The Supreme Court has restored the proceedings initiated by the Serious Fraud Investigation Office (SFIO) against a nominee director of the Punjab National Bank (PNB) on the board of Bhushan Steel Limited (BSL) in a financial fraud case.
The Bench of Justice MM Sundresh and Justice Rajesh Bindal set aside an order passed by the Delhi High Court, which quashed the summons issued against Rajesh Kumar Yaduvanshi.
Yaduvanshi served as a non-executive nominee director of PNB on the board of BSL from 2015 to 2017.
The SFIO had filed a complaint against 287 individuals and entities for manipulating financial statements, diverting funds and inflating asset values.
Bhushan Steel Limited promoters Brij Bhushan Singal and Neeraj Singal were accused of siphoning off funds through a network of 157 associated companies.
Yaduvanshi was summoned by the trial court in August 2019.
The SFIO alleged that he failed to question the fraudulent financial statements approved by the board, particularly during the transition to the Indian Accounting Standards (IndAS) in 2017, which led to significant write-off of inflated assets.
The High Court quashed the summons against Yaduvanshi in September 2020 on the grounds that there was no material evidence to suggest his complicity in the fraud.
The High Court held that nominee directors of public sector banks were immune from liability for acts done in good faith under Section 16A of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
The Apex Court, however, observed that the High Court had erred by conducting a mini-trial and making factual presumptions at the summoning stage, which was not permissible under law.
The Bench noted that High Courts, while exercising revisional or discretionary jurisdiction under Section 482 of the Code of Criminal Procedure (CrPC), should not conduct a mini-trial or delve into factual adjudication at the summoning stage. Such matters should be left to the trial court, it added.
The top court of the country granted liberty to Yaduvanshi to seek remedies available under the law, including filing for discharge before the trial court.
It further granted him exemption from personal appearance before the trial court unless specifically directed.
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