11. Supreme Court on Bank Fraud and Criminal Liability

Background The Supreme Court of India ruled that a borrower’s willingness to repay loans does not absolve criminal liability in cases of bank fraud. Key Observations of the Court • Case involved alleged siphoning of public funds. • Intent, conspiracy, and mens rea are central to criminal liability. • Court directed the Enforcement Directorate (ED) to constitute a Special Investigation Team (SIT). • Financial settlement cannot substitute criminal prosecution. Value Addition (Governance & Financial Regulation) • Forensic audits play a crucial role in uncovering complex frauds. • Strengthens deterrence against corporate malfeasance and wilful defaults. • Reinforces public confidence in the banking and financial system. Legal Framework • Prevention of Money Laundering Act (PMLA). • Core principles of criminal jurisprudence. Key Definition • Siphoning of Funds: Illegal diversion of borrowed funds for unintended purposes. Conclusion The ruling upholds the principle that rule of law prevails over monetary settlements, reinforcing accountability in financial crimes. UPSC Relevance: GS Paper II & III – Judiciary, financial regulation, economic offences