TMI Blog2009 (8) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... iminal misconduct under section 13(1)(d)( iii) of the Prevention of Corruption Act. - CRIMINAL APPEAL NOS. 76, 90, 92, 101, 147 AND 164 OF 2004 - - - Dated:- 7-8-2009 - S.B. SINHA AND CYRIAC JOSEPH, JJ. Mohan Prasaran for the Respondent. JUDGMENT S.B. Sinha, J. Introduction 1. These six appeals are directed against a judgment and order dated 4-12-2003 passed by the Special Court in Case No. 2 of 1993 whereby and whereunder the appellants herein were convicted and sentenced in the following terms :- "( a )Accused No. 1, K. Margabandhu is sentenced for the offence punishable under section 120B read with section 409 of the Indian Penal Code read with section 13(1)( d )( iii ) read with section 13(2) of the Prevention of Corruption Act to undergo R.I. for a period of six months and to pay fine of Rs. 1,00,000 in default S.I. for two months. ( b )Accused No. 2, R. Venkatakrishnan is sentenced for the offence punishable under section 120B read with section 409 of the Indian Penal Code read with section 13(1)( d )( iii ) read with section 13(2) of the Prevention of Corruption Act, to undergo R.I. for a period of six months and to pay a fine of Rs. 1,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and late Harshad Mehta was that some transactions were carried out in connivance with the officials of the Financial Institutions, Banks illegally as a result whereof late Harshad Mehta was allowed to obtain a sum of Rs. 40 crores which was actually Call Money given as a loan by the National Housing Bank to the UCO Bank. 7. Similar illegal transactions relating to Government securities and other non-Governmental securities came to the notice of the Central Government. A Committee commonly known as Janakiraman Committee was thereafter constituted, Shri R. Janakiraman, the then Deputy Governor of Reserve Bank of India was appointed as its Chairman. The Committee submitted its report between May, 1992 and April, 1993. On the basis of the report of the said Committee, Special Courts were constituted in terms of The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1993. 8. Allegations against the appellants and late Harshad Mehta were as under :- On 6-4-1992 National Housing Bank lent a sum of Rs. 40 crores at call to UCO Bank. However the said amount was credited to Harshad Mehta s account in UCO Bank, Hamam Street Branch, Mumbai. This was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Witness 3.Ravi Vira Gupta, Chairman, National Housing Bank, Sanctioning Authority 4.Shri B.L. Sachdeva, Under Secretary in the Ministry of Finance in Banking Division 5.Shri Hiten D. Mehta, Employee of late Shri Harshad S. Mehta 6.Shri N.A. Shivraman, Assistant, Funds Department, National Housing Bank 7.Shri Sunil Pandurang Gondhale, Peon, National Housing Bank 8.Jeroo Dalal, Management Trainee, ANZ Grindlays Bank 9.Shri Satish D. Hosangadi, Chief General Manager, National Housing Bank. 10.Mrs. Jyoti R. Patankar, Officer, Reserve Bank of India Production Witness 11.Sujata Milind Nimbalkar, ANZ Grindlays Bank Production Witness 12.Shri Sunil Kakkar, Assistant Chief Officer, UCO Bank, Head Office, Kolkata. 13.Shri Chinmoykumar Mukherjee, Assistant Chief Officer, UCO Bank, Kolkata 14.Shri K. Vijayan, Manager, Accounts Department, D.N. Road Branch, UCO Bank 15.Shri Manohar C. Rupani, Assistant Manager, D.N. Road Branch, UCO Bank 16.Neelam P. Kini, Clerk, Hamam Street Branch, UCO Bank. 17.Shri K. Mallikarjunan, Officer, UCO Bank, Head Office, Kolkata 18.Shri Pradeep A. Karkhanis, Senior Manager, UCO Bank, Hama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be a party to the conspiracy nor the prosecution had been able to show that he had any role to play in the transaction. 15. Admittedly accused No. 6, C. Ravi Kumar, was a dealer with NHB. The prosecution relied upon the deposition of PW-3, Ravi Vira Gupta to prove the order of sanction, validity whereof is in question. The prosecution for proving charge against him relied upon the deposition of PW-5, Hiten D. Mehta, who was working with late Harshad Mehta. Reliance by the prosecution has also been placed on the evidence of PW-6, Shri N.A. Shivraman, who was working as Assistant, Funds Department, NHB from 27-1-1991 to 31-12-1991. Reliance has also been placed in this behalf on the deposition of PW-9, Shri Satish D. Hosangadi, who at the relevant time was the Chief General Manager of NHB. 16. For proving the charges against accused No. 7, the prosecution has relied upon the depositions of PW-6, Shri N.A. Shivraman and PW-9, Shri Satish D. Hosangadi. 17. Accused Nos. 1 to 3 and 6 and 7 were public servants. 18. Orders of sanction for their prosecution were passed by the competent authorities. Accused Nos. 6 and 7 challenged the validity of the said orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amnathan wrote a letter dated 17-3-1992 on instruction from accused No. 1 K. Margabandhu for starting of the transactions again. P.W. 18 Karkhanis has stated that on 6-4-1992 accused No. 3 Ramnathan came to the Hamam Street Branch and insisted on starting the transactions immediately. He also states that accused No. 3 said that he is saying so on instructions from accused No. 1. This shows that accused No. 3 knew that on that day N.H.B. was to route Rs. 40 crores to Harshad Mehta through the UCO Bank and he had gone to the UCO Bank Hamam Street Branch to see that the transaction goes through and that he did so on instruction from the accused No. 1, K. Margabandhu. The Supreme Court has clearly laid it down in the case of Somnath Thapa referred to above that for establishing conspiracy knowledge about indulgence in illegal act is necessary. So far as accused No. 1 is concerned, from the statements that he made in the meeting on 6-4-1992 it is clear that he knew about the transaction. (The dispute about the time of the meeting raised by accused No. 1 is really not relevant considering the means of communication available and the written submissions filed by him, where he says that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he was guilty of commission of offence of conspiracy. 