[Cites 4, Cited by 0]

Telangana High Court

J.Srinivas vs State Of Telangana on 25 March, 2026

   IN THE HIGH COURT FOR THE STATE OF TELANGANA

                        AT HYDERABAD

        THE HONOURABLE SMT. JUSTICE K. SUJANA



            CRIMINAL PETITION No.4570 OF 2025



                       DATE : 25.03.2026

Between :

J.Srinivas & another
                                     ...     Petitioners/A.6 & A.8


                               And

State of Telangana,
Rep., by its Special Public Prosecutor,
C.B.I., Hyderabad& another
                                     ... Respondents


                          : O R D E R:

This petition is filed under Section 528 of Bharatiya

Nagarik Suraksha Sanhita, 2023 praying this Court to quash

the proceedings against the petitioners in C.C.No.16 of 2014 on

the file of Principal Special Sessions Judge for CBI Cases,

Hyderabad, wherein the alleged offences against the petitioners

are under Sections 120-B r/w.420, 409, 467, 467 r/w.472, 468

r/w.471 of Indian Penal Code and under Section 13 (2) r/w.13

(1) (d) and substantive offences.

2. The prosecution case is that the 2nd respondent lodged a

complaint, based on which the CBI, Economic Offences Wing,

registered FIR No.14(E)/2012 alleging that A.1 to A.8 entered

into a criminal conspiracy to defraud Indian Bank, Osmangunj

Branch, Hyderabad. A.1, K. Suresh Kumar, initially availed an

Open Cash Credit (OCC) limit of Rs.15 lakh in September 2001

in the name of M/s. Sirish Traders, which was later renamed as

M/s. PDM Industries. The OCC limits were periodically

enhanced, and ultimately, on 06.02.2009, the limit was

increased to Rs.450 lakh. It is further alleged that the Bank

sanctioned multiple loans, including two term loans totaling

Rs.2.25 crore to M/s. P.S. Educational Society, a

mortgage/term loan of Rs.50 lakh to M/s. Sri Sakthi

Constructions and M/s. Suryodaya Constructions, and a

housing loan of Rs.40 lakh to K. Suresh Kumar and K. Rajendra

Kumar. These loans were secured by mortgaging properties

belonging to K. Rajendra Kumar, Smt. K. Bharathi Devi, K.

Suresh Kumar, and Smt. K. Pallavi, along with personal

guarantees from K. Madhu, Smt. K. Sarita Rani, and J. Krishna.

As the borrowers failed to repay the dues, the accounts were

classified as Non-Performing Assets (NPA) on 31.03.2010, with

an outstanding amount of Rs.7.18 crore as on 04.09.2010.

3. The prosecution further alleges that certain bank officials,

namely A.6 to A.8, who were working as Branch Manager/Chief

Manager, Senior Manager, and Assistant Manager at the

relevant time, conspired with A.1 to A.5. It is alleged that the

borrowers submitted forged title deeds as genuine, and despite

knowing the same, A.6 and A.7 recommended the loan

proposals and failed to comply with sanction conditions before

disbursement, thereby acting with criminal intent. It is further

alleged that in August 2002, A.1 applied for enhancement of the

OCC limit from Rs.15 lakh to Rs.50 lakh under Trade Finance

"Trade Well". Along with the application, financial statements,

asset and liability statements, a legal opinion, and a valuation

report were submitted. However, the application was processed

without independently obtaining legal opinion from the panel

advocate and without verifying the genuineness of the title

deeds. Based on the recommendation of A.7 and the Credit

Department's note, the Circle Office sanctioned an enhanced

limit of Rs.40 lakh on 22.08.2002. On the basis of the

complaint and subsequent investigation, it is alleged that A.1 to

A.8, in furtherance of their conspiracy, committed offences of

cheating, forgery, use of forged documents, criminal breach of

trust, and criminal misconduct, thereby causing wrongful loss

of Rs.7,17,96,555/- to the Bank. Accordingly, the case was

registered against all the accused for the said offences.

4. Heard Sri Rajasripathi Rao, learned Senior counsel

appearing for Sri G.Aditya Goud, learned counsel for the

petitioners, Sri T.Srujan Kumar Reddy, learned Special Public

Prosecutor appearing for respondent No.1 and Sri Hemanth

Kumar Vemuri, learned counsel appearing for respondent No.2.

