Author: Ashutosh Chaudhary, WBNUJS, Kolkata
To the Point
This case study discusses an important 2024 order passed by Principal District & Sessions Judge, Rohini Courts, Delhi in the case of Vinod Kumar Sharma vs Punjab National Bank & Ors which was a case of whether a bank had misrepresented in a SARFAESI case and whether it was the concerned bank which must be proceeded against under Section 340 CrPC under the head of perjury. The case determines the preconditions of the criminal prosecution of false affidavits in respect of recovery proceedings involving banks. It brings into light the paramountcy of courts to strike a balance between expediency in the cause of justice and the rigours of formalism of procedural fairness.
Abstract
A very critical judgment was delivered in Vinod Kumar Sharma vs Punjab National Bank & Ors in April 2024 wither concerned the appeal made under Section 341 CrPC against the rejection of a complaint under Section 340 CrPC. The claim on which complaint was filed was that the Punjab National Bank had lied that they have mortgaged the terrace of the property belonging to the appellant and had acted upon the SARFAESI Act. It is the same judgment that reminds the judicial unwillingness to bring up the criminal perjury actions unless it is convenient in justice. According to this article, the legal principles declared in this case and its implications are ascertained, and the references are extended to the areas of banking law and ethics of litigation.
Use of Legal Jargon
This case clearly lies at crossroad of both the law of banking recovery- Banking recovery act, particularly the Securitisation and reconstruction of financial assets and enforcement of security interest Act (SARFAESI) 2002 and the criminal process protection guaranteed under Section 340 and 341 of the Criminal Procedure Code (CrPC). The judgement passes through important legal parameters like expediency in the interest of justice, false affidavit, Perjury and mens rea. It also refers to some jurisprudence where the limit of application of Section 195(1) (b) read with Section 340 CrPC comes to light particularly against the backdrop of secured debt recovery and procedural representations by financial institutions.
The Proof
The facts underlie on a 56 lakhs loan made by Punjab National Bank to Mr. Vinod Kumar Sharma who pledged his upper floor of his building. In the SARFAESI application filed under Section 14 of the Act however, the Bank inadvertently added the terrace and other parts to the mortgage property. Mr. Sharma argued that this was perjury and made an application under Section 340 CrPC against the officials of the Bank saying that they have presented a false affidavit. The Bank later tried to correct their SARFAESI application stating that it was a mistake on part in respect of terrace, but their application was rejected on grounds of procedure.
The Magistrate notwithstanding his admission refused to invoke Section 340 CrPC on the ground that it was not expedient in the interest of justice. The appellate court concurred with this holding stating that by itself a false affidavit did not justify commencement of criminal proceedings unless there was a more serious effect on the administration of justice. This also concurs with the precedents which also highlight that Section 340 is not mandatory, but also discretionary, wherein the applicability of a section relies not only on the falsity, but also whether the integrity of justice is greatly affected.
Case Laws
Iqbal Singh Marwah & Anr. v. Meenakshi Marwah & Anr.
The Supreme Court held that even if forgery or falsehood is established, the court must still be satisfied that initiating proceedings is expedient in the interest of justice. This principle formed the backbone of the rejection in the Sharma case.
Subrata Roy Sahara v. Union of India
Cited by the appellant to argue that courts must act strictly against those who abuse the judicial process. However, the court distinguished the facts and did not find comparable abuse of judicial process in the current matter.
Ram Rameshwar v. Nirmala Devi
Relied upon by the appellant to suggest that Section 340 CrPC is intended not to determine guilt, but to flag falsehoods for further inquiry. Nonetheless, the court stressed that this alone is not sufficient unless judicial expediency demands action.
Conclusion
Vinod Kumar Sharma judgment is an illustration of how the judiciary acts prudently whenever dealing with the claim of perjury brought to its notice in the context of financial litigation. As much as the misstatement on the mortgaged part of the property namely, terrace portion was considered by the bank and admitted partially by an application seeking amendment, the decision of the court not to take any criminal action could be seen in terms of a larger institution of law. Section 340 CrPC, does not act as a punitive measure against absolutely all procedural errors and improper representations, but acts to protect the sanctity of the judicial processes when such fabrications and misrepresentations menace the administration of justice in a substantive and systemic way.
In refusing to prosecute the bank officials under Section 340 CrPC, the court supported two critical considerations; the first was that the standard of perjury is not limited to falsity, but instead to the threat became the poison to the whole justice system, and the second was that the process of law should not be used like a sword in active financial contention, particularly when there are better options of appeal, appeals at DRT or civil suit.
It is also a symptom of a wider movement in the common law of judicial reasoning in which one judges on efficiency, fairness, and reasonableness in the working of procedural discretion. In the sphere of bank law where any attempt to recover property under SARFAESI usually results in a high stakes claim and claim to property it is the care of the court that the opportunism of reckless claims and counter litigation is kept at bay. But eventually such vigilance should be accompanied by measured reaction focusing both on preserving judicial resources and rule of law.
Consequently, even though the appellants complaints could be as a result of their genuine worry about misrepresentation, the court held such that parties must seek substantial relief by means of the correct channel of civil law or tribunal instead of resorting to criminalization. To the legal professionals, the case strengthens the need to be precise in affidavits and pleadings during recovery proceedings. To policy reformers, it points at the requirement of more clear procedural stipulations on how to go about alteration of revival applications without yielding false accusation of criminality. In summary, the case of Vinod Kumar Sharma v PNB can be said to add to jurisprudence on procedural integrity, fair banking practices and judicious application of criminal law in civil and commercial matters.
FAQs
1. What is the key legal issue in this case?
The central issue was whether Punjab National Bank committed perjury by wrongly including the terrace in its SARFAESI application and whether this justified action under Section 340 CrPC.
2. What is Section 340 CrPC?
Section 340 CrPC allows a court to initiate proceedings if it believes that an offence such as giving false evidence or fabricating documents has been committed during a judicial proceeding, but only if it is expedient in the interest of justice.
3. Was the bank found guilty of perjury?
No. Although the court acknowledged that the bank wrongly included the terrace, it held that initiating criminal proceedings was not necessary or expedient in the interest of justice.
4. What principle did the court apply from past judgments?
The court relied on the Iqbal Singh Marwah case, which stated that criminal proceedings under Section 340 CrPC must only be initiated when absolutely required for upholding the administration of justice.
5. Why is this case important in banking law?
It sets a precedent on the procedural safeguards for banks and borrowers in SARFAESI recovery proceedings and clarifies the threshold for initiating perjury proceedings against financial institutions.
REFERENCES
Cases
Iqbal Singh Marwah and Another v Meenakshi Marwah and Another (2005) 4 SCC 370 (SC).
Subrata Roy Sahara v Union of India (2014) 8 SCC 470 (SC).
Ram Rameshwar v Nirmala Devi (2011) 8 SCC 249 (SC).
Vinod Kumar Sharma v Punjab National Bank and Others CA No 27/23, Principal District & Sessions Judge (NW), Rohini Courts, Delhi, 16 April 2024 (unreported).
Statutes
Code of Criminal Procedure 1973, ss 195(1)(b), 340, 341.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, ss 13(2), 14.
