Bank Cannot Be Summoned As Accused For Offence Of Defamation: Delhi High Court Quashes Case Against Bank Officers

The Delhi High Court held that a bank cannot be summoned as an accused for the offence of Defamation and that the Bank Officers cannot be held liable for the same.

The Court held thus in five Petitions preferred by the officers of Bank of Baroda, Oriental Bank of Commerce, Corporation Bank, and Canara Bank under Section 482 of the Criminal Procedure Code, 1973 (CrPC).

A Single Bench of Justice Neena Bansal Krishna observed, “The Complainant, in various parts of the Complaint, has alleged that the act of the Bank in declaring the Company as fraud, is defamatory. From the above discussion, it is clear that a Bank or a Company cannot be made an accused for an offence under Section 499 IPC, as they lack a state of mind or mens rea necessary to constitute the offence. … It therefore, is concluded that the Bank cannot be summoned as an accused for the offence of Defamation.”

The Bench said that for an offence under Section 499 of the Indian Penal Code, 1860 (IPC), the intention or mens rea to cause harm to reputation is an essential ingredient and a company, being an artificial or juristic person, does not possess such intention or mens rea.

Senior Advocate Kunal Tandon represented the Petitioners, while APP Shoaib Haider represented the Respondents.

Facts of the Case

The Complainant was a company claiming to be enjoying a strong reputation and earning reverence and respect in the business community. In 2014, it entered into a consortium arrangement and executed an inter-se agreement with seven banks. A credit facility was extended to the company wherein the Punjab National Bank (PNB) acted as the lead bank of the consortium. The total credit facility amounted to Rs. 250 Crores, of which Rs. 56 Crores was extended by the lead bank. Thereafter, the Central Bureau of Investigation (CBI) conducted a raid on the factory premises and offices of the company in relation to an ongoing investigation into the allegations of fraud committed by another company with the State Bank of Mysore. It was alleged that the signatures of the Directors of the Complainant company were forged and a fictitious bank account was opened, which was later acknowledged by the CBI. The Complainant company requested the Consortium Banks not to take any steps curtailing financial services.

Despite its request, some of the banks stopped extending financial assistance. Thereafter, the company issued a letter to the AGM of the lead bank and the Consortium Banks unanimously agreed that the Auditors had not arrived at any conclusive opinion. Allegedly, the accused Banks with the intent to cause injury and harm to the Complainant’s reputation and to compel to clear their outstanding dues, illegally and arbitrarily decided to declare the Complainant as fraud, despite there being no fraudulent activity on the part of the Complainant. This was challenged and the High Court directed the banks not to take any precipitative steps against the company and its directors until next date of hearing. Thereafter, a criminal complaint was filed by the company against the accused banks. The Metropolitan Magistrate (MM) issued summons against the banks and being aggrieved, they approached the High Court.

Court’s Observations

Whether the act of the Banks in classifying company’s account as fraud, amounts to defamation under Section 499 IPC?

The High Court in view of this issue, noted, “The Banks, acting in good faith and upon analysing the Reports and the Letters received from the CBI and RBI, concluded that certain irregularities had been found in the accounts of Respondent No. 2. The declaration of the Complainant Company as fraud, was made for cogent reasons.”

The Court reiterated that 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 entire case of the Complainant rests on the averment that the act of Banks in declaring the Complainant Company as fraud, has defamed it. that Pertinently, certain alleged frauds were noticed in the Accounts of the Complainant’s Company, which prompted CBI and RBI, to conduct further enquiry in the Accounts of the Company. The Letters were also written to the Banks for scrutiny of the Accounts of the Complainant’s Company, with their respective Banks”, it said.

The Court was of the view that such act of declaring the Complainant’s Company as fraud, was in discharge of their banking activities and in good faith while conducting the banking activities of their respective bank.

“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 as per the averments made in the Complaint, the only assertion is that because the Complainant’s Company was declared as a fraud, it has resulted to major financial losses. Therefore, even if all the averments made in the Complaint, are admitted to be correct and true, they do not constitute any act which can be termed as defamatory”, it held.

The Court observed that the act of declaring the Complainant’s Company as fraud, was not a personal vendetta of the Banks or intended to bring disrepute or to defame the Complainant in any manner; rather, it was an informed decision taken in by the Banks, in their interest and in accordance with law.

Can Officers acting in their professional capacity, be made vicariously liable for the offence of Defamation allegedly committed by the Company (Banks)?

The Court further noted that no person can be vicariously summoned for the act of a Company unless there is some provision of law, which so mandates and this principle has been stated and reiterated consistently by the Apex Court.

“It is the cardinal principle of criminal jurisprudence that there can be no vicarious liability unless the statute specifically provides so. Furthermore, an individual who has allegedly perpetrated the commission of an offence on behalf of a Company, can be made accused along with the Company if there is sufficient evidence of his active role coupled with criminal intent”, it reiterated.

The Court also said that there exists no provision under Criminal Code which recognizes vicarious liability of the Directors of a Company for criminal offences allegedly committed by the Company.

“For the summoning of individual Directors, there has to be personal imputations to make them liable for their individual acts and criminal liability cannot be vicariously fastened onto Directors/officials merely because of their designation, in the absence of any specific allegations”, it added.

Conclusion

Moreover, the Court remarked that the Petitioners, who are the Senior Bank Officers, have not been attributed even a single act done by them, with the requisite mens rea of bring disrepute to the Complainant’s Bank and all the averments in the Complaint are directed towards the Banks, who had acted in discharge of their business activities.

“In the absence of any allegation against any of the Bank Officers, they cannot be held liable for any act of defamation and could not have been summoned for the offence under Section 500 of IPC. … 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”, it said.

The Court held that there is no defamatory act attributed to the Petitioners in the entire Complaint which refers only to the act of the Banks declaring the Complainant Company fraud and the Petitioners cannot be held to have committed the offence of defamation.

“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”, it concluded.

Accordingly, the High Court allowed the Petitions and quashed the case against the Petitioners.

Cause Title- P S Jayakumar & Anr. v. State (NCT of Delhi) & Anr. (Neutral Citation: 2025:DHC:9364)

Appearance:

Petitioners: Senior Advocate Kunal Tandon, Advocates Kapil Arora, Palak Nagar, Natasha, R.S. Dakha, M.S. Dakha, Shivani, Meena, Som Raj Choudhary, and Shrutee Aradhaa.

Respondents: APP Shoaib Haider, Advocates Manohar Malik, and Astha Gumber.

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