The Karnataka High Court has dismissed a plea by Union Bank of India seeking the transfer of an investigation into the alleged financial irregularities at the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd to the Central Bureau of Investigation (CBI). The decision was delivered on Wednesday by Justice M Nagaprasanna, who stated that Section 35A of the Banking Regulation Act does not provide sufficient grounds for such a transfer, citing concerns about potential overreach by banking institutions.
The legal contention centered around whether the CBI should take over the probe from state police, with the Union Bank of India arguing that the complexity and significance of the case warranted national-level investigation to ensure the integrity of the banking system. Attorney General R Venkataramani, representing the bank, pushed for a broader interpretation of RBI’s directions under Section 35A, advocating for CBI involvement in cases of potential bank frauds.
However, the court upheld that the state police are fully competent to handle the investigation, as emphasized by senior advocate B V Acharya, representing the Karnataka government. Acharya argued that the statutory authority of state police should not be undermined and noted that disputes between central and state governments are constitutionally earmarked for the Supreme Court under Article 131.
Senior Advocate Professor Ravivarma Kumar, representing the state-run corporation, concurred with the state’s argument, maintaining that the CBI’s jurisdiction is confined to specifically notified crimes and does not extend to the alleged misdeeds at the corporation, which fall within the state’s purview.
The controversy stems from a significant financial scam involving the illegal transfer of funds within the corporation, which came to public attention following the suicide of Chandrasekharan P, the corporation’s accounts superintendent, on May 26. His death note triggered investigations that uncovered substantial misappropriations, leading to the resignation of Congress MLA B Nagendra as the Scheduled Tribes Welfare Minister in June.
Further complicating the matter, the Enforcement Directorate (ED) arrested Nagendra and five others under the Prevention of Money Laundering Act (PMLA). Investigations by the ED revealed that funds from the corporation were illicitly diverted to support a Lok Sabha candidate and for Nagendra’s personal expenses.
