Supreme Court Quashes Criminal Proceedings On Rs 5100 Crore Settlement In Sandesara–Sterling Group Bank Fraud
Kiran Raj
The Supreme Court of India Division Bench of Justice J.K. Maheshwari and Justice Vijay Bishnoi directed that, upon deposit of Rs 5,100 crore as full and final settlement with lender banks and investigating agencies, all criminal and related civil proceedings arising from the Sandesara–Sterling Group bank fraud allegations against the two petitioners will stand quashed. The dispute concerns alleged large-scale diversion and default of bank finance by group entities, followed by one-time settlement arrangements and insolvency proceedings, with parallel actions by the CBI, Enforcement Directorate, Serious Fraud Investigation Office, Income Tax authorities and others. The Bench clarified that these directions are confined to the specific circumstances of the case, adopted to secure recovery of public funds, and will not operate as a precedent in other matters.
The petitions arose from multiple FIRs and related proceedings initiated by different agencies against the petitioners in relation to alleged defalcation of loan amounts advanced by a consortium of banks. The CBI registered FIRs invoking provisions of the Prevention of Corruption Act, 1988 and the Indian Penal Code, while the Enforcement Directorate registered ECIRs under the Prevention of Money Laundering Act. Parallel proceedings were also commenced under the Fugitive Economic Offenders Act, the Companies Act, 2013 and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, together with attachment, seizure and freezing actions.
The petitioners approached the Court seeking quashing of all such criminal cases, charge-sheets, ECIRs, prosecution complaints and consequential measures. At the admission stage, their counsel indicated that one-time settlements had been obtained with a majority of the lending banks and that further payments would be made, while contending that pending criminal proceedings impeded settlement. The Court recorded these statements and granted time to the respondents to obtain instructions, during which interim protection orders were passed and periodically continued.
Subsequently, detailed figures were placed on record regarding the total amount alleged in the FIRs, the one-time settlement amounts for Indian and foreign group companies, payments already made, and recoveries achieved through Insolvency and Bankruptcy Code proceedings before the NCLT. The petitioners’ side asserted that, despite these payments and recoveries, the banks had proceeded under insolvency, and expressed willingness to deposit further sums so as to resolve all disputes with the lending banks and investigating agencies, conditional on closure of the pending proceedings.
The Court first noted the petitioners’ willingness to repay the amounts corresponding to the charge-sheet, recording that “In view of the fact that the entire amount in respect of which charge sheet has been filed has been volunteered to be paid by the petitioners, we really see no reason why the money should not be received but then the excuse given today is such that we don’t want to say anything more, except that all proceedings must remain in abeyance till we consider the matter.”
Assessing the financial position, the Court observed: “Having considered the submissions and looking to the material placed, it is clear that the amount of defalcation in FIR was Rs. 5383 crores. The OTS with respect to all Indian Companies of the petitioners with the Banks was for a sum of Rs. 3826 crores and for foreign companies being guarantor was of Rs. 2935 crores, bringing the total sum to Rs. 6761 crores. Out of the said amount, the petitioners have voluntarily deposited fraction of total amount under various heads, including as per orders of this Court, which comes to around Rs. 3507.63 crores, leaving the remaining dues to Rs. 3253.37 crores. The lender Banks have initiated the proceedings under Insolvency Bankruptcy Code, 2016 before the National Company Law Tribunal, wherein recoveries made of worth Rs. 1192 crores. However, out of the total amount as specified in the OTS, which was higher than the amount as specified in the FIR, the remaining unpaid amount comes to Rs. 2061.37 crores.”
On the overall approach, the Court stated: “The perusal of the orders passed in the proceedings of this case as noted hereinabove, it is apparent that since inception, this Court was of the view that if the petitioners are ready to deposit the amount as settled in OTS and public money comes back to lender banks, the continuation of the criminal proceedings would not serve any useful purpose. The tenor of the proceedings apparently indicate peculiarity, with intent to protect the public money and interest and to get deposited the defalcated amount. In furtherance, the consensus has been arrived at as indicated above. In this view, in the peculiar facts and situation of the present case, discretion as prayed, deserves to be exercised for granting the relief, as prayed and to direct for quashment of all the proceedings.”
The Court directed: “In view of the foregoing, subject to deposit of Rs. 5100 crores as indicated towards full and final settlement with the lender banks and investigating agencies, these petitions deserve to be allowed granting the following reliefs –”
“(i) The writ petitions filed by the petitioners are allowed directing quashing of the proceedings as indicated in relief clause (i) to (x) quoted hereinabove in paragraph 1 of this order. The said quashing would be operative on deposit of Rs. 5100 crores as a full and final payment based on consensus, on or before 17.12.2025.”
“(ii) The said amount be deposited before the Registry of this Court on or before the date as specified in clause (i) above, permitting the petitioners to make the deposits in separate tranches and dates. On receiving the amount, it shall be kept in a short time interest bearing fixed deposit account in any nationalized bank till its disbursement.”
“(iii) Upon submitting the claims, the deposited amount shall be disbursed to the respective lender Banks on proportionate basis in reference to the amount due towards them. The Registrar (Judicial-Administration) shall verify the details of the amount due, proportionate entitlement and accordingly disburse the amount in the account of the respective banks. The Registrar is at liberty to take assistance of Account personnels, if needed.”
“(iv) Registrar (Judicial-Administration) is further at liberty to the seek clarification, if needed from the Bench, on the issue of the proportionate disbursement.”
“(v) In consequence of the above, the litigation with respect to the loan amount of the petitioners for which the FIR was registered and the OTS was sanctioned and approved, shall be put to an end by way of full and final settlement as per consensus and this litigation shall be put to quietus.”
“(vi) These directions as issued are in peculiar facts of this case, therefore, they shall not be treated as precedent.”
“(vii) Accordingly, both the writ petitions are allowed and be treated as disposed-of in above terms. Pending applications, if any, shall stand be treated disposed-of.”
Case Title: HEMANT S. HATHI VERSUS CENTRAL BUREAU OF INVESTIGATION & ORS.; CHETAN JAYANTILAL VERSUS CENTRAL BUREAU OF INVESTIGATION & ORS.
Case Number: WRIT PETITION (CRIMINAL) NO. 37 OF 2020; WRIT PETITION (CRIMINAL) NO. 48 OF 2020
Bench: Justice J.K. Maheshwari, Justice Vijay Bishnoi
