Officers of Pvt. Banking Co, are also 'public servant' under Prevention of Corruption Act 1988- Interesting update
The recent judgment of the Supreme Court is encouraging to eradicate the anti-corruption activities in India by extending the definition of 'public officers' to pvt. banking cos. even if PCA is not specifically included under the banking laws of India. The court has applied an exemption to casus-omissus rule and broaden the ambit of PCA,This sets a precedent to all other special acts that define its officers as 'public servants' - Interesting read
Supreme Court expands definition of 'public servant' under Prevention of Corruption Act 1988
Newsletters
August 08 2016 | Contributed by Shardul Amarchand Mangaldas & Co
Introduction
In the recent Supreme Court case of Central Bureau of Investigation v Ramesh Gelli(1) the managing director and chair of a private banking company were held to be public servants for the purposes of prosecution under the Prevention of Corruption Act 1988. In light of this judgment, an appeal filed by the Central Bureau of Investigation (CBI) against a Bombay High Court order was allowed and the cases launched against the two accused employees of the private banking company were held to be maintainable under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.
Facts
In this case, the CBI filed a charge sheet under Section 13(2) read with Section 13 (1)(d) of the Prevention of Corruption Act against the chair and executive director of the Global Trust Bank (GTB). GTB was incorporated as a banking company under the Companies Act 1956 and was issued a licence under the Banking Regulation Act 1949 by the Reserve Bank of India (RBI).
The prosecution contended that in order to raise contributions to GTB's capital, the two accused individuals conspired and obtained loans from various individuals and companies, including M/s Beautiful Group of Companies and M/s Trinity Technomics Services Pvt Ltd. Having done so in abuse of their position in GTB, they then granted higher credit limits to M/s Beautiful Diamonds Ltd, one of the companies owed by the M/s Beautiful Group.
On August 14 2004, after the alleged events had occurred, GTB merged with public sector bank Oriental Bank of Commerce (OBC).
Following this, based on a complaint made by OBC's chief vigilance officer, a first information report was registered by the CBI in respect of offences punishable under Sections 420, 467, 468 and 471 of the Penal Code 1860 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act 1988.
Another complaint was lodged by OBC's chief vigilance officer against two GTB employees and two private persons, wherein it was alleged that loans were granted and disbursed without following any banking norms. Pursuant to this complaint, a second information report was registered by the CBI for offences punishable under Section 120-B read with Sections 409 and 420 of the Penal Code against the two employees and two private persons, Rajesh Mehta and Prashant Mehta.
After investigations into the matter were concluded, charge sheets were filed before the special judge in Mumbai in respect of the second information report for offences punishable under Section 120-B read with Sections 409 and 420 of the Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act. However, the special judge declined to consider the offences punishable under the Prevention of Corruption Act on the grounds that Gelli and Subasri were employees of private banks on the dates that the alleged transactions took place and thus not public servants for the purposes of the Prevention of Corruption Act.
The Bombay High Court upheld the special judge's order. The CBI appealed to the Supreme Court.
Supreme Court decision
The question of law that came up for consideration before the Supreme Court was whether the chair, directors and officers of GTB were public servants for the purposes of their prosecution with regard to offences punishable under the Prevention of Corruption Act.
The CBI contended that the two accused individuals were 'public servants' under the definition contained in Section 2(c) of the Prevention of Corruption Act, as well as by virtue of Section 46A of the Banking Act, which provides that full-time chairs, managing directors and directors of a banking company are considered public servants. Notably, Section 46A was inserted into the Banking Regulation Act 1949 by Act 95/56, with effect from January 14 1957, and referred to Sections 161 to 165A of Chapter IX of the Penal Code before the Prevention of Corruption Act repealed these provisions.
The accused's council alleged that since Sections 161 through 165A of Chapter IX of the Penal Code were repealed by Section 31 of the Prevention of Corruption Act, Section 46A of Banking Act did not apply.
Rejecting this argument, the Supreme Court held that for the purpose of construing the term 'public servant' under the Prevention of Corruption Act, the same must be purposively and harmoniously read with Section 46A of Banking Act. The court emphasised that the legislature's failure to substitute the words "for the purpose of Prevention of Corruption Act, 1988" with "Chapter IX of Indian Penal Code" while amending Section 46 of the Banking Act was unintended and cannot be construed in order to make Section 46 inapplicable to the Prevention of Corruption Act.
