A special CBI court has discharged KV Brahmaji Rao, former Executive Director of Punjab National Bank, in the Nirav Modi fraud case involving fraudulent letters of undertaking (LoUs) worth Rs23,000 crore.
Special judge Ajay Vitthal Gujarathi held that no conspiracy or criminal intent could be attributed to Rao. The court observed there was no allegation of dishonest intention, participation in conspiracy, pecuniary benefit, or quid pro quo against him. At most, the allegations suggested a lapse or dereliction of duty, which does not amount to criminal liability.
The court noted that Rao, as a top-level executive, was involved in policy-making and not branch-level operations. It questioned the CBI for excluding supervisory officials like deputy general managers, chief general managers, and general managers, who acted as statutory links between branches and head office. The judge remarked that misconduct, if any, should first be examined at the supervisory level before escalating accountability to senior management, and criticised the prosecution for a ‘pick-and-choose’ approach.
CBI Allegations on RBI Notice
The CBI had alleged that despite an RBI caution notice in August 2016 regarding fraudulent Letters of Comfort via SWIFT, senior PNB officers, including Rao, failed to act. The prosecution argued that Rao dealt with such notices and failed to protect the bank’s interests.
The defence countered that Rao convened meetings with senior officials after receiving the RBI circular, and that the responsibility for implementing corrective steps lay with the IT Division, headed by another executive director.
Discharge from Criminal Liability
After hearing both sides, the court ruled that Rao had discharged his functions and had no involvement in the fraudulent acts committed by bank officials Gokulnath Shetty and Manoj Kharat at PNB’s Brady House branch. It said that with more than 7,000 branches under his purview, it was impossible for Rao to monitor every transaction. No material showed that he overruled internal guidelines, pressured subordinates, or benefited from the fraud.
Finding no mens rea, the court concluded that criminal liability could not be fastened on Rao and ordered his discharge.
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