Bombay High Court
Central Bureau Of Investigation vs Mulangi Krishnaswamy Ashok Kumar & ... on 14 August, 1998
Equivalent citations: 1999(2)BOMCR771, (1998)3BOMLR228
Author: S.N. Variava
Bench: S.N. Variava
ORDER S.N. Variava, J.
1. This Court was established because large amounts were siphoned out from Banks and Financial Institutions into private pockets. The manner by which monies have been siphoned out are many. This case indicates how the broker and the officer, who is a public servant and whose duty it should have been to protect public monies, have conspired to misuse public position to enable the broker to siphon out monies on a large scale.
2. Accused No. 1 was at the relevant time the Executive Vice President of Canbank Financial Services Limited (hereinafter called "CANFINA"). Accused No. 1 was the Chief Dealer of CANFINA. Accused Nos. 2 and 3 were at the relevant time Assist. Vice Presidents of CANFINA. Accused No. 3 was, at the relevant time, also a dealer of CANFINA. Accused No. 4 was and is a Share and Securities Broker.
3. The case of the prosecution is as follows:
Sometime in September, 1991 one Canbank Mutal Fund had taken out an Issue of Units called CANCIGO Units. It is the case of the prosecution that Accused No. 4 got Andhra Bank to subscribe for the CANCIGO Units F.V. Rs. 11 crores. It is the case of the prosecution that Accused No. 4 got Andhra Bank Financial Services Limited to subscribe for the CANCIGO Units F.V Rs 22 Crores. It is the case of the prosecution that CANCIGO Units F.V. Rs. 11 crores were thus purchased in the name of Andhra Bank and CANCIGO Units F.V. of Rs. 22 crores were purchased in the name of Andhra Bank Financial Services Limited. It is the case of the prosecution that Accused No. 4 paid for the CANCIGO Units F.V. Rs. 33 crores. It is the case of the prosecution that the CANCIGO Units on the face of them, showed that they were not transferable. It is also the case of the prosecution that as these stood in the names of Andhra Bank and Andhra Bank Financial Services Limited Accused No. 4 could not have dealt with them without the consent of and authorization from Andhra Bank and Andhra Bank Financial Services Limited.
4. It is the case of the prosecution that on 20th January, 1992 Accused No. 4 had owed monies to CANFINA in the following transactions:
1.
7,00 crore 13% HPF @ 97.5 for a total consideration of Rs. 7,25,63,150.68
2. 10.9365 crore 13% NPC @ 97.5 for a total consideration of Rs. 11,11,88,249.48
3. 1.75 crore 13% HPF @ 97.5 for a total consideration of Rs. 1,81,40,787.67
4. 4.93 crore 13% ITI @ 97.5 for a total consideration of Rs. 4,84,18,678.60
5. 6.00 crore 13% NPC @ 97.5 for Rs. 6.09,78,904.11 Total Rs. 31,13,07,328.93 It is the case of the prosecution that against the aforesaid amount of Rs. 31,13,07,328.93 CANFINA received Rs. 25,77,28,453.83 only i.e. Rs. 5,35,78,875/- short.
5. It is case of the prosecution that on 6th February, 1992, Accused No. 1 had finalised following transactions of sale of securities with Accused No. 2 through Citibank without collecting Contract Note/Delivery Order.
1. 14% Godrej Soaps f.v. 5 crores @ 95.67 total consideration of Rs. 4,85,25,410.96
2. 14% Insilco f.v. 10.30 crores @ 99.3214 total consideration of Rs. 10,73,57,876.71
3. 13% CIL f.v.40 crores @ 99.4665 total consideration of Rs. 42,27,97,506.85
4. 13% CIL f.v. 15 crores® 99.5733 total consideration of Rs. 15,85,49,041.10
5.
14% Haryana Petro f.v. 5 crores @ 99.33:64 total consideration of Rs. 5,21,22,994.52 6. 15% Indian Rayon f.v. 3.53 crores @ 105.6598 total consideration of Rs. 3,91,54,012.58 Total Rs. 82,85,06,842.72
CANFINA received payment of Rs. 59,90,51,739.72 from one C. Mackertich, Broker, thus receiving Rs. 22,94,55,103/- short. CANFINA also received Rs. 3,28,66,849/- from one R.K. Tandon, Broker at Kanpur, through State Bank of Travancore. Balance was receivable from Accused No. 4
6. Thus as on 6.2.92 the total receivable amount from Accused No. 4 worked out as under:
1.
Receivable against the transactions dt. 20-1-92 with Citibank Rs. 5,35,78,875.00
2. Receivable against the transactions dt. 6..2.92 shown with Citibank though some amounts were received from C. Mackertich.
Rs. 22.94,55,103.00
3.
Total receivable Rs. 28,30,33,978.00 4. Less: On account of cheque received from R.K.Tandon. Rs. 3.28,66,849.00 Net receivable Rs. 25,01,67,129.00
7. It is the case of the prosecution that Accused Nos. 1, 2 and 3 entered into a transaction with Accused No. 4 to purchase the above mentioned CANCIGO Units F.V. Rs. 33 crores. It is the case of the prosecution that in the books of CANFINA at Bangalore the transaction was shown to be with Andhra Bank. It is the case of the prosecution that no letter of authority or consent was obtained from either Andhra Bank or Andhra Bank Financial Services Limited. It is the case of the prosecution that these transactions were entered into, knowing that the CANCIGO Units were not transferable and that in any event Accused No. 4 could not deal with them.
8. It is the case of the prosecution that after adjusting the amount of Rs. 25,01,67,129/- (which was due and payable by Accused No. 4 to CANFINA) a cheque for the balance amount of Rs. 7,98,33,871/- was paid. It is the case of the prosecution that a cheque for a sum of Rs.7,98,33,871 was drawn in the name of Andhra Bank. However a letter was issued to Andhra Bank to credit the proceeds of the cheque into the account of Accused No. 4. It is the case of the prosecution that by this method dues of Accused No. 4 to the tune of Rs.25,01,67,129/- were wiped out and on top, a sum of Rs.7,98,32,871/- was received by Accused No. 4. It is the case of the prosecution that CANFINA has not been able to get the CANCIGO Units transferred into their name as these Units were not transferable.
9. On these facts all the accused are charged with having committed criminal conspiracy, to commit offences of cheating and/or criminal breach of trust, falsification of accounts and offences under section 13(1)(c) and section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The Accused Nos. 1 to 3 are also charged with substantive offence under section 420 and/or 409, 477. A Indian Penal Code and under section 13(1)(c) and section 13(1)(d) read with section 13(2) of Prevention of Corruption Act. Accused No. 4 is also charged with substantive offence under section 411 Indian Penal Code. The accused are also charged with aiding and abetting each other.
10. The prosecution has led evidence of 17 witnesses in order to prove their case. In my view, for reasons set out in greater detail hereafter, the basic facts have been established by the prosecution.
11. The Points for Determination and the Findings thereon are as follows:-
POINTS FOR DETERMINATION FINDINGS
1.
Whether Accused No. 4 had got Andhra Bank and Andhra Bank Financial Services Limited to subscribe in their name to 11 crores and 22 crores CANCIGO Units respectively even though Accused No. 4 paid for them ?
Proved beyond a reasonable doubt that Accused No. 4 had got Andhra Bank and Andhra Bank Financial Services Limited to subscribe to CANCIGO Units F.V. Rs. 11 crores and Rs. 22 crores respectively.
2. Whether on allotment the Credit Sheets for CANCIGO Units stood in the names of Andhra Bank to the extent of face value of Rs. 11 crores and Andhra Bank Financial Services Ltd. to the extent of F.V. Rs. 22 crores ?
Proved beyond a reasonable doubt that the concerned Credit Sheets stood in the names of Andhra Bank (F.V, Rs. 11 crores) and Andhra Bank Financial Services Ltd. (F.V. Rs. 22 crores)
3. Whether CANCICO Units are not transferable and if so whether such a condition restricting transferability is void ?
In the Affirmative-Such a condition is not void but is valid and enforeable
4. Whether a sum of Rs. 25,01,67, 129/ was due and payable by Accused No. 4 to CANFINA on 6th February, 1992 ?
Proved beyond a reasonable doubt that a sum of Rs. ? 25,01,67,129/- was due and payable by Accused No. 4 to CANFINA on 6th February, 1992.
5. Whether Accused No. 4 sold CANCIGO Units F.V. Rs. 33 crores (11 crores standing in the name of Andhra Bank and 22 crores standing in the name of Andhra Bank Financial Services Ltd.) to CANFINA ?
Proved beyond a reasonable doubt that Accused No. 4 sold CANCIGO Units F. V. Rs. 33 crores (11 crores standing in the name of Andhra Bank and 22 crores standing in the name of Andhra Bank Finan cial Services Limited).
6. Whether after adjustment of the sum of Rs. 25,01,67,129/- a sum of Rs. 7,98,32,871/- was paid to Accused No. 4 ?
Proved beyond a reasonable doubt that after adjustment of the sum of Rs. 25,01,67, 129/-a sum of Rs. 7,98,32,871/-was paid to Accused No. 4.
7. Whether CANFINA has lost the sum of Rs, 33 crores as they could not get CANCIGO Units transferred totheir name ?
Proved beyond a reasonable doubt that CANFINA has lost the sum of Rs. 33 crores as they could not get the CANCIGO Units F.V. Rs, 33 crores transferred to their name. Proved that CANFINA has had to hand over the Credit Sheets to the Custodian.
8. If answer to question No. 5 is in affirmative, then who on behalf of CANFINA entered into such a contract ?
Proved beyond a reasonable doubt that Accused No. 3 entered into this transaction on behalf of CANFINA.
9. Whether any Sanction Order is required and/or whether the Sanction Order is valid ?
No Sanction Order is required. In any case valid Sanction has been obtained.
10. Whether these accused or any of them have committed the offences with which they are charged and if so what offences ?
As per final Order set out hereafter.
REASONS
12. The first two points for determination must be taken together. In order to prove that Accused No. 4 has got Andhra Bank and Andhra Bank Financial Services Limited to purchase CANCIGO Units and that the credit sheets stood in the name of these parties, prosecution has led the evidence of Sidavaram Subramaniam Nagraj (P.W. 2), Ramesh Vardaraj Shinoy (P.W. 3) and Shirangam R.Ramaraj (P.W. 10).
13. P.W. 2 is at present a Dealer in the Funds and Investment Cell of Andhra Bank. He deposed that the Funds Dept. of Andhra Bank were, amongst other things, dealing in call monies and securities transactions and maintaining constituent accounts. He deposed that he was familiar with the working of the Funds Dept. during 1991-92 because he assisted the investigation starting from 1992 upto 1995. He deposed that the transactions entered into on behalf of constituent were entered into "Sale of Security Register", Purchase of Security Register" and "a Stock Register". He deposed that these above mentioned Registers were maintained for each individual constituent. He deposed that in 1991-92, one Mr. R.Dhankumar was working as the Manager of Funds Dept. in Andhra Bank and one Mr. S.P. Kamat was working as an officer in the Funds Dept. of Andhra Bank. He deposed that he was familiar with handwriting of both Mr. Dhankumar and Mr. Kamt.
14. The witness deposed that he had seen a letter dated 20th August, 1991 addressed by Accused No. 4 to the Manager, Andhra Bank. He deposed that by this letter Accused No. 4 had requested the Manager to sign an Application Form for CANCIGO Units of the F.V.Rs.11 crores, which were to be given to Andhra Bank Financial Services Limited. He has identified the signature of Accused No. 4 on this letter. He has also identified the handwriting of Mr. Dhankumar who has made certain endorsement on this letter. The letter is marked as Exhibit-21. It must be noted that this letter requested the Manager of Andhra Bank to sign the Application Form so that the Certificate could come directly into the name of Andhra Bank. This letter therefore shows that, for some reason with which we are not concerned in this case, Accused No. 4 did not want these CANCIGO Units in his own name. For reasons best known to him Accused No. 4 wanted the CANCIGO Units to be in the name of Andhra Bank. This is being mentioned because in all seriousness it was initially sought to be argued, across the bar, that Accused No. 4 did not know that the Credit Sheets for CANCIGO Units did not stand in his own name till a very late date. This letter put an absolute lie to such an argument. It was therefore not pressed seriously.
15. P.W. 2 has further deposed that he had also seen an Application Form for 1,10,000 CANCIGO Units. That Application Form is ultimately marked as Exhibit-D. This witness has identified the signature of Mr. Dhankumar on this Application Form. This witness deposed that Mr. Dhankumar wrote in his own handwriting in this Application the words "A/C of Clients M/s. Hiten P. Dalal". He deposed that the words "Rs. 11 crores" are also in the handwriting of Mr. Dhankumar, At this stage it must be mentioned that the name of the Applicant under column "A" is "Andhra Bank". Under column "B" the Legal status is shown as "Statutory Corporation". Under column "D" the address is shown as the address of Andhra Bank. The Application is signed by Mr. Dhankumar as the authorized signatory of Andhra Bank. Thus the Application clearly shows that the Applicant for the 11 crore CANCIGO Units is Andhra Bank and not Accused No. 4.
16. P.W. 2 deposed if Andhra Bank had actually purchased some securities, either on its own account or on account of a constituent, the transaction would be reflected in the Purchase Register and in the Stock Register. The witness has identified the Purchase Register and Stock Register. He deposed that those Registers were maintained in the normal course of business. He deposed that in those Registers there is no entry regarding purchase of CANCIGO Units by Andhra Bank on 20th August, 1991 or at all. Those Registers are marked as Exhibits 23 and 24 respectively (Ex-24 being only a page containing the entries of 28 August, 1991). This shows that Andhra Bank had not purchased as bankers acting for and on behalf of constituent i.e. Accused No. 4
17. P.W. 2 has further deposed that Andhra Bank maintained a muster roll. He deposed that the muster roll was maintained in the normal course of business, He deposed that officers initialed in the muster roll as a token of their presence. He deposed that on 28th September , 1991 Mr. Dhankumar attended work. In support of this, the relevant entry in the muster roll is produced and marked as Ex.25, similarly Mr. Dhankumar's presence in office on 10th September, 1991 is also proved by the entry in the muster roll which is marked as Ex-26.
18. The prosecution has also established that even though the Application was made by Andhra Bank the payment for 11 core CANCIGO Units was made by Accused No. 4. P.W. 2 has identified a cheque which is marked as Ex-27. P.W. 2 deposed that this cheque has been signed by Accused No. 4. He deposed that this cheque is issued by Accused No. 4 on his current account No. 4819 with Andhra Bank. The said cheques is in favour of Canbank Mutual Fund. The prosecution has also produced the certified true copy of the statement of account No. 4819. The certified copy of the relevant date is marked as Ex-101.
19. P.W. 2 has also identified a cheque dated 6th September, 1991. He deposed that the cheque has been issued by Accused No. 4 from his account No. 4819. He deposed that cheque has been signed by Accused No. 4. That cheque is marked as Ex-28. This cheque is issued in favour of Canbank Mutual Fund. The statement of account (Ex-101) shows that the amount of this cheque has been debited in the account of Accused No. 4. At this stage it must be mentioned that this is cheque by which payment for 22 crore CANCIGO Units, which are taken in the name of Andhra Bank Financial Services Limited, has been made.
20. P.W. 2 has also deposed that when money is deposited into an account, a credit voucher would have to be prepared. He deposed that credit vouchers could be of two types. One where a bank receives money on behalf of a client and the bank fills the credit voucher. The other is where a client himself brings the money and fills up a pay-in-slip. The witness has identified a credit voucher date 8-1-1992. He deposed that the signature on that voucher is signature of one Mr. S.P. Kamat the then officer of the Funds & Investment Department. He has also identified the signature of one Mr. Haribabu, the then officer of the Current A/c. Dept. He deposed that this voucher shows that the amounts mentioned on the voucher were received by Andhra Bank on behalf of Accused No. 4 and that the amounts have been credited into the account No. 4819 of Accused No. 4. He deposed that the voucher shows that the amounts were received from Canbank Mutual Fund towards interest on CANCIGO Units F.V. Rs. 11 crores from 3rd September, 1991 to 31st December, 1991. This voucher is marked as Exhibit-29. This voucher shows that interest on the CANCIGO Units was given by Canbank Mutual Fund to Andhra bank. However thereafter Andhra Bank credits this amount to account of Accused No. 4. That credit has been received in the account is proved by the Statement of Account Ex-101. This witness also identified another voucher dated 11-2-1992. This is also a credit voucher. He identifies the signatures of Mr. Kamat and of Mr. Haribabu on this voucher. He deposes that this voucher is credited in the Account No. 4819 of Accused No. 4. This voucher is also for interest amount on the 11 crore CANCIGO Units. This voucher is marked as Ex-30.
21. P.W. 2 also identified a pay-in-slip dated 8-2-1992. He deposed that the amount shown on the pay-in-slip had been credited into the account No. 4819 of Accused No. 4. This pay-in-slip is marked as Ex-31.
22. P.W. 2 deposed that the Andhra Bank also maintained a Sale Register wherein entries of all transactions of sale have been made. He deposed that the Sale Register was to be maintained on a day-to-day basis. He deposed that such a Register was maintained in the ordinary course of business. He produced the Sale Register. He deposed that on 6-2-1992 there is no sale by Andhra Bank to CANFINA of any CANCIGO Units. The relevant page of the Register is marked as Ex-32.
23. In cross-examination, the evidence of this witness has not been shaken. In cross-examination the witness again reiterates that if CANCIGO Units had been purchased by Andhra Bank then an entry would necessarily have to be made in the records of Andhra Bank. In cross-examination on behalf of Accused No. 1 a letter dated September, 1992 addressed by Chief Manager of Andhra Bank to Canbank Mutual Fund has been brought on record as Ex-C. By this letter Andhra Bank is denying that the Certificates of CANCIGO Units worth Rs. 11 crores had ever been delivered to them. This letter thus shows that delivery of these CANCIGO Units had been taken by some person other than Andhra Bank from Canbank Mutual Fund. Court does not have before it any evidence as to who took delivery. But the fact remains that ultimately Accused No. 4 delivered the CANCIGO Units to CANFINA.
24. Thus this evidence proves that payment for both the Rs. 11 crores and 22 crores CANCIGO Units has gone from Account of Accused No. 4. This evidence proves that on request of Accused No. 4 an Application is made by Andhra Bank for CANCIGO Units F.V.Rs. 11 crores. This evidence shows that interest amounts, on CANCIGO Units, has been credited into Account of Accused No.4, after it was first received by Andhra Bank.
25. Prosecution has next examined Mr. R.V. Shenoy (P.W. 3) who is the Asstt. Vice President of Andhra Bank Financial Services Limited. He deposed that Andhra Bank Financial Services Limited was maintaining a Transaction Register in which the transactions which took place were recorded. He deposed that the Transaction Register was maintained on a day-to-day basis and in the normal course of business. He deposed that the Transaction Register does not show any investment by Andhra Bank Financial Services Limited in CANCIGO Units F.V./ Rs. 22 crores. The relevant pages of the Transaction Register have been marked as Ex-34.
26. P.W. 3 deposed that Accused No. 4 had written a letter dated 14th September, 1991 to the Sr. Vice President of Andhra Bank Financial Services Limited asking him to sign the Application Form. The letter is marked as Ex-35. The witness identifies the signature of Accused No. 4 on the letter. This witness also identifies the signatures of Mr. Kalyanaraman on the Application Form which is ultimately marked as Ex-85. This Application Form shows that the Applicant is Andhra Bank Financial Services Limited. The address is that of Andhra Bank Financial Services Limited. The signature of the Applicant is by Mr. Kalyanaraman as authorized signatory of Andhra Bank Financial Services Limited. This Application, therefore on the face of it, shows that this is an Application by Andhra Bank Financial Services Limited for CANCIGO Units F.V. Rs. 22 crores. P.W. 3 then identifies the pay-in-slip by which an amount of Rs. 82,87,671/- is credited into the account of Andhra Bank Financial Services Limited. He identifies the signature of Mr. Haribabu. He deposed that this was the amount received as interest on CANCIGO Units F.V. Rs. 22 crores. This shows that Canbank Mutual Fund had paid the interest amount in Andhra Bank Financial Services Limited because the Units stood in the name of Andhra Bank Financial Services Limited. This witness then identifies a letter dated 6-1-1992 from Accused No. 4 to Andhra Bank Financial Services Limited. The witness identifies the signature of Accused No. 4. This letter is marked as Ex-38. By this letter Accused No. 4 is asking Andhra Bank Financial Services Limited to give him credit for the sum of Rs. 82,87,671/- which had been received by Andhra Bank Financial Services Limited from Canbank Mutual Fund as interest on the CANCIGO Units F.V. Rs. 22 crores. This letter clearly shows that in 1992 itself Accused No. 4 was aware that the Units stood in the name of Andhra Bank Financial Services Limited and that they therefore received the interest amount. Accused No. 4 is thus making a claim to that interest amount. The witness deposed that on receipt of this letter the interest amount was paid to Accused No. 4. He deposed that this was done by the cheque Ex-39. The witness has identified the signature of Mr. Kalyanraman on the cheque. He deposed that the handwriting of the cheque was his own. He deposed that Accused No. 4 got credit for the amount of the cheque. To be remembered that Accused No. 4 has deposited this amount into his account No. 4819 in Andhra Bank by pay-in-slip Ex-31.
27. P.W. 3 deposed that the further interest which was received by Andhra Bank Financial Services Limited was returned by them to Canbank Mutual Fund because it did not pertain to Andhra Bank Financial Services Limited. The witness has produced a letter dated 1-1-1992, which is marked as Ex-40.
28. In cross-examination the witness is asked why the interest amount was returned by Andhra Bank Financial Services Limited to Canbank Mutual Fund. It was sought to be suggested that this amount was returned because Andhra Bank Financial Services Limited knew that Accused No. 4 had sold the securities to CANFINA. The witness denies such a suggestion and states that the interest was returned because Andhra Bank Financial Services Limited knew that the securities belonged to Accused No. 4 and Accused No. 4 had been Notified. The witness reiterates that there is no entry in respect of the purchase of securities by Andhra Bank Financial Services Limited. He further deposes that even when the interest amounts are paid over to Accused No. 4 there is no entry in that behalf in the books of Andhra Bank Financial Services Limited. He deposed that even in respect of the 2nd interest amount there is no entry in the books of Andhra Bank Financial Services Limited. The witness deposes that even though these Units had been offered as security to Andhra Bank Financial Services Limited, Andhra Bank Financial Services Limited had refused to accept these securities as there was a lock-in period of 1 year. Thus it is to be noted that one other institution had refused to touch these securities and/or to even accept them even as securities. This was because it was known to all that these were non-transferable and there was a lock-in period of one year. In cross-examination this witness has admitted that Accused No. 4 was the owner of the CANCIGO Units F.V. Rs. 22 crores. He deposes that he does not know why they were purchased in name of Andhra Bank Financial Services Ltd. He deposes that he does not know whether these were purchased by CANFINA on 6th February, 1992.
29. Thus this evidence proves that the payment of Rs. 22 crore CANCIGO Units was made by Accused No. 4 but at the request of Accused No. 4 the Application is made by Andhra Bank Financial Services Limited. The Units are taken in the name of Andhra Bank Financial Services Limited. This evidence proves that Canbank Mutual Fund gave the interest amounts to Andhra Bank Financial Services Ltd. Accused No. 4 asked for and was given the interest amount on the first occasion. Thereafter Accused No. 4 got Notified and thus Andhra Bank Financial Services Ltd. returned the interest amount.
30. Prosecution has also examined Mr. S.R. Ramaraj (P.W. 10). He is the Asstt. General Manager Canbank Investment Management Services Limited. He deposed that from May, 1991 till September, 1993 he was working with Canbank Mutual Fund. He deposed that prior to May, 1992 one Mr. Anil Narichania was heading the money market operation of Canbank Mutual Fund. He deposed that Canbank Investment Management Services Limited had been formed to manage activities of Canbank Mutual Fund. This witness deposed he is conversant with the procedure and requirement of acquisition of CANCIGO Units. He deposed that there was a lock-in period of one year and that these Units were not transferable.
31. This witness deposed that Ex-D was an Application Form received from Andhra Bank for 1,10,000 CANCIGO Units. He identifies the rubber stamp of Canbank Mutual Fund on the top right hand side of the Application Form. He identifies the numbers and the handwritings in that rubber seal. He also identifies the Application Form Ex-85. He deposed that this is an Application by Andhra Bank Financial Services Limited for 2,20,000 CANCIGO Units. He identifies the rubber stamp of Canbank Mutual Fund on the top right hand side of the Application Form. He identifies the numbers and handwritings in the rubber stamp.
32. He also identifies the CANCIGO Credit Sheets which had been issued by Canbank Mutual Fund. He identifies the signature of Mr. T. Ravi and Mr. Anil Narichania on the credit sheets of CANCIGO Units F. V. Rs. 11 crores. He deposes that the credit sheet Ex-66 (Colly.) are the authenticated document pertaining to the CANCIGO Units. He also identifies a cheque which is marked as Ex-86. He deposes that by this cheque interest is paid to Andhra Bank on CANCIGO Units F.V. Rs. 11 crores.
33. In cross-examination this witness admits that Canbank Mutual Fund has promoted several Schemes of Mutual Fund Units. He admits that CANFINA was instrumental in mobilizing large amount of funds for various Schemes promoted by Canbank Mutual Fund. He admits that CANFINA would be a market maker for the Mutual Fund Units of Canbank Mutual Fund. In my view this cross-examination only shows that CANFINA was promoting the Mutual Fund Schemes of Canbank Mutual Fund. This it would do by getting individuals, Companies, corporations etc. to subscribe to those Schemes. There is big difference in mobilizing subscriptions for a Scheme where under CANFINA got somebody else to directly apply for the concerned Bond/Unit and purchasing Units already subscribed to by somebody else knowing that those Units are non-transferable. The first type of activity would be a genuine activity whereas the second type of activity would be an illegal activity. The second type of activity is prohibited by law and would undoubtedly give rise to a civil action.
34. It was next suggested to this witness that the Trustees of Canbank Mutual Fund had discretion to alter the terms. It was suggested that because the relationship of CANFINA and Canbank Mutual Fund were very cordial the Trustees would have acceded to the request of the CANFINA to pay the amounts of CANCIGO Units to CANFINA if such a request had been made. Such a suggestion was objected to by Mr. Gupte and rightly. It was a hypothetical question. To be noted that there was no evidence on record that prior to the Units being purchased on behalf of CANFINA, the trustees had agreed that the CANCIGO Units would be transferred into the name of CANFINA. So long as there is no such prior consent, the Units could never have been purchased in the hope that the Trustees would give the benefit to Companies. Even otherwise there is no evidence to show that such a thing was anticipated. There is no evidence that the Trustees have permitted transfer in any case. On the contrary the evidence is, as pointed out hereafter, that the Trustees have refused to transfer the CANCIGO Units in favour of CANFINA. It is because of the fact the Trustees were not recognizing CANFINA's claim to the CANCIGO Units F.V. Rs. 33 crores that CANFINA had to file petition Ex-U.
35. In cross examination, the Letter of Offer of CANCIGO Units has been brought on record. This is Ex.-M. The Letter of Offer also indicates that the transfer of CANCIGO Units from one person to another is not permitted. The Letter of Offer also makes it clear that the CANCIGO Units would be non-transferable. In cross-examination a letter dated 28th August, 1992 from CANFINA to Canbank Mutual Fund is also brought on record as Ex-N. This letter is brought on record merely to show that such a letter was sent and received. Thus the contents of this letter are not proved. However it must be mentioned that if the contents had been proved, this letter would have worked against the accused as the letter implicitly shows that there could be no purchase of these Units and CANFINA is merely asking Canbank Mutual Fund to note a lien on the Certificate as they had parted with money.
36. Thus by the above evidence prosecution has proved beyond a reasonable doubt that Accused No. 4 has got Andhra Bank and Andhra Bank Financial Services Limited to make Applications for CANCIGO Units F.V. Rs. 11 crores and Rs. 22 crores respectively in their names. Even though Andhra Bank and Andhra Bank Financial Services Limited made the Applications in their names, in their books and records there are no entries regarding these Applications. Evidence on record (Ex.-E) shows that Andhra Bank never received the Certificate for the CANCIGO Units F.V. Rs. 11 crores. There is no evidence whether or not Andhra Bank Financial Services Limited received the Certificate for CANCIGO Units F.V. Rs. 22 crores. However it is Accused No. 4 who sold and delivered the same to CANFINA. The evidence proves that Accused No. 4 was aware that the. Certificates (Ex. 66 (Colly.)), stood in the names of Andhra Bank (to the extent of Rs. 11 crores) and Andhra Bank Financial Services Limited (to the extent of Rs. 22 crores). These bodies had received interest from Canbank Mutual Fund. Interest could have gone to them only if the Certificates stood in their names. If Accused No. 4 had thought that the Certificates stood in his name the moment the interest went to Andhra Bank and Andhra Bank Financial Services Limited Accused No. 4 would have known that there was something wrong. He would have known that the Certificates did not stand in his name. He would have at that stage complained. No such complaint has been brought on record. On the contrary as seen above, by his letter Accused No. 4 asked Andhra Bank Financial Services Limited to pay him the interest amount. He also received the interest amount from Andhra Bank. Thus it is proved that, for reasons best known to him, Accused No. 4 had got Andhra Bank to subscribe to CANCIGO Units F.V. Rs. 11 crores and Andhra Bank Financial Services Limited to subscribe to CANCIGO Units F.V. Rs. 22 crores even though he paid for the CANCIGO Units F.V. Rs. 33 crores.
