Breaking; Prosecution for Corruption (PC Act) against Officials of Private Bank is maintainable as they are deemed Public Servants; SC

Supreme Court Today delivered a landmark Judgment holding that Chairman, Directors and Officers of Global Trust Bank Ltd. (a private bank before its amalgamation with the Oriental Bank of Commerce), can be said to be public servants for the purposes of their prosecution in respect of offences punishable under Prevention of Corruption Act, 1988.

The Two Judge Bench held that by virtue of the provisions of Section 46A of the Banking Regulation Act, 1949 prosecutions launched against the accused officials are maintainable in law.

As per Clause (viii) contained in Section 2(c) of P.C. Act, 1988 a person who holds an office by virtue of which he is authorized or required to perform any public duty, is a public servant. In this Case the Court has examined as to whether the chairman/managing director or executive director of a private bank operating under licence issued by RBI under Banking Regulation Act, 1949, held/holds an office and performed /performs public duty so as to attract the definition of ‘public servant’.

Section 46A was inserted in Banking Regulation Act, 1949 by Act No. 95/56 with effect from 14.01.1957. The expression “every chairman who is appointed on a whole time basis, managing director, director, auditor” was substituted by Act No. 20/94 with effect from 31.01.1994 in place of “every chairman, director, auditor”. As such managing director of a banking company is also deemed to be a public servant. In the present case transactions in question relate to the period subsequent to 31.01.1994.

Justice Prafulla C. Pant in his main Judgment stated as follows;

In view of definition of public servant in Section 46A of Banking Regulation Act, 1949 as amended the Managing Director and Executive Director of a Banking Company operating under licence issued by Reserve Bank Of India, were already public servants, as such they cannot be excluded from definition of ‘public servant’. We are of the view that over the general definition of ‘public servant’ given in Section 21 of IPC, it is the definition of ‘public servant’ given in the P.C. Act, 1988, read with Section 46-A of Banking Regulation Act, which holds the field for the purposes of offences under the said Act. For banking business what cannot be forgotten is Section 46A of Banking Regulation Act, 1949 and merely for the reason that Sections 161 to 165A of IPC have been repealed by the P.C. Act, 1988, relevance of Section 46A of Banking Regulation Act, 1949, is not lost.

Be it noted that when Prevention of Corruption Act, 1988 came into force, Section 46 of Banking Regulation Act, 1949 was already in place, and since the scope of P.C. Act, 1988 was to widen the definition of “public servant”. As such, merely for the reason that in 1994, while clarifying the word “chairman”, legislature did not substitute words “for the purposes of Prevention of Corruption Act, 1988” for the expression “for the purposes of Chapter IX of the Indian Penal Code (45 of 1860)” in Section 46A of Banking Regulation Act, 1949, it cannot be said, that the legislature had intention to make Section 46A inapplicable for the purposes of P.C. Act, 1988, by which Sections 161 to 165A of IPC were omitted, and the offences stood replaced by Sections 7 to 13 of P.C. Act, 1988.

The Court further held that Section 46-A of Banking Regulation Act, 1949, cannot be left meaningless and requires harmonious construction. Thus the Special Judge (CBI) has erred in not taking cognizance of offence punishable under Section 13(2) read with Section 13(1)(d) of P.C. Act, 1988. However, the Bench made it clear that in the present case the accused cannot be said to be public servant within the meaning of Section 21.

In a concurrent but separate opinion Justice Ranjan Gogoi stated as follows;

“The definition of public duty in Section 2(b) of the PC Act, indeed, is wide. Discharge of duties in which the State, the public or the community at large has an interest has been brought within the ambit of the expression ‘public duty’. Performance of such public duty by a person who is holding an office which requires or authorize him to perform such duty is the sine qua non of the definition of the public servant contained in Section 2(c)(viii) of the PC Act. The expressions ‘office’ and ‘public duty’ appearing in the relevant part of the PC Act would therefore require a close understanding”.

According to Justice Gogoi it would be more reasonable to understand the expression “public servant” by reference to the office and the duties performed in connection therewith to be of a public character. He also held that the omission to mention about the PC Act 1988 in 1994 Amendment in 46A of the Banking Regulation Act is inconsequential

“By virtue of Section 46A of the BR Act office bearers/employees of a Banking Company (including a Private Banking Company) were “public servants” for the purposes of Chapter IX of the I.P.C. with the enactment of the PC Act the offences under Section 161 to 165A included in Chapter IX of Code came to be deleted from the said Chapter IX and engrafted under Sections 7 to 12 of the PC Act. With the deletion of the aforesaid provisions from Chapter IX of the I.P.C. and inclusion of the same in the PC Act there ought to have been a corresponding insertion in Section 46A of the BR Act with regard to the deeming provision therein being continued in respect of officials of a Banking Company insofar as the offences under Sections 7 to 12 of the PC Act are concerned. However, the same was not done. The Court need not speculate the reasons therefor, though, perhaps one possible reason could be the wide expanse of the definition of “public servant” as made by Section 2(c) of the PC Act. Be that as it may, in a situation where the legislative intent behind the enactment of the PC Act was, inter alia, to expand the definition of “public servant”, the omission to incorporate the relevant provisions of the PC Act in Section 46A of the BR Act after deletion of Sections 161 to 165A of the I.P.C. from Chapter IX can be construed to be a wholly unintended legislative omission which the Court can fill up by a process of interpretation”, Justice Gogoi held.

Read the Judgment here.