Supreme Court Upholds Discharge of Bank Chairman in Loan Fraud Case: Evidence Insufficient for Trial

The Supreme Court of India dismissed the appeal filed by CBI, challenged a Bombay High Court judgment that discharged Srinivas D. Sridhar, former Chairman and Managing Director of Central Bank of India, from charges related to a loan fraud case. The Central Bureau of Investigation (CBI) contended that the High Court erred in its decision.

The central legal question was whether sufficient evidence existed to proceed with a trial against Sridhar, who was accused of conspiring with others to sanction fraudulent loans to a company, M/s Electrotherm (India) Limited, causing a loss of Rs. 436.74 crores to the bank. The CBI argued that even though Sridhar might not have received personal benefits, his actions constituted criminal misconduct under Section 13(1)(d) of the Prevention of Corruption Act, 1988.

The CBI emphasized the speed at which the loan proposals were sanctioned as a key indicator of Sridhar's involvement in the alleged conspiracy. They pointed out that certain procedural steps, like recommendations from the zonal office, were missing in the approval process for a large Export Packing Credit (EPC) facility.

However, the Supreme Court, after reviewing the evidence, found that Sridhar's role in the sanctioning process was limited and procedural in nature. He signed the Memorandum for the Management Committee after it was approved by senior bank officials, including the Chief General Manager (Credit). His role was confined to presenting the proposal to the Management Committee, which ultimately approved the loan. The Court noted that the Loan Advisory Committee had recommended the proposal and that 14 other public sector banks, in addition to an international private bank, were already lending to the company. This suggested that the proposal had undergone some level of scrutiny and due diligence

The Court acknowledged that the speed of the approval process might raise suspicion, but it held that mere suspicion was insufficient to frame charges against Sridhar, given his position and limited role in the sanctioning process and the Apex Court held "As far as the respondent is concerned, considering his position and the role ascribed to him in the grant of sanction to the loan proposal of the Company, mere suspicion against him is not enough to frame a charge against him."

Therefore, the Supreme Court upheld the High Court's judgment and dismissed the CBI's appeal, stating that the available evidence did not establish Sridhar's complicity in the alleged fraud. It's important to note that the Court explicitly clarified that its observations pertained solely to Sridhar's role and would not impact the ongoing trial against the other accused in the case.

Coram: Justice Abhay S. Oka and Justice Ujjal Bhuyan.
Between: Central Bureau of Investigation Vs Srinivas D. Sridhar
DOJ: 16-10-2024