Calcutta HC quashes cheating case in settled loan dispute
The Calcutta High Court has quashed criminal proceedings against borrowers in a loan dispute that was settled before the Debt Recovery Tribunal. Justice Chaitali Chatterjee Das examined whether the borrowers could face prosecution for cheating and criminal breach of trust related to a construction loan repayment dispute.
The Court noted that the complainant company was not a party to the original loan transaction and that the complaint failed to disclose either the DRT settlement or essential elements needed to establish the alleged offences. The dispute involved a non-banking finance company that had extended a construction loan of ₹15 crore to a private company in 2015, with ₹12.44 crore subsequently disbursed.
The borrower company fell behind on EMI payments due to financial hardship following demonetisation. The lender issued a demand notice under the SARFAESI Act, 2002, which was challenged before the Debt Recovery Tribunal, Jabalpur. The demand notice and recovery proceedings were later withdrawn following a settlement between the parties.
Holding that the dispute was predominantly civil in nature, the Court ruled that permitting criminal prosecution in relation to the settled transaction would constitute an abuse of legal process. All consequential orders against the petitioners were quashed.
