The Madras High Court has affirmed that a bank branch manager cannot evade criminal liability under the Prevention of Corruption Act merely by claiming a limited or procedural role in a loan fraud scheme. The Court dismissed a revision petition challenging the rejection of a discharge application, holding that the petitioner’s actions in submitting forged documents and facilitating improper disbursement constituted a prima facie case of criminal conspiracy and cheating.
Background & Facts
The Dispute
The petitioner, T.K. Balaji, was the Branch Manager of State Bank of India (SBI), Medavakkam Branch, and was named as Accused A5 in C.C. No. 2 of 2024 for allegedly participating in a criminal conspiracy to defraud SBI of Rs. 4,37,63,527 through a fraudulent housing loan. The conspiracy involved multiple accused, including the borrower (A1), a panel valuer (A2), the property seller (A3), the power of attorney holder (A4), and two RACPC officials (A6 and others). The fraud centered on the sanction and disbursement of a Housing Term Loan of Rs. 3.33 Crores and a Suraksha loan of Rs. 19.85 lakhs.
Key Facts
- The complaint was lodged by the Regional Manager, SBI Tambaram Branch, on 05.09.2022.
- The FIR was registered on 27.12.2022 against A1 - A6 and unknown persons.
- The petitioner was not named in the initial FIR but was added during investigation after evidence emerged.
- On 10.01.2019, the petitioner conducted a pre-sanction inspection of the property, falsely reporting that seller A3 was in peaceful possession and that there were no disputes, despite the previous owner, Madhan Kumar, continuing to occupy the property.
- The petitioner submitted a pre-sanction inspection report, forged Income Tax returns, and a fraudulent valuation report (a color photocopy) to RACPC Tambaram.
- On 07.02.2019, SBI RACPC sanctioned the loan based on these documents.
- On 08.02.2019, the petitioner personally collected the Demand Draft of Rs. 3.33 Crores from RACPC Tambaram.
- On the same day, he opened an account for A4 (the power of attorney holder) and deposited the entire loan amount into it, despite the sale deed not being registered until 09.02.2019.
- On 08.02.2019, the petitioner signed two Demand Drafts as both Authorized Signatory and Branch Manager - a clear violation of banking norms requiring dual signatures.
- Rs. 50 lakhs was withdrawn and re-deposited on 08.02.2019, followed by issuance of a second Demand Draft, which was deposited into A4’s account on 11.02.2019.
- A4 withdrew Rs. 1.45 Crores on 11.02.2019 and 12.02.2019.
- Only Rs. 28 lakhs was transferred to the seller A3; the rest was diverted to firms owned by A1 and A4, including M/s. Aswini Enterprises, M/s. Adhi Lakshmi Traders, and others.
- The internal bank investigation (Document No. 112) identified lapses by RACPC officials but did not exonerate the petitioner.
- The petitioner was suspended on 02.02.2022.
- Approval under Section 17-A of the Prevention of Corruption Act was obtained from the Chief Vigilance Officer, SBI Mumbai, on 15.05.2023.
- The charge sheet was filed listing 58 witnesses and extensive documentary evidence.
Procedural History
- 05.09.2022: Complaint lodged by SBI Tambaram Branch.
- 27.12.2022: FIR registered under Sections 120(b), 420, 468, 471 IPC and Section 13(2) r/w 13(1)(a) of the Prevention of Corruption Act.
- 02.02.2022: Petitioner placed under suspension by SBI.
- 17.04.2023: CBI sought approval under Section 17-A of the PC Act.
- 15.05.2023: Competent authority granted approval under Section 17-A.
- 25.05.2023: Petitioner summoned for inquiry by CBI.
- 03.07.2025: Trial Court dismissed the petitioner’s discharge petition (Crl.M.P. No. 6950 of 2024).
- 20.02.2026: Criminal Revision Petition reserved.
- 27.03.2026: Judgment pronounced.
The Parties' Positions
For the Petitioner: Argued that his role was purely formal - limited to submitting a pre-sanction report to RACPC, which independently conducted the final appraisal and sanction. Claimed he acted in good faith, relied on RACPC’s due diligence, and was not the sanctioning authority. Cited P.S. Rajya v. State of Bihar and Yashwant Sinha v. CBI to argue that the standard of proof for discharge is high and that departmental lapses do not equate to criminal intent.
For the Respondent (CBI): Contended that the petitioner knowingly submitted forged documents, manipulated disbursement procedures, and facilitated the diversion of funds through his branch. Highlighted that the fraudulent transactions occurred at his branch, he signed documents in violation of norms, and the internal investigation did not absolve him. Emphasized that Section 17-A approval and the detailed charge sheet established a prima facie case.
Relief Sought
The petitioner sought quashing of the Trial Court’s order dated 03.07.2025 dismissing his discharge petition, and a direction to discharge him from the case on grounds of insufficient evidence.
