India: Prevention Of Corruption Act - Scanning Private Bankers

Last Updated: 29 April 2016
Article by Legasis Legasis

Corruption is one of the biggest areas of concern for the world in its efforts to make itself a better place in terms of compliance and ethics. All over the world, may it be Brazil in America, Italy in Europe or China in Asia; countries are trying to ensure stricter enforcement of anti-corruption provisions. Also, in order to have more elaborated and clearer anti-corruption statutes in place, countries are opting to bring into force separate anti-corruption statutes over having these provisions as part of their civil codes. To keep the business economies untainted from non-compliant and unethical practices such as corruption, it's important for the judiciary to interpret the statutes based on the purposivism theory of interpretation. Purposive interpretation i.e. interpretation by placing the focus on the legislative intent or purpose is a sine qua non for the judiciary in order to curb corruptive practices at a ground level. The Supreme Court of India recently set an example by interpreting India's Prevention of Corruption Act in a way that will extend the ambit of ethics and compliance to the private banking industry.

The rule of casus omissus states that 'what has not been provided for in the statute cannot be supplied by the Courts'. The rule limits the right of judiciary to interpret beyond what is stipulated. However, Justice Lord Denning, in the case of Seaford Court Estates Ltd. Vs Asher ((1949) 2AIIER 155, p 164) opines that "... A Judge must not alter the material of which the Act is woven, but he can and should iron out the creases..." The approach taken by Justice Denning serves as an exception to the rule and the same has been relied upon by Justice Ranjan Gogoi of the Supreme Court of India. In the case of Ramesh Galli Vs CBI through Superintendent of Police, BS & FC & Anr.("the said decision")1, Justice Gogoi widened the scope of the definition of a 'public servant' given under the Prevention of Corruption Act, 1988 ("the P. C. Act") to include bankers working in a private bank.

To sum up the facts of the said decision, the Global Trust Bank ("GBT") was incorporated as a banking company in 1993 and was issued a license by the Reserve Bank of India ("RBI") under the Banking Regulations Act, 1949. The promoters Ramesh Gelli and Sridhar Subasri, who are also the Chairman and the Executive Director of the Bank respectively ("the Accused # 1"), obtained loans from certain individuals and corporations including M/s Beautiful Group of Companies and M/s Trinity Technomics Services Pvt. Ltd. run by Rajesh Mehta and Vijay Mehta ("the Accused # 2"). After opening the account in the name of Beautiful Diamonds Ltd. in GTB, the Accused #1 allowed Accused #2 to avail of certain credit facilities by fraudulently instructing the branch heads without following the branch norms of credit facilities. The Accused #1 also illegally approved higher credit limits to M/s Beautiful Diamonds Ltd. In addition, the non-performing assets ("NPA") accounts of the Accused #2 were manipulated and declared as higher profit yielding accounts. The Accused #1 and #2 together caused a total loss of Rs 41.00 crores to GTB. The scam came to light only when GTB merged with Oriental Bank of Commerce ("OBC") and two First Information Reports ("FIR") were lodged by the Vigilance Officer of the OBC under Sections 420, 467, 468, 471 of Indian Penal Code ("IPC"), Sec 13 (2) read with Sec 13 (1)(d) of the Prevention of Corruption Act ("PC Act") and Section 120B read with Sections 409 and 420 IPC against the Accused #1 and 2.

It is important to emphasise on the fact that GBT was a private sector bank before its amalgamation with OBC and that the Accused #1 were the employees of a private sector bank when the offence was committed. The question that arises is whether being the private bankers, they can be deemed to be a public servant to be charged guilty under the P. C. Act. As per Section 2(c) of the P. C. Act, 'public servant' means "(i)...(ii)...(viii) any person who holds an office by virtue of which he is authorised or required to perform any public duty ... (ix)..." Also, "public duty" as defined under the P. C. Act means "a duty in the discharge of which the State, the public or the community at large has an interest". Taking a plain view of both the definitions, the definitions do not seem to include the employees of a private bank in their scope and thus, from a literal point of view, the P. C. Act should not reach the employees of a private bank. However, the Supreme Court in the said decision chose to look beyond the plain interpretation of these definitions and took a purposive way to interpret the P. C. Act.

In the said decision, the Supreme Court laid down that "The present Act (the 1988 Act) envisages widening of the scope of the definition of the expression "public servant". It was brought in force to purify public administration. The legislature has used a comprehensive definition of "public servant" to achieve the purpose of punishing and curbing corruption among public servants. Hence, it would be inappropriate to limit the contents of the definition clause by a construction which would be against the spirit of the statute. Bearing in mind this principle, when we consider the case of the appellant, we have no doubt that he is a public servant within the meaning of Section 2(c) of the Act.... The word "office" is of indefinite connotation and, in the present context, it would mean a position or place to which certain duties are attached and has an existence which is independent of the persons who fill it."

Thus, the said decision brings private bankers in the purview of anti-corruption provisions of India. This can be considered as one of the landmark judgements in determining the reach of anti-corruption provisions.  In order to encourage robust compliance and ethics practices, mere enactment of a law does not suffice. It further requires judiciary to correctly interpret and apply the law in the manner that it will serve the purpose of the legislation and will, as a result, deter noncompliance. The Supreme Court through the said decision sets a benchmark by interpreting and applying the P. C. Act in the manner that will curb unethical and non-compliant practices in a private banking industry which indeed is the purpose of the legislation.


1 CRIMINAL APPEAL NOS. 1077-1081 OF 2013,

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions