Bank Suffering Financial Loss From Fund Siphoning Is “Victim” In Bail Proceedings: Karnataka High Court
The Karnataka High Court has held that a bank which suffers financial loss due to an accused allegedly siphoning funds is a “victim” entitled to participate in the accused's bail proceedings.
Justice M Nagaprasanna allowed Standard Chartered Bank's petition challenging the Additional Chief Metropolitan Magistrate, Bengaluru's order rejecting its application to intervene in the bail proceedings of accused Kishore Nakka. The Bench held:
“It is trite law that a person would become a victim who has suffered injury, financially or otherwise, the trite of which are all considered by the Apex Court in its judgments from time to time. Therefore, the bank cannot be said to be a stranger to the proceedings for it not to be impleaded into the proceedings.”
The Bank alleged that Nakka had caused it a loss of Rs. 88 crore through the alleged misappropriation, siphoning and misuse of customer funds. Based on complaints by the Bank and its customers, two crimes were registered, initially under Section 318 of the Bharatiya Nyaya Sanhita. Nakka was accused in both cases. While the Bank was the complainant in one case, the other was filed by customers.
After Nakka was taken into custody and the charge sheet was filed, he sought bail in the case in which the Bank was not the complainant. The Bank then sought to intervene, claiming that it qualified as a “victim” under Section 2(wa) of the Code of Criminal Procedure and was entitled to be heard on the bail application.
The Magistrate rejected the application, prompting the Bank to approach the High Court.
Senior Counsel Sri P. P. Hegde, appearing for the Bank, submitted that the institution had suffered financial loss, injury, and reputational harm due to the alleged acts of Nakka . He argued that reimbursing affected customers through insurance or other means did not waive the Bank's right of recovery or its right to oppose bail.
It found the Magistrate's conclusion that the Bank did not qualify as a “victim” unacceptable. It noted that the Bank had suffered a loss of Rs. 88 crore and had nevertheless released, or was in the process of releasing, the amount to its customers to mitigate their losses.
Further, it noted that the Rs. 88 crore allegedly siphoned from the Bank had been diverted to Nakka's family members, with Rs. 69 crore transferred to his wife, Rs. 6 crore to his daughter, Rs. 9 crore to his second daughter and Rs. 1.47 crore to his father. Observing that the money was public money, it held:
“If the bank is not a victim in such case, I fail to understand as to who else can be better suited to the position of a victim, to object to the grant of bail to a person who has siphoned off bank's funds - public money in the manner set out above.”
Referring to Supreme Court decisions on victims' rights, the Bench observed that a person who suffers physical, mental, financial or legal injury, in its wider sense, by reason of an act or omission for which the accused has been charged would qualify as a victim. It concluded:
“Therefore, the Bank, in the case at hand, undoubtedly is in the position of a victim, who is entitled to enter into the proceedings for grant of bail of the accused. The concerned Court has erred in not permitting the petitioner to enter into the proceedings as a victim and to place its objections before the grant of any bail.”
Accordingly, the High Court allowed the petition and quashed the Magistrate's order.
For Petitioner: Senior Advocate P.P Hegde and Advocate Maitreyi B Kannur
For Respondents: Senior Advocate Nalima Maye Gowda, Advocate B.N Jagadeesha, SPP and Manjunatha Hiral