The Supreme Court observed that the Statement of Object and Reasons for the Prevention of Corruption Act demonstrates that the legislature intended to strengthen the anti-corruption law by widening its coverage and broadening the definition of 'public servant' under the act. The court in this respect referred to the observations made in State of Maharashtra v Modani,(2) Trivedi v State of Rajasthan(3) and State of AP v Reddy(4) with regard to the interpretation of the term 'public servant' under the Prevention of Corruption Act.
In light of the above observations, the Supreme Court held that the lower courts had erred in law in holding that the two accused, who were the chair/managing director and the executive director of GTB, respectively, were not public servants for the purposes of the Prevention of Corruption Act.
A separate concurring judgment was rendered by Justice Ranjan Gogoi, wherein it was noted that where the legislative intent behind the enactment of the Prevention of Corruption Act was, among other things, to expand the definition of 'public servant'. The failure to incorporate the relevant provisions of the Prevention of Corruption Act into Section 46A of the Bank Regulation Act may be construed as a wholly unintended legislative omission, which the courts can correct through their interpretation. It was observed that although the rule of casus omissus – that is, "what has not been provided for in the statute cannot be supplied by the Courts" – is a strict rule of interpretation, there are certain well-known exceptions thereto.
In these circumstances, the cases launched against the two accused were found to be maintainable and it was held that the term 'public servant' under Section 2(c) of the Prevention of Corruption Act would also subsume managing directors, executive directors and other employees.
Comment
The principles laid down by this judgment are indicative of the judicial mind to give effect to the spirit and intent of the Prevention of Corruption Act and not to let the legislature's inadvertent lapse prevent a broad interpretation to the term 'public servant' under the Prevention of Corruption Act.
For further information on this topic please contact Jasleen K Oberoi, Surbhi Mehta or Rishabh Sureka at Shardul Amarchand Mangaldas & Co by telephone (+91 11 4159 0700) or email (jasleen.oberoi@amsshardul.com, surbhi.mehta@AMSShardul.com or rishabh.sureka@AMSShardul.com). The Shardul Amarchand Mangaldas & Co website can be accessed at www.amsshardul.com.
In the recent Supreme Court case of Central Bureau of Investigation v Ramesh Gelli(1) the managing director and chair of a private banking company were held to be public servants for the purposes of prosecution under the Prevention of Corruption Act 1988. In light of this judgment, an appeal filed by the Central Bureau of Investigation (CBI) against a Bombay High Court order was allowed and the cases launched against the two accused employees of the private banking company were held to be maintainable under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.
Facts
In this case, the CBI filed a charge sheet under Section 13(2) read with Section 13 (1)(d) of the Prevention of Corruption Act against the chair and executive director of the Global Trust Bank (GTB). GTB was incorporated as a banking company under the Companies Act 1956 and was issued a licence under the Banking Regulation Act 1949 by the Reserve Bank of India (RBI).
The prosecution contended that in order to raise contributions to GTB's capital, the two accused individuals conspired and obtained loans from various individuals and companies, including M/s Beautiful Group of Companies and M/s Trinity Technomics Services Pvt Ltd. Having done so in abuse of their position in GTB, they then granted higher credit limits to M/s Beautiful Diamonds Ltd, one of the companies owed by the M/s Beautiful Group.
On August 14 2004, after the alleged events had occurred, GTB merged with public sector bank Oriental Bank of Commerce (OBC).Following this, based on a complaint made by OBC's chief vigilance officer, a first information report was registered by the CBI in respect of offences punishable under Sections 420, 467, 468 and 471 of the Penal Code 1860 and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act 1988.
Another complaint was lodged by OBC's chief vigilance officer against two GTB employees and two private persons, wherein it was alleged that loans were granted and disbursed without following any banking norms. Pursuant to this complaint, a second information report was registered by the CBI for offences punishable under Section 120-B read with Sections 409 and 420 of the Penal Code against the two employees and two private persons, Rajesh Mehta and Prashant Mehta.
