- 1 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 IN THE HIGH COURT OF KARNATAKA,AT DHARWAD DATED THIS THE 21ST DAY OF JANUARY, 2026 BEFORE THE HON'BLE MR. JUSTICE V.SRISHANANDA CRIMINAL PETITION No.103533 OF 2024 (482(CR.PC)/528(BNSS)) BETWEEN: O.N. NAGRAJ S/O. LATE OBANNA AGE. 65 YEARS, OCC. PENSIONER, PRESENT ADDRESS R/O. 12, FF 02 4TH FLOOR, 3RD CROSS, M.L.A. LAYOUT, KALENA AGRAHARA BANNERGHATTA ROAD, GOTTIGERE POST BENGALURU-560076. …PETITIONER (BY SRI. K.L. PATIL, ADVOCATE) AND: THE CENTRAL BUREU OF INVESTIGATION, BANK AND SECURITIES FRAUD CELL, NO. 36, CBI COMPLEX, II FLOOR, BELLARY ROAD, GANGANAGAR, BENGALURU-560032. …RESPONDENT (BY SRI. NEELENDRA D. GUNDE, ADVOCATE) THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C. (528 OF BNSS), PRAYING TO ALLOW THIS CRIMINAL PETITION AND QUASH ORDER DATED 08.08.2024 PASSED BY III ADDL.DISTRICT AND SESSIONS JUDGE, DHARWAD (SPL.JUDGE FOR CBI/ACB/KLA CASES) IN SPL.CBI C.C. NO.24/2013 AND DISCHARGE THE PETITIONER/ACCUSED NO.1 FROM OFFENCES PUNISHABLE U/S 420, 467, 468, 471 AND 511 R/W SECTION 120-B OF IPC SECTIONS 7, 13(2) AND 13(1) (D) OF PREVENTION OF CORRUPTION ACT, IN THE INTEREST OF JUSTICE AND EQUITY. Digitally signed by CHANDRASHEKAR LAXMAN KATTIMANI Location: High Court of Karnataka, Dharwad Bench. - 2 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 THIS CRIMINAL PETITION COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: ORAL ORDER (PER: THE HON'BLE MR. JUSTICE V.SRISHANANDA) Heard Sri.K.L.Patil, learned counsel for the petitioner and Sri.Neelendra D. Gunde, learned counsel for the respondent /Central Bureau of Investigation (hereinafter ‘CBI’ for short). 2. Present petitioner is accused No.1 who was the Branch Manager of Union Bank of India, Ballari, who has been charge sheeted for the offences punishable under Section 120B read with Section 420, 467, 468, 471 of Indian Penal Code. 3. He has approached this Court with the following prayer by filing a petition under Section 482 of the Code of Criminal Procedure: “WHEREFORE, it is most humbly prayed that this Hon’ble Court be pleased to allow this Criminal petition and quash Order dated 08.08.2024 passed by III Addl. District and Sessions Judge, Dharwad (Spl. Judge for CBI/ACB/KLA Cases) in Spl. CBI CC No.24/2013 and discharge the petitioner/accused No.1 from offences punishable under Sections 420, 467, 468, 471 and 511 r/w Section 120B of IPC and Sections 7, 13(2) and 13(1)(d) of Prevention of Corruption Act, in the interest of justice and equity.” - 3 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 4. Facts in the nutshell which are utmost necessary for disposal of the present petition are as under: 4.1 Accused No.8-M/s Rytu Depot Cold Storage Pvt. Ltd., filed an application for sanction of loan with the Union Bank of India, Ballari Branch. 4.2 Loan application was serviced and as against the security of the immovable property, loans were being sanctioned at different interval of time. 4.3 Loan account was serviced without proper sanction from the Board, as the branch did not have the power to sanction the loan beyond the prescribed limit. Therefore, the loan request was recommended by the branch to the higher authorities. 4.4 It is alleged that the loan became irregular and at that juncture, an internal enquiry was held in the bank by the Vigilance Department of the Union Bank of India and they found lot of irregularities in servicing the loan request of accused No.8. A report came to be filed in this regard. - 4 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 4.5 Based on the report, the Board of Union Bank of India decided to initiate criminal action against accused No.8 and other employees of the Union Bank of India who are all responsible for recommendation of the loan and present petitioner is named as accused No.1 in the First Information Report and arraigned as accused No.1 in the charge sheet after collecting necessary materials that he is also responsible for illegal servicing of the loan request of accused No.8. 4.6 In the meantime, the recovery proceedings were also initiated for the amounts that were due to the Union Bank of India and accused No.8 opted for the one time settlement scheme and it is submitted that entire loan amount is now settled and as such, there is no civil liability. 4.7 After the charge sheet came to be filed, learned Special Judge took cognizance of the offences alleged against the accused persons and registered the case and proceeded with the case. - 5 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 5. An Application seeking discharge of the present petitioner/accused No.1 seeking discharge. Same was opposed by the CBI by filing written objections. 6. Learned Trial Judge after considering the objections filed by the CBI, dismissed the application filed by the present petitioner by order dated 08.08.2024. 