Andhra HC (Pre-Telangana)
M. Gopala Krishnaiah And Etc. vs The State on 14 July, 1987
ORDER
1. These petitions were filed by A-1 and A-2 under S. 482 Cr.P.C. to quash the proceedings against them in C.C. No. 81/86 on the file of the Principal Special Judge for SPE & ACB Cases, Hyderabad, which is now transferred to the Court of the Ist Addl. Special Judge for SPE & ACB cases, Hyderabad, and re-numbered as C.C. No. 19/87. A charge-sheet has been filed against the petitioners (A-1 and A-2) and three others by the Inspector/CBI : CIU (i) New Delhi, alleging that they have committed the offences punishable under sections 120-B read with S. 420 IPC, 161 IPC, 165 IPC and S. 5(2) read with S. 5(1)(d) of the Prevention of Corruption Act.
2. A-1 (Petitioner in Crl.M.P. No. 111/87) who is now working as General Manager, Andhra Bank, worked as Dy. General Manager, Andhra Bank, Central Office, Sultan Bazar, Hyderabad, from 1980 to 11-3-1983. A-2 (Petitioner in Crl.M.P. No. 397/87) worked as Branch Manager, Andhra Bank, Ramanthapur Branch, Hyderabad, from May, 1980 to May, 1984. A-3 worked as Rural Credit Officer, Andhra Bank, Nizamabad, from July, 1982 to July, 1983. A-4 was an Approved Valuer of the Andhra Bank during the year 1982-83. A-5 is a Civil contractor during the aforesaid period.
3. The prosecution case is that A-1 to A-4 entered into a criminal conspiracy at Hyderabad with an object to cheat the Andhra Bank and to cause huge pecuniary advantage to N. V. Choudary (A-5) in the matter of sanction of loan facilities to A-5 and his associated concerns during the period 1981 to 1983. In the matter of sanction of tipper loans, A-2 took oral permission of A-1 and released the loans. A-1 allowed decrease in the rate of interest for payment of loans by reducing it to 15% and further increased the number of installments for repayment of loans after the sanction of loan facilities. For the loan facilities, the house property of A-5 situated at E-1 Kakatiyanagar, Habsiguda, Hyderabad, was the collateral security. In pursuance of the criminal conspiracy, A-1 and A-2 recommended and enhanced the secured over-draft limit of A-5 from Rs. 1.5 lakhs to Rs. 3 lakhs and recommended renewal of bank guarantee limit of Rs. 4.4 lakhs and further allowed the release of bank guarantee limit up to Rs. 5 lakhs against the security of the house at Kakatiyanagar.
4. As part of the conspiracy, A-5 applied to the Andhra Bank, Ramanthapur Branch, on 2-11-1982 for grant of facilities of bank guarantee limit to the extent of Rs. 98 lakhs and secured over-draft facility to the extent of Rs. 10 lakhs. A-5 required those facilities for the execution of the contract works he had with M/s. Hindustan Steel Works Ltd., Visakhapatnam. A-5 offered to pledge different properties worth Rs. 1.4 crores which include his house property at Kakatiyanagar worth Rs. 30 lakhs. A-2 made an assessment of the value of the properties of A-5 and submitted his estimate to the extent of Rs. 57.5 lakhs and recommended for a bank guarantee limit of Rs. 33 lakhs and secured over-draft facility of Rs. 3 lakhs in favour of A-5 which was later on sanctioned by the Board of Directors and the sanction was conveyed vide letter dated 13-12-1982. The properties that have been shown by A-5 have to be valued by the Approved Valuer followed by the opinion of the Legal Adviser. A-4 evaluated the house property of A-5 and the different properties situated at Nacharam on 14-12-1982 on inflated rates and the same was accepted as security before obtaining legal opinion. A-3 who is one of the persons in this conspiracy, valued the agricultural property on 24-1-1983 at the rate of Rs. 25,000/- per acre as against the instructions of the bank that the agricultural property should have been valued at the rate of Rs. 5,000/- per acre.
