CRIMINAL PROCEDURE CODE, 1973 (Cr.P.C.) – SECTION 482 – QUASHMENT OF FIRST INFORMATION REPORT (FIR). PREVENTION OF CORRUPTION (AMENDMENT) ACT, 2018 (PC (AMENDMENT) ACT) – SECTIONS 7, 13(1)(o), 17A. INDIAN PENAL CODE, 1860 (IPC) – SECTIONS 409, 120B.
ECONOMIC OFFENCES – MISAPPROPRIATION OF GOVERNMENT FUNDS – PUBLIC SERVANT – DUTY TO PREVENT MISUSE OF FUNDS – CRIMINAL CONSPIRACY.
(2025) 7 KCD 232 : 2025 KER 54490
IN THE HIGH COURT OF KERALA
CORAM: HONOURABLE MR. JUSTICE A. BADHARUDEEN
CRL.MC NO. 5278 OF 2025; JULY 23, 2025
SREERAJ G v. STATE OF KERALA & ANR.
Facts: The petitioner, Sreeraj G, the 3rd accused and State Program Manager (Finance) in Kudumbashree (State Poverty Eradication Mission) under the Government of Kerala, filed a criminal miscellaneous case (Crl.M.C. No. 5278 of 2025) seeking to quash the FIR in Crime No. 4/2024 of Vigilance and Anti-Corruption Bureau (VACB), Thiruvananthapuram. The FIR was registered alleging commission of offenses under Sections 7 and 13(1)(o) of the PC (Amendment) Act and Sections 409 and 120B of the IPC. The core allegation was that the three accused, including the petitioner, entered into a criminal conspiracy and abused their official position to misappropriate Government funds amounting to Rs. 5,63,24,597/- allocated by the State Kudumbashree Mission to the High Range Rural Development Society (HRDS), a Project Implementing Agency (PIA) for DDU-GKY and Yuvakerala skill development projects for poor youth. The 1st and 2nd accused, officials of HRDS, allegedly misappropriated a significant portion of these funds (over Rs. 3.74 crore collectively, including Rs. 89,70,000/- by A1 and Rs. 77,83,000/- by A2) under the guise of ‘salaries,’ which the prosecution argued was not permissible under the Standard Operating Procedure (SOP). The allegation against the petitioner (A3) was that, despite being the first responsible officer for preventing the misuse of public funds and entrusted with verifying financial statements and audit reports of the PIA, he failed to take any action or report the misappropriation to higher authorities, thereby assisting the 1st and 2nd accused and causing huge financial loss to the Government.
Petitioner’s Contentions: The petitioner contended that he was at the “inferior tier of the hierarchy” concerning the release of funds and had nothing to do with the alleged misappropriation of salaries. He argued that none of the offenses would apply to him and that the Project Director and Project Head were entitled to salary from the allotted funds as per Chapter 3.3A of the SOP.
Investigating Officer’s Response: The Vigilance and Anti-Corruption Bureau (VACB) objected to the quashment, submitting that the petitioner’s contention regarding salary entitlement from Chapter 3.3A of SOP was incorrect. They clarified that Chapter 3.3A merely described PIA’s organizational setup and readiness, while Chapter 8.5A of SOP volume 2 specifically stated that only trainers, master trainers, and PIA Q-team members were entitled to salaries from the project fund, with no mention of entitlement for the project head or director. The VACB emphasized that the petitioner, as State Program Manager (Finance), was duty-bound to verify financial statements and audit reports but never reported the large-scale withdrawal of funds as salaries by the other accused.
Held: The High Court, referencing Apex Court precedents such as Gian Singh v. State of Punjab [(2012) 10 SCC 303], Aahir v. State of Gujrat [2017 SCC OnLine SC 1189], State v. R Vasanthi Stanley [2015 SCC OnLine SC 815], and Anil Bhavarlal Jain & Anr. v. State of Maharashtra & Ors. [2024 SCC OnLine SC 3823], reiterated the settled law that a liberal view is not sanctioned when quashing FIRs registered for offenses under the Prevention of Corruption Act. The Court emphasized that economic offenses have wider ramifications, affecting the financial health of the state and society, and should not be treated lightly. It was held that where materials prima facie indicate economic abuse by way of misappropriation, interfering with the investigation by quashing the FIR cannot be resorted to as a routine manner. Given the specific allegations against the petitioner, who was entrusted with preventing fund misuse and failed to report or prevent the misappropriation of crores of rupees, the High Court concluded that effective investigation was required. The petition was accordingly dismissed, with a direction to the petitioner/3rd accused to co-operate with the investigation.