7. Being aggrieved by the same, petitioner has filed the present petition on the following grounds: • It is submitted that the order passed by Trial court dismissing the discharge application filed by the petitioner is contrary to the facts and material placed on record. Hence, interference of this Hon'ble court is warranted. • It is submitted that, petitioner was working as Branch Manager of the Union Bank, Bellary. An application was submitted for the construction of cold storage. After collecting all the necessary documents and after verifying the genuineness of the documents, Petitioner had forwarded the loan application to higher authority for sanction of the loan. The higher authorities after cross verifying all the necessary papers and securities provided by the borrower, sanctioned the loan amount to the borrower. Therefore, absolutely there is no role of petitioner in sanctioning the loan to the borrower, - 6 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 therefore petitioner cannot be held liable, and he cannot be prosecuted for the offences punishable under the provision of prevention of corruption Act and other provisions of IPC as alleged by the prosecution. Hence, interference of this Hon'ble court is warranted. • It is submitted that, at the time of applying for the loan by M/s Rytu Depot cold Storage (P) Ltd for the construction of the cold storage, the construction work had already started and the borrower had already invested an amount of Rs. 84.50 Lacs. The loan application forwarded by the petitioner had specifically mentioned that, construction work has started and the engineer has issued a work certificate to the effect. The higher authorities have sanctioned the loan amount to the M/s. Rytu Depot cold Storage (P) Ltd, after satisfying themselves considering the fact that work has already started. Therefore, the allegation that, petitioner has disbursed the entire amount without verifying the progress of the work cannot be said as irregularity and conspiracy to cheat the bank. Therefore, this aspect of the matter is not considered by the trial court. • It is further submitted that, the Regional office Bangalore had sanctioned a term loan of Rs. 261.60 Lacs to M/s Rytu Depot cold Storage P Ltd (RDCSPL). While forwarding the said loan proposal, the petitioner had informed that "the firm has already started construction and invested around Rs. 84.50 Lacs". The same was also supported by the "Invested certificate" dated:24-12- - 7 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 2006 issued by the Chartered Accountant M/s Anil Kumar and investment certificate dated 28.12.2006 of Rs. 81.85 Lacs issued by Sri C.B Srinivas Reddy a chartered engineer. Vide "Pre-inspection" Certificate dated: 28-12- 2006 the petitioner had informed the Regional office that an amount of Rs. 84.50 has been already invested by the firm. Further the chartered accountant had confirmed that the M/s Rytu Depot cold storage had invested an amount of Rs. 114.60 lacs towards construction done till 13-03-2007 vide investment certificate dated 13.03.2007. further, on 17-03-2007, the contractor M/s Chandrala Construction who had entered in to "Memorandum of understanding" dated 15-03-2007 with the company to undertake the labour contract works, vide their "investment Certificate" dated: 17-03-2007 had confirmed that the work has reached up to roof slab level and the total cost involved was Rs. 131.20 Lacs. Upon side inspection, it was found to be true that the work had reached up to roof stage and after deducting 25% margin as per sanction term, an amount of Rs. 103.50 lacs was released against the already invested i.e Rs. 131.20 Lacs. This aspect clearly shows that the petitioner has taken due care and caution while releasing the loan amount and absolutely and there are no irregularities committed by the petitioner. Hence, the petitioner cannot be held liable. This aspect of the matter is not considered by the trial court. Hence, interference of this Hon'ble court is warranted. - 8 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 • It is also submitted that the detailed estimate for the total project was prospered by Sri. C.B Srinivas Redddy, a Chartered Engineer & Valuer who specialize in the said field. He is not a contractor, but only a consultant. Vide their letter dated 17-03-2007 M/s C.B Srinivas Reddy had confirmed this fact. The company RDCSPL and entrusted the construction work to M/s Chandrala Construction as intimated by them to the Branch vide their letter dt: 17-03-2007, which was also evident from the memorandum of understating produced to the Branch. As per letter dated: 17-03-2007, RDCSPL had instructed the Branch to release the funds to the contractor being M/s Chandrala Construction. Finally, on 17-03-2007 after release of the installment to the contractors, the Branch vide letter no, BLY/822/07 dated: 17.03.2007, had informed the Regional office that the Branch had made payment to M/s Chandrala Constructions. The Chief Manager, Credit Department and the Banks Technical officer have inspected the project of the borrower at the stage of completion, thought it was the duty of the credit department and credit grid department who have conducted the above mentioned diligence, it is at the insistence of the petitioner that the concerned officers have inspected the project site. It is