22 years, zero loss, but 3 lives wrecked: Madras High Court quashes HUDCO loan case against retirees

“One of the petitioners is paralysed, bedridden, and all of them denied their career growth, promotion and denied their terminal benefits, which is a planned fallback for their future, a requirement for post-retirement needs, including for health care. Thus, petitioners were deprived of their fundamental right,” the order read.

The Madras High Court was hearing petitions filed by Gandhi, K Lalitha and Gnanaoli, who were accused in a CBI case relating to alleged irregularities in housing loans sanctioned by HUDCO.

Justice M Nirmal Kumar noted that the entire loan amount, along with interest, had been recovered much before the framing of charges.

All three accused were charged under the Prevention of Corruption Act, 1988, and other provisions of the Indian Penal Code (IPC) and were alleged to have furnished false salary certificates to get excessive loans from HUDCO.

Case pending for 22 years

In 2001–2002, a private developer, Sindhu Developers, and some HUDCO officials were accused of giving housing loans on inflated property values, using false documents, like salary slips, and violating loan rules under the HUDCO scheme. A total of 43 loanees, including these petitioners, were accused of furnishing false certificates.

After investigation, a chargesheet was filed in 2006 where the petitioners were charged for the crime of cheating, forgery, conspiracy and corruption.

The petitioners had earlier sought discharge before the trial court, which was rejected in 2010, and their revision petitions before the Madras High Court were also dismissed in 2015, allowing the trial to proceed.

Retirement benefit of Rs 30 lakh due

Senior advocate Dr A E Chelliah submitted that one of the accused, Gandhi, was employed in Chennai Port Trust, Marine Department, as a fireman and retired, attaining superannuation in March 2025.

However, because of the pendency of the case, the authority concerned did not pay any settlement amount, such as payment of gratuity or provident fund, and promotions were denied citing the case. The retirement benefits of the petitioner, which are around Rs 30 lakh, were not paid.

It was pointed out by the counsel that the allegation against this petitioner is that he obtained a false certificate from his employer and got an excess loan from HUDCO, but it was the developer of plots, who has done all the work pertaining to the loan.

It was also argued before the Madras High Court that the case has been pending for more than 22 years, and the petitioner has already paid the entire loan amount.

He added that the petitioner did not cause any wrongful loss; in fact, HUDCO gained, but the petitioner has been facing trial since 2006.

Paralytic attack

Coming to the other petitioner, Lalitha was employed in the government central press and retired in August 2006. Due to the pendency of the case, the original sale deed of this petitioner’s plot has not been released, despite the petitioner paying all dues, and now she is on her deathbed owing to a paralytic attack, and facing innumerable sufferings.

It was further mentioned that the HUDCO, in September 2006, had acknowledged and informed that the loan amount had been fully repaid and there is no outstanding balance. It was also confirmed that the property is released from all charges, but the original sale deed could not be released at the direction of the CBI.

Hand-to-mouth existence

Lastly, the counsel pointed out to the Madras High Court that the third accused, Gnanaoli, was previously employed in the Principal Accountant General’s office in Chennai and retired from service in 2014.

It was claimed that the third petitioner, after his retirement, is now surviving on a provisional pension with a hand-to-mouth existence, for no fault of his own.

In his case, the counsel also pointed out that HUDCO had confirmed that the entire loan amount was discharged by the petitioner in 2007, the mortgage of the property was also discharged, but the document could not be released due to the pendency of the case.

Court’s observations

• The Madras High Court noted that the entire loan amount, along with interest, had been recovered much before the framing of charges, further weakening the case against the petitioners.
• It pointed out that the employers of the petitioners had stated that there is a variance in the salary certificates submitted with the loan application and their actual salary received, and the salary certificate is doubtful.
• However, the court also pointed out that in this case, the person who issued the salary certificate was not examined, and the person who signed the disputed salary certificate was not found or identified.
• The Madras High Court further said that there might be a discrepancy in the salary particulars, but certainly, the petitioners did not create any forged documents, and there is no forensic report to show that the petitioners forged documents.
• It was stated by the court that Sindhu Developers Pvt Ltd took all steps and measures in sales promotion and for the availment of a loan, and the petitioners have no interface with the HUDCO authorities.
• Moreover, it was the agents of Sindhu Developers who collected documents, submitted them to HUDCO, which thereafter processed the same, released the loan and credited the amount to the developer of the property.

• In this case, the loanees are government servants and public sector employees, but no sanction for prosecution was obtained, and thus, no charges under the Prevention of Corruption Act can be framed.
• The special public prosecutor had contended that the petitioners filed revision petitions against the dismissal of their discharge pleas, and this court had dismissed the revision petitions; hence, the petitioners cannot subsequently file another petition to quash the same. The court, however, pointed out that this was not correct or proper.