Bombay High Court
Turner Morrison And Co., Bombay vs K.N. Tapuria And Others on 10 February, 1993
Equivalent citations: 1993(3)BOMCR187, 1993CRILJ3384
JUDGMENT
1. Should the law Courts play the role of a helpless spectator in a situation where corporate funds are diverted for personal use and criminally misappropriated by persons in control of the management merely because the fraud was detected after a lapse of time or the now familiar situation of a key witness disappearing ? Do the interests of justice require that the benefit of every possible lacuna be generously afforded to the accused even if it results in blatant miscarriage of justice, or is it not more in consonance with the objective of criminal jurisprudence that the guilty be punished regardless of time lapse, if that is legally permissible. These are the broad issues that fall for determination in the present appeal which assails the correctness of an order of acquittal passed against the two respondents by a Metropolitan Magistrate at Bombay. After recording the finding that, undoubtedly a substantial amount of Rs. 7,00,000/- has been misappropriated from the funds of M/s. Turner Morrison and Co. Ltd., the learned Trial Magistrate has proceeded to acquit the two accused, the first of whom was a Director and the second an Executive of the Company in June/July, 1969. The record of this case is rather voluminous, the hearings proceeded almost day-to-day for close to three months and the number of authorities cited was sizable. Mr. K. M. Desai, Senior Counsel and one of the veterans on the criminal side, has taken me through the entire record virtually threadbares and in his own imitable style has done an excellent job. It was equally a pleasure to hear Mr. M. A. Rane, Senior Counsel and one of the finest at the Bar who appeared on behalf of respondent No. 1 as also Shri Baadkar, who represented respondent No. 2, and Shri B. R. Patil, the learned A.P.P. on behalf of the State. The judgment was required to be reserved due to the change of assignment after the vacation and it has taken my considerable time to re-examine the entire record and the authorities.
2. It is essential to start with a broad recital of the relevant facts :-
The complaint in this case was filed before the trial Court by Mrs. Leela Wellingkar, Secretary of Turner Morrison and Co. Ltd., against the two accused who are alleged to have conspired to commit criminal breach of trust in respect of the Company's Funds and were, consequently, charged with having committed offences punishable under Sections 120B and 409 of the Indian Penal Code. Though it is alleged that the offence took place in June/July 1969, the complaint came to be filed only on 17th July, 1974 as the new management of the Company, which took over in 1972, investigated into the records and thereafter took action. Admittedly, at the relevant time, accused No. 1 K. N. Tapuria, who is the son-in-law of H. D. Mundhra, was a Director of the Company and accused No. 2 R. M. Agarwal was the Executive in-charge of Mallet Welding Works. Turner Morrison and Co. was the proprietor of Mallet Welding Works having a tube mill division at Kolshet Road, Thane. Accused No. 1, in his capacity as a Director of the parent company, was looking after the affairs of Mallet Welding Works and accused No. 2 was the Executive in-charge of the said division. Though the charge relates to an offence of criminal breach of trust of Rs. 7,00,000/- from Turner Morrison and Co. at the instance of the two accused, it is very necessary to set out the background with regard to the position in which H. D. Mundhra was placed at the relevant time vis-a-vis this Company because it is the prosecution case that this money was diverted by the accused for the benefit of Mundhra who was in urgent need of funds at that time.
3. Turner Morrison and Co. Ltd. had its entire share capital held by M/s. Hungerford Investment Trust. In November 1955, M/s. Hungerford Investment Trust agreed to sell 49% shares to H. D. Mundhra with an option to purchase the remaining 51% shares in five years' time. The agreement was reduced to writing on 30th October, 1956. Mr. Mundhra did not exercise the option in time, instead of which he filed Civil Suit No. 600 of 1961 against M/s. Hungerford Investment Trust on 19th April, 1961 in the Calcutta High Court to deliver 51% shares on payment of Rs. 86,60,000/- and obtained an injunction against M/s. Hungerford not to use their voting power except in accordance with the instructions of Mr. Mundhra, who thus obtained full control of Turner Morrison and Co. Ltd. His claim was decreed on 25th January, 1964. Mr. Mundhra did not make the payment and obtained delivery of the 51% shares as per decree whereupon M/s. Hungerford took out master summons praying for directions to implement the decree by paying Rs. 86,60,000/- or in default that the decree should be rescinded. The master summons was dismissed and M/s. Hungerford went in appeal to the Supreme Court. The Supreme Court on 9th March, 1972 (Reported in .) allowed the appeal of Hungerford rescinding the decree with effect from 11th April, 1967 and directed the Receiver to hand over 2295 shares to the Registrar of the Supreme Court who, in turn, was directed to hand them over to Mr. Hoon, Liquidator of Hungerford. After this Judgment at the request of Hungerford, the Company Law Board by notice dated 15th February, 1972 called an Annual General Meeting of the Company on 6th July, 1972. The Annual General Meeting was convened and the elections were held. However, on 4th July, 1972, Mr. Mundhra filed a writ petition in the Calcutta High Court challenging the validity of the notice and obtained an order that the results of the elections held at the meeting should not be discussed until the disposal of the writ petition. On 12th September 1972, the writ petition was dismissed and the injunction was vacated. The new Directors elected in the meeting on 6th July, 1972 took control of the Company. Mr. Hoon became Chairman, Mr. Mehra was appointed as General Manager and Mrs. Wellingkar, the complainant in this case, as Secretary of the Bombay office. Mr. Mundhra was thus in absolute control of the Company from 25th February, 1964 to 9th March, 1972 and thereafter up to 25th September, 1972. In the present proceedings we are, however, concerned with the incidents that took place in the months of June/July, 1969.
4. Pursuant to a meeting of the then Directors of the Company held on 23rd June, 1969 at Calcutta, it was resolved that a current account in the name of Mallet Welding Works, Proprietor, Turner Morrison and Co., be opened with the Bank of Maharashtra at Bombay and that accused Nos. 1 and 2 be authorised to operate the current account. They were also authorised to execute on behalf of the Company, counter-guarantee, etc., as the object of opening this account was specifically to avail of a cash credit facility to the tune of Rs. 10,00,000/-, which the Bank had agreed to extend. Accused No. 2 had entered into the necessary correspondence with the Bank of Maharashtra and the State Bank of India for this purpose.
5. On 25th June, 1969, the current account was opened with an initial deposit of Rs. 500/- and in keeping with the resolution, the documents were executed by accused Nos. 1 and 2 whereby they were authorised to operate the account singly. Then followed a series of abnormally hurried transactions which are indicative of a desperate desire to utilise the entire limit of Rs. 10,00,000/- virtually at one go. These events are summarized below :-
(i) On 28th June, 1969, Mr. Bhave, Constituted Attorney of the Company, sent letter (Exhibit S) to the State Bank with a copy to Maharashtra Bank requesting the State Bank to accept the cheque for Rs. 3,24,353.10 Ps. of the Maharashtra Bank towards their dues of the middle term account and deliver the title-deeds to the representative of the Maharashtra Bank.
(ii) On 20th June, 1969, accused No. 1 and another Director Mr. Goenka sent letter (Exhibit J) to the Maharashtra Bank for sanctioning on demand cash credit of Rs. 10,00,000/-. On the same day, they executed pronotes of Rs. 10,00,000/- with the Maharashtra Bank (Exhibit K). On the same day, they executed continuing security in favour of the Bank of Maharashtra (Exhibit L). On the same day, they executed Hypothecation Deed (Exhibit N) in favour of the Bank. On the same day, accused No. 2 issued a cheque for Rs. 7,00,000/- in favour of Bank of Maharashtra (Exhibit U) and sent it to the Bank and on the same day the Bank of Maharashtra draw an R.B.I. cheque (Exhibit I) for Rs. 7,00,000/- in favour of United Commercial Bank. The abnormal hurry is significant.
6. At this stage, there appears to have been some change of decision as a result of which by letter dated 1st July, 1969, the agent of the Maharashtra Bank requested United Commercial Bank, Fort Branch, to refund the amount per bearer by R.B.I. cheque in their favour. The UCO Bank refunded the amount preparing two vouchers, one for debit and other for offset on 1st July, 1979. On the same day, accused No. 2 issued a cheque (Exhibit V) in favour of Maharashtra Bank instructing the Bank to issue a cheque in favour of Kashiprasad Kedia and Co. by letter (Exhibit T) dated 30th June, 1969. On the same day, the account of Kashiprasad Kedia and Co. in UCO Bank is credited with Rs. 7,00,000/-. Simultaneously, on the same day, Kashiprasad Kedia instructed his bankers to issue an R.B.I. cheque of the same amount in favour of Basant Trading Co., of which one Usha Daga is one of the partners. On the same day, Usha Daga by her letter (Exhibit V-20) instructed her Bankers UCO Bank, Bombay to issue two Demand Drafts, one favouring Tapuria and Sons for Rs. 3,00,000/- against cheque No. 573155 of even date and another for Rs. 4,00,000/- favouring Hind Products. The amount of Rs. 7,00,000/- had been credited in the account of Basant Trading Co. with UCO Bank, Bombay, on the same day and it is this very amount that had been split up and transferred.
7. In keeping with the instructions of Usha Daga, UCO Bank issued two Demand Drafts for Rs. 4,00,000/- and Rs. 3,00,000/- respectively which drafts were deposited on 2nd July, 1969 in the respective accounts of Hind Products in UCO Bank, Brabourne Branch, Calcutta and in the account of Tapuria and Sons in First National City Bank, Calcutta. On 3rd July, 1969, D. P. Tapuria, Director of Hind Products instructed his Bankers by letter (Exhibit P-8) to issue a Manager's cheque favouring accused No. 1 for Rs. 4,00,000/-. The said D. P. Tapuria is the nephew of accused No. 1. Similarly, on 3rd July, 1969, Mrs. Chandrika Tapurai, Director of Tapuria and Sons, instructed the Bankers to issue a Manager's cheque in favour of accused No. 1 for Rs. 3,00,000/-. Mrs. Tapunia is the wife of accused No. 1 and the daughter of Mr. Mundhra. In pursuance of these letters, the respective Bankers issued Manager's cheques, one for Rs. 4,00,000/- and another for Rs. 3,00,000/- in favour of accused No. 1 on 4th July, 1969. On 5th July, 1969, both the cheques were deposited in the account of accused No. 1 with the Central Bank of India, Calcutta. On the same day, i.e., on 5th July, 1965, accused No. 1 passed on this amount along with a further amount of Rs. 25,00,000/- by Seven Pay Orders, six of Rs. 5,00,000/- and one of Rs. 2,00,000/-, favouring I. K. Daga who, in turn, endorsed those Pay Orders in favour of Vijaykumar Mundhra, son of Mr. Mundhra. Thus, the prosecution alleges that within a short span of less than one week, through this devious procedure, the amount of Rs. 7,00,000/- which was originally shown as a payment made to Kashiprasad Kedia, who was a supplier of the Company, made its way through different Bank accounts and with the assistance of various family members back to Mr. Mundhra.
