Bombay High Court’s Quashing of FIR Overturned: Supreme Court Upholds Right to Initiate Criminal Proceedings

The case of Dhanraj N Asawani v. Amarjeetsingh Mohindersingh Basi and Others revolves around a dispute concerning financial irregularities at Seva Vikas Co-operative Bank. The Supreme Court had to determine whether an individual could initiate criminal proceedings based on an audit report, despite specific procedural requirements under the Maharashtra Co-operative Societies Act, 1960.

Background of the Case

The case originated from alleged fraudulent activities in the management of Seva Vikas Co-operative Bank, a financial institution registered under the Maharashtra Co-operative Societies Act, 1960. Several complaints were lodged against the bank’s management, alleging financial misappropriation and cheating.

The Economic Offences Wing (EOW) of Pimpri-Chinchwad took up investigations in early 2019. Following forensic audits and internal reviews, reports indicated massive financial irregularities, including loans being granted to non-creditworthy entities and funds being siphoned off.

On July 19, 2019, the appellant, Dhanraj N Asawani, filed FIR No. 806 of 2019 at Pimpri-Chinchwad police station, alleging offences under:

Section 420 (Cheating)
Section 406 (Criminal Breach of Trust)
Section 409 (Criminal Breach of Trust by a Public Servant, Banker, or Agent)
Section 465 (Forgery)
Section 467 (Forgery of Valuable Security)
Section 468 (Forgery for Purpose of Cheating)
Section 471 (Using Forged Document as Genuine)
Section 34 (Acts Done by Several Persons in Furtherance of Common Intention) of the IPC.

Bombay High Court’s Decision

The accused, including the bank’s former CEO and Chairperson, challenged the FIR before the Bombay High Court, arguing that the procedure under the Maharashtra Co-operative Societies Act, 1960, was not followed.

On November 16, 2021, the Bombay High Court quashed FIR No. 806 of 2019, holding that:

Section 81(5B) of the Maharashtra Co-operative Societies Act mandated that the auditor or Registrar of Co-operative Societies must file an FIR in case of financial irregularities.
Allowing any other individual, such as the appellant, to initiate criminal proceedings would render the Act’s provisions redundant.
Since the FIR was based on an audit report prepared under Section 81, it was necessary to follow the procedural safeguards laid down under the Act.

Supreme Court’s Analysis and Judgment

The Supreme Court, led by Chief Justice D.Y. Chandrachud and Justices J.B. Pardiwala and Manoj Misra, examined whether Section 81(5B) of the Maharashtra Co-operative Societies Act precluded an individual from setting the criminal law into motion.

Arguments by the Appellant

The appellant contended that the High Court misinterpreted the law and argued:

“Neither expressly nor by necessary implication does the Maharashtra Co-operative Societies Act preclude an individual from initiating criminal proceedings in cases of financial fraud.”

Further, the appellant highlighted that:

The audit report indicated clear financial misappropriation.
The police were duty-bound to register an FIR and investigate.
The High Court erred in treating Section 81(5B) as an absolute bar.

Arguments by the Respondents

The accused argued that:

“The procedure under Section 81(5B) requires the auditor to first file a report with the Registrar, who must then approve the filing of an FIR.”

They contended that the FIR should have been registered by the authorities specified under the Act.

Supreme Court’s Ruling

The Supreme Court overturned the Bombay High Court’s decision, holding:

“Neither expressly nor by necessary implication does the 1960 Act prevent an individual from setting the criminal law into motion.”

The Court emphasized:

Section 81(5B) imposes a duty on auditors and the Registrar to act but does not prohibit an individual from filing a complaint.
Criminal law exists independently, and a victim or affected party has the right to approach the police.
Previous Supreme Court judgments, including A.R. Antulay v. Ramdas Nayak, upheld that criminal proceedings could be initiated by any person unless explicitly barred.

Final Decision

The Supreme Court allowed the appeal and restored FIR No. 806 of 2019, directing the police to resume investigations.

However, the Court clarified that:

“The pending proceedings before the Bombay High Court challenging the audit report shall not be affected by this judgment.”

Conclusion

This landmark judgment underscores the fundamental principle that criminal law is not subordinate to procedural formalities under special statutes. The Supreme Court reaffirmed that a statutory provision imposing a duty on certain authorities does not take away the right of an affected individual to initiate legal action.

By overturning the Bombay High Court’s decision, the Supreme Court reinforced the notion that financial frauds affecting the public interest must be thoroughly investigated, irrespective of procedural technicalities.

Petitioner Name: Dhanraj N Asawani.
Respondent Name: Amarjeetsingh Mohindersingh Basi and Others.
Judgment By: Justice D.Y. Chandrachud, Justice J.B. Pardiwala, Justice Manoj Misra.
Place Of Incident: Pimpri-Chinchwad, Maharashtra.
Judgment Date: 24-07-2023.

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