Bombay High Court
P.K. Easwar Kumar And Others vs State Of Maharashtra, Through The … on 23 February, 2026
2026:BHC-NAG:3175-DB
1 CRI. WP.609-2015 & ANR.JUDGMENT.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
CRIMINAL WRIT PETITION NO. 609 OF 2015
1. Sh. Ajit S/o. Shirish Korde DEAD
2. Smt. Mrudula W/o. Rajendra Paonikar,
Aged about 46 yrs., Occu. : Service,
(Chief Manager, Bank of India
Mid Corporate Br., S.V. Patel Marg,
Nagpur) R/o. RH-54, "Krutartha"
Vyankatesh Nagar Near KDK Engg.
College Nandanvan, Nagpur. PETITIONERS
Versus
1. The State of Maharashtra Through
Police Station Officer, Pratap Nagar
Police Station, Nagpur.
2. Sh. Yogesh S/o. Dnyaneshwar
Nagpure,
Aged about Major, Occu.: Business,
60, Modern Housing Society
Ranapratap Nagar, Nagpur. RESPONDENTS
WITH
CRIMINAL WRIT PETITION NO. 631 OF 2015
1. P. K. Easwar Kumar,
Aged 48 years, Occ. Service, Chief
Financial Officer, BGR Energy Systems
Limited, 443, Anna Salai, Teynampet,
Chennai-18.
\
2 CRI. WP.609-2015 & ANR.JUDGMENT.odt
2. K. Sreenivasa Deva Kumar,
Aged 46 years, Occ. Service, General
Manager-Corporate Finance, BGR
Energy Systems Limited, 443, Anna
Salai, Teynampet, Chennai-18.
3. R. Arunachalam,
Aged 50 years, Occ. Service, Deputy
General Manager (Finance), BGR
Energy Systems Limited, 443, Anna
Salai, Teynampet, Chennai-18. PETITIONERS
Versus
1. State of Maharashtra, Through the
Senior Inspector of Police, Ranapratap
Nagar, Police Station, Nagpur.
2. Yogesh Dnyaneshwar Nagpure,
Aged 42 years, R/o 60 Garden Society,
Ranapratap Nagar, Nagpur and Partner
of Aaradhya Infotech Pvt. Ltd. having
its Office at Gokulpeth, Nagpur. RESPONDENTS
-----------------------------------------------
Mr. A.T. Purohit, Advocate for the Petitioner in
W.P. No.609/2015.
Mr. A.C. Dharmadhikari, Advocate for the Petitioners in
W.P. No.631/2015.
Mr. N.B. Jawade, APP for the Respondent No.1/State.
Mr. S.P. Bhandarkar, Advocate for the Respondent No.2.
-----------------------------------------------
CORAM : URMILA JOSHI PHALKE, J.
RESERVED ON : 09th FEBRUARY, 2026.
PRONOUNCED ON : 23rd FEBRUARY, 2026.
ORAL JUDGMENT :-
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1. These Writ Petitions are filed for seeking appropriate
directions for quashing and setting aside the impugned First
Information Report (for short “FIR”) in connection with Crime
No.262/2015 registered with Police Station Ranapratap Nagar,
Nagpur for the offence punishable under Sections 420, 403,
406, 418, 425, 427 read with Section 34 of the Indian Penal
Code (for short “IPC“).
2. The Petitioners in Writ Petition No. 609/2015 are
the Senior Bank Officials of Bank of India, Nagpur, whereas the
Petitioners in Writ Petition No. 631/2015 are the officials of
BGR Energy Systems Limited. During pendency of these Writ
Petitions the Petitioner No.1 in Writ Petition No. 609/2015 who
at the relevant time was Zonal Manager of Bank of India is
reported to be dead. Petitioner No.2 was posted as a Senior
Manager of Bank of India, Pratapnagar Branch Nagpur. The
Respondent No.2/Yogesh Dnyaneshwar Nagpure is the partner
of “Aaradhya Infotech Pvt. Ltd.” was engaged in the business of
supplying of construction material under the name and style as
“M/s. Aradhya Engineers & Constructions, Nagpur” since 2011.
Subsequently the said partnership firm converted into company
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as “Aradhya Infratech Pvt. Ltd.”
3. Said Yogesh Nagpure lodged a report against the
Petitioners by approaching to Pratapnagar Police Station
alleging that his firm received a civil work in relation to power
plant of Chandrapur for CW Channel, forebay, pump house and
ESP control room building. From the BGR Energy Systems
Limited, the firm of the Complainant received service orders by
the said BGR Energy Systems Limited for two contracts. As per
the terms of the contract, the Complainant was required to
furnish bank guarantees to the extent of 10% of the contract
value. For carrying out the aforesaid construction four bank
guarantees were executed and furnish to BGR Energy Systems
Limited, for an amount of Rs. 81,37,822/-. The Complainant
has obtained financial assistance from Bank Of India by
mortgaging his fathers property. Thus, for execution of the
Service Orders issued by BGR Energy Systems Limited, in the
year 2011 and the actual construction work was as per the
contention of the Complainant belated for want of copies of
map.
4. As per the allegation of the Complainant, his firm
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had furnished bank guarantees for a specific period. On the
expiry of the said period, the bank guarantees is to be extended
up to 30.09.2012. The BGR Energy Systems Limited, terminated
the contract by communication dated 17.11.2012. The validity
of the bank guarantee was to expire on 30.09.2012. The
Complainant intimated the Bank by communication dated
26.09.2012 not to extend the bank guarantee beyond
30.09.2012. On 30.09.2012, the extension period of bank
guarantees was expired. On 04.10.2012, the communication
was received by the Bank from the firm of the Complainant M/s
Aradhya Infratech Pvt. Ltd., to close all the bank guarantees
since his firm has not received any communication from BGR
Energy Systems Limited for its extension. On 09.10.2012, by
inter office communication the Bank has closed the bank
guarantees at the request of the Complainant as no
communication is received from BGR Energy Systems Limited.
The notice was served upon the Bank to close the bank
guarantees as neither the Bank nor the Complainant received
communication from BGR Energy Systems Limited regarding
extension of time of bank guarantees or its invocation.
Accordingly, the Bank has closed the bank guarantees.
6 CRI. WP.609-2015 & ANR.JUDGMENT.odt
5. The statement of account from 01.10.2012 to
31.10.2012 of the Complainant firms showing closure proceeds
and margin money is credited to the account of the
Complainant. As per the allegation despite the communication
from the complainant the Petitioner No.2 in Writ Petition
No.609/2015 who was serving as a Senior Branch Manager of
Bank of India issued communication under her signature that
BGR Energy Systems Limited has written to the Bank for
encashment of the bank guarantees which are to the tune of
Rs.81,37,822/-. The Complainant vide communication dated
05.12.2012 informed the Bank that the bank guarantees are
already expired and there was no question for invoking them
and the amount could not be transferred to BGR Energy
Systems Limited.
6. As per the allegations of the Complainant despite
the communication the Bank of India had transferred the
amount of Rs. 81,37,822/- on 18.01.2013 to BGR Energy
Systems Limited, and by communication dated 18.01.2013
called upon the Complainant to deposit the said amount
towards invocation of bank guarantees paid to BGR Energy
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Systems Limited. It was further instructed by the Bank to the
Complainant that on failure to deposit the said amount coercive
action would be taken against the Complainant.
7. Thus, as per the allegations of the Complainant
Petitioner No.2 who was the Senior Bank Manager in
conveyance with deceased Zonal Manager and officials of the
BGR Energy Systems Limited, transferred the amount and the
loss is caused to the Complainant. On the basis of the said
report Police have registered the crime against the present
Petitioners.
8. Present Writ Petitions are preferred for challenging
the registration of the crime and quashing of the FIR. By order
dated 27.10.2015 the further investigation was stayed.
9. Heard Mr. Purohit, learned Counsel for the
Petitioner in Writ Petition No.609/2015, Mr. Dharmadhikari,
learned Counsel for the Petitioners in Writ Petition
No.631/2015, Mr. Jawade, learned APP for the Respondent
No.1/State and Mr. Bhandarkar, learned Counsel for the
Respondent No.2.
8 CRI. WP.609-2015 & ANR.JUDGMENT.odt
10. Mr. Purohit, learned Counsel, vehemently submitted
that, the entire allegations levelled against the Petitioners are of
civil in nature. As far as the offence under Sections 405 and 420
of IPC is concerned, there is no personal gain to the Petitioner
No.2. It was the decision of the Bank which was executed by the
Petitioner No.2 being the Senior Manager. He submitted that, as
the action was taken under the provisions of The Securitisation
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (for short “SARFAESI Act“) and to
give a counter blast to the same this false FIR is filed against the
present Petitioners. He submitted that in view of Section 32 of
the SARFAESI Act protection is given to the Petitioners.
