Central Bureau of Investigation Vs Srinivas D. Sridhar (Supreme Court of India)
Conclusion: Mere suspicion of speedy loan sanction alone was insufficient proof of credit facility misuse and no material was placed on record to show that any of the accused other than bank officials ever met the respondent before the sanction of the proposal by the Management Committee, therefore, Court ordered the discharge of the Ex-Chairman of the Central Bank.
Held: In the instant case, the main allegations were wrongful sanction of loans to Electrotherm (India) Ltd. by the Central Bank of India, resulting in a loss of approximately Rs. 436.74 crores to the bank. The CBI alleged that the bank’s senior management, including Sridhar, sanctioned large credit facilities such as short-term loans, Letters of Credit, and Export Packing Credit to the company without proper due diligence. The Additional Solicitor General (ASG) argued that a conspiracy existed among the accused to defraud the bank, particularly through sanctioning export credit facilities without proper appraisal or clearance. Further, ASG argued that even strong suspicion was enough to frame charges of conspiracy, and the speed with which the loans were sanctioned raises serious doubts about the accused’s role. The respondent’s counsel argued that Sridhar’s involvement was limited to signing off on the proposals presented to him by the bank’s officers and the credit proposals were vetted and recommended by various committees including the Loan Advisory Committee, which provided approvals before the respondent acted. Further, the counsel pointed out that no direct evidence linked Sridhar to the conspiracy, nor does the charge sheet show his involvement in fraudulent actions. It was held that the only material that created suspicion was the speed with which the proposal of the Company was sanctioned. As far as the respondent was concerned, considering his position and the role ascribed to him in the grant of sanction to the loan proposal of the Company, mere suspicion against him was not enough to frame a charge against him. The proposal had passed through the Loan Advisory Committee which recommended the same. As the credit proposal was beyond the sanctioning authority of the respondent, it was directed to be placed before the Management Committee. Apart from the Loan Clearance Committee, the proposal was approved by the Bank’s Chief General Manager (Credit). The respondent’s role started with signing the Memorandum after it was approved by the Chief General Manager (Credit) and the Executive Director. A perusal of the Memorandum placed before the respondent for sanction showed that as many as 14 Public Sector Banks were lending to the Company apart from an international private sector bank. The respondent’s role was confined to signing the memorandum prepared by the senior officers and participating in the Management Committee meeting, which approved the proposal. No material was placed on record to show that any of the accused other than bank officials ever met the respondent before the sanction of the proposal by the Management Committee. Only because the entire proposal was processed and cleared within a short span of time, no offence was made out against the respondent. Taking the material in the charge sheet as it was, complicity of the respondent was not made out.
