Vijay Kumar Kela & Anrv.Central Bureau of Investigation & Anr

Legal Analysis: Vijay Kumar Kela & Anr. vs. Central Bureau of Investigation & Anr

Citation: 2026 INSC 588 (Reportable)
Court: Supreme Court of India
Bench: Division Bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan
Judgment Author: Justice Ujjal Bhuyan
Date of Decision: May 29, 2026
Nature of Judgment: Criminal Appeal under Article 136 of the Constitution of India against the order of the Chhattisgarh High Court, which had dismissed the appellants’ petition under Section 482 CrPC seeking quashing of criminal proceedings under Sections 420 and 471 IPC arising out of a banking transaction that had been settled through a compromise approved by the Debts Recovery Tribunal (DRT).

Synopsis of the Judgment
The appellants (borrowers) had availed cash credit facilities from UCO Bank. Due to business difficulties following the death of the key person, the loan account became non-performing. The Bank initiated proceedings before the DRT. During the pendency, the parties entered into a compromise settlement approved by the Bank’s competent authority, under which the appellants paid a settled amount (Rs.4.25 crores against dues of Rs.6.48 crores). The DRT recorded the compromise and dismissed the recovery application as withdrawn after noting full payment and issuance of a no dues certificate. More than two years later, the Bank lodged a complaint with the CBI alleging fraud and forgery, leading to an FIR and chargesheet against appellant No.1 under Sections 420 and 471 IPC. The High Court refused to quash the proceedings. The Supreme Court allowed the appeal, holding that the dispute had overwhelmingly civil characteristics; the compromise settlement was fully implemented and endorsed by the DRT; the Bank had certified in the compromise that there were no documentation lapses; the criminal prosecution initiated belatedly after the settlement was oppressive and an abuse of process; and the possibility of conviction was remote. The Court quashed the chargesheet and the charge framing order.

1. Basic Information of the Judgment

• Case Title: Vijay Kumar Kela & Anr. vs. Central Bureau of Investigation & Anr.

• Criminal Appeal No.: of 2026 (arising out of SLP (Crl.) No. 18035 of 2024) (Leave granted)

• Bench: Justice B.V. Nagarathna and Justice Ujjal Bhuyan (Division Bench)

• Judgment Author: Justice Ujjal Bhuyan

• Date of Decision: May 29, 2026

• Citation: 2026 INSC 588 (Reportable)

• Appeal From: Order dated 05.07.2024 passed by the High Court of Chhattisgarh in Cr.M.P. No. 1361 of 2023, dismissing the appellants’ petition under Section 482 CrPC seeking quashing of criminal proceedings.

2. Legal Framework

Laws and Provisions Involved:

• Indian Penal Code, 1860 (IPC): Section 415 (definition of cheating), Section 420 (cheating and dishonestly inducing delivery of property), Section 464 (making a false document), Section 470 (forged document), Section 471 (using as genuine a forged document), Section 120B (criminal conspiracy).

• Prevention of Corruption Act, 1988 (PC Act): Section 13(1)(d) and 13(2) – dropped in this case.

• Code of Criminal Procedure, 1973 (CrPC): Section 482 (inherent powers of High Court to quash proceedings to prevent abuse of process or secure ends of justice), Section 320 (compounding of offences).

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Section 13(2) (notice to defaulting borrower).

• Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Original Application before DRT.

Key Precedents Cited and Applied:

• Nikhil Merchant v. Central Bureau of Investigation (2008) 9 SCC 677 – Where a dispute arising out of commercial transactions is settled by compromise and the dues are cleared, continuing criminal proceedings would be a futile exercise; quashing is permissible.

• Gian Singh v. State of Punjab (2012) 10 SCC 303 (Three-Judge Bench) – Power under Section 482 is distinct from compounding under Section 320. Criminal cases having overwhelmingly and predominantly civil character (commercial, financial, mercantile transactions) may be quashed on settlement, especially where possibility of conviction is remote. Heinous and serious offences or offences under special statutes like PC Act should not be quashed merely on compromise.

• Narinder Singh v. State of Punjab (2014) 6 SCC 466 – Reiterated the principles; timing of settlement crucial; cases arising out of commercial transactions should be quashed when parties have resolved their disputes.

• Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur v. State of Gujarat (2017) 9 SCC 641 – Summarised broad principles: Section 482 preserves inherent powers; quashing on settlement is not same as compounding; heinous offences not to be quashed; civil-flavour commercial disputes may be quashed; but economic offences affecting financial wellbeing of State may not be quashed.

