Gujarat High Court
Harendra Dvarkadas Patel vs State Of Gujarat on 5 May, 2026
NEUTRAL CITATION
R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL REVISION APPLICATION NO. 160 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE HASMUKH D. SUTHAR
==========================================================
Approved for Reporting Yes No
✔
==========================================================
HARENDRA DVARKADAS PATEL & ORS.
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR RC JANI(357) for the Applicant(s) No. 1,2,3,4
MS MONALI BHATT, APP for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE HASMUKH D. SUTHAR
Date : 05/05/2026
JUDGMENT
1. By way of present revision application under Sections 397 read with 401 of the Code of Criminal Procedure, 1973, the applicants have prayed for quashing and setting aside the order dated 10.02.2010 passed by learned Additional Senior Civil Judge and JMFC, Patan in Criminal Case No.1490 of 2009.
2. Heard learned advocates for the respective parties.
3. Brief facts of the case are that The applicants, who are guarantors of original accused Nos. 1 to 3, submit that the said accused had availed financial facilities from the complainant bank, including a term loan of Rs. 1.25 crore and an overdraft facility of Rs. 3.90 crore, aggregating to Rs. 5.15 crore. It is alleged that accused Nos. 1 to 3 opened and operated accounts with other banks, namely Syndicate Bank, Axis Bank, Patan, Page 1 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined and Harij Nagrik Sahkari Bank Ltd., without informing the complainant bank, and carried out certain transactions in breach of the contractual terms. The complainant bank also initiated proceedings under Section 13(2) of the SARFAESI Act, 2000 and issued notices, including for auction of mortgaged properties, wherein the present applicants were also guarantors. Subsequently, an FIR being C.R. No. I-Patan City Police Station dated 13.03.2009 came to be registered under Sections 467, 468, 471, 406, 420 and 120B IPC, which upon investigation was restricted to Sections 406, 420 read with Section 120B IPC. The applicants thereafter preferred a discharge application below Exh. 13 before the learned 3rd Additional Senior Civil Judge and JMFC, Patan, which came to be rejected on the grounds that the applicants were partners of the accused and had supplied false documents. Being aggrieved by the said order, the present revision application has been filed.
4. Learned advocate for the applicants submitted that the applicants are merely guarantors of accused Nos. 1 to 3 and are neither partners nor beneficiaries of the alleged transactions. It was contended that the learned trial Judge committed an error in rejecting the discharge application by wrongly observing that the applicants were partners of the principal accused and had supplied false documents, despite the investigation papers and FIR indicating that original documents were produced before the Investigating Officer and offences under Sections 467, 468 and 471 of the Indian Penal Code were not retained in the charge- sheet. It was further submitted that the dispute arises out of a loan transaction and is purely civil in nature, for which Page 2 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined proceedings under the SARFAESI Act, 2002 had already been initiated by the complainant bank by taking mortgaged properties under process of recovery. It was argued that mere default in repayment of installments cannot give rise to criminal prosecution under Sections 406 and 420 IPC, particularly when substantial amounts had already been deposited with the bank. It was therefore urged that continuation of the criminal proceedings against the guarantors amounts to misuse of the process of law and the applicants deserve to be discharged by exercising revisional powers under Sections 397 and 401 Cr.P.C.
5. Learned APP appearing for the respondent-State opposed the present application and submitted that sufficient material has been collected during the course of investigation connecting the applicants with the alleged offence. It was contended that the applicants were not merely passive guarantors, but had actively facilitated the transactions and execution of loan documents, and therefore their role cannot be brushed aside at this stage. Learned APP further submitted that the allegations disclose a systematic act of cheating and criminal breach of trust causing substantial financial loss to the complainant bank, and merely because proceedings under the SARFAESI Act, 2002 have been initiated, the criminal liability of the accused does not get extinguished. It was argued that civil and criminal proceedings can proceed simultaneously when the ingredients of criminal offences are prima facie made out. Learned APP submitted that the trial Court has rightly appreciated the material available on record and rejected the discharge application, and therefore no interference is warranted in exercise of revisional jurisdiction Page 3 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined under Sections 397 and 401 Cr.P.C.