37. Further Accused No. 4 in his statement under section 313 of the Indian Penal Code has in answers to Questions Nos. 66, 67, 78, 79, 81, 82, 88, 92 and 94 admitted that he had signed the letters Ex-21 and Ex-35. He admits that he had forwarded the Application Ex-D to Andhra Bank. He admits that the cheques Ex- 27 and Ex.-28 were issued by him and signed by him. He admits that the amounts of those cheques were debited into his account. He admits that interest on the amounts was initially received by Andhra Bank and Andhra Bank Financial Services Limited and that they were thereafter transferred to his Account No. 4819. In reply to question Nos. 97 and 99 Accused No. 4 claims that these investments in CANCIGO Units F.V. Rs. 33 crores were his investments.
38. The Credit Sheets for CANCIGO Units are marked as Ex-66 (Colly.), These show that the Credit Sheet for 11 crore Units stands in the name of Andhra Bank and the Credit Sheet for 22 crore Units stands in the name of Andhra Bank Financial Services Limited. As seen above P.W. 10 deposed that these Credit Sheets (Ex.-66 (Colly).) are the authenticated documents pertaining to CANCIGO Units. Thus it is proved that on allotment CANCIGO Units F.V. Rs. 11 crores stood in the name of Andhra Bank and CANCIGO Units F.V. Rs. 22 crores stood in the name of Andhra Bank Financial Services Limited.
39. The next point for determination is whether the CANCIGO Units are non-transferable and if so whether such a condition is void. The Credit Sheets for CANCIGO Units are Ex-66 (Colly.). As stated above the Letter of Offer is Ex-M. As stated above the Letter of Offer makes it clear that the transfer of CANCIGO Units holding from one to another is not permitted. The Certificates Ex-66 (Colly.) contain Clause 4 which reads as follows:
"4. CANCIGO holders cannot create any interest in CANCIGOS or transfer them to a third person."
Clause 7 reads as follows:
"No CANCIGOS can be encashed unless it has completed one full year after the allotment".
Thus on the face of them the Certificates and the Letter of Offer both show that these are not transferable. That these are not transferable is also clear from the evidence of P.W. 1. On page 24 of the Notes of Evidence P.W. 1 asserts that these are not transferable. On page 226 of the Notes of Evidence P.W. 6 also deposes that these are not transferable. P.W. 7 also deposes about the CANCIGO Units being not transferable on page 247 of the Notes of Evidence. On pages 292, 301, 312 and 337 of the Notes of Evidence P.W. 11 deposes/reiterates that the Units are not transferable. Thus numerous wit-nesses, not just from CANFINA, but also from RBI and Canbank Mutual Fund, have categorically asserted that these Units are not transferable.
All attempts to get some of these witnesses to state that in spite of such a condition these Units could have been transferred were entirely fruitless. Even in cross-examination all these witnesses continued to maintain that these were not transferable. As has been pointed out hereafter Canbank Mutual Fund has in fact refused to transfer these CANCIGO Units in favour of CANFINA on the ground that they were not transferable. Also as seen above Andhra Bank Financial Services Ltd. had even refused to accept the CANCIGO Units F.V. Rs. 22 crores, as security. The clear terms on the face of the Letter of Offer and the Credit Sheets read with oral evidence of numerous witnesses proves beyond a reasonable doubt that the CANCIGO Units are non-transferable.
40. As the Units are non-transferable it is clear that they could not have been purchased. Such a purchase is therefore contrary to the provisions of section 6(d) of the Transfer of Property Act. Section 6(d) of the Transfer of Property Act, provides that an interest in property restricted in its enjoyment to the owner personally cannot be transferred by him. In this case the lock-in period is one year and they are non-transferable. Thus the enjoyment of these CANCIGO Units, is restricted to the owner personally. This therefore is a case which falls squarely under section 6(d) of the Transfer of Property Act. The person who has subscribed to these CANCIGO Units must hold the same for minimum of 1 year and there can be no transfer by him.
41. At this stage it must be mentioned that Accused No. 4 has brought on record a copy of the petition (Ex-U(Colly). This is the petition which was filed by CANFINA against the Custodian. Accused No. 4. Andhra Bank, Andhra Bank Financial Services Limited, Reserve Bank of India and Canbank Mutual Fund. By this petition CANFINA sought a declaration that these CANCIGO Units F.V. Rs. 33 crores had become their property and were not attached assets of Accused No. 4. These reliefs were asked for because Canbank Mutual Fund had refused to transfer these CANCIGO Units F.V. Rs. 33 crores into the name of CANFINA. This petition came to be dismissed on 22nd September, 1993 on the specific ground that CANCIGO Units were not transferable. It was held that CANFINA got no right, title or interest as none could be created in their favour. Thus, if nothing else, it is very clear that the transactions of purchase of these CANCIGO Units on behalf of CANFINA from Accused No. 4 was not only likely to give a ground for a civil action but has in fact given rise to a civil action.
42. Mr. Thakkar, Mr. Ovalekar and Mr. Kulkarni admitted that the CANCIGO Units Ex-66 (Colly.) provided, under Clause 4, that the CANCIGO Units were not transferable. Mr. Thakkar and Mr. Kulkarni however, submit that these are mere "Credit Sheets". They submit that the effect of such a condition was merely that Canbank Mutual Fund was a debtor who was bound to repay on maturity, Mr. Thakkar and Mr. Kulkarni submit that Clause 4 merely provided that Canbank Mutual Fund would not recognize any other creditor except the one named on the Certificates. Mr. Thakkar and Mr. Kulkarni submit that even though Canbank Mutual Fund may not recognize the Transferee, that did not make the transfer illegal. They submit that a registered holder would still have a right to transfer. They submit that the registered holder could give a letter of authority to somebody else to go and collect the money on maturity. They submit that for this reason a transfer between two willing parties was not illegal. They submit that between two willing parties a transfer could take place. They submit that these CANCIGO Units could be traded or transferred.
43. In my view, this is a submission which merely needs to be stated to be rejected. The Letter of Offer Ex-M as well as the CANCIGO Certificates Ex-66(Colly.) make it very clear that they are not transferable. Such a submission is also against categoric evidence in this case. As pointed out above, a number of witnesses, not just from CANFINA but also from Canbank Mutual Fund and Reserve Bank of India have given categoric evidence that the CANCIGO Units are not transferable. Once the enjoyment is restricted in its use to the owner a transfer would be prohibited under section 6(d) of the Transfer of Property Act. The transfer would therefore be illegal. It would be a transfer which is prohibited by law. Even otherwise it would be illegal because it is something which is bound to give rise to a civil action. There is no evidence, oral or documentary, to show that in spite of such a categoric condition CANCIGO's could be traded.
44. It was next submitted by Mr. Thakkar that there were large dues from Accused No. 4. It was submitted that a sum of Rs. 25,01,67,129/- was due and payable by Accused No. 4. It was submitted that this was a good way of ensuring receipt of monies on maturity. It was submitted that not only the money but the interest would also have been received on maturity. I see no substance in this submission also. As stated above, as the CANCIGO Units were not transferable there was no question of CANFINA receiving any money much less money with interest. Even otherwise the evidence of P.W. 1 indicates that the purchase had been not on behalf of CANFINA but on behalf of a Portfolio Management Scheme customer. This is clear from Ex-B which shows these Units were allocated to ITI, Rahul & Co. and ONGC. There was thus no question of receiving money or interest on maturity. On the contrary it is clear that even though these were purchased on behalf of constituents and allotted to them, because they were not transferable, CANFINA could not deliver them to the constituent. This is clear because CANFINA ultimately made a claim to the CANCIGO Units F.V. Rs. 33 crores on its own account and was thereafter forced to hand over the Credit Sheets to the Custodian. Even otherwise as stated above, the CANCIGO Units being not transferable neither the money nor the interest could have been received by CANFINA. Further CANFINA had not obtained any Letter of Authority nor were the Credit Sheets signed on the reverse by either Andhra Bank or Andhra Bank Financial Services Ltd. The evidence shows that in fact Canbank Mutual Fund refused to transfer or honour the claim of CANFINA on these Units. The evidence shows that even in this Court CANFINA could not enforce its claim to these CANCIGO Units. The end result is that today CANFINA has lost Rs. 33 crores and has to hand over the CANCIGO Units to the Custodian.
45. Mr. Thakkar and Mr. Kulkarni next submit that under section 6 of the Transfer of Property Act the general rule is that the property of any kind can be transferred. They submit that sub-clause (d) is an exception to this rule. They submit that such an exception would only apply to a case where a person had an interest in the property restricted in its own enjoyment to the owner personally. They submit that in case of a full owner it could not be said that the full owner only had an interest in the property which was restricted in its enjoyment. They submit that a holder of the CANCIGO Units would be a full owner. They submit that this sub-clause (d) would not apply. They submit that the holder would have a right to transfer the ownership.
46. Mr. Thakkar relied upon the authority in the case of Ram Nath v. Nanak Chand & others, A.I.R. 1932 All. 686 : 143 I.C. 61. In this case, there was an Award making a partition. Under this Award certain property was to belong absolutely to one "M". Under the Award he was to maintain himself with the income and rent of such property but was to have no power to transfer any properties by way of sale, mortgage etc. The question was whether section 6(d) of the Transfer of Property Act applied. The Allahabad High Court held that section 6(d) did not apply. It must however be noted that the Court considered the question whether "M" had a life interest under this award or whether "M" had absolute ownership of the property. On that basis it was held that the contravention of the conditions against alienation would be voidable at the option of the descendant of M. The Court held that the Transferee had been put in possession by "M" and could at least claim a possessory right. It is under these circumstances that the Court held that section 6(d) of the Transfer of Property Act did not apply. This case is of no assistance to a case like the present where the interest in the property is restricted in its enjoyment to its owner personally.
47. Mr. Ovalekar expanded on above argument. He submits that to find out whether purchasing non-transferable Units is an "illegal act" within the meaning of the said expression found in section 120-A of the Indian Penal Code one had to go to the meaning of the word "illegal" as defined in the Indian Penal Code. Mr. Ovalekar submits that under section 43 of the Indian Penal Code the word "illegal" was applicable to everything which is an offence or which is prohibited by law, or which furnishes ground for a civil action. He points out that a person is said to be "legally bound to do" whatever it is illegal in him to omit". He submits that thus for holding that certain act is illegal it must fall in any of the following three cases:
(a) If the act is an offence i.e. it is punishable under the Indian Penal Code:
(b) If that act is prohibited by law viz. a Benami Transaction is prohibited by the Benanmi Transactions (Prohibition) Act, 1988:
(c) If that act furnishes ground for a civil action.
48. Mr. Ovalekar submits that thus under these three eventualities an act becomes illegal. He submits that in other words the expression "illegal" applies to three types of acts only. He submits that in such an event while considering whether any particular act is illegal the above three eventualities are to be kept in mind. He submits that the three expressions take colour from each other. He submits that an act which is an offence and an act prohibited by law and an act which furnishes ground for a civil action must resemble each other or must have identical characteristics.
49. Mr. Ovalekar relies upon the case of Thakorlal D. Wadgama v. State of Gujarat, , wherein the words "Take" and "Entice" appearing in section 366 of the Indian Penal Code have been discussed and it is held that they must take colour from each other. He submits that therefore the three acts falling in the above mentioned three parts of section 43 of the Indian Penal Code must have common characteristics because they take colour from each other.
50. Mr. Ovalekar submits that the Units are made non-transferable not by operation of any law, but the Units are made non-transferable under the contract between Canbank Mutual Fund which issued the Units and the purchaser thereof. He submits that the non-transferability is the term of the contract which prohibits transfer and it is not the consequence of any law prohibiting transfer. He illustrates by stating that under the Benami Transactions (Prohibition) Act, 1988 a Benami Transaction is prohibited. He points out that section 3(3) of the said Act states whoever enters into any Benami Transaction shall be punished with imprisonment or fine or with both. He submits that therefore an agreement to transfer Benami will be an agreement to do an illegal act within the meaning of section 120-A of the Indian Penal Code and hence it constitutes an offence of conspiracy. He submits that an agreement to purchase units which are made non-transferable under a contract by the party issuing Units neither an act which is art offence under the Indian Penal Code nor is it prohibited by law and hence we have only to see whether it falls in the third category of acts furnishing ground for a civil action.
51. He submits that section 6(d) is in the following terms:
"(d) An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him."
He submits that this is a clause known as disabling clause. He submits that this clause disables a person from transferring interest in property which is given to him by the owner, for his personal enjoyment. He submits that this is not at all a prohibiting law. He submits that a law which is prohibiting begins like this: --
"No person shall do this or do that"
He submits that it would further provide a punitive clause saying whoever violates this prohibition shall be punished with etc. etc. He submits that this section 6(d) of the Transfer of Property Act does not prohibit transfer of interest in property stated therein.
52. Mr. Ovalekar submits that when two persons agree to commit murder of some person they jointly commit an offence of criminal conspiracy against a third person who is intended to be murdered. He submits that similarly when two office-bearers of a College agree to take or demand capitation fee which is prohibited by law they commit offence of conspiracy against the intending student. He submits that if two persons agreed to prosecute someone falsely and maliciously, they will commit an offence of conspiracy against the person agreed to be prosecuted as malicious prosecution is a Tort which furnishes grounds for a civil action covered by Clause 3. Mr. Ovalekar submits that if two persons, one of them holding CANCIGO Units, agree to sell and purchase CANCIGO Units the seller and the purchaser both knowing that the Units are non-transferable then this agreement does not furnish ground for any civil action. The cause of action is the agreement to purchase. In the present case this agreement has been complied with and no breach is committed. He submits that such an agreement does not furnish ground for any civil action. Mr. Ovalekar submits that thus the agreement between Accused No. 4 and Accused Nos. 1 and 3 representing CANFINA does not furnish any ground for a civil action and hence it is not an illegal act within the meaning of section 120-B of the Indian Penal Code.
53. I see no substance in the above submissions of Mr. Thakkar, Mr. Kulkarni and Mr. Ovalekar. Section 6(d) of the Transfer of Property Act, is dealing with the right of an owner. The owner would not be Canbank Mutual Fund but the subscriber. Section 6(d) recognises the fact that even an owner may not have, in all cases, a full right. It is not unknown to law that an owner has a right of enjoyment restricted to him alone. Section 6(d) merely recognises that position. It therefore provides that if the owners right of enjoyment is restricted to himself then he cannot transfer that property. CANCIGO Units are Units issued under a scheme. There is no compulsion to subscribe to them. The Letter of Offer made it clear that there was a lock in period of one year and these were non-transferable. Application for subscription could only be made provided such conditions were acceptable. Thus the owner was becoming an owner with full knowledge and with consent that the enjoyment would be restricted only to the owner. The owner takes on the condition that they are to his investment only. If that be so then this is a case which falls squarely under section 6(d) of the Transfer of Property Act. Now there can be no transfer during the lock in period of one year. After that also there can be no transfer but then the owner could encash and deal with the money in any manner he likes. The encashment could however only be by the owner.
54. Further it is the Agreement to purchase non-transferable Units which does and did give rise to a civil action. This because the Agreement was to transfer title when in fact no title could be transferred. To be noted that section 6(d) of the Transfer of Property Act, prohibits transfer in cases where the owners right of enjoyment is restricted to the owner personally. The restriction of personal enjoyment will be under some contract or agreement. The non-transferability is thus under a contract or agreement. Section 6(d) is giving effect to the term in the contract or agreement. It is a prohibition in law based on a term in the contract or agreement.
55. The submission of Mr. Ovalekar that under section 43 Indian Penal Code an act can be "illegal" if any of the three ingredients are fulfilled is correct. Thus an act would be "illegal"
(a) If the act is an offence i.e. it is punishable under the Indian Penal Code;
(b) If that act is prohibited by law;
(c) If that act furnishes ground for a civil action.
It is possible that the three ingredients may be interlinked. In examples given by Mr. Ovalekar they are interlinked. However I am unable to accept submission that the three ingredients must draw colour from each other or that, they must be interlinked. Normally when words are meant to draw colour form each other they will be used one after another without use of the word "or" in between them. The word "or" as used in section 43 clearly indicates that each ingredient is a separate and independent ingredient. Thus it is not necessary that what must furnish ground for a civil action must also be an offence or must be prohibited by law. In that case the Legislature need not have used the words "or" in between the three elements at all. It would have been simple for the Legislature to use the word "and" or to provide words to the effect that furnishing ground for a civil action in cases resulting from acts which are an offence or are prohibited by law. Mr. Ovalekar wants to add words which the Legislature has purposely omitted. Also it is not necessary that everything which is prohibited by law is an offence. If argument of Mr. Ovalekar is to be accepted then even the words "Prohibited by law" must take colour from the words "an offence". If the argument of Mr. Ovalekar is to be carried to its logical conclusion then the only eventuality in which an act would be "illegal" would be if it was an act which was prohibited by law as being an offence or furnishing ground for a civil action being an offence. In that event the only real eventuality would be that it must be an offence. If such an interpretation was to be given then it would drastically restrict the effect of section 43. The whole purpose in providing for three independent elements would be lost. Such a restrictive interpretation cannot be given. Even otherwise in this case the act which furnished ground for a civil action is also one which was prohibited by law. Thus even on the interpretation of Mr. Ovalekar in this case there is an "illegality".
56. It was next submitted by all that Article 18 of the Memorandum and Article of Association permits CANFINA to inter alia buy, sell and deal in securities "whether transferable/negotiable or not". It is submitted that therefore in the securities "whether transferable/negotiable or not". It is submitted that therefore in the Memorandum itself there is a specific power which permits CANFINA to deal in securities even though they are not transferable. It is submitted that as there is a specific power in the Memorandum the dealers could enter into a transaction to purchase non-transferable securities. It is submitted that even if such a transaction was prohibited by law it would not be a dishonest transaction inasmuch as it is a transaction which was within the permissible parameters as laid down in the Memorandum and Articles of Association of the Company. I am unable to read Article 18 in manner sought to be done by Counsel. Article 18 does not permit or authorise an illegal act/transaction. What Article 18 permits is a purchase which is legal. Thus by virtue of Article 18 CANCIGO sic CANFINA could have purchased the CANCIGO Units by making an Application to Canbank Mutual Fund. They could have so purchased CANCIGO Units even though CANCIGO Units are not transferable. But Article 18 does not permit/authorise an illegal purchase i.e. purchase of non-transferable securities from a person who has no right to transfer and where no transfer could take place in favour of CANFINA. Article 18 does not authorise a transaction where CANFINA can get no title to the security purchased. Also the dealers did not derive their authority from Article 18. Article 18 only permitted the Board to authorise certain types of transactions including, if the Board thought it fit, purchase of non-transferable securities by directly subscribing for such securities. The Dealers could only exercise such authority as the Board delegated to them. No authority is shown which permitted the dealers to purchase or deal in non-transferable securities.
57. It was submitted that Misc. Petition No. 13 of 1993 (Ex.-U) which had been filed by CANFINA indicated that even according to CANFINA Accused No. 4 had offered the CANCIGO Units F.V. of Rs. 33 crores making it clear that they were not transferable and were not standing in his name. It was submitted that there was no dishonesty in this transaction and therefore it was not illegal. I am unable to accept this submission. The petition would show that all that Respondent sic accused No. 4 had offered was a transfer of his beneficial right, if any. The petition clearly shows that there is no offer to transfer ownership in the CANCIGO Units. In this case as set out hereafter prosecution has established beyond a reasonable doubt that the transaction is to sell these CANCIGO Units. Therefore the petition can be of no assistance to the accused in this case. There is a big difference between an offer to transfer a beneficial interest and an agreement to purchase the property itself. If anything the petition is contrary to a case of transfer of absolute ownership. Even otherwise it must be remembered that after the Benami Transactions (Prohibition) Act, 1988 there could be no beneficial ownership in such cases. The moment Accused No. 4 chose, for reasons best known to him, to take the CANCIGO Units F.V. Rs. 11 crores in name of Andhra Bank and F.V. Rs. 22 crores in name of Andhra Bank Financial Services Limited, he was prevented by the Benami Transactions (Prohibition) Act, from making a claim to these CANCIGO Units. A transfer of an alleged beneficial right would be against the principles of the Benami Transaction (Prohibition) Act. It would therefore be illegal.
58. It was next submitted by Mr. Thakkar and Mr. Ovalekar that the condition laid down under Clause 4 of the CANCIGO Units Ex-66 (Colly.) is void under section 10 of the Transfer of Property Act. It is submitted that such a condition being void, there was no necessity for complying with a void condition. It was submitted that a transfer would be valid inspite of such a condition.
59. I am unable to accept this submission. Section 10 applies to a case where there is a transfer. It is in cases of transfers that a condition restraining further transfer in perpetuity is declared to be void. Section 10 cannot and does not apply to cases where a party makes an application for property knowing that there is restriction to transferability for a limited period and they accept such property with full knowledge. In this case there is no transfer to the owner. It is an initial allotment. Also the restriction is for a limited period of one year. As stated above after one year the owner is at liberty to encash the CANCIGO Units. Thus section 10 does not apply in this case at all. Further section 10 of the Transfer of Property Act, is based on the general principles laid down under section 6 of the Transfer of Property Act, i.e. the property of any kind can be transferred. Thus section 10 has to be read in conjunction with section 6. Thus what section 10 provides is that a condition restraining alienation, which does not fall within the exemptions given under section 6, would be void. Otherwise on a plain reading the two sections i.e. section 6 and section 10 would clash with each other and would be contrary to each other. It is an established rule of interpretation that the interpretation must always be one which harmonizes. Thus what section 10 provides is that a condition against alienation, other than those provided under subsection (a) to (i) of section 6, would be void. Such an interpretation would lead to no clash and would harmonize both the sections.
60. As already indicated hereinabove this is a case which squarely falls within section 6(d) of the Transfer of Property Act. As it falls within section 6(d) of the Transfer of Property Act, there is no question of the condition being void under section 10 of the Transfer of Property Act. There can always be a condition by which the interest in a property is restricted in its enjoyment to the owner. Such a condition would not be void under section 10.
61. It must be mentioned that initially Mr. Ovalekar and Mr. Thakkar had also argued that the "Charge" did not mention that the transaction was illegal as it contravened section 6(d) of the Transfer of Property Act and was against the principle of the Benami Transactions (Prohibition) Act. It is not now necessary to reproduce those submissions. By an Order dated 9th January, 1998 the charge was amended and altered to specifically so provide. An appeal filed by Accused No. 4 to the Supreme Court against this Order has been rejected on 23rd March, 1998. However, the Supreme Court has clarified that Accused No. 4 would be at liberty to challenge the Order dated 9th January, 1998 in the appeal against the final order. The Order dated 9th January, 1998 is a detailed order. It sets out in great detail the reasons why the Charge was amended. That order speaks for itself and need not be reproduced herein. It may only be mentioned that the Charge was amended in order to ensure that the Accused were not put to an disadvantage. The accused had claimed that they had not properly understood the Charge. The amendment was made to assist the Accused in understanding the Charge properly. After that the accused were given liberty and opportunity to recall and cross-examine any or all witnesses and/or to lead evidence if they so desired. Some witnesses have been cross-examined.
62. Thus it would have to be held that the CANCIGO Units were not transferable. A transfer of such Units is prohibited by section 6(d) of the Transfer of Property Act. It also furnishes a ground for civil action. It is, in this case also against the principles under the Benami Transaction (Prohibition) Act. In this case it has established that it did lead to a civil action.
63 The next point for determination is whether a sum of Rs.25,01,67,129/-was due and payable by Accused No. 4 to CANFINA. As set out above according to the prosecution the amounts were due and payable under the following transactions:
On 20th January, 1992.
1.
7-00 crore 13% [email protected] for a total consideration of Rs. 2,25,63,150.68
2. 10.9365 crore 13% NPC @ 97.5 for a total consideration of Rs. 11,11,88,249.48
3. 1.75 crore 13% HPF@ 97.5 for a total consideration of Rs. 1,81,40,787.67
4. 4.93 crore 135 IT! @ 97.5 for a total consideration of (one day interest less calculated in dealer pad) Rs. 4,84,18,678.60
5. 6.00 crore 13% NPC @ 97.5 for Rs. 6,09,78,904.11 Total:
Rs. 31,13,07,328.93 As stated above it is the case of the prosecution that against the aforesaid amount of Rs.31,13,07,328.93 CANFINA received Rs. 25,77,28,453.83 only, i.e. Rs. 5,35,78,875/- short.
64. As stated above it is the case of the prosecution that on 6th February, 1992, the following transactions of sale of securities had been entered into:
6.
14% Godrej Soaps f.v.5 crores @ 95,67 total consideration of Rs. 4,85,25,410.96
7. 14% Insilco f.v. 10.30 crores@ 99.3214 total consideration of Rs. 10,73,57,876.71
8. 13% CIL f.v. 40 crores @ 99.4665 total consideration of Rs. 42,27,97,506.85
9. 13% CIL f.v. 15 crores @ 99.5733 total consideration of Rs. 15,85,49,041.10
10. 14% Haryana Petro f.v. 5 crores @ 99-3364 total consideration of Rs. 5,21,22,994.52
11. 15% Indian Rayon f.v. 3.53 crores @ 105.6598 total consideration of Rs. 3,91,54,012.58 Total:
Rs. 82,85,06,842.72 A stated above it is the case of the prosecution CANFINA received payment of Rs. 59.90,51,739.72 from one C. Mackertich, Broker, thus receiving Rs. 22,94,55,103/ - short. CANFINA also received Rs. 3,28,66,849/- from one R.K. Tandon, Broker at Kanpur, through State Bank of Travancore. As state above it is the case of the prosecution that the balance was receivable from Accused No. 4.
65. Thus as on 6-2-92 the total receivable amount from Accused No. 4 worked out as under:-
1.
Receivable against the transactions date 20- 1-92 with Citibank Rs. 5,35,78,875.00
2. Receivable against the transactions dt. 6-2-92 Rs. 22,94,55,103.00
3. Total receivable Rs. 28,30,33,978.00
4. Less: On account of cheque received from R.K. Tandon.
Rs. 3,28,66,849.00 Net receivable Rs. 25,01,67,129.00,
66. That these amounts were due is established by the evidence of P.W. 4, P.W. 6, P.W. 7, P.W. 8, P.W. 9, P.W. 13 and P.W. 14 and the documentary record. P.W. 4 one Mr. Omprakash Sanjiv Kukian is at present the Sr. Management Associate of M/s. C. Mackertich. At the relevant time he was working as a Secretary in CANFINA, Bombay. He deposed that at the relevant time he was working with CANFINA in the Money Market Department . He deposed that initially he was reporting to one Mr. Srinivasan and thereafter to a Canara Bank officer one Mr.D.G. Vernekar. He deposed that all transactions were being entered into at the Registered Officer in Bangalore and that thereafter telephonic information would be conveyed to Bombay. He deposed that the officer in Bombay would then instruct him and he would accordingly make entries in the Transaction Register. He deposed that he was maintaining the General Ledger, the BR Purchase Register, the BR Sale Register and the Physical Security Register. He deposed that he was preparing various vouchers and Bankers Receipts. He deposed that at the time he joined CANFINA Accused Nos. 1 and 3 were the dealers. He deposed that he knew them because they used to come to the office of CANFINA at Bombay. He deposed that the documents and entries were made in Bombay in respect of deals executed in Bombay. He deposed about the manner in which the documents were prepared in a Purchase and Sale transactions. He deposed that Mr. Vernekar maintained a Rough Transaction Sheet on which he used to note down the instructions received from Bangalore. He deposed that he was conversant with the handwriting and signature of Mr. Vernekar. He has identified the Rough Transaction Sheet maintained by Mr. Vernekar. He identified the Rough Transaction Sheet for transactions of 20th January, 1992 as being Ex-44 (Colly.). It must be mentioned that in Ex-44(Colly.) all the above mentioned five transactions of 20th January, 1992 have been noted. However, the rates, shown in Ex-44, in respect of these transactions are different. Apparently it is this difference which was being made good by Accused No.4. Also instead of a transaction of 1.75 crores 13% HPF Ex-44 shows a transaction of 1.45 crores 13% HPF. This difference is explained hereafter. The witness also produced the Sale Memos in respect of these five transactions. These Sale Memos are marked as Exs-45 to 49. All these Sale Memos show that the sale is to Citibank.
67. The witness also produced the Rough Transaction Sheet maintained by Mr. Vernekar for the transactions of 6th February, 1992. This Rough Transaction Sheet is marked as Ex-50 . This Rough Transaction Sheet contains, amongst others, the transactions of 6th February, 1992 listed above. The witness also produces the Sale Memos in respect of the transactions mentioned above. These are at Exs-52 to 57. The witness deposed that the Sale Memos indicate that sales have taken place as indicated therein.
68. The witness has also produced the Transaction Register of CANFINA during the period 17th December, 1991 to 30th May, 1992. He deposed that this Transaction Register was maintained on a day-to-day basis and that it showed both Sale as well as Purchase transactions. He deposed that all entries of 20th January, 1992 are in his handwriting. He deposed that the entries had been made on the basis of Sale and Purchase Memos. He deposed that all transactions covered by Exs-45 to 47 were reflected in the Transaction Register of 20th February, 1992. He deposed that the entries in the Transactions Register indicated that transactions were executed on that day. It must be mentioned that prosecution had sought to tender the entire Register. However, an objection was taken by all the accused or on their behalf. It was submitted that only the relevant page should be tendered. Therefore, the relevant page is marked as Ex-58. The Transaction Register contains entries in respect of all the transactions set out hereinabove.
69. The witness also deposed that the entries under the date 6th February, 1992 are in his handwriting. He deposed that all transactions covered by Exs. 45 to 47 are reflected in the Transaction Register. The relevant page of the Transaction Register is marked as Ex-59. Thus the evidence of this witness proves the existence of these transactions.
70. During the cross-examination of P.W. 4 it had been put to him that the total of certain transactions in Exs-52 to 57 came to a sum of Rs. 59,90,51,739.72. The witness agreed that in all these transactions the purchaser was Citibank and the broker C. Mackertich. The witness was shown a cheque dated 6th February, 1992 issued by American Express Bank in favour of Canara Bank for Rs.59,90,51,739.72. This cheque is marked as Ex-E. This cheque shows that in respect of the transactions of 6th February, 1999 a sum of Rs. 59,90,51,739.72 was received from American Express Bank. During the evidence of P.W. 6 it has come out that American Express Bank has made this payment for and on behalf of C. Mackertich.
