Telangana High Court
Srei Equipment Finance Limited vs The State Of Telangana on 24 July, 2026
HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
THE HONOURABLE SRI JUSTICE J. SREENIVAS RAO
CRIMINAL PETITION Nos. 5805 and 6481 of 2026
DATE: 24.07.2026
Between :
SREI Equipment Finance Limited and four others
....Petitioners/accused Nos.1 to 5
in Crl.P.No.5805 of 2026
Mr Shamik Kumar Roy
....Petitioner/accused No.6 in
Crl.P.No.6481 of 2026
AND
The State of Telangana and another
....Respondents
.
: COMMON ORDER :
Criminal Petition No.5805 of 2026 has been filed by the
petitioners/accused Nos.1 to 5 and Criminal Petition No.6481 of
2026 has been filed by the petitioner/accused No.6 seeking to quash
the proceedings in F.I.R. No.61 of 2026 of Central Crime Station,
Hyderabad, for the offences punishable under Sections 318(4), 344,
316(2), 336(3), 338 and 340(2) read with 3(5) of the Bharatiya Nyaya
Sanhita, 2023 (for short ‘the BNS’). Hence, both the criminal
petitions are being heard together and disposed of by this common
order.
2
2. Brief facts of the case:
2.1. On 26.03.2026 at 1830 hours, Mr.K.Kranti Kiran Reddy, who
is the Authorized Signatory of Janapriya Engineers Syndicate Private
Limited (JESPL)/respondent No.2, lodged a complaint before the
Deputy Commissioner of Police, Detective Department, Central
Crime Station, Hyderabad City, stating that JESPL is a Company
incorporated under the Companies Act, 1956, and availed multiple
equipment loans from petitioner No.1-SREI Equipment Finance
Limited since 2008. It is submitted that the parties entered into a
One Time Settlement (OTS)-cum-Restructuring Agreement/
Settlement Agreement (“2015 Settlement”) with effect from
01.10.2015, under which, a total settlement amount of
Rs.13,50,00,000/- was agreed with interest at 13% per annum.
Out of the said amount, an amount of Rs.8,00,00,000/- was already
paid by the end of 2016, leaving a principal outstanding of
Rs.5,50,00,000/- only.
2.2. It is stated that in or around mid-2017, petitioner No.1
induced respondent No.2, through deliberate misrepresentation, to
execute a fresh Loan Agreement No. 136475 dated 01.07.2017
(“2017 Loan Agreement”) for a notional amount of Rs.19,53,00,000/-
It is submitted that petitioner No.1 categorically and falsely
represented that 2017 Loan Agreement was merely for its internal
accounting and regulatory compliance, and that the parties would
3
continue to be governed solely by the 2015 Settlement, and that the
notional amounts would be waived off for petitioner No.1’s
accounting convenience. It is submitted that respondent No.2 was
made to sign the agreement by threatening criminal action via
cheque bounce cases filed against it. Multiple cases were filed before
the Metropolitan Magistrate Court, Calcutta, during 2016-2017,
even after 2015 Settlement. The majority of those cases were
subsequently withdrawn by petitioner No.1 under the Payment of
Settlement Systems Act during 2017, which itself proves that 2017
Loan Agreement was the operative arrangement and corroborates the
criminality of the petitioners.
2.3. The entries dated 01.07.2017 show a drawdown mentioned at
Rs.24,41,25,000/- towards the full asset value and not the
sanctioned amount of Rs.19,53,00,000/-. A margin money credit of
Rs.4,88,25,000/- immediately followed by a margin money re-debit
of Rs.4,88,25,000/- and four ‘bank flow’ entries on 05.07.2017,
totaling Rs.4,88,25,000/- debited out through instrument numbers
21363266, 21363262, 21363260 and 21363258, which clearly show
that the books and accounts are cooked and falsified by making a
false document by petitioner Nos.1 and 2 with criminal intention and
criminal inducement to deceive respondent No.2 and further,
sanctioned loan of Rs.19,53,00,000/- cannot become
Rs.24,41,00,000/- on the very first day.
4
2.4. It is further stated that 2017 Loan Agreement was closed on
the very same day and all the transactions relying upon the said
account deliberate criminal intention to defraud respondent No.2.
No fresh money whatsoever was received by respondent No.2 and
entire disbursement was an accounting fraud engineered with
criminal intent. Additionally, the margin money manipulation of
Rs.4,88,25,000/- inflated the principal amount on which interest
and overdue charges were computed throughout the 62-month loan
tenure at Hyderadad branch, thereby causing wrongful gain to
petitioner No.1 and wrongful loss to respondent No.2. Reliance is
placed on the bank statements, dated 05.07.2017, to contend that
they corroborate the alleged criminality, fabrication of accounts, and
closure of the loan account on the very same day.
2.5. It is further stated that even after execution of 2017 Loan
Agreement and payment and repayment of all amounts, petitioner
Nos.1 and 2 continued to act consistently with 2015 Settlement
while simultaneously maintaining parallel fabricated accounts under
2017 Loan Agreement, despite nothing being payable thereunder.
The series of communications and statements of account were
regularly furnished under 2015 Settlement and a separate statement
of account was simultaneously maintained under the closed 2017
Loan Agreement. Petitioner No.2 regularly requested and sent
statements referring to the “settlement account”. Vide email dated
5
27.06.2021, petitioner No.1 provided a calculation sheet
acknowledging the settlement amount of Rs.13,50,00,000/- and a
balance of only Rs.40,07,289/- as on 31.07.2021, which clearly
shows that 2015 settlement governed the relationship between the
parties.
2.6. It is also stated that acting upon the assurances and
inducements of petitioner Nos.1 and 2, respondent No.2 continued
to make payments under 2015 Settlement in good faith and also
offered to pay the balance amount of approximately Rs.40 lakhs, to
which petitioner No.1 did not respond. It is further contended that
the e-mails relating to 2015 Settlement continued till July 2021,
whereas the Statement of Account pertaining to 2017 Loan
Agreement was issued only till 2019, which according to respondent
No.2 substantiates the allegation of fraudulent inducement and a
pre-planned criminal design by the petitioners.
2.7. It is stated that having maintained the facade of 2015
Settlement for years, petitioner No.1 then dropped all pretence and
began criminally claiming under the fabricated 2017 Loan
Agreement: (a) Demand Notice dated 15.11.2021 under Section 13(2)
of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as
‘SARFAESI Act‘) claiming Rs.28,17,48,804/-; (b) Possession Notice
6
dated 13.10.2023 under Section 13(4) of the SARFAESI Act; (c)
Demand Letter for Rs.73,47,92,867/- dated 26.12.2024 (of which
overdue charges of Rs.56,05,87,463/- are three times the alleged
principal); (d) Letter to National Financial Reporting Authority
(NFRA) and Statutory Auditors dated 02.01.2025 amounting to
criminal intimidation; (e) Show-Cause Notice dated 09.12.2025 for
Willful Defaulter proceedings; and (f) Company Petition under the
Insolvency and Bankruptcy Code, 2016 (for short, ‘IBC’) before
National Company Law Tribunal (NCLT) claiming Rs.76,79,81,227/-
using fabricated accounts.
2.8. It is further stated that petitioner No.1 tampered with 2017
Loan Agreement, while filing the same before the NCLT, particularly
with regard to the asset details, and that the document filed before
the NCLT differs from the original Loan Agreement. According to
respondent No.2, the alleged tampering demonstrates a fraudulent
intention to extort money from the Company. Further, respondent
No.2 is unaware of the Deeds of Personal Guarantee allegedly
executed by K. Ravinder Reddy and K. Priyamvada Reddy and that
no copy of the said Deeds of Personal Guarantee is available in its
records and the signatures appearing on the Deeds of Personal
Guarantee do not tally with the signatures on the Loan Agreement.
