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SC: Reference to larger Bench has to be for reconsideration of the principle of law and not merits of the decision.

Vineet Kumar ,
  15 April 2014       Share Bookmark

Court :
Supreme Court of India
Brief :
The bench comprising of Chief Justice of India, P. Sathasivam, Justice Ranjan Gogoi and Justice N.V. Ramana held that the reference of a case to a larger Bench necessarily has to be for a reconsideration of the principle of law on which the case has been decided and not the merits of the decision. The Court said: ''Reference of a case to a larger Bench necessarily has to be for a reconsideration of the principle of law on which the case has been decided and not the merits of the decision. The decision rendered by any Bench is final inter-parte, subject to the power of review and the curative power. Any other view would have the effect of conferring some kind of an appellate power in a larger Bench of this Court which cannot be countenanced. However, the principle of law on which the decision based is open to reconsideration by a larger Bench in an appropriate case.''
Citation :
Nikhil Merchant vs. Central Bureau of Investigation and Another Gian Singh vs. State of Punjab and Another CBI ACB Mumbai vs. Narendra Lal Jain & Ors. B.S. Joshi vs. State of Haryana Manoj Sharma vs. State




CRIMINAL APPEAL  NO.          831                     OF 2014

(Arising out of Special Leave Petition (Crl.) No. 8914 OF 




C.B.I. & ANR.        ...  RESPONDENT (S) 


1. Leave granted.


2. The  appellant  is  the  second  accused  (hereinafter 

referred to as ‘A-2’) in CC No. 48 of 2011 (RC 27(A)/2004) in 

the  Court  of  the  Special  Judge  (SPE/CBI), 

Thiruvananthapuram.  He is aggrieved by the refusal dated 

25.06.2013  of  the  High  Court  of  Kerala  to  quash  the 


Page 1

aforesaid  criminal  proceeding  lodged  by  the  respondent-

Central Bureau of Investigation (hereinafter for short ‘CBI’).

3. The allegations made against the accused-appellant in 

the FIR dated 30.11.2004 are to the effect that the accused-

appellant  alongwith  one  T.K.  Rajeev  Kumar  (A-1),  Branch 

Manager,  Indian  Overseas  Bank,  Killippalam  Branch, 

Trivandrum  and  C.  Sivaramakrishna  Pillai  (A-3)  (since 

deceased) had entered into a criminal  conspiracy to obtain 

undue pecuniary advantage for themselves.  Specifically,  it 

was  alleged  that  in  furtherance  of  the  aforesaid criminal 

conspiracy the accused-appellant  dishonestly applied for  a 

car loan of Rs. 5 lakhs and opened a bank account bearing 

No.  1277  on  24.08.2002  without  proper  introduction. 

Thereafter,  according  to  the  prosecution,  the  accused-

appellant  furnished a forged agreement  for  purchase of  a 

second hand Lancer Car bearing No. KL-5L-7447 showing the 

value thereof as Rs. 6.65 lakhs though the accused-appellant 

had purchased the said vehicle for Rs. 5.15 lakhs only.  It is 

further alleged that  A-1,  by abusing his official  position as 


Page 2

Branch Manager, dishonestly sanctioned Rs. 5 lakhs towards 

car loan without prerequisite sanction inspection.  It is also 

alleged that A-1,  who did not have the authority to do so, 

sanctioned  education  loan  of  Rs.4  lakhs  under  the 

Vidyajyothi Scheme to the accused-appellant for undergoing 

a course on Digital Film Making at SAE Technology College, 

Thiruvananthapuram.   According  to  the  prosecution,  the 

accused-appellant had submitted two forged receipts of the 

aforesaid college showing payment of Rs. 1,60,000/- as fees 

which amount  was duly released in his favour  though  he 

had  actually  paid  Rs.  47,500/-  to  the college and had 

attended the course only for three days.

4. It  is  the  further  case  of  the  prosecution  that  A-1, 

without  being authorised to do so,  sanctioned cash credit 

facility of  Rs.  17 lakhs to one M/s. Focus Infotainments of 

which  the  accused-appellant  is  the  proprietor  and in  this 

regard had obtained inflated value of the collateral security 

offered by the accused-appellant from deceased accused,  A-

3.   According  to  the  prosecution  in  the  valuation  report 


Page 3

submitted by  A-3 the  value  of  the  property  offered as  a 

collateral  security  by  A-2  was  shown  at  Rs.17,34,675/- 

though the subsequent  valuation thereof  by  an approved 

valuer  was  for  Rs.8,56,600/-.   The  prosecution  had  also 

alleged that after sanction of  the said loan,  A-1 wiped out 

the  over  draft  facility  of  Rs.  13,94,000/-  given  to  the 

accused-appellant without any authority by transferring the 

said amount  from the cash credit  account  which was not 

only  against  the  banking  procedure  but  had also  caused 

undue pecuniary advantage to the accused-appellant to the 

extent  of  Rs.  23,57,887/-.   On  the  aforesaid  facts, 

commission of  offences under Section 120-B IPC read with 

Section 13(2) read with Section 13(1)(d)  of the Prevention of 

Corruption Act and Sections 420/471 IPC was alleged insofar 

as the accused-appellant is concerned.  

