Apex court ruling strengthens accountability
The Supreme Court's decision to bring private bank officials under the ambit of the Prevention of Corruption Act, 1988, which generally covers only Government servants, will go a long way to serve the public interest. Private banks deal with large amounts of public money and must be made more accountable. There is a belief that private banks are better managed than public banks, and, therefore, more reliable and free from irregularities. This may not be necessarily — and always — true. Take the case at hand: Messrs Ramesh Gelli and Sridhar Subasri, in their capacity as Chairman/Managing Director and Executive Director respectively of a private bank named Global Trust Bank, had liberally sanctioned multi-crore loans, going against banking regulations and throwing all caution to the wind.
This caused the bank to eventually lose a lot of money, though the scale of damage only became evident after GTB was merged with the Oriental Bank of Commerce, a public sector bank. Notably, GTB was also involved in the 2001 stock scam that was engineered by Ketan Parekh and which resulted in a loss of Rs1,000 crore. The question before the Supreme Court was, whether Messrs Gelli and Subasri were public servants. The lower courts and the Bombay High Court had held that cognizance could not be taken against the accused under the anti-corruption Act because they were not public servants. The Central Bureau of Investigation challenged the ruling in the apex court, which, on Tuesday, ruled that the two indeed were.
But the decision was not just based on the argument that private banks handle public finance. If that had been the case, then a counter-argument could have been put forth that, if the definition of public servant is being so extended, then every shop-keeper and factory-owner should come under the anti-corruption law as all private businesses engage with public finance. Instead, the apex court's decision was based on more of technicality. It was noted that Section 46A of the Banking Regulation Act, 1949 had already made it clear that the private bank employees were public servants for the purposes of Chapter IX of the Indian Penal Code.
The confusion stemmed from the fact that Sections 161 to 165A of Chapter IX of the Indian Penal Code had been repealed and substituted by relevant provisions in the Prevention of Corruption Act. The latter defines a ‘public servant’ as “any person who holds an office by virtue of which he is authorised or required to perform any public duty” and ‘public duty’ as “a duty in the discharge of which the state, the public or the community at large has an interest”. Clearly, this broad-based definition covers private bank officials, but the shift from the IPC to the anti-corruption law had not been reflected in the Banking Regulation Act.
This is where the Supreme Court stepped in and ruled that just because the legislature had not put in the words “for the purposes of Prevention of Corruption Act, 1988” for the expression “for the purposes of Chapter IX of the Indian Penal Code (45 of 1860)”, Section 46(A) of the Banking Regulation Act could not be rendered useless. With the legality settled, the resultant deterrence should improve the functioning of the country’s banking sector in its entirety.