20.6 So far as the offences under the Prevention of Corruption Act, 1988 is concerned, a finding has also been arrived at that the charges under the said provisions have been proved. 20.7 The learned Special Court also negated the contention of accused Nos. 6 and 7 that the order of sanction passed against them are not valid. Submissions 21. The principal contentions raised on behalf of the appellants are :- (1)That the prosecution case even if taken to be correct in its entirety does not disclose any offence of conspiracy. (2)So far as accused Nos. 1 and 2 are concerned they were stationed at Kolkata. Only because they had held a meeting in the Chamber of accused No. 1 in presence of PWs 12 and 13, the same by itself does not prove that they were party to a larger conspiracy, namely use of call money for causing unlawful gain to late Harshad Mehta. (3)The charges of conspiracy vis-a-vis criminal breach of trust cannot be said to have been proved as even in terms of section 14 of the National Housing Bank Act, such a transaction was legally permissible. (4)Only because the accused No. 3 was present at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that he had committed the offence. (14)On behalf of accused No. 5, it was submitted that being an employee of Late Harshad Mehta and having acted on his instructions, he cannot be held to have committed an offence of conspiracy only because he had visited the banks and/or was in touch with some of their officers for the purpose of ascertaining the position of accounts of Mehta. (15)Accused No. 6 merely being signatory to the cheque of Rs. 40 crores issued in favour of UCO Bank which has been cleared by the Reserve Bank of India cannot be presumed to have any knowledge of diversion of the said amount by the officers of UCO Bank in the account of Late Harshad Mehta and the purported refund of the said amount with interest by him through ANZ Grindlays Bank, and as such he cannot be said to have committed the offence of conspiracy. (16)Accused No. 7 merely being an Assistant Manager and having discharged his functions acting under the directions of accused No. 6 and other higher officers cannot be said to have committed any offence as alleged or at all. (17)Departmental proceedings having not been initiated by the employers and neither the UCO Bank nor the NHB having suffered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the said letter was, inter alia, forwarded to accused No. 2, showed that he had also been a party to the said conspiracy which has also been proved by reason of the fact that he had visited the D.N. Road Branch of UCO Bank along with accused No. 5 on the date of the said transaction. (5)Accused Nos. 6 and 7 had not only been a party to the entire transaction but also manipulated other documents, and in particular, the vouchers, which clearly show that they not only had the requisite knowledge that the amount of Rs. 40 crores had to be diverted to the account of Late Harshad Mehta but also the fact that the said amount would be returned with interest by him through ANZ Grindlays Bank. (6)The purported contradiction in regard to absence of accused No. 1 from the office of UCO Bank on 6-4-1992, and also the timing of meeting the same does not affect the prosecution case, namely the commission of offence of conspiracy by all of them, as it has been established that the cheque issued by the NHB was never intended to be utilised as call money. (7)Accused No. 2, in fact, in his written statement in unequivocal terms admitted before the Special Court that the transaction invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of every other description;" 27. The Hierarchy of NHB is as under: 1.Chairman- cum -Managing Director 2.Executive Director 3.Chief General Manager/s 4.General Manager/s 5.Deputy General Manager/s 6.Assistant General Manager/s 7.Regional General Manager/s 8.Manager/s 9.Deputy Manager/s 10.Assistant Manager UCO Bank 28. UCO Bank is a nationalized bank having been taken over in terms of the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Its head office is at Calcutta. Amongst others it has two branches in Bombay - one at D.N. Road and other at Hamam Street. 29. Functions of the scheduled banks are governed by the provisions of the Banking Companies Act, 1936. UCO Bank is one of the fourteen banks which was nationalized. The administrative hierarchy of UCO Bank is as under: 1.Chairman Managing Director 2.Executive Director 3.General Manager (Scale VII) 4.Dy. General Manager (Scale VI) 5.Asstt. General Manager (Scale V) 6.Officer in (Scale IV) 7.Officer in (Scale III) 8.Officer in (Scale II) 9.Officer in (Scale I) Call Money - The Legal History 30. The statute relating to busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e average daily balance held at the Bank by a scheduled bank during any fortnight is below the minimum prescribed by or under sub-section (1) or sub-section (1A), such scheduled bank shall be liable to pay to the Bank in respect of that fortnight penal interest at a rate of three per cent, above the bank rate on the amount by which such balance with the Bank falls short of the prescribed minimum, and if during the next succeeding fortnight, such average daily balance is still below the prescribed minimum, the rates of penal interest shall be increased to a rate of five per cent, above the bank rate in respect of that fortnight and each subsequent fortnight during which the default continues on the amount by which such balance at the Bank falls short of the prescribed minimum." 