 "Supreme Court's Sterling ruling may pave way for similar settlements")
The Supreme Court’s decision to drop criminal cases against Sterling Biotech’s former directors Nitin and Chetan Sandesara after a part-payment of their dues could prompt other high-profile economic offenders to seek similar settlements, legal experts said.
Though the apex court has clarified that its order is confined to the “peculiar facts” of the case, some lawyers believe it sets a powerful example that others like Vijay Mallya, Nirav Modi, and Mehul Choksi may attempt to invoke in their own defence.
“The Supreme Court has exercised its extraordinary powers to allow a one-time settlement that could exonerate accused ‘fugitive economic offenders’ from both criminal prosecution and civil liabilities, conditional on a massive payment to lenders,” said B Shravanth Shanker, advocate-on-record in the Supreme Court.
On Friday, a bench of Justice JK Maheshwari and Justice Vijay Bishnoi allowed the closure of all criminal and investigative proceedings against the Sandesara brothers, provided they deposit ~5,100 crore by December 17, which is roughly one-third of their total dues. The amount will be distributed among a consortium of lender banks as a full and final settlement of the loans due, the court said.
“This move is an exception, not the norm, and is possible only because of the court’s discretionary authority under Article 142 (power to pass any order to do complete justice),” he said.
Other experts, however, believe that despite the bench’s clear direction that the order should not be treated as
a precedent, the practical effect could be otherwise.
“Such a high-profile settlement is likely to prompt other major defaulters such as Vijay Mallya, Nirav Modi, and Mehul Choksi to seek similar deals,” Shanker said, adding that others may argue that a similar partial repayment or settlement should justify closure of criminal and civil cases against them as well, especially if they can offer significant sums to lenders.
This approach, however, could carry systemic risks, he said.
“The danger is that offenders may view partial repayments as a way to negotiate immunity after fleeing the country. That could weaken deterrence and reinforce the perception that financial crime in India can be settled with money rather than accountability,” Shanker added.
The Sandesara brothers, accused of defrauding Indian banks of over $1.7 billion, fled India in 2017 and later acquired Albanian citizenship after pledging investments in local projects. Following probes by the Central Bureau of Investigation, Enforcement Directorate, Serious Fraud Investigation Office, and Income Tax Department, they were declared fugitive economic offenders.
The Supreme Court noted that the brothers had accepted a proposal presented by Solicitor General Tushar Mehta on behalf of the government, which offered to settle all pending proceedings. The bench noted that since the petitioners were ready to repay a substantial amount, continuing prosecution “would serve no useful purpose”.
Alay Razvi, managing partner at law firm Accord Juris, said the ruling marks a shift towards prioritising recovery over prolonged prosecution.
“The court used its Constitutional powers in this unique case but did not create a formal statutory route allowing settlements to replace prosecution,” he said.
“The decision signals that substantial repayments with government and bank consent may justify staying criminal proceedings, but only in rare and exceptional situations,” Razvi added.
For public-sector banks, the ruling offers reassurance that courts are willing to back credible, structured repayment offers that ensure recovery within fixed timelines. But experts warn that unless applied sparingly, such settlements could erode deterrence and send the wrong signal to future offenders.
The ruling could reshape how banks and enforcement agencies approach complex financial frauds, Razvi said.
“It strengthens the recovery framework by valuing tangible fund retrieval, but also carries the risk of moral hazard if banks begin tolerating delayed or reduced repayments,” he said.
Tushar Kumar, an advocate practising in the Supreme Court, said the order must be seen as a narrow, case-specific exercise of discretion rather than a new legal pathway.
“It does not automatically benefit others like Mallya or Choksi,” he said, adding that any such relief would depend on bona fide conduct, full disclosure, and substantial restitution under the court’s direct supervision.
The judgment reflects judicial pragmatism, not leniency, he said.
“It recognises repayment and restitution as relevant factors in exceptional economic offences where the priority is recovery of public funds,” he said.
“In rare cross-border situations, settlement-based closure may better serve justice than drawn-out prosecution,” Kumar said.
Investigating agencies remain free to act within their statutory mandates, he said.