Transfer Valimiki Development Corporation Probe To CBI To Ensure Integrity Of Banking Industry: Union Bank Of India To Karnataka High Court

While emphasizing the need for transferring the investigation into the Valmiki Development Corporation "scam" to the CBI, the Union Bank of India told the Karnataka High Court on Tuesday (September 24) that the transfer is necessary to ensure that the integrity of the banking industry as a whole is maintained. A single judge bench of Justice M Nagaprasanna was hearing a petition by Union Bank of India seeking a direction to the government to transfer the probe being carried out in the alleged scam in regards to the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd to the Central Bureau of Investigation. At the outset senior advocate BV Acharya, appointed for State, raised a preliminary question on the maintainability of the plea. He said that the dispute is between the State and the Union Government. To this the high court orally said, "I do not agree with that not at all, it is not a dispute between state and Union". Acharya however said that the petition relies on a circular issued by Central Government which forms the foundation of the petition as to whether such circulars can interfere with powers of state government and police.The court however orally said that it shall answer the matter on merits. Acharya meanwhile referred to the Supreme Court's decision in the case of State of West Bengal v. Union of India. To this the high court orally asked, "Did the SC says it is a dispute between state and central govt and only it is to hear the case?". Meanwhile Acharya said that the jurisdiction of all other courts are barred when there is dispute between State and Central Government. The high court however orally said, "This may require an answer. I was not aware of this. We will decide on maintainability first". Beginning his submissions, Attorney General (AG) R Venkataramani appearing for the petitioner bank said that the petition does not rely on Delhi Special Police (DSP) Act. "We are not in the scope/domain of DSP Act. It is an act of 1940, Banking regulation came in 1949...There is a special legislation to mandate the functioning of a banking entity. When RBI finds that bank frauds require attention, RBI issues master circular under section 35A. It is not qualified by DSP act. State government would ordinarily yield for investigation by CBI. But there are circumstances where state will say what is the need for CBI to investigate," he added. For context Section 35A of the Banking Regulation Act pertains to the power of the Reserve Bank to give directions. The provision entails that the RBI may issue directions if it is satisfied that it needs to do so in "public interest" or "in the interest if banking policy" or "to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or prejudicial to the interests of the banking company" or "to secure the proper management of any banking company generally". The provision states that these directions have to be complied by the banking company/companies. The RBI, the provision states, on a representation made to it or on its own motion, modify or cancel any such direction issued by it and while modifying or cancelling it may impose conditions as it thinks fit.Referring to the to DSP Act the AG said, "Today a banking institution occupies a core of economic discipline of a country; anything which impleads the fiscal disciplines will have a large impact and implications. Bank discharges wide range of function now. If RBI issues master circular to ensure integrity of bank. RBI says a specialized agency will be suited to look into any offences either in relation to bank or committed by instrumentality of bank, or outsider who use the bank". He further submitted that Section 35A can be read as indoor directions to the bank but it cannot be read it narrowly. He further submitted that he was not looking at an offence committed by an "officer or outsider" or the class of offence is committed. The focus was on the aspect that the integrity of banks must be maintained, the AG emphasized. The AG further submitted that the RBI's master circular states that the CBI will be only authority which can probe certain class of offences and the DSP Act is kept out. "RBI then designates under Sec 35A that CBI will be the investigating agency.The master circular says CBI will be the only authority to investigate a certain class of offences. To do this RBI does not require to go to Central govt. DSP act is kept out. RBI in its wisdom has said that i do not require the assistance of Central government to ask CBI to investigate under the Banking Regulation Act," the AG said. At this stage the high court orally said, "The bank has registered a complaint; now you are asking this complaint to be investigated by CBI". To this the AG said that under the master circular the only agency which can investigate is the CBI. To this the court orally remarked, "Because it is state owned corporation and Union bank has...

Transfer Valimiki Development Corporation Probe To CBI To Ensure Integrity Of Banking Industry: Union Bank Of India To Karnataka High Court

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