CHAVAN DHARMENDAR & ORS. v. THE STATE OF TELANGANA & ORS.

2026 INSC 1133 Non-Reportable

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

Criminal Appeal No.4930 of 2026 (@Special Leave Petition (Crl.) No.13161 of 2026)

CHAVAN DHARMENDAR & ORS. ...APPELLANTS Versus

THE STATE OF TELANGANA & ORS. ...RESPONDENTS

ORDER

1. Leave granted.

2. A seemingly beleaguered enterprise, reeling

under financial problems by reason of its loan

accounts being declared as Non-Performing Assets

(NPAs), in retaliation has levelled allegations under

the Scheduled Caste and Scheduled Tribes

(Prevention of Atrocities) Act, 19891. The High Court

noticing the allegations, found after referring to Signature Not Verified

Digitally signed by various decisions, from which copious references VISHAL ANAND Date: 2026.10.15 17:21:47 IST

were made that the appellants herein, who are the Reason:

1 The SC&ST Act

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accused have to face trial.

3. We heard Mr. Rajiv Shakdher, learned Senior

Counsel appearing for the appellants, Mr. Shadan

Farasat, learned Senior Counsel appearing for the

party respondent-company and its Director, and Ms.

Disha Wadekar, learned Counsel, appearing for the

State of Telangana.

4. Admittedly, the issue arose on the facilities

granted by the Bank to the 3rd respondent, a small-

scale industry, having turned sticky. The very

contention of the Director of the enterprise was that

they were having credit facilities from the State Bank

of India from the year 2010 onwards and collateral

security was also furnished for the same. In the year

2016, the accounts become NPA and the Company

turned sick, having incurred a capital loss of Rs.2

crores in the year 2012-2013, despite which it had

repaid a term loan of Rs.2.90 crores after which the

company was declared NPA. Even then the promoters

paid Rs.45 lakhs to the bank with a view to regularize

the account and in spite of the debt being serviced

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from 2010 to 2017, it is alleged that they were

subjected to caste-based discrimination by certain

bank officials.

5. Allegations galore are made of documents

forged and false and frivolous information submitted

to higher authorities, causing the superior officers to

use their lawful power to cause injury or annoyance

to the promoters of the company. The contention is

that it attracts Section 3(1)(q) of the SC&ST Act.

6. Allegations are also of economic boycott against

small scale enterprises managed by members of the

Scheduled Castes and Scheduled Tribes. The

industries owned by higher caste influential

entrepreneurs were extended rehabilitation packages

twice over with substantial discounts which reliefs

were denied to enterprises like the subject one. There

are also complaints of violation of Reserve Bank of

India’s guidelines and circulars and the rehabilitation

package having not been offered to the tottering

enterprises like the 3rd respondent.

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7. The High Court specifically noticed that the

allegations in the complaint were with respect to the

non-implementation of circulars issued by the RBI,

rehabilitation scheme having not been extended, as

also forgery and fabrication of documents submitted

as security for the loans obtained by the de facto

complainant.

8. The response by the accused, who were the

petitioners before the High Court is that the

documents alleged to have been forged and

fabricated, were those furnished by the directors of

the enterprise who had stood as guarantors to the

loan account. In spite of these compelling

circumstance, the High Court refused to consider the

case set up by the writ petitioners by referring to

various decisions and eventually finding a duty on the

accused, the appellants herein to follow the directions

issued by the Central Government and the RBI with

regard to the framework for revival and rehabilitation

of the MSMEs. We are of the definite opinion that this

does not justify the invocation of criminal proceedings

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against the officers of the bank.

9. Admittedly, the respondent enterprise was

enjoying credit facilities from the bank which turned

NPA in which circumstance, there would have been

proceedings initiated. Non-compliance of the RBI’s

guidelines and circulars cannot result in a criminal

prosecution, merely on the ground that the Directors

of the enterprise are the members of scheduled

castes and scheduled tribes. There is no specific

allegation as to any of the officers having denigrated

the directors merely on the basis of their caste. In

fact, the very contention of the de facto complainant,

as noticed in the order of the High Court is that it is a

small-scale industry, predominantly managed by

women belonging to the scheduled castes and

scheduled tribes; but the Managing Director of the

company, the second respondent is not a woman.

10. We are not convinced that the criminal

prosecution should be continued on the allegations

raised. However, we make it clear that the

contentions of the respondent could be urged in the

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appropriate forum, obviously, the Debts Recovery

Tribunal, where there would be proceedings initiated.

Violation of the circulars and guidelines, refusal to

grant rehabilitation package in accordance with the

circulars, false information or misrepresentations

being made to initiate coercive action against a

borrower could all be agitated in a recovery

proceedings, and it is for the adjudicating authority to

decide as to whether such allegations are legally valid

and could interfere with a valid recovery sought by

the bank. Hence, leaving open such contentions, we

interfere with the criminal prosecution initiated

against the appellants as per FIR No.1 of 2019 dated

04.02.2019, registered at Police Station CID, P.S.

Hyderabad, District Hyderabad, Telangana. The

proceedings, pursuant to the said FIR shall stand

quashed.

11. The appeal stands allowed.

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12. Pending application (s), if any, shall stand

disposed of.

……...…….……………………. J. (J. B. PARDIWALA)

...………….……………………. J. (K. VINOD CHANDRAN)

NEW DELHI OCTOBER 12, 2026.

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