Bombay High Court
Gtl Limited Through Milind Bapat vs Central Bureau Investigation And Anr. on 27 February, 2026
2026:BHC-AS:10318-DB
Panchal WP-3631-24 (GTL)-28.02.26.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
WRIT PETITION NO. 3631 OF 2024
GTL Limited } Petitioner
versus
Central Bureau of Investigation & Anr. } Respondents
Mr. Aabad Ponda, Senior Advocate with Mr. Manoj
Mohite, Senior Advocate, Mr. Sajal Yadav, Ms. Sonam
Gupta, Ms. Apporva Agrawal, Mr. Prasad Lotlikar, Mr.
Essaji Vahanvati, Ms. Aparna Kulkarni, Mr. Suyash
Gadre, Mr. Abhishek Thote i/b. Mr. Harsh Ghangurde,
Advocates for the Petitioner.
Mr. Kuldeep Patil with Mr. Sumitkumar Nimbalkar, Ms.
Sanika Joshi, Mr. Anay S. Joshi and Ms. Saili Dhuru,
Advocates for Respondent No.1-CBI.
Ms. M. M. Deshmukh, In-Charge Public Prosecutor with
Mr. S. V. Gavand, APP for Respondent No. 2
CORAM: SHREE CHANDRASHEKHAR, CJ. &
GAUTAM A. ANKHAD, J.
Reserved on : 12th December 2025
Pronounced on : 27th February 2026
JUDGMENT
Per, Shree Chandrashekhar, CJ :
The GTL Limited represented through its authorized
representative is seeking quashing of the First Information Report
registered by the Central Bureau of Investigation (in short, CBI) on
21st January 2023 against the GTL Limited, unknown directors of
the GTL Limited, unknown bank officers and unknown private
persons including the vendors and beneficiary group of the GTL
Limited.
2. A Preliminary Enquiry vide PE 2192022E0001 was
conducted into the allegation made in the complaint dated
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14th July 2021 submitted to the CBI. After the inquiry, the CBI
registered a crime vide RC2192023E0003 on 21st January 2023
under section 120-B read with section 420 of the Indian Penal
Code and section 13(2) read with section 13(1)(d) of the Prevention
of Corruption Act, 1988. This was the allegation against the GTL
Ltd. that it fraudulently obtained various credit facilities from the
consortium of banks and diverted/siphoned off major part of the
loan amount to various vendor-companies which were created and
operated with the mala fide intention in conspiracy with such
vendors.
3. In brief, on conclusion of the Preliminary Enquiry a written
complaint dated 16th January 2023 was submitted by the
Inspector, CBI, EO-I, New Delhi and on that basis a First
Information Report was registered. The allegation against the
petitioner-company is that it generated Rs.1400 crores from
capital non-convertible debentures and availed credit facilities
from a consortium of 24 banks to the tune of Rs.4760.01 crores. A
short-term loan was availed by the petitioner-company on a
misrepresentation that the loan amount shall be utilized for the
business activities. However, the petitioner-company cheated the
lender banks and misappropriated the funds by providing
advances to the purported vendors. A substantial part of such
advances remained outstanding and a part of it was routed back
to the petitioner-company by the vendor-entities. The petitioner-
company utilized the working capital funds availed from the bank
to acquire fixed assets from the vendors and investments were
made by it in other companies through purchase of shares.
According to the CBI, the inquiries revealed that the petitioner-
company provided advances to the vendors year after year and
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without supply of materials and eventually those advances were
provisioned. The vendor-companies were not supplying the goods
commensurate with the advances given to them and none of the
vendor-companies supplied goods more than 16% of the advances
given to it. There was supply of materials worth only Rs. 347.32
crores by M/s. Acuity Trading Pvt. Ltd., M/s. Lenity Trading Pvt.
Ltd., M/s. Venerate Trading Pvt. Ltd. and M/s. Vinamra
Multitrading Pvt. Ltd. but they were provided Rs.1213.97 crores as
in advance. It is further alleged that the vendor-companies were
incorporated within a short span of less than three months. The
account of the petitioner-company was red-flagged by the IDBI
Bank Ltd. pursuant to the advice received from the RBI for a
Forensic Audit Report and M/s. NBS & Co. was appointed to
conduct the forensic audit of the petitioner-company. In the
complaint, there is a mention of part of the Forensic Audit Report
to the effect that no material was received by the petitioner-
company against the advance of Rs.1141.84 crores given to the
vendors in FY 2010-11.
