Produce specific case of CBI not proceeding against RBI directors: SC to Swamy
Subramaninan Swami, in a petition,said that no RBI nominee director was prosecuted by the CBI for failing to prevent sanctioning of big-ticket loans to corporate entities in the major banking scams in the country
The Supreme Court on Monday asked former Union minister and Bharatiya Janata Party (BJP) leader Subramanian Swamy to produce specific instances of the Central Bureau of Investigation (CBI) not proceeding against the Reserve Bank of India (RBI)’s independent directors in banking scams, saying that it will examine the matter once the petitioner submits the relevant material.
A bench of justices BR Gavai and Vikram Nath also allowed RBI to respond to Swamy’s reply and directed the matter to be heard after six weeks.
Swamy, in his petition, listed out major scams currently being probed by CBI and other agencies, which included the Kingfisher scam (to the tune of ₹9,400 crore), Nirav Modi-Punjab National Bank scam ( ₹11,400 crore), Bank of Maharashtra scam ( ₹2,043 crore), PMC Bank scam ( ₹6,500 crore), among others to make a point that in none of these cases, an RBI nominee director was prosecuted for failing to prevent sanctioning of big-ticket loans to corporate entities.
The CBI represented by Solicitor General Tushar Mehta had opposed the petition for making general allegations without giving any specific instances where a nominee director of RBI was clearly at fault.
Putting the onus on the petitioner to show if there was any material against RBI officials, the bench told Swamy, “How can we make a roving enquiry. You must point out instances in a specific case or else how do we pass order.”
The Court further explained, “Mere exclusion of RBI nominee director is not enough. There should be material against them and still they were excluded (by CBI.”
Mehta said that Swamy can share such material that can be gone into by the agency. The bench told the Solicitor General, “If he gives information, it will also reveal the role of CBI – how the investigation was not carried out. We may have an opportunity to examine the role of CBI. If he prima facie shows some material against independent directors and CBI has not filed any charge sheet, that may be a case for action.”
Swamy informed the court that while bank directors have been arrayed as accused in these scams, not a single RBI nominee director has been named or put to trial. “The issue here is nominee directors were not alert about the matter,” Swamy said.
The RBI in January filed an affidavit to Swamy’s petition claiming that nominee directors of RBI have no role to play in the sanctioning and post-sanction monitoring of large value loans by banks.
It said, “Large value credit sanctions in banks are generally taken by a Committee of the Board/senior management of the bank. The sanctioning of such credit is Committee-based and not an individual decision. RBI Nominee Director does not have veto power in the credit sanctioning process.”
The court told Mehta, “The material must show that the RBI director had an opportunity but did not oppose it (sanctioning of loan).”
Detailing the role of directors in banks, RBI affidavit said, “RBI Nominee Director has no role in the day-to-day affairs of the bank, including post-sanction monitoring of the loan for which the responsibility lies entirely with the bank management.” Further, it said, “Post sanction management and monitoring of loan, to ensure that the borrower satisfies all the terms and conditions of the sanction, including ensuring end use of funds for intended purposes, lies with the bank management.”
The petition by Swamy and advocate Satya Sabharwal highlighted a spate of financial or banking frauds in the recent past that resulted in a huge drain on the economy of the country. It said, “In the last couple of years, various banks have reported scams after scams wherein the role of bank officials were clearly made out but surprisingly not even a single RBI official has been brought to justice despite RBI retaining the power to monitor, regulate, supervise, audit and direct the functioning of all banking companies in India.”
In the IL&FS scam, the Serious Frauds Investigation Office in June 2019 charge-sheeted the company officials for defaulting on loan obligations worth over ₹91,000 crore wiping off a huge chunk of public revenue.
The petition demanded a CBI enquiry or a probe by any independent agency into the role played by CBI to unearth any failure on part of the RBI which resulted in these scams.
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