Karnataka High Court
A. Narasimhaiah And Ors. vs State Of Karnataka And Ors. on 9 August, 2001
Equivalent citations: 2001CRILJ4293, 2001 AIR - KANT. H. C. R. 2516
Bench: P.V. Reddi, N.K. Patil
JUDGMENT P.V. Reddy, C.J.
1. Writ Appeal 4220/ 2000 is filed by the petitioners in Writ Petition No. 32774/1996 and Writ Appeal No. 7653/1999 is filed by the State Government and other officials, who were respondents in Writ Petition No. 19578/1997. In both the Writ Petitions, the Petitioners are Directors of Bangalore District & Rural District Central Co-operative Bank Limited (hereinafter referred to as 'Bank').
2. In Writ Petition No. 32774/1996 the prayer is to restrain the respondents from taking any adverse action against the petitioners pursuant to the communications dated 8-11-1996 and 11-11-1996 (Annexures - 'C' and 'D'). Annexure - 'C' is a letter addressed by the then Union Minister of Textiles addressed to the then Chief Minister pointing out serious financial improprieties committed in sanctioning the loans by the Bank under the Chairmanship of the 1st petitioner and requesting the Chief Minister to direct a probe into the entire matter and also to provide him with certain information. Annexure - 'D' is a communication addressed by the Registrar of Co-operative Society (2nd respondent.) to the Managing Director of the DCC Bank. In that letter the Registrar observed that the inspection of the Bank revealed that the loans were given to Housing and Credit Societies without adequate and proper security and that the Management had shown total lack of prudence and acted negligently while handling precious money of the depositors. The Registrar then observed that the Committee of Management was guilty of 'criminal breach of trust and negligence'. The Managing Director was directed to examine each case of loan sanctioned wherever it was overdue and to take necessary action to prosecute the erring member of the Committee. The learned single Judge dismissed the writ petition holding that the persons who addressed the letters were within their rights to make the complaints and to request/direct a probe into the matter. It was observed:
If, after enquiry the allegations are found to be untrue or false, it is for the authority to take such action as is necessary and permitted in law.
The learned Judge further observed that this Court, in exercise of its extraordinary jurisdiction under Article 226 of Constitution of India, would not be right in interfering with the powers vested in the authorities and to forbear them from taking any action on such letters.
3. We do not find any error of law in the impugned judgment. The relief sought, for is somewhat extraordinary. The communications - Annexure - 'C' and 'D' are meant to bring to the notice of the appropriate authorities certain aspects relating to the functioning of the Co-operative Societies so as to facilitate a further probe/enquiry into the matter. One such letter is written by a public representative in the position of a Minister and another is an inter-departmental communication. The writ petitioners have no cause of action to complain against such letters being addressed by responsible persons in office. The approach adopted by the learned single Judge cannot be legally faulted. Hence, Writ Appeal is dismissed with costs of Rs. 2000/-.
4. We now turn our attention to the more contested writ appeal i.e., Writ Appeal No. 7653/1999 filed against the order in Writ Petition No. 19578/1997. That writ petition was filed by the 1st petitioner in the other writ petition by name Sri Narayana Gowda. The relief sought for in the writ petition is to quash the notification dated 10-6-1997 (Annexure-'G') issued by the State Government (Home Department) giving consent to the Delhi Special Police Establishment (CBI) to register a case, investigate it and launch prosecution against those involved in the irregularities that occurred in the DCC Bank. The Notification reads as follows :
In pursuance of the provision contained in Section 6 of the Delhi Special Police Establishment Act, 1946 (Act XXV of 1946), the Government of Karnataka is pleased to accord consent to the extension of powers and jurisdiction to the members of the Delhi Special Police Establishment for registration and investigation of a case against those persons who are involved in the irregularities in Bangalore District and Bangalore Rural District Central Co-operative Societies in Karnataka, Bangalore, vide Report No. DO H6 CRD KMC 38, 96-97 dated 11-11-1996 under the provision of the Prevention of Corruption Act, 1988 or any other law within the whole State of Karnataka and to launch criminal prosecution against concerned.
