Karnataka High Court
C V Krishnamurthy vs State By Superintendent Of Police on 14 November, 2018
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF NOVEMBER 2018
BEFORE
THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR
CRIMINAL APPEAL No.780 OF 2007 C/W
CRIMINAL APPEAL No.141 OF 2012
In Crl.A. No.780/2007
BETWEEN
C.V.Krishnamurthy,
S/o. C.M.Venkataramana Setty,
Occ: Assistant Manager,
State Bank of Mysore,
Harihar Branch,
R/o. No.2811/3,
3rd Main, 4th Cross,
M.C.C. "B" Block,
Davanagere.
...Appellant
(By Sri Kiran S Javali and Sri K.Chandrashekara, Advocates)
AND
State by
Superintendent of Police,
CBI, Bellary Road,
Bangalore.
...Respondent
(By Sri P.Prasanna Kumar, Advocate)
This Criminal Appeal is filed under Section 374 of
Criminal Procedure Code against the judgment dated
30.04.2007 passed by the XXXII Addl. C.C. & S.J. & Spl.
Judge for CBI Cases, Bangalore, in Spl.C.C.No.32/04 -
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convicting the appellant/accused No.1 for the offences
punishable under Sections 120B, 420, 477A IPC and under
Section 13(1)(d) punishable under Section 13(2) of the
Prevention of Corruption Act, 1988 and sentencing him to
undergo R.I. for one year and to pay fine of Rs. 1,000/- I.D.,
to suffer further S.I. for 2 months for the offence punishable
under Section 120B of IPC and etc.
In Crl.A. No.141/2012
BETWEEN
C.G.Daya Pereira,
S/o. Late J.B.Pereira,
Aged about 52 years,
Dhoddamane Village,
Mudukodi, Venoor Post,
Belthangadi Taluk,
Dakshina Kannada District.
...Appellant
(By Sri S.G.Bhagavan, Advocate)
AND
The State by
Inspector of Police,
CBI/ACB, Bangalore.
...Respondent
(By Sri P.Prasanna Kumar, Advocate)
This Criminal Appeal is filed under Section 374(2) of
Criminal Procedure Code praying to set aside the judgment
dated 04.01.2012 passed by the XXXII Additional City Civil
and S.J. and Spl. Judge for CBI cases, Bangalore in
Spl.C.C.No.52/2004 - convicting the appellant/accused for
the offence punishable under Section 120(B) read with 420 &
under Section 13(1)(d) read with 13(2) of Prevention of
Corruption Act 1988 read with 109 of IPC.
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These Criminal Appeals coming on for hearing this
day, the court delivered the following:
JUDGMENT
These appeals are disposed of together by a common judgment.
2. The Deputy Superintendent of Police, CBI : SPE :
Bengaluru filed charge sheet in the first instance against two accused. Against the first accused, the offences invoked in the charge sheet are those that are punishable under Sections 120B, 420, 477A of Indian Penal Code and Section 13 (2) read with Section 13 (1) (d) of Prevention of Corruption Act. So far as the second accused is concerned, the offences alleged in the charge sheet are those which are punishable under Section 120B and 420 IPC and Section 109 IPC read with 13(2) of Prevention of Corruption Act. The charge sheet was filed in the first instance in the court of III Addl. District and Sessions Judge, (Spl. Judge), Mysore and later on it was transferred to the Special Court at Bengaluru. Since the second accused did not appear before the court and remained absconded for quite a long time, in order to 4 expedite the trial against the first accused, the case was split against the second accused and separate charge sheet came to be filed. Thus the first accused faced trial in Spl.
C.C.No.32/2004 and the second accused faced trial in Spl. C.C.No.52/2004.
3. Crl.A.No.780/2007 arises from the judgment dated 30.04.2007 in Spl. C.C.No.32/2004 and Crl.A.No.141/2012 arises from the judgment dated 04.01.2012 in Spl.C.C.No.52/2004. Both the accused were held guilty of the offences. The first accused has been sentenced to undergo rigorous imprisonment for one year and pay fine of Rs.1,000/- and in a default to undergo of simple imprisonment for two months in relation to offence under Section 120B IPC. For each of the offences under Section 420 and 477A IPC, the first accused has been sentenced to undergo rigorous imprisonment for one year and pay fine of Rs.2,000/- and in default to undergo simple imprisonment for three months. For the offence under Section 13(2) of Prevention of Corruption Act, the first accused has been convicted to undergo rigorous imprisonment for two years 5 and pay fine of Rs.5,000/- with a default sentence of simple imprisonment for six months. The Special court directed that all the sentences should run concurrently, but the sentence of imprisonment for default in payment of fine was ordered to run independently.