8. After the new management took over the Company on 25th September, 1972 and several of the previous dealings were probed, the complainant, Mrs. Wellingkar, states that in or about February, 1973 she came across voucher No. 4755 dated 2nd July, 1969 debiting Rs. 7,00,000/- to the account of Kashiprasad Kedia and Co. and showing it as advance for purchase of raw material. It was clear from the records that no material was supplied against this voucher and Kashiprasad was, therefore, called. He is alleged to have stated that the real transaction was a paper entry and that he had passed on the entire amount on the same day, i.e., 1st July, 1969, to Basant Trading Company. The explanation put forward by him for having been a party to the transaction was that he was to pay interest at 9 per cent per annum to the Company; whereas Basant Trading Company was to be charged interest at 12 per cent per annum leaving him with a profit of 3 per cent. There is a document on record (Exhibit 8) which is a letter dated 20th October, 1972 which is the explanation submitted by Kashiprasad. On realising that a substantial amount of Rs. 7,00,000/- had been diverted out of the Company's funds through the medium of Kashiprasad Kedia, the matter was reported to the Central Bureau of Investigation who, in turn, referred the complaint to the Department of Company Affairs, Company Law Board, Delhi.
9. Ultimately, on 17th July, 1974, the present complaint was filed against the present accused and the same was referred to the D.C.B., C.I.D. for inquiry and report. The police submitted their report on 5th March, 1975, whereupon the learned Trial Magistrate issued process against both the accused. It is relevant to point out that the Company filed Civil Suit No. 854 of 1976 before the High Court on the Original Side for recovery of the amount of Rs. 7,00,000/- with interest thereon at the rate of 10 per cent per annum against as many as 16 defendants. Digressing here slightly, I need to record that the learned Counsel appearing on behalf of the accused have referred to the Plaint in that Civil Suit, which is on record, and have strenuously contended that if it is the case of the Company that as many as 16 defendants are, in fact, liable for the amount in question and if, as appears from the prayer clause, their liability is joint and several, then the present charge, which is restricted to the present two accused who are defendants Nos. 9 and 10 to that suit, must ipso facto fail. To summarize Mr. Rane's contention, he maintained that apart from the other evidence, which according to him does not establish the charges against the present two accused, if the Company itself even after the date of filing of the present complaint and completion of the investigation considered that the 16 defendants were collectively responsible for the transaction, the criminal liability can never be fastened exclusively on the present two and, therefore, according to him, this complaint must fail on this ground alone. Shri K. M. Desai, learned Counsel appearing on behalf of the appellant-company, has submitted that the suit takes care of the recovery proceeding and the list of defendants must necessarily be wide enough to take in everyone of the persons who have dealt with the amount in the course of its circuitous journey as also the concerns represented by them. Since the money had moved from person to person and firm to firm, the entire chain of persons and firms, as of necessity, had to be arraigned as party-defendants because this was a requirement of the Code of Civil Procedure. In criminal law, however, the culpability as far as the criminal offence is concerned could devolve only on the persons who had dominion and control over the Company's funds in the first instance and who were responsible for the act of criminal breach of trust. Whether the remaining persons can be said to have been part of the conspiracy or can be said to have abetted in the offences is a matter of evidence and inference, but it can never be open to an accused to argue that merely because other accused are not in the dock with him that the prosecution should fail.
10. Undoubtedly, in a situation such as this, by leaving out the remaining persons, the prosecution does run the risk of providing an escape of route to an accused who could always contend that it was the others and not he who committed the offence and thereby escape the consequences. However, Shri Desai is right when he points out that if the prosecution can establish the guilt of the accused individually, the fact that their abettors or co-conspirators have not been proceeded against cannot, in any manner, lessen their guilt nor is there any provision under the Code of Criminal Procedure which would vitiate the prosecution for non-joinder of the remaining accused. In fact, this concept is foreign to criminal jurisprudence.
11. It is necessary to briefly deal with the line of defence adopted by the two accused. Accused No. 1 admits that he was a Director of the Company in 1969 as also the fact that pursuant to the resolution of the Board of Directors on 23rd June, 1969 that the current account in question was opened in the Bank of Maharashtra, Fort Branch, vide account opening form (Exhibit 8), which bears his signature and that of accused No. 2, and that he and accused No. 2 were authorised to operate the account. He also admits that the pronote, guarantee and hypothecation were executed in favour of the Bank by him and his co-Director Mr. Goenka on 28th June, 1969. He denies any knowledge about the cheques (Exhibits U and V) having been issued from this account and also denies knowledge of the letter (Exhibit T) that was sent to the Bank along with Exhibit V. He also denies the knowledge in respect of the Bank of Maharashtra drawing R.B.I. cheque favouring the UCO Bank (Exhibit I) on 28th June, 1969 or of the fact that this amount was taken back by the Bank of Maharashtra. He denies any knowledge about the payment made to P.W. 4 Kashiprasad Kedia and by him, in turn, to Vasant Trading Company. He admits that he knows Usha Daga as she is distantly related to his brother, but denies knowledge of the fact that she is partner of Basant Trading Company and further states that it is only after filing of the case that he came to know about the cheque (Exhibit P-21) along with letter (Exhibit P-20) requesting her Bankers to issue two drafts, one for Rs. 4,00,000/- in favour of Hind Products and another for Rs. 3,00,000/- favouring Tapuria and Sons or for that matter that UCO Bank, D. N. Road, Bombay, in fact, issued such drafts on their Brabourne Road Branch, Calcutta. He denies the knowledge of these drafts being deposited in the respective accounts and he denies the knowledge of the letters (Exhibits P-8 and P-9) sent by D. P. Tapuria and Mrs. Chandrika Tapuria to their Bankers for issuing Manager's cheques for Rs. 3,00,000/- and Rs. 4,00,000/- in their favour. He admits that he received the two cheques in question, but states that he was not aware at the time that these cheques given to him were brought from the account of Hind Products and of Tapuria and Sons. He admits that these cheques were deposited in his account, but this was not done by him personally and he further admits that Exhibit P-3 is the statement of his account with the Central Bank of India, Calcutta.
12. As regards his part of the transaction, he states that it is incorrect to allege that accused No. 2 suggested to Kedia that a loan of Rs. 7,00,000/- would be given to him which he was, in turn, to pace on to Basant Trading Co., that he would get interest at the rate of 12 per cent per annum from Basant Trading Co., that he should pay 9 per cent per annum to Turner Morrison and retain 3 per cent. He denies any knowledge about the alleged voucher No. 4755 dated 2nd July, 1969 showing payment of Rs. 7,00,000/- to PW 4 as advance for purchase of raw materials. He admits that Exhibit P-1 is an entry in the cash book dated 2nd July 1969 to the above effect and Exhibit P-2 is a debit entry in the ledger. He states that he was not aware of these entries nor could he explain why this amount still lies due in the suspense account. He denies the receipt of the original of Exhibit B which document according to him is fabricated. He admits that at the relevant time he was share-holder in both Hind Products and Tapuria & Sons Pvt. Ltd. It is his case that he was neither a whole-time Director nor an Executive Director or Manager of the Company. He had nothing to do with the day-to-day affairs of the Company and was only concerned in attending the Board meetings and in business discussions at the Board level. He was not paid any salary or remuneration by the company other than the Director's fees for attending the Board meeting. The management of the Company was looked after by the Executives who were entirely responsible for running the business.
13. It is his case that Mr. Mundhra requested him to give a guarantee to the Solicitors for taking delivery of 51% shares of Turner Morrison & Co. He agree to provide the requisite funds. He reluctantly yielded to the pressure of Mr. Mundhra who brought several Pay Orders and Drafts totalling to more than Rs. 30,00,000/- and deposited these into his bank account. Since he had no interest whatsoever in this transaction, he did not try to find out the origin or the sources of these funds. He was to hold the funds temporarily on behalf of Mr. Mundhra. Rs. 7,00,000/- out of that came from Hind Products and Tapuria & Sons and that this entire amount was immediately made payable by Pay Order in favour of I. K. Daga, brother of his wife, as Mr. Mundhra arranged for guarantee by I. K. Daga. This arrangement was confirmed by Duncan Straton & Co. Ltd. and accordingly he credited this amount to the account of that Company and also debited it. He states that he had no knowledge of the payment of Rs. 7,00,000/- by Turner Morrison & Co. to Kashiprasad Kedia or by Kedia to Basant Trading Co. or by Basant Trading Co. to Tapuria & Sons and Hind Products. He came to know about all these only during the present proceedings. Though he proposed to lead evidence, he did not do so.
14. In his statement under S. 313 of the Code of Criminal Procedure, accused No. 2 admits that he was an Executives in Turner Morrison & Co. in 1969, but denies any knowledge about looking after of the Board contracts relating to the meeting held at Calcutta on 23rd June 1969. He admits that he gave the account opening form (Exhibit P) under his signature and also the specimen signature card along with accused No. 1. He admits that he issued a cheque for Rs. 7,00,000/- dated 28th June 1969 (Exhibit U), but states that he did not instruct the Bank to issue a cheque in favour of UCO Bank against this cheque and denies the knowledge with regard to who gave such instructions. He admits to have addressed communications (Exhibits Q, R and S) and also to have signed cheque (Exhibit V) dated 1st July 1969 and to have sent the instruction letter dated 30th June 1969, which is Exhibits T. As regards the voucher (Exhibit X), he states that he cannot say without seeing that voucher as to whether it was signed by Mokashi as Accounts Officer and signed by him in token of approval of payment. He admits the entry in Exhibits P-1 and P-2, but states that they are not made by him. He denies to have made any proposal to PW 4 Kedia with regard to the amount of Rs. 7,00,000/- and denies any knowledge as to how the amount paid to PW 4 was debited by his Bankers. According to him, he knew nothing with regard to the further movements of this money. It is his case that being an Executive of the Company, he issued the cheque (Exhibits U and V) and instruction letter (Exhibit T) under instructions of his superiors. Mr. Kedia was a regular supplier of raw material to Turner Morrison & Co. and other allied concerns. Even after making this payment, Mr. Kedia did supply material to the Turner Morrison & Co. However, the quantity was not enough and he had entered into some correspondence with Mr. Kedia which he had filed until March 1971 when his services were terminated. He has produced along with his written statement a letter dated 2nd April 1968 from accused No. 1 to him which is at page 186 of the compilation. This letter makes a reference to the fact that as of April 1968, accused No. 2 was looking after the tube mill division under Mr. Bhave. There is an endorsement on the letter that a copy of it is sent to Mr. Bhave and the obvious purpose behind production of this letter appears to be that accused No. 2 desired to impress upon the Trial Court that Mr. Bhave was an Executive above him in the Company and, therefore, it would be wrong to fasten any liability on accused No. 2 in relation to the Company's transactions because he was not even the Head of the Department in that sense of the term.