The learned single Judge did not go into the merits of the contentions raised as regards the validity of the notification. However, the Notification dated 10-6-1997 was quashed on the short ground that the State Government should have waited for the disposal of Writ Petition No. 32774/1996 (appeal against which has been dealt with supra). The learned Judge observed that the State Government having issued the impugned notification pursuant to the communication of the Registrar dated 11-11-1996, which is the subject matter of challenge in Writ Petition No. 32774/1996, could have waited for the outcome of the writ petition especially in view of the undertaking given on behalf of the State Government in that written petition that it will not proceed in the matter until the Court decides the issues involved therein. The learned single Judge gave liberty to the State Government to issue appropriate notification if it is so desired after the disposal of the Writ Petition No. 32774/ 1996 and accordingly writ petition was disposed of. By the time of disposal of Writ Petition No. 19578/1997, it appears that the arguments in Writ Petition No. 32774/1997 were heard and judgment was reserved. Unfortunately, the judgment was delivered long thereafter.
5. Aggrieved by the order in Writ Petition No. 19578/1997, the substance of which has been set out above, the Writ Appeal No. 7653/1999 has been filed by the State Government and the Registrar of Co-operative Societies.
6. In this writ appeal, there was some debate on the question whether in fact an undertaking was given by the Government counsel and whether the notification dated 10-6-1997 could be quashed on the basis of the alleged undertaking or the pendency of the writ petition in which the Registrar's communication dated 11-11-1996 was challenged. However, in the light of the subsequent event of the disposal of writ petition No. 32774/1996, it is not necessary to deal with that aspect. The Writ Petition No. 32774/1996 having been dismissed and the writ appeal therein also having been dismissed, the State Government could very well issue a fresh notification in terms of the liberty given in the impugned judgment. But the fact remains that the validity of the Notification dated 10-6-1997 has been assailed on other grounds viz., the power and propriety to issue such notification. Those questions, though raised in that writ petition, were not gone into by the learned Single Judge for the reason that the learned Judge disposed of the writ petition on the short ground which has been adverted to above. Therefore, in this appeal, we have to necessarily go into the contentions raised by the writ petitioners as regards the legality of the notification. If these contentions are to be negatived and the notification is found to be intra vires, there is no need to direct or give liberty to issue a fresh notification as per the order of the learned Single Judge. Such an exercise would be an empty formality. The impugned notification itself can form the basis for probe/investigation by CBI. With this preface, let us look into the contentions urged by the learned counsel for the respondent-writ petitioner.
7. The 1st contention urged is that no order has been issued under Section 5 of the Delhi Special Establishment Act (hereinafter referred to as the Act) after the offence were specified under Section 3 of the Act and, therefore, the purported consent of the State Government is an infructuous exercise and has no sanctity in the eye of law. Section 3 of the Act empowers the Central Government, by notification in the official Gazette, to specify the offences or classes of offences, which are to be investigated by SPE. In exercise of this power, the Central Government issued a notification on 7-9-1989 specifying the offences. Amongst several offences, IPC offences including Cri breach of trust, criminal mis-appropriation, offence under Prevention of Corruption Act 1947 and 1988 are included. Attempts, abetments, conspiracies in relation to the specified offences are also brought within the purview of the notification. There was an earlier notification of 18-2-1963 under Section 3. Offences under IPC, Prevention of Corruption Act, 1947 etc. have been specified therein. A comprehensive notification has been issued after Prevention of Corruption Act came into force i.e., notification dated 7-9-1989. The counsel for the respondent contends that 1989 notification impliedly supersedes the earlier notification of 1963. The learned counsel then contends that no notification was issued under Section 5 of the Act thereafter," i.e., after 7-9-1989 and, therefore, the question of giving consent under Section 6 does not arise. It is submitted that the order under Section 5 issued on 18-2-1963 extending the powers and jurisdiction of the Delhi SPE to the State of Mysore and other States is of no avail to the State. According to the learned counsel for the respondent-writ petitioner, a fresh order under Section 5 should necessarily follow a notification under Section 3 and then only, the consent under Section 6 could be given. An order under Section 5 which was issued prior to the fresh notification under Section 3 issued with reference to the then existing notification under Section 3 will cease to be in force when once a fresh notification under Section 3 is issued. We cannot accept this contention. Let us notice the provisions contained in Sections 5 and 6 of the Act -
5. Extension of powers and jurisdiction of special police establishment to other areas - (1) The Central Government may by order extend to any area (including Railway areas), in a State, not being a Union territory the powers and jurisdiction of members of the Delhi Special Police establishment for the investigation of any offences or classes of offences specified in a notification under Section 3.