4. The second accused who faced trial in Spl.C.C.52/2004 was convicted for the offences under Section 120B read with 420 IPC and Section 13 (1)(d) read with Section 13(2) of Prevention of Corruption Act read with Section 109 IPC. He has been sentenced to undergo simple imprisonment for a period of one year for the offence under Section 120B IPC and simple imprisonment for one year and pay fine of Rs.10,000/- with default sentence of six months imprisonment in case of failure to pay fine in relation to Section 420 IPC. For the offence under Section 13 (2) read with Section 13 (1)(d) of Prevention of Corruption Act read with 109 IPC, he was sentenced to undergo simple imprisonment for one year and fine of Rs.10,000/- and to undergo simple imprisonment for six months in case of 6 default in payment of fine. These sentence was ordered to run concurrently.
5. If a brief account of prosecution case is given, it is as follows:
Accused No.1-C.V.Krishnamurthy was serving State Bank of Mysore in the capacity of Manager at its Pattadur Branch, Chickmagalore District. In the year 1993, when he was serving there, it was alleged that he entered into criminal conspiracy with accused no.2 C.G.Daya Pereira, a customer of that branch, to cheat the bank and derive pecuniary gain for themselves. The specific allegations are as follows : -
(i) On 6.3.1993 and 12.3.1993 first accused being a public servant by corrupt or illegal means permitted overdraft of Rs.4,91,230/-
and Rs.2,45,615/- respectively even though he was very much aware that the second accused had no intention of clearing the overdrafts. It was falsely shown in the books 7 of accounts that the overdrafts were sanctioned against the pledge of Reinvestment Deposits.
(ii) On 30.3.1993, the second accused with a fraudulent and dishonest intention presented before the first accused three cheques drawn on his S.B.A/c no.3525 at the State Bank of Travancore, Mangalore, for a total sum of Rs.3,00,000/- in the name of third parties. The first accused knew very well that there was no funds in the account of the second accused to honour those cheques, yet he purchased them and issued term deposit receipts for those amounts. On maturity of these term deposits, the first accused, instead of appropriating the proceeds towards the pending cheque transactions, allowed the parties to withdraw the amounts and unauthorizedly debited an amount of Rs.3,08,433/- to the current account of 8 accused no.2 and settled the cheque purchase transactions.
(iii) On 8.4.1993, the second accused with a fraudulent and dishonest intention, issued a self cheque for Rs.9,00,000/- drawn on his account in State Bank of Mysore, Kannapura Branch. This cheque was unauthorisedly purchased by the first accused knowing fully well that there was no funds in his account to honour the said cheque and then allowed accused no.2 to utilize the said amount in order to settle his other cheque transaction at State Bank of Msore, Kannapura Branch.
This cheque purchase transaction was partly settled on 2.8.1993 and finally settled on 6.8.1993 by unauthorizedly debiting an amount of Rs.62,785/- to the current account of accused no.2 towards overdue interest.
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(iv) On 10.5.1993 the first accused without any authority permitted an overdraft of Rs.2,00,375/- to the current account of accused no.2 knowing fully well that the second accused had no intention of clearing the overdraft.
(v) On 25.5.1993, accused no.2 issued a cheque for Rs.5,00,000/- in the name of his wife Maria Pereira. This cheque was drawn on his current account maintained at Pattadur Branch. First accused knew very well that there was no funds in second accused but falsely made a noting on the cheque "good for payment". Second accused purchased this cheque at Federal Bank, Mangalore, making use of false and unauthorized noting made by the first accused on the cheque.
Subsequently, on 3.7.1993 when this cheque was received at the Branch for collection, the first accused unauthorisedly debited the 10 amount to the current account of accused no.2 and paid the amount to the Federal Bank, Mangaluru.
(vi) Second accused was introduced to Pattadur Branch of State Bank of Mysore by another customer namely H.N.Krishnagowda, a coffee planter. On the very same day the second accused opened a current account at Pattadur Branch and first accused, on a written request made by the second accused permitted on the first day of the opening of the account itself an overdraft of Rs.4,91,230/- even though he had no authority to permit overdraft to that extent. On the same day the second accused issued ten demand drafts for Rs.49,000/- each in favour of his brother Arun Pereira. But, the second accused himself encashed these demand drafts in the name of his brother through S.B. Account 4936 opened on 11 9.3.1993 in the name of Arun Pereira, Karnataka Bank, Mangaluru.
(vii) While permitting the overdraft facility to C.G.Daya Pereira on 6.3.1993, the first accused made a false note in the DP sheet attached to the ledger sheet that the overdraft was against the lien of two reinvestment deposits for Rs.1,80,000/- and Rs.5,00,000/-. But these deposit receipts were issued by Pattadur Branch on 4.3.1993 in the names of Sri Richard D'Souza and Smt. Mabel D'Souza. Neither the deposit holders nor their Power of Attorney holder Sri A.J.Larsado had given consent for holding their deposits as a lien by way of surety to the overdraft provided to second accused Daya Pereira. On 13.1.1995, the said couple pre-maturely closed their RIDs and withdrew the proceeds.
