Allowed

Sri.Kondakalla Srikanth Reddy, v. The Sate of Telangana

Telangana HC11 Sept 2026CRLP/13338/2025

Case brief

AI extract

What is this about?

Criminal Petition filed under Section 528 BNSS to quash criminal proceedings against a petitioner accused of cheating and forgery in a loan fraud case. The High Court held that since the loan dispute was settled, the bank issued a No Due Certificate, and the civil proceeding was closed in DRT, the likelihood of conviction was remote, and the criminal case was quashed to uphold the sanctity of the

What did the court decide?

Criminal Petition allowed; proceedings in C.C.No.2840 of 2021 quashed against the petitioner-A3.

Sri.Kondakalla Srikanth Reddy, Vs The Sate of Telangana — Property and Title | Telangana HC (2026)

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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THE HON’BLE JUSTICE B.R.MADHUSUDHAN RAO

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CRIMINAL PETITION No.13338 of 2025

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(CNR.No.HBHC010616002025)

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DATED 11 .09.2026

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Reserved on: 25.08.2026 Pronounced on: 11.09.2026

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Uploaded on: 11.09.2026

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Between:

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Sri. Kondakalla Srikanth Reddy

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..Petitioner-A3

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And

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The State of Telangana

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Through the Station House Officer, Central Crime Station, CCS Chair duty, Begumpet, Hyderabad, Rep. by its Public Prosecutor, High Court at Hyderabad. ...Respondent No.1-State

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SBI, SME-Saifabad Branch, Rep. by its General Manager.

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….Respondent No.2-de-facto complainant.

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O R D E R

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This Memorandum of Criminal Petition is filed under

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Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023

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(BNSS) praying this Court to call for records and quash and set aside the proceedings in C.C.No.2840 of 2021 pending on the file of the learned XII Additional Chief Metropolitan Magistrate, Hyderabad, at Nampally.

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Heard Sri J. Venudhar Reddy, learned counsel for petitioner-A3 and Sri E. Ganesh, learned Assistant Public Prosecutor, appearing for respondent No.1– State.

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Learned counsel for the petitioner submits that there are no specific allegations attributed against the petitioner-A3 except being land owner of the land which is hypothecated to the bank. The petitioner-A3 purchased the land jointly with A1 under registered Sale deed and mortgaged the same to the complaint bank as a Collateral security. The sale deed is genuine. Accused No.1 being the Managing partner of the Firm was managing the entire business. Petitioner-A3 is not aware of the criminal character of the Accused No.1. Petitioner-A3 was induced by Accused No.1 to join him in Granite business, by believing his words petitioner-A3 joined

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in the partnership Firm created by Accused No.1 and

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mortgaged the land which was jointly purchased by the petitioner-A3 and Accused No.1. Petitioner-A3 never committed any offences as alleged in the charge sheet and has no criminal antecedents. On coming to know about the non-payment of the loan amount, the petitioner-A3 himself voluntarily approached the complainant bank for repayment of the loan amount. The matter was compromised with the Bank under compromise proposal letter dated 18.09.2020 which was accepted by the Bank on 03.10.2020 for a total sum of Rs.1,50,00,000/- which is duly paid by the petitionerA3. Entire loan amount was cleared by the petitioner-A3 and no offence is made out against him. Complainant bank has filed O.A.No.935 of 2014 and obtained decree from the Debt Recovery Tribunal, conducted auction of the secured asset on five occasions. As no bidder came forward to purchase the land, the present complaint came to be lodged to pressurize the petitioner-A3 under the guise of arrest and humiliation. Entire loan amount has been paid, there are no outstanding

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liabilities against the petitioner-A3. Counsel in support of his contention has relied on the decision in the case of Vijay Kumar Kela and another vs. Central Bureau of Investigation and another¹ .

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Learned Assistant Public Prosecutor for R1 submits that C.C. cannot be quashed merely on the compromise between the de-facto complainant with that of the petitioner-A3. Case has been made out for the offences he is charged with and prayed to dismiss the petition.

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Notice got issued to respondent No.2-bank in the petition is served but none appeared.

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Now the point for consideration is: whether the petitioner-A3 has made out any case to quash the C.C.No.2840 of 2021 pending on the file of the learned XII Additional Chief Metropolitan Magistrate, Hyderabad, at Nampally.

