It is a popular proverb that when the going gets tough, the tough gets going and even the inverse is true; that when the tough gets going, the going gets tough. Exactly, this happened on 23rd February 2016, when the highest court of the Indian land, the Supreme Court delivered a judgement thereby taking punitive anti-bribery teeth right into the private domain of private bankers.
The script of fate started to get written when Global Trust Bank (GTB), a banking company incorporated under Companies Act, 1956 received license under Banking Regulation Act, 1949 (BR Act) by the Indian regulatory bank, Reserve Bank of India (RBI). The then gentlemen, Ramesh Gelli was Chairman and Managing Director, and Sridhar Subasri was Executive Director of GTB besides being its promoters.
The duo (Ramesh Gelli and Sridhar Subasri), abusing their official positions, sanctioned higher credit limits to one M/s. Beautiful Diamonds Ltd. against prescribed regulations. Ramesh Gelli, Sridhar Subasri and other accused, who were Directors of Beautiful Group of Companies, are said to have caused total wrongful loss. The scam came to the light in 2005, during GTB’s merger with Oriental Bank of Commerce (OBC), a public sector bank.
India’s premium investigating agency, Central Bureau of Investigation initiated the process of prosecution against the accused. The trial court and subsequently following the same line, the Bombay High Court held that cognizance cannot be taken against the said duo accused under the Prevention of Corruption Act, 1988 (PC Act) on the ground that they are not public servants.
The common question of law, which the Supreme Court resolved to examine was –
Whether the 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 or not?
The relevant point here being that the transactions of alleged crime of corruption related to the period prior to amalgamation with public sector bank (OBC). Hence, GTB was a private bank when the cause of action arose. Accordingly, its office bearers ought to be private persons moreso they weren’t performing a public duty. They weren’t holding any public office. The accused also argued that the relationship between the creditor and debtor is commercial in nature with no element of public duty.
The Supreme Court while analysing the proposition in hand emphasised on three major findings –
(1) The relevant extract of the object for which the Prevention of Corruption Act, 1988 was enacted by the Parliament – “The bill is intended to make the existing anti-corruption laws more effective by widening their coverage and by strengthening the provisions.”
(2) Definition of a `public servant’ under Section 2(c) of Prevention of Corruption Act, 1988, which states that a person who holds an office by virtue of which he is authorized or required to perform any public duty, is a public servant.
(3) Most importantly, Section 46A of Banking Regulation Act, 1949, which states that
Every chairman who is appointed on a whole-time basis, managing director, director, auditor, liquidator, manager and any other employee of a banking company shall be deemed to be a public servant for the purposes of the Indian Penal Code.
Thus, the Supreme Court effectively concluded 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”……it cannot be said, that the legislature had intention to make Section 46A inapplicable for the purposes of P.C. Act, 1988…….”
Consequently, the Supreme Court concluded that Ramesh Gelli and Sridhar Subasri, who were Chairman/Managing Director and Executive Director of GTB were indeed public servants for the purposes of Prevention of Corruption Act, 1988.
I congratulate the Indian Supreme Court for taking a very pragmatic and rational view in the matter thereby bringing private players in the public domain of anti-bribery tirade. The private players of the likes of GTB promoters are integral part of the scheme of the Prevention of Corruption Act, 1988.
Author: Hemant K. Batra, Founder & International Lead, Kaden Boriss Partners, Lawyers
New Delhi, India
 Criminal Appeal Nos. 1077-1081 Of 2013 – Central Bureau of Investigation, Bank Securities & Fraud Cell Vs. Ramesh Gelli and Others with Writ Petition (Crl.) No. 167 Of 2015 Ramesh Gelli Vs.Central Bureau of Investigation through Superintendent of Police, BS & FC & Anr.