Loan fraud: Criminal liability can’t be wiped away, says High Court

Srinagar, Jul 1: The High Court of Jammu & Kashmir and Ladakh has dismissed a batch of eight petitions seeking to quash the chargesheets in the Jammu & Kashmir Bank loan fraud case, holding that a prima facie offence of cheating is made out against the promoters and directors of Aman Hospitality Pvt Ltd (AHPL) and connected entities.
According to the details available, the common judgment was pronounced by Justice Sanjay Dhar in CRM(M) No.235/2023 and seven connected petitions filed under Section 482 Cr.P.C. by Madhu Bakshi, Raj Singh Gehlot, Sheela Gehlot, Mohan Singh and four connected companies. The petitions challenged the charge sheets arising out of FIR No.15/2019 of Police Station Anti-Corruption Bureau (Central), Srinagar, and Crime No.RCBD12021E0004 dated 02.09.2021 registered by the Central Bureau of Investigation, Bank Securities Fraud Branch, New Delhi, for offences under Sections 120-B, 409 and 420 RPC read with Sections 5(1)(c) and 5(1)(d) read with 5(2) of the J&K Prevention of Corruption Act, pending before the Special Judge Anti-Corruption, Srinagar. Petitioner Raj Singh Gehlot is the promoter of the Ambience Group.
Appearing for the respondents the Anti-Corruption Bureau and the CBI, Central Government Counsel Vikas Malik, with Mushtaq Ahmad Dar and Syed Gowhar, resisted the quashing pleas, urging that the charge sheets disclosed ample material showing diversion and siphoning of the loan tranches through entities controlled by the borrower, and that such disputed questions of fact could not be examined under Section 482. They relied on State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, Rajiv Thapar v. Madan Lal Kapoor, (2013) 3 SCC 330, and Pradeep Kumar Kesarwani v. State of Uttar Pradesh, 2025 SCC OnLine SC 1947. For the petitioners, Senior Advocate Tanveer Ahmad Mir argued that there was no conspiracy with the bank management, that the funds were merely reimbursed to the turnkey contractor M/S APL, that the forensic audit disclosed no fraud, and that the completed hotel and the bank’s own One-Time Settlement showed a purely civil dispute.
Rejecting these contentions, the Court held that “the Bank has been dishonestly induced to release the tranches of loan in favour of the borrower company and upon release, the loan amount has been utilized for a purpose for which it was not sanctioned. Thus, prima facie, offence of cheating is made out against the petitioners.” It added that “Merely because the Bank has agreed to enter into a One-Time Settlement with the borrower company, the criminal liability of the borrower company and its Directors cannot be wiped away once it is shown from the material annexed with the charge sheet that there has been fraudulent conduct on the part of the borrower company.”
Dismissing the petitions, the Court directed: “For what has been discussed hereinbefore, I do not find any merit in these petitions. The same are dismissed accordingly. Interim direction(s), if any, shall cease to be in operation.” It clarified that “the observations made herein are only for the purpose of deciding the present petitions and shall not be construed as an expression of opinion on the merits of the case,” and that “the learned trial court shall proceed to consider the matter independently and uninfluenced by any observation made in this judgment.” (KNO)