PROTECTION FOR NATIONALIZED BANK EMPLOYEE UNDER SECTION 197 OF Cr.PC FOR PROSECUTION

[Mr. M. GOVINDARAJAN]

Prosecution of public servants

Section 197 of the Criminal Procedure Code (‘Cr.PC’ for short) provides that when any person who is or was a public servant, not removable from his office save by or with the sanction of the Central Government or State Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duties, no Court shall take cognizance of such offence, except with the previous sanction of the appropriate Government.

Section 197(1) shows that the sanction for prosecution is required where any person who is or was a Judge or Magistrate or a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in discharge of his official duty.

The legislature has given great importance to sanction as is evident from the Scheme of the Cr.PC. Section 216 of the Cr.PC gives power to the Court to alter or add to any charge at any time before judgment is pronounced but sub-section (5) thereof provides that if the offence stated in the altered or added charge is one for the prosecution of which previous sanction is necessary, the case shall not be proceeded with until such sanction is obtained, unless sanction has been already obtained for a prosecution on the same facts as those on which the altered or added charge is founded.

Bank employee - a public servant?

The banks are public sector undertakings.  The employees working in the bank are considered as public servant.  Whether Section 197 of Cr.PC is applicable to such bank officials for taking prosecution against them?

The Supreme Court in A. SREENIVASA REDDY VERSUS RAKESH SHARMA & ANR. - 2023 (8) TMI 650 - SUPREME COURT, held that the for the prosecution of bank officials prior sanction under Section 197 of Cr.PC is not required.

In the above said case the appellant was working as Assistant General Manager in State Bank of India Overseas Bank, Hyderabad.  It was alleged that the appellant conspired with

other co-accused to cheat the Bank by sanctioning a corporate loan of Rs. 22.50 crore in favor of Sven Genetech Limited, Secunderabad.  The said company had applied for loan for the purpose of purchase of new equipments/implementation of the expansion programme.  It had also applied with the Bank for loan credit limit of Rs. 5 crore for the purpose of purchase of raw material from the domestic market and cash credit limit of Rs. 20 crore for using as working capital.

It was alleged that the facilities sanctioned by the Bank were not utilized by the company for the purposes for which it was sanctioned and the company diverted the funds for its personal benefits and to clear its old debts.  The appellant was instrumental in approving the release of corporate loan without compliance of all the principle/disbursement conditions.  The appellant is alleged to have approved the release of cash credit limit of Rs. 10 crore hastly on the recommendation of one Shri Kuppa Srinivas (Original Accused No. 3 Regional Manager), despite having knowledge of non-installment of machinery proposed to be purchased out of the corporate loan amounts with fraudulent intention to cause wrongful gain to the original accused Nos. 1 to 4 and others.

The Central Bureau Investigation registered a First Information Report dated 30.10.2013 against the appellant herein and other co-accused for the offences punishable under Sections 120-B read with 420, 468 and 471 respectively of the Indian Penal Code (‘IPC’ for short) and Section 13(2) read with  Section 13(1) of the Prevention of Corruption Act, 1988 (‘PC Act’ for short).

The Chief General Manager (MCG-I), SBI declined to accord sanction under Section 19 of the PC Act to prosecute the appellant for the offences punishable under the PC Act but later gave his sanction.  Then the Special Court at Hyderabad took cognizance of the offence.  The appellant questioned the legality and validity of the order of grant of sanction before the High Court of Telangana by filing a Writ Petition.  The High Court allowed the writ petition and quashed the sanction for prosecution under PC Act.

The CBI filed intra-Court appeal against the order of Single Judge.  In appeal the order of Single Judge was confirmed.  CBI dropped the case at this instant.  Since the High Court decided the case in favor of the appellant, the appellant filed a discharge application before the Special Court under Section 239 of Cr.PC.  The Special Court discharged the appellant from the prosecution under the PC Act.  However the said Court declined to discharge the appellant from the offences under the IPC.

Being aggrieved against the order of Special Court the appellant filed a Criminal Petition before the High Court with a prayer that he should be discharged from the entire prosecution or to put in other words, he should also be discharged for the offences under the IPC as there is no sanction accorded by sanctioning authority under Section 197 of the Cr.PC.  The High Court rejected the writ petition filed by the appellant.  Therefore the appellant filed the present appeal before the Supreme Court.

