Steel Hypermart INDIA PVT LTD vs. Central Bureau Of Investigation

Facts

The petitioners, Steel Hypermart India Pvt. Ltd. and its directors, challenged the registration of a First Information Report (FIR) by the CBI. The company had obtained cash credit limits from Indian Bank and other consortium banks. A GST raid was conducted on January 9, 2019, leading to the seizure of records and directions to banks not to interact with the company. Consequently, the company's loans became Non-Performing Assets (NPAs). The Indian Bank initiated proceedings under the SARFAESI Act, including issuing possession notices, which were challenged. The Bank also issued a notice to declare the company a 'willful defaulter' on February 20, 2020, which was stayed by the High Court in a previous writ petition. Despite the stay, the Bank, with consent from Bank of Baroda, filed a complaint with the CBI, leading to the registration of the FIR on January 12, 2021, for offences under the IPC and the Prevention of Corruption Act.

Held

The Court quashed the FIR registered by the CBI. The Court found that the Indian Bank's action of registering the crime was flawed as it was done in the teeth of an existing interim order from the High Court that had stayed further proceedings concerning the declaration of the company as a willful defaulter. The Court noted that the writ petition, which led to the stay, was disposed of based on the Bank's submission that it would reconsider the case of the petitioner as a willful defaulter. However, as of the date of this judgment, the matter was still pending before the Review Committee of the Indian Bank. The Court held that permitting the CBI proceedings to continue would be an abuse of process and an attempt to overreach the Court's orders. The respondents were granted liberty to initiate proceedings subject to the outcome of the decision of the Review Committee of the Indian Bank, in terms of the judgment of the Apex Court in M/s Jah Developers Private Limited, and any such future proceedings must be in accordance with law.

Key Issues

1. Whether the Indian Bank could register a complaint with the CBI while an interim order from this Court was in operation, staying further proceedings related to the declaration of the company as a 'willful defaulter'? (Question of law) Petitioner's arguments: The learned senior counsel for the petitioners contended that the procedure stipulated by the Reserve Bank of India for declaring a company a 'willful defaulter' was not followed. He argued that the Indian Bank could not have registered a complaint with the CBI in the teeth of the earlier interim order from this Court, which had stayed all further proceedings. The petitioners sought annulment of the proceedings and remittance back to the appropriate authority for reconsideration from the stage of declaring the company a willful defaulter. Revenue/State's arguments: The learned counsel for the Indian Bank argued that the circulars regarding willful defaulters were not applicable. He asserted that the Bank retained its right to file a complaint for offences under the IPC, as the declaration of a willful defaulter and the registration of a crime under the IPC are distinct. He emphasized that technicalities should not jeopardize public money amounting to Rs. 200 crores. The CBI submitted that it had proceeded with the investigation based on the complaint filed by the Indian Bank.