therefore submitted that the loan amount disbursed was in proportionate to the progress of the work and that there has been no malafide intention or violation in the loan sanction terms for the disbursement of funds. The funds were disbursed after visiting the construction site and the disbursal was in - 9 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 accordance with the progress of the work and also Regional office and Filed General Manager office substantiated the payments made to M/S Chandrala constructions and informed to Central office that there is no wrongful diversion of fund. • It is submitted that, on 17-03-2007 the borrower made a request letter to the Bank, requesting the bank to release the loan amount in favour of M/s Chandrala Construction as per Memorandum of understanding entered between borrower and M/s Chandralal construction. The petitioner as per memorandum of understanding released the loan amount in favour of M/s Chandrala Construction and the same was brought to the notice of higher authority. This aspect of the matter is not considered by the trial court. Asthe Borrower invested around Rs.131.20 lakhs during October 2006 to 17.3.2007 towards constructions from own source of funds and personal borrowing. As the amount released to M/s Chandrala Constructions was invested by the borrower only and M/s Chandral Constructions was not undertken the work, as per the advice of the auditor, the borrower obtained an amount of Rs.102.20 lakhs from M/s Chandrala construction and credited to M/s Rytu Depot cold storage current account. Borrower made payment to dealers who had supplied the material for construction work and M/s Lakshmi Iron Mart from whom he had borrowed on 14.3.2007 for closure of housing loans and ware house loan. Hence this can not be treated as neither misutilisation nor borrower has not brought - 10 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 the margin. The same has been justified by both the Regional office and FGMO. • Reasons for disbursing in advance; Borrower wants to complete the construction of cold storage work by December 2007 to make use of the current year harvesting season. If it is delayed for 2-3 months he will miss that harvesting season and he has to wait for next year's harvesting season. There will be an interest burden on him and without earning any income in this season, payment of interest & installment will be difficult Quotations obtained 4 months back at the time submitting proposal and are valid for only 3 months, if he does not make the payment now 10 to 15 percent price will be hiked and because of this Rs.10 to 15 lakhs extra burden will be there. Without receiving the Advance payment none of the suppliers will keep ready the goods and will not supply the goods in time. Borrower also informed that, as the Bank interest is less, if Bank makes the payment in advance above said all problems will be solved. O.N.Nagaraja, being Branch Manager, in his best judgment and to facilitate the borrower to tide over above problems released the amount in advance. So for the purpose of keeping the goods ready and to supply in time as and when required without any delay to complete the cold storage in time. O.N.Nagaraja has disbursed the amount in advance only with good intention at the interest of the Bank, Borrower and Farmers to complete the cold storage at the earliest and make use of the same in the current harvesting season. - 11 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 • It is further submitted that the petitioner was transferred on 15th June 2007 within three months from the date of first disbursement. This was routine transfer due to the completion of three years of service in that Branch and was transferred as Branch manager of the transfer, the Bank had sanctioned an SOD limit of Rs. 75-00 lacs and upon completion of the project, a working capital short term loan of Rs. 225-00 lacs was sanctioned to M/s Rytu Depot Cold storage Pvt. Which was after 2 years of the transfer of the petitioner from Bellary Branch. The above two subsequent development are a standing confirmation to the fact that during the period of the petitioner as the Branch Manager of Bellary Branch was in order and while disbursing the sanctioned Term Loan, there had been no malafide intention, nor dereliction of duty, and that the petitioner had performed his duties in good faith and without negligence. It is a standing fact disbursing the loan. As per the laid down procedures of Reserve Bank of India ,additional loans can be sanctioned and released only and only if the first or the previous loans sanctioned are in order. Further, the release of subsidy of Rs. 25-00 lacs by NABARD also establishes the fact that the first loan was properly sanctioned, disbursed and utilized. The investigation report is also silent on this aspect of the matter. Hence, interference of this Hon'ble court is warranted. • It is submitted that absolutely there is no material on record to show that petitioner has forged the documents for the purpose of sanction of loan. The prosecution in - 12 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 