One-time settlement doesn’t end cheating case, rules SC—in departure from its own proposal to Sandesaras

The order comes weeks after a separate bench proposed dropping all criminal charges against the billionaire Sandesara brothers, given that they deposited Rs 5,100 cr as settlement with defrauded banks.

Illustration: Manas Gurung | ThePrint

New Delhi: A one-time settlement is not a valid ground to quash charges of cheating and forgery that caused losses to a financial institution, the Supreme Court has held, hearing a CBI appeal against a 2022 court judgment that quashed the agency’s case against M/s Sarvodaya Highways Ltd against the backdrop of a one-time settlement.

This comes more than a fortnight after a separate bench of the Supreme Court proposed dropping all criminal charges against Nitin and Chetan Sandesara—the billionaire brothers who had fled India after defrauding banks—on the condition that they deposit Rs 5,100 crore as a full and final settlement with the lender banks. Following the SC order, “Nitin Sandesara, Chetan Sandesara, and family have deposited 5,100 crore with the Registry of the Honourable Supreme Court of India”, shows the court’s 19 November order.

In the current judgment, a Supreme Court division bench of Justice Vikram Nath and Justice Sandeep Mehta has reiterated a settled principle—economic offences not only defraud banks but also impact society at large. The justices have held that a one-time settlement (OTS) cannot erase criminal liability for fraud, forgery, or corruption and, by their very nature, is not a full recovery.

The current case involves M/s Sarvodaya Highways’ outstanding liability of nearly Rs 52 crore. A 2022 Punjab and Haryana High Court order had quashed the CBI’s case against the company, noting that it had paid Rs 41 crore under a one-time settlement (OTS) scheme with the State Bank of Bikaner and Jaipur—now SBI—and quashed the CBI case. The CBi then approached the Supreme Court.

The FIR against M/s Sarvodaya Highways was filed in 2015 under Section 120B (criminal conspiracy) of the Indian Penal Code, read with IPC sections 406 (criminal breach of trust), 420 (cheating), 467, 468, and 471 (forgery, fabrication, etc.), and Section 13(2) of the Prevention of Corruption Act, read with Section 13(1)(d). It was based on a complaint against the company for obtaining credit facilities by submitting fabricated work orders, manipulated revenue records, and false stock statements. An internal bank inquiry declared the company account a non-performing asset (NPA) and estimated a Rs 52.5 crore fraud.

Allowing the CBI’s appeal, the Supreme Court noted that the settlement amount was significantly lower than the actual liability, and it was under compelling circumstances that the bank still accepted it. This, the court has held, is typical of recovery processes in cases of non-performing assets (NPA).

Since the nature of the dispute is that of an economic offence and not a private dispute, it does not fall in the category of cases that can be settled through such a compromise, the Supreme Court order has said. A corruption case, the judges have also observed, cannot be quashed only upon a settlement.

This view of the Supreme Court contrasts with its approach in the legal case against the Sandesaras. A different bench heard the brothers, who control the Nigeria-based Sterling Oil Exploration and Energy Production Company.

Proposal to the Sandesara brothers

On 19 November, the Supreme Court had proposed to quash all criminal charges against the Sandesara brothers, thereby wiping their slate clean, considering their Rs 5,100 crore OTS as a full and final settlement for their Rs 5,383 crore bank fraud.

A Supreme Court division bench, comprising Justice J.K. Maheshwari and Justice Vijay Bishnoi, had granted the brothers time till 17 December to pay, following which it had proposed to pass formal orders to set aside all the pending criminal cases.

This order had come on a plea by the Sandesara brothers, who were willing to put a ‘quietus’ to the litigation. The duo had offered a deposit of Rs 3,500 crore in exchange for the withdrawal of all cases against them.

Both the CBI and the Union of India had agreed with the proposal before the Supreme Court. They then quoted a higher settlement figure, to which the brothers also agreed.

After noting that Nitin and Chetan Sandesara are ready to deposit the OTS, the bench had observed that once they returned public money to the lender banks, the continuation of the criminal proceedings against them would not serve any useful purpose. It, however, had clarified that its order would not be treated as a precedent.

“The deposit of Rs 5,100 crore has been fully made as of 6 December 2025. This comprehensively brings closure to all cases regarding the Sandesara Family and their companies pending before multiple judicial forums and government agencies since 2017,” the 19 November court order had noted.

Back to the Sarvodaya Highways case

Arguing against the Punjab and Haryana High Court’s quashing of the CBI case against M/s Sarvodaya Highways Ltd, additional solicitor general Vikramjit Banerjee had contended before the Supreme Court that the HC committed a gross error in law by quashing the proceedings arising out of the CBI chargesheet only based on an OTS between the defaulting firm and the bank.

The CBI’s probe, he had submitted, resulted in an unimpeachable finding regarding documents that had been fabricated before being used to procure a short-term business loan from the bank—cash credit facility.

The OTS, he had added, was under compulsion since the account of the defaulter company had been declared to be an NPA. Moreover, proceedings against the duo had been initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.

Realising it would not be possible to recover the entire outstanding amount, plus interest, the bank opted for a safer course; it settled. It accepted a substantially lower amount than the required recovery under the terms of the company’s cash credit account. This, Banerjee had argued, caused significant losses to the bank, having a direct adverse bearing on the public exchequer.

Opposing the CBI’s appeal, senior advocate Siddharth Dave had sought to highlight his client’s bona fide. He had attempted to focus on the release of all pledged assets and closure of proceedings before the Debt Recovery Tribunal, after the bank’s instructions in this regard.

In these circumstances, the continuation of the criminal prosecution against his client—the company’s directors—would serve no useful purpose and amount to an exercise in futility, he had argued.

“One-time settlements are, as a rule, effected under circumstances where the bank, under duress, is compelled to accept a lesser amount to secure the maximum possible recovery against the defaulting account. In this background, we feel that the High Court committed an error—apparent in the eyes of the law—by quashing the proceedings,” the Supreme Court bench noted in its current order.

The Supreme Court bench referred to its previous judgments that “expressly” prohibit quashing of proceedings of a criminal case on the strength of a compromise, where the loss to the public exchequer is evident, and the offences under the Prevention of Corruption Act (PC) are invoked.

Noting the HC’s approach was legally unsustainable, the Supreme Court bench admitted to its failure to consider vital aspects, including the alleged fabrication of documents, the involvement of a bank official, the application of the Prevention of Corruption Act, and the deficit of over Rs 5 crore, even after the settlement.

As the Supreme Court restored the CBI chargesheet, directions were issued to the trial court to proceed based on the case’s merits. At the same time, the justices clarified that none of their observations should prejudice the case.

(Edited by Madhurita Goswami)