Karnataka High Court
Sidram vs The State Of Karnataka on 8 October, 2025
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CRL.P No. 200872 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 8TH DAY OF OCTOBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
CRIMINAL PETITION NO.200872 OF 2025
(482(Cr.PC)/528(BNSS))
BETWEEN:
1. SIDRAM S/O DHULAPPA KHATAGAVE,
AGE: 56 YEARS, OCC: PRESIDENT,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
2. BALAJI S/O PANDARINATH CHAVAN,
AGE: 45 YEARS, OCC: VICE-PRESIDENT,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
3. UMAKANT
Digitally signed S/O GURUPADAPPA NAGAMARPALLI,
by RENUKA AGE: 66 YEARS, OCC: DIRECTOR,
Location: HIGH R/O NARANJA SAHAKARI SAKKARE KARKHANE
COURT OF NIYAMITA, IMAMPUR, BIDAR-585401.
KARNATAKA
4. RAJKUMAR S/O MANIKAPPA KARANJE,
AGE: 65 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
5. SHANKAREPPA S/O RACHAPPA PATIL,
AGE: 50 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
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6. SHIVABASAPPA
S/O VAIJANATH CHANNAMALLE,
AGE: 50 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-565401.
7. SIDRAM S/O DADARAO WAGAMARE,
AGE: 60 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
8. VIJAYAKUMAR S/O BASAVANAPPA P. PATIL,
AGE: 54 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
9. SMT. MALLAMMA KASHINATH M. PATIL,
AGE: 49 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
10. SMT. SHOBHAVATI SHANKARAPPA PATIL,
AGE: 52 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
11. SITARAM S/O KHEMA RATHOD,
AGE: 73 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
12. ZARIYAPPA S/O MALLAPPA MAMADAPURE,
AGE: 72 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
13. SHASHIKUMAR
S/O CHANDRASHEKAR PATIL,
AGE: 46 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
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14. NAGAREDDY S/O SHANKAR REDDY YACHE,
AGE: 70 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
15. VEERASHETTY S/O BASAPPA PATNE,
AGE: 50 YEARS, OCC: DIRECTOR,
R/O NARANJA SAHAKARI SAKKARE KARKHANE
NIYAMITA, IMAMPUR, BIDAR-585401.
...PETITIONERS
(BY SRI JAYAKUMAR S. PATIL., SR. ADVOCATE FOR
SRI ASHOK MULAGE, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
THROUGH JANAWADA POLICE STATION,
BIDAR RURAL CIRCLE,
BIDAR-585401
REPRESENTED BY ADD. SPP.
HIGH COURT OF KARNATAKA,
KALABURAGI-585107.
2. SMT. MANJULA S.
AGE: 52 YEARS,
OCC: CHIEF EXECUTIVE OFFICER,
DISTRICT CENTRAL COOPERATIVE BANK
LIMITED, BIDAR-585101.
...RESPONDENTS
(BY SMT. ANITHA M. REDDY, HCGP FOR R1;
SRI S. S. HALALLI, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF CR.P.C.(OLD), UNDER SECTION 528 OF BNSS (NEW)
PRAYING TO ALLOW THE PETITION AND QUASH THE FIR AND
COMPLAINT UNDER ANNEXURE-S AND S1 IN CRIME
NO.0055/2025 DATED 08.05.2025 OF JANAWADA POLICE
STATION, TQ. AND DISTRICT BIDAR FOR THE OFFENCES
PUNISHABLE UNDER SECTION 420, 409, 468, 474, 120B OF
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IPC PENDING ON THE FILE OF I ADDITIONAL JMFC BIDAR, AS
AGAINST THE PETITIONERS.
THIS PETITION COMING ON FOR ADMISSION THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
ORAL ORDER
(PER: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM) This petition is filed by the petitioners, who are the Directors of Naranja Sahakari Sakkare Karkhane Niyamita (for short 'Sugar Factory') seeking quashing of the proceedings pending in Crime No.55/2025 for the offences punishable under Sections 420, 409, 468, 474 and 120B of the Indian Penal Code, 1860 (for short 'IPC').
