Where Prima Facie Overvaluation Suggests Conspiracy, Discharge Cannot Be Granted Without Trial: Kerala High Court

“Criminal Liability on Property Valuation Is a Matter of Evidence, Not Dismissal at the Threshold” - In a significant ruling Kerala High Court, through Justice A. Badharudeen, refused to discharge a government-approved valuer accused of inflating property valuations in a ₹4.33 crore loan fraud investigated by the Central Bureau of Investigation (CBI). Dismissing Criminal Revision, the Court held that the question of deliberate overvaluation forming part of a criminal conspiracy cannot be decided at the pre-trial stage and must be tested through full evidence at trial.

The case, arising out of C.C. No. 7/2011 before the Special CBI Court, Thiruvananthapuram, centres around allegations that bank officials, borrowers, and a valuer (the 5th accused) conspired to sanction inflated loans by grossly overvaluing properties, thus causing wrongful loss to the State Bank of India and corresponding gain to the accused parties. The valuer, K. Sreenivasan, had moved the High Court after the Special Court denied his plea for discharge.

Rejecting his arguments, the High Court observed: “It is specifically made clear that when overvaluation is the allegation and there are valuation reports showing that the actual valuation would come to a lesser amount, then the question of overvaluation is a matter of evidence and the same cannot be considered at the pre-trial stage.”

“Discharge Cannot Be Allowed When There Is Material Suggesting Conspiracy and Abuse of Office”: High Court Upholds Special Court’s Order

The revision petitioner contended that mere disparity between valuations was not sufficient to impute criminal intent, especially when valuation is subjective and dependent on market variables. He relied on prior Kerala High Court decisions (Crl.R.P. Nos. 926/2018 and 927/2018) to argue that without proof of a scientific valuation method, no criminal liability could be fastened.

But the High Court firmly rejected this position, clarifying:“Merely looking at the report, without examining the authors thereof and the methodology adopted for valuing the property during trial, jumping into conclusion that the reports showing subsequent valuations… are without any rationale at the pre-trial stage, would be fatal to the prosecution.”

The Court emphasized that where the allegation of overvaluation is supported by material, including bank revaluations and third-party expert reports, a full trial is necessary to determine whether the discrepancy was an honest mistake or part of a conspiracy.

“Overvaluation As a Means of Fraud Cannot Be Judged Without Examining the Evidence”: Discrepancy of Over ₹6 Crores in Property Valuation Cited

The prosecution presented a detailed comparative chart showing a massive difference between the valuations provided by K. Sreenivasan (A5) and those obtained later by bank-commissioned valuers and independent experts. For instance, one property originally valued by the petitioner at ₹3.71 crore was later revalued at just ₹44.40 lakh—a glaring difference that the Court noted as indicative of prima facie overvaluation.

Justice Badharudeen highlighted this inconsistency: “From the materials produced by the prosecution, it is luculent that A5 exaggerated the value of the properties for the purpose of availing loans. The difference in the valuation prepared by A5 and the valuation prepared by CW73 is significant.”

The Court reiterated that such large-scale overvaluation cannot be brushed aside as mere professional divergence without trial scrutiny. The total valuation submitted by the accused stood at over ₹9.6 crores, while revaluations by independent sources and the Village Officer averaged around ₹3.48 crores—a disparity exceeding ₹6 crores.

“Judicial Interference at the Pre-trial Stage Must Be Restrained Where Prosecution Shows Plausible Involvement”: Court Rejects Premature Exoneration

The High Court reiterated settled principles on the limited scope of judicial interference at the stage of discharge, noting that when the prosecution materials disclose plausible involvement in criminal conspiracy, the Court cannot conduct a mini-trial or assess the sufficiency of evidence.

The judgment made it abundantly clear: “Discharge cannot be granted at the threshold when prima facie case exists and evidence requires examination at trial.”

In fact, the Court disagreed with its own earlier ruling in Crl.R.P. No. 927/2018, which had been relied on by the petitioner to argue that valuation-based charges lacked criminal substance. Justice Badharudeen found that such a blanket conclusion was not applicable when there is credible material on record showing intentional inflation of property values.

“Abuse of Position By Bank Officials in Conspiracy With Private Valuer Requires Trial Scrutiny”: Prevention of Corruption Act Invoked

The Court also rejected the argument that the petitioner, being a private professional, could not be tried under the Prevention of Corruption Act, 1988, observing that the alleged conspiracy with public servants (bank officials) and the consequential wrongful gain and loss squarely brought the case within the ambit of Section 13(1)(d) read with Section 13(2) of the PC Act.

The prosecution had alleged that the petitioner colluded with bank officials to present inflated valuations so as to sanction higher loans using fraudulently obtained property documents, with the entire scheme orchestrated to defraud the bank.

Justice Badharudeen observed: “When prosecution materials disclose plausible involvement in criminal conspiracy and financial fraud, High Court cannot usurp trial function by evaluating credibility or sufficiency of evidence.”

Criminal Revision Petition Dismissed, Trial Directed to Be Completed Within Three Months

Concluding that the Special Court had rightly rejected the discharge plea, the High Court dismissed the criminal revision petition and lifted the interim stay, directing:

“The learned Special Judge shall expedite the trial of this matter, considering the fact that this case has been pending from 2011 onwards, within a time-frame, at any rate within a period of three months.”

The Court also clarified that none of its observations will bind the trial court on merits, leaving the prosecution and defence to contest the matter in accordance with law.

"Criminal Fraud Allegedly Engineered Through Overvaluation Must Face Trial, Not Escape Through Procedural Loopholes": High Court Emphasises Evidentiary Scrutiny Over Technical Discharge

This judgment reaffirms that valuation discrepancies, especially when linked to public funds, bank fraud, and conspiracy, cannot be prematurely decided without full-fledged evidence. It warns against the increasing tendency to seek discharge by attacking the evidence before it's even tested, and calls for judicial restraint in second-guessing investigative conclusions.

Date of Decision: 11 November 2025