32. Section 42 also provides for penalties. It is, thus, mandatory in character. 33. Maintenance of cash reserve ratio is, therefore, a statutory requirement. The consequence of non-compliance thereof has been provided for in sub-section (3) and (3A) of section 42 which was brought into the statute book by Act 38 of 1956 which came into force from 6-10-1956. 34. In terms of the said provision ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems of liabilities. Reserve Bank of India has been authorized in terms of section 42(1C) of the RBI Act, 1934 to classify any particular liability as either a demand or a time liability. 39. Demand Liabilities include all liabilities which are payable on demand. Time Liabilities are those which are payable otherwise than on demand and they include fixed deposits, cash certificates etc. 40. "Call money" transactions are thus indisputably banking transactions. It is no doubt true that in the event any irregularity is committed, the Reserve Bank of India would be entitled to take action against the erring Bank. Jurisdiction of the Special Courts 41. During the period April, 1992 and June, 1992 certain large scale irregularities and malpractices were detected in transactions of both Governmental and other securities, carried out by some brokers in collusion with the employees of various Banks and Financial Institutions. To have a more close look into the matter the RBI appointed a committee under the chairmanship of the then Deputy Governor of RBI, Shri R. Janakiraman ("the Janakiraman Committee"). The committee submitted its report between May, 1992 and April 1993 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions in securities, as is required by the section. The definition of the term securities as provided for in section 2( c ) of the Act, reads as under : "... ( c ) "securities" includes ( i )shares, scrips, stocks, bonds, debentures, debenture stock, units of the Unit Trust of India or any other mutual fund or other marketable securities of a like nature in or of any incorporated company or other body corporate; ( ii )Government securities; and ( iii )rights or interests in securities;" [Emphasis added] 46. Section 4 of the Act gives the Custodians the requisite power to cancel certain contracts entered into fraudulently and/or to defeat the provisions therein. Section 5 of the Act provides for the establishment of a special Court with a sitting judge of a High Court for speedy trial of such offences. Section 6 empowers the Special Court to take cognizance or try such cases as are instituted before it. 47. Section 7, which is of relevance in determining the present issues before us, defines the jurisdiction of the Special Courts in criminal matters. It reads as under : "7. Jurisdiction of Special Court. Notwithstanding anything contained in any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier also show that the words in section 7 that the prosecution for any offence shall be instituted only in Special Court deserve a liberal and wider construc- tion. . ." (p. 561) 54. Similarly the court in L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd. [2004] 54 SCL 660 (SC) also noted that the jurisdiction of the Special Court is of wide amplitude. Subject to a decision in appeal therefrom, its decision is final. 55. Further section 4 of the Code of Criminal Procedure provides that all offences under the Indian Penal Code shall be investigated and tried as per the provisions of the Code. The same, however, would be subject to special provisions to the contrary. Section 5 of the Code of Criminal Procedure contains a saving clause in terms of which the jurisdiction of special legislations is saved. The Jurisdiction of the Special Court was required to be determined with reference to the said provision. The Act is a special Act. The section conferring jurisdiction on the Special Courts under the Act contains a Non Obstante clause. It, thus, prevails over any other Law. [ See Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. [2001] 30 SCL 59 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d interest of the company in relation to every such textile undertaking.... The expressions pertaining to , in relation to and arising out of , used in the deeming provision, are used in the expansive sense, as per decisions of courts, meanings found in a standard dictionaries, and the principles of broad and liberal interpretation .... We are of the opinion that the words pertaining to and in relation to have the same wide meaning and have been used interchangeably.... The expression in relation to (so also pertaining to ), is a very broad expression which presupposes another subject-matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context.... In this connection reference may be made to 76 Corpus Juris Secundum at pages 620 and 621 where it is stated that the term relate is also defined as meaning to bring into association or connection with. It has been clearly mentioned that relating to has been held to be equivalent to or synonymous with as to concerning with and pertaining to the expression pertaining to is an expression of expansion and not of contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleged to have been committed by a public servant, except with the previous sanction, ****** ( c )in the case of any other person, of the authority competent to remove him from office." 