(2) When by an order under Sub-section (1) the powers and jurisdiction of members of the said police establishment are extended to any such area, a member thereof may, subject to any orders which the Central Government may make in this behalf, discharge the functions of a police officer in that area and shall, while so discharging such functions, be deemed to be a member of a police force of that area and be vested with the powers, functions and privileges and be subject to the liabilities of a police officer belonging to the police force.
6. Consent of State Government to exercise of powers and jurisdiction - Nothing contained in Section 5 shall be deemed to enable any member of the Delhi Special Police establishment to exercise powers and jurisdiction in any area in a State, not being a Union territory or railway area, without the consent of the Government of that State.
We do not think that, that on the emergence of a fresh notification under Section 3 of the Act the antecedent order under Section 5 will become extinct and will not survive. We cannot infer any such result either on the basis of language employed or scheme underlying the two provisions viz., Sections 3 and 5. The purpose of Section 3 notification is to specify offences and the purpose of order envisaged by Section 5 is to extend the powers and jurisdiction of SPE to specify areas. When once the jurisdiction of SPE is extended to another State it remains in force until and unless it is rescinded. The powers and jurisdiction of members of SPE can be exercised subject to the provisions of Section 6 with reference to the offences specified in a notification issued under Section 3, whenever it is or has been issued. It is not necessary that fresh order under Section 5 should be promulgated by the Central Government as and when the notification under Section 3 is amended or altered. The language employed in Section 5 viz., 'for the investigation of any offences or classes of offences specified in a notification under Section 3' does not admit of the interpretation that the order under Section 5 should necessarily follow the notification under Section 3. Such an interpretation would go against the principle of 'Purposive construction of statutes'. There is no reason to think that the Parliament intended that with the change of notification under Section 3 adding or deleting the offences, the Central Government should every time issue a formal order under Section 5. It may, if it so chooses, having due regard to the offences added or deleted. But when it is not necessary to do so and when its extension to the areas of operation is intended to be kept intact despite the change in Section 3 notification, the insistence on a fresh order under Section 5 would be meaningless and does not in any way effectuate the purpose underlying the statute. We, therefore, reject this contention advanced by the learned counsel for the respondent. When once it is accepted that the order under Section 5 issued on 18.2.1963 is valid and applicable to the State of Karnataka (corresponding to the old State of Mysore), consent by the State Government under Section 6 should be up-held subject to our findings on the other objections thereto.
8. The next contention put forward by the learned counsel for the respondent is that the Prevention of Corruption Act has no application to the instant case inasmuch as the respondent-writ petitioner, who is a member of Managing Committee of DCC Bank is not a 'Public servant' within the meaning of that Act. It is, therefore, submitted that the consent given by the State Government on the basis that the offences falling within the ambit of the Prevention of Corruption Act needs to be investigated is vitiated in law. The 1st answer to this contention is that not only the Prevention of Corruption Act, but offences under 'any other law' is mentioned in the impugned notification dated 10-6-1967. As already noticed, there are various offences under IPC which are notified under Section 3 of the Act. The possibility of the commission of specified offences under the provisions of IPC cannot be ruled out at this premises-investigation stage. Therefore, on the basis of the consent given by the State Government, the CBI is not precluded from making an enquiry or investigation irrespective of the fact whether the offences fall under the purview of Prevention of Corruption Act or not.