4. The petitioner-company states that the advances provided to
the vendor-entities were recovered and reflected in the bank
statements and Aircel agreement which were collected by the CBI
in course of the Preliminary Enquiry vide PE 2192022E0001. The
petitioner-company recovered Rs.639.47 crores from the vendor-
entities and Rs.1118.01 crores from the Aircel but the CBI has
made a completely baseless allegation of the provisioning of
Rs.1420 crores. The special audit conducted by T.R. Chaddha &
Co. LLP did not report any fraud or diversion of funds by the
petitioner-company at any stage, but the CBI selectively used the
said audit report pertaining to the period till November 2011 and
ignored the events post-November 2011 such as supply of
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materials, settlement with Aircel, recovery of outstanding
advances etc. The petitioner-company contends that the
consortium of banks took a decision to remove Red Flag Account
(“RFA”) tag from the account of the GTL Limited. The petitioner-
company further states that if it had an intention to defraud at the
inception it would not have made repayments to the tune of
Rs.5543 crores against the principal borrowing of Rs.3164 crores.
These repayments were made by the petitioner-company without
any borrowings from the banks or financial institutions. The
lender banks never made any allegation of fraud or diversion of
funds or wrongful loss to them and no complaint has been lodged
by the lender banks. The FIR has been lodged on the basis of
vague and incomplete information. The CBI concealed the
important information and did not refer to relevant documents
which, if taken into consideration, shall reveal that all financial
transactions were bona fide and the losses reflected in the
balance-sheets etc. were for a transit period.
5. The petitioner-company further states that the allegation of
non-payment of outstanding amounts to the extent of 86.84% has
no basis and the records would reveal that all vendor advances
were duly recovered before the FIR was lodged. The CDR was
introduced because of the shortfall in revenue on account of the
volatile Telecom sector. It was a case of non-fulfilment of the
contractual obligations on account of the circumstances beyond
the control of the petitioner-company. The petitioner-company was
not classified for the CDR due to any fraud detection or diversion
of funds and no ingredients of the offence of cheating has been
prima facie shown by the CBI. The Income Tax Settlement
Commission in its order dated 27 th November 2013 clearly held
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that there was no bogus purchase nor any evidence was found of
purchases by accommodation bills. The Income Tax Settlement
Commission clearly held that the vendors were genuine and
supplies were made. The entire edifice of lodging the FIR is built
on assumptions, omissions and suppression of material
information and documents. The audited balance-sheets of at
least five vendors are available in public domain and it can be
easily gathered therefrom that the aggregate sale of materials by
them was for more than 1400 crores for the FY 2009 to FY 2012.
All the vendors and suppliers have been issued PAN and CIN
numbers and have identifiable addresses. They are registered with
Service Tax and have been filing income tax returns. The
advances were made by the petitioner-company after taking due
approval from its shareholders through postal ballots dated
14th January 2010. The settlement agreements, copies of the
letters dated 22nd May 2012 and 24th May 2014 with the Aircel and
the bank statements were provided to the CBI. The investment in
mutual funds was a part of prudent treasury management where
funds are temporarily invested and then used for sanctioned
purposes. The fixed assets were procured from the funds available
to the petitioner-company and not from the working capital
availed from the bank. The OTS proposals were submitted to the
lender bank in December 2023 and were accepted in principle as
communicated to the petitioner-company by the IDBI vide letter
dated 20th January 2024 and loans have been repaid.
6. In the counter affidavit, the CBI states that the Special
Auditor, namely, T. R. Chaddha & Co. LLP flagged the issue of
advances to the vendors in its report dated 3 rd March 2012 to the
effect that an amount of Rs. 778.55 crores was outstanding for
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more than one year and Rs. 329.62 crores was outstanding for
more than six months. It is stated that the petitioner-company did
not receive the materials against the purchase orders to M/s.
Venerate Multitrading Pvt. Ltd., M/s. Acuity Trading Pvt. Ltd.,
M/s. Vinamra Multitrading Pvt. Ltd., M/s. Lenity Trading Pvt.
Ltd. and M/s. Network Telelink Pvt. Ltd. and gave additional
advances of Rs. 344 crores to these parties. The petitioner-
company availed short-term loans for working capital but diverted
the loan amount through vendors as advances. There is a
reference of loan of Rs. 128.05 crores to M/s. Acuity Trading Pvt.
Ltd. which, according to the CBI was reportedly a SME vendor of
the petitioner-company. The CBI has pleaded as under:-
“24. That the averments made in para 5(Z) of the Writ Petition are
denied. It is submitted that the sections of the Prevention of
Corruptiion Act, 1988 were invoked in the FIR prima facie
considering the role of the public servants. The offences u/s 420
IPC and that u/s 13(2) r/w 13(1)(d) of PC Act, 1988 are different.
The offences u/s 120-B r/w 420 IPC and substnative offences
thereof are under investigation getting substantiated. The role of
public servant will depend on the evidences that may come forth
during investigation. The lender banks did not declare the account
as fraud as the Forensic Auditor could not detect the fraud as
explained in the foregoing paras. However, there were sufficient
evidences available even as per the letter dated 31.03.2017 of IDBI
bank to RBI that the bank’s fund were diverted. Moreover, RBI did
not agree with the submissiions of the bank that there was no
fraud and advised the bank. Now investigation has also
established that there was frand. Hence, why the bank had not
declared the loan accounts of the borrower company as fraud is to
be looked into during investigation.