The Legal Issue
Whether the petitioner’s conduct - submitting a false pre-sanction inspection report, facilitating improper disbursement of loan proceeds, and violating banking norms - constitutes a prima facie case of criminal conspiracy and cheating under the IPC and Prevention of Corruption Act, sufficient to proceed to trial despite his claim of limited responsibility.
Arguments Presented
For the Appellant/Petitioner
The learned Senior Counsel argued that the petitioner’s role was strictly procedural and confined to forwarding documents to RACPC, which had exclusive authority for loan sanction and disbursement under SBI’s manual. He relied on P.S. Rajya v. State of Bihar to assert that the standard of proof for discharge requires more than mere suspicion, and that departmental lapses, even if serious, do not automatically translate into criminal liability. He further cited Yashwant Sinha v. CBI and Nara Chandrababu Naidu v. State of Andhra Pradesh to argue that Section 17-A of the PC Act mandates a preliminary assessment of official duty before prosecution, and that the CBI failed to establish that the petitioner acted outside his official capacity. He emphasized that the internal investigation by SBI did not attribute any misconduct to him.
For the Respondent/State
The Special Public Prosecutor countered that the petitioner’s actions were not passive or administrative but actively facilitated fraud. He pointed to the petitioner’s personal collection of the Demand Draft, his dual signature on disbursement instruments, the opening of A4’s account at his branch, and the diversion of funds through that account. He argued that the pre-sanction report was knowingly false, the valuation report was a photocopy, and the petitioner’s conduct was integral to the conspiracy. The approval under Section 17-A, granted after scrutiny, confirmed the existence of a prima facie case. The prosecutor stressed that discharge petitions are not trials and that the petitioner’s defenses must be tested during trial.
The Court's Analysis
The Court examined the nature of the petitioner’s role in the context of SBI’s operational manual, which clearly delineated responsibilities between the sourcing branch (Medavakkam) and the central processing unit (RACPC Tambaram). While acknowledging that RACPC held primary responsibility for final sanction, the Court found that the petitioner’s conduct went beyond mere formality.
"The petitioner personally collected the disbursement Demand Draft for Rs.3.33 Crores from RACPC Tambaram and credited the same to A4's account even before registration of the sale deed on 09.02.2019."
The Court noted that the petitioner’s actions - signing dual-authority Demand Drafts, opening an account for the power of attorney holder, and permitting cash withdrawals and re-deposits - were not routine but deliberate violations of banking norms. The fact that the fraudulent transactions occurred within his branch, and that the loan proceeds were diverted through accounts he controlled, established a direct link between his conduct and the financial loss.
The Court rejected the argument that the internal bank investigation exonerated the petitioner, observing that the report focused on systemic lapses and did not absolve individuals. It further held that Section 17-A approval, obtained after review, was not a mere formality but a substantive determination that the accused’s actions were not protected by official duty.
The Court distinguished P.S. Rajya and Yashwant Sinha, noting that those cases involved situations where no overt criminal act was established. Here, the petitioner’s submission of forged documents and manipulation of disbursement procedures constituted clear overt acts in furtherance of the conspiracy.
The Court emphasized that at the discharge stage, the court does not weigh evidence but examines whether there is a prima facie case. Given the documentary evidence - including Demand Drafts, bank statements, and witness statements - the Trial Court was justified in concluding that the case warranted trial.
The Verdict
The Criminal Revision Petition was dismissed. The Trial Court’s order dated 03.07.2025 dismissing the discharge petition was upheld. The petitioner shall face trial on charges under Sections 120(b), 420, 468, 471 IPC and Section 13(2) r/w 13(1)(a) of the Prevention of Corruption Act. The Court directed the Trial Court to decide the case on its merits without delay. The connected miscellaneous petition was closed.
What This Means For Similar Cases
Pre-Sanction Roles Are Not Immune from Criminal Liability
- Practitioners must now argue that even administrative or procedural roles in financial transactions can attract criminal liability if there is evidence of knowingly submitting false documents or facilitating irregular disbursements.
- Merely claiming that another unit had final authority is insufficient to secure discharge; courts will examine the actual conduct and its nexus to the fraud.
Section 17-A Approval Is Not a Shield, But a Threshold
- The grant of Section 17-A approval under the Prevention of Corruption Act is not a procedural formality but a substantive determination that the accused’s actions were not protected by official duty.
- A public servant cannot rely on Section 17-A to avoid prosecution if the conduct, though within the scope of duty, was knowingly fraudulent.
Discharge Petitions Are Not Trials - Evidence Is Not Scrutinized
- At the discharge stage, courts must accept the prosecution’s version if it is plausible and supported by documents.
- Defenses based on internal investigations or procedural norms must be raised at trial, not in discharge petitions.
- Practitioners should avoid over-reliance on P.S. Rajya or Yashwant Sinha unless the facts show complete absence of overt criminal acts.