15. As indicated by me earlier, the learned Trial Magistrate, though he records the finding that the amount of Rs. 7,00,000/- had been diverted from the Company's funds finally, concludes that neither of the accused can be convicted principally because there was insufficient evidence to fasten the liability for the offences on them. It is against this verdict that the present appeal has been preferred.
16. Shri K. M. Desai, learned counsel appearing on behalf of the appellant, has very meticulously taken me through the entire record virtually threadbare and this exercise was repeated by Shri Rane, learned counsel appearing on behalf of the accused. I permitted this procedure for the second time principally because after hearing Mr. Desai, it did appear to me that this was a case in which the High Court would have to interfere. Under these circumstances, it was essential to give the accused a more than full opportunity of a hearing on every aspect. To start with, Shri Desai attacked the correctness of the judgment principally on the ground that this was essentially a case on documents. He contended that the learned Magistrate has rejected the evidence of PW 4 Kashiprasad Kedia who is the star witness for the prosecution before the Trial Court, and quite wrongly. Shri Desai started with the submission that the evidence of Kashiprasad Kedia can be safely relied upon, but at the same time advanced an alternative contention that even if his oral evidence were to be rejected completely, there was enough documentary evidence on record to completely establish the prosecution case. He was critical of the conclusion of the learned Magistrate who, while accepting the position that an amount of Rs. 7,00,000/- had been misappropriated, still held that the present accused cannot be convicted for that offence. In totality, Shri Desai contended that the Judgment was so wrong that this Court ought to set it aside as this case squarely came within the ambit of those proceedings where the verdict of the Trial Court was faulty. Shri Desai categorised the judgment as being legally perverse and, therefore, vulnerable.
17. As against this position, both Shri Rane and Shri Badkar have forcefully contended that the law relating to appeals against acquittals is well-crystallised and that this Court is precluded from interfering with a judgment if the Trial Court has evaluated the evidence and if there is nothing faulty with the reasoning of that authority. I do concede that merely because another view is possible, an order of acquittal ought not to be and for that matter cannot be interfered with if the judgment of the Trial Court appears to be a sound one. In the present case, the main ground of attack is with regard to the rejection of the evidence of Kashiprasad Kedia and the finding of the Trial Court that the nexus alleged between the two accused and the act of misappropriation is non-existent. Learned counsel on behalf of the accused have valiantly supported the Trial Court judgment and have even gone to the extent of stating that the conclusions are sacrosanct even if Shri Desai can argue that the quality of the reasoning could have been better. In substance, therefore, they contend that, in the first instance, the appellant has not been able to make out any case for interference and that the appeal should, therefore, fail on a preliminary ground.
18. I need to point out certain special features with regard to this case which appear to have been totally overlooked by the Trial Court. In the first instance, the complaint was lodged on behalf of a Public Limited Company and it concerned on issue of immense public importance because instances of illegal diversion of company funds are not only numerous but are blatant. The consequences of such activity have been disastrous and to a large extent are directly responsible for the volume of industrial sicknesses in the economy when companies are bled of funds by their management resulting in financial disaster, ultimate collapse and, in the process, loss of jobs of the employees at all levels. The complaints that come before the criminal Courts in respect of all such situations are few and far between, but, to my mind, they are ones of utmost seriousness and, therefore, require to be handled with a high degree of concern. Such complaints will invariably see the light of day at a belated stage long after the Liquidator or the new management is able to unearth whatever records are available. That the persons responsible will do everything to cover their tracks does not require to be restated and the prosecution will have to, therefore, labour as has happened in the present case under severe handicaps. The time factor, to my mind, is, therefore, wholly irrelevant and the fact that the prosecution could have even done a better job is also equally inconsequential. On the contrary, after hearing this proceeding for several months, I am of the view that under the circumstances, the prosecution has done an admirable job. Where it appears, therefore, that the material on record does establish the charges where it appears that the learned Magistrate has gone wrong at more than one of the crucial stages and where it further appears that in the ultimate result in a serious offence of the present type that a total miscarriage of justice has resulted, this Court is virtually obliged to interfere in the present proceeding. Being conscious of the limitations in my way, I have meticulously evaluated the entire record before concluding that there is valid justification for variation of the Trial Court's order.
19. The learned Trial Magistrate has entered into a rather lengthy debate with regard to the admissibility of the evidence of PW 4 Kashiprasad Kedia. I was not altogether surprised to find from the record that after Kashiprasad Kedia had deposed before the Trial Court prior to framing of the charge that he was not available to the prosecution thereafter. For a crucial witness or a Panch to disappear either before or during a trial or even better for the witness to turn hostile is something which is now common. I do not believe that this happens by accident because the inevitable consequence is that in many of the cases the prosecution fails. The accused being a direct beneficiary of this situation, I have taken the view in more than one such case, that where a criminal Court is presented with a fait accompli of this type that it is essential for the Court to do everything to ensure that it would not result in a casualty vis-a-vis the prosecution. Shri Desai pointed out that Kashiprasad was initially available to the Trial Court, that his examination-in-chief was recorded, that he was cross-examined at great length by the defence on behalf of accused No. 2, though accused No. 1 declined to cross-examine him at that stage, and under these circumstances the admissibility of his evidence cannot be questioned. In order to prove his bona fides, Shri Desai drew my attention to the part of the record wherein the prosecution has made reasonable efforts to procure his presence, but his whereabouts were unknown. Shri Rane, on the other hand, stated that Kashiprasad was the corner-stone of the prosecution case and that the entire edifice virtually crumbled down in the absence of his evidence. According to Shri Rane having regard to the documents on record which unmistakably establish that Kashiprasad has virtually contradicted himself from time to time that the defence would have been successful in establishing through his witness that the two accused are in no way liable. On the contrary, Shri Rane contends that the money which was given to Kashiprasad who admittedly was a supplier of the Company against advance for materials to be supplied was, if at all, diverted by him and, consequently, he was the prime culprit in the operation and Kashiprasad was aware of the fact that in the face of overwhelming evidence, would face a prosecution and he, therefore, decided to make himself scarce. In law, Shri Rane contended that it would be inappropriate for this Court to rely on Kashiprasad's evidence for two reasons, the first of them being that there is no opportunity to test it through cross-examination as far as accused No. 1 is concerned, and secondly, the so-called efforts made by the prosecution to produce him only relate to making certain enquiries about his where-abouts. If stringent steps were taken with the assistance of the police machinery, he would most certainly have been produced and that consequently, this is a case in which the prosecution has deliberately kept back the witness and, therefore, that the evidence ought to be discarded.
20. I do not need to labour on the main question regarding the admissibility of Kashiprasad's evidence which was earlier agitated before this Court. The learned Magistrate in his judgment has dealt with the provisions of Ss. 32(3) and 33 of the Evidence Act as also the decisions reported in the case of Emperor v. Savlimiya Miyabhai ; Nathu Ram v. The State, and Bakhashish Singh v. The State of Punjab, , in support of the proposition that non-availability of the witness at a later stage of the same proceeding will not render the evidence inadmissible since an opportunity to cross-examine was afforded to the defence at the time when the witness was examined. The learned Magistrate has also dealt with the provisions under S. 138 and has considered the decisions reported in the cases of State of Sikkim v. Pemba Sherpa, 1981 Cri LJ 856 (Sikkim); State v. Baldev Kishan, 1953 Cri LJ 51 : (AIR 1952 Pepsu 178) (FB); State of Assam v. Ramani Mohan, 1953 Cri LJ 1593 : (AIR 1953 Assam 176); Banwari Lal v. The State, ; Queen Empress v. Basvanta, (1900) 2 Bom LR 761; Satish Chandra v. Emperor ; Phani Bhusan v. Sibakali Basu, and Arabinda Dev v. The State, . The parties had approached this Court on this very issue at an earlier stage and the point has virtually been set at rest by Rule, J. (as he then was) who has, in a considered judgment, decided that the evidence of Kashiprasad is certainly admissible, but, having regard to the fact that he was subsequently not available for cross-examination, that it will have to be approached with a degree of caution.
21. In support of his contention that the evidence of Kashiprasad Kedia must be looked at and relied upon, Shri Desai cited the case of Jose v. State of Kerala, . The Supreme Court while dealing with S. 33 of the Evidence Act held that where the presence of a witness examined in the Court of the committing Magistrate cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable, and there was evidence to show that the attempts were made to secure his presence in the Trial Court, his evidence can be brought on record and will constitute substantive evidence. Shri Desai argued that all reasonable efforts have been made by the prosecution to secure the presence of Kashiprasad Kedia and in these circumstances the evidence should not be discarded merely because he is not available. There is considerable justification in what Shri Desai has pointed out, apart from which the circumstances in which Kashiprasad Kedia has disappeared are not above suspicion. In any event, this issue has already been determined by the High Court and Kashiprasad Kedia's evidence is very much part of the record.
22. Shri Rane relied on a Division Bench decision of this Court in the case of L. R. Malwani v. State, , in support of his proposition that the evidence of Kashiprasad Kedia must be totally disregarded on the ground that it is impermissible to argue that he was available for cross-examination before charge and in so far as for whatever reason he was not produced for cross-examination after the stage of framing of charge that the defence has been completely handicapped in its right of testing and demolishing his evidence. The Division Bench in that case was dealing with a prosecution under the Customs Act where the situation was entirely different. We are here concerned with a private prosecution where the witness was made available for cross-examination. He was, in fact, cross-examined by one accused and the second accused, who had the opportunity of cross-examining him, declined to do so and further the matter having been carried to the High Court, there is a final decision of this Court in terms holding that the evidence can be looked at and can be used, but that it will have to be treated with caution. In this situation, it would be incorrect to go behind that decision. The earlier approach to this Court whereby the plea that the evidence be disregarded was canvassed but has failed.
