Safiya Malik

The High Court of Delhi, Single Bench of Justice Neena Bansal Krishna held that banks cannot be prosecuted for defamation, observing that as juristic entities they lack the requisite intent or mens rea to commit such an offence. The Court held that the classification of a company’s account as “fraud” by banks, made in the course of their official functions and in good faith pursuant to communications from the CBI and RBI, did not amount to defamation. Consequently, the criminal complaint and summons issued against senior bank officers were quashed, with the Court terming the continuation of proceedings an abuse of process.

The petitions were filed under Section 482 of the Code of Criminal Procedure by senior officers of the aforementioned banks seeking quashing of Complaint and the summoning order dated 21 January 2017 issued by the Metropolitan Magistrate, Rohini Courts, under Sections 500 and 34 of the Indian Penal Code. The complaint was lodged by Rangoli International Pvt. Ltd. through its director, Mr. Luv Bhardwaj, alleging that the banks’ decision to declare the company’s account as fraudulent had damaged its reputation and caused financial loss.

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Rangoli International, incorporated in 2009, had entered into a consortium arrangement with seven banks, led by Punjab National Bank, for a total credit facility of Rs. 250 crores. Following a CBI raid in September 2014 concerning another company, certain consortium banks sought clarification regarding alleged irregularities in Rangoli International’s accounts. A forensic audit was conducted by M/s T.R. Chadha & Co., which yielded no conclusive findings of fraud. Despite this, several banks, including Canara Bank, Corporation Bank, Bank of Baroda, and Oriental Bank of Commerce, classified the company’s account as fraudulent.

The complainant alleged that the banks’ actions were motivated by malice and intended to harm its reputation. It was claimed that the accused officers, acting in concert, filed false complaints with the CBI and reported the company to the RBI and the Fraud Monitoring Group. The complaint also alleged violations under multiple sections of the IPC, including Sections 405, 409, 415, and 500. Witnesses examined by the complainant testified that the company’s business reputation had suffered significantly due to the fraud classification.

The petitioners contended that the actions were undertaken in compliance with communications from the RBI and CBI. Letters dated 25 June 2015 from the CBI and 14 July 2015 from the RBI directed the banks to examine the company’s account for irregularities and report findings as per regulatory requirements. The banks maintained that their officers, being public servants, acted in official capacity and could not be held personally liable without government sanction. It was also argued that the criminal complaint lacked specific allegations establishing the offence of defamation or the requisite mens rea.

The Court recorded that defamation requires the making or publication of imputations with the intention to harm reputation. “In essence, any statement which has a tendency to injure the reputation of the person or lower him in the estimation of members of the society results in loss of reputation and is consequently defamatory,” the Court stated.

Referring to the CBI letter of 25 June 2015, the judgment recorded, “It was the CBI that stated that in the light of the enquiry conducted by CBI, it requested the petitioner banks to file a formal complaint against M/s Rangoli International Pvt. Ltd. so that a regular case could be registered.” The RBI’s letter, dated 14 July 2015, similarly advised examination of the company’s account for fraudulent activity.

It noted, “The declaration of the complainant company as fraud was made for cogent reasons.” The judgment stated that the acts of the banks were undertaken in discharge of statutory and fiduciary obligations, adding that “there is nothing on record to show it was done by the banks intentionally, in order to cause loss of reputation.”

Addressing the issue of vicarious liability, the Court discussed precedents, including Zee Telefilms Ltd. v. Sahara India Commercial Corp. Ltd. and Raymond Ltd. v. Rameshwar Das Dwarkadas Pvt. Ltd., which held that a company, being a juristic entity, cannot possess mens rea and therefore cannot commit offences such as defamation that require intent. Citing Supreme Court judgements in Maksud Sayed v. State of Gujarat and Sunil Bharti Mittal v. CBI, the Court observed that vicarious liability cannot be imputed to directors or officers absent statutory provision or specific allegations of personal involvement. “The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company,” the Court recorded.

It observed, “There is not a whisper of any fact which can be termed to have been intended to bring disrepute to the complainant’s company. Even if all the averments made in the complaint are admitted to be correct, they do not constitute any act which can be termed as defamatory.”

The Court also rejected the allegation of common intention under Section 34 IPC, holding that each bank acted independently and no concerted intent to defame could be inferred. “There cannot be any common intention imputable to two or more persons of having conjointly in furtherance of common intention committed the act of defamation,” the judgment stated.

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The Court concluded that “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 continuation of the criminal proceedings against the Petitioners, would be an abuse of the process of the Court, as held in the case of State of Haryana v Bhajan Lal, 1992 AIR 604. Accordingly, Complaint Case No. 216 of 2017 pending before the Ld. Metropolitan Magistrate, New Delhi, along with the Summoning Order dated 21.01.2017 and all the proceedings arising therefrom, are hereby quashed.”

“The Petitions are allowed in the above terms. Pending application(s), if any, are disposed of accordingly.”

Advocates Representing the Parties:
For the Petitioners: Mr. Kunal Tandon, Senior Advocate with Mr. Kapil Arora, Ms. Palak Nagar, and Ms. Natasha, Advocates (for Bank of Baroda); Mr. R.S. Dakha, Mr. M.S. Dakha, Ms. Shivani, and Ms. Meena, Advocates (for Oriental Bank of Commerce); Mr. Som Raj Choudhary and Ms. Shrutee Aradhaa, Advocates (for Canara Bank and its officials).

For the Respondents: Mr. Shoaib Haider, APP for the State; Mr. Manohar Malik and Ms. Astha Gumber, Advocates (for Rangoli International Pvt. Ltd.).

Case Title: P.S. Jayakumar & Ors. v. State (NCT of Delhi) & Rangoli International Pvt. Ltd.

Neutral Citation: 2025: DHC:9364

Case Number: CRL.M.C. 1197/2017 and connected matters

Bench: Justice Neena Bansal Krishna