Delhi District Court
Our Hon'Ble High Court Of Delhi In ... vs Official on 20 December, 2012
IN THE COURT OF SHRI L.K. GAUR, SPECIAL JUDGE
P.C. ACT (CBI09), CENTRAL DISTRICT,
TIS HAZARI: DELHI
CC No. 34/11
R.C. No. 30(A)/97/CBI/ACB/ND
Central Bureau of Investigation
Versus
1. Shri Satnam Singh (Expired)
S/o Shri Sardul Singh,
Chief Manager, Andhra Bank
20, Visakhapatnam,
Andhra Pradesh.
2. M/s Simran Exports,
A2/62, Hastasal Road, Uttam Nagar
Delhi.
3. Shri Naresh Kumar Sikri,
A2/62, Hastasal Road,
Uttam Nagar,
Delhi.
CC No. 34/2011 1 of 101
4. Shri V.P Chhabra (Expired)
No. 6, Community Centre,
IInd Floor, Naraina, PhaseI,
New Delhi.
5. Sh. Parmatama Saran (Expired)
S/o Sh. Hari Sh. Hari Singh Sharma
R/o 32, Noor Nagar, Village Sihani,
District Ghaziabad (UP).
Date of Institution : 03.07.2000
Date of reserving Judgment : 15.10.2012
Date of Pronouncement : 18.12.2012
JUDGEMENT
Preliminary The charge sheet in this case was filed as against accused namely Sh. Satnam Singh (Public Servant Accused No.1), M/s Simran Exports (Proprietorship Firm Accused No. 2 ), Sh. Naresh Kumar Sikri (Proprietor Accused No.3), Sh. V.P Chhabra ( Approved Valuer Accused No.4) and one Sh. Paramatma Saran Sharma ( Guarantor of Accused No.3 - Accused No5) . During the course of the trial accused Satnam CC No. 34/2011 2 of 101 Singh, accused V.P Chhabra and accused Paramatma Saran Sharma expired and proceedings against them already stand abated. Since M/s Simran Exports is nothing but name of business identity of accused Naresh Kumar Sikri and has no existence of it own beyond that of Accused Naresh Sikri, this judgment is only with reference to the accused Naresh Kumar Sikri.
2. Accused Satnam Singh was the Chief Manager of Andhra Bank, Janakpuri Branch, New Delhi (hereinafter 'Branch'). Accused Naresh Kumar Sikri, who is an exporter running his business in the name of M/s Simran Exports, had approached the Bank for Packing Credit Limit. According to the case of prosecution Sh. Paramatma Saran had submitted the documents to the bank relating to his property for securing the Credit already released to M/s Simran Exports. Sh. V.P Chhabra was the valuer who had (over) valued the said property.
CC No. 34/2011 3 of 101
3. Present case was registered as against the accused Satnam Singh and others under Section 120B read with Section 420, 468, 471 IPC and under Section 13(2) read with 13(d) of the Prevention of Corruption Act (hereinafter 'Act') on 28.4.1997 and for committing substantive thereof.
Brief Facts
4. M/s Simran Exports was a partnership firm at one time and had already an account with the Bank and was enjoying cash credit facilities, which was closed on 5.12.1993 and a new account was opened in the name of M/s Simran Exports as proprietorship firm. On the same day accused Naresh Kumar Sikri had applied for Packing Credit Limit of Rs.18 lacs against a Letter of Credit for US$ 64,550 in favour of M/s Simran Exports by Mushreq Bank, Dubai dated 13.11.1993 for export of ready made garments. This application came to be considered for processing by the SubManager Sh. K. S. Murthy who vide his office note dated 5.12.1993 noted that the party was new to export business, the previous account of the party with the bank CC No. 34/2011 4 of 101 was not being conducted satisfactorily and financial statement of the firm had not been submitted. He also raised the question, would it possible to export the goods by M/s Simran Exports as Proprietorship Firm with the same Export Code allotted to M/s Simran Export when it was a partnership firm? Despite these objections accused Satnam Singh had sanctioned the Packing Credit Limit of Rs.18 lacs on the same day i.e 5.12.1993. In doing so, accused Satnam Singh had also exceeded his discretionary powers which was only for Rs.10 lacs. He had also done so without obtaining prior sanction from the Zonal office, which was mandatory on his part.
5. According to the charge sheet accused Satnam Singh had directly obtained the loan documents from the party and on 6.12.1993 released Rs.15 lacs after preparing the vouchers himself and this amount was credited in the account of M/s Simran Exports. Further, on the same day got issued pay orders worth Rs.14.5 lacs in the name of the firms M/s Dhingra Trading Company (Rs. 5 lacs), M/s Avatar Textiles (Rs.4.50 CC No. 34/2011 5 of 101 lacs) and M/s Vinny Impex (Rs.5 lacs). On 7.12.1993 Accused Satnam Singh allowed withdrawal of Rs.50,000/ in cash and on 22.4.1994 got a pay order issued in favour of Poma Fashions in the sum of Rs.50,000/. Thus, out of Rs.18 lacs of PCL released, Rs.15.50 lacs was utilized. The pay order of Rs.5 lacs issued in favour of M/s Dhingra Trading Company was returned to accused Naresh Sikri by the party by two cheques and this amount was credited to the bank and in its place another pay order was got issued for Rs.5 lacs in the name of M/s Vandana Enterprises.
6. Accused Sh. Naresh Sikri though availed the above limit to the extent of 15.50 lacs but did not make export under the LC which was to expire on 11.5.1994 and extended up to 9.8.1994. It is alleged that Sh. Naresh Sikri misutilized the said funds. It is also stated that Sh. Naresh Sikri neither credited the sale proceeds of the goods fabricated using the said PCL nor returned the money to the bank. Subsequently, however, in this situation Satnam Singh had obtained a collateral security from CC No. 34/2011 6 of 101 Accused Naresh Sikri in the form of one property of 2902 Sq. Yards in village Noorpur Loni owned by Sh. Paramatma Saran. He got it valued at Rs.15 lakhs by the approved valuer of the bank Sh. V.P Chhabra on 14.3.1994. The subsequent inquiries showed that this property had already been mortgaged to Indian Bank in 1991.
Charge
7. On the basis of the allegations in this case charge was framed against the accused Late Satnam Singh, Naresh Sikri and Late Paramatma Saran (accused V.P Chhabra had expired before the framing of charge) under Section 120 B IPC read with 420 IPC and under Section 13(d) punishable under Section 13(2) of the Prevention of Corruption Act, 1988. Separate charges were framed against accused Satnam Singh under Section 13(1)(d) punishable under Section 13(2) of the Prevention of Corruption Act, 1988 and against the accused Naresh Sikri under Section 420 IPC. The accused had pleaded not guilty and claimed trial.
CC No. 34/2011 7 of 101 Examination of Witnesses Prosecution Witnesses
8. During the course of the trial the prosecution had examined in all 15 number of witnesses.
PW1
9. Witness PW1 Sh. Dinesh Kumar posted as Manager in Indian Bank, New Delhi main branch in the year 1999 had deposed that the letter Ex.PW1/1 was sent by Sh. Harsh Malhotra, Asstt. General Manager and Branch Head of Indian Bank, New Delhi Branch to Sh. P. Balachandran Inspector CBI along with some documents. He had identified those documents as, (1) Non encumbrance Certificate No.57/1991 dated 5.2.1991 relating to the property in the name of Late Paramatma Saran Sharma at Noor Nagar, Sihani, Ghaziabad - Ex.PW1/2; (2) An order of Sub Divisional Officer dated 25.3.1991 relating to the said property by which it was declared that the said property was in the residential area - Ex.PW1/3;
CC No. 34/2011 8 of 101 (3) Khatoni relating to the said property dated 10.1.1991 - Ex.PW1/4; (4) Affidavit dated 4.4.1991 signed by accused Late Paramatma Saran Sharma wherein he had declared that he was the owner of the said property and he had not taken any loan as against the said property and till the time he has not returned the loan he would neither transfer nor mortgage the said property to anyone - Ex.PW1/5; (5) Search certificate dated 23.4.1991 issued by Sub Registrar stating that a charge had been registered on the said property of accused Late Paramatma Saran in the office of the Sub Registrar, Ghaziabad
- Ex.PW1/6; (6) A letter dated 20.4.1991 written by accused Late Paramatma Saran to the Manager of Indian Bank for creating equitable mortgage in its favour by depositing the title deeds relating to the said property - Ex.PW1/7; and (7) Letter dated 12.12.1991 of accused Late Paramatma Saran Sharma regarding retaining the title deeds of the said property as additional security by the Indian Bank- Ex.PW1/8.
