the securities offered as collateral lt is, therefore, contended

that the petitioner cannot avoid such responsibility merely by asserting that

the authority to accord final sanction for the enhanced credit limits did not

vest in him The Bank further submits that the petitioner's conduct in

processing scrutrnising and recommending the proposals on the basis of the

documents and securitres furnished by the borrowers is relevant for

assessing his role and responsibility in the alleged transactions

7 4 lt is also submrtted that the record discloses allegations relating to the

loan documents and the alleged acceptance of fake and fabricated

documents as security, the alleged farlire to follow the prescribed banking

procedure, the failure to obtarn the requisite legal opinron, the failure to verify

the properties offered as security, and the failure to ascertarn the existence

of any prior mortgage. According to Respondent No.2-Bank, the petitioner's

criminal liability in respect of these allegations involves disputed questions of

fact and apprecration of evidence, which cannot appropriately be determined

in proceedings seekrng quashing of the criminal proceedrngs, particularly

when charges have already been framed and the trial is substantially

underway.

7 5 Learned counsel for Respondent No.2-Bank also disputed the

contention that the subsequent OTS and recovery proceedings have the

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effect of extinguishing the alleged criminal liability lt is submitted that the

settlement involved an alleged loss of approximately Rs 1,256 Lakhs and

that the settlement, by itself, does not nullify the allegations relating to

fraudulent abuse of the banking process or criminal conspiracy On the

aforesaid grounds, Respondent No 2-lndian Bank prayed fcr dismissal of the

petition

Analysis and Conclusion:

8. Having heard the rival submissions and upon consideration of the

material placed on record, the following points arise for consideration

A. Whether the materral placed on record prima fzrcie discloses the

essential ingredients of the offencls alleged against the petitioner?

B Whether there is specific material connecting the petitioner with the

alleged criminal consPiracy?

C. Whether criminal liability can be fastened upon the: petltioner merely

on account of his position as the Bank Officer who authorised,

processed or forwarded the loan proposals?

D Whether continuation of the criminal proceedings against the

petitioner would amount to an abuse of the process of law?

9' At the outset, it is necessary to bear in mind that th': Jurisdiction

under

Section 482 Cr.P.C. is required to be exercised sparingtly, cautiously and

with circumspection At the same time, the inherent juriscliction of thts Court

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is intended to prevent abuse of the process of law and to secure the ends of

Justice. Ordtnarily, while conslderlng a petltlon seeklng quashlng of criminal

proceedrngs, this Court would not undertake a meticulous appreciation of

evidence or conduct a mini-trlal. lt is, however, equally well settled that

where the allegations and the material placed on record, even if taken at

their face value and accepted rn their entirety, do not constitute the essential

ingredients of the alleged offences, or where the material does not disclose

the necessary nexus between the accused and the alleged criminallty

contrnuatron of the proceedrngs cannot be permitted merely because a

charge sheet has been filed or the trial has commenced The exercise of

inherent lurisdiction. therefore. necessarily requires the court to examine

whether the prosecutron materral drsclobes the foundational ingredients of

the offences and whether there is sufficient material connecting the particular

accused with the alleged criminal acts.

1 0 ln the instant case, the petttioner was admrttedly working as Branch

Manager of lndian Bank, Osmangunj Branch, Hyderabad, from 2001 to

2006. The material placed before this court indicates that the petitioner

rnitrally sanctroned an OCC facrlrty of Rs

'1 5 Lakhs on 12 09 200'1 The

subsequent enhancements to Rs.40 Lakhs, Rs 70 Lakhs and Rs 1'50

crores were beyond the petitioner's delegated powers and were sanctioned

by the circle offrce, Hyderabad The proposals for the satd facllrtles were'

prepared by the Credtt Offrcer/PW-4 and the petrtioner's case that he

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forwarded the proposals to the competent authority frndt; support from the

matenal referred to before this Court. The Housing Loan of Rs.40 Lakhs was

also sanctroned by the Circle Office In this context. the (listinction between

an Officer who processes, scrutrnrses or forwards a proposal and the

competent authority empowered to accord the final sanctron assumes

significance. The petitioner cannot be attributed criminal liability merely by

reason of the office held by him as Branch [Vlanager To sustain allegations

of conspiracy, cheating, criminal breach of trust, forgr:ry, use of forged

documents or cnminal misconduct, there must be mate'ial connecting the

petitioner with the essential elements of the respectrve c ffences The mere

fact that the petitioner processed or forwarded proposals, which were

subsequently considered and sanctioned by the competert authorrty cannot,

in the absence of further material, by itself be construec as participation in

the alleged fraudulent transactions The prosecution case: substantially rests

upon the allegation that certain documents furnished as; collateral security

were fake or forged. The mere fact that some documents were subsequently

found to be forged cannot. by itself. constitute a circumslance against every

person, who dealt with the transactron unless there rs material to show that

such person fabricated the documents intentionally used them as genuine.

or consciously relied upon them with knowledge of their alleged fraudulent

character.