25. That the averments made in para 5(AA) of the Writ Petition are
denied. It is submitted that alleged recovery during the year 2010-
2014 were not the recovery against the advances paid to the
vendors. The claimed recovery of Rs. 343.57 Crores during June
201 to July 2020 cannot be taken for the outstanding advances as
on 31.03.2012. For remaining alleged recoveries direct recovery
from the four major vendors, namely M/s Acuity Trading Pvt Ltd.,
Lenity Trading Pvt. Ltd., Vinamra Multitrading Pvt. Ltd. and
Venerate Trading Pvt. Ltd. direct receipts are only of approximately
Rs 175 Crores instead of Rs 524.50 Crores as claimed in the
instant Writ Petition. Remaining are from Aircel or its group
companies. Hence, any receipt from Aircel and its group companies
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Panchal WP-3631-24 (GTL)-28.02.26.docxcannot be considered as recovery from the vendors, because Aircel,
itself was availing the services of the borrower company, therefore,
the receipts from Aircel may be taken as the cost of services
provided by the borrower company. If, any amount was received
from Aircel, in the capacity of the Principal Contractor, under the
garb of recovery on behalf of the alleged vendors that is another
fraud on the lender banks of Aircel. Further most of the alleged
recoveries were deposited in HDFC bank account or Standard
Chartered Bank account of the borrower company and the same
were fraudulently further utilized to make investments in group
companies, mutual funds, and other payments etc. instead of
adjusting the same against the outstanding loans in compliance
with the terms and conditions of the CDR. Hence, the same were
not recovery of the current assets rather were the receipts of the
cost of services provided by the borrower company.
26. That the averments made in para 6 to 12 of the Writ Petition are
denied except which are the matter of records. That in various
judgments the Hon’ble Apex Court has held that the economic
offences constitute a class apart and need to be visited with a
different approach. The economic offences having deep-rooted
conspiracies and involving huge loss of public funds need to be
viewed seriously and considered as grave offences affecting the
economy of the country as a whole and thereby posing serious
threats to the financial health of the country. It is submitted that the
instant writ petition may please be dismissed in the interest of
justice, as the instant FIR is based on evidence of fraud of huge
loan amount of Rs. 4760 Crores and the allegations made in the
FIR are getting substantiated during the investigation which is
continuing. The investigation is in progress and major evidences are
surfacing on record”
7. Mr. Aabad Ponda, the learned senior counsel for the
petitioner-company submitted that it is quite surprising that the
offence of cheating has been committed by unknown directors of
the petitioner-company, unknown bank officials and the unknown
vendors and beneficiary group companies of the GTL Limited. The
vendor-entities supplied materials worth about Rs.709 crores
which are duly recorded in the complaint dated 16 th January
2023. The Income Tax Settlement Commission recorded a finding
in its order dated 27 th November 2013 that the purchases were
genuine and not bogus. The vendor-entities filed income tax
return and their balance-sheets reflected revenue of approximately
4000 crores; the four vendors, namely, M/s. Acuity Trading Pvt.
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Ltd., M/s. Lenity Trading Pvt. Ltd., M/s. Venerate Trading Pvt.
Ltd. and M/s. Vinamra Multitrading Pvt. Ltd. generated revenue of
more than Rs.1400 crores. The learned senior counsel further
submitted that the important and relevant finding in the Forensic
Audit Report and the conclusions of the auditors are not recorded
in the complaint dated 16th January 2023 and the officer who
conducted the Preliminary Enquiry selectively referred to a part of
the report dehors the final conclusion.
8. The learned senior counsel further submitted that the
commercial wisdom and decision of the consortium of banks and
financial institutions are of paramount importance and do not
permit any inquiry or investigation where no allegation of
collusion and fraud is made by the lender banks. The lender
banks and financial institutions had full disclosures before them
about the viability of the GTL Limited and there shall be an
assumption of the commercial decision being taken bona fide. The
learned senior counsel further submitted that no offence of
cheating or conspiracy to cheat is made out and the investigation
by the CBI is a misuse of the power to investigate.
9. The CBI is a premier Investigating Agency and employs state
of the art techniques of investigation [vide, “Yashwant Sinha”1].
The source information dated 14th July 2021 which triggered the
Preliminary Enquiry did not provide adequate materials to justify
registration of a criminal case. The paragraph no.7.15 of the CBI
Manual provides that a regular case should be registered when
sufficient material is collected “and it is felt that outcome of
investigation is likely to culminate in prosecution”. In course of
the Preliminary Enquiry, the CBI gathered as many as 52
documents a description of which is given in a tabular chart filed
1
Yashwant Sinha & Ors. v. CBI Anr.: (2020) 2 SCC 338.