After investigations into the matter were concluded, charge sheets were filed before the special judge in Mumbai in respect of the second information report for offences punishable under Section 120-B read with Sections 409 and 420 of the Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act. However, the special judge declined to consider the offences punishable under the Prevention of Corruption Act on the grounds that Gelli and Subasri were employees of private banks on the dates that the alleged transactions took place and thus not public servants for the purposes of the Prevention of Corruption Act.
The Bombay High Court upheld the special judge's order. The CBI appealed to the Supreme Court.
Supreme Court decision
The question of law that came up for consideration before the Supreme Court was whether the chair, directors and officers of GTB were public servants for the purposes of their prosecution with regard to offences punishable under the Prevention of Corruption Act.
The CBI contended that the two accused individuals were 'public servants' under the definition contained in Section 2(c) of the Prevention of Corruption Act, as well as by virtue of Section 46A of the Banking Act, which provides that full-time chairs, managing directors and directors of a banking company are considered public servants. Notably, Section 46A was inserted into the Banking Regulation Act 1949 by Act 95/56, with effect from January 14 1957, and referred to Sections 161 to 165A of Chapter IX of the Penal Code before the Prevention of Corruption Act repealed these provisions.
The accused's council alleged that since Sections 161 through 165A of Chapter IX of the Penal Code were repealed by Section 31 of the Prevention of Corruption Act, Section 46A of Banking Act did not apply.
Rejecting this argument, the Supreme Court held that for the purpose of construing the term 'public servant' under the Prevention of Corruption Act, the same must be purposively and harmoniously read with Section 46A of Banking Act. The court emphasised that the legislature's failure to substitute the words "for the purpose of Prevention of Corruption Act, 1988" with "Chapter IX of Indian Penal Code" while amending Section 46 of the Banking Act was unintended and cannot be construed in order to make Section 46 inapplicable to the Prevention of Corruption Act.
The Supreme Court observed that the Statement of Object and Reasons for the Prevention of Corruption Act demonstrates that the legislature intended to strengthen the anti-corruption law by widening its coverage and broadening the definition of 'public servant' under the act. The court in this respect referred to the observations made in State of Maharashtra v Modani,(2) Trivedi v State of Rajasthan(3) and State of AP v Reddy(4) with regard to the interpretation of the term 'public servant' under the Prevention of Corruption Act.
In light of the above observations, the Supreme Court held that the lower courts had erred in law in holding that the two accused, who were the chair/managing director and the executive director of GTB, respectively, were not public servants for the purposes of the Prevention of Corruption Act.
A separate concurring judgment was rendered by Justice Ranjan Gogoi, wherein it was noted that where the legislative intent behind the enactment of the Prevention of Corruption Act was, among other things, to expand the definition of 'public servant'. The failure to incorporate the relevant provisions of the Prevention of Corruption Act into Section 46A of the Bank Regulation Act may be construed as a wholly unintended legislative omission, which the courts can correct through their interpretation. It was observed that although the rule of casus omissus – that is, "what has not been provided for in the statute cannot be supplied by the Courts" – is a strict rule of interpretation, there are certain well-known exceptions thereto.
In these circumstances, the cases launched against the two accused were found to be maintainable and it was held that the term 'public servant' under Section 2(c) of the Prevention of Corruption Act would also subsume managing directors, executive directors and other employees.
Comment
The principles laid down by this judgment are indicative of the judicial mind to give effect to the spirit and intent of the Prevention of Corruption Act and not to let the legislature's inadvertent lapse prevent a broad interpretation to the term 'public servant' under the Prevention of Corruption Act.
For further information on this topic please contact Jasleen K Oberoi, Surbhi Mehta or Rishabh Sureka at Shardul Amarchand Mangaldas & Co by telephone (+91 11 4159 0700) or email (jasleen.oberoi@amsshardul.com, surbhi.mehta@AMSShardul.com or rishabh.sureka@AMSShardul.com). The Shardul Amarchand Mangaldas & Co website can be accessed at www.amsshardul.com.
Endnotes
Reference: http://www.internationallawoffice.com/Newsletters/White-Collar-Crime/India/Shardul-Amarchand-Mangaldas-Co/Supreme-Court-expands-definition-of-public-servant-under-Prevention-of-Corruption-Act-1988?utm_source=ILO+Newsletter&utm_medium=email&utm_content=Newsletter+2016-09-12&utm_campaign=White+Collar+Crime+Newsletter
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