Court clarifies distinction between administrative proceedings and criminal investigations in Vivimed Labs case
In a significant judgment, the Telangana High Court has dismissed the writ petition filed by Vivimed Labs Limited, which sought to halt the ongoing criminal investigation by the Central Bureau of Investigation (CBI) following the interim suspension of the administrative classification of its account as "Fraud" by the Reserve Bank of India (RBI). The judgment, delivered by Justice Nagesh Bheemapaka, underscores the legal distinction between administrative proceedings under banking regulations and criminal investigations under penal law.
Vivimed Labs Limited, a pharmaceutical company, challenged the CBI's search and seizure operations conducted on January 20, 2026, arguing that these actions were predicated on the fraud classification that had been suspended by the court's interim order dated August 20, 2025. The company contended that all subsequent proceedings based on the fraud classification should also be considered suspended.
However, the court held that the suspension of administrative classification does not automatically nullify criminal investigations into cognizable offences disclosed by the FIR. Justice Bheemapaka emphasized that administrative classification under RBI guidelines operates in a separate sphere from criminal investigations, which are governed by distinct statutory frameworks. The judgment clarifies that criminal proceedings have an independent statutory character and continue under penal law, even if administrative actions are stayed.
The court noted that the FIR registered by the CBI involved serious allegations of diversion and siphoning of public funds amounting to Rs. 424.43 Crores, which necessitated a thorough investigation. It further observed that criminal investigations should not be interdicted at a nascent stage, except in cases of manifest mala fides or abuse of process, which Vivimed Labs failed to demonstrate.
The court also addressed the procedural aspect, stating that the search and seizure operations were conducted under judicial supervision and pursuant to statutory powers under the Bharatiya Nagarik Suraksha Sanhita, 2023. The judgment asserted that lawful exercise of statutory powers cannot be construed as contemptuous or circumventing judicial orders.
This ruling reinforces the legal precedent set by the Supreme Court in CBI v. Surendra Patwa, affirming the separate and distinct spheres of administrative and criminal proceedings. The Telangana High Court's decision marks a crucial development in the legal landscape concerning economic offences and the investigation process involving public funds.
Bottom line:-
Criminal proceedings and administrative classification of an account as "Fraud" under RBI Master Directions operate in separate and distinct spheres. Suspension of administrative classification does not nullify or automatically invalidate criminal investigations into cognizable offences.
Statutory provision(s): Article 226 of the Constitution, Bharatiya Nagarik Suraksha Sanhita, 2023 Section 96, RBI Master Directions on Fraud Risk Management, Sections 120B, 420, 468, 471, 477A of the Indian Penal Code, Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.
Vivimed Labs Limited v. Central Bureau of Investigation, (Telangana) : Law Finder Doc id # 2937108