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in the present proceedings. The CBI collected the loan policy and
delegation of lending power to a few lender banks, balance-sheets
of M/s. Spruce Trading Pvt. Ltd., M/s. Venerate Trading Pvt. Ltd.,
M/s. Lenity Trading Pvt. Ltd., M/s. Acuity Trading Pvt. Ltd., M/s.
Vinarma Trading Pvt. Ltd. and M/s. Adjuvant Trading Pvt. Ltd.
etc.; auditor report and balance-sheet of M/s. Delphic Trading,
approval of the assignment of debt to M/s. Edelweiss Asset
Reconstruction Company, estimation of recoverability of loan to
M/s. Chennai Network Infrastructure Limited and the GTL
Infrastructure Limited by the TRC Corporate Consulting Pvt. Ltd.
and ITCOT Consultancy & Services Limited, minutes of meetings
of Joint Lender Forum, appraisal report in search and seizure
under section 132 of the Income Tax Act, the replies received from
E & Y, Canara Bank, Steve Lyols, Phoenix ARC, and Forensic
Audit Report of the GTL Limited by NBS & Co. If this is to be
assumed that the CBI in course of the Preliminary Enquiry
gathered sufficient material which prima facie disclosed
commission of a cognizable offence then the CBI must indicate the
name of the accused person or persons or a public servant who
committed serious misconduct to cause loss to public exchequer.
Evey director of the petitioner-company, the officials of the
consortium of banks, the vendor-entities etc. are identifiable and
their names are recorded in the records. Therefore, this is of
considerable importance that the CBI could not identify the
accused in course of the Preliminary Enquiry and the First
Information Report has been lodged against unknown. This is
also of equal importance that the CBI is unable to identify an
accused even today. There seems to be an inseparable obstacle in
the stand of the CBI that unknown persons and bank officials
were involved in the crime.
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10. The CBI recorded the statements of Krishna Prasad, Amit
Agarwal, S. K. Sachdeva, Bhagwat Patra, Chandan Churiwal,
Abizer Diwan, Sushant Paralkar, Rajesh Vasant, Vineet Singh,
Kshitij Goel and Jayesh Kulkarni. However, there is no indication,
not even a whisper, in the counter affidavit filed by the CBI that
the witnesses made a statement during the Preliminary Enquiry
regarding any foul play on the part of the petitioner-company.
There is no statement in the First Information Report that the
witnesses stated anything about the role played by the petitioner-
company and a collusion or conspiracy between the petitioner-
company and the vendor-entities or the bank officials. It was
observed by this Court in the order dated 6 th September 2024 that
the counter affidavit filed on behalf of the CBI is unsatisfactory
but no fresh affidavit was filed by the CBI indicating the result of
investigation conducted so far and only a vague statement was
made in the Court that the investigation is still going on.
11. Chapter XII of the Code of Criminal Procedure, 1973 deals
with the information to the police and their powers to investigate.
The right, discretion and powers of the police to investigate a case
which may prima-facie disclose the commission of a cognizable
offence were considered unfettered for some time. However, over a
passage of time the right of the police to investigate a cognizable
offence is no longer considered unfettered and the Courts have
held that the police cannot proceed to investigate a case where
there is a statutory bar. In “P. Sirajuddin”2, the Hon’ble Supreme
Court observed that there is a need for Preliminary Enquiry before
proceeding against the public servant. However, the Manual puts
a note of caution under paragraph no.7.2 that the important
difference between a business risk and a mala fide conduct of the
2
P. Sirajuddin v. State of Madras: (1970) 1 SCC 595.
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public servant should be kept in mind. The day when the CBI
conducted the Preliminary Enquiry and lodged a crime bearing no.
RC2192023E0003 on 21st January 2023, the Prevention of
Corruption (Amendment) Act, 2018 was on the statute book.
Section 17A which was inserted in the Prevention of Corruption
Act puts a bar to conduct any inquiry or investigation into any
offences by the police alleged to have been committed by a public
servant where the alleged offence is relatable to any
recommendation made or decision taken by such public servant in
discharge of his official functions or duties without the prior
approval of the appropriate Government or the competent
authority as the case may be. The bank officials are public
servants who are provided a protective umbrella under section
17A to shield them from frivolous complaints. The unknown bank
officials could not have come to the Court but this is relevant in
the context of the allegation against the petitioner-company that
unknown bank officials of 24 banks may be involved in the crime.
Importantly, there is no allegation that they violated any provision
under the extant circular, guidelines or rules with dishonest
intention. The decision of the consortium of banks was approved
in the general body meeting and the Ministry of Finance has
control over them. Against them, neither any inquiry or
investigation has been sought to be conducted. In our opinion,
this cannot be an argument that the purpose of present
investigation is to ascertain the identity of the unknown accused.