5. The learned Senior counsel for the petitioners contended

that the charges framed by the trial Court do not contain any

specific allegations against A.6 and A.8. Charge No.1 pertains

only to the loan availed by A.1 to A.5, and the allegations are

confined to them. The only vague allegation against A.6 to A.8 is

that they allegedly joined A.1 to A.4 in committing misconduct.

However, the trial has already commenced, and none of the

prosecution witnesses have implicated the petitioners in the

alleged transaction.

6. It is further submitted that Pw.1 (complainant) did not

attribute any role to the petitioners and, in cross-examination,

admitted that there were no lapses on the part of the Branch

Manager in assessing or processing the loan. Pw.2, a panel

advocate, also did not make any allegations against the

petitioners and admitted lack of recollection regarding

verification of documents. Pw.3, a retired AGM, only stated that

A.6 and A.7 were Branch Managers during the relevant period

and identified A.1 and A.2 as the key persons. He further

admitted that prior to sanction, the loan proposals were verified

and approved by the legal department and higher authorities.

Pw.4 confirmed that loan proposals were forwarded to higher

authorities without alteration, and Pw.5 stated that loans

exceeding Rs.1 crore were monitored by the Circle Office,

thereby indicating that the petitioners had no role in

sanctioning the loans.

7. Learned Counsel further submitted that Pws.6 to 12,

including senior and zonal officers, did not make any allegations

against the petitioners. Their evidence shows that the borrower

had financial strength, the loan process complied with bank

guidelines, and the staff accountability report recorded "Nil"

against the concerned transactions. Pws.13 to 15 spoke only

about subsequent renewals and did not implicate the

petitioners. Pw.27's evidence also indicates that the loan

amount was properly utilized for the intended purpose, as

infrastructure and equipment were indeed available. It is

therefore contended that the entire evidence of Pws.1 to 15 and

other material witnesses does not disclose any role or

involvement of the petitioners in the alleged conspiracy, and

there is no incriminating material against them. Reliance is also

placed on the order of the Hon'ble Supreme Court in SLP (Crl.)

No.4113 of 2024 dated 03.10.2024, whereby proceedings

against A.3 and A.4 were quashed, and the same reasoning is

applicable to the present petitioners. It is further submitted that

an earlier quash petition was disposed of due to non-

representation of the petitioners' counsel, and liberty was

granted to file a fresh petition. In view of the said liberty, the

present petition is filed, and therefore, the learned counsel

prayed for quashing of proceedings against the petitioners.

8. On the other hand, the learned Standing Counsel

appearing for Indian Bank contended that the CBI investigation

revealed that A.6 to A.8, being bank officials, had conspired

with the other accused to cheat the Bank. It is submitted that

A.6, in furtherance of the conspiracy, forwarded proposals for

enhancement of credit limits to the Circle Office without

properly verifying the viability of the loan, sales turnover, or end

use of earlier funds. Based on such recommendations, the

Circle Office enhanced the OCC limits from Rs.150 lakh to

Rs.300 lakh and subsequently to Rs.450 lakh. It is alleged that

A.6 failed to verify the genuineness of financial statements,

asset and liability details, stock statements, and net worth

certificates, and did not ensure compliance with sanction

conditions before release of the limits. It is further contended

that A.6 and A.7 showed undue favour to the borrowers by not

rectifying discrepancies and by forwarding proposals without

due diligence. It is further submitted that A.6 and A.8

submitted a false visit report dated 07.06.2007, stating that the

school building had 82 rooms with full infrastructure and

facilities, including air conditioners, laboratories, library,

computers, swimming pool, and other amenities, whereas in

reality the building had only 38 rooms and lacked such

facilities. This, according to the Bank, clearly establishes that

the petitioners submitted false reports, showed undue favour to

the borrowers, and thereby cheated the Bank.

9. The learned Standing Counsel further contended that the

Hon'ble Supreme Court quashed proceedings only against A.3

and A.4, without expressing any opinion on the case against the

present petitioners. It is also pointed out that the quash petition

filed by A.1 and A.2 was earlier dismissed, and that settlement

of dues under OTS, issuance of No Due Certificate, or closure of

DRT proceedings have no bearing on the criminal liability of the

petitioners. It is submitted that the Bank suffered a substantial

loss even under OTS, and that the petitioners, by abusing their

official position, facilitated pecuniary advantage to the

borrowers. After examining their role, sanction was accorded for

prosecution by the competent authority. Hence, dismissal of the

petition is sought.