2. Facts leading to the case are as under:
Respondent No.2/defacto complainant, who is the Chief Executive Officer of the District Central Cooperative Bank Limited, has lodged a complaint against the present petitioners, who are stated to be the Directors of the concerned Sugar Factory. It is alleged that the petitioners, -5- NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR in their capacity as Directors, have consciously passed a resolution dated 04.01.2023, thereby misrepresenting the quantum of sugar stock while availing a loan of Rs.78 crores from the said Bank. According to the complainant, the factory, under the authority of the impugned resolution, falsely projected that it possessed sugar stock to the tune of 2,71,627 quintals, valued at Rs.85,95,22,897/-, whereas in fact, no such stock was available. It is further alleged that the petitioners, with a deliberate intent to defraud the Bank, inflated the value of the sugar stock and secured the said loan on the basis of such fictitious representation. Based on these allegations, the complaint has culminated in the registration of Crime No.55/2025 against the petitioners for the alleged offences.
3. Learned Senior Counsel, Sri Jayakumar S. Patil, appearing for the petitioners, vehemently contended that the Bank has already initiated recovery proceedings under the provisions of the Securitisation and Reconstruction of -6- NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR Financial Assets and Enforcement of Securities Interest Act, 2002 (for short, the 'SARFAESI Act'). He further submitted that the internal inspection, which culminated in the preparation of an inspection report forming the very basis for the present complaint, is the subject matter of proceedings before this Court in W.P.No.202314/2025, wherein the said inspection report has been stayed. In the light of the pendency of recovery proceedings and the interim stay operating against the inspection report, the learned Senior Counsel contends that the initiation of criminal prosecution on the same set of facts is wholly unwarranted and amounts to abuse of process of law. He has placed reliance on the judgment of the Hon'ble Apex Court in Goa Foundation vs. Union of India & Others1, and the decision of a Coordinate Bench of this Court in Venkataraman Laxminarayan Bhat & Others vs. Karnataka Appellate Tribunal & Others2, to buttress 1 (2014)6 SCC 590 2 1989 (2) KLJ 291 -7- NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR his contention that parallel criminal proceedings are impermissible when the dispute is primarily civil or regulatory in nature and already under adjudication.
4. Per contra, learned counsel Sri S.S. Halalli appearing for respondent No.2/defacto complainant, while reiterating the contentions urged in the statement of objections, submitted that the petitioners, being Directors of the Sugar Factory, had jointly signed the resolution dated 04.01.2023, as evidenced at Annexure-R1. Based on this resolution, the factory represented to the Bank that it was holding sugar stock of 2,71,627 quintals, valued at Rs.85,95,22,897/-, against which the Bank sanctioned a loan of Rs.78 crores by treating the stock as pledged security. However, upon subsequent verification, as reflected in Annexure-R6, it was revealed that the actual sugar stock was only 76,117 quintals. It is in this background that the complaint was lodged, alleging deliberate falsification and fraudulent misrepresentation by the Directors. Learned counsel, therefore, contended that -8- NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR the allegations disclose a clear cognizable offence, and the investigation, having been lawfully set in motion, ought not to be interfered with at this stage. In support of his submissions, he placed reliance on the judgments of the Hon'ble Supreme Court in Sushil Suri vs. Central Bureau of Investigation & Another3 and Central Bureau of Investigation vs. Maninder Singh4, to emphasize that criminal prosecution cannot be stifled merely because civil or recovery proceedings are pending.
5. Learned High Court Government Pleader, Smt. Anita M. Reddy, supporting the submissions of respondent No.2, submitted that the complaint and accompanying material prima facie disclose cognizable offences warranting thorough investigation. It is contended that the matter involves serious allegations of financial fraud and misrepresentation, and therefore, no interference is called for at this preliminary stage of investigation. 3 AIR 2011 SC 1713 4 (2016) 1 SCC 389 -9- NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR
6. I have heard Sri Jayakumar S. Patil, learned Senior Counsel appearing for the petitioners, Smt. Anita M. Reddy, learned High Court Government Pleader for respondent No.1/State, and Sri S.S. Halalli, learned counsel appearing for respondent No.2/defacto complainant.