71. The evidence of this witness, in respect of the existence of these transactions, is also supported by evidence of P.W. 6. P.W. 6 corroborates the evidence in respect of the Rough Transaction Sheet, the Transaction Register and the Sale Memos. The evidence of P.W. 6 Mr. Vernekar would have to be dealt with in greater detail at a later stage. Therefore it is not being set out here.
72. Prosecution has also relied upon the evidence of Mr. Vinayak Yashwant Sardesai (P.W. 7). He is the Asstt. Manager of the Citibank. At the relevant time he was a Sspecial Assistant in Citibank. At the relevant time he was working in the Back-up Office of the Security Department of Citibank. He deposed that Citibank had issued cheque Ex. 74. He deposed that the said cheque was signed by him for and on behalf of one Mr. Shiva Shankar, this cheque is for Rs. 25,51,48,768.90p. He deposed that in all transactions of CANFINA the cheques have been issued by Canara Bank or paid to Canara Bank. He deposed that his cheque is for payment of the security transactions. This witness has also deposed about cheque Ex-75. This is the cheque in the amount of Rs; 25,79,684.93. He deposed that this is the amount for payment of security transactions. The total figure of the two cheques Exs. 74 and 75 comes to Rs. 25,77,28,453.83. This is the amount which the prosecution has claimed has been received under the transaction of 20th January, 1992. It has not even been suggested to any witness that apart from these two cheques any other or further amounts were received. This proves that only Rs. 25,77,28,453.83 was received in respect of transactions of 20th January, 1992.
73. The prosecution has also examined P.W. 8 one Mr. Divyesh Kumar Mishra. He is at present the Relationship Manager of Bank of International, Indonesia. At the relevant time he was working with the State Bank of Travancore at Bombay. He deposed that one M/s. R.K. Tandon & Co. had made an Application for issuance of a Pay Order or a Bankers Cheque in favour of Canara Bank. The Pay Order/Bankers Cheque was to be in a sum of Rs. 3,28,66,849/-. He deposed that M/s. R.K. Tandon 6s Co. was the constituent of State Bank of Travancore and its request was therefore accepted. The said Application is at Ex-77. He deposed that such a request would be complied with only if the Applicant had sufficient balance. He deposed that in this case the Applicant had sufficient balance. He deposed that pursuant to this Application a debit voucher was prepared and signed by two officers of the State Bank of Travancore. That debit voucher is Ex-78. The signatures of the two officers have been identified by him. He deposed that the amount of Rs. 25/- in both Ex-77 and Ex-78 are towards service charges of the Bank.
He deposed that pursuant to this, a Pay Order was issued in a sum of Rs. 3,28,66,849/-. He has identified that Pay Order. He deposed that, that Pay Order was issued in the ordinary course of business. That Pay Order is Ex.79.
74. Prosecution has also examined P.W. 9 one Mr. Ravindrakumar. B. Tandon. He is a share broker, who is a resident of Kanpur and a member of the U.P. Stock Exchange. He deposed that for security transactions he used to come to Bombay. He deposed that in Bombay he had only dealt with 2-3 brokers viz. Accused No.4, M/s. V.V.Desai and M/s. Narayandas & Co. He deposed that he knows Accused No.4. He deposed that he is the Sole Proprietor of M/s. R.K. Tandon & Co. He deposed that as such Sole Proprietor he had made an Application dated 13-1-1992 for issuance of a Bankers Cheque in a sum of Rs. 3,28,66,849/-. He deposed that, that Application was Ex-81. He deposed that the Form Ex-77 had been filled in on behalf of his Sole Proprietary concern by one Mr. Abhay Kayal who was a staff member. He deposed that Ex-79 is a cheque which was issued pursuant to Ex-77 and Ex-81. He deposed that he had given that Pay Order to Accused No. 4 with a letter dated 13th January, 1992, He deposed that the copy of the letter has been signed by a staff member of Accused No. 4 who acknowledged receipt of Ex-79. The copy of letter is marked as Ex-82. This witness has also produced a Cost Memo dated 13th January, 1992 whereunder 4 crore 13% MTNL Bonds had been purchased from Accused No.4. He deposed that this is the transaction for which Bankers Cheque Ex-79 was issued. He deposed that even though he had made payment, Bonds were not delivered by Accused No.4. In cross-examination he however, admits that Accused No. 4 directly repaid the amount of 13% MTNL Bonds of the F.V. of Rs. 4 crore to one M/s, Sahara India Investment Corporation Limited. Thus the evidence of the last two witnesses establishes prosecution's case that CANFINA had received Rs. 3,28,67,849/- from R.K. Tandon, the broker at Kanpur. This evidence shows that even though the cheque was got issued by R.K. Tandon it is Accused No.4 who received that cheque from R.K. Tandon. Therefore it is Accused No. 4 who has then given cheque to CANFINA.
75. Prosecution has also led the evidence of P.W. 13 one Mr. Diren M. Naimpally. He was at the relevant time a Computer Operator in the Funds Department of CANFINA at Bangalore. He deposed that he was doing the work of entering data in the Computers. He deposed that he was also entering the details of Sale and Purchase transactions on the basis of manual. Vouchers and the Deal Pads. He deposed that the original Deal Pad was got xeroxed by some secretarial staff and the same was given back to the dealer. He deposed that a copy of the Deal Pad was given to him in order to enable him to enter the transactions in the Computer. He deposed that from that copy he made entries in Manual Ledgers i.e. a Stock of Security Register and a Physical Register. He deposed that thereafter entries were made in the Computer. He deposed that after the details were fed into the computer he used to get various outputs like Physical Ledger, Vouchers, Stock Ledger etc. He was then shown some computer sheets which are marked as Ex-103 (Colly.). He deposed that these computer sheets contain details of Sale and Purchase transactions. He deposed that what was shown to him was the print out of what had been fed into the Computer by him. He deposed that the transactions shown in the computer sheet had been entered into the computer by him. He deposed that the contents of the computer sheets were as per the Deal Pads. He deposed that they were correctly entered. It must be mentioned that the computer prints outs Ex-103 (Colly.) contains all the transactions which have been listed hereinabove. This also shows the existence of those transactions.
76. This witness was then shown Ex-19, Ex-91 and Ex-92. These are a Deal Pad entry and Deal Pads maintained by the Bangalore office of CANFINA. He explains certain notings on these Deal Pads and identifies the handwritings on these Deal Pads.
77. The witness then identifies various Vouchers which marked as Ex-107 to Ex-112. He deposed that these are the printed Vouchers generated by the Computer and the handwritten Vouchers which were prepared by him in the ordinary course of business. These Vouchers also bear out that the transactions, listed above, have taken place. The witness also produced the Ledger print out from the computer. He deposed that this is the original account of CANFINA. He deposed that these computer print out were the accounts of CANFINA for the period 1st January, 1992 to 31st March, 1992. He deposed that this Ledger was maintained head-wise. He deposed that these computer print outs were generated in the ordinary course of business. These computer print out are marked as Ex-114.
78. The prosecution has also examined P.W. 14 one Mr. S. Venkatachalam, who is the present Vice President of Citibank. He has produced the Deal Slips of Citibank which are marked as Exs-116 to 121. He deposed that these are the Deal Slips of P 8s M Division. He deposed that these Deal Slips indicate purchase by Citibank from CANFINA. He deposed that the deal were entered into by one Mr. Ashish Parthasarathi. He has identified the initial of Mr. Ashish Parthasarathi on all the Deal Slips. He deposed that the Deal Slips were the original/official record of Citibank in respect of transactions undertaken in the normal course of business. These are Deal Slips pertaining to the transactions of 20th January, 1992 as listed above. These Deal Slips also establish that these transactions had taken place. This witness has also produced certain delivery letters which are marked Ex-122, Ex-123 and Ex-124. These show delivery of securities, under the transactions listed above.
79. Thus the prosecution has proved beyond a reasonable doubt that in the transactions listed above for 20th January, 1992 and 6th February, 1992 a sum of Rs. 25,01,67,121/- was due and payable. In their statements under section 313, it is admitted by Accused Nos. 1, 2 and 4 that this amount was due from Accused No. 4 to CANFINA. Thus the prosecution has established the fact that on 6th February, 1992 a sum of Rs. 25,01,67,129/- was due and payable by Accused No. 4 to CANFINA.
80. The next point for determination is whether there is a transaction to purchase CANCIGO Units F.V. Rs. 33 crores from Accused No. 4. Connected to this is also the question whether after adjusting the sum of Rs. 25,01,67,129/- a sum of Rs. 7,98,32,871/- was paid to Accused No. 4. To prove this prosecution has led the evidences of P.W. 1, P.W. 4, P.W. 5, P.W. 6, P.W. 11, P.W. 13, P.W. 15 and P.W. 16. Through these witnesses numerous documents have been brought on record which clearly establishes that there was a transaction to purchase from Accused No. 4 CANCIGO Units F.V. Rs.
33 crores and that after adjusting Rs. 25,01,67,129/- a sum of Rs. 7,98,32,871/- was paid to Accused No. 4.
81. Through P.W. 1 Ex-19 has been brought on record. Ex-19 is the entry in the Dealers Pad maintained at the Bangalore office of CANFINA. It is for 6th February, 1992. It is in the handwriting of Accused No. 2. The evidence indicates the procedure which was followed. The deals for purchase and sales in securities were first struck by the dealers in Bangalore. Under instructions of the dealers entries were made in the Deal Pads. Then, if the execution was to take place outside Bangalore, intimation was given on phone to the concerned person in the office at Bombay or Delhi or Calcutta etc. Ex-19 is the Deal Pad entry pertaining to this transaction of purchase CANCIGO Units F.V. Rs. 33 crores. Ex-19 shows that on 6th February, 1992 a transaction to purchase 33 crores CANCIGO Units at the rate of Rs. 100 per Unit had been entered into. Ex-19 shows that the amount payable was Rs. 25,01,67,- 129/-. This has been deducted from the total consideration of Rs. 33 crores. It also shows that the balance was Rs. 7,98,32,871/- as payable. Thus this Deal Pad entry indicates that at the time the purchase contract was entered into it was known that the amount of Rs. 25,01,67,129/- was receivable and that it was to be adjusted against the purchase price. As seen above the amount of Rs. 25,01,67,129/- was receivable from Accused No. 4. Yet Ex-19 shows the seller, of the entire 33 crores CANCIGO Units to be Andhra Bank through Accused No. 4.
82. P.W. 4 deposed that after the transactions were entered into at Bangalore intimation would be given to Bombay if the execution was to be at Bombay. He deposed that Mr. Vernekar i.e. P.W. 6 would receive those instructions and note them down on Rough Transaction Sheets. The Rough Transaction Sheets have been established through his evidence as well as evidence of P.W, 6. The relevant Rough Transaction Sheet for this transaction is Exs-51, 51A and 72. This is the Rough Transaction Sheet for 11th February, 1992. Different portions have been marked as Exs. 51, 51A and 72. The relevant entry, in respect of this transaction has been separately marked as Ex-51 A. The relevant, entry reads as follows:-
"Due to HPD 7,98,32,871/ = IBA 32894 (Mohan) 6th Feb. 33 Cr. Cancigo @ 100/- received Rs. 25,01,67,129/- Adjust Debit".
83. On page 84 of the Notes of Evidence P.W. 4 was asked whether he can explain what the word "Mohan" meant. This witness deposes that the word "Mohan" was preceded by a Inter Branch Advice No. 32894, He deposes that this might mean that the Inter Branch Advice No. might have been conveyed by Accused No. 3 to Mr. Vernekar.
84. This witness has also produced and proved the Transaction Register maintained by CANFINA at its office in Bombay. The pages in this Transaction Register for 6th February, 1992 and 11th February, 1992 are marked as Ex-59 and Ex-60 respectively. In the Transaction Register on 6th February, 1992 an entry had been made which reads as follows:-
"Paid to Andhra/PHD on account of difference in 33 crores Cancigo purchased on 6-2-1992, amount adjusted towards debenture sales on 6-2-1992".
That entry has then been scored out. In the entries pertaining to the transaction of 11th February, 1992 there is an entry which reads as follows:-
"Paid to Andhra/PHD on account of difference in 33 crores Cancigo purchased on 6-2-1992 amount adjusted towards debenture sales on 6-2-1992".
Under the column "Total Rs." a sum of Rs. 7,98,32,871/- has been shown. Under the column "IBA Particulars" the No. 32894 and date 11-2-1992 have been put. The witness has been cross-examined on the entry having been first entered under the date 6th February, 1992, then being cancelled and thereafter having been entered under date 11th February, 1992. P.W. 4 admitted that these entries were in his handwriting. He has stated that he had been informed by Mr. Vernekar to make such an entry. He has stated that he initially made the entry under the date 6th February, 1992 because the transaction was entered into on 6th February, 1992. He deposed that he was thereafter informed that the execution was on 11th February, 1992. He deposed that he therefore cancelled the entry under the date 6th February, 1992 and made an entry under the date 11th February, 1992.
85. In my view, nothing really turns on the fact that the entry had initially been made on 6th February, 1992, had then been scored out and then entered under date 11th February, 1992. The fact is that Ex-19 shows that such a transaction had been entered into. The entry is only reflecting such a transaction. What is relevant is to see whether such a transaction was entered into or not. It makes no difference whether the entry is under date 6th February, 1992 or 11th February, 1992. In Bangalore the transaction has been entered into on 6th February, 1992 but execution may have taken place on 11th February, 1992. In fact all documents set out hereafter indicate that the execution was to be on 11th February, 1992. Therefore there would be nothing wrong in the witness cancelling the initial entry under the date 6th February, 1992 and putting it under the date 11th February, 1992.
86. P.W. 5 had explained as to how funds are transferred from Bangalore to the various branch offices of CANFINA. The funds are transferred by way of Inter Branch Advices. The witness deposed that an Inter Branch Advice would be issued when a request for transfer of funds to another account in another branch is made. He deposed that an Inter Branch Advice would be issued against a cheque or a letter of a party. The witness identifies Ex-65 as an Inter Branch Advice bearing No. 32894. At this stage it is to be remembered that in Ex-51A the number which had been noted was Inter Branch Advice No. 32894. This is the Inter Branch Advice whose number is noted in Ex-51-A. The witness deposed that this Inter Branch Advice had been issued by Canara Bank at Bangalore. He has identified the signature of one officer Mr. Venkataraman. He has identified the handwriting to be that of a clerk Mr. Hegde. He deposed that this Inter Branch Advice was issued at the instance of CANFINA at. Bangalore. He deposed that by this Inter Branch Advice the amount mentioned therein was transferred to Bombay. The amount was a sum of Rs. 7,98,32,871/-. To be remembered that this is the amount payable after adjustment of the sum of Rs. 25,01,67,129/-. The witness then identified Ex-68 as Cheque No. 535618 which had been issued by CANFINA Bangalore on its account with the Cunningham Road Branch of Canara Bank. He deposed that this cheque was issued by CANFINA in order to enable Canara Bank to issue the above Inter Branch Advice. He deposed that this cheque was received in the ordinary course of business. He deposed that the amount of the cheque i.e. the sum of Rs. 7,98,32,871/- has been produced the statement of account of CANFINA in the Cunningham Road Branch of Canara Bank for the month of January/February, 1992 duly certified under the Bankers Books Evidence Act. The witness deposed that in this account the sum of Rs. 7,98,32,871/- has been debited pursuant to cheque Ex-68. This account shows a debit entry under the date 11th February, 1992 in respect of Cheque No. 535618. The account shows that this debit is for the Inter Branch Advice No. 32894. Thus the evidence of this witness establishes that it is the CANFINA at Bangalore who had asked Canara Bank to issue an Inter Branch Advice for transferring the sum of Rs. 7,98,32,817/- to Bombay. For that purpose CANFINA at Bangalore had issued a cheque on their own account, in cross-examination this witness reiterates that the bank statement Ex-69 shows that the amount of the cheque Ex-68 has been debited in the account of CANFINA. The Application for issuance of the Inter Branch Advice, the cheque Ex-68 and the Inter Branch Advice Ex-65 are all dated 11 on February, 1992.
87. Prosecution had led the evidence of Mr. Vernekar (P.W. 6). He is the officer of Canara Bank, who had been authorized by a Board Resolution (Ex-71) to execute security transactions of CANFINA. He has also deposed about the manner in which deals were concluded at Bangalore and intimation given to the various centres on telephone. He deposed that he used to receive telephone instructions from Bangalore and record those instructions on Rough Transaction Sheets. He has proved the Rough Transaction Sheets including the Rough Transaction Sheet Ex-51-A has been noted. He deposed that on this Rough Transaction Sheet the entry Ex-51-A is in his handwriting. He deposed that this entry pertains to purchase of CANCIGO Units F.V Rs. 33 crores from Accused No. 4. He deposed that he made this entry on the basis of instructions received from Accused No. 3. He deposed that on telephone Accused No. 3 instructed him to pay Rs. 7,98,32,871/- to Accused No A. He deposed that Accused No. 3 sent the Inter Branch Advice No. 32894 by which the funds were transferred from Bangalore to Bombay in order to facilitate the payment. He deposed that the date 6th February, 1992, was written because CANFINA Bangalore had purchased CANCIGO Units F.V. Rs. 33 crores on 6th February, 1992. He deposed that he however received instructions only on 11th February, 1992. He deposed that Accused No. 3 had told him that a sum of Rs. 25,01,67,129/- was recoverable from Accused No. 4 against some transactions and that this amount was to be adjusted against the transaction of purchase of CANCIGO Units F.V. Rs. 33 crores. He deposed that in Ex-50, which is the Rough Transaction Sheet for 6th February, 1992, there is no entry regarding this transaction because he had not received any instructions in this behalf on 6th February, 1992.
88. This witness has also deposed that after the instructions were noted down on the Rough Transaction Sheets they would be recorded in the Transaction Registers. He deposed that the entry in Ex-60 regarding purchase of CANCIGO Units F.V. Rs. 33 crores is in the handwriting of P.W. 4. He deposed that P.W, 4 had made that entry under his instructions. He deposed that the entry in Ex-60 corresponds to the entry in Ex-51-A in respect of Cancigo Units F.V. Rs. 33 crores. This witness has also identified one page of the Security Register which is marked as Ex-64. He deposed that in this Security Register entries would be made as soon as the securities were received at Bombay. He deposed that the Register is maintained security-wise. Page 134 of the Register is marked as Ex-64. This shows under the column "description and security" the letters "HPD". Under the column "face value" the figures "11 crores, 22 crores total 33 crores". The distinctive numbers are not mentioned. The date of lodging has not been mentioned and all other columns are blank. This witness has also deposed that when securities are purchased payment is made by way of Bankers Cheque. He deposed that to make payment in Bombay the payment is arranged by transfer of fund by way of Inter Branch Advices. He deposed that Ex-65 was the Inter Branch Advice by which the sum of Rs. 7,98,32,871/- was transferred from Bangalore to Bombay for making payment in the transaction of purchase of CANC1GO Units F.V. Rs. 33 crores. He deposed that the Inter Branch Advice number mentioned on Ex-51-A corresponds to Ex-65. He deposed that this Inter Branch Advice was received in Bombay.
89. He has further deposed that on receipt of instructions on 11th February, 1992, a dummy Inter Branch Advice was prepared. He deposed that the dummy Inter Branch Advice was prepared because it would take one or two days for Ex-65 to reach Bombay. He deposed that on the basis of the dummy Inter Branch Advice they could issue the cheque. He deposed that on receipt of the instructions he had prepared the cheque Ex-63. This is the cheque in favour of Andhra Bank for a sum of Rs. 7,98,32,871/-. He deposed that this cheque was handed over to a representative of Accused No. 4 along with a covering letter dated 11th February, 1992. He deposed that, that letter was *written by him under instructions of Accused No. 3 from Bangalore. He identified Ex-61 as the letter which had been written by him and signed by him. He deposed that this is the letter with which cheque Ex-63 was handed over to the representative of Accused No. 4. This letter is addressed to the Manger, Andhra Bank. By the letter cheque (Ex-63) is forwarded with a request to credit the proceeds to the account of Accused No. 4.
90. In cross-examination he reiterates that he was only acting under instructions from Bangalore and that Accused No. 3 had telephoncially informed him to accept the CANCIGO Units from Accused No. 4. He reiterates that Accused No. 3 gave him the Inter Branch Advice number and the amount. He reiterates that Accused No. 3 explained why only a sum of Rs. 7,98,32,871 /- was being paid. He reiterates that Accused No. 3 had informed him that the sum of Rs. 25,01,67,129/- was being adjusted against the earlier transactions. He deposes that he had informed Accused No. 3 that there were discrepancy in the CANCIGO Units. He deposes that Accused No. 3 instructed him to accept delivery. He deposes that he therefore accepted delivery and issued the cheque as well as the covering letter to Andhra Bank. He reiterates that this conversation took place on 11th February, 1992 between 2-3 p.m. on that day.
91. In further cross-examination he again reiterates that the cheque Ex-63 was delivered along with the letters Exs-61 and 62 to a representative of Accused No. 4. He denies the suggestion that in Ex-51-A initially he had written down the name of Accused No. 1 and subsequently scored that out and then written the name of Accused No. 3. He denies the suggestion that he had written the name of Accused No. 3 in order to blame Accused No. 3.
He denies the suggestion that Ex-61 and cheque Ex-62 were not issued under instruction of Accused No. 3.
92. Prosecution had also examined P.W. 11. He is an officer of Canara Bank. Initially he was on deputation to CANFINA. He was thereafter permanently absorbed in CANFINA. He was at the relevant time an Executive Vice president of CANFINA. This witness has produced various Board Resolutions by which the dealers were authorized to deal in securities. He has identified various handwritings on the Deal Pads which have been exhibited in this Court. He deposed that on the basis of cheque Ex-68 an Inter Branch Advice has been issued. He deposed that in the Bank Statement of Account Ex-69 the cheque Ex-68 has been reflected. He deposed that Ex-65 is the Inter Branch Advice which was issued pursuant to cheque Ex-68. This witness has also produced the Attendance Register of CANFINA. Out of this entries for 20th January, 1992, 6th February, 1992 and 11th February, 1992, in respect of Accused Nos. 1, 2 and 3, have been marked as Ex-94 (Colly.). Ex-94 shows that on 20th January, 1992 Accused No. 3 was absent. However on other two days Accused Nos. 1, 2 and 3 were present in office. This witness has also produced Ex. 96. This is a letter addressed by Sr. Vice President of CANFINA to the Inspector of Police, CBI, informing him that Accused Nos. 1 and 3 have been dismissed from service.
93. The prosecution has also led the evidence of P.W. 13. He was Computer Operator in CANFINA's office at Bangalore. Through him prosecution has produced the computer print outs of the relevant periods. As stated above this witness deposed that the computer print outs were on the basis of entries made by him. He deposed that the entries were made on the basis of copies of Deal Pads which were sent to him. The computer print outs show, under the date 6th February, 1992, a purchase of CANCIGO Units F.V. Rs. 33 crores from Andhra Bank, the broker being Accused No. 4. He deposed that Ex-19 was in the handwriting of Accused No. 2. He has identified Ex-106 as being a copy of Deal Pad which had been sent to him to enable him to make the entry. It must be mentioned that this includes a copy of Ex-19. He deposed that the number of 5007/1 on this copy of the Deal Pad is his handwriting. He deposed that this number was given at the time the entries were being posted in the Computer. He deposed about Ex-109 which is a computer print out is on basis of the entries made by him. He deposed that this was done in the normal course of his duties. Ex-109 shows the transaction of CANCIGO Units F.V. Rs. 33 crores from Andhra Bank, the broker being Accused No. 4. He has also produced Ex-112 which is the Manual Voucher. This Voucher shows that the amount payable was in a sum of Rs. 7,98,32,871/-. It gives a reference to a number "5007" which is the number noted on the carbon copy of the Deal Pad. This Voucher also gives a reference to the Inter Branch Advice No. 32894 and Cheque No. 565318.
94. The prosecution has also examined P.W. 15. He was the Secretary in the Funds Department at the relevant time. He has produced a sheet from the Physical Ledger maintained by the Funds Department of CANFINA in Bangalore. This sheet contains entries regarding CANCIGO Units. The entry of 6-2-1992 shows the purchase of CANCIGO Units F.V. Rs. 33 crores at the rate of Rs. 100/- per Unit. Against particulars it has been written "Hiten (Andhra)". This witness deposed that this entry is in the handwriting of Accused No. 2. He deposed that all entries in this Exhibit relate to transactions regarding CANCIGO Units. He deposed that the transactions were entered into in normal course of business. In cross-examination it was sought to be suggested that the entries were made after receiving instructions from Bombay. He denied the suggestion and categorically stated that he never received instructions from Bombay.
95. The Prosecution has also examined P.W. 16 who was in July, 1992, appointed as the Managing Director of CANFINA. He deposed about the Sanction Order and about the petition Ex-U. He deposed that he came to know that in the records of CANFINA there were CANCIGO Units F.V. Rs. 33 crores. He deposed that as per the record this was supposed to have been purchased from Andhra Bank. He deposed that Reserve Bank of India had informed CANFINA not to deal with the Certificates as these have been acquired by Accused No. 4 even though they were issued in the names of Andhra Bank and Andhra Bank Financial Services Limited. He deposed that the Custodian had made a claim to these Certificates. He deposed that as CANFINA had paid for the Certificates it became necessary to file the petition Ex-U.
96. All the above evidence particularly the records of the CANFINA establish beyond a reasonable doubt that there has been a transaction of purchase of the CANCIGO Units F.V. Rs. 33 crores. Even though the transaction was with Accused No. 4 in the records of CANFINA at Bangalore the transaction is shown as being with Andhra Bank through Accused No. 4 as a broker. What was received under this transaction were Credit Sheets Ex-66 (Colly.). CANFINA, Bangalore has got funds to the extent of Rs. 7,98,32,871/- transferred to Bombay after making an adjustment of Rs. 25,01,67,129/-. The sum of Rs. 7,98,32.871/- was transferred by way of an Inter Branch Advice, Thereafter a cheque has been issued in favour of Andhra Bank. However a covering letter was issued advising Andhra Bank that the amount was to be credited into the account of Accused No. 4. As seen earlier the amount is credited into account of Accused No. 4. Thus by this purchase the debt of Rs. 25,01,67,129/- is wiped out and a further sum of Rs. 7,98,32,871/- is paid to Accused No. 4.
97. Accused No. 1 have in their statements under section 313 admitted that the sum of Rs. 7,98,32,871/- was paid to Accused No. 4 after adjusting the amount recoverable from him i.e. Rs. 25,01,67,129/-. They have admitted that the amount of Rs. 7,98,32,871/- was released from Bangalore for purposes of making such a payment to Accused No. 4. However Accused No. 2 has not made any such admission. In his statement Accused No. 2 claimed that he was not concerned with the same.
98. The next point for determination is whether CANFINA has lost the sum of Rs. 33 crores as they could not get the CANCIGO Units transferred into their name. The evidence set out above establishes (a) that Accused No. 4 paid for these CANCIGO Units but got Andhra Bank to subscribe to CANCIGO Units F.V. Rs. 11 crores and Andhra Bank Financial Services Limited to subscribe to CANCIGO Units F.V. Rs. 22 crores. Thus CANCIGO Units F.V. 11 crores stood in name of Andhra Bank and CANCIGO Units F.V. Rs. 22 crores stood in name of Andhra Bank Financial Services Limited; (b) that on 6-2-92 a sum of Rs. 25,01,67,129/- was owed by Accused No. 4 to CANFINA. This is also admitted by Accused Nos. 1, 2 and 4 in their statements under section 313; (c) that Accused No. 4 sold these CANCIGO Units F.V. Rs. 33 crores (Rs. 11 crores standing in name of Andhra Bank and Rs. 22 crores standing in name of Andhra Bank Financial Services Limited) to CANFINA; (d) that after adjusting the sum of Rs. 25,01,67,129/- a sum of Rs. 7,98,32,871/- was paid to Accused No. 4. This is admitted by Accused Nos. 1, 2 and 4 in their statement under section 313; (e) CANFINA had thus paid Rs. 33 crores and was thus holding the CANCIGO Units without getting any title to them, they being non-transferable and also not in name of Accused No. 4; (f) CANFINA had to file petition Ex-U as Canbank Mutual Fund refused to recognise CANFINA and to transfer these CANCIGO Units into their name. CANFINA's petition is dismissed by this Court. CANFINA has had to hand over the Certificates Ex-66 (Colly.) to the Custodian. Thus CANFINA has parted with Rs. 33 crores and does not even have the CANCIGO Units F.V. Rs. 33 crores with them any longer. It is thus clear that CANFINA has lost the sum of Rs. 33 crores as Canbank Mutual Fund refused to transfer the CANCIGO Units info their name.
99. The next point for determination is who, on behalf of CANFINA entered into the above transaction. P.W. 1 has stated on page 3 of the Notes of Evidence that Funds Management was looked after by an Executive Vice President. He deposed that Accused No. 1 was the Executive Vice President of the Funds Department. He deposed that the Funds Department was mainly dealing in securities i.e. purchasing and selling securities. He deposed that during the year 1991-93 Accused Nos. 2 and 3 were also working in the Funds Department. P.W. 1 had identified all the three accused. He deposed that Accused No. 3 was mainly purchasing and selling securities and Accused No. 2 was liasoning with purchase and sale on one hand and accounts on the other hand. He deposed that Accused Nos. 1 and 3 are dealers of CANFINA. P.W. 1 has produced a Resolution of the Board of Directors which is marked as Ex.-18.
