In a pivotal legal decision, the Supreme Court has delivered a resounding verdict in favor of DBS Bank and its directors, absolving them of any criminal liability for actions attributed to the former leadership of Lakshmi Vilas Bank (LVB) prior to their amalgamation. This landmark ruling underscores the critical role played in maintaining public trust in the banking system.

At the core of this legal case was the interpretation of Clause 3(3) within the scheme announced by the Ministry of Finance, Department of Financial Services, which specifically addressed criminal proceedings related to the transferor bank, LVB, before the non-voluntary amalgamation.

In November 2020, the Government of India invoked Section 45 of the Banking Regulations Act, 1949, to initiate the merger of DBS Bank with LVB. The primary objective behind this move was to safeguard the interests of customers, depositors, creditors, and employees of the financially troubled LVB.

While delving into this intricate legal matter, the Supreme Court emphasized the paramount importance of protecting the interests of depositors, creditors, and the general public who had invested in LVB before its financial distress. The amalgamation scheme was designed to serve the broader public interest by ensuring the stability of the banking sector.

The Court firmly asserted that DBS Bank and its directors, who were appointed following the merger and duly approved by the Reserve Bank of India (RBI), should not be held criminally responsible for the actions of LVB's previous leadership. The judgment notably highlighted the stark differentiation between the conduct of DBS and that of the former LVB directors.

Furthermore, the Court pointed out the erroneous nature of the chargesheet, which incorrectly imputed criminal liability to DBS Bank for actions carried out by LVB's former directors. It emphatically reaffirmed that the individual accountability of LVB directors under criminal law remained fully intact, unaffected by the amalgamation.

In its ruling, the Supreme Court stressed the imperative for a judicious exercise of the authority to quash a criminal investigation. While acknowledging the gravity of this power, the Court emphasized its pivotal role in ensuring the triumph of justice.

CASE TITLE: DBS Bank India Ltd. vs. Delhi Government & Others