Similarly, under Section 52 of the Banking Regulation Act, 1949
the Petitioners in Writ Petition No. 609/2015 are protected. He
has taken me through the entire communication and submitted
that, despite there was a settlement between the Complainant’s
firm and BGR Energy Systems Limited, the FIR came to be
lodged by suppressing the settlement as well as the civil suit
filed by the Respondent No.2.
11. He further submitted that, the bank guarantees are
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invoked during the validity period. The communication from the
Zonal Manager issued to the Investigating Agency or whom so
ever shows that, the invocation of the bank guarantee is within
its validity period. Thus, suppressing all the material facts by the
Complainant i.e. the settlement of the dispute on 12.07.2013 by
which full and final settlement certificate was issued alongwith
the amount of Rs.47,35,198/- to the Complainant and filing of
the civil suit sufficiently shows that, the Respondent No.2 has
concealed the material facts from the Investigating Agency and
thereby has not come with a clean hands. For all above these
terms he claimed that being the dispute is of a civil in nature the
FIR deserves to be quashed and set aside.
12. Mr. Dharmadhikari, learned Counsel for the
Petitioners in Writ Petition No.631/2015 who are the Senior
officials of BGR Energy Systems Limited, submitted that, there
was no dispute that, the firm of the Complainant and the firm of
the Petitioners entered into a contract and service orders are
issued in favour of the Complainant’s firm. Against the said
service orders, four bank guarantees by way of security was
furnished. As the Complainant could not complete the work, the
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said contract was terminated. The firm BGR Energy Systems
Limited, issued the communication to the Bank of India during
the validity period for the invocation of guarantee. As the
communication was issued by the BGR Energy Systems Limited
and bank guarantees were not invoked grievance was made by
the officials of the BGR Energy Systems Limited, stating that
despite the request the Bank has not credited the amount in the
account of BGR Energy Systems Limited. The said
communication was addressed to the Zonal Office also. During
investigation the communication by the Zonal Manager also
shows that, they have received the communication and in view
of that communication the bank guarantees were invoked in
favour of M/s BGR Energy Systems Limited. Subsequently, there
was a settlement between the Aradhya Infratech Pvt. Ltd., and
M/s BGR Energy Systems Limited, and they entered into the full
and final settlement and the cheque of remaining amount of
Rs. 47,35,198/- is already issued in favour of the Complainant
firm. But this fact was concealed by the Complainant and after
two years of this settlement, the FIR came to be lodged. In the
said FIR the Complainant has not narrated about the settlement.
Though the Complainant has filed civil suit bearing S.C.S
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No. 213/2013, wherein also he has not brought to the notice of
the Court about the said settlement. Even accepting the
allegations as it is no offence is made out against the Petitioners,
and therefore, Petitions deserve to be allowed.
13. Mr. Jawade, learned APP for the Respondent
No.1/State, submitted that the entire case reveals around
invocation of bank guarantees and whether it was invoked in
time or not. The bank guarantees were valid up to 30.09.2012.
The entire communication shows that neither the Bank nor the
Complainant received the communication from BGR Energy
Systems Limited, as to invocation of bank guarantees before
30.09.2012. Therefore, on the request of the Complainant Bank
guarantees were not extended and closed. The closure proceeds
margin money was credited into the accounts of the
Complainant. No communication received from the BGR Energy
Systems Limited to the Bank as to the extension of the said bank
guarantees but the officials of the BGR Energy Systems Limited
created a document to show that they have already
communicated with the Bank during the validity period and
demanded invocation of bank guarantees. In fact, no such letter
12 CRI. WP.609-2015 & ANR.JUDGMENT.odt
dated 24.09.2012 was received by the Bank. The letter dated
24.09.2012 and 07.11.2012 are created subsequently. In fact
inter office communication between the office of Senior Branch
Manager, Pratapnagar, Bank of India and the Zonal Office shows
that no such communication was received. Despite there was no
communication it was shown that the communication was
received during the validity period and bank guarantee was
invoked and payment was given after validity period on
18.01.2013. Thus, the intention since inception is apparent. For
all above these grounds, the Petitions deserve to be rejected.
14. Mr. Bhandarkar, learned Counsel for the Respondent
No.2, endorsed the same contentions and submitted that,
whether the Bank can invoke the bank guarantees after the
validity period. The act of the Bank invoking bank guarantees
after validity period is apparent from the documents. As per the
request of the Complainant the procedure of the closure of the
bank guarantee was done and the margin money was credited
to the account of the Complainant. Thus, the act of the
Petitioners in both the Petitions was with collusion and it is a
case of siphoning of public money. Considering the prima facie
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material, the Petitions deserve to be dismissed.
15. Mr. Purohit, learned Counsel for the Petitioner in
support of his contention placed reliance on the decision of M/s
Indian Oil Corporation Vs. M/s NEPC India Ltd. & Ors., AIR
2006 SC 2780 and Priyanka Srivastava & Anr. Vs. State of Uttar
Pradesh & Ors., (2015) 6 SCC 287.
16. Mr. Dharmadhikari, learned Counsel for the
Petitioners, placed reliance on Bank of India Vs. Nangia
Constructions (I) Private Limited, (2008) 7 SCC 290.
17. Mr. Jawade, learned APP for the Respondent
No.1/State, placed reliance on C.S. Prasad Vs. C. Satyakumar &
Ors., Criminal Appeal No.140/2026 decided on 08.01.2026.
18. Mr. Bhandarkar, learned Counsel for the Respondent
No.2, placed reliance on the following judgments:
Kathyayini Vs. Sidharth P.S. Reddy & Ors., 2025 SCC
OnLine SC 1428; Dinesh Sharma Vs. Emgee Cables &
Communication Ltd., & Anr. 2025 SCC OnLine SC 929; Kamal
Shivaji Pokarnekar Vs. State of Maharashtra & Ors., (2019) 14
14 CRI. WP.609-2015 & ANR.JUDGMENT.odtSCC 350; Neeharika Infrastructure Private Limited Vs. State of
Maharashtra & Ors., (2021) 19 SCC 401; India Oil Corpn. Vs.
NEPC India Ltd. & Ors., (2006) 6 SCC 736; Hindustan
Construction Co. Ltd. Vs. State of Bihar & Ors., (1999) 8 SCC
436; Parbatbhai Aahir Alias Parbatbhai Bhimsinhbhai Karmur &
Ors. Vs. State of Gujarat & Anr., (2017) 9 SCC 641; M/s. Itma
Hotels India Private Limited Vs. The Additional Commissioner
of Customs & Ors., WA NO. 2183 OF 2023; Commissioners of
Customs (Export) Vs. Bank of India & Anr., 2025 SCC OnLine
Bom 2850; Narayan Malhari Thorat Vs. Vinayak Deorao Bhagat
& Anr. (2019) 13 SCC 598; State of Punjab Vs. Dharam Singh &
Ors., 1987 (Supp) SCC 89; Siddharth Mukesh Bhandari VS. The
State of Gujarat & Anr., Criminal Appeal no.1044/2022 &
connected matters, decided on 02.08.2022; State of Bihar &
Anr. Vs. P.P. Sharma, IAS & Anr., 1992 Supp (1) SCC 222.
19. Before entering into the merits the law as to the
quashing of the FIR which is laid down by the Hon’ble Apex
Court in catena of decisions requires to be considered. In the
case of Paramjeet Batra Vs. State of Uttarakhand & Ors.,
2013(11) SCC 673, the Hon’ble Apex Court in paragraph No.12
15 CRI. WP.609-2015 & ANR.JUDGMENT.odt
has observed as under:-
“12. While exercising its jurisdiction under Section 482 of
the Code the High Court has to be cautious. This power is
to be used sparingly and only for the purpose of preventing
abuse of the process of any court or otherwise to secure
ends of justice. Whether a complaint discloses a criminal
offence or not depends upon the nature of facts alleged
therein. Whether essential ingredients of criminal offence
are present or not has to be judged by the High court. A
complaint disclosing civil transactions may also have a
criminal texture. But the High Court must see whether a
dispute which is essentially of a civil nature is given a cloak
of criminal offence. In such a situation, if a civil remedy is
available and is, in fact, adopted as has happened in this
case, the High court should not hesitate to quash the
criminal proceedings to prevent abuse of process of the
court.”
20. Thus, while considering the aforesaid issue the law
on the exercise of power by the High Court under Section 482
of Code of Criminal Procedure (for short “Cr.P.C.”) and under
Article 226 of the Constitution of India to quash the
FIR/Complaint and the parameters for exercise of power and
scope and ambit of the power under Section 482 of Cr.P.C. or
under Article 226 of the Constitution of India are very wide,
however, while exercising the said powers great caution requires
to be exercised. Court must be careful to see that its decision in
exercise of power is based on sound principles. The inherent
powers could not be exercised to frustrate a legitimate
prosecution. In the case of Neeharika Infrastructure Private
16 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Limited (supra), wherein after considering the various decisions
the Apex Court has culled out. The similar principles are also
laid down in the case of M/s Indian Oil Corporation, (supra)
which are as under:
“The principles relating to exercise of jurisdiction under
Section 482 of the Code of Criminal Procedure are:
(i) A complaint can be quashed where the allegations
made in the complaint, even if they are taken at their face
value and accepted in their entirety, do not prima facie
constitute any offence or make out the case alleged against
the accused.