9. The second aspect to be considered is whether the respondent-writ petitioner, who was at the relevant point of time the member of the Managing Committee of the Cooperative Bank, governed inter-alia by the provisions of Co-operative Societies Act, is a 'Public servant'. The contention of the learned counsel for the respondent, in this regard, is that the respondent does not fall under any of the limbs of the definition of 'Public Servant' contained in Section 2(c) of the Prevention of Corruption Act, 1988.
10. The contention of the learned Advocate-General appearing for the State is that the respondent is a 'Public Servant' under Sub-clauses (viii) and (ix) of Section 2(c) and, therefore, the Prevention of Corruption Act comes into play. The relevant part of definition of 'public servant' is as follows :
2. Definitions In this Act, unless the context otherwise requires, -
(a)&(b) ....
(c) 'public servant' means
(viii) any person who holds an office by virtue of which he is authorised or required to perform any public duty;
(ix) any person who is the president, secretary or other office-bearer of a registered co-operative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid from the Central Government a State Government or from any Corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956).
The definition of 'public duty' in Clause (b) of Section 2 is "a duty in the discharge of which the State, the public or the community at large has an interest." It is the contention of the learned Advocate General that the members of the Managing Committee of the DCC Bank governed by the provision of the Central Co-operative Bank has important public function to perform and the functioning of the society affects a sizeable sections of public who are either share-holders or depositors or members of the Primary Societies which received aid from the District Co-operative Bank. The learned counsel for the respondents disputes this position and submits that neither the interests of the public or community at large are at stake. The fact that certain benefits are extended by the Bank to its members-constituents does not make the function of this Cooperative society 'public duty' within the meaning of Section 2(b) of the Prevention of Corruption Act. It is pointed out that the Co-operative Society is not a statutory body, though it is governed by the provisions of Co-operative Societies Act when once it is registered.
11. Leaving aside the question whether the respondent falls within Sub-Clause (viii) of Section 2(c) of Prevention of Corruption Act, we are of the view that Clause (ix) is clearly attracted in the instant case. The only controversy in this regard is whether this Co-operative Society is 'receiving or having received any financial aid' from the State or Central Government or from a Corporation established by or under a Central Act or by any authority or body owned or controlled or aided by the Government. It is the contention of the learned Advocate General appearing for the State that this Cooperative Society is receiving and at any rate has received financial aid both from the State Government as well as from NABARD, which is a Corporation established under a Central Act and promoted by the Central Government. In this connection, reference is made to the additional affidavit filed by the Assistant Registrar of the Co-operative Societies (Credit) clarifying the factual position regarding the financial aid and support received from the State Government and the NABARD. The sources of the funds of the Bank consisting of Share Capital from the members, Share Capital from the State Government, deposits from the members, borrowing's from the NABARD and the Apex Cooperative Bank Ltd., as on 31-3-2000 was to the tune of Rs. 730 lakhs. Prior to 1994-95, the Bank was getting loans under refinance facility from NABARD. But, that facility has been stopped since 1994 on account of various deficiencies. In order to get refinance facility from NABARD. The State Government has been extending guar -antee to Apex Bank to raise short term and medium term loans on behalf of the DCC banks including the Bangalore District and Rural District Central Co-operative Bank Limited. As a result of erosion of public deposits and the discontinuance of refinancing facility by NABARD, the Bank is not in an effective position to extend timely and adequate loans to the farmers. During the year 1991, the Government of India waived off agricultural loans borrowed by farmers up to Rs. 10,000/- under the Rural Debt Relief Scheme and the Bank has availed the benefit of the same. The factual position is summed up as follows :
It is, therefore, respectfully submitted that the Bank is recipient of financial aid from the. State Government. It is also the recipient of finance from the NABARD, which is a Corporation established under the Act of Parliament.