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1 2026 SCC Online SC 1003

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7.1. A. Siva Kumar, Assistant General Manager SBI, has

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lodged a complaint before the Deputy Commissioner of Police, CCS, Hyderabad on 26.03.2019 stating that K. V. Krishna Reddy and his wife K. R. Vineela Reddy, K. Srikanth Reddy and P. Subrahmanyam who are the partners of M/s KVK Granites & Company were sanctioned Cash Credit (Hypothecation) Limit of Rs.1.10 crores and term loan of Rs.0.20 crores on 23.06.2011 with primary security of Hypothecation of stocks, book debts and other current assets of the firm present and future as collateral security of mortgage of vacant land of Sri. K.V. Krishna Reddy and K. Shrikanth Reddy, admeasuring 1210 Sq.Yards (10 Guntas) situated in Sy.No.460/1, Puppalguda village, Rajendranagar Mandal, Ranga Reddy District. On 28.12.2012 the bank came to know that the accounts of the firm had become Irregular due to non-payment of debt obligations and slipped into Non-performing assets. As on 28.12.2012 the firm is outstanding Rs.118.05 Lakhs in CC account and Rs.13.54 Lakhs in Term Loan. The total due is Rs. 131.59 Lakhs.

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7.2. Basing on the above said complaint FIR No.70 of 2019

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came to be registered against A1 to A4 for the offences under Sections 406, 420, 465, 446 and 471 of IPC.

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7.3. After investigation charge sheet came to be filed on

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15.02.2021 against the petitioner-A3, A1-K. Vamshikrishna Reddy, A4-P. Subrahmanyam, A5-K. Maruthi, A6-T. Srinivas, A7-M/s. KVK Granites and Company for the offence under Sections 406, 420, 109 r/w 34 of IPC.

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After filing the charge sheet, petitioner-A3 has approached the R2-bank on 18.09.2020 in respect of loan account No.37619135372 and 37620124597 of M/s. KVK Granites and Company and brought forward a proposal for compromise and for closure of the account. In pursuance of the letter of the petitioner-A3 dated 18.09.2020 R2-bank has issued letter dated 03.10.2020 offering the terms and conditions for payment of compromise settlement amount. Petitioner-A3 has filed No Due Certificate issued by the bank dated 12.11.2025 in respect of M/s. KVK Granites and

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Company. The Certificate states that the loan accounts of the unit was settled under the Banker’s Regular Compromise Settlement on 27.11.2020 and the bank does not have any dues to be recovered against the account Nos. 37619115372 and 37620124597.

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Learned Assistant Public Prosecutor for respondent No.1 has also produced a letter issued by the bank dated 25.08.2026 confirming that the loans are closed on 27.11.2020.

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R2-Bank has also filed O.A.No.935 of 2014 before the Debts Recovery Tribunal-I at Hyderabad, which came to be settled vide order dated 18.08.2023 in RP.No.484 of 2017 in O.A.No.935 of 2014. The docket order speaks as “F.S. Memo filed. F.S. Recorded. Accordingly Recovery Proceedings are closed”.

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11. In Vijay Kumar Kela and another¹ Supreme Court

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observed at Para Nos.23, 24, 27 and 28 which reads as under:

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In K. Bharthi Devi v. State of Telangana ((2024) 10 SCC 384), the accused persons were granted various credit facilities by the Indian Bank which were secured by collateral security. As the accused persons failed to repay the dues, the loan account was declared as NPA and to realize the outstanding dues Indian Bank filed an original application before the DRT. During pendency of the proceedings before the DRT, Indian Bank lodged a written complaint before the CBI alleging that some of the title documents executed by the accused persons by virtue of which equitable mortgage was created were not original documents, rather those were fake, forged and fabricated. CBI registered an FIR whereafter chargesheet was filed stating that offences punishable under Sections 120B read with Section 420, 409, 467, 468 and 471 IPC and Sections 13 (1) (d) and 13 (2) of the PC Act were committed.

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23.1. At that stage, the accused persons approached the Indian Bank for settlement. After negotiations, the parties arrived at a settlement whereafter the settlement amount was paid by the accused persons following which the Indian Bank issued no dues certificate to the borrowers (accused persons). DRT recorded that the dispute was settled in full satisfaction of the dues of the respondent-Indian Bank.

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23.2. Thereafter, the accused persons filed a criminal petition before the High Court under Section 482 CrPC seeking quashing of the chargesheet. The High Court, however, rejected the said petition holding that the settlement arrived at was only a private settlement and was not a part of any decree given by any court. The charges include the use of fraudulent, fake and forged documents that were used to embezzle public money; if the charges were proved, those would be grave crimes against the society as a whole and hence merely due to a private settlement between the Bank and the accused, it cannot be said that prosecution of the accused persons would amount to abuse of the process of the court.

