Supreme Court: Prevention of Corruption Act,1988 applies to Private Banks as well

At the end it is relevant to mention that in the case
of Govt. of A.P. and others vs. Venku Reddy (supra), in
which while interpreting word ‘public servant’ this court
has made following observations:
 “12. In construing the definition of “public
servant” in clause (c) of Section 2 of the 1988 Act,
the court is required to adopt a purposive
approach as would give effect to the intention of
the legislature. In that view the Statement of
Objects and Reasons contained in the Bill leading
to the passing of the Act can be taken assistance
of. It gives the background in which the legislation
was enacted. The present Act, with a much wider
definition of “public servant”, was brought in force
to purify public administration. When the
legislature has used such a comprehensive
definition of “public servant” to achieve the
purpose of punishing and curbing growing
corruption in government and semi-government
departments, it would be appropriate not to limit
the contents of the definition clause by
construction which would be against the spirit of
the statute. The definition of “public servant”,
therefore, deserves a wide construction. (See State
of M.P. v. Shri Ram Singh (2000) 5 SCC 88)”
24. In the light of law laid down by this court as above,
it is clear that object of enactment of P.C. Act, 1988, was
to make the anti corruption law more effective and widen
its coverage. In view of definition of public servant in
25Section 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IPC have been repealed by the P.C. Act, 1988, relevance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.

The Court held that all officials of a private bank operating under the license issued by the Reserve Bank of India would be defined as public servants under the Prevention of Corruption Act, a law meant to prosecute government employees caught indulging in a corrupt practice. Further, bank employees, whether private or government, discharge a public duty in which the state, the public or the community at large has an interest and as such performance of such public duty by a person who is holding an office which requires or authorise 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 Court further held that the Banking Regulation Act (BR), 1949, cannot be left meaningless and requires harmonious construction.

The said judgment is significant as vide the said judgment the Supreme Court of India has expanded the scope of the Prevention of Corruption Act, 1988 by bringing all private bank employees under the ambit of the anti-graft law, which, was so far been only applied against corrupt government officials.

 REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS. 1077-1081 OF 2013

Central Bureau of Investigation, Bank Securities & Fraud Cell 
Vs Ramesh Gelli 


Dated;February 23, 2016.

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When offence of criminal breach of trust is made out against bank officers?

CRIMINAL BREACH OF TRUST The next charge we shall deal with is one arising under Section 409 of the IPC with which the accused herein have also been convicted of by the special judge. The punishment for criminal breach of trust by a public servant is provided under Section 409. However we must herein make reference of definition of criminal breach of trust simplicitor which reads as under Section 405:

"405.Criminal breach of trust.--Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits `criminal breach of trust'."

The punishment for criminal breach of trust is provided in Section

406. Punishment for aggravated forms of criminal breach of trust is provided in Section 407 toSection 409.

The terms of the section are very wide. It applies to one who is in any manner entrusted with property or dominion over property. The section does not require that the trust should be in furtherance of any lawful object. The section provides inter alia, that if such a person dishonestly misappropriates or converts to his own use property entrusted to him he commits criminal breach of trust. There are separate offences by which criminal breach of trust may be committed. This section requires :

1) Entrusting any person with property or with dominion over property.

2) That person entrusted (a) dishonestly misappropriates or converting to his own use that property; or (b) dishonestly using or disposing of that property or willfully suffering any other person so to do in violation -

(i) of any direction of law prescribing the mode in which such trust is to be discharged, or

(ii) of any legal contract made touching the discharge of such trust.

In Onkar Nath Mishra and Ors. vs. State (NCT of Delhi) and Anr., [(2008) 2 SCC 561] this court noted that in the commission of the offence of criminal breach of trust, two distinct parts are involved. The first consists of  the creation of an obligation in relation to the property over which dominion or control is acquired by the accused. The second is misappropriation or dealing with the property dishonestly and contrary to the terms of the obligation created.

Criminal breach of trust by a public servant has been dealt with under Section 409 which reads as under:

"409. Criminal breach of trust by public servant, or by banker, merchant or agent.-- Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits breach of trust in respect of that property, shall be punished with 1[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."

Since we have dealt with the said issue in detail in K Venkatkrishnan v. Central Bureau of Investigation (Criminal Appeal 76 of 2004 decided today), we need not deal with it here again.

However, it is important to mention here that more recently this court in State of Punjab v. Pritam Chand and Ors., 2009 (2) SCALE 457 opined:  "The ingredients of offence under Section 405 are

(i) entrusting any person with property or with dominion over the property, (ii) the person entrusted (a) dishonestly misappropriated or converted to his own use the property or (b) dishonestly used or disposed of the property or willfully suffered any other person so to do in violation (i) of any direction of law prescribing mode in which such mode is to be discharged or

(ii) of any legal contract made touching the discharge of trust."

Further, more the court in Sharon Michael and Ors. v. State of Tamil Nadu and Anr., 2009 (1) SCALE 627 noted thus:

"Ingredients of Section 409 of IPC read as under:

(i) The accused must be a public servant;

(ii) He must have been entrusted, in such capacity, with property.

(iii) He must have committed breach of trust in respect of such property."

Therefore, in view of the principles of law extracted above in our opinion there is no doubt that the offences relating to criminal breach of trust stands established against the accused. They were the officers in the Funds Department of Andhra Bank. In the said capacity they had been entrusted with the funds of the Bank. In that sense they had dominion over a thing. The money which was transferred to the account of A3 was the money  belonging to the Bank. Only the said accused had the power to transfer it to the account of A3.

In the present case, the same has been done dishonestly to cause wrongful gain to A3 and in the process wrongful loss has been caused to the Bank. The instruments based on which the funds of Andhra Bank were transferred to the account of A3 were not physically available with Andhra Bank at the time the accused persons authorized the transfer of the funds of Andhra Bank to the account of A3.

Supreme Court of India

Mir Nagvi Askari vs C.B.I on 7 August, 2009

Bench: S.B. Sinha, Cyriac Joseph
Citation: AIR2010SC528, (2009)15SCC643, 

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