100. P.W. 1 deposed, in cross-examination, that after July, 1991, the Funds Department was headed by a separate Executive Vice. President and that the Back-up Department was part of the Funds Department. He deposed that Accused No. 1 headed the Funds department and that one Mr. Shinoy headed the Back-up Department. He deposed that Accused No. 2 worked under Mr. Shinoy. P.W." 1 has also deposed that the Back-up Department used to maintain accounts of the transactions of the Funds Department and allocate the securities to various parties after they were purchased. He deposed that Accused No. 2 was liasoning with the accounts in the Dealing section. He deposed that the duties of the Dealers were separate from the duties of the Back-up Section. He deposed that the Back-up Section was mainly maintaining accounts of transactions entered into. In cross-examination the witness also admits that Ex-18 did not authorise Accused No. 3 to buy and sell securities. He reiterated that Accused No. 3 was a dealer in the Funds Department and was so working at the time when he joined CANFINA.
101. P.W. 4 deposed that when he joined, Accused Nos. 1 and 3 were dealers. He deposed that he knew that they were dealers because they used to come to the office at Bombay. He has identified both Accused Nos. 1 and 3. P.W. 4 deposed that transactions were being entered into at the Registered Office at Bangalore and thereafter telephonic information would be sent to Bombay. He deposed that the concerned officer in Bombay would then note down the transactions on a Rough Transaction Sheet and then instruct him to make entries in the Transaction Register; General Ledger; BR Purchase Register, BR Sale Register and Physical Security Register. He deposed that after the transaction was executed, at the end of the day, the transactions would be reported back to Bangalore. He deposed, on page 128 of the Notes of Evidence, that the documents which were prepared in respect of a transaction by the Bombay Office were sent to the Registered Office at Bangalore once in a month. The witness then added it would be once or twice in a month. He deposed, on page 131 of the Notes of Evidence, that Inter Branch Advice Nos. were conveyed from Bangalore to Bombay in cases where monies were sent from Bangalore to Bombay and from Bombay to Bangalore where payments were sent from Bombay to Bangalore.
102. P.W. 6 deposed that during the year 1991-92 there were three dealers in the Registered Office at Bangalore i.e. Accused Nos. 1, 2 and 3. However, during cross-examination P.W. 6 corrected himself and stated that there were only two dealers, i.e. Accused Nos. 1 and 3. He identified Accused Nos. 1, 2 and 3. He deposed that the Purchase and Sale transactions were finalised in the Registered Office at Bangalore. He deposed that the dealers used to give telephonic instructions to execute the purchase and sale transactions. P.W. 6 deposed that the telephonic instructions would be received by him in Bombay and that in his absence they would be received by one Mr. K.D. Prabhu or Mr. R. Venugopal. He deposed that he used to record the telephonic instructions on Rough Transaction Sheets and thereafter used to instruct Mr. Kukian (P.W. 4) to prepare Cost Memos, BRs, SOL Transfer Forms etc. He deposed that the Rough Transaction Sheets were maintained in the normal course of business.
103. He deposed that the entry Ex-51-A is in his handwriting. He deposed that he made that entry on the basis of instructions given by Accused No. 3. He deposed that Accused No. 3 also instructed him to pay Rs. 7,98,32,871/- to Accused No. 4. He deposed that he had given him the Inter Branch Advice No. 32894 by which funds were being transferred from Bangalore to Bombay in order to facilitate execution of the payment. He deposed that the Accused No. 3 had told him that the sum of Rs. 25,01,67,129/- was recoverable from Accused No. 4 against some transactions and that the amount would be adjusted against the transactions, of CANCIGO Units F.V. Rs. 33 crores. He deposed that he had delivered the cheque Ex-63 along with covering letter Ex-67 to the representative of Accused No. 4 under instructions received from Accused No. 3 at Bangalore. P.W. 6 has also deposed, on page 156 of the Notes of Evidence, that he had accepted the CANCIGO Units, even though deficient, under instructions of Accused No. 3. He deposed, on pages 172 to 174 of the Notes of Evidence, that Accused No. 3 had telephonically told him that he was to accept the CANCIGO Units F.V. Rs. 33 crores from Accused No. 4. He deposed that he asked for the Inter Branch Advice number and was given the Inter Branch Advice number and the amount by Accused No. 3. He deposed that he asked Accused No. 3 why only 7 crores and odd was to be paid when the transaction was for Rs. 33 crores. He deposed that Accused No. 3 had told him that adjustment was being made against transactions of 6th February, 1992. He deposed that as soon as he received delivery of the CANCIGO Certificates he found that they were not accompanied by any covering letter. He deposed that he therefore immediately telephoned Accused No. 3 and told him about the discrepancy. He deposed that Accused No. 3 asked him to accept delivery as it was. He deposed that as per the instructions of accused No. 3 he accepted the delivery and issued the cheque. He deposed that as per the instructions of Accused No. 3 he had delivered the covering letter to Andhra Bank asking them to credit the amount to the account of Accused No. 4. He deposed that this conversation took place on 11th February, 1992 between 2-3 p.m.
104. As has been pointed out hereinabove, in respect of the transaction of 6th February, 1992, CANFINA had received a cheque in a sum of Rs. 59,90,51,739.72 from the American Express Bank. That cheque is marked Ex-E. He deposed that it was not in the ordinary course of business to receive a cheque from one bank for transaction of another bank. He deposed that Accused No. 1 had instructed him that such a cheque would be coming and that he should accept that cheque. He deposed that he had accepted that cheque under instructions of Accused No. 1. He deposed that these instructions were given even before the cheque had been received.
105. During cross-examination by Accused No. 3 he deposed that he received instructions from Bangalore only over the telephone and that he had never received any written instructions from Bangalore. He deposed that it would be either Accused Nos. 1 to 3 who would convey instructions in respect of security transactions. He has denied the suggestion that the name "S. Mohan" in Ex-51-A has been entered into at a subsequent stage only with a view to save his skin. He deposed the suggestion that the word "SBI 32894 (Mohan)" have been written subsequent to 11th February, 1992, only in view to save his skin. He denied the suggestion that he inserted the Inter Branch Advice number and the word "Mohan" under instructions from somebody else. He denied the suggestion that he had initially written down the name of Accused No. 1 as the person who had conveyed the instruction and subsequently scored out that name and wrote the name of Accused No. 3. He deposed that he was sure that he had not written the name of Accused No. 1 earlier and that he had not cancelled it. On pages 211 and 212 of the Notes of Evidence he was asked whether it was not his duty to ensure that proper documentation was received in respect of CANCIGO Units F.V. Rs. 33 crores. He admitted that it was part of his duty to so see and deposed that he was only following instructions. Thus P.W. 6 directly implicates Accused No. 3 as being the person who had given him instructions from Bangalore.
106. P.W. 11 deposed that Accused No. 1 was in charge of the Funds Department. He has identified Accused No. 1. He deposed that Accused No. 1 was the Chief Dealer in the Funds section. He deposed that Ex-18 was the Board Note by which powers were granted to Accused No. 1 to deal on behalf of CANFINA. He deposed that apart from Accused No. 1 there was also a dealer who was Accused No. 3. He identified Accused No. 3. P.W. 11 deposed that the dealer and the chief dealer used to sit in the same cabin opposite each other from morning till afternoon i.e. during the period the deals took place. He deposed that in the afternoon Accused No. 3 would go back to his cabin and -make entries in the record. He deposed that the dealing generally took place over telephone. He deposed that the dealer and the chief dealer would receive telephone calls or make telephone calls to brokers or counter parties and strike the deals. He deposed that the deals so struck, were noted down on a piece of paper. He deposed that the deals so struck used to be simultaneously conveyed to the various branches at Delhi, Calcutta and Bombay. He deposed that the sheets which were prepared by the dealers were handed over to the Back-up Section. He deposed that this was generally handed over to Accused No. 2. He deposed that the Back-up Office was situated in a cabin opposite the cabin of the chief dealer and the dealer. He deposed that Accused No. 2 was the Asstt. Vice President. He deposed that the job of the Accused No. 2 was to note down the security transactions in the Deal Pads on the basis of sheets prepared by the dealers. He deposed that some time the chief dealer and the dealer also wrote up Deal Pads. He has identified Accused No. 2. This witness has also produced Ex-89 which is the note, dated 23rd September, 1991, prepared by Funds Department and sent to the Managing Director of CANFINA. This note enumerates the staff wise duty of various persons. In this note the areas of work to be attended by Accused No. 2 have been set out as follows:
"Areas of work to be attended to by Mr. N. Balasubramanian, Assistant Vice President:
Secretary : To be posted.
Areas which would mainly assist the Dealing Operations/Dealers, as under.
* Daily Maintenance of Physical Ledger.
* Preparing Transaction Memos.
* Dairising RF Transactions and Moneys Received, Security Allocation thereof.
* Bonds - Securities-Physical Movement-Monitoring holding.
* SGL/BR-follow up-Liquidation.
* Follow-up of Receivable/payable including interest Receivable and payable, Contract Notes.
* Brokerage Payable-Settlements.
* Bank Transactions/IBI's follow-up."
107. This witness deposed that the Back-up Office was situated in a cabin opposite the cabin of the chief dealer and the dealer. He deposed that Accused No. 2 was the Asstt. Vice President of CANFINA. He deposed that it was the job of the Accused No. 2 to note down the security transactions in the Deal Pads on the basis of sheets prepared by the dealers. This witness was asked whether the chief dealer and the dealer would enter into the transactions independently and without the knowledge of each other. This witness replies that he could not say that the deals struck by one would be immediately known to other. This witness deposed that all security transactions on behalf of CANFINA would be entered into by chief dealer and the dealer in the same cabin. He deposed that as soon as the deals were struck telephonic intimation used to be sent to the concerned branch offices. This witness produced and proved Ex-19 which is Board Note which delegates power in respect of Portfolio Management, trading in securities and payment of brokerage. This witness had also identified Deal Pads of the relevant dates and the handwriting in those Deal Pads. He deposed that some of these handwriting were of Accused No. 2. The witness has stated that all those entries would have been made by Accused No. 2 whilst working in the Back-up Office of CANFINA at Bangalore. He deposed that these entries are in the book which is maintained by the CANFINA in the ordinary course of business for recording security deals entered into on behalf of CANFINA. The witness deposed that Ex-19 was the Deal Pad containing details of deals entered into. He has identified the handwriting on this Deal pad as being that of Accused No. 2. He deposed that on the basis of the cheque Ex-68 the Inter Branch Advice Ex-65 was issued. This witness has also proved the Attendance Register of CANFINA for the dates 20th January, 1992, 6th February, 1992 and 11th February, 1992. The Attendance Register shows that on 20th January, 1992 Accused No. 3 was absent but that on 6th February, 1992, and 11th February, 1992 Accused Nos. 1, 2 and 3 were present in office. This witness has also proved Ex-95 which is a certified true copy of the Board Note. By this Board Note Accused Nos. 1, 2 and 3 have been authorized to deal in securities. This witness deposed that Accused Nos. 1 and 3 ceased to be in the employment of CANFINA. In cross-examination, this witness deposes that during 1991-92 Accused No. 1 was carrying on money market operation and dealing in securities on behalf of CANFINA. He admitted that CANFINA had filed Misc. Petition No. 13 of 1993 claiming ownership of CANCIGO Units F.V. Rs. 33 crores (Ex-U (Colly.). He deposed that the petition was filed because of non-transferability of CANCIGO Units and because of refusal of Canbank Mutual Fund to transfer these Units into the name of CANFINA. In cross-examination this witness has further deposed that Accused No. 3 had clarified certain things to one Mr. P.N. Narayanarao. He deposed that accused No. 3 had given reply to RBI Inspectors in respect of this transaction and that he has seen that reply. He deposed that he also had some discussions with Accused No. 3 but now he did not remember what those discussions were. He has further deposed that Ex-68 had been signed by him because Accused No. 1 even though he was an Executive Vice President, never signed the cheques. He has denied the suggestion that he was jealous of Accused No. 1 because of compliments paid to Accused No. 1 by the Chairman of the Board of Directors. He deposed that he was happy that Accused No. 1 had received such compliments. In cross-examination he admitted that Accused No. 2 had never worked under him nor put up any proposals or letters to him and that in respect of security transactions ho has never given instructions to Accused No. 2. He has also deposed that all that the Deal Pads suggested is that instructions were given to Accused No. 2 to record such instructions. He deposed that before filing the petition Ex-U facts had been ascertained from Accused Nos. 2 and 3. This witness in cross-examination has also stated that Ex-95 is the Board Note which authorizes the dealers to deal in securities. He has also deposed that Accused No. 3 had signing power and used to sign.
108. P.W. 13 who is the Secretarial Officer in CANFINA deposed that during 1991-92 he was posted in the Funds Department of CANFINA at Bangalore. He deposed that he was doing the work of entering data in the computer. He deposed that Accused No. 1 was the Executive Vice President. He has identified Accused No. 1. He deposed that Accused Nos. 1 and 2 were dealers of CANFINA during 1991-92. He deposed that during 1991-92 he took instructions from Accused No. 2. He has identified Accused No. 2. He deposed that the original deal pad got xeroxed and the xerox copy was given to him. He deposed that from that xerox copy he would make entries in the computer and after the details were fed into the computer he used to get various outputs like Physical Ledger, Stock Ledger and vouchers etc. As set out hereinabove he has proved various documents which showed that the transactions of 20th January, 1992 and 6th February, 1992 set out above, have taken place. Also the documents show that the concerned transactions of purchase of CANCIGO Units F.V. Rs. 33 crores has taken place. The documents show that in the records of CANFINA this transaction purports to be with Andhra Bank. This witness has admitted that Accused No. 2 was looking after accounts and that the Back-up Department was headed by Mr. K.B. Shenoy. He deposed that Accused No. 2 used to assist Mr. K.B. Shenoy. He deposed that entries in the Deal Pads were made on basis of instructions from the dealers. He deposed that Accused No. 2 had been assigned the task of writing the Deal Pads because there was a back-lock as the dealers, who were earlier writing the Deal Pads, were very busy. He deposed that if he required any clarifications he got the clarifications from Mr. Satish Shetty or Accused No. 2.
109. P.W. 15, who is the Secretarial Officer in CANFINA deposed that he had been posted in the Funds Department and has been continued in that Department. He deposed that Accused Nos. 1 and 3 were transacting in securities. He deposed that in the Funds Department he was working under instructions of Accused No. 2. He deposed that the Back-up Office used to get the Deal Pads from Accused No. 1 or Accused No.3. He has also identified the handwriting of Accused No. 2 on various Deal Pads. He deposed that Ex-113 which is a sheet from the Physical Ledger is in the handwriting of Accused No. 1. He has also produced Ex-126 which is a sheet from the Physical Ledger. This sheet is in respect of CANCIGO Units. This sheet shows a number of transactions in CANCIGO Units. From the sheet it is clear except for the concerned transaction of CANCIGO Units F.V. Rs. 33 crores all the other transactions are Ready Forward or Ready Forward Reverse transactions. The Supreme Court has in the case of BOI Financial Ltd. & others v. Custodian & others, , confirmed the decisions of this Court that the Ready Forward transactions were illegal. This sheet would prima facie indicate that apart from the concerned transaction a number of other illegal transactions were also being entered into.
110. P.W. 16 was the General Manager, Canara Bank. He has been appointed as the Managing Director of CANFINA in June, 1992. He has identified Accused Nos. 1, 2 and 3. He deposed that Accused No. 1 was the Executive Vice President, who was in charge of the Funds Department at the Registered Office in Bangalore. He deposed that Accused Nos. 2 and 3 were Asstt. Vice Presidents. He confirmed the contents of Ex-96. This is a letter by which inspector of Police, C.B.I. has been informed that Accused Nos. 1 and 3 have been dismissed from their service with effect from 21st September, 1994 and 20th September, 1994 respectively. In respect of the petition (Ex-U) he deposes as follows:
"A In July, 1992. I came to know that in the records of CANFINA there were CANCIGO Units of F.V. of Rs. 33 crores. As per our records, these were supposed to have been purchased from Andhra Bank. Thereafter, in the first week of August, 1992, R.B.I. wrote us a letter informing us not to deal with the CANCIGO Certificates R.B.I. informed us that they had come to know that these CANCIGO Certificates were acquired by Mr. Hiten Dalal though these were issued in the name of Andhra Bank and Andhra Bank Financial Services Limited. After some time, the Custodian wrote to us claiming these CANCIGO Certificates on the basis that they belonged to the Notified Party. As CANFINA had paid for these Certificates, it became necessary for us to approach the Court to get a proper title to these Certificates. Therefore we had to collect the information from our records as well as from the people who were then working in the Department. This is so that we could justify our claim. It is on the basis of that, that the averments were made in this paragraph. What is stated in paragraph 4 is also based on the information which we had collected from Mr. N. Balasubramanian and Mr. S. Mohan. They were the persons who were working in this Department at the relevant time."
111. To be noted, that according to this witness what was mentioned in para 4 of Ex-U was on basis of information collected from Accused Nos. 2 and 3. In cross-examination he admits that Accused No. 1 has been suspended with effect from 2nd July, 1992. He denies that Accused Nos. 1, 2 and 3 have been made scapegoats. He recollects that Accused No. 2 had given an explanation and clarification. He deposed that CANFINA wants a proper legal title so that they could make a claim against Canbank Mutual Fund on the CANCIGO Units Ex-66 (Colly.). He admits that CANFINA claims that they have purchased the securities prior to Accused No. 4 becoming Notified. He admits that the transactions of purchase of CANCIGO Units F.V. Rs. 33 crores have not been rejected by the Board of Directors of CANFINA. He admits that CANFINA is still standing by this transaction. In cross-examination a suggestion is made to him that it is not the CANFINA's case that CANFINA was induced to purchase the Units on false representation. To this the answer is that he is not in a position to say whether CANFINA was induced to purchase CANCIGO Units on basis of a false representation.
112. This is the evidence as regards the duties, functions and involvements of Accused Nos. 1, 2 and 3. From this evidence it is clear that all transactions in securities were entered into by the dealers in Bangalore i.e. Accused Nos. 1 and/or. 3. At the relevant time, Accused No. 1 was the Chief dealer and Accused No. 3 was the dealer. The evidence clearly shows that the moment the deal was struck/finalised instructions were given to the Backup Department to record the transaction on a Deal Slip. At the relevant time and in the concerned transaction Accused No. 2 was the person who filed in the Deal Slip under instructions from the dealers. The Deal Slip Ex-19 is in the handwriting of Accused No. 2. After the deals were finalised information was conveyed to the various centres where the deals were to be executed. The evidence shows that at those centres the concerned person receiving the information, would note down the details on a Rough Transaction Sheet.
Thereafter entries would be made in various Ledgers. In cases of purchases, monies were sent from Bangalore to the various centres by way of Inter Branch Advices. In case of sales, on receipt of monies the money would be transmitted to Bangalore again by way of Inter Branch Advices. The securities would be received at the centre at which execution was to take place. In this case execution was at Bombay and the CANCIGO Units were received in Bombay. The securities were then retained at that centre. In this case the securities were retained in Bombay. Intimation regarding execution of transactions was daily reported back to Bangalore.
113. In the light of above one has to ascertain who on behalf of CANFINA entered into the transaction. As seen above it is established that Accused No. 4 had sold to CANFINA CANCIGO Units F.V. Rs. 33 crores (Rs. 11 crores in the name of Andhra Bank and Rs. 22 crores stood in the name of Andhra Bank Financial Services Limited). As seen above it is established that due to transactions undertaken on 20th January, 1992 and 6th February, 1992 a sum of Rs. 25,01,67,129/- was payable by Accused No. 4 to CANFINA. By virtue of this sale of non-transferable securities the liability of Accused No. 4 to the tune of Rs. 25,01,67,129/- is wiped out. On top Accused No. 4 has received Rs. 7,98,32,871. CANFINA can and have got no title in the CANCIGO Units. This transaction has given a rise to a civil action. Thereafter CANFINA has lost the CANCIGO Units also as they have had to hand them over to the Custodian. The question is whether Accused Nos. 1, 2 and/or 3 are involved in this.
114. The evidence set out above discloses that there is no direct evidence of Accused No. 1 having entered into this transaction or having done any overt act. As against Accused No. 1 the prosecution is relying upon circumstantial evidence viz.
(a) he is the chief dealer,
(b) he and Accused No. 3 were sitting in the same room.
(c) that on the deals being struck information was being given by the dealers to the various centres and thereafter on execution information was received back by the dealers.
(d) Accused No. 1 has not disclaimed any knowledge of this transaction either in his statement under section 313 or otherwise,
(e) in any case as a chief dealer he cannot disclaim knowledge,
(f) he has never protested against this transaction,
(g) he was present on 20-1-1992, 6-2-1992 and 11-2-1992.
115. So far as the Accused No. 2 is concerned the evidence on record shows that the Deal Slip Ex-19 is in the handwriting of Accused No. 2. The evidence also shows that he was receiving instructions from the dealers and on the basis of those instructions making entries in the Deal Slips. Evidence shows that he was thereafter instructing the Back-up Department to make entries in the other books and records. The entry in the Deal Slip Ex-19 and the other records indicate that the purchase is from Andhra Bank when in fact the purchase is from Accused No. 4. Question will be whether because of this Accused No. 2 could be said to be involved.
116. So far as Accused No. 3 is concerned there is direct evidence that he had given instructions to P.W. 6 at Bombay to carry out this transaction.
There is direct evidence that he had conveyed the Inter Branch Advice number to P.W. 6 at Bombay. There is direct evidence that he had also instructed P.W. 6 at Bombay to accept the CANCIGO Units Ex-66 (Colly.) even though it was pointed out to him that there was a deficiency.
117. On this evidence Mr. Gupte submits that the prosecution has proved beyond a reasonable doubt that on 6-2-1992 a particular state of affair existed. Mr. Gupte submits that the prosecution has proved that Accused No. 4 was in possession of CANCIGO Units F.V. Rs. 33 crores with very doubtful title. He submits that even though Accused No. 4 has paid for these from his own funds the concerned Units had been obtained in the name of Andhra Bank (to the extent of Rs. 11 crores) and in the name of Andhra Bank Financial Services Limited (to the extent of Rs. 22 crores). Mr. Gupte submits that the reason why Accused No, 4 chose to do this is not relevant in this trial. He submits that it is not necessary for this Court to go into the question why these CANCIGO Units were taken in the name of Andhra Bank (Rs. 11 crores) and Andhra Bank Financial Services Limited (Rs. 22 crores) in this trial. Mr. Gupte submits that Accused No. 4 being a broker could not disclaim knowledge of the special features of CANCIGO Units viz. that there was a lock-in-period of 1 year and that the Units were not transferable. Mr. Gupte submits that the result was that even if Accused No, 4 had purchased these CANCIGO Units in his own name they would have been non-transferable and nontradable. He submits that added to that was the fact that Accused No. 4 had deliberately chosen not to purchase them in his own name but to purchase the Units in the name of Andhra Bank (Rs. 11 crores) and Andhra Bank Financial Services Limited (Rs. 22 crores). Mr. Gupte submits that this by itself was a violation of section 3(1) of the Benami Transactions (Prohibition) Act. He submits that would be an act which is illegal by itself. Mr. Gupte submits that so far as this CANCIGO Units are concerned these securities were no use to Accused No. 4 inasmuch as he could not trade them and could not have passed any title in these securities to any third party.
118. Mr. Gupte submits that as a result of the earlier transactions entered into on 20-1-1992 and 6-2-1992 (through Accused No.4) a large amount of Rs.25,01,67,129/- was due and payable by Accused No. 4 to CANFINA. Mr. Gupte pointed out that Accused Nos. 1, 3 and 4 have admitted in their statements under section 313 that this amount was due and payable by Accused No. 4 to CANFINA.
119. Mr. Gupte submits that the prosecution Has proved that on 6-2-1992 a deal was struck between the dealers in Bangalore i.e. Accused Nos. 1 and 3 and Accused No. 4 in Bombay for purchase of these CANCIGO Units F.V. Rs. 33 crores. He submits that by entering into such a transaction the amount of Rs. 25,01,67,129/- was netted off and an amount of Rs. 7,98,32,871/- was paid. He submits that in the Deal Slip Ex-19, the amount payable by Accused No. 4 (which was to be netted off) and the amount to be paid to Accused No. 4, was noted on 6-2-1992 itself. He relies upon Ex-19, which is the Deal Slip in respect of this transaction. Mr. Gupte submits that this shows that all the three Accused in Bangalore had full knowledge of the nature of the transactions including the fact that there was a netting off.
120. Mr. Gupte submits that Ex-19 also shows that in the records of CANFINA the transaction is purported to be shown as being with Andhra Bank, through Accused No. 4. He submits that the prosecution has proved that normally when a transaction is entered into and finalised by the dealers information is given to the concerned centres on the same day. He submits that in this case it is proved that no information is conveyed to the Bombay office till 11-2-1992. He submits that in cross-examination and during arguments a weak effort had been made to try and show that the information had been conveyed on 6-2-1992 and that the securities were also received on 6-2-1992. Mr. Gupte submits that the voluminous documentary evidence on record as well as the oral evidence clearly establishes that the story sought to be made out in cross-examination and during argument is false and cannot be accepted. He submits that this is proved from the facts that there is no entry regarding this transaction in the Rough Transaction Sheet of Bombay for the date 6-2-1992. He submits that there is no entry even in the Transaction Register for the date 6-2-1992. He submits that the entry in the Rough Transaction Sheet (Ex-51-A) clearly shows that the information had been conveyed on 11-2-1992. He submits that this is supported by the Register Ex-59 wherein also the entry is on 11-2-1992. He points out that the Security Ledger at Bombay would contain entries when the securities are delivered. He submits that in Ex-GG there is an entry regarding purchase of 33 crores Units from Andhra Bank. He submits that significantly no date has been put in this Register except that somebody had written in pencil the date 6-2-1992. He submits that when and who had written that date is not proved by any of the accused. He points out that therefore the date has not been marked as an Exhibit. He submits that this by itself is suspicious circumstance. He points out the evidence of P.W. 1 who had made the entry. He also points out the evidence of P.W. 6 who categorically deposes that information regarding this transaction had only been received on 11-2-1992 and that the Units were received only on 11-1-1992. Mr. Gupte points out that this evidence had not been shaken in cross-examination. He points out that the categoric evidence that the delivery by Accused No. 4 was on 11-2-1992 has not been disputed by and on behalf of Accused No. 4 in cross-examination.
121. Mr. Gupte submits that the fact that information was conveyed only on 11-2-1992 is further established by the records of the Bangalore office of CANFINA. He submits that the prosecution has shown that CANFINA issued the cheque on Canara Bank and made an Application for issue of an Inter Branch Advice only on 11-2-1992. He submits that it has been proved that the Inter Branch Advice was prepared by Canara Bank in Bangalore and sent to Bombay only on 11-2-1992. He submits that thus information about the Inter Branch Advice could only have been furnished on 11th February, 1992. He submits that this supports the oral testimony that information was conveyed on 11th February, 1992. He submits that the oral evidence also shows that on the basis of information about the Inter Branch Advice having been prepared at Bangalore a dummy Inter Branch Advice was prepared in Bombay. He submits that the cheque along with a letter were handed over to the representative of Accused No. 4 against delivery of securities. The cheque and the concerned letter are Ex-61 and Ex-62. He submits that it is clear that the cheque could only have been prepared on 11th February, 1992. He submits that this establishes that delivery was on 11th February, 1992. He submits that P.W. 6's evidence shows that he could not take decisions on his own or override decisions taken by the dealers at the Bangalore office. He submits that P.W. 6's deposition that he had scrutinized the CANCIGO Units Ex-66 (Colly.) and communicated the deficiencies back to the dealers in Bangalore is absolutely believable. He submits that as P.W. 6 could not take any decision on his own it is absolutely believable that he had accepted the deficient securities on instructions received from Bangalore to so accept.
122. Mr. Gupte submits that the evidence of P.W. 4 and P.W. 6 shows that all transactions were reported back to Bangalore everyday. He submits that the evidence shows that the details of all transactions were reported back to Bangalore everyday. He submits that if P.W. 6 had done something contrary to what the Bangalore office had instructed, then there would have been a protest from Bangalore office. He submits that the record shows that there had been no protest from the Bangalore office. Mr. Gupte submits that all these facts taken together show that the P.W. 6's story is also supported by the fact that CANFINA has also not thought it fit to take any action against P.W. 6 for his alleged lapse on his part. Mr. Gupte submits that there is absolutely no reason to falsely implicate Accused No. 3.
123. Mr. Gupte submits that the prosecution has also proved that a cheque for Rs. 7,98,32,871/- was issued in the name of Andhra Bank and delivered to the representative of Accused No. 4 with instructions to credit the amount into the account of Accused No. 4. He submits that the prosecution has proved that by virtue of Accused Nos. 1 and 3 having entered into this transaction. He submits that Prosecution has proved that CANFINA has received CANCIGO Units of F.V. Rs. 33 crores (Rs. 11 crores standing in the name of Andhra Bank and Rs. 22 crores standing in the name of Andhra Bank Financial Services Limited). He submits that Prosecution has proved that the amount of Rs. 25,01,67,129/-, which was due and payable by Accused No. 4 to CANFINA stood netted off. He submits that the prosecution has proved that a further sum of Rs. 7,98,32,871/- had been paid to Accused No. 4. He submits that it had been proved that struck with the non-transferable securities CANFINA tried to establish title by filing a petition before this Court. He submits that it has been proved that the attempt to establish title failed. He submits that today CANFINA does not even have physical possession of the securities as they had to hand them over to the Custodian. He submits that CANFINA's claim to title has been negatived by this Court. He submits that it is proved that CANFINA has lost Rs. 33 crores. Mr. Gupte submits that the prosecution has made out a case of criminal conspiracy.
