Bombay High Court
Smt. Dr. Rita Parasher vs State Of Mah. Through C.I.D. Nagpur on 26 November, 2019
Author: Z. A. Haq
Bench: Z. A. Haq, M. G. Giratkar
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
Criminal Writ Petition No. 413 of 2018
Smt. [Dr.] Rita Parasher,
aged 67 years,
Occ : Medical Practitioner,
resident of 36, Rajiv Nagar,
Wardha Road,
Nagpur-440 025. ..... Petitioner
Versus
State of Maharashtra,
through C.I. D., Nagpur. ..... Respondent
*****
Mr. Surindra Singh, Senior Adv., with Mr. Arun S. Agrawal and
Mr. Prateek Sharma, Advs., for the petitioner.
Mr. M. K. Pathan, Addl. Public Prosecutor for respondent.
*****
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CORAM : Z. A. HAQ AND
M. G. GIRATKAR, JJ.
DATE : 26th November, 2019
ORAL JUDGMENT [Per Z. A. Haq, J.] :
01. Heard. Rule. Rule is made returnable forthwith.
02. The Petitioner, a Medical Practitioner by profession, was co-opted as a Director of Samta Sahakari Bank Ltd., a Co-operative Society, running banking business, from 01 st March, 1994 till 31st March, 2000. On 15th November, 2007, First Information Report was registered by the respondent against thirty persons, including the petitioner, for offences under Sections 406, 408, 409, 468, 471, 420, 201, 120-B and 109 read with Section 34 of Indian Penal Code, read with Section 65 of the Information Technology Act, 2000. All the thirty persons [accused] had been connected with Samata Sahakari Bank Ltd. [hereinafter referred to as the "Financial Establishment"], some of them being elected Directors, some of them being Co-opted Directors, some of them being Officers of the Financial Establishment and some of them being borrowers. After investigation, charge-sheet came to be filed before the trial Court, which came to be registered as Regular Criminal Case No. 2190/2008. In this charge-sheet, name of the ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 3 petitioner was not included in the list of accused persons. Supplementary charge-sheet was filed on 22nd August, 2008 and additional supplementary charge-sheet was filed on 15 th October, 2008. In these charge-sheets, name of the petitioner was not shown in the list of accused. Third supplementary charge-sheet came to be filed on 30th June, 2010, and in this charge-sheet, the petitioner was shown as Accused No.20. On 2 nd November, 2016, offences under Sections 3 and 4 of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 [hereinafter referred to as "the Act of 1999"] came to be added. The petitioner has filed this petition, praying that First Information Report No. 338/2007 registered against her, Charge-sheet dated 30th June, 2010 and Regular Criminal Case No. 2190/2008 registered against her be quashed, and she be discharged from the prosecution.
03. Learned Senior Adv. appearing for the petitioner has taken us through the record, particularly the report submitted by the Enquiry Officer under Section 83 of the Maharashtra Co- operative Societies Act, 1960 [hereinafter referred to as "the Act of 1960"]. This enquiry under Section 83 of the Act of 1960 was conducted by a Chartered Accountant appointed by the Commissioner of Co-operation, Maharashtra State. In the conclusions recorded by the Enquiry Officer, ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 4 it is recorded that in case of most of the large borrower accounts and group accounts, the Bank has advanced and enhanced their credit facility without appraisal of the proposals and the operations of the business activity, and in such sanctions and enhancements, it was observed that the sanction of proposals was never discussed in board meetings. It is found that minutes were altered after the board meeting was over and the Chief Executive Officer of the Bank had written the minutes of the board and kept the Minutes Book in his custody. It is recorded that modus operandi was to leave four- five lines blank after the resolution of sanction of loan and after the minutes were read at the board meeting, Chief Executive Officer used to insert sanction of big loans. It is recorded that small loans were sanctioned after a lengthy discussion, giving all the details of security, application amount, amount of loan sanctioned etc., but, the large loans, like loans of Rs. 75,00,000-00 were sanctioned by a four-word resolution. The Enquiry Officer found that some of the insertions in the Minute Book were in different inks and no discussions were reflected in the minutes of Loan Committee; but those resolutions were inserted lateron, and in these cases also, the ink by which the insertions were introduced was different. It is specifically recorded by the Enquiry Officer that except for the Chairman, the Directors were not knowing about the illegalities committed by the Chief Executive Officer. The ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 5 Enquiry Officer concluded that the proposals of large advances were never put before the board meeting, but were sanctioned by the Chief Executive Officer and the Chairman only. In the report, it is recorded that none of the Directors, except the Chairman, is responsible for the illegal sanctions. The Enquiry Officer held that the then Chairman-Shri D.S. Chimurkar, Chairman - Shri Milind Chimurkar and the Chief Executive Officer should be held responsible for sanctioning large loans without fulfilling the proper norms.