It is further stated that the Deed of Hypothecation and the Deeds of
Personal Guarantee allegedly executed by K. Ravinder Reddy and
7
K. Priyamvada Reddy are not available in the records of respondent
No.2 and are denied. It is alleged that the said documents contain
forged and superimposed signatures, thereby indicating fabrication
and forgery.
2.9. It is stated that vide e-mail dated 02.09.2020, petitioner No.2
sent an Excel spreadsheet titled “SREI Payments Recon.xlsx” to
respondent No.2’s Chairman. This spreadsheet contains two
simultaneous accounts: Sheet-1 being a “Settlement Account” with
principal of Rs.13,50,00,000/- from October 2015 at 13% per
annum, and Sheet-2 contains payment breakdowns. Cross-
referencing this with petitioner No.1’s internal Settlement of Account
for Contract No.136475 and the Settlement of Account filed with the
Company Petition reveal that beyond doubt the fraudulent
simultaneous duel crediting of the same payments in two separate
accounts, which clearly constitute fraudulent and falsification of
accounts.
2.10. It is further stated that the e-mail attachments reveal that the
same payments were adjusted in two separate accounts by using the
same instrument numbers, one pertaining to 2015 Settlement and
the other to the alleged loan account, thereby indicating fabrication
of accounts. Although the loan account stood closed on the very
same day, petitioner No.1 subsequently relied upon the said account
8
in the IBC proceedings, while simultaneously adjusting the same
payments towards 2015 Settlement, which evidences dual-
accounting and fabrication of accounts. While petitioner No.1 stated
in the IBC proceedings and its letter dated 28.12.2021 that the
payments made during 2018 and 2019 were adjusted towards old
balances, the very same payments were also reflected as collections
in the Statement of Account pertaining to Loan Account No.136475.
According to respondent No.2, this demonstrates misrepresentation
and an attempt to unlawfully recover further amounts.
2.11. The Statement of Account reflects a disbursement under
Contract No.136475, dated 01.07.2017, and monthly installment
dues from January, 2018 to August, 2022. According to respondent
No.2, the alleged disbursement was merely a paper transaction, the
account having been closed on the very same day, and the
subsequent entries constitute fabricated and falsified accounts. The
“Installment Collection Amounts” reflected in the Statement of
Account are the very same payments made under 2015 Settlement
and that the overdue and penal charges were computed on
installments which were never due.
2.12. It is further stated that from 30.06.2024 onwards, the
Statement of Account reflects no further collections while the
overdue charges increased substantially. According to respondent
9
No.2, the absence of further collections coupled with the escalation
of overdue charges demonstrates fabrication of accounts and an
intention to cause wrongful loss to respondent No.2. Despite
respondent No.2 having paid approximately Rs.19.92 Crores under
2015 Settlement and offering to pay the balance of about Rs.40
lakhs, petitioner No.1 initiated proceedings under the SARFAESI Act
on the basis of the 2017 Loan Agreement and the alleged fabricated
Statements of Account, which evidences a pre-planned fraudulent
scheme.
2.13. All payments were made by respondent No.2 pursuant to 2015
Settlement, but were subsequently credited towards 2017 Loan
Agreement. It is also alleged that the margin money of
Rs.4,88,25,000/- was unlawfully treated as part of the loan liability
through fabricated accounting entries.
2.14. On the aforesaid allegations, respondent No.2 sought
registration of an F.I.R. against the petitioners and initiation of
appropriate criminal proceedings in accordance with law. Based
upon the said complaint, F.I.R.No.61 of 2026 was registered against
the petitioners for the offences under Sections 318(4), 344, 316(2),
336(3), 338 and 340(2) read with 3(5) of the BNS.
3. Heard Sri N.Venkataraman, learned Additional Solicitor
General of India, and Sri B.Narasimha Sharma, learned Additional
10
Solicitor General of India, representing Sri N.Naveen Kumar, learned
counsel for the petitioners, Sri D.Prakash Reddy, learned Senior
Counsel representing Sri T.P.S. Harsha, learned counsel for
respondent No.2, and Sri Jithender Rao Veeramalla, learned
Additional Public Prosecutor for respondent No.1-State.
4. Submissions of Sri N.Venkataraman, learned
Additional Solicitor General of India, on behalf of
the petitioners:
4.1. Learned Additional Solicitor General of India submitted that
the petitioners have not committed the alleged offences and have
been falsely implicated in the present crime. The petitioners have
not created or fabricated any document, as alleged by respondent
No.2 in the complaint. Initially, the crime was registered for the
offences under Sections 318(4) and 344 r/w 3(5) of the BNS. On
15.04.2026, petitioner No.2 was arrested and the learned Magistrate
remanded him to judicial custody. Pursuant to the arrest of
petitioner No.2, the offences under Sections 316(2), 336(3), 338 and
340(2) of the BNS were added based on the alleged confessional
statement and the Forensic Science Laboratory report obtained
outside the scope of the investigation. Even according to the
allegations taken at face value, the ingredients of Sections 318(4),
344, 316(2), 336(3), 338 and 340(2) of the BNS are not attracted
against the petitioners.
11
4.2. He further submitted that petitioner No.1 is a Non-banking
Financial Institution within the meaning of the Companies Act,
2013. Respondent No.2 is engaged in the business of asset finance
and has been in the said industry over 41 years and is conducting
the business with strict adherence to the regulations of the Reserve
Bank of India (RBI). Respondent No.2 obtained financial assistance
from petitioner No.1 since 2008 and has availed financial loans on
several accounts over the period, namely; Contract No.13174 for an
amount of Rs.1,23,19,238/- on 15.12.2011, Contract No.8440 for an
amount of Rs.20,77,65,698/- on 15.12.2011, Contract No.56574 for
an amount of Rs.15,51,29,916/- on 08.02.2014 and Contract
No.104654 for an amount of Rs.3,91,00,000/- on 28.03.2016 and
the said accounts running into non-performing assets. For closure
of the above said accounts, respondent No.2 availed financial
assistance for Rs.19,53,00,000/- with interest @ 17.75% per annum
through Loan Agreement No.136475, dated 01.07.2017. The said
Loan Agreement was duly executed by respondent No.2. Pursuant to
the said agreement, financial facility was sanctioned and extended to
respondent No.2 and the amount was disbursed as per Loan
Agreement and the same was remitted by respondent No.2 and it
was adjusted towards the outstanding dues aggregating to
approximately Rs.19 Crores standing in the name of respondent
No.2’s Group Companies across four separate loan accounts.
124.3. He also submitted that as per the terms and conditions of the
2017 Loan Agreement, respondent No.2 was obligated to repay the
debt in monthly installments @ Rs.51,88,250/-, commencing from
15.01.2018. In support of the said Loan Agreement, Deeds of
Personal Guarantee, dated 01.07.2017, was executed by K. Ravinder
Reddy, who is the Director of respondent No.2, and K. Priyamvada
Reddy, guaranteeing the repayment of financial assistance availed
loan vide agreement No.136475.
4.4. However, respondent No.2 has defaulted in paying monthly
installments pursuant to 2017 Loan Agreement. Accordingly, the
Loan Account of respondent No.2 was classified as non-performing
assets (NPA) on 15.01.2020 and consequently, on 15.11.2021,
petitioner No.1 issued demand notice under Section 13(2) of the
SARFAESI Act calling upon respondent No.2 to pay a sum of
Rs.28,17,48,804/- along with further interest from 13.11.2021.
Pursuant to the said notice, respondent No.2 issued reply on
02.12.2021 denying the allegations made in the said notice stating
that respondent No.2 had entered into a OTS in the year 2015 for an
amount of Rs.13,50,00,000/-, wherein Rs.8,00,00,000/- was paid in
2016 and alleging that the account thereafter was restructured
leading to the subject loan of Rs.19,53,00,000/-, which is devoid of
any merit and contrary to the terms of 2017 Loan Agreement.
