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Unlawful use of criminal proceedings would encourage recalcitrant borrowers to use the criminal process to stall the recovery of their loans: Bombay High Court.

The Bombay High Court on Monday, the 1st of August, in the year 2022 passed a judgement in favour of the petitioners and quashed an FIR as it was used as unlawful criminal force to hamper the recovery of the loans taken by the complainant. This was seen in the case of ICICI Bank Ltd. & Ors. vs. The State of Maharashtra & Anr. (Writ Petition No. 2778 Of 2021) and this judgement was passed by The Honourable Mr. Justice Nitin M. Jamdar and The Honourable Mr. Justice N. R. Borkar.

FACTS OF THE CASE:

In this petition, the petitioners have challenged the integrity of the FIR charged against them by the complainant and pray to the court to quash the FIR. The power of the Court to quash a First Information Report (FIR) is in the exercise of powers under Section 482 of the Code of Criminal Procedure and Article 226 of the Constitution of India.

The complainant is a director of Hotel Horizon Private Limited and is engaged in the business of hoteliers and hospitality services. The complainant has filed the impugned FIR with BKC Police Station, Mumbai for offences under Section 420, 409, 465, 468, 471 and Section 34 of the Indian Penal Code on 9th July 2021.

The Complainant had approached the ICICI Bank for a loan and the loan agreement was executed between the Bank and the Complainant in the year 2011. The Complainant’s account was classified as a Non-performing Asset (NPA) on 30th June 2016 and the loan recall notice was issued to the Complainant on 8 July 2016. On 30th September 2016, the Complainant’s facility was assigned to the JM Financial Asset Reconstruction Company Limited (ARC)and on 7th December 2017, the ARC filed proceedings before the Debt Recovery Tribunal (DRT) against the Complainant. On 14th June 2021, the DRT issued summons to the Borrower and the Complainant and injuncted them from alienating and/or dealing with the properties. On 9th July 2021, the FIR was filed by the Complainant and The Economic Offence Wing (EOW) issued summons to the ARC to produce and hand over the original documents pertaining to the loan transaction.

The Bank and the ARC claim that the FIR is filed with malafides and is seeking to convert a purely commercial dispute arising out of defaults in repayment of loan into criminal proceedings to harass and pressurize the Bank, its officers, and the ARC. They contend in the court that the Complainant is using the police machinery to force the Bank to settle the matter and avoid repayment of the loan. The Bank and ARC also contend that the perusal of the FIR would show that there is no criminality but a civil transaction relating to loan recovery. The bank states that the Complainant is a borrower whose account has been declared as a non-performing asset by multiple other banks and has initiated the criminal process six years after the account was classified as NPA and the loan recall notice was issued. They contend that the FIR filed is done so to make grievance of what transpired between 2011 – 2012 only after the summons was issued by the Debt Recovery Tribunal on the proceedings initiated by the ARC.

JUDGEMENT:

The court in its judgement declared that in this case no cognisable offence is made out. The court also says the manner in which the FIR has been lodged, the repeated summons issued by the Investigating Officer and the insistence on handing over the original documents, the court is convinced that this FIR is filed as an abuse of the process of law. It is filed in respect of the events that occurred a decade ago only with an intention to block the recovery of the loan. The court feels if this criminal process is permitted to go on, with all the senior officers of the Bank and the ARC being subjected to it, it would be a gross failure of justice and if such pressure tactics are permitted, it would encourage recalcitrant borrowers to use the criminal process to stall the recovery of their loans and enforcement of personal guarantees, defeating the legislative intent of setting up a special mechanism for recovery of bad loans. The court gives the Complainant an opportunity to put forth all its contentions regarding the inter-se dispute in the proceedings pending in the DRT.

Thereafter, the writ petition is allowed, and The FIR is quashed.

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JUDGEMENT REVIEWED BY TANAV ZACHARIAH.

Click here to view the Judgement

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