CC No. 34/2011 9 of 101 PW2
10. PW2 Sh. J. V. Ratnam an Officer posted in the bank from 1992 to 1994 at the time when accused Late Satnam Singh was the Chief Manager. He had deposed that as far as he could remember the accused Satnam Singh was competent to grant Packing Credit Limit to the tune of Rs.10 lacs to any customer in the export business and if he was to accord sanction for Packing Credit Limit above the said amount, the sanction from the Zonal office was necessary. According to him on 5.12.1993 he was on leave and in his absence Sh. K.S Murthy who was working as the Sub Manager had put up the note Ex.PW2/1 on the application dated 30.11.1993 of M/s Simran Exports for the grant of Packing Credit Limit to the tune of Rs. 18 lacs. He had proved this note by identifying the signatures of Sh. Murthy. On this note the approval was granted by the accused Late Sh. Satnam Singh by making a note on it Ex.PW2/2. The limit was sanctioned against a Letter of Credit which was in favour of M/s Simran Exports which was a sole proprietorship firm at that time.
CC No. 34/2011 10 of 101 Prior to that M/s Simran Exports was a partnership firm and it was availing cash credit and cheque and bill discounting facilities. At that time certain bills of M/s Simran Exports had not been paid by the purchaser and, therefore, on the instructions of the Zonal office he had verified the entire transactions of M/s Simran Exports and submitted a report to the Zonal office.
11. Further in his testimony this witness had identified the four pay orders signed by accused Late Satnam Singh and another Officer of the bank Sh. A.C Gururaj, Ex.PW2/3 to Ex.PW2/6 issued in favour of M/s Avatar Textiles (for Rs.4.50 lacs), M/s Dhingra Trading Company (for Rs.5 lacs), M/s Vinny Impex (for Rs.5 lacs) and M/s Vandana Enterprises (for Rs.5 lacs). He had further deposed that as per the Letter of Credit the accused Naresh Sikri proprietor of M/s Simran Exports was to procure raw material and process the same as a step towards preparation of finished goods and it is only thereafter he could have applied for cash withdrawal from the current account where the money stood credited form the Packing Credit Limit CC No. 34/2011 11 of 101 Loan Account for making payment to the labour and other misc. expenses.
12. This witness had also stated that while he was posted in the bank, accused Naresh Sikri had approached him for the sanction of the limit at a time when M/s Simran Exports was a partnership firm but due to past record he had refused to entertain the request of the accused.
PW3
13. Witness PW3 Sh. Gurcharan Dass Bhalla, who was posted as Chief Inspector at the Zonal office of the Andhra Bank during the year 1994, had deposed that he had carried out inspection in respect of four firms namely M/s Simran Exports, Raj Exports, Bharti Exports and M/s Jay Key Impex Corporation. He had submitted separate reports relating to the said accounts with the assistance of Sh. M.M Tyagi Vigilance Officer, Delhi Zone. The inspection relating to M/s Simran Exports was conducted between 23.12.1994 and 25.12.1994. He had CC No. 34/2011 12 of 101 proved this report as Ex.PW3/1. He had elaborated that in this report he had interalia discussed the role of the Zonal office in the relation to the account of M/s Simran Exports. With regard to the role of the Branch he had prepared the report Ex.PW3/2. Further as to the role of the Chief Manager of the Bank accused Satnam Singh, he had prepared the report Ex.PW3/3. All these reports he had forwarded along with the "Staff Accountability Report" dated 27.1.1995 Ex.PW3/4 to higher authorities. In the reports Ex.PW3/1 to Ex.PW3/3 in respect of M/s Simran Exports he had highlighted the shortcoming/irregularities in the conduct of this account.
PW4
14. Witness PW4 Sh. M.M Tyagi who was posted as Vigilance Officer at Zonal Office, New Delhi, Andhra Bank in the year 1994 had deposed on the same lines as the witness PW3 Sh. G.D Bhalla had deposed. He had confirmed the fact that he had assisted Sh. G.D Bhalla in the inspection of above account.
CC No. 34/2011 13 of 101 PW5
15. Witness PW5 Sh. R.C Jain, who is an architect by profession, had deposed that in the year 1999 he was the approved valuer of Andhra Bank, Ghaziabad U.P and had conducted the valuation in respect of the property situated at Village Noor Nagar, District Ghaziabad, U.P and submitted his report dated 19.7.1999. He had proved his report as Ex.PW4/1. As per his report the value of this property on 19.7.1999 was Rs. 2,61,000/. According to him he had visited the property along with one Officer of Andhra Bank, Navyug Market Branch, Ghaziabad, namely Sh. V.K Sharma who had identified the land. PW6
16. Witness PW6 Sh. A.C Gururaj, who was posted as Officer from 1992 to 1998 in the bank, had deposed that as per the instructions of the Chief Manager he had inspected the unit of M/s Simran Exports on 18.3.1994 and submitted Unit Inspection Report on 20.3.1994 to the Manager of the Branch. He had proved this report as Ex.PW6/1.
CC No. 34/2011 14 of 101 PW7
17. Witness PW7 Sh. R.K Bansal, who was posted as Chief Manager in Zonal Office of Andhra Bank, had deposed that in 1995 he was heading a team of Inspectors and it was part of his duty to follow up and arrange inspections in various branches of the Zone. He had inspected the PCL account of M/s Simran Exports maintained at the bank and submitted report in that respect. Though in his deposition he had stated that in the account he had found number of irregularities such as amount of stock which was shown was much higher than the available stock on the date of inspection, credit facility was being availed against Letter of Credit which had expired even after getting extensions, the Branch Manager who had sanctioned the loan did not have authority to sanction loan to that extent i.e he had exceeded his discretionary powers, the Branch Manager also did not follow up the procedure of periodical inspections of stocks and proper timely reporting to the authorities and also that the bills, cheques reflected in the account being returned unpaid and/or delayed submissions of bills showed that the CC No. 34/2011 15 of 101 activities of the firm were not proper but his report in which he had supposedly pointed out all these things had been collected by the investigating officer and not filed. PW8
18. Witness PW8 Shri Devi Dass posted as Officer in Chandni Chowk Branch of Allahabad Bank had deposed that M/s Dhingra Trading Company had a current account with the Allahabad bank, Chandni Chowk. As per the Account Opening Form Sh. Ashok Kumar, Sh. Naresh Kumar, Sh. Narender Kumar and Sh. Vimal Juneja were its partners. He had identified the Account Opening Form Ex.PW8/1 and also the Specimen Signature Card related thereto Ex.PW8/2. This witness had further deposed that vide payin slip Ex.PW8/3 there was a Banker's cheque for Rs.5 lacs issued by the Janakpuri Branch of Andhra Bank. There was a draft issued from this account in favour of one Duratex Silk Mills Pvt. Ltd. for Rs.92,894.79 on application dated 11.12.1993 Ex.PW8/4.
CC No. 34/2011 16 of 101 There was another draft issued in favour of M/s Simran Exports for a sum of Rs.3,50,000/ Ex.PW8/10 vide application dated 13.12.1993 Ex.PW8/5. Similarly, there were drafts issued for a sum of Rs.97,662.43 in favour of M/s Adilon Synthetic Pvt. Ltd. vide application dated 10.12.1993 Ex.PW8/6 and M/s Tex India Fabrics for a sum of Rs.26,564/ vide application dated 14.12.1993 Ex.PW8/7. As per his testimony there was a cheque dated 17.12.1993 Ex.PW8/8 issued by M/s Dhingra Trading Co. in favour of M/s Simran Exports for Rs.1,50,000/. This witness had also proved the statement of account of M/s Dhingra Trading Co. Ex.PW8/9.