5. Based  on  the  aforesaid  allegations  RC  Case  No. 

27(A)/2004  dated  21.7.2005  was  registered  wherein 

chargesheet  had been filed against  the accused-appellant 

under the aforesaid sections of the Indian Penal Code as well 


Page 4

as the PC Act.   It is not in dispute that charges under the 

aforesaid provisions of  law have been framed against  the 

accused-appellant  in  the  court  of  the  Special  Judge 

(SPE/CBI), Thiruvananthapuram on 29.07.2013.  

6. Shri  H.P.  Raval,  learned Senior  Counsel  appearing for 

the accused-appellant had contended that all  amounts due 

to the bank from the accused-appellant has been tendered 

in full in an out of court settlement between the parties.  An 

acknowledgement  dated  30.3.2009  has  been  issued  on 

behalf of the bank to the aforesaid effect wherein it is also 

stated  that  the  bank  has  no  further  claims  and  charges 

against  the accused-appellant  in view of  the compromise 

reached.   Placing reliance on the decisions of this Court in 

Nikhil  Merchant   vs.  Central  Bureau of  Investigation 

and Another




 and Gian Singh vs.  State of Punjab and 

 and  a  recent  pronouncement  in  CBI,  ACB,  

Mumbai vs.  Narendra  Lal  Jain  & Ors.


 Shri  Raval  had 

contended that in view of the settlement arrived at between 




 (2008) 9 SCC 677

 (2012) 10 SCC 303

 2014 (3) SCALE 137


Page 5

the bank and the accused-appellant, the High Court ought to 

have exercised its power under Section 482 Cr.P.C. to quash 

the criminal proceedings against the accused-appellant.  Shri 

Raval  has  taken  the  Court  through  the  details  of  the 

allegations made and the charges framed to contend that 

the  same  are  identical  with  those  in  Nikhil  Merchant 

(supra).  The charges against the accused in both the cases 

are  identical;  the  same  has  been  quashed  in  Nikhil  

Merchant (supra) which decision has been endorsed by a 

larger Bench in Gian Singh (supra) and also in  Narendra 

Lal Jain (supra).  It is, therefore, contended that the criminal 

proceeding  against  the  accused-appellant  is  liable  to  be 

quashed and the impugned order passed by the High Court 

set aside.

7. On  the  contrary,  Shri  Sidharth  Luthra,  learned 

Additional Solicitor General has submitted that the decision 

in Nikhil Merchant (supra) turns on its own facts and what 

has  been approved in  Gian Singh  (supra)  is  merely  the 

principle  of  law  laid  down  in  Nikhil  Merchant  (supra), 


Page 6

namely,  that  quashing a non-compoundable offence under 

Section 482 Cr.P.C.,  following the settlement  between the 

parties,  does  not  amount  to  a  circumvention  of  the 

provisions of Section 320 of the Code of Criminal Procedure. 

Notwithstanding  the  above,  according  to  Shri  Luthra, 

whether  a  criminal  proceeding  should  or  should  not  be 

interdicted midway would really depend on the facts of each 

case.   Shri  Luthra  has  also  drawn  our  attention  to  the 

observations  made  in  para  61  of  the  judgment  in  Gian 

Singh (supra)  wherein  this  Court  had  carved  out  an 

exception by observing that, 

“heinous  and  serious  offences  of  mental 

depravity  or  offences  like  murder,  rape, 

dacoity, etc. cannot be fittingly quashed even

though the victim or victim’s family and the

offender  have  settled  the  dispute.   Such

offences are not private in nature and have a

serious  impact  on  society.   Similarly,  any

compromise  between  the  victim  and  the

offender  in  relation  to  the  offences  under

special  statutes  like  the  Prevention  of  


Page 7

Corruption Act or the offences committed by

public  servants  while  working  in  that 

capacity,  etc.;  cannot  provide for  any basis 

for  quashing criminal  proceedings  involving

such offences.”

According to Shri  Luthra in view of  the above and having 

regard to the charges framed in the present case the High 

Court  was fully justified in declining to quash the criminal 

proceeding against the accused.