Such an exercise was to be conducted in the course of the
Preliminary Enquiry. Surprisingly, not a single individual was
identified by the CBI in course of the Preliminary Enquiry and the
First Information Report seems to have been lodged only for
making a roving and fishing inquiry.
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12. Previously, there was an inquiry into the matter and the CBI
had taken a decision not to conduct a Preliminary Enquiry. This
has been brought on record that the Department of Financial
Services, Ministry of Finance has communicated the decision of
the CBI to the IDBI Bank that the competent authority of the CBI
had ordered closure of the matter because the account of the GTL
Limited was not classified as fraud. A copy of the letter dated 5 th
September 2018 communicating the said decision of the CBI is
reproduced herein below :
“F. No. 5/7/2015/Vig
Government of India
Ministry of Finance
Department of Financial Services3rd Floor, Jeevan Deep Bldg.,
Parliament Street, New Delhi
Dated 5th September 2018
To,
The Chief Vigilance Officer
IDBI BankThe Chief Vigilance Officer
Union Bank of IndiaSubject: Parliminary Enquiry to be conducted into the account of M/s
GTL Ltd with Union Bank of India and IDBI Bank-Reg.
Sir,
Please refer the subject matter and find enclosed herewith a copy
of CBI letter No.SI/CBI/BSFC/Mum/2013/05/518 dated 07.08.2018
wherein CBI has informed that the competent authority of CBI has or-
dered closure of the said matter, as the account of M/s. GTL Ltd. has
not been classified as fraud by JLF.
Encl: as above
Yours faithfully
sd/-
(Gurdeep Singh)
Under Secretary (Vigilance)
Tel: 23748709″
13. The afore-mentioned decision was taken by the CBI in the
background of the inquiries made against the petitioner-company
under the supervision of the Ministry of Finance. Through the
communication dated 9th October 2015, the details of the GTL
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Limited, GTL Infrastructure Limited and M/s. Chennai Network
Infrastructure Limited were provided to the Ministry of Finance.
The Union Bank of India which was the lead bank for GTL
Infrastructure Limited stated in the said communication that the
petitioner-company had been dealing with the bank since 2002
and availed credit facilities since 2003. It was sanctioned a term
loan of Rs. 100 crores for establishing Passive Telecom BPO
Infrastructure. The said loan amount was not availed of during
the valid period as the Union Bank of India had taken shares of
Rs. 100 crores in the project. A loan of Rs. 200 crores was also
sanctioned by the Union Bank for the project and there are
references of further loans provided to the petitioner-company. In
conclusion, it was stated that the revenue projections by the
petitioner-company were based on long term commitment of the
Aircel Group on existing tower portfolio for 15 years and future
tenancy based on tenancy study report of KPMG. Most
importantly, in the letter dated 9 th October 2015 the Union Bank
of India provided its opinion to the Ministry of Finance that the
petitioner-company was generating profit and was not fit to be
declared as fraudulent. This communication summarizes thus:
“Conclusion:
M/s Mott MacDonald, who have done the due diligence of the
telecom towers of CNIL in April 2015 have informed that telecom
towers found to be in order and overall passive infrastructure of
CNIL is in good condition.
Valuation of telecom towers at Rs.48.00 per tower is the
valuations done in the similar structure l.e., Tatas with Quippo
(Rs.61.00 lacs) and ATC with Scel Tlecom (Rs.41.00 lacs per
tower).
Revenue projections were based on long term commitment of Aircel
Group on existing tower portfolio for 15 years and future tenancy
based on Tenancy Study Report of KPMG.
M/s Barclays Capital and Citi Group’s Global Markets India Pvt
Ltd (financial advisor to ascertain the valuation of the transaction
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with Aircel) and SBI Capital Markets Ltd, advisors who carried out
financial appraisal for the Aircel deal were independent agencies
having a good reputation and did not form part of the consortium,
valuations submitted by the consultants were considered
Independently and without conflict of interest.
All the three group concerns namely M/s. GTL Infrastructure Ltd.,
M/s. GTL Ltd. and M/s. Global Holding Corporation Pvt. Ltd were
generating profit.
In view of the foregoing, the bank has not identified the referred account
(GTL) fit to be declared as fraudulent one as on date and the bank has
not come across any adverse opinion on the private persons.
Therefore, we are of the opinion that there is no need to file a complaint
with Central Bureau of Investigation in this regard.