(ii) A complaint may also be quashed where it is a clear
abuse of the process of the court, as when the criminal
proceeding is found to have been initiated with mala fides/
malice for wreaking vengeance or to cause harm, or where
the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to
stifle or scuttle a legitimate prosecution. The power should
be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce
the legal ingredients of the offence alleged. If the necessary
factual foundation is laid in the complaint, merely on the
ground that a few ingredients have not been stated in
detail, the proceedings should not be quashed. Quashing of
the compliant is warranted only where the complaint is so
bereft of even the basic facts which are absolutely
necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil
wrong; or (b) purely a criminal offence; and (c) a civil
wrong as also a criminal offence. A commercial transaction
or a contractual dispute, apart from furnishing a cause of
action for seeking remedy in civil law, may also involve a
criminal offence. As the nature and scope of civil
proceeding are different from a criminal proceeding, the
mere fact that the complaint relates to a commercial
transaction or breach of contract, for which a civil remedy
is available or has been availed of, is not by itself a ground
to quash the criminal proceedings. The test is whether the
17 CRI. WP.609-2015 & ANR.JUDGMENT.odt
allegations in the complaint disclose a criminal offence or
not.”
21. Similar parameters are laid down by the Hon’ble
Apex Court in State of Harayana & Ors. Vs. Ch. Bhajan Lal &
Ors., 1992 AIR 604 as well as Parbatbhai Aahir Alias Parbatbhai
Bhimsinhbhai Karmur,(supra). Thus, the consistent view is the
powers regarding quashing of the FIR are under the inherent
jurisdiction and has to be exercised sparingly, caring and with
caution and only when exercise is justified by the test
specifically laid down in a catena of decisions.
22. Coming to the facts of the present case, on
17.01.2011 Aradhya Infratech Pvt. Ltd., Nagpur availed
financial facilities from Bank of India, Pratap Nagar. Total
financial limits granted by the Bank is of Rs.235 Lakhs
comprising of bank guarantee of Rs. 200 Lakhs and cash credit
limits of Rs. 35 Lakhs. On 18.02.2011, the Service Orders vide
Order No.3300005526 and Order No.3300006842 were issued
by the BGR Energy Systems Limited to M/s Aradhya Infratech
Pvt. Ltd., to carryout the construction work. To fulfill the terms
and conditions of the contract the Complainant firm required to
furnish bank guarantees worth of Rs.81,37,822/-. Therefore, the
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Complainant approached to the Bank of India, Pratap Nagar,
Nagpur Branch with request to issue the bank guarantees. Upon
the request of the Complainant 4 bank guarantees worth of
Rs.81,37,822/- in favour of M/s BGR Energy Systems Private
Limited, Chennai were issued. The said bank guarantees details
are as follows:
(a). Contract Security cum Performance Bank
Guarantee dated 29.03.2011 validity upto 18.02.2012 of
Rs.33,27,318/- vide BG No.8722IPEBG110017.
(b). Advance Bank Guarantee dated 29.03.2011
validity period upto 18.02.2012 of Rs.33,27,318/- bearing BG
No.8722IPEBG110020.
(c). Contract Security cum Performance Bank
Guarantee dated 24.01.2012 validity period upto 31.03.2012 of
Rs.7,41,593/- vide BG No.8722IPEBG120005.
(d). Advance Bank Guarantee dated 24.01.2012
validity period upto 31.03.2012 of Rs.7,41,593/- bearing BG
No.8722IPEBG120006.
23. In February 2012, the said bank guarantees were
extended upto 30.09.2012 with a claim period upto 30.09.2012.
19 CRI. WP.609-2015 & ANR.JUDGMENT.odt
24. The terms and conditions of the Contract Security
cum Performance Bank Guarantee are as follows:
“1 The Bank does hereby irrevocably, unconditionally
guarantee to the Company the due and faithful
performance, observance and/or discharge of the Contract
by the Supplier/Contractor (including defects liability
obligations and equipment performance guarantees) and
further unconditionally and irrevocably guarantees and
undertakes to pay to the company without any demur or
protest and merely on demand the sum not exceeding Rs.
33,27,318/- (Rs Thirty Three Lacks Twenty Seven
Thousand Three Hundred Eighteen only) and claim for any
default of the Supplier/Contractor under the Contract
(including defects liability and equipment performance
guarantee). The Bank hereby waives the necessity to make
a demand from the Supplier/Contractor before making the
demand and claim to the Bank.
2 The Bank hereby undertakes to pay forthwith on
receipt of a written demand from the Company for such
payment, stating that the Supplier has failed to fulfill any
of its obligations under the contract. The Bank further
agrees to indemnify and keep the Company indemnified
against all costs, charges and expenses whatsoever, which
the Company may incur by reason of the Supplier’s failure
to fulfill its obligations under the contract.
3 Any demand so made on the Bank shall be
conclusive as regards the amount due and payable by the
Bank under this Guarantee. The Bank waives in favour of
the Company all rights, defenses and pleas which the Bank,
as Guarantor, and/or the Supplier may be entitled to. To
give effect to this Guarantee, the Bank shall be deemed to
be the principal debtor.
4 The Bank further agrees that the Company shall be
the sole judge as to whether or not the Supplier has failed
to fulfill any of its obligations under the contract and of the
extent of the loss, damage, costs, charges or expenses
suffered or incurred by the Company or likely to be
suffered or incurred by the Company on account thereof.
5 Should it be necessary to extend this Guarantee
beyond its validity period on account of extension of time
20 CRI. WP.609-2015 & ANR.JUDGMENT.odtgranted by the Company to the Supplier to fulfil its
obligations under the Contract, the Bank undertakes to
extend the period of this Guarantee until such time as may
be reasonably required.”
25. The terms and conditions of Advance Bank
Guarantee are as follows:
1 The Bank hereby unconditionally, irrevocably
guarantees and undertakes to pay without demur or
protest and merely on demand to the Company, an amount
not exceeding Rs.33,27,318/- (Rs Thirty three lakhs
twenty seven thousand three hundred and eighteen)
forthwith on receipt of a written demand from the
Company for such payment, stating that the supplier has
defaulted to supply the Equipment in conformity with the
terms of the Contract. The Bank further agrees to
indemnify and keep the Company indemnified against all
costs, charges and expenses whatsoever, which the
Company may incur by reason of the Supplier’s failure to
supply the Equipment in terms of the Contract.
2 Any demand so made on the Bank shall be
conclusive as regards the amount due and payable by the
Bank under this guarantee. The Bank waives in favour of
Company all rights, defences and pleas which the Bank, as
Guarantor, and/or the Supplier may be entitled to. To give
effect to this Guarantee the Bank shall be deemed to be the
principal debtor.
3 The Bank further agrees that the Company shall be
the sole judge as to whether or not the Supplier has failed
to supply the Equipment / Materials in terms of the
Contract and of the extent of the loss, damage, costs,
charges or expenses suffered or incurred by Company
likely to be suffered or incurred by Company on account
thereof.”
26. In the above context, it becomes necessary to
examine the meaning and scope of a bank guarantee and the
21 CRI. WP.609-2015 & ANR.JUDGMENT.odt
respective rights created thereunder.
27. The Guarantee has been defined in Halsbury’s Laws
of England, Vol.20, Fourth Edn. page 49 para 101 as that “A
guarantee is an accessory contract whereby the promisor
undertakes to be answerable to the promisee for the debt,
default or miscarriage of another person whose primary liability
to the promise must exist or be contemplated”.
28. It is in common parlance that the issuance of
guarantee is what that a guarantor creates to discharge liability
when the principle debtor fails in his duty and guarantee is in
the nature of collateral agreement to answer for the debt. It is
well settled that the bank guarantee is an autonomous contract
and imposes an absolute obligation on the Bank to fulfill the
terms and the payment in the Bank guarantee becomes due on
the happening of a contingency on the occurrence of which the
guarantee becomes enforceable.
29. The Hon’ble Apex Court in the case of Syndicate
Bank Vs. Vijay Kumar & Ors., AIR 1992 SC 1066 , in para 12
observed as under:
22 CRI. WP.609-2015 & ANR.JUDGMENT.odt
“12. In the banking system it is understood that Bank
guarantee has an dual aspect. In the case of a Bank
guarantee the banker is the promisor. It is a contract
between the Bank and the beneficiary of the guarantee and
it is also a security given to the beneficiary by a third party.
