A recent decision by the Supreme Court to quash all criminal proceedings against the Sandesara brothers — Nitin and Chetan Sandesara, promoters of the Sterling Biotech group — has seized national attention. The order, based on a One-Time Settlement (OTS) of Rs 5,100 crore, carries significant implications for the prosecution of fugitive economic offenders and large-scale bank fraud.
The case originated from allegations of a multi-crore bank fraud (initially pegged at over Rs 5,383 crore in the FIR) involving loan defaults and money laundering, following which the Sandesara brothers fled India in 2017.
The Apex Court’s November 19, 2025, order is strictly conditional. The Supreme Court agreed to drop all parallel actions by a host of investigative agencies, including the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO), the Income Tax Department, and all proceedings under the Fugitive Economic Offenders Act, 2018.
This sweeping quashing is entirely contingent upon the Sandesara brothers depositing the sum of Rs 5,100 crore as a “full and final settlement” with the Supreme Court Registry on or before December 17, 2025. This figure was proposed by the Solicitor General, representing the Government and agencies, after consultation with the lender banks.
The Apex Court’s primary objective was the recovery of public money, noting that continuing criminal prosecution would serve little purpose if the defalcated amount is substantially returned to the banks. Crucially, the Supreme Court explicitly clarified that these directions were based on the “peculiar facts of this case” and “shall not be treated as a precedent” in future matters, limiting the order’s potential use by other offenders.
In a nutshell, the Supreme Court’s extraordinary order is a trade-off where the Government and banks accepted cash over jail. This decision has generated a significant and sharply divided reaction across the legal, financial, and political spheres. The core of the reaction centres on the tension between the immediate recovery of public money versus the long-term goal of deterrence and penal justice for economic crimes.
Critics believe that despite the warning, this order creates a powerful road map for any wealthy economic criminal to negotiate their freedom if they can settle their debts, potentially weakening laws meant to punish fugitives and major fraudsters. The order has generated keen interest and intense legal scrutiny, particularly when considering the complex background against which the Sandesara saga reached the Apex Court around 2020, resulting in the definitive quietus of all criminal litigation.
This is more so when the Sandesara case has been connected to several politicians, bureaucrats, and other influential people, leading to a political controversy that ran parallel to the financial fraud investigations. The connections primarily involve allegations of corruption, kickbacks, and the use of influence to facilitate the fraud and impede investigations. Consequently, the quashing of the proceedings against the brothers automatically shields their alleged co-conspirators and facilitators, who were also under investigation.
In the Sandesara case, another noteworthy feature was that the brothers had secured an order of protection from arrest or any coercive action from the Supreme Court. They were also at an advantage as the Government agencies failed in their effort to bring them back from a foreign land.
In this background, a question arises regarding the existence of back-channel negotiations before the matter formally reached the Supreme Court for settlement. While clarity on these discussions rests with the Government, it appears that this back-channel consensus was formally presented to the Supreme Court in a crucial, non-public manner. The Solicitor General, representing the Government and the investigating agencies, submitted the final proposal of Rs 5,100 crore demand in a sealed cover — a figure the Sandesaras then accepted. The Supreme Court order immediately raises another question: why must the Sandesara matter be brought under the category of ‘peculiar facts’ — to be not treated as a precedent for other fugitive economic offenders of nearly equal magnitude?
Does the existence of an extradition treaty or deportation provisions with the countries of refuge deprive them of the same legal remedy? The quashing of all criminal proceedings also suggests that the Sandesaras will escape any finding of criminal intent (mens rea). The settlement guarantees the recovery of money, but it simultaneously ensures that the accused are never found criminally guilty of fraud or money laundering, thereby undermining the foundational principle of criminal law — punishment based on intent.
Further, agencies like the ED and SFIO spent years building their cases (money laundering, corporate fraud). The ultimate resolution, being a cash-for-freedom deal, could demoralise investigators and incentivise them to focus solely on asset attachment rather than conviction.
Giving an insight about the order, noted jurist and senior advocate AK Ganguli, said it is true that the Apex Court has not referred to Article 142 of the Constitution, but it is evident that the Top Court has invoked it’s inherent powers for quashing the FIRs and the related proceedings that were pending against the petitioners in various fora for violation of several provisions of PMLA, FEOA (Fugitive Economic Offenders Act, 2018), Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Section 447 of the Companies Act, 2013, Prevention of Corruption Act read with Section 120B (Criminal Conspiracy), 420 (Cheating), 467 (Forgery), 468 (Forgery for the purpose of Cheating) and 471 (Using as genuine a forged document) IPC etc.
Ganguli said it is also evident from the Order passed by the Court that all the proceedings pending against the petitioners in various courts and tribunals were in relation to complaints of serious offences being committed by them that attracted penal provisions of several statutes.
The Writ Petitions filed by the petitioners sought the quashing of all proceedings listed in the Order. It is also evident that the prosecuting agencies agreed that if the petitioners pay a lump sum of Rs 5,100 crores, which includes liabilities of overseas companies, the pending proceedings would be all quashed. The Court has accepted that proposal given by the parties, including the proposal given by the prosecuting agencies in a sealed cover. However, Ganguli is of the view that it appears that none of the parties brought to the notice of the Court the legal position applicable to the case.
The Senior Advocate said it is well settled that an agreement to stifle prosecution is not enforced by the courts on the ground that the consideration for such an agreement is opposed to public policy and is a violation of Section 23 of the Contract Act.
He said way back in 1962, the Supreme Court in B NarasimhaRaju v. V GurumurthyRaju, 1963 (3) SCR 678, had ruled that “the principle underlying this provision (Section 23 of the Indian Contract Act) is obvious. Once the machinery of the Criminal Law is set into motion on the allegation that a non-compoundable offence has been committed, it is for the criminal courts and criminal courts alone to deal with that allegation and to decide whether the offence alleged has in fact been committed or not.
“The decision on this question cannot, either directly or indirectly, be taken out of the hands of criminal courts and dealt with by private individuals. When, as a consideration for not proceeding with a criminal complaint, an agreement is made, in substance it really means that the complaint has taken upon himself to deal with his complaint and on the bargaining counter he has used his non-prosecution of the complaint as a consideration for the agreement which his opponent has been induced or coerced to enter into.”
Ganguli said that the Supreme Court further held that ‘In dealing with the question as to whether the consideration for the agreement is opposed to public policy or not, it is immaterial that the debt in respect of which an agreement is made for the illegal consideration was real, nor was it necessary to prove that a crime in fact had been committed.
All that is necessary to prove in such a case is “that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting.” larifying further, the noted jurist said that the Supreme Court held that “it is clear that if the appellant proves that the consideration for the arbitration agreement was the promise by respondent not to prosecute his complaint, then the said consideration would be opposed to public policy and the agreement based on it would be invalid in law.”
Citing certain Privy Council decisions, Ganguli said that the Apex Court further held that “In dealing with the question as to whether the consideration for the agreement is opposed to public policy or not, it is immaterial that the date in respect of which an agreement is made for the illegal consideration was real, nor is it necessary to prove that a crime in fact has been committed.
All that is necessary to prove in such a case is “that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting””. One is not certain as to how the Court would have concluded the case, had this clear, unequivocal legal position been brought to its notice, Ganguli said.
Regardless of the uncertainty over whether the Supreme Court was fully apprised of the legal position on stifling prosecution, the resulting order in the Sandesara case is clear. While it is not a formal legal precedent that grants a right to settlement, it has created a powerful institutional signal that economic criminals with the financial capacity to make a significant repayment can negotiate a “cash-for-freedom” deal at the highest judicial level.
