SRINAGAR: The High Court of Jammu & Kashmir and Ladakh has dismissed a batch of petitions seeking quashing of criminal proceedings in the alleged Rs 227-crore Jammu Kashmir Bank loan fraud involving Aman Hospitality Pvt. Ltd. It held that that the material collected by investigating agencies prima facie discloses offences of cheating, criminal conspiracy and diversion of loan funds. The court ruled that the case must proceed to trial, observing that it cannot evaluate the truthfulness of the defence at the stage of deciding petitions under Section 482 CrPC.
The judgment was reserved on May 14, 2026, and pronounced on June 30, 2026, by Justice Sanjay Dhar of the High Court of Jammu & Kashmir and Ladakh at Srinagar. The petitions were argued by senior advocate Tanveer Ahmad Mir for the petitioners, while the respondents, the Anti-Corruption Bureau (ACB) and another, were represented by Vikas Malik, Central Government Counsel, assisted by other counsel.
The common judgment disposed of eight connected petitions filed by Madhu Bakshi, Raj Singh Gehlot, Sheela Gehlot, Mohan Singh, Aman Hospitality Pvt. Ltd., Raj Commercial and Agencies Ltd., NGR Consultant Pvt. Ltd., and Ambience Pvt. Ltd., all of whom had challenged charge sheets arising out of FIR No. 15/2019 registered by the Anti-Corruption Bureau, Srinagar, and the subsequent CBI case RCBD12021E0004.
According to the judgment, the case originated from a source report alleging that officials of J&K Bank’s Ansal Plaza Branch in New Delhi sanctioned loans worth hundreds of crores to Aman Hospitality Pvt. Ltd., which later became a non-performing asset (NPA), and subsequently facilitated a One Time Settlement (OTS) conferring undue financial benefit upon the borrower.
The investigation found that Aman Hospitality had obtained a term loan of Rs 227 crore from J&K Bank, besides a bank guarantee of Rs 15 crore, as part of financing for a twin five-star hotel project at Shahdara, Delhi. The company subsequently defaulted, leading to restructuring of the loan account and sanction of an additional Funded Interest Term Loan (FITL) of Rs 47.21 crore. By June 2018, the outstanding liability to J&K Bank had risen to Rs 289.28 crore.
The FIR alleged that despite dues of Rs 289.28 crore, the bank settled the account for Rs 128.94 crore, which was less than half of the outstanding principal amount. It further alleged that bank officials, in conspiracy with the promoters of Aman Hospitality, conferred pecuniary benefits worth more than Rs 160 crore by opting for an OTS instead of pursuing recovery under the SARFAESI Act.
The Anti-Corruption Bureau initially investigated diversion of funds relating to the first disbursement of Rs 35 crore and filed a charge sheet against company promoters, associated firms and bank officials. Later, on the request of the Jammu and Kashmir Government, the investigation was transferred to the Central Bureau of Investigation (CBI) in 2021, which conducted further investigation and filed a supplementary charge sheet in December 2024.
The CBI alleged that successive tranches of the sanctioned loan were routed through Aman Hospitality’s designated account and then transferred to Ambience Pvt. Ltd. and numerous other companies allegedly controlled by Raj Singh Gehlot, resulting in diversion and siphoning of loan funds. The supplementary charge sheet details several transactions involving shell companies, proprietary concerns and group entities through which the money allegedly circulated before being utilised for purposes unrelated to the sanctioned project.
The petitioners argued that there was no evidence of any conspiracy with bank officials and denied allegations of diversion of funds. They contended that the transfers represented reimbursement to the turnkey contractor after construction work had already been executed, and therefore could not amount to siphoning of loan proceeds. They also relied upon forensic audits which, according to them, found no fraud or diversion of funds.
The petitioners further submitted that delays in infrastructure development around the hotel project adversely affected its commercial viability, leading to financial distress beyond the borrower’s control. They argued that several lending banks had accepted the One Time Settlement and issued no-dues certificates, while the hotel project itself had been completed and was operational, negating allegations of cheating.
Justice Dhar extensively discussed the principles governing the High Court’s inherent jurisdiction under Section 482 CrPC, relying upon Supreme Court judgments in State of Haryana v. Bhajan Lal, Rajiv Thapar v. Madan Lal Kapoor and Pradeep Kumar Kesarwani v. State of Uttar Pradesh. The court reiterated that while exercising powers to quash criminal proceedings, it cannot undertake a detailed examination of evidence or determine the truthfulness of rival claims.
The court observed: “At this stage, truthfulness or otherwise of the allegations levelled by the prosecution is not to be evaluated nor veracity of the defences raised on behalf of the accused is to be ascertained.”
The judge further clarified that, for the purposes of deciding the petitions, the court would confine itself to examining allegations regarding diversion and siphoning of loan funds rather than the conduct of bank officials, since they were not before the court.
After examining the investigation material, the court held that there was sufficient material to indicate fraudulent utilisation of the sanctioned loans.
“There is material on record to show that petitioner Raj Singh Gehlot made requests to the J&K Bank for release of tranches of sanctioned loan… but actually the amount disbursed has been utilized for the purposes which fall outside the purview of the conditions of the sanction,” the court observed. “Thus, there is material on record to prima facie show that the Bank has been dishonestly induced to release the tranches of loan… Thus, prima facie, offence of cheating is made out against the petitioners.”
Justice Dhar also observed that the One Time Settlement was concluded for an amount lower than the principal advanced by the bank, resulting in an apparent pecuniary loss.
The judgment states: “This, prima facie, shows that the J&K Bank Ltd. has suffered pecuniary loss on account of One Time Settlement which it had entered into with the borrower company.”
Holding that the charge sheets disclose a prima facie case warranting trial, the High Court dismissed all eight petitions and vacated interim relief granted earlier.
The court concluded: “For what has been discussed hereinbefore, I do not find any merit in these petitions. The same are dismissed accordingly.”
However, Justice Dhar clarified that all observations contained in the judgment were confined to deciding the quashing petitions and should not influence the trial court while considering the merits of the criminal case.
