Loan Settled, Yet Gold Revalued and Auctioned — Supreme Court Restores FIR Alleging Fraud by Bank Officials

The Supreme Court held that once the loan was settled, the subsequent revaluation and auction of the pledged gold raised serious doubts, thereby warranting the restoration of the FIR alleging fraud and misappropriation by bank officials.

The Supreme Court Bench of Justice Sanjay Karol and Justice Manoj Misra, while adjudicating a criminal appeal, observed that the High Court erred in quashing the FIR at the preliminary stage. It held that concluding the absence of ill intent or fraud by the bank officials was premature, as the question of misappropriation or tampering with the pledged gold warranted evidence and trial—particularly since the loan had already been repaid and settled, leaving no valid basis for revaluation or auction.

Leave had been granted in the present matter where the appellant, Abhishek Singh, challenged the judgment and order dated 12th November 2024 passed by the High Court of Judicature at Patna in Criminal Misc. No. 67884 of 2023. By that order, the High Court had allowed the respondents' application under Section 482 of the Cr.P.C. and quashed the FIR dated 7th September 2023 registered as Mithanpura P.S. Case No. 393 of 2023 under Sections 420, 406 and 34 of the IPC.

The appellant, a businessman, had availed of a gold loan by pledging 254 grams of 22 carat gold, amounting to ₹7,70,000, from Bank of India, Motijhil Branch, on 22nd July 2020. A dispute arose upon repayment of the loan, when despite discharging his liability by 31st March 2023 in response to a recall notice, the pledged gold was neither returned nor auctioned. Instead, the bank revalued the gold and declared it spurious, allegedly based on a new valuation, and refused to return it. The appellant, suspecting foul play and irregularities in the handling and revaluation of the pledged asset, proceeded to file a criminal complaint, which ultimately led to the registration of the impugned FIR.

Despite the filing of a chargesheet, the High Court accepted the respondents’ plea for quashing the FIR, holding that the complaint was retaliatory, malicious, and devoid of merit. It observed that the FIR was lodged as a counterblast to the FIR earlier registered by the bank, and relied heavily on documentary materials outside the FIR, including the appellant’s alleged failure to submit an affidavit with his Section 156(3) Cr.P.C. application. The High Court concluded that even if taken at face value, the allegations did not disclose any offence.

The Supreme Court disagreed with the High Court’s reasoning. It reiterated the established position that in an application under Section 482 Cr.P.C., the Court must only assess whether the allegations in the complaint disclose the ingredients of the alleged offences and should not delve into the merits or defence. The Court noted that findings on the appellant’s alleged intent or motive, or reliance on subsequent conduct and extraneous material, were unwarranted at the pre-trial stage. It found merit in the appellant’s contention that the pledged gold remained in the bank’s custody and that the revaluation—carried out after loan settlement—had no apparent justification, thereby necessitating a trial to uncover the truth.

The Supreme Court Bench observed, "...However, once the loan is settled, it is difficult to understand as to why the gold was revalued and auctioned."

The Court noted that quashing of an FIR under Section 482 Cr.P.C. is impermissible where the allegations disclose a prima facie case of misappropriation and fraud by bank officials.

The Court held that the High Court's decision to quash the FIR was improper and premature, especially in light of the allegations pointing to a possible act of misappropriation or fraud in relation to the revaluation process. It restored the FIR and directed that the matter proceed before the trial court in accordance with law. Accordingly, the appeal was allowed and pending applications were disposed of.

Mr. Vaibhav Niti, Advocate, represented the Appellant.

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REEDLAW 2025 SC 06001