[Yes Bank Fraud] Special Court rejects Rana Kapoor's challenge to sanction under Prevention of Corruption Act

A special CBI court in Mumbai on Thursday rejected Rana Kapoor's plea which had alleged lack of proper sanction under Section 19 of the Prevention of Corruption Act (PC Act) for the Central Bureau of Investigation (CBI) proceedings against him in the Yes Bank scam [Rana Kapoor vs. CBI].Special Judge MR Purwar held that there was proper sanction and the contention that the sanction was granted by an incompetent authority (Board of Directors of Yes Bank Ltd) can only be looked at during the stage of the trial."Even otherwise on the day of the sanction applicant was already removed from service and thus, no question of concurrence of Reserve Bank of India arises," the Court said. .Kapoor, through advocate Vijay Agarwal, had contended that since the sanction itself stipulated that it is subject to the concurrence of the Reserve Bank of India (RBI), and the same had not been approved, the sanction was invalid.He highlighted that according to the Memorandum of Association, the termination of appointment, appointment, and re-appointment of the Chairman, MD, and CEO of the firm were all subject to RBI approval.Hence, the sanction dated October 6, 2021 upon which the Court relied to take cognisance was null and void, it was submitted.Since the sanction under section 19(1)(c) of the PC Act was granted without showing what documents were referred to, it was granted mechanically without application of mind, the counsel added..The CBI, represented by Special Public Prosecutor PKB Gaikwad, argued that Yes Bank Ltd is a company incorporated under the Companies Act and is a scheduled commercial bank under Reserve Bank of India Act. Therefore, it was submitted that as per section 196 of the Companies Act, a Managing Director (MD) has to be appointed by the Board of Directors.It was argued that since the Board of Directors decides on appointment and terms of appointment of MD & CEO, it has the authority to decide on their removal.The CBI contended that although RBI is empowered to concur with the decision of the board, it cannot remove the MD & CEO on its own. Hence, it argued that the competent authority to remove the applicant from his office is the Board of Directors and that in turn rendered the present application devoid of any merit..The Court found that the prosecution had produced the sanction order and, therefore, this was not a case of absence of sanction altogether.Relying on the decisions of the Supreme Court in Prakash Singh Badal Vs. State of Punjab and various other cases, the special court underlined that the question of a defective sanction can be raised during the trial. It, therefore, rejected Kapoor's plea.Kapoor along with his wife Bindu Kapoor, is in custody for an alleged loan scam of over ₹1,700 crores.After the offence was registered by the Central bureau of Investigation, the Enforcement Directorate registered a money-laundering case.The first information report (FIR) claimed that Kapoor obtained pecuniary advantage of over ₹300 crores thereby causing loss of over ₹1,700 crores to Yes Bank by extending credit facilities to Avantha group of companies when it was not eligible.[Read Order]