Introduction:

This chapter deals with the application of the principles of vigilance to public sector Banks. Its objective is to apply and supplement rather than substitute the material contained in the earlier chapters. To that extent, it is not and should not be construed as a self-sufficient code.

The Central Vigilance Commission (hereinafter referred to as the Commission) was set up by the Government of India by its resolution dated 11.2.1964 in pursuance of the recommendation made by the Committee on Prevention of Corruption. ;(popularly known as the Santhanam Committee). The Commission acts as the apex body for exercising general superintendence and control over vigilance matters in administration and probity in public life. The Commission has been accorded statutory status with effect from 25.8.1998 through "The Central Vigilance Commission Ordinance, 1998". While the Commission continues to perform the functions assigned to it by the Government's Resolution,(insofar as these are not inconsistent with the provisions of the Ordinance) it has also been given some additional powers with a view to strengthening its functioning.

Some of the major changes brought out through the Ordinance are given below:-

1. The Commission has been made a multi-member Commission, headed by the Central Vigilance Commissioner (CVC);

2. The Central Vigilance Commissioner and other Vigilance Commissioners (VCs) shall be appointed by the President by warrant under his hand and seal;

3. The Commission has been empowered to :-

   1. exercise superintendence over the functioning of the Delhi Special Police Establishment (DSPE) insofar it relates to investigation of offences alleged to have been committed under the Prevention of Corruption Act, 1988

   2. review the progress of investigations conducted by the DSPE into offences alleged to have been committed under the PC Act;

4. The Commission has been given all the powers of a civil court trying a suit under the Code of Civil Procedure, 1908, while inquiring, or causing an inquiry or investigation to be made, into any complaint against a public servant, and in particular in respectof the following matters:-

   1. summoning and enforcing the attendance of any person from any part of India and examining him on oath;

   2. requiring the discovery and production of any document;

   3. receiving evidence on affidavits;

   4. requisitioning any public record or copy thereof from any court or office;

   5. issuing commissions for the examination of witnesses or documents;

   6. any other matter which may be prescribed.

5. The Commission is deemed to be a civil court for the purpose of section 195 and Chapter XXVI of the Code of Criminal Procedure and every proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code.

6. No suit, prosecution or other legal proceeding shall lie against the Commission, the CVC, any VC, Secretary or against any staff of the Commission in respect of anything which is in good faith done or intended to be done under the ordinance;

7. The CVC will head the committees to make recommendations for the appointments to the posts of the Director, CBI, and the Director of Enforcement

The Commission's jurisdiction is co-terminus with the executive powers of the Union. It can undertake any inquiry into any transaction in which a public servant is suspected or alleged to have acted for an improper or corrupt purpose; or cause such an inquiry or investigation to be made into any complaint of corruption, gross negligence, misconduct, recklessness, lack of integrity or other kinds of mal-practices or misdemeanors on the part of a public servant.

The Commission tenders appropriate advice to the concerned disciplinary authorities in all such matters. For practical considerations, the Commission has restricted its jurisdiction to the officers of the rank of scale-III and above in the public sector banks; However, in composite cases involving officials who fall in the Commission's jurisdiction along with others who do not, the case as a whole has to be referred to the Commission for its advice. Such composite references enable the Commission to take an overall view of the individual accountabilities in the transaction. Where a reference has been made to the Commission in respect of officers not within the jurisdiction of the Commission and award staff, by virtue of it being a composite case, it will be not necessary to approach the Commission for second stage advice in respect of such officials provided the Commission's advice has been accepted by the Banks.

The Chief Vigilance Officers in the concerned organisations have been authorised to decide upon the existence of a vigilance angle in a particular case, at the time of registration of the complaint. Once a complaint has been registered as a vigilance case, it will have to be treated as such till its conclusion, irrespective of the outcome of the investigation. Although formulation of a precise definition is not possible, generally such an angle could be perceptible in cases characterised by:

1. commission of criminal offences like demand and acceptance of illegal gratification, possession of disproportionate assets, forgery, cheating, abuse of official position with a view to obtaining pecuniary advantage for self or for any other person; or

2. irregularities reflecting adversely on the integrity of the public servant; or

3. lapses involving any of the following ;

   1. gross or wilful negligence;/LI>

   2. recklessness;

   3. failure to report to competent authorities, exercise of discretion without or in excess of powers/jurisdiction; and

