High Court Discharges Hospital Directors in CBI Loan-Fraud Case After Finding Loan Was Repaid Before Charge Sheet

A Single‑Judge bench of Justice Subhendu Samanta of the Andhra Pradesh High Court at Amaravati heard a criminal revision challenging an order of the II Additional Judicial First Class Magistrate, Eluru, which had dismissed the petitioners’ application under Section 239 Cr.P.C. seeking discharge. The appeal arose from a CBI charge sheet alleging offences under Section 120‑B read with Sections 420, 468 and 471 of the IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act in relation to bank loan transactions.

The Court allowed the revision, set aside the magistrate’s order dated 22.06.2012 and discharged the petitioners under Section 239 Cr.P.C., holding that the charge sheet was groundless. The High Court found that the Investigating Agency had collected documents before submission of the charge sheet showing repayment of the loan and that the charge sheet did not disclose the prima facie ingredients of the offences alleged, including absence of wrongful loss to the bank or wrongful gain to the accused. The Court noted that “before submission of the charge sheet, the Bhimavaram Hospitals has already repaid the loan and the documents collected by the CBI at the time of investigation has also reflected the same fact.” The Court, in its reasoning, observed: “In these circumstances, it is crystal clear that the charge sheet does not disclose the prima facie ingredients of the offence punishable under Section 420 IPC, as there is neither wrongful loss caused to the State Bank of India nor wrongful gain accrued to Bhimavaram Hospitals. Mere allegations of use of bogus bills or documents for availing a loan, in the absence of any resultant wrongful loss, do not constitute offences under Sections 120‑B read with Sections 420, 468 and 471 I.P.C. In case of an offence under Section 120‑B I.P.C., it is essential to prima facie establish that the alleged conspiracy resulted in wrongful loss to the bank. In the present case, there is no material to show that the bank suffered any loss due to the acts of the petitioners.”

Background The petitioners were directors and officials of M/s. Bhimavaram Hospitals Limited. The CBI registered RC‑05(E)/2009 on a written complaint of the Regional Manager, State Bank of India (Vijayawada Administrative Unit) alleging that credit facilities and term loans were procured by the hospital using forged or bogus documents, in conspiracy with certain bank officials. The CBI submitted a charge sheet on 14.05.2011 naming the hospital officials as Accused Nos.1–5; bank officials were not charged because sanction for their prosecution was not granted by the Vigilance Commissioner. The petitioners sought discharge under Section 239 Cr.P.C.; the Magistrate dismissed the application and the petitioners filed the present criminal revision.

The High Court framed two issues: whether the Investigating Agency had collected sufficient documents before filing the charge sheet to show repayment of the loan; and whether such repayment absolved the petitioners of criminal liability. The Court recorded that the CBI had collected 517 documents during investigation, including correspondence (Documents Nos.483 and 484) and a “No Due” certificate dated 21.01.2010 from the State Bank of India certifying full repayment. The Court held that those documents were available prior to filing the charge sheet and that the loan account had not become a non‑performing asset. The CBI relied on precedents holding that repayment or one‑time settlements did not automatically extinguish criminal liability; the petitioners relied on authority permitting quashment where settlement rendered prosecution futile. The Court distinguished decisions where repayment evidence was not on file at charge framing and followed precedents that allowed exercise of the Court’s discretion where no wrongful loss was shown. The High Court concluded that the charge sheet was groundless and discharged the petitioners; miscellaneous petitions were closed.

Case Details: Case No.: Criminal Revision Case No.1245 of 2012 Case Title: Dr. G. Gopala Raju & Ors. v. Central Bureau of Investigation, Bank Securities and Frauds Cell, Bangalore Appearances: For the Petitioner(s): T. Nagarjuna Reddy For the Respondent(s): P. S. P. Suresh Kumar, Special Public Prosecutor for CBI