New Delhi: The Supreme Court has quashed criminal proceedings under the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act against several bank officials, ruling that initiating loan recovery proceedings or denying rehabilitation benefits to a borrower cannot, by itself, attract prosecution under the Act without specific allegations of caste-based discrimination or insult.
A Bench of Justices J B Pardiwala and K Vinod Chandran observed that criminal liability under the SC/ST Act requires specific allegations establishing caste-based discrimination and that a commercial dispute involving loan recovery cannot automatically be converted into a criminal case under the legislation.
The court passed the order while allowing an appeal filed by Chavan Dharmendar and others, challenging criminal proceedings arising from an FIR registered on February 4, 2019, at the CID Police Station in Hyderabad, Telangana.
The case originated from credit facilities extended by the State Bank of India to Hritasha Infra Projects Private Limited, a small-scale industry. The company’s director, Y Rajasekhar, alleged that the bank had extended credit facilities to the enterprise since 2010 against collateral security.
However, the company’s accounts were classified as non-performing assets (NPAs) in 2016 following financial losses. The promoters claimed to have repaid a term loan of Rs 2.90 crore and subsequently deposited another Rs 45 lakh to regularise the account.
They alleged that despite these payments, certain bank officials discriminated against them on caste grounds and denied the company rehabilitation benefits.
The complainants further accused the officials of forging documents and furnishing false information to senior authorities, allegedly resulting in coercive action against the company. They claimed that the conduct attracted provisions of Section 3(1)(q) of the SC/ST Act.
The complaint also alleged economic boycott, claiming that rehabilitation packages and substantial concessions had been extended to enterprises owned by influential entrepreneurs from higher castes, while similar benefits were denied to businesses managed by members of the Scheduled Castes and Scheduled Tribes.
Rejecting the allegations as sufficient grounds for criminal prosecution, the Supreme Court observed that there was no specific allegation that any of the bank officials had insulted or denigrated the company’s directors on account of their caste.
The Bench further held that alleged violations of Reserve Bank of India (RBI) guidelines and circulars, or failure to provide rehabilitation benefits, could not independently justify criminal prosecution merely because the company’s promoters belonged to the Scheduled Castes or Scheduled Tribes.
The apex court clarified that the complainants remained free to pursue their grievances before appropriate forums, including the Debt Recovery Tribunal (DRT). Issues concerning alleged violations of RBI guidelines, denial of rehabilitation benefits and purported misrepresentations could be examined in the relevant recovery proceedings.
Disagreeing with the Telangana High Court’s refusal to interfere with the criminal proceedings, the Supreme Court held that the circumstances did not warrant invoking the SC/ST Act against the bank officials.
Accordingly, it quashed the proceedings arising from the FIR.
