🎯REQUIREMENT OF CONSENT OF STATE GOVERNMENT FOR CBI PROBE

Subhodeep Chattopadhyay
Oct 14, 2025
6 min read

⚖️ Supreme Court Overturns High Court's Quashing of CBI Case Against Banking Fraud: Key Takeaways from the Narayan Niryat Judgment

📋 Case Overview

In a significant ruling dated October 9, 2025, the Supreme Court of India set aside a Madhya Pradesh High Court judgment that had quashed criminal proceedings in a major banking fraud case involving loans worth over ₹110 crores. The case of Central Bureau of Investigation vs M/s Narayan Niryat India Pvt. Ltd & Ors. provides crucial insights into procedural requirements for CBI investigations and the limits of High Court jurisdiction in quashing criminal proceedings.

💼 Background of the Case

The Financial Transaction 🏦

M/s Narayan Niryat India Pvt. Ltd, a company incorporated under the Companies Act, received credit facilities from multiple banks:

UCO Bank: Initially ₹10.50 crores, later increased to ₹37 crores
Punjab National Bank: ₹33.5 crores
Corporation Bank: ₹40 crores
Total Consortium Limit: ₹110.5 crores

The Default 📉

The company's account was declared a Non-Performing Asset (NPA) by all consortium banks on March 31, 2013. Despite attempts at compromise through a Joint Lenders Meeting in March 2017 and proposed One Time Settlement (OTS), the company failed to honor its commitments.

Criminal Investigation 🔍

On November 5, 2020, the CBI registered FIR No.RC2222020A0002/2020 under:

Sections 420 (cheating) and 120-B (criminal conspiracy) of IPC
Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988

After investigation, the CBI filed chargesheets under Sections 120B, 406, 420, and 471 IPC. The Prevention of Corruption Act charges were dropped due to lack of requisite sanctions against bank officials.

⚠️ The High Court's Decision

On August 8, 2024, the Madhya Pradesh High Court allowed the company's petition under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, quashing the entire proceedings on two grounds:

Procedural Ground: Lack of consent from the State of Madhya Pradesh under Section 6 of the Delhi Special Police Establishment Act, 1946
Merit Ground: No case for prosecution existed as allegations were inherently improbable and no loss was caused to banks

🎯 Supreme Court's Analysis

Issue 1: Timing of Consent Challenge ⏰

The Supreme Court held that both grounds cited by the High Court were "misconceived and misdirected."

Key Principle Established: The objection regarding lack of state consent under Section 6 of the DSPE Act must be raised immediately after FIR registration. Once:

Investigation is complete
Chargesheet has been filed
Court of competent jurisdiction has taken cognizance

Such a plea cannot be raised to vitiate the validity of cognizance, except in cases of:

Severe miscarriage of justice
Where quashing proceedings were initiated before chargesheet filing

Issue 2: Limits of High Court's Jurisdiction 👨‍⚖️

The Supreme Court found that the High Court exceeded its jurisdiction by:

Assuming the role of a Trial Court
Determining merits that involved debatable issues
Issues that should have been left to the wisdom of the Trial Court

This reinforces the principle that High Courts should exercise restraint while examining cases under quashing jurisdiction and should not conduct a mini-trial.

📌 Key Directives

The Supreme Court:

✅ Set aside the High Court's judgment completely
✅ Directed the Trial Court (XXVII ASJ, Indore) to proceed with ST No.16/2023
✅ Clarified that if the Trial Court finds prima facie case against bank officials under Prevention of Corruption Act or other penal provisions, there shall be no impediment to summon them
✅ Ordered respondents to appear before Trial Court on October 28, 2025
✅ Vacated asset attachment orders dated March 21, 2025, and May 5, 2025, upon furnishing of bail bonds

🔐 Deep Dive: The State Consent Controversy

Understanding Section 6 of DSPE Act 📜

The Delhi Special Police Establishment Act, 1946, under Section 6, requires that the CBI obtain consent from the state government before conducting investigations within that state's territory. This provision exists to protect the federal structure and state autonomy in matters of law and order, which is a state subject under the Constitution.

Why State Consent Matters 🤝

The consent requirement serves multiple purposes:

Federal Balance: Maintains the constitutional distribution of powers between Centre and States
State Sovereignty: Protects states from arbitrary central investigation without their knowledge
Cooperative Federalism: Ensures coordination between central and state law enforcement agencies
Political Safeguards: Prevents misuse of central agencies for political purposes

The Timing Dilemma ⏳

The critical question in this case was: When should the objection regarding lack of state consent be raised?