13
4.5. He further submitted that petitioner No.1 issued letter, dated
28.12.2021, denying the contentions raised by respondent No.2 in
their reply letter, dated 02.12.2021, stating that the outstanding due
as on June 2020 is only Rs.5.50 Crores. In spite of reminders,
respondent No.2 has not taken steps to clear the outstanding debt in
terms of 2017 Loan Agreement.
4.6. On 13.10.2023, petitioner No.1 issued a Possession Notice
under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002,
in respect of the properties of respondent No.2. Subsequently,
petitioner No.1 came to know that respondent No.2 alienated the
said properties to third party, despite the subsisting of mortgage in
favour of petitioner No.1. Therefore, Corporate Insolvency Resolution
Process (CIRP) has been initiated against petitioner No.1 vide order,
dated 08.10.2021. After approval of the resolution plan,
Implementation and Monitoring Committee has been formed and
subsequently in terms of the Approved Resolution Plan New Board of
petitioner No.1 (SREI Equipment Finance Limited) and SIFL (Steel
and Industrial Forgings Limited) is duly reconstituted on
26.02.2024, who took over the operations and management of the
Company, consequent to which, the Implementation and Monitoring
Committee stood dissolved. Accordingly, petitioner No.1 is under the
management of the National Asset Reconstruction Company Limited
(NARCL).
14
4.7. He further submitted that petitioner No.1 once again issued a
demand notice dated 26.12.2024 to respondent No.2 calling upon
them to repay a sum of Rs.73,47,92,867/- and also issued an
intimation letter dated 02.01.2025 to the National Financial
Reporting Authority (NFRA) and other statutory authorities in
respect of the willful default committed by respondent No.2 and the
guarantors. Petitioner No.1 issued a show-cause notice on
09.12.2025 to respondent No.2 to declare it as a willful defaulter as
per RBI guidelines. On 30.12.2025, respondent No.2 had issued
reply.
4.8. He further submitted that due to continued default and
persistent negligence on the part of respondent No.2 and the
guarantors, petitioner No.1 has availed its remedies under law by
approaching the NCLT and initiated the CIRP against respondent
No.2 under the provisions of the IBC and filed
C.P.(I.B.)/31/HYD/2026, dated 18.02.2026, and the same is
pending for adjudication.
4.9. After receiving the notice in the said case, respondent No.2
filed the present complaint by making omnibus allegations alleging
that petitioner No.1 filed Company Petition under IBC before NCLT
claiming Rs.76,79,81,227/- by using fabricated accounts, though
respondent No.2 is liable to pay the balance amount of
15
Rs.40,07,289/- as on 31.07.2021 and the Deeds of Personal
Guarantee, dated 01.07.2017, allegedly executed by K. Ravinder
Reddy and K.Priyamvada Reddy, and Deed of Hypothecation
allegedly executed by K. Ravinder Reddy, are not genuine one and
they are fabricated documents. Respondent No.2 filed the complaint
with a malafide intention.
4.10. He further submitted that the transaction between petitioner
No.1 and respondent No.2 are purely banking transaction, which is
duly governed by the loan agreements and the terms contained
therein. Even the allegations if taken at face value do not disclose
mens rea or culpability on the part of petitioner No.1 or its
employees. Respondent No.2 filed the complaint with a dishonest
intention to evade lawful liability and to defeat the legitimate
recovery proceedings initiated by petitioner No.1 by giving a criminal
colour.
4.11. He further submitted that 2017 Loan Agreement and Deeds of
Personal Guarantee dated 01.07.2017 were executed by respondent
No.2 and that a Deed of Hypothecation was also executed to secure
the above said Loan Agreement. After filing Company Petition under
IBC before NCLT, respondent No.2 filed the present complaint after
lapse of more than six years. At no point of time, respondent No.2
raised any allegation that the Deeds of Personal Guarantee and the
16
Deed of Hypothecation are created and forged with a dishonest
intention and filed the present complaint seeking to settle the legal
proceedings pending before the NCLT. Even when petitioner No.1
issued demand notice dated 15.11.2021 under SARFAESI Act,
respondent No.2 did not raise any objection.
4.12. He further submitted that the allegations levelled in the
complaint that as per the OTS entered in the year 2015 between the
parties, loan amount was settled for Rs.13.50 Crores and respondent
No.2 paid installments as per OTS and they are due only an amount
of Rs.41.87 lakhs as on 02.12.2021, is absolutely not true and
correct, especially there is no such scheme and respondent No.2 has
not placed any copy of the settlement/agreement, on the other hand
relied solely on the e-mail dated 27.06.2021 sent by one of the
employees. In the absence of any agreement under the OTS, the
matter does not fall within the scope of OTS.
4.13. He further submitted that respondent No.2 filed the present
complaint, after initiation of the IBC proceedings before the NCLT, by
making omnibus allegations of forgery and fabrication of the Deeds
of Personal Guarantee and Deed of Hypothecation, though the said
documents were executed along with 2017 Loan Agreement on
01.07.2017 only. The transactions between the parties are purely
commercial arising out of 2017 Loan Agreement and respondent
17
No.2 filed the complaint only with an intention to obstruct the
proceedings before the NCLT as a counter blast by giving it a
criminal colour and the same is a clear abuse of the process of law.
Hence, the F.I.R. is liable to be quashed.
5. Submissions of Sri B.Narasimha Sharma, learned
Additional Solicitor General of India, appearing on
behalf of the petitioner:
5.1. In addition to the submissions made by Mr. N. Venkataraman,
learned Additional Solicitor General of India, Mr. B. Narasimha
Sharma, learned Additional Solicitor General of India, submitted that
the allegations levelled in the complaint do not attract the
ingredients of Sections 318(4), 344, 316(2), 336(3), 338 and 340(2) of
the BNS. Petitioner No.1 filed the IBC proceedings before the NCLT
on 18.02.2026. Respondent No.2 filed the present complaint on
26.03.2026 after the lapse of nine years from the date of execution of
Loan Agreement pertaining to the allegations of the year 2017,
alleging that respondent No.2 has not executed the Deeds of
Personal Guarantee and Deed of Hypothecation pursuant to the
2017 Loan Agreement and the said complaint is liable to be quashed
on the ground of delay in lodging the complaint. Respondent No.2
filed the present complaint as a counter blast to the proceedings
pending before the NCLT. Respondent No.2 did not raise any
objection from 2017 till 2026. Respondent No.2 executed 2017 Loan
18Agreement on 01.07.2017 and K. Ravinder Reddy and K.Priyamvada
Reddy have executed the Deeds of Personal Guarantee and Deed of
Hypothecation. The transaction between the petitioners and
respondent No.2 is a banking transaction. If any dispute arises out
of 2017 Loan Agreement, dated 01.07.2017, respondent No.2 ought
to have approached the competent Court, on the other hand, filed
the present complaint by giving it a criminal colour, only with an
intention to evade the liability.
5.2. The allegations levelled in the complaint that the signatures of
K. Ravinder Reddy and K. Priyamvada Reddy in Deeds of Personal
Guarantee and signatures of K. Ravinder Reddy in Deed of
Hypothecation were forged. However, the said persons have not
lodged any complaint. The present complainant is lodged by
authorized person of respondent No.2 and the same is not
maintainable under law. Petitioner No.1 has issued notices under
Sections 13(2), 13(3), 13(4) of the SARFAESI Act and Possession
Notice and respondent No.2 has neither questioned the said
proceedings nor disputed the documents as mentioned in the
complaint, on the other hand, filed the present complaint on
26.03.2026 only after filing of C.P. (I.B.)/31/HYD/2026, dated
18.02.2026, before the NCLT as a counter blast and respondent No.2
is entitled to raise all the allegations before the NCLT.