• Anil Bhavarlal Jain v. State of Maharashtra (2023) – Quashing not justified where PC Act was invoked.

• K. Bharthi Devi v. State of Telangana (2022) – After settlement of loan account with Bank and DRT recording the same, continuation of criminal proceedings for offences under Sections 420, 467, 468, 471 IPC and PC Act was quashed. The Court applied Gian Singh and Nikhil Merchant.

What the Judgment is About: The judgment quashes criminal proceedings under Sections 420 and 471 IPC initiated against a borrower after the loan account was fully and finally settled through a compromise approved by the DRT and the Bank had issued a no dues certificate. It reaffirms the principle that commercial disputes having overwhelmingly civil characteristics, when settled by consent before a judicial forum, should not be allowed to be converted into criminal proceedings belatedly. The Court held that continuing such prosecution would be oppressive, an abuse of process, and would undermine the sanctity of settlements.

3. Relevant Facts

• Appellant No.2 (M/s Mohan Traders) was a proprietary concern established by late Parmanand Kela, elder brother of appellant No.1. After his death, appellant No.1 became sole proprietor.

• On 02.09.2006, UCO Bank sanctioned cash credit limit of Rs.50 lakhs and letter of credit limit of Rs.1 crore to appellant No.2, secured by hypothecation of stocks and mortgage of a plot of land at Amlidih, Raipur (23,680 sq. ft., valued at Rs.82.88 lakhs).

• On 22.01.2007, limits were enhanced: cash credit to Rs.2 crores, letter of credit to Rs.3 crores, with additional collateral of another plot (90,000 sq. ft., valued at Rs.210 lakhs) and personal guarantee of appellant No.1.

• On 30.01.2009, limits were further enhanced: cash credit to Rs.3 crores, letter of credit to Rs.5 crores. The earlier two mortgaged properties were substituted with one larger open plot at Boriyakhurd, Raipur (1,78,784.65 sq. ft.), valued at Rs.625.75 lakhs by the Bank’s valuer and at Rs.634.68 lakhs by another approved valuer. Bank officials physically inspected the property and confirmed its openness and saleability.

• Parmanand Kela died on 28.11.2009. Thereafter, the firm faced business difficulties and repayments became irregular. The loan account was declared NPA on 31.12.2010.

• UCO Bank invoked SARFAESI Act and filed Original Application No.355/2011 before DRT, Jabalpur for recovery.

• During the DRT proceedings, the parties negotiated a compromise. On 14.03.2015, a compromise proposal was prepared. The Bank certified in clause 9.1.9 that there were “no lapses in documentation or irregularity” as per legal audit dated 12.02.2009. Clause 25 certified that the compromise amount (Rs.4.25 crores against outstanding dues of Rs.6.4874 crores, including notional interest of Rs.3.088 crores) was in terms of RBI policy and not lower than distress sale value.

• The compromise was approved by the Management Committee of the Board on 30.03.2015, and the competent authority issued a sanction letter.

• A joint application was filed before the DRT recording the compromise. The DRT directed compliance.

• Appellants paid the entire settlement amount. UCO Bank issued a no dues certificate dated 30.09.2015.

• On 27.10.2015, UCO Bank filed an application for withdrawal of OA No.355/2011, stating that the entire compromise amount had been deposited and the loan account stood liquidated. The DRT dismissed the OA as withdrawn.

• On 27.02.2018 (more than two years later), the Zonal Head of UCO Bank submitted a written complaint to the CBI alleging that the appellants had defrauded the Bank by substituting mortgaged properties with an encroached property and by submitting forged audit reports to obtain enhancement of credit limits. The Bank claimed wrongful loss of Rs.223.74 lakhs plus notional interest.

• On 08.03.2018, CBI registered FIR No.RC2202018E0002 under Section 120B read with Section 420 IPC and Section 13(2) read with 13(1)(d) of PC Act.

• After investigation, CBI filed a chargesheet on 27.11.2018 before the Special Judicial Magistrate, CBI Cases, Raipur, against appellant No.1 under Sections 420 and 471 IPC. Bank officials were not chargesheeted as no proactive role was found; PC Act charges were dropped.

• On 20.02.2023, the Special Judicial Magistrate framed charges under Sections 420 and 471 IPC against appellant No.1.

• Appellants filed a petition under Section 482 CrPC before the High Court of Chhattisgarh seeking quashing of the chargesheet and charge framing order. The High Court dismissed the petition on 05.07.2024, observing prima facie that the appellants with fraudulent intention got released valuable properties by substituting with encroached property and submitted forged audit reports.