PW9
19. Witness PW9 Sh. Rakesh Krishan Gupta, who was working as clerk cum cashier with the Chandni Chowk Branch of Oriental Bank of Commerce from 1982 to 2005, had identified the receipt memo dated 16.6.1999 Ex.PW9/1 by which he had handed over the documents to CBI. This witness had identified the Account Opening Form dated 12.11.1993 Ex.PW9/2 CC No. 34/2011 17 of 101 opened by Sh. Vinod Kumar of M/s Avatar Textiles and also the Specimen Signature Card related to the said account Ex.PW9/3. This witness had deposed that a cheque dated 3.12.93 Ex.PW9/4 for Rs.3 lacs was issued by M/s Avatar Textiles in favour of Sh. Gulshan Kumar. Similarly he had identified the self cheque dated 10.12.1993 Ex.PW9/5 of Rs.2 lacs issued in its own favour by M/s Avatar Textiles; payin slip dated 29.12.93 of Rs.85,000/; payin slip dated 8.12.1993 of Rs.4,50,000/ and payin slip of 5.11.1994 of Rs.5,000/ all relating to M/s Avtaar Textiles Mills Ex.PW9/6 to 9/8.
20. This witness had also identified the signatures of S.K Duggal Manger of the Bank on the Account Opening Form of M/s Vandana Enterprises dated 4.10.89 Ex.PW9/9 and the Specimen Signature Card Ex.PW9/10.
21. Further this witness had identified the payin slip dated 27.12.1993 Ex.PW9/11 by which Rs.5 lacs were deposited in this account. He had also identified the cheques Ex.PW9/12 CC No. 34/2011 18 of 101 collectively (1 to 5) dated 13.12.1993 for Rs.10,000/ (in favour of M/s Marar Textiles), dated 5.11.1994 for Rs.5,000/ (in favour of M/s Avatar Textiles), dated 19.12.1993 for Rs.85,000/ (in favour of M/s Avatar Textiles), dated 29.12.1993 for Rs.2 lacs (self) and another cheque dated 29.12.1993 for Rs.2 lacs (self) issued by M/s Vandana Enterprises.
22. This witness had proved the statements of account of M/s Vandana Enterprises as well as that of M/s Avatar Textiles Ex.PW9/13 and Ex.PW9/14 respectively.
PW10
23. Witness PW10 Sh. K.S Murthy is an important witness in this case. He was posted as Sub Manager ScaleII at the Bank between 1991 to 1994. He had deposed that the application Ex.PW10/1 for advance dated 30.11.1993 which M/s Simran Exports had submitted through its proprietor Sh. Naresh Kumar Sikri for Packing Credit Limit of Rs.18 lacs along with the property statement Ex.PW10/2 was processed by him vide CC No. 34/2011 19 of 101 office note dated 5.12.1993 Ex.PW2/1 wherein he had pointed out the deficiencies in the proposal and had not recommended the loan on the said proposal. He had submitted the same for further instructions to the accused Late Satnam Singh who despite the said deficiencies pointed out, had approved the loan proposal in his own hand writing vide the note Ex.PW2/2 against the Letter of Credit dated 13.11.1993 issued by one Mashreq Bank PSC Ex.PW2/DC.
24. In his testimony this witness had identified various documents relating to the execution of loan documents, agreements, furnishing of guarantees, filling up of relevant forms etc. The details of the same are as follows:
(i) Letter dated 18.11.1993 written by State Bank of India to Andhra Bank Janakpuri Branch forwarding the authenticated Letter of Credit - Ex.PW10/3;
(ii) Demand Promissory Note dated 6.12.1993 executed by Naresh Sikri as proprietor of M/s Simran Exports - Ex.PW10/4;
CC No. 34/2011 20 of 101 (iii) Packing Credit Agreement dated 6.12.1993 executed by
Naresh sikri on behalf of M/s Simran Exports - Ex.PW10/5;
(iv) Document relating to security of advances and loans executed by Naresh Kumar Sikri proprietor of M/s Simran Exports - Ex.PW10/6;
(v) Form RF/298 dated 6.12.1993 executed by Sh. Naresh Kumar Sikri proprietor of M/s Simran Exports Ex.PW10/7;
(vi) General Form of Guarantee dated 6.12.1993 executed by one Sh. Mahesh Kumar and one Jai Singh in favour of M/s Simran Exports - Ex.PW10/8;
(vii) General Form of Guarantee dated 4.4.1994 executed by accused Parmatma Saran in favour of M/s Simran Exports -
Ex.PW10/9;
(viii) Letter dated 10.3.1994 by which accused Parmatma Saran had offered collateral security in favour of M/s Simran Exports - Ex.PW10/10;
(ix) Form RF/255 dated 17.4.1994 by which accused Parmatma Saran had deposited the documents mentioned therein including title deeds - Ex.PW10/11;
CC No. 34/2011 21 of 101 (x) Six documents handed over by accused Parmatma Saran
to the Branch as per the list in Ex.PW10/11 - Ex.PW10/12 (collectively);
(xi) Letter dated 5.12.1993 written by accused Naresh Kumar Sikri proprietor of M/s Simran Exports for release of Packing Credit Limit in favour of parties namely M/s Dhingra Trading Company, M/s Vinny Impex, M/s Avtar Textiles, M/s Poma Fashions or M/s R.K Garments amounting to Rs.18 lacs - Ex.PW10/13;
(xii) Debit Voucher dated 6.12.1993 for a sum of Rs.15 lacs in favour of M/s Simran Exports in the hand writing of accused Sh. Satnam Singh - Ex.PW10/14;
(xiii) Credit Voucher dated 6.12.1993 for Rs.15 lacs credited in the account of M/s Simran Exports prepared by accused Satnam Singh - Ex.PW10/15;
(xiv) Cheque dated 6.12.1993 for Rs.5,00,025/ in favour of the branch for the issuance of the draft in favour of M/s Dhingra Trading - Ex.PW10/16;
(xv) Draft Voucher dated 6.12.1993 for issuing draft in favour CC No. 34/2011 22 of 101 of M/s Dhingra Trading for Rs.5 lacs signed by accused Naresh Sikri - Ex.PW10/17;
(xvi) Debit Voucher dated 22.2.1994 for Rs.4,50,000/ bearing initials of accused Satnam Singh - Ex.PW10/18; (xvii) Credit Voucher dated 22.2.1994 for Rs.50,000/ for crediting the account of M/s Simran Exports - Ex.PW10/19; (xviii) Cheque dated 22.2.1994 for Rs.50,000/ favouring the Branch issued by accused Naresh Sikri for issuance of draft - Ex.PW10/20;
(xix) Draft Voucher dated 22.2.1994 for Rs.50,025/ signed by accused Naresh Sikri for issuance of draft in favour of M/s Poma Fashions - Ex.PW10/21;
(xx) Debit Voucher dated 31.3.1994 by which Rs.50,635/ as interest was debited in the account of M/s Simran Exports - Ex.PW10/22;
(xxi) Credit Voucher dated 31.3.1994 by which Rs.2,07,415/ had been credited in the Profit & Loss Account of the bank - Ex.PW10/23;
(xxii) Deposit slip dated 7.4.1994 by which the cheque CC No. 34/2011 23 of 101 Ex.PW10/25 was issued by M/s J.N Exports was deposited in the account of M/s Simran Exports by accused Naresh Kumar Sikri - Ex.PW10/24;
(xxiii) Cheque dated 7.4.1994 by which accused Naresh Sikri had withdrawn Rs.50,000/ from his account Ex.PW10/26; (xxiv) Statement of Account of Packing Credit loan of M/s Simran Exports certified under the Banker's Bank Evidence Act
- Ex.PW10/27;
(xxv) Statement of account of current account of M/s Simran Exports already exhibited as Ex.PW2/DE;
(xxvi) Certified copy of relevant pages of Draft Issue Register - Ex.PW10/28;
(xxvii)Unit Inspection Report conducted by Sh. A.C Gururaj an officer of the bank - Ex.PW10/29, submitted by Sh. A.C Gururaj with covering letter Ex.PW10/30;
(xxviii)Application for opening Current Account in the name of M/s Simran Exports dated5.12.1993 signed by accused Naresh Kumar Sikri - Ex.PW10/31;
(xxix) Proprietary Declaration Form dated 5.12.1993 signed by CC No. 34/2011 24 of 101 accused Naresh Sikri - Ex.PW10/32; and (xxx) Valuation Report dated 14.3.1994 given by accused V.P Chhabra in respect of the property situated at Village Noor Pur - Ex.PW10/33.
