Kerala HC Reserves Order on Sanction for Prosecution in SNDP Microfinance Scam

Home / News updates SNDP Microfinance Scam: Kerala HC Reserves Order On Whether Govt Sanction Is Needed To Prosecute Accused X High Court to decide if prior government sanction is mandatory to prosecute accused persons in the alleged ₹15.85-crore SNDP microfinance fraud. The High Court will decide whether office-bearers of SNDP Yogam fall within the definition of “public servant” under the Prevention of Corruption Act and therefore require prior prosecution sanction. The Kerala High Court on September 22 reserved its order on whether prior government sanction is mandatory to prosecute accused persons in the alleged ₹15.85-crore SNDP microfinance fraud case. Justice A. Badharudeen was hearing petitions seeking an effective investigation into the alleged irregularities in the microfinance scheme. The case arises from a Vigilance and Anti-Corruption Bureau (VACB) investigation registered in 2016 concerning alleged misappropriation of funds provided under a microfinance scheme involving the Sree Narayana Dharma Paripalana (SNDP) Yogam. Among those named in the proceedings were SNDP office-bearers, including Vellappally Natesan, as well as former Managing Directors of the Kerala State Backward Classes Development Corporation Ltd. (KSBCDC). The immediate controversy concerns Section 19 of the Prevention of Corruption Act, 1988, which requires previous sanction before a court can take cognisance of certain offences against a public servant. The State government told the High Court that no prosecution sanction is required for the SNDP office-bearers because they are private individuals and do not fall within the statutory definition of “public servant”. The State Attorney submitted that the KSBCDC had sanctioned the loans to SNDP in its capacity as an NGO, rather than treating SNDP as a government agency or nodal authority. However, the petitioner contended that the accused fall within the definition of “public servant” under Section 2(c)(xii) of the Prevention of Corruption Act, making sanction necessary. The Vigilance Special Public Prosecutor has also taken the position that sanction is required. The issue arose after the investigating agency indicated that final reports could be filed in several cases, but prosecution sanction was required in at least some matters. The High Court had earlier directed the competent authority in the Backward Classes Development Department to consider the sanction issue by September 10. Delay in complying with that direction led the Court to summon the Additional Chief Secretary and express displeasure over the handling of the matter. On September 17, the Backward Classes Development Department issued an order taking the position that sanction was unnecessary because the accused concerned were private parties. The Vigilance side, however, continued to argue that sanction was necessary, prompting the High Court to examine the underlying statutory question itself. After hearing the parties on September 22, the Court reserved its order. Case Title: MS Anil v State of Kerala & Anr