Oral Judgment:

1. These Writ Petitions are filed for seeking appropriate directions for quashing and setting aside the impugned First Information Report (for short “FIR”) in connection with Crime No.262/2015 registered with Police Station Ranapratap Nagar, Nagpur for the offence punishable under Sections 420, 403, 406, 418, 425, 427 read with Section 34 of the Indian Penal Code (for short “IPC”).

2. The Petitioners in Writ Petition No. 609/2015 are the Senior Bank Officials of Bank of India, Nagpur, whereas the Petitioners in Writ Petition No. 631/2015 are the officials of BGR Energy Systems Limited. During pendency of these Writ Petitions the Petitioner No.1 in Writ Petition No. 609/2015 who at the relevant time was Zonal Manager of Bank of India is reported to be dead. Petitioner No.2 was posted as a Senior Manager of Bank of India, Pratapnagar Branch Nagpur. The Respondent No.2/Yogesh Dnyaneshwar Nagpure is the partner of “Aaradhya Infotech Pvt. Ltd.” was engaged in the business of supplying of construction material under the name and style as “M/s. Aradhya Engineers & Constructions, Nagpur” since 2011. Subsequently the said partnership firm converted into company as “Aradhya Infratech Pvt. Ltd.”

3. Said Yogesh Nagpure lodged a report against the Petitioners by approaching to Pratapnagar Police Station alleging that his firm received a civil work in relation to power plant of Chandrapur for CW Channel, forebay, pump house and ESP control room building. From the BGR Energy Systems Limited, the firm of the Complainant received service orders by the said BGR Energy Systems Limited for two contracts. As per the terms of the contract, the Complainant was required to furnish bank guarantees to the extent of 10% of the contract value. For carrying out the aforesaid construction four bank guarantees were executed and furnish to BGR Energy Systems Limited, for an amount of Rs. 81,37,822/-. The Complainant has obtained financial assistance from Bank Of India by mortgaging his fathers property. Thus, for execution of the Service Orders issued by BGR Energy Systems Limited, in the year 2011 and the actual construction work was as per the contention of the Complainant belated for want of copies of map.

4. As per the allegation of the Complainant, his firm had furnished bank guarantees for a specific period. On the expiry of the said period, the bank guarantees is to be extended up to 30.09.2012. The BGR Energy Systems Limited, terminated the contract by communication dated 17.11.2012. The validity of the bank guarantee was to expire on 30.09.2012. The Complainant intimated the Bank by communication dated 26.09.2012 not to extend the bank guarantee beyond 30.09.2012. On 30.09.2012, the extension period of bank guarantees was expired. On 04.10.2012, the communication was received by the Bank from the firm of the Complainant M/s Aradhya Infratech Pvt. Ltd., to close all the bank guarantees since his firm has not received any communication from BGR Energy Systems Limited for its extension. On 09.10.2012, by inter office communication the Bank has closed the bank guarantees at the request of the Complainant as no communication is received from BGR Energy Systems Limited. The notice was served upon the Bank to close the bank guarantees as neither the Bank nor the Complainant received communication from BGR Energy Systems Limited regarding extension of time of bank guarantees or its invocation. Accordingly, the Bank has closed the bank guarantees.

5. The statement of account from 01.10.2012 to 31.10.2012 of the Complainant firms showing closure proceeds and margin money is credited to the account of the Complainant. As per the allegation despite the communication from the complainant the Petitioner No.2 in Writ Petition No.609/2015 who was serving as a Senior Branch Manager of Bank of India issued communication under her signature that BGR Energy Systems Limited has written to the Bank for encashment of the bank guarantees which are to the tune of Rs.81,37,822/-. The Complainant vide communication dated 05.12.2012 informed the Bank that the bank guarantees are already expired and there was no question for invoking them and the amount could not be transferred to BGR Energy Systems Limited.

6. As per the allegations of the Complainant despite the communication the Bank of India had transferred the amount of Rs. 81,37,822/- on 18.01.2013 to BGR Energy Systems Limited, and by communication dated 18.01.2013 called upon the Complainant to deposit the said amount towards invocation of bank guarantees paid to BGR Energy Systems Limited. It was further instructed by the Bank to the Complainant that on failure to deposit the said amount coercive action would be taken against the Complainant.

7. Thus, as per the allegations of the Complainant Petitioner No.2 who was the Senior Bank Manager in conveyance with deceased Zonal Manager and officials of the BGR Energy Systems Limited, transferred the amount and the loss is caused to the Complainant. On the basis of the said report Police have registered the crime against the present Petitioners.

8. Present Writ Petitions are preferred for challenging the registration of the crime and quashing of the FIR. By order dated 27.10.2015 the further investigation was stayed.

9. Heard Mr. Purohit, learned Counsel for the Petitioner in Writ Petition No.609/2015, Mr. Dharmadhikari, learned Counsel for the Petitioners in Writ Petition No.631/2015, Mr. Jawade, learned APP for the Respondent No.1/State and Mr. Bhandarkar, learned Counsel for the Respondent No.2.

10. Mr. Purohit, learned Counsel, vehemently submitted that, the entire allegations levelled against the Petitioners are of civil in nature. As far as the offence under Sections 405 and 420 of IPC is concerned, there is no personal gain to the Petitioner No.2. It was the decision of the Bank which was executed by the Petitioner No.2 being the Senior Manager. He submitted that, as the action was taken under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI Act”) and to give a counter blast to the same this false FIR is filed against the present Petitioners. He submitted that in view of Section 32 of the SARFAESI Act protection is given to the Petitioners. Similarly, under Section 52 of the Banking Regulation Act, 1949 the Petitioners in Writ Petition No. 609/2015 are protected. He has taken me through the entire communication and submitted that, despite there was a settlement between the Complainant’s firm and BGR Energy Systems Limited, the FIR came to be lodged by suppressing the settlement as well as the civil suit filed by the Respondent No.2.

11. He further submitted that, the bank guarantees are invoked during the validity period. The communication from the Zonal Manager issued to the Investigating Agency or whom so ever shows that, the invocation of the bank guarantee is within its validity period. Thus, suppressing all the material facts by the Complainant i.e. the settlement of the dispute on 12.07.2013 by which full and final settlement certificate was issued alongwith the amount of Rs.47,35,198/- to the Complainant and filing of the civil suit sufficiently shows that, the Respondent No.2 has concealed the material facts from the Investigating Agency and thereby has not come with a clean hands. For all above these terms he claimed that being the dispute is of a civil in nature the FIR deserves to be quashed and set aside.