PW11
25. Witness PW11 Sh.Ravinder Pal Kapoor is the person who had introduced the account of Sh. K. K Chopra in the name of M/s Vinny Impex. He had deposed that Sh. K.K Chopra had worked as Manager in his firm M/s J.N Exports International. He had identified the signatures of Sh. Chopra on the Account Opening Form related to the account of M/s Vinny Impex Ex.PW11/1 as he was familiar with his signatures. Similarly he had also identified the signatures of Sh. K.K Chopra on the Specimen Signature Card relating to the said account Ex.PW11/2.
26. He had also identified the signatures of Sh. K.K Chopra on the cheque dated 11.12.1993 of Rs.3 lacs of Dena Bank, CC No. 34/2011 25 of 101 Pitampura, cheque dated 11.12.1993 for Rs.2 lacs of Dena Bank, Pitampura and also credit slip dated 9.12.1993 for Rs.5 lacs of Dena Bank, Pitampura, Ex.PW11/3 to Ex.PW11/5 respectively.
PW12
27. Witness PW12 Sh. Ashok Kumar, who at one time was the partner of M/s Dhingra Trading Company and later on became its exclusive owner, had identified the Account Opening Form Ex.PW8/1 relating to his Current Account at Allahabad Bank, Chandni Chowk and also the Specimen Signature Card relating to the said account. This witness had further deposed that he knew Sh. Naresh Kumar Sikri who used to visit him quite often for business purposes as Naresh Kumar Sikri had a business of garment exports. He had stated that at one time he had made an advance payment of Rs.5 lacs to him for the purchase of clothes by a pay order of Andhra Bank. He had deposited the same in his account vide payin slip Ex.PW8/3. This money was credited in his account as shown in the Statement of Account CC No. 34/2011 26 of 101 Ex.PW8/9 at point X. According to him this agreement, however, was later on cancelled by accused Naresh Kumar Sikri by saying that he was facing some difficulty in the exporting of garments. He had, therefore, returned the said money to the accused Naresh Kumar Sikri by two cheques of Rs.3,50,000/ and Rs.1,50,000/. The cheque of Rs.3,50,000/ was a Banker's cheque drawn on Allahabad Bank and the cheque of Rs. 1,50,000/ was issued from the Current Account of M/s Dhingra Trading Company. He had identified the application Ex.PW8/5 submitted by him for issuance of the pay order for Rs.3,50,000/ and also the cheque Ex.PW8/8 of Rs.1,50,000/ which he had issued in favour of M/s Simran Exports. This witness had also identified the applications Ex.PW8/4, Ex.PW8/6 and Ex.PW8/7 relating to the purchase orders which had been placed on behalf of M/s Dhingra Exports to different suppliers of clothes. PW13
28. Witness PW13 Sh. Surendra Dhillon was the initial I.O of this case to whom the investigation of this case was entrusted CC No. 34/2011 27 of 101 after registration of the FIR Ex.PW13/A. He had searched the house of the accused Late Satnam Singh and had prepared the search cum seizure memo Ex.PW13/B. He had seized pass books and some misc. papers referred to in the search memo during the search. As per his statement the investigation of this case was thereafter transferred to Inspector Sh. P. Balachandran.
PW14
29. Witness PW14 Sh. P. Balachandran is the Investigating Officer who had conducted remaining part of the investigation in this case. This witness during his testimony had identified various seizure memos and the documents which he had collected during the course of the investigation and finally deposed about the obtaining of sanction for prosecution of accused Satnam Singh Ex.PW14/M and filing of charge sheet in the Court.
CC No. 34/2011 28 of 101 PW15
30. Witness PW15 Sh. Yogeshwar Kumar who was General Manager (HRD) Andhra Bank had deposed that as to how after getting the papers relating to the offences committed he had accorded Sanction for the prosecution of accused Late Satnam Singh, Ex.PW14/M under the provisions of Prevention of Corruption Act, 1988.
Statement of accused under Section 313 Cr.P.C
31. As has been noted above in this case, during the course of the trial other accused had passed away. It was the statement of Sh. Naresh Kumar Sikri only which had been recorded under Section 313 Cr.P.C after putting to him all the evidence which had come on record.
Defence Evidence DW1
32. The accused Sh. Naresh Kumar Sikri had examined Sh. A.C Gururaj working as Dy. Manager in Andhra Bank, Janakpuri CC No. 34/2011 29 of 101 Branch as the defence witness. His deposition primarily relates to the fact M/s Simran Exports had settled its account with the Andhra Bank, Janakpuri Branch and issued the No objection certificate in favour of M/s Simran Exports. He had placed on record letter addressed to the Court Ex.DW1/A informing that the bank had filed a suit against M/s Simran Exports on 16.12.1995 for an amount of Rs.23,06,500/ including interest and legal charges. He had also placed on record letter of the Chief Manager of the Branch Ex.DW1/B by which he had sent to the Court an attested copy of No Objection Certificate issued by the Andhra Bank to M/s Simran Exports with regard to payment of Rs.16.20 lacs along with an interest of Rs.43,171/ as on 27.9.2006 towards full and final settlement of the loan. Submissions
33. I have heard the Ld. Defence Counsel as well as the Ld. Prosecutor of CBI and have gone through the record of this case.
CC No. 34/2011 30 of 101 Findings and discussion
34. Evidence is to be examined in this case from the point of view if the offence has been committed by the Accused No3 Sh. Naresh Kumar Sikri under section 120 IPC read with section 13(2) r/w section 13(1)(d) of the Act and 420 IPC and substantive offence under section 420IPC
35. To begin with one may state here that as far as the offence committed under Section 13(1)(d) punishable under Section 13(2) of the Prevention of Corruption Act is concerned the same does not survive as the only public servant in this case accused no.1 Satnam Singh has expired. It may still, however, be possible to say that the accused Naresh Kumar Sikri had committed offence under Section 120B IPC read with Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 and under section 420 IPC, as an offence under Section 120B is an independent offence provided there is sufficient evidence to prove the same.
CC No. 34/2011 31 of 101
36. The facts in this case can be divided into two parts. One relating to the sanctioning Packing Credit Limit and subsequent furnishing of security and the other related to the (mis)utilization of Packing Credit Limit released pursuant to the sanction of Packing Credit Limit.
Part I of allegations Irregularities committed in the sanctioning of limit and subsequent furnishing of security Offer of Collateral Security already pledged with another bank
37. It is alleged in the charge sheet that Accused Late Satnam Singh obtained collateral security on 14.3.1994 from Accused Sh. Naresh Sikri in the form of a property of 2902 Sq. Yards in Village Loni, Ghaziabad, owned by the accused Paramatma Saran which was already pledged with Indian Bank in 1991.
38. In order to prove this fact the prosecution had examined the witness PW1 Sh. Dinesh Kumar who was working as CC No. 34/2011 32 of 101 Manager in the Indian Bank from July 1995 to March 2001. This witness has referred to one letter Ex.PW1/1 written by the AGM Sh. Harsh Malohtra to the Inspector P. Balachandran wherein it was mentioned that accused Parmatma Saran Sharma had a poultry farm at Khasra no.1066, Khatoni 484, Noor Nagar, Sihani, Ghaziabad and he was sanctioned credit facilities on 16.4.1991. Accused Late Sh. Parmatma Saran had created an equitable mortgage of the said property and the building constructed thereon as security. The equitable mortgage was created on 19.4.1991 which was later on extended on 12.12.1991. It was further stated that since the party had not deposited the money, therefore, a suit was filed against the party i.e Parmatma Saran for recovery. He had also submitted that for creating the equitable mortgage the accused Parmatma Saran had submitted nonencumbrance certificate issued by the Sub Registrar dated 5.2.1991 Ex.PW1/2 that there was no charge on the said property, one judgment of the SDO dated 25.3.1991 Ex.PW1/3 stating that this property had been declared as the populated area, one khatoni dated 10.4.1991 CC No. 34/2011 33 of 101 Ex.PW1/4 according to which as per the orders of the SDO dated 25.3.1991 the property had been declared as populated area, affidavit Ex.PW1/5 submitted by the accused Parmatma Saran stating that the said property has already been declared as populated area (Abadi)and also undertaking that till the time he will return the loan, he would neither transfer the land to anyone nor mortgage the same and also a search certificate Ex.PW1/6 dated 23.4.1991 with regard to creation of charge on the said property with Indian Bank.