23. The oral evidence in this case with the exception of the star witness, Kashiprasad Kedia, consists mainly of formal evidence. As indicated by me earlier, this is basically a case on documents and the fact that the amount of Rs. 7,00,000/- was paid to Kashiprasad Kedia by the Company, that it moved through the various channels and ultimately ended up with or on behalf of Mr. Mundhra is not really in dispute. The ultimate destination of the funds is a secondary issue, though it may be of some relevance while considering the culpability of the accused, but as far as the commission of an offence is concerned, to my mind, as long as the funds were diverted to a channel into which their entry was not permissible, the offence was complete. Even though there has been much debate at the Bar with regard to the ultimate destination of the amount of Rs. 7,00,000/-, I do not propose to devote any special consideration to that aspect of the matter, neither do I propose to reproduce the evidence of the various prosecution witnesses or the contents of the documents, all of which establish that the amount of Rs. 7,00,000/- was diverted from M/s. Turner Morrison & Co. Ltd. in June/July 1974 for a purpose other than the Company's business or what could pass the test of legal scrutiny. The finding of the Trial Court to the effect that the amount in question was misappropriated stands confirmed and the secondary issue, namely, the question as to whether the charges against accused Nos. 1 and 2 are proved in relation to this act require to be decided. For this purpose, the evidence of Kashiprasad Kedia assumes considerable importance.
24. PW 4 Kashiprasad Kedia has stated that he was a supplier of iron and steel and that he had an office at Carnal Bunder. Admittedly, he was virtually a broker who used to arrange for goods from the market, supply them to his customers and make his money on the transactions. As is typical of these persons, he was functioning from an office which, in fact, was a table-space. He states that he knew both accused Nos. 1 and 2 and that he used to supply goods on the basis of verbal orders and receive payments within one or two weeks. He states that in July 1969, an amount of Rs. 7,00,000/- was paid to him on condition that he should draw a cheque for an equivalent amount in favour of Basant Trading Co. who would pay him interest at 11 per cent per annum and that he, in turn, was to pay interest at the rate of 9 per cent per annum to M/s. Turner Morrison & Co. Ltd. on the original amount, retaining he difference for himself. He states that accused No. 2 made the proposal to him and that accused No. 2 gave him the cheque. He thereafter passed on the amount to Basant Trading Co. on the same day. He was indicated similar transactions with Alcock Ashdoon & Co. Ltd. of which Company accused No. 1 was a Director and accused No. 2 Mr. Agarwal was the Commercial Manager. He has been asked about the letter dated 14-9-1970 by which document addressed to accused No. 1 he has requested that the transaction be squared up as he was worried about having to account for the receipt of the amount of Rs. 7,00,000/- which apparently was creating a tax liability to him. He has also deposed about a letter dated 20th October 1972 (Exhibit C), which document is very crucial as I shall presently indicate.
25. The letter dated 14th August 1970 as translated into English, which is addressed by this witness to accused No. 1, reads as follows :-
"Respected Sir, On 1-7-69, from Turner Morrison Ltd. Seven Lacs of Rupees were given by you through me to Basant Trading Co. and on 18-12-69 from Alcock Ashdown Co. Ltd. Rupees One and Half Lacs were given to Kumar Trading Co. and twenty five thousand rupees to Hind Products Pvt. Ltd. also. These three entries you write off as soon as you can. Otherwise, I find myself unable to keep these entries in my accounts.
From your side a letter has been received yesterday, copy of the same is being sent to you."
Apart from this letter, which is Exhibit B, the most crucial document in this case is the letter dated 20th October 1972 (Exhibit C) which even though a longish letter is required to be reproduced in its entirety. The letter reads as follows :-
"The Directors of Messrs. Turner, Morrison & Co. Ltd., CALCUTTA. ATTENTION : Mr. N. S. Hoon Dear Sirs, Re : Fake entries and defalcation of Rs. 7,00,000 in Melet Welding Works, Tube Mill Division, and Rs. 1,50,000 and 25,000 in Messrs Alcock Ashdown & Co. Ltd. in the year 1969.
In 1969, I was a steel merchant carrying on business at 62, Latif House, Iron Market, Bombay-9. I came in touch with Mr. Kashinath Tapuria, Director of Turner Morrison & Co. Ltd. and Alcock Ashdown & Co. Ltd. and Dr. K. M. Agarwal some time in the year 1968 when I was supplying them iron and steel material for Alcock Ashdown & Co. Ltd. and Tube Mill Division of Melet Welding Works, Thane. I also came to know Mr. Haridas Mundhra, father-in-law of Mr. Kashinath Tapuria at a later date.
On or about 2nd July 1969, Mr. K. N. Tapuria and Dr. Agarwal brought a pay order in the name of Kashiprasad Kedia & Co. of which I was the sole proprietor. They told me that they have made available to me Rs. 7 lakhs at an interest rate of 9% p.a. and they have already negotiated with one Basant Trading Co. who will borrow this money from me at the rate of 12% p.a. interest, whereby I could make a clean 3% p.a. profit, and that I will get better business deals with Alcock Ashdown & Co. Ltd. and Turner Morrison & Co. Ltd. I was therefore persuaded to enter into this transaction thinking that I will make a clean profit of Rs. 21,000 p.a. without any risk whatsoever, because the Directors themselves were responsible for this whole deal.
Similarly in December 1969, Mr. Tapuria and Dr. Agarwal brought a cheque for Rs. 1,50,000 from Alcock Ashdown & Co. Ltd. and under similar arrangement and under same terms and conditions, I paid this amount to Kumar Trading Co., 45/47, Apollo Street.
On the same date, and at the same time, another cheque for Rs. 25,000/- was brought by them from Alcock Ashdown & Co. Ltd. and I parted the same amount on similar arrangements to their nominated firm Hind Products Private Ltd. This Company was located at the similar address of the above mentioned Kumar Trading Co.
I also enclose herewith letter dated 11th August 1970 from Alcock Ashdown & Co. Ltd., and my letter dated 14th August 1970 sent by Regd. Post to Mr. Kashinath Tapuria to adjust these fake entries standing in my books, amounting to Rs. 8,75,000/-. These letters speak for themselves. I may further add that I have supplied lakhs of rupees worth of materials both to Malet Welding Works and Alcock Ashdown Co. Ltd. and every time I took the genuine payment I signed a voucher in both the Companies. You will not find any vouchers signed by me in respect of these three bogus payments amounting to Rs. 8,75,000/-.
I may add here that all the monies given by them to me were deposited in the United Bank of India, Sir P. M. Road, Bombay, in the account of Kashi Prasad Kedia & Co., and immediately these monies were withdrawn and cheques given out to the Companies nominated by Mr. K. N. Tapuria, Dr. R. M. Agarwal and other accessories.
I am a simple and honest dealer in iron and steel who believed and trusted the word of Mr. Tapuria and Dr. Agarwal and other Directors of Turner Morrison & Co. which is supposed to be a large concern who assured me that I will have a good career by supplying them iron and steel permanently. In good faith I allowed these transactions to go through from my Company. I never suspected at that time these were all frauds.
When I came to know that these were all fraudulent transactions, they stopped giving me business and I became a nervous wreck for the past two years and in utter distress, I even tried to commit suicide in August 1970, but unfortunately for me I lived to see this day that such important and big men who are Directors of such Companies like Alcock Ashdown & Co. Ltd. and Turner Morrison & Co. Ltd., could be such frauds and dishonest who have deliberately cheated a simple godfearing but trusting person like myself. I have not yet recovered from these shocks and am still living in a state of nightmare and terror from these people. I am prepared to go to a temple and swear on my Goddess that this is true. I will give you all the papers concerning these fraudulent transactions which may be available with me or my bankers. I would further tell you that my wife also became a nervous wreck since this fraud and died on 15th August 1972. Please forgive me for being a tool in the hands of the Directors of Turner Morrison & Co. Ltd. and Alcock Ashdown & Co. Ltd. and I never realised that they were such blatant crooks. I would further mention that even the 3% difference promised to me was never paid to me till this day and I have not made a penny in all these fraudulent transactions. I have been cheated by them, and was not given any work since I came to know of these frauds.
Thanking you and begging your forgiveness, Yours faithfully."
26. Shri Desai placed very strong reliance on both the oral evidence of Kashiprasad as also on the aforesaid two documents which according to him more than fully established the prosecution case. As far as the letter dated 14-8-1970, which I shall refer to as the first letter is concerned, Shri Desai states that it is significant that it is addressed to accused No. 1 and rightly so according to him. He points out that apart from being a Director of the Company and the person-in-charge of Malet Welding Works that accused No. 1 was the person who was responsible for the disbursement of the amount of Rs. 7,00,000/- from the Company into a channel that led directly to Basant Trading Works and thereafter into his own bank account. If accused No. 1 was not the Chief Architect of the scheme and if it was not a clandestine transaction which had nothing to do with the supply of goods, there would have been no question of Kashiprasad requesting him to reverse the entries and relieve him of the possible tax complications. Shri Desai links this letter directly with the voucher No. 4755 and the entry at folio 29 in the suspense account of Kashiprasad Kedia showing an advance of Rs. 7,00,000/- and submits that this material conclusively establishes the culpability of the accused. In addition to this, Shri Desai also placed reliance on Kedia's statement recorded by the income-tax authorities (Exhibit 14) wherein this witness has, in terms, indicated the entire transactions relating to the receipt by him of Rs. 7,00,000/- from M/s. Turner Morrison & Co. and his admission that he virtually provided a book entry to this amount in the hope that he would earn 3% interest by lending his name to the transaction. He has even indicated in this statement that he attempted suicide in the year 1970 when he realised that he was seriously involved in this transaction.
27. As regards the second letter, Shri Desai points out that there is nothing unusual about the witness having made a clean breast of the entire transaction when the same was investigated in the year 1972. According to him, when the voucher (Exhibit X) was detected and it was found that the Company's records showed an outstanding of Rupees 7,00,000/-, the most natural thing was for Kashiprasad to be called and asked to make good the amount. At that stage, he indicated that he had only been used as a channel for diversion of the money to M/s. Basant Trading Co. and that the amount had never been used as a loan by him or for that matter retained by him. The overwhelming documents on record fully support this version and, therefore, according to Shri Desai even if one were to totally disregard Kashiprasad's oral evidence that the documents on record fully substantiate this transaction.
