The Prevention of Corruption Act, which punishes public servants for wrongdoings, will now apply even to heads of private sector banks following a decision by the Supreme Court on Tuesday.
The ruling is significant as the Central Bureau of Investigation (CBI) will now be able to examine frauds and scams involving private banks, considering the fact that they hold sway over the country’s banking sector.
The Bench of Justices Ranjan Gogoi and Prafulla C Pant, through separate judgments, came to the same conclusion that the intent of Parliament to enact the Prevention of Corruption Act, 1988 was to widen the definition of “public servant” so that the anti-corruption law can be made more effective. The banking sector is regulated by the Banking Regulation (BR) Act, 1949 and under Section 46A of the said law, the chairman, managing director, director, auditor, or any employee of a banking company is deemed to be a public servant.
The CBI had relied on this law to prosecute two top officials of the Global Trust Bank (GTB) accused of defrauding the bank and its creditors of Rs17.46 crore. However, the trial court and the Bombay High Court refused the CBI permission to slap charges under Section 13(1)(d) and Section 13(2) of Prevention of Corruption Act against GTB managing director Ramesh Gelli and its Executive Director Sridhar Subasri.
The bank had merged in 2004 with a public sector bank Oriental Bank of Commerce following which the fraud came to light. But the HC held that the crime related to the period from 1999-2004, when it was a private bank. Even the trial against the accused has been stalled since 2007.
With the SC order, the trial against the two individuals will restart after a decade since the FIR got filed in 2005.
Applying the definition of public servant as stated in the BR Act to the case at hand, the Bench said, “It is the definition of public servant given in the Prevention of Corruption Act read with Section 46A of Banking Regulation Act which holds the field for the purpose of offences under the said Act.”
Justice Gogoi said that the BR Act declared officials of both public and private banks as public servants for offences under the Indian Penal Code.
“The omission to continue to extend the deeming provisions in Section 46A of BR Act to the offences under Prevention of Corruption Act must be understood to be clearly unintended,” Justice Gogoi said, adding, “The unequivocal legislative intent to widen the definition of public servant by enacting the Prevention of Corruption Act cannot be allowed to be defeated by interpreting and understanding the omission in Section 46A of the BR Act to be incapable of being filled up by the court.”