39. As per the statement of witness PW10 Sh. K.S Murthy, the accused Late Sh. Parmatma Saran had submitted the Form RF/255 dated 17.4.1994 Ex.PW10/11 submitting six documents mentioned therein collectively Ex.PW10/12. I have seen those documents. These documents are : one khatoni showing that the property herein had been entered in the record in the name of accused Late Sh. Parmatma Saran and the same had been declared to be Abadi by the orders of the SDO (Sub Divisional Officer) dated 8.4.1991. This copy is dated 3.4.1994. There are CC No. 34/2011 34 of 101 also affidavits on record of one Ram Manohar and Shyam Sunder the brothers of accused Parmatma Saran and also the declarations given by them with regard to the family settlement arrived at among them according to which accused Parmatma Saran was the owner of the property. There is also one certificate of search Ex.PW14/H12 referred to in the testimony of the Investigating Officer signed by the Chief Sub Registrar dated 23.2.1994 stating therein that in respect of the property referred above there did not appear to be any "bar". Meaning thereby there was no charge on the said property. There was also one order of the SDM referred to in the testimony of witness PW14 as PW14/H13 by which the said property was declared to be Abadi by the SDO.
40. On comparison of the two set of documents one would find that as far as the order of the SDO is concerned, it is common in both the cases. Similarly the contents of the khatoni Ex.PW1/4 and Ex.PW10/12 also appear to be the same. The declarations filed by the brothers of Parmatma Saran along with CC No. 34/2011 35 of 101 their affidavits before the Andhra Bank, however, were not filed before the Indian Bank. The bone of contention is the certificate Ex.PW1/6 submitted before the Indian Bank which shows that there was no "bar" on the said property and also the Ex.PW14/H12 showing that there was no "bar" for mortgaging the said property. According to the case of the prosecution the report given in the certificate of search dated 23.2.1994 Ex.PW14/H12 was not possible in view of the report Ex.PW1/6 submitted on behalf of Indian Bank showing that the property had been mortgaged to the Indian Bank and had been entered in the charge register.
Submission of Security by Parmatma Saran in support of accused Naresh Kumar Sikri
41. It was submitted by the Ld. Defence Counsel very strongly that in this case there is no document to connect that the land offered to the bank as security and submission of the documents related thereto was at the behest of accused Naresh CC No. 34/2011 36 of 101 Kumar Sikri. According to him there is no letter of request from the side of the accused for offering him as an additional surety or guarantor . He has also submitted that this loan was already secure, as at the time of the sanction of the PCL there were two persons who had stood guarantors for Accused Naresh Kumar Sikri in December 1993 itself. There was no reason for Naresh Kumar Sikri to have offered another guarantor in March 1994 after limit not only had been sanctioned but also released. There was no instruction from the bank also asking him to submit additional guarantor.
42. The Ld. Public Prosecutor on the other hand interalia submitted that it was perhaps later realization on the part of the Manager of the Bank Accused Late Satnam Singh that though there was a letter of guarantee taken from accused Naresh Kumar and also from two guarantors Sh. Mahesh Kumar and Sh. Jai Singh ( Ex PW10/8) earlier but in terms of security they had offered nothing to the bank and later on in the anxiety to fill up the gap in a hurry the accused Naresh Kumar Sikri was CC No. 34/2011 37 of 101 asked to submit an additional guarantor offering security to the bank. He had also stated that there was absolutely no reason for accused Late Sh. Parmatma Saran to have mortgaged his own property to the bank as security to secure the loan advanced to the Accused Naresh Kumar Sikri.
43. All said and done, document or no document, I am of the view that it does not appeal to common sense that as to why accused Late Sh. Parmatma Saran would offer his own land as security to the bank if it was not for accused Naresh Kumar Sikri. It is a logic which is hard to defeat. I, therefore, conclude that accused Late Sh. Parmatma Saran was the guarantor for accused Naresh Sikri and he had mortgaged his own land as security for the bank.
Land already mortgaged to Indian Bank before being mortgaged to Andhra Bank.
44. It was submitted by the Ld. PP for CBI that the letter on record Ex.PW1/1 written by the Manager of Indian Bank to CC No. 34/2011 38 of 101 Inspector P. Balachandran would clearly establish that the land in question had been equitably mortgaged to the Indian Bank on 19.4.1991 which was later on extended on 12.12.1991 and this fact was also in the knowledge of accused Late Sh. Parmatma Saran that this land had already been mortgaged to the Indian Bank as the property papers relating to this property had been submitted to the Andhra Bank on 12.3.1994 and the letter Ex.PW1/1 would show that since the accused Late Sh. Parmatma Saran had not made any payment to the Indian Bank, therefore, Bank had to file a suit for recovery against him for the recovery of dues of Rs.22,80,352.45 as on 19.12.1994. He had added that since the accused Late Sh. Parmatma Saran was offering the land as guarantor to the Andhra Bank as security, it was also for the accused Naresh Sikri to have ensured that it was clean.
45. The Ld. PP for CBI had also made comparison of the certificates issued by the Office of the Sub Registrar, district Ghaziabad, Uttar Pradesh Ex.PW1/2 dated 5.2.1991 which CC No. 34/2011 39 of 101 showed that there was "no bar" on this land, certificate Ex.PW1/6 dated 3.4.1991 showing that a charge had been created on the land in question in favour of the Indian Bank (the documents available with the Indian Bank) and certificate Ex.PW14/H12 dated 23.2.1994 (submitted with Andhra Bank) showing that there was "no bar" on the property and submitted that the certificate submitted to the Andhra Bank was obtained by providing wrong information so as to ensure that the Andhra Bank could be made to believe that there was no charge on the property. He had also made reference to one report of Sahejpal & Associates Advocates Ex.PW14/H15 submitted to the bank showing that this property had already been mortgaged, giving the opinion that the property had been offered to the bank as security by accused Late Sh. Parmatma Saran in connivance with accused Naresh Sikri.
46. Ld. Defence Counsel on the other hand had submitted interalia that it is a fact admitted by the Investigating Officer himself that he had not personally verified which of the two CC No. 34/2011 40 of 101 report is correct. He had also submitted that on the basis of the material which has been produced the conclusion cannot be reached that the property in question had already been mortgaged to the Indian Bank.
