Criminal Proceedings Cannot Continue After DRT-Approved Loan Settlement

Introduction

In a notable judgment dated May 29, 2026, a Division Bench of the Supreme Court of India comprising Hon’ble Justices BV Nagarathna and Ujjal Bhuyan in Vijay Kumar Kela & Anr. v. CBI & Anr.¹ quashed criminal proceedings initiated by the Central Bureau of Investigation (“CBI”) against a borrower whose loan account dues had already been settled through a compromise approved by the Debt Recovery Tribunal (“DRT”). The ruling provides important clarity on the interplay between civil debt recovery mechanisms and criminal prosecution in the context of banking disputes.

Background

The dispute arose from credit facilities extended by UCO Bank to Mohan Traders, a proprietorship concern. Following the death of its founder in 2009, the firm encountered financial difficulties and loan repayments became irregular. The loan was eventually classified as a Non-Performing Asset (“NPA”), and UCO Bank initiated recovery proceedings before the DRT.