Supreme Court quashes SC/ST Act case against bank officers, says RBI guideline violations alone do not justify criminal prosecution

The respondent-company had obtained credit facilities from the State Bank of India from 2010; its accounts were declared non-performing in 2016. The company’s directors alleged that bank officials discriminated against them on caste grounds, failed to extend RBI rehabilitation measures, and made or relied on forged or false documents to initiate coercive action

The allegations led to FIR No. 1 of 2019 under the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989. The High Court declined to interfere with the prosecution; the accused bank officers appealed to the Supreme Court

1. Whether the allegations justified continuation of the criminal prosecution against the bank officers under the SC/ST Act

2. Whether complaints concerning RBI guidelines, rehabilitation measures, and alleged false or forged information could instead be pursued in recovery proceedings before the appropriate forum

The Court considered Section 3(1)(q) of the SC/ST Act, invoked in connection with allegations of false or frivolous information being submitted to public authorities

It held that non-compliance with RBI guidelines or circulars does not, by itself, justify criminal prosecution merely because the borrower’s directors belong to Scheduled Castes or Scheduled Tribes; the allegations must include a specific basis for the alleged caste-based conduct

The Court identified the Debts Recovery Tribunal as an appropriate forum for the borrower to raise disputes concerning RBI directions, rehabilitation measures, and alleged misrepresentations affecting recovery proceedings

No precedent was relied on in the Court’s stated reasoning.

The Court considered the dispute in the context of the company’s credit facilities having turned NPA and the resulting bank proceedings

Although the complaint alleged discriminatory treatment and irregularities in the handling of the loan, the Court found no specific allegation that an officer had denigrated the directors on the basis of caste. It concluded that alleged failures to follow RBI directions and disputes about documents or recovery measures did not, without such a specific allegation, warrant continuing the criminal prosecution. Those disputes could be raised in recovery proceedings for determination by the appropriate adjudicating authority

It allowed the appeal and quashed the proceedings arising from FIR No. 1 of 2019, while leaving the company’s contentions open for pursuit before the appropriate forum, including the Debts Recovery Tribunal