12. Mr. Dharmadhikari, learned Counsel for the Petitioners in Writ Petition No.631/2015 who are the Senior officials of BGR Energy Systems Limited, submitted that, there was no dispute that, the firm of the Complainant and the firm of the Petitioners entered into a contract and service orders are issued in favour of the Complainant’s firm. Against the said service orders, four bank guarantees by way of security was furnished. As the Complainant could not complete the work, the said contract was terminated. The firm BGR Energy Systems Limited, issued the communication to the Bank of India during the validity period for the invocation of guarantee. As the communication was issued by the BGR Energy Systems Limited and bank guarantees were not invoked grievance was made by the officials of the BGR Energy Systems Limited, stating that despite the request the Bank has not credited the amount in the account of BGR Energy Systems Limited. The said communication was addressed to the Zonal Office also. During investigation the communication by the Zonal Manager also shows that, they have received the communication and in view of that communication the bank guarantees were invoked in favour of M/s BGR Energy Systems Limited. Subsequently, there was a settlement between the Aradhya Infratech Pvt. Ltd., and M/s BGR Energy Systems Limited, and they entered into the full and final settlement and the cheque of remaining amount of Rs. 47,35,198/- is already issued in favour of the Complainant firm. But this fact was concealed by the Complainant and after two years of this settlement, the FIR came to be lodged. In the said FIR the Complainant has not narrated about the settlement. Though the Complainant has filed civil suit bearing S.C.S No. 213/2013, wherein also he has not brought to the notice of the Court about the said settlement. Even accepting the allegations as it is no offence is made out against the Petitioners, and therefore, Petitions deserve to be allowed.

13. Mr. Jawade, learned APP for the Respondent No.1/State, submitted that the entire case reveals around invocation of bank guarantees and whether it was invoked in time or not. The bank guarantees were valid up to 30.09.2012. The entire communication shows that neither the Bank nor the Complainant received the communication from BGR Energy Systems Limited, as to invocation of bank guarantees before 30.09.2012. Therefore, on the request of the Complainant Bank guarantees were not extended and closed. The closure proceeds margin money was credited into the accounts of the Complainant. No communication received from the BGR Energy Systems Limited to the Bank as to the extension of the said bank guarantees but the officials of the BGR Energy Systems Limited created a document to show that they have already communicated with the Bank during the validity period and demanded invocation of bank guarantees. In fact, no such letter dated 24.09.2012 was received by the Bank. The letter dated 24.09.2012 and 07.11.2012 are created subsequently. In fact inter office communication between the office of Senior Branch Manager, Pratapnagar, Bank of India and the Zonal Office shows that no such communication was received. Despite there was no communication it was shown that the communication was received during the validity period and bank guarantee was invoked and payment was given after validity period on 18.01.2013. Thus, the intention since inception is apparent. For all above these grounds, the Petitions deserve to be rejected.

14. Mr. Bhandarkar, learned Counsel for the Respondent No.2, endorsed the same contentions and submitted that, whether the Bank can invoke the bank guarantees after the validity period. The act of the Bank invoking bank guarantees after validity period is apparent from the documents. As per the request of the Complainant the procedure of the closure of the bank guarantee was done and the margin money was credited to the account of the Complainant. Thus, the act of the Petitioners in both the Petitions was with collusion and it is a case of siphoning of public money. Considering the prima facie material, the Petitions deserve to be dismissed.

15. Mr. Purohit, learned Counsel for the Petitioner in support of his contention placed reliance on the decision of M/s Indian Oil Corporation Vs. M/s NEPC India Ltd. & Ors., AIR 2006 SC 2780 and Priyanka Srivastava & Anr. Vs. State of Uttar Pradesh & Ors., (2015) 6 SCC 287.

16. Mr. Dharmadhikari, learned Counsel for the Petitioners, placed reliance on Bank of India Vs. Nangia Constructions (I) Private Limited, (2008) 7 SCC 290.

17. Mr. Jawade, learned APP for the Respondent No.1/State, placed reliance on C.S. Prasad Vs. C. Satyakumar & Ors., Criminal Appeal No.140/2026 decided on 08.01.2026.

18. Mr. Bhandarkar, learned Counsel for the Respondent No.2, placed reliance on the following judgments:

                   Kathyayini Vs. Sidharth P.S. Reddy & Ors., 2025 SCC OnLine SC 1428; Dinesh Sharma Vs. Emgee Cables & Communication Ltd., & Anr. 2025 SCC OnLine SC 929; Kamal Shivaji Pokarnekar Vs. State of Maharashtra & Ors., (2019) 14 SCC 350; Neeharika Infrastructure Private Limited Vs. State of Maharashtra & Ors., (2021) 19 SCC 401; India Oil Corpn. Vs. NEPC India Ltd. & Ors., (2006) 6 SCC 736; Hindustan Construction Co. Ltd. Vs. State of Bihar & Ors., (1999) 8 SCC 436; Parbatbhai Aahir Alias Parbatbhai Bhimsinhbhai Karmur & Ors. Vs. State of Gujarat & Anr., (2017) 9 SCC 641; M/s. Itma Hotels India Private Limited Vs. The Additional Commissioner of Customs & Ors., WA NO. 2183 OF 2023; Commissioners of Customs (Export) Vs. Bank of India & Anr., 2025 SCC OnLine Bom 2850; Narayan Malhari Thorat Vs. Vinayak Deorao Bhagat & Anr. (2019) 13 SCC 598; State of Punjab Vs. Dharam Singh & Ors., 1987 (Supp) SCC 89; Siddharth Mukesh Bhandari VS. The State of Gujarat & Anr., Criminal Appeal no.1044/2022 & connected matters, decided on 02.08.2022; State of Bihar & Anr. Vs. P.P. Sharma, IAS & Anr., 1992 Supp (1) SCC 222.

19. Before entering into the merits the law as to the quashing of the FIR which is laid down by the Hon’ble Apex Court in catena of decisions requires to be considered. In the case of Paramjeet Batra Vs. State of Uttarakhand & Ors., 2013(11) SCC 673, the Hon’ble Apex Court in paragraph No.12 has observed as under:-

                   “12. While exercising its jurisdiction under Section 482 of the Code the High Court has to be cautious. This power is to be used sparingly and only for the purpose of preventing abuse of the process of any court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not depends upon the nature of facts alleged therein. Whether essential ingredients of criminal offence are present or not has to be judged by the High court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High court should not hesitate to quash the criminal proceedings to prevent abuse of process of the court.”

20. Thus, while considering the aforesaid issue the law on the exercise of power by the High Court under Section 482 of Code of Criminal Procedure (for short “Cr.P.C.”) and under Article 226 of the Constitution of India to quash the FIR/Complaint and the parameters for exercise of power and scope and ambit of the power under Section 482 of Cr.P.C. or under Article 226 of the Constitution of India are very wide, however, while exercising the said powers great caution requires to be exercised. Court must be careful to see that its decision in exercise of power is based on sound principles. The inherent powers could not be exercised to frustrate a legitimate prosecution. In the case of Neeharika Infrastructure Private Limited (supra), wherein after considering the various decisions the Apex Court has culled out. The similar principles are also laid down in the case of M/s Indian Oil Corporation, (supra) which are as under:

                   “The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure are:

                   (i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.

                   (ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/ malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.

                   (iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.

                   (iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the compliant is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.

                   (v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; and (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed of, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.”