Yours’ sincerely,
CK JA (VK JAIN)
GENERAL MANAGER
Copy to: CVO, Union Bank of India, Central Office, Mumbai”
14. The aforementioned inquiries were closed after the thorough
check and discussions with the competent authorities and no foul
play was observed in the working of the petitioner-company. The
RBI was also involved in the inquiries made by the lender banks
and the decisions taken by the JLF were duly communicated to
the RBI. One of the most important and crucial decisions was
taken in the JLF meeting held on 11 th January 2017. This decision
was communicated to the Central Fraud Monitoring Cell of the
RBI through a communication dated 1 st April 2017. In the said
meeting, a decision was taken to remove the red flag qua the
petitioner-company from CRILC data. The letter dated 1 st April
2017 is reproduced herein below :
“April 1, 2017
Ref No: GTL/2017-18/RBI/
General Manager
Central Fraud Monitoring Cell,
Department of Banking Supervision,
Reserve Bank of India,
10/3/8, Nrupathunga Road, P.B.No. 5467,
Bangalore-560 001
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Panchal WP-3631-24 (GTL)-28.02.26.docxDear Sir,
Preliminary Enquiry to be conducted into the account of M/s GTL Ltd.
with Union Bank of India and IDBI Bank
Please refer to your letter Ref. DBS. CO. CFMC/11492/
23.02.012/ 2015-16, dated April 01, 2016, and the subsequent
correspondence on the captioned subject. As advised, IDBI Bank had
classified the account of GTL Ltd as Red Flagged and instituted Forensic
Audit. A copy of the Forensic Audit Report was forwarded to your office
vide our letter no. GTL/2016-17/RBI/748, dated December 28, 2016.
Further, on the observations contained in your letter no.BS. CO. CFMC/
6815/ 23.02.012/2016-17 dated March 3, 2017, IDBI Bank has already
submitted its clarifications vide letter dated March 31, 2017.
The Forensic Audit Report was discussed by lenders at two JLF
Meetings, held on January 11, 2017 and March 18, 2017. At the last JLF
Meeting, held on March 18, 2017, the lenders concluded that based on
the findings of the Forensic Audit Report, clarifications received from the
company and further clarifications given by the Forensic Auditors, there
was no conclusive evidence of diversion of funds and hence the Forensic
Audit could be closed without classifying the account as “Fraud ‘. All the
lenders agreed that IDBI Bank, as MI, would inform this decision to RBI
and could also consider removing the ‘Red Flag’ from CRILC data (copy of
the JLF Minutes circulated amongst the lenders on March 18, 2017 is
enclosed).
Submitted for your information and guidance please.
Yours Faithfully
SK Sachdev
Chief General Manager
Large Corporate Group”
15. Thereafter, the Under Secretary (Vigilance), Ministry of
Finance, Government of India by its letter dated 25 th April 2017
forwarded the report of the petitioner-company to the CBI. It has
also referred to the JLF meeting held on 11 th January 2017 and
18th March 2017 which decided not to classify the account of the
petitioner-company as fraud. With these comments, a copy of the
Forensic Audit Report and the minutes of the JLF meeting were
forwarded to the Joint Director of the CBI for taking a further view
in the matter. A copy of the said letter is reproduced herein
below :
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"F. No. 5/7/2015/Vig
Government of India
Ministry of Finance
Department of Financial Services
3rd Floor, Jeevan Deep Bldg.,
Parliament Street, New Delhi
Dated: 25 April, 2017
To,
Sh. A.K. Sharma
Joint Director
Central Bureau of Investigation.
Bank Securities & Fraud Zone,
5-B, 10th Floor, CBI Building,
CGO Complex, Lodhi Road,
New Delhi-110003
Subject: Preliminary Enquiry to be conducted into the account of M/s
GTL. Ltd with Union Bank of India and IDBI Barik-Reg
Sir,
In continuation to this Department’s letter dated 17.08.2016 and
CBI letter no. 47/SL/077/2013/E/0005 dated 30.05.2016 on the
subject cited above. I am directed to inform that IDBI Bank being the lead
Bank has got a Forensic Audit conducted into the accounts of M/s.GTL
Ltd. IDBI Bank vide letter no. 605/Vig. GTL dated 21.01.2017 has
forwarded a copy of the Forensic Audit Report (FAR) to this Department.
The same is enclosed for your perusal.
2. IDBI Bank vide letter 766/Vig.G-8 dated 01.04.2017 (copy
enclosed) has also informed that FAR was discussed in the JLF Meeting
held on 11.01.2017. As many lenders had various queries on the
observations made by the auditor, another JLF meeting was convened on
18.03.2017. The lenders in the meeting have concluded that based on the
findings of the Forensic Audit Report, clarifications received from the
company and further clarifications given by the auditors, there was no
conclusive evidence of funds and hence the lenders close the Forensic
Audit, without classifying the account as ‘Fraud’. Copy of the minutes of
the JLF held on 18th March, 2017 is enclosed.