7. On a close examination of the prima facie material placed on record, this Court is of the considered view that the mere pendency of the writ petition concerning the challenge to vacation of interim order by the Appellate Authority in an appeal under Section 106(3) of the Karnataka Co-operative Societies Act, 1959, cannot, by itself, constitute a valid ground to quash the criminal proceedings in Crime No.55/2025. The allegations in the complaint are specific and grave in nature. The essence of the complaint is that the petitioners, in their capacity as Directors of the Sugar Factory, have passed a resolution to secure a substantial loan from the District Central Cooperative Bank Limited. In the said resolution, the
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NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR details of stock, including sugar, molasses, and bagasse, were indicated and the proposal was forwarded to the Central Bank for renewal of the key loan facility. It is alleged that the Directors resolved to pledge 2,71,627 quintals of sugar as stock security. However, the complainant asserts that this declaration is contrary to the stock statement furnished by the factory to the Apex Bank, wherein the closing stock was shown as 76,117 quintals only. This glaring disparity in stock figures forms the foundation of the allegation that the Directors, by depicting inflated stock, have intentionally misrepresented the financial position of the factory with a view to obtaining a higher credit facility from the Bank.
8. The learned Senior Counsel appearing for the petitioners has strenuously contended that since the Bank has already initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, the simultaneous initiation of criminal prosecution on the same
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NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR set of facts is unwarranted and constitutes a misuse of process. However, this Court is not inclined to accept the said contention. It is now well settled by a catena of decisions of the Hon'ble Apex Court as well as this Court that economic offences are not mere private disputes, but are public wrongs that strike at the very foundation of the financial integrity of institutions. Therefore, Courts exercising jurisdiction under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short, 'BNSS, 2023') are required to exercise great caution and should refrain from interdicting an investigation at the nascent stage unless the complaint fails to disclose any cognizable offence.
9. The judgments relied upon by the learned counsel for respondent No.2 are squarely applicable to the present case. The material on record indicates that the society, through its Directors who are the petitioners herein has availed a substantial loan of Rs.78 crores by pledging what is alleged to be an inflated sugar stock.
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NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR Whether the Directors, at the time of passing the resolution, had in fact deliberately overstated the stock position with the intent to defraud the Bank and secure an excessive loan, is a matter that falls squarely within the domain of investigation. The Hon'ble Supreme Court in CBI vs. Maninder Singh has categorically held that acts of financial deception perpetrated upon banking institutions amount to offences against the economic health of the nation and warrant serious investigation. Such acts cannot be treated as mere contractual or civil disputes, as they reflect fraudulent intent and erode the sanctity of financial discipline.
10. In view of the underlying principles enunciated by the Hon'ble Apex Court in the aforesaid decisions, this Court is of the considered opinion that the present case does not warrant interference under Section 528 of the BNSS, 2023. The allegations against the petitioners are of serious nature, involving the alleged inflation of stock figures and pledging of non-existent inventory to secure
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NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR an enormous loan amounting to Rs.78 crores. The discrepancies between the stock figures reflected in the factory's resolution and those found in the subsequent inspection report, as evidenced by Annexure-R6, are substantial and require thorough verification.
11. At this stage, the Court cannot embark upon a detailed appreciation of the disputed facts or adjudicate upon the veracity of the allegations. The matter necessarily warrants a comprehensive investigation by the jurisdictional police to ascertain whether the Directors, by passing the impugned resolution, had conspired or acted in concert with a fraudulent design to secure a financial advantage by misrepresentation. Interference at this stage would amount to stifling a legitimate investigation into an economic offence.
12. Without expressing any opinion on the merits of the case, this Court deems it appropriate to permit the investigation to proceed unhindered. The petitioners, being
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NC: 2025:KHC-K:5887 CRL.P No. 200872 of 2025 HC-KAR Directors of the Sugar Factory, are bound to extend full cooperation to the Investigating Officer in the course of the investigation.
13. For the foregoing reasons and observations, this Court finds no merit in the petition. Accordingly, the criminal petition stands dismissed.
Sd/-
(SACHIN SHANKAR MAGADUM) JUDGE SRT List No.: 1 Sl No.: 36 CT-SI