The Supreme Court today questioned the continuation of CBI proceedings in a bank fraud case even after the borrower had settled the loan account through a One Time Settlement (OTS).

The case arose from a CBI investigation into alleged bank fraud involving credit facilities granted by UCO Bank to a trading firm owned by the petitioners. The borrowers had obtained enhanced loan limits by mortgaging and later substituting certain properties allegedly found to be encroached land. Though the loan account later became an NPA and was settled through a One Time Settlement (OTS), with the bank issuing a No Dues Certificate in 2015, the bank subsequently lodged a complaint in 2018 alleging fraudulent substitution of mortgaged properties and submission of forged documents, leading to registration of FIR and chargesheet by the CBI under cheating and forgery provisions of the IPC.

During the hearing, Justice B.V. Nagarathna questioned why criminal proceedings were continuing despite the bank having accepted the settlement amount.

Responding, the CBI submitted that the case involved misuse of public funds and forgery, arguing that “settlement of a civil dispute would not extinguish criminal liability, particularly when there is forgery and misuse of public funds.”

The Bench, however, observed that the bank had already accepted the money and the loan transaction had effectively come to an end. “Where is the criminality?” Justice Nagarathna asked. The CBI again responded that “the criminality lies in using forged documents and misusing public funds.”

However, Justice Nagarathna made strong oral observations on selective action in bank default cases, remarking: “This is a strange case. Please go and get back the extradition you get from those people who are sitting outside. Thousands of crores have been given by banks to entities in India, not returned, no action taken… and you’re going against a widow.”

The Bench of Justice BV Nagarathna and Justice Satish Chandra Sharma ultimately allowed the Special Leave Petition.