21. Similar parameters are laid down by the Hon’ble Apex Court in State of Harayana & Ors. Vs. Ch. Bhajan Lal & Ors., 1992 AIR 604 as well as Parbatbhai Aahir Alias Parbatbhai Bhimsinhbhai Karmur,(supra). Thus, the consistent view is the powers regarding quashing of the FIR are under the inherent jurisdiction and has to be exercised sparingly, caring and with caution and only when exercise is justified by the test specifically laid down in a catena of decisions.

22. Coming to the facts of the present case, on 17.01.2011 Aradhya Infratech Pvt. Ltd., Nagpur availed financial facilities from Bank of India, Pratap Nagar. Total financial limits granted by the Bank is of Rs.235 Lakhs comprising of bank guarantee of Rs. 200 Lakhs and cash credit limits of Rs. 35 Lakhs. On 18.02.2011, the Service Orders vide Order No.3300005526 and Order No.3300006842 were issued by the BGR Energy Systems Limited to M/s Aradhya Infratech Pvt. Ltd., to carryout the construction work. To fulfill the terms and conditions of the contract the Complainant firm required to furnish bank guarantees worth of Rs.81,37,822/-. Therefore, the Complainant approached to the Bank of India, Pratap Nagar, Nagpur Branch with request to issue the bank guarantees. Upon the request of the Complainant 4 bank guarantees worth of Rs.81,37,822/- in favour of M/s BGR Energy Systems Private Limited, Chennai were issued. The said bank guarantees details are as follows:

                   (a). Contract Security cum Performance Bank Guarantee dated 29.03.2011 validity upto 18.02.2012 of Rs.33,27,318/- vide BG No.8722IPEBG110017.

                   (b). Advance Bank Guarantee dated 29.03.2011 validity period upto 18.02.2012 of Rs.33,27,318/- bearing BG No.8722IPEBG110020.

                   (c). Contract Security cum Performance Bank Guarantee dated 24.01.2012 validity period upto 31.03.2012 of Rs.7,41,593/- vide BG No.8722IPEBG120005.

                   (d). Advance Bank Guarantee dated 24.01.2012 validity period upto 31.03.2012 of Rs.7,41,593/- bearing BG No.8722IPEBG120006.

23. In February 2012, the said bank guarantees were extended upto 30.09.2012 with a claim period upto 30.09.2012.

24. The terms and conditions of the Contract Security cum Performance Bank Guarantee are as follows:

                   “1 The Bank does hereby irrevocably, unconditionally guarantee to the Company the due and faithful performance, observance and/or discharge of the Contract by the Supplier/Contractor (including defects liability obligations and equipment performance guarantees) and further unconditionally and irrevocably guarantees and undertakes to pay to the company without any demur or protest and merely on demand the sum not exceeding Rs. 33,27,318/- (Rs Thirty Three Lacks Twenty Seven Thousand Three Hundred Eighteen only) and claim for any default of the Supplier/Contractor under the Contract (including defects liability and equipment performance guarantee). The Bank hereby waives the necessity to make a demand from the Supplier/Contractor before making the demand and claim to the Bank.

                   2 The Bank hereby undertakes to pay forthwith on receipt of a written demand from the Company for such payment, stating that the Supplier has failed to fulfill any of its obligations under the contract. The Bank further agrees to indemnify and keep the Company indemnified against all costs, charges and expenses whatsoever, which the Company may incur by reason of the Supplier’s failure to fulfill its obligations under the contract.

                   3 Any demand so made on the Bank shall be conclusive as regards the amount due and payable by the Bank under this Guarantee. The Bank waives in favour of the Company all rights, defenses and pleas which the Bank, as Guarantor, and/or the Supplier may be entitled to. To give effect to this Guarantee, the Bank shall be deemed to be the principal debtor.

                   4 The Bank further agrees that the Company shall be the sole judge as to whether or not the Supplier has failed to fulfill any of its obligations under the contract and of the extent of the loss, damage, costs, charges or expenses suffered or incurred by the Company or likely to be suffered or incurred by the Company on account thereof.

                   5 Should it be necessary to extend this Guarantee beyond its validity period on account of extension of time granted by the Company to the Supplier to fulfil its obligations under the Contract, the Bank undertakes to extend the period of this Guarantee until such time as may be reasonably required.”

25. The terms and conditions of Advance Bank Guarantee are as follows:

                   1 The Bank hereby unconditionally, irrevocably guarantees and undertakes to pay without demur or protest and merely on demand to the Company, an amount not exceeding Rs.33,27,318/- (Rs Thirty three lakhs twenty seven thousand three hundred and eighteen) forthwith on receipt of a written demand from the Company for such payment, stating that the supplier has defaulted to supply the Equipment in conformity with the terms of the Contract. The Bank further agrees to indemnify and keep the Company indemnified against all costs, charges and expenses whatsoever, which the Company may incur by reason of the Supplier’s failure to supply the Equipment in terms of the Contract.

                   2 Any demand so made on the Bank shall be conclusive as regards the amount due and payable by the Bank under this guarantee. The Bank waives in favour of Company all rights, defences and pleas which the Bank, as Guarantor, and/or the Supplier may be entitled to. To give effect to this Guarantee the Bank shall be deemed to be the principal debtor.

                   3 The Bank further agrees that the Company shall be the sole judge as to whether or not the Supplier has failed to supply the Equipment / Materials in terms of the Contract and of the extent of the loss, damage, costs, charges or expenses suffered or incurred by Company likely to be suffered or incurred by Company on account thereof.”

26. In the above context, it becomes necessary to examine the meaning and scope of a bank guarantee and the respective rights created thereunder.

27. The Guarantee has been defined in Halsbury’s Laws of England, Vol.20, Fourth Edn. page 49 para 101 as that “A guarantee is an accessory contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promise must exist or be contemplated”.

28. It is in common parlance that the issuance of guarantee is what that a guarantor creates to discharge liability when the principle debtor fails in his duty and guarantee is in the nature of collateral agreement to answer for the debt. It is well settled that the bank guarantee is an autonomous contract and imposes an absolute obligation on the Bank to fulfill the terms and the payment in the Bank guarantee becomes due on the happening of a contingency on the occurrence of which the guarantee becomes enforceable.

29. The Hon’ble Apex Court in the case of Syndicate Bank Vs. Vijay Kumar & Ors., AIR 1992 SC 1066, in para 12 observed as under:

                   “12. In the banking system it is understood that Bank guarantee has an dual aspect. In the case of a Bank guarantee the banker is the promisor. It is a contract between the Bank and the beneficiary of the guarantee and it is also a security given to the beneficiary by a third party. Now, it is a well-known business transaction in the World of commerce and it has become the backbone of the banking system. Now coming to its enforceability the same depends upon the terms under which the guarantor has bound himself. He cannot be made liable for more than what he has undertaken. Therefore the Bank guarantee, as already noticed, is in the nature of a special contract depending upon the happening of a specific event and when once it is discharged the guarantee comes to an end. It has to be borne in mind that the obligations arising under the Bank guarantee are independent of the obligations arising out of a specific contract between the parties.”

