Loan Sanction on Same Day Not Illegal: Chhattisgarh HC Acquits Banker, Quashes CBI Conviction in Decades Old Loan Fraud Case [Read Order]

The Chhattisgarh High Court has held that sanctioning a bank loan on the same day as the submission of the application does not, by itself, constitute any illegality or criminal misconduct, and has acquitted a former bank Branch Manager and other accused, setting aside their conviction in a decades-old CBI loan fraud case.

In the matter of Indrajeet Singh Solanki, the appeals were filed against a 2007 judgment of the Special CBI Court, Raipur, which had convicted the appellants under Sections 120B, 420, 468 and 471 of the IPC and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act.

The case related to the sanction of loans during the period 1989-1992 when the appellant, Indrajeet Singh Solanki, was serving as the Branch Manager of Dena Bank’s Industrial Estate Branch, Raipur.

The prosecution alleged that the Branch Manager entered into a criminal conspiracy with private individuals to sanction loans in the names of fictitious firms by relying on forged documents, without following mandatory banking procedures, thereby causing wrongful loss to the bank.

The fact that the loan applications were approved the same day they were submitted, which was presented as evidence of fraud and abuse of official position, was a key component of the prosecution's case.

The prosecution witnesses themselves weakened the prosecution's case, the High Court found after a thorough review of the material.

During cross-examination, a number of bank executives strongly agreed that, as long as the Branch Manager is happy with the documentation and compliance criteria, there is no regulation or banking guideline that forbids the sanctioning of a loan on the same day.

According to one important witness, loan applications are frequently approved and approved the same day, and this does not constitute a procedural infraction.

The Court further noted that the evidence on record showed that insurance of the hypothecated stock was duly obtained, insurance premiums were debited from the borrowers’ accounts, and instalments were repaid from time to time.

The bench observed that insurance could not have been issued without physical verification of the stock by the insurance company, which strongly supported the defence case that normal banking procedures were followed. Also, even the investigating officer admitted that no departmental enquiry was ever initiated against the Branch Manager for irregular loan sanctioning.

Justice Rajani Dubey noted that mens rea and dishonest intention must be proven beyond a reasonable doubt by applying the standards established by the Supreme Court on criminal conspiracy, forgery, and cheating.

The necessary elements of the crimes were determined to be missing in the lack of any proof demonstrating falsified documents, an agreement between the accused, or unlawful gratification. Strong suspicion, no matter how serious, cannot replace valid proof in criminal law, the Court confirmed.

Accordingly, the Chhattisgarh High Court allowed all the appeals, set aside the conviction and sentences imposed by the trial court, and acquitted the appellants of all charges

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