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by Admin
20 December 2025 8:32 AM
“Where Petitioners Deposit Entire Defalcated Public Money, Continuation of Criminal Prosecution Serves No Useful Purpose”, Supreme Court of India (Bench comprising Justice J.K. Maheshwari and Justice Vijay Bishnoi) delivered a rare and unprecedented judgment in Writ Petition (Criminal) No. 37/2020 and No. 48/2020, invoking its extraordinary constitutional powers under Article 32 to quash multiple criminal, regulatory, and enforcement proceedings against petitioners Hemant S. Hathi and Chetan Jayantilal, after full consensus was reached for the deposit of ₹5100 crores towards recovery of public funds in a complex web of financial fraud litigation.
This judicial intervention—characterised explicitly by the Court as “not to be treated as precedent”—was grounded in the peculiar and extraordinary facts of the case, involving recovery from multiple defunct and liquidated corporate entities, cross-border fraud, and litigation spanning nearly a decade under numerous penal, economic, and regulatory statutes.
“Criminal Continuation Serves No Purpose Where Public Money is Recovered in Full”
In the key observation guiding this extraordinary quashment, the Court reasoned:
“Since inception, this Court was of the view that if the petitioners are ready to deposit the amount as settled in OTS and public money comes back to lender banks, the continuation of the criminal proceedings would not serve any useful purpose.”
Thus, exercising its plenary powers under Article 32, the Supreme Court allowed the petitions, quashing FIRs, ECIRs, prosecution complaints, attachments, and proceedings under multiple statutes, subject to deposit of ₹5100 crores on or before December 17, 2025.
Massive Financial Fraud, OTS Settlements, and a Torrent of Prosecutions
The petitioners were facing criminal and regulatory action from the CBI, Enforcement Directorate (ED), SFIO, Income Tax Department, and others, with allegations of fraud and money laundering pegged at ₹5383 crores. The trigger was:
Despite the multitude of proceedings, the petitioners approached the Court voluntarily under Article 32, requesting a comprehensive quashing of all actions on the premise that they had reached a One-Time Settlement (OTS) with most banks and were willing to make a full and final payment.
Initially, the Court had extended interim protection, noting:
“We really see no reason why the money should not be received… all proceedings must remain in abeyance till we consider the matter.”
Can Criminal Proceedings Be Quashed Upon Full Repayment?
The central legal question was whether the Court could, in exercise of Article 32, quash an entire gamut of criminal and regulatory proceedings, including:
Senior Advocate Mukul Rohatgi, appearing for the petitioners, argued that a full consensual settlement had been reached, and the petitioners were willing to deposit ₹5100 crores, which was more than the assessed unpaid amount of ₹2061.37 crores.
On the other hand, the Solicitor General Tushar Mehta, assisted by ASG S.V. Raju, stated that recovery alone could not ordinarily be grounds to quash criminal prosecution, but acknowledged the unique and exceptional factual matrix, and placed the Government’s proposed settlement figure of ₹5100 crores before the Court in a sealed cover.
Settlement Details and Computation: From ₹6761 Crores in OTS to ₹5100 Crores in Full Payment
The Court meticulously computed the dues:
However, in a significant gesture, the petitioners agreed to pay ₹5100 crores—more than double the net due—to seek closure and quashment of all legal proceedings, covering even defunct entities and unresolved CIRP matters.
Full Restitution Justifies Quashment in Public Interest
The Court made a clear and emphatic observation:
“The tenor of the proceedings apparently indicate peculiarity, with intent to protect the public money and interest and to get deposited the defalcated amount… discretion as prayed deserves to be exercised… in the peculiar facts and situation.”
It further held that such a consensual full and final repayment, far exceeding the amounts calculated as due, coupled with a decade-long litigation fatigue, warranted closure of all proceedings, stating:
“Continuation of the criminal proceedings would not serve any useful purpose.”
This approach was seen as protecting both public interest and judicial economy, while ensuring no dilution of criminal law in general—hence the Court emphatically barred the use of this ruling as precedent.
Directions Issued by the Supreme Court
Upon acceptance of the Government’s settlement proposal and petitioners' commitment:
Supreme Court Closes Decade-Long Financial Fraud Litigation Upon Full Repayment, But Insists It’s a One-Off
This judgment marks a rare but reasoned invocation of Article 32 to quash massive financial crime proceedings—not on legal technicalities, but on principles of public interest, restitution, and judicial pragmatism.
By allowing the petitioners to deposit ₹5100 crores—a sum well exceeding the unpaid dues—and directing closure of over a dozen major proceedings under five central legislations, the Court achieved a remarkable recovery for public banks, while also avoiding continued judicial drain on a litigation that had seen extensive compliance and cooperation.
Yet, the Bench was cautious and deliberate in limiting the implications:
“These directions as issued are in peculiar facts of this case, therefore, they shall not be treated as precedent.”
The decision balances criminal accountability with effective restitution and may well serve as a template—not in law, but in approach—for future settlement-driven resolution in large financial frauds.
Date of Decision: November 19, 2025
