The Supreme Court of India dismissed an appeal filed by the Central Bureau of Investigation (CBI), upholding the discharge of Srinivas D. Sridhar, the former Chairman and Managing Director of the Central Bank of India, in a fraud case involving the bank’s financial dealings with Electrotherm (India) Limited. The court ruled that no prima facie case of criminal conspiracy or misconduct could be made out against the respondent based on the available evidence.
The judgment, delivered by a bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan in Central Bureau of Investigation v. Srinivas D. Sridhar (Criminal Appeal No. 2891 of 2023), reaffirmed the principle that mere suspicion or procedural haste in processing loan proposals is insufficient to frame charges without concrete evidence of wrongdoing.
Background of the Case
The case revolved around the financial transactions between the Central Bank of India and Electrotherm (India) Limited, a company that had obtained credit facilities from the bank. Between 2010 and 2011, the bank sanctioned a short-term loan of ₹50 crores, a letter of credit for ₹100 crores, and an Export Packing Credit (EPC) facility of ₹330 crores to the company. The EPC facility, in particular, was granted for setting up a steel plant in Tanzania on a turnkey basis.
However, it was alleged that the company misused the funds by diverting them to other accounts and failing to import the required materials or machinery. The CBI charged several bank officials, including Srinivas D. Sridhar, under Sections 420 (cheating), 468 (forgery), 471 (using forged documents), and 120-B (criminal conspiracy) of the IPC, along with Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act (PCA), 1988, for their role in the alleged fraudulent sanction of credit facilities.
Key Legal Issues
1. Criminal Conspiracy and Misconduct: The central issue was whether Sridhar, as the Chairman and Managing Director of the bank, was involved in any conspiracy or criminal misconduct in the sanctioning of the ₹330 crore EPC facility to Electrotherm (India) Limited.
2. Role of Suspicion in Framing Charges: The court had to consider whether suspicion alone was enough to proceed with framing charges, especially when no direct evidence linked the respondent to the alleged fraud.
3. Haste in Processing Loan Proposals: The prosecution highlighted the alleged haste in processing the company’s loan proposal, arguing that this indicated possible misconduct by bank officials, including the respondent.
Supreme Court’s Observations
Justice Abhay S. Oka, writing for the bench, noted that while the CBI’s case relied heavily on the speed with which the loan proposal was processed, there was no direct evidence implicating the respondent in any conspiracy or fraud. The court observed:
“The speed with which the proposal of the company was sanctioned is perhaps the only material that creates suspicion, but suspicion alone is not enough to frame a charge against the respondent.”
The court also emphasized that the loan proposal had passed through multiple levels of internal bank scrutiny, including the Loan Advisory Committee, before being placed before the Management Committee, of which Sridhar was a part. The proposal was prepared by senior bank officials and recommended for approval based on the usual processes.
The bench also pointed out that Sridhar’s involvement was limited to signing the memorandum prepared by the bank’s senior officers and participating in the Management Committee meeting that approved the loan. There was no evidence to suggest that he personally benefitted from the transactions or that he was aware of any irregularities at the time of sanctioning the credit facilities.
Decision and Conclusion
The Supreme Court upheld the decision of the High Court to discharge Srinivas D. Sridhar, stating that the prosecution had failed to present sufficient material to establish his complicity in the fraud. The court clarified that its ruling was limited to Sridhar’s role and did not impact the ongoing trial against other accused persons in the case.
“Mere suspicion, no matter how strong, cannot substitute for proof of conspiracy or misconduct,” the court observed. It further stated that the discharge of Sridhar was warranted, as the available evidence did not justify the continuation of criminal proceedings against him.
The appeal filed by the CBI was accordingly dismissed.
Case Details:
– Case Title: Central Bureau of Investigation v. Srinivas D. Sridhar
– Case Number: Criminal Appeal No. 2891 of 2023
– Bench: Justice Abhay S. Oka and Justice Ujjal Bhuyan
– Legal Representation: The appellant, CBI, was represented by the Additional Solicitor General, while the respondent, Srinivas D. Sridhar, was represented by senior counsel.