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(viii) The first accused also permitted another overdraft of Rs.2,45,615/- in relation to the current account of accused no.2 on 12.3.1993 without any authority. This was sanctioned on a written request of accused no.2 for Rs.3,00,000/- and his assurance that he would clear the overdraft within ten days. Further after sanctioning the overdraft, accused no. 1 issued five demand drafts for Rs.49,000/- each for a total sum of Rs.2,45,000/- in favour of the brother of the second accused, namely Arun Pereira. But it was accused no.2 who encashed these demand drafts through his brother's S.B. account at Karnataka Bank, P.M.Rao Road, Mangaluru.
(ix) On 29.3.1993 accused no.2 gave three cheques for total amount of Rs.3,00,000/- drawn by him on his S.B.Account 3525 State Bank of Travancore, Mangaluru, even though 13 there was no sufficient balance in the said account. First accused purchased these cheques on 30.3.1993 without any authority and the amount was utilized for issuing three term deposits in the names of Mrs. Mary Lasrado, Mrs. Molly Kamath and Mr.Kalbavi Rajendra Rao. Later on when these three cheques were sent to State Bank of Travancore, Mangaluru, for collection, they were returned unpaid because of insufficient funds in the account of the first accused.
Later on the first accused without any authority debited an amount of Rs.3,08,433/- to the current account of Daya Pereira and cleared the cheque purchase transactions. With this the amount overdrawn in the current account of accused no.1 came to Rs.10,54,565/-. The three cheques were again sent for collection to State Bank of Travancore, Mangaluru, but 14 they returned unpaid. In the meantime, the term deposits made in the names of the aforesaid three persons matured and the first accused, at that time, instead of appropriating the deposit amounts to settle the cheque purchase transactions, allowed the deposit holders to withdraw the proceeds by way of demand drafts payable at Mangaluru.
(x) On 8.4.1993, accused no.2 issued a cheque for Rs.9,00,000/- drawn on his current account at State Bank of Mysuru, Kannapura Branch, although there was no funds in his account. Accused no.1 purchased this cheque knowing the true position and credited an amount of Rs.8,92,643/- to the current account of accused no.2 at Pattadur Branch. On the same day accused no.2 issued a DD for Rs.8,90,000/- in favour of accused no.2 payable at SBM, Kannapura. 15 Accused no.2 encashed the said DD on 8.4.1993 itself and withdrew an amount of Rs.40,000/- by cash and utilized the balance amount of Rs.8,50,000/- to settle the three pending cheque purchase transactions.
Accused no.2 had earlier issued three cheques to one R.Ramachandra Nair for Rs.1,00,000/- and drawn two cheques on his name for Rs.2,50,000/- and Rs.5,00,000/-.
State Bank of Travancore, Mangaluru.
Accused no.1 purchased these three cheques and sent them to State Bank of Mysuru, Kannapura Branch, for realisation.
Rs.8,50,000/- that was available in the current account of Daya Pereira was utilized for clearing these three cheques. The said cheque purchase transactions were pending till first week of August 1993. There was credit of Rs.9,00,000/- on 2.8.1993. The first accused closed the cheque purchase 16 transactions finally on 6.8.1993 by unauthorizedly debiting Rs.62,785/- to the current account of accused no.2 towards interest and with this the overdrawn amount reached Rs.18,83,078/-.
6. After framing the charges in both the cases against the accused, trial was held separately. In Spl.C.C.32/2004 the prosecution examined 15 witnesses PWs1 to 15 and got marked the documents as per Exs.P1 to P144. The first accused did not lead evidence, however from his side 10 documents as per Exs.D1 to D10 were marked. At the stage when he was examined under Section 313 Cr.P.C he submitted a separate written statement.
7. In Spl.C.C.52/2004 the prosecution examined 13 witnesses PWs1 to 13 and got marked 119 documents as per Exs.P1 to P119. Accused no.2 also filed a separate written statement after he was examined under Section 313 Cr.P.C. 17
8. Upon appreciation of evidence, accused 1 and 2 were held guilty of the offences charged against them and hence they have preferred separate appeals.