   4. cause of undue loss or a concomitant gain to an individual or a set of individuals/a party or parties; and

   5. flagrant violation of systems and procedures

As in all organisations, vigilance activity in financial institutions is an integral part of the managerial function. The raison d'être of such activity is not to reduce but to enhance the level of managerial efficiency and effectiveness in the organisation. In banking institutions risk-taking forms an integral part of business. Therefore, every loss caused to the organisation, either in pecuniary or non-pecuniary terms, need not necessarily become the subject matter of a vigilance inquiry. It would be quite unfair to use the benefit of hind-sight to question the technical merits of managerial decisions from the vigilance point of view. At the same time, it would be unfair to ignore motivated or reckless decisions, which have caused damage to the interests of the organisation. Therefore, a distinction has to be drawn between a business loss which has arisen as a consequence of a bona-fide commercial decision, and an extraordinary loss which has occurred due to any malafide, motivated or reckless performance of duties. While the former has to be accepted as a normal part of business and ignored from the vigilance point of view, the latter has to be viewed adversely and dealt with under the extant disciplinary procedures.

Whether a person of common prudence, working within the ambit of the prescribed rules, regulations and instructions, would have taken the decision in the prevailing circumstances in the commercial interests of the organisation is one possible criterion for determining the bonafides of the case. A positive response to this question may indicate the existence of bonafides. A negative reply, on the other hand, might indicate their absence. It follows that vigilance investigation on a complaint would not be called for on the basis of a mere difference of opinion/ perception or an error of judgement simpliciter or lack of efficiency or failure to attain exemplary devotion in the performance of duties. [ Union of India v. J. Ahmed AIR 1979 SC 1022.] Such failures may be a matter of serious concern to the organisation but not from the vigilance point of view. They have to be dealt with separately. The criteria indicated above for determination of a vigilance angle in a case would also obviously exclude all cases of misdemeanours in personal life. Administrative misconduct, such as, unpunctuality, drunken behaviour at work etc. would again be left to the disciplinary authority to deal with in a appropriate manner. However, once a vigilance angle is evident, it becomes necessary to determine through an impartial investigation as to what went wrong and who is accountable for the same.

1. The Special Police Establishment, Central Bureau of Investigation, was constituted by the Government of India, under the DSPE Act, 1946, It inquiries and investigates into offences pertaining to corruption and other malpractices involving public servants. The SPE takes up cases for investigation on the basis of the information collected by them from their own sources or received from members of the public. It also investigates cases referred to them by the Commission and the administrative authorities. If the information discloses, prima - facie, commission of a cognizable offence, a regular case (RC) is registered u/s 154 Cr.P.C. But if the information prima facie discloses commission of irregularities, which call for further enquiry, a preliminary enquiry (PE) is first registered. If the PE reveals commission of a cognizable offence, a regular case is registered for further investigation. As soon as a PE or a RC is registered, a copy thereof is sent to the Head of Department and/or the administrative Ministry. A copy of PE/RC is also sent to the Commission if the public servant concerned comes within the advisory jurisdiction of the Commission. The SPE generally does not take up inquiries or register a case where minor procedural flaws are involved. They are also expected to take note of an individual officer's positive achievements while recommending RDA so that a single procedural error does not cancel out a life time's good work.

Advisory Boards

2. Considering the complexities involved in commercial decisions of bankers especially in matters related to credit, the CBI may find it worthwhile to obtain the benefit of expert advice from various disciplines before registration of PE/RC. The existing Advisory Board on Bank Frauds(ABBF) would continue to assist CBI for this purpose, but would henceforth be redesigned as Central Advisory Board on Bank Frauds(CABBF). In addition, regional advisory boards comprising retired judges(of the level of presiding officers of district and session courts), retired police officials(of the level of DIG) and retired bank officials(of the level of GM or higher) would also be constituted. The CABBF as well as the new Regional Advisory Boards on Bank Frauds(RABBF) would form part of the organisational infrastructure of the CBI. Appointments on the Boards would be made from a panel of names approved by the CVC. It would not be necessary for the CBI to refer cases of frauds in non-borrowal accounts to such boards. Even in respect of borrowal accounts it would not be necessary for them to take advice therefrom if the CVO of the bank has himself referred the matter to the CBI. Reference to the boards will thus lie only in respect of complaints in borrowal accounts which the CBI has suo motu found worthwhile to tentatively pursue. The cases involving officers of the rank of GM or equivalent or higher would continue to be referred to the CABBF. The cases of other officials of lower rank would be required to be referred the RABBF. The Board concerned would give its considered opinion within one month from the date of reference, failing which the CBI would be competent to decide the matter without advice. It is also clarified that the advice of any of the aforesaid boards will not be binding on them. Investigational and secretarial services required by the Boards would be provided by the RBI.