65. Indisputably the competent authority had passed the orders of sanction against all the concerned accused persons. Whereas accused Nos. 1, 2 and 3 have raised no objection as regards validity of orders of sanction issued against them; accused Nos. 6 and 7 who were employees of the National Housing Bank have questioned the same. 66. The order of sanction as against accused No. 6 was passed by the Chairman- cum -Managing Director of NHB, Shri R.V. Gupta, who has been examined as PW 3. The relevant portion of the order granting sanction reads as under : "And whereas, I R.V. Gupta, Chairman National Housing Bank, being the Authority competent to remove the said Shri C. Ravi Kumar from office, after fully and carefully examining the materials and investigation report in regard to said allegations and circumstances of the case, consider that the said Shri C. Ravi Kumar should be prosecuted in the Court of Law of competent jurisdiction for the said offences. Now therefore, I.R.V. Gupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to any delegation of powers conferred in terms of the Regulations or through Resolutions adopted by the Board of Directors, the appointing authority. As an appointing authority, therefore, he will have the requisite jurisdiction to accord sanction for prosecution of the employees. 71. Even though, in our opinion, the sanction orders are legal and valid, even if any doubt exists, the same becomes clear in view of the provisions of section 19(3). It is reproduced heretobelow : "(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), ( a ) no finding, sentence or order passed by a special judge shall be reversed or altered by a court in appeal, confirmation or revision on the ground of the absence of, or any error, omission or irregularity in, the sanction required under sub-section (1), unless in the opinion of that court, a failure of justice has in fact been occasioned thereby;... Explanation. For the purpose of this section. ( a )error includes competency of the authority to grant sanction;..." [Emphasis supplied] 72. What has been challenged here before us by both the accused is in fact the competence of the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fact-finding body. It was constituted for a limited purpose. Contents of the report, therefore, without formal proof, could not have been taken in evidence. 75. A Division Bench of the Nagpur High Court in M.V. Rajwade v. Dr. S.M. Hassan AIR 1954 Nag. 71 following the judgment of the Privy Council in Maharaja Madhava Singh LR, In re [1905] 31 IA 239, held that a Commission is a fact-finding body meant only to instruct the mind of the Government without producing any document of a judicial nature and that findings of a Commission of Inquiry were not as definitive as a judgment. 76. Similarly in Branjnandan Sinha v. Jyoti Narain AIR 1956 SC 66, this Court held that the Commission appointed under the Public Servants (Inquiries) Act, 1850, was not a court within the meaning of the Contempt of Courts Act, 1952. [ See also Ram Krishna Dalmia v. S.R. Tendolkar AIR 1958 SC 538, Puhupram v. State of Madhya Pradesh [1968] MPLJ 629 and Sham Kant v. State of Maharashtra [1992] Suppl. 2 SCC 521. 77. Accordingly, the Janakiraman committee report was not admissible in evidence. The report in terms of the provisions of the Evidence Act, 1872 is not a judgment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 82. Condition precedent, therefore, for holding accused persons guilty of a charge of criminal conspiracy must, therefore, be considered on the anvil of a fact which must be established by the prosecution, viz., meeting point of two or more persons for doing or causing to be done an illegal act or an act by illegal means. 83. The courts, however, while drawing an inference from the materials brought on record to arrive at a finding as to whether the charges of the criminal conspiracy have been proved or not, must always bear in mind that a conspiracy is hatched in secrecy and it is, thus, difficult, if not impossible, to obtain direct evidence to establish the same. 84. The manner and circumstances in which the offences have been committed and the level of involvement of the accused persons therein are relevant factors. For the said purpose, it is necessary to prove that the propounders had expressly agreed to or caused to be done the illegal act but it may also be proved otherwise by adduction of circumstantial evidence and/or by necessary implication. See Mohammad Usman Mohammad Hussain Maniyar v. State of Maharashtra [1981] 2 SCC 443. 85. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to any lawful use. Finally, when the ultimate offence consists of a chain of actions, it would not be necessary for the prosecution to establish, to bring home the charge of conspiracy, that each of the conspirators had the knowledge of what the collaborator would do, so long as it is known that the collaborator would put the goods or service to an unlawful use." [ See also K.R. Purushothaman v. State of Kerala [2005] 12 SCC 631] 89. We may also notice a decision of this Court being State (NCT) of Delhi v. Navjot Sandhu @ Afsan Guru [2005] 11 SCC 600, commonly known as the Parliament Attack case, wherein upon taking note of various earlier decisions of this Court, it was opined that as conspiracy is mostly proved by circumstantial evidence, usually both the existence of conspiracy and its objects have to be inferred from the circumstances and the conduct of the accused, stating : "101. One more principle which deserves notice is that the cumulative effect of the proved circumstances should be taken into account in determining the guilt of the accused rather than adopting an isolated approach to each of the circumstances. Of course, each one of the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia in this behalf. It is for the maintenance of this cash reserve ratio that UCO Bank used to participate in call money transactions in the money market, decision in respect whereof used to be taken at its Head Office at Kolkata. For the said purpose, however, the Head Office used to be in touch with the D.N. Road Main Branch in Bombay. 