124. Mr. Gupte submits that Accused No. 1 was in charge of Funds Department. He submits that the evidence shows that both Accused No. 1 and Accused No. 3 were sitting in the same cabin and entering into all deals. He submits that Accused No. 1 was sitting opposite Accused No. 3. He submits that the transactions of 20-1-1992 were entered into by Accused No. 1 as on that day Accused No. 3 was not present. He submits that the amount due under those transactions has also been netted off. He submits that every evening information used to be conveyed from the various centres (including Bombay) to the dealers in Bangalore. He submits that thus all information were received back at Bangalore. He submits that Accused No. 1 was thus fully aware of all that was going on and was a party to the criminal conspiracy. He submits that this is clear from the fact that Accused No. 1 has not claimed that he was ignorant of this transaction. He submits that as chief dealer Accused No. 1 cannot disclaim knowledge. He submits that even in the statement under section 313 Accused No. 1 has not claimed that he was not aware of this transaction or what was going in the office at Bangalore. He submits that Accused No. 1 has admitted in his statement under section 313 that he was present on all three days i.e. 20-1-1992, 6-2-1992 and 11-2-1992. Mr. Gupte submits as Accused No. 1 was chief dealer who was present on all days his involvement is adequately brought out. He submits that his involvement is very clear from the fact that at no stage Accused No. 1 has protested about this transaction.
125. Mr. Gupte submits that Accused No. 3 was present on 6-2-1992 and 11-2-1992. He submits that prosecution has established that Accused No. 3 had conveyed information to Bombay in respect of this transaction. He submits that Accused No. 3 had conveyed the Inter Branch Advice number to the Bombay office. He submits that the Prosecution has also established that Accused No. 3 had asked P.W. 6 to accept the securities even though they were deficient. He submits that Accused No. 3 was also a dealer. He submits that he would also be present when all information was conveyed back to Bangalore at the end of the day. He submits that Accused No. 3 has also not protested at any stage. He submits that therefore involvement of Accused No. 3 has been adequately established.
126. Mr. Gupte submits that Accused No. 2 may not be involved in the entering into of the transaction. He states that Accused No. 2 would not be a party who entered into the transaction. He submits that however it has been established that Accused No. 2 was informed about the transaction immediately after the deal was finalised. He submits that the documents Ex-19 is in the handwriting of Accused No. 2. Mr. Gupte submits that being an Asstt. Vice President and a Senior Officer Accused No. 2 cannot disclaim knowledge of the fact that CANCIGO Units were not transferable. He submits that even a Junior Officer like P.W. 6 was aware of the fact that the CANCIGO Units were not transferable. Mr. Gupte submits that Accused No. 2 was Secretary to the Managing Director and had direct access to the Managing Director. He submits that at no stage Accused No. 2 made any protest against this transaction. He submits that by reason of his remaining quiet it is proved that Accused No. 2 is a conspirator along with the others. Mr. Gupte submits that Accused No. 2 was a high official whereas Vernekar was a low ranking officer who was basically from Canara Bank. Mr. Gupte submits that as Asstt. Vice President, Accused No. 2 had responsibility unlike Mr. Vernekar who only had to execute the transactions as per instructions given to him. He submits that it is therefore adequately established that Accused No. 2 was hand in glove with Accused Nos. 1 and 3 who were hand in glove with Accused No. 4.
127. Mr. Gupte further submits that the conduct of Accused No. 3 and his conversation with P.W. 6 also makes section 10 of the Evidence Act, applicable. Section 10 of the Evidence Act, reads as follows:--
"Section 10. Things said or done by conspirator in reference to common design-Where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to be so conspiring as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it."
128. Mr. Gupte submits that even though the starting point may be 6-2-1992 the communication with Accused No. 3 on 11-2-1992 clearly falls within section 10 of the Evidence Act. He submits that this would be relevant not only to show the existence of the conspiracy but also to show that Accused No. 3 is a party to it. Mr. Gupte submits that the evidence of P.W. 4 and 6 is supported by contemporaneous documentary evidence. He submits that therefore even if there may be slight inaccuracies the evidence of these witnesses could not be rejected. Mr. Gupte relied upon the case of Sohrab & another v. The State of Madhya Pradesh, , wherein the Supreme Court has held that one hardly comes across a witness whose evidence does not contain a grain of untruth or at any rate exaggeration, embroideries or embellishments. The Supreme Court has held that in most cases when asked about details the witnesses venture to give some answers not necessarily true or relevant for fear that their evidence may not be accepted in respect of the main incident. The Supreme Court has held that, that is not to say that their evidence as to the salient features of the case after cautious scrutiny cannot be considered. Mr. Gupte submits that thus Accused Nos. 1 and 3 had been entrusted with the property and had dominion over the property and that Accused No. 2 is an abetter and a conspirator.
129. Mr. Gupte summed up by submitting that the prosecution has proved beyond a reasonable doubt that Accused 1 and 3 had entered into the transaction to purchase these CANCIGO Units F.V. Rs. 33 crores with Accused No. 4. He submits that the prosecution has established beyond a reasonable doubt that Accused No. 2 had knowledge and had conspired with the other Accused and/or aided and abetted them.
130. Mr. Thakkar submits that there was no direct evidence against Accused No. 1. He submits that as against Accused No. 1 there was only circumstantial evidence. He pointed out that the circumstantial evidence relied upon by Prosecution are those listed in para 114 above.
131. Mr. Thakkar relied upon the case of S.P. Bhatnagar & another v. The State of Maharashtra, . This was a case under section 5(1)(d) of the Prevention of Corruption Act, 1947. The Supreme Court held that in cases depending on circumstantial evidence there is always the danger that conjuncture of suspicion may take the place of legal proof. The Supreme Court has held that the circumstances from which conclusion of guilt is to be drawn should in the first instance be fully established. The Supreme Court has held that all the facts so established should be consistent only with the hypothesis of guilt of the Accused. The Supreme Court has held that the circumstances should be of a conclusive nature and tendency and they should be such as to exclude every hypothesis but the one proposed to be proved. The Supreme Court has held that the word "abuse" must take colour from the preceding words and therefore, it must be something savoring of dishonest act on the part of the public servant. The Supreme Court has held that to come within the mischief of the section one must necessarily be dishonest so that it may be proved that the Accused caused deliberate loss to the Department. The Supreme Court has also held that in cases depending on circumstantial evidence there is always a danger that conjuncture or suspicion may take the place of legal proof. The Supreme Court has held that in such cases the mind is apt to take a pleasure in adapting circumstances to one another and even in straining them a little, if need be, to force them to form parts of one connected whole. The Supreme Court has held that the more ingenious the mind of the individual, the more likely it is, considering such matters, to overreach and mislead itself, to supply some little link that is wanting to take for granted some fact consistent with its previous theories and necessary to render them complete.
132. Mr. Thakkar also relied, upon the case of Major S.K. Kale v. State of Maharashtra, . In this case the appellant was a Senior Officer in the Army and was at the relevant time the Local Purchase Officer. A requisition for some engineering tools to the Ordinance Depot has been received by his Department. The tools were required immediately. The appellant was thus directed to purchase the stores locally and to deliver them to the Group Officer. The Officer in charge passed an order enabling the Local Purchase Officer to immediately purchase the tools on cash purchase basis. The appellant purchased the tools. The allegation was that the appellant has made a deliberate departure from the normal procedure which was adopted in the Department, and had thus enabled the contractor to earn a profit of 45% and thereby caused wrongful loss to the Army Department. The Supreme Court has held that the entire charge against the appellant rested on circumstantial evidences and the prosecution has failed to prove that the circumstances were such as could be explained only on one hypothesis viz. that the Accused was guilty. The Supreme Court has held that not following the normal procedure could be an error of judgment or an act of indiscretion but from that alone an inference of dishonest intention could not be drawn. The Supreme Court has held that the abuse of position must necessarily be dishonest so that it may be proved that the appellant caused deliberate wrongful loss.
133. Mr. Thakkar also relied upon the case of Abdulla Mohammed Pagarkar etc. v. State (Union Territory of Goa, Daman and Diu), . This was also a case wherein offences under sections 420, 468 and 471 of the Indian Penal Code and Prevention of Corruption Act, were alleged. In this case a public servant and a contractor were prosecuted for allegedly defrauding the Government by submitting false bills of the work done. It was also alleged that the work was to be done departmentally. It was alleged that in fact the public servant got the work done through the contractor whose tender was not accepted. The Supreme Court held that the onus of proof of the existence of every ingredient of the charge always rests on the prosecution and never shifts. The Supreme Court held that it was incumbent on the State to bring out beyond all reasonable doubt that the number of labourers actually employed in carrying out the work was less than that stated in summaries appended to the bills. The Supreme Court held that suspicion however strong, could not be a substitute for proof.
134. Mr. Thakkar also relied upon the authority in the case of Pohalya Motya Valvi v. State of Maharashtra, . In this case the Supreme Court held that the principles governing appreciation of evidence in a case dependent upon circumstantial evidence relied upon by the prosecution must be established by the cogent, succinct and reliable evidence and that the circumstances relied upon must be such as cannot be explained on any hypothesis except the guilt of the accused. The Supreme Court has held that in other words the circumstances must be of an incriminating character. The Supreme Court held that all the proved circumstances must provide a complete chain, no link of which must be missing and they must unequivocally point to the guilt of the accused and exclude any hypothesis consistent with his innocence.
135. Mr. Thakkar also relied upon the case of Lakhanpal v. State of Madhya Pradesh, A.I.R. 1979 S.C. 1620. In this case the prosecution was for an offence of murder. The Accused and the deceased were real brothers and they were together in the field prior to the occurrence. There was also evidence of an extra judicial confession. The Supreme Court held that these by themselves though suspicious were not circumstantial which was sufficient to prove the offence. The Supreme Court held that the prosecution has not proved its case beyond a reasonable doubt and the appellant was acquitted.
136. Mr. Thakkar also relied upon the case of Vishwanath Madhav Karkhanis v. State of Maharashtra, . This Court held that unlike cases where it is alleged that an Accused acted in furtherance of a common intention or where abetment is alleged in cases of a criminal conspiracy it was the prime necessity that the prosecution establish that there was meeting of minds, that a preconceived plan was hatched to do illegal acts and that the accused acted in furtherance of that plan. This Court held that it was necessary for prosecution to establish from tangible evidence the hatching of the conspiracy, the nature of the conspiracy and the acts done in furtherance of that conspiracy. On facts the Court held that the prosecution had not established its case. One of the circumstances relied upon was that all the accused were working in the same Department. It had been submitted that since they are working in the same Department, it could be concluded that they were acting in furtherance of a criminal conspiracy. This Court rejected this argument and held that if this reasoning was to be accepted then almost any employee in a department who performs one of a series of a acts or a chain of transactions would become liable for a criminal conspiracy.
137. Mr. Thakkar also relied upon the case of Sumerpal Jain & others v. The Union Territory of Tripura, A.I.R. 1964 Tripura 41. In this case against one of the accused, the case for conspiracy was based on the facts that the Accused was present in certain meetings. The Court held that mere presence was not sufficient for a charge under section 120-B unless it was shown that he had done some overt act.
138. Mr. Thakkar also relied upon the case of Harendra Narain Singh etc. v. State of Bihar, . In this case the Supreme Court held that wherein a case of circumstantial evidence, absence of explanation or a false explanation of the Accused for the circumstances and the facts proved against him are used as additional link against the accused, the Court should satisfy itself that (a) various links in the chain of evidence led by the prosecution have been satisfactorily proved; (b) the circumstances point to the guilt of the Accused with reasonable definiteness and (c) the circumstances are in proximity to the time and situation. The Supreme Court also held that there is a basic rule of criminal jurisprudence that if two views are possible on the evidence, adduced in a case of circumstantial evidence, one pointing to the guilt of the accused and the other to his innocence, the Court should adopt the latter view favourable to the accused.
139. Mr. Thakkar also relied upon the case of C. Chenga Reddy & others v. State of A.P., . In this case it was alleged that the offences under sections 120-B, 420 read with section 34 and section 477-A read with section 34 and offences under the Prevention of Corruption Act, had been committed. There had been irregularity and illegality in execution of jungle clearance work by the Government Engineers and contractors. The Supreme Court held that the Prosecution has established that there had been irregularities by ignoring various circulars and departmental orders. The Supreme Court held that however, dishonest intention had not been shown and the circumstances relied upon were not of any conclusive nature and all the circumstances put together did not lead to the irresistible conclusion that they were compatible only with the hypothesis of the guilt of the appellants and wholly incompatible with their innocence. The Supreme Court held that the act of commission and omission did give rise to a strong suspicion that the appellants so acted with a view to misappropriate Government funds, but suspicion however strong, could not take the place of proof. The Supreme Court held that in a case based on circumstantial evidence the settled law is that the circumstances from which the conclusion of guilt is drawn should be fully proved and that such circumstances must be conclusive in nature. The Supreme Court held that all the circumstances should be complete and there should be no gap left in the chain of evidence. The Supreme Court held that the proved circumstances must be consistent only with the hypothesis of the guilt of the accused and totally inconsistent with his innocence.
140. Mr. Thakkar also relied upon the case of Param Hans Yadav and Sadanand Tripathi v. State of Bihar and others, . This was a case where the accused was tried for conspiracy and murder involving the killing of a District Magistrate in his office. The Supreme Court held that it was true that it is difficult to support the charge of conspiracy with direct evidence in every case. The Supreme Court held that if the prosecution relied upon circumstantial evidence, then a clear link had to be established and a chain had to be completed. The Supreme Court held that otherwise it would be hazardous to accept a part of the link as a complete one. The Supreme Court held that on the basis of such incomplete evidence, the allegation of conspiracy cannot be accepted.
141. Mr. Thakkar also relied upon the case of State of V.P. v. Sukhbasi and others, . In this case the above principles have been again reiterated by the Supreme Court.
142. Based on these authorities Mr. Thakkar submits that the mere fact that Accused No. 1 was sitting in the same cabin as part of his duties is not a circumstance which can be used against Accused No. 1. He submits that it is inconceivable that a person who received commendation and was instrumental in maximizing profits for CANFINA and who was the head of the Department and neither a friend nor a relative of Accused No. 4 would be party to such a conspiracy. He submits that even if there are violation of rules and norms still that by itself would not mean that there has been any conspiracy or that an offence has been committed. He submits that all the above cases relied upon by him were in respect of public monies and Government Contracts and the principles laid down therein would be applicable here also. He submits that suspicion, even though strong, was not sufficient. He submits that the mere fact that Accused No. 1 was the chief dealer and was sitting in the same cabin are not circumstances which only lead to an inference of guilt. He submits that the prosecution was, as part of its circumstantial evidence, basing its case on the fact that Accused No. 1 had not claimed that he was ignorant of the transaction or that as a chief dealer he could not disclaim knowledge and that in his statement under section 313 he had not stated that he was not aware and that he had not protested against this transaction. He submits that by relying on such circumstances, the prosecution was placing a burden of proof on Accused No. 1 when there was no burden on the accused. He submits that in law the accused has to prove nothing. He submits that it was for the prosecution to prove their case "beyond a reasonable doubt". He submits that thus under these circumstances it could not be said that there was any circumstance which would unerringly lead to the guilt of Accused No. 1.
143. Mr. Thakkar relied upon Ex-99 and Ex-88 and submitted that the powers to enter into transactions in securities was given to the Executive Vice President and the dealer. He submits that both had to and could act independently. He submits that there was no evidence to show that Accused No. 1 had knowledge of this transaction. He submits that it is impossible to come to the conclusion that Accused No. 1 had knowledge of this transaction merely because he was a chief dealer and/or sitting in the same cabin and/ or because information used to flow from the Bangalore Office and was received back in the Bangalore Office.
144. Mr. Thakkar relied upon Ex-U which is a copy of the Petition filed by CANFINA, claiming title to these securities. He submits that the averments in this Petition must be deemed to be admissions as against CANFINA. He submits that this Petition contains admissions to the following effect:-
1. that the sum of Rs. 25,01,67,129/- was due and payable by Accused No. 4 to CANFINA;
2. that the Accused No. 2 made an offer to CANFINA;
3. that CANFINA accepted that offer;
4. that CANFINA agreed to purchase the beneficial rights;
5. that the above agreement was arrived at;
6. that the agreement was acted upon.
He submits that Ex-U shows that it is the CANFINA's case that they have entered into an agreement. He submits that CANFINA does not say that it was cheated. He submits that there was no criminality by whosoever entered into this transaction. He submits that in this Petition there is no allegation that Accused Nos. 1 or 2 or 3 had cheated and/or defrauded CANFINA.
145. Mr. Thakkar also relied upon evidence of P.W. 16. He points out that P.W. 16 had affirmed Ex-U. He submits that P.W. 16 has confirmed the averments in the Petition. He submits that P.W. 16 has also deposed that CANFINA had not filed any complaint or First Information Report. He submits that these admission of CANFINA are binding on CBI. He submits that therefore the Prosecution case must fail. He submits that even if the Court does not accept the averments still they show that there are two possible cases. He submits that under such circumstances the Court must give benefit to the Accused.
146. Mr. Thakkar also relied upon the evidence to show that according to witnesses of CANFINA the transaction was entered into in the ordinary course of business and that CANFINA even now claimed title to the CANCIGO Units.
147. In support of his submission that admissions can be relied upon, Mr. Thakkar had relied upon the authorities in the case of Nagindas Ramdas v. Dalpatram Iccnaram alias Brijram and others, ; Nathoo Lal v. Durga Prasad, and Bharat Singh & others v. Mst. Bhagirathi, .
148. It must be mentioned that Mr. Thakkar and Accused No. 3 have seriously challenged the evidence of P.W. 6. This challenge is more or less on the same grounds. The challenge to the evidence of P.W. 6 will therefore be dealt with while discussing the submissions of Accused No. 3.
149. These therefore are the rival submissions so far as Accused No. 1 is concerned. I have considered the rival submissions. As seen above, against Accused No. 1 there is only circumstantial evidence. The circumstances being -
(a) that Accused No. I was a chief dealer;
(b) that Accused Nos. 1 and 3 were sitting in the same cabin;
(c) that information was constantly given by the dealers to various centres and information was constantly received back from various centers;
(d) that Accused No. 1 has not claimed that he was ignorant of the transaction;
(e) that as chief dealer Accused No. 1 could not disclaim knowledge;
(f) that in his statement under section 313 Accused No. 1 has not stated that he was not aware of the transaction;
(g) that Accused No. 1 has not protested against this transaction;
(h) that Accused No. 1 was present on 20-1-1992, 6-2-1992 and 11-2-1992.
150. The law on the subject is very clear. The Supreme Court has held in the large number of cases, relied upon by Mr. Thakkar, that for a person to be convicted on circumstantial evidence the circumstances from which conclusions are to be drawn should be fully established. In this case all the basic facts relied upon by the Prosecution have been established. However that is not all. All these facts must only be consistent with a hypothesis of guilt of the accused. The circumstances must be such as to exclude every other hypothesis but that proposed to be proved. In other words the circumstances must unequivocally point to the guilt of the Accused and exclude any hypothesis of his innocence. Having given deep consideration to the matter, I am of the opinion that the above mentioned circumstances are not such that they can only be consistent with the hypothesis of guilt of Accused No. 1. In my view these are not circumstances which will exclude the possibility of his innocence. In this behalf it must be mentioned that P.W. 11 had been asked during his Examination-in-chief whether the chief dealer and dealer could enter into transactions independently and without knowledge of each other. The witness has honestly answered that he could not say that the deals struck by one would be immediately known to other. Further there is no evidence, even though so many witnesses from CANFINA were examined, that the Chief Dealer had to know about all transactions and/or that the Chief Dealer and Dealer informed each other about all deals entered into by them. Undoubtedly the circumstances enumerated by the Prosecution raise a strong suspicion that the chief dealer is likely to know what is happening in the office. However suspicion, even though strong, cannot be substitute for legal proof. It is possible that Accused No. 1 had no knowledge of this transaction at the time it was entered into. Undoubtedly Accused No. 1 has not denied knowledge. However, he has not admitted that this knowledge was there from the beginning. His case that he subsequently learnt cannot be discarded. In this view of- the matter it will have to be held that Prosecution has not proved beyond a reasonable doubt that Accused No. 1 was a conspirator and/or that he entered into this transaction and or aided or abetted anybody else.
151. Mr. Kulkarni has taken the Court in detail through the evidence set out herein above. He submits that the evidence clearly shows that Accused No. 2 is not a dealer and that Accused No. 2 was merely working in the Backup section under the Vice President Mr. A.P. Shenoy. He points out from the evidence listed above that the transactions were concluded by the dealers in Bangalore and that the execution was taking place at other centres like Bombay, Delhi, Calcutta etc. He submits that the evidence shows that after the dealers concluded the deals they would instruct the Back-up section to note down the transaction in the Deal Slips. He points out that in the Back-up section, at the relevant time, Accused No. 2 was merely recording the security transactions. He submits that Accused No. 2 was merely recording as per instructions given to him by the dealers. He submits that thereafter what had been conveyed was sent to the Back-up Department for preparation/ entry in Ledgers and preparation of Vouchers. He submits that therefore the functions of Accused No. 2 in the Back-up section was merely to record market transactions of Sale and Purchase put through by the dealers, guiding the juniors working in the Back-up section regarding allocation of the securities, guiding the computer operators and assisting in computerization of the accounting function. He submits that the evidence makes it clear that it is the dealer who was giving intimation to the various centers. He submits that it is the dealer who was receiving intimation from the various centres. He submits that the evidence also make it very clear that the securities were received at the executing centre and were not sent to Bangalore but retained at the centre. He submits that there is no evidence to show that Accused No. 2 was aware or had been made aware that the instructions given to him by the dealer, which he had recorded in Ex-19, were not correct. He submits that as the Units never came to Bangalore, Accused No. 2 would never have the chance to look at them. He submits that there is no way that Accused No. 2 could find out that the Units were not in the name of Andhra Bank. He submits that there is no evidence to show that Accused Ho. 2 was aware, that on 6-2-1992 a sum of Rs. 25,01,67,129/- was receivable from Accused No. 4. He submits that the Physical Ledger and other documents prepared at Bangalore were prepared on the basis of the Deal Slips and the information contained in the Deal Slips. He submits that Accused No. 2 had merely a glorified title. He submits that there is no evidence that Accused No. 2 knew that CANCIGO Units were not transferable. He submits that in the absence of any evidence that Accused No. 2 had such a knowledge, only on the footing that Accused No. 2 followed the instructions of the Dealer, it could not be said that Accused No. 2 was a party to the conspiracy and/or he had abetted the commission of any offences.
152. Mr. Kulkarni relied upon the unreported authority in the case of R.N. Vellaiyan v. State of Tamil Nadu & another, Cr. Appeal No. 170 of 1998 Dt. 12-1-1995. In this case an officer of the bank had introduced a party whilst opening an account. In that account proceeds of fictitious bills were credited and cleared. The question was whether that officer was guilty of offences under the Prevention of Corruption Act and under section 420 of the Indian Penal Code. The Supreme Court held that the mere circumstances of his having introduced the account was not sufficient to show any dishonest intention. The Supreme Court held that even though it was a suspicious circumstance, mere suspicion was not sufficient. The Supreme Court held that a conviction could not be maintained on that suspicion. The Supreme Court set aside the conviction.
153. Mr. Kulkarni also relied upon the authority in the case of State of Kerala v. Janardhanan Chettiar, 1965 K.L.T. 377. In this case the question was whether, a mere failure to prevent the commission of an offence would amount to an abetment. It has been held that mere failure to prevent the commission of an offence did not amount to abetment. In this Judgment it was also held that even though no offence has been made out, the Accused was either a moron in intelligence or a clear rogue who in either case deserved to be hauled up in disciplinary action by the Department. A copy of the Judgment was forwarded to the head of the Department for necessary action.
154. As seen from the evidence above it is clear that the entire power of entering into security transactions was with the dealers. Accused No. 2 had no power to enter into any security transactions. The evidence makes it clear that Accused No. 2 was with the Back-up Department working under Mr. K.B. Shenoy. The evidence makes it clear that his duties were to record the instructions given to him by the dealers in the Deal Slips. Undoubtedly he has so recorded the concerned transaction in Ex-19. Therefore, he undoubtedly had knowledge that non-transferable CANCIGO Units were being purchased. As he has made the entry in Ex-19 it is also clear that he had knowledge that Rs. 25,01,67,129/- was being adjusted and Rs. 7,98,32,871/- was to be paid. The question is that whether he would be said to be part of the conspiracy or an abetter. There is no evidence of any dishonest intention on his part. In this behalf the only argument of the prosecution has been that he is an Asstt. Vice President i.e. a senior officer and that he was the Secretary to the Managing Director. The argument of the prosecution has been that Accused No. 2 had access to the Managing Director and should have protested and/or made a complaint. If mere knowledge of the transaction was sufficient, then many of the prosecution witnesses also had knowledge of transaction. They would also be equally guilty. P.W. 6 has the knowledge of the transaction. Not only did he have knowledge of the transaction but he was the person who received the securities and saw that they were deficient. The evidence of P.W. 6 has been that he acted on the instructions of the dealer. The evidence of other witnesses have also been that the dealers were given instructions. As is being set out in greater detail hereinafter the Court is accepting the evidence of P.W. 6. Thus merely because some persons act under instructions of the dealer does not ipso facto mean that they are conspirators or abetters. In this case the evidence shows that it was a job of Accused No. 2 to note down instructions as given by the dealers. Accused No. 2 has performed that job. Of course he could have complained when he learnt about the transaction. However, merely because he did not so complain is not by itself sufficient to hold that he is a conspirator or abettor. As set out in Vishwanath Karkhanis case (supra) merely being an employee with knowledge is not sufficient. In the words of the Judgment in State of Kerala's case (supra) it can only mean that Accused No. 2 is either a moron in intelligence or a clear rogue. However that does not lead to the conclusion that he has committed an offence. These are matters where he would have deserved to be hauled up in disciplinary action by the Department. The Court would have sent the papers to CANFINA for necessary action, however Accused No. 2 informs Court (orally) that pursuant to disciplinary action with effect from April, 1998, he has already been dismissed from service.
155. That brings us to the question of involvement of Accused No. 3. As seen above there is direct evidence against Accused No. 3. Accused No. 3 had at the beginning been asked whether he wanted legal aid. He had refused legal aid. Accused No. 3 had cross-examined by himself and argued by himself. The Court admires the competent manner in which Accused No. 3 has cross-examined the witnesses and argued on his own behalf. There can be no doubt that Accused No. 3 is a clever and competent person.
156. The main attack of Accused No. 3 has been, as must be expected, to discredit the evidence of P.W. 6. This because P.W. 6 has directly implicated Accused No. 3.
157. Before the submissions of Accused No. 3 are considered there is an aspect on which the Court must express an opinion. In law as it stands today, Accused need do nothing. It is sufficient for the Accused to merely cast aspersions and then argue that the Prosecution has not proved its case "beyond a reasonable doubt". That might have been good law at a time when morality in this society was very high. Today one finds that criminals are taking protection behind such a law and misusing it to evade just punishment. In this case both Accused Nos. 1 and 3 sought to seriously challenge the evidence of P.W. 6. Both Accused Nos. 1 and 3 are the Dealers. They are the persons who were entering into transactions and receiving back information. They would be aware, at least by this stage, of all transactions and how things have taken place. They would thus know that the deposition of P.W. 6 was absolutely truthful. Yet to discredit P.W. 6 they cast aspersions on his deposition. They however made the mistake of trying to test P.W. 6's story obviously thinking that now after so many years P.W. 6 may not be able to substantiate his deposition. However it was immediately noted that, whenever tested, P.W. 6 was substantiating all his statements. Therefore resort was then taken to the common tactic of merely casting aspersions.
158. The testimony of the P.W. 6 is sought to be challenged on following grounds:-
(1) P.W. 6 has given false evidence about a transaction of 13% HPF which had been entered into by CANFINA on 20-1-1992. The suggestion was that the transaction has been wrongly recorded in the Rough Transaction Sheet. On record is Ex- 45. This is the sale/cost memo by which Rs. 1.75 crores 13% HPF had been sold to Citibank. As seen above when instructions are received from Bangalore they are noted down on a Rough Transaction Sheet. The Rough Transaction Sheet for 20-1-1992 is Ex-44. In Ex-44 an entry has been made in respect of Rs. 1.45 crores 13% HPF. Thus making use of this it was sought to be suggested that P.W. 6 was not making correct entries. On this aspect P.W. 4 was first cross-examined. P.W. 4 has given evidence that initially the transaction must have been for Rs. 1.45 crores and that it must have been changed to Rs. 1.75 crores subsequently. Thereafter P.W. 6 is cross-examined on this aspect. On page 176 of the Notes of Evidence P.W. 6 was asked whether transaction evidence by Ex-45 was reflected in Ex-44. P.W. 6 answers that the transaction evidenced by Ex-45 was the transaction noted as "1.45 crores" in Ex-44. P.W. 6 deposes that before Ex-45 was prepared there was another sale memo for "1.45 crores 13% HPF". He deposes that, that sale memo was cancelled when Ex-45 was prepared. He deposes that the second copy of the sale memo would have been sent to Bangalore. P.W. 1 and P.W. 3 would have received both the Sale Memos and thus would know that this is true. Yet, in hope that P.W. 6 would not be able to substantiate this after so many years, he was asked to produce the copy of the sale memo for Rs. 1.45 crores. P.W. 6 has also deposed that initially the transaction was for 1.45 crores 13% HPF. He deposed that after the transaction was executed he has informed the dealers on phone about the execution of the transaction. He deposed that at that time the dealer told him that the transaction is not for 1.45 crores but for 1.75 crores. He deposed that the dealer had informed him that the delivery should be made of the balance and the difference in price should also be received from Citibank. He deposed that the dealer had asked him to issue a fresh Bankers Receipt and the dealer had given him calculations regarding the amount for 1.75 crores 13% HPF. P.W. 6 is asked whether or not the balance amount, which would be Rs. 25,79,684.93, was received from Citibank. Speaking from memory the witness states that the amount was received on the next day. He is asked whether this amount had been forwarded to Bangalore. He deposed that he is sure that the amount of Rs. 25,79,684.93 had been forwarded to Bangalore. The witness is then shown the Transaction Register Ex-58. To be remembered the Transaction Register is filed in by P.W. 4 and not by this witness. In the Transaction Register the amount of 1.45 crores has been cancelled out and changed to 1.75 crores. The initial figure has also been increased. But it is noted that the sum of Rs. 25,79,684.98 had been less received. This was sought to be used in order to show that this witness was an unreliable witness. He was called upon to produce documents to substantiate his story. Unfortunately for the cross-examiner the witness was in a position to prove that he was telling the absolute truth.