Now, it is a well-known business transaction in the World
of commerce and it has become the backbone of the
banking system. Now coming to its enforceability the same
depends upon the terms under which the guarantor has
bound himself. He cannot be made liable for more than
what he has undertaken. Therefore the Bank guarantee, as
already noticed, is in the nature of a special contract
depending upon the happening of a specific event and
when once it is discharged the guarantee comes to an end.
It has to be borne in mind that the obligations arising
under the Bank guarantee are independent of the
obligations arising out of a specific contract between the
parties.”
30. The Hon’ble Apex Court has occasion to consider
the aspect of bank guarantee in the case of Hindustan
Construction Co. Ltd., (supra), wherein also it was observed in
para 9, which reads as under:
“9. What is important, therefore, is that the Bank
Guarantee should be in unequivocal terms, unconditional
and recite that the amount would be paid without demur
or objection and irrespective of any dispute that might
have cropped up or might have been pending between the
beneficiary under the Bank Guarantee or the person on
whose behalf the Guarantee was furnished. The terms of
the Bank Guarantee are, therefore, extremely material.
Since the Bank Guarantee represents an independent
contract between the Bank and the beneficiary, both the
parties would be bound by the terms thereof. The
invocation, therefore, will have to be in accordance with
the terms of the Bank Guarantee; or else, the invocation
itself would be bad.”
23 CRI. WP.609-2015 & ANR.JUDGMENT.odt
31. Thus, the Hon’ble Apex Court observed that a Bank
Guarantee is the common mode, of securing payment of money
in commercial dealings as the beneficiary, under the Guarantee,
is entitled to realise the whole of the amount under that
Guarantee in terms thereof irrespective of any pending dispute
between the person on whose behalf the Guarantee was given
and the beneficiary.
32. In the case of Standard Chartered Bank Vs. Heavy
Engineering Corporation Ltd. & Ors., [2019] 15 SCR 368 ,
wherein also by referring the earlier decision in the case of
Ansal Engineering Projects Ltd. Vs. Tehri Hydro Development
Corporation Ltd. & Anr., MANU/SC/1199/1996, it is observed “
the law relating to invocation of bank guarantees with the
consistent lines of precedents of this Court is well settled and a
Three Judge Bench of this Court has held as under:
“4. It is settled law that bank guarantee is an independent
and distinct contract between the bank and the beneficiary
and is not qualified by the underlying transaction and the
validity of the primary contract between the person at
whose instance the bank guarantee was given and the
beneficiary. Unless fraud or special equity exists, is pleaded
and prima facie established by strong evidence as a triable
issue, the beneficiary cannot be restrained from encashing
the bank guarantee even if dispute between the beneficiary
and the person at whose instance the bank guarantee was
given by the bank, had arisen in performance of the
24 CRI. WP.609-2015 & ANR.JUDGMENT.odtcontract or execution of the works undertaken in
furtherance thereof. The bank unconditionally and
irrevocably promised to pay, on demand, the amount of
liability undertaken in the guarantee without any demur or
dispute in terms of the bank guarantee. The object behind
is to inculcate respect for free flow of commerce and trade
and faith in the commercial banking transactions
unhedged by pending disputes between the beneficiary
and the contractor.”
33. In the above said judgment also it is held that a
bank guarantee constitutes an independent contract. What is
important, therefore, is that the bank guarantee should be in
unequivocal terms, unconditional and recite that the amount
would be paid without demur or objection and irrespective of
any dispute that might have cropped up or might have been
pending between the beneficiary under the bank guarantee or
the person on whose behalf the guarantee was furnished. The
terms of the bank guarantee are, therefore, extremely material.
Since the bank guarantee represents an independent contract
between the bank and the beneficiary, both the parties would be
bound by the terms thereof. The invocation, therefore, will have
to be in accordance with the terms of the bank guarantee, or
else, the invocation itself would be bad.
34. The Hon’ble Apex Court by referring the decisions of
State of Bank of India & Anr. Vs. Mula Sahakari Sakhar
25 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Karkhana Ltd. MANU/SC/3353/2006; Himadri Chemicals
Industries Limited Vs. Coal Tar Refining
Co.,MANU/SC/3256/2007 and Gujarat Maritime Board Vs
Larsen & Toubro Infrastructure Development Projects Limited &
Anr., MANU/SC/1105/2016, has laid down the principles for
grant or refusal for invocation of bank guarantee or a letter of
credit, which are as follows:
“(i) While dealing with an application for injunction in
the course of commercial dealings, and when an
unconditional bank guarantee or letter of credit is given or
accepted, the beneficiary is entitled to realise such a bank
guarantee or a letter of credit in terms thereof irrespective
of any pending disputes relating to the terms of the
contract.
(ii) The bank giving such guarantee is bound to honour
it as per its terms irrespective of any dispute raised by its
customer.
(iii) The courts should be slow in granting an order of
injunction to restrain the realisation of a bank guarantee or
a letter of credit.
(iv) Since a bank guarantee or a letter of credit is an
independent and a separate contract and is absolute in
nature, the existence of any dispute between the parties to
the contract is not a ground for issuing an order of
injunction to restrain enforcement of bank guarantees or
letters of credit.
(v) Fraud of an egregious nature which would vitiates
the very foundation of such a bank guarantee or letter of
credit and the beneficiary seeks to take advantage of the
situation.
(vi) Allowing encashment of an unconditional bank
guarantee or a letter of credit would result in irretrievable
harm or injustice to one of the parties concerned.”
26 CRI. WP.609-2015 & ANR.JUDGMENT.odt
35. In the case of Garg Builders Vs. Hindustan Prefab
Ltd. & Ors., MANU/DE/1518/2022, wherein the Delhi High
Court by referring the catena of decisions culled out the basic
principles relating to bank guarantees and their invocation and
the interdiction of such invocation as follows:
“(i) Commercial contracts often contain clauses requiring
the contractor to furnish bank guarantees.
(ii) These bank guarantees are, principally, either bank
guarantees provided towards security, for having been
awarded the contract, or performance bank guarantees, to
guarantee performance of the contract, though, on
occasion, other bank guarantees such as bank guarantees
towards mobilization advance etc. may also be required to
be provided.
(iii) The contract, in such cases, also provides for the
circumstances in which the bank guarantees could be
invoked, as well as the purpose for requiring the bank
guarantees to be provided in the first place.
(iv) No bank guarantees payment to anyone gratis. Every
bank guarantee is of necessity issued by a bank on
instructions. In case of a commercial contract, such as the
contract in the present petition, the instruction to the bank,
to provide a bank guarantee, is given by the person to
whom the contract is awarded; in the present case, the
petitioner. The party to whom the contract is awarded, in
other words, instructs the bank, in lieu of having been
awarded the contract, to issue a bank guarantee in favour
of the person awarding the contract. In the present case, as
required by the agreements between the petitioner and the
HPL, and that the petitioner’s instance, bank guarantees
were issued by the bank in favour of HPL which, therefore,
is the beneficiary of the bank guarantee.
(v) These bank guarantees are, however, bilateral contracts
between the bank and the beneficiary, i.e. HPL, even if they
were issued at the instance of the petitioner. The petitioner
is not a party to the bank guarantees. It is, therefore,
legally a stranger to the contract, insofar as the bank
guarantees are concerned.
27 CRI. WP.609-2015 & ANR.JUDGMENT.odt
(vi) Like all independent commercial contracts, every bank
guarantee has to abide strictly by its terms. Honour and
compliance of a bank guarantee, as per its terms, is,
therefore, mandatory. In the case of bank guarantees,
especially, the Supreme Court has stressed this aspect, as
there is an overwhelming element of public interest
involved in requiring banks to honor their commitments
towards customers and clients. If a bank is to be
interdicted, at the instance of a third party, who is a
stranger to the bank guarantee between the bank and the
beneficiary, from honouring the bank guarantee, the
Supreme Court has held in United Commercial Bank v.
Bank of India MANU/SC/0003/1981: (1981) 2 SCC 766
and Hindustan Steelworks Construction Ltd. v. Tarapore &
Co. MANU/SC/0582/1996: (1996) 5 SCC 34, that it would
erode the public faith in the banking institution of the
country.
(vii) The bank is, therefore, concerned only with the terms
of the bank guarantee. The elements of any dispute
between the contractor and the beneficiary of the bank
guarantee, or the conditions existing in the contract
between the contract awardee and the beneficiary of the
bank guarantee, i.e. in the present case between the
petitioner and HPL, are, therefore, generally irrelevant to
the aspect of invocation of the bank guarantee. Even the
circumstances stipulated in the contract between the
beneficiary and the contract awardee, in which the bank
guarantee could be invoked, are also of no relevance
insofar as the liability of the bank to honour the bank
guarantee is concerned.
