Prevention of Corruption Act applies to Private Banks as well #indianlaws

The Supreme Court held that, clearly, the object of enactment of PC Act was to make the anti-corruption law more effective and widen its coverage. In view of definition of public servant in Section 46A of Banking Regulation Act, 1949 as amended the Managing Director and Executive Director of a Banking Company operating under licence issued by Reserve Bank of India, were already public servants, as such they cannot be excluded from definition of ‘public servant’. It was stated that for banking business what cannot be forgotten is Section 46A of Banking Regulation Act, 1949 and merely for the reason that Sections 161 to 165A of IPC have been repealed by the P.C. Act, 1988, relevance of Section 46A of Banking Regulation Act, 1949, is not lost. 

Supreme Court in the instant petition dealt with the term ‘Public Servant” as defined in Section 2(c) of the Prevention of Corruption Act, 1988 (‘PC Act’) and in particular those contained in Section 2(c)(viii). The above question arose in the backdrop of impugned finding whereby Courts below held that cognizance cannot be taken against the accused persons (the bank officials) on the ground that they are not public servants.

The accused person, serving with Global Trust Bank (GTB), had sought for quashing of charge sheet filed by CBI in connection with FIR relating to offences punishable under Section 120B read with Sections 420, 467, 468, 471 of Indian Penal Code (IPC) and offence punishable under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

GTB was a private sector bank, before its amalgamation with a public sector bank. The common question of law involved in the appeals was to determine as to whether the Chairman, Directors and Officers of Global Trust Bank Ltd. (a private bank before its amalgamation with the Oriental Bank of Commerce), can be said to be public servants for the purposes of their prosecution in respect of offences punishable under Prevention of Corruption Act, 1988 or not?

As per the prosecution, the transactions of alleged fraud, cheating, misappropriation and corruption relate to the period prior to amalgamation with public sector bank.

As per Section 2(c) of PC Act and under Clause (viii) thereof, a person who holds an office by virtue of which he is authorized or required to perform any public duty, is a public servant. The issue in the backdrop of above statutory  position was to examine as to whether the chairman/ managing director or executive director of a private bank operating under licence issued by RBI under Banking Regulation Act, 1949, held/ holds an office and performed /performs public duty so as to attract the definition of ‘public servant’.

Court referred to Section 46A of the Banking Regulation Act, which was inserted by Act No. 95/56 with effect from 14.01.1957. The expression “every chairman who is appointed on a whole time basis, managing director, director, auditor” was substituted by Act No. 20/94 with effect from 31.01.1994 in place of “every chairman, director, auditor”. As such managing director of a banking company is also deemed to be a public servant. In the present case transactions in question relate to the period subsequent to 31.01.1994.

It was further observed that the legislature has created a fiction that every Member shall be deemed to be a public servant within the meaning of Section 21 of the Penal Code. The PC Act envisages widening of the scope of the definition of the expression “public servant”. It was brought in force to purify public administration. The legislature has used a comprehensive definition of “public servant” to achieve the purpose of punishing and curbing corruption among public servants. Hence, it would be inappropriate to limit the contents of the definition clause by a construction which would be against the spirit of the statute.

Based on above principle, it was held that it cannot be doubted that Accused here is a public servant within the meaning of Section 2(c) of the Act. Clause (viii) of Section 2(c) of the Act makes any person, who holds an office by virtue of which he is authorised or required to perform any public duty, to be a public servant.

It was held with the observation that, clearly, the object of enactment of PC Act was to make the anti-corruption law more effective and widen its coverage. In view of definition of public servant in Section 46A of Banking Regulation Act, 1949 as amended the Managing Director and Executive Director of a Banking Company operating under licence issued by Reserve Bank of India, were already public servants, as such they cannot be excluded from definition of ‘public servant’.

It was further held that over the general definition of ‘public servant’ given in Section 21 of IPC, it is the definition of ‘public servant’ given in the PC Act read with Section 46-A of Banking Regulation Act, which holds the field for the purposes of offences under the said Act. When Prevention of Corruption Act, 1988 came into force, Section 46 of Banking Regulation Act, 1949 was already in place, and the scope of PC Act was to widen the definition of “public servant”.

Section 46-A of Banking Regulation Act, 1949, cannot be left meaningless and requires harmonious construction. It was categorically held that for banking business what cannot be forgotten is Section 46A of Banking Regulation Act, 1949 and merely for the reason that Sections 161 to 165A of IPC have been repealed by the P.C. Act, 1988, relevance of Section 46A of Banking Regulation Act, 1949, is not lost.

[CBI, Bank Securities & Fraud Cell vs. Ramesh Gelli and Ors.]

(SC, 23.02.2016) – Criminal Appeal Nos. 1077-1081 of 2013