Supreme Court Acquits Bank Manager, Calls CBI Case “Fully Fabricated” in Indian Bank Loan Fraud

A bench of Justices J.B. Pardiwala and K. Vinod Chandran set aside the conviction of a branch manager, finding the CBI case wholly unproved and ordering Indian Bank to account for excess auction proceeds.

The Supreme Court on 1 September 2026 acquitted V. Balakrishnan, a former Branch Manager of Indian Bank's Anna Nagar Branch, of all charges framed under Section 420 of the Indian Penal Code, 1860 read with Section 120B, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. A division bench of Justices J.B. Pardiwala and K. Vinod Chandran described the CBI prosecution as “fully fabricated” and said the investigating agency had “failed miserably” in both framing and proving its case. The Court granted a clean acquittal, set aside the concurrent findings of the Trial Court and the High Court, and separately directed Indian Bank to report on excess amounts still retained from the auction of mortgaged properties more than a decade after those auctions concluded.

How the Case Reached the Court

The prosecution alleged that Balakrishnan (A1), while serving as Branch Manager at the Anna Nagar Branch of Indian Bank around 1991–1992, colluded with A2 — a retired officer of the Indian Overseas Bank — to sanction loans in favour of A4 and A5, two individuals whom the prosecution described as domestic helps in A2's employment. The loan amounts were said to have been disbursed by cheque and received by A2 himself, as evidenced by his alleged signatures on the reverse of those cheques.

The loans in question included Rs. 13,50,000 recommended by Balakrishnan for A4, styled in the application as a real estate businessman, and a further advance of Rs. 3,30,000 disbursed before formal sanction. A loan of Rs. 10,00,000, disbursed in two tranches of Rs. 8,00,000 and Rs. 2,00,000, was also sanctioned in favour of A5 for the purchase of 21.39 acres of land. A3, a property appraiser of the bank, was alleged to have issued a certificate showing inflated values for the mortgaged land, facilitating the sanctions.

Of the five accused originally arraigned, A2 and A4 died before charges were framed; A3, who was bedridden, had his trial split up and is said to have since expired; and A5 was acquitted at trial. Balakrishnan alone was convicted by the Trial Court and the conviction was upheld by the High Court. He appealed to the Supreme Court.

What the Prosecution Actually Proved at Trial

The Court examined the testimony of all thirteen prosecution witnesses in detail and found the evidence wanting at every level. PW1, who issued the sanction to prosecute A1, was a retired General Manager of Indian Bank and the competent authority for disciplinary proceedings against Scale III officers like Balakrishnan. Significantly, PW1 admitted in cross-examination that the loans to A4 and A5 were both sanctioned by the Assistant General Manager of the Regional Office, Madras North — not by Balakrishnan himself.

PW2, a Senior Manager at the Regional Office, confirmed through documents that there was sanction from the Regional Office for both loan accounts. PW3, an Assistant Manager at the Anna Nagar Branch designated as Loan Officer, said she had not even seen the loan applications, which the Court found irrelevant to the question of Regional Office sanction.

The prosecution's case that A2 personally collected the disbursed amounts relied on identifying A2's signature on the back of disbursal cheques. The Court found a complete failure of proof on this point. PW5 and PW6, retired officers of the Indian Overseas Bank who had worked with A2, were not confronted with the signatures on the cheques to confirm whether those were A2's signatures. No contemporaneous specimen signature of A2 was produced. The two witnesses were instead examined on the unrelated question of whether they had rented premises to A4 and A5, evidence which the Court described as difficult to comprehend in its relevance.

PW7, said to be a furniture businessman, testified that A2 had introduced him to Balakrishnan and that Balakrishnan had promised him a loan that was never granted. The Court dismissed this entirely: it went to A1's general character rather than to any charge at trial. PW8 to PW11 spoke of land transactions with A2 and denied selling land to A4 or A5. The Court noted that only photocopies of sale deeds were produced, no testimony identified who the purchaser was on those deeds, and none of the title deeds or certified copies of the mortgaged properties were ever brought before the Trial Court. The lands described by PW9, PW10, and PW11 covered extents — 1.22 acres, 37 cents, and 54 cents respectively — that plainly could not have been purchased from the loans in question.