94. It is neither in doubt nor in dispute that Mr. K. Venkatkrishnan (Accused No. 2) at the Head Office in Kolkata was authorized for the said purpose. P.W. 12 - Sunil Kakkar in his statement before the learned Special Judge, stated as under : "6. ... The General manager Mr. Venkatkrishnan [A 2] used to decide upon the requirement of borrowing of call money on a particular date. He also used to decide about lending of call money to other banks. Instructions in this respect were given by the treasury and investment department head office, Kolkata by the General Manager to the DN Road branch in Bombay. .... Mr. Venkatkrishnan, General manager used to take decisions after knowing the requirement, the rate of interest etc. The call money transactions are authorized by him and are recorded in a register known as call money register." 95. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... National Housing Bank for a sum of Rs. 40 crores. 100. It is profitable to notice the relevant portion of his testimony, which reads as under : "6. On 6-4-1992, I was informed by Mr. Venkatkrishnan that Rs. 40 crore are borrowed as call money from NHB. It was sometime in the afternoon and must be at 2.00 pm. Mr. Venkatkrishnan informed me and I noted it down on a chit in my own handwriting. I noted on that chit the names of four institutions and the total borrowing from four institution Rs. 144 crore. [...] I gave this chit to Mr. Sunil Kakkar for making necessary entries in the call money register. He made the entries and sent [the call money register] through me to General Manager, Venkatkrishnan. I am shown the call money register [...] for identification [...]. I identify the handwriting of Sunil Kakkar. The entries in Call Money Authorization register would be made subsequently by Sunil Kakkar and register would be signed by Venkatkrishnan. I am shown the register [...] These are in the handwriting of Mr. Kakkar and signed by Venkatkrishnan. [...]" 101. With respect to the said chit in which Mr. Mallikarjun had noted down the details regarding the call money trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 6-4-1992. This witness has proved the entries in the said registers. 105. Yet again, a comment has been made with reference to his statement that a number of pages of the register were written at one time and, i.e., post facto and Accused No. 2 signed the same after the entries had been made post facto. The signature of the Accused No. 2 in those registers, therefore, stands proved. 106. The significance of this aspect of the matter would be dealt with a little later. Before, however, we do so, we may notice the evidence of P. W. 12 - Sunil Kakkar in this behalf which is to the following effect : "8. [...] There is reference in the daily Report of call money borrowing on 6-4-1992 amounting to Rs. 141 crore [...] the last borrowing is from National Housing Bank Rs. 40 crore at 26 per cent interest due date 7-4-1992 i.e., for one day. These figures are collected from a slip of paper given to me by Assistant general manager Mr. Mallikarjun. The signature of the Assistant General Manager on this document signifies that he has noted the daily funds position as mentioned in the sheet." 107. He, upon making entries with regard to the said transaction in the registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been borrowed from the National Housing Bank had in fact been arranged by Harshad Mehta for the purpose of carrying out his security transactions. He further informed them that the money was required by Harshad Mehta at UCO Banks, Hamam Street Branch in Bombay. As per the deposition of the said witness, Venkatkrishnan (Accused No. 2) and C.K. Mukherjee (P.W. 13) were also present in the said meeting. He stated: "7. On 6-4-1992 there was meeting at about 2.00 p.m. in a chamber of Mr. Margabandhu where Mr. R. Venkatakrishnan, myself and CK Mukherjee were present. Mr. Margabandhu who is accused in this case told us that this amount from NHB of Rs. 40 crore meant for Harshad S. Mehta account." 112. In his cross-examination to which our attention has been drawn by the learned counsel appearing on behalf of the appellant, he is said to have accepted that he did not remember to have heard from Accused No. 2 that it was not a call money and that the said amount was raised from the Bank by Harshad Mehta. He further accepted : "I did not tell the CBI about this as I was not asked any question about the same by the CBI, [...] I was not knowing for what purpose the inquiry was made. