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,
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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
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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
(2014)6 SCC 590
1989 (2) KLJ 291
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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
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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.
AIR 2011 SC 1713
(2016) 1 SCC 389
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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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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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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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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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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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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
CT-SI