5. After the sanction of the bank guarantee limit of Rs. 35 lakhs, A-1 gave oral permission on 15-12-1982 for exceeding the sanction by Rs. 3,81,331/-. A-2 further recommended enhancement of bank guarantee limit to the extent of Rs. 75 lakhs with a view to cause advantage to A-5. A-1 also recorded a false note on 10-2-1983 that he had discussed the matters of aforesaid enhancement with Sri Aravinda Reddy, General Manager and allowed release of additional bank guarantee limit of Rs. 26 lakhs as against the equitable mortgage of properties worth Rs. 84.74 lakhs with a margin of 10%. On account of misrepresentation of facts and inflated valuation in properties, the Board of Directors sanctioned a bank guarantee limit of Rs. 75 lakhs against the aforesaid properties. A-2 informed the Central Office subsequently that the value of the properties offered by A-5 are to the extent of Rs. 74.34 lakhs instead of Rs. 84.74 lakhs. With regard to co-acceptance facility also, A-1 and A-2 conspired together and caused loss to the bank. A-1 purchased a plot in Nacharam for a sum of Rs. 9,576/- and A-2 also purchased a plot in the name of his wife at Nacharam for a sum of Rs. 5,928/- from A-5 on 22-1-1982 and those plots were purchased by them from A-5 who was holding the General power of attorney in respect of the aforesaid properties and the same was obtained as a motive or reward to show favour to A-5 in the matter of sanction of loans.
6. A detailed counter has been filed, denying the allegations made in the petitions by the accused.
7. Sri Padmanabha Reddy raised the following points in support of his contention that the prosecution case against the accused cannot be maintained. Those points are : (1) No valid sanction has been obtained for prosecuting the accused under S. 6(1)(c) of the Prevention of Corruption Act. (2) The allegations, per se, do not make out a case. Sanctioning of loans to customers and decrease or increase of the rate of interest or instalments can never be regarded as acts of cheating. (3) There is no allegation of false representation by A-5 or any individual inducing the bank to give loan facility. (4) There is no allegation about the acts of A-1 causing loss to the bank. (5) Most of the amounts were paid with interest by A-5 and A-5 was a customer of the bank, enjoying the facilities since more than 10 years and he made certain huge deposits. (6) The Board of Directors sanctioned the guarantee deeds and sanctioned the over-draft facility on the basis of the recommendation of the valuation that has been made therein. (7) The sanction that has been made for the increase or decrease of the instalments was done in the capacity of a Dy. General Manager by A-1 and the sanction for tipper loans also are within the discretionary power of A-1. (8) A-5 discharged 90% of the loan and the bank holds security of Rs. 74 lakhs for the 10% of the amount that has been advanced to him and no loss has been caused to the bank. (9) A-1 is not directly concerned with the valuation. (10) The application filed by A-1 on 27-10-1986 explaining the details of his acquiring the property and the other allegations were not considered by the Board at the time of granting sanction.
8. The contention of the Public Prosecutor is that the allegations alone have to be taken into consideration and at this stage, it is not desirable to take into consideration the pleas set up by both the parties. A-5 has got acquaintance with A-1 and A-2. The sanction of loans and the other allegations made with regard to the other aspects amount to causing advantage to A-5 and the question whether loss arose to the bank, or not is immaterial when once an allegation has been made that the officer, in discharge of his duties, allowed the party to make a wrongful gain. In support of her contentions, she relied upon the details that have been mentioned in the counter. She also relied upon the following decisions :
(1) Om Prakash v. State of U.P., ;
(2) Jaswant Singh v. State of Punjab, ;
(3) Shiv Raj v. Delhi Administration, and (4) S&R of Legal Affairs, W.B. v. S. K. Roy, .
9. A recent judgment of the Supreme Court reported in (5) J. P. Sharma v. Vinod Kumar Jain, becomes relevant. It was held at para 46 :
"The power under S. 482, Criminal Procedure Code, has been examined by this Court in Municipal Corpn. of Delhi v. Ram Krishna Rohtagi . It was laid down clearly that the test was that taking the allegations and the complaint as they were without adding or subtracting anything, if no offence was made out then only the High Court would be justified in quashing the proceedings in exercise of its powers under S. 482 of Code of Criminal Procedure. There this Court observed that the power under S. 482 should be used very sparingly."
It was further observed therein as follows :
"The question at this stage is not whether there was any truth in the allegation made but the question is whether on the basis of the allegations, a cognizable offence or offences had been alleged to have been committed. The facts subsequently found out to prove the truth or otherwise on the allegation is not a ground on the basis of which the complaint can be quashed."