• The appellants appealed to the Supreme Court.

4. Issues

1. Whether criminal proceedings under Sections 420 and 471 IPC can be continued against the borrowers (appellants) after the loan account was fully and finally settled through a compromise approved by the Bank’s competent authority and recorded by the DRT, and after the Bank had issued a no dues certificate and withdrawn the recovery proceedings.

2. Whether the High Court was justified in dismissing the quashing petition under Section 482 CrPC when the dispute had overwhelmingly civil characteristics, the settlement was fully implemented, and the criminal complaint was filed more than two years after the closure of the DRT proceedings.

3. Whether the Bank’s conduct of first certifying in the compromise that there were no documentation lapses, and thereafter belatedly alleging fraud and forgery, amounts to an abuse of the process of court, warranting quashing of the criminal proceedings.

4. Whether the principles laid down in Nikhil Merchant, Gian Singh, Narinder Singh, and K. Bharthi Devi apply to the facts of this case, and whether the possibility of conviction is remote, making continuation of the prosecution oppressive.

5. Ratio Decidendi

A. The dispute between the parties was overwhelmingly civil in nature and was fully settled through a compromise that was approved by the Bank and recorded by the DRT (Paras 16-25, 27-28).

The Court held that the entire transaction arose out of banking facilities – cash credit and letter of credit – which are commercial transactions. The loan account became NPA due to business difficulties following the death of the key person, not due to any initial fraud. The parties negotiated a compromise, which was approved by the Bank’s highest authority. The compromise itself contained a certification (clause 9.1.9) that there were no lapses in documentation or irregularity. The compromise amount was in accordance with RBI policy. After the appellants paid the full settled amount, the Bank issued a no dues certificate and withdrew the DRT proceedings. Therefore, the dispute was fully and finally resolved in a civil forum. The criminal complaint was filed more than two years later, which the Court found to be oppressive and lacking good faith.

B. The criminal proceedings initiated after the settlement amount was paid and the DRT proceedings were withdrawn amount to an abuse of the process of the court (Paras 24-28).

The Court noted that the Bank itself had stated in the compromise that there were no documentation lapses. The allegation of fraud was first suspected in 2013, but the Bank did not initiate criminal proceedings at that time. Instead, it chose to enter into a compromise to “maximise recovery.” After receiving the full settlement amount and issuing a no dues certificate, the Bank lodged a complaint with the CBI. The Court held that such conduct betrays lack of good faith. Permitting criminal prosecution after a full and final settlement that had the imprimatur of the DRT would undermine the sanctity of judicial settlements and would have a debilitating effect on the economy, as commercial entities would be hesitant to settle disputes.

C. The principles laid down in Nikhil Merchant, Gian Singh, and K. Bharthi Devi squarely apply to this case (Paras 18-23, 26-27).

The Court traced the evolution of the law on quashing criminal proceedings after settlement. In Nikhil Merchant, this Court quashed criminal proceedings after the dispute between the company and the bank was settled and dues were cleared. In Gian Singh, the three-Judge Bench held that criminal cases having overwhelmingly and predominantly civil character (commercial, financial, mercantile transactions) may be quashed on settlement, especially where the possibility of conviction is remote. In K. Bharthi Devi, the Court quashed proceedings under Sections 420, 467, 468, 471 IPC and PC Act after the loan account was settled and the DRT recorded the settlement. The Court held that in the present case, the possibility of conviction of appellant No.1 is remote and bleak, and continuation of the criminal case would cause grave prejudice and injustice.

D. The fact that Bank officials were not chargesheeted and the PC Act charges were dropped further supports quashing (Paras 15.14, 16).

The Court noted that the CBI investigation did not reveal any proactive role by Bank officials; therefore, they were not chargesheeted. The charges under the PC Act were also dropped. This indicates that the alleged fraud was not a systemic one involving public servants, but rather a commercial dispute between a borrower and a bank that was settled. The absence of any prosecution against Bank officials weakens the case for continuing the prosecution against the borrower alone after settlement.

E. The High Court erred in dismissing the quashing petition without considering the binding precedents and the facts of the compromise settlement (Paras 24-28).

The High Court had merely observed that prima facie there was fraudulent intention. It did not consider the crucial fact that the compromise itself certified that there were no documentation lapses. It also ignored the long delay in filing the complaint (more than two years after the DRT proceedings were closed). The Supreme Court held that the High Court ought to have exercised its inherent power under Section 482 CrPC to quash the proceedings to secure the ends of justice and prevent abuse of process.