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11. The crucial question, therefore, in the case of the present petltioner ls

whether there is any material to show that Accused No.7 either fabricated

the documents. partrcipated in their preparation, delrberately facilrtated their

use, or entered rnto an agreement wlth the other accused for obtaining the

loan facilities by fraudulent means. Upon examinatron of the material placed

before thrs court, no specific nexus between the petitioner and the alleged

fraudulent acts has been demonstrated There ts no matertal polnted out to

show that the petitroner fabricated or caused the fabrication of any title

document. IVlore importantly, there is no material on record demonstrating

that, at the relevant time, the pettttoner was aware that the documents were

forged or that the securittes allegedly offered to the Bank were based upon

fabricated documents. The mere fact that the Securtties were subsequently

found to be defective or fabricated cannot, by itself, establish that the

petitioner possessed knowledge of such forgery or acted wlth dishonest

intention at the time when the loan proposals were processed and forwarded

for consideratron along with the legal optnion.

12. The prosecution alleges that the petitloner approached the Panel

Advocate with photocopies of the documents and obtained a legal opinion

without furntshing the orrginal documents The petitioner, however, points out

that the crrcular relred upon by the prosecutron was lssued only in 2003 and,

therefore, could not have been retrospectively applied to the transactions in

question, so as to characterise the petitioner's conduct as a deviation from

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the banking procedure prescribed at the relevant time Even assuming that

there was a deviation from the prescribed procedure, such devtation in the

absence of material demonstrating that the petitioner consctously adopted

the procedure knowing that the documents were forged or with an intention

to facilitate cheating, would not by itself, constitute th,r offences alleged

against hrm. A mere procedural lapse or devratron, wrthout the requisrte

criminal intent and without a demonstrable nexus with th€ alleged fraudulent

acts, cannot, by itself, be converted into an offence of cheatrng, forgery or

conspiracy

13. ln the rnstant Calendar Case, the statements of the witnesses referred

to above. at their highest, dlsclose a devration frcm the prescribed

procedure ln the absence of any other materral establishrng a nexus

between such deviation and the alleged fraudulent acts, drawrng an

inference of a deliberate design or criminal intent on the part of the petitioner

would not be justified. Similarly, the allegation concerntng the enhancement

of the OCC facrlity beyond Rs 15 Lakhs, by rtself , cannot establish the

existence of a criminal conspiracy on the part of tre petitioner The

enhanced facilities were admittedly beyond the pet tioner's delegated

powers and were sanctioned by the Circle Office lf th3 petrtioner merely

fonrtrarded the proposals to the competent authority, the s_rbsequent decision

or action of the Circle Office cannot retrospectively be attributed to him in the

absence of materral demonstrating that he deliberatr:ly partjcipated tn

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facilitated or was otherwise knowingly connected with the alleged fraudulent

actrvities

14. The allegations concerning the genuineness of the documents also

require consideration ln thrs context, the prosecution relies upon the

depositions of PWs 2 and 3 and the officials of the Registration Department.

who stated that, out of fourteen (14) documents examined, eleven (1'1

) were

fake and only three (3) were genuine. There can be no dispute that the

creation or fabrication of forged documents may give rise to criminal lrability

on the part of the persons responsrble for therr creatton or use, subJect to the

ingredients of the relevant offences being established. However, the mere

fact that certain documents were subseq'uently found to be forged does not,

in the absence of further materral establish that every officer, who

processed or dealt with the loan transaction necessanly had knowledge of

the forgery or shared the dishonest intention behind it. Knowledge and

dishonest intention cannot be attributed generally or merely by virtue of an

offrcial designatron They must be established, on the material available,

against the partrcular accused. Criminal liability cannot be imposed merely

by reason of a person's designation, office or supervisory posrtion.

15. The prosecution has also relied upon the responsibilities attached to

the petitioneis position as Branch Manager. lt is undoubtedly true thsl's

Branch [\,4anager is required to exercise due care and drligence in

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accordance with the applicable banking norms and proceJures However, a

mere lapse in the discharge of official duties, in the at sence of material

establishing the requisite mens rea and the necessary nexus with the

alleged criminal acts, cannot, by itself, establrsh the ngredients of the

offences alleged against the petitioner. The distinction between negligence,

procedural irregularity and intentional participation in e criminal scheme

assumes particular importance in the present case. The extstence of a duty

of care does not. by itself. establish that the petitioner possessed knowledge

of the alleged fraud or shared the dishonest intentior of the principal

accused.

