Timely Objection Required on State Consent for CBI Probe

Source: Supreme Court

Why in News?

The bench of Justices Surya Kant and Joymalya Bagchi in the case of Central Bureau of Investigation v. M/s Narayan Niryat India Pvt. Ltd. & Ors. (2025) held that the objections regarding the CBI's lack of state consent under Section 6 of the Delhi Special Police Establishment Act, 1946, must be raised at the earliest stage, usually right after the FIR is registered. It clarified that once the investigation is complete, a chargesheet is filed, and a magistrate takes cognizance, such objections cannot be used belatedly to invalidate the proceedings, except where a quashing petition was already pending before cognizance was taken. 

What was the Background of Central Bureau of Investigation v. M/s Narayan Niryat India Pvt. Ltd. & Ors. (2025) Case? 

• The first respondent, a Company incorporated under the Companies Act, was initially granted a credit limit of Rs.10.50 crores by UCO Bank, which was increased progressively. 
• The credit limit was later extended to Rs.37 crores by UCO Bank, while Punjab National Bank and Corporation Bank also extended facilities of Rs.33.5 crores and Rs.40 crores respectively. 
• These banks subsequently formed a consortium and sanctioned an aggregate limit of Rs.110.5 crores to the Company. 
• The Company's account was declared as Non-Performing Asset (NPA) by all consortium banks on 31.03.2013. 
• Recovery proceedings before the Debt Recovery Tribunal were initiated following the NPA declaration. 
• A Joint Lenders Meeting was held on 23.03.2017, where the compromise proposal given by the Company was found unacceptable. 
• The banks proposed to file a criminal complaint after rejecting the compromise proposal. 
• A One Time Settlement (OTS) was also proposed subsequently, but the Company failed to honour the same. 
• The complaints made by the banks led to registration of FIR No.RC2222020A0002/2020 on 05.11.2020, under Sections 420 read with 120-B of IPC and Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988. 
• After investigation, CBI filed a chargesheet and one supplementary chargesheet before the Special Magistrate, CBI, Indore, under Sections 120B, 406, 420 and 471 IPC. 
• The charges under Prevention of Corruption Act were dropped as no bank official or public servant could be prosecuted for want of requisite sanction. 
• While the CBI Court had taken cognizance of the chargesheet, the Company approached the High Court of Madhya Pradesh at Indore on 16.07.2024. 
• The petition was filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 for quashing of the FIR dated 05.11.2020, chargesheet and proceedings in ST No. 16/2023. 
• The High Court vide judgment dated 08.08.2024 allowed the petition and quashed the entire proceedings on two grounds.

What were the Court's Observations? 

On State Consent Requirement: 

• The Supreme Court held that both reasons given by the High Court were misconceived and misdirected. 
• The Court emphasized that lack of consent under Section 6 of the Delhi Special Police Establishment Act, 1946 ought to have been raised soon after registration of FIR. 
• Once the investigation is complete, chargesheet has been filed, and the court of competent jurisdiction has taken cognizance, such plea cannot be raised to vitiate the validity of an order taking cognizance. 
• The Court carved out limited exceptions where such plea may be raised:  
  • When it causes severe miscarriage of justice 
  • Where proceedings for quashing of FIR have been initiated and chargesheet has been filed during pendency of the quashing proceedings 
• In the latter case, the aggrieved person may have justification in contending that filing of chargesheet during pendency of quashing proceedings will not prejudice their right. 

On Merit-Based Examination: 

• The Supreme Court found that the High Court exceeded its jurisdiction while assuming the role of a Trial Court. 
• The Court noted that there were debatable issues which ought to have been left to the wisdom of the Trial Court. 
• The High Court should not have entered into merit-based examination of allegations at the stage of quashing proceedings.

Court's Directions: 

• The impugned judgment passed by the High Court was set aside on both counts. 
• The XXVII Additional Sessions Judge, Indore, before whom ST No.16/2023 was pending, was directed to proceed with the matter in accordance with law. 
• The Court clarified that if in the ongoing proceedings, the Trial Court finds prima facie case to prosecute bank officials under Prevention of Corruption Act, 1988 or any other penal provision, there shall be no impediment to summon such officials. 
• The respondents were directed to appear before the Trial Court on 28.10.2025 and furnish bail bonds to the satisfaction of the Trial Court. 
• Upon furnishing of bail bonds, the orders dated 21.03.2025 and 05.05.2025 passed by Supreme Court attaching personal and family assets of the Managing Director and Director of the respondent Company would stand vacated. 
• The Court specifically clarified that it had not gone into the merits of the allegations.