04. Learned Senior Adv., has pointed out the conclusions of Enquiry Officer that the Financial Establishment had acted contrary to the directives issued by the Reserve Bank of India on investments through the broker and that the member of Investment Committee and the Board of Directors, in part, were responsible for the lapse. The Enquiry Officer recorded that the time allotted to him to complete the enquiry under Section 83 of the Act of 1960 was not sufficient and a further detailed probe was necessary in the matter to unearth misappropriation by some of the officials. The Enquiry Officer proposed that the provisional fee paid to him should be recovered from the guilty, i.e., Ex-chairman - Shri B. S. Chimurkar, Chairman - Shri Milind Chimurkar, the Chief Executive Officer - Shri P. B. Choudhary and the Manager of the Bhagwaghar Branch - Shri S. P. Deshpande.
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05. It is not in dispute that action as per Section 81 (3 (b) of the Act of 1960 was also taken and a report came to be submitted on 22nd September, 2007. This report, referred as "Flying Squad Report" runs into two volumes. The petitioner has annexed the relevant extracts of this report concerning the transactions in which, according to the respondent, the petitioner was involved.
Learned Senior Adv., has taken us through the extracts of Flying Squad Report, and has pointed out that the loans, which were disbursed as per the resolutions passed in the meetings in which the petitioner was present, have been repaid by the borrowers.
06. The Commissioner of Co-operation then took action as per Section 88 of the Act of 1960. The report submitted by the Authorized Officer under Section 88 of the Act of 1960 is placed on record. In the concluding paragraph, Authorized Officer has recorded that Smt. Rita Parashar [present petitioner] being the ex- Director of the Bank does not have any direct or indirect involvement and she is not responsible for the loss caused to the Bank. It is recorded that the petitioner is not liable for action under Section 88 of the Act of 1960. The Authorized Officer opined that charge-sheet need not be filed against her and action should not be taken against her as per Rule 72 (2) of the Maharashtra Co-operative Societies Rules, 1961. After the Authorized ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 7 Officer submitted his report under Section 88 of the Act of 1960, determining the amount recoverable from the erring directors/officials, Recovery Certificate was issued under Section 98 of the Act of 1960. The list showing the names of Directors/officers against whom Recovery Certificate was issued is also placed on record. Name of the petitioner is not found in the list and this is because the Authorized Officer had not found any involvement of the petitioner in the illegalities and liability was not fixed on her.
It is submitted on behalf of the petitioner that she is implicated as accused in the third supplementary charge-sheet unnecessarily without there being any prima facie material against her to show her involvement in the alleged crime. It is prayed that the supplementary charge-sheet filed against her and the Regular Criminal Case registered against her be quashed.
07. On behalf of the respondent-State, it is submitted that admittedly the petitioner was a co-opted Director of the Financial Establishment from 01st March, 1994 till 31st March, 2000 and substantial amounts of loans were disbursed during that period.
