Kerala High Court Denies Quashing FIR in Rs 135 Crore Loan Fraud Case, Emphasizes Investigation Necessity

High Court Rejects Plea to Quash FIR Against Accused Businessman, Highlights Fraudulent Intent from Inception
The Kerala High Court has dismissed a petition to quash an FIR against Abdul Rahman, accused of defrauding a UAE-based bank of Rs 135 crore. The decision underscores the need for a thorough investigation to ascertain the fraudulent intent of the accused from the beginning of the transaction. The order was delivered by Justice Bechu Kurian Thomas on July 17, 2024.

The case stems from a complaint filed by Asin P.S., authorized by M/s Invest Bank, UAE, accusing Abdul Rahman of obtaining a loan of 68.159 million UAE dirhams (Rs 135 crores) for his company, M/s Hexsa Oil and Gas Services LLC. The complaint alleges that Rahman failed to repay 42.898 million UAE dirhams and diverted the funds for personal use. Despite issuing 84 post-dated cheques, the first cheque bounced, and Rahman allegedly absconded to India, initiating new businesses with the misappropriated funds.

Justice Thomas' order emphasized that the core issue was whether the accused had a fraudulent intention at the time of securing the loan. The court referenced the Supreme Court's principles regarding the distinction between breach of contract and cheating, noting that fraudulent intent at the inception of the transaction is crucial for constituting cheating.

Justice Thomas highlighted that while mere breach of contract does not constitute cheating, the complaint against Rahman suggested a deliberate intention to defraud the bank. This was evidenced by his actions post-loan disbursement, such as issuing dishonored cheques, absconding from the UAE, and starting new businesses in India with the diverted funds.

The court relied on several precedents, including the Supreme Court's rulings in International Advanced Research Centre for Powder Metallurgy and New Materials v. Nimra Cerglass Technics (P) Ltd. and Mahmood Ali v. State of UP, which delineate the requirements for establishing fraudulent intent in cases of alleged cheating. The court reiterated that the presence of fraudulent intent from the beginning is key to differentiating between a criminal offense and a civil dispute.

Justice Thomas remarked, "Intention to deceive from the beginning is the essence of the offense of cheating, and a mere failure to keep a promise subsequently cannot give rise to any assumption that there was culpable intention from the beginning." He further noted that "deception can be performed by words or by conduct and must be appreciated based on the circumstances of each case."

The court's refusal to quash the FIR against Abdul Rahman emphasizes the importance of allowing the investigation to proceed to uncover the full extent of the alleged fraud. This decision reinforces the judiciary's commitment to addressing financial crimes seriously and ensures that individuals accused of large-scale fraud are thoroughly investigated before any judicial intervention. The judgment sends a strong message about the legal framework's robustness in tackling sophisticated financial deceptions.

Date of Decision: July 17, 2024