What is Delhi Special Police Establishment Act, 1946? 

About: 

• Extent: Applies to the whole of India. 
• Date of Enactment: 19th November 1946 

Purpose and Objective: 

• To constitute a special police force in Delhi for investigation of certain offences in Union territories. 
• To provide for superintendence and administration of this special police force, 
• To enable extension of powers and jurisdiction of this force to other areas for investigation of specified offences. 

Constitution of Delhi Special Police Establishment: 

• Creation: Central Government may constitute a special police force called the Delhi Special Police Establishment. 
• Purpose: Investigation of offences notified under Section 3 in any Union territory. 
• Powers: Members have all powers, duties, privileges and liabilities that police officers of that Union territory have for investigation and arrest. 
• Rank Authority: Members of or above the rank of Sub-Inspector may exercise powers of officer in charge of a police station. 

Offences to be Investigated: 

• Central Government specifies offences or classes of offences through notification in Official Gazette. 
• These offences are to be investigated by the Delhi Special Police Establishment.

Superintendence and Administration: 

Superintendence: 

• For Prevention of Corruption Act cases: Vests in the Central Vigilance Commission 
• For all other matters: Vests in the Central Government 

Administration: 

• Vests in an officer appointed as Director by the Central Government. 
• Director exercises powers similar to Inspector-General of Police as specified by Central Government. 

Appointment of Director: 

Committee Composition: 

• Chairperson: Prime Minister 
• Member: Leader of Opposition in House of the People (or Leader of single largest Opposition Party if no recognized Leader of Opposition). 
• Member: Chief Justice of India or Judge of Supreme Court nominated by CJI. 

Selection Criteria: 

• Panel recommended based on seniority, integrity and experience in investigation of anti-corruption cases. 
• Officers chosen from Indian Police Service. 

Validity: 

• Appointment not invalid merely due to vacancy or absence of a Committee Member. 

Terms and Conditions of Director: 

Tenure: 

• Minimum period of 2 years from date of assumption of office. 
• Period may be extended up to one year at a time in public interest on Committee's recommendation with recorded reasons. 
• Maximum total period including extensions: 5 years. 

Transfer: 

• Director cannot be transferred except with previous consent of the Committee under Section 4A. 

Director of Prosecution: 

Appointment and Rank: 

• Officer not below rank of Joint Secretary to Government of India. 
• Appointed by Central Government on recommendation of Central Vigilance Commission. 
• Heads the Directorate of Prosecution. 

Function: 

• Conducts prosecution of cases under this Act. 
• Functions under overall supervision and control of the Director. 

Tenure: 

• Minimum period of 2 years from date of assumption of office.

Appointment of Senior Officers 

Covered Posts: 

• Posts of level of Superintendent of Police and above (except Director). 

Appointing Committee: 

• Chairperson: Central Vigilance Commissioner 
• Members: Vigilance Commissioners 
• Members: Secretary, Ministry of Home Affairs 
• Members: Secretary, Department of Personnel 

Process: 

• Committee must consult Director before submitting recommendation. 
• Central Government passes orders on receiving recommendation. 
• Committee also recommends extension or curtailment of tenure of such officers. 

Extension of Powers to Other Areas 

Authority: 

• Central Government may extend powers and jurisdiction to any area (including Railway areas) in a State (not being a Union territory). 
• Extension done through order for investigation of offences specified in Section 3 notification. 

Powers When Extended: 

• Members may discharge functions of police officer in that area. 
• Deemed to be member of police force of that area. 
• Vested with powers, functions, privileges and liabilities of police officer of that area. 
• Sub-Inspector and above may exercise powers of officer in charge of police station. 

State Consent Requirement (Section 6) 

Critical Provision: 

• No member of Delhi Special Police Establishment can exercise powers and jurisdiction in any State (not being a Union territory or railway area) without consent of State Government. 
• This protects federal structure and State autonomy. 
• Consent can be general or case specific. 

Central Government Approval for Certain Cases (Section 6A) 

Prior Approval Required For: 

Investigation of offences under Prevention of Corruption Act, 1988 when allegation relates to: 

• Employees of Central Government of level of Joint Secretary and above. 
• Officers appointed by Central Government in corporations, government companies, societies and local authorities owned or controlled by Central Government. 

Exception to Approval Requirement: 

• Not required for spot arrests on charge of accepting or attempting to accept gratification (other than legal remuneration).