F. The appeal was allowed, and the chargesheet and charge framing order were quashed (Paras 29-30).

The Supreme Court set aside the impugned order of the High Court, quashed the chargesheet dated 27.11.2018, and quashed the order of the Special Judicial Magistrate dated 20.02.2023 framing charges. No costs were awarded.

6. New Legal Principles Established / Reiterated

• Quashing of criminal proceedings in banking disputes after settlement: Where a borrower and a bank enter into a compromise settlement of a loan account, the settlement is approved by the bank’s competent authority, the borrower pays the entire settled amount, the bank issues a no dues certificate, and the DRT dismisses the recovery proceedings as withdrawn, subsequent criminal proceedings under Sections 420 and 471 IPC (alleging fraud and forgery in obtaining credit facilities) are liable to be quashed under Section 482 CrPC. The possibility of conviction is remote, and continuation would be oppressive.

• Certification in compromise as estoppel: If the bank, in the compromise document, certifies that there are “no lapses in documentation or irregularity” as per legal audit, it cannot later (after full settlement) initiate criminal proceedings alleging forgery and fraud on the same transactions. Such conduct lacks good faith and amounts to abuse of process.

• Timing of criminal complaint after settlement is crucial: If the bank suspects fraud, it should initiate criminal proceedings at the earliest, not wait until after a compromise is fully implemented and recovery proceedings are withdrawn. Belated initiation after receiving full payment indicates an ulterior motive and justifies quashing.

• Sanctity of judicial settlements: Settlements recorded by judicial forums (like DRT) should not be permitted to be undermined by belated criminal proceedings based on the same facts. Otherwise, it would discourage parties from settling commercial disputes and would harm the economy.

7. Court’s Examination and Analysis of Concepts

• Examination of the compromise settlement (Paras 15.7-15.12): The Court meticulously analysed the compromise proposal dated 14.03.2015, the approval by the Management Committee on 30.03.2015, the joint application before the DRT, and the order of the DRT dated 27.10.2015 dismissing the OA as withdrawn. The Court highlighted clause 9.1.9 of the compromise, where the Bank stated “there are no lapses in documentation or irregularity thereof altering adversely security and legal remedies available to the Bank as per legal audit dated 12.02.2009.” This finding was crucial because it contradicted the later allegation of forged audit reports.

• Analysis of ingredients of Sections 420 and 471 IPC (Paras 16-16.3): The Court quoted Mohammed Ibrahim v. State of Bihar and Deepak Gaba v. State of U.P. to explain that for Section 420, there must be cheating and dishonest inducement leading to delivery of property; for Section 471, the document must be forged under Section 464. The Court noted that the Bank’s own certification in the compromise that there were no lapses made the case for fraud weak.

• Application of Gian Singh and subsequent precedents (Paras 18-23): The Court traced the evolution from Nikhil Merchant (2008) to Gian Singh (2012) to Narinder Singh (2014) to Parbatbhai Aahir (2017) to K. Bharthi Devi (2022). It noted that Gian Singh clarified that power under Section 482 is separate from compounding under Section 320. It also noted that economic offences affecting the financial wellbeing of the State may not be quashed, but the present case was a single borrowing transaction that was settled, not a systemic economic fraud.

• Distinction from cases involving PC Act (Paras 22, 23.3): The Court distinguished Anil Bhavarlal Jain, where the PC Act was invoked and the accused were Bank employees. In the present case, Bank officials were not chargesheeted, and PC Act charges were dropped. Therefore, the case fell within the category of civil-flavour commercial disputes, not corruption cases.

• Analysis of Bank’s conduct (Paras 24-26): The Court held that the Bank’s conduct of first certifying no lapses, then entering into compromise, receiving full payment, issuing no dues certificate, withdrawing DRT proceedings, and then belatedly filing a criminal complaint “betrays lack of good faith.” The complaint mentioned that fraud was suspected in 2013, but the Bank chose to compromise to maximise recovery. This, according to the Court, was a clear abuse of process.

8. Critical Analysis

Strengths: The judgment is a strong reaffirmation of the principle that criminal law should not be allowed to be used as a tool for harassment after a civil dispute has been fully and finally settled. It correctly applies the Gian Singh principles to a banking context. The Court’s emphasis on the Bank’s own certification in the compromise (“no lapses in documentation”) is a masterstroke – it effectively estopped the Bank from later alleging forgery. The judgment also sends a clear message to banks: if you suspect fraud, act promptly; you cannot compromise, take the money, issue a no dues certificate, and then years later cry fraud. The reliance on K. Bharthi Devi is apposite. The judgment also protects the sanctity of DRT settlements, which are important for the speedy resolution of banking disputes.

