Introduction:

In Hemant S. Hathi v. Central Bureau of Investigation & Others along with a connected case, the Supreme Court of India addressed one of the most complex and high-value financial fraud litigations emerging from the Sandesara–Sterling Group controversy, involving accused individuals Hemant S. Hathi and Chetan Jayantilal. The matter stemmed from multiple criminal and civil proceedings initiated by central investigating agencies including the CBI, Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO), and the Income Tax Department, alleging a web of offences such as cheating, forgery, corruption, money-laundering, diversion of bank funds, and undisclosed foreign assets connected with the Sandesara brothers and the Sterling Group. After prolonged litigation, interim protections, and repeated settlement-related submissions, the petitioners approached the Supreme Court seeking quashing of all proceedings upon their willingness to deposit ₹5,100 crore as full and final settlement with consortium lender banks. This case presented a unique intersection of criminal prosecution, economic recovery, banking interests, and judicial discretion exercised in unprecedented financial circumstances, culminating in a decision the Court explicitly cautioned should not be treated as precedent.

Arguments of the Petitioners:

The petitioners advanced a unified and elaborate set of arguments, contending that continuation of criminal and civil proceedings served no meaningful purpose in light of their concrete commitment to repaying the outstanding amounts owed to public sector banks. They emphasized that they had already entered into multiple one-time settlement (OTS) agreements with Indian banks concerning the debts of their companies and guarantor entities, and had significantly complied with the settlement obligations. They stressed that several tranches of payments had already been made pursuant to court directions, including major deposits of USD 50 million each on earlier dates, and a further commitment to deposit an additional USD 100 million within the timeline noted by the Court. The petitioners further submitted that by November 2025, more than ₹3,500 crore had already been deposited under various headings, and that banks additionally recovered approximately ₹1,192 crore through Insolvency and Bankruptcy Code (IBC) proceedings. Therefore, the actual outstanding amount was substantially reduced. They argued that the willingness to deposit ₹5,100 crore upfront—an amount exceeding the remaining due—should be sufficient to wipe out all criminal liability, especially when the primary purpose of bank fraud prosecutions is restitution of public money. They relied on the Court’s earlier inclination, expressed in interim orders, that restitution of defrauded funds was central to the Court’s concern. The petitioners also insisted that multiple overlapping proceedings—FIRs, charge sheets, ECIRs under PMLA, attachment orders, FOE Act proceedings, and complaints under the Black Money and Companies Act—created a web of duplicative and coercive actions that hindered meaningful financial settlement. They contended that once lenders agreed to settlement terms and the Court was supervising compliance, the entire structure of criminal prosecution became redundant. The petitioners asserted that their proposed settlement was not only bona fide but also in national economic interest because it ensured recovery of a substantial amount of the alleged defalcated sum without prolonged trial, delays, or further expenditure of state resources. They finally argued that the Supreme Court had ample inherent powers under Article 142 to ensure complete justice in extraordinary cases, and urged that this was a fit case for exercising such discretionary jurisdiction.

Arguments of the Respondents / Investigating Agencies and the Union of India:

The Union of India, represented by the Solicitor General, and the investigating agencies, placed extensive materials on record reflecting the vast and intricate nature of the alleged financial irregularities. They contended that the offences involved were not merely civil disputes of recovery but included serious criminal allegations such as criminal conspiracy, cheating under Section 420 IPC, forgery under Sections 467, 468, 471 IPC, corruption charges under the Prevention of Corruption Act, and money-laundering under Section 3 of the PMLA, along with grave corporate fraud under Section 447 of the Companies Act and violations under the Black Money Act. They emphasized that the alleged fraud ran into thousands of crores and involved intentional falsification of financial statements, diversion of loan funds to offshore entities, creation of shell structures, forgery of documents, and laundering of proceeds of crime. The prosecution argued that criminal liability cannot be neutralized merely because the accused agrees to repay a portion of the amount, as criminal trials serve broader public purposes including deterrence, punishment, and maintaining financial integrity. They stressed that large-scale economic offences are crimes against the economic fabric of the nation, and therefore criminal prosecution is essential irrespective of recovery. However, recognizing the Court’s interest in securing recovery of public money, the Solicitor General submitted a sealed-cover proposal suggesting a consolidated settlement amount of ₹5,100 crore as a pragmatic mechanism to resolve the multifaceted disputes. While maintaining that criminal offences should ordinarily proceed, the prosecution also indicated that recovery of public funds was a paramount objective and that the proposed settlement offered a viable path to achieve that without prolonged litigation. Thus, although the agencies did not concede that the offences should automatically be quashed, they acknowledged the utility of a consensual resolution under the Court’s supervision. Ultimately, it was the unique circumstances—including the magnitude of recovery, the involvement of multiple banks, and judicial management over several years—that shaped the government’s final position supporting the settlement proposal.

Court’s Judgment:

The Supreme Court, after reviewing the extraordinary factual matrix, the repeated settlement-linked submissions of the petitioners, and the evolving recovery status from 2020 to 2025, exercised its extraordinary jurisdiction to quash all pending criminal and civil proceedings contingent upon deposit of ₹5,100 crore. The Court emphasized that the decision was rooted exclusively in the peculiar facts of the case and should not be treated as precedent. The Bench noted that since the beginning of the proceedings, the Court had been inclined to consider quashing if the petitioners were willing to repay the entire settlement amounts and restore public funds. The Court recounted the detailed chronology: interim protections granted since 2020, compliance with OTS, deposits of USD 50 million tranches, further commitments, and eventual consensus that the petitioners would deposit ₹5,100 crore to settle all liabilities. It recorded that the alleged amount in the FIR was ₹5,383 crore, while the total OTS exposure amounted to approximately ₹6,761 crore. The Court also meticulously examined the recovery already achieved—₹3,507.63 crore deposited directly and ₹1,192 crore recovered via IBC—highlighting that the remaining amount was significantly reduced. The sealed-cover proposal offered by the Solicitor General, endorsing a consolidated settlement figure of ₹5,100 crore, was accepted as a fair mechanism to restore public funds while preventing unnecessary continuation of sprawling criminal proceedings. The Court held that continuing criminal litigation would serve no useful purpose once the funds were restored, particularly because the primary objective was protection of public money. Accordingly, it quashed all pending FIRs, charge sheets, ECIRs, PMLA proceedings, FOE Act proceedings, attachment and seizure orders, and complaints under the Companies Act and Black Money Act, directing that the quashment shall take effect upon full deposit of ₹5,100 crore with the Registry on or before December 17, 2025. The amount may be deposited in tranches, kept in short-term interest-bearing fixed deposits, and later proportionately disbursed to lender banks. The Registrar (Judicial-Administration) was tasked with verifying dues of each lender bank, computing proportional entitlement, and releasing payments accordingly. In conclusion, the Court reiterated that this exercise of discretion was based solely on the unique constellation of circumstances, the magnitude of recovery, and the consensual settlement ensuring restitution of public money.