On the next day when the witness came back into the witness box he produced documents to show that the initial transaction had been for 1.45 crores and later converted to 1.75 crores. He produced a Bankers Receipt which had been issued by CANFINA to Citibank. The Bankers Receipt dated 20-1-1992 shows that the initial transaction was for 1.45 crores. He also produced another Bankers Receipt for 1.75 crores. The initial Bankers. Receipt for Rs. 1.45 crores shows that it is discharged by Citibank. P.W. 6's case that the initial transaction was substituted, is proved by these two documents. Not only that but he also produced a cheque for a sum of Rs. 25,79,684.93. This is the cheque which Citibank sent to CANFINA for the difference in price between 1.75 crores and 1.45 crores. The Bankers Receipts are Ex-K (Colly.). The cheque is Ex-75. The witness also brought a credit slip which is marked as Ex- H. By this certain amounts have been transferred to the Bangalore Head Office General Account. This witness deposed that this includes the amount of Rs. 25,79,684.93.
The evidence of this witness that there had been a substitution of the initial transaction is also supported by the evidence of P.W. 7. This is an officer of Citibank. This officer has confirmed that the cheque Ex-75 had been sent by Citibank to CANFINA for purchase of securities. P.W. 7 has also confirmed that Bankers Receipt No. 1487, which is the Bankers Receipt in respect of Rs. 1.45 crores 13% HPF (part of Ex-K Colly.) had been discharged by him. He identifies his signature on that Bankers Receipt.
P.W. 14 who is now the Vice President of Citibank has produced a Deal Slip of Citibank which is marked as Ex-117. This Deal Slip shows that the initial transaction, even as per the records of Citibank, was for 1.45 crores 13% HPF. This witness has also produced Ex-118 which is again a Deal Slip of Citibank. This is now for 1.75 crores 13% HPF. Thus it is to be seen that even in the records of Citibank there was initially a transaction of 1.45 crores and then subsequently changed to 1.75 crores. Citibank issued the cheque Ex-75 for the difference amount. The dealers in Bangalore were the parties who had entered into this transaction. They well knew what the transactions were. Yet the truthful evidence of a witness is sought to be challenged in this manner. As stated above unfortunately for them the witness was able to prove that the aspersions cast were absolutely baseless. The witness was able to establish that he was deposing the absolute truth.
(2) Accused No. 3 also challenged P.W. 6's testimony on the ground that the transaction of CANCIGO Units of F.V. Rs. 33 crores had actually taken place on 6-2-1992. It was submitted that the transaction was also executed on 6-2-1992. It was submitted that therefore the entry under the date 11-2-1992 in the Rough Transaction Sheet was false and fabricated by P.W. 6 with the intention of saving his own skin and implicating Accused No. 3. To be immediately noted that the Rough Transaction Sheets were prepared in February, 1992. At that time nobody anticipated that there would be a criminal prosecution in respect of this transaction. If instruction had in fact been conveyed on 6-2-1992 there is no reason why those instructions would not have been written down on Rough Transaction Sheet for 6-2-1992. One would have understood if initially in the Rough Transaction Sheet of 6-2-1992 there was an entry which was then scored out and subsequently written down in the Rough Transaction Sheet of 11-2-1992. But in this case there is no such entry in the Rough Transaction Sheet of 6-2-1992. The first entry in respect of this transaction appears only in Rough Transaction Sheet of 11-2-1992. In February, 1992 a dull witted person like P.W. 6 could never have anticipated that there would be a criminal prosecution and therefore he has to concoct evidence, and try and implicate somebody else.
The case that execution took place on 6-2-1992, is also falsified by the records from Bangalore. It must be remembered that these are security transactions in large amounts where every days delay means loss of interest of large amounts. If the transaction was to be executed on 6-2-1992, as claimed, then the Bangalore office should have applied for the issuance of Inter Branch Advice on 6-2-1992 itself. The records from Bangalore shows that the Funds Department at Bangalore had issued a cheque in favour of Canara Bank and made an application for issuance of Inter Branch Advice only on 11-2-1992. Pursuant to that, Canara Bank issued an Inter Branch Advice only on 11-2-1992. This clearly indicates that even according to the Bangalore office execution was to be only on 11-2-1992. It is thus that the cheque Ex-61 is made out on 11-2-1992. The deposition that the Inter Branch Advice number was conveyed only on 11-2-1992. The Inter Branch Advice number could never have been conveyed on 6-2-1992. It was submitted that the application for issuance of Inter Branch Advice was only made on 11-2-1992 because on 6-2-1992 there was not enough balance to arrange for payment of Rs. 7,98,32,871/-. It was submitted that some amounts had also to be kept for the SLR and CLR requirements. For this reliance was placed on Exs. 69 and 90. Reliance was also placed on Ex. 109 and it was submitted that in the books of CANFINA capitalization has taken place on 6-2-1992. These are oral submission. Such a case has not been put to any witness. Also if execution was to be on 6-2-92 then there had to be sufficient balance. The fact that there was no sufficient balance is a factor which should show that execution could not be on 6-2-92. As transaction was entered into on 6-2-92 the entry in Ex-109 is made on 6-2-92. There is no evidence to show that this amounts to capitalization.
Also to be noted that it is a representative of the Accused No. 4 who has collected the letter Ex-61 and the cheque Ex-63. If execution was to be on the 6-2-1992 Accused No, 4 would have protested on the 6-2-1992 as to why he has not been paid his money on 6-2-1992. There has been no protest from Accused No. 4. He has collected the cheque on 11-2-1992. Also the deposition of P.W. 6 that Accused No. 4 delivered the CANCIGO Units on 11-2-1992 is not challenged in cross-examination by Accused No. 4. Faced with this it was submitted that CANFINA had waited from 20-1-1992 for Rs. 25,01,67,129/- so there was no reason why Accused No. 4 should wait for 5 days for Rs. 7,98,32,871/-. This argument overlooks fact that Accused No. 4 only delivered the CANCIGO Units on 11-2-1992. As stated above this evidence is not disputed or challenged by Accused No, 4. If execution was to be on 6-2-1992 then delivery would have had to be on 6-2-1992. Thus it is clear that there is no substance in the case, sought to be made out, that execution was also on 6-2-1992. This shows that P.W. 6 has not made a false entry Ex-51-A. (3) P.W. 6's evidence was next sought to be challenged in respect of certain entries in Ex-50 (which is the Rough Transaction Sheets for 6-2-1992). In this Rough Transaction Sheet two transactions of sale viz. 15 crores 17% SR Gujarat and 15 crores 17% SR Shipping are shown. In the Transaction Register these two transactions have also been entered, but they have been encircled. In respect of these two transactions no Sale Memo has been exhibited. P.W. 4 was first cross-examined in respect of these transactions. On page 105 of the Notes of Evidence he is asked why he has encircled the two entries in respect of 15 crores 17% SR Gujarat and 15 crores 17% SR Snipping. He admits that he had encircled those entries. He deposed that the entries were made on the basis of sale memos which had been prepared by him. He deposed that P.W. 6 then told him that these transactions were cancelled. He deposed that he had therefore encircled those entries. He deposed that P.W. 6 had so told him on 6-2-1992 itself. He agrees that instead of encircling the entries he should have scored them out. Thus this witness had already explained that these two transactions stood cancelled. This witness had already admitted his mistake. P.W. 4 was the person who had actually made the entries in the Transaction Register. Yet P.W. 6's evidence was sought to be challenged on basis of these entries. On page 182 of the Notes of Evidence P.W. 6 confirmed that initially these transactions had been entered into and executed- He deposed that subsequently they were cancelled as consideration was not received. He deposed that the entries in respect of these transactions were made before the transactions were cancelled. Thus the story of P.W. 4 is confirmed. That these transactions were cancelled is also borne out by the Rough Transaction Sheet Ex-50 wherein against that transaction instead of a tick a cross has been put in. It is thus to be seen that there is absolutely no substance in this challenge.
(4) The next ground on which deposition of P.W. 6 is sought to be challenged is that even though one transaction was with one bank, a cheque from another bank had been accepted. P.W. 4 was first asked about this on page 118 of the Notes of Evidence. He is asked to total the amounts under the transactions in Ex-52 and Ex-57. So totalling out, he states that the amount comes to Rs. 59,92,80,506.85/-. P.W. 4 deposed that all these transactions are with Citibank and the broker was C. Mackertich. He is then asked whether he would be surprised to know that the payment of these transactions had come from American Express Bank. The witness honestly answers that he would be surprised. Then he is shown the cheque Ex-E. This is the cheque which has been received by CANFINA from American Express Bank in a sum of Rs. 59,90,51,739.71. It must be mentioned that under Ex-52 to Ex-57 the amount is Rs. 59,92,506.85. If an amount of Rs. 2,28,767,13/- is deducted it gives the figure of this cheque. At this stage it must be mentioned that it is in fact the case of the Prosecution that in the transaction of 6-2-1992 this cheque had been received from the broker C. Mackertich and another sum has been received from Mr. R.K. Tandon. P.W. 4 of course could not explain why a cheque would be received from a third party in a transaction with Citibank. The question is therefore repeated to P.W. 6. P.W. 6 explains that Accused No. 1 had informed him that he would be receiving this cheque from American Express Bank and he should accept this cheque. He deposes that, that is why this cheque was accepted. To be remembered that it is the dealers in Bangalore who enter into the transactions and finalise the terms and conditions with third parties. Except for the dealers, no other officer had any authority to finalise deals. If a cheque was being received from a third party it could only be with the knowledge of the dealer. The deposition of P.W. 6 that it was received under instructions of Accused No. 1 is absolutely believable. In fact this shows how loosely the dealers had been dealing with CANFINA's transactions in securities. They were doing it so loosely that it has enabled at least one of them to cause a loss to CANFINA in a sum of Rs. 33 crores.
(5) It was next sought to be submitted that there were differences in entries in the Rough Transaction Sheets and in the Transaction Registers. In the Rough Transaction Sheets (which are Ex-44, Ex-50, Ex-51-A and Ex-72) and the Transaction Registers which are Ex-58, Ex-59 and E-60 there was some differences in entries. Capital was sought to be made of this. P.W. 4 was first asked about these differences. The differences according to P.W. 4 was that in Ex-44 three purchases and six sales were recorded whereas in Ex-58 four purchases and six sales were recorded. The other difference was that in Ex-50 six purchases and nine sales including sales in respect of the transactions of SR Shipping and SR Gujarat have been recorded whereas in Ex-59 seven purchases and eight sales were recorded. The other difference was that in Ex-51 and Ex-72 nine sales and four purchases are recorded whereas in Ex-60 only two sales and four purchases were recorded. P.W. 4 had made the entries in the Transaction Register. He however was not able to explain how this differences had arisen, but P.W. 4 makes it clear that the Transaction Register was not based on the Rough Transaction Sheets. It was also made clear by P.W. 4 that the Rough Transaction Sheets would not be conclusive of alt transactions. This would be so because it was only a document on which instructions given by Bangalore were noted. He deposed that the official document was the Transaction Register. In spite of this, capital was sought to be made of the difference by cross-examining P.W. 6 on this aspect. On page 183 of the Notes of Evidence P.W. 6 explains that in Ex-59 there are seven sales whereas in Ex-58 there are only six sales because Bank of America whilst executing the transactions of 9% IRFC Bonds of F.V. Rs. 47 crores sent two cost memos of Rs. 32 crores and Rs. 15 crores respectively. Thus in Ex-59 this was entered as two transactions whereas in Ex-58 this was entered as one transaction. He also explains, on pages 175 and 180 of the Notes of Evidence, why there are differences in Ex-44 and Ex-58. He explains that in Ex-44 the pink sheet is for 20-1-1998 and the first few entries are of 20-1-1998. He explains that the other entries on the yellow sheet are of 21-1-1998. In the Transaction Register the transactions were written down separately for these two days. Realizing that P.W. 6 was giving explanation and thereby strengthening his evidence Counsel decided not to pursue this line of cross-examination. P.W. 6 was not asked about the other alleged differences between the Rough Transactions Sheets and the Transaction Register. It must be remembered that this line of cross-examination had been adopted on behalf of Accused Nos. 1 and 3. Both of them were dealers. They were by this time fully aware of all that had happened. Knowing that there were no real differences aspersion were still sought to be cast. Finding that the explanation was forthcoming the line was abandoned.
(6) The other aspect on which evidence of P.W. 6 was sought to be challenged was that in the Transaction Register certain entries had been entered subsequently. P.W. 6 in his evidence honestly admits that certain entries had been entered subsequently. The evidence in this behalf is on pages 158 to 164 of the Notes of Evidence. P.W. 6 has explained that these entries are made by him because at the time when inspections were going on, one of the Inspectors had asked him to make these entries in the Transaction Register. He deposes that therefore under instructions of that Inspector he made those entries. It is to be seen that most of those entries are in respect of transaction in shares. As the Transaction Register was for security transactions, obviously entries for transactions in shares would not have been made in it earlier. I see nothing wrong in the deposition that these entries were made under instructions of some Inspectors. On almost every other aspect, it has been shown that the witness was truthful witness.
(7) P.W. 6's evidence was also sought to be challenged by pointing minor contradictions in evidence. The evidence of P.W. 6 runs into app. 80 pages. In such a lengthy evidence only two or three minor contradictions could be pointed out. In this behalf the observations of the Supreme Court in Sohrab's case (supra) are very relevant. As held by the Supreme Court one hardly comes across witness whose evidence does not contain a grain of untruth or at any rate exaggeration, embroideries or embellishments. As held in most cases when asked about details the witnesses venture to give some answers not necessarily true or relevant for fear that their evidence may not be accepted in respect of the main incident. As held by the Supreme Court that is not to say that their evidence as to the salient features of the case, after cautious scrutiny, cannot be considered.
159. It was also submitted by Accused No. 3 that initially in Ex-51-A the name of Accused No. 1 was written. According to Accused No. 3 the name of Accused No. 1 was then deleted and his name put in. This is denied by and on behalf of Accused No. 1. It is also denied by P.W. 6. Having seen Ex-51-A such a case is not sustainable. Also as stated above no reason could be shown why P.W. 6 should favour Accused No. 1 at cost of Accused No. 3. It has not even been suggested that there was any enmity.
160. It must also be mentioned that Court had opportunity to observe the demeanor of P.W. 6. Court found that this was one of those persons who, even though he may not be termed as a moron in intelligence, was definitely not a very bright person. He was the type of person who would never be able to think up, on the spur of the moment, a story. He was the type of person who would be led/misled by others. He was the type of person who would not take any decisions on his own or be bold to take a contrary stand. If one had an opportunity to observe P.W. 6 one would immediately believe that he would act under instructions of other without any question. One would believe he was the sort of person who would not even report to higher ups even if there was something wrong because it would not strike him to do so. It is a pitty that in banks and financial institutions such persons are kept in such important posts thereby enabling others who are clever and more dominating to take advantage.
161. Also no reason has been shown as to why P.W. 6 should want to implicate Accused No. 3. To be remembered that there were two dealers i.e. Accused Nos. 1 and 3. One of them has entered into this transactions and conveyed these instructions. There is no reasons why P.W. 6 should favour Accused No. 1 and try to falsely implicate Accused No. 3. It has not been shown or even suggested that P.W. 6 had any enmity against Accused No. 3. Also as seen there is no direct evidence to show that Accused No. 1 had entered into this transaction. This also in a way supports the case that if must be Accused No. 3.
162. Further the fact that Accused No. 3 must have conveyed the instruction to P.W. 6 is borne out by evidence of other witnesses. It must be remembered that CANFINA had filed the petition Ex-U (Colly). In evidence it has come out that before this petition was filed discussions had taken place with persons who had knowledge of this transaction. There is evidence to show who the persons were with whom discussions took place before that petition was filed. P.W. 11 has stated, on page 337 of the Notes of Evidence, that before Ex-U (Colly.) was filed facts were ascertained from Accused Nos. 2 and 3. There is no reason to disbelieve P.W. 11 when he deposes that facts were ascertained from Accused No. 3. P.W. 16 has also, on page 401 of the Notes of Evidence deposed that information regarding Ex-U (Colly.) was collected from Accused Nos. 2 and 3. As seen earlier Accused No. 2 had knowledge. He had got it from the dealer who had instructed him to make entry Ex-19. Thus the other person who would have knowledge is that dealer. The evidence of P.W. 11 and P.W. 16 shows that the dealer who had knowledge was Accused No. 3.
163. All this clearly indicates that the deposition of P.W. 6 was truthful. Having watched the demeanor of the witness Court also felt that P.W. 6 was telling the truth. Thus his deposition to the effect that it was Accused Ho. 3 who had conveyed the information to him about the transaction of CANCIGO Units F.V. Rs. 33 crores and who had thereafter conveyed the Inter Branch Advice number and who had thereafter instructed P.W. 6 to accept the securities even though deficient has to be accepted as truthful evidence. The evidence of P.W. 6 read along with evidence of P.W. 11 and 16 leaves no manner of doubt that it is Accused No. 3 who was responsible for entering into this transaction with Accused No. 4.
164. It must be mentioned that Accused No. 3 had submitted that he could not have been the person who had entered into this transaction. He had submitted that he had no powers to enter into transactions insecurities. He submitted that only Accused No. 1 had powers to enter into transactions in securities. He submitted that the Board Note Ex-88 is dated 28-1-1989. He submitted that at that time he was working in the Back-up Department and there was only one dealer and one Executive Vice President at Bangalore. In support of this, he relies upon the evidence of P.W. 13 at page 173 of the Notes of Evidence wherein the witness has admitted that during 1988-89 and 1989-90 Accused No. 3 was looking after accounts. He also relies upon the statement of Accused No. 2 in answer to question No. 439 wherein Accused No. 2 has stated that at the time the Board Note Ex-88 was issued he was the only dealer. He submits that thus Ex-88 gave no powers to him to enter into transactions in securities. He submitted that Ex-18 which is Board Note dated 30-11-1991 does not talk of any power to a dealer. He submitted that Ex-95 being a Board Note dated 10-8-1989 also does not give any financial power but that it was merely a resolution passed because Reserve Bank of India required such a resolution. He submitted that he had never been entrusted with the monies of CANFINA nor had any dominion over the monies of CANFINA. He submitted that there was nothing to show that he had any authority to enter into any transactions in securities on behalf CANFINA. He submitted that even if Court is not accepting submission that he had no authority to enter into securities transaction then also Court must hold that he had no authority to enter into a transaction to purchase CANCIGO Units. He submits that at the highest he had authority to only enter into transactions in Units of UTI, Public Sector Bonds or Government of India securities.
165. I am unable to accept these submissions. The evidence of numerous witnesses set out above shows that he was a dealer of CANFINA. The evidence of numerous witnesses set out above shows that both the dealers were entering into transactions in securities. Even otherwise on record are Ex-95 dated 10-8-1989, Ex-19 dated 12-3-1990, Ex-88 dated 20-1-1991, Ex-A dated 19-7-1991, Ex-89 dated 23-9-1991 and Ex-71 & Ex-18 both dated 30-11-1991.
166. Ex-95 which is dated 10-8-1989 specifically authorizes the persons named therein to deal in securities. Amongst the name of various persons so authorized are Accused Nos. 1 and 3. I am unable to accept the submission that this resolution was passed by the Board only because the Reserve Bank of India required such a resolution to be passed. The resolution speaks for itself. It authorizes the persons to deal in securities and certain other persons to operate accounts and also authorized Accused Nos. 1 and 3 to deal in securities of IDBI, UTI, Bonds of Public Sector Corporation and debentures of Public Limited Companies.
167. Ex-19 is dated 12-3-1990. Here also the power of deployment of funds at the Registered Office is given to both the dealers as well as the Executive Vice President.
168. Ex-88 is a Board Note No. 220 dated 20-1-1991. It talks of delegation of powers in respect of Portfolio Management Scheme. By this Board Note power to trade in securities is delegated not just to the Executive Vice President but also to the dealers at the Registered Office.
169. Ex-A is the Board Note dated 19-7-1991. This deals with the power of the Back-up Department. Ex-A deals with the powers of Back-up Department and is not relevant on this topic.
170. Ex-89 is the Board Note dated 23-9-91. This has already been set out herein above. It deals with powers of Accused No. 2 in the Back-up Department.
171. Ex-71 is the Board Note dated 30-11-1991. This does not deal with the Bangalore office.
172. Ex-18 is the Board Note dated 30-11-1991. Strong reliance has been placed by Accused No. 3 on this Board Note. In this Note the power to receive funds under the Portfolio Management Scheme and to sell and buy securities has been given only to the chief dealer in the rank of Executive Vice President. It has been submitted by Accused No. 3 that this Board Note supersedes all the earlier Board Notes. He submits that after this Board Note only Accused No. 1 had the power to deal in securities. This is denied by Mr. Thakkar on behalf of Accused No. 1.
173. It must be noted that whenever earlier authorities are superseded it is specifically so provided. This Board Note does not so provide. Therefore the effect is that by this Board Note the extent of power given to the Executive Vice President has been changed. However, the power given to the dealer is not superseded or cancelled. Thus 1 am unable to accept this submission that because of this Board Note the earlier Board Notes were no longer applicable.
174. From the above it is clear that both the chief dealer and the dealer had authority to enter into transactions in securities. Therefore the submission of Accused No. 3 that he had no authority cannot be accepted.
175. The above discussion shows that Accused No. 3 and Accused No. 4 entered into an agreement which resulted in a sale by Accused No. 4 to CANFINA of CANCIGO Units of F.V. Rs. 33 crores. As stated above CANCIGO Units were not transferable. Therefore such a transaction was by itself illegal. In any event it was clear that such a transaction would give rise to a civil action. In fact in this case it has given rise to a civil action. By virtue of this transaction dues in the amount of Rs. 25,01,67,129/- payable by Accused No. 4 to CANFINA, have been set off and wiped out. In addition a sum of Rs. 7,98,32,871- has been paid to Accused No. 4. The result has been that CANFINA has lost Rs. 33 crores and had in its hand securities to which it had a doubtful title, if any. In course of time they have lost the securities also as they have had to hand over the credit sheets for CANCIGO Units F.V. Rs. 33 crores, to the Custodian. These are the facts which are established. The question is whether any offence is committed and if so, what ?
176. Before this question is considered one other aspect needs to be dealt with.
Mr. Kulkarni has submitted that the Sanction which has been granted is not a valid Sanction. He read out Ex-128 which is the Sanction Order. He submitted that the statements in Ex-128 are contrary to paragraph 4 of the petition and evidence of witnesses in this case. He submitted that the Sanction Order shows total non application of mind and therefore is not a valid Sanction. In this behalf he relied upon the authority in the case of Rambhai Nathabhai Gadhvi & others v. State of Gujarat with The State of Gujarat v. Rambhai Nathabhai Gadhvi, .
177. It has already been held that Accused No. 2 is not guilty of any offence. Accused No. 2 is being acquitted. This question does not really require to be considered. Accused Nos. 1 and 3 had already been dismissed from service. However, as this point has been argued it is being dealt with.
178. Mr. Gupte submits that P.W. 16 had been cross-examined on the aspect of Sanction. He relies upon the evidence of P.W. 16 to show that P.W. 16 had taken into consideration all the material and fully applied his mind before granting Sanction. Mr. Gupte relied upon the case of Union of India & another v. Ashok Kumar Mitra, . In this case the Supreme Court has held that the employees of a Nationalised Bank are public servants. Mr. Gupte also relied upon the case of Mahabir Prasad Santuka & others v. Collector, Cuttack & others , wherein the Supreme Court had held that no Sanction, under section 197 of the Criminal Procedure Code, is required in case of an employee of a Nationalised Bank. Mr. Gupte submits that in any case a proper and valid Sanction Order has been obtained to prosecute Accused No. 2.
179. I am in agreement with the submission made by Mr. Gupte. Thus there is no substance in the submission that the Sanction Order is not valid.
180. Now let us determine whether any offence have been committed by Accused Nos. 3 and 4. Mr. Gupte relied upon the case of Ajay Aggarwal v. Union of India & others, . In this case the Supreme Court has held that a criminal conspiracy is itself a substantive offence, different from the offence to commit which the conspiracy was entered into. The Supreme Court has held that the criminal conspiracy was continuing offence and would endure till it is executed, rescinded or frustrated by choice or necessity. The Supreme Court has held that each conspirator need not know all details of the scheme. The Supreme Court has held that there are three elements viz., (1) an agreement (2) between two or more persons by whom the agreement is effected and (3) a criminal object, which may be either the ultimate aim of the agreement, or may constitute the means, or one of the means by which that aim is to be accomplished. The Supreme Court has held that it is not necessary that each conspirator must know all the details of the scheme nor be a participant at every stage. The Supreme Court has held that it is necessary that they should agree about design and object of the conspiracy.
181. Mr. Gupte also relied upon the case of Shivanarayan Laxminarayan Joshi & others v. State of Maharashtra & others, . In this case the Supreme Court has held that a conspiracy is always hatched in secrecy and it is impossible to adduce direct evidence of the same. The Supreme Court has held that an offence of conspiracy can only be proved largely from the inferences drawn from acts or illegal omissions committed by the conspirators in pursuance of a common design.
182. Mr. Gupte also relies upon the case of Yash Pal Mittal v. State of Punjab, . In this case the Supreme Court has held that in the case of an offence of criminal conspiracy under section 120-A the very agreement, concert or league is the ingredient of the offence and it is not necessary that all the conspirators must know each and every detail of the conspiracy as long as they are co-participators in the main object of the conspiracy. The Supreme Court has held that in achieving the goal several offences may be committed by some of the conspirators even unknown to the others. The Supreme Court has held that only relevant factor is that all means adopted and illegal acts done must be in furtherance of the object of the conspiracy. The Supreme Court has held that even if some steps are resorted to by one or the other of the conspirators without the knowledge of the others, it will not affect the culpability of those others who were associated with the object of the conspiracy.
183. Mr. Gupte also relied upon the case of Kehar Singh & others v. State (Delhi Administration), . The Supreme Court has held as follows :
"271. Before considering the other matters against Balbir Singh, it will be useful to consider the concept of criminal conspiracy under sections 120-A and 120-B of Indian Penal Code. These provisions have brought the Law of Conspiracy in India in line with the English law by making the overt act unessential when the conspiracy is to commit any punishable offence. The English law on this matter is well settled. The following passage from Russell on Crime (12th edn. Vol. I, p. 202) may be usefully noted :
The gist of the offence of conspiracy then lies, not in doing the act, or effecting the purpose for which the conspiracy is formed, nor in attempting to do them, nor in inciting others to do them, but in the forming of the scheme or agreement between the parties. Agreement is essential. Mere knowledge, or even discussion, of the plan is not, per se, enough.
272. Glanville Williams in the Criminal Law (2nd edn., p. 382) explains the proposition with an illustration.-
The question arose in a law case, but it was discussed in terms of conspiracy rather than of accessoryship. D, who had a grievance against P, told E that if he would whip P someone would pay his fine, E replied that he did not want anyone to pay his fine, that he had a grievance of his own against P and that he would whip him at the first opportunity. E whipped P.D. was acquitted of conspiracy because there was no agreement for "concert of action", no agreement to co-operate".
273. Coleridge, J., while summing up the case to jury in Regina v. Murphy, 173 Eng. Reports 508 pertinently states:-
"I am bound to tell you, that although the common design is the root of the charge, it is not necessary to prove that these two parties came together and actually agreed in terms to have this common design and to pursue it by common means, and so to carry it into execution. This is not necessary, because in many cases of the most clearly established conspiracies there are no means of proving any such thing, and neither law nor common sense requires that it should be proved. If you find that these two persons pursued by their acts the same object, often by the same means, one performing one part of an act, so as to complete it, with a view to the attainment of the object, which they were pursuing, you will be at liberty to draw the conclusion that they have been engaged in a conspiracy to effect that object. The question you have to ask yourselves is, "Had they this common design, and did they pursue it by these common means- the design being unlawful?"
274. "It will be thus seen that the most important ingredient of the offence of conspiracy is the agreement between two or more persons to do an illegal act. The illegal act may or may not be done in pursuance of agreement, but the very agreement is an offence and is punishable. Reference to sections 120-A and 120-B I.P.C. would make these aspects clear beyond doubt. Entering into an agreement by two or more persons to do an illegal act or legal act by illegal means is the very quintessence of the offence of conspiracy.
275. Generally, a conspiracy is hatched in secrecy and it may be difficult to adduce direct evidence of the same. The prosecution will often rely on evidence of acts of various parties to infer that they were done in reference to their common intention. The prosecution will also more often rely upon circumstantial evidence. The conspiracy can be undoubtedly proved by such evidence direct or circumstantial. But the Court must enquire whether the two persons are independently pursuing the same end or they have come together in the pursuit of the unlawful object. The former does not render them conspirators, but the latter does. It is, however, essential that the offence of conspiracy requires some kind of physical manifestation of agreement. The express agreement, however, need not be proved. Nor actual meeting of two persons is necessary. Nor it is necessary to prove the actual words of communication, The evidence as to transmission of thoughts sharing the unlawful design may be sufficient. Gerald Orchard of University of Canterbury, New Zealand explains the limited nature of this proposition:
''Although it is not in doubt that the offence requires some physical manifestation of agreement, it is important to note the limited nature of this proposition. The law does not require that the act of agreement take any particular form and the fact of agreement may be communicated by words or contract. Thus, It has been said that it is unnecessary to prove that the parties "actually came together and agreed in terms" to pursue the unlawful object; there need never have been an express verbal agreement, it being sufficient that there was "a tacit understanding between conspirators as to what should be done".
