Banks Can't Be Summoned As Accused For Defamation, Declaring Company 'Fraud' Not Defamatory: Delhi High Court

The Delhi High Court has held that banks cannot be summoned as an accused for defamation as they lack the state of mind or mens rea necessary to constitute the offence.

Justice Neena Bansal Krishna said that the act of the banks in declaring a Company as fraud, in discharge of their banking activities and in good faith, does not constitute defamation.

The Court was dealing with a batch of pleas filed by Senior Officials of four banks challenging a complaint case of defamation pending before the trial court as well as the summoning order. The complaint was registered by Rangoli International Pvt. Ltd.

The banks had declared the account of the complainant company as “fraud” after internal audits, correspondence from the RBI, and directions from CBI related to financial irregularities.

The complainant company alleged that the bank officers, acting in concert, committed defamation by reporting it as fraud without any evidence.

It was further alleged that the false designation as “fraud” resulted in substantial reputational and financial loss to the complainant company.

The petitioner official's contended that there was no personal malice or direct imputations against the complainant company and that action was taken in good faith for safeguarding bank interests.

It was also submitted that there was no mens rea individually attributed to the officers and thus, vicarious liability did not arise.

Allowing the pleas, Justice Krishna said that even if all the averments made in the Complaint were admitted to be correct and true, they did not constitute any act which could be termed as defamatory.

“The aforesaid circumstances as discussed, clearly establish the act of declaring the Complainant's Company as fraud, was not a personal vendetta of the Banks or intended to bring disrepute or to defame the Complainant in any manner; rather, it was an informed decision taken in by the Banks, in their interest and in accordance with law. Such proceedings cannot be termed as defamation or as lowering the reputation of the Complainant in the eyes of the general public,” the Court said.

It added that criminal liability cannot be vicariously fastened onto Directors or officials of the banks merely because of their designation, in the absence of any specific allegations.

The Court concluded that in the absence of any allegation against any of the Bank Officers, they cannot be held liable for any act of defamation and could not have been summoned for the offence of defamation.

“In the light of aforesaid discussion, it is held that the Complaint does not contain any specific allegations to establish defamation by any of the Banks. Furthermore, the Petitioners, who are the officers of the Banks, cannot be held vicariously liable for the affairs of the Company/Bank in the absence of any act of alleged defamation, attributable to them,” the Court said while quashing the complaint case as well as the summoning order against the banks officials.

Title: P S JAYAKUMAR & ANR v. STATE (NCT of Delhi) & ANR and other connected matters

Citation: 2025 LiveLaw (Del) 1383

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