PNB fraud: Over 7,000 branches, humanly impossible to keep eye on every transaction: Special court, discharging senior executive

“…the applicant / accused was not directly working at the branch where the fraud was committed by employees of the bank. The applicant / accused was working in supervisory capacity. More than 7,000 branches were under his control. Under these circumstances, it is humanly impossible to keep eye on the transactions taking place in each and every branch. Admittedly, there is no material on record to show that fraudulent activities of the co-accused, particularly, bank employees were brought to the notice of the present applicant / accused. Admittedly, the present applicant / accused has not obtained any illegal consideration / gratification out of the said fraudulent transactions. Therefore, in the absence of mens rea, it cannot be said that criminal liability can be fastened on the present applicant / accused,” special judge A V Gujarathi said in the order passed on September 3, which was made available on Tuesday.

The fraud allegedly took place in the Brady House branch of the bank in the Fort area of South Mumbai. The court observed that the fraud took place in one of the 7,000 branches and therefore was ‘localised’.

“The accused / applicant had played no role in commission of the crime in any manner whatsoever. The internal and external auditors were in fact responsible for mandatory reporting of deviations in bypassing the Core Banking Solution (CBS) System and directly transmitting SWIFT instructions to overseas branches of Indian banks to raise buyer’s credit, resulting in a wrongful loss to PNB,” the court said.

Rao had filed a discharge plea that he was involved in making policy decisions and was not responsible for issuing LoUs, nor was he a beneficiary. Mere negligence cannot anyway be constituted as a criminal offence, it was submitted on his behalf. The court agreed with the contention stating that there are several layers of hierarchy between the executive directors and individual branches. It added that after an RBI directive in 2016 on auditing SWIFT infrastructure through which the LoUs are issued, a meeting was called with senior officials of various divisions, and its implementation fell in the domain of the Information Technology division. The court also accepted that the decision to implement the technology during another software upgrade was taken by the MD and CEO in 2016.