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2023 (9) TMI 634 - SC - Indian LawsMisappropriation of Fixed Deposits (FDs) furnished as security by RFL and its group companies - Criminal liability of a company - HELD THAT - The criminal liability of the individuals now attributed to DBS are actions of (1) Anjani Kumar Verma, (2) S. Venkatesh, (3) Pradeep Kumar and (4) Parthsarathi Mukherjee. They were all officials of LVB. Their individual responsibility and accountability in criminal law, is and remains unaffected by the amalgamation. Therefore, there is in fact, no involvement of DBS Bank, revealed in the charge sheet filed by the Delhi Police. In completely ignoring these aspects and proceeding on a rather superficial basis, the High Court, in our considered opinion fell into error. There is no gainsaying that the power to quash a criminal investigation or proceedings should not be lightly exercised. Yet, to refuse recourse to that power, in cases that require or may demand it, is being blind to justice, which the courts can scant afford to be. In the present context, the public s confidence in the banking industry was at stake, when RBI stepped in, imposed the moratorium and asked DBS to take over the entire functioning, management assets and liabilities of the erstwhile LVB. To permit prosecution of DBS for the acts of LVB officials (who are in fact, facing criminal charges) would result in travesty of justice. The impugned judgment is accordingly set aside; the appeal by DBS is allowed.
Issues Involved:
1. Quashing of criminal proceedings against DBS Bank India Limited. 2. Interpretation of Clause 3(3) of the Amalgamation Scheme. 3. Transfer of criminal liability post-amalgamation. Summary: 1. Quashing of Criminal Proceedings Against DBS Bank India Limited: The Supreme Court examined appeals arising from a Delhi High Court order rejecting a petition to quash criminal proceedings against DBS Bank India Limited (DBS). The proceedings were related to allegations against the erstwhile Laxmi Vilas Bank (LVB) for misappropriating Fixed Deposits (FDs) furnished as security by Religare Finvest Limited (RFL) and its group companies. RFL had lodged a criminal complaint, leading to an FIR by the Economic Offences Wing under Sections 409 and 120B of the IPC. The High Court had stayed the summoning order against DBS and directed parties to seek clarification from the RBI regarding the interpretation of Clause 3(3) of the amalgamation scheme. 2. Interpretation of Clause 3(3) of the Amalgamation Scheme: Clause 3(3) of the amalgamation scheme states that any pending legal proceedings against the transferor bank (LVB) shall be prosecuted and enforced by or against the transferee bank (DBS). The proviso specifies that criminal proceedings against directors or employees of the transferor bank shall continue as if the bank had not been dissolved. The Supreme Court noted that the scheme aimed to protect depositors and maintain public confidence in the banking system. The Court held that prosecutions or criminal proceedings could not be attributed to DBS or its directors post-amalgamation, as the liability of LVB officials remains unaffected. 3. Transfer of Criminal Liability Post-Amalgamation: The Court analyzed whether DBS could inherit criminal liability for the actions of LVB officials. It referenced legal principles and precedents indicating that criminal liability is typically personal and cannot be transferred through amalgamation. The Court emphasized that the legal effect of amalgamation results in the dissolution of the transferor company (LVB), and only defined legal proceedings are succeeded by the transferee company (DBS). The Court concluded that the criminal liability of LVB officials could not be transferred to DBS, and the High Court erred in not quashing the proceedings against DBS. Conclusion: The Supreme Court set aside the impugned judgment, allowed the appeal by DBS, and quashed the criminal proceedings against DBS arising from FIR No. 189/2019. The appeal by RFL was dismissed, affirming that the criminal liability of LVB officials remains unaffected by the amalgamation.
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