28. Both Shri Rane and Shri Baadkar, learned Counsel appearing on behalf of the accused, have not only been critical but have been very severe on all the aforesaid evidence which according to him is in total shambles, contradictory inter se, has been virtually fabricated by the new management of the Company and, therefore, cannot involve either of the two accused. They have virtually dissected the evidence with a fine tooth-comb and have forcefully contended that no judicial forum can accept this quality of evidence which bristles with inconsistencies and utter falsity. Shri Rane states that the oral evidence of Kashiprasad Kedia has to be viewed with caution in keeping with the earlier decision of this Court which only means that it should not be accepted unless there is overwhelming and reliable support to it. He demonstrates how Kashiprasad Kedia is utterly unreliable in so far as his version before the Court wherein he involves accused No. 2 as the person who put across the proposal regarding the Rs. 7,00,000/- to him directly contradicted by his statement before the Income-tax Authorities where he does not even remotely refer to accused No. 2. Again, Shri Rane points out that in his oral testimony he does not implicate accused No. 1, but he attributes the entire transaction to him before the Income-tax Authorities. On a most crucial issue, learned Counsel demonstrate that it is the version of Kashiprasad Kedia before the Court that he was to earn a profit of 3% on the transaction whereas before the Income-tax Authorities, he mentions 4%. What is contended by the learned Counsel is that their definition of Kashiprasad Kedia as a man of straw is an understatement and that the letters attributed to him and statements attributed to him cannot support the evidence which is otherwise weak because one set of unreliable evidence cannot be corroborated by another set of equally unreliable evidence principally since the central figure from whom all this material emanates is thoroughly dishonest. As an illustration, the learned Counsel referred to the letter dated 20th October, 1972, namely, the second letter reproduced above and they have pointed out that Kashiprasad Kedia was incapable of using either words such as "blatant" or the quality of language is to be found in the letters nor did he have the capacity to get such a letter drafted. According to learned Counsel, it is quite obvious that this letter was prepared by Mr. Moon, the new Managing Director, and that Kashiprasad Kedia signed it in order to shift the blame on the accused and foist them from the liabilities that were fastned on him.
29. As indicated by me earlier, the learned Magistrate found it difficult to accept this crucial evidence and has, therefore, refused to rely on it and has acquitted the accused, though not only on this ground. That certain infirmities exist is undisputed, but the real question before me is as to whether this material is required to be rejected completely or whether it is essential to scrutinize it and have certain parts of which can be relied upon. I prefer to start the exercise in the reverse direction with the legal position that has been canvassed, namely, the fact that Kashiprasad Kedia was not available for cross-examination after the framing of charge on the ground that he had disappeared. The defence pleads that, reasons regardless, on this ground the entire head of evidence must go, Shri Desai states that all reasonable efforts were made to trace him out, including enquiries with his entire family at different place as is evident from the evidence of P.W. 18 Jagannath Shinde. This witness has set out before the Court the details of all the efforts made by him to locate Kashiprasad Kedia, including at various parts of India, enquiries with relatives and different places, where Kashiprasad Kedia could have gone. It was after this that he submitted his report (Exhibit 24) dated 29th December, 1979 from which it can safely be concluded that in spite of all possible efforts, Kashiprasad Kedia could not be traced. Shri Desai put forward two possibilities, the first being that one cannot rule out a situation whereby after the investigations were started Kashiprasad Kedia, who had once attempted suicide and was convicted for the offence might have succeeded in his attempt on a subsequent occasion, which explains his total disappearance. The second possibility was that Kashiprasad Kedia had decided to stay away from any places whereby he could be traced and brought forward as a witness out of fear that he would be shown as an accused and not as a witness. He lastly argued that the witness having been made available for cross-examination at an earlier point of time that no special grievance could be made if he was not subsequently available.
30. The record indicates that Kashiprasad Kedia was available to the prosecution at the time of the trial and that he attended the Court on several dates of hearing when his examination-in-chief and cross-examination went on. It is obvious, therefore, that the prosecution was desirous of producing him as a witness and had no intention of keeping him back. A scrutiny of his evidence also shows that no appreciable success was achieved by the defence in the course of cross-examination. The time has come when this Court will have to take judicial notice of the so-called disappearance of witnesses more so when it happens in the course of a trial. Even though there is not the slightest direct evidence on record that the accused who benefit totally out of such a situation had a hand in this, one cannot rule out the possibility. Undoubtedly, the defence is entitled to insist that no adverse inference be drawn unless there is concrete material on record to establish that Kashiprasad Kedia's non-availability was ensured by the accused. It would be absurd to except such evidence, but this Court will not shut its eyes to several unhealthy and criminal practices that have now become rampant in the trial Courts, the most effective of which is the tamper with the prosecution evidence. Hostile witnesses and witnesses who vanish presuppose activity behind the scenes by somebody. Where there are only two parties and the prosecution could never have done it, the answer is inevitable. In this case, however, since the situation is unusual, the other possibilities suggested by Shri Desai cannot be ruled out. I do not propose, however, to accord any special benefit to the accused because of Kashiprasad Kedia's non-availability as the facts of this case do not justify it.
31. As regards Kashiprasad Kedia's credibility, there does not appear anything intrinsically and inherently false with regard to his evidence. He has displayed the typical character of a trader and it was because of his pliability that he was used for the transaction in question. In fact, the expectation was that it would provide a perfect cover because he was even otherwise a supplier of the Company to whom payments had to be made and an advance of Rs. 7,00,000/- would not attract any special or unusual attention and the fact that it is outstanding would only provide a convenient handle of some later point when he would have either been asked to make himself scarce or to follow the more convenient ploy that is adopted in market circles in this city of declaring himself insolvent, Kashiprasad Kedia, in his turn, was completely dependent on the Company for his business and was, therefore, a willing channel for the transfer of the funds to Basant Trading Company, particularly when he was promised a 3% reward for using his name. It is true that there are some inconsistencies in his statement before different authorities which Shri Rane and Shri Baadkar have termed as absolutely fatal to his evidence. These blemishes are not of such gravity as are sufficient to write off his evidence. The principal reason for it is that the transaction being a cheque payment is evidenced by records of M/s. Turner Morrison & Co. Ltd. The instructions to the bank and the bank statements of the respective accounts and Kashiprasad Kedia's oral evidence, statements and correspondence in form and substance completely fit in with these records. The blemishes regardless, it is completely and fully established, therefore, that the amount of Rs. 7,00,000/- was channelised through Kashiprasad Kedia to Basant Trading Company, that this had nothing to do with the supply of material by him and that he did not, in fact, supply any material against this payment. These records and Kashiprasad's Kedia evidence also establish that the amount in question has not been repaid by Basant Trading Company to Kashiprasad Kedia or for that matter by him to the Company and, more importantly, that the amount was never retained by Kashiprasad Kedia, but was passed on to Basant Trading Company immediately in keeping with the instructions given to him.
32. That brings me to the crucial aspect of the matter, namely, the culpability of accused Nos. 1 and 2. It is Kashiprasad Kedia's case in his evidence before the Court that it is accused No. 2 who put forward the proposal to him with regard to the amount of Rs. 7,00,000/-, but in his letter dated 14-8-1970 he squarely involves accused No. 1 alone as the person responsible. In his statement before the Income-tax Authorities, he does not refer to accused No. 2. From these and several other circumstances on record, it is vehemently contended by learned Counsel appearing on behalf of the accused that this is a case in which neither of the accused can be implicated on the basis of this evidence because it is wholly unreliable and unsatisfactory.
33. At this stage, it would be very necessary to advert to the case made out by the accused in their statements recorded under S. 313 of the Code of Criminal Procedure. Accused No. 1 admits that at the relevant time, he was a Director of M/s. Turner Morrison & Co. and that the current account in question was opened with the Bank of Maharashtra, Fort Branch in the name of Melet Welding Works and also that he and accused No. 2 were authorised to operate the account as also that they executed the necessary documents for obtaining the facilities of Rs. 10,00,000/- from the Bank. He totally denies any knowledge of the transaction relating to the withdrawal of Rs. 7,00,000/- from this account which was given to Kashiprasad Kedia or for that matter that the same amount was immediately passed on to Basant Trading Company. He disclaimed knowledge of the movement of the amount thereafter. He states that D. P. Tapuria, his nephew, was looking after Hind Products and Tapuria & Sons. He admits that the two cheques for Rs. 3,00,000/- and for Rs. 4,00,000/- were given to him, but he states that he was not aware that they were obtained from the accounts of Hind Products and Tapuria & Sons. Even though he admits that the cheques were deposited in his account, he states that he had not done so personally. According to him, they were deposited along with several other Pay Orders and cheques. As regards the transaction with Kashiprasad Kedia, he states that he is not aware of the voucher No. 4755 dated 2nd July, 1969 for payment of Rs. 7,00,000/- to Kashiprasad Kedia as advance for the purchase of raw materials or for that matter that the voucher was signed by the Accounts Officers and approved by accused No. 2. He disclaims knowledge of the corresponding entry in the cash-book.
34. According to him, the letter (Exhibit B) was never received by him, that he does not know Kashiprasad Kedia and that the copy of Exhibit B is fabricated. He admits that he is the son-in-law or Mr. Mundhra and that his wife is Mr. Mundhra's daughter. He states that he had given a guarantee to Mr. Mundhra's Solicitors for undertaking to take delivery of 51% shares of M/s. Turner Morrison & Co. on his behalf and that this was given for a short period and very reluctantly and only because Mr. Mundhra undertook to provide funds for this guarantee. He further states that it was under these circumstances that he yielded to Mr. Mundhra's pressures and that it was Mr. Mundhra who brought several Pay Order and Drafts and cheques totalling to more than Rs. 30,00,000/- and deposited them into his bank account. He further states that since he had no interest in this transaction that he did not try to find out the origin and sources of these funds. According to him Mr. Mundhra informed him that he had arranged for the amount of Rs. 7,00,000/- for Tapuria & Sons and Hind Products, but did not tell him the source thereof. Mr. Mundhra, according to him, arranged for the guarantee by I. K. Daga, brother of his wife, and he directed accused No. 1 to transfer the entire fund, including this amount of Rs. 7,00,000/- to the account of I. K. Daga, which was done by means of Pay Order immediately.
35. According to accused No. 1, he had nothing to do with the funds thereafter, that he has not derived any benefits out of the said transaction and that he has no personal interest whatsoever in it. Specifically, he contends that he had no knowledge of the payment of Rs. 7,00,000/- by M/s. Turner Morrison and Co. to Kashiprasad kedia or by Kashiprasad Kedia to Basant Trading Co. or by Basant Trading Co. to Tapuria and Sons and Hind Products and that he came to know about this movement of the funds only during these proceedings. He concludes by stating that the control of M/s. Turner Morrison and Co. was taken over by Sahu Jain Group in 1972, that there has been continuous litigation between the Mundhra Group and the Jain Group and that there are several cases pending between the parties at the Calcutta High Court and various other Courts. According to accused No. 1, it is because he is the son-in-law of Mr. Mundhra that he has been unnecessary implicated. This, in substance, is the defence statement of accused No. 1 and it is consistent with the line adopted right through the trial and during the conduct of this appeal whereby it is contended that even though admittedly he was a Director of the Company that he was unaware of the diversion of the amount of Rs. 7,00,000/- and that not only did he have no knowledge of the transaction but that he was in no way concerned with it. I have reproduced the defence statement in detail because it contains many admissions which are of some consequence and which would ultimately narrow down the controversy to a significant extent.
