Axis Bank Limited vs. State Of Karnataka

Heard the learned counsel for the petitioner-Bank, learned HCGP for respondent No.1-State and learned counsel for respondent No.2 - complainant.

In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner - Bank invited my attention to the Over Draft facility/Over Draft credit facility granted by the petitioner - Bank in favour of M/s. Sunness Capital India Private Limited on 12.09.2019 to an extent of `10.00 Crores, in order to point out that the said Company had made a Fixed Deposit in a sum of `15,00,000/- in the petitioner - Bank bearing Fixed Deposit No.918040071171469, which was frozen by the respondent No.1 - Police, during the course of investigation in relation to an FIR dated 20.04.2022 in Crime No.11/2022 filed by the respondent No.2 - complainant against various accused persons who are the Directors of the aforesaid Company - M/s. Sunness Capital India Private Limited, for the offences punishable under HC-KAR NC: 2025:KHC:27636 Sections 420, 406, 403, 120B, 506 of IPC, Section 5, 21(3) of The Banning of Unregulated Deposit Schemes Act, 2019 (for short, hereinafter referred to as "BUDSA" ) and Section 4 of the Karnataka Protection of Interest Depositors Exorbitant Act, 2004. 4. It is submitted on behalf of the petitioner-Bank that there is no connection or nexus whatsoever between the amount claimed by the respondent No.2 -complainant and the Over Draft/credit facility granted by the petitioner - Bank in favour of the borrowers/accused persons and consequently the said amount in FD No.918040071171469 deserves to be de-frozen so as to enable the petitioner - Bank to recover the said amount from the accused persons who are borrowers, who had availed the subject Over Draft facility.

It is also submitted on behalf of the petitioner- Bank that so long as the amounts claimed by the respondent No.2 - complainant from the accused persons had not been deposited directly from the Account of the HC-KAR NC: 2025:KHC:27636 respondent No.2 - complainant to the Account of the accused persons, the question of freezing the Account of the accused persons which had been obtained by way of Over Draft facility and converted as Fixed Deposit would not arise. It is submitted that the Trial Court committed an error in rejecting the application filed by the petitioner - Bank by passing the impugned order, which deserves to be set aside.

Per contra, learned counsel for the second respondent - complainant submitted that, during the course of investigation, it is revealed that the amount involved in the Fixed Deposit is part of the proceeds of the crime and as such, the Trial Court was fully justified in rejecting the application filed by the petitioner - Bank. It is also submitted on behalf of respondent No.2 - complainant that Section 12 of the BUDSA specifically bars the petitioner - Bank from seeking de-freezing of the Account and as such, the impugned order deserves to be confirmed on this ground also. HC-KAR NC: 2025:KHC:27636

A perusal of the material on record will indicate that on 12.09.2019, the petitioner Bank granted Over Draft facility in favour of M/s. Sunness Capital India Private Limited, which reads as under: "AXIS BANK

Original FDR duly Discharged in favour of Axis Bank Ltd.

FDR Pledge Form

Undated cheque equivalent to the entire credit facility amouNt i.e. Rs.10.00 Crores 8 Processing Fees : 0.01% plus GST 9 Other Stipulations :
The company is requested to provide their Legal Entity Identifier (LEI) as per the Reserve Bank of India guidelines RBI/2017- 18/82 DBR,No. BP. BC.92/21. 04.048/2017- 18 dated November 02, before disbursement of enhanced facility.

Subsequently,

In this context, it is relevant to state that in the complaint, respondent No.2 - complainant does not specifically state anywhere that the amount alleged to have been deposited by respondent No.2 - complainant which was alleged to have been part of the complaint was the same amount in relation to which, the borrower- M/s.Sunness Capital India Private Limited made the aforesaid Fixed Deposit in the petitioner - Bank.

Under these circumstances, in the absence of any material to show any nexus or connection between the alleged amount of which respondent No.2 - complainant was cheated of and the amount which is a part and parcel of the Fixed Deposit amount in the petitioner - Bank coupled with the fact that the material on record clearly establishes that the amount which is `15.00 lakhs which pertains to the said Fixed Deposit/Over Draft facility granted by the petitioner - Bank in favour of the accused/borrower, I am of the view that the Trial Court fell in error in rejecting the application filed by the petitioner HC-KAR NC: 2025:KHC:27636 - Bank, seeking de-freezing of the Fixed Deposit amount invested by the aforesaid borrower - M/s. Sunness Capital India Private Limited.

Insofar as the contention urged by the learned counsel for respondent No.2 - complainant with regard to Section 12 of the BUDSA is concerned, it is necessary to extract the said provision which reads as under:

Priority of depositors' claim.-- Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), any amount due to depositors from a deposit taker shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority."

A plain reading of the aforesaid provision would simply indicate that the depositors have the priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate Government or the local HC-KAR NC: 2025:KHC:27636 authority. It is also relevant to state that the said provision mandates that the priority of a depositor is subject to the provisions contained in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) or the Insolvency and Bankruptcy Code, 2016 (IBC).

In the instant case, the right of the petitioner - Bank to claim the amount deposited by way of the aforesaid Fixed Deposit pursuant to Over Draft facility is not curtailed by the provisions contained in Section 12 of BUDSA thereof when the said provision does not relate to the claim made by the petitioner-Bank under Sections 451 and 457 of Cr.P.C. relating to de-freezing of the Account and consequently, the said contention urged by the learned counsel for respondent No.2 - complainant cannot be accepted.

Insofar as the finding recorded by the Trial Court on the correctness or otherwise of the diversion of the proceeds of the Crime by way of the same being invested HC-KAR NC: 2025:KHC:27636 in the Fixed Deposit would require trial, investigation is concerned, as stated supra, it can be seen that, much prior to the impugned complaint of the year 2022, the petitioner - Bank had already granted Over Draft facility in favour of the borrower, who had invested the same in the aforesaid Fixed Deposit to an extent of `15.00 lakhs in the year 2018 and consequently, the said monies claimed by the respondent No.2 - complainant cannot be made the basis to restrain the petitioner - Bank from seeking de- freezing of the Bank Account.

Under these circumstances, I am of the opinion that the impugned order passed by the Trial Court dated 29.03.2023 deserves to be set aside and the application filed by the petitioner- Bank under Sections 451 and 457 of Cr.P.C. deserves to be allowed.

Accordingly, I pass the following: ORDER i. Criminal Petition is allowed. HC-KAR NC: 2025:KHC:27636 ii. The order dated 29.03.2023 passed by the learned Principal City Civil and Sessions Judge, at Bengaluru, in Spl.C.C.No.1792/2022, is hereby set aside;