3. While the CBI have the powers to take up any fraud case for investigation irrespective of the amount of loss involved, in order to maximize the effectiveness of investigations the following guidelines may be followed in future:-

   The Banking Securities & Fraud Cell (BS&FC) at Delhi, Bombay and Bangalore would handle information/complaints if the amount of the alleged bank fraud exceeds Rs.5 crores. If the amount of the alleged fraud ranges between Rs.25 lacs and Rs.5 crores, the information would be handled/investigated by the branch of the CBI having territorial jurisdiction over the area. If the amount involved in the bank fraud appears to be less than Rs. 25 lacs the complaint may be entrusted to the local police. However, having regard to the legal difficulties in the CBI taking over a case after it has been registered with the local police, the bank should also carefully examine the matter with regard to the interstate/ international ramifications of the case. Regardless of the quantum involved in the fraud, the CBI may register any case suo moto, if it has reason to believe that it has inter-state or international ramifications. The BS&FC would be the focal point to co-ordinate the handling of all bank cases. The Banks would initially refer the matter to the respective zonal office of the BS&FC.(Jurisdiction of such offices to be indicated by the CBI). The BS&FC would either assume jurisdiction or pass on the matter to the concerned wing of the CBI under intimation to the Bank./P>

4. Full cooperation and facilities should be extended by the public sector banks to the CBI during the course of investigation. This would include making available to them the requisite documents with the least possible delay, directing such employees as are to be examined to appear before the investigating officer and making suitable accommodation in the bank's guest houses, available to touring officers (subject to availability), in accordance with their entitlement and on payment of the prescribed charges. When the Banks make reference to the CBI for investigation, they should also make available duly certified photocopies of all relevant documents along with the complaint so that there is no delay in initiating action on the part of the CBI. The originals may be handed over to them only at the time of the actual registration of the case. Similarly, when CBI seizes documents, authenticated copies of all the documents, should within four days of the seizure, be made available to the CVO of the Bank. Further, whenever the CBI or other investigating agencies require assistance in tracing and freezing assets created from the proceeds of an offence, the Banks would extend to them such assistance as may be requested for and is possible. The banks may also avail the services of Chartered Accountants/Computer professionals for the purpose.

1. On completion of their investigation, the CBI forwards a copy of the SP's report to the concerned CVOs for further action. A copy of the SP's report is also endorsed to the Commission in cases in which the Commission's advice is necessary.

2. The CBI generally recommends prosecution in cases of bribery, corruption or other criminal misconduct; it also considers making similar recommendations in cases involving a substantial loss to the Government or a public body. The Commission's advice for prosecution however is required only if the sanction for prosecution is necessary under any law promulgated in the name of the President. In such cases, CVOs should furnish the department's comments within a month of the receipt of the CBI report by the competent authority. In other cases, as directed by the Supreme Court, the matter should be processed expeditiously to ensure that the required sanction is issued within a period of three months( the instructions issued by the Department of Personnel & Training vide O.M. dated 14.01.1998 also refer). However, in case of difference of opinion between the CBI and the administrative authority, the matter may be referred to the Commission for its advice irrespective of the level of the official involved.

3. Prosecution proposals should be able to meet the technical requirements laid down by the Courts. Apart from adequate evidence to establish that offence has been committed under the relevant provision of the law, there should be some facts on record from which it should be possible to infer or presume a criminal or guilty intention behind the omission or commission. In the absence of mens rea violation of rules or codal formalities could at worst be considered as transgressions of systems and procedures of the organisation and the same would, as such, be more suitable as the subject matter of RDA rather than criminal prosecution. In Maj. SK Kale v/s State of Maharashtra, 1977 Cri. L.J. 604 and Shri SP Bhatnagar v/s State of Maharashtra, 1979 Cri. L.J. 566 the Supreme Court ruled that irregularities per se may not amount to indication of criminal intent even if third parties had benefited.