47. It may be seen that as far as the documents relating to the property filed before Andhra Bank are concerned there is no deposition as to the truthfulness or correctness of these documents. The only testimony available is the submission of these documents with the Bank in the form of deposition of the witness PW10 Sh. K S Murthy. Similarly when it comes to the documents filed before the Indian Bank, there is no witness examined to prove the correctness of the said documents. The testimony of the witness PW1 Sh. Dinesh Kumar is only to the effect that Sh. Harsh Malhotra AGM had forwarded these documents to to Sh. P Balachandran Inspector CBI. He had merely identified the signatures on the letter by which the said documents had been forwarded to him. Further there is no document on record as such in terms of Statement of Account/ CC No. 34/2011 41 of 101 Ledgers etc. which may show that there was an outstanding balance as against the accused Parmatma Saran of Rs. 22,80,352.45 as on 29.12.1994 and also there was no documentary proof submitted that there was any suit filed against the accused Late Sh. Parmatma Saran for recovery of said amount. I am of the view that just mentioning a figure in a letter addressed to the Inspector P. Balachandran Investigating Officer of the case is grossly inadequate to reach any such conclusion. I am also of the view just production of the documents relating to the property was not enough. If the prosecution was serious about the issue, then there should have been someone examined from the Indian Bank who could have proved the factum of the accused Late Sh. Parmatma Saran having taken loan from Indian Bank by production of the relevant documents and also the documents/letters/applications which the accused Late Sh. Parmatma Saran stated to have submitted to the Bank while creating the equitable mortgage in favour of the bank. It would have also given opportunity to the accused Late Sh. Parmatma Saran to establish his defence as CC No. 34/2011 42 of 101 to whether he had actually submitted these documents with the Indian Bank or not. As has already been noted above that there was not even Sh. Harsh Malhotra examined as witness in this case who could have at least stated in Court that he had taken those documents from the record of the bank and sent to the Investigating Officer. The cause of the investigation would have been better served if the Investigating Officer had actually made effort to get the records of the Indian Bank clearly linking the accused Late Sh. Parmatma Saran with the certificates Ex.PW1/2 and Ex.PW1/6 relating to the said property. It may further be noted that in the letter addressed to Inspector P. Balachandran Ex.PW1/1 there is not even the number of the account mentioned in which the said documents were offered as equitable mortgage. The placing on record documents Ex.PW1/2 and Ex.PW1/3 without connecting them with any loan account which was in the name of accused Late Sh. Partmatma Saran is neither here nor there. The fact that this witness had not been crossexamined on behalf of accused Late Sh. Parmatma Saran or accused Naresh Sikri also has no meaning.
CC No. 34/2011 43 of 101 There was any purpose to crossexamine this witness on their behalf if either the witness who had actually written the letter to the Investigating Officer had appeared in the Court to be able to answer the questions in the crossexamination on the issues mentioned in the said letter. What questions could have been put to the witness who had simply identified the signature of the person who had sent the letter along with documents to the Investigating Officer?
48. There is one reference made to the opinion given by Sahijpal & Associates Ex.PW14/H15. This opinion has been addressed to the Chief Manager of Andhra Bank. It is dated 28.7.1994 and it is signed by Sh. S.K Sahijpal Advocate. According to this report on visit to the property and after the perusal of the records in the office of the Patwari he had found the property having been mortgaged by Sh. Parmatma Saran to the Indian Bank in the year 1991. The Investigating Officer has not even cared to cite Sh. Sahijpal Advocate as a witness in this case. Simply because he had collected this document during CC No. 34/2011 44 of 101 the course of investigation is not good enough to show either this letter had been written to the Chief Manager by Sh. Sahij Pal Advocate or he by making inquires had discovered that the property in question had already been mortgaged to the Indian Bank in 1991. I would like to add here that the Investigating Officer if he had read this letter ,which I believe he must have, before concluding this investigation in this case, he would have got a clear lead that in the records of the Patwari, Noorpur it was recorded that this property had been mortgaged by Parmatma Saran to the Indian Bank before the papers related thereto had been submitted to the Andhra Bank. The investigating officer for the best reasons known to him did not go to the Patwari's office to seize the relevant record as it would have clinched the issue.
49. The Ld. Public Prosecutor had repeatedly drawn attention of the Court to various aspects of the above certificate in order to convince that the later certificate submitted to the Andhra Bank by accused Late Sh. Parmatma Saran was based on wrong information, therefore, can be said to be false. I am of CC No. 34/2011 45 of 101 the view that the Investigating Officer has left too much to be speculated by the Court. He had all the documents in his possession the certificates forwarded to him by the Branch Head of Indian Bank and also the certificates submitted with the Andhra Bank. He could have simply visited the office of the Sub Registrar, Dist. Ghaziabad, Uttar Pradesh and checked their records personally and/or had examined someone from the Sub Registrar's office as witness to explain that under what circumstances the above certificates had been issued. As stated above he had admitted in his crossexamination that he had personally not verified the genuineness of the above documents.
50. In my opinion the above certificates placed on record may create some kind of suspicion that the property in question had been mortgaged by the accused Late Sh. Parmatma Saran already with Indian Bank before being mortgage to Andhra Bank, but it is hardly sufficient to say that the prosecution has been able to establish this fact beyond reasonable doubt.
CC No. 34/2011 46 of 101
51. There is one more aspect of it which needs to be considered. I have seen the testimony of witness PW10 Sh. K S Murthy and the documents proved by him related to the submission of the said documents by accused Late Sh. Parmatma Saran with the Bank to create equitable mortgage in respect of the said property in favor of Andhra Bank. Although it is possible to say that there was no reason for Parmatma Saran to have submitted those papers as security if not at the behest of accused Naresh Kumar Sikri, but there is absolutely no reason to say that accused Late Sh. Satnam Singh also knew that the said property had already been pledged with the Indian Bank before taking the said documents on record. It may also be noted that the Packing Credit Limit in this case had been sanctioned long time back before these documents came on record. There is, therefore, no reason to reach the conclusion that accused Late Sh. Satnam Singh was also part of any agreement with regard to submission of those documents with the Andhra Bank. If it can be said to be a conspiracy to deceive the bank by letting it accept the documents herein as security CC No. 34/2011 47 of 101 despite they having been already mortgaged to the Indian Bank, it could have been a conspiracy only between the accused Naresh Kumar Sikri and accused Late Parmatma Saran. A Conspiracy which would have been completely independent of the conspiracy which is the subject matter of this case which primarily relates to the sanctioning of the loan involving the public servant Satnam Singh and its misutilization later on with the aim to give undue benefit to the accused Naresh Sikri. I am of the view that the allegation that accused Late Sh. Parmatma Saran had concealed the facts that the property in question had already been mortgaged to the bank and to that effect had obtained false document from the office of the Sub Registrar, Ghaziabad, could have been a subject matter for a separate trial and not being clubbed with the present case.
52. I would, therefore, conclude that in the light of the above discussion it cannot be said beyond reasonable doubt that the property which was equitably mortgaged to the Andhra Bank had already been mortgaged with the Indian Bank.
CC No. 34/2011 48 of 101 Opening of Account in the name of M/s Simran Exports as Proprietorship firm and sanctioning of PCL despite it having an account, when it was a partnership firm which was highly irregular :
53. One of the objections in the note of Sh. K.S Murthy is :
"As a partnership firm they have never shown their books of accounts for verification on some pretext or other. However, they have completely adjusted their liability in the account on 5.12.1993 as closed their account. They have submitted their balance sheet and other statement as on 31.03.1993 and as on 30.09.1993 only on 27.11.1993 of previous account."
54. I have also seen the report Ex.PW3/2 of the Inquiry Officer Sh. G.D Bhalla wherein it has been observed that :
"M/s Simran Exports (partnership firm) opened a Current A/C No.1354 on 22892 with the address A2/62, Hastsal Road, Uttam Nagar, New Delhi59 for Readymade Garments and applied for O.C.C limit of Rs.3.39 lacs and Bill limit of Rs. 2.70 lacs.
CC No. 34/2011 49 of 101 Branch sanctioned OCC limit of Rs.3.00 lacs (with 50% margin) and Documentry Bills Purchased limit of Rs. 1.00 lacs (with 25% margin) with coobligation of Sri Sukhbir Singh and Collateral security of Rs.7.92 lacs vide sanction letter no268/18/297 dated 261192 (AnnexI). The account became irregular and branch gave notice to borrower on 15493 vide letter No268/18/12 dated 15493 for overdrawn limit to Rs 434779/ against Rs 3.00 lacs limit and Rs 83,000/ bills returned unpaid. Stock statement was not submitted and D.P. was not known. Even a cheque of Rs 40,000/ purchased by branch was returned unpaid. In current A/C there were few business credits of cash sales or cheques. Maximum credits were of CBP and DBPs and most of CBPs and DBPs were returned unpaid (Annex II). There is no record wherein it could be established that borrower has shown book of accounts, purchase invoices/sales invoice etc. to any official of bank. Branch has not inspected the unit regularly & peridically. D.P. was not marked in ledger. Whatever stock statement were submitted by borrower, most of them were not verified by any branch official and no D.P. was arrived.