16. ln particular, Section 471 of lhe IPC requires knowledge or reason to

believe that the document in question is forged Section 420 of the IPC

requires the essential elements of deception and d shonest intention.

Section 120-B of the IPC requires an agreement betv;een two or more

persons to commit an illegal act or to commit a lawful act by illegal means.

Similarly Section 13(1)(d) of the Prevention of Corrup:ion Act. 1988, as

applicable to the relevant period requires the obtainin'3 or attemptlng to

obtain for oneself or for any other person any valuable thing or pecuniary

advantage by corrupt or illegal means or by abusing cne's posltion as a

public servant.

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17 No specrfrc material demonstrating the aforesaid requirements has

been brought to the nottce of thts Court insofar as the petitioner is

concerned. The subsequent conduct of the Bank also assumes some

relevance, though rt cannot, by itself, determine the question of criminal

liability The matenal placed before thrs Court indicates that Stock Audits,

Branch lnspections, Statutory Audits and Staff Accountability Studtes did not

attnbute any specific accountability to the petitioner, and the Stafi

Accountabrlity was recorded as "Nii" lt is further not in dispute that after the

petitioner ceased to be the Branch Manager in July, 2006, the Circle Office

substantially enhanced the OCC timrts rn 2OQ7 and 2009, and the accounts

were classified as Non-Performing Assets only in 2010 These

crrcumstances do not, by themselves, cbnclusrvely establlsh the petitioner's

innocence. Nevertheless, they constitute relevant surrounding circumstances

when the Court examines whether there is sufficient materlal to demonstrate

that, during hts tenure, the pettttoner rntentionally partrcipated ln the alleged

fraudulent scheme

18 The petitioner's reliance upon the legal opinions, valuation reports and

the rnstitutional mechanism through which the credit proposals were

processed cannot also be completely disregarded. The credit proposals

were processed through a mechanism involving the Credit Officer, Panel

Advocates. valuatton reports and the competent sanctroning authorlty "flle

mere fact that the documents were subsequently found to be false does not

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necessarily establish that every officer associated with the processing of the

proposals had knowledge of their falsity ln the absence of material

demonstrating that the petitioner had actual knowledge of the alleged fraud,

or that he deliberately ignored facts withrn his knowledg€r n furtherance of

the alleged consprracy, the Court rs requtred to dtsttnguts 1 between a mere

instance of negligence or procedural irregularity and conscious criminal

participation

19 As regards the OTS and subsequent recovery. thrs Court is conscious

that settlement of a banking dispute does not rnvariably -.xtinguish criminal

Irability. particularly where senous offences such as forcrery cheatrng and

conspiracy are alleged The OTS therefore, cannot ce treated as an

independent or automatic ground for quashing the crirrinal proceedings

Nevertheless, the OTS. the substantral amounts recovered by the Bank and

the subsequent satisfactron recorded rn the recovery pror;eedtngs constrtute

surrounding circumstances, which may be taken into consideration along

with the absence of specific material connecting the cetitioner with the

alleged criminal acts The decrsive factor in the present case rs not the OTS

by itself Rather it is the absence of sufficient matertal establtshtng the

petitioner's conscious participation in the alleged fraudulent transactions and

consprracy.

9l

20. The principle laid down by the Hon'ble Supreme Court in K. Bharati

Devr (supra) assumes partrcular significance since the said proceedings

arose out of the same Calendar Case While considering the role attributed

to the accused therein, the Hon'ble Supreme Court examined whether the

charge sheet drsclosed a specific and independent culpable role against

them and ultimately quashed the proceedrngs. The said judgment cannot,

however, be understood as laying down that an OTS or settlement of the

Bank's dues, by itself, is sufficrent to quash criminal proceedings arising out

of the underlying transactions. lts relevance to the present case lies in the

principle that individual criminal culpability must be discernible from the

material available agarnst the partlcular accused. Likewise, Susanta Kumar

Dalel (supra) is relevant to the extent t6at criminal proceedings cannot be

sustained on the basis of general, vague or omnibus allegations where the

material does not disclose the specific role of the accused or a sufficient

nexus between the accused and the alleged offences.

21 At this stage, this Court is not required to determine whether the

petitioner is ultimately innocent. The limited questron is whether the

prosecution material is suffrcient to justify the continuation of criminal

proceedings against him The fact that the trial has progressed and several

witnesses have already been examined also deserves consideratton.

Ordinarily, this Court would be stow to interfere with crlmlnal proceedings at

an advanced stage of trial. However, mere progress of the trial cannot, by

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itself, denude this Court of its jurisdiction under Section 482 Cr P C Where

the foundational material against a particular accused do,:s not disclose the

essential ingredients of the offences alleged, continuation of the proceedings

cannot be justified solely on the ground that evidence has already been

recorded. The inherent jurisdiction is rntended, inter a ia, to prevent the

criminal process from being permrtted to continue in circurlstances where its

continuation, in the facts of the particular case, would result in an abuse of

the process of law.