10. It is not desirable to go into the disputed facts of the contentions raised by both the parties as there are certain limitations as found in the rulings cited by the Public Prosecutor which are mentioned above. The allegation is that there is no valid sanction. The provision for sanction is a most salutary safeguard. The sanctioning authority is placed somewhat in the position of a sentinel at the door of criminal courts in order that no irresponsible or malicious prosecution can pass the portals of the Court of justice. It is, therefore, essential that persons charged with the responsible duty of granting sanction which is a duty of deciding whether or not the credit and reputation of another citizen should be put in peril by means of a criminal prosecution, should bring to the discharge of their duty a sense of responsibility and the industry required to examine the relevant materials.
11. The Board is the sanctioning authority to accord sanction of prosecution of A-1 and A-2 and others who are bank officials. The Board in its meeting held on 7-11-1986 passed the following resolution :
"The Board considered the allegations of criminal conspiracy, corruption contained in the report in respect of Rc. No. 1/85-CI(1) forwarded by Finance Ministry under cover of their letter D.O. No. 24/8/86-Vij., dated 9th October, 1986 against M/s. M. Gopalakrishnaiah, General Manager, V. Sambasiva Rao, the then Manager of Ramanthapur Branch, G. Surindra Reddy, R.C.O., and after discussions at length, resolved to sanction prosecution of the officers.
Further resolved to authorise the Chairman to issue the sanction orders as per the draft for prosecution of the said officers and sign the same on behalf of the Board of Directors of the Bank.
The Board also decided that the letter dated 27-10-1986 handed over earlier to the Chairman and Managing Director by Sri M. Gopalakrishnaiah, General Manager enclosing the letter addressed to the Additional Secretary, Government of India with a request to forward the same, be sent to the Government of India with a request to forward the same, be sent to the Government for their consideration."
On the basis of this resolution, the sanction order was signed by the Chairman for and on behalf of the Board of Directors of the Bank. From this resolution which is the basis for sanction, we are having information about the letter received from the Finance Ministry dated 9-10-1986 and the letter dated 27-10-1986 handed over to the Chairman by A-1. The letter dated 9-10-1986 mentioned in that resolution is the letter written by one of the Directors of the Board who is the Addl. Secretary of the Ministry of Finance. It is as follows :-
"S. K. PURKAYASTHA DIRECTOR (VIG) MUST IMMEDIATE/CONFIDENTIAL D.U. No. 24/8/86-Vig.
Department of Economic Affairs (Banking Division) "Jeevan Deep"
Parliament Street, New Delhi-110001. Dated : the 9th October, 1986.
Dear Shri Venkataratnam.
I am forwarding herewith a copy of letter No. 3653/3/1/85-GW. 1/CIU-1, dated 29th August, 1986, along with SP's report in respect of CBI Rc. No. 1/85-CIU (1) against Shri M. Gopalakrishnaiah, General Manager, Andhra Bank and others.
I would be grateful if the report of the C.B.I. is placed before the Board of Directors of the Bank for according sanction for prosecution for launching criminal proceedings against Shri Gopalakrishnaiah and others within 15-11-1986 and for taking all other actions as sought for by the C.B.I. in their letter referred to above.
Banking Division may also be kept apprised of the action taken in the matter.
With regards, Yours sincerely, Sd/-
x x x (S. K. PURKAYASTHA)"
The contents themselves indicate that the person who wrote that letter, wanted that the Board should consider to pass a resolution at the earliest point of time, i.e., 15-11-1986. What all that has been placed before the Board is only the police report and the pro forma about the sanction. All the available material which was with the investigation agency with regard to the enquiry, was not placed before the Board for consideration. The acceptance of the report, per se, indicates that the board has not independently applied its mind before passing the resolution for sanction of prosecution against the accused. The resolution also shows that discussions were held at length. What discussions are those is not known and what material available is also not known. The possibility of placing the material basing on the police report does not arise as that material has not been placed before the Board. The instances mentioned in the report or in the pro forma sent by the police for approval indicate number of instances and in most of the instances, though not all, it is the Board that has ratified or gave sanction for granting loans or other facilities to A-5 or his associations. The Board, before giving the sanction, has to consider about its act in ratification and sanction. It is not the individual act of A-1, A-2 or A-3. It is only after the sanction and ratification of the Board, loans and other facilities were granted. If we take into consideration the allegation of conspiracy, definitely the Board which has ratified or gave sanction, has to be treated as a party. Unless and until there is a discussion in the Board that it has been misled by the acts of A-1 and A-2, the Board cannot simply say that on the basis of the police report and the letter received from the Finance Ministry dated 9-10-1986 they can grant sanction without looking into the transactions wherein they were also parties.