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, learned counsel appearing on behalf of the Accused No. 2 that the instructions for cancellation was received at 1:00 p.m. or so. Although, according to P.W. 17, the meeting had taken place at about 2:00 p.m. 117. It must, however, be borne in mind that in a case of this nature where the witnesses were being examined more than ten years later i.e., in the 2003, some amount of discrepancy with regard to time would not be of much significance. We would deal with this aspect of the matter at some details at an appropriate stage. Keeping in view the statement made by P.W. 14 which was not shaken in the cross examination, there is no reason for us to disbelieve that part of the material brought on record that call money from NHB was, in fact, sought to be cancelled. In any event, as would appear from the discussions to be made hereinafter, the prosecution cannot be said to have failed to prove its case. We may, however, notice that at one stage, according to this witness, such a telephone call had been made at about 2:00 or 2:30 p.m. 118. Our attention has also been drawn that P.W. 13 before the CBI stated: "Mr. Kakkar also told me that the telex message received at Head O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen vital decisions as regards the borrowing of call money was required to be taken. That amount of concern from a highly responsible officer should be expected. 122. We must, however, notice that the evidence of P.W.14, who at the relevant point of time was working at the Bombay Branch of UCO Bank, categorically stated : "7. The Head Office had instructed that call money transaction of Rs. 40 crore was cancelled. This instruction was received at about 1:00 pm or so. From Head Office Mr. Mukherjee talked to me about this cancellation of call money transaction from NHB. Mr. Mukherjee first told me that there are four call money transaction from NHB and subsequently informed that Rs. 40 crore transaction from NHB has been cancelled." 123. Mr. Vijayan (PW 14) in his testimony further goes on to clarify about the cancellation of the call money. 124. Though the entry for the call money transaction occurs in the Note Book which was being maintained, but the final call money register which was being maintained only had three call money transactions, since by the time the entries in the register had to be noted down the fourth transaction had already been cancelled : "9. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anch Manager and I talked with him in connection with the transaction. I told him that we received cheque of Rs. 40 crore from NHB on behalf of Hamam street branch and we have deposited it with RBI." 129. Mr. Karkhanis (PW 18 ) [Senior Manager, Hamam Street Branch] stated in his testimony as regards the said phone call which was received by him from Mr. Vijayan (PW 14) : "2. On 6-4-1992 the current account of Harshad Mehta was credited by 40 crores. The cheque was deposited in DN Road Branch but I have not seen that cheque. Sr. Manager of DN Road Branch, Mr. Vijayan informed me on phone that he had received a RBI cheque of 40 crores and he was depositing it directly with RBI because of time constraint. He gave instructions to credit it to the account of Harshad Mehta. The instruction were received from Mr. Vijayan at about 3.00." 130. However, Mr. Vijayan, (PW 14) [DN Road Branch] in his testimony disclosed that he had only received information from NHB that the cheque was to be transferred to the Hamam Street Branch in the following terms : "It did not happen that I contacted Ravi Kumar on telephone and he told me that amount of Rs. 40 crores is meant for Harshad Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Bank and Harshad Mehta, thus, stood established. 136. This is one of the links in the chain to show how the arrangement developed so as to bring the matter within the purview of conspiracy amongst the accused. 137. In between 11:00 a.m. and 3:00 p.m. things took place in quick succession. The transaction in question was shown to be a call money transaction. While assuming it to be so for the time being, if it was a call money transaction it could not have been used for any other purpose. The amount was required to be retained in the Bank and should have ordinarily been deposited at the D.N. Road Branch. This was not done. Why the amount had been deposited in the Hamam Street branch remains a mystery. Indisputably, the money which had been lent to UCO Bank had been credited to Harshad Mehta s Hamam Street Bank account on the very same day. Any call money operation could not have been carried out without the knowledge and involvement of Accused Nos. 1 and 2. The involvement of the accused Nos. 1 and 2 in tandem for the purpose of entering into such agreement, thus, stands established. 138. It would be appropriate also to deal with the role played by SV Ramanathan (A 3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on phone from Shri Atul Parekh on the basis of which this is prepared. I can say that this was prepared on pursuance of telephone of Shri Atul parekh and I have mentioned in the document favouring National Housing Bank for Rs. 40,27,52,442 and below that Debit Shri Harshad Mehta and I have signed. " 144. Satish D Hosangadi (PW 9) [Chief General Manager, NHB] also, in his deposition, notes with regard to the repayment of the said call money from ANZ Grindlays Bank stated, thus : "From the record, it appears that the cheque dated 16-4-1992 was given to the National Housing Bank by Grindlays Bank. [Technically] the amount of Rs. 40 crore is not yet repaid by the UCO Bank. . . . 6. The cheque of Grindlays bank was directly deposited with RBI and credited to the account of NHB." 145. During his re-examination, Mr. Satish D. Hasangadi furthermore to the following questions : "Q. During the period of 6th of April and 16th April, 1992 did the ANZ Grindlays Bank owe Rs. 40,27,52,42 to the National Housing Bank in connection with any transaction." answered in negative. 