(viii) In order for the aspect of performance, or failure of
performance, of the parent contract, by either party, to
become relevant as a consideration for invocation of the
bank guarantee, they have necessarily to be incorporated
by express reference in the bank guarantee itself. In other
words, if the bank guarantee were to stipulate that the
bank would be required to make payment to the
beneficiary only in the event of failure, on the part of the
contract awardee, to abide by its obligations under the
Contract, then the aspect of performance of the contract by
the contract awardee would become a relevant
consideration, while assessing the obligation of the bank to
make payment to the beneficiary.
(ix) Similarly, oftentimes, a contract may stipulate the
particular stage at which, or exigency in which, the bank
28 CRI. WP.609-2015 & ANR.JUDGMENT.odt
guarantee could be invoked by the beneficiary. Such a
stipulation in the contract would, however, become
relevant for the bank, when called upon by the beneficiary
to honour the bank guarantee, only if that stipulation
figures expressly in the body of the bank guarantee itself.
(x) Else, the bank is not expected, much less required, to
advert to the covenants of the original contract between
the contract awardee and the beneficiary, to which the
bank is a stranger-just as the contract awardee is a stranger
to the bank guarantee. Nor is it required to enter into the
disputes between the contract awardee and the beneficiary
of the bank guarantee, or into the aspect of performance,
or non-performance, of the contract. Nor, for that matter, is
the bank entitled to examine whether the stage at which
the contract between the parties envisages invocation, or
enforcement, of the bank guarantee, has, or has not, been
reached. The bank, being a stranger to the contract
between the contract awardee and the beneficiary of the
bank guarantee, has no authority to probe into the said
contract, unless the terms of the bank guarantee expressly
require it to do so. The bank has necessarily to be
concerned only with the terms of the bank guarantee, to
which alone it is a party.
(xi) If the invocation of the bank guarantee by the
beneficiary thereof is, therefore, in terms of the bank
guarantee, the Court cannot interdict the bank from
honouring the bank guarantee, by referring to the
covenants in the contract between the contract awardee
and the beneficiary of the bank guarantee. Any such
attempt by the Court would amount to directing the bank
to violate the contract, with the beneficiary of the bank
guarantee, to which it is a party and, therefore, to direct
the bank to commit an illegality. This, quite obviously, is
completely impermissible.
(xii) Equally, it is not permissible, either, for the Court to
interdict the invocation of a bank guarantee on the ground
that the stage for such invocation, as per the contract, has
not been reached, or that the exigency in which the bank
guarantee could be invoked as per the contract, does not
exist, unless that stage, or that the exigency, is
incorporated as a condition for invocation in the bank
guarantee itself.
(xiii) Interdiction of invocation of unconditional bank
guarantees would be justified, where the invocation is
29 CRI. WP.609-2015 & ANR.JUDGMENT.odt
otherwise in terms of the covenants in the bank
guarantees, only where there is found to exist egregious
fraud, or special equities, or where irretrievable injustice
would ensue were invocation not to be injuncted.”
36. In the light of the above well settled legal position
the bank guarantees issued by the Bank in favour of the BGR
Energy Systems Limited, the terms and conditions for the
Contract Security cum Performance Bank Guarantee shows that
it was unconditional guarantee issued to the company and the
bank agreed to invoke the said guarantee to the company on
faithful performance observance and discharge of the contract
by the supplier/contractor and undertook to pay to the company
without any demur or protest and merely on demand. Similarly,
Advance Bank Guarantee was issued which was also
unconditional irrevocable guarantees and undertakes to pay
without any demur or protest and merely on demand to the
company. The legal position as to the invocation of bank
guarantees is concerned, it is the contract between the Bank and
beneficiary of the guarantee and it is also security given to the
beneficiary by third party. It is also settled that, the bank
guarantee should be unequivocally, unconditional and it should
recite that the amount would be paid without demur or
30 CRI. WP.609-2015 & ANR.JUDGMENT.odt
objection and irrespective of any dispute that might have
cropped up or might have been pending between the beneficiary
under the bank guarantees. Thus, as far as the dispute between
the beneficiary and the person on whose behalf the bank
guarantee is issued, the Bank has to make the payment
irrespective of the dispute between them, only exception is that
in case of fraud is made out then and then only the Bank can
restrain the payment. Thus, the Bank is under obligation to
make the payment in favour of the beneficiary irrespective of
the disputes between them.
37. It is not in dispute that, the BGR Energy Systems
Limited and the Respondent No.2/Complainant who is the
partner of Aradhya Infratech Pvt. Ltd., entered into an
agreement to perform the contract as the firm of the
Complainant was engaged in the business of supplying the
construction materials. The Complainant firm received civil
works in relation to power plant of Chandrapur In view of that,
BGR Energy Systems Limited issued the Service Orders to the
firm of the Complainant. The said Service Orders are numbered
as 3300005526 and 3300006842. Against the said contract and
31 CRI. WP.609-2015 & ANR.JUDGMENT.odt
for carrying out the aforesaid construction 4 bank guarantees
BG No.8722IPEBG110017 dated 29.03.2011 valid upto
18.02.2012, BG No. 8722IPEBG110020 dated 29.03.2011 valid
upto 18.02.2012, BG NO. 8722IPEBG120005 dated 24.01.2012
valid upto 31.03.2012 and BG No. 8722IPEBG120006 dated
24.01.2012 valid upto 31.03.2012 was issued.
38. In February 2012, the said bank guarantees were
extended upto 30.09.2012 with claim period upto 30.09.2012.
Thus, the validity period of the said bank guarantees was upto
30.09.2012. The Bank has received a letter from the firm of the
Complainant dated 26.09.2012 instructing the Bank for not
extending the bank guarantees to BGR Energy Systems Limited.
On 04.10.2012, the notice was also issued by the Aradhya
Infratech Pvt. Ltd. for closing the bank guarantees issued to the
BGR Energy Systems Limited, in view of the said letter the Bank
has followed the closure procedure and margin money was
credited in the account of Aradhya Infratech Pvt. Ltd.
39. The inter communication between the Senior
Branch Manager Ranapratap Nagar Branch, Nagpur to Zonal
Manager discloses that since no communication received from
32 CRI. WP.609-2015 & ANR.JUDGMENT.odt
BGR Energy Systems Limited, the Bank has closed the bank
guarantees on 09.10.2012 on the request of the account holders
and the margin money is credited in the account of Aradhya
Infratech Pvt. Ltd. However, the officials of the BGR Energy
Systems Limited claimed that, they have already issued the
communication on 24.09.2012 for invocation of bank
guarantees. As per the internal communication between the
Senior Manager and Zonal Manager discloses that the said
communication was not received by them.
40. The subsequent letter of BGR Energy Systems
Limited dated 07.11.2012 addressed to the Senior Branch
Manager shows that, despite they have issued the
communication as to the invocation of bank guarantees the
Bank has neither paid as per their demands and the amount of
Rs. 81,37,822/- nor extended the bank guarantees. They have
already lodged their claim with Bank before expiry of the bank
guarantees but the Bank has not credited the amount by
invoking the bank guarantees, and therefore, it is the default on
the part of the Bank in fulfilling its commitment and the
payment is delayed. It has further intimated to the Bank if the
33 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Bank failed to honour the claim, would be viewed very seriously
and they would constrain to approach the Bank Regulatory
Authorities.
41. After receipt of this communication, the Senior
Branch Manager has communicated that she has not received
such communication. However, the said letter issued to the BGR
Energy Systems Limited, neither bears the date nor bears the
signature. It is apparent from the record that, after receipt of the
said communication on 18.01.2013, the bank guarantees were
invoked and the amount of Rs.81,37,822/- was credited into the
account of BGR Energy Systems Limited. This fact was also
communicated by the communication dated 18.01.2013 to the
Aradhya Infratech Pvt. Ltd. The said communication was
strongly opposed by the Aradhya Infratech Pvt. Ltd., by
communication dated 28.11.2012 stating that the bank
guarantees issued to M/s BGR Energy Systems Limited had
already stood expired and the relevant process for its conclusion
has also been duly complied with. Therefore, the question of
invoking the bank guarantee after the expiry does not arise at
all. The communication of Aradhya Infratech Pvt. Ltd., dated
34 CRI. WP.609-2015 & ANR.JUDGMENT.odt
26.12.2012 to the Senior Branch Manager further shows that,
the bank guarantee is the tripartite agreement which ceases its
effect after expiry of its claim period and strongly contended
that, the bank guarantee is invoked after the validity period,
which is illegal.
42. Thereafter, the Respondent No.2, Aradhya Infratech
Pvt. Ltd., through its partner Yogesh Nagpure and Ashish Kahate
filed a Civil Suit bearing No. 213/2013. In the said civil suit the
reliefs claimed by the plaintiff therein are as follows:
“1. Declaration that the banks guarantees as listed in the
plaint issued by the defendants 2 & 3 in favour of BGR
Energy Systems Ltd., stood expired on 30/9/2012.
