NEW DELHI: Supreme Court has held that criminal proceedings should not be allowed to go on against a loan defaulter if the bank and the debtor reached a compromise for settlement of the loan account. The SC said it would have a debilitating effect on the overall economy if such proceedings are allowed.A bench of Justices B V Nagarathna and Ujjal Bhuyan said permitting such criminal proceedings would be oppressive for the loan defaulter and would also amount to an abuse of the process of the court after both the parties settle their dispute which is commercial in nature. It allowed the plea of a businessman who sought quashing of criminal case on the ground that he and the bank already compromised before debts recovery tribunal and paid the settlement amount of Rs 4.25 crore against the outstanding due of Rs 6.49 crore which included a notional interest of Rs 3.09 crore.“Having regard to the fact that the dispute between the parties arising out of banking transactions which are commercial transactions having overwhelmingly or predominantly civil flavour had ended in a compromise settlement, that too, in the manner which we have delineated above, in our view, the possibility of his conviction of appellant No. 1 (businessman) is remote and bleak. Therefore, continuation of the criminal case would cause grave prejudice and injustice to the appellants,” the bench said.In this case the bank had lodged criminal complaint of cheating and fraud against the borrower two years after settling the loan with him. The case was probed by CBI which filed chargesheet and it was alleged that businessman had used forged copies of audit report to get enhancement of cash credit limit more than two times of the original amount. Quashing the case, the court said such conduct of the bank betrays lack of good faith.“There is one more reason why we say so. If the respondent-Bank is permitted to go ahead with the criminal prosecution initiated after settlement of the loan account before the DRT, it would adversely impact the sanctity of such settlement which has become part of the judicial proceeding and which had the approval of a judicial forum like the DRT. If such a conduct is overlooked and prosecution is allowed to continue, many persons including commercial entities would be hesitant to come forward and seek resolution of their disputes arising out of banking transactions... This in turn would have a debilitating effect on the overall economy, more so, when the focus is on settlement of commercial disputes…”it added.