As per the report of Mr. R.K. Khera, Technical Officer, Zonal Office, New Delhi and Sri J.V. Ratnam, then Manager, Janakpuri Branch, New CC No. 34/2011 50 of 101 Delhi (AnnexIII), it was quite evident that one of the partner Sri Naresh Sikri opened a Current A/C at Karnal Central Cooperative Bank Ltd in the name of M/s Fashion Trading Company and got a cheque of Rs 40,000/ purchased from our branch. This cheque was returned unpaid. This a/c with Style Fashion Trading Co. was introduced by Sri R.K. Batra of M/s Vidhata Handloom PC I C Ltd., Panpat. Mr. Batra has further confirmed that he never asked/ordered for any cloth supplied by M/S Simran Exports through bills (DBPs) purchased by our branch for Rs 93,410/.
Even bills drawn at Bhadurgarh were drawn on nonexisting party as no shop could be located by Sri J.V Ratnam, then Manager at Janakpuri during his visit to Bahadurgarh.
Branch has allowed for payment of Rs 1,50,000/ to M/S Samta Collections, which is a firm owned by wife of Mr. Naresh Kumar Sikri one of the partners. Even address of M/s Samta Collections is same as of M/S Simran Exports. Maximum withdrawals are done in self or in the name of Sri Rakesh Kumar, Sh. Mahesh Kumar, Sh. Dinesh Kumar (all brothers of Sh. Naresh Kumar Sikri) and Sh. Ishwar Dutt father of N.K. Sikri.
The operations in OCC a/c were not satisfactory at all from the beginning itself. OCC limit and DBP CC No. 34/2011 51 of 101 limit were exceeded many times.
All above shows that party has dishonestly conducted the affair of A/C and cheated the bank. Branch has not ensured proper and use of funds."
55. Unfortunately none of the above observations carry any meaning in the absence of the actual record been produced in the Court. Despite the specific observation made in the process note (Ex.PW2/1) of Sh. K.S Murthy and the note of Sh. G.D Bhalla (Ex.PW3/2) the Investigating Officer did precious little to collect the said material and to be placed before the Court. It would best remain an hearsay evidence as far this court is concerned. It would, therefore not be possible to take into account this factor while making overall assessment with regard to the irregularities committed in the process of sanctioning of Packing Credit Limit to the accused Naresh Kumar Sikri by accused no.1 Sh. Satnam Singh.
No security taken from the guarantors :
56. In the report of Sh. G.D Bhalla Ex.PW3/2 it is submitted CC No. 34/2011 52 of 101 that the bank had sanctioned the limits without any collateral security and released the limit to the tune of Rs.15 lacs on 6.12.1993.
57. I have seen on record the property statements Ex.PW14/H1 and Ex.PW14/H2, one signed by Mahesh Kumar and the other by one Jai Singh whose names appear in the application for advance Ex.PW10/1 as guarantors submitted on 5.12.1993. I have also seen the General Form of Guarantee Ex.PW10/8 signed by said Jai Singh and Mahesh Kumar.
58. First of all it may be seen that witness PW10 Sh. K. S. Murthy was a witness who had processed the application of the accused Naresh Kumar Sikri and he was the witness involved in the execution of documents relating to loan. Although the letter of General Form of Guarantee Ex.PW10/8 was put to him in the examination in chief, signed by Mahesh Kumar and Jai Singh, but the said statements of property Ex.PW14/H1 and Ex.PW14/H2 were not put to him. These documents had been CC No. 34/2011 53 of 101 proved by the Investigating Officer as having been received by him during the course of the investigation. Witness PW10 Sh. K. S Murthy was the best person to depose that as to whether along with the documents Ex.PW14/H1 and Ex.PW14/H2, title deeds of the properties referred to therein had been submitted to the bank as security or not. There was, however, no question put to this witness in the entire course of his testimony. As has been stated above, not even the statements of properties Ex.PW14/H1 and Ewx.PW14/H2 had been put to this witness from the side of prosecution so that at least defence had the opportunity to bring on record that as to whether the title deeds of the properties mentioned therein had been submitted to the bank or not. It is a matter which cannot be left to the inferences being drawn. These facts should have been brought on record as such if the prosecution wanted this fact to be taken into consideration to reach the conclusion that there had been no step taken from the side of accused Satnam Singh to secure the interest of the bank because he was in connivance with accused Naresh Kumar Sikri. At the cost of repetition one may say that CC No. 34/2011 54 of 101 the Investigation Report of Sh. G.D Bhalla by itself is not sufficient to reach any such conclusion. It was necessary for the prosecution to prove the fact stated therein by bringing positive evidence on record.
59. I would therefore conclude that prosecution has not been able to establish beyond reasonable doubt that at the time of the sanctioning of the loan there was no collateral security offered to the bank.
Letter of Credit not related to M/s Simran Exports proprietorship firm :
60. Although it is a question which has been not raised from the side of prosecution or the defence and it has also not been referred to in the Charge sheet, but on close examination of the record I have found that in the Letter of Credit at the end it is clearly mentioned "PLEASE ADVISE THIS L/C THROUGH :ANDHRA BANK, B1, COMMUNITY CENTRE, CC No. 34/2011 55 of 101 JANAKPURI, NEW DELHI, INDIA A/C NO.OCC/1354." The reading of the Investigation Report would show that the A/c No. OCC/1354 related to M/s Simran Exports partnership firm. As has already been seen above that in this case the Investigating Officer seized no records relating to M/s Simran Exports partnership firm, therefore, only on the basis of the number being given in the report of Sh. G.D Bhalla it would not be possible to say that the A/c No.1354 relates to M/s Simran Exports, but at the same time one may take note of the fact that this Letter of Credit is dated 13.11.1994 whereas M/s Simran Exports proprietorship firm came into existence only on 5.12.1993 and the account number of this newly created entity was "1526". At least it can be said that the Letter of Credit in question did not relate to this account of M/s Simran Exports proprietorship firm. It may be noted that M/s Simran Export proprietorship firm and M/s Simran Exports partnership firm cannot be said to be one and the same thing. I am of the view that in this case the Packing Credit Limit could not have been sanctioned in favour of M/s Simran Exports proprietorship firm CC No. 34/2011 56 of 101 on the basis of the said Letter of Credit Ex.PW2/DC. Sanctioning of limit by the accused no.1 Satnam Singh beyond his powers:
61. It may be noted here that although there are statements of wintess PW2 Sh. J.V Ratnam and also that of witness PW10 Sh. K.S Murthy that the loan in this case had been sanctioned by Sh. Satnam Singh beyond his powers and there is also an observation to this effect in the Inspection Report of Sh. G.D Bhalla, but no circular or document has been proved on record from the side of the prosecution. In the record I have seen one circular dated 9.9.1988 in which there is some reference to the limits up to which a Chief Manager could sanction loans. But none of the witnesses in their testimony referred to this circular.
62. On the other hand, during the course of the examination of the witness PW2 there was one circular dated 19.6.1992 Ex.PW2/DA and another circular Ex.PW2/DB where the General Manager had circulated the said circular Ex.PW2/DA asking the CC No. 34/2011 57 of 101 branches to make full use of the said circular. The close examination of the circular dated 2.11.1988 which has not been proved by the prosecution shows that the circular is applicable to all kinds of loans and advances, whereas the circular proved by the defence Ex.PW2/DA is specifically in relation to the discretionary powers to negotiate short term export bills drawn under irrevocable letter of credit. This circular would show that Chief Managers of branches had been given discretion to negotiate the export bills upto 25 lacs per party and upto 10 lacs per export bill. It may be noted that the question of negotiation of export bill would arise only when the goods have been shipped. It may further be noted that negotiation of export bills is quite different from sanctioning of Packing Credit Limits.
