LI Network
Published on: 14 September 2023 at 11:14 IST
The Supreme Court has declared that DBS Bank cannot be held liable for legal violations committed by officials of the former Lakshmi Vilas Bank (LVB) prior to their merger. This decision came in the case Religare Finvest Limited v. State of NCT of Delhi and anr.
A bench consisting of Justices S Ravindra Bhat and Aravind Kumar emphasized that the criminal proceedings in question were solely connected to actions taken by four LVB officials before the amalgamation with DBS Bank.
The bench explained, “Their (LVB officials’) individual responsibility and accountability in criminal law remain unaffected by the amalgamation. Therefore, there is no involvement of DBS Bank revealed in the charge sheet filed by the Delhi Police.”
Additionally, the amalgamation scheme approved by the Reserve Bank of India (RBI) in relation to LVB and DBS Bank supported the position that DBS Bank should not be held accountable for the pre-amalgamation actions of LVB officials.
The Supreme Court affirmed, “In the ordinary sense, criminal liability can neither be attributed to DBS nor its directors, brought in after the amalgamation, whose appointments were approved by the RBI.”
Consequently, the Supreme Court quashed the case against DBS Bank, making it clear that the legal violations were the responsibility of LVB officials alone.
The court’s judgment stated, “Therefore, the pending criminal proceedings (arising out of FIR – 189/2019 registered at P.S. Economic Affairs Wing, New Delhi), to the extent it involves DBS, which was the subject matter of the impugned judgment and all consequent proceedings arising therefrom (to the extent of involvement of DBS), are hereby quashed.”
This legal matter reached the Supreme Court following an appeal filed by DBS against a Delhi High Court order that had declined to dismiss criminal proceedings against the bank and its directors.
The High Court had granted an interim stay on a summons issued to DBS, awaiting clarification from the RBI on the issue.
The RBI had previously approved the non-voluntary amalgamation of LVB into DBS in 2020 due to LVB’s unstable financial condition.
Simultaneously, Religare Finvest Limited filed a case alleging that LVB had misappropriated fixed deposits amounting to ₹791 Crores, which were held as security for short-term loans.
Religare Finvest also challenged the Delhi High Court’s decision to stay criminal proceedings against DBS in the Supreme Court. However, the Supreme Court has now upheld DBS Bank’s appeal and dismissed Religare’s appeal.
The Supreme Court’s decision sets aside the Delhi High Court’s order that had refused to dismiss the case against DBS Bank, effectively ending the criminal case against the bank.
“In the present context, the public’s confidence in the banking industry was at stake when the RBI intervened, imposed the moratorium, and instructed DBS to take over the entire functioning, management, assets, and liabilities of the erstwhile LVB. To prosecute DBS for the actions of LVB officials (who are, in fact, facing criminal charges) would result in a travesty of justice,” added the Supreme Court.
