Breach of RBI Circulars Is No Ground for SC/ST Act Prosecution of Bank Officers: Supreme Court Quashes FIR

The third respondent, a small-scale industry, had credit facilities from the State Bank of India from 2010, and its accounts became NPA in 2016 (para 4). Its directors alleged caste-based discrimination by bank officials, forged documents and false information to superiors attracting Section 3(1)(q) of the SC/ST Act, and an economic boycott: rehabilitation packages given to enterprises of higher-caste entrepreneurs were denied to it in breach of RBI circulars (paras 4-6). An FIR was registered in 2019 (para 10). The officers said the allegedly forged documents came from the enterprise's own directors as guarantors, but the High Court held that they must face trial (paras 2, 8).

The High Court did not consider the officers' case and instead found a duty on them to follow the Central Government's and the RBI's directions on reviving MSMEs; that does not justify criminal proceedings against bank officers (para 8). Once the credit facilities turned NPA, recovery proceedings would follow, and non-compliance with RBI guidelines and circulars cannot lead to a criminal prosecution merely because the enterprise's directors are members of Scheduled Castes and Scheduled Tribes (para 9). There was no specific allegation that any officer denigrated the directors on the basis of caste, and although the complaint described the enterprise as predominantly managed by women from those communities, its Managing Director is not a woman (para 9). Breach of circulars, refusal of a rehabilitation package and misrepresentations made to start coercive action can all be raised in recovery proceedings, where the adjudicating authority will decide whether they affect the bank's recovery (para 10).