146. The testimony of Mr. Jeroo Dalal also brings out the involvement of Mr. Atul Parekh (A5) in the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money transaction from 1 day to 9 days and the reduction of the interest from 26 per cent to 25 per cent. The involvement of C. Ravi Kumar (A6) is also corroborated by the testimony of Mr. Vijayan (PW 14) where he made reference to the fact that it was the former who had informed him that the cheque from NHB worth Rs. 40 crore was to be transferred to the DN Road Branch of UCO Bank. 152. What survives is the involvement of the Suresh Babu (A7) who was working under C. Ravi Kumar (A6) at NHB. In this regard, reliance has been placed by the prosecution and even by the Special Court in its judgment on the testimony of Mr. Sunil Pandurang Gondale (PW 7) who deposed that Suresh Babu (A 7) had sent him to UCO Bank, Hamam Street Branch on 16-4-1992 to collect the cheque for the return of the call money advanced : " For the first time, I had gone on 6-4-1992 I went to UCO Bank and handed over the cheque. After about 10 days on 15th or 16th April, 1992 I again had gone to UCO Bank on instructions of Shri Suresh Babu. When I went for the second time, I was directed to receive cheque from UCO bank, Hamam Street Branch.... However I did not get the cheque from there as directed by Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this leg of the submission we must notice the provisions of the National Housing Bank Act, 1987 (The 1987 Act). The NHB was created to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions. It was thus created to provide finance to housing finance institutions. Section 14 of the 1987 Act which is of some relevance deals with the Business of NHB, the relevant portions whereof read as under : "14. Business of the National Housing Bank. Subject to the provisions of this Act, the National Housing Bank may transact all or any of the following kinds of business namely : ****** ( b )making of loans and advances or rendering any other form of financial assistance whatsoever to housing finance institutions and scheduled banks (or to any authority established by or under any Central, State or Provincial Act and engaged in slum clearance)." 160. In terms of section 14 of the 1987 Act, NHB could advance loans to housing finance institutions and scheduled banks or slum authority constituted under a Central or State Legislation. Furthermore, sub-section (4) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the offence of criminal conspiracy. 165. In conclusion we hold that there is sufficient evidence to hold all accused A1 to A3, all official of UCO Bank and A5 who was working under Harshad Mehta and A6, official of NHB guilty of criminal conspiracy. But there is not sufficient evidence to show the involvement of A7, NHB in the said transactions. Criminal Breach of Trust 166. The next charge we have to deal with is one arising under section 409 IPC. For the offence of Criminal Breach of Trust by a public servant the punishment is provided under section 409 IPC. We must also in this respect have regard to the provision of section 405 which defines Criminal Breach of Trust : "405. Criminal Breach of trust. Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposed of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust or wilfully suffers any other person so to do, commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his failure to account for the property entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him but where he is unable to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made." (p. 891) 171. However, sections 407 to 409 make special provisions for various cases in which property is entrusted to the enumerated categories of persons who commit the offence. 172. Criminal breach of trust by a Public servant is dealt with under section 409. "409. Criminal breach of trust by public servant, or by banker, merchant or agent. Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property shall be punished with imprisonment of life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine." 173. This section classe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted, there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by someone else which he willingly suffered to do." (p. 484) 178. In Ram Narain Poply ( supra ), this Court stated the law, thus: "To constitute an offence of criminal breach of trust, there must be an entrustment, there must be misappropriation or conversion to one s own use, or use in violation of legal direction or of any legal contract; and the misappropriation or conversion or disposal must be with a dishonest intention. When a person allows others to misappropriate the money entrusted to him that amounts to a criminal appropriation of trust as defined by section 405. The section relatable to property in a positive part and a negative part. The positive part deals with criminal misappropriation or conversion of the property and the negative part consists of dishonestly using or disposing of the property in violation of any direction and of law or any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above referred judgments of this Court, when a person allows others to misappropriate the property entrusted to him, that also amounts to criminal breach of trust. 