Supreme Court Reinstates CBI Cases Quashed by High Courts in Banking Fraud Matters

In a landmark judgment delivered on April 25, 2025, the Supreme Court of India set aside multiple High Court orders that had quashed FIRs and criminal proceedings initiated by the Central Bureau of Investigation (CBI) in banking fraud cases. The bench comprising Justices M.M. Sundresh and Rajesh Bindal ruled that High Courts had erroneously equated administrative actions by banks with criminal proceedings while quashing the cases.

The case originated from the Reserve Bank of India’s (RBI) Master Directions on Frauds issued in 2016, which mandated banks to report fraudulent accounts to investigative agencies like CBI. Several borrowers challenged these actions in various High Courts, which quashed not only the administrative actions but also the consequent criminal proceedings, primarily citing violation of natural justice principles.

The Supreme Court made crucial distinctions between administrative actions and criminal proceedings. “An FIR, by taking cognizance of an offence, merely sets the law into motion. This has nothing to do with a decision on the administrative side,” the Court observed. It emphasized that even if administrative actions were set aside for procedural lapses, the factual basis could still sustain criminal investigations.

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The judgment extensively relied on its earlier decision in State Bank of India v. Rajesh Agarwal (2023), where it was held that principles of natural justice don’t apply at the stage of reporting criminal offenses. “No opportunity of being heard is required before an FIR is lodged and registered,” the Court reiterated from its previous ruling.

The Court categorized the appeals into five groups for disposal: cases where FIRs were challenged and set aside (to be remanded back to High Courts); cases where FIRs were quashed without being challenged (respondents given two weeks to seek remedies); cases with interim orders; cases based on investigation status; and cases where CBI wasn’t made a party (directed to be impleaded).

This judgment reinforces the independence of criminal proceedings from administrative actions and clarifies that technical violations in administrative processes don’t automatically invalidate criminal cases. It serves as an important precedent on the scope of judicial review in banking fraud cases and the operational autonomy of investigative agencies.

Petitioner Name: Central Bureau of Investigation.
Respondent Name: Surendra Patwa & Ors..
Judgment By: Justice M.M. Sundresh, Justice Rajesh Bindal.
Place Of Incident: Multiple locations across India.
Judgment Date: 25-04-2025.
Result: allowed.

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