Bengaluru, 18 August, 2025 — In a landmark decision reinforcing accountability in banking operations, the Karnataka High Court has dismissed eight petitions filed by senior executives of State Bank of India (SBI) and Punjab National Bank (PNB), thereby upholding the charge sheet filed by the Criminal Investigation Department’s Economic Offences Division (CID-EOD) in 2018. The case stems from allegations of fraudulent and illegal SARFAESI Act invoked by SBI & PNB in the case of Metal Closures Pvt. Ltd., a Bengaluru-based market leader in metal packaging.
A Legacy Business Impacted by Controversial Bank Action
Established in 1977, Metal Closures was a key supplier to global FMCG and beverage majors including Coca-Cola, Pepsi, Heineken, Carlsberg, and Panasonic, employing over 650 staff at its peak. In 2014, the company banked with a consortium led by SBI, with PNB, UCO Bank, and Union Bank as members.
According to Managing Director B. Prashanth Hegde, a Chartered Accountant, the company uncovered serious irregularities by its CFO and deputy CFO involving unauthorised foreign letters of credit, diversion of imported material, and forged RTGS payments. The alleged misconduct, Mr. Hegde claims, was in collusion with certain executives of SBI and PNB. Rather than investigating these allegations, the banks proceeded with SARFAESI Act—without the account being a Non-Performing Asset (NPA).
CID Investigation and Key Findings
The CID’s Economic Offences Division concluded that the SARFAESI Act was resorted to “shut down Metal Closures” and quantified losses at ₹78.5 crore during nearly two years of banks possession. The charge sheet details serious allegations, including:
- Removal of stocks from factory premises and ₹4.5 crore worth of goods from the Inland Container Depot, Bengaluru.
- Sale of company equipment to competitors.
- Fraudulent RTGS payments of ₹8.89 crore without the MD’s authorisation.
- Payments of ₹6.26 crore by a senior PNB executive to sham companies linked to his son.
- Forgery of the MD’s signature, confirmed by the State Forensic Laboratory.
- Power disconnections and non-payment of wages, contributing to the closure of operations.
- Removal of servers and data from the company’s premises during bank possession, allegedly to manipulate records.
- Permitting removal of LPG installation of Total Gas from the premises without company’s approval knowing fully that LPG is the heartline of company’s business.
High Court’s Observations
In a lengthy and a well reasoned order, dated 23 July, 2025, the High Court Justice Mrs MG Uma rejected the petitioners’ claims that banks possession was “symbolic” and that they were protected by Section 32 of the SARFAESI Act for actions taken in good faith. It also criticised inconsistencies in the banks’ narrative—initially claiming the NPA date was 28 May 2014, then changing it to 31 January 2010—despite the sanctioning of ₹10 crore in fresh working capital just 18 days before the alleged NPA date 28.05.2014 which was declined by the company. The Court noted that the Company had repaid more than Rs.100 crores during the period 2010-2014 and wondered how the account could turn into NPA either in 2010 or in 2014. SBI withdrew the 1st Sarfaesi possession notice dated 20.02.2015 on 07.07.2015 after SBI’s legal department pointed out that the Sarfaesi proceedings was illegal.
The Court cited the Supreme Court’s ruling in Transcore v. Union of India, emphasising that “symbolic” versus “actual” possession is not a valid distinction under the SARFAESI framework, and that “possession” is a relative term to be judged by facts on record.
Following the banks’ withdrawal of the concurrent auditor and security agency in 2017, Metal Closures resumed operations. The company has since filed a ₹413.65 crore compensation claim before the Debts Recovery Tribunal (DRT). In a separate writ, the High Court has directed the DRT to decide the matter within six months.
Senior advocates Dhyan Chinappa and Anant Mandgi represented Metal Closures.
Commenting on the verdict, B. Prashanth Hegde said: “This judgment vindicates our stand that the SARFAESI process was misused to deliberately dismantle a thriving business. It also sends a strong message that banking powers must be exercised with integrity, transparency, and in strict compliance with the law.” He even cited the case of Mardia Chemicals Ltd vs Union of India, in which the Supreme Court upholding the constitutional validity of the Sarfaesi Act,2002 observed that “possessing more drastic powers calls for exercise of higher degree of good faith and fair play as part of the lender’s liability”.
Additionally in, Keshavlal Khemchand & sons Pvt Ltd vs Union of India, again the Apex Court had said that the Sarfaesi action “if not taken after an appropriate deliberation in a given case could result in the disruption of industrial production and consequently resulting in unemployment and loss of GDP etc. impacting larger interests of the nation”.
About Metal Closures Pvt. Ltd.
Founded in 1977, Metal Closures has been a pioneer in India’s metal packaging industry,
manufacturing closures and caps for some of the world’s leading beverage and FMCG
brands. Known for quality, innovation, and scale, the company has served both domestic and
international markets for over four decades.