10. The learned Standing Counsel for CBI also opposed the

petition, contending that there are specific and clear allegations

against the petitioners. It is submitted that the enhancement of

loans was based on reports submitted by the petitioners, which

contained fabricated facts regarding the infrastructure and

capacity of the building, including non-existent facilities such as

a swimming pool. It is further contended that, contrary to

standard banking procedure, the borrowers directly obtained

legal opinion and, based on such opinion, the petitioners

forwarded proposals for sanction and enhancement of loans,

thereby indicating their involvement in the conspiracy. It is also

submitted that an earlier quash petition filed by the petitioners

was dismissed after trial had progressed, and that departmental

enquiry findings also held the petitioners at fault. It is argued

that mere settlement of dues is not a ground to quash criminal

proceedings where allegations of conspiracy and misconduct

exist. In support of his contentions, reliance is placed on

Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur and

Others V State of Gujarat and Another 1, Ishoo Narang and

Others V State of Telangana and another 2, Central Bureau of

Investigation V Hari Singh Ranka and Others 3 and prayed to

dismiss this petition.

11. Considering the submissions made by the learned counsel

on either side and upon perusal of the material available on

record, the primary contention of the petitioners is that sanction

of the loan was made by the Circle Office, and the Zonal Office

had no authority to sanction such a huge amount. Therefore,

according to them, they are not concerned with the sanction of

the loan. It is also contended that the recommendation for the

loan was made by A.7 and that the petitioners were not

connected with forwarding or recommending the proposal to the

Circle Office. Another contention is that A.2 and A.3, who are

guarantors to the loan, have already obtained an order from the

Hon'ble Supreme Court quashing the proceedings against them,

and the same benefit should enure to the petitioners. It is 1 AIR 2017 Supreme Court 4843

2 2021 (4) ALD 496 (TS)

3 (2019) 16 Supreme Court Cases 687

- 10 -

further contended that the Bank has accepted the dues under

the OTS scheme and withdrawn the proceedings before the

DRT, and therefore, continuation of the criminal proceedings

amounts to abuse of process of law. Lastly, it is contended that

none of the material witnesses, particularly the bank officials,

have spoken against the petitioners, and the allegation that a

false report was submitted by them is incorrect. It is also

contended that once a "No Due Certificate" is issued and full

satisfaction is recorded before the DRT, nothing survives in the

criminal case.

12. Upon consideration of the above contentions, it is an

admitted fact that the loan was sanctioned by the Circle Office

and that the Zonal Office had no authority to sanction such a

large amount. However, the specific allegation against the

petitioners is that they recommended the proposal and, based

on such recommendation, the Circle Office sanctioned the OCC

limit of Rs.450 lakhs in favour of A.1 and A.2. The core issue

relates to the genuineness of the documents submitted for

availing the loan. In this context, it is not in dispute that the

Bank had a panel of advocates to render legal opinions

regarding the documents. In the present case, the material on

record indicates that the borrowers approached the legal

- 11 -

department and obtained legal opinion regarding the

documents, which were opined to be genuine. The petitioners,

relying upon such legal opinion, recommended the loan

proposal. The contention of the learned Standing Counsel for

CBI that the opinion ought to have been routed through the

Bank is met with the submission of the petitioners that, at the

relevant point of time, there was no such mandatory procedure

and it was a prevailing practice for borrowers to approach the

legal department directly. Therefore, at this stage, it cannot be

conclusively held that the petitioners conspired with A.1 and

A.2 solely on that basis.

13. Further, the evidence of Pw.5, who was the Credit Officer,

discloses that the credit proposals were prepared by him

without any misrepresentation or suppression of facts and, after

verification of the documents, the same were forwarded to the

Branch Manager and thereafter to the Circle Office without any

alteration or addition. This indicates that the petitioners did not

interfere with or modify the proposals or legal opinion.