195.3. He further submitted that there are no specific allegations
against petitioner No.1 and other petitioners in the complaint to
attract the ingredients of the offences under Sections 318(4), 344,
316(2), 336(3), 338 and 340(2) of the BNS. Hence, continuation of
the proceedings is a clear abuse of the process of law, especially in
view of the statutory protection given under Section 32-A of the IBC
and also the Doctrine of Indoor Management is applicable to the
present case.
5.4. He further submitted that continuation of the proceedings
against petitioner No.1 is also contrary to the orders passed by the
NCLT, Kolkata Bench, dated 11.08.2023, in CP (IB)
No.295/KB/2021, wherein it is categorically observed that the reliefs
sought for all inquiries, litigations, investigations and proceedings
shall be granted strictly as per the Section 32A of the IBC. The
transactions were pertaining to 2017, whereas petitioner Nos.2 to 4
have joined in 2021, and respondent No.2 implicated them as
accused with malafide intention. Hence, continuation of the
proceedings against the petitioner Nos.2 to 4 is a clear abuse of the
process of law.
5.5. In support of his contentions, learned counsel for the
petitioners relied upon the following judgments;
20
i) Priyanka Srivastava and another vs. State of
Uttar Pradesh and others 1;
ii) K.Virupaksha and another vs. State of Karnataka
and another 2;
iii) Deepak Upadhyaya and others vs. State rep. by
The Inspector of Police, District Crime Branch
and another 3;
iv) ICICI Bank Limited and others vs. State of
Maharashtra and others 4;
v) Mala Choudhary and another vs. State of
Telangana and another 5;
6. Submissions of Sri D. Prakash Reddy, learned Senior
Counsel appearing on behalf of respondent No.2:
6.1. Learned Senior Counsel submitted that respondent No.2
availed multiple equipment finance facilities from petitioner No.1
from the year 2008. On 01.10.2015, petitioner No.1 and respondent
No.2 entered into an OTS, under which, the liability was settled at
Rs.13.50 Crores with interest @ 13% per annum to be paid around
five years. As per the OTS, an amount of Rs.8 Crores was already
paid by the end of 2016, leaving principal outstanding amount of
Rs.5.50 Crores.
1
(2015) 6 SCC 287
2
(2020) 4 SCC 440
3
2023 SCC OnLine Mad 2567
4
2022 SCC OnLine Bom 12095
5
2025 SCC OnLine SC 1474
21
6.2. He further submitted that petitioner No.1 and respondent No.2
executed 2017 Loan Agreement on 01.07.2017 for a notional amount
of Rs.19.53 Crores. Petitioner No.2 sent an excel spread sheet titled
“SREI Payments Recon.xlsx” to respondent No.2’s Chairman. Even
after execution of 2017 Loan Agreement dated 01.07.2017, 2015
Settlement subsisted and respondent No.2 has regularly requested
for the settlement of accounts. Vide e-mail dated 27.06.2021,
petitioner No.1 provided a calculation sheet acknowledging the
settlement amount of Rs.13.50 Crores and the balance is only
Rs.40,07,289/- as on 31.07.2021, which clearly shows that 2015
Settlement governed the relationship between the parties.
6.3. He also submitted that petitioner No.1 filed Company Petition
under IBC proceedings before the NCLT claiming a huge amount of
Rs.76,79,81,227/- by using fabricated accounts and fabricated
documents. Respondent No.2 came to know about the said
fabricated documents, namely Deeds of Personal Guarantee
executed by K. Ravinder Reddy and K. Priyamvada Reddy, and Deed
of Hypothecation executed by K. Ravinder Reddy, after receiving the
notice from the NCLT in IBC proceedings and after verification of the
above said documents filed by petitioner No.1, respondent No.2
lodged the present complaint. There are specific allegations levelled
against the petitioners that they have filed an application before the
NCLT, claiming huge amounts based upon the forged and fabricated
22
documents. Even according to the settlement and proceedings,
dated 01.07.2017, respondent No.2 is due only Rs.41.87 lakhs. The
allegations levelled in the complaint attract the ingredients of the
offences under Sections 318(4), 344, 316(2), 336(3), 338 and 340(2)
of the BNS, which prima facie disclose cognizable offences and the
petitioners are not entitled to seek quashing of the proceedings at
the threshold.
6.4. He further submitted that the petitioners in the memorandum
of grounds of criminal petition stated that respondent No.2 had
entered into four contracts and availed financial loan on several
accounts specifically referring to Contract No.13174 for an amount
of Rs.1,23,19,238/- on 15.12.2011, Contract No.8440 for an amount
of Rs.20,77,65,698/- on 15.12.2011, Contract No.56574 for an
amount of Rs.15,51,29,916/- on 08.02.2014 and contract
No.104654 for an amount of Rs.3,91,00,000/- on 28.03.2016 and
for closure of the said four contracts, respondent No.2 had entered
into 2017 Loan Agreement on 01.07.2017. Whereas, in the
additional grounds filed on 20.04.2026, the petitioners have
completely changed and took inconsistent pleadings and abandoned
their original pleading stating that petitioner No.1 and respondent
No.2 had entered into five entirely different contracts.
23
6.5. He further submitted that the petitioners in the main
memorandum of grounds mentioned that contract No.13174
(Rs.1,23,19,238/-), contract No.8440 (Rs.20,77,65,698/-), whereas,
in the additional grounds, the petitioners have not mentioned the
above said contracts. The petitioners have mentioned in additional
grounds about new Contract No.54095 for Rs.4,15,00,000/-,
Contract No.94562 for Rs.5,00,00,000/- and Contract No.122845 for
Rs.4,00,00,000/-. However, the above said contracts were not
mentioned in the main memorandum of grounds. The petitioners
only retained the Contract No.56574 for Rs.15,51,29,916/- and
Contract No.104654 for Rs.3,91,00,000/- in additional grounds.
The petitioners have not given any explanation for substitution of the
contracts underlying 2017 Loan Agreement and they have been
replaced with entirely new contracts, which were not mentioned in
the original memorandum of grounds.
6.6. He further submitted that respondent No.2 availed multiple
equipment loans from petitioner No.1 from 2008 and the parties
have entered into OTS-cum-Restructuring Agreement/Settlement
Agreement with effect from 01.10.2015, under which a total
settlement amount of Rs.13,50,00,000/- was agreed with interest at
13% per annum. Out of the said amount, respondent No.2 has
24
already paid Rs.8,00,00,000/- by end of 2016, leaving principal
outstanding only Rs.5,50,00,000/-.
6.7. He further submitted that on 02.12.2021, respondent No.2
has given reply to the notice, dated 15.11.2021, wherein it is stated
that as on date, respondent No.2 has paid an amount of Rs.17.83
Crores including interest for the delayed period and only an amount
of Rs.41.87 lakhs is due, and requested petitioner No.1 to rectify
their records and confirm the balance amount to be paid as per the
OTS. He further submitted that on 27.06.2021, petitioner No.2 sent
an e-mail providing a calculation sheet, which reflected that the
settlement amount payable to respondent No.2 was Rs.13.50 Crores
and balance only Rs.40,07,289/- as on 31.07.2021.
6.8. He further submitted that petitioner No.1 filed IBC
proceedings before the NCLT claiming a huge amount of
Rs.76,79,81,227/- basing on the fabricated documents, namely,
Deeds of Personal Guarantee and Deed of Hypothecation, and forged
the signatures of K. Ravinder Reddy and K. Priyamvada Reddy on
the Deeds of Personal Guarantee and the signature of K.Ravinder
Reddy on the Deed of Hypothecation, dated 01.07.2017 and also
there was an alteration in the annexure in respect of equipments.
6.9. The signatures on Deeds of Personal Guarantee and Deed of
Hypothecation do not tally with the signatures on 2017 Loan
25
Agreement and the signature of K. Ravinder Reddy appears to be
superimposed on the Deed of Hypothecation, with smudging visible,
where signatures have been placed. The admitted signatures of K.