36. As far as accused No. 2 is concerned, in his statement under Section 313 of the Code of Criminal Procedure, he admits that he was on Executive of M/s. Turner Morrison in 1969, but that there were other Executive above him. He also admits that the account with the Bank of Maharashtra with which we are concerned was specially opened and that he and accused No. 1 were the two persons in-charge of operating the account. He also admits having approved of a voucher No. 4755 dated 2nd July, 1969 and the corresponding entries in the cash book and the debit entry in the ledger at page 29. He states that the voucher was prepared for paying Rs. 7,00,000/- to Kashiprasad Kedia as advance towards purchase of raw-material. He, however, denies having told the witness that he should advance this very amount to Basant Trading Co. which will pay him interest at 11% per year and that he should pay only 9% per year to M/s. Turner Morrison and Co. He denies having issued any instructions for transmission of this amount of Rs. 7,00,000/- to Basant Trading Co. He also denies any knowledge with regard to the subsequent movement of these funds. Accused No. 2 also seeks to take advantage of the corporate set-up by referring to names of various other Senior Executive and Officers of the Company whose names also appear in connection with the day-to-day transactions such as letters, cheques, vouchers, etc., and tries to disclaim his responsibility in relation to the present transaction. He, however, admits that he issued the cheque for Rs. 7,00,000/- to Kashiprasad Kedia, but his case all though is that he was acting under instructions. He does not, however, name the person who gave his these instructions. He seeks to justify the payment by stating the Kashiprasad Kedia had supplied a good quantity of raw-material to the tube mill prior to the advance, that he was a dealer in steel and that after the advance was made, Kashiprasad Kedia had supplied some raw-material to M/s. Turner Morrison and Co. According to him, he also corresponded with Kashiprasad Kedia asking him to fulfil the commitment of supplying steel. He states that he had no personal interest of any nature in the transaction nor had he derived any benefit thereof. He has produced a letter dated 2nd April, 1968 whereby accused No. 1 has given him certain instructions and he emphasised the fact that he was working in the Company under one Mr. Bhave.
37. In substance, accused No. 2, who cannot disclaim his connection and knowledge with the transaction relating to Rs. 7,00,000/- nor can be disclaim the position that he was holding at the relevant time, has sought to point out that he innocently followed the instructions given to him though, significantly, he does not mention the name of the persons who gave him such instructions. It needs to be noted that there is a deliberate reservation in mentioning the name of accused No. 1 anywhere, but at the same time no attempt has been made to mention the name of any other officer. This accused has attempted to pass off the transaction on the ground that it was a simple advance made to one of the suppliers, namely, Kashiprasad Kedia, that attempts were made to adjust it against the steel supplied by him and that in the process no culpability as far as a criminal offence is concerned could be fastened on him. The short question that finally emerges is as to whether the material on record would justify a conclusion that accused No. 2 was not acting as innocently as he makes himself out to be and that he was, in fact, part of a conspiracy to defraud the Company and, therefore, be held liable for the offences with which he has been charged.
38. Digressing here, it would be essential to dispose of the vague explanation set out in support of the charge that the amount of Rs. 7,00,000/- was advanced to Kashiprasad Kedia. There is nothing on record to support this theory. Kashiprasad Kedia himself does not state that it was an advance against the material and a scrutiny of all the earlier transactions indicates that it was never the practice to advance money against future orders, and that too huge amounts. There is no letter or reference to any documents on the basis of which such an advance was asked for. Furthermore, the records of the Company do not admit that any adjustments were made in relation to future supplies or otherwise by Kashiprasad Kedia and, therefore, the case with regard to the amount being an advance to him will have to be discarded. This is all the more so when Kashiprasad himself states that the amount of Rs. 7,00,000/- was handed over to him for being paid over to Basant Trading Company on which transaction he was to earn 3%. The simultaneous payment to Basant Trading Co. conclusively establishes this fact. This, to my mind, does represent the true complexion of the transaction.
39. The charge in this case being one of criminal breach of trust, once it is established that the accused were entrusted with the money in question, or that they had dominion over it, the onus of establishing that the funds were not diverted for purposes other than that which was legally permissible would shift to the accused. The record in the present case establishes that accused Nos. 1 and 2 were the persons in-charge of the Company's bank account with the Bank of Maharashtra, with which we are concerned. The record also indicates that immediately on the opening of this account with undue haste, the amount of Rs. 7,00,000/- was paid over to Kashiprasad Kedia. That this payment was not in relation to any goods supplied by him is established and what is more important is that there is nothing on record to support the view that the payment was against future supplies. Shri Rane and Shri Badkar were extremely critical of Kashiprasad's trustworthiness and consequent credibility. That Kashiprasad Kedia facilitated the commission of the offence is obvious and one does not have to rely on his honesty while testing his version because the documentary evidence, particularly the relevant bank records, establishes that the money was not paid to him against further supplies. The fact that he passed it on to the Basant Trading Company on the same day completely corroborates his statement that he was told to loan the money to that firm and for his participation in the transaction, he was to receive 3% commission. I cannot brand Kashiprasad Kedia as an accomplice because he could never have been told that the Company funds were being misappropriated. As far as he was concerned, it was a high level business transaction for which his services were being utilised and he was receiving some commission on it. It is quite obvious that it was only after several months that he realised the implications of his name being shown as a debtor in the Company's records and it was at this stage that he came forward with his request to accused No. 1 that the transaction should be sorted out. It is in these circumstances that the explanation put forward by the accused assumes considerable significance. Had the accused come forward with a valid explanation or justification for their conduct either in the course of their statement under Section 313 of the Code of Criminal Procedure or by having established this in any other manner, they could have discharged the burden cast on them.
40. As far as accused No. 1 is concerned, on a totality of the evidence in this case, the following position emerges :-
(a) That he was a Director of the Company and the person in overall charge of Mallet Welding Works in which capacity the Board had appointed him as the main signatory to the bank account in question.
(b) That Accused No. 1 was the guaranter in respect of Mundhra's transaction concerning payment of a huge amount of money which obligation Mundhra had to discharge. The fact that accused No. 1 was the son-in-law of Mundhra is also a circumstance that requires notice.
(c) That the amount in question has travelled through certain firms, all of which are managed and controlled by persons within the family from where it finally comes into accused No. 1's bank account is significant, that accused No. 1 did not physically sign the cheque himself is of no consequence and I would, in fact, regard it as a tell-tale circumstance because it is essential to note that the money was diverted through a circuitous route with the sole object of masking the offence and leaving as little direct evidence as possible against accused No. 1. To this extent, therefore, it is not at all surprising that accused No. 1 did not sign the cheque himself, but get accused No. 2 to do this. One cannot accept for a moment the ridiculous statement made by accused No. 1 that he was unaware of the source of the funds that came to his own bank account in Calcutta even when his own wife was instrumental in the transfer of one of these amounts. On the other hand, the irresistible conclusion in this case is that accused No. 1 planned and executed the diversion of the funds and it makes no difference whatsoever whether this money was intended to be used by him personally or whether it was to go for other purposes. All that matters is the issue as to whether as custodian of the Company's funds he was at all justified in diverting the amount of Rs. 7,00,000/- through his own bank account to Mundhra or his nominee.
41. Shri Desai relied on the decision of the Supreme Court in the case of Deonandan Mishra v. State of Bihar, , wherein the standard of proof in relation to a conviction based on circumstantial evidence has been laid down. The Supreme Court has observed that the circumstances must be individually and collectively established and that they should not leave any doubt whatsoever with regard to the only conclusion which points to the guilt of the accused. Shri Desai laid particular emphasis on the fact that though it is permissible for an accused to demolish the prosecution case by tendering a reasonable explanation in respect of the material alleged against him that, on the other hand, where a false explanation is put forward that this is an incriminating circumstance. In the present case, the explanation put forward by accused No. 1 not only falls short of not casting any doubt on the prosecution evidence, but it is also clear that it is false in material aspects and this only aggravates the situation for him.
42. Shri Desai also placed reliance on the decision of the Supreme Court in the case of Inder Singh v. The State, 1979 SCJ 10 : (1978 Cri LJ 766). Shri Desai relied on the following observations in that judgment (Para 2 of Cri LJ) :-
"Credibility of testimony, oral and circumstantial, depends considerably on a judicial evaluation of the totality, not isolated scrutiny. While it is necessary that proof beyond reasonable doubt should be adduced in all criminal cases, it is not necessary that it should be perfect. If a case is proved too perfectly, it is argued that it is artificial; if a case has some flaws, inevitable because human beings are prone to err, it is argued that it is too imperfect. One wonders whether in the meticulous hypersensitivity to eliminate a random innocent from being punished, many guilty man must be callously allowed to escape. Proof beyond reasonable doubt is a guideline, not a fetish and a guilty man cannot get away with it because truth suffers some infirmity when projected through human processes."
In this case, the Supreme Court has very rightly taken a very practical and down-to-earth approach with regard to situations that almost any Court would be confronted with in a criminal proceeding and has also pointed out that it would be wrong to apply absolute standards in so far as in the search for such total perfection, guilty persons would get undue benefit. In evaluating the evidence and holding that the case is proved beyond reasonable doubt, one is conscious of certain limitations and infirmities, but the question still arises as to whether the substratum of the prosecution case that subsists after pruning what has to be discarded still brings home the charge. It is precisely for this reason that criminal jurisprudence uses the term "reasonable" because blemishes are inevitable in every prosecution and minor deficiencies are only to be expected, but all these are required to be of sufficient substance as to seriously undermine the edifice of the prosecution case. Applying those tests, to my mind, the prosecution has established the charge vis-a-vis the accused No. 1 only.