12. It is pertinent to note here that the person who wrote the letter dated 9-10-1986 is the person that participated in the Boards' meeting. In one capacity is asking the Board to consider to take action and in another capacity, he was participating in the Board meeting, and approved the action for sanction on the basis of the report sent by the police.
In Jaswant Singh v. State of Punjab, (1958 Cri LJ 265) (supra) it was held as follows :-
"The sanction under the Act is not intended to be nor is an automatic formality and it is essential that the provisions in regard to sanction should be observed with complete strictness; (Basdeo Agarwala v. Emperor, 1945 FC 93 at p. 98 : AIR 1945 FCR 16 at p. 18 : (1945 (46) Cri LJ 510 at p. 512). The object of the provision for sanction is that the authority giving the sanction should be able to consider for itself the evidence before it comes to a conclusion that the prosecution in the circumstances be sanctioned or forbidden. In Gokulchand Dwarkadas Morarka v. The King, 75 Ind. App. 30 at p. 37 : AIR 1948 PC 82 at p. 84 : (1948 (49) Cri LJ 261 at p. 263) the Judicial Committee of the Privy Council also took a similar view when it observed :
"In their Lordships' view, to comply with the provisions of Clause 23 it must be proved that the sanction was given in respect of the facts constituting the offence charged. It is plainly desirable that the facts should be referred to on the face of the sanction, but this is not essential, since C. 23 does not require the sanction to be in any particular form, nor even to be in writing. But if the facts constituting the offence charged are not shown on the face of the sanction, the prosecution must prove by extraneous evidence that those facts were placed before the sanctioning authority. The sanction to prosecute is an important matter; it constitutes a condition precedent to the institution of the prosecution and the government have an absolute discretion to grant or with hold their sanction."
It should be clear from the form of the sanction that the sanctioning authority considered the evidence before it and after a consideration of all the circumstances of the case, sanctioned the prosecution, and therefore unless the matter can be proved by other evidence, in the sanction itself the facts should be referred to indicate that the sanctioning authority had applied its mind to the facts and circumstances of the case. In Yusefalli Mulla v. The King, 76 Ind. App. 158 : AIR 1949 PC 264 : (1949 (50) Cri LJ 889 it was held that a valid sanction on separate charges of hoarding and profiteering was essential to give the Court Jurisdiction to try the charge. Without such sanction the prosecution would be a nullity and the trial without jurisdiction."
13. The Board, while considering sanction, ought to have acquainted itself about the effect of the sanction. The Board also has got a legal cell. It can as well obtain legal opinion. A-1 forwarded the letter dated 27-10-1986 narrating the entire incident. It is not for the Addl. Secretary, Ministry of Finance, Govt. of India to consider the truth or otherwise of the contents noted in that letter. No doubt it was addressed to the Addl. Secretary. At the time when they consider about giving sanction on the basis that some offences have been made out and that the Board's sanction is necessary, it is incumbent upon the Board to note the contentions raised by A-1 even though they are not having any material of their own, except the report. For each and every allegation that has been made in the complaint, A-1 gave answers. The Board simply forwarded the letter, but it has not chosen to consider the contents therein. No where in the resolution, we can get any information or date about the Board making any discussion on the basis of the letter written by A-1. Before granting sanction, the Board need not issue any notice to the accused, but when the Board has decided to forward the letter, it ought to have considered the contents. When the Board has got an opportunity to know the stand of the accused, it is certainly incumbent on it to call for that relevant file and examine the truth or otherwise of the statement made by A-1. The Board shirked its responsibility in considering the contents of the letter. The Addl. Secretary is not the person that has to grant sanction. He is also not the person that has to review the sanction order that has been passed by the Board. So far as granting of sanction is concerned, the Board's authority is final. The Board did not apply its mind and simply acted on the instructions of the letter of the Finance Ministry which was written by Addl. Secretary who is one of the Directors and who has participated in the proceedings. When the sanction is the result of such deliberations and when the Board has not applied its mind either on the basis of the files or on the basis of the allegations mentioned in the letter of A-1, we have to arrive at a conclusion that the Board has not discharged its duty properly but passed a resolution accepting the sanction mechanically with a direction to the Chairman to sign on behalf of it. By virtue of the fact of mentioning the letter dated 27-10-1986 and the letter of the Finance Ministry dated 9-10-1986, in the resolution, we are able to know, prima facie, without adding or subtracting anything to the complaint, and arrive at the conclusion that the Board has not applied its mind independently and passed the resolution due to extraneous reasons mentioned above.
