Madras High Court Quashes CBI Prosecution in Rs. 284.84 Crore Bank Fraud Case** The Madras High Court has quashed criminal proceedings against seven accused in a CBI bank fraud case involving Union Bank of India, ruling that a purely commercial loan default cannot be given a criminal colour once dues have been settled through the insolvency process. Justice G.K. Ilanthiraiyan, in a

**Madras High Court Quashes CBI Prosecution in Rs. 284.84 Crore Bank Fraud Case**

The Madras High Court has quashed criminal proceedings against seven accused in a CBI bank fraud case involving Union Bank of India, ruling that a purely commercial loan default cannot be given a criminal colour once dues have been settled through the insolvency process.

Justice G.K. Ilanthiraiyan, in a common order dated July 10, 2026 disposing of Crl.O.P.Nos.35063 to 35066 of 2025, quashed proceedings in CC.No.2005 of 2025 pending before the Additional Chief Metropolitan Magistrate, Egmore, arising from CBI FIR RC21/2018 against M/s. Star Agro Marine Exports Pvt. Ltd. and its associates.

**Counsel for the petitioners:**
– **Mr. S. Elambharathi** (for Mr. N.K. Ponraj) appeared for Shaikh Mahaboob and M/s. Chemstar International Pvt. Ltd. (A5 & A7)
– Mr. K. Suresh Kumar (for Mr. M. Vijayamehanath) for Shaikh SK Chan Basha (A4)
– Mr. P.H. Manoj Pandian (for Mr. M. Vijayamehanath) for Shaikh Abdul Aziz (A3)
– Mr. Abdul Saleem, Senior Counsel (for Mr. M. Vijayamehanath) for Shaik Abdul Jaleel and M/s. Star Aqua International Pvt. Ltd. (A2 & A6)

Mr. K. Srinivasan, Senior Counsel and Special Public Prosecutor (CBI), appeared for the CBI, and Mr. A.V. Arun for Union Bank of India.

**The law point:** The Court held that the prosecution’s own case showed the accused had operated the banking facility since 1998 and repaid hundreds of crores before defaulting in 2016 due to floods and market conditions — not due to any dishonest intent at inception. Reiterating settled law under Section 420 IPC, the Court held cheating requires deception at the very inception of the transaction; a default arising later, or a mere breach of contract, cannot retrospectively be dressed up as cheating.

Significantly, the Court found that once the Committee of Creditors (with the complainant bank holding 95.35% voting share) approved a Resolution Plan under the Insolvency and Bankruptcy Code, and a No Due Certificate was issued, initiating parallel criminal proceedings amounted to an abuse of process. The Court distinguished the CBI’s reliance on *Rumi Dhar v. State of West Bengal*, *CBI v. Maninder Singh*, and *CBI v. Sarvodaya Highways Ltd.* — all cited for the proposition that economic offences affect society at large and settlement doesn’t bar prosecution — holding those precedents inapplicable since no fraudulent inducement at inception was made out here.

All four connected petitions were allowed and the proceedings quashed in their entirety.