Court Dismisses Quashing Petition, Cites Need for Comprehensive Probe into Allegations of Fabricated Loan Documents
In a significant ruling, the Telangana High Court has dismissed petitions filed by SREI Equipment Finance Limited and its associates seeking to quash an FIR alleging forgery, fabrication, and falsification of loan documents. The FIR, filed by Janapriya Engineers Syndicate Private Limited (JESPL), accuses SREI Equipment Finance and others of manipulating financial records and coercing JESPL into signing a questionable loan agreement under the guise of compliance.
The case revolves around allegations that SREI Equipment Finance induced JESPL to enter into a loan agreement in 2017, purportedly for internal accounting purposes, while maintaining that the 2015 settlement terms were still in force. According to JESPL, the 2017 agreement was a façade, with no actual money being exchanged, which later facilitated false claims and inflated dues through fabricated documents.
Justice J. Sreenivas Rao emphasized that the allegations disclosed cognizable offences, necessitating a thorough investigation. The court underscored that disputed facts, particularly the authenticity of the alleged forged documents, must be scrutinized during trial rather than being adjudicated at the quashing stage. The court also noted that the immunity under Section 32A of the Insolvency and Bankruptcy Code does not extend to individual criminal liabilities of company directors or officers.
During the proceedings, counsel for SREI Equipment Finance argued that the FIR was a retaliatory move by JESPL to counter insolvency proceedings initiated against it. However, the court, relying on precedents, held that the inherent jurisdiction to quash criminal proceedings is to be exercised sparingly and only in exceptional circumstances. The proceedings should not be halted at the threshold based on preliminary objections or parallel proceedings.
The court dismissed the petitions, allowing the investigation by the Central Crime Station, Hyderabad, to proceed unhindered. This decision underscores the judiciary's stance on ensuring that serious allegations of forgery and financial fraud are subjected to detailed judicial scrutiny and investigation.
Bottom line:-
The High Court held that allegations of forgery, fabrication, and falsification of records, particularly regarding Deeds of Personal Guarantee and Deed of Hypothecation, prima facie disclose cognizable offences and investigation must proceed. The Court emphasized that disputed facts cannot be adjudicated at the quashing stage under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.
Statutory provision(s):
Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528, Insolvency and Bankruptcy Code, 2016 Section 32A, SARFAESI Act Sections 13(2), 13(3), 13(4)
SREI Equipment Finance Limited v. State of Telangana, (Telangana) : Law Finder Doc id # 2949374