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23.3. A two-Judge Bench of this Court referred to the previous decisions of this Court including Nikhil Merchant, Gian Singh, Narinder Singh, etc. and held that criminal cases having overwhelmingly and predominantly civil character, particularly those arising out of commercial transactions or arising out of matrimonial relationships or family disputes should be quashed when the parties have resolved their entire disputes among themselves. The Bench observed that the dispute involved in the said case had predominantly overtures of a civil dispute. After the settlement, the Bank had also closed the loan account. That apart, the Bench noted that in view of the settlement between the parties in a proceeding before the DRT, the possibility of conviction is remote and bleak. In such a case, continuation of the criminal proceedings would put the accused to great oppression and prejudice. Holding that it was a fit case where the High Court ought to have exercised its jurisdiction under Section 482 CrPC and ought to have quashed the criminal proceedings, the Bench allowed the appeal, set aside the order of the High Court and quashed the criminal proceedings.

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Applying the above principles to the facts of the present case, we find that in the pending proceedings before the DRT instituted by the second respondent-Bank, a negotiated compromise was arrived at between the parties. The settlement was approved by the competent authority of the respondentBank. Joint application was filed before the DRT by appellant No. 1 and respondent No. 2-Bank to place on record the settlement which was noted by the DRT and adjourned to a subsequent date to ensure compliance. Following the same, appellants paid the entire settlement amount whereafter the Bank issued no dues certificate to the appellants. Thereafter, on a further application by the respondent-Bank, the original application was dismissed as withdrawn by the DRT after noting that the claim to the outstanding dues were settled as per the compromise and the settlement amount was paid by the appellants whereafter no dues certificate was issued by the Bank. When the matter was fully settled which was endorsed by the DRT, the respondent-Bank after more than two years lodged complaint before the CBI to initiate criminal prosecution alleging fraud and forgery by the appellants. In the facts and circumstances, we are of the view that the present case is squarely covered by the decision of this Court in K. Bharthi Devi.

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Further, having regard to the fact that the dispute between the parties arising out of banking transactions which are commercial transactions having overwhelmingly or predominantly civil flavour had ended in a compromise settlement, that too, in the manner which we have delineated above, in our view, the possibility of conviction of appellant No. 1 is remote and bleak. Therefore, continuation of the criminal case would cause grave prejudice and injustice to the appellants.

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There is one more reason why we say so. If the respondentBank is permitted to go ahead with the criminal prosecution initiated after settlement of the loan account before the DRT, it would adversely impact the sanctity of such settlement which has become part of the judicial proceeding and which had the approval of a judicial forum like the DRT. If such a conduct is overlooked and prosecution is allowed to continue, many persons including commercial entities would be hesitant to come forward and seek resolution of their disputes arising out of banking transactions which are after all commercial transactions, having predominantly elements of civil dispute(s). This in turn would have a debilitating effect on the overall economy, more so, when the focus is on settlement of commercial disputes. This is the larger picture we need to keep in mind.

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It is observed in Para No.2 of the charge sheet that “the mortgaged collateral security-property open land 10 guntas sale deed document is genuine.

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Petitioner-A3 has compromised the matter with respondent No.2-bank, to that effect No Due Certificate is issued on 12.11.2025 by the bank. Which is also confirmed by the learned Assistant public Prosecutor that the matter is settled and the loan account is closed on 27.11.2020

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furthermore O.A. filed by the bank is also closed in view of the settlement.

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The decision cited by the petitioner counsel is squarely applicable to the case on hand.

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The possibility of the conviction of the petitioner-A3 is remote and bleak, continuation of the criminal case would cause grave prejudice and injustice to the petitioner-A3.

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The Supreme Court in the above said decision observed that “if the respondent bank is permitted to go ahead with the criminal prosecution initiated after settlement of the loan account before the DRT, it would adversely impact the sanctity of such settlement which has become part of the judicial proceeding and which had the approval of a judicial forum like the DRT”.

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In view of the reasons above petitioner-A3 has made out

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a case to quash the proceedings.

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Accordingly, the Criminal Petition is allowed and the proceedings in C.C.No.2840 of 2021 pending on the file of the learned XII Additional Chief Metropolitan Magistrate,

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Hyderabad, at Nampally is quashed against the petitioner-A3.

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Miscellaneous applications, if any pending, shall stand closed.

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B.R.MADHUSUDHAN RAO, J

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Date: 11 .09.2026 TU

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THE HON’BLE JUSTICE B.R.MADHUSUDHAN RAO

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