Therefore, it cannot prima facie be said that the petitioners

facilitated the borrowers in availing the loan on the basis of

fabricated documents. It is also pertinent to note that certain

properties were proceeded against under the SARFAESI Act and

- 12 -

amounts were recovered. Subsequently, under the OTS scheme,

the remaining dues were settled and the documents were

returned to the borrowers. With regard to the alleged false visit

report, the material on record shows that in the earlier visit

report dated 10.03.2007 it was noted that the school required

additional rooms for expansion, and this aspect appears to have

been taken into consideration in the subsequent report dated

09.06.2007. Moreover, the pre-release audit report dated

18.05.2007, prepared by a Chartered Accountant nominated by

the Circle Office, also reflects that a pre-sanction visit was

conducted and the report was forwarded as per sanction

conditions. This indicates that the sanction of the loan was not

solely based on the visit report submitted by the petitioners.

14. In view of the above, the contention that the visit report

alone formed the basis for sanction and that the petitioners

conspired with the other accused does not prima facie appear to

be substantiated. It is also brought on record that disciplinary

proceedings were initiated against the petitioners for certain

omissions, which were subsequently closed. Further, the

Hon'ble Supreme Court has quashed the proceedings against

A.2 and A.3, who were guarantors to the loan.

- 13 -

15. In K.Bharthi Devi and another V State of Telangana

and another 4 in 29.7 of para 40, it was held as follows :

....

29.7. While deciding whether to exercise its power under Section 482 of the Code or not, timings of settlement play a crucial role. Those cases where the settlement is arrived at immediately after the alleged commission of offence and the matter is still under investigation, the High Court may be liberal in accepting the settlement to quash the criminal proceedings/investigation. It is because of the reason that at this stage the investigation is still on and even the charge-

sheet has not been filed. Likewise, those cases where the charge is framed but the evidence is yet to start or the evidence is still at infancy stage, the High Court can show benevolence in exercising its powers favourably, but after prima facie assessment of the circumstances/material mentioned above. On the other hand, where the prosecution evidence is almost complete or after the conclusion of the evidence the matter is at the stage of argument, normally the High Court should refrain from exercising its power under Section 482 of the Code, as in such cases the trial court would be in a position to decide the case finally on merits and to come to a conclusion as to whether the offence under Section 307IPC is committed or not. Similarly, in those cases where the conviction is already recorded by the trial court and the matter is at the appellate stage before the High Court, mere compromise between the parties would not be a ground to accept the same resulting in acquittal of the offender who has already been convicted by the trial court. Here charge is proved under Section 307IPC and conviction is already

(2024) 10 Supreme Court Cases 384

- 14 -

recorded of a heinous crime and, therefore, there is no question of sparing a convict found guilty of such a crime."

44. The facts in the present case are similar to the facts in Sadhu Ram Singla [CBI v. Sadhu Ram Singla, (2017) 5 SCC 350 : (2017) 2 SCC (Cri) 535] wherein a dispute between the borrower and the Bank was settled. In the present case also, undisputedly, the FIR and the charge-sheet are pertaining to the dispute concerning the loan transaction availed by the accused persons on one hand and the Bank on the other hand. Admittedly, the Bank and the accused persons have settled the matter. Apart from the earlier payment received by the Bank either through equated monthly instalments (EMIs) or sale of the mortgaged properties, the borrowers have paid an amount of Rs 3,80,00,000 under OTS. After receipt of the amount under OTS, the Bank had also decided to close the loan account. The dispute involved predominantly had overtures of a civil dispute.

45. Apart from that, it is further to be noted that in view of the settlement between the parties in the proceedings before DRT, the possibility of conviction is remote and bleak. In our view, continuation of the criminal proceedings would put the accused to great oppression and prejudice.

16. In the above judgment it was observed that already A.1

and Bank have settled the matter and main accusations are

against A.1 and quashed the proceedings against A.2 and A.3.

In the present case also petitioners are arrayed as A.6 and A.8

and the only allegation against these petitioners is that they

have not verified the documents filed by the borrower and the

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visit report submitted by petitioners is false whereas, the

documents are verified by the legal department and basing on

their opinion petitioners have sent proposal to the Circle office

and the visit report is also verified by Pw.5 and C.A. and loan

was sanctioned by Circle Office. Considering all these aspects,