Was the CBI right in raiding NDTV?

The NDTV says that the Central Bureau of Investigation (CBI) has no jurisdiction to investigate any complaint of wrongful loss to ICICI, even if there had indeed been a loss caused to the bank stemming from transactions between itself and ICICI. But the CBI says the Supreme Court’s ruling in the case of CBI versus Ramesh Gelli (Criminal Appeals 1077-1081 of 2013- Supreme Court) confers such a jurisdiction on it.

Who is right? As it happens, the question is moot. A lot depends on how the facts and circumstances of the totality of transactions between NDTV and ICICI are seen, as similar to or can be distinguished from, the issues that were agitated before the Supreme Court, in the Gelli case.

The case relates to certain loan transactions of Global Trust Bank (GTB), a private sector bank licensed by the RBI in 1994 to undertake banking business. Subsequently, having regard to the fragile nature of banking operations of GTB and as a measure of protection of interests of depositors in GTB, the RBI ordered in 2004 that the bank be merged with Oriental Bank of Commerce (OBC), a public sector bank.

Post such a compulsory takeover, OBC undertook a complete investigation of the affairs of the erstwhile GTB which revealed that certain loans were sanctioned to borrowers in the diamond trade that did not adhere to prescribed norms of scrutiny of loan applications and which later turned out to be bad causing thereby, a loss to the bank. It was contended by the CBI that the officials of the bank who sanctioned these loans were pressured by the GTB’s then Chairman and Managing Director, Ramesh Gelli and Executive Director, Subasri Sridhar. It was also contended by them that there was a quid pro quo in the form of the delinquent borrowers contributing funds to make up the short fall in promoters’ contribution for setting up the GTB in return for sanction of loans initially and later forbearing to resort to any coercive measures of recovery.

The question before the Trial Court was whether on the dates the loan transactions had taken place, the accused (Ramesh Gelli and Subasri Sridhar) could be deemed as ‘public servants’ within the meaning of the Prevention of Corruption Act (PC Act).

For even if there was a clear quid pro quo (support for promoters’ equity contribution to the bank’s capital and sanction of loans) between the two sets of players, charges of ‘criminal misconduct’ under the Prevention of Corruption Act would not be attracted if Gelli and Sridhar could not be regarded as ‘public servants’ under that law.

The Supreme Court took note of the fact that the Banking Regulations Act (BR Act) expanded the scope of officials of banks who are liable for criminal prosecution for purposes of offences under the Indian Penal Code dealing with corruption. From a position where only a chairman or auditor could be prosecuted for acts of corruption the scope of law was expanded to cover practically every employee of a banking institution within the ambit of a corruption investigation.

The Court also dismissed a technical lacuna in the BR Act which only spoke of acts of corruption under Indian Penal Code which have since been repealed but did not refer to acts of corruption mentioned in the PC Act. The Court quite rightly ruled that the provisions under the Indian Penal Code that have been repealed have been substituted by identical provisions under the Prevention of Corruption Act and as such the absence of any explicit reference to the latter Act in the law on banking regulation is no bar to the launch of any criminal prosecution for acts of corruption by a bank official.

That said, it is far from certain that the Supreme Court verdict in the Gelli case settles the law on the prosecution of bank officials for cases of corruption in the ordinary course of banking business. This is because the particular judgement confines itself to ruling on the narrow question of law as to whether a managing director can be prosecuted for an act of corruption within the narrow parameters of the Prevention of Corruption Act.

The verdict while expounding on the expanded notion of a ‘public servant’ under the PC Act omits to discuss at any length the notion of ‘public duty’ in the context of the banking industry and more specifically that of specific acts of banking. For a charge of corruption under the PC Act to stick, it is necessary to establish that not only was the officer of a bank a ‘public servant’ but also that the specific act which is the subject matter of investigation is in the nature of a ‘public duty’.

Indeed, Justice Ranjan Gogoi, writing a separate but concurring judgement, specifically mentions this aspect. As he puts it, “the mere performance of public duties by the holder of any office cannot bring the incumbent within the meaning of the expression ‘Public servant’ as contained in Section 2(c) of the PC Act. The broad definition of ‘public duty’ contained in Section 2(b) would be capable of encompassing any duty attached to any office in as much as in the contemporary scenario there is hardly any office whose duties cannot, in the last resort, be traced to having a bearing on public interest or the interest of the community at large. Such a wide understanding of the definition of public servant may have the effect of obliterating all distinctions between the holder of a private office or a public office which, in my considered view, ought to be maintained”.

Clearly, this is an aspect on which there is a case for the Supreme Court to deliver its considered opinion and until then the legal position will only be in the realm of speculation. Above all, the Gelli case doesn’t also address another aspect that is of particular relevance.

There is little in it to help distinguish between acts of a bank official that amounts to a grant of a largesse (such as an egregious grant of a loan to the most undeserving of a borrower) to a customer for pecuniary considerations and acts of commercial give and take in the context of building an enduring commercial relationship in the banking business. Hopefully the latest CBI initiative in the NDTV-ICICI Bank case would help bring some more clarity on the subject.