The Supreme Court has acquitted a former Indian Bank branch manager in a decades-old loan fraud case, holding that the Central Bureau of Investigation (CBI) failed to establish the allegations against him through credible evidence.
A bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran came down sharply on the manner in which the prosecution had built its case, observing that the allegations were unsupported by evidence and describing the case as “fully fabricated”.
The Court said the CBI had failed not merely in proving the charges but also in properly framing the prosecution case.
The matter concerned loans sanctioned in 1991 when the appellant, V. Balakrishnan, was serving as Branch Manager of Indian Bank’s Anna Nagar branch in Chennai. The prosecution alleged that he had entered into a criminal conspiracy with a retired Indian Overseas Bank officer and facilitated loans in favour of two borrowers who were allegedly being used as fronts.
The CBI had alleged that one of the borrowers, who was employed as a washerman at the residence of the alleged intermediary, was projected as a real-estate businessman and sanctioned a loan of ₹13.50 lakh. Another borrower was sanctioned ₹10 lakh for the purchase of 21.39 acres of land.
The prosecution’s case was that the loans had been improperly sanctioned and that the properties furnished as security had been deliberately overvalued.
Balakrishnan was prosecuted under provisions of the Indian Penal Code relating to cheating and criminal conspiracy, along with provisions of the Prevention of Corruption Act. His conviction by the trial court was subsequently affirmed by the High Court, prompting him to approach the Supreme Court.
The apex court, however, found the evidentiary foundation of the prosecution case seriously deficient.
The bench noted that even if the alleged intermediary had acquired properties or operated through the names of the borrowers, such circumstances did not establish the former bank manager’s complicity. The Court further rejected the prosecution’s assertions concerning the borrowers’ relationship with the intermediary, alleged diversion of loan funds, overvaluation of the mortgaged properties and purportedly illegal sanctioning of the loans.
According to the Court, these allegations were essentially speculative and could not substitute for proof connecting the appellant with the alleged fraudulent conduct.
The Court also scrutinised the prosecution’s claim that the properties had been overvalued at the time the loans were sanctioned. It noted that the CBI had relied on only one valuation certificate and had failed to place on record contemporaneous sale deeds or government-prescribed market values capable of demonstrating the actual value of the properties in 1991-92.
The lapse assumed greater significance because the properties were ultimately auctioned almost two decades later, in 2010. The Court found that the evidence was insufficient to establish that the properties had been deliberately overvalued at the time the loans were granted.
Another significant aspect of the judgment concerned recovery of the bank’s dues.
The Supreme Court noted that the loan amounts had been recovered through auction of the mortgaged properties. In certain cases, the auction proceeds were higher than the amounts required to satisfy the outstanding loan accounts.
This prompted the Court to question why the surplus funds had remained with the bank instead of being released to persons legally entitled to receive them.
The bench directed the Branch Manager of Indian Bank’s Anna Nagar branch to submit a report concerning the relevant loan accounts, the manner in which the dues were satisfied and the utilisation of the proceeds generated through the auction of the mortgaged properties. The bank has also been asked to produce the relevant title deeds.
The Court has kept this limited aspect of the matter pending and directed that the case be listed on October 5, 2026, for consideration of the bank’s report and further directions concerning the surplus auction proceeds.
Allowing Balakrishnan’s appeal, the Supreme Court set aside both the trial court’s conviction and the High Court’s judgment upholding it.
The Court directed that if the appellant was in custody and was not required in any other case, he should be released forthwith. Where he had already been released on bail, his bail bonds were ordered to stand cancelled.
The judgment thus brings to an end a prosecution arising from transactions dating back more than three decades, while simultaneously raising questions about the manner in which the investigation was conducted and the subsequent handling of surplus funds recovered through the auction of secured properties.
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