SC says, bank fraud not just a civil dispute


The Supreme Court of India has set aside a Madras High Court judgment in the case Tamil Nadu Mercantile Bank Ltd vs State. After this decision by the apex court, trial courts are now allowed to proceed with the prosecution of former directors of the bank who allegedly colluded with managers of five different firms to commit fraud against the bank.

SC says, bank fraud not just a civil dispute. According to the charge sheets in the case, the managers of the five  firms were maintaining current account with the bank since 2000, and they collectively siphoned around INR 2.51 crore from the bank with the help of the other accused, sources informed.

The fraud which was first discovered in June 2003, deployed the following modus operandi:


The accused managed to encash cheques at the bank’s Tiruppur branch despite the drawers accounts not having the requested amount. Apparently, the branch manager facilitated the transactions using the Local Bill Discounting provisions.

Later, after learning from the bank that their cheques had bounced, the accused deposited cheques with even higher amount in order to “clear the debt”.

After they were dragged to the court, the accused appealed to the High Court for quashing all criminal charges filed against them. The HC, after coming under the impression that the dispute in concern was more of a civil nature and the bank could move the debt recovery tribunal to recover the money, cleared the accused of criminal charges.

However, the SC has now set aside the HC judgment saying that the forgery was not just a breach of contractual terms, but smacked of criminality. Based on that opinion, the court allowed criminal proceedings against the accused to resume full fledgedly.