Packing Credit Limit is released for the manufacturing of goods including for the purchase of raw material etc, whereas the question of export bill comes only after the goods are shipped or ready to be shipped. The considerations which may go in the negotiation of an export bill would be quite different from the sanctioning of Packing Credit Limit. The Packing Credit Limit is CC No. 34/2011 58 of 101 actually a preshipment credit which is liquidated out of the export bills drawn for the exported commodities. Once the bill is purchased/discounted, the preshipment credit gets converted into postshipment credit which is liquidated by the proceeds of the export bill received from abroad in respect of the goods exported. In this case there was no question of the applicability of the circular of 19.6.1992 as admittedly there had been no export. I am, therefore, of the view on the basis of the circular Ex.PW2/DA it will not be possible to conclude that a Chief Manager had powers to sanction Packing Credit Limit up to Rs. 25 lacs. If this does not serve the case of the defence, then it also does not help the prosecution in any way. It may be noted that since there was circular in existence, and also on the record of the case available, it is inexplicable that as to why it was not proved by the prosecution. In the absence of the said circular been proved just on the basis of the oral testimonies of witnesses it would not be possible to say beyond reasonable doubt that the Chief Manager did not have power to sanction loan in this case.
CC No. 34/2011 59 of 101 Under valuation of the property offered as collateral security by accused Parmatma Saran :
63. There is an allegation in this case that accused V.P Chhabra who was the valuer of the bank deliberately over valued the property of the guarantor Parmatma Saran at Rs.
15,10,775/ whereas the subsequent valuation of the property by PW5 Sh. R.C Jain showed the valuation of this property only at Rs.2,61,000/.
64. On examination I have found that the report of Late Sh. V.P Chhabra is much more reliable as compared to the valuation of the property by the valuer Sh. R.C Jain PW5, for the following reasons :
a. From the report of Sh. R.C Jain it is clear that he had not been able to locate the property which was to be evaluated. In column no.8 of the report, where he was supposed to answer the query "Is the property situated in residential/commercial CC No. 34/2011 60 of 101 mixed area/industrial area" he has noted "I think this is an agriculture land, the proper location of the land not traced". b. In part II of the valuation it is again stated "I have try (sic) to locate the exact site with Sh. V.K Sharma Sub Manager of Andhra Bank, Ghaziabad, we have locate (sic) the village area and some persons of that area told us about the approximate location. It is an open land which is used to digging the earth for bhattas. There is no construction of shed now on this site". This would again show that the valuer was not very sure about the location of the property.
c. Sh. R.C Jain in order to value the property had relied upon the sector rates given by the office of Sub Registrar dated 30.8.1997. It may be noted that there are three rates given in this notification, one related to the agriculture land, second related to the abadi land on the road side and third abadi land inside the village. Although in column no.14 of the report he has described the property to be freehold abadi land but had used CC No. 34/2011 61 of 101 the sector rates of the agriculture land. (It also stands confirmed that it was Abadi land by the order of SDO dated 25.3.1991 relied upon by the prosecution Ex.PW1/3 and Ex.PW14/H13.) If one were to apply the sector rates, the sector rates applicable would of abadi land and not agricultural land. Even if , the property is considering to be not a road side but property inside the village as per the notification the value of this land would have come out to be :
Size of the land - 19 Biswa and 7 Biswansi or 2902.50 Sq.
Yards or 2426.90 Sq. Meters.
Sector rate Rs.600 per Sq. Meter Value of Land Rs.14,56,140/
Thus, the valuation by PW5 Sh. R.C Jain valuing this property as Rs.2,61,000/ treating it as agriculture land is completely in correct. It may be noted that this valuation is of the year 1997.
CC No. 34/2011 62 of 101 d. On the other hand according to the valuation report of the
property this land as mentioned in para no.14 is "freehold abadi land". The same description which has been given by the witness PW5 Sh. R.C Jain in his report. He has taken the value of the land to be Rs.300 per Sq. Yard. He has given this rate of the land by stating "the above land rate is based on its size, its location, Katcha road leading to site, type of construction and its being declared abadi land." According to him "the land rate is further confirmed from the local property brokers". If the value of this land was Rs.600/ per Sq. Meters then the value of the land taken by Sh. Chhabra as Rs.300/ per Sq. Yard (or Rs. 357.14 per Sq. Metre), while giving the total value of the land as Rs.8,70,750/ does not appear to be unreasonable. In fact it appears to be quite reasonable. The dimensions and the description on the structure of the land given by Sh. Chhabra are very elaborate. First of all such a description could have been possible only after Sh. Chhabra had visited the site and secondly after looking at the description which has been given the value reached by Sh. Chhabra on the structure of land as CC No. 34/2011 63 of 101 Rs.6,40,000/ also does not appear to be unreasonable. Thus, the value of the property given by him as Rs.15,10,750/ cannot be dismissed as wrong or incorrect. As has been already noted above that this evaluation of the property is on much better footing as compared to the valuation of the witness PW5 Sh.
R.C Jain.
Sanctioning of loan in a hurry
65. It is alleged in this case that the Packing Credit Limit was sanctioned and disbursed by the accused no.1 in favour of accused no.3 overlooking the objections of the witness PW10 Sh. K.S Murthy in such a hurry that it can be assumed that the accused no.3 Sh. Naresh Kumar Sikri and accused No. 1 Late Sh. Satnam Singh were in hand in glove and the accused No. 1 Late Satnam Singh was out to favour the Accused Naresh Kumar Sikri.
CC No. 34/2011 64 of 101
66. Ld. PP for CBI had pointed out that the accused no.3 Sh. Naresh Kumar Sikri had earlier a Current Account with the bank in the same name as partnership firm. This account was closed on 5.12.1993 and on the same day the account in question bearing no.1526 was opened in the name of M/s Simran Exports as its proprietor on the same day. On the same day he had applied for Packing Credit Limit of Rs.18 lacs on the basis of a Letter of Credit dated 13.11.1993 and on the same day it was processed by the witness PW10 Sh. K.S Murthy and on the same day it was sanctioned by the accused no.1 overlooking the objections of the witness PW10 and on the same day the guarantors had submitted the details of the properties. On the next day i.e on 6.12.1993 the other documents relating to Packing Credit Limit sanction were executed and also the pay orders were issued in all amounting to Rs.14.5 lacs.
67. It was submitted on the other hand by the Ld. Defence Counsel that there was no unusual hurry shown in this case. According to him the application for loan bears the date of 30.11.1993, when M/s Simran Exports was still a partnership CC No. 34/2011 65 of 101 firm, mentioning therein that from 1.12.1993 onwards M/s Simran Exports would be a proprietorship firm. If this application had not been signed on 30.11.1993 such words would not have been written. In other words if this application had been signed on 5.12.1993 then there was no necessity to write that the constitution of M/s Simran Exports would change and from 1.12.1993 it would be a proprietorship firm. Ld. Defence Counsel had further explained that according to the process been followed in the branch the guarantors were required to put their signatures only after the credit limit had been sanctioned. This letter bears the signatures of the guarantors of 5.12.1993 only because they were called upon to sign this document only after the Packing Credit Limit had been sanctioned. He had further pointed out that the letter submitted by Sh. Naresh Kumar Sikri giving the particulars of his family and also details of his property bears the date of 4.12.1993. He submits that the date of 4.12.1993 on this letter only shows that the application for Packing Credit Limit was already under consideration before 5.12.1993.
CC No. 34/2011 66 of 101
68. It is apparent that the Accused No. 3 Naresh Kumar Sikri was not new to the Bank. He had already had an account with the Bank with the same name i.e M/S Simran Exports when it was partnership firm, it is though not clear what made him open a new account. It is not clear that he had opened this account for reasons that since the LC was in the name of M/s Simran Exports, therefore, he could not afford to change the name of the firm and at the same time because of the poor performance of the earlier account, he could not have been able to get the PCL sanctioned. It is clear that the the Investigating Officer did not collect any material to explore this angle. The only thing which can be said in the absence of any material to the contrary to be in tune with the presumption of law that the Accused is presumed to be innocent till proven guilty that since the Accused No.3 Sh. Naresh Kumar Sikri was already known to the Bank it was not unusual that the Bank may have processed the application of the Accused No.2 for PCL a little faster. It may also be noted none of the witnesses have deposed in the Court that as to how much is taken usually for CC No. 34/2011 67 of 101 processing such applications to make an assessment that it was a case of "unusual hurry". Unless there was a statement to this effect in the examination of any of the witnesses, the defence could not have crossexamined any the witnesses on these lines to get to the truth. It would be unjust now suddenly claim by referring to the dates that there was "unusual hurry" in this case. In the end I would like to add, it is neither the case of the prosecