Bombay High Court Refuses To Quash Cheating FIR Against Former Credit Manager In Fraudulent Loan Case

“At the stage of quashing, the Court cannot hold a mini trial; allegations in FIR disclose prima facie offence”:  Bombay High Court (Coram: Justice Ravindra V. Ghuge and Justice Gautam A. Ankhad) dismissed a writ petition seeking quashing of FIR No. 73 of 2019 registered under Sections 420 and 34 of the Indian Penal Code. The petitioner, a former Credit Manager with a housing finance company, was accused of facilitating a fraudulent loan sanction for a slum property in violation of internal norms.

The Court held that the allegations in the FIR clearly disclosed the commission of a cognizable offence and rejected the plea for quashing under Section 482 of the CrPC. The interim protection earlier granted to the petitioner was vacated.

The petitioner, employed as a Credit Manager with Aspire Home Finance Company Ltd. (now Motilal Oswal Home Finance Ltd.), was responsible for analyzing creditworthiness and sanctioning home loan proposals. In 2015, a housing loan of ₹10.39 lakh was disbursed for purchase of a property in Andheri East. Upon default, the finance company discovered that the property was in a chawl/slum, for which housing loans were not permitted. Further, no mortgage deed had been executed, and the borrowers had already sold the unit to a third party.

An internal inquiry revealed that the loan had been sanctioned in violation of norms and that the petitioner, along with two branch managers, had misused his position in the loan approval process. Based on a complaint filed by the company’s legal manager, the FIR was registered at Virar Police Station.

The petitioner contended that his role was limited, that the loan approval was conditional on legal and technical clearances from another department, and that he had not benefited personally from the transaction. He relied on State of Haryana v. Bhajan Lal (1992), Inder Mohan Goswami v. State of Uttaranchal (2007), and a 2023 Bombay High Court decision (Nitin Jayaram Parab v. State of Maharashtra) to argue that his inclusion in the FIR was unwarranted.

The Bench rejected the petitioner’s attempt to distance himself from the approval process, noting that the credit appraisal memo itself recorded his role in the sanctioning of the loan. The Court emphasized that whether or not the loan was finally subject to legal and technical clearance was a matter of evidence for trial and not a ground for quashing at the FIR stage.

Citing Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra (2021) and the celebrated Bhajan Lal principles, the Court reiterated the limited scope of quashing under Section 482 CrPC. Justice Ankhad, delivering the judgment, observed:

“At this stage, we cannot embark upon an inquiry as to the reliability or genuineness of the allegations. It is only in exceptional cases where the allegations are absurd or inherently improbable that interference is warranted. This case does not fall within that exception.”

The Court also distinguished the petitioner’s reliance on the 2023 Bombay High Court ruling, clarifying that in that case the accused had no connection with the loan sanction, whereas here the petitioner’s involvement was evident on record.

The writ petition was dismissed and the interim protection against filing of charge-sheet, granted earlier in February 2020, was vacated. The Court concluded:

“The FIR discloses prima facie commission of a cognizable offence. The investigation must proceed, and the truth of the allegations is a matter for trial, not for adjudication under Section 482 CrPC.”

The Bombay High Court’s ruling underscores that the power to quash FIRs is to be used sparingly and only in exceptional cases. By refusing to shield the petitioner from prosecution at the threshold, the Court reaffirmed the principle that financial fraud allegations, supported by prima facie material, require full investigation and trial rather than summary termination.

Date of Decision: 20 August 2025