Karnataka HC Keeps Defamation Case Alive Against SBI And Authorised Officer Over Notice Naming Ex-Director As Defaulter, While Quashing It Against Chairman And DGM

The complainant alleged that, although he had resigned as a director of Bharath Infra Exports and Imports Ltd. and was not a guarantor or mortgagor for the company’s borrowings, SBI officials caused his name to be published in a SARFAESI possession notice as a defaulter.

He claimed the publication harmed his reputation and business interests.

The Magistrate recorded statements from the complainant and two witnesses, considered documents, and issued process for offences under Sections 499 and 500 IPC.

SBI and three officials sought to set aside the process and quash the proceedings under Section 482 CrPC.

The complainant disputed the authenticity of guarantee deeds relied on by the petitioners; a civil court had granted an injunction restraining SBI from relying on those deeds while the suit was pending.

Sections 499 and 500 IPC require an imputation made with the intention, or knowledge, that it would harm a person’s reputation; at the quashing stage, allegations taken at face value must disclose the offence, while statutory exceptions to defamation may require proof at trial.

Civil and criminal proceedings may coexist where the same conduct gives rise to both causes of action and the complaint discloses the ingredients of an offence.

Under Section 482 CrPC, defence documents may justify quashing only where they are of sterling and impeccable quality and conclusively disprove the accusation; disputed documents ordinarily require investigation or trial.

Section 202 CrPC requires an inquiry or investigation in the circumstances covered by that provision, but examination of the complainant and witnesses may satisfy the requirement of inquiry into whether sufficient grounds exist to proceed.

Section 32 of the SARFAESI Act protects acts or omissions done in good faith.

Criminal liability cannot be imposed on an officer merely by virtue of office; the complaint must attribute a specific role or participation to that individual.

The Court held that the alleged guarantee deeds could not conclusively defeat the complaint because their authenticity was disputed in the civil suit and their use was subject to an injunction; they therefore were not unimpeachable material suitable for quashing.

The allegation that the complainant was knowingly described and publicly identified as a guarantor and defaulter, despite his denial of that status, was sufficient at this stage to disclose a prima facie defamatory imputation.

The Court considered that the asserted protection under the exceptions to Section 499, including good-faith publication, could not be established on the material before it.

The Magistrate had recorded the complainant’s and two witnesses’ statements and considered the documents, which satisfied the Court that the order reflected application of mind and that the Section 202 inquiry requirement had been met.

Section 32 did not warrant quashing because good faith was disputed.

As to individual responsibility, the complaint did not allege specific participation by accused no. 2; accused no. 3 was alleged to have informed accused no. 4 that the complainant was not a guarantor and was no longer a director.

By contrast, accused no. 4 was specifically alleged to have caused the complainant’s inclusion in the publication as a defaulter.

It declined to quash the proceedings against SBI (accused no. 1) and accused no. 4, holding that the complaint disclosed a prima facie case against them.

Crl.P. No. 852 of 2019, filed by accused no. 4, was dismissed.