Isabella Mariam

The High Court of Delhi Single Bench of Justice Neena Bansal Krishna has quashed criminal proceedings against a public sector bank and its senior officials, holding that retention and adjustment of funds deposited under a failed One Time Settlement scheme does not constitute cheating or criminal breach of trust. The Court set aside both the criminal complaint and the summoning order, finding that once a borrower defaults on agreed settlement terms, the bank is within its rights to adjust the deposited amount against outstanding dues, and that any remaining dispute is purely civil in nature.

The petitions were filed under Section 482 Cr.P.C. seeking quashing of a criminal complaint instituted under Sections 406/409/420/120B/34 IPC against a nationalised bank and its senior officials. The complainant, representing two private companies, had availed overdraft facilities which were declared NPA. Recovery Certificates were issued by the Debts Recovery Tribunal for amounts aggregating to approximately ₹13 crores.

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In January 2013, discussions were initiated for a One Time Settlement (OTS). The complainant deposited ₹10 lakhs in a ‘No Lien’ account and subsequently ₹48 lakhs. A Sanction Letter dated 27.02.2013 provided for settlement at ₹6 crores, with ₹58 lakhs to be adjusted and the balance payable by 31.03.2013. The complainant failed to pay the remaining amount, resulting in cancellation of the OTS.

The complainant alleged that the bank wrongfully retained ₹58 lakhs and assigned the debt to an asset reconstruction company through an Assignment Agreement dated 20.04.2013, which he claimed was fabricated and antedated. He alleged offences of cheating, criminal breach of trust, and conspiracy. The Magistrate issued summons under Sections 420/409/120B IPC. The bank and its officials challenged the summoning order.

The Court recorded that “the gravamen of the Complaint is that the Bank failed to refund the sum of Rs.58 lakhs deposited in the ‘No Lien’ Account and thereby, committed offences under Sections 406/409/420 IPC.” It observed that “admittedly, OTS failed on account of non-adherence of the terms by the Complainant.”

The Court stated, “though this amount of Rs.58 lakhs was lying in ‘No lien’ account, the Bank, in case of default, was well within its right to adjust the said amount towards outstanding amount.” It further recorded, “It cannot be held to be a case of criminal breach of trust or of cheating.”

Addressing the nature of the dispute, the Court observed, “At best, the dispute relates to adjustment or refund of money arising out of contractual terms.” It stated, “There is no material to indicate any fraudulent or dishonest intention at the inception of the transaction, a sine qua non for constituting the offence of cheating under Section 420 IPC.” The Court concluded, “Thus, it does not disclose any criminal offence, as is sought to be made out by the Complainant.”

Regarding the Assignment Agreement, the Court recorded the contention that it was fabricated, but stated, “the Bank was well within its right to assign its debts to the Company.” It added, “This was an Agreement entered into by the Bank with UVARCL in its business wisdom and there is nothing to show that it was intended to cheat the Complainant of his Rs.58 lakhs.” The Court noted, “Even if the account got assigned along with other NPA Accounts, it is merely a business venture in which no element of cheating can even prima facie presumed.”

On allegations of conspiracy, the Court stated, “Such negotiations, even if assumed to be true, do not disclose ingredients of criminal conspiracy under Section 120B IPC in the absence of material indicating an Agreement to commit an illegal act.” It recorded, “No connivance or conspiracy can be even prima facie presumed.”

The Court ultimately observed, “If the entire content of the Complaint is admitted to be correct and true in toto, even then, it does not disclose any criminal offence of cheating or of criminal breach of trust or any other criminal offence.”

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The Court directed that “the Complaint under Section 200 of Cr.P.C. along with the Summoning Order date 28.06.2017 and all proceedings emanating therefrom, is quashed. Petition along with pending Applications is disposed of.”

Advocates Representing the Parties

For the Petitioners: Mr. Rakesh Tiku, Senior Advocate with Mr. Jaswainder Singh and Mr. Monu Kumar, Advocates

For the Respondents: Mr. Utkarsh, APP with SI Vivek; Ms. Sima Gulati with Ms. Diksha Narula, Advocates

Case Title: Mahender Singh & Ors. v. State (Govt. of NCT of Delhi) & Anr.
Neutral Citation: 2026: DHC:1584
Case Number: CRL.M.C. 2499/2018 & Connected Matters
Bench: Justice Neena Bansal Krishna