9. In Spl.C.C.32/2004, the learned trial judge has arrived at conclusions that the prosecution has been able to prove the charges against the first accused beyond reasonable doubt. The evidence of the witnesses discloses that during the year 1993 when he was functioning as Manager of SBI, Pattadur Branch he entered into conspiracy with the second accused and permitted him fraudulently and dishonestly to overdraw the amount beyond his permissible limit. This amounted to deceiving the bank and causing wrongful loss to it. He did it willfully. He created false reinvestment deposits to provide overdraw facility to the second accused. As a public servant, being the Manager of the bank, he indulged in corrupt and illegal means. The second accused was able to obtain pecuniary advantage. The learned trial judge has held that the sanction accorded by PW-7 was proper. Therefore the trial judge held that the first accused committed offences punishable under Sections 18 120B, 420, 477A IPC and Section 13 (1)(d) read with Section 13(2) of Prevention of Corruption Act.
10. In Spl. C.C.No.52/2004, the learned trial judge has believed the evidence of the witnesses to hold accused no.2 guilty of the offences charged against him. The entire evidence discloses conspiracy between accused No.1 and 2. The transactions were unauthorized. The very fact that accused no.1 made an endorsement, "Good for payment" on the cheque shows the presence of element of deceit. The Federal Bank, Mangaluru, acted on this endorsement to allow discount. Subsequently accused no.1 debited the amount to SB account of accused no.2, increasing the overdue to Rs.18,20,288/-.
11. The trial court has also relied upon the testimony PW12-D.G.Goel, a handwriting expert to give a finding that some of the documents executed were in the handwriting of A2 and this evidence being corroborative is helpful to arrive at a conclusion that there was conspiracy between first and 19 second accused for cheating the bank and that second accused abetted the first accused.
12. I have heard the arguments of Sri Kiran Javali and Sri S.G.Bhagavan, the learned counsel appearing for appellants and Sri P.Prasanna Kumar, the learned standing counsel for CBI. The points that they argued will be referred to at appropriate stages. From their arguments, the following points arise for discussion :-
Points for discussion (1) Whether PW7-K.Bhasker Rao examined in Spl.C.C.32/2004 was not competent to accord sanction? Whether sanction order shows proper application of mind by PW-7?
(2) Whether the evidence provided by the prosecution makes out an offence as against accused no.1? If evidence does not disclose any offence against accused no.1, whether accused no.2 can be acquitted?20
Point No. (1)
13. It is the vehement argument of learned counsel for accused no.1, Sri Kiran Javali that PW1 was not competent to accord sanction for prosecuting accused no.1. According to him, PW7 was only a disciplinary authority. He was not the appointing authority. He tried to distinguish between disciplinary action and prosecution; he argued that disciplinary action is intra departmental. Degree of proof required in a departmental enquiry is not same as what is required in a criminal proceeding. Therefore, the authority according sanction must be appointing authority also. Mere disciplinary authority is not competent to issue sanction. In this case, evidence of PW7 shows that he is only disciplinary authority. He also argued that Ex.P99 does not indicate application of mind to the materials placed before PW7 and for this reason also it should be held that there was no proper sanction to prosecute first accused.
14. Learned counsel for accused no.2 argued that the sanction order does not disclose that there was abetment by accused no.2. When it is clear case of prosecution that 21 accused no.2 abetted accused no.1 and nothing is there in the sanction order about abetment, it shows non application of mind by the authority to issue sanction. He argued that even in Spl.C.C.52/2004, Bhasker Rao should have been examined. Therefore, the case against accused no.2 also does not stand.
15. On the other hand, Sri P.Prasanna Kumar, learned standing counsel for CBI argued that PW7 was competent to issue sanction, he was both appointing and disciplinary authority for the cadre of officers to which first accused belonged. Ex.P99 discloses that all the materials that the prosecution collected were placed before him and that PW7 applied his mind before according sanction. He also argued that disciplinary authority is also the appointing authority. He also argued that in Spl. C.C.52/2004, there was no need to examine the authority to accord sanction as second accused is not a public servant.
16. Considering the arguments on this point it is to be stated that though in a intra departmental enquiry, degree of 22 proof required for establishing charges is not of high standard as required in a criminal proceeding, the point of distinguishment that Sri.Kiran Javali tried to make is difficult to be accepted after considering evidence adduced by PW7. His evidence shows very clearly that he worked as Chief General Manager of State Bank of Mysore and he was the competent authority to appoint and remove officials in the cadre of MMGS-II. Ex.P98 is the schedule of his powers. Indeed, in the cross-examination, it has been elicited from him that Ex.P98 does not mention any power for criminal prosecution. This answer, in my opinion, is not fatal. The authority according sanction does not initiate criminal prosecution. In this case, it is the CBI which conducted investigation and prosecuted the accused. As a requirement of law, the prosecution obtained sanction from PW7. Except this, I do not find any other answer which affords a ground to doubt the authority of PW7 to issue sanction.
