Sanchayita Lahkar

The High Court of Kerala Single Bench of Justice A. Badharudeen has ruled that repayment of misappropriated funds in corruption matters does not absolve accused persons from criminal prosecution. Delivering judgment on a petition to quash proceedings, the Court rejected the plea of Kerala State Beverages Corporation employees accused of misappropriating liquor stock worth ₹27.92 lakh from the Muvattupuzha outlet. Citing the Prevention of Corruption Act, its 2018 Amendment, and relevant IPC provisions, the Court held that the alleged large-scale diversion of stock requires charges to be tried in full despite subsequent remittance of the loss.

The petitioners, accused Nos.1, 2, 5 and 6 in C.C.No.2 of 2024 before the Enquiry Commissioner and Special Judge, Muvattupuzha, approached the High Court seeking to quash the final report filed by the Vigilance and Anti-Corruption Bureau (VACB). The allegations pertained to the misappropriation of foreign liquor stock valued at Rs.27,92,523 between 1 April 2018 and 30 July 2018 from the KSBC outlet FL-1-7051, Muvattupuzha.

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The prosecution case, as recorded, alleged that the petitioners, while working as Shop-in-Charge and staff of the outlet, abused their official positions as public servants and, with dishonest intention, misappropriated stock of foreign liquor and converted it for personal use. The misappropriation was alleged to have caused wrongful loss to the Government exchequer and corresponding pecuniary gain to the accused. The offences were framed under Section 13(1)(c) read with Section 13(2) of the Prevention of Corruption Act, 1988; Section 13(1)(a) of the Prevention of Corruption (Amendment) Act, 2018; and Sections 403, 409, 420, and 34 of the Indian Penal Code.

It was submitted by the petitioners that upon discovery of the shortage, they remitted the proportionate amounts fixed as per a circular dated 20 December 2017 issued by the KSBC. Counsel for the petitioners contended that the discrepancies were common in KSBC outlets due to the volume of work, peculiarities in stock procurement and sales, and delay in audit. It was further argued that since the amounts had been remitted, prosecution under corruption and penal provisions was unwarranted. The petitioners also referred to Annexure D circular, though counsel conceded that the Division Bench of the High Court had later set aside the validity of this circular in WA No.642 of 2025.

The State, represented by the Public Prosecutor and Standing Counsel for KSBC, opposed the petition. They submitted that the misappropriation was complete before repayment, and repayment at a later stage would not erase the commission of the offence. It was contended that prosecution was necessary despite repayment.

Justice A. Badharudeen examined the rival submissions and the case materials. The Court noted that the FIR originated from a complaint lodged by the Warehouse Manager, Kerala State Beverages Corporation, reporting the shortage of liquor stock amounting to Rs.27,92,523. It was recorded in the complaint that certain amounts were remitted by the accused, though the timing of such remittances was not disclosed.

The Court addressed the central issue, stating: “The crucial question to be decided herein is as to whether repayment of the amount of misappropriation or the value of the misappropriation of the articles would efface the criminal prosecution so as to quash the same.”

Considering the arguments of delay in audit and voluminous workload, the Court recorded: “When the shortage of foreign liquor is to the tune of Rs.27,92,523/-, a very gigantic quantity, intentional misappropriation of the same is foreseeable with the active participation of the accused persons.” The Court observed that such a large-scale shortage could not be attributed to unintentional omissions or oversight.

On the question of repayment, the Court held: “The repayment of the amount without any interest for the same was done at a much belated stage and the accused persons enjoyed the benefits of misappropriation in between the period of misappropriation and the remittance of the value for the same.”

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Rejecting the petitioners’ plea that discrepancies were common and repayment sufficed, the Court stated: “In the facts of the case involving misappropriation of huge quantity of foreign liquor, mere repayment of the amount of the misappropriated foreign liquor by the accused persons, on finding the huge misappropriation at a belated stage itself, would not efface their criminal prosecution.”

The Court finally concluded: “Quashment of a serious case of this nature, merely on the ground that value for misappropriated foreign liquor was repaid, would not sustain as the matter would require framing of charge and trial of the accused persons.”

The Court recorded: “In the result, this petition fails and is dismissed accordingly. Interim order of stay, if any, granted by this Court stands vacated.”

Advocates Representing the Parties
For the Petitioners: Sri. Mathew Kuriakose, Advocate
For the Respondents: Sri. Rajesh A, Special Public Prosecutor, VACB; Smt. Rekha S, Senior Public Prosecutor, VACB; Smt. Naveen T, Standing Counsel for Kerala State Beverages Corporation

Case Title: P.N. Suresh Kumar & Ors v. State of Kerala & Anr
Neutral Citation: 2025: KER:71213
Case Number: Crl.M.C. No. 3477 of 2025
Bench: Justice A. Badharudeen