The appellant submitted the following before the Supreme Court-

• The sanction under Section 197 of the Cr.PC is mandatory to prosecute the appellant for the offences under Sections 120-B, 420, 468 and 471 respectively of the IPC.
• As sanction to prosecute the appellant under the provisions of the PC Act, came to be declined, the appellant cannot now be prosecuted for the offences under IPC without valid sanction under Section 197 of the Cr.PC.
• The appellant came to be exonerated of all the charges in the departmental inquiry as evident from the report of the inquiry officer on the very same charges on which the appellant is now sought to be prosecuted in the Court of the Special Judge at Hyderabad.
• The continuation of the criminal prosecution for the offences under the IPC would be nothing but a gross abuse of the process of law and would lead to serious miscarriage of justice.

Therefore the appellant prayed the Supreme Court to set aside the impugned order and thereby discharge the appellant from criminal prosecution.

The CBI submitted the following before the Supreme Court-

• Although the sanctioning authority declined to accord sanction under Section 19 of the PC Act to prosecute the appellant for the offences punishable under the provisions of the PC Act yet, that by itself is not sufficient to discharge the appellant even from the offences punishable under the IPC.
• The sanction required under Section 197 of the Cr.PC and the sanction required under the PC Act stand on different footings whereas, sanction under the IPC in terms of the Cr.PC is required to be granted by the State or Central Government as the case may be; under the PC Act it can be granted also by the authorities specified in Section 19 thereof.
• The CBI at no point of time had prayed for sanction under Section 197 of the Cr.PC to prosecute the appellant for the offence under the IPC.

The CBI prayed that since there being no merit in this appeal, the same may be dismissed.

The bank submitted the following before the Supreme Court-

• The consistent stand of the CBI before the CBI Court and the High Court has been that no prior sanction under Section 197 of the Cr.PC is required to prosecute the appellant for offences punishable under the IPC, as there is no legal obligation for seeking such a sanction.

• It is incorrect on the part of the appellant to state that he has been exonerated in the departmental proceedings.
• The appellant, was ultimately, given ‘Administrative Warning’ in respect of the charges against him which were levied for the appellant’s failure to discharge his duties with utmost devotion and diligence and acting in a manner unbecoming of a Bank Official and highly prejudicial to the Bank’s interest – the said charges were neither of Sections 420, 468, 471 or 120-B of the IPC.
• The charges not being identical, the fate of the departmental proceedings cannot weigh at all in respect of criminal proceedings based on trial.  Therefore the appellant cannot rely on the outcome of the departmental proceedings to seek quashing of the criminal case against him.
• The Manager of a Nationalized Bank though a public servant yet not removable from his office save by or with the sanction of the Government and hence cannot claim protection under Section 197 of the Cr.PC.

The Supreme Court considered the submissions of the appellant, CBI and the bank.  The Supreme Court considered the following questions for its consideration-

• Whether the appellant, serving in his capacity as an Assistant General Manager, State Bank of India, Overseas Bank, is removable from his office save by or with the sanction of the Government so as to make Section 197 of the Cr.PC applicable?
• Is it permissible for the Special Court (CBI) to proceed the appellant for the offences punishable under the IPC despite the fact that the sanction under Section 19 of the PC Ac to prosecute the appellant for the offences under the PC Act, is not on record as the same came to be declined?

The Supreme Court analyzed the provisions of Section 197 of Cr.PC and the Law Commission Report.  The Supreme Court held that although a person working in a Nationalized Bank is a public servant, yet the provisions of Section 197 of the Cr.PC would not be attracted at all as Section 197 is attracted only in cases where the public servant is such who is not removable from his service save by or with the sanction of the Government.  The appellant is not holding a post where he could not be removed from service except by or with the sanction of the Government. In this view of the matter, even if it is alleged that the appellant herein is a public servant, still the provisions of Section 197 of the Cr.PC are not attracted at all.

In respect of question No. 2, the Supreme Court analyzed the provisions of Section 19 of PC Act.  The Supreme Court observed that the offences under the IPC and offences under the PC Act are different and distinct. What is important to consider is whether the offences for one reason or the other punishable under the IPC are also required to be approved in relation to the offences punishable under the PC Act?  It is important to draw a distinction between an order of sanction required for prosecuting a person for commission of an offence under the IPC and an order of sanction required for commission of an offence under the PC Act.  The Supreme Court held that although in the present case, the appellant has been discharged from the offences punishable under the PC Act yet for the IPC offences, he can be proceeded further in accordance with law.