2. Declaration that the action on part of the defendants, in
honouring the expired bank guarantees by debiting the cash
credit account no. 872230110000018 of the plaintiff no. 1
by the amount of Rs. 81,37,822/- as reflected from the
letter dated 18/1/2013 is fraudulent and illegal.
3. Declaration that the debit entry of the amount of Rs.
81,37,822/- in the cash credit account no.
872230110000018 of the plaintiff no. 1 made by the
defendants on 18/1/2013 is fraudulent, illegal, null and
void and all consequent interest charged by the bank on
account of such entry is also fraudulent, illegal and the
defendants are not entitled to any such amounts from the
plaintiffs.
4. A decree in the sum of Rs. 5,16,265.13 alongwith interest
@18% thereupon from 29/1/2013 till realisation, against
the defendants jointly and severally.
5. Any other order, relief, decree deemed fit in the
circumstances of the case.
6. The cost of the suit.”
35 CRI. WP.609-2015 & ANR.JUDGMENT.odt
43. Thus, the suit was filed by the Respondent No.2 for
declaration that the bank guarantees as listed in the plaint
issued by the defendant Nos. 2 and 3 i.e. the Bank officials in
favour of BGR Energy Systems Limited stood expired on
30.09.2012. The action on the part of the defendants honouring
the bank guarantees by debiting the cash credit account of the
plaintiff No.1 by the amount of Rs.81,37,822/- as reflected from
the letter dated 18.01.2013 is fraudulent and illegal. Thus, the
issue involved in the suit was the crediting of the amount to the
BGR Energy Systems Limited, as per the allegations after
validity period, whereas it is the contention of the Bank that the
communication was received by the Bank but it was misplaced
and the communication by the Zonal Manager Nagpur Zone
dated 07.09.2015 shows that, the payment against the bank
guarantees was done as per the guidelines including guidelines
of the Reserve Bank of India as the beneficiary submitted the
proof of having delivered the letter of invocation to the Branch
within the validity/claim period of the bank guarantees. The
record further discloses that, Bank has also initiated the action
against the Respondent No.2 by filing Original Application No.
49/2013 before the Debt Recovery Tribunal, Nagpur alongwith
36 CRI. WP.609-2015 & ANR.JUDGMENT.odt
I.A. No. 489/2013 for recovery of the amount. The said I.A.
came to be rejected by the Presiding Officer Debt Recovery
Tribunal, Nagpur.
44. During the pendency of the civil suit and the
recovery proceedings before the Debt Recovery Tribunal, the
Respondent No.2 approached the Police Station and filed a
complaint application against the Bank officials i.e. Petitioner
No.2 in Writ Petition No. 609/2015. The said complaint was
forwarded to CBI Anti Corruption Branch, Nagpur and also to
the Director Serious Fraud Investigation Office. Thereafter, FIR
came to be lodged on 22.07.2015. In the meantime,
departmental action was initiated against the Petitioner No.2/
Mrudula Rajendra Paonikar in Writ Petition No. 609/2015. The
memorandum calling explanation dated 06.03.2013 shows that,
the explanation was called for cancelling the bank guarantees
without obtaining the original guarantees or issuing the letter to
the beneficiary to return the original guarantees for physical
cancellation and for releasing the margin money amounting to
Rs.20,55,218/- despite the letter was received from BGR Energy
Systems Limited, on 24.09.2012 for extension/invocation of
37 CRI. WP.609-2015 & ANR.JUDGMENT.odt
bank guarantee was misplaced. Thus, the departmental action
was not for releasing the payment against the bank guarantee.
45. The explanation by the Petitioner No.2/Mrudula
Paonikar shows that the said letter of BGR Energy Systems
Limited dated 24.09.2012 was not reached to her though it was
received and acknowledged by the Bank staff who was then
deputed to her branch, and therefore, she was not aware about
the receipt of the said letter. During the departmental action it
was held that, she failed to discharge her duties with utmost
devotion and diligence and also failed to ensure and to protect
the interest of the Bank which is a misconduct in terms of
Regulation 24 of the Bank of India Officer’s Employees
(Discipline and Appeal), Regulations, 1976 and penalty order
was passed against her by the Disciplinary Authority. The order
of Disciplinary Authority dated 28.11.2013 shows that, “Minor
penalty of Reduction to lower stage by three stages in a time
scale pay for a period of three years without cumulative effect
and not adversely affecting her pension” in terms of the Bank of
India Officer Employees’ (Discipline and Appeal), Regulations,
1976 is hereby imposed upon Smt. Mrudula Paonikar.
38 CRI. WP.609-2015 & ANR.JUDGMENT.odt
46. Being aggrieved with the said action, she
approached to the Appellate Authority and the Appellate
Authority set aside the said penalty by order dated 07.02.2014
and minor penalty of “CENSURE” was imposed on her.
47. Thus, the document on record shows that, the
departmental action against the Petitioner No.2/Mrudula
Paonikar was not initiated for releasing the amount of bank
guarantee after the validity period but action was initiated, as
despite the letter received on 24.09.2012 she followed the
closure procedure on the request of the customer and credited
the margin amount in the account of the customer. Her reply
before the Disciplinary Authority dated 19.03.2013 also shows
that the letter dated 24.09.2012 vide No.BGR/PPD/17,18,19,20
dated 24.09.2012 was received and acknowledged by the
branch staff/DRO which was not reached to her.
48. The another circumstance which brought to the
notice that, during the pendency of the suit filed by the
Respondent No.2, the Respondent No.2 and BGR Energy
Systems Limited entered into the settlement on 12.07.2013. As
per the settlement the following points were discussed and
39 CRI. WP.609-2015 & ANR.JUDGMENT.odt
finalized by BGR Energy Systems Limited with M/s Aradhya
Infratech Pvt. Ltd. which are as follows:
“1. 2 X 500 MW Chandrapur Site Certified actual final
work done quantity of M/s.Aradhya Infratech pvt. limited
against work done as per Service Orders no: 3300006840
and 33000005526. This is the FULL & FINAL AGREED
SETTLEMENT. M/s.Aradhya Infratech also agreed &
confirmed the same.
2. As per the workings towards full and final settlement,
Rs.73,35198/- was arrived by M/S.BGRESL with
consideration of all contractual conditions as per issued
above service orders.
3. M/s. Aradhya was paid Rs.26,00,000/- dt.26.04.2013,
as interim payment from the full and final settlement
amount arrived as per above and balance settlement value
for Rs. 47,35,198/- after adjusting above interim paid
amount is paid (in person to Mr. Yogesh Nagpure of M/s.
Aradhya) vide cheque no: 489845 dt. 10.07.2013 towards
full and final settlement.
4. It is confirmed that Form 406/407 and Form 16A will be
sent in due course and BGRESL shall provide appropriate
TDS returns.
5. This minutes dated 12.07.2013 shall be read along with
the full and final certification.”
49. In view of that settlement, it was undertook by the
Aradhya Infratech Pvt. Ltd., that they have received a sum of
Rs. 47,35,198/- vide cheque No.489845 dated 10.07.2013
drawn on Punjab National Bank towards full and final
settlement of all outstandings for work / supplies at
MAHAGENCO’s CHANDRAPUR T.P.S. EXPANSION PROJECT,
Maharashtra State against various Work Orders/Service Orders/
40 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Purchase Orders. It was further certified that, they confirm and
undertake that they will not make any claim against above
referred work on M/s BGR Energy Systems Limited. It was
further agreed in the settlement terms that M/s Aradhya
Infratech Pvt. Ltd., has already received the amount of Rs. 26
Lakhs as full and final settlement. The details of the account
given in Writ Petition No.631/2015 also shows that by way of
BG invocation the BGR Energy Systems Limited, received the
amount of Rs.81,37,822/-. The BGR Energy Systems Limited
paid the mount of Rs. 26 Lakhs to the Aradhya Infratech Pvt.
Ltd., and remaining amount Rs.47,35,198/- was paid on the
date of the settlement i.e. on 12.07.2013.
50. The attempt was made by the learned APP as well
learned Counsel for the Respondent No.2 that this settlement
has no relevance with the bank guarantees. The account extract
maintained by the BGR Energy Systems Limited in the name of
Aradhya Infratech Pvt. Ltd., shows that the account was
maintained in respect of Service Orders or Work Orders No.
