The Supreme Court ruled that a juristic person, such as a corporation, cannot have mens rea (criminal intent), leading to the dismissal of a criminal case against HDFC Bank. The court emphasized that criminal liability, in certain cases, depends on the presence of intent, which legal entities like companies cannot possess.
New Delhi: In a significant ruling, the Supreme Court of India dismissed criminal proceedings against HDFC Bank, highlighting that a juristic entity, such as a bank, cannot possess “mens rea,” or criminal intent, which is crucial for establishing most offenses under the Indian Penal Code (IPC).
The decision made by a bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan.
The case stemmed from a search operation conducted by the Income Tax Department in October 2021 at the premises of Smt. Sunita Khemka and others in Patna.
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During this operation, a bank locker (No. 462) at HDFC Bank’s Exhibition Road Branch identified, which was under a prohibitory order issued on October 5, 2021, under Section 132(3) of the Income Tax Act.
This order prohibited the operation of lockers, bank accounts, and fixed deposits belonging to Khemka and her associates. On November 1, 2021, the Income Tax Department partially revoked the restrictions on certain bank accounts but maintained the prohibition on the bank locker. However, on November 9, 2021, HDFC Bank officials mistakenly allowed Khemka access to her locker, misinterpreting the revocation order.
This led to a complaint from the Deputy Director of Income Tax and the subsequent registration of an FIR against bank officials for offenses such as cheating (Section 420), criminal breach of trust (Section 409), and conspiracy (Section 120B).
The appeal before the Supreme Court raised significant legal issues, including:
- Mens Rea Requirement: Whether a juristic entity like a bank can possess the mens rea necessary to commit criminal offenses under the IPC.
- Interpretation of Orders: Whether bank officials acted with criminal intent in misinterpreting the revocation order regarding locker access.
- Scope of High Court’s Powers under Section 482 CrPC: The extent of the High Court’s inherent powers to quash an FIR if no prima facie offense is established.
Supreme Court’s Observations
In quashing the FIR, the Supreme Court made important clarifications regarding mens rea and criminal liability for juristic persons.
The Court stated,
“A juristic entity like a bank cannot possess mens rea, which is a fundamental ingredient for offenses under Sections 406, 409, and 420 of the IPC.”
The bench further explained that although bank officials are responsible for the bank’s actions, attributing mens rea to the entity itself is not legally valid.
On criminal breach of trust, the Court noted that it requires evidence of dishonest misappropriation or conversion of entrusted property, which was not present in this case,
“There was no allegation of misappropriation or conversion of the locker contents for personal use by the bank officials.”
Regarding the misinterpretation of orders, the Court observed that the actions of the bank officials were based on an inadvertent misinterpretation of the partial revocation order, concluding that “good faith misinterpretation does not amount to criminal intent.”
Senior Advocate Neeraj Kishan Kaul, representing HDFC Bank, argued that the FIR lacked the essential elements to establish criminal liability, particularly the intent to deceive or misappropriate. He emphasized that the bank officials acted in accordance with their understanding of the revocation order and that no evidence indicated malicious intent.
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In contrast, Advocate Manish Kumar, representing the State of Bihar, argued that the bank’s actions constituted a violation of the prohibitory order, necessitating an investigation to determine if a cognizable offense had occurred.
The Supreme Court upheld the appeal, overturning the Patna High Court’s earlier ruling that declined to quash the FIR.
The Court stated,
“Continuing the criminal proceedings against HDFC Bank would impose undue hardship, especially in light of the lack of criminal intent and misappropriation.”