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Bank doesn’t hold customer’s deposits in trust, Banker-Depositor Relationship is that of Creditor-Debtor: Supreme Court of India

The money deposited in a Bank by its customers is not held by it as a trustee but it becomes a part of the Banker’s fund who is under a contractual obligation to pay the sum deposited by the customers back to him with an agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay the money back to the customers when called upon, but until it’s called upon to pay it, the Bank is entitled to utilize the money in any manner for earning profit. Such an observation was made by the Hon’ble Supreme Court before Hon’ble Chief Justice N.V. RAMANA, Hon’ble Justice SURYA KANT & Hon’ble Justice HIMA KOHLI in the matter of N. Raghavender vs State of Andhra Pradesh, CBI [CRIMINAL APPEAL NO. 5 OF 2010].

The facts that gave rise to the present appeal were that N. Raghavender worked as a Branch Manager in Sri Rama Grameena Bank, Nizamabad, A. Sandhya Rani, Accused No. 2 worked as a Clerkcum-Cashier in the same Bank, C. Vinay Kumar, Accused No. 3 was the Treasurer of the Nishita Educational Academy and is the brother-in-law of Appellant (Accused no. 1). Accused No. 3 opened Current Account No. 282 in the afore-said Bank in his capacity as an authorized signatory of the Academy. The account was opened with an initial deposit of Rs. 5,00,000/-. The prosecution case is that the Appellant and Accused No. 2 abused their respective position in the Bank and conspired with Accused no. 3 by allowing withdrawal of amounts up to Rs. 10,00,000/- from the account of the Academy, notwithstanding the fact that the account did not have the requisite funds for such withdrawal. When the Auditor noticed the irregularities the appellate was transferred to the Head office and an internal inquiry was instituted. The said inquiry prompted the chairman to lodge a criminal complaint with the CBI. CBI registered the case u/s 409, 477(A), and 120B IPC and u/s 13(2) r/w 13(1)(c) & (d) of the PC Act. The CBI filed the charge sheet before the special judge, CBI. The Special Judge acquitted all the accused of offenses u/s 120B IPC and u/s 13(2) r/w Section 13(1)(c) of the PC Act. Accused No.2 and Accused No. 3 were further acquitted of all the other charges as well. The Appellant, however, was held guilty of offenses punishable u/s 420, 409, and 477A IPC as also u/s 13(2) r/w Section 13(1)(d) of the PC Act. Aggrieved the appellate appealed to the High court but the same was dismissed. Aggrieved the appellate preferred the present appeal.

The Hon’ble Supreme Court referred to the case of Sadupati Nageswara Rao v. State of Andhra Pradesh (2012) 8 SCC 547 wherein it was held that the onus is on the prosecution to prove that the accused, a public servant or a banker was entrusted with the property which he is duly bound to account for and that he has committed criminal breach of trust.

Additionally, the Hon’ble Supreme Court observed that entrustment of public property and dishonest misappropriation or use thereof in the manner illustrated under Section 405 are a sine qua non for making an offense punishable under Section 409 IPC, i.e., Criminal breach of trust by a public servant. Additionally, the bench referred to the essential ingredients of section 405 IPC and noted that the crucial word used in Section 405 IPC is ‘dishonestly’ and therefore, it presupposes the existence of mens rea. In other words, mere retention of property entrusted to a person without any misappropriation cannot fall within the ambit of criminal breach of trust. Unless there is some actual use by the accused in violation of law or contract, coupled with dishonest intention, there is no criminal breach of trust. The second significant expression is ‘misappropriated’ which means improperly setting apart for one use and to the exclusion of the owner.

Additionally, the Hon’ble Supreme Court held that since no explicit prohibition on issuing of loose cheques has been proved, the mere fact that the Appellant issued those loose cheques, is not sufficient to conclude that he acted unlawfully or committed a ‘criminal misconduct’. The Hon’ble Supreme Court noted that the expression ‘intent to defraud’ as given under Section of 477-A, contains two elements, deceit, and injury. So far as the second element is concerned, no financial injury was caused to the Bank.

Furthermore, the Hon’ble Supreme Court held that the Prosecution has failed to establish the charge of criminal breach of trust against the Appellant beyond a reasonable doubt.

Finally, the Hon’ble Supreme Court allowed the present appeal and acquitted the appellate from all charges but the appellate shall not entitle him to initiate a second round of lis to seek his reinstatement or to claim other service benefits from the Bank on account of being guilty of gross departmental misconduct, for which the punishment of dismissal from service has been adequately awarded.

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Judgment Reviewed by: Rohan Kumar Thakur

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