277. I share this opinion, but hasten to add that the relative acts or conduct of the parties must be conscientious and clear to mark their concurrence as to what should be done. The concurrence cannot be inferred by a group of irrelevant facts artfully arranged so as to give an appearance of coherence. The innocuous, innocent or inadvertent events and incidents should not enter the judicial verdict. We must thus be strictly on our guard."
184. Based on the above Mr. Gupte submits that even though it is only Accused No. 3 who had communicated instructions to Bombay, Accused Nos. 1 and 3 were acting in pursuance of a conspiracy and thus even Accused No. 4 is equally liable.
185. Mr. Gupte submits that the prosecution has proved that Accused Nos. 1 and 3 whilst acting as public servants have jointly acted in an illegal manner for obtaining for Accused No. 4 a pecuniary advantage without any public interest. He submits that they did this by abusing their positions as public servants. He submits that they have therefore abetted each other and have also committed offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act and under section 109 of the Indian Penal Code.
186. Mr. Gupte further submits that under section 11 of the Indian Penal Code, the words "person" includes a company or association or body of persons whether incorporated or not. He submits that if Accused No. 4 along with the employees of CANFINA together does an act which will fall under section 415 of the Indian Penal Code in relation to CANFINA then an offence of cheating would be spelled out. He submits that dishonest concealment of fact is deception. He submits that material elements are suppressed and the transaction is made out to be normal and ordinary and huge amounts are then adjusted and paid over. He submits that by deceiving/suppression of facts viz. that CANCIGO Units were not transferable; not in the name of Accused No. 4 and not in the name of Andhra Bank, CANFINA was induced in delivering property i.e. monies which it would not have done if it was not so deceived. He submits that this has resulted in a loss of Rs. 33 crores i.e. damage to CANFINA. He submits that thus an offence of cheating has been made out and the accused must be punished under section 420 of the Indian Penal Code.
187. Mr. Gupte submits that even otherwise, Accused Nos. 1 and 3 had been entrusted with property and had dominion over property. He submits that this is clear from Ex-90 and Ex-95, Ex-90 is Note No. 448 placed before a Board Meeting held on 12-3-1990. Under this Note a dealer and an Executive Vice President at the Registered Office could deploy funds and trade in securities to the extent laid down therein. Ex-95 Board Note No. 339 placed at the Board Meeting held on 12-8-1990 wherein authority to, inter alia, deal in securities had been given amongst others to Accused Nos. 1 and 3. Mr. Gupte submits that the evidence of P.W. 11 also establishes that both Accused Nos. 1 and 3 were entrusted with property and had dominion over the property i.e. monies of CANFINA.
188. Mr. Gupte relies upon the case of R.K. Dalmia 8s others. v. The Delhi Administration, 1962(2) Cri.L.J. 805. In this case the Supreme Court has held that the word "property" in sections 405 and 409 of Indian Penal Code is used in a much wider sense than the expression 'moveable property'. The Supreme Court has held that there is no good reason to restrict the meaning of the term "property" to movable property only when it is used without any qualification in section 405 or in any other sections of Indian Penal Code. The Supreme Court has also held that where a partner had authority to collect monies or property of the firm he is then entrusted with dominion over that property and if he dishonestly misappropriates it then he comes within section 405 of Indian Penal Code. In this case again the Supreme Court has reiterated that it is not necessary that each member of a conspiracy must know all details of the conspiracy. The Supreme Court has held that what section 409 requires is that the person alleged to have committed criminal breach of trust with respect to any property be entrusted with that property or with dominion over that property in the way of his business as an agent. The Supreme Court has held that the expression in the way of his business means that the property is entrusted to him in the ordinary course of his duty or habitual occupation, profession or trade.
189. Mr. Gupte next submits that Accused Nos. 1,2 and 3 with an intent to defraud have made or abetted in making of false entries. He submits that in the records at Bangalore, the transaction is shown to be with Andhra Bank when to their own knowledge it was not so. He further submits that the omission to mention the name of Andhra Bank Financial Services Limited would also amount to an offence under section 477-A of the Indian Penal Code. Mr. Gupte submits that so far as Accused No. 4 is concerned, he has received stolen property within the meaning of section 411 of Indian Penal Code. He submitted that this is so because he has received monies in respect of which a criminal breach of trust had been committed. He submits that therefore Accused No. 4 was also liable to be punished under section 411 of the Indian Penal Code.
190. Mr. Gupte summed up by submitting that the prosecution has proved beyond a reasonable doubt that all the Accused had entered into a criminal conspiracy with the object of illegally procuring undue pecuniary advantage to Accused No. 4 by entering into a purchase transaction of CANCIGO Units of F.V. Rs. 33 crores which by itself was an illegal act. He submits that in pursuance of this criminal conspiracy the CANCIGO Units were purchased, false entries made in the account, the fact that these were non-transferable and the title could not thus pass was concealed. He submits that the fact that the CANCIGO Units were not in the name of Accused No. 4 was also concealed. He submits that Accused Nos. 1, 2 and 3 misused their position as public servant by netting off dues of Rs. 25,01,67,129/- which were payable by Accused No. 4 to CANFINA and over and above that paid Rs. 7,98,32,871/- to Accused No. 4. He points out that the cheque was drawn in the name of Andhra Bank but specific instruction were given to credit the amount to the account of Accused No. 4 He Submits that the prosecution doubt that all the Accused have committed the offences set out above and that they should be convicted.
191. Accused No. 3 did not advance any arguments on law. On law he adopted the arguments of Counsel on behalf of other Accused. However some arguments made by Accused No. 3 are the same as made by Mr. Ovalekar. Those are thus dealt with whilst considering submissions of Mr. Ovalekar.
192. Mr. Ovalekar submits that Accused No. 4 is merely a victim of circumstances. He submits that Accused No. 4 had out of his own money purchased and acquired the CANCIGO Units F.V. Rs. 33 crores. He submits that even though the Units were in the name of Andhra Bank and Andhra Bank Financial Services Limited, both those institutions after they received interest on these Units passed on that interest to Accused No. 4. He submits that in his business as a broker Accused No. 4 had incurred a liability of Rs. 25,01,67,129/-. He submits that Accused No. 4 owes this amount to CANFINA. He submits that Accused No. 4 being an honest broker, wanted to discharge his liability. He submits that therefore Accused No. 4 agreed to sell these CANCIGO Units F.V. Rs. 33 crores, which were his property. He submits that Accused No. 4 has delivered these Units to the Bombay Office. He submits that P.W. 6 has accepted delivery on 11-2-1992. He submits that thus the amount payable was rightly set off and Accused No. 4 rightly received the sum of Rs. 7,98,32,871/-.
193. Mr. Ovalekar and Accused No.3 submitted that the witnesses of the prosecution have stated that this transaction was entered into in the normal course of business. For this they relied upon the evidence of P.W. 6 on page 225 of the Notes of Evidence; the evidence of P.W. 11 on pages 339/340 of the Notes of Evidence; the evidence of P.W. 15 on page 391 of the Notes of Evidence and the evidence of P.W. 16 page 425 of the Notes of Evidence. This submission is unacceptable. It is in the ordinary course of business to extend that dealers had authority to enter into securities transaction. However this did not permit dealers to purchase non-transferable securities or enter into an illegal transaction.
194. Mr. Ovalekar submits that even though the Credit Sheet stood in the names of Andhra Bank and Andhra Bank Financial Services Limited, this fact was known to the Bangalore office. He submits that, that is why the cheque for Rs. 7,98,32,871/- was drawn in the name of Andhra Bank but instructions were given from Bangalore that the amount should be paid to Accused No. 4. This is denied by Accused No. 3.
195. Mr. Ovalekar submits that thus Accused No. 4 has honestly satisfied the debt due by him. He and Accused No. 3 submit that the CANFINA has never made a complaint about this transaction. Accused No.3 also submits that a number of Audits and inspections have taken place and no one has complained about this transaction. It was submitted that this showed that nobody considered this transaction to be wrong. Court has seen in almost all matters that the monitoring agencies have absolutely failed in their duties to notice and/or to object to such transactions. Merely because they failed in their duties does not mean that there is no illegality.
196. Mr. Ovalekar submits that the First Information Report dated 2-6-1993 is on the basis of source information. He submits that P.W. 17 has admitted this on pages 430 and 433 of the Notes of Evidence. He submits that this is also clear from the First Information Report which is Ex-130. He submits that the Criminal Procedure Code does not recognise any source information. He submits that the witnesses of CANFINA have admitted that there was no enquiry held before the First Information Report was filed. He submits that, that case was then dropped and the present case taken up. He submits that the entire case is a wild imagination of C.B.I. He submits that CANFINA has not made any complaint that it has been cheated and/or that any other offences has been committed. He submits that if the C.B.I had not interfered then CANFINA would have been able to sort but their problem with Canbank Mutual Fund and would have got these securities transferred into their name. He submits that Accused No. 4 has made no misrepresentation nor foisted any deal on CANFINA nor hidden any facts. He submits that the transaction was entered into with open eyes. He submits that even if all other accused are convicted Accused No. 4 must be set free.
197. To be noted that all facts have been established by the prosecution. At cost of repetition it must be mentioned that prosecution have proved 'beyond a reasonable doubt' that Accused No. 4 for reasons best known to him chose to get Andhra Bank to subscribe CANCIGO Units of F.V. of Rs. 11 crores and Andhra Bank Financial Services Limited to subscribe to CANCIGO Units of F.V. Rs. 22 crore. By doing this Accused No. 4 knew that he would thereafter not be able to deal with these Units as these were non transferable. It is proved that in transactions in securities Accused No. 4 owed CANFINA a sum of Rs. 25,01,67,129/-. It is proved that instead of paying the money Accused No. 4, with Accused No.3 entered into this transaction of sale of CANCIGO Units which were not transferable and which to the knowledge of Accused No. 4 were not even standing in his name. Accused No. 4 thus well knew that no title could be passed by him. To be remembered that he does not even get any letters of authority from Andhra Bank and/or Andhra Bank Financial Services Limited. Thus by this method Accused No. 4 sets off his liability of Rs. 25,01,67,129/- and on top receives a sum of Rs. 7,98,32,871/-. CANFINA is then left with securities to which they have a doubtful title and which they ultimately have to give up to the Custodian. This according to Mr. Ovalekar is the conduct of a honest broker. If conduct of selling securities, in which no title can pass and which do not stand in your name, is honest then there can be no cheating or any other offence in this world at all. To the knowledge of Accused No. 4 he could not have sold these CANCIGO Units as they were non-transferable. Accused No. 4 well knew that they did not stand in his name. The dishonest intention is clearly indicated by the fact that Accused No. 4 sold in spite of knowing full well that he could not deal with these CANCIGO Units as they did not stand in his name and in event as to his knowledge they were non-transferable. The dishonest intention is also clear from fact the Accused No. 4 never even bothered to get any Letter of Authority or any document from either Andhra Bank or Andhra Bank Financial Services Limited. The conduct of Accused No. 4 in selling and handing over non-transferable Units not standing in his name itself shows that the intention was a dishonest intention.
198. Mr. Ovalekar has strongly relied upon the petition Ex-U (Colly). He had submitted that CANFINA has in this petition averred that in respect of various transactions a sum of Rs. 25,01,67,129/- was payable by Accused No. 4. He relies upon para 4 of the petition which reads as follows:-
"4. Respondent No. 2 claimed that Respondents Nos. 3 and 4 held the said CANCIGO's of the face value of Rs. 33 crores issued by Canbank Mutual Fund. Respondent No. 2 further claimed that the CANCIGO's were not transferable. Respondent No. 2 further claimed that he was a beneficiary in respect of the said CANCIGO held by Respondents Nos. 3 and 4. Respondent No. 2 further offered that although the said CANCIGO's were in law not his own property he was willing to transfer his right as a beneficiary of the said CANCIGO's in favour of the petitioners in discharge of his aforesaid liability to the petitioners. The petitioners accepted the offer made by Respondent No. 2 and agreed to purchase and/or acquire the beneficial right of Respondent No. 2 in the said CANCIGO. Pursuant to the above agreement, Respondent No. 2 delivered to the petitioners two CANCIGO Certificate first one dated 3rd September, 1991, bearing No. 5289 standing in the name of Respondent No.3 for a sum of Rs. 11 crores and the second one dated 13th September, 1991, for a sum of Rs. 22 crores standing in the name of Respondent No. 4 The petitioners in their turn after adjusting the aforesaid amounts due in the sum of Rs. 25,01,67,129/- paid the balance purchase consideration in the sum of Rs. 7,98,32,871/- vide their cheque No. 081329 dated 11th February, 1992, issued in favour of Andhra Bank to the credit of Respondent No. 2. Hereto annexed and marked as Exhibit "A" and Exhibit "B" respectively are copies of the said certificates dated 3rd September, 1991 and 13th September, 1991. Hereto annexed and marked as Exhibit "C" is a copy of the petitioners daily memo sheet dated 6th February, 1992, inter alia recording the transaction for purchase and/or acquiring of property in the CANCIGO of Rs. 33 crores."
199. Mr. Ovalekar submits that the averments in this petition must be taken to be admissions of CANFINA. He submits that the averments make it very clear that Accused No. 4 had disclosed, from the beginning, that CANCIGO Units are not transferable. He submits that the averments make it very clear that Accused No. 4 had disclosed, from the beginning, that he is a beneficiary in respect of these. CANCIGO Units. He submits that this petition shows that the Accused No. 4 had made it very clear that in law this was not his property but he was willing to transfer his right as beneficiary of these Units. He submits that the averments make it very clear that CANFINA accepted this offer, agreed to purchase and acquired the beneficial rights in these CANCIGO Units. He submits that this averments make it very clear that it was in pursuance of such an agreement that Accused No. 4 delivered Ex-66 (colly) to CANFINA at Bombay and received the sum of Rs. 7,98,32,871/- after adjustment of Rs. 25,01,67,129/-.
200. Mr. Ovalekar submits that the whole case is based on transaction between Accused Nos. 1, 2 and 3 representing CANFINA and accused No. 4. He submits that all these three Accused were public servants working in the Funds Department of CANFINA. He submits that CANFINA took delivery in their Bombay office from Accused No. 4.
201. Mr. Ovalekar submits that a fixed rate of interest was payable and there was a lock in period of one year. He submits that hence the holder of the Units could not encash the Units before completion of the one year's period, he submits that another relevant restriction was that the Holder could not transfer the Credit sheets which were specifically made non-transferable.
202. Mr. Ovalekar submits that though the Credit Sheets (Ex-66) were in the name of Andhra Bank (face value Rs. 11 crores) and Andhra Bank Financial Services Limited face value of Rs. 22 crores yet physically the said Units were in the custody of the Accused No. 4. He submits that Accused No. 4 was trading and doing business as a Broker. He submits that the Prosecution has led evidence that though the Credit Sheets were issued in the names of Andhra Bank and Andhra Bank Financial Services Limited, yet the entire consideration of Rs. 33 crores, paid to Canbank Mutual Fund, flowed from the personal Bank Account of Accused No. 4. He submits that Canbank Mutual Fund appears to have recognised Accused No. 4 as the owner of those Units. He submits that this is so because they paid the further interest due on those Units by drawing cheques on Andhra Bank and Andhra Bank Financial Service Limited who credited the amount to the account of Accused No. 4 with them. It must be mentioned that this last submission is contrary to evidence which shows that Canbank Mutual Fund did not recognise anybody apart from Andhra Bank and Andhra Bank Financial Services Limited as owners of 11 crores and 22 crores Units respectively. Mr. Ovalekar submits that Canbank Mutual Fund is a Trust and subsidiary of Canara Bank. He submits that another subsidiary of Canara Bank is CANFINA, a Board Managed Company incorporated under the Companies Act.
203. Mr. Ovalekar submits that the charge of conspiracy requires for its proof evidence that on a particular day or during particular period at a particular place the Accused Nos. 1 to 3 met Accused No. 4 and thereafter there was meeting of their minds on doing a particular act or there was consensus between them on a particular subject or object or that they became on such meeting of one mind that certain act should be carried out or done. He submits that there should therefore be evidence that all the Accused reached an agreement. He submits that this arriving at an agreement becomes a criminal conspiracy as defined in section 120-A of the Indian Penal Code and made punishable under section 120-B of the Indian Penal Code if such an agreement is to do an illegal act. Mr. Ovalekar submits that the agreement alleged in this case is an agreement to purchase non-transferable CANCIGO Units. He submits that the act of purchase is stated to be illegal in Charge Firstly on the ground that the CANCIGO Units were non- transferable. He submits that the 1st count of the Charge in this respect is too vague and general and it does not set out any particular allegation which indicates that the act of purchase of non-transferable Units is an illegal act because of certain reason. He submits that this Charge is defective and nonspecific and it has resulted in miscarriage of justice. At this stage it must be mentioned that as such an argument was advanced, to ensure that the Accused understood the charge properly and there was no miscarriage of justice the Charges were amended/altered by Order dated 9th January, 1998. An Appeal against that Order was dismissed by the Supreme Court on 23rd March, 1998. Pursuant thereto Accused No. 4 was allowed to further cross-examine any witness. He has used that opportunity.
204. Mr. Ovalekar submits that it has been alleged by Prosecution that Accused No. 4 cheated Funds Department of CANFINA inasmuch as:-
(a) Accused No. 4 made false representations regarding the sale of CANCIGO Units of face value Rs. 33 crores. (please note that no representations are specified).
(b) Dishonestly and fraudulently induced CANFINA to deliver a sum of Rs. 33 crores in respect of fraudulent sales of CANCIGO Units which were non-transferable.
(c) Received Rs. 7,98,32,871/- on 11-2-1992, by Banker's cheque and got adjusted outstanding debt of CANFINA of Rs. 25,01,67,129/-.
205. Mr. Ovalekar submits that cheating is defined in section 419 of Indian Penal Code as follows:-
"Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act of omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
206. Mr. Ovalekar submits that the offence of cheating contemplates two persons Say A and B. Out of them B holds some property. B delivers that property to A. He submits that these events into the realm of an offence when the cause of the act of delivery is deception and fraudulent and dishonest inducement to the person so deceived. He submits that this completes the offence of cheating.
207. Mr. Ovalekar submits that in this case CANFINA a Board managed Company incorporated under the Companies Act, possessed or held funds in their funds department at Bangalore. He submits that those funds of CANFINA were under the control of their three employees in the Funds Department Accused Nos. 1, 2 and 3 jointly and severally. He submits that out of those funds and Accused Nos. 1 and 3 either jointly or severally delivered or caused to be delivered to Accused No. 4 funds to the tune of Rs. 33 crores on 11th February, 1992, by adjusting Rs. 25,01,67,129/- against the receivable from Accused No. 4 to CANFINA (and thus wiping out the liability of Accused No. 4 to CANFINA to that extent) and further paid the balance amount of Rs. 7,98,32,871/- to Accused No. 4 by a Banker's cheque, thus completing the amount of Rs. 33 crores.
208. Mr. Ovalekar submits that thus, the Funds Department of CANFINA delivered the property viz., Rs. 33 crores to Accused No. 4 and the question is whether this delivery is caused by Accused No. 4 by deception and fraudulent and dishonest inducement. He submits that this deception and inducement would be by representations made by Accused No. 4 to Accused Nos. 1 and 3. He submits that if the representations do not amount to any deception or inducement which is fraudulent or dishonest then the offence of cheating is ruled out
209. Mr. Ovalekar submits that "dishonestly" is defined in section 24 of the Indian Penal Code as follows:-
"Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing "dishonestly". "
He submits that "Fraudulently" is defined in section 25 of the Indian Penal Code, as follows:-
"A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise".
210. Mr. Ovalekar submits that in this case parting or delivery of properly being Rs. 33 crores to Accused No. 4 by Accused Nos. 1 to 3 is not in dispute. He submits that the only question is whether this delivery of property was brought about by Accused No. 4 by deceiving Accused Nos. 1 to 3 and by fraudulently and dishonestly inducing them to deliver that property. He submits that thus the charge must set out the alleged representations of Accused No. 4 which allegedly caused the delivery of property and but for which representation the Accused Nos. 1 and 3 would never have delivered that property. He submits that the Charge "Ninethly", does satisfy those requirements. I am unable to accept this submission. Charge Ninethly clearly sets out all ingredients necessary to be set out also to be seen that the cheating is not of Accused No. 1 and/or 3 but of CANFINA in conspiracy with the dealer.
211. Mr. Ovalekar next submits that the offence of cheating in Charge Ninethly is destroyed because Accused Nos. 1 to 3 purchased CANCIGO Units F.V. Rs. 33 crores with the full knowledge that the Units could not be transferred. He submits that Accused Nos. 1 to 3 delivered the property viz. Rs. 33 crores not because of any inducement made dishonestly and fraudulently by Accused No. 4 and also not on account of any representations regarding sale of CANCIGO Units but Accused Nos. 1 and 3 had the previous knowledge that the Units were non-transferable. He submits that thus the parting of amount of Rs. 33 crores was not because of inducement or representations but Accused Nos. 1 to 3 entered into this deal with the full knowledge that the Units were non-transferable. Thus Accused No. 4 committed no offence of cheating. Mr. Ovalekar submits that on the facts disclosed in the oral and documentary evidence led in this case by the prosecution it is apparent that the necessary ingredients appearing in the definition of cheating as given in section 415 of the Indian Penal Code, are not forth coming and as such the charge of cheating set out in the Charge Ninethly must fail. It must be mentioned that the cheating is not of the dealers but that in conspiracy with the dealer CANFINA has been cheated.
212. Mr. Ovalekar submits that the motive behind the alleged commission of offence is stated to be, to obtain pecuniary advantage to Accused No. 4 to the tune of Rs. 33 crores. He submits that there is no evidence to support this allegation of motive. He submits that this allegation is only a wild imagination and an unwarranted inference. He submits that the real motive behind entering into this deal was to meet the exigencies of the matter i.e. the need to enter into the said transaction. He submits that the deal of purchase of CANCIGO Units for Rs. 33 crores if examined on the background of the situation obtaining at that time may have been unwise but cannot be termed as a dishonest deal. He submits that at that time Accused No. 4 had to pay to CANFINA Rs. 25,01,67,129/- which amount is quantified as receivable by CANFINA from Accused No. 4 hi connection with other transactions. He submits that CANFINA was thus faced with a problem of recovering those dues from Accused No. 4. He submits that to secure that amount CANFINA took possession of CANCIGO Sheets face value Rs. 33 crores and paid Rs. 7,98,32,871/- by a cheque to Accused No. 4. In my view Mr. Ovalekar has answered himself. The motive was to wipe out the debt of Rs. 25,01,67,129/-not by any honest means but by passing on property in which CANFINA can get no title. On top a sum of Rs. 7,98,32,871/- is received in exchange for nothing. This is not done in a genuine transaction in securities. It is done with thus that CANCIGO Units were non-transferable and CANFINA would have knowledge to get no title. In any case CANFINA would have had to take recourse to legal action to establish title.
213. As regards the very elaborate arguments based on Ex-U (Colly.) that everything has been disclosed by Accused No. 4 and therefore there could be no cheating, the answers are simple. Accused No. 4 has brought Ex-U (Colly.) on record. Ex-U (Colly.) would be binding on accused No. 4, hut evidence brought on record by one Accused would not be evidence against the other Accused. Accused No. 3 does not admit that at the time the transaction was entered into, all these facts had been disclosed. However above evidence, discloses that Accused No. 3 was so aware. It is on basis of information supplied by him and Accused No. 2 that Petition Ex-U was filed. Also he had instructed Accused No. 2 to enter the name of Andhra Bank in Ex-19. He instructed P.W. 6 to accept delivery even though deficient. On the facts established and even on facts in Ex-U (Colly.) a clear case of criminal breach of trust has been made out. On these facts a clear case of offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act, has been made out. The facts would show that in conspiracy with each other Accused No. 4 got Accused No. 3, the person entrusted with property or dominion over property i.e. Rs. 33 crores in his capacity as public servant to commit criminal breach of trust in respect of that property. As seen earlier, Accused No. 3 has been entrusted with monies of CANFINA and empowered to deal in transactions in securities. He therefore also had dominion over monies of CANFINA. Such entrustment and dominion could only be used for entering into genuine transactions of securities wherein the title in the securities could be obtained by CANFINA. In breach of such entrustments and dominion Accused No. 4 and Accused No. 3 both agreed and entered into an illegal transaction to purchase CANCIGO Units F.V. Rs. 33 crores knowing that they were non-transferable and such a transaction would be illegal as prohibited by law and/or being one which would give rise to a civil action, also as the CANCIGO Units did not stand in the name of accused No. 4 such a transaction was also against the principles of the Benami Transaction (Prohibition) Act. By this method they have enabled adjustment or setting off of a debt of Rs. 25,01,67,129/- and Accused No. 4 has received a sum of Rs. 7,98,32,871/-. The dishonest motive is writ large on the face of the transaction itself. Accused No. 4 did not even bother to get any letter of authority from either Andhra bank or Andhra Bank Financial Services Ltd. Of course even if such authority had been obtained it would not have been of much use as CANCIGO Units were not transferable. However the action of Accused No. 4 not getting any letter of authority clearly indicates the dishonest intention. It shows that Accused No. 4 well knew that he was selling something in which CANFINA was not going to get any title. The intention was not to sell any valid security but to wipe out the debt of Rs. 25,01,67,129/- and deprive CANFINA of another sum of Rs.7,98,32,871/-. The public servant Accused No. 3 has also dishonestly allowed Accused No. 4 to convert to his own use Rs. 33 crores. The public servant has also obtained by illegal means a valuable thing and pecuniary advantages i.e. Rs. 33 crores for Accused No. 4. The public servant by abusing his position as public servant has obtained for Accused No. 4 the valuable thing and pecuniary advantage and the same has been done without any public interest. Accused No. 3's dishonest intention is clear from fact that he entered into such a transaction knowing that the CANCIGO Units were non-transferable and not in name of Accused No. 4. P.W. 6 had on receipt informed Accused No. 3 about the deficiency. Yet Accused No. 3 instructs P.W. 6 to accept deficient securities.
214. It must be mentioned that Mr. Ovalekar had also submitted that for properly understanding the real interest of Accused No. 4 in the said Units this Court has to take into account the following points:-
1. From whom the consideration for Rs. 11 crores and Rs. 22 crores flowed for acquiring the CANCIGO Units of face value of equal amounts.
2. Who submitted the application to Canbank Mutual Fund for the purchase of the said Units.
3. Whether the applications were intended to be submitted for the signatory thereof or on behalf of the Constituent Agent or on behalf of the person issuing the cheques for the value of the Units.
4. Whether Canbank Mutual Fund was right in issuing the Units in the names of Andhra Bank (face value of Rs. 11 crores) and in the name of Andhra Bank Financial Services Limited (face value Rs. 22 crores).
5. What were the Rules serving as guidelines to Canbank Mutual Fund for dealing with the Units issued and for encashment of the Units.
6. What were the restrictions and conditions to which the Units were subject.
7. What were the lawful consequences following the breach of those Rules or Restrictions Conditions.
Points (1) to (4) are irrelevant in this case. As stated above Canbank Mutual Fund has correctly issued the Credit Sheets for Rs. 11 crores Units in the name of Andhra Bank as they had applied for them. Canbank Mutual Fund had correctly issued Rs. 22 crores Units in name of Andhra Bank Financial Services Limited as they applied from them. Undoubtedly Accused No. 4 paid for them. However it is Accused/No. 4 who got Andhra Bank and Andhra Bank Financial Services Limited to apply for the Units in their name. Why he did that is best known to him. As stated above, in this case, we are not concerned with the reason. Ex-U as well as the fact that interest was paid, not to Accused No. 4 but to Andhra Bank and Andhra Bank Financial Services Limited and then received by Accused No. 4 shows that Accused No. 4 was at all stages aware that these stood in the name of Andhra Bank (Rs. 11 crores) and Andhra Bank Financial Services Limited (Rs. 22 crores). Accused No. 4 never objected to the Units being issued in the name of Andhra Bank and Andhra Bank Financial Services Limited. Points 5 to 7 have been dealt with above.
215. Mr. Ovalekar submits that the above are the key issues, answers to which, conclusively decide whether the Charges framed are established on evidence. He submits that in the circumstances for establishing the Charges framed it was the duty of the prosecution to lead all available evidence. He submits that this evidence consists of documents brought on record of this case and oral evidence of witnesses executing or dealing with those documents. He submits that it was most improper and almost unfair on the part of prosecution to withhold witnesses necessary to unfold the case. He submits that Prosecution have examined P.W. 2 Nagraj who when he gave evidence was working as a Dealer in the Treasury in the Funds and Investment Department of Andhra Bank. From 1989 till May, 1992 he was working as the Branch Manager at Sholapur and as such knew nothing about the transactions involved in this case. He submits that P.W. 2 was examined to speak about the document with which Mr. Dhankumar was personally concerned. He submits that P.W. 2 could not be a substitute for Mr. Dhankumar. He submits that the prosecution withheld Mr. Dhankumar without assigning any reasons. He submits that this was not only unfair to the Accused but almost unjust and this becomes deprecable because all these were intentional manoeuvres deliberately indulged into to conceal the truth.
216. Mr. Ovalekar submits that the duty of the prosecutor was discussed by Sir Lorence Jenkins as far back as in 1915, when His Lordship was the Chief Justice of the Calcutta High Court. He relies upon the case of Ram Ranjan Roy & another v. Emperor, A.I.R. 1915 Cal. 545. He also relies upon the cases of Stephen Seneviratne v. The King, A.I.R. 1936 P.C. 289, in the case of Habeeb Mohammad v. State of Hyderabad, , and in the case of Darya Singh & others v. State of Punjab, .
