Karnataka High Court rejects plea by Union Bank for CBI probe into Valmiki scam

The Karnataka High Court on Tuesday dismissed a plea by the Union Bank of India for a probe by the Central Bureau of Investigation (CBI) into the alleged misappropriation of funds of the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation (Valmiki Corporation) [Union Bank of India v. State of Karnataka]..Justice M Nagaprasanna held that Section 35A of the Banking Regulation Act, which confers powers on Reserve Bank of India to give directions in public interest, cannot be interpreted in a blanket manner to provide for a CBI probe. "I have not accepted the interpretation that Section 35A of the Banking Regulation Act means automatically the CBI will probe. Otherwise, every banking authority will ask for that," the Court explained while pronouncing the verdict. .Detailed judgment awaited..The alleged scam pertains to misappropriation of Valmiki Corporation funds. It came to light in May this year after the Corporation's accounts superintendent, Chandrashekhar, died by suicide at his residence. Chandrashekhar had left behind a note alleging misappropriation of the welfare funds.Soon after, the Karnataka government constituted a Special Investigation Team to probe the allegations, while the Enforcement Directorate (ED) too began a separate probe.As per the ED, around ₹90 crore was illegally transferred from the Valmiki Corporation’s Union Bank of India account to several unauthorised accounts..The Union Bank of India, meanwhile, sought a CBI probe into the matter by filing a plea before the High Court. Attorney General for India R Venkatramani had appeared in his personal capacity for the Bank and pressed its plea for a CBI probe in the “interest of the country’s banking regulations.”Senior Advocate BV Acharya, who appeared for the State, opposed the bank's plea and argued that the central agency was synonymous with the Central government. Therefore, the CBI taking over the investigation from the State will effectively mean the Centre encroaching upon the State’s federal powers, Acharya had argued.Senior Advocate Prof Ravivarma Kumar, who had appeared for the Valmiki Corporation, also opposed the Bank’s petition and said it was a “proxy petition.”.On September 30, Justice Nagaprasanna reserved his orders in the matter and said that he would consider two points on the maintainability of the petition. Firstly, the judge said he would be examining whether the matter should be sent to the Supreme Court under Article 131 of the Constitution, which gives the apex court original jurisdiction over legal disputes between States or between the States and the Union.Secondly, the Court said it would examine whether the master circular issued by the Reserve Bank of India (RBI) under Section 35A of the Banking Regulation Act - as per which banking frauds beyond a certain amount must be investigated by the CBI - is a blanket order..Attorney General R Venkataramani along with Senior Advocates Kiran S Javali, Vibha Dama Makhija, and advocate Vinay Kumar, Advocate appeared for the Union Bank of India.Special Public Prosecutor (SPP) BV Acharya along with Additional Advocate General VG, High Court Government Pleader Thejesh P appeared for the State authorities.The CBI was represented by SPP P Prasanna Kumar.Senior Advocate Prof. Ravi Varma Kumar and Advocate Aditya Bhat represented the Valmiki Corporation.Advocate Sudhanva DS appeared for an impleaded respondent..[Read Judgment]