Supreme Court Reinstates FIR Against Bank of India Officials in Fake-Gold Loan Case
- ByAdmin --
- 27 Jun 2025 --
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The Supreme Court of India has revived an FIR against officials of the Bank of India in a case involving a disputed gold loan, setting aside a previous Patna High Court order that had quashed the complaint. The ruling strengthens key procedural safeguards under criminal law, especially in the context of financial disputes involving breach of trust and alleged misrepresentation.
Background of the Case
In July 2020, a borrower took a gold loan of ₹7.7 lakh from the Motijheel branch of the Bank of India, offering 254 grams of 22-carat gold ornaments as collateral.
- The borrower received a recall notice from the bank and subsequently repaid the full loan amount along with interest by March 2023.
- However, instead of returning the pledged ornaments, the bank conducted a fresh valuation of the gold and claimed it was counterfeit.
- Based on this assessment, the bank filed a complaint under Sections 420 (cheating) and 379 (theft) of the Indian Penal Code (IPC) against the borrower.
- In response, the borrower lodged an FIR against bank officials under Sections 420 (cheating), 406 (criminal breach of trust), and 34 (common intention), IPC, alleging dishonest conduct and wrongful retention of property.
The Patna High Court quashed the borrower’s FIR, accepting the bank's claim that the gold was fake and the borrower had fraudulent intent. The Supreme Court was then approached to review this order.
Supreme Court’s Ruling
The Supreme Court set aside the High Court’s quashing order and reinstated the FIR. It held that the High Court had exceeded its jurisdiction under Section 482 of the Code of Criminal Procedure (CrPC) by pre-judging the merits of the case at the preliminary stage.
Key Legal Issues and Principles
1. Limits of Section 482 CrPC
Under Section 482 CrPC, High Courts can quash FIRs to prevent abuse of the legal process. However, this power is narrow and exceptional, and cannot be invoked to assess evidence or conclude whether a party is guilty at the FIR stage. The Supreme Court ruled that where a prima facie cognizable offence is disclosed, the complaint must proceed to investigation.
2. Prima Facie Case Against the Bank
The Court found that the borrower’s FIR disclosed sufficient allegations of criminal breach of trust and cheating, particularly because:
- The gold remained in the bank’s custody throughout the loan period.
- The borrower had fully repaid the loan.
- The revaluation was done after repayment, raising questions about intent and transparency.
3. Procedural Fairness and Banking Due Diligence
The Court noted that if the pledged gold was indeed fake, the bank had a responsibility to verify its authenticity at the time of loan disbursement. Delayed action, especially after repayment, could reflect institutional negligence or bad faith.
4. Custody and Control of Collateral
Since the gold was under the exclusive custody of the bank, any allegations of tampering or fraud post-disbursement must be viewed seriously. The burden of proving the condition and authenticity of the gold lies with the bank.
Implications of the Judgment
1. Reaffirmation of Investigative Process
The judgment underlines that courts should not interfere with ongoing investigations unless the complaint is clearly frivolous or mala fide. A valid FIR deserves to be investigated rather than prematurely dismissed.
2. Accountability in Banking Transactions
Banks must follow due diligence protocols while handling physical collateral. Post-loan disputes, particularly when used to withhold the return of pledged assets, can lead to criminal liability if procedural lapses are evident.
3. Borrowers’ Right to Legal Recourse
The ruling affirms that borrowers can seek legal protection against unfair practices, even by banking institutions. Allegations of fraud or breach of trust must be investigated fairly, regardless of the status of the accused.
Conclusion
By reinstating the FIR, the Supreme Court has reinforced the principle that criminal complaints cannot be quashed based solely on the accused’s version of events, especially when disputed facts and credibility of parties are yet to be tested. The matter will now proceed to investigation, ensuring that both the borrower’s allegations and the bank’s defense are examined through proper legal process.
This decision also sets a precedent for greater scrutiny of gold loan transactions, and serves as a reminder that institutional credibility does not override the rights of individuals, particularly in disputes involving trust, property, and accountability.
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