30. The Hon’ble Apex Court has occasion to consider the aspect of bank guarantee in the case of Hindustan Construction Co. Ltd., (supra), wherein also it was observed in para 9, which reads as under:

                   “9. What is important, therefore, is that the Bank Guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the Bank Guarantee or the person on whose behalf the Guarantee was furnished. The terms of the Bank Guarantee are, therefore, extremely material. Since the Bank Guarantee represents an independent contract between the Bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the Bank Guarantee; or else, the invocation itself would be bad.”

31. Thus, the Hon’ble Apex Court observed that a Bank Guarantee is the common mode, of securing payment of money in commercial dealings as the beneficiary, under the Guarantee, is entitled to realise the whole of the amount under that Guarantee in terms thereof irrespective of any pending dispute between the person on whose behalf the Guarantee was given and the beneficiary.

32. In the case of Standard Chartered Bank Vs. Heavy Engineering Corporation Ltd. & Ors., [2019] 15 SCR 368, wherein also by referring the earlier decision in the case of Ansal Engineering Projects Ltd. Vs. Tehri Hydro Development Corporation Ltd. & Anr., MANU/SC/1199/1996, it is observed “ the law relating to invocation of bank guarantees with the consistent lines of precedents of this Court is well settled and a Three Judge Bench of this Court has held as under:

                   “4. It is settled law that bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. Unless fraud or special equity exists, is pleaded and prima facie established by strong evidence as a triable issue, the beneficiary cannot be restrained from encashing the bank guarantee even if dispute between the beneficiary and the person at whose instance the bank guarantee was given by the bank, had arisen in performance of the contract or execution of the works undertaken in furtherance thereof. The bank unconditionally and irrevocably promised to pay, on demand, the amount of liability undertaken in the guarantee without any demur or dispute in terms of the bank guarantee. The object behind is to inculcate respect for free flow of commerce and trade and faith in the commercial banking transactions unhedged by pending disputes between the beneficiary and the contractor.”

33. In the above said judgment also it is held that a bank guarantee constitutes an independent contract. What is important, therefore, is that the bank guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished. The terms of the bank guarantee are, therefore, extremely material. Since the bank guarantee represents an independent contract between the bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the bank guarantee, or else, the invocation itself would be bad.

34. The Hon’ble Apex Court by referring the decisions of State of Bank of India & Anr. Vs. Mula Sahakari Sakhar Karkhana Ltd. MANU/SC/3353/2006; Himadri Chemicals Industries Limited Vs. Coal Tar Refining Co.,MANU/SC/3256/2007 and Gujarat Maritime Board Vs Larsen & Toubro Infrastructure Development Projects Limited & Anr., MANU/SC/1105/2016, has laid down the principles for grant or refusal for invocation of bank guarantee or a letter of credit, which are as follows:

                   “(i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional bank guarantee or letter of credit is given or accepted, the beneficiary is entitled to realise such a bank guarantee or a letter of credit in terms thereof irrespective of any pending disputes relating to the terms of the contract.

                   (ii) The bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer.

                   (iii) The courts should be slow in granting an order of injunction to restrain the realisation of a bank guarantee or a letter of credit.

                   (iv) Since a bank guarantee or a letter of credit is an independent and a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of bank guarantees or letters of credit.

                   (v) Fraud of an egregious nature which would vitiates the very foundation of such a bank guarantee or letter of credit and the beneficiary seeks to take advantage of the situation.

                   (vi) Allowing encashment of an unconditional bank guarantee or a letter of credit would result in irretrievable harm or injustice to one of the parties concerned.”

35. In the case of Garg Builders Vs. Hindustan Prefab Ltd. & Ors., MANU/DE/1518/2022, wherein the Delhi High Court by referring the catena of decisions culled out the basic principles relating to bank guarantees and their invocation and the interdiction of such invocation as follows:

                   “(i) Commercial contracts often contain clauses requiring the contractor to furnish bank guarantees.

                   (ii) These bank guarantees are, principally, either bank guarantees provided towards security, for having been awarded the contract, or performance bank guarantees, to guarantee performance of the contract, though, on occasion, other bank guarantees such as bank guarantees towards mobilization advance etc. may also be required to be provided.

                   (iii) The contract, in such cases, also provides for the circumstances in which the bank guarantees could be invoked, as well as the purpose for requiring the bank guarantees to be provided in the first place.

                   (iv) No bank guarantees payment to anyone gratis. Every bank guarantee is of necessity issued by a bank on instructions. In case of a commercial contract, such as the contract in the present petition, the instruction to the bank, to provide a bank guarantee, is given by the person to whom the contract is awarded; in the present case, the petitioner. The party to whom the contract is awarded, in other words, instructs the bank, in lieu of having been awarded the contract, to issue a bank guarantee in favour of the person awarding the contract. In the present case, as required by the agreements between the petitioner and the HPL, and that the petitioner’s instance, bank guarantees were issued by the bank in favour of HPL which, therefore, is the beneficiary of the bank guarantee.

                   (v) These bank guarantees are, however, bilateral contracts between the bank and the beneficiary, i.e. HPL, even if they were issued at the instance of the petitioner. The petitioner is not a party to the bank guarantees. It is, therefore, legally a stranger to the contract, insofar as the bank guarantees are concerned.

                   (vi) Like all independent commercial contracts, every bank guarantee has to abide strictly by its terms. Honour and compliance of a bank guarantee, as per its terms, is, therefore, mandatory. In the case of bank guarantees, especially, the Supreme Court has stressed this aspect, as there is an overwhelming element of public interest involved in requiring banks to honor their commitments towards customers and clients. If a bank is to be interdicted, at the instance of a third party, who is a stranger to the bank guarantee between the bank and the beneficiary, from honouring the bank guarantee, the Supreme Court has held in United Commercial Bank v. Bank of India MANU/SC/0003/1981: (1981) 2 SCC 766 and Hindustan Steelworks Construction Ltd. v. Tarapore & Co. MANU/SC/0582/1996: (1996) 5 SCC 34, that it would erode the public faith in the banking institution of the country.

                   (vii) The bank is, therefore, concerned only with the terms of the bank guarantee. The elements of any dispute between the contractor and the beneficiary of the bank guarantee, or the conditions existing in the contract between the contract awardee and the beneficiary of the bank guarantee, i.e. in the present case between the petitioner and HPL, are, therefore, generally irrelevant to the aspect of invocation of the bank guarantee. Even the circumstances stipulated in the contract between the beneficiary and the contract awardee, in which the bank guarantee could be invoked, are also of no relevance insofar as the liability of the bank to honour the bank guarantee is concerned.

                   (viii) In order for the aspect of performance, or failure of performance, of the parent contract, by either party, to become relevant as a consideration for invocation of the bank guarantee, they have necessarily to be incorporated by express reference in the bank guarantee itself. In other words, if the bank guarantee were to stipulate that the bank would be required to make payment to the beneficiary only in the event of failure, on the part of the contract awardee, to abide by its obligations under the Contract, then the aspect of performance of the contract by the contract awardee would become a relevant consideration, while assessing the obligation of the bank to make payment to the beneficiary.