Ravinder Reddy and K. Prayamvada Reddy were already sent to the
handwriting expert and the real truth will come out during the
course of investigation.
6.10. He further submitted that mere pendency of the IBC
proceedings before the NCLT, the petitioners are not entitled to seek
quashing of the proceedings, especially there are specific allegations
levelled in the complaint that the petitioners have forged the
signatures of K. Ravinder Reddy and K. Priyamvada Reddy and
fabricated the alleged documents.
6.11. The complaint filed by respondent No.2 is very much
maintainable under law and Section 32(A) of the IBC is not
applicable. He further submitted that there are specific allegations
levelled in the complaint that the petitioners in furtherance of a
criminal conspiracy and dishonest intention from the inception have
forged the signatures of K. Ravinder Reddy and K. Priyamvada
Reddy in the Deed of Hypothecation and Deeds of Personal
Guarantee, as if they executed the said documents in favour of
petitioner No.1. Based on the said fabricated documents, petitioner
26
No.1 filed IBC proceedings before NCLT and claiming a huge amount
of Rs.76,79,81,227/-. Hence, the allegations levelled in the
complaint attract the ingredients of the offences under Sections
318(4), 344 316(2), 336(3), 338 and 340(2) read with 3(5) of the BNS.
6.12. He further submitted that the petitioners have filed the Xerox
copy of the Deed of Hypothecation dated 01.07.2017 and colour
Xerox copy of the very same document along with additional material
memo dated 24.04.2026 and there is a vast variation in the two
documents. In the Xerox copy of the Deed of Hypothecation, the
name of the company mentioned as Janapriya Engineering
Syndicate Pvt. Ltd. and in the tabular form, the name of equipment
was mentioned as ‘various assets as per list attached’. Whereas, in
the colour Xerox, the party name was mentioned as Jayapriya
Engineering Syndicate Ltd., and in the tabular form, the name of
equipment was mentioned as ‘4 Nos. various assets + 26 Nos.
various assets’. Hence, the investigation is very much required to
ascertain the truth or otherwise and the petitioners are not entitled
to seek quashing of the proceedings at threshold.
6.13. He also submitted that the judgments relied upon by the
learned counsel for the petitioners are not applicable to the facts and
circumstances of the case on the ground that in the said judgments,
the parties have not disputed the documents filed by each other.
27
Whereas, in the case on hand, respondent No.2 specifically made
allegations against the petitioners that petitioner No.1 filed
application before NCLT basing upon the fabricated and forged
documents, namely the Deeds of Hypothecation and Personal
Guarantee, and the signatures in the said documents are not
belonging to K. Ravinder Reddy and K. Priyamvada Reddy.
6.14. In support of his contention, the learned Senior Counsel he
relied upon the following judgments:
1. Sharla Bazliel v. Baldev Thakur and others 6;
2. Neeharika Infrastructure Private Limited v. State of
Maharashtra and others 7;
7. Vasanthi v. Umesh G.D. 12; and
8. Manish Kumar v. Union of India and another 13
6
2026 SCC OnLine SC 396
7
(2021) 19 SCC 401
8
1992 Supp (1) SCC 335
9
(2023) 4 SCC 338
10
2025 SCC OnLine SC 2713
11
(1984) 2 SCC 500
12
2024 SCC OnLine Kar 15256
13
(2021) 5 SCC 1
28
7. Submissions of Sri Jithender Rao Veeramalla, learned
Additional Public Prosecutor :
7.1. Learned Additional Public Prosecutor submitted that there are
specific allegations levelled against the petitioners in the complaint
that petitioner No.1 filed application before the NCLT basing upon
the forged and fabricated documents, namely Deeds of Personal
Guarantee and Deed of Hypothecation. The allegations, such as,
criminal breach of trust, cheating, forgery of signature on valuable
security documents for loan disbursement, forged documents using
as genuine, falsification of accounts and criminal conspiracy, prima
facie disclose commission of cognizable offences. Therefore, the
same cannot be quashed at the threshold, especially the
investigation is under progress.
7.2. He further submitted that the petitioners intentionally
manipulated the financial records of respondents, forged the
signatures of K. Ravinder Reddy and K. Priyamvada Reddy on the
Deeds of Personal Guarantee and Deed of Hypothecation, and by
using the same, they have filed an application before the NCLT.
7.3. In support of his contention, he relied upon the order of the
Hon’ble Supreme Court in Vinod Kumar Pandey and another v.
Seesh Ram Sain and others 14, wherein the Hon’ble Supreme Court
held that whenever information placed before the authorities
14
2025 SCC OnLine SC 1951
29
discloses the commission of a prima facie cognizable offence,
registration of an FIR is mandatory, and the veracity or otherwise of
the allegations is a matter for investigation, not a ground to refuse
registration. The Court further emphasized that preliminary
objections or parallel proceedings cannot be used to stifle criminal
law at the threshold.
Analysis :
8. Having considered the rival submissions made by the
respective parties, the written submissions filed on behalf of the
petitioners, dated 02.07.2026, the written submissions filed on
behalf of respondent No.2, dated 08.07.2026, and upon perusal of
the material available on record, it reveals that petitioner No.1 is a
Non-banking Financial Institution within the meaning of the
Companies Act, engaged in the business of asset finance, registered
with the RBI and governed by the regulations framed by the RBI.
Respondent No.2 is a company incorporated under the provisions of
the Companies Act. On 26.03.2026, respondent No.2 lodged a
complaint before the Deputy Commissioner of Police, Detective
Department, Central Crime Station, Hyderabad City, wherein it is
stated that respondent No.2 had availed multiple equipment finance
facilities from petitioner No.1 since the year 2008 and respondent
No.2 and petitioner No.1 had settled their accounts under a OTS
30
scheme dated 01.10.2015. As per the said OTS, the liability was
settled for Rs.13.50 Crores with interest at 13% per annum payable
over a period of five years/1765 days. According to respondent No.2,
it had paid an amount of Rs.8 Crores by the end of 2016, leaving an
outstanding principal of only Rs.5,50,00,000/-. At the instance of
the petitioners, for their internal accounting and regulatory
compliance, respondent No.2 entered into a Loan Agreement on
01.07.2017, vide agreement No.136475, for a notional amount of
Rs.19.53 Crores. The said amount was transferred to the account of
respondent No.2 and on the very same day, re-transferred to the
account of petitioner No.1. Respondent No.2 made a series of
payments between 2018 and 2021 on various dates pursuant to
2015 Settlement, dated 01.10.2015, and petitioner No.1 forwarded a
calculation sheet on 01.10.2015 recording the settlement amount of
Rs.13.50 Crores with interest at 13% per annum and reflecting a
balance amount of Rs.40,07,289/- as on 31.07.2021 and further
stated that petitioner No.1 had filed cheque bounce cases against
respondent No.2 before the Metropolitan Magistrate Court, Calcutta,
during 2016-2017, even after settlement under OTS. However, those
cases were withdrawn by petitioner No.1.
9. In the said complaint, it is stated that petitioner No.1 issued a
demand notice on 15.11.2021 under Section 13(2) of the SARFAESI
31
Act claiming an amount of Rs.28,17,48,804/-. In response thereto,
respondent No.2 issued a reply dated 02.12.2021 denying the claim
made by petitioner No.1. On 13.10.2023, petitioner No.1 issued a
Possession Notice under Section 13(4) of the SARFAESI Act.