not able to point out which part of the documents and in what manner the documents are forged. It is submitted that whatever the documents submitted by the customer of the Bank was sent to the Regional office for sanction of the loan. The Regional office has considered the proposal of the loan and sanctioned the same without calling for additional documents. Therefore, the charge leveled against the petitioner for commission of the offence of forgery is not attracted. This aspect of the matter is not considered by the trial court. • The learned sessions judge has failed to consider the fact that the prosecution has failed to produce any oral and documentary evidence to prove the commission of offence U/s 7, 13 (2) R/w 13 (1) (d) of PC Act and other alleged offences. It is submitted that absolutely there is no prima facia case regarding the illegal gratification and absolutely there is no statement or document to prove or to show that petitioner has received any illegal gratification. Therefore the provision of PC Act is not attracted. • It is submitted that closure of the housing loan was one of the condition laid down by the competent authority while sanctioning the loan of Rs. 261.60 Lacs to M/s. Rytu Depot cold storage Pvt. Ltd. This was to be complied before the release of the loan. Hence, the borrower M/s Rytu Depot cold Storage Pvt. Ltd had closed the housing on 14/03/2007. The disbursal of the loan to M/s Rytu Depot cold storage Pvt. Ltd took place on 17-03-2007. It - 13 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 is submitted here that since the loan was disbursed as reimbursement for the works which have been already undertaken by investing their own funds, the same is in order and there has been no diversion of funds as alleged by the prosecution. Hence, absolutely there is no material to show that there is diversion of funds. • Petitioner's Bank's Regional office and filed General Manager Office vide their letter No. Ro:CR:1174:08 dated 28.08.2008 and FGMO vide their letter No. FGMO: AUD: 1971:08 dated: 11.09.2008 respectively have already confirmed that there is no wrongful diversion of funds by borrower, and has justified the action of the petitioner in disbursing the part of the loan amount directly to M/s Chandrala Constructions. Further, the Regional office has also justified that the petitioner has ensured investment of margin by the borrower. • The Petitioner's Banks after through investigation and inquiry has found that nothing was brought on record of the inquiry to cast any aspersions on the petitioner's Honesty/integrity, Accordingly Bank vide order No. CO:IRD:5246/2014 dated 2nd Sept 2014 has now reduced the charges of major penalty of Reduction in Grade-MMGS III To MMGS-II restored the petitioner in MMGS-III. • The wing of the RBI being the NABARD has approved the project of the borrower and even released advance capital subsidy of Rs.25 Lacs on 20/07/2009 after due - 14 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 appraisal and evaluation of the economic viability of the project and completion of the project. The NABARD have already asserted that the project is satisfactory for availing financial assistance, promoters have rich experience with sound financial backgrounds. Besides, NABARD has also observed that the project of the borrower complies with the specification/requirement of the Dept. of Food processing and as such, he is entitled for capital subsidy. It is based on these aforesaid mentioned recommendations of the Nodal agency being NABARD that the credit department has recommended the project for availing credit facility and such other facility from the Bank. • It is important to mention here that, the project of construction of the cold storage was completed, the term loan which was sanctioned was properly utilized by the borrower and absolutely there is no material on record to show that project did not complete nor there is misuse of funds. However, the prosecution alleges that the working capital which was sanctioned to the borrower was mis- utilized. It is important to mention here that, at the time of sanction of working capital this petitioner was not the Branch Manager of Bellary Branch and he was transferred to another branch viz, Kalkere. The petitioner is in no way concerned with sanctioning of SOD and working capital to the borrower. The loan amount released by the petitioner in favour of M/s Chandrala construction was properly utilized by the borrower and it is evident from the records also. Therefore, there are no - 15 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 offences committed by the petitioner as alleged by the prosecution. This aspect of the matter is not considered by the trial court. Hence, interference of this Hon'ble Court is warranted. • In the instant case, since the facility sought by the borrower was beyond the sanctioning powers entrusted with the branch, the power of sanction of limits was vested with the Regional office which involved complete scrutiny, due diligence, ascertaining certain worthiness of the borrower and if