17. With regard to argument of Sri S.G.Bhagavan, it has to be stated that there was no need to examine Bhasker Rao in Spl.C.C.52/2004. It may be a fact that Bhasker Rao 23 examined as PW7 in Spl.C.C.32/2004 does not say about abetment by second accused. For this reason alone evidence of PW7 cannot be discarded. Section 19(3)(a) of Prevention of Corruption Act clearly states that no error or omission or irregularity in the sanction can be a ground in appeal for reversing a finding given by trial court. Probably sanction according authority might not have been examined in Spl. C.C. 52/2004 as accused no.2 was not a public servant.
18. Though it is held that PW7 was a disciplinary authority competent to accord sanction, the entire testimony of PW7 can be looked from another angle. The learned counsel for appellant in Crl.A.141/2012 has referred to a judgment of the Supreme Court in CBI vs Ashok Kumar Aggarwal [AIR 2004 SC 827]. In this judgment, the Hon'ble Supreme Court has laid down the following legal propositions : -
8. In view of the above, the legal propositions can be summarised as under:
(a) The prosecution must send the entire relevant record to the sanctioning authority 24 including the FIR, disclosure statements, statements of witnesses, recovery memos, draft charge sheet and all other relevant material. The record so sent should also contain the material/document, if any, which may tilt the balance in favour of the accused and on the basis of which, the competent authority may refuse sanction.
(b) The authority itself has to do complete and conscious scrutiny of the whole record so produced by the prosecution independently applying its mind and taking into consideration all the relevant facts before grant of sanction while discharging its duty to give or withhold the sanction.
(c) The power to grant sanction is to be exercised strictly keeping in mind the public interest and the protection available to the accused against whom the sanction is sought.
(d) The order of sanction should make it evident that the authority had been aware of all relevant facts/materials and had applied its mind to all the relevant material.25
(e) In every individual case, the prosecution has to establish and satisfy the court by leading evidence that the entire relevant facts had been placed before the sanctioning authority and the authority had applied its mind on the same and that the sanction had been granted in accordance with law."
19. These principles if applied and examined, it is possible to opine here that there was no application of mind by PW7 to the materials placed before him. The reason being that when it was suggested to him in the cross- examination that the accused had no intention at any point of time to cause loss to bank, he gave a very strange answer that he would neither deny or affirm that suggestion. The authority according sanction is expected to have prima facie satisfaction of existence of prima facie materials to subject a public servant to criminal prosecution. If the materials placed before him afford sufficient ground for prosecuting a public servant, sanction must be accorded. The answer thus given by PW7 shows his confusive state of mind. It can be said that there was no proper application of mind by PW7. Therefore the sanction order is bad.
26Point No.2:
20. Given a re-look to the evidence, undoubtedly it can be held that accused no.2 obtained pecuniary advantage in the form cheque discounting and over draft facility. In Spl. C.C.No.32/2004, the main witnesses are PW-2, PW-3, PW-6, PW-7, PW-8, PW-9, PW-10, PW-15. The last witness PW-15 is the investigation officer. There is no need to refer to in detail what these main witnesses have spoken in their examination in chief, for, the first accused does not deny sanctioning overdraft to and allowing cheque discounting for the second accused. The learned counsel for accused no.1 argued that all the transactions that the prosecution refers to for inculpating accused no.1 are mere irregularities which do not constitute offences charged against first accused. He argued that every transaction was brought to the notice of controlling authority regularly and no objection was taken by any of the officers superior to first accused. He also argued that there is no evidence for conspiracy between first accused and second accused. The trial court has relied upon Ex.P.92, Ex.P.93, Ex.P.95 and Ex.P.96, but they are all 27 xerox copies; and no foundation was laid before marking xerox copies. They are also not certified according to Banker's Book Evidence Act. He also drew attention to a note made by the learned trial judge at the end of the deposition sheet of PW-9 and argued that PW-9 was effectively cross examined and case of prosecution was demolished. In fact the evidence of PW-9 shows that first accused complied with every thing statutorily required. If there was no compliance, a competent officer from regional or zonal office should have been examined. Further, with regard to two reinvestment deposits of Richard D'Souza and Mabel D'Souza being held in lien for the overdraft facility granted to accused no.2, the prosecution should have examined them or either of them if they had not consented for their deposits being held in lien. They had also appointed their power of attorney for their banking transactions. He too was not examined. Therefore the first accused was denied of cross-examining a person who would have thrown light on actual transaction. The findings of the trial court suffers from improper appreciation of evidence. 28 For all these reasons, Sri. Kiran Javali, argued that the prosecution case should fail.