184. In the present case the amount of Rs. 40 crore was entrusted to accused No. 6, C. Ravi Kumar to be dealt with in accordance with the provisions of the NHB Act. As has already been noticed hereinbefore, the 1987 Act does not permit grant of loan to an individual. Accused No. 6 in violation of the law handed over the amount to the UCO Bank with full knowledge that the amount would be credited to the account of accused No. 4 Harshad Mehta. The call money transaction with UCO Bank was only a cover up. Thus the property which was trusted to accused No. 6 was misappropriated by him. 185. It must in this regard be emphasized that an act of breach of trust simpliciter involves a civil wrong of which the person wronged may seek his redress for damages in a civil court but a breach of trust with mens rea gives rise to a criminal prosecution as well. [ S.W. Palanitkar v. State of Bihar [2002] 1 SCC 241. The element of dishonest intention is therefore an essential element to constitute the offence of Crimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 193. We must also make reference to the following observations of the Supreme Court in Ram Narain Poply ( supra ) which was a case arising from the connected securities market scam, to bring home the point as to the impact of the transactions : "The offences in these cases were not of the conventional or traditional type. The ultimate objective was to use public money in a carefully planned manner for personal use with no right to do it. Funds of the public bodies were utilized as it they were private funds. There was no legitimacy in the transactions. ...Their acts had serious repercussions on the economic system of the country, and the magnitude of financial impact involved in the present appeal is only tip of the iceberg. There were several connected cases and interestingly some of the prosecution witnesses in the present case are stated to be accused in those cases. That itself explains the thread of self-perseverance running through their testimony. Therefore, the need to pierce the facadial smoke screen to unravel the truth to lift the veil so that the apparent, which is not real can be avoided. The proverbial red herrings are to be ignored, to find out the guilt of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advantage without any public interest would be guilty of criminal misconduct. Sub-section (2) of section 13 provides for the punishment for such criminal misconduct. 197. Minimum sentence is prescribed under section 13(2) of the 1988 Act and a public servant who abuses his position as such for obtaining for himself or for any other person any valuable thing or pecuniary advantage cannot be punished for a term of imprisonment, which is less than for the duration of one year. For convicting the person under section 13(1)( d )( iii ), there must be evidence on record that accused obtained for any other person any valuable thing or pecuniary advantage without any public advantage. 198. In Dalpat Singh v. State of Rajasthan AIR 1969 SC 17 while interpreting an analogous provision in the unamended Prevention of Corruption Act, this opined noted : "...The ingredients of the offence under section 5(1)( d ) are : (1) that the accused should be a public servant, (2) that he should use some corrupt or illegal means or otherwise abuse his position as a public servant, (3) that he should have obtained a valuable thing or pecuniary advantage, and (4) for himself or any other per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishment. Accordingly a just and proper sentence should neither be too harsh nor too lenient. In judging the adequacy of a sentence, the nature of the offence, the circumstances of its commission, the age and character of the offender, injury to individual or the society, effect of punishment on offender, are some amongst many other factors which should be ordinarily taken into consideration by the courts. We may also place on record that as the CBI has not preferred any appeal against the quantum of sentence, this Court cannot impose a higher sentence. 203. We must first accordingly take into consideration the sentence imposed by the Special Court : As regards A1, K Margabanthu, the court stated that he had been the Chairman and the Managing Director of a public sector bank when he committed the offence. Though the court was of the opinion of giving him a harsh sentence because of the key role played by him in the entire transaction, it, however, while considering his age and health condition, sentenced him to undergo only six months Rigorous Imprisonment and ordered him to pay a fine of Rs. 1,00,000 and in default to undergo SI for two months. We find no reason to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conclusion 1.A1, K. Margabanthu is sentenced for the offence punishable under section 120B and section 409 of the IPC as also section 13(1)( d )( iii ) read with section 13(2) of the Prevention of Corruption Act to undergo RI for a period of six months and to pay fine of Rs. 1,00,000 in default to undergo SI for two months. 2.A2, R. Venkatkrishnan is found guilty of offence under section 120B and section 409 of the IPC as also section 13(1)( d )( iii ) read with section 13(2) of the Prevention of Corruption Act and is sentenced to undergo RI for a period of six months and to pay fine of Rs. 1,00,000 and in default SI for two months. 3.A3, S.V. Ramanathan is sentenced for the offence punishable under section120B and section 409 of the IPC as also section 13(1)( d )( iii ) read with section 13(2) of the Prevention of Corruption Act to undergo RI for a period of one month and to pay fine of Rs. 10,000 and in default SI for two months. 4.A5, Atul M. Parekh is sentenced for the offence punishable under section 120B of the IPC to undergo RI for a period for 15 days and to pay a fine of Rs. 10,000 and in default to undergo a SI for 15 days. 5.A6, C. Ravikumar is sentenced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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