Thereafter, on 26.12.2024, petitioner No.1 had issued a Demand
Letter stating that respondent No.2 is due an amount of
Rs.73,47,92,867/- as on 15.12.2024 based upon fabricated
accounts and also stated that on 21.01.2025, respondent No.2 got
issued a reply to the letter dated 26.12.2024 and 02.01.2025
denying the averments made in the said letters. It is further stated
that petitioner No.1 filed an application under Section 7 of the IBC
before the NCLT, Hyderabad, against respondent No.2 claiming an
amount of Rs.76,79,81,227/-. At that stage, respondent No.2 came
to know that petitioner No.1 had filed the said application before the
NCLT by relying upon forgery, fabrication and falsification of records,
especially, Deeds of Personal Guarantee executed by K. Ravinder
Reddy, Managing Director of respondent No.2, and K. Priyamvada
Reddy, one of the Directors of the Company, as well as the Deed of
Hypothecation read with the ROC Charge Form. According to
respondent No.2, the said documents had never been executed by
them and their signatures appearing thereon were forged. Upon
knowing the same, respondent No.2 lodged the present complaint on
26.03.2026. Based on the said complaint, Crime No.61 of 2026 was
32
registered initially for the offences under Sections 318(4) and 344
read with 3(5) of the BNS. Subsequently, offences under Sections
316(2), 336(3), 338 and 340(2) of the BNS were also added.
10. Whereas, the case of petitioner No.1 is that respondent No.2
was due an amount of Rs.19,52,78,312/- as on 30.06.2017 in
respect to five (5) contracts, namely, Contract Nos.54095, 56574,
94562, 104654 and 122845. In order to close the above said
accounts, respondent No.2 had accepted the benefit of the
consolidation of the outstanding dues under the earlier facilities and
availed finance assistance for Rs.19.53 Crores and entered into the
Loan Agreement No.136475 on 01.07.2017, pursuant to which,
petitioner No.1 sanctioned a loan of Rs.19.53 Crores with interest at
the rate of 17.75% per annum. As per the terms and conditions of
the Loan Agreement, respondent No.2 was required to pay the loan
in monthly installments of Rs.51,88,250/- commencing from
15.01.2018. Respondent No.2 made repayments under the said
Loan Agreement till the year 2020. It is the further case of petitioner
No.1 that respondent No.2 failed to make payment from thereafter
and the said loan account was classified as NPA on 15.01.2020.
Subsequently, petitioner No.1 issued a demand notice dated
15.11.2021 under Section 13(2) of the SARFEASI Act calling upon
respondent No.2 to pay a sum of Rs.28,17,48,804/-. In response to
33
the said demand notice, respondent No.2 submitted a reply dated
02.12.2021 stating that as on date, respondent No.2 had already
paid an amount of Rs.17.83 Crores including interest for the delayed
period and that as per the records, only a sum of Rs.41.87 lakhs is
due from their end and confirm the balance amount to be paid as
per the OTS. However, in the said reply, there is no allegation of
cheating, falsification of accounts or agreement was entered by
threatening criminal action and fabrication of documents. Petitioner
No.1 issued a reply to respondent No.2 on 28.12.2021, wherein it is
stated that there was no formal communication neither from them
nor from respondent No.2 regarding OTS proposal as referred in the
reply letter dated 02.12.2021. According to petitioner No.1,
respondent No.2 did not submit any further reply with regard to the
alleged OTS. Subsequently, petitioner No.1 issued a Possession
Notice on 13.10.2023 under Section 13(4) of the SARFEASI Act and
took symbolic possession of the immovable properties owned by
respondent No.2. Thereafter, petitioner No.1 issued another notice,
dated 26.12.2024, stating that respondent No.2 was due a total
amount of Rs.76,79,81,227/- as on 03.10.2025.
11. It is the further case of petitioner No.1 that respondent No.2
executed 2017 Loan Agreement along with Deed of Hypothecation
and Deeds of Personal Guarantee of K. Ravinder Reddy and
34
K. Priyamvada Reddy. The Loan Agreement was executed for the
purpose of consolidating the outstanding liabilities under the earlier
credit facilities into a single loan account, consequent to which
earlier contracts stood closed. Respondent No.2 acted upon 2017
Loan Agreement by making repayments thereunder till the year
2020, thereby acknowledging and confirming the existence and
validity of the transaction entered in the year 2017.
12. It is also the specific case of the petitioners that at no point of
time, respondent No.2 has not been made the allegation that any
falsification of the accounts or the agreements had been executed
under coercion or the Deed of Hypothecation and Deeds of Personal
Guarantee were forged and fabricated documents and only after
filing of the IBC proceedings before the NCLT, with a malafide
intention and to obstruct the said proceedings, filed the present
complaint and the same is clear abuse of the process of law.
Further, as per Section 32(A) of the IBC, respondent No.2 is not
entitled to prosecute the petitioners under the penal law.
13. The specific case of respondent No.2 is that the Deed of
Hypothecation and Deeds of Personal Guarantee are fabricated
documents and that the signatures of K. Ravinder Reddy and K.
Priyamvada Reddy were forged; during the course of hearing, learned
Senior Counsel for respondent No.2 has pointed out that the Loan
35
Agreement and the Deed of Hypothecation filed by petitioner No.1
before the NCLT are different from the Loan Agreement and the Deed
of Hypothecation furnished to respondent No.2 and also there are
material alterations.
14. The record discloses that respondent No.2 is not disputing the
execution of the Loan Agreement, dated 01.07.2017, however
disputing the asset details, which were mentioned in ‘Annexure I to
Schedule VII Assets Details’ attached to the Loan Agreement.
Further, respondent No.2 contends that the said document filed
before the NCLT and the document furnished to it is not one and the
same, and also disputing the Deed of Hypothecation, dated
01.07.2017, especially the particulars of the equipments mentioned
in the Schedule differs from the documents which were filed before
the NCLT and documents which were furnished to respondent No.2.
15. Sri N. Venkataraman, learned Additional Solicitor General of
India, during the course of hearing submitted that the documents
furnished to respondent No.2 and the documents filed before the
NCLT are one and the same and only variation pertains to ‘name of
the equipment’ column in the schedule of assets. Upon completion
of documentation process at Head Office, the quantities were
corrected as to accurately reflect the total number of assets covered
under the transaction in reference to the Deed of Hypothecation and
36
respondent No.2 has not disputed about execution of the 2017 Loan
Agreement as well as the Deed of Hypothecation and the dispute is
only with regard to Asset Details and the particulars of the
equipment in the ‘Name of equipment’ column in the schedule of
assets respectively.
16. In the written arguments dated 02.07.2026 filed by learned
counsel for the petitioners, it is stated that the loan documentation
was processed through the petitioner’s Hyderabad Branch Office,
whereas the Petitioner’s Head Office situated at Kolkata was
responsible for maintaining the final records and completing the
documentation process. Consequently, the schedules forming part
of the Loan Agreement and the Deed of Hypothecation came to be
completed at different stages of the documentation process. While
copies of the documents were furnished to the Borrower/respondent
No.2 at the branch level at Hyderabad, the documents were
thereafter transmitted to the Head Office at Kolkata, where the
schedules were completed and maintained as part of the petitioner’s
records. On account of the said documentation process, the
handwritten particulars appearing in the schedules are not identical
in all copies. Though, the underlying transaction, the documents
executed by the parties and the security created thereunder remain
one and the same. It is relevant to mention that basing on the
37
above said submissions/reasons, this Court cannot give any finding
that the disputed documents are genuine one or otherwise, while
exercising the powers conferred under Section 528 of the BNSS in
the present proceedings.
17. It is also relevant to mention that whether respondent No.2
has availed the loan for an amount of Rs.19,53,00,000/- under the
2017 Loan Agreement dated 01.07.2017 to close the earlier contract
debts or at the instance of petitioner No.1, for their internal
accounting and regulatory compliance only, and the said amount
was credited to the account of respondent No.2 and on the very same
day, they re-transferred the said amount to the account of petitioner
No.1 and there is no due amount under 2017 Loan Agreement, dated
01.07.2017, in spite of the same, petitioner No.1 filed proceedings
before the NCLT by claiming an amount of Rs.76,79,81,227/- under
the said Loan Agreement based on the fabricated and falsification of
records; and whether respondent No.2 entered OTS and pursuant to
the same, respondent No.2 paid an amount of Rs.17.83 Crores
including interest for the delayed period and only an amount of
Rs.41.87 lakhs is due or not, or there is no agreement with regard to
OTS between petitioner No.1 and respondent No.2 and respondent
No.2 solely relying upon the e-mails sent by one of the employees
does not constitute any settlement under OTS, these are disputed
38
facts and the same cannot be adjudicated and decided in the present
criminal petition.