The Supreme Court categorically held that this objection cannot be raised as an afterthought. The rationale is clear:

Immediate Challenge Principle: If the accused believes that the CBI investigation lacks proper state consent, this objection must be raised:

Immediately after FIR registration
Before substantial investigation proceeds
Not after chargesheet filing and cognizance

Why This Timeline Matters: Allowing belated challenges would:

Waste judicial resources and investigation efforts
Enable accused to strategically delay proceedings
Undermine the entire criminal justice process
Create uncertainty in law enforcement

Exceptions to the Rule ⚠️

The Supreme Court recognized two situations where belated consent objections might still be entertained:

Severe Miscarriage of Justice: Where the lack of consent has resulted in fundamental rights violations or gross procedural irregularities that shock the conscience of the court
Pending Quashing Proceedings: Where the accused had already initiated quashing proceedings before the chargesheet was filed. In such cases, the filing of chargesheet during pendency should not prejudice the accused's right to challenge consent

Practical Impact on Future Cases 📊

This ruling establishes clear guidelines:

For Accused Persons:

Must be vigilant about procedural irregularities from day one
Cannot adopt a "wait and watch" strategy
Should seek legal advice immediately upon FIR registration
Must act promptly or lose the right to challenge

For CBI/Investigating Agencies:

Should ensure proper consent is obtained beforehand
Must maintain clear documentation of state consent
Can proceed confidently once investigation advances without challenge
Protected from belated procedural challenges after cognizance

For Courts:

Should dismiss belated consent challenges firmly
Must balance procedural fairness with judicial efficiency
Should not allow technical objections to derail entire proceedings
Need to assess whether delay was strategic or genuine

The Broader Constitutional Question 🏛️

This judgment also touches upon important constitutional principles:

Doctrine of Waiver: By not objecting early, the accused may be deemed to have waived their right to challenge the consent requirement. This prevents manipulation of the legal system.

Finality of Proceedings: Once a competent court takes cognizance after investigation, there is a presumption of regularity in proceedings. This presumption can only be rebutted in exceptional circumstances.

Abuse of Process: Courts are increasingly vigilant against attempts to use procedural technicalities to stall criminal proceedings, especially in economic offenses involving large public money.

💡 Legal Implications and Precedent Value

For CBI Investigations 🔎

This judgment significantly strengthens the CBI's position by clarifying that procedural objections regarding state consent must be raised promptly and cannot be used as a belated defense after cognizance has been taken. It provides operational certainty to investigating agencies and prevents endless litigation on procedural grounds.

For High Courts ⚖️

The ruling serves as a reminder that:

High Courts must exercise caution while quashing criminal proceedings
Debatable issues of fact should be left to trial
Courts should not assume the role of trial courts during quashing petitions

For Accused Persons 👥

The judgment indicates that:

Procedural objections have strict timelines
Quashing petitions on merits face high scrutiny
Courts will be reluctant to quash proceedings where debatable issues exist

🎓 Important Legal Principles Established

Timing of Procedural Objections: Consent-related objections must be raised immediately after FIR registration
Scope of Quashing Jurisdiction: High Courts should not delve into debatable factual issues
Cognizance Protection: Once cognizance is taken, it cannot be easily challenged on procedural grounds
Trial Court Autonomy: Trial courts retain power to summon additional accused if prima facie case emerges

🔮 What's Next?

The case now returns to the Trial Court where:

Full trial proceedings will commence
Evidence will be examined in detail
Respondents must appear on October 28, 2025
Bail bonds must be furnished
Trial Court may summon bank officials if warranted

📝 Conclusion

This judgment reinforces the principle that criminal justice administration requires a delicate balance between protecting rights of accused and ensuring that genuine allegations are properly investigated and tried. The Supreme Court's decision underscores that procedural objections cannot be used as shields indefinitely, and that trial courts must be allowed to perform their constitutional duty of examining evidence and determining guilt or innocence.

The case serves as an important precedent for future banking fraud cases and CBI investigations, particularly regarding jurisdictional challenges and the scope of High Court intervention in criminal proceedings.

Case Citation: Central Bureau of Investigation vs M/s Narayan Niryat India Pvt. Ltd & Ors., Criminal Appeal No. 4390 of 2025 (Supreme Court of India, October 9, 2025)

Bench: Justice Surya Kant and Justice Joymalya Bagchi

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. For specific legal guidance, please consult a qualified legal professional.