Cash Credit Facility was also granted to some customers during that period and those customers are now defaulters. According to the respondent-State, because of the large-scale illegalities in the conduct of business ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 8
by the Financial Establishment, Reserve Bank of India had imposed a moratorium on 3rd August, 2006, because of which, the depositors were not able to withdraw their amounts from the Financial Establishment. Relying on the judgment in the case of Soma Suresh Kumar Vs. Govt. of Andhra Pradesh & others [ (2013) 10 SCC 677] and the order passed by learned Single Judge of this Court in Criminal Application [BA] No. 955 of 2015 on 18 th January, 2016, it is submitted that the offences punishable under Sections 3 and 4 of the Act of 1999 have been rightly added against all the accused, including the petitioner. Learned Addl. Public Prosecutor countered the arguments made on behalf of the petitioner relying on the report of enquiry under Section 88 of the Act of 1960, submitting that the Authorized Officer was not able to enquire under Section 88 of the Act of 1960 because of the bar created by Section 88 itself prohibiting the enquiry of things done five years prior to the date of commencement of audit or date of order for enquiry. It is pointed out that the cases on the basis of which charge-sheet has been filed against the petitioner are relating to the period till 31 st March, 2000 and order for enquiry under Section 88 of the Act of 1960 was issued on 4th December, 2006, i.e., after five years. A general submission is made that there is ample material against the petitioner for her prosecution and this is not a case fit to exercise extraordinary jurisdiction under Article 226 of the Constitution ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 9 of India and under Section 482 of the Code of Criminal Procedure. Conclusions from the Flying Squad Report are relied upon by learned Addl. Public Prosecutor to urge that the Board of Directors had not taken sufficient/appropriate surety/mortgage while sanctioning the loan. It is further submitted that as per Bye-law No. 36 (4), the Board of Directors is under an obligation to examine the applications for grant of loan and Cash Credit and to impose proper conditions while granting those applications. Bye-law No.41 (c) is relied and it is argued that the Board of Directors was under an obligation to draft Rules for considering/sanctioning the applications for grant of loan and cash credit, and while drafting the Rules, they were duty-bound to consider the guidelines/directives issued by the Reserve Bank of India and the Rules were framed, however, while passing resolutions for grant of loan and grant/enhancement of Cash Credit Facility, action was not taken as per those Rules, and thereby the petitioner faulted, resulting in the unwarranted moratorium by the Reserve Bank of India, causing immense loss and inconvenience to the depositors. Report of SVK & Company, Chartered Accountants, submitted to the Liquidator of the Financial Establishment is relied upon by the respondent-State to point out that in the cases of Sharda Builders, Taurus Network Marketing, Sepctra Vision, Vikram Sales Corporation and Shridhar Builders, the exposure norms laid down by the Reserve Bank of India were violated ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 10 while considering their applications for grant of loans and grant/enhancement of the Cash Credit Facility.
08. The communication issued by the Liquidator to the Deputy Superintendent of Police on 26 th July, 2018 is pointed out by the learned Addl. Public Prosecutor, and it is argued that the submission made on behalf of the petitioner that the amount of loan which was given to Sharda Builders, Taurus Network, Spectra Vision and M/s. Vikram Sales Corporation has not been repaid as contended on behalf of the petitioner, and it is shown that amount is diverted from the Cash Credit to Term Loan Account. It is submitted that Cash Credit loans are still outstanding against these borrowers. It is prayed that considering the above facts, this Court should not interfere at this stage and the petition be dismissed.
09. In reply, learned Adv., for the petitioner submitted that offence under Section 3 of the Act of 1999 is not made out, as the offence can be said to be committed when the Financial Establishment fraudulently defaults in repayment of deposit on maturity along with any benefit, and, in the present case, the prosecution has not pointed out that the Financial Establishment failed to repay any deposit of depositor on its maturity along with any benefit till the time the ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 11 petitioner was a co-opted Director of the Financial Establishment. It is further argued by Shri Arun Agrawal, Adv., for the petitioner, that the Act of 1999 has come into force from 21 st January, 2000, giving it retrospective effect from 29th April, 1999. According to the petitioner, the last transaction, in which the petitioner was involved, as reflected from the charge-sheet, is dated 30th March, 1999, and at that time, the Act of 1999 was not promulgated.
It is submitted that the report of SVK & Company, Chartered Accountants, also cannot be relied upon as that report itself states that the exposure limit on advances was calculated as per the Reserve Bank of India Circular dated 10th March, 2004 and admittedly, the petitioner ceased to be co-opted Director of the Financial Establishment from 1st April, 2000.
10. After giving consideration to the rival submissions, we are of the view that the contention of the petitioner that offence under 3 of the Act of 1999 prima facie is not made out against her, has substance and has to be accepted.
