Supreme Court Quashes Criminal Proceedings Against Sandesara Brothers After ₹5,111 Crore Deposit

Background of the Sterling Biotech Bank Fraud Case

The Supreme Court of India has finally quashed all criminal proceedings against fugitive businessmen Chetan Jayantilal Sandesara and Nitin Jayantilal Sandesara, promoters of Sterling Biotech Ltd, after they deposited an additional ₹5,111 crore with the Registry of the Supreme Court.

The litigation arose from allegations of a massive bank fraud involving public sector banks, with the Central Bureau of Investigation (CBI) registering FIRs in October 2017. The alleged fraud, committed between 2004 and 2012, was initially quantified at ₹5,383 crore, though subsequent assessments placed the total exposure significantly higher.

Supreme Court’s Final Order and Compliance with Conditions

A Bench comprising Justice J.K. Maheshwari and Justice Vijay Bishnoi noted that the Sandesara brothers had fully complied with the conditions imposed in the Court’s November 19 order, which required them to deposit an additional ₹5,100 crore as part of a comprehensive one-time settlement (OTS) with lender banks.

Between December 3 and December 6, the brothers deposited ₹5,111 crore, exceeding the stipulated amount by ₹11 crore. Taking note of this excess, the Court directed that the surplus be transferred to the Supreme Court Legal Aid Services Committee.

Upon recording full compliance, the Court formally quashed all criminal proceedings against the Sandesara brothers.

Scope of Proceedings Quashed by the Supreme Court

The quashing covered a wide spectrum of proceedings initiated under multiple statutes, including:

  • FIRs registered by the Central Bureau of Investigation (CBI)

  • Enforcement Case Information Reports (ECIRs) by the Enforcement Directorate (ED)

  • Provisional attachment and confiscation proceedings under the Prevention of Money Laundering Act, 2002 (PMLA)

  • Proceedings under the Fugitive Economic Offenders Act, 2018

  • Prosecutions by the Serious Fraud Investigation Office (SFIO) under the Companies Act, 2013

  • Proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

  • Income tax prosecution complaints

The Court directed that all civil and criminal proceedings would stand quashed upon full payment and verification of amounts by the Registrar of the Supreme Court.

Financial Assessment and Recovery of Public Money

The Supreme Court carefully examined the financial background:

  • Original alleged fraud (CBI FIR): ₹5,383 crore

  • Total OTS value recorded by the Court: ₹6,761 crore

  • Amount already deposited earlier by the Sandesaras: ₹3,507.63 crore

  • Recoveries through insolvency proceedings before the National Company Law Tribunal (NCLT): ₹1,192 crore

  • Residual dues after adjustment: approximately ₹2,061 crore

Despite this lower residual figure, the Sandesara brothers agreed to deposit ₹5,100 crore to ensure a complete and final closure of all proceedings, which the Court described as substantially restoring public money to the banking system.

Legal Basis for Quashing Criminal Proceedings

Inherent Powers of the Supreme Court

The Supreme Court exercised its extraordinary jurisdiction under Article 142 of the Constitution, which empowers it to pass any order necessary to do “complete justice” in a cause or matter.

The Court emphasised that the decision was rendered in the “peculiar facts” of the case and explicitly stated that it shall not be treated as a precedent.

Statutory Framework Involved

Key Statutes Invoked in the Case

  • Indian Penal Code, 1860 – offences relating to cheating, criminal breach of trust, and conspiracy

  • Code of Criminal Procedure, 1973 – investigation and prosecution framework

  • Prevention of Money Laundering Act, 2002 – attachment, confiscation, and prosecution

  • Fugitive Economic Offenders Act, 2018 – declaration of fugitive status and confiscation

  • Companies Act, 2013 – SFIO prosecutions

  • Black Money Act, 2015 – undisclosed foreign assets

  • Insolvency and Bankruptcy Code, 2016 – recovery through corporate insolvency proceedings

Constitutional Provisions Engaged

  • Article 142 – Power of the Supreme Court to do complete justice

  • Article 14 – Equality before law (implicitly considered in ensuring proportionality)

  • Article 21 – Fair procedure in criminal prosecution

  • Article 136 – Special leave jurisdiction enabling comprehensive scrutiny

Judicial Precedents Relied Upon in Substance

While the Court did not explicitly cite all precedents in the final order, its reasoning aligns with earlier rulings:

Gian Singh v. State of Punjab (2012)

Held that criminal proceedings involving overwhelmingly civil and financial disputes can be quashed when continuation serves no useful purpose.

State of Gujarat v. Nilkanth Patel (2017)

Recognised that restitution of public money is a relevant consideration in economic offences.

CBI v. Jagjit Singh (2021)

Observed that recovery of defrauded money is a crucial objective in financial crime prosecution.

February 2022 Observations (Justice Sanjay Kishan Kaul Bench)

The Court questioned the utility of endlessly pursuing accused across jurisdictions when substantial repayments were being offered.

Court’s Caution: No Blanket Immunity for Economic Offenders

The Supreme Court was categorical that:

  • The order was fact-specific

  • It does not create a general rule for quashing serious economic offences

  • Future cases must be assessed independently based on recovery, conduct of the accused, and public interest

This caveat preserves the deterrent value of criminal law in financial fraud cases.

Role of Investigating Agencies

The CBI registered the FIR in 2017, while the ED initiated money laundering proceedings soon thereafter. Look-out circulars were issued in August 2017 as the Sandesara brothers left India.

Despite the quashing of proceedings, the Court’s orders underline systemic challenges in cross-border economic crime enforcement.

Conclusion: A Pragmatic Yet Controversial Resolution

The Supreme Court’s decision reflects a pragmatic approach prioritising recovery of public money over prolonged criminal litigation. While it ensures substantial restitution to banks and closure of decade-long proceedings, it also raises larger questions about accountability in high-value economic offences.

By carefully limiting the order to the peculiar facts of the case, the Court has attempted to strike a balance between financial recovery, judicial efficiency, and rule of law, without diluting the statutory framework governing economic crimes.

Location: Pune, Maharashtra, India

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