8. Insofar as the judgment in Narendra Lal Jain (supra) is 

concerned, Shri Luthra has pointed out that in the aforesaid 

case the accused was charged for the offence under Section 

120B  read  with  Section  420  of  the  IPC  whereas  in  the 

present case the charges against the accused-appellant are 

under  Section  120-B  read  with  Section  13(2)  read  with 

Section  13(1)(d)  of  the  Prevention  of  Corruption  Act  and 

Section 420/471 of  the Indian Penal  Code.   It  is submitted 

that the offences under the Prevention of Corruption Act and 

Section 471 of Indian Penal Code are not compoundable.  


Page 8

9. We  have  also  heard  Shri  P.  Suresh  Kumar,  learned 

senior  counsel  for  the  respondent  No.2-bank  who  had 

admitted the payment  of  the entire amount  due from the 

accused-appellant  under  the  transaction  in  question. 

Learned  counsel  has,  however,  submitted  that  in  written 

acknowledgment  issued by the Bank there is  no mention 

regarding any ‘settlement’ of the criminal  case against the 

accused-appellant insofar as the bank is concerned.

10. The charges framed against  the accused-appellant,  it 

may be repeated,  are under  Section 120-B IPC read with 

Section 13(2) read with Section 13(1)(d) of the PC Act and 

Sections  420/471  of  the  IPC.   It  is  true  that  in  Nikhil  

Merchant  (supra) the charges framed against the accused 

were also under Sections 120-B read with Section 5(2) and 

5(1) (d) of the PC Act, 1947 (Section 13(2) read with 13(1)(d) 

of the PC Act, 1988) and Sections 420, 467, 468, 471 of the 

Indian Penal Code.  However, in para 28 of the judgment in 

Nikhil Merchant (supra) on a consideration of the totality of 

the  facts  and  circumstances  in  which  the  charges  were 


Page 9

brought  against  the accused this  Court  had come  to the 

following conclusion:-

“28. The basic  intention of  the accused in this 

case appears to  have been to  misrepresent  the

financial  status  of  the  Company,  M/s  Neemuch

Emballage Ltd.,  Mumbai,  in order to avail  of  the

credit facilities to an extent to which the Company

was  not  entitled.  In  other  words,  the  main

intention of  the Company and its officers was to 

cheat  the  Bank  and  induce  it  to  part  with 

additional  amounts  of  credit  to  which  the

Company was not otherwise entitled.”

The Court,  thereafter,  took into account  the fact that 

the  dispute  between  the  parties  had  been 

settled/compromised and such compromise formed a part of 

the decree passed in the suit filed by the bank.  After holding 

that the power under Section 482 Cr.P.C. to quash a criminal 

proceeding was not contingent on the provisions of Section 

320  of  the  Code  of  Criminal  Procedure,  and  taking  into 

account the conclusion recorded in para 28 of the judgment, 

as noticed above, the Court ultimately concluded that in the 

facts of the case (Nikhil Merchant) it would be justified to 

quash the criminal proceeding.  In this regard, it is important 


Page 10

to note that the Court in Nikhil Merchant (supra) had come 

to  the  conclusion  that  “the  dispute  involved  herein  has 

overtones of a civil dispute with certain criminal overtones.”

11. The decisions in Nikhil Merchant (supra) as well as in 

some  other  cases  namely  B.S.  Joshi   vs.  State  of 



 and Manoj Sharma vs. State


 were referred to a 

larger  Bench  in  Gian Singh  (supra)  for  an  authoritative 

pronouncement  as to whether in the said cases this Court 

had  “indirectly  permitted  compounding  of  non-

compoundable offences”.   The larger Bench hearing the 

matter in its judgment





 took the view that the, 

“Quashing of  offence or  criminal  proceedings on

the ground of settlement between an offender and

victim is not  the same thing as compounding of 

offence.  ……..  Strictly  speaking,  the  power  of 

compounding of  offences given to a court  under 

Section  320  is  materially  different  from  the

quashing  of  criminal  proceedings  by  the  High

Court  in  exercise  of  its  inherent  jurisdiction.” 

[Para 57]

 (2003) 4 SCC 675

 (2008) 16 SCC 1

 Gian Singh Vs. State of Punjab & Anr. (2012) 10 SCC 303


Page 11

Eventually, in para 61 the note of caution insofar as heinous 

and  grave  offences  and  offences  under  special  laws,  as 

already noticed,  was sounded and it  was held that  Nikhil  

Merchant  (supra),  B.S.  Joshi   vs.  State  of  Haryana 

(supra) and Manoj Sharma vs. State (supra) were correctly 


12. Reference of a case to a larger Bench necessarily has to 

be for a reconsideration of the principle of law on which the 

case has been decided and not the merits of the decision. 

