Kerala High Court Upholds Further Investigation into Bank Officials' Role in Alleged Fraud

Court emphasizes necessity for comprehensive probe into alleged gross negligence by bank officials in HCCPL fraud case

In a significant judgment, the Kerala High Court has upheld the order of the Special Judge (CBI/SPE), Thiruvananthapuram, directing a further investigation into the involvement of bank officials in a fraud case involving Heera Constructions Company Pvt. Ltd. (HCCPL). The court stressed the importance of thoroughly examining the role of bank officials, highlighting evidence of their gross negligence and callous attitude during the loan sanction process.

The judgment came in response to a petition filed by Abdul Rasheed, the first accused and Managing Director of HCCPL, who sought to quash the Special Judge's order directing further investigation. The High Court, presided over by Justice A. Badharudeen, dismissed the petition, underscoring the necessity of continuing the probe to ensure justice.

The case revolves around allegations that HCCPL, with the alleged complicity of unknown public servants, defrauded the State Bank of India (formerly State Bank of Travancore) by availing a project loan of Rs. 15 crore and subsequently failing to repay it. The loan account was classified as a Non-Performing Asset in 2017, following which investigations revealed that HCCPL sold flats and commercial properties offered as collateral without the bank's consent.

In 2020, the CBI filed a final report excluding bank officials from the list of accused, attributing lapses to negligence without criminal intent. However, the Special Judge, in 2023, ordered further investigation, questioning the exclusion and emphasizing the need to explore the bank officials' potential complicity in the fraud.

The High Court supported the Special Judge's observations, noting that the documents presented did not adequately explain the bank officials' silence during crucial transactions. It pointed out the lack of an escrow account and the bank's extension of the loan period despite HCCPL's defaults, which raised doubts about the officials' role.

Justice Badharudeen rejected the petitioner's argument that the investigation had already cleared the bank officials of any wrongdoing. He highlighted the unholy nexus between the first accused and the bank officials, suggesting potential collusion that warranted further scrutiny.

The judgment directs the investigating officer to conduct an effective and thorough investigation within two months and submit the findings to the Special Court. This move aims to ensure a comprehensive probe into the alleged negligence and potential complicity of the bank officials involved in the case.

The ruling is seen as a step towards holding accountable those responsible for safeguarding public financial interests and upholding the integrity of banking institutions.

Bottom Line:

The Special Judge's order directing further investigation into the involvement of bank officials is upheld, emphasizing the necessity for thorough examination of their role in alleged gross negligence and potential complicity in fraud committed by HCCPL.

Statutory provision(s): Criminal Procedure Code, 1973 Section 173, Criminal Procedure Code, 1973 Section 227, Prevention of Corruption Act, 1988 Sections 13(1)(d) and 13(2), Indian Penal Code Sections 120B, 420, 405, 406

Abdul Rasheed @ Dr. A.R. Babu v. Central Bureau of Investigation (CBI), (Kerala) : Law Finder Doc Id # 2796073