22. ln the ultimate analysis, the material placed before this Court

establishes that the petitioner was the Branch Manager Juring the relevant

period and was associated wrth the processing of the loan proposals

However, mere association with the banking transactions cannot, by itself,

be equated with participation in the alleged criminai conspiracy The

enhanced credit facilrties were beyond the petitioner's delegated sanctioning

powers and were sanctioned by the Crrcle Office. Tl- e proposals were

prepared by the Credit Officer and were supported by legal opinions and

valuation reports, which formed part of the relevant records. No material has

been brought to the notice of this Court to establish that the petitioner

fabricated any title document, procured the forged dlcuments, or had

knowledge that the documents were forged and nevertheless intentionally

used them as genuine. There is also no material demcnstrating that the

petitioner deliberately suppressed the alleged prior mortg age tn furtherance

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of the conspiracy or entered into any agreement wlth the borrowers or the

other accused to cheat the Bank Equally. there is no specific material

demonstrating that the petitroner possessed dishonest intention,

misappropnated any property or forged any document entrusted to hrm, so

as to attract Sectron 409 of the lPC. Lrkewise, there is no material to show

that, by abusing his position as a public servant, the petitioner obtained or

attempted to obtain for himself or for any other person any valuable thing or

pecunrary advantage by corrupt or illegal means. so as to satisfy the

ingredients of the applicable provision of the Prevention of Corruption Act

The material relied upon by the prosecution may, at the highest grve rise to

a questron concerntng the adequacy of the petitioner's supervlsion or the

manner rn which he discharged his'official duties. However' criminal

prosecution cannot be sustained merely on the basis of such supervisory

lapses. particularly in the absence of material establishing the requisite

knowledge, dishonest intention or conscious participation in the alleged

conspiracy.

23 This Court is, therefore. of the considered view that, insofar as

Accused No.7 is concerned, the prosecution has failed to demonstrate

sufficient material establishing a specific nexus betvveen the petitioner and

the alleged forged documents or the alleged conspiracy The allegations and

the material, even when considered cumulatively. do not disclose the

essentral ingredients of the offences alleged against the petitioner ln the

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absence of material establishing his knowledge of the alleged forgery,

dishonest intention, conscious use of forged documents. ()r an agreement or

concert with the princrpal accused to commit the allegec offences. ln such

circumstances, permitting the prosecutron to continue agarnst the petitioner

would amount to subjecting him to criminal proceecrngs without the

foundational material necessary to establish indrvrdual ()riminal culpability.

The petitioner is, therefore, entr ed to rnvoke the inheren:

lurisdictron of thrs

court under sectron 482 cr.p.c. to prevent abuse of the orocess of raw and

to secure the ends of justice

24 Accordrngly, thrs Criminal petitron

rs allowed Consequen y the

proceedings in C. C No 1 6 of 2014, pending on the

,.ile

of the learned

Principal Special Judge for cBr cases, Hyderabad, rnsofirr as they rerate to

the petitioner/Accused No 7, are hereby quashed

It is made clear that the observations made in this order are confined

exclusively to the case of the petitioner/Accused No 7 and shall not be

construed as an expression of opinion on the merits of the case agatnst the

other accused. The triar court shaI proceed agarnst ther other accused rf

any, in accordance with raw and uninfruenced by any cf the observations

made herein. Pending miscellaneous applications, if any, :;hall stand closed.

SD/- P.PONNA KRISHNA

ASS,tsrANr

yGtsrRAR

ri lRuE (c.ty tt sEcfldifr_FFtcER

one Fair copy to,l!:

I.1,fl"

Sri Justice N. TUKARAMJI

(For His Lordships firJ p"rr"rU

To,

1The Principat Special Judge ror Cat Cases]dderabad

2. 11 LR CoPies

3. The Under Secretary, Union of lndia Ministry of law, Justice and Company

Affairs, New Delhi

4. The Secretary Telangana Advocates Association, Library, High Court

Buildings Hyderabad

5. The Stition House Officer, CBl, EOW, Police Station, Chennai

6. Two CCs to the special Public Prosecutor for cBl, High court for the State of

Telangana at HYderabad. [OUT]

7. One CC to Sri G Aditya Goud, Advocate [OPUC]

B. One CC to Sri Srinivas Survi, Advocate IOPUC]

9. Two CD CoPies

AW

S'BA

HIGH COURT

DATED: 1710912026

ORDER

CRLP.No.8877 of 2023

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ALLOWING THE CRIMINAL PETITION

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