Telangana High Court Forces Reopening of Sealed NBFC Branch, Citing Public Harm in Rs 8 Crore Embezzlement Probe

In a sharp rebuke to police actions, the Telangana High Court has mandated the immediate reopening of a Ujjivan Small Finance Bank branch in Hyderabad, which was sealed by authorities as part of an ongoing investigation into an alleged Rs 8 crore embezzlement. The court’s decisive order underscores a critical stance against what it perceived as an overreach of police power, emphasizing the paramount importance of public access to banking services and adherence to principles of natural justice.

The financial institution found itself embroiled in controversy following allegations of a substantial Rs 8 crore fraud, reportedly orchestrated by a former manager and other staff members.

In response, police sealed the entire branch premises, effectively cutting off thousands of customers from their accounts and crucial financial services. This drastic measure, however, drew the ire of the High Court, which deemed the police action disproportionate and detrimental.

Justice B. Vijaysen Reddy, presiding over the case, delivered a scathing critique of the police department’s handling of the situation.

The court highlighted that by sealing the entire bank, police not only obstructed the public’s fundamental right to access their funds but also prevented the NBFC from conducting its essential business operations, including internal audits and customer service. The ruling explicitly stated that such an indiscriminate sealing order, without proper justification or consideration for the public interest, amounted to a violation of natural justice.

The petition filed by Ujjivan Small Finance Bank sought the court’s intervention, arguing that the continued sealing of the branch inflicted immense hardship on its clientele, many of whom rely on the branch for daily transactions and accessing their savings.

The bank also stressed the urgent need to regain access to its premises to conduct internal investigations, retrieve vital records, and facilitate the smooth functioning of its operations, which are crucial for maintaining public trust and regulatory compliance.

While acknowledging the gravity of the embezzlement allegations, the court firmly asserted that the police’s duty primarily lies in securing evidence and records pertinent to the crime, not in shutting down an entire financial institution that serves the public.

The order clarified that if police needed to secure specific documents or evidence, they should have done so without sealing the entire premises. The court suggested alternative measures, such as installing CCTV cameras and ensuring an adequate police presence, to safeguard the integrity of the evidence while allowing the bank to function.

This landmark decision by the Telangana High Court sends a clear message about the boundaries of police authority during criminal investigations, especially when public services are impacted.

It reiterates the judiciary's role in safeguarding not only legal processes but also the broader public interest, ensuring that investigative actions do not inadvertently penalize innocent citizens or cripple essential services. The Ujjivan Small Finance Bank branch is now set to resume operations, bringing relief to its customers and setting a precedent for similar cases in the future.