18. Insofar as the contentions raised by both the learned
Additional Solicitor General of India that at no point of time, from
the date of execution of the 2017 Loan Agreement i.e., on
01.07.2017, till the filing of the proceedings before the NCLT,
respondent No.2 did not raise any dispute regarding the execution of
the Deeds of Personal Guarantee and Deed of Hypothecation along
with Loan Agreement and filed the present complaint only on
26.03.2026, after a lapse of six years, by making false allegations
that the said documents are forged and fabricated, as a counter
blast to the proceedings pending before the NCLT, are concerned, the
specific case of respondent No.2 is that it came to know about the
alleged fabrication and forgery of documents i.e., Deeds of Personal
Guarantee and Deed of Hypothecation, only after petitioner No.1
filed an application before the NCLT. Whether the Deeds of Personal
Guarantee executed by K. Ravinder Reddy and K. Priyamvada Reddy
and the Deed of Hypothecation are forged and fabricated documents
or not, is a disputed fact and the same cannot be decided by this
Court while exercising the powers conferred under the provisions of
Section 528 of the BNS, as the scope of the present criminal petition
is very limited.
39
19. In Bhajan Lal (supra), the Hon’ble Supreme Court held that
the inherent jurisdiction of the High Court to quash criminal
proceedings under Section 482 Cr.P.C. is extraordinary in nature
and must be exercised sparingly, with great circumspection, and
only to prevent abuse of the process of the Court or to secure the
ends of justice. At the stage of quashing, the Court must proceed on
the basis that the allegations in the FIR or complaint are true and
examine only whether they prima facie disclose the commission of a
cognizable offence. The Court cannot undertake an enquiry into the
reliability, genuineness, or sufficiency of the allegations or evaluate
the evidence. Unless the case falls within the well recognized
categories warranting interference, criminal proceedings should
ordinarily be allowed to continue, and the investigation or trial
should not be interdicted at the threshold.
20. In Neeharika Infrastructure Private Limited (supra), the
Hon’ble Supreme Court held that the power to quash criminal
proceedings under Section 482 CrPC is extraordinary and must be
exercised sparingly and with great circumspection. An FIR is not an
encyclopedia and need not contain every minute detail of the alleged
offence. At the stage of quashing, the Court is only required to
ascertain whether the allegations prima facie disclose the
commission of a cognizable offence and cannot embark upon an
40
enquiry into their truthfulness, reliability, or sufficiency. Ordinarily,
the investigating agency must be permitted to complete the
investigation, and criminal proceedings should not be interdicted at
the threshold except in exceptional cases where no offence is
disclosed or where the continuation of the proceedings would
amount to an abuse of the process of law.
21. In M. Maridoss (supra), the Hon’ble Supreme Court held that
while exercising jurisdiction under Section 482 Cr.P.C., the High
Court is not expected to conduct a mini trial or assess the merits of
the allegations. Its enquiry is confined to determining whether the
averments in the FIR, taken at their face value, prima facie disclose
the commission of a cognizable offence. The investigating agency has
a statutory right to conduct a fair and complete investigation and
must be afforded reasonable time to do so. Premature quashing of
criminal proceedings, without permitting the investigation to
progress, is impermissible unless the FIR ex facie fails to disclose
any cognizable offence or the prosecution is barred by law.
22. In Rocky (supra), the Hon’ble Supreme Court held that, at the
stage of quashing, the Court cannot adjudicate upon disputed
questions of fact or determine the authenticity, evidentiary value, or
legal effect of disputed documents. Where the allegations in the FIR
or charge sheet prima facie disclose the commission of a cognizable
41
offence and are supported by material collected during the
investigation, the criminal proceedings ought not to be quashed
merely on the basis of a defence founded on disputed documents, as
their genuineness and evidentiary value are matters to be decided
during trial.
23. In A.R. Antulay (supra), the Hon’ble Supreme Court held that
it is a settled principle of criminal jurisprudence that the concept of
locus standi is foreign to criminal law and, unless a statute
expressly provides otherwise, any person can set the criminal law in
motion by lodging a complaint or furnishing information regarding
the commission of an offence. Since a crime is an offence against
society and not merely against an individual, the right to initiate
criminal proceedings cannot be restricted by importing the concept
of locus standi, except where a specific statutory provision
prescribes an eligibility criterion for the complainant.
24. In Vasanth (supra), the High Court of Karnataka held that a
person has the locus to initiate criminal proceedings where the
alleged forged or fabricated document is used or intended to be used
against him or otherwise affects his legal rights or interests. Even if
the forgery pertains to a property or document not directly owned by
the complainant, he is competent to lodge a criminal complaint if the
42
forged document has been relied upon to prejudice his rights or has
formed the basis of proceedings against him.
25. In Sharla Bazliel (supra), the Hon’ble Supreme Court held that
where the FIR contains specific allegations of forgery, fraud,
fabrication of documents, or criminal breach of trust, and the
disputed documents or signatures are pending forensic or
handwriting examination, the High Court should not exercise its
inherent jurisdiction to quash the proceedings at a premature stage.
Until the investigation, including scientific examination of the
questioned documents, is completed, the criminal proceedings ought
to be permitted to continue to their logical conclusion.
26. Insofar as the other grounds raised by Sri B. Narasimha
Sharma, learned Additional Solicitor General of India, that
respondent No.2 filed the present complaint by giving a criminal
colour, as a counter blast to the proceedings pending before the
NCLT and by virtue of statutory protection given under Section 32A
of the IBC, respondent No.2 is not entitled to prosecute the
proceedings under penal law and also Doctrine of Indoor
Management is applicable, especially there are no specific allegations
against petitioner Nos.2 to 4 and they have joined in 2021 and the
alleged allegations are pertaining to 2017 are concerned, there are
specific allegations levelled in the complaint that the Deeds of
43
Personal Guarantee and Deed of Hypothecation are forged and
fabricated documents. Whether petitioner Nos.2 to 4 are having any
role in the commission of offence or not and whether any material
exists to connect them with the alleged crime are to be revealed
during the course of investigation, especially the investigation is at
threshold and pendency of the proceedings before the NCLT is not a
bar to prosecute the proceedings under penal provisions.
27. In Manish Kumar (supra), the Hon’ble Supreme Court held
that while upholding the constitutional validity of Section 32A of the
Insolvency and Bankruptcy Code, 2016, held that the immunity
thereunder is a substantive, post-approval immunity available only
to the corporate debtor as a juristic entity and its property
contingent upon fulfilment of the conditions in Section 32A(1) and
does not extinguish the criminal liability of the individual promoters,
directors, or officers who committed the offence; such individuals
remain liable to be prosecuted independent of and notwithstanding
the pendency or conclusion of proceedings before the NCLT/NCLAT,
as further borne out by the continuing obligation of cooperation with
investigating authorities under Section 32A(3). Consequently,
Section 32A cannot be read as a procedural bar on parallel criminal
proceedings against individual accused persons during the pendency
of NCLT proceedings.
44
28. It is relevant to mention that in Ruben and Ladenberg v.
Great Fingall Consolidated Co. 15, the House of Lords laid down the
foundational principle that the doctrine of indoor management
cannot be invoked where the act complained of is a forgery or where
the circumstances themselves arouse suspicion, holding that
persons dealing with a company must act with due caution and
cannot blindly rely on ostensible authority when the transaction is
tainted with irregularity. This principle was subsequently adopted
and applied by the Hon’ble Supreme Court in M/s. MRF Limited v.