3. CBI may take a further view in the matter.
Encl: as above
Yours faithfully
Mritunjay Singh
Under secretary (Vigilance)”
16. In “Rashmi Kumar”3, the Hon’ble Supreme Court observed
that the power of quashing a criminal proceeding should be
sparingly and cautiously exercised and only when the Court is of
3
Rashmi Kumar v. Mahesh Kumar Bhada: (1997) 2 SCC 397.
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the opinion that otherwise there will be miscarriage of justice. The
special features of a case and the defence set up by the accused
person through uncontroverted document can be considered to
arrive at a decision whether it is expedient and in the interest of
justice to permit the prosecution to continue. The High Court may
while taking into consideration the special facts of the case quash
the criminal proceedings at a preliminary stage. The power under
section 482 of the Code of Criminal Procedure is a wholesome
power. It saves the High Court’s inherent power both in civil and
criminal matters. Similarly, the power of the writ Court seeks to
achieve a public purpose and a criminal proceeding ought not to
be permitted where there will be miscarriage of justice. The
registration of the First Information Report affects the petitioner-
company in many ways. In a case like the present one, this is a
duty of the High Court to examine the materials on record even
though the investigation is said to be still continuing. On
examination of the materials brought on record by the petitioner-
company, many of which were collected by the CBI in the course
of the Preliminary Enquiry, if it is found that the allegations in the
First Information Report are substantially wiped out then this
Court should interfere in the matter and quash the First
Information even if minor issues remain unresolved.
17. There is no allegation of misrepresentation by the petitioner-
company to avail loan from the lender banks. The petitioner-
company is not alleged to have made a false projection to deceive
the lender banks and financial institutions. It is not said to have
forged any document or manipulated the Forensic Audit Report.
The Forensic Audit Report covered the period between 2012-2018
and also examined the advances provided to the vendors during
2009-2011. The Forensic Audit Report made a categoric
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carried out through MCA Defaulter Company List/SEBI Shell
Company List and no abnormality was detected in the dealings of
such companies and they were not in the list of shell companies.
The Forensic Audit Report examined the advances provided to the
vendors as on 31st December 2012 and did not detect any fraud or
diversion of any funds. The learned senior counsel submitted that
this is an admitted position that the commercial decision taken by
the lender banks and financial institutions have turned out to be
a sound commercial decision and the petitioner-company has paid
more than what was once due to the lender banks and financial
institutions and the dissenting banks have accepted the offer of
the petitioner-company under OTS Scheme.
18. The allegation of overpricing of the shares and the decision
of the consortium of banks to accept the proposal cannot be
examined with the standpoint of the Investigating Agency. The
share market dynamics, the market forces and prevailing market
conditions are important factors which decide the share price at a
particular moment. The decision of the consortium of banks to
wipe out a certain portion of the loan amount is a commercial
decision. Except a lone dissent by the Canara Bank which also
subsequently accepted one time settlement proposal for the
petitioner-company, there was unanimity in the consortium of
banks which accepted the proposal of the petitioner-company.
This is a very crucial aspect of the matter that everything was
under the purview of the RBI and the Ministry of Finance was
aware of every development and decisions of the lender banks. The
Preliminary Enquiry continued for 18 months but no specific
allegation of conspiracy between the bank officials and the
petitioner-company is recorded in the First Information Report.
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This is unimaginable that the private/public sector banks joined
hands and hatched conspiracy with the petitioner-company to
cover up siphoning of funds. The allegation of not proceeding
against the petitioner-company under the statutory regime for
recovering the loan amount is merely ipse dixit of the Investigating
Agency.
19. The counter affidavit dated 3rd September 2024 filed by the
CBI refers to selective portions of different documents and reports
but does not indicate any evidence collected in course of the
investigation so far. In paragraph no. 4.5 of the counter affidavit,
it is stated that the forensic auditor did not report any fraud or
diversions of the loan amount and the consortium of lender banks
did not declare the loan amount as fraud or diversion of funds but
the investigation has revealed that the loan amount was siphoned
off through group companies and vendors; but without any
reference to any material, documentary or oral gathered in course
of the investigation. There are no details provided by the CBI as to
investment in the shares, debentures and fixed deposits. The
entire counter affidavit filed by the CBI simply refers to certain
letters, documents, reports etc. The order dated 5 th December
2025 records the statement made in the Court on behalf of the
Investigating Officer that statements of certain individuals have
been recorded wherever there was any doubt as regards any
transaction. The order dated 5th December 2025 passed by this
Court reads as under :-
“The original source of information and a copy of the
assessment made by an officer of the Central Bureau of Investigation
(CBI) in a sealed cover are produced in the Court. The said complaint
was made on 14th July 2021. These documents are returned in a
sealed cover to the Investigating Officer who is present in the Court.