PW4, an Assistant Commissioner of the Income Tax Department, was examined to disprove an introduction noted in the Account Opening Form of one borrower. He denied knowledge of the applicant. The Court observed that the named person from the Managing Director's Office who was stated to have made the introduction was never examined.

The Valuation Question and the Auction Proceeds

Both the Trial Court and the High Court had placed reliance on the allegedly inflated valuation certificate issued by A3 for the mortgaged properties. The Supreme Court found only one valuation certificate in evidence — Exhibit P22 — furnished to the bank by A4. No contemporaneous sale deed data or government circle rates applicable at the time the loans were availed in 1991–1992 were placed on record. The lower courts had presumed, from the amounts obtained at auction in 2010, that the properties must have been overvalued at the time of the loans. The Court rejected this as presumption unsupported by evidence across a gap of nearly twenty years.

A further dimension emerged from the auction itself. The properties mortgaged against A5's loan account were auctioned, and the bank received Rs. 1,17,50,000, of which only Rs. 16,42,397 was applied to the loan account. Against A4's loan, the auction fetched Rs. 2,42,00,000, with only Rs. 5,35,550 appropriated to the loan. A further property of A5 was sold for Rs. 34,50,000. The loans, in other words, had been satisfied in full and substantial surplus remained with the bank. The Court expressed surprise that no attempt had been made to trace the legal heirs of the accused — some of whom are deceased — and return the excess funds.

The Court's Reasoning on Acquittal

The Court held that the foundational allegations of the prosecution — that A4 and A5 were domestic helps, that the disbursed amounts were appropriated by A2, that the mortgaged properties were overvalued, and that Balakrishnan sanctioned loans illegally — were, in its words, “all just figments of imagination.”

On the critical question of whether Balakrishnan had the authority to sanction the loans, the testimony of PW1 and PW2 themselves established that the Regional Office had sanctioned both accounts. The communications between the Anna Nagar Branch and the Regional Office were produced in evidence. Balakrishnan's role as recommending Branch Manager could not by itself, on this evidence, constitute criminal conduct. A2's involvement in real estate purchases was shown through PW8–PW11, but the Court held that real estate business is not illegal, and A2's activity in that space did not establish any culpability on the part of Balakrishnan. The testimony of PW12 and PW13, the Investigating Officers, also yielded nothing incriminating against Balakrishnan specifically.

The Court found no incriminating circumstance against any of the accused, including A3. It said the CBI had failed in both investigating and framing the case.

Directions to Indian Bank

Having acquitted Balakrishnan, the Court turned to the question of the excess auction proceeds retained by Indian Bank. It directed the Branch Manager of Indian Bank, Anna Nagar Branch — who is impleaded as a respondent — to file a report on the loan accounts that are the subject matter of the CBI case, their satisfaction, the utilisation of amounts received on auction sale, and the title deeds of the mortgaged properties. The Court directed its Registry to serve a copy of the judgment on the Branch Manager and ordered the Branch Manager to comply.

The Registry was also directed not to return the records of the case until further orders. The matter is to be listed on 5 October 2026 solely for the purpose of examining the report and issuing further directions regarding disbursement of the excess amounts to the rightful legal heirs.

Outcome

Criminal Appeal No. 2460 of 2026 was allowed. The conviction and sentence imposed on V. Balakrishnan by the Trial Court and upheld by the High Court were set aside. The Court granted a clean acquittal on all charges. If in custody, Balakrishnan is directed to be released forthwith, subject to no requirement in any other case; if already on bail, his bail bonds stand cancelled. The matter remains on the board for 5 October 2026 for examination of the bank's report on the excess auction proceeds.