Manohar Parrikar & Ors 16, where the Court observed that when
there exists “definite suspicion of irregularity” and the conduct of the
concerned individual indicates active involvement in the fraudulent
act, the doctrine ceases to operate. Applying the same, accused No.1,
being an employee of respondent No.2 company, cannot be treated
as a mere intermediary but is prima facie shown to have actively
colluded in the fraudulent transactions alleged. The said doctrine
was further clarified in Gunmala Sales (P) Limited v. Navkar
Promoters (P) Limited & Ors 17, wherein the Hon’ble Apex Court
held that “it cannot be invoked to give a carte blanche to outsiders to
avoid liability where the circumstances invite inquiry or suggest
collusion”. Hence, while bona fide outsiders dealing with a company
15
(1906) AC 439 (HL)
16
(2010) 11 SCC 374
17
(2015) 1 SCC 103
45
in good faith may be protected, such protection is unavailable where
the transactions are irregular or executed in concert with insiders.
In the present case, petitioner No.1, who is employee of the banking
institution and petitioner No.2 is a banking institution, though
outsiders to respondent No.2 company and there are specific
allegations against them that they facilitated or overlooked irregular
transactions undertaken in collusion with other accused. Hence,
this Court of the considered view that basing upon the principle of
protection of the doctrine of indoor management, petitioners are not
entitled to seek quash the proceedings at the threshold.
29. Insofar as the judgments relied upon by the learned counsel
for the petitioners, in Priyanka Srivastava (supra), the Hon’ble
Supreme Court held that the power under Section 156(3) Cr.P.C/
Section 175(3) BNSS must be exercised with due application of
judicial mind and not mechanically. Where the dispute arises from
proceedings under the SARFAESI Act, 2002, and an efficacious
statutory remedy is available before the Debts Recovery Tribunal,
criminal proceedings should not be permitted to be used as a
pressure tactic against secured creditors or bank officials. Before
directing investigation, the Magistrate must exercise greater care and
caution, particularly in view of the protection under Section 32 of the
46
SARFAESI Act for acts done in good faith, so as to prevent abuse of
the criminal process.
30. In K. Virupaksha (supra), the Hon’ble Supreme Court held
that criminal law cannot be invoked to adjudicate disputes that are
essentially civil, contractual or governed by a special statutory
mechanism. Where a complete statutory remedy is available under a
special enactment, the criminal process cannot be permitted to
circumvent or overreach such remedies unless the complaint, on its
face, discloses the essential ingredients of a cognizable criminal
offence independent of the civil dispute. Courts must remain vigilant
to prevent the criminal justice system from being employed as a
means of exerting pressure, settling contractual disputes or
otherwise abusing the process of law.
31. In Deepak Upadhyaya (supra), the High Court of Madras held
that where a special statute provides a complete and efficacious
mechanism for redressal of grievances, the criminal process ought
not to be invoked by bypassing such statutory remedies, particularly
when the complaint is lodged belatedly, without any plausible
explanation, and only after adverse proceedings have been initiated
against the complainant. Such circumstances may legitimately
indicate malafides, an ulterior motive, or an attempt to exert
pressure or settle personal scores. Courts, in the exercise of their
47
inherent jurisdiction, must prevent abuse of the criminal process
and quash proceedings where the criminal law is employed as a tool
of harassment rather than for the bona fide prosecution of a genuine
criminal offence.
32. In ICICI Bank Ltd. (supra), the High Court of Bombay held
that where a special statute provides a complete and efficacious
mechanism for redressal of grievances, the criminal process ought
not to be invoked by bypassing such statutory remedies, particularly
when the complaint is lodged belatedly, without any plausible
explanation, and only after adverse proceedings have been initiated
against the complainant. Such circumstances may legitimately
indicate malafides, an ulterior motive, or an attempt to exert
pressure or settle personal scores. Courts, in the exercise of their
inherent jurisdiction, must prevent abuse of the criminal process
and quash proceedings where the criminal law is employed as a tool
of harassment rather than for the bona fide prosecution of a genuine
criminal offence.
33. In Mala Choudhary (supra), the Hon’ble Supreme Court held
that a purely civil or contractual dispute cannot be permitted to
assume the colour of a criminal offence merely by making bald
allegations of cheating or fraud. Where the allegations are
inconsistent, materially contradictory, or fail to disclose prima facie
48
criminal intent at the inception of the transaction, the initiation of
criminal proceedings amounts to a misuse of the criminal justice
system. The criminal process cannot be employed as a weapon of
pressure or harassment, or to secure relief that is essentially civil in
nature. Such proceedings constitute an abuse of the process of law,
warranting interference by the High Court in the exercise of its
inherent jurisdiction.
34. In the aforesaid judgments, the Hon’ble Supreme Court and
High Courts of Madras and Bombay held that criminal law cannot be
invoked to adjudicate the disputes that are essentially civil,
contractual or governed by a special statutory mechanism.
35. The above said judgments relied upon by the learned counsel
for the petitioners are not applicable to the facts and circumstances
of the present case on the ground that respondent No.2 in the
complaint has made specific allegations regarding forgery and
falsification of accounts as well as the fabrication of documents,
especially the Deeds of Personal Guarantee and the Deed of
Hypothecation, and the said allegations prima facie attract the
ingredients of the offences mentioned in the F.I.R.
36. It is very much relevant to mention that the Hon’ble Supreme
Court in Bhajan Lal, Neeharika Infrastructure Private Limited, M.
Maridoss, A. R. Anthulay, Rocky and Sharla Bazliel (supra) has
49
consistently held that while exercising its inherent jurisdiction to
quash criminal proceedings under Section 482 Cr.P.C., the High
Court must proceed on the assumption that the allegations
contained in the FIR or complaint are true and examine only
whether they prima facie disclose the commission of a cognizable
offence. At this stage, the Court cannot assess the truthfulness,
reliability, genuineness, or sufficiency of the allegations, nor can it
evaluate the evidence or adjudicate disputed questions of fact. The
power to quash is extraordinary in nature and must be exercised
sparingly and only in exceptional cases where the FIR does not
disclose any offence, the prosecution is barred by law, or the
continuation of the proceedings would amount to an abuse of the
process of law. An FIR is not expected to be an exhaustive account of
every minute detail of the alleged offence; it is sufficient if it sets out
the basic facts disclosing the commission of a cognizable offence.
Ordinarily, the investigating agency must be permitted to conduct a
fair and complete investigation, and the High Court should not
undertake a mini trial by examining the merits of the allegations or
the defence of the accused. It is equally well settled that the concept
of locus standi is generally foreign to criminal law, and any person
may set the criminal law in motion unless a statute expressly
provides otherwise. Furthermore, where the allegations involve
forgery, fraud, fabrication of documents, or criminal breach of trust,
50
and the disputed documents or signatures are yet to undergo
forensic or handwriting examination, the High Court ought not to
quash the proceedings on the basis of disputed documents or
defence material, as their authenticity and evidentiary value are
matters to be determined during investigation.
37. It is already stated supra that there are specific allegations
levelled in the complaint regarding forgery, fabrication and
falsification of records, especially Deeds of Personal Guarantee and
the Deed of Hypothecation, which prima facie disclose the
commission of cognizable offences and the investigation is at
threshold. Hence, this Court is of the considered view that the
petitioners are not entitled to seek quashing of F.I.R.No.61 of 2026
at this stage.
38. For the foregoing reasons and in view of the precedent
decisions, this Court does not find any ground to quash the
proceedings against the petitioners in F.I.R.No.61 of 2026 of Central
Crime Station, Hyderabad, to exercise the powers under Section 528
of the BNSS.
39. Accordingly, both the Criminal Petitions are dismissed.
Miscellaneous applications, pending if any, shall stand closed.
_______________________
J. SREENIVAS RAO, J
Date:24.07.2026
mar
