SBI manager's Rs 22.5 crore loan scam: Can he be tried without government sanction?

He sanctioned a Rs 22.5 crore loan that vanished. The corruption case collapsed. But the cheating case stayed alive. The Supreme Court just decided why.

On a Hyderabad afternoon in 2013, the CBI officer's knock on the door of an Assistant General Manager at State Bank of India broke the quiet of the bank's corridor. The charge: he had conspired with others to sanction a Rs 22.50 crore corporate loan to a company that promptly diverted the money. The bank's own officer, the agency alleged, had helped empty the vault.

Nearly a decade later, the corruption charges against him were dead — the sanction to prosecute under the Prevention of Corruption Act had been quashed by the High Court. But the cheating and forgery charges remained very much alive. The officer argued they should die too. The Supreme Court had to decide: can a bank manager be tried for cheating when the corruption case against him has already collapsed?

When the loan went missing

The Assistant General Manager — identified in court records as A-2, the second accused — allegedly sanctioned and disbursed Rs 22.50 crore to a company in violation of disbursement conditions. The money was diverted. The bank was left holding a bad loan and a criminal complaint.

The CBI registered an FIR (a written complaint that starts a police investigation) on October 30, 2013, under the Banking Securities and Fraud Cell in Bangalore. The charges spanned both the Indian Penal Code — Sections 120-B (criminal conspiracy), 420 (cheating), 468 (forgery for cheating), and 471 (using a forged document as genuine) — and the Prevention of Corruption Act, 1988, specifically Section 13(2) read with 13(1)(d), which deals with criminal misconduct by a public servant.

By December 2014, a chargesheet had been filed against six persons, including the AGM, before the Principal Special Judge (CBI Cases) in Hyderabad.

The sanction that came and went

Under the Prevention of Corruption Act, a public servant cannot be prosecuted for corruption without prior sanction from the authority competent to remove them. This is Section 19 of the PC Act — a procedural shield designed to protect honest officers from frivolous prosecution.

On February 13, 2015, the Chief General Manager (MCG-I) of SBI declined to grant that sanction. But then something unusual happened. The sanctioning authority reviewed its decision and, on April 11, 2015, granted sanction under Section 19.

The accused challenged this reversal before the High Court of Telangana. A Single Judge allowed his writ petition on October 30, 2018, quashing the sanction. The CBI appealed to a Division Bench, but the appeal was dismissed on July 15, 2019. The sanction was gone.

Why the corruption case died but the IPC case didn't

With the PC Act sanction quashed, the Special Court in Hyderabad discharged the AGM from the corruption charges on August 30, 2019. But it refused to discharge him from the IPC offences — cheating, conspiracy, forgery, and using forged documents. The courtroom fell silent as the judge read out the order: the corruption shield had fallen, but the cheating door remained open.

The AGM then filed a petition under Section 482 of the CrPC (the High Court's inherent power to prevent abuse of its process) before the Telangana High Court, arguing that the IPC prosecution should also be dropped. The Single Judge dismissed that petition on June 20, 2022.

That brought him to the Supreme Court, where he raised a fresh argument: even if Section 19 of the PC Act didn't apply, Section 197 of the CrPC — which requires government sanction before prosecuting a public servant for any offence committed while discharging official duty — should protect him.

The key question: is a bank officer a 'government servant'?

Section 197 CrPC applies only to judges, magistrates, and "public servants not removable from office save by or with the sanction of the Government." The AGM argued that as an officer of a nationalised bank — which is owned by the government — he fell within this category.

The Supreme Court bench of Justice B.R. Gavai and Justice J.B. Pardiwala examined this claim closely. Their answer was clear: no.

The court held that while a person working in a nationalised bank is indeed a "public servant" under the Prevention of Corruption Act, Section 197 CrPC demands something more specific. It requires that the officer be someone who cannot be removed except by or with the sanction of the government. Nationalised bank officers are appointed and removed by the bank's board or its designated authority — not by the government. The government may own the bank, but it does not hire or fire individual officers. As the court put it, "Section 197 CrPC is not attracted because it applies only to public servants not removable from office save by or with the sanction of the Government."

The court drew on Article 311 of the Constitution (which protects civil servants from arbitrary dismissal) and its own precedent in Parkash Singh Badal v. State of Punjab to distinguish between government servants and public servants working in government-owned corporations.

Even if Section 197 applied, would it save him?

The court then addressed a second layer: even if a bank officer could claim Section 197 protection, would the acts alleged in this case — sanctioning a loan in violation of disbursement conditions — be covered?

Here, the court applied what it called the "safe test": whether the omission of the complained act would constitute dereliction of official duty. If the answer is yes, the act has a nexus with official duty and may attract protection. But if the official duty was merely a cloak for criminal conduct, the protection falls away.

The court cited its own recent decision in A. Srinivasulu v. The State (decided just two months earlier, on June 15, 2023) and the Privy Council's old but still relevant Gokulchand Dwarka Das Morarka v. King to hold that even acts in excess of duty can attract protection — but only if they are reasonably connected to the official duty. If the discharge of duty is a mere pretext for illicit acts, the shield disappears.

The AGM's last argument fails

The most important part of the judgment for practitioners is the court's clear separation of Section 19 PC Act and Section 197 CrPC. These are two different protections, the court said, standing on different footings.

Section 19 PC Act protects against prosecution for corruption offences. Section 197 CrPC protects against prosecution for any offence — including IPC offences — committed while discharging official duty. But the refusal of sanction under one does not automatically block prosecution under the other.

In this case, the PC Act sanction was quashed, so the corruption charges fell. But the IPC charges — cheating, conspiracy, forgery — could survive independently, provided they did not require Section 197 sanction. Since the court had already held that Section 197 did not apply to nationalised bank officers, the IPC prosecution could proceed.

The court also cited K. Ch. Prasad v. Smt. J. Vanalatha Devi, S.K. Miglani v. State (NCT of Delhi), SHO, CBI/ACB/Bangalore v. B.A. Srinivasan, and Kamal Shivaji Pokarnekar v. State of Maharashtra to reinforce the principle that discharge from one set of charges does not entitle an accused to discharge from another set, as long as the remaining charges are supported by prima facie evidence.

What this means for bank officers and prosecutors

For officers of nationalised banks, this judgment closes one escape route. You cannot argue that IPC prosecution requires government sanction simply because you work for a government-owned bank. The protection of Section 197 CrPC is reserved for those who are appointed and removed by the government itself — not by a bank board.

For prosecutors, the judgment offers a clear strategy: even if a PC Act sanction is refused or quashed, IPC charges can continue independently, provided the facts support them. The two statutes operate in parallel, not in sequence.

THE PLAY: When a PC Act sanction is refused, immediately assess whether the same facts support IPC offences — if they do, the prosecution survives.

The loan was sanctioned. The money vanished. The corruption case died. But the cheating case lived on — because the court drew a line that bank officers cannot cross.