Karnataka Government Challenges Union Bank’s Request Amid Ongoing Investigation into Alleged ₹90 Crore Scam
The Karnataka government opposed a plea from the Union Bank of India seeking to transfer the investigation of the alleged multi-crore Valmiki Corporation scam to the Central Bureau of Investigation (CBI). During Monday’s proceedings, Senior Advocate BV Acharya argued before Justice M Nagaprasanna that the CBI is essentially an extension of the Central government. He asserted that allowing the CBI to take over the investigation would infringe upon the state’s federal powers.
Acharya emphasized that the CBI lacks inherent authority to investigate cases independently, as police powers are constitutionally mandated and must not be interfered with by the central authorities. He further stated that the presence of the CBI, along with the Union Bank, represented a federal overreach.
In opposition, Senior Advocate Prof. Ravivarma Kumar, representing Valmiki Corporation, criticized the Bank’s petition as a “proxy petition.” He argued that, under Article 12, the CBI cannot be equated with state authorities, insisting that the agency operates under the jurisdiction of the Union of India.
Attorney General of India R Venkatramani, appearing for the Union Bank, refrained from engaging in the debate regarding the CBI’s status as an extension of the central government. He asserted that the CBI is the sole authority for investigating such cases under provisions of the Reserve Bank of India (RBI) that mandate CBI involvement in significant banking frauds.
Justice Nagaprasanna reserved judgment on the matter, stating he would consider the petition’s maintainability. He highlighted two key points: whether the case should be referred to the Supreme Court under Article 131, which governs disputes between states and the Union, and whether the RBI’s master circular under Section 35A mandates CBI investigations for all banking frauds above a certain threshold.
The Valmiki Corporation scam, involving the alleged misappropriation of funds meant for the welfare of Scheduled Tribes, came to light in May after the suicide of accounts superintendent Chandrashekhar, who left a note alleging misuse of funds. Following this, the Karnataka government formed a Special Investigation Team, while the Enforcement Directorate (ED) initiated a separate inquiry.
The ED reported that approximately ₹90 crore was improperly transferred from the Valmiki Corporation’s account at Union Bank to unauthorized accounts. Notably, an FIR was filed against ED officers involved in the investigation, but Justice Nagaprasanna had stayed that inquiry. The Bank subsequently sought a CBI investigation, leading to the current proceedings. The High Court had previously requested the State government’s response to the matter in July.
(With inputs from agency)
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