Special Court under the Prevention of Corruption Act 1988 can proceed against an accused for offences under the Indian Penal Code 1860 even if sanction for prosecution has not been granted in respect of PC Act offences as per Section 19 of the said Act.

Supreme Court || Bonumlex

(A. SREENIVASA REDDY Versus RAKESH SHARMA & ANR, CRIMINAL APPEAL NO. 2339 OF 2023, decided on 08.08.2023)

The Hon’ble Supreme Court held that a Special Court under the Prevention of Corruption Act 1988 can proceed against an accused for offences under the Indian Penal Code 1860 even if sanction for prosecution has not been granted in respect of PC Act offences as per Section 19 of the said Act.

In the case in hand, an Appeal was preferred by the Appellant herein against the judgment passed by the Hon’ble Telangana High Court dated 20.06.2022 whereby it rejected the Petition filed by the Appellant herein and thereby declined to quash the criminal proceedings instituted against the Appellant for the offence punishable under Sections 120-B r/w 420, 468 and 471 of the Indian Penal Code, 1860.

The Appellant herein was serving as an Assistant General Manager, in the State Bank of India, Overseas Bank (Bank), Hyderabad and was alleged to have conspired with other co-accused to cheat the Bank by sanctioning a corporate loan of Rs. 22.50 crore in favour of pharmaceutical company.  The said Company had applied for loan for the purpose of purchase of new equipments/implementation of the expansion programme. The company had also applied with the Bank for loan credit limit of Rs. 5 crore for the purpose of purchase of raw material from the domestic market and cash credit limit of Rs. 20 crore for using as working capital. The case of the prosecution was that the facilities sanctioned by the Bank were not utilised by the company for the purposes for which it was sanctioned and the company diverted the funds for its personal benefits and to clear its old debts.

The case against the Appellant herein was that he was instrumental in approving the release of corporate loan without compliance of all the principle/disbursement conditions. He was also alleged to have approved the release of cash credit limit of Rs. 10 crore on the recommendation of Regional Manager, despite having knowledge of non-instalment of machinery proposed to be purchased out of the corporate loan amounts. It was also alleged that the Appellant herein hastily approved the release of Rs. 10 crore out of the sanctioned cash credit limit of Rs. 20 crore with the fraudulent intention to cause wrongful gain to the accused persons. The Central Bureau Investigation registered an F.I.R dated 30.10.2013 against the Appellant herein and other accused persons for the offences punishable under Sections 120-B r/w 420, 468 and 471 respectively of the IPC and Section 13(2) r/w Section 13(1) of the Prevention of Corruption Act, 1988.

By an order dated 13.02.2015, the Chief General Manager (MCG-I), SBI declined to accord sanction under Section 19 of the PC Act, 1988 to prosecute the Appellant herein for the offences punishable under the PC Act, 1988. The very same authority referred to above, who had earlier declined to accord sanction, later reviewed its earlier order dated 13.02.2015 referred to above and by an order dated 11.04.2015 accorded sanction to prosecute the Appellant herein for the offences punishable under PC Act, 1988. The Appellant herein questioned the legality and validity of the order of grant of sanction before the Hon’ble High Court of Telangana by filing the Writ Petition No. 33297 of 2016.  The Hon’ble High Court by order dated 30.10.2018 allowed the said writ petition by holding that the sanctioning authority once having declined to accord sanction could not have taken its earlier order in review and granted fresh sanction to prosecute the appellant and allowed the writ petition and quashed the order of grant of sanction. The CBI being aggrieved with the above referred order passed by the Hon’ble High Court preferred an Appeal and questioned the legality and validity of the judgment and order passed by the Hon’ble High Court. The Appeal filed by the CBI failed vide order dated 15.07.2019 and thereby the order dated 30.10.2018 came to be affirmed. The CBI accepted the order passed by the Hon’ble High Court and thought fit not to carry it further. Pursuant to the orders dated 30.10.2018 and 15.07.2019 respectively, the Appellant preferred a discharge application before the Special Court under Section 239 of the Code of Criminal Procedure. The Special Court at Hyderabad by its order dated 30.08.2019 discharged the appellant herein from the prosecution under the PC Act, 1988 for want of sanction. The Special Court, however, declined to discharge the Appellant for the offences under the IPC. The Special Court relied on the decision of the Hon’ble Supreme Court in the case of Parkash Singh Badal and Another v. State of Punjab and Others reported in (2007) 1 SCC 1.

Feeling aggrieved with the aforesaid, the Appellant herein moved  to the Hon’ble High Court by filing the Criminal Petition with a prayer that he should be discharged from the entire prosecution or to put in other words, he should also be discharged for the offences under the IPC as there is no sanction accorded by sanctioning authority under Section 197 of the CrPC. The Hon’ble High Court adjudicated the Criminal Petition filed by the Appellant herein and by its impugned order dated 20.06.2022 rejected the same.

Before the Hon’ble Supreme Court, the learned counsel appearing for the Appellant vehemently submitted that the sanction under Section 197 of the CrPC is mandatory to prosecute the appellant for the offences under Sections 120-B, 420, 468 and 471 respectively of the IPC. He would submit that as sanction to prosecute the Appellant under the provisions of the PC Act, 1988 came to be declined, the appellant cannot now be prosecuted for the offences under IPC without valid sanction under Section 197 of the CrPC. While the Additional Solicitor General (ASG) appearing for the CBI submitted that although the sanctioning authority declined to accord sanction under Section 19 of the PC Act, 1988 to prosecute the Appellant for the offences punishable under the provisions of the PC Act, 1988 yet, that by itself is not sufficient to discharge the Appellant even from the offences punishable under the IPC.  He further  submitted that the Appellant was also subjected to a departmental inquiry. The departmental inquiry was by and large on the very same charges on which the Appellant is now sought to be prosecuted in the Court of the Special Judge at Hyderabad. He pointed out that the Appellant came to be exonerated of all the charges in the departmental inquiry as evident from the report of the inquiry officer dated 09.06.2014.

The learned counsel appearing for the Bank vehemently submitted that the application of the Appellant, seeking discharge from the offences under the PC Act, 1988 has already been allowed, however, his application, seeking discharge from the offences under the IPC has been dismissed by order dated 26.07.2022 of the CBI Court and the said order is not under challenge before this Court.

Having heard the learned counsel appearing for the parties and having gone through the materials placed on record, the Hon’ble Supreme Court held that:

“There is a material difference between the statutory requirements of Section 19 of the PC Act, 1988 on one hand, and Section 197 of the CrPC, on the other. In the prosecution for the offences exclusively under the PC Act, 1988, sanction is mandatory qua the public servant. In cases under the general penal law against the public servant, the necessity (or otherwise) of sanction under Section 197 of the CrPC depends on the factual aspects. The test in the latter case is of the “nexus” between the act of commission or omission and the official 27 duty of the public servant. To commit an offence punishable under law can never be a part of the official duty of a public servant. It is too simplistic an approach to adopt and to reject the necessity of sanction under Section 197 of the CrPC on such reasoning. The “safe and sure test”, is to ascertain if the omission or neglect to commit the act complained of would have made the public servant answerable for the charge of dereliction of his official duty. He may have acted “in excess of his duty”, but if there is a “reasonable connection” between the impugned act and the performance of the official duty, the protective umbrella of Section 197 of the CrPC cannot be denied, so long as the discharge of official duty is not used as a cloak for illicit acts.”

Read the full Judgment here