Question Of Mens Rea Does Not Arise Since Bank Is A Juristic Person: Supreme Court Quashes FIR Alleging Cheating & Breach Of Trust Against HDFC Bank

The Court set aside the order of the Patna High Court which dismissed the petition filed by the HDFC Bank Ltd. (Bank) for quashing an FIR against them under Sections 34, 37, 120B, 201, 206, 217, 406, 409, 420 and 462 of the IPC. An FIR was registered following a search and seizure operation led by the Income Tax (IT) Department concerning a locker associated with an account holder.

A Bench of Justice B.R. Gavai and Justice K.V. Viswanathan held, “We are of the considered view that the continuation of the criminal proceedings against the appellant-bank would cause undue hardship to the appellant-bank.”

Senior Advocate Neeraj Kishan Kaul represented the appellant, while Advocate Venkatraman Chandrashekhara Bharathi for the respondents.

An order was issued under Section 132(3) of the IT Act to stop the operation of any bank lockers, bank accounts and fixed deposits linked to certain account holders of the Bank. The prohibition extended to all such assets pending the investigation.

The Income Tax Department revoked the restraint order specifically for bank accounts to be operated but maintained the restraint order on lockers. However, one of the account holders accessed her locker, allegedly with the assistance of bank officials, which resulted in the FIR.

The bank officials submitted that they misread the revocation order to understand/assume that the revocation of the restraint on the bank accounts extended to the bank lockers as well. Having misunderstood the order, the bank officials contended that under a bona fide assumption that the bank locker had been released as well, they allowed the account holder to operate the same.

Going through the restraint and revocation orders, the Supreme Court noted that it was imposed in respect of Bank Lockers, Bank Accounts and Fixed Deposits, while the Revocation Order only referred to the Bank Accounts.

For bringing out an offence under Section 420 of the IPC, the Court explained that the bank should have induced the account holder since inception, and the said inducement must have been fraudulent or dishonest to prove mens rea.

However, the Bench stated that the question of mens rea could not arise since the bank was a juristic person.

“However, even reading the FIR and the complaint at their face value, there is nothing to show that the appellant-bank or its staff members had dishonestly induced someone deceived to deliver any property to any person, and that the mens rea existed at the time of such inducement,” the Court remarked.

Similarly, neither were the ingredients of Section 409 of the IPC made out. “For bringing out the case under criminal breach of trust, it will have to be pointed out that a person, with whom entrustment of a property is made, has dishonestly misappropriated it, or converted it to his own use, or dishonestly used it, or disposed of that property,” the Court explained.

Consequently, the Court held, “The impugned judgment and order passed by the learned Single Bench of the High Court of Judicature at Patna in Criminal Writ Jurisdiction Case No. 1375 of 2021 is quashed and set aside.”

Accordingly, the Supreme Court allowed the appeal.

Cause Title: HDFC Bank Ltd. v. The State of Bihar & Ors. (Neutral Citation: 2024 INSC 807)

Appearance:

Appellant: Senior Advocate Neeraj Kishan Kaul; AOR Nagarkatti Kartik Uday; Advocates Vikram B. Trivedi, Faisal Sayyed, Sanidhya Kumar and Pritha Suri

Respondents: AOR Manish Kumar; Advocates Venkatraman Chandrashekhara Bharathi, Divyansh Mishra, H.R. Rao, Priyanka Terdal, Udai Khanna and Shashank Bajpai

Click here to read/download the Judgment