43. Shri Desai relied on another decision of the Supreme Court in the case of Kishore Chand v. State of Himachal Pradesh, . K. Ramaswamy, J., while restating the law relating to convictions based on circumstantial evidence, has summarized the principle that the guilt of the accused must be fully and cogently established and the proved circumstances must bring home the offence to the accused beyond all reasonable doubt. The Court was dealing with the question as to what constitutes reasonable doubt and the manner in which the same can be established had observed as follows :-
"In assessing the evidence imaginary possibilities have no role to play. What is to be considered are ordinary human probabilities. It is not necessary that each circumstance by itself be conclusive but there must be a chain of evidence so far as consistent and complete as not to leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that in all probability the act must have been done by the accused and the accused alone. There is distinction between facts which may be called primary or basic facts on the one hand and inference of fact to be drawn from them, on the other. In regard to the proof of basic or primary facts, the Court has to Judge the evidence in the ordinary way and in appreciation of the evidence in proof of those basic facts or primary facts, there is no scope for the application of the doctrine of benefit of doubt. The Court has to consider the evidence and decide whether the evidence proves a particular fact or not. Whether the fact leads to the inference of the guilt of the accused or not is another aspect. In dealing with this aspect, the doctrine of benefit would apply and an inference of guilt can be drawn only if the proved facts are inconsistent with the innocence of the accused and are consistent only with his guilt. There is a long distance between may be true and must be true. The prosecution has to travel all the way to establish fully all the chain of events which should be consistent only with the hypothesis of the guilt of the accused and those circumstances should be of a conclusive nature and tendency and they should be such as to exclude all hypothesis but the one proposed to be proved by the prosecution. If any of the circumstances proved in a case are consistent with the innocence of the accused or the chain of continuity of the circumstances is broken, or the circumstances or some of them can be explained by any of the reasonable hypothesis then the accused must have the benefit of that hypothesis, and is thereby entitled to benefit of doubt."
44. Reliance was also placed on a decision of the Supreme Court in the case of Himachal Pradesh Admn. v. Om Prakash, (1972) 1 SCJ 691 : (1972 Cri LJ 606). While dealing with the principles applicable to a criminal case and the ambit and scope of the concept of reasonable doubt, the Supreme Court observed as follows (Para 6 of Cri LJ) :-
"It is therefore difficult to expect a scientific or mathematical exactitude while dealing with such evidence or arriving at a true conclusion. Because of these difficulties corroboration is sought wherever possible and the maxim that the accused should be given the benefit of doubt becomes pivotal in the prosecution of offenders, which, in other words, means that the prosecution must prove its case against an accused beyond reasonable doubt by a sufficiency of credible evidence. The benefit of doubt to which the accused is entitled is reasonable doubt, the doubt which rational thinking men will reasonably, honestly and conscientiously entertain and not the doubt of a timid mind which fights shy - though unwillingly it may be - or is afraid of the logical consequences, if that benefit was not given. Or as one great Judge said it is not the doubt of a vacillating mind that has not the moral courage to decide but shelters itself in a vain and idle scepticism. It does not mean that the evidence must be so strong as to exclude even a remote possibility that the accused could not have committed the offence. If that were so the law would fail to protect society as in no case such a possibility can be excluded. It will give room for fanciful conjectures or untenable doubts and will results in deflecting the course of justice if not thwarting it altogether. What in effect this approach amounts to is that the greatest possible care should be taken by the Court in convicting an accused who is presumed to be innocent till the contrary is clearly established which burden is always in the accusatory system, on the prosecution. The mere fact that there is only a remote possibility in favour of the accused is itself sufficient to establish the case beyond reasonable doubt. This then is the approach."
The Supreme Court was also considering another angle of the law relating to circumstantial evidence whereby even if individual circumstances are not conclusively incriminating the accused, the linking of all of them may forge the chain in arriving at that conclusion. The Court observed as follows (1972 Cri LJ 606, Para. 3) :-
"It is well-established that circumstantial evidence consists in various links in a chain which if complete leads to the undoubted conclusion that the accused and accused alone could have committed the offence with which he is charged. It is said that this evidence is much more dependable than direct evidence provided that no link in the chain is missing. While it is possible that each of these links may not by itself incriminate the accused or be conclusive against him the linking of all of them may forge the chain in arriving at that conclusion."
It would be wrong to hold that the present case is one of circumstantial evidence alone. The documentary evidence and the oral evidence complement the circumstantial evidence and fully support it and, therefore, it is unnecessary for me to examine and decide the niceties of the law relating to circumstantial evidence alone. However, I must observe that as far as the question of reasonable doubt is concerned, that it is a fundamental principle of criminal jurisprudence and this test has to be strictly applied and in so doing since the evidence does not admit of any such doubt where accused No. 1 is concerned, there is something to be said as far as accused No. 2 goes and, therefore, the acquittal in his case will have to be confirmed.
45. In this regard, the conclusion arrived at by the learned Magistrate is wholly unsustainable. The trial Court ought not to have lost sight of the fact that persons in-charge of corporate affairs are trustees of all funds that are under their control and which they handle and that there exists a heavy ethical and legal responsibility to ensure that these funds are used for nothing other than the Company's legitimate activities. Where the funds are diverted for a collateral purpose, the offence of criminal breach of trust is complete because wrongful loss is caused to the Company and the ingredients of the offence are satisfied. It was incorrect on the part of the learned Magistrate to have rejected Kashiprasad Kedia's evidence on the ground that it suffers from certain infirmities. That Kashiprasad Kedia was a pliable person, there could be no two opinions about, but it was precisely a person of this type who had to be used by accused No. 1 for the execution of his scheme. One cannot expect a paragon of virtue to be chosen as a medium for siphoning off corporate funds. The unique factor about this case is that Kashiprasad Kedia's oral evidence is quite secondary and, in fact, incidental to the proof of the charges which rest entirely on documents and it is only to a very limited extent that his evidence is required to fill in the gaps. One needs to test it on the touchstone of the documents on record and if the evidence satisfied that test as it does, it is clear that he has related the correct facts. It is well-settled law that evidence may be accepted partially or in the whole and where there are certain infirmities the evidence would be of restrictive use; and as has been already indicated by me in this case, the evidence has been used to very limited extent.
46. As far as the conspiracy charge is concerned, Shri Desai did argue at great length and sought to establish that it can safely be concluded that the two accused in furtherance of a conspiracy to misappropriate the company's funds had been involved in a series of acts which would justify a finding that such a conspiracy did, in fact, exist. I have carefully evaluated all the material produced by the prosecution and there can be little difficulty in holding that accused No. 1 was personally and consciously responsible for the offence under Section 409 of the Indian Penal Code in relation to the diversion of the amount of Rs. 7,00,000/-. It would, however, not permissible to conclude that any conspiracy was in existence for a variety of reasons, the most important of which is that accused No. 2 was a mere employee of the Company unlike accused No. 1 and further since the record indicates that he got no benefit whatsoever from the entire transaction except perhaps special appreciation from his boss, accused No. 1. That he did participate in the transaction is quite certain, but the question is as to whether he did so consciously and with a guilty intent or whether he was used by accused No. 1. Accused No. 2 has stated that he had acted on the basis of instructions given to him. There were one or two persons in the Company above accused No. 2, but it was quite clear from the letter of accused No. 1 to accused No. 2 that he used to report directly to accused No. 1 and that he used to work under him and also that accused No. 1 used to deal with him directly. It would be absurd to expect that accused No. 1 would inform the second accused of his intention to commit an offence by diverting a large amount of Rs. 7,00,000/- out of the Company. It is more plausible to hold that accused No. 1 merely told accused No. 2 to pay an amount of Rs. 7,00,000/- as advance to Kashiprasad Kedia who was the Company's supplier as an advance against material and the second accused did so without having reason to doubt anything. This explains how the voucher for the advance was approved by accused No. 2 and how the transaction is recorded by the Company. This also explains why Kashiprasad Kedia does not involve accused No. 2 at some stage. It is also certain that at the stage of the payment to Kashiprasad Kedia, he must have been told that Basant Trading Company with which concern accused No. 1 was connected required certain money, that Kashiprasad Kedia should advance the amount in question as a loan for which he would be paid interest and that the corpus for this loan would be given to him by the Company. To my mind, there was nothing that could have made Kashiprasad Kedia suspect of any illegality or underhand business in a transaction of this type because the payment to him was made by cheque from the Company which very amount was advanced through a recorded transaction to Basant Trading Company which concern, in turn, was not a stranger, but one with which accused No. 1 himself was connected. There is some ambiguity with regard to the question as to whether this proposal was put across to Kashiprasad Kedia by accused No. 1 or by accused No. 2. This would not make much difference for the reason that if accused No. 1 did it on his own, as is more likely, it is a highly incriminating circumstance against him, but if he got accused No. 2 to do it on the instructions, there is no reason to assume that he was mixed up in schemes concerning accused No. 1, or his family or Mundhra. It would still not be good enough to hold him responsible either for the commission of a criminal offence or a conspiracy charge. The existence of a conspiracy presupposes a guilty state of mind and a situation wherein the concerned accused pursuant to a predetermined decision execute a series of acts that constitute a criminal offence. Normally, in such cases, the acts themselves are of such a character that a participation in them could leave no doubt that the concerned accused was aware that he is taking part in the commission of the criminal offence. In the present case, where the transaction was given the character and garb of an advance to Kashiprasad Kedia and he, in turn, was to advance money to Basant Trading Company, it would be unsafe to hold that accused No. 2 must be fixed with the guilt of having known that this money was being siphoned out of the Company and that it was not to return. On the contrary, it is permissible to conclude that where the payment was by cheque and was duly recorded that accused No. 2 would have safely felt that Kashiprasad Kedia was always obliged to restore the money to the Company or to adjust the supplies that were to be made by him. In this view of the matter, the acquittal by the Trial Court under the conspiracy charge stands confirmed.
47. As far as accused No. 2 is concerned the Trial Court has acquitted him and to my mind there does not appear to be sufficient justification to disturb that finding. Signing a cheque on the Company's account or for that matter approving the voucher for the advance made to Kashiprasad Kedia are both functions which accused No. 2 had to perform in the course of his normal duties. The existence of the voucher heavily assists accused No. 2 in so for as it is obvious that accused No. 1 told him that the payment was being made to Kashiprasad Kedia as an advance. Accused No. 1 was the Director of the Company and the person in overall charge as a result there of accused No. 2 was bound to act under his instructions. If those instructions were in relation to something patently illegal, then accused No. 2 would not have been justified in saying that he participated in the offence at the behest of accused No. 1. Where, however, it is demonstrated that accused No. 1 executed his plan by giving it the garb and veneer of a legitimate transaction, it would be unsafe to impute guilty knowledge to accused No. 2. Apart from all this, the fact that stares one in the face is that there is nothing on record from which it can be inferred that accused No. 2 was to derive any benefit at all from the transaction. On the contrary, the evidence indicates that he got nothing except the torture of being prosecuted before a criminal Court at a later point of time. This does not mean that a responsible Executive of a Company would be justified in executing whatever dishonest schemes his Directors ask him to implement. For from it, the only reason why accused No. 2 would be entitled to an acquittal is because the complexion of the scheme would not have indicated to accused No. 2 that it was an illegal transaction. It is in these circumstances that the acquittal of accused No. 2 is confirmed.
48. For the reasons indicated above, the order of the learned Magistrate is required to be modified to the extent that the order of acquittal passed in favour of accused No. 1 in respect of the charge under Section 409, I.P.C. simpliciter of the Indian Penal Code is set aside. Accused No. 1 is convicted for the offence punishable under Section 406 of the Indian Penal Code.