2. Mr. Kuldeep Patil, the learned counsel for the CBI has taken us
through the Forensic Audits Report at page page no.344 onwards. He
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has mainly argued on the basis of the counter affidavit filed on behalf
of the CBI and emphasized that the matter is still under investigation.
The learned counsel for the CBI, on instructions from the Investigating
Officer who is present in the Court, states that wherever some doubt
or suspicion had arisen, the Investigating Officer recorded the
statements of a few of the directors of the vendor company and the
auditors. The learned counsel for the CBI further states that the
Investigating Officer has yet not formed his opinion and he is
scrutinizing the materials on record. In course of the Preliminary
Enquiry, commission of cognizable economic offence which affects the
financial stability of the country was found and, therefore, the First
Information Report has been lodged and now the CBI has a right to
investigate the matter to take it to its logical conclusion.
3. Post the matter on 9th December 2025. To be listed first on
Board.”
20. The CBI has taken a specific stand that the matter is still
under investigation and it has a right in law to investigate the case
which prima-facie discloses commission of cognizable offence. The
sphere of investigation is well demarcated and the case set up by
the CBI in the First Information Report can be examined in the
light of unimpeachable documents produced by the petitioner-
company. The scope of Preliminary Enquiry and investigation in a
cognizable offence after an FIR is lodged are different. But then, it
is difficult to accept the proposition that the CBI is still searching
for the accused. The registration of an FIR after the Preliminary
Enquiry against unknown bank officials and unknown directors of
the petitioner-company indicates the fluid state of affairs. The
continuance of criminal proceedings against the petitioner-
company cannot be permitted on the ground that the Investigating
Officer may some day find the real culprits and form an opinion to
file a charge-sheet.
21. There is no allegation in the First Information Report that
the petitioner-company had dishonest intention at the beginning
and it made projections knowing the same not to be true. The
lender banks and the financial institutions made assessments on
the basis of the Forensic Audit Report, prevalent market
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conditions and followed the RBI’s Master Circular. Such a decision
was taken after due deliberations and the dissent by a few lender
banks was on the ground that a fresh evaluation of the assets and
liabilities of the petitioner-company was not made. Pertinently, a
dissent by itself cannot impute criminality to the collective
business decision taken by the majority of the lender banks and
financial institutions. The CBI collected 52 documents in course of
the investigation and, as stated by the Investigating Officer during
the Court proceedings that he has yet to make up his mind
whether or not to file a charge-sheet.
22. The offence of cheating as defined under section 415 of the
Indian Penal Code requires (i) deception of a person either by
making a false or misleading representation or by other action or
omission, (ii) fraudulent or dishonest inducement of other person
to either deliver any property or to consent to the retention thereof
by any person or to intentionally induce that person to do or omit
to do anything which he would not have done or omitted to do if
he were not so deceived and (iii) that act or omission causes or is
likely to cause damage or harm to that person in body mind,
reputation or property. In “Hridaya Ranjan Prasad Verma”4, the
Hon’ble Supreme Court observed that there is a fine distinction
between mere breach of contract and the offence of cheating.
Mere breach of contract cannot give rise to criminal prosecution
for cheating unless fraudulent or dishonest intention is shown
right at the beginning of the transaction. The Hon’ble Supreme
Court further held that it is necessary to show that the accused
person had fraudulent or dishonest intention at the time of
making the promise and mere failure to keep up the promise
subsequently is not sufficient. In the present case, there was no
4
Hridaya Ranjan Prasad Verma & Ors. v. State of Bihar & Anr.: (2000) 4 SCC 168.
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deception at the inception or subsequently by the petitioner-
company. There is no allegation of any favor extended to or by the
petitioner-company which was all the time insisting on a
resolution plan for its revival. The alleged loss of public exchequer
does not fall within the meaning of wrongful loss in absence of any
evidence of intentional and fraudulent act on the part of the
petitioner-company. The CBI could not detect any illegal act or
deceit in the entire transaction played by any of the directors of
the petitioner-company. Their identity is known but there is no
allegation against any of them. The machinery of criminal justice
system cannot be put in motion for making a roving inquiry. The
CBI cannot be permitted to continue with the investigation in this
matter in a hope that some day it may identify the offender where
no offender has yet been identified.
23. As a result of the above discussions, we have formed an
opinion that the investigation in RC2192023E0003 registered on
21st January 2023 cannot be permitted to continue any further.
This First Information Report requires interference by this Court
and is, accordingly, quashed.
24. Writ Petition No.3631 of 2024 filed by the GTL Limited is
allowed.
[GAUTAM A. ANKHAD, J.] [CHIEF JUSTICE] Digitally signed by PRAVIN PRAVIN DASHARATH DASHARATH PANDIT PANDIT Date: 2026.02.28 13:27:07 +0530 22/22 ::: Uploaded on - 28/02/2026 ::: Downloaded on - 06/03/2026 21:49:19 :::