CBI Can’t Prosecute When Bank Suffers No Loss: Andhra Pradesh High Court Discharges Bhimavaram Hospitals Directors in ₹1.5 Crore SBI Case

“No Wrongful Loss, No Wrongful Gain — Ingredients of Section 420 IPC Are Missing”, In a powerful reaffirmation of the principle that criminal law cannot be used in the absence of demonstrable loss or unlawful gain, the Andhra Pradesh High Court discharging Dr. G. Gopala Raju and other directors of M/s. Bhimavaram Hospitals Limited from CBI charges of cheating, conspiracy and corruption.

Justice Subhendu Samanta held that where the entire loan amount along with interest was repaid prior to filing of the charge sheet and a “No Due Certificate” was issued by the State Bank of India, continuation of prosecution would be legally unsustainable. The Court ruled that the charge sheet was “groundless” within the meaning of Section 239 Cr.P.C.

CBI Case Alleging Conspiracy in Availing Credit Facilities

The case originated from a complaint dated 10.06.2009 by the Regional Manager of SBI, Vijayawada, alleging that Bhimavaram Hospitals Limited and its Managing Director had availed a ₹50 lakh cash credit facility and ₹1 crore term loan by allegedly using bogus documents in conspiracy with certain SBI officials.

The CBI registered RC-05(E)/2009 for offences under Sections 120-B, 420, 468 and 471 IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

After investigation, a charge sheet was filed on 14.05.2011. Notably, sanction for prosecution against bank officials was refused by the Vigilance Commission. Consequently, only the hospital directors were charge-sheeted.

The accused moved an application under Section 239 Cr.P.C. seeking discharge. The Magistrate dismissed it on 22.06.2012, leading to the present revision under Sections 397 and 401 Cr.P.C.

“Documents Collected by CBI Itself Show Full Repayment Before Charge Sheet”

A central feature of the High Court’s reasoning was that the repayment was not a subsequent development. It was already reflected in the investigation record.

The Court noted that the CBI had collected 517 documents, including:

“Document Nos. 483 and 484 evidencing correspondence regarding liquidation of dues,”

and more significantly, a “No Due Certificate dated 21.01.2010” issued by SBI certifying that the entire loan along with interest had been repaid.

The charge sheet was filed on 14.05.2011 — nearly 16 months after issuance of the No Due Certificate.

Justice Samanta recorded: “It is crystal clear 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.”

Thus, the Magistrate failed to properly appreciate the prosecution’s own material while rejecting discharge.

Distinguishing Debendranath Padhi: Court Can Look at Prosecution Documents

The CBI relied on State of Orissa v. Debendranath Padhi to argue that defence material cannot be considered at the stage of discharge.

However, the High Court clarified that the repayment documents were not defence-produced material but were already part of the investigation record collected by the CBI.

Hence, the principle in Debendranath Padhi did not bar consideration of such documents under Section 239 Cr.P.C.

“Mere Allegations of Bogus Bills Without Resultant Loss Do Not Constitute Cheating”

The Court carefully analysed the ingredients of Section 420 IPC and reiterated that cheating requires:

“Dishonest inducement; delivery of property by deception; and wrongful gain to the accused coupled with wrongful loss to the victim.”

On facts, the Court found: “There are no instances or evidence collected by the CBI to show that the bank suffered any loss by any act or action of the present petitioners.”

Even more tellingly, the Court observed: “The loan account never became a non-performing asset (NPA).”

In categorical terms, the Court declared: “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.”

Conspiracy and Prevention of Corruption Charges Also Collapse

The High Court further held that for an offence under Section 120-B IPC:

“It is essential to prima facie establish that the alleged conspiracy resulted in wrongful loss to the bank.”

With sanction to prosecute bank officials refused and no loss shown, the alleged conspiracy lacked foundational basis.

Similarly, under Section 13(1)(d) of the Prevention of Corruption Act, the prosecution must establish that the accused obtained “pecuniary advantage” by corrupt means. The Court found no material demonstrating unlawful gain or financial injury to the bank.

Supreme Court Authorities Applied: Settlement + No Loss = Futile Prosecution

Justice Samanta relied upon recent Supreme Court rulings including:

In K. Bharati Devi v. State of Telangana (2024) 10 SCC 384, the Supreme Court held that where a bank dispute was settled and loan account closed, “continuance of the criminal proceedings would be an exercise in futility.”

In Suresh C. Singhal v. State of Gujarat (2025 SCC OnLine SC 788), it was observed that where no loss is caused to the bank and the dispute has predominantly civil character, criminal proceedings may be quashed.

In Hemant S. Hathi v. CBI, the Supreme Court directed quashing once public money was restored.

The High Court distinguished Eluri Srinivasa Chakravarthi and Sarvodaya Highways, noting that those cases involved substantial unpaid dues or incomplete settlements, unlike the present case where full repayment including interest was made prior to filing of the charge sheet.

Charge Sheet Held “Groundless”

Concluding that essential ingredients of cheating and conspiracy were absent, and that continuation of proceedings would be futile, the High Court allowed the revision.

The impugned order dated 22.06.2012 was set aside, and the petitioners were discharged under Section 239 Cr.P.C. All miscellaneous petitions were closed.

This judgment sends a strong signal in banking fraud prosecutions: repayment alone may not always absolve liability, but where investigation itself establishes full discharge of liability, absence of wrongful loss, and lack of pecuniary advantage, criminal prosecution cannot be mechanically sustained.

Date of Decision: 13/02/2026