September 15, 2023 In Uncategorized


A two Judge Bench of the Supreme Court comprising of Justice S. Ravindra Bhat and Justice Aravind Kumar passed a Judgment dated 11-09-2023 in the matter of Religare Finvest Limited Vs State of NCT of Delhi & Anr. in Criminal Appeal No(s). 2242 of 2023 and DBS Bank India Limited Vs State of NCT of Delhi & Anr. in Criminal Appeal No(s). 2243 of 2023 and observed that the Appellant-DBS Bank India Ltd. will not be liable to be prosecuted for the wrongful acts of the officials of the company that it has amalgamated with under a Scheme of Amalgamation sanctioned by the Government under the Banking Regulation Act 1949.


(i) In the present case, one, Religare Finvest Limited (RFL) got an FIR registered on 23-09-2019 bearing FIR No. 189 / 2019 under Sections 409 of the Indian Penal Code 1860 (IPC) (Criminal breach of trust by public, servant. or by banker, merchant or agent) read with 120-B of IPC (Punishment of criminal conspiracy) with the P.S. Economic Offences Wing (EOW), Mandir Marg, New Delhi, pertaining to the (a) Laxmi Vilas Bank’s (LV Bank) unauthorised creation of security of the Fixed Deposits of RFL against the short-term loans availed from LV Bank by RFL’s group companies, namely, RHC Holding Pvt. Ltd. (RHC) and Ranchem Private Limited (RPL) and (b) further, LV Bank’s misappropriation of fixed deposits of RFL upon default in repayment of loan by the group companies of RFL.

(ii) RFL further stated that it had deposited around Rs. 400 Crores and Rs. 350 Crores in 2 short-term Fixed Deposits (FDs) each with LV Bank, for which RFL received 4.5% interest p.a. in 2016-17. However, to the shock of RFL, LV Bank sent an Email dated 31-07-2017 stating that the funds in the FDs were credited to RFL’s current account and subsequently, debited from its current account, without the authorisation of RFL. Further, LV Bank used those funds to provide loans to people @10% interest p.a. and thereby made huge gains. LV Bank also adjusted the outstanding loan amount to be repaid by RFL’s group companies, from RFL’s FD amount, without the authorisation of RFL.

(iii) Post-investigation, a Supplementary Chargesheet dated 12-02-2021 was filed before the Ld. Additional Chief Metropolitan Magistrate (ACMM), New Delhi (Trial Court), against various officials of the LV Bank and RHC and RPL (i.e. the group companies of RFL) stating that they acted in connivance with each other to cheat RFL.

(iv) The Trial Court took on record the Supplementary Chargesheet in Crime Case No. 1534 / 2020 and vide, a Summoning Order dated 16-02-2021, issued Summons dated 09-04-2021 to the Accused persons.

(v) Meanwhile, owing to the unstable financial condition of LV Bank, the Government ordered for amalgamation of LV Bank with DBS Bank India Ltd. (DBS Bank), a wholly owned subsidiary of DBS Singapore Ltd. on 25-11-2020.

(vi) Aggrieved by the Trial Court’s Summoning Order dated 16-02-2021, DBS Bank filed a Criminal Miscellaneous Case in M. C. No. 3173/2021 before the Delhi High Court seeking quashing of the Supplementary Chargesheet dated 12-02-2021 and the Summoning Order dated 16-02-2021, on the ground that LV Bank had ceased to exist due to the aforementioned Amalgamation with DBS Bank and that DBS Bank should not face prosecution for the acts and omissions of LV Bank which it merged with, as directed by the Government and the Reserve Bank of India (RBI).

(vii) However, the High Court, vide Order dated 24-03-2023, refused to quash the Supplementary Chargesheet dated 12-02-2021 and the Summoning Order dated 16-02-2021, till the time the RBI gives a clarification regarding Clause 3 (3) of the Scheme of Amalgamation sanctioned under the Banking Regulation Act 1949 in respect of “criminal proceedings constituted against transferor bank if be carried forward to transferee bank or not after the amalgamation.

Supreme Court Observations

Aggrieved by the High Court Order dated 24-03-2023, the DBS Bank filed Criminal Appeal No(s). 2243 of 2023 before the Supreme Court challenging the High Court’s refusal to quash the Summoning Order dated 16-02-2021 and the RFL filed Criminal Appeal No(s). 2242 of 2023 before the Apex Court on the limited point that the High Court ought not to have deferred the issue for consideration by RBI and should have dismissed DBL Bank’s prayer for quashing the Summoning Order dated 16-02-2021.

The Supreme Court, vide Order dated 11-09-2023, made the following observations:

(1) That the word amalgamation “contemplates a state of things under which 2 companies are so joined as to form a third entity or one company is absorbed into and blended with another company.”

(2) That every scheme of amalgamation sanctioned under the Banking Regulation Act 1949 is made in order to protect the interests of the general public, creditors, depositors, customers, etc, otherwise it may lead to huge losses in terms of money and confidence in the banking and financial system.

(3) That as per the Apex Court’s earlier judgments, the effect of amalgamation of two companies is that the transferor company ceases to have any entity, and the amalgamated company acquires a new status, hence, it is not possible to hold the two companies jointly liable in respect of their liabilities and assets.

(4) Further, the criminal liability of a company which is attributable to individual acts of employees, directors or officials of the said company, cannot be transferred ipso facto, when it is in the nature of a penal proceeding.

(5) Thus, applying the aforesaid principles to the present case, the Supreme Court observed as follows:

(i) That Clause 3 of the Scheme of Amalgamation, in the present case, provided that if any director or officer of the transferor company i.e. LV Bank contravened with any provisions of the law, they will be liable to be proceeded against under such law, as if the transferor company had not been dissolved.

(ii) Hence, upon Amalgamation of LV Bank with DBS Bank, (a) although the corporate existence of LV Bank is deemed to have been destroyed, (b) the legal proceedings already initiated against the officials of erstwhile LV Bank will continue and remain unaffected by the Amalgamation, (c) further, such liability cannot be fastened / transferred / attributed to DBS Bank and more so, when the Police did not find any scope of involvement of DBS Bank in the perpetrated fraud.


Thus, based on the aforesaid observations, the Apex Court quashed all the criminal proceedings registered with EOW and pending before the Trial Court, to the extent that it involved the DBS Bank. As a result, the Criminal Appeal No(s). 2243 of 2023 filed by DBS Bank was allowed and the Criminal Appeal No(s). 2242 of 2023 filed by RFL was dismissed and the High Court Order dated 24-03-2023 was also set aside.

Harini Daliparthy

Senior Associate

The Indian Lawyer

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