3300006842 and 3300005526. It is nowhere contention of the
Respondent No.2 that, besides these Service Orders there was
41 CRI. WP.609-2015 & ANR.JUDGMENT.odt
any other contract executed between the Respondent No.2 and
the BGR Energy Systems Limited. Thus, from the said
settlement it reveals that, the dispute between the BGR Energy
Systems Limited and the Respondent No.2 was settled during
the pendency of suit. Admittedly, this fact was not mentioned in
the FIR by the Respondent No.2. Admittedly, the FIR is not an
encyclopedia but being it is a material fact requires to be
mentioned. It is pertinent to note that, even it was not brought
to the notice of the Civil Judge Senior Division, Nagpur, wherein
the suit is pending. Admittedly, the suit is filed for recovery of
the amount of bank guarantee and against the said bank
guarantee the parties have arrived at a settlement.
51. Learned Counsel for the Respondent No.2, placed
reliance on the decision of Kathyayini Vs. Sidharth P.S. Reddy
(supra), wherein the Hon’ble Apex Court held that, there is no
bar against the prosecution during the pendency of the civil suit.
There is no dispute about the settled position of law that, there
are large number of cases where criminal law and civil law can
run side by side. In the case of Kamal Shivaji Pokarnekar
(supra), wherein also the Hon’ble Apex Court held that, the
42 CRI. WP.609-2015 & ANR.JUDGMENT.odt
criminal complaints cannot be quashed only on the ground that
the allegations made therein appear to be of a civil nature. If the
ingredients of the offence alleged against the accused are prima
facie made out in the complaint, the criminal proceeding shall
not be interdicted. Admittedly, there is no dispute as to the
above settled legal position.
52. Coming to the facts of the present case, the various
communications which are filed on record disclosed that the
bank has received the communication dated 24.09.2012 i.e.
before the validity period, unfortunately that was not brought to
the notice of the Petitioner No.2/Mrudula Paonikar, and
therefore, she has followed the process of closure and margin
money was credited in the account of Aradhya Infratech Pvt.
Ltd. Subsequently, when it was brought to the notice that
communication was already received on 24.09.2012 itself i.e.
during the validity period, therefore she has credited the
amount of bank guarantee to the account of BGR Energy
Systems Limited. Admittedly, the Bank has no concern with the
dispute between the parties who entered into the contract. It is
a common practice that, the issuance of guarantee is what that
43 CRI. WP.609-2015 & ANR.JUDGMENT.odt
the guarantor to discharge liability when the principal debtor
fails in his duty. It is an autonomous contract and imposes an
absolute obligation on the Bank to fulfill the terms and the
payment of the bank guarantee becomes due.
53. In catena of decisions which are already referred
discloses the role of the Bank and the manner in which the bank
guarantee is to be invoked. Here in the present case, after
following the due process, the Bank has invoked the bank
guarantee. Therefore, the act of the Bank or the Bank officials
cannot be said to be a fraudulent act. On the contrary, it was the
duty of the Complainant to mention about pendency of civil
litigation and settlement between the parties while lodging the
FIR, but it is apparent that, though the compromise is entered
by the Complainant and BGR Energy Systems Limited against
the contract i.e. Service Orders bearing Nos. 3300005526 and
3300006842, there was no other contract entered into by the
Respondent No.2 and BGR Energy Systems Limited. The fact of
settlement is not only concealed while lodging the FIR but it
was also not brought to the notice of Civil Judge Senior
Division, Nagpur or Debt Recovery Tribunal, Nagpur.
44 CRI. WP.609-2015 & ANR.JUDGMENT.odt
54. In the above facts and circumstances the observation
of the Hon’ble Apex Court in the case of Usha Chakraborty &
Anr. Vs. State of West Bengal & Anr., (2023) 15 SCC 135 , is
relevant. In para no. 17 after adverting to the facts in the cited
case in para 18, the Hon’ble Apex observed as under :
“By non-disclosure the respondent has, in troth, concealed
the existence of a pending civil suit between him and the
appellants herein before a competent civil court which
obviously is the causative incident for the respondent’s
allegation of perpetration of the aforesaid offenses against
the appellants. We will deal with if further and also its
impact a little later.”
55. The Petitioners herein are charged for the offences
punishable under Sections 420, 403, 406, 418, 425, 427 read
with Section 34 of the Indian Penal Code. The Complainant has
alleged that, the officials of the BGR Energy Systems Limited
and the Petitioner No.2 who is the Bank Officer in conveyance
with each other released the amount of bank guarantees and
thereby committed an offence punishable under Sections 406
and 420 read with Section 34 of IPC. There is a difference
between criminal beach of trust and cheating. There is a
difference between criminal breach of trust and cheating.
56. The ingredients in order to constitute a criminal
45 CRI. WP.609-2015 & ANR.JUDGMENT.odt
breach of trust are: (i) entrusting a person with property or with
any dominion over property, (ii) that person entrusted: (a)
dishonestly misappropriating or converting that property to his
own use; or (b) dishonestly using or disposing of that property
or wilfully suffering any other person so to do in violation (i) of
any direction of law prescribing the mode in which such trust is
to be discharged, (ii) of any legal contract made, touching the
discharge of such trust.
The ingredients of an offence of cheating are: (i)
there should be fraudulent or dishonest inducement of a person
by deceiving him, (ii)(a) the person so deceived should be
induced to deliver any property to any person, or to consent
that any person shall retain any property; or (b) the person so
deceived should be intentionally induced to do or omit to do
anything which he would not do or omit if he were not so
deceived; and (iii) in cases covered by (ii)(b), the act of
omission should be one which causes or is likely to cause
damage or harm to the person induced in body, mind,
reputation or property.
57. Thus, in both the aforesaid Sections, mens rea i.e.
46 CRI. WP.609-2015 & ANR.JUDGMENT.odt
intention to defraud or the dishonest intention must be present,
and in the case of cheating it must be there from the very
beginning or inception.
58. On the plain reading of the FIR, it is spelt out that
the allegations levelled against the present Petitioners that
Petitioner No.2/Mrudula Paonikar in Writ Petition No.609/2015
by joining hands with the officials of BGR Energy Systems
Limited, who are Petitioners in other Writ Petition No.
631/2015 invoked the bank guarantee and deposited the
amount in the account of BGR Energy Systems Limited. The
grievance is against the institution Bank. The civil suit filed by
the Complainant for declaration, wherein also the relief claimed
is that the action on the part of the Bank officials honouring the
expired bank guarantee by debiting the cash credit account of
the Complainant by an amount of Rs.81,37,822/-.
59. Thus, in the FIR as well as in the civil suit the issue
is regarding invoking the bank guarantee after validity period.
In fact, the documents which shows that, the letter of BGR
Energy Systems Limited dated 24.09.2012 was received by the
Bank within validity period. The explanation given by the
47 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Petitioner No.2/Mrudula Paonikar to the Deputy Zonal Manager
discloses that the branch staff/DRO has received the letter
No.BGR/PPD/17,18,19 and 20 dated 24.09.2012, but it was not
brought to the notice of Senior Branch Manager. The
communication of the Zonal Manager, Nagpur Zone dated
07.09.2015 addressed to whomsoever it may concern, also
discloses that the bank guarantee was invoked during the
validity period. It is pertinent to note that, the Complainant and
the BGR Energy Systems Limited during the pendency of the
suit entered into the settlement on 12.07.2013 in respect of the
Service Order Nos.3300006842 and 3300005526. Admittedly,
except these two Service Orders there was no any contract
entered by the Complainant with the BGR Energy Systems
Limited. Thus, the settlement arose as a full and final
settlement before lodging of the FIR. The amount of Rs.
47,35,198/- is already given to the Complainant by way of
cheque bearing No.489845 drawn on Punjab National Bank.
60. Despite the above settlement on 12.07.2013 itself
after two years on 22.07.2015 the FIR came to be lodged by the
Complainant by concealing the fact of settlement.
48 CRI. WP.609-2015 & ANR.JUDGMENT.odt
61. As observed by the Hon’ble Apex Court in the case
of Delhi Race Club (1940) Limited & Ors., Vs. State of Uttar
Pradesh & Anr., (2024) 10 SCC 690, wherein the Hon’ble Apex
Court has held in para 39 which read as under:
“39. Every act of breach of trust may not result in a penal
offence of criminal breach of trust unless there is evidence
of manipulating act of fraudulent misappropriation. An act
of breach of trust involves a civil wrong in respect of which
the person may seek his remedy for damages in civil courts
but, any breach of trust with a mens rea, gives rise to a
criminal prosecution as well. It has been held in Hari
Prasad Chamaria v. Bishun Kumar Surekha & Ors.,
reported in (1973) 2 SCC 823 as under:
“4. We have heard Mr. Maheshwari on behalf of the
appellant and are of the opinion that no case has been
made out against the respondents under Section 420
Penal Code, 1860. For the purpose of the present
appeal, we would assume that the various allegations
of fact which have been made in the complaint by the
appellant are correct. Even after making that
allowance, we find that the complaint does not disclose
the commission of any offence on the part of the
respondents under Section 420 of the Penal Code,
1860. There is nothing in the complaint to show that
the respondents had dishonest or fraudulent intention
at the time the appellant parted with Rs. 35,000. There
is also nothing to indicate that the respondents induced
the appellant to pay them Rs. 35,000 by deceiving him.
It is further not the case of the appellant that a
representation was made by the respondents to him at
or before the time he paid the money to them and that
at the time the representation was made, the
respondents knew the same to be false. The fact that
the respondents subsequently did not abide by their
commitment that they would show the appellant to be
the proprietor of Drang Transport Corporation and
would also render accounts to him in the month of
December might create civil liability for them, but this
49 CRI. WP.609-2015 & ANR.JUDGMENT.odtfact would not be sufficient to fasten criminal liability
on the respondents for the offence of cheating.” ”
62. To put it in other words, the case of cheating
dishonest intention starts with the very inception of the
transaction. But in the case of criminal breach of trust, a person
who comes into the possession of the movable property and
receives it legally, but illegally retains it or converts it to his own
use against the terms of the contract, then the question is, in a
case like this, whether the retention is with dishonest intention
or not, whether the retention involves criminal breach of trust
or only a civil liability would depend upon the facts of each
case.
63. The Hon’ble Apex Court in catena of judgments has
considered the distinction between mere breach of contract and
the offence of criminal breach of trust and cheating. As observed
earlier, in case of cheating, the intention of the accused at the
time of inducement should be looked into which may be judged
by a subsequent conduct. Mere breach of contract cannot give
rise to a criminal prosecution for cheating unless fraudulent or
dishonest intention is shown right from the beginning of the
50 CRI. WP.609-2015 & ANR.JUDGMENT.odt
transaction i.e. the time when the offence is said to have been
committed. Therefore, it is this intention, which is the gist of the
offence.
64. Thus, in case of criminal breach of trust, the
offender is lawfully entrusted with the property, and he
dishonestly misappropriated the same. Whereas, in case of
cheating, the offender fraudulently or dishonestly induces a
person by deceiving him to deliver any property. In such a
situation, both the offences cannot co-exist simultaneously.
65. In the case of Rikhab Birani & Anr., Vs. State of
Uttar Pradesh & Anr., 2025 SCC OnLine SC 823 , Arshad Neyaz
Khan Vs. State of Jharkhand & Anr., 2025 SCC OnLine SC 2058 ,
and Mahmood Ali & Ors., Vs. State of Uttar Pradesh & Ors.,
(2023) 15 SCC 488, wherein it is consistently held that both the
offences cannot co-exist simultaneously.
66. In the light of the above facts and circumstances of
the case as observed earlier that the Petitioner No.2/Mrudula
Paonikar, Senior Branch Manager has invoked the bank
guarantee during the validity period by observing the rules and
51 CRI. WP.609-2015 & ANR.JUDGMENT.odt
regulations issued by the Reserve Bank of India and the law laid
down by the Hon’ble Apex Court in catena of decisions which
are refereed earlier. The transaction between the Complainant
and the BGR Energy Systems Limited, was already settled in
view of settlement dated 12.07.2013. The final settlement
certificate alongwith the cheque mentioned earlier was issued to
the Complainant. Though it was submitted that, the settlement
was not in respect of the transaction regarding the bank
guarantee but the settlement terms specifically shows that the
settlement was in respect of the Service Order Nos.3300006842
and 3300005526. Therefore, this contention is not sustainable.
67. The account extract which is attached in Writ
Petition No.631/2015 maintained by the BGR Energy Systems
Limited, is in the name of the Complainant also discloses the
Service Orders which are mentioned above. Thus, there is
nothing on record to show that, there is any other transaction
between the BGR Energy Systems Limited and the Complainant.
The Civil Suit bearing S.C.S. No.213/2013 by the Complainant
is also regarding the same transaction. Thus, the documents on
record is sufficient to show that despite the settlement between
52 CRI. WP.609-2015 & ANR.JUDGMENT.odt
the Complainant and the BGR Energy Systems Limited against
the said contract, after two years the FIR came to be lodged by
the present Complainant by concealing the settlement. Thus, the
Complainant has not approached to the Police Authorities with
a clean hand. The documents on record nowhere shows that,
there was any dishonest intention on the part of the present
Petitioners. The FIR was lodged by suppressing the earlier
proceedings, is sufficient to show the intention of the
Complainant itself. The continuance of the above said
proceeding against the present Petitioners would be an abuse of
process of law. Moreover, accepting the case as it is in its
entirety do not prima facie constitute any offence against the
present Petitioners. The contention of the Complainant that the
Petitioners have misappropriated the amount of bank guarantee
as well as he is deceived by the Petitioners with an intention
since inception, which cannot co-exist, and therefore, if the
criminal proceedings are allowed to continue against the
present Petitioners, the same would be an abuse of process of
law and result in miscarriage of justice.
68. In the case of Achin Gupta Vs. State of Haryana &
53 CRI. WP.609-2015 & ANR.JUDGMENT.odt
Anr., 2024 SCC OnLine SC 759 , wherein the Hon’ble Apex Court
observed as under:
“19. It is now well settled that the power under Section
482 of the Cr. P.C. has to be exercised sparingly, carefully
and with caution, only where such exercise is justified by
the tests laid down in the Section itself. It is also well
settled that Section 482 of the Cr. P.C. does not confer any
new power on the High Court but only saves the inherent
power, which the Court possessed before the enactment of
the Criminal Procedure Code. There are three
circumstances under which the inherent jurisdiction may
be exercised, namely (i) to give effect to an order under
the Code, (ii) to prevent abuse of the process of Court, and
(iii) to otherwise secure the ends of justice.
20. The investigation of an offence is the field exclusively
reserved for the police officers, whose powers in that field
are unfettered, so long as the power to investigate into the
cognizable offence is legitimately exercised in strict
compliance with the provisions under Chapter XII Cr.PC.
While exercising powers under Section 482 CrPC. The
court does not function as a court of appeal or revision. As
noted above, the inherent jurisdiction under the section,
although wide, yet should be exercised sparingly, carefully
and with caution and only when such exercise is justified
by the tests specifically laid down in the section itself. It is
to be exercised ex debito justitiae to do real and substantial
justice for the administration of which alone courts exist.
The authority of the court exists for advancement of justice
and if any attempt is made to abuse that authority so as to
produce injustice, the court has the power to prevent such
abuse. It would be an abuse of process of the court to allow
any action which would result in injustice and prevent
promotion of justice. In exercise of the powers, the court
would be justified to quash any proceeding if it finds that
the initiation or continuance of it amounts to abuse of the
process of court or quashing of these proceedings would
otherwise serve the ends of justice. When no offence is
disclosed by the complaint, the court may examine the
question of fact. When a complaint is sought to be
quashed, it is permissible to look into the materials to
assess what the complainant has alleged and whether any
54 CRI. WP.609-2015 & ANR.JUDGMENT.odt
offence is made out even if the allegations are accepted in
toto.”
69. In the present case also, despite the Complainant
has availed the remedy by filing a civil suit, he entered into the
settlement with BGR Energy Systems Limited on 12.07.2013
itself, he has not brought the said fact to the notice of the Civil
Judge Senior Division, Nagpur, wherein the suit is pending
regarding the similar issue regarding invocation of bank
guarantee. The conduct of the Complainant that filing of the
civil suit and settlement between the firm of the Complainant
and BGR Energy Systems Limited, is not disclosed to the Police
Authorities, admittedly is an abuse of the process of law. The
Petitioner No.2/Mrudula Paonikar who has invoked the bank
guarantee during the validity period constrained to face the said
prosecution. For all above these grounds, heavy costs requires to
be imposed on the Complainant.
70. For all above these reasons, it is apparent that, the
Complainant has not approached to the Investigating Agency
with a clean hand, and therefore, in my considered opinion, the
Writ Petitions deserve to be allowed. Accordingly, I proceed to
pass the following order.
55 CRI. WP.609-2015 & ANR.JUDGMENT.odt
ORDER
i. The Writ Petitions are allowed.
ii. The First Information Report in connection with
Crime No. 262/2015 registered with Police Station
Pratapnagar, Nagpur City for the offence punishable
under Sections 420, 403, 406, 418, 425, 427 read
with Section 34 of the Indian Penal Code, is hereby
quashed and set aside to the extent of the present
Petitioners.
iii. The costs of Rs.2,00,000/- (Rs. Two Lakhs Only) is
imposed on the Complainant for abusing the process
of law. The cost be paid to the “Public Welfare
Account” in Account No. 129712010001014 IFSC
Code : UBIN0812978 Union Bank of India, Branch
High Court, Civil Lines, Nagpur.
71. Pending application/s, if any, shall stand disposed of
accordingly.
(URMILA JOSHI PHALKE, J.)
S.D.Bhimte
Signed by: Mr.S.D.Bhimte
Designation: PA To Honourable Judge
Date: 24/02/2026 14:32:04