Potential concerns: One could argue that the judgment may give a license to borrowers to commit fraud and then escape criminal liability by settling the civil claim. However, the Court addressed this by noting that the Bank itself had certified no documentation lapses. If there was actual forgery, the Bank should not have given such a certification. Moreover, the Court left open the possibility that in cases where the compromise does not contain such a certification, or where the fraud is patent and systemic, quashing may not be appropriate. The judgment also does not discuss whether the Bank could have filed a civil suit for damages even after settlement – but that was not the issue. Another concern is that the Court did not explicitly discuss the difference between the settlement being a “compromise” under the SARFAESI/DRT framework and a “settlement” that includes a waiver of the right to prosecute. However, the Court implicitly held that the Bank’s conduct (certifying no lapses) and the full satisfaction of dues made the criminal prosecution oppressive.

Practical impact: This judgment will be cited in all cases where borrowers face criminal prosecution under Sections 420/471 IPC for alleged fraud in obtaining credit facilities, after the loan has been settled and a no dues certificate has been issued. It will be used to argue that once the bank has certified that there are no documentation lapses and has accepted a compromise, criminal proceedings must be quashed. Banks will now be more cautious in drafting compromise settlements – they may insert a clause that the settlement is without prejudice to their right to pursue criminal proceedings for fraud, or they may refuse to certify that there are no lapses. The judgment also encourages banks to initiate criminal proceedings promptly if they suspect fraud, rather than using the threat of prosecution as a bargaining chip in compromise negotiations.

9. Final Outcome

• Criminal Appeal: Allowed.

• The impugned order dated 05.07.2024 passed by the High Court of Chhattisgarh in Cr.M.P. No. 1361 of 2023 was set aside.

• The chargesheet dated 27.11.2018 filed by the CBI before the Special Judicial Magistrate, CBI Cases, Raipur was quashed.

• The order dated 20.02.2023 passed by the Special Judicial Magistrate framing charges under Sections 420 and 471 IPC against appellant No.1 was quashed.

• The criminal proceedings arising out of FIR No. RC2202018E0002 dated 08.03.2018 were quashed.

• No order as to costs.

10. Practical Application

• For the defence (borrowers/accused) in a banking fraud case: If you have settled the loan account with the bank, and the bank has issued a no dues certificate, and the settlement has been recorded by the DRT, immediately file a quashing petition under Section 482 CrPC (or Section 528 BNSS). Annex the compromise deed, the DRT order, the no dues certificate, and highlight any clause in the compromise where the bank certified that there were no documentation lapses or irregularities. Argue that the dispute is overwhelmingly civil in nature, that the possibility of conviction is remote, and that continuing criminal proceedings would be oppressive and an abuse of process. Cite Nikhil Merchant, Gian Singh, K. Bharthi Devi, and this judgment. Also, point out any delay in filing the criminal complaint after the settlement.

• For the prosecution (CBI/Bank) in a banking fraud case: If the bank has entered into a compromise and issued a no dues certificate, you must ensure that the compromise does not contain any clause that absolves the borrower of criminal liability. If the compromise is silent, you may still argue that a civil settlement does not bar criminal prosecution for fraud, especially if the fraud was discovered after the settlement. However, after this judgment, if the bank certified “no lapses in documentation,” it will be very difficult to proceed. The better strategy is to initiate criminal proceedings before entering into a compromise, or at least to reserve the right to prosecute in the compromise deed. Also, act promptly – do not wait for years after the settlement.

• For the High Court (while hearing quashing petitions in banking fraud cases): First, examine the compromise deed. If the bank has certified that there were no documentation lapses or irregularities, that is a strong factor in favour of quashing. Also, consider the timing: if the criminal complaint was filed after the full settlement and after the DRT proceedings were closed, and there is a long delay, quashing may be appropriate. Apply the Gian Singh principles: if the dispute has overwhelmingly civil characteristics and the possibility of conviction is remote, quash the proceedings. However, if the fraud is systemic and involves public servants (PC Act), or if the compromise does not contain such certifications, you may decline to quash.

