The Supreme Court of India has quashed criminal proceedings under the SC/ST (Prevention of Atrocities) Act against bank officials accused of caste-based discrimination during a loan recovery dispute.
The Court ruled that alleged violations of Reserve Bank of India (RBI) guidelines cannot, by themselves, justify criminal prosecution merely because the borrowers belong to Scheduled Caste or Scheduled Tribe communities.
The judgment was delivered on October 12, 2026, by a bench of Justices J.B. Pardiwala and K. Vinod Chandran in Chavan Dharmendar and Others v. State of Telangana and Others.
What Was the Dispute?
The case involved a company that had obtained credit facilities from the State Bank of India. Its loan accounts were classified as non-performing assets (NPAs) in 2016, following which recovery-related proceedings were initiated.
The company's directors alleged that bank officials had discriminated against them on caste grounds, failed to provide rehabilitation benefits under RBI guidelines and used allegedly false information to initiate coercive action.
An FIR was registered in Hyderabad under the SC/ST Act. After the High Court declined to quash the proceedings, the bank officials approached the Supreme Court.
What Did the Supreme Court Say?
The top court observed that there was no specific allegation showing that any bank official had denigrated the directors because of their caste.
It held that non-compliance with RBI circulars or guidelines cannot automatically become grounds for criminal prosecution simply because the borrowers belong to Scheduled Castes or Scheduled Tribes.
The bench consequently ruled that continuing the criminal proceedings on the allegations presented was not justified.
Borrowers Can Approach Recovery Forums
Importantly, the Supreme Court clarified that the company could still raise its grievances regarding alleged violations of RBI guidelines, rehabilitation measures and misrepresentations before the appropriate forum, including the Debt Recovery Tribunal.
The Court allowed the bank officials' appeal and quashed the FIR and proceedings arising from it.
The Larger Implication
The ruling clarifies that disputes arising from loan recovery and alleged regulatory violations must be examined on their legal merits. At the same time, it does not grant blanket immunity to bank officials: specific allegations of caste-based offences can still be examined under the law.