217. Mr. Ovalekar and Accused No. 3 submit that the following witnesses were necessary to unfold the prosecution case:---
1. Dhankumar Andhra Bank,
2. Kalyan Raman ABFSL.
3. Haribhau Andhra Bank.
4. S.B. Kamath Andhra Bank.
They submit that an adverse inference will have to be drawn that if examined they would not have supported the prosecution case. They submits that in a situation like this the duly of the Court does not end with drawing an adverse inference. He submits that the duty extends to the Court examining witness as the Court's witness. He submits that, that alone can serve the ends of justice.
218. I see no substance in these submissions. Prosecution has not kept back any relevant witness. Prosecution has fully established its case beyond any reasonable doubt. It is no part of the duty of the prosecution to lead unnecessary witness/evidence. As stand above in this case it is proved that Accused No. 4 asked Andhra Bank and Andhra Bank Financial Service Limited to apply for CANCIGO Units in their names. Why Accused No. 4 did this is best known to him. In this case we are not concerned with that motive. Fact is that to the knowledge of Accused No. 4 CANCIGO Units were issued in the name of Andhra Bank and Andhra Bank Financial Services Limited. Accused No. 4 knew this as he had asked them to so apply and also because he received interest from them. He even asked for the interest. He never protested about it. Thus there is nothing further which these witnesses would have unfolded which was relevant in this case.
219. Mr. Ovalekar submits that the evidence of P.W. 2, P.W. 3 and P.W. 10 along with the documents clearly show that Accused No. 4 was the owner of CANCIGO face value 33 crores. This is not established. All that the evidence shows is that Accused No. 4 had paid for them. However he chose to take them in the names of Andhra Bank and Andhra Bank Financial Services Limited. By doing this Accused No. 4 knew that he could not then deal with these Units nor enforce any right in respect thereof by virtue of the Benami Transaction (Prohibition) Act. Mr. Ovalekar submits that the offer of Accused No. 4 to deliver the Units to CANFINA was a bona fide offer and there were no misrepresentations. He submits that the offer was accepted by Accused Nos. 1 and 3 and processed by Accused No. 2 knowing full well the nature of the Units. He submits that they were free to decline the offer in which case the Accused No. 4 could have disposed of the Units in any other way. Mr. Ovalekar submits that if the deal struck by Accused Nos. 1 and 3 is considered as against the interest of CANFINA in that case also Accused No. 4 had committed no offence. Accused Nos. 1 and 3 are being acquitted. It appears that Mr. Ovalekar is right that Accused No. 3 did accept such an offer. However this was because Accused Nos. 4 and 3 criminally conspired with each other to enter into the agreement to purchase non-transferable Units. They criminally conspired to commit criminal breach of trust and offences under sections 409 and 411 of the Indian Penal Code and section 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act.
220. Mr. Ovalekar submits that CANFINA could have negotiated with Canbank Mutual Fund who would have waived the condition that the Units were non-transferable. He submits that after all both were sister concern with Canara Bank as their parent organisation. He submits that there is no evidence that Canbank Mutual Fund had refused to recognise CANFINA as the lawful holders of the CANCIGO Units. To be noted that these submission are contrary to evidence on record. Ex-U which has been brought on record by Accused No. 4 itself shows that Canbank Mutual Fund refused to recognise the transfer in favour of CANFINA. CANFINA was thus forced to file the petition. Its claim was rejected by this Court. All witnesses have deposed that CANCIGO Units were non-transferable. All attempts to get some witnesses to state that Canbank Mutual Fund could have waived the condition have failed. It has not been shown that Canbank Mutual Fund has ever waived such condition.
221. Mr. Ovalekar submits that this is a wholly misconceived prosecution which is liable to be terminated in favour of Accused No. 4. He submits that for the above, amongst other reasons Accused No. 4 must be acquitted and the Credit Sheets Ex-66 must be forthwith restored to CANFINA.
222. I see no substance in this submission. In my view prosecution has proved beyond a reasonable doubt that Accused Nos. 3 and 4 entered into a criminal conspiracy to purchase non-transferable securities i.e. CANCIGO Units which by itself was an Illegal Act. The prosecution has proved beyond a reasonable doubt that Accused Nos. 3 and 4 entered into a criminal conspiracy to commit offences under sections 409, 411 of the Indian Penal Code and offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The prosecution has also proved beyond a reasonable doubt that Accused No. 3 has committed an offence under section 409 of the Indian Penal Code and section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The prosecution has also proved beyond a reasonable doubt that Accused No. 4 has committed the offence under section 411 of the Indian Penal Code.
223. Accordingly Accused Nos. 1 and 2 are acquitted of the offence of criminal breach of trust to commit offences and of the substantive offences under sections 409, 420, 477-A Indian Penal Code and offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The personal bonds executed by Accused Nos. 1 and 2 to stand discharged forthwith.
224. Accused Nos. 3 and 4 are held guilty of criminal conspiracy and criminal conspiracy to commit offences under sections 409, 411 Indian Penal Code and offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act.
Accused No. 3 is also held guilty of offence under section 409 Indian Penal Code and offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act.
Accused No. 4 is also held guilty of offence under section 411 Indian Penal Code, i.e. of having received stolen property viz. Rs. 33 crores this being property in respect of which criminal breach of trust was committed.
225. The Court was wanting to hear Accused Nos. 3 and 4 on the question of punishment. At this stage Mr. Ovalekar applies that an adjournment may be given for the purposes of hearing the Accused on the question of sentence. He relies upon the case of Allauddin Man & others. Sharif Mian & another v. State of Bihar, , wherein the Supreme Court has held that as a general rule after recording conviction the Court should adjourn the matter to a future date and call upon both the prosecution as well as the defence to place all relevant material bearing on the question of sentence before it and thereafter pronounce the sentence to be imposed on the offender. In my view the Supreme Court is not laying down that in every matter the Court should follow this procedure. In my view the Supreme Court has made the observations relied upon only in the context of capital punishment being imposed by a Court. However, to leave no room for complaint I adjourn the case to 27th August, 1998, to hear Accused Nos. 3 and 4 on the question of sentence.
226. Accused Nos. 3 and 4 have, as set out above, been held guilty of offences of criminal conspiracy, criminal conspiracy to commit offences under sections 409 and 411 of the Indian Penal Code and offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. Accused No. 3 has also been held guilty of the substantive offence under section 409 of Indian Penal Code and substantive offences under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. Accused No. 4 has been held guilty of the substantive offence under section 411 of the Indian Penal Code.
227. At the request of Mr. Ovalekar the case was then adjourned to today for the purposes of hearing the prosecution and accused on the question of sentence to be passed.
228. Mr. Gupte submits that as this Court has held Accused Nos. 3 and 4 guilty of criminal conspiracy to commit an offence, the same sentence would have to be passed against both the Accused. In support of this he relies upon the case of Ram Chandra & another v. State of Uttar Pradesh, . In this case the Supreme Court held that as the offences were committed in pursuance of a criminal conspiracy or in pursuance of a common intention the appellants would be equally guilty of the substantive offences and would be liable to the same sentence.
229. Mr. Gupte also relies upon the case of Mohd. Hussain Umar Kochra etc. v. K.S. Dalipsinghji & another, , where again the Supreme Court has held that a party to a criminal conspiracy to commit an offence was punishable under section 120-B(1) of the Indian Penal Code, in the same manner as if he had abetted the offence. The Supreme Court has held that the criminal conspiracy is a separate offence, punishable separately from the main offence. On the facts of the case the Supreme Court has held that the sentences on all the charges should run concurrently.
230. Mr. Gupte next submitted that this is a case of economic offence. He submitted that in such cases the Court should take a serious view. He relies upon a judgment of the Bombay High Court in the case of State of Maharashtra v. Drupati Sahijising Bhawnani, 66 Bom.L.R. 281. In this case certain wrist watches, watch straps, rings and other articles were sought to be brought into the country without declaration and payment of duty. The trial Court merely passed a sentence of fine on a plea of guilty. An application was moved for enhancement of sentence in the High Court. The High Court held that the cases of this sort reveal that there are larger questions involved. The High Court held that this showed that there was not enough abhorrence or fear or sanction against commission of such crimes with impunity. The High Court held that to permit wholesale violation of these restrictions and prohibitions exposes the national interests to avoidable risks which no citizen has a right to attempt. The High Court held that the items sought to be imported could not have been for personal use or for the use of any member of the family but were for the purposes of selling the same at fancy prices. The High Court held that the enormity of the offence and the deliberateness with which it was planned and committed left no doubt that the accused was voluntarily participating and was fully conscious of what she was doing. The High Court held that a serious view must therefore, be taken of such offences which showed a distressingly growing tendency. The High Court held that the argument that the accused comes from a respectable or high family rather emphasizes the seriousness of the malady. The High Court held that if members belonging to high status in life show scant regard for the laws of this country, which are for public good, for protecting our foreign trade or exchange position or currency difficulties, the consequential punishment for the violation of such laws must be equally deterrent. The High Court held that serious economic crimes must be curbed effectively.
231. Mr. Gupte also relies upon the case of (Balkrishna Chhaganlal Soni v. State of West Bengal, . This was a case where the gold had been smuggled into the country. The Supreme Court endorsed the observations of Bombay High Court set out above in above mentioned case. The Supreme Court has held that social and economic offences stand on a graver footing in respect of punishment. The Supreme Court held that crimes are professionally committed by deceptively respectable members of the community by inflicting severe trauma on the health and wealth of the nation. The Supreme Court held that the numbers of this neo-criminal tribe are rapidly escalating. The Supreme Court held that this form a deterrent exemption to humane softness in sentencing. The Supreme Court held that the smugglers, hoarders, adulterators and others of their like have been busy in their underworld because the legal hardware has not been able to halt the invisible economic aggressor inside. The Supreme Court held that the ineffectiveness of prosecutions in arresting the wave of white collar crime must disturb the Judge's conscience. The Supreme Court held that in the category of professional economic offenders, incarceration is peculiarly potent. The Supreme Court held that such offences are typical of respectable racketeers who, tempted by the heavy pay-off, face the perils of the law and hope that they could smuggle on a large scale and even if struck by the Court they could get away with a light blow. The Supreme Court noted the Law Commission's observation that the tendency to award light sentences must be curbed. The Supreme Court held that if judicial institutions are not to be cynically viewed by the community Court must help the process by giving such anti-social operators an unhappy holiday in jail.
232. Mr. Gupte also relies upon the case of State of Maharashtra v. Champalal Punjaji Shah, . In this case the Supreme Court held that the offence was one which jeopardized the economy of the country and it was therefore impossible to take a casual or a light view of the offence. The Supreme Court held that in cases of offence of a trivial nature such as a simple assault or the theft of a trifling amount the Court may hesitate to send an accused person back to jail as it would not be in the public interest or in the interest of anyone to do so. The Supreme Court held that however, where the stakes involved are large then sympathy would be misplaced.
233. Mr. Gupte also relies upon the case of Dhananjoy Chatterjee alias Dhana v. State of W.B., . In this case the Supreme Court held that there was a rising crime rate. The Supreme Court held that shockingly a large number of persons go unpunished thereby encouraging the criminal and in the ultimate making justice suffer by weakening the system's credibility. The Supreme Court held that it was not possible to lay down any cut and dry formula relating to imposition of sentence but the object of sentencing should be to see that the crime does not go unpunished and the victim of crime as also the society has the satisfaction that justice has been done. The Supreme Court held that justice demands that courts should impose punishment befitting the crime so that the courts reflect public abhorrence of the crime.
234. Mr. Gupte also relied upon the case of Rajiv alias Ram Chandra v. State of Rajasthan , wherein the Supreme Court held that it is the nature and gravity of the crime and not the crime and not the criminal which are germane for consideration of appropriate punishment in a criminal trial. The Supreme Court held that the Court is failing in its duty if appropriate punishment is not awarded for a crime which has been committed not only against the individual victim but also against the society to which the criminal and victim belong. The Supreme Court held that the punishment should respond to the society's cry for justice against the criminal.
235. Mr. Gupte also relies upon the authority in the case of Surja Ram v. State of Rajasthan, , wherein again the same principles have been reiterated.
236. Based upon the above, Mr. Gupte submits that the magnitude of amount involved in this case is very high. He submits that this is an economic offence. He submits that economic offences of this nature are committed by white collar criminals and such crimes are affecting the economy of the country. He submits that such crime needs to be dealt with, with a heavy hand. He submits that the deterrent elements of the sentence must be the predominant factor. He submits that this is the case where there is no mitigating circumstance but only aggravating circumstances. He submits that this crime was perpetrated in a cool and calculated manner and not on the spur of the moment. He submits that this is the crime which is not committed out of any economic compulsion like poverty but from greed for money. He submits that the society's expectations have to be taken into account and an appropriate punishment which will act as a severe deterrent must be awarded. He submits that any sympathy shown will be misplaced.
237. Mr. Gupte also relies upon the case of Bollavaram Pedda Narsi Reddy & others v. State of Andhra Pradesh. In this case, the Supreme Court was dealing with an argument that the appellants were young men and the bread winners of the family of each consisting of a wife, minor child and aged parents. While dealing with such an argument the Supreme Court held that such compassionate grounds would always be present in most cases and are not at all relevant for the purposes of interference. Mr. Gupte submits that he is citing this authority because he expects that the accused in this case will also plead that they are the bread winner of the family and have wife and minor children and aged parents. He submits that this authority shows that these factors are not relevant at all.
238. Lastly Mr. Gupte relies upon the judgment of this Court reported in 1994, Bank Journal 563 Bratindranath Banerjee, Director, Standard Charted Bank v. Hiten P. Dalal wherein this Court has held that the Court has to take judicial note of fact that there has been a major fraud in this country. This Court has held that this Court was established because of this situation. This Court has held that this was a serious blow to the economy of the country. This Court has held that there were cases where a strict sentence must be imposed.
239. Mr. Gupte submits that this is a fit case where the very maximum sentence provided by law, should be awarded. He also submits that if this Court is not inclined to do that then the sentence should be as close to the maximum as possible.
240. Accused No. 3 has submitted to the Court written submission on the question of sentence. The Court has gone through the written submissions. The Court finds that these submissions are basically a repetition of the argument which Accused No. 3 had taken in defence.
Very briefly the submissions are :---
(a) That he had no authority to enter into such a transaction and only Accused No. 1 had authority or power to do so, (b) That the purchase was made on 6th February, 1992, as evidenced by Ex-19, (c) That the evidence of P.W. 6 and Ex-51-A are false, unreliable and made up in order to falsely implicate him, (d) It was duty of P.W. 6 to get proper documentation and he failed to do so, (e) That the management was aware of this transaction and approved it and (f) That the auditors checked all physical securities. Items (a) to (c) are already dealt with in great detail earlier and need not be repeated here. As regards (d) undoubtedly it was duty of P.W. 6 to get proper documentation. As stated earlier the evidence of P.W. 6 is absolutely believable. P.W. 6 informed Accused No. 3 about the deficiencies P.W. 6 informed Accused No. 3 that there was no documentation. It is Accused No. 3 who directed P.W. 6 to accept in spite of deficiency. Now such a submission is being made. As regards (e), Mr. Ovalekar has taken the same submission in greater detail. Thus this will be dealt with at that stage. As regards (f) P.W. 16 has deposed that it was in July, 1992, only that he came to learn that in records of CANFINA there were CANCIGO Units F.V. Rs. 33 crores. Evidence also is that in records of CANFINA these were shown as purchased from Andhra Bank. There is no evidence to show that the auditors had seen the CANCIGO Units. Even if they had, it would make no difference on question of sentence. In all Banks and Financial Institutions there have to be internal checks as well as audits. In spite of this large scale diversion has taken place. The internal check mechanism has failed. The auditors also appear to have failed in their duty to properly check and to bring irregularities and illegalities to the notice of higher-ups.
241. It is next submitted by Accused No. 3 that he had received no pecuniary advantage and therefore he should be dealt with leniently. It is also submitted that this is not a case where the maximum sentence should be imposed only in the gravest of grave cases.
242. Lastly it is submitted that he is married having a wife and two children; one child studying in the 7th Std., one girl studying in 1st Std. It is also submitted that he is having aged parents who require constant medical attention and brothers are not well settled.
243. It is further submitted that his services have been terminated, his wife is not working and that considering all the above, the minimum sentence should be awarded.
244. At the request of Accused No. 4 Court heard Mr. Ovalekar on behalf of Accused No. 4. Mr. Ovalekar also submitted written submissions. Mr. Ovalekar also made oral submissions which were basically repetition of the written submissions.
245. Mr. Ovalekar submits that even though the prosecution has cited such a large number of cases none of them have any relevance to the facts of this case. He submits that four of these cases were cases where there had been smuggling of gold. He submits that four of those cases were murder cases and one' case was a rape and murder. He submits that observations made in those cases can have no application to a case like the present. He submits that in this case there is no atrocity or brutality and observations made in cases where there is atrocity and brutality cannot be applied to a case like the present. Mr. Ovalekar submits that this was not a case of an economic offence. However, to be noted that whether it is smuggling or siphoning out monies on a large scale, the offence is an economic offence. It is not possible to accept submission that this is not an economic offence. The cases of economic offences relied upon by Mr. Gupte show what view a Court should take in respect of cases of economic offences.
246. Mr. Ovalekar relies upon the case of Jayendra Thakur v. Govt. of National Capital Territory of Delhi, 1998 Cri.L.J. 1613. This was a case under the Terrorist and Disruptive Activities (Prevention) Act, 1987. The Trial Court had only sentenced the accused to five years. The Supreme Court held that the maximum sentence should be reserved for the gravest instances of offence likely to occur as a principle of commonsense. On the facts of that case, the Supreme Court held that, that was not a case where the maximum sentence could be awarded. The Supreme Court however enhanced the sentence to 10 years.
247. Mr. Ovalekar also relied upon the case of Allauddin Mian A others, Sharif Mian & another v. State of Bihar, . This is the same authority which had been relied upon by Mr. Ovalekar on 14th August, 1998. While considering the provisions of section 235(2) of the Criminal Procedure Code, the Supreme Court observed that the accused must have an effective and real opportunity to place his antecedents, social and economic background, mitigating and extenuating circumstances, etc., before the Court. The Supreme Court held that the sentencing decision has far more serious consequences on the offender and his family members than in the case of a purely administrative decision. Mr. Ovalekar submits that this judgment shows that the antecedents, social and economic background, the fact of the family members being affected are circumstances which a Court should take into account and keep in mind. Mr. Ovalekar submits that this authority shows that the Court must also keep in mind the extenuating and mitigating circumstance in every case.
248. Mr. Ovalekar submits that in this case the Order of conviction is based on a finding that Accused Nos. 3 and 4 have entered into a transaction for purchase of non-transferable CANCIGO Units and that therefore CANFINA lost a sum of Rs. 33 crores. He submits that CANFINA is supposed to have lost Rs. 33 crores only because it is held that they got no valid title to the CANCIGO Units (Rs. 11 crores which were standing in the name of Andhra Bank and Rs. 22 crores which were standing in the name of Andhra Bank Financial Services Limited). Mr. Ovalekar submits that the facts are that Accused No. 4 had paid from his own monies Rs. 33 crores for acquiring these Units. He submits that Accused No. 4 owed Rs. 25,01,67,129/- to CANFINA and honestly offered to CANFINA these CANCIGO Units which belonged to him. He submits that Accused No. 4 delivered the CANCIGO Units and the same were accepted by P.W. 6 Mr. Vernekar. He submits that in exchange, after adjusting of a sum of Rs. 25,01,67,129/-, a sum of Rs. 7,98,32,871/- was paid to Accused No. 4. He submits that the Court has held that these were stolen property in view of the fact that the Court has held that criminal breach of trust has been committed. Mr. Ovalekar relies upon the evidence of various witnesses of CANFINA and Andhra Bank and Andhra Bank Financial Services Limited to show that Andhra Bank and Andhra Bank Financial Services Limited were not claiming any title in these CANCIGO Units.
249. These submissions have already been dealt with earlier and the reason why they cannot be accepted need not be repeated here. Accused No. 4 did not acquire these Units in his own name. For reasons best known to him he chose to acquire them in the names of Andhra Bank (Rs. 11 crores) and Andhra Bank Financial Services Limited (Rs. 22 crores). Accused No. 4 had no right to deal with them. Even if they were in his own name he could not have dealt with them. They were non-transferable to his knowledge.
250. Mr. Ovalekar next submits that the evidence is that this transaction had been entered into in the normal course of business. He submits that the evidence shows that the management was aware of the transaction and has accepted it.
251. Mr. Ovalekar submits that it is only on the basis of a technicality i.e. that CANFINA got no title to the CANCIGO Units, that this Court has held the Accused to be guilty. He submits that if the Accused had obtained proper documentation and had obtained consent from Andhra Bank and Andhra Bank Financial Services Limited and also from Canbank Mutual Fund, who had issued the Units and who had right to amend the rules, then there could have been no illegality. He submits that it is only because the accused, not being guided properly foolishly did not comply with the formalities that the Court is holding them guilty. He submits that even now the appeal of CANFINA is pending in the Supreme Court. He submits that if CANFINA succeeds in this appeal then CANFINA would get the CANCIGO Units and there would be deemed to be no offences by the accused. He submits that since the accused have been convicted on a technicality. He submits there is a possibility that CANFINA may succeed in the Supreme Court. He submits that in that case there would be no offence. He submits that the Court should then only award a technical sentence which would be reversible. He submits that the only technical and reversible punishment which a Court can award would be a fine. He submits that this is a fit case where Court should not award any irreversible sentence of jail but should only award a fine.
252. Mr. Ovalekar also submits that Accused No. 4 has a family consisting of wife and two daughters. He submits that Accused No. 4 is under a disability inasmuch as he is a Notified Party. He submits that considering all these factors this Court should only impose a sentence of fine on the Accused.
253. As stated above, most of the submission have already been covered by the judgment. The submission that the offence is merely a technical offence is not correct. At the cost of repetition it must be mentioned that, for reasons best known to him Accused No. 4 chose to get Andhra Bank (to extent of Ra. 11 crores) and Andhra Bank Financial Services Limited) (to extent of Rs. 22 crores) to subscribe to the CANCIGO Units F.V. Rs. 33 crores. It was known to all including Accused No. 4 that there was a lock-in period and the CANCIGO Units were non-transferable. By getting Andhra Bank and Andhra Bank Financial Services Limited to subscribe to CANCIGO Units F.V. Rs. 33 crores, Accused No. 4 knew that he was putting himself in a position where he could not deal with these CANCIGO Units. Even otherwise, Accused No. 4 could not have transferred these Units. Accused No. 4 owed a sum of Rs. 25,01,67,129/- to CANFINA. Instead of honestly repaying the amount, a criminal conspiracy is entered into with Accused No. 3 where under an Agreement to purchase on behalf of CANFINA non-transferable CANCIGO Units is entered into. Accused No. 4 well knew that, that CANCIGO Units F.V. Rs. 33 crores did not stand in his name. He yet delivers these Units without getting any Letter of Authority or consent from Andhra Bank and Andhra Bank Financial Services Limited. The submission that there was nothing wrong as these were accepted by P.W. 6 overlooks the fact that P.W. 6 accepted these Units on direct instructions of the co-conspirator Accused No. 3. Having delivered CANCIGO Units F.V. Rs. 33 crores which were not standing in his name and in which he could never pass any title, the debt of Rs. 25,01,67,129/- is wiped out and on to a sum of Rs. 7,98,32,871/- is collected by Accused No. 4. I am in agreement with Mr. Gupte when he submits that there is no mitigating circumstances. This was a conspiracy which had been entered into a cool and calculated manner and not one which has taken place on the spur of the moment. It is not because of any economic compulsion but out of greed of money.
254. I am unable to accept submission that in the event of the Supreme Court accepting CANFINA's claim to the CANCIGO Units there would be no offence. This argument overlooks the facts that the criminal breach of trust is not in respect of CANCIGO Units but in respect of the sum of Rs. 33 crores. CANFINA's claim is to the CANCIGO Units. As far as Rs. 33 crores are concerned, CANFINA has lost that amount. Also to be seen that CANFINA has had to maintain an expensive and lengthy litigation, first in this Court and now in the Supreme Court merely in the hope of establishing a title to the CANCIGO Units. CANFINA had to do it because CANFINA lost Rs. 33 crores. The institution is left with no option but to try and recover whatever it can.
CANFINA knows that Accused No. 4 has become a Notified Party. CANFINA knows that there is no likelihood or possibility of recovering Rs. 33 crores from Accused No. 4, what choice has CANFINA but to claim that it is now accepting the transaction. Merely because CANFINA is forced by the circumstances, to accept the transaction and try and salvage whatever it can, does not mean that offence of criminal breach of trust was not committed. Accused No. 3 having been entrusted and having dominion over the monies of CANFINA could only enter into transactions in securities when CANFINA would get a clear title to the securities. He having entered into an illegal transaction to purchase non-transferable CANCIGO Units committed criminal breach of trust. The transaction was one prohibited by law and one which would and did furnish ground for a civil action. The offence of criminal breach of trust is completed by entering into of the transaction. Merely because after a lengthy and expensive litigation CANFINA may manage to get title to the CANCIGO Units will not mean that no offence of criminal breach of trust in respect of Rs. 33 crores had been committed.
255. Contrary to the hope expressed by Mr. Ovalekar this Court sees no reason to vary the earlier view expressed in the case reported in Bratindranath Banerjee, Director, Standard Charted Bank v. Hiten P. Dalal, . In my view these are matters where strict sentence must be imposed. It has become very common today to find scams after scams taking place, public monies are being siphoned out and diverted regularly. All this is being done because there is no deterrent sentences and white collar criminals like this are emboldened because they think that nothing will happen to them. They think that legal process is slow and that in any event courts can be persuaded to be lenient and sympathetic. It is time that Court sends a message that even though justice may be delayed it is sure to follow. It is time the Court sends a message that parties who commit economic offences like this, which put the national economy in a jeopardy, will not get away with light sentences. In my view this is a fit case where the sentence must be in keeping with the gravity of the offence. In this case a small amount is not siphoned out. A large amount of Rs. 33 crores have been siphoned out. Therefore the sentence must be strict. However, I am unable to accept Mr. Gupte's submission that the maximum sentence must be awarded.
256. I sentence Accused No. 3 for the offence of criminal breach of trust under section 409 of the Indian Penal Code with rigorous imprisonment for a period of seven years and a fine of Rs. 1 lac. In default of payment of fine, accused shall undergo rigorous Imprisonment for a further term of one and half years. Accused No. 4 having committed offence of criminal conspiracy to commit offences under section 409 is also liable to the same sentence. Thus for the offence of criminal conspiracy to commit criminal breach of trust under section 409 of the Indian Penal Code, I sentence Accused No. 4 to rigorous Imprisonment for a term of seven years and also to fine in a sum of Rs. 1 lac. In default of payment of fine, Accused shall undergo rigorous Imprisonment for a term of one and half years.
257. I sentence Accused No. 3 for the offences of criminal misconduct under section 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act to rigorous Imprisonment for a period of five years and a fine of Rs. 50,000/-. In default of payment of fine, accused shall undergo rigor-
ous Imprisonment for a term of one year. This being an offence by a public servant such a sentence is not imposed on Accused No. 4 even though there has been criminal conspiracy.
258. I sentence Accused No. 4 for the offence under section 411 of the Indian Penal Code for being in possession of stolen property i.e. property in which criminal breach of trust is committed with rigorous Imprisonment for a period of two years and a fine of Rs. 50,000/-. In default of payment of fine, Accused shall undergo rigorous Imprisonment for a term of six months.
259. Accused No. 3 having committed criminal conspiracy to commit offence under section 411 of Indian Penal Code is also liable to the same sentence. Thus for offence of criminal conspiracy to commit offence under section 411 of Indian Penal Code, I sentence Accused No. 3 to rigorous Imprisonment for period of two years and a fine of Rs. 50,000/-. In default of payment of fine, Accused shall undergo rigorous imprisonment for a term of six months.
260. I direct that all the sentences shall run concurrently.
261. Both the Accused are given four weeks time to make payment of fine.
262. Mr. Ovalekar applies that this Court suspend the sentence for some time in order to enable the Accused to file an appeal to the Supreme Court. He fairly points out that the only power to do this is under section 482 of the Criminal Procedure Code. Mr. Gupte objects. He submits that the only power available to this Court is under section 389 of the Criminal Procedure Code, the Court may order the convicted person to be released on bail only provided the sentence is to an imprisonment for a term not exceeding three years. Mr. Gupte submits that in this case sentence is exceeding three years. Mr. Gupte submits that the Court cannot exercise the power under section 389 of the Criminal Procedure Code. Mr. Gupte submits that this Court is not the High Court and cannot exercise powers under section 482 of the Criminal Procedure Code.
263. The question whether Court can exercise power under section 482 of the Criminal Procedure Code has recently been considered by this Court in a judgment dated 15th June, 1998 in Misc. Application No. 432 of 1997 in Special Case No. 4 of 1995. The Court has accepted submission that this Court does not require powers under section 482 of the Criminal Procedure Code. Under section 9(4) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, this Court is empowered to adopt such procedure as deems fit consistent with the principles of natural justice. Normally the accused would have been able to approach an higher Court in this city without any difficulty. By virtue of the Special Court (Trial of Offences Relating to Transactions in Securities) Act the accused has now only to approach the Supreme Court. Court must take note of the fact that some time would be required for the accused to approach the Supreme Court. In my view principles of natural justice require that in cases like this, where personal liberty is at stake, some time must be given to accused to effectively exercise that right of appeal. In my view section 9(4) of Special Court (Trial of Offences Relating to Transactions in Securities) Act, will empower this Court to suspend the sentence of imprisonment for some time. Accordingly I suspend the sentences of imprisonment for two weeks.
264. Order accordingly.