49. In view of the aforesaid findings, it was essential, having regarded a conviction against Accused No. 1, that I hear him on the question of sentence. The Judgment had been reserved and when the matter was notified and the order of conviction was pronounced on 24-9-1992, Mr. Rane, learned Counsel appearing on behalf of Respondent No. 1, stated that his client would like to negotiate the matter with the complainant-Company and its directors and explore the possibility of resolving the dispute. He pointed out to me that there was a big civil suit pending between the parties and that both the heavy civil and criminal litigation could be concluded if the matter were to be amicably settled. It did appear to me rather late in the day for such a request to be made, but Shri Thakore, learned Counsel appearing on behalf of the complainant-Company, also advanced the plea that the Court should grant some time for negotiations. Undoubtedly, a very important issue that would arise, in such circumstances, is the question as to whether after having used the machinery of the Trial Court for several years and having taken up the time of this Court virtually for several months in this extremely heavy matter, it was at all open to the parties to settle the matter inter se and to request the Court not to pronounce the judgment. Before this could be considered, it was pointed out that Accused No. 1 was not present in Bombay and that, in any event, time would be required for obtaining requisite instructions. The matter was adjourned from time to time and was finally heard by me on 16-12-1992. On that date, Shri Thakore on behalf of the complainant-Company and Shri Rane on behalf of Accused No. 1 stated that the settlement talks had finally broken down. They advanced their submissions on the question of sentence and at their request it was stood over to 10-2-93.
50. Shri Thakore stated that the offence under Section 409 of the Indian Penal Code is a very serious offence which is why the Legislature has provided for a sentence extending up to imprisonment for life and unlimited fine, depending upon the gravity. It was his contention that the Accused in his capacity as a Director of the Company was liable to be convicted under Section 409 of the Indian Penal Code. I have pointed out to Shri Thakore, however, that the charge in this case was not framed under section 409 of the Indian Penal Code, but that the same was under Section 408 of the Indian Penal Code read with Sections 109 and 120-B of the Indian Penal Code. Shri Thakore pointed out to me that the complaint clearly mentioned Section 409 of the Indian Penal Code and that this was only a typographical error which can be corrected and, if necessary, a fresh plea obtained from the Accused. To my mind, this procedure is not advisable at this point of time because the trial and the hearing of the appeal having been concluded, if the Accused were to contend that such alteration is to prejudice him, it would involve an unnecessary reopening of the proceedings, which is not permissible. Moreover, I have recorded a conviction against the Accused under Section 406 of the Indian Penal Code, which is a lesser offence to the one with which he was charged.
51. Shri Thakore pointed out to me that the Accused was a Director of a limited Company and that he committed criminal breach of trust in respect of a huge amount of Rs. 7,00,000/-. He has stated that the evidence has also indicated that a similar modus operandi was adopted by the Accused who syphoned the amount from a sister Company of which he was the Director, but which is not the subject-matter of the charge in the present case. The Accused is a well-placed person and this substantially aggravates the nature of the offence. Shri Thakore pointed out to me that the Company brought to the notice of the Accused the offence committed by him long before the prosecution and the suits were instituted and that it was open to him to have restored the money to the Company even at that point of time which was almost 24 years back. Shri Thakore made a serious grievance of the fact that the Accused who is a businessman has benefited tremendously by having taken this amount of Rs. 7,00,000/- out of the Company and that it must have multiplied at least fifty-fold in the course of the last over two decades. He, therefore, submitted that this Court must realistically compute the actual loss that has resulted to the Company and the wrongful gain that has taken place while awarding a sentence.
52. Shri Rane pointed out that the Accused is the son-in-law of Mundra and the at the entire evidence has been directed towards establishing that it was Mundhra who was acting in the background and that the transaction was, in fact, planned by him for the purposes of obtaining money to pay for the shares. Shri Rane made a grievance that Accused No. 1 has virtually been used as a front and that the real culprit has not even been prosecuted and towards this end, he indicated that all the other persons who were parties to the transaction, particularly Mundra, are defendants before the Civil Courts. He pleaded that Accused No. 1 is being virtually hanged for no fault of his except that he carried out certain instructions and Shri Rane made an impassioned plea that only a token punishment be awarded. The record clearly indicates that within hardly three or four days an amount of Rupees 7,00,000/- had been paid over by Accused No. 1 to Vijaykumar Mundra S/o Mr. Mundra through I. K. Daga. Shri Rane contended that, admittedly, the Accused has neither retained the amount nor has he benefited from it and in these circumstances it would be harsh to impose a heavy punishment on him on a mechanical consideration that the amount was misappropriated by him. He also pointed out to me that Accused No. 1 is 56 years old, that he has several health problems and further that he has recently undergone surgery.
53. In the first instance, it is essential that the inconsistencies in the record should be sorted out. I have carefully perused the original complaint which does make out a charge under Section 409 of the Indian Penal Code. The charge, however, framed by the Court was under Section 408 of the Indian Penal Code, which Section prescribes a lesser punishment for Criminal Breach of Trust than Section 409 of the Indian Penal Code. It would, however, be legally incorrect to convict the Accused under Section 408 of the Indian Penal Code because that Section concerns a clerk or a servant. The Accused was a Director of the Company and he was certainly not a clerk. It would be debatable as to whether he was a servant of the Company because the relationship of Master and servant in law would normally be one where the Accused is an employee. There is nothing on record to indicate that the Accused was an employee in that sense and the record does suggest that he was nominated as a Director in which case a conviction under Section 408 of the Indian Penal Code may not be legally sound. It would, however, be open to the Court on finding that the Accused has committed the offence of criminal breach of trust to record a conviction under Section 406 of the Indian Penal Code which constitutes the same offence, but involves a lesser sentence. Accused No. 1, therefore, stands convicted of the offence under Section 406 of the Indian Penal Code.
54. Coming to the grounds that have been adduced by either sides, it is essential that this Court takes cognizance of the realistic quantum of the amount involved in this case which happens to be a large amount of Rupees 7,00,000/-. The offence has taken place in the month of July 1969 at which time, even on a mechanical consideration, the rupee value was very much higher. This is for the limited aspect of considering the money quantum involved in the offence in relation to actual purchasing power. The accused was a Director of a public limited Company in which position the law expects of him to act with a sense of honesty, integrity and with great responsibility. In diverting corporate funds, he was perhaps involving in a form of activity that is indulged in which great impunity. Unfortunately, this does not change the complexion of the fact that even if it is considered a common place white collar in discretion that it still is a serious criminal offence. To my mind, when instances of this type are established before the Court, it is in the public interest that the law must be firmly and meaningfully applied and having regard to the manner in which Companies are subject to such rackets by Directors, a deterrant sentence is called for.
55. There is another angle to this case, namely, the fact that accused No. 2 was subjected to the prosecution and the lengthy litigation, thereafter, merely because his name figures in the transaction. Accused No. 2 was an employee and accused No. 1 used him for the commission of the offence with the obvious intention that if at all anybody had to face the music later on that the blame would go to accused No. 2. The offence of criminal breach of trust in respect of the Company funds was cleverly planned by accused No. 1, but the dishonesty was so deep that an employee was used as a front and a channel for this purpose. These are aggravating factors. I have had occasion to deal with the evidence of Kashiprasad who, in no uncertain terms, has stated that this transaction had so frightened him that he had attempted suicide. Kedia was a broker and a client of the Company and that accused No. 1 had used him and his bank account as a cover for the commission of the offence is established. Kedia was subsequently not available and there is nothing to indicate as to what happened to him. The reference to this aspect is for the purpose of recording that the offence was carefully planned and that it was executed in a manner whereby on detection, the blame would normally have rubbed off on the other two persons and accused No. 1 would have gone scot-free. Serious cognizance will, therefore, have to be taken of these aspects.
56. It is a principle of law that unjust enrichment is not permissible. The argument canvassed on behalf of accused No. 1 is that he has not retained the money with him nor has he used it and, therefore, it cannot be concluded that wrongful gain has accrued to him. To my mind, this last aspect of the matter irrelevant, but I am not prepared to hold that wrongful gain has not accrued to the accused. It has been demonstrated that there were in existence a number of firms and companies, all of which accused No. 1 and his family relations and in-laws were running and were connected with and that the money was deliberately routed through as many as these three or four concerns in order to hide the identity of the amount, its origin and its movement and change its complexion altogether, and it was thereafter traced until it reached the son of Mundra. In these circumstances, whether accused No. 1 retained the amount with him for a long time or whether he was a party to all sorts of dubious financial transactions is not of much consequence, but what he would be liable for is the wrongful loss that has accrued to the Company.
57. The amount that was siphoned out of the Company in July 1969 was Rs. 7,00,000/-. Shri Thakore pointed out that this amount is outstanding to the Company and that along with the interest that has accrued over the years, it has accumulated to over Rupees 1,00,00,000/-. It is true that Shri Rane contended that the length of the litigation is not something for which he is responsible, but it would be impossible to deny that accused No. 1 has resisted making good the loss caused by him to the Company for this entire period of time. On the other hand, as a businessman, whether directly or indirectly, it must be assumed that he has benefited through the amount which must have multiplied at least ten-fold even if one were to take the most conservative estimate. To my mind, therefore, apart from a jail sentence, which is a must, having regard to the complexion of the present offence, it would be equally necessary and in the public interest to impose a fine on accused No. 1 that would offset such unjust enrichment. Unless this is done, it may unfortunately be assumed that it is most profitable to indulge in such offences.
58. The appeal in accordingly allowed against accused No. 1. The appeal against accused No. 2 stands dismissed. The acquittal of accused No. 2 by the trial Court stands confirmed. As far as accused No. 1 is concerned, his acquittal of the offence punishable under S. 120-B of the Indian Penal Code stands confirmed.
59. The acquittal of accused No. 1 in respect of the offence of criminal breach of trust by the trial Court is set aside. Accused No. 1 is convicted of the offence punishable under S. 406 of the Indian Penal Code and it is directed that he should undergo a sentence of rigorous imprisonment for two years and that he pay a fine in the sum of Rs. 70,00,000/- (Rupees Seventy Lacs only), in default, to undergo rigorous imprisonment for nine months. The substantive sentences to run concurrently.
60. Having regard to the quantum of the fine imposed on accused No. 1, accused No. 1 is granted time of 12 weeks to deposit the fine amount in this Court. The operative part of this order shall be stayed for a period of 12 weeks even as far as the jail sentence is concerned. Office shall furnish to accused No. 1 a certified copy of this judgment on a priority basis. The appeal is disposed of accordingly.
61. Order accordingly.