21. Sri. P. Prasanna Kumar, learned standing counsel for CBI argued that the prosecution case has stood proved beyond reasonable doubt. Accused no.1 exceeded his permitted limits to obtain pecuniary advantage for accused no.2, which aspect is proved by the witnesses. Moreover accused no.1 admits to have facilitated accused no.2; his defence is that some of them might be procedural violation which were reported to Regional office. Therefore it is clear that he admits the prosecution case and burden was on him to show that no offence would get constituted. With regard to non-examination of deposit holders, it is his argument that sufficient evidence is there showing their consent being not obtained and that accused no.1 was sending incorrect periodical report to Regional Office. This is the reason for no action being taken against accused no.1 for some time. The defence counsel should have questioned the investigation officer in the cross-examination whether any other witness would be examined or not? For these reasons, the first 29 accused gets no right to raise an argument that non- examination of depositors is fatal to prosecution case. The trial court has rightly appreciated the evidence. He contended that if rules, regulations and administrative instructions, were deliberately not followed, and as a result, the bank suffered loss, it can be said that they amount to an offence or offences. In this context he has referred to a judgment of the Supreme Court in Sudhir Shantilal Mehta Vs. Central Bureau of Investigation [(2009) 8 SCC 1]. In paras 67, 68 and 69 of this judgment, the Supreme Court has held as below:
67. It is one thing to say that any Circular Letter issued by the Reserve Bank of India being not within the public domain would not be law but it would be another thing to say that it did not contain any direction of law so as to attract the liability in terms of Section 405 of the Indian Penal Code. Lawful directions were issued by the Reserve Bank of India. The Circular Letter was meant for all Scheduled Banks. The authorities and/or officers running the affairs of the Scheduled Banks therefore were aware thereof. If 30 it is binding on the Banks, it would be binding on the officers.
68. Any act of omission or commission on the part of any authority of the Bank would amount to acting in violation of any direction of law. A direction of law need not be a law made by the Parliament or a Legislature; it may be made by an authority having the power therefor;
the law could be a subordinate legislation, a notification or even a custom.
69. Indisputably, the higher authorities of the bank were entrusted with or otherwise had dominion over the properties of the bank. They were dealing with public funds. Indisputably again they were required to apply the same in terms of the Circulars issued by the Bank as also the Reserve Bank of India. It has been accepted at the Bar that failure on the part of the officers of the Bank to abide by the directives issued under the Circulars would result in civil action. Subjecting the bank to a civil liability would thus attract one of the ingredients of criminal breach of trust. There cannot be, however, any doubt whatsoever that a mere error of judgment would not attract the penal provision contained in Section 409 of the Indian Penal Code. The 31 materials brought on record by the parties must be judged keeping in view the aforesaid legal position.
22. Before applying the above ratio, it is very much necessary to examine how the witnesses have fared in their cross examination. PW-2 was working as a field officer at Pattadur Branch of SBM during the period 1991 to 1994 when the first accused was the branch manager there. His answers show that accused no.1 was honest and had absolute integrity. Most of his answers to questions touching the transactions, he has given neither evasive answers; he has neither given definite answers nor denied the suggestions. For instance three suggestions were given to him, firstly that he was present when Regional Manager visited the branch, secondly that first accused explained to the Regional Manager the compelling circumstances to extend OD facility to accused no.2 and thirdly that the Regional Manager did not object to the OD transactions looking to the bonafides in them. For all these suggestions, 32 answer of PW-2 is "I do not know". The effect of this kind of answer will be dealt with later.
23. PW-3 worked as head cashier at Pattadur Branch of SBM when first accused was manager there. If entire cross examination of this witness is perused, the impression that can be obtained is that accused no.2 was known to every staff member of the bank, that certain targets for achieving deposits and advances had been fixed, that when accused no.1 took charge of the bank, the deposit collection position was depleting and the accused no.1 had to reach targets of the years 1992 and 1993. His answers also indicate that every transaction relating to accused no.2 had been intimated to controlling office and Ex.P.2 to Ex.P.83 indicate that every official of the branch had made entries in one or the other way. He also answered that there was no room for suspecting the transaction of second accused.
24. PW-6 is another important witness who in his examination chief has stated about noticing serious irregularities in "Advances" made by Pattadur branch during 33 the year 1993. He was working as manager in the department of Audit and Inspection. He made a report after inspecting Pattadur branch. He too admits that statements of regular and irregular transactions were sent to controlling authority and that the controlling authority had not made any observation in relation to transactions made by accused no.1. He has taken ignorance for the suggestion that the controlling authority had the knowledge that transactions were genuine and bonafide.