The  decision  rendered  by  any  Bench  is  final  inter-parte, 

subject to the power of review and the curative power.  Any 

other view would have the effect of conferring some kind of 

an appellate  power  in a larger  Bench of  this Court  which 

cannot be countenanced.  However, the principle of law on 

which the decision based is open to  reconsideration by a 

larger Bench in an appropriate case.  It is from the aforesaid 

perspective that the reference in Gian Singh (supra) has to 

be  understood,  namely,  whether  quashing  of  a  non-

compoundable  offence  on  the  basis  of  a 


Page 12

compromise/settlement  of  the dispute between the parties 

would be permissible and would not amount to overreaching 

the  provisions  of  Section  320  of  the  Code  of  Criminal 

Procedure.  In fact, this is the question that was referred to 

the larger Bench in Gian Singh (supra) and not the merits of 

the decision in Nikhil Merchant (supra).  

13. The  decision  in  Gian  Singh  (supra)  holding  the 

decision  rendered  in  Nikhil  Merchant  (supra)  and  other 

cases to be correct is only an approval of the principle of law 

enunciated  in  the  said  decisions  i.e.  that  a  non-

compoundable offence can also be quashed under  Section 

482  CrPC  on  the  ground  of  a  settlement  between  the 

offender and the victim.   It is not an affirmation,  for there 

can  be  none,  that  the  facts  in  Nikhil  Merchant  (supra) 

justified/called  for  the  due  application  of  the  aforesaid 

principle of law. Also, neither  Nikhil Merchant  (supra) nor 

Gian Singh  (supra)  can be understood to mean that  in a 

case  where  charges  are  framed  for  commission  of  non-

compoundable offences or for criminal conspiracy to commit 


Page 13

offences  under  the  PC  Act,  if  the  disputes  between  the 

parties  are  settled by  payment  of  the  amounts  due,  the 

criminal  proceedings  should  invariably  be  quashed.  What 

really follows from the decision in Gian Singh (supra) is that 

though quashing a non-compoundable offence under Section 

482 CrPC, following a settlement between the parties, would 

not amount to circumvention of the provisions of Section 320 

of the Code the exercise of the power under Section 482 will 

always depend on the facts of each case.   Furthermore,  in 

the exercise of such power, the note of caution sounded in 

Gian Singh (supra) (para 61) must be kept in mind.  This, in 

our view, is the correct ratio of the decision in Gian Singh 


14. The aforesaid principle of  law may now be applied to 

the facts of the present case.  At the very outset a detailed 

narration of the charges against the accused-appellant has 

been  made.   The  appellant  has  been  charged  with  the 

offence of criminal conspiracy to commit the offence under 

Section 13(1)(d).   He is  also  substantively charged under 


Page 14

Section 420 (compoundable with the leave of the Court) and 

Section 471 (non-compoundable).  A careful consideration of 

the facts  of  the case would indicate that  unlike in  Nikhil  

Merchant  (supra)  no conclusion can be reached that  the 

substratum of the charges against the accused-appellant in 

the present case is one of cheating nor are the facts similar 

to those in  Narendra Lal  Jain (supra)  where the accused 

was charged under Section 120-B read with Section 420 IPC 

only.  The offences are certainly more serious; they are not 

private in nature.   The charge of  conspiracy is to commit 

offences  under  the  Prevention  of  Corruption  Act.   The 

accused  has  also  been  charged  for  commission  of  the 

substantive  offence  under  Section  471  IPC.   Though  the 

amounts due have been paid the same is under a private 

settlement between the parties unlike in  Nikhil Merchant 

(supra)  and  Narendra  Lal  Jain  (supra)  where  the 

compromise was a part of the decree of the Court. There is 

no  acknowledgement  on  the  part  of  the  bank  of  the 

exoneration of the criminal liability of the accused-appellant 


Page 15

unlike the terms of compromise decree in the aforesaid two 

cases.  In the totality of the facts stated above, if the High 

Court has taken the view that the exclusion spelt out in Gian 

Singh (supra) (para 61) applies to the present case and on 

that basis had come to the conclusion that the power under 

Section  482  CrPC  should  not  be  exercised  to  quash  the 

criminal  case  against  the  accused,  we  cannot  find  any 

justification to interfere with the said decision.   The appeal 

filed by the accused is, therefore,  dismissed and the order 

dated 25.06.2013 of the High Court, is affirmed.



APRIL 7, 2014.


       [P. SATHASIVAM]





       [N.V. RAMANA]


Page 16

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