12. It is not in dispute that substantial amount payable to NABARD under the refinance facility up to 1994 is still outstanding. We are mentioning this fact for the reason that financial aid which the Bank had received cannot be brushed aside as an event of past without any projection over the future. It still looms large over the affairs of the Bank. The guarantee extended by the State Government and the sanction of Rs. 25 lakhs loan by the State Government in October, 2000 (referred to in Para 7 of the additional affidavit) also indicates that the Bank has been receiving considerable financial support from the State Government. In these circumstances it cannot but be said that the Bank of which the respondent was a member of Managing Committee received and has been receiving financial aid from the State Government and NABARD, and therefore Sub-Clause (ix) of Section 2(c) of the Prevention of Corruption Act is clearly attracted.
13. The learned counsel for the respondent Mr. Subramanya Jois placed strong reliance on the decision of the Supreme Court in State of Maharashtra v. L.R. Shah we do not think that the ratio of the said decision has any application to the issue involved in the present case. In that case decided by the Supreme Court, the Supreme Court was concerned with the questioned whether by virtue of the deeming definition of'public servant' Under by reference to Section 21 of IPC, the Chairman and members of the Managing Committee could be prosecuted for the offences under IPC. The ratio of the decision is clearly discernable from the following passage at page 940-941 of AIR:
The Indian Penal Code and the Maharashtra Co-operative Societies Act are not Statutes in pari materia. The Co-operative Societies Act is a completely self-contained Statute with its own provisions and has created specific offences quite different from the offences in the India Penal Code. Both Statutes have different objects and created offences with separate ingredients. They cannot thus be taken to be Statutes in pari materia, so as to form one system. This being the position, even though the Legislatures had incorporated the provisions of Section 21 of the Indian Penal Code into the Co-operative Societies Act in order to define a 'public servant' but those 'public servants' cannot be prosecuted for having committed the offence under the Indian Penal Code.
It was then observed :
the legislative intent is clear that a specific category of officers while exercising powers under specific sections have by legal fiction become 'public servant' and it is only for the purposes of the Co-operative Societies Act. That by itself does not make those persons 'public servants' under the Indian Penal Code, so as to be prosecuted for having committed the offence under the Penal Code.
The question whether Clause (ix) or Clause (viii) of Section 2(c) of Prevention of Corruption Act is attracted was not the subject matter of the discussion in that case.
14. The last submission of the learned counsel for the respondent is that there is no material before the State Government that any criminal offence has been committed by the respondent and there was failure on the part of State Government to apply its mind to this crucial aspect. It is pointed out that the general consent given by the State Government on 20-11-1992 under Section 6 of the Act was rescinded by an order dated 15-12-1998. It is, therefore, submitted that in case the State Government wanted to treat any case as a special case warranting its consent for investigation by CBI, the State Government should have actively applied its mind to the question whether there are facts and circumstances warranting the entrustment of investigation to the CBI. It is contended that the consent was given merely on the basis of the letter dated 11-11-1996 addressed by the registrar of Co-operative Societies which does not contain specific details and which is merely based on presumption or generalisation. While examining this contention, it should be borne in mind that the consent contemplated by Section 6 of the Act is on the limited aspect of entrusting the investigation of case or cases to CBI. Whether it should give consent under Section 6 so as to pave the way for investigation by CBI is a matter within the realm of executive discretion of the State Government. Instead of the State Police investigating the matter after registering FIR, the CBI has been entrusted with that duty. It may be, on account of complex nature of investigation or on account of the fact that the stake of NABARD - a Central Government body, which had sanctioned loans under the refinance facility is also involved. It is not expected of the State Government at the stage of giving consent under Section 6 to address itself to the truth or otherwise of the allegations against the persons in management of Bank nor is it called upon to arrive at a conclusion whether a prima facie case exists for the eventual prosecution of respondent, because the facts would come to light only after investigation. As already observed, the State Government is only