Delhi High Court Quashes Defamation Case Against Bank Officials

Court rules no vicarious liability for bank officers; corporate entities lack mens rea for defamation charges.

In a significant ruling, the Delhi High Court has quashed a defamation case filed against senior officers of Bank of Baroda, Oriental Bank of Commerce, Corporation Bank, and Canara Bank. The case was initiated by Rangoli International Pvt. Ltd., which alleged that the banks defamed the company by classifying it as "fraud." The court, presided over by Justice Neena Bansal Krishna, held that corporate entities, such as banks, lack the mens rea, or guilty mind, necessary to commit the offence of defamation under Section 499 of the Indian Penal Code (IPC).

The case arose from a series of events beginning with a Central Bureau of Investigation (CBI) raid on Rangoli International in connection with alleged fraudulent activities. Following the raid, the banks, acting on letters from the CBI and Reserve Bank of India (RBI), conducted internal inquiries that led to the classification of Rangoli International's account as fraud. Rangoli International subsequently filed a complaint alleging defamation and vicarious liability of the bank officers.

Justice Krishna emphasized that for defamation to be established under Section 499 IPC, there must be an intention to harm the reputation of the complainant. The court found that the banks acted in good faith based on the findings of their internal investigations and the directives from the CBI and RBI. The court further noted that the act of declaring the company's account as fraud was not meant to defame but was a necessary step in safeguarding the banks' interests.

The judgment underscored that a corporate entity cannot possess the state of mind required for defamation. Consequently, the bank officers could not be held vicariously liable for acts committed by the banks in their corporate capacity. The court reiterated the principle that criminal liability cannot be automatically imposed on company directors or officers unless specific provisions in the statute mandate such vicarious liability.

With this ruling, the court quashed the complaint filed by Rangoli International, including the summoning order dated January 21, 2017, and all proceedings arising from it. The judgment serves as a significant precedent in cases involving allegations of corporate defamation and the vicarious liability of corporate officers.

Bottom Line:

Bank officers acting in their official capacity cannot be held vicariously liable for defamation allegedly committed by the bank. Corporate entities lack mens rea and cannot be prosecuted for defamation under Section 499 IPC.

Statutory provision(s):  

• - Indian Penal Code, 1860 - Sections 34, 499, 500  
• - Criminal Procedure Code, 1973 - Sections 200, 202, 482

P S Jayakumar v. State (NCT of Delhi), (Delhi) : Law Finder Doc Id # 2800056