The Supreme Court of India has set aside the conviction and sentence of a former Indian Bank branch manager prosecuted under the Indian Penal Code and the Prevention of Corruption Act, holding that the criminal case built by the Central Bureau of Investigation had no evidentiary basis. A bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran granted a clean acquittal to the appellant, V. Balakrishnan, after observing that the bank loans in question were duly authorized by higher regional authorities, the debts had been fully satisfied through property auctions with substantial surplus, and the allegations of criminal conspiracy and illegal sanction were entirely unsubstantiated.
Background of the Case
The case dates back to 1991, when the appellant, V. Balakrishnan (Accused No. 1 / A1), was serving as the Branch Manager at the Anna Nagar Branch of Indian Bank. The prosecution alleged that A1 entered into a criminal conspiracy with P. Kumaradevan (A2), a retired officer of the Indian Overseas Bank, to fraudulently sanction loan facilities to domestic workers employed by A2, identified as A4 (a washerman) and A5.
According to the prosecution, A1 recommended an overdraft/loan limit of Rs. 13,50,000 for A4 by portraying him as a real estate businessman and prematurely disbursed Rs. 3,30,000 to him before formal sanction. In respect of A5, loans amounting to Rs. 10,00,000 were sanctioned in two stages for the purchase of 21.39 acres of land based on an allegedly inflated valuation certificate issued by A3, a bank-approved property appraiser. The investigating agency asserted that the sanctioned funds were siphoned off and directly pocketed by A2, who signed the reverse of the disbursement cheques.
Charges were framed under Section 420 read with Section 120B of the Indian Penal Code, 1860, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. During the pendency of proceedings, A2 and A4 died before charges were framed. The trial against A3 was split up due to illness, and he subsequently passed away. A1 and A5 faced trial, which resulted in the acquittal of A5, leaving A1 as the sole convicted accused. The trial court’s conviction was upheld by the High Court, prompting A1 to appeal before the Supreme Court.
Arguments Before the Court
Senior Counsel S. Nagamuthu, appearing for the appellant, argued that the allegations against A1 were baseless, pointing out that the loans had been sanctioned not unilaterally by A1, but by the competent regional authority of the bank. Furthermore, the defense emphasized that the bank had suffered no wrongful loss, as all dues were entirely cleared through the recovery and auction of mortgaged assets, yielding significant surplus proceeds.
Additional Solicitor General Davinder Pal Singh, representing the respondent State (CBI), contended that A1 had colluded with A2 to sanction loans in the names of domestic workers on the strength of overvalued property certificates and manipulated account openings, with the disbursement cheques being encashed by A2.
The Court’s Analysis
Upon evaluating the depositions of 13 prosecution witnesses (PW1 to PW13) and the documentary record, the Supreme Court identified serious evidentiary gaps in the prosecution’s narrative.
The bench noted the testimony of PW1, the retired General Manager who accorded prosecution sanction, and PW2, a Senior Manager at the Regional Office, both of whom admitted that the credit facilities in favour of A4 and A5 were formally sanctioned by the Assistant General Manager of the Regional Office of Indian Bank (Madras North), and not by A1 on his own accord.
Regarding the allegation that A2 received the disbursed loan amounts, the court observed that the prosecution failed to produce any contemporaneous signature specimens or bank records from A2’s tenure at Indian Overseas Bank to substantiate that the endorsements on the cheques belonged to him. Crucially, prosecution witnesses PW5 and PW6—former colleagues of A2—were never confronted with the cheques to identify his handwriting.
The court also scrutinized the claim of inflated valuations. Pointing out that only a single valuation certificate (Ext. P22) had been brought on record without any contemporaneous sale deeds or government guideline values from 1991–1992, the bench observed that the lower courts had impermissibly presumed that properties were overvalued merely because the auction took place nearly two decades later in 2010.
Most critically, official records established that the recovery proceedings had fetched sums far in excess of the outstanding liabilities:
- In A5’s account, against arrears of Rs. 16,42,397, the bank realized Rs. 1,17,50,000 through auction, alongside another property sale fetching Rs. 34,50,000.
- In A4’s account, against arrears of Rs. 5,35,550, the auction yielded Rs. 2,42,00,000.
Delivering a scathing critique of the investigation and prosecution, the bench observed:
“We are clear in our minds that the prosecution case set up is fabricated and has no legs to stand. That A1 had sanctioned loans to A4 and A5, has been proved. It is also coming out from the testimonies of the official witnesses, PW1 and PW2 that the loans were sanctioned by the Regional Office itself. Properties mortgaged were proceeded against and sold in auction, the proceeds of which satisfied the loan availed and left much more with the bank.”
The court further held:
“That, A4 & A5 were domestic helps of A2, that the loans sanctioned were in fact appropriated by A2, that the mortgaged properties were overvalued, that A1 sanctioned the loans illegally are all just figments of imagination. The CBI has failed miserably in not only proving its case but also in framing the case.”
Decision and Directives
Finding no legal or factual basis to sustain the findings of guilt, the Supreme Court set aside the judgments of the trial court and the High Court. The bench directed the immediate release of the appellant if in custody, or the discharge of bail bonds if already released, making it clear that A1 stood cleanly acquitted of all charges.
Expressing serious concern over the Indian Bank retaining the massive surplus auction proceeds rather than disbursing them to the legal heirs of the borrowers, the court impleaded the Branch Manager of the Indian Bank, Anna Nagar Branch. The bench called for a comprehensive report regarding the loan accounts, satisfaction of dues, and utilization of the excess funds realized from the auction, and directed the production of the original title deeds.
While the criminal appeal stands allowed, the matter has been posted to October 5, 2026, solely to verify compliance regarding the status and disbursal of the excess auction proceeds.
Case Title: V. Balakrishnan v. State Rep by the Deputy Superintendent of Police
Case No.: Criminal Appeal No. 2460 of 2026
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran
Date: September 01, 2026