25. PW-7, though examined for the purpose of proving the 'Sanction' as required under Section 19 of Prevention of Corruption Act, certain answers given by him in the cross examination have a direct bearing on the prosecution case. His answers also show that deposit mobilization target was given to Pattadur branch and there was keen competition among the bank branches in mobilizing the deposits. According to him, as can be seen from his answer to one specific question, deposit collections by accused no.2 for all the three branches of SBM (Pattadur, Kannapur and Mudigere) were mixture of genuine and non-genuine 34 transactions. He has also revealed that performance report concerning accused no.1 was good and even after he was kept under suspension, he made special efforts to recover bad debts and irregular advances made to second accused, and several other non performing assets and bad debts. Having certified accused no.1 like this, his answer to another suggestion at the cost of repetition is extracted here.
"I would not deny or affirm your suggestion that at no point of time, the accused had any actual intention to cause loss to the bank."
This answer has some importance, which will be dealt with little later.
26. PW-8 was working as General Manager of Inspection and Finance wing and also as Chief Vigilance officer in the year 1994. It was she who lodged complaint, Ex.P.100, with SP, CBI, Bengaluru. According to her, an internal enquiry had been conducted and it disclosed that serious irregularities had been committed by the officials of Pattadur Branch, and there was involvement of outsiders also. This resulted in bank suffering loss. Her answers in 35 the cross examination show that she was not able to recollect whether she visited Pattadur Branch or not for inspection purpose.
27. PW-9 succeeded accused no. 1 as branch manager of Pattadur Branch and as it appears, he was mainly examined to identify the signatures of first accused and speak about certain fixed deposits of Richard D'Souza and Mabel D'Souza. In the cross-examination he has given clear admission that he did not certify the copies of the documents handed over to CBI as required under Banker's Book Evidence Act.
28. PW-10 was working as Deputy Manager in the Regional Office of State Bank of Mysore at Mysore. He was in Advances and Disciplinary Proceedings section. Even according to him the controlling authority noticed irregularities having taken place at Pattadur branch after going through the monthly returns. What is prominently noticeable from evidence of this witness is that if in the examination in chief, he has stated that branch manager 36 had the power to purchase the cheques upto Rs.10,000/- and purchase of cheque for Rs.9,00,000/-, by first accused, is not mentioned in Ex.P.95, the return for the month of April, 1993; but in the cross examination he has given a contradictory answer that purchase of cheque like Ex.P.7 need not be reflected in control return or irregular return. Ex.P.7 is a cheque for Rs.9,00,000/-.
29. PW-15 is the Investigation Officer. He has given a lengthy account of investigation conducted by him. In the examination in chief, he has stated that in respect of some of the transactions, it was falsely shown that they were supported by security, Ex.P.95, Ex.P.96 and Ex.P.144; but there was no consent by the depositors to treat their deposits as securities for the transaction by accused no.2. His cross examination very clearly shows that he never visited Pattadur and Kannur branches during his investigation, he has stated that he considered it not necessary. He has admitted that some of the documents are just xerox copies and some of them are not certified in accordance with Banker's Book Evidence Act. He also did not notice whether 37 officers of Regional Office or Regional Manager himself had made periodical inspection of Pattadur Branch.
30. He also did not ascertain whether any memo had been issued to first accused by the Regional Office asking his explanation for omissions and commissions. He also did not meet Regional Manager. He admits that Ex.P95 and Exs.P96, 112, 144 are the control returns and had been routed through the Regional Manager. He has also stated that when he interrogated the first accused, he told him that he had made sincere efforts to obtain security from accused no.2 and his father and also came to know that first accused had submitted regular returns and that he came across certain remarks made by controlling authority in respect of regular transactions.
31. If an assessment of evidence is made, what surfaces is violation of banking norms or regulations, that's why the witnesses have spoken that 'irregularities' were noticed. It is not as though these irregularities were not within the knowledge of controlling authority. PW2 does not 38 appear to be firm in his stand; rather from his answers, it is possible to draw an inference that some how he does not want to admit the suggestions given to him by defence counsel. From his evasive answers, it is possible to infer that he wanted to suppress something he knew and the probability of truth in the suggestions given to him. The evidence of PW3 gives a clear picture about target being fixed for Pattadur branch and that accused no.2 was known to every official of Pattadur branch. The evidence adduced by PW6 also shows mere irregularity and taking ignorance to a suggestion does not make him truthful witness. Evidence of PW8 does not disclose anything more than mere irregularities. It is quite strange that PW8 did not find it necessary to visit the branch to ascertain about the truth before lodging complaint with CBI. PW10 has given conflicting answers with regard to report to be made in relation to cheque purchase transaction and therefore absolute reliance cannot be placed on his evidence. The evidence of PW-7 requires a special comment here for, he was the authority who accorded sanction for criminal 39 prosecution. It is necessary that the authority according sanction should have prima facie satisfaction from the materials placed before him that there are materials for prosecuting a public servant. But one answer of PW7 that has been referred to above clearly shows that he too was not convinced about irregularities taking the shape of offence and bank suffering loss owing to these irregularities. He is not definite about intention on the part of first accused to defraud the bank. If evidence given by PW-15 is assessed, it can very well be said that his investigation appears to be total perfunctory. He did not visit the branch to ascertain the truth, which was very essential. His evidence does not indicate trivial lapses in investigation that can be ignored, but rather shows total non-application of mind to the evidence collected by him. It is not enough if an investigation officer rhetorically proceeds to file charge sheet; but before filing charge sheet he is duty bound to apply his mind to decipher whether the evidence collected by him indicates an offence being committed so that the accused can be prosecuted. The investigator is a trained person 40 capable of distinguishing between an act amounting and not amounting to an offence. This kind of application of mind is not forthcoming from the evidence of PW-15.