concerned with the limited question whether the CBI should be entrusted with the investigation instead of State Police. Coming to the material on record, it is to be noted that the letter addressed by the Registrar of the Co-operative Societies on 11-11-1996 to the State Government (which is different from the letter of even date addressed to the Managing Director of the Bank) is not skeletal or sketchy. The results of inspection made in June 1996 have been set out in detail. The sanction of loan of Rs. 4 crores without adequate security to M/s. Nava Karnataka Co-operative Society which is said to be a bogus society and M/ s. Konarak Co-operative Society finds place in the report of the Registrar. The Registrar referred to the report of the Joint Registrar of the Co-operative Societies in this regard. The actions already initiated and to be initiated are indicated in report. The learned Advocate-General also drew our attention to the report dated 21-9-1997 addressed by the Registrar of Co-operative Societies (Credit) pursuant to an enquiry under Section 64 of the Karnataka Co-operative Societies Act. The name of the respondent figures therein as the person responsible for having recommended sanction of loans to 96 Societies on the basis of manipulation of records and without adequate security. The learned Advocate General clarified that the entire loan amount sanctioned to the aforementioned two Societies still remains unpaid and cheques issued were bounced. Of course, in the counter affidavit filed by the respondent, there is a bald denial of allegations. We do not propose to enter into the details nor express any opinion, but we are only examining the correctness of the contention that there was no material at all before the Government, excepting the bald and sketchy letter of the Registrar of the Co-operative Societies addressed to the Managing Director of the Bank.
15. We are satisfied that apart from the letter of the Registrar dated 11-11-1996, a detailed and comprehensive report of the Joint Registrar (adverted into in the Registrar's letter to the Government) was also available to the Government and a presumption could be lawfully raised that all these material entered into the mind of the Government before according consent under Section 6 of the Act. We are not expressing any view or otherwise on the correctness of the allegations in the report but a probe/ investigation is the least that is expected in a case of this nature. If the allegations are found to be true, a fraud involving misutilisation of funds of-the Bank to the detriment of share-holders and depositors of Bank will be unravelled. There is no legal basis to pre-empt the probe or investigation. The power under Article 226 cannot be used to thwart such investigation at the threshold.
16. The learned counsel for the respondent, to reinforce his argument that the Government did not apply its mind to the relevant facts and the material before the authority concerned, has drawn our attention to the judgment of this Court in Writ Petition No. 7931/1993 dated 25-8-1994. In that case, the respondent and others challenged the order of supercession dated 12-12-1993. That writ petition was allowed by quashing the order of supersession. The learned Judge was of the view that there was no material before the Government to prove the charges that led to the supercession and it was an instance of non-application of mind on the part of the Government. The second charge referred to therein is the alleged irregularity in financing loans to various House Building Co-operative Societies without proper authority. That charge is quite different from the allegations that have come to surface in the year 1996 or so. It cannot be said that on the same set of allegations, an investigation by CBI has been ordered. That apart, the scope of supercession and the scope of consent for investigation into the alleged commission of offence are two distinct things and one should not be mixed up with the other.
17. Thus, we reject all the contentions advanced on behalf of the respondent. Before closing, there is one more aspect which we have to refer to. We are informed that by the time the further proceedings were stayed by this Court, 48 persons were examined and a large number of documents were seized for scrutiny. The learned counsel for the respondent contended that even before the registration of the crime on the basis of a formal complaint, an investigation cannot go on. It is clarified by the learned Standing Counsel appearing for SPE that what has been undertaken by CBI is a preliminary enquiry and a regular investigation has not yet been taken up. He has drawn our attention to Chapter V of the Manual dealing with preliminary enquiries. It is not proper for us, in this writ appeal, to go into this aspect at all. It has nothing to do with the validity or otherwise of the consent accorded by the State Government under Section 6 of the Act. That is the only question raised in the writ petition giving rise to this appeal.
In the result Writ Appeal No. 7653/1997 is allowed with costs of Rs. 1,000/-.