Authority: High Court of Judicature at Madras

Order Date: 10 July 2026

Case Overview

  • Petitioners: Shaikh Mahaboob (representing Chemstar International Pvt Ltd), Shaikh S.K. Chan Basha, Shaikh Abdul Aziz, Shaik Abdul Jaleel (representing Star Aqua International Pvt Ltd), and other individual petitioners.
  • Respondents: Central Bureau of Investigation (CBI) represented by the Inspector of Police, Bank Securities & Fraud Cell, Bangalore; Assistant General Manager, Union Bank of India, Industrial Finance Branch, Chennai (impleaded suo motu).
  • Proceedings Challenged: Criminal Original Petitions Nos. 35063‑35066 of 2025 filed under Section 528 of the Banking and Financial Services (BNSS) Act, seeking to quash the criminal trial in CC.No.2005 of 2025 pending before the Additional Chief Metropolitan Magistrate Court, Egmore, Chennai, arising from FIR No. RC21/2018.
  • Allegations by Prosecution: Accused conspired (2012‑2018) to cheat the complainant bank by fraudulently availing credit facilities, submitting fabricated financial statements, inflated stock/receivables, false invoices, and diverting loan funds, causing an alleged loss of Rs 284.84 crore.
  • Key Dates & Events:
  • FIR registered: RC21/2018.
  • Corporate Insolvency Resolution Process (CIRP) initiated before NCLT, Chennai (CP.No.668 of 2017).
  • Resolution plan submitted by Seelam Infra Developers Limited and approved by Committee of Creditors on 01 Oct 2018 with 100 % voting share (defacto complainant held 95.35 %).
  • NCLT, Chennai order approving the plan: 11 Mar 2019 (MA.No.520 of 2018).
  • No‑Due Certificate issued by the complainant bank on 16 Mar 2020, stating no dues payable by the corporate debtor.
  • Debt Recovery Tribunal‑I, Chennai recovery certificate (DRC.No.3 of 2025) for Rs 628.15 crore as on 27 Feb 2025.
  • Petitioners’ Arguments: The matter is a commercial transaction and civil dispute; the complaint was lodged with malafide intent; the accused were classified as non‑performing assets in 2016 due to floods and market downturn; settlement via CIRP and No‑Due Certificate extinguishes criminal liability; no dishonest intention at the inception of transactions; Section 420 IPC requires fraudulent intent at the outset.
  • Respondents’ (CBI) Arguments: Despite settlement, the accused committed serious default amounting to Rs 284.84 crore, constituting economic offence; civil settlement does not bar criminal prosecution; reliance on Supreme Court judgments (Rumi Dhar vs State, CBI vs Maninder Singh, CBI vs Sarvodaya Highways) that economic offences can be pursued irrespective of civil remedies.
  • Court’s Observations:
  • The prosecution’s case hinges on alleged fraudulent representations, but no evidence of forgery or dishonest intent at the time of the transactions was found.
  • The settlement under the Insolvency and Bankruptcy Code (IBC) and issuance of a No‑Due Certificate bar further criminal prosecution; the defacto complainant is estopped from pursuing the case.
  • Breach of contract without deception at inception does not constitute cheating under Section 420 IPC.
  • The court noted that the accused had repaid hundreds of crores from 1998‑2016 and default occurred only after 2016 due to floods and market crisis.
  • The court rejected the reliance on Supreme Court judgments, emphasizing the commercial nature of the dispute and lack of fraudulent intent.

Final Outcome

  • The court quashed the criminal proceedings in CC.No.2005 of 2025.
  • All four Criminal Original Petitions (Nos. 35063‑35066) were allowed.
  • All connected miscellaneous petitions were closed.
  • The order was pronounced on 10 July 2026.

Topics: Court Order, Insolvency Settlement