Negligence Is Not Conspiracy: Calcutta High Court Upholds Discharge of Bank Manager in ₹9.14 Crore Loan Fraud Case

“Where Two Views Are Possible, One Leading to Trial and the Other to Discharge, The Court Must Opt for Justice Over Harassment”— In a significant judgment that underscores the limits of criminal liability in complex economic offences and the duty of investigators to pursue all culpable parties equally, the Calcutta High Court dismissed the Central Bureau of Investigation’s revisional plea challenging the discharge of K.D. Bakshi, a former Bank Manager of Canara Bank, in a ₹9.14 crore loan fraud case.

Justice Chaitali Chatterjee Das emphatically held that the discharge order passed by the Special CBI Court on November 28, 2014, was legally sound, finding no prima facie material against the bank manager to proceed under charges of criminal conspiracy or corruption. The High Court found CBI's investigation lacked thoroughness, and that the “pick-and-choose” approach in prosecuting only junior officers while leaving out key decision-makers in the bank hierarchy amounted to a denial of fair trial rights under Article 21 of the Constitution.

“Failure to Reinvestigate Despite Specific Court Order Weakens Prosecution’s Credibility”

The Court was sharply critical of the CBI’s failure to comply with the Special Judge’s direction for reinvestigation, particularly concerning officials of the Core Credit Group and the sanctioning General Manager who played a direct role in approving the loan in favour of M/s Raiganj Solvent Oil Industries Pvt. Ltd.

Justice Chatterjee Das observed: “It is surprising that despite giving a specific direction to reinvestigate the matter regarding involvement of any such officer of Circle Office or Core Credit Group, no development took place, and nothing has been placed before this Court.” [Para 10]

Referring to the Supreme Court’s ruling in State of M.P. v. Sheetla Sahai (2009) 8 SCC 617, the High Court reaffirmed the need for fair, non-selective investigations, warning that “selective prosecution offends the accused’s fundamental rights and the integrity of the trial process.”

“Recommending a Loan Without Sanctioning Authority Does Not Constitute Criminal Conspiracy”

The CBI had accused the Opposite Party (Bakshi) of conspiring to commit loan fraud by recommending a loan to a Kolkata-based company with alleged fraudulent credentials. However, the Court found that the loan sanctioning authority rested solely with senior officials of Canara Bank — particularly the General Manager, Anil Girodia, and members of the Core Credit Group — who were not named as accused.

The High Court clearly held:

“The Core Credit Group and the competent authority of the Canara Bank sanctioned the loan, not only on the basis of the credit report submitted by the present Opposite Party, but also on the basis of the report of the Technical Field Officer.” [Para 10]

Further:

“Even if the evidence so projected by the prosecution against the accused was proved before the Court during trial, then also the accused was not liable to sanction the loan… the Opposite Party had no authority to sanction such a huge amount.” [Para 10]

Thus, the Court found no mens rea or active role in the alleged criminal conspiracy and concluded that Bakshi’s conduct, at best, suggested negligence, not fraud or criminal intent.

“Revisional Court Should Not Interfere Where Trial Court Has Applied Its Mind Judiciously”

The CBI had challenged the Special Judge’s findings as “mechanical” and claimed that the discharge was granted without proper consideration of evidence. However, the High Court disagreed, noting that the Trial Court had thoroughly applied its judicial mind.

Justice Chatterjee Das stressed:

“When only one view is possible and that is to discharge the accused, it would be an abuse of process to compel an accused to face trial.” [Para 11]

Quoting Sheetla Sahai, the Court reaffirmed that:

“The prosecution cannot proceed in a pick-and-choose manner when the record itself reveals complicity of several senior officials who have been let off without explanation.”

This selective arraignment, the Court held, violates both procedural fairness and substantive justice.

“Negligence Alone Cannot Be Criminalised Under Prevention of Corruption Act”

The High Court made a crucial distinction between professional lapses and criminal misconduct, noting that:

“It can be said unequivocally that there was negligence on the part of the Opposite Party, but whether he had hatched a conspiracy cannot be said to be proved.” [Para 10]

Despite allegations of an incomplete credit report and failure to seek independent opinion on the borrower’s past default with SBI, the Court reiterated that these acts were insufficient to attract criminal charges under Sections 120B, 420, or under the Prevention of Corruption Act.

₹9.14 Crore Loan Fraud and Alleged Procedural Lapses

The case originated from a complaint filed by the General Manager & Chief Vigilance Officer of Canara Bank on 15 January 2009, alleging that the borrower company, M/s Raiganj Solvent Oil Industries Pvt. Ltd., had secured substantial credit facilities based on false documents and forged financials.

The loan package included:

• OCC limit of ₹375 lakhs

• Term Loan of ₹450 lakhs

• OBDB sub-limit of ₹90 lakhs

The company's directors, aided by middlemen and allegedly with the connivance of bank officials, diverted funds and siphoned off crores, causing the account to slip into Non-Performing Asset (NPA) status.

While several accused were named, including middlemen, promoters, and chartered accountants, the CBI selectively targeted lower-level bank officials such as Bakshi, while not charging core decision-makers. This disparity ultimately became fatal to the prosecution’s case against Bakshi.

Justice Chatterjee Das, after a detailed analysis of the charge sheet, investigation records, and the previous trial court order, concluded:

“This Court does not find any illegality in the findings of the Learned Trial Court. The Opposite Party cannot be made to face a criminal trial for acts in which he neither had the authority to sanction, nor exclusive responsibility.” [Para 12]

Consequently, the Court ordered:

“The revisional application filed by the CBI stands dismissed. The discharge order dated 28.11.2014 passed by the Learned Special Judge, CBI Court, Kolkata, is affirmed.” [Para 13–14]

A Judgment Upholding Individual Fairness Against Institutional Failure

This judgment serves as a powerful reminder that criminal law must be applied with precision, particularly in economic offences where systemic failure and chain-of-command complicity often lead to scapegoating of lower-level officers.

The Calcutta High Court, by refusing to allow a trial to proceed in absence of prima facie evidence, has upheld the principles of fair trial, equality before law, and protection from abuse of process — ensuring that criminal law does not become a tool of institutional convenience.

Date of Decision: 28 October 2025