14. The motive for favouring even as per the allegation in the charge-sheet is that A-1 obtained a plot in Nacharam and A-2 also obtained a plot in Nacharam in the name of his wife admeasuring respectively 504 and 312 Sq. Yards. There is no dispute about their purchasing plots in question. The attempt to purchase plot commenced in the year 1978 and the same was completed by means of an agreement of sale followed by the registration of sale deed in the first quarter of 1982. A-1 in his letter dated 27-10-1986 mentioned the facts about the purchase and the payment of advance and the explanation with regard to obtaining the drafts. The agreement of sale is dated 23-1-1982 and it was executed by Azmatunnisa Begum, R/o. U.S.A. represented by her general Power of Attorney holder Afsarunnisa Begum wife of Mohd. Ghouse Khan. The receipt also is signed by the General Power of Attorney for Rs. 8576/- towards the full consideration of the premises No. 1-10/B/6. The site is about 12 K.Ms. away from the main city and they are only plots and registered with same residential numbers. A-1 has applied for house loan even in November, 1982, much prior to the alleged favours that have been done by him to A-5 who was already a customer since long time. We cannot expect that the Branch Manager will take money as bribe anticipating about the future advances that are being made about 10 months or one year later. If there is any nexus between the date of purchase and the date of the acts of commission and omission done by the accused with a view to cause loss to the bank or cause advantage to the customer, then we can understand that the obtaining of the sale deed is only a product that has been received by him as a bribe. This Court is very cautious in making this approach as generally, the court is not expected to go into the facts. But on the facts that have been brought out in the charge-sheet itself without adding or subtracting, if the Court is able to arrive at the conclusion that what has been contended by the accused is correct, the court is bound to accept the same. No customer of a bank will pay money in advance anticipating the loan or favours after a lapse of about one year. Not even a single paper has been moved within a short time after obtaining the agreement or sale deed for granting of loans or advances by A-1 and A-2. As already pointed out by me, the time lag of 10 months or one year is a point factor in favour of the accused to contend that they have not received anything as a reward for rendering services to A-5. The Affidavit of the real estate agent, the agreement & the receipt of consideration mentioned in the letter dated 27-10-1986 by the accused themselves speak about the truthful nature of the transaction. Simply because some plots were purchased by A-5 and his relations and simply because the general power of attorney has been given for executing the sale deeds by the general power of attorney holder as she was proceeding to U.S.A., it cannot be said there is some suspicion or cloud about the genuineness of the transaction made by A-1 and A-2. It must also be noted here that A-1 obtained loan on filing these papers which is now relied on by him an which was mentioned in his letter. If it has been received as a bribe, he would not have brought it to the notice of the bank even before doing any favour for obtaining loan for construction of a house. It is not uncommon in a city like Hyderabad that persons who require house plots, will get information from the real estate brokers or from persons of their acquaintance. It is also not uncommon that a person will choose to purchase a plot nearby the plot of the person with whom he has got acquaintance. A-2's wife has got house property and she was getting rents also and it is not difficult for her to spare this much of amount for purchasing plot. The capacity of A-1 as a General Manager then, or the capacity of A-2's wife in parting with the amounts to purchase those plots cannot be doubted in any manner. When they have got capacity to purchase the plots by parties about Rs. 10,000/- and Rs. 6,000/- respectively and when there is no nexus between the transaction and the allegation about their doing favour, I feel that the allegation that as a motive or reward A-1 and A-2 received the plots freely from A-5 in consideration of their future promise to favour him by advancing loans or other credit facilities from the Bank, cannot be accepted. The Board also failed to apply its mind on this aspect even though it was brought to its notice by A-1. When the Board itself failed in its duty, it cannot be permitted to state that after full discussion, it applied its mind and granted the sanction, when particularly most of the transactions are ratified or approved by the Board.