32. Before giving conclusion about the effect of oral evidence, I find it necessary to refer to two decisions of the Supreme Court.
32.1. In the case of Sudhir Shantilal Mehta (supra), it is held that an act of omission or commission on the part of any authority of the bank would amount to acting in violation of any direction of law and that a direction of law need not be a law made by a Parliament. It may be made by an authority having the power, and it could be a subordinate legislation also. It is further held in para 69 that a mere error of judgment would not attract the penal provision, and the materials brought on record by the parties must be judged keeping in view the aforesaid legal position.
32.2. The case of State of Madhya Pradesh vs Sheetlasahali and others [(2009) 8 SCC 617] discusses a situation whether the authority had to take a decision in the 41 exigency of preventing the contractors from quitting the project. The Hon'ble Supreme Court held that the decision taken by the authority concerned was an error of judgment, and that no material was brought on record that the authorities took a decision contrary to agreement for making a wrongful gain for themselves or to a third party or for causing wrongful loss to the State.
33. In my opinion, the above situation can be said to be present in this case also. When accused no.1 took charge of Pattadur branch as its manager, there were no sufficient fixed deposits and target was fixed not only to achieve the target of the year 1993, but also to make good the target of the previous year. Accused no.2 was a customer of bank and was in a position to mobilize deposits. If in a situation like this, accused no.1 was found to be extra lenient towards accused no.2, it is not possible to attribute malafides to him. This could be, as has been deposed by many witnesses, a sheer irregularity and nothing more. The prosecution has alleged conspiracy between the two accused. There is no evidence for it. It is true that direct evidence for conspiracy 42 is difficult to be secured, but there are no circumstances indicative of an illegal agreement between the two. Every irregularity does not amount to offence. The essential ingredients of the offences alleged against the accused in a given case must be shown to exist, then only an irregularity can be said to have taken the shape of an offence. The prosecution should have examined the deposit holders to prove that they were not consulted for their deposits being held as lien for the overdraft facility given to accused no.2. The prosecution should have also laid foundation for producing secondary evidence of some of the documents. Therefore evidence placed before the court does not bring to fore none of the offences alleged against accused no.1. For these reasons the findings of the trial court in Spl.C.C.32/2004 cannot be upheld and therefore accused no.1 needs to be acquitted.
34. In Crl.A.141/2012, the learned counsel argued that the charge sheet was filed by a Police Inspector, who was not authorized. He was not examined nor even cited as a witness. He also argued that evidence does not disclose 43 abetment by second accused. If it is held that accused no.1 is not guilty of offences, that benefit should be available to second accused. The learned standing counsel argued that investigation was actually conducted by a police officer of the rank of Deputy Superintendent of Police and only split up charge sheet was filed by a Police Inspector after the case was split against accused no.2. Therefore, there is no infirmity. With regard to offence under Section 109 IPC alleged against accused no.2, he argued that but for abetment by him, first accused would not have taken decisions in violation of banking norms and hence accused no.2 has been rightly convicted.
35. In regard to first argument of Sri.S.G.Bhagavan, it is to be stated that no infirmity can be seen if split up charge sheet was filed by a Police Inspector. It is not the argument of Sri S.G.Bhagavan that case was not investigated by a Deputy Superintendent of Police. In fact, actual investigation was by a police officer of the rank of Deputy Superintendent of Police. This argument does not hold good. However, the benefit of acquittal must be available to 44 accused no.2 also. No material is placed before the court in so far abetment by accused no.2. Therefore without much discussion, a conclusion can be drawn that accused no.2 should also be acquitted. Point no.2 is answered accordingly.
36. From the above discussion, I proceed to pass the following order : -
(i) Criminal Appeals 780/2007 and 141/2012 are allowed.
(ii) The judgments in Spl.C.Cs.32/2004 and 52/2004 are set aside.
(iii) Accused no.1-C.V.Krishnamurthy and
accused no.2-C.G.Daya Pereira are
acquitted of the offences charged against them.
Sd/-
JUDGE ckl/sd