Section 3 of the Act of 1999 reads as follows :-
3. Fraudulent default by Financial Establishment Any Financial Establishment, which fraudulently defaults any repayment of deposit on maturity along with any benefit in the form of interest, bonus, profit or in any other form as promised or fraudulently fails to render service as ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 12 assured against the deposit, every person including the promoter, partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or affairs of such Financial Establishment shall, on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lac of rupees and such Financial Establishment also shall liable for a fine which may extend to one lac of rupees."
"Explanation. - For the purpose of this section, a Financial Establishment, which commits default in repayment of such deposit with such benefits in the form of interest, bonus, profit or in any other form as promised or fails to render any specified service promised against such deposit, or fails to render any specific service agreed against the deposit with an intention of causing wrongful gain to one person or wrongful loss to another person or commits such default due to its inability arising out of impracticable or commercially not viable promises made while accepting such deposit or arising out of deployment of money or assets acquired out of the deposits in such a manner as it involves inherent risk in recovering the same when needed shall, be deemed to have committed a default or failed to render the specific service, fraudulently."
Undisputedly, the Financial Establishment, of which the petitioner was Director, had been conducting the business of advancing loans and cash credit facility, since long. Mere grant of loan or Cash Credit Facility in violation of guidelines issued by the Reserve Bank of India will not by itself amount to an offence under Section 3 of ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 13 the Act of 1999. Offence under Section 3 of the Act of 1999 can be said to be committed when the Financial Establishment fraudulently defaults in the payment of deposit on maturity along with any benefit as referred in Section 3 of the Act of 1999. There is nothing on record to show that Samata Sahakari Co-operative Bank, i.e., the Financial Establishment committed any "fraudulent default" in repayment of any deposit on maturity along with any benefit till 31 st March, 2000. According the respondent, the imposition of moratorium by the Reserve Bank of India on 3 rd August, 2006 resulted in depriving the depositors/customers of the Bank from withdrawing their amounts. Accepting this submission, offence under Section 3 of the Act of 1999, if at all committed, it would be much after the petitioner ceased to be a Director of the Financial Establishment from 1st April, 2000. The respondent-State has not been able to show that moratorium was imposed by Reserve Bank of India on 3rd August, 2006 because of the alleged illegal activities which were committed during the period when the petitioner was the co-opted Director of the Financial Establishment. Hence, we hold that in the present case, offences under Section 3 of the Act of 1999 and under Section 4 of the Act of 1999 cannot be applied to the petitioner.
11. As far as offences under Sections 406, 408, 409, 467, 468, 471 and 420 of Indian Penal Code are concerned, the reports ::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 ::: wp413.18 14 submitted by the Authorized Officer under Section 83 and under Section 88 of the Act of 1960 are self-speaking. The Authorised Officer has recorded definite conclusion in the reports that the illegalities were committed by Ex-chairman - Shri B. S. Chimurkar, Chairman - Shri Milind Chimurkar, Chief Executive Officer - Shri P.B. Choudhary and Manager of Bhagwaghar Branch - Shri S.P. Deshpande.
On assessing the material on record, we hold that there is no prima facie case against the petitioner for her prosecution for the offences under Sections 406, 408, 409, 467, 468, 471, 420, 201, 120-B and 109 of Indian Penal Code, read with Section 65 of the Information Technology Act.
12. Hence, the following order:-
[a] The First Information Report No. 338/2007 registered against the Petitioner only, Charge-sheet dated 30 th June, 2010 filed against the petitioner only and Regular Criminal Case No. 2190/2008 filed against the petitioner only and pending before Additional Chief Judicial Magistrate No.1, Nagpur, are quashed.
[b] The Notification dated 2nd August, 2019, published on 6th August, 2019, to the extent properties of the petitioner are attached is also quashed.::: Uploaded on - 10/02/2020 ::: Downloaded on - 24/04/2020 21:28:04 :::
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13. Rule is made absolute in the above terms. No costs.
14. At this stage, learned Addl. Public Prosecutor requested that the effect, operation and implementation of this judgment may be deferred by eight weeks, to enable the respondent-State to take appropriate steps in the matter. The request being reasonable is granted. The effect, operation and implementation of this judgment is kept in abeyance till eight weeks from the date of receipt of copy of this judgment by the State. However, it is directed that the respondent-State shall not take any further steps pursuant to the Notification dated 2nd August, 2019, published on 6 th August, 2019 in so far as properties of petitioner are concerned.
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