                   (ix) Similarly, oftentimes, a contract may stipulate the particular stage at which, or exigency in which, the bank guarantee could be invoked by the beneficiary. Such a stipulation in the contract would, however, become relevant for the bank, when called upon by the beneficiary to honour the bank guarantee, only if that stipulation figures expressly in the body of the bank guarantee itself.

                   (x) Else, the bank is not expected, much less required, to advert to the covenants of the original contract between the contract awardee and the beneficiary, to which the bank is a stranger-just as the contract awardee is a stranger to the bank guarantee. Nor is it required to enter into the disputes between the contract awardee and the beneficiary of the bank guarantee, or into the aspect of performance, or non-performance, of the contract. Nor, for that matter, is the bank entitled to examine whether the stage at which the contract between the parties envisages invocation, or enforcement, of the bank guarantee, has, or has not, been reached. The bank, being a stranger to the contract between the contract awardee and the beneficiary of the bank guarantee, has no authority to probe into the said contract, unless the terms of the bank guarantee expressly require it to do so. The bank has necessarily to be concerned only with the terms of the bank guarantee, to which alone it is a party.

                   (xi) If the invocation of the bank guarantee by the beneficiary thereof is, therefore, in terms of the bank guarantee, the Court cannot interdict the bank from honouring the bank guarantee, by referring to the covenants in the contract between the contract awardee and the beneficiary of the bank guarantee. Any such attempt by the Court would amount to directing the bank to violate the contract, with the beneficiary of the bank guarantee, to which it is a party and, therefore, to direct the bank to commit an illegality. This, quite obviously, is completely impermissible.

                   (xii) Equally, it is not permissible, either, for the Court to interdict the invocation of a bank guarantee on the ground that the stage for such invocation, as per the contract, has not been reached, or that the exigency in which the bank guarantee could be invoked as per the contract, does not exist, unless that stage, or that the exigency, is incorporated as a condition for invocation in the bank guarantee itself.

                   (xiii) Interdiction of invocation of unconditional bank guarantees would be justified, where the invocation is otherwise in terms of the covenants in the bank guarantees, only where there is found to exist egregious fraud, or special equities, or where irretrievable injustice would ensue were invocation not to be injuncted.”

36. In the light of the above well settled legal position the bank guarantees issued by the Bank in favour of the BGR Energy Systems Limited, the terms and conditions for the Contract Security cum Performance Bank Guarantee shows that it was unconditional guarantee issued to the company and the bank agreed to invoke the said guarantee to the company on faithful performance observance and discharge of the contract by the supplier/contractor and undertook to pay to the company without any demur or protest and merely on demand. Similarly, Advance Bank Guarantee was issued which was also unconditional irrevocable guarantees and undertakes to pay without any demur or protest and merely on demand to the company. The legal position as to the invocation of bank guarantees is concerned, it is the contract between the Bank and beneficiary of the guarantee and it is also security given to the beneficiary by third party. It is also settled that, the bank guarantee should be unequivocally, unconditional and it should recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantees. Thus, as far as the dispute between the beneficiary and the person on whose behalf the bank guarantee is issued, the Bank has to make the payment irrespective of the dispute between them, only exception is that in case of fraud is made out then and then only the Bank can restrain the payment. Thus, the Bank is under obligation to make the payment in favour of the beneficiary irrespective of the disputes between them.

37. It is not in dispute that, the BGR Energy Systems Limited and the Respondent No.2/Complainant who is the partner of Aradhya Infratech Pvt. Ltd., entered into an agreement to perform the contract as the firm of the Complainant was engaged in the business of supplying the construction materials. The Complainant firm received civil works in relation to power plant of Chandrapur In view of that, BGR Energy Systems Limited issued the Service Orders to the firm of the Complainant. The said Service Orders are numbered as 3300005526 and 3300006842. Against the said contract and for carrying out the aforesaid construction 4 bank guarantees BG No.8722IPEBG110017 dated 29.03.2011 valid upto 18.02.2012, BG No. 8722IPEBG110020 dated 29.03.2011 valid upto 18.02.2012, BG NO. 8722IPEBG120005 dated 24.01.2012 valid upto 31.03.2012 and BG No. 8722IPEBG120006 dated 24.01.2012 valid upto 31.03.2012 was issued.

38. In February 2012, the said bank guarantees were extended upto 30.09.2012 with claim period upto 30.09.2012. Thus, the validity period of the said bank guarantees was upto 30.09.2012. The Bank has received a letter from the firm of the Complainant dated 26.09.2012 instructing the Bank for not extending the bank guarantees to BGR Energy Systems Limited. On 04.10.2012, the notice was also issued by the Aradhya Infratech Pvt. Ltd. for closing the bank guarantees issued to the BGR Energy Systems Limited, in view of the said letter the Bank has followed the closure procedure and margin money was credited in the account of Aradhya Infratech Pvt. Ltd.

39. The inter communication between the Senior Branch Manager Ranapratap Nagar Branch, Nagpur to Zonal Manager discloses that since no communication received from BGR Energy Systems Limited, the Bank has closed the bank guarantees on 09.10.2012 on the request of the account holders and the margin money is credited in the account of Aradhya Infratech Pvt. Ltd. However, the officials of the BGR Energy Systems Limited claimed that, they have already issued the communication on 24.09.2012 for invocation of bank guarantees. As per the internal communication between the Senior Manager and Zonal Manager discloses that the said communication was not received by them.

40. The subsequent letter of BGR Energy Systems Limited dated 07.11.2012 addressed to the Senior Branch Manager shows that, despite they have issued the communication as to the invocation of bank guarantees the Bank has neither paid as per their demands and the amount of Rs. 81,37,822/- nor extended the bank guarantees. They have already lodged their claim with Bank before expiry of the bank guarantees but the Bank has not credited the amount by invoking the bank guarantees, and therefore, it is the default on the part of the Bank in fulfilling its commitment and the payment is delayed. It has further intimated to the Bank if the Bank failed to honour the claim, would be viewed very seriously and they would constrain to approach the Bank Regulatory Authorities.

41. After receipt of this communication, the Senior Branch Manager has communicated that she has not received such communication. However, the said letter issued to the BGR Energy Systems Limited, neither bears the date nor bears the signature. It is apparent from the record that, after receipt of the said communication on 18.01.2013, the bank guarantees were invoked and the amount of Rs.81,37,822/- was credited into the account of BGR Energy Systems Limited. This fact was also communicated by the communication dated 18.01.2013 to the Aradhya Infratech Pvt. Ltd. The said communication was strongly opposed by the Aradhya Infratech Pvt. Ltd., by communication dated 28.11.2012 stating that the bank guarantees issued to M/s BGR Energy Systems Limited had already stood expired and the relevant process for its conclusion has also been duly complied with. Therefore, the question of invoking the bank guarantee after the expiry does not arise at all. The communication of Aradhya Infratech Pvt. Ltd., dated 26.12.2012 to the Senior Branch Manager further shows that, the bank guarantee is the tripartite agreement which ceases its effect after expiry of its claim period and strongly contended that, the bank guarantee is invoked after the validity period, which is illegal.

