IMPORTANT POINT
Chairman and Executive Officer of a Cooperative Bank come within the definition of “public servant”.

JUDGMENT

Altamas Kabir, J.—

1. Leave granted in both the special leave petitions which are taken up for hearing and final disposal together.

2. The respondents were Directors of the Indore Premier Co-operative Bank Limited and were also members of the Loan Committee for sanctioning loans. One Harish Patil and Kanhaiyalal Yadav lodged a complaint with the Special Establishment of the Lokayukt, Madhya Pradesh at Indore, alleging that the respondents had sanctioned loans amounting to Rs.56,50,000/- in favour of 35 persons without verifying their eligibility to receive such loans or the end-use of such loans and had intentionally acted in an illegal manner to enable the said borrowers to avail of the loans. On receiving the complaint, the Special Establishment Lokayukt, Indore, registered Crime No.133/99 and after investigation filed a charge-sheet against the respondents under Sections 409, 420 and 120-B of the Indian Penal Code (‘IPC’ for short) together with Sections 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as the ‘P.C. Act’). The Trial Court on due consideration of the charge-sheet, found a prima facie case against the respondents and by its order dated 4.11.2006 directed framing of charges as suggested in the charge-sheet.

3. Being aggrieved by the said order dated 4.11.2006, directing framing of charges, the respondents moved in revision before the Indore Bench of the Madhya Pradesh High Court for setting aside the aforesaid order passed by the Special Judge, Indore, in Special Case No.1 of 2006 and for their discharge from the above-mentioned charges.

4. Considering the case made out by the respective parties, the High Court came to the conclusion that admittedly the respondents were members of the Loan Committee and as such members they are only required to consider the loan cases which are put up to them by the concerned Bank Manager for the grant of loan and it was for the Branch Managers to verify the facts regarding entitlement for grant of loan before submitting the same to the Loan Committee. Furthermore, it is only after the Executive Officer had also verified the applications for loan that the loan cases were put up before the Loan Committee for its sanction. In view of the aforesaid procedure, the High Court held that it could not be said that the Members of the Loan Committee (the respondents herein) had acted illegally and had wrongly sanctioned loans to the concerned borrowers. The High Court also took into consideration the fact that out of the total amount of loan which had been sanctioned by the Loan Committee amounting to Rs.56,50,000/- a total sum of Rs.64,69,000/- had already been deposited by the concerned depositors in the Bank and hence it could not be contended that by sanctioning the loans to the concerned borrowers the Bank had suffered any monetary loss since the full amount of loan, together with interest, had already been deposited by the borrowers in the Bank.

5. On the question of status of the respondents as “public servants” for the purpose of prosecution under the provisions of the Prevention of Corruption Act, 1988, the High Court relying on the judgment of this Court in State of Maharashtra vs. Laljit Rajshi Shah and others1 [(2000) 2 SCC 699] held that the respondents could not be treated as public servants and could not, therefore, be punishable either under the provisions of the Prevention of Corruption Act, 1988, or under Section 409 IPC.

6. On such finding, the High Court by its order dated 17th March, 2007, allowed the Revision Petition and set aside the order of the Trial Court dated 4.11.2006 framing charges against the respondents and discharged them from the said charges under Sections 409, 418, 420 and 120-B IPC and Section 13(1)(d) read with Section 13(2) of the P.C. Act.

7. The present appeals have been filed by the State of Madhya Pradesh against the said order of the High Court.

8. Appearing for the appellant State o