6. Having heard the learned advocates appearing for both the sides and upon perusal of the record, it appears that the principal borrower, namely Mahendrabhai Amin, has expired. The said borrower had availed loan facilities from the complainant bank. Subsequently, for recovery of the outstanding dues, the bank initiated proceedings under the SARFAESI Act, 2002, pursuant to which the mortgaged property came to be auctioned. Initially, the complaint came to be lodged for offences punishable under Sections 406, 468 and 471 of the Indian Penal Code; however, during the course of investigation, the Investigating Officer arrived at the conclusion that no case of forgery was made out and, therefore, offences under Sections 468 and 471 IPC were not retained, and the charge-sheet came to be filed only for the offences punishable under Sections 406 and 420 IPC.
7. The accused Nos. 2 to 5 preferred a discharge application under Section 239 Cr.P.C. Upon perusal of the record, it appears that the bank had sanctioned loan facilities aggregating to Rs. 5.15 crore, including a term loan of Rs. 1.25 crore, repayable in 18 quarterly installments. The amount was admittedly withdrawn by accused No.1, who has now expired. The allegation against the present applicants is that they entered into a conspiracy with the principal accused and thereby committed offences under Sections 406 and 420 IPC. However, it is an undisputed position that the present applicants had merely stood as guarantors and their properties were already subjected Page 4 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined to mortgage and recovery proceedings under the SARFAESI Act. It further appears that certain installments had also been repaid by the borrower. Prima facie, at the inception of the loan transaction, there was no dishonest or fraudulent intention attributable to the present applicants so as to constitute the offence of cheating. The dispute, prima facie, appears to be civil in nature. Nothing incriminating has been found in the conscious possession of the present applicants, nor is there any material to indicate that they siphoned off any amount or transferred any hypothecated property over which the bank had created a charge.
8. Mere failure on the part of the borrower to repay the loan amount, in absence of any mens rea or dishonest intention, cannot give rise to criminal prosecution against the present applicants. Prima facie, this Court is of the opinion that a purely civil dispute has been given the colour of criminality. Hence, the application filed below Exhibit 13 in Criminal Case No.1490 of 2009 by the present applicants, who stood as guarantors, deserves consideration. The concept of discharge in criminal jurisprudence acts as a constitutional safeguard to ensure that no person is subjected to the rigours of a criminal trial unless the prosecution is able to disclose a prima facie case against such person.
9. In the backdrop of the aforesaid discussion, the discharge application filed by the present applicants-accused deserves to be allowed. The object of the discharge mechanism occupies a crucial place within the criminal justice system, as it acts as a Page 5 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined preliminary judicial filter before commencement of trial. Its primary purpose is to ensure that only those cases which disclose a legal and prima facie foundation proceed to trial, thereby safeguarding the rights and liberty of the accused while simultaneously preserving judicial efficiency. The mechanism protects an individual from being unnecessarily subjected to the ordeal of a full-fledged criminal trial when the prosecution material fails to disclose even a prima facie case. Such safeguard upholds the constitutional values of personal liberty and fair procedure and prevents abuse of the process of law by filtering out frivolous prosecutions at the threshold.
10. Even after the pronouncement in Priti Saraf & Anr. (supra), the Hon'ble Apex Court, in the cases of Rikhab Birani & Anr. v. State of Uttar Pradesh & Anr. reported in 2025 INSC 512, Rekha Jain v. State of Karnataka & Anr. reported in 2022 LiveLaw (SC) 468 and Vesa Holdings Pvt. Ltd. & Anr. v. State of Kerala reported in (2015) 8 SCC 293, has clarified the legal position regarding the circumstances in which offences under Sections 406 and 420 of the Indian Penal Code are made out. Further, as held by the Hon'ble Supreme Court in Lalit Chaturvedi and Others v. State of Uttar Pradesh and Another reported in 2024 SCC OnLine SC 171, any attempt to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution deserves to be deprecated and discouraged.
11. Accordingly, the present revision application is allowed. The order dated 10.02.2010 passed by the learned 3 rd Additional Page 6 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026 NEUTRAL CITATION R/CR.RA/160/2010 JUDGMENT DATED: 05/05/2026 undefined Senior Civil Judge and JMFC, Patan below Exhibit 13 in Criminal Case No.1490 of 2009 is hereby quashed and set aside. Consequently, the discharge application filed by the present applicants stands allowed and the applicants are discharged from the offences alleged against them. The bail bond, if any, shall stand cancelled and the sureties shall stand discharged. Rule is made absolute. Record and proceedings be transmitted back to the concerned Court forthwith.
(HASMUKH D. SUTHAR,J) Ali Page 7 of 7 Uploaded by ALI ISTAYAK(HC01093) on Thu May 07 2026 Downloaded on : Thu May 07 21:28:37 IST 2026