42. Thereafter, the Respondent No.2, Aradhya Infratech Pvt. Ltd., through its partner Yogesh Nagpure and Ashish Kahate filed a Civil Suit bearing No. 213/2013. In the said civil suit the reliefs claimed by the plaintiff therein are as follows:

                   “1. Declaration that the banks guarantees as listed in the plaint issued by the defendants 2 & 3 in favour of BGR Energy Systems Ltd., stood expired on 30/9/2012.

                   2. Declaration that the action on part of the defendants, in honouring the expired bank guarantees by debiting the cash credit account no. 872230110000018 of the plaintiff no. 1 by the amount of Rs. 81,37,822/- as reflected from the letter dated 18/1/2013 is fraudulent and illegal.

                   3. Declaration that the debit entry of the amount of Rs. 81,37,822/- in the cash credit account no. 872230110000018 of the plaintiff no. 1 made by the defendants on 18/1/2013 is fraudulent, illegal, null and void and all consequent interest charged by the bank on account of such entry is also fraudulent, illegal and the defendants are not entitled to any such amounts from the plaintiffs.

                   4. A decree in the sum of Rs. 5,16,265.13 alongwith interest @18% thereupon from 29/1/2013 till realisation, against the defendants jointly and severally.

                   5. Any other order, relief, decree deemed fit in the circumstances of the case.

                   6. The cost of the suit.”

43. Thus, the suit was filed by the Respondent No.2 for declaration that the bank guarantees as listed in the plaint issued by the defendant Nos. 2 and 3 i.e. the Bank officials in favour of BGR Energy Systems Limited stood expired on 30.09.2012. The action on the part of the defendants honouring the bank guarantees by debiting the cash credit account of the plaintiff No.1 by the amount of Rs.81,37,822/- as reflected from the letter dated 18.01.2013 is fraudulent and illegal. Thus, the issue involved in the suit was the crediting of the amount to the BGR Energy Systems Limited, as per the allegations after validity period, whereas it is the contention of the Bank that the communication was received by the Bank but it was misplaced and the communication by the Zonal Manager Nagpur Zone dated 07.09.2015 shows that, the payment against the bank guarantees was done as per the guidelines including guidelines of the Reserve Bank of India as the beneficiary submitted the proof of having delivered the letter of invocation to the Branch within the validity/claim period of the bank guarantees. The record further discloses that, Bank has also initiated the action against the Respondent No.2 by filing Original Application No. 49/2013 before the Debt Recovery Tribunal, Nagpur alongwith I.A. No. 489/2013 for recovery of the amount. The said I.A. came to be rejected by the Presiding Officer Debt Recovery Tribunal, Nagpur.

44. During the pendency of the civil suit and the recovery proceedings before the Debt Recovery Tribunal, the Respondent No.2 approached the Police Station and filed a complaint application against the Bank officials i.e. Petitioner No.2 in Writ Petition No. 609/2015. The said complaint was forwarded to CBI Anti Corruption Branch, Nagpur and also to the Director Serious Fraud Investigation Office. Thereafter, FIR came to be lodged on 22.07.2015. In the meantime, departmental action was initiated against the Petitioner No.2/ Mrudula Rajendra Paonikar in Writ Petition No. 609/2015. The memorandum calling explanation dated 06.03.2013 shows that, the explanation was called for cancelling the bank guarantees without obtaining the original guarantees or issuing the letter to the beneficiary to return the original guarantees for physical cancellation and for releasing the margin money amounting to Rs.20,55,218/- despite the letter was received from BGR Energy Systems Limited, on 24.09.2012 for extension/invocation of bank guarantee was misplaced. Thus, the departmental action was not for releasing the payment against the bank guarantee.

45. The explanation by the Petitioner No.2/Mrudula Paonikar shows that the said letter of BGR Energy Systems Limited dated 24.09.2012 was not reached to her though it was received and acknowledged by the Bank staff who was then deputed to her branch, and therefore, she was not aware about the receipt of the said letter. During the departmental action it was held that, she failed to discharge her duties with utmost devotion and diligence and also failed to ensure and to protect the interest of the Bank which is a misconduct in terms of Regulation 24 of the Bank of India Officer’s Employees (Discipline and Appeal), Regulations, 1976 and penalty order was passed against her by the Disciplinary Authority. The order of Disciplinary Authority dated 28.11.2013 shows that, “Minor penalty of Reduction to lower stage by three stages in a time scale pay for a period of three years without cumulative effect and not adversely affecting her pension” in terms of the Bank of India Officer Employees’ (Discipline and Appeal), Regulations, 1976 is hereby imposed upon Smt. Mrudula Paonikar.

46. Being aggrieved with the said action, she approached to the Appellate Authority and the Appellate Authority set aside the said penalty by order dated 07.02.2014 and minor penalty of “CENSURE” was imposed on her.

47. Thus, the document on record shows that, the departmental action against the Petitioner No.2/Mrudula Paonikar was not initiated for releasing the amount of bank guarantee after the validity period but action was initiated, as despite the letter received on 24.09.2012 she followed the closure procedure on the request of the customer and credited the margin amount in the account of the customer. Her reply before the Disciplinary Authority dated 19.03.2013 also shows that the letter dated 24.09.2012 vide No.BGR/PPD/17,18,19,20 dated 24.09.2012 was received and acknowledged by the branch staff/DRO which was not reached to her.

48. The another circumstance which brought to the notice that, during the pendency of the suit filed by the Respondent No.2, the Respondent No.2 and BGR Energy Systems Limited entered into the settlement on 12.07.2013. As per the settlement the following points were discussed and finalized by BGR Energy Systems Limited with M/s Aradhya Infratech Pvt. Ltd. which are as follows:

                   “1. 2 X 500 MW Chandrapur Site Certified actual final work done quantity of M/s.Aradhya Infratech pvt. limited against work done as per Service Orders no: 3300006840 and 33000005526. This is the FULL & FINAL AGREED SETTLEMENT. M/s.Aradhya Infratech also agreed & confirmed the same.

                   2. As per the workings towards full and final settlement, Rs.73,35198/- was arrived by M/S.BGRESL with consideration of all contractual conditions as per issued above service orders.

                   3. M/s. Aradhya was paid Rs.26,00,000/- dt.26.04.2013, as interim payment from the full and final settlement amount arrived as per above and balance settlement value for Rs. 47,35,198/- after adjusting above interim paid amount is paid (in person to Mr. Yogesh Nagpure of M/s. Aradhya) vide cheque no: 489845 dt. 10.07.2013 towards full and final settlement.

                   4. It is confirmed that Form 406/407 and Form 16A will be sent in due course and BGRESL shall provide appropriate TDS returns.