these parameters are in line with the Bank Policy and RBI Guidelines, then the Credit department will consider the proposal and put up to the credit grid which is independent evaluating authority created by the Bank specifically for such purpose. All the evaluation is undertaken by the above stated department independent of each other strictly as per Banking Norms. • As per the laid down procedure to be followed, the Branch on receipt of the application of the customer collected the relevant records and made the visit to the place of Business and Collected the required information. The Bank had obtained the Legal opinion regarding the title from the empanelled Advocate of the Bank in respect of the security and the market value of the property was obtained from the authorized valuer of the Bank. The Petitioner who was the then Branch head collected the records and obtained the legal opinion regarding the title of the property which is proposed as the security for the loan to be advanced. The petitioner has submitted the - 16 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 entire records in respect of the proposed loan which are provided and collected by him and recommended to the delegated authority at Regional office of the Bank for the sanction of the loan. The role of the petitioner is limited and restricted. Hence, he cannot be held liable for offences alleged by the prosecution. • It is submitted that, even if the entire charge sheet is perused it will disclose the offence as alleged by the prosecution against the petitioner. Hence, interference of this Hon'ble Court is warranted. • Thus viewed from any angle, dismissal of discharge application is contrary to law and needs to be set aside. • Borrower N.Sri Hari, Managing Director of M/s Rytu Depot Cold Storage who forged the documents like ware house /cold storage receipts and loan documents for the short term loan availed Rs.2.25 crore and cheated the Bank committed suicide subsequently. This loan was neither recommended nor disbursed by O.N. Nagaraja. This was done only after the transfer of O.N.Nagaraja. • His wife Vijaya Lakshmi who is also one of the Directors has closed all the loan accounts under OTS and got discharged from all charges. • Asset Recovery Branch, Bangalore has issued a settlement certificate to the borrower vide letter no.ARB/199/2017 dated 01.07.2017. - 17 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 • Bellary branch has released mortgaged documents of M/s Rytu Depot Cold Storage, handed over the keys and physical possession of cold storage. • There was no criminal intent of whatsoever nature as alleged by CBI. CBI also has failed to produce any evidence or documents in support of its allegations against O N Nagaraja. Whatever they have produced in support of criminal charges pertains to the period subsequent to his transfer from branch.” 8. Sri K.L.Patil, learned counsel for the petitioner reiterating the grounds urged in the petition contented that petitioner is not the sanctioning authority. He has only recommended the loan request of the accused No.8 to the higher authorities and based on the directions received in writing from the higher authorities, he has serviced the loan of the accused No.8. Therefore, no criminality can be attributed insofar as the accused No.1 is concerned. 9. He submits that, at the most the petitioner has only adhered to the instructions of the official superiors and that by itself would not result in any criminality. Thus, charges against the petitioner is incorrect and sought for allowing the petition. - 18 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 10. Per contra, Sri Neelendra D. Gunde, learned counsel for the respondent would support the impugned judgment contending that beyond the permissible limit and scope of the branch, the loan request of accused No.8 has been serviced by improper noting on the proposal of the accused No.8 by the Branch Manager. 11. Therefore, prima facie he is in hand in glove in the alleged fraud which has to be established during the trial and therefore sought for dismissal of the petition. 12. Having heard the arguments of both sides, this Court perused the material on record. 13. On such perusal of the record, it is crystal clear that the loan service to accused No.8 is beyond the permissible limit of the Branch of Union Bank of India, Ballari. 14. Further, the contentions urged on behalf of the petitioner that he only adhered to the instructions of the Official Superiors is a defence that has to be established during the trial by placing necessary material evidence on record. - 19 - HC-KAR NC: 2026:KHC-D:669 CRL.P No. 103533 of 2024 15. Suffice to say that the material collected by the Investigation Agency, that too based on the Internal Enquiry Report, would be sufficient enough to frame the charges against petitioner. 16. The grounds urged in the petition are more in the nature of defence and same needs to be urged in the trial in accordance with law. 17. Reserving such liberty to the petitioner, petition is dismissed. Sd/- (V.SRISHANANDA) JUDGE kcm CT:CMU LIST NO.: 1 SL NO.: 21