• For a bank drafting a compromise settlement: To preserve the right to prosecute for fraud, do not include a clause that certifies that there are “no lapses in documentation.” Instead, state that the settlement is “without prejudice to the bank’s right to pursue criminal proceedings for any fraud or forgery that may be discovered.” Also, if fraud is suspected, file a criminal complaint before entering into the compromise, or at least simultaneously. After this judgment, banks will face an uphill task if they first certify “no lapses” and then later allege fraud.

11. Court Lines

• “In the written complaint before the CBI, the complainant i.e. respondent- Bank mentioned that fraud was suspected in 2013, but no steps were taken at that point of time to initiate criminal proceedings against the appellants. The justification given for this is that the Bank wanted to maximize the recovery. It was only after the compromise settlement was given effect to by the appellant by paying the settlement amount and after withdrawal of the original application from the DRT on account of the settlement, the respondent- Bank sought to initiate the criminal prosecution that too after more than two years from the withdrawal of proceedings before the DRT upon arriving at an approved compromise settlement.” (Para 25)

• “We are afraid, such conduct of the respondent- Bank betrays lack of good faith.” (Para 26)

• “After entering into a compromise settlement with the appellants wherein it was clearly stated that there was no tampering of any of the documents and after filing joint application before the DRT to record the compromise settlement, it was not proper on the part of the respondent- Bank to belatedly initiate criminal proceedings against the appellants, that too, after withdrawing the proceedings from the DRT on execution of the compromise settlement leading to closure of the loan account. Such a criminal proceeding in our view would not only be oppressive qua the appellants but would also amount to an abuse of the process of the court.” (Para 26)

• “Having regard to the fact that the dispute between the parties arising out of banking transactions which are commercial transactions having overwhelmingly or predominantly civil flavour had ended in a compromise settlement, that too, in the manner which we have delineated above, in our view, the possibility of conviction of appellant No. 1 is remote and bleak.” (Para 27)

• “If the respondent- Bank is permitted to go ahead with the criminal prosecution initiated after settlement of the loan account before the DRT, it would adversely impact the sanctity of such settlement which has become part of the judicial proceeding and which had the approval of a judicial forum like the DRT. If such a conduct is overlooked and prosecution is allowed to continue, many persons including commercial entities would be hesitant to come forward and seek resolution of their disputes arising out of banking transactions which are after all commercial transactions, having predominantly elements of civil dispute(s). This in turn would have a debilitating effect on the overall economy, more so, when the focus is on settlement of commercial disputes.” (Para 28)

12. Legal Strategy Insight

• For the defence (borrower): The most powerful weapon is the compromise deed itself. If the bank has certified that there were “no lapses in documentation,” you have a virtually unanswerable case for quashing. Also, bring on record the timeline: date of compromise, date of payment, date of no dues certificate, date of DRT order dismissing the OA, and then the date of criminal complaint (showing delay). Argue that the bank is trying to have its cake and eat it too – take the money and then prosecute. Also, point out that Bank officials were not chargesheeted, indicating that the alleged fraud was not substantiated. If the loan was settled at a discount, argue that the discount was a commercial decision (distress sale value) and not evidence of fraud. The bank’s own clause 25 in the compromise stating that the amount was not lower than distress sale value is key.

• For the prosecution (CBI/Bank): After this judgment, to successfully prosecute a borrower after a compromise, you must ensure that the compromise deed does not contain any certification that there were no lapses. If possible, include a clause that the settlement is without prejudice to criminal proceedings. Also, file the criminal complaint before the compromise is finalised, or at least simultaneously. If the bank suspected fraud in 2013, it should have lodged the complaint then, not waited until after the compromise. The judgment makes it clear that delay after settlement is fatal. Also, if the fraud is systemic (involving multiple borrowers, bank officials, large-scale forgery), the case may fall outside the Gian Singh exception for economic offences. But for a single borrower case, quashing is likely.

• For the DRT: When recording a compromise, you may consider asking the parties whether they intend to pursue any criminal proceedings. However, the DRT does not have criminal jurisdiction. The judgment does not impose any duty on the DRT to inquire into criminal aspects. Still, the DRT can note in its order that the bank has certified that there are no documentation lapses.

• For the High Court: When a quashing petition is filed after a compromise recorded by the DRT, do not dismiss it summarily. Call for the compromise deed. Examine whether the bank certified that there were no irregularities. If yes, quash the proceedings. Even if there is no such certification, consider whether the criminal complaint was filed after a long delay and after full settlement. If the possibility of conviction is remote (e.g., the allegations are based on the same documents that the bank had accepted earlier), quash the proceedings. Use the Gian Singh test: “overwhelmingly and predominantly civil character.”