                   5. This minutes dated 12.07.2013 shall be read along with the full and final certification.”

49. In view of that settlement, it was undertook by the Aradhya Infratech Pvt. Ltd., that they have received a sum of Rs. 47,35,198/- vide cheque No.489845 dated 10.07.2013 drawn on Punjab National Bank towards full and final settlement of all outstandings for work / supplies at MAHAGENCO’s CHANDRAPUR T.P.S. EXPANSION PROJECT, Maharashtra State against various Work Orders/Service Orders/ Purchase Orders. It was further certified that, they confirm and undertake that they will not make any claim against above referred work on M/s BGR Energy Systems Limited. It was further agreed in the settlement terms that M/s Aradhya Infratech Pvt. Ltd., has already received the amount of Rs. 26 Lakhs as full and final settlement. The details of the account given in Writ Petition No.631/2015 also shows that by way of BG invocation the BGR Energy Systems Limited, received the amount of Rs.81,37,822/-. The BGR Energy Systems Limited paid the mount of Rs. 26 Lakhs to the Aradhya Infratech Pvt. Ltd., and remaining amount Rs.47,35,198/- was paid on the date of the settlement i.e. on 12.07.2013.

50. The attempt was made by the learned APP as well learned Counsel for the Respondent No.2 that this settlement has no relevance with the bank guarantees. The account extract maintained by the BGR Energy Systems Limited in the name of Aradhya Infratech Pvt. Ltd., shows that the account was maintained in respect of Service Orders or Work Orders No. 3300006842 and 3300005526. It is nowhere contention of the Respondent No.2 that, besides these Service Orders there was any other contract executed between the Respondent No.2 and the BGR Energy Systems Limited. Thus, from the said settlement it reveals that, the dispute between the BGR Energy Systems Limited and the Respondent No.2 was settled during the pendency of suit. Admittedly, this fact was not mentioned in the FIR by the Respondent No.2. Admittedly, the FIR is not an encyclopedia but being it is a material fact requires to be mentioned. It is pertinent to note that, even it was not brought to the notice of the Civil Judge Senior Division, Nagpur, wherein the suit is pending. Admittedly, the suit is filed for recovery of the amount of bank guarantee and against the said bank guarantee the parties have arrived at a settlement.

51. Learned Counsel for the Respondent No.2, placed reliance on the decision of Kathyayini Vs. Sidharth P.S. Reddy (supra), wherein the Hon’ble Apex Court held that, there is no bar against the prosecution during the pendency of the civil suit. There is no dispute about the settled position of law that, there are large number of cases where criminal law and civil law can run side by side. In the case of Kamal Shivaji Pokarnekar (supra), wherein also the Hon’ble Apex Court held that, the criminal complaints cannot be quashed only on the ground that the allegations made therein appear to be of a civil nature. If the ingredients of the offence alleged against the accused are prima facie made out in the complaint, the criminal proceeding shall not be interdicted. Admittedly, there is no dispute as to the above settled legal position.

52. Coming to the facts of the present case, the various communications which are filed on record disclosed that the bank has received the communication dated 24.09.2012 i.e. before the validity period, unfortunately that was not brought to the notice of the Petitioner No.2/Mrudula Paonikar, and therefore, she has followed the process of closure and margin money was credited in the account of Aradhya Infratech Pvt. Ltd. Subsequently, when it was brought to the notice that communication was already received on 24.09.2012 itself i.e. during the validity period, therefore she has credited the amount of bank guarantee to the account of BGR Energy Systems Limited. Admittedly, the Bank has no concern with the dispute between the parties who entered into the contract. It is a common practice that, the issuance of guarantee is what that the guarantor to discharge liability when the principal debtor fails in his duty. It is an autonomous contract and imposes an absolute obligation on the Bank to fulfill the terms and the payment of the bank guarantee becomes due.

53. In catena of decisions which are already referred discloses the role of the Bank and the manner in which the bank guarantee is to be invoked. Here in the present case, after following the due process, the Bank has invoked the bank guarantee. Therefore, the act of the Bank or the Bank officials cannot be said to be a fraudulent act. On the contrary, it was the duty of the Complainant to mention about pendency of civil litigation and settlement between the parties while lodging the FIR, but it is apparent that, though the compromise is entered by the Complainant and BGR Energy Systems Limited against the contract i.e. Service Orders bearing Nos. 3300005526 and 3300006842, there was no other contract entered into by the Respondent No.2 and BGR Energy Systems Limited. The fact of settlement is not only concealed while lodging the FIR but it was also not brought to the notice of Civil Judge Senior Division, Nagpur or Debt Recovery Tribunal, Nagpur.

54. In the above facts and circumstances the observation of the Hon’ble Apex Court in the case of Usha Chakraborty & Anr. Vs. State of West Bengal & Anr., (2023) 15 SCC 135, is relevant. In para no. 17 after adverting to the facts in the cited case in para 18, the Hon’ble Apex observed as under :

                   “By non-disclosure the respondent has, in troth, concealed the existence of a pending civil suit between him and the appellants herein before a competent civil court which obviously is the causative incident for the respondent’s allegation of perpetration of the aforesaid offenses against the appellants. We will deal with if further and also its impact a little later.”

55. The Petitioners herein are charged for the offences punishable under Sections 420, 403, 406, 418, 425, 427 read with Section 34 of the Indian Penal Code. The Complainant has alleged that, the officials of the BGR Energy Systems Limited and the Petitioner No.2 who is the Bank Officer in conveyance with each other released the amount of bank guarantees and thereby committed an offence punishable under Sections 406 and 420 read with Section 34 of IPC. There is a difference between criminal beach of trust and cheating. There is a difference between criminal breach of trust and cheating.

56. The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property, (ii) that person entrusted: (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust.

The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.

57. Thus, in both the aforesaid Sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception.

58. On the plain reading of the FIR, it is spelt out that the allegations levelled against the present Petitioners that Petitioner No.2/Mrudula Paonikar in Writ Petition No.609/2015 by joining hands with the officials of BGR Energy Systems Limited, who are Petitioners in other Writ Petition No. 631/2015 invoked the bank guarantee and deposited the amount in the account of BGR Energy Systems Limited. The grievance is against the institution Bank. The civil suit filed by the Complainant for declaration, wherein also the relief claimed is that the action on the part of the Bank officials honouring the expired bank guarantee by debiting the cash credit account of the Complainant by an amount of Rs.81,37,822/-.

59. Thus, in the FIR as well as in the civil suit the issue is regarding invoking the bank guarantee after validity period. In fact, the documents which shows that, the letter of BGR Energy Systems Limited dated 24.09.2012 was received by the Bank within validity period. The explanation given by the Petitioner No.2/Mrudula Paonikar to the Deputy Zonal Manager discloses that the branch staff/DRO has received the letter No.BGR/PPD/17,18,19 and 20 dated 24.09.2012, but it was not brought to the notice of Senior Branch Manager. The communication of the Zonal Manager, Nagpur Zone dated 07.09.2015 addressed to whomsoever it may concern, also discloses that the bank guarantee was invoked during the validity period. It is pertinent to note that, the Complainant and the BGR Energy Systems Limited during the pendency of the suit entered into the settlement on 12.07.2013 in respect of the Service Order Nos.3300006842 and 3300005526. Admittedly, except these two Service Orders there was no any contract entered by the Complainant with the BGR Energy Systems Limited. Thus, the settlement arose as a full and final settlement before lodging of the FIR. The amount of Rs. 47,35,198/- is already given to the Complainant by way of cheque bearing No.489845 drawn on Punjab National Bank.

