In a judgment having far reaching implications for private banks, the Supreme Court on Tuesday ruled that their chairpersons, directors and officers are public servants and can be prosecuted for corruption under the anti-corruption law.
A bench of Justice Ranjan Gogoi and Justice PC Pant held all officials of a private bank operating under the license issued by the Reserve Bank of India would be defined as public servants under the Prevention of Corruption Act, a law meant to prosecute government employees caught indulging in a corrupt practice.
The court held bank employees, whether private or government, discharge a public duty and are therefore amenable to the jurisdiction of the special law aimed to stem corruption.
“Discharge of duties in which the state, the public or the community at large has an interest has been brought within the ambit of the expression ‘public duty’. Performance of such public duty by a person who is holding an office which requires or authorise him to perform such duty is the sine qua non of the definition of the public servant contained in Section 2 (c) (viii) of the PC Act,” the bench held.
The court allowed CBI’s appeal to prosecute two former officials of Global Trust Bank Ltd (a private bank before its amalgamation with the Oriental Bank of Commerce) who had allegedly cleared credit facilities for a private company in violation of rules.
CBI had appealed against the Delhi and Bombay high court verdicts quashing the agency’s charge sheet against Ramesh Gelli (then chairman of GBT) and Sridhar Subasri (then executive director) stating the two could not be prosecuted under the Prevention of Corruption Act because they were private bank officials and not public employees.
The court further held that the Banking Regulation Act (BR), 1949, cannot be left meaningless and requires harmonious construction. Section 46A of the BR Act says bank of ficials are deemed to be public officials.
This definition was, however, for the purposes of prosecuting corrupt employees under various sections of the Indian Penal Code (IPC).
But, when the IPC provisions dealing with corruption were repealed to bring in a stringent anti-graft law in 1988, there was no corresponding insertion in the BR Act. Terming this omission as “unintended” on the part of the legislature, the court said it cannot lose sight of the fact that the objective of the antigraft law is to expand the definition of “public servant.”
“For banking business what cannot be forgotten is Section 46A of Banking Regulation Act, 1949, and merely for the reason that the IPC provisions have been repealed by the PC Act, 1988, relevance of Section 46A of Banking Regulation Act, 1949, is not lost,” the bench said.