The Reserve Bank of India's guidelines do not confer jurisdiction upon the CBI to investigate bank fraud without prior state consent as mandated by the Delhi Special Police Establishment Act.

ORDER :

M.I.ARUN, J.

Petitioner No.3 is a private limited company and petitioner Nos.1 and 2 are its directors. Petitioner No.3 borrowed a loan from a consortium of banks headed by the State Bank of India (for short, 'the SBI'). It has committed default in repayment of the said loan. The loan account has been declared as a Non-Performing Asset (NPA). The banks have initiated recovery proceedings. In the process, they discovered that they have been defrauded by petitioner No.3-private limited company, its directors and some of its employees. Hence, the SBI lodged a complaint with respondent No.1-Central Bureau of Investigation (for short, 'the CBI') on 16.10.2017, wherein they have made allegations on the petitioners, their auditors and their employees. However, in the complaint, they have categorically stated that they do not suspect any of their employees being involved in the said offences. Paragraph No.13 of the complaint reads as under:

"13. Subsequent to the account becoming a NPA, staff accountability exercise had been conducted by the Bank, which did not reveal any malafide discernible on the part of any of the bank officials, who dealt with the account during the material time. We do not suspect any criminal connivance of our officials in the fraud. We also do not suspect the role of any Stock Auditor, Empanelled Valuer or Concurrent Auditor (Chartered Accountant). However, the role of Statutory Auditors, who audited the books of accounts of the company for the year 2011-12 and 2012-13, is suspicious."

2. But, in paragraph No.18 of the complaint, they have stated, they suspect certain persons of having committed the offences and the same reads as under:

"18. Hence, as authorized by the competent authority of State of India and the consortium of Bankers, (Copies of the authorization letters issued by the other bankers placed as Annexure-N, O & P), I request your goodselves to receive this complaint on your records, investigate and bring the culprits (alleged as under) to book, in order to render justice to the Bank and to safeguard the public money involved.

1. Shri B.Prashanth Hegde

(PAN-AAIPH2121D)

S/o.V.Ratnakar Hegde

Hindu, aged about 66 years

Residing at 261, Defence Colony, Indiranagar, Bengaluru 560038.

(Last Known address as per available records)

2. Smt.Shereen Hegde

(PAN-AALPH0765Q)

Wife of Shri.B.Prashant Hegde

Hindu, aged about 61 years

Residing at 261, Defence Colony, Indiranagar, Bengaluru 560038.

(Last Known address as per available records)

3.Mahesh Hegde

Chief Financial Officer

Metal Closures Pvt Ltd

39/4B, Doddakallasandra, 12 KM,

Kanakapura Road, Bangalore-560 062

4. Shri.Sudhakar (Partner)

M/s Venkat, Kollali & Murthy (Chartered Accountants)

No 25, 1^st Floor, Gover Road,

Cox Town, Bangalore-560 005.

5. Unnamed Officials and employees of

Metal Closures Pvt Ltd.,

A Private Limited Company

having its registered office at

39/4B, Doddakallasandra, 12 KM,

Kanakapura Road, Bangalore-560 062

6. Unknown Public Servants &

Unknown others."

3. The complaint has been lodged with respondent No.1-CBI, based on a circular issued under Section 35A of the Banking Regulation Act, 1949. The said provision reads as under:

"¹[35A. Power of the Reserve Bank to give directions.—(1) Where the Reserve Bank is satisfied that—

(a) in the [public interest]; or

[(aa) in the interest of banking policy; or]

(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

(c) to secure the proper management of any banking company generally,

it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under