60. Despite the above settlement on 12.07.2013 itself after two years on 22.07.2015 the FIR came to be lodged by the Complainant by concealing the fact of settlement.

61. As observed by the Hon’ble Apex Court in the case of Delhi Race Club (1940) Limited & Ors., Vs. State of Uttar Pradesh & Anr., (2024) 10 SCC 690, wherein the Hon’ble Apex Court has held in para 39 which read as under:

                   “39. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well. It has been held in Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors., reported in (1973) 2 SCC 823 as under:

                   “4. We have heard Mr. Maheshwari on behalf of the appellant and are of the opinion that no case has been made out against the respondents under Section 420 Penal Code, 1860. For the purpose of the present appeal, we would assume that the various allegations of fact which have been made in the complaint by the appellant are correct. Even after making that allowance, we find that the complaint does not disclose the commission of any offence on the part of the respondents under Section 420 of the Penal Code, 1860. There is nothing in the complaint to show that the respondents had dishonest or fraudulent intention at the time the appellant parted with Rs. 35,000. There is also nothing to indicate that the respondents induced the appellant to pay them Rs. 35,000 by deceiving him. It is further not the case of the appellant that a representation was made by the respondents to him at or before the time he paid the money to them and that at the time the representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability for them, but this fact would not be sufficient to fasten criminal liability on the respondents for the offence of cheating.” ”

62. To put it in other words, the case of cheating dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into the possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case.

63. The Hon’ble Apex Court in catena of judgments has considered the distinction between mere breach of contract and the offence of criminal breach of trust and cheating. As observed earlier, in case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence.

64. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.

65. In the case of Rikhab Birani & Anr., Vs. State of Uttar Pradesh & Anr., 2025 SCC OnLine SC 823, Arshad Neyaz Khan Vs. State of Jharkhand & Anr., 2025 SCC OnLine SC 2058, and Mahmood Ali & Ors., Vs. State of Uttar Pradesh & Ors., (2023) 15 SCC 488, wherein it is consistently held that both the offences cannot co-exist simultaneously.

66. In the light of the above facts and circumstances of the case as observed earlier that the Petitioner No.2/Mrudula Paonikar, Senior Branch Manager has invoked the bank guarantee during the validity period by observing the rules and regulations issued by the Reserve Bank of India and the law laid down by the Hon’ble Apex Court in catena of decisions which are refereed earlier. The transaction between the Complainant and the BGR Energy Systems Limited, was already settled in view of settlement dated 12.07.2013. The final settlement certificate alongwith the cheque mentioned earlier was issued to the Complainant. Though it was submitted that, the settlement was not in respect of the transaction regarding the bank guarantee but the settlement terms specifically shows that the settlement was in respect of the Service Order Nos.3300006842 and 3300005526. Therefore, this contention is not sustainable.

67. The account extract which is attached in Writ Petition No.631/2015 maintained by the BGR Energy Systems Limited, is in the name of the Complainant also discloses the Service Orders which are mentioned above. Thus, there is nothing on record to show that, there is any other transaction between the BGR Energy Systems Limited and the Complainant. The Civil Suit bearing S.C.S. No.213/2013 by the Complainant is also regarding the same transaction. Thus, the documents on record is sufficient to show that despite the settlement between the Complainant and the BGR Energy Systems Limited against the said contract, after two years the FIR came to be lodged by the present Complainant by concealing the settlement. Thus, the Complainant has not approached to the Police Authorities with a clean hand. The documents on record nowhere shows that, there was any dishonest intention on the part of the present Petitioners. The FIR was lodged by suppressing the earlier proceedings, is sufficient to show the intention of the Complainant itself. The continuance of the above said proceeding against the present Petitioners would be an abuse of process of law. Moreover, accepting the case as it is in its entirety do not prima facie constitute any offence against the present Petitioners. The contention of the Complainant that the Petitioners have misappropriated the amount of bank guarantee as well as he is deceived by the Petitioners with an intention since inception, which cannot co-exist, and therefore, if the criminal proceedings are allowed to continue against the present Petitioners, the same would be an abuse of process of law and result in miscarriage of justice.

68. In the case of Achin Gupta Vs. State of Haryana & Anr., 2024 SCC OnLine SC 759, wherein the Hon’ble Apex Court observed as under:

                   “19. It is now well settled that the power under Section 482 of the Cr. P.C. has to be exercised sparingly, carefully and with caution, only where such exercise is justified by the tests laid down in the Section itself. It is also well settled that Section 482 of the Cr. P.C. does not confer any new power on the High Court but only saves the inherent power, which the Court possessed before the enactment of the Criminal Procedure Code. There are three circumstances under which the inherent jurisdiction may be exercised, namely (i) to give effect to an order under the Code, (ii) to prevent abuse of the process of Court, and (iii) to otherwise secure the ends of justice.

                   20. The investigation of an offence is the field exclusively reserved for the police officers, whose powers in that field are unfettered, so long as the power to investigate into the cognizable offence is legitimately exercised in strict compliance with the provisions under Chapter XII Cr.PC. While exercising powers under Section 482 CrPC. The court does not function as a court of appeal or revision. As noted above, the inherent jurisdiction under the section, although wide, yet should be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the section itself. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone courts exist. The authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has the power to prevent such abuse. It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers, the court would be justified to quash any proceeding if it finds that the initiation or continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complaint, the court may examine the question of fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto.”

69. In the present case also, despite the Complainant has availed the remedy by filing a civil suit, he entered into the settlement with BGR Energy Systems Limited on 12.07.2013 itself, he has not brought the said fact to the notice of the Civil Judge Senior Division, Nagpur, wherein the suit is pending regarding the similar issue regarding invocation of bank guarantee. The conduct of the Complainant that filing of the civil suit and settlement between the firm of the Complainant and BGR Energy Systems Limited, is not disclosed to the Police Authorities, admittedly is an abuse of the process of law. The Petitioner No.2/Mrudula Paonikar who has invoked the bank guarantee during the validity period constrained to face the said prosecution. For all above these grounds, heavy costs requires to be imposed on the Complainant.

70. For all above these reasons, it is apparent that, the Complainant has not approached to the Investigating Agency with a clean hand, and therefore, in my considered opinion, the Writ Petitions deserve to be allowed. Accordingly, I proceed to pass the following order.

                   ORDER

                   i. The Writ Petitions are allowed.

                   ii. The First Information Report in connection with Crime No. 262/2015 registered with Police Station Pratapnagar, Nagpur City for the offence punishable under Sections 420, 403, 406, 418, 425, 427 read with Section 34 of the Indian Penal Code, is hereby quashed and set aside to the extent of the present Petitioners.

                   iii. The costs of Rs.2,00,000/- (Rs. Two Lakhs Only) is imposed on the Complainant for abusing the process of law. The cost be paid to the “Public Welfare Account” in Account No. 129712010001014 IFSC Code : UBIN0812978 Union Bank of India, Branch High Court, Civil Lines, Nagpur.

71. Pending application/s, if any, shall stand disposed of accordingly.