15. One of the allegations in the charge-sheet is that A-1 favoured A-5 and his associates by reducing the rate of interest from higher rate to 15% and increased the number of instalments for repayment. The job of A-1 and A-2 is to grant loans and permit credit facilities etc. The Andhra Bank, Central Office, issued a Circular No. 071/GM/56, dated : May 21, 1981, about the discretionary powers for sanctioning loans and advances. Another letter dated : 6-3-1981 issued by the Bank is with regard to the rate of interest on advances. It shows that the rate of interest that can be reduced is 15% Sanctioning of loans to customers by bank officials as per the guidelines issued from the Head Office in the form of circulars from time to time vesting in them with some discretion allowing decrease in the rate of interest and increasing the number of instalments for repayment of loans can never be regarded as acts of cheating. The allegation of deceit, fraud or misrepresentation are totally absent. The vesting of discretionary powers means that they can apply their mind consciously while treating the similar persons on the same footing. The allegation, per se, in the charge-sheet does not show that A-1 and A-2 have not exercised their discretion in lowering the rate of interest or in increasing the number of instalments for other customers. If they have not exercised their discretion in favour of other customers, then we can understand that the allegation has got some force. When such an allegations is not there, we cannot accept or swallow the statement of the prosecution that simply because A-1 has exercised the discretion and reduced the rate of interest in the case of A-5, they have acted in a biased manner or have acted in a motivated manner on the ground that they received bribe. Exercising of a discretion within limits prescribed in the circular in the case of old customer, per se, does not amount to cheating or causing loss to the bank or causing advantage to the customer. We have to see the nature of the business and the nature of the functions that have been entrusted and the nature of the discretion that can be exercised. It is not for each and every discretion in the case of reduction of interest or increase of instalments that has been exercised by A-1 and A-2, that they have to obtain the Board's permission. Even if they have applied to the Board for permission and if the Board sanctioned permission, we cannot say that they have misled the Board. From the letter dated : 31st January, 1987, it is clear that the bank has not suffered any loss on account of the grant of loans and still the bank has got security to the extent of Rs. 74 lakhs as against the 10% of the loans that have been advanced to A-5 and to be recovered. The Bank has not made any complaint and the Board of Directors never entertained any suspicion or doubt and no departmental enquiry has been made and the Board never passed any resolution prior to the date of sanction order that A-1 and A-2 misused their official position and misled it in ratifying or sanctioning loans and advances to A-5. The counsel for the petitioner contended that some people who were jealous and who felt that A-1 may come in the way of some other posts or promotion by virtue of his honesty and ability, got an anonymous petition sent without any basis. It is not uncommon that some blacksheep who are having some hold in the higher-ups, are misusing their power or utilising the services of the police under the guise of sending anonymous or pseudonymous petitions with false allegations to achieve their object of eliminating honest persons who stood in their way or in the way of their associates.
16. For the reasons mentioned above, the sanction order for prosecution of A-1 and A-2 under section 6 of the Prevention of Corruption Act as approved by the Board, which is the competent authority, in its meeting dated : 7-11-1986, is not valid.
17. From the facts and circumstances that have been discussed above, we have to find that the sanction is to legal and it is not a valid sanction and without proper and valid sanction, the proceedings against A-1 and A-2 for prosecution would be a nullity and the trial without jurisdiction.
18. In the result, both the petitions are allowed. The proceedings against A-1 and A-2 in C.C. No. 81/86 on the file of the Prl. Special Judge for SPE & ACB Cases, Hyderabad, which is now transferred to the Court of the Ist Addl. Special Judge for SPE & ACB Cases, Hyderabad, and re-numbered as C.C. No. 19/87 for offences under sections 120-B read with Section 420, IPC, 161 and 165, IPC and Section 5(2) R/w. 5(1)(d) of the Prevention of Corruption Act are quashed by invoking the provisions under S. 482, Cr.P.C. as it has been found that the continuation of the proceedings is a gross abuse of the process of law.
19. Petitions allowed.