The Supreme Court set aside a 2022 judgment from the Patna High Court and quashed an FIR filed against HDFC Bank and its officials. The FIR had alleged that bank officials unlawfully allowed a customer, Sunita Khemka, to operate a locker in violation of a restraining order issued under the Income Tax Act during an ongoing investigation. The Supreme Court held that the FIR did not establish the necessary ingredients for the offenses charged, including criminal conspiracy, breach of trust, and cheating, as it lacked evidence of dishonest intent or misappropriation.

1. Background (Paras 2–3.12):

   • A search operation was conducted under Section 132(1) of the Income Tax Act, 1961, at premises linked to Sunita Khemka.
   • HDFC Bank was ordered to freeze the accounts and locker of Khemka, including locker No. 462.
   • The bank later allowed the operation of the locker following a misunderstanding of a subsequent revocation order, which only applied to bank accounts.

2. Prohibitory and Revocation Orders (Paras 12–15):

   • The initial prohibitory order under Section 132(3) directed HDFC Bank to freeze accounts and lockers.
   • A subsequent revocation order only lifted restrictions on bank accounts, not the locker, which was mistakenly operated.

3. FIR and Allegations (Paras 3.13, 17):

   • Based on the operation of the locker, an FIR was lodged against the bank staff, alleging violations of Section 132(3) of the Income Tax Act and provisions of the Indian Penal Code, including conspiracy and breach of trust.

4. Defense of HDFC Bank (Paras 5–7):

   • HDFC Bank argued that there was no mens rea or dishonest intent in allowing the locker operation, as the bank officials misunderstood the revocation order.

5. Court's Reasoning (Paras 19–27):

   • The FIR did not establish key ingredients of offenses under Sections 420, 409, or 406 IPC, which require proof of dishonest intent, misappropriation, or inducement.
   • The Court also found no evidence of criminal conspiracy (Section 120B) or any intentional breach of law.

6. Conclusion (Paras 29–31):

   • The Supreme Court quashed the FIR, emphasizing that continuation of the criminal proceedings would cause undue hardship to HDFC Bank and that no prima facie case of any offense had been made out.

Acts and Sections Discussed:

• Income Tax Act, 1961:
  • Section 132(3): Prohibitory order on bank accounts and lockers during search proceedings.
  • Section 275A: Penalty for contravention of Section 132(3).
• Indian Penal Code, 1860:
  • Sections 34, 37, 120B: Criminal conspiracy and common intention.
  • Sections 201, 206, 217: Destruction of evidence and disobedience of law by public servants.
  • Sections 406, 409: Criminal breach of trust by banker.
  • Sections 420, 462: Cheating and misappropriation of bank property.

Ratio Decidendi:

The Supreme Court ruled that in the absence of dishonest intent, misappropriation, or inducement, the FIR failed to disclose any prima facie case against HDFC Bank under the Indian Penal Code. The misunderstanding of the order was not sufficient to establish criminal liability, especially under stringent provisions like Sections 420 and 409 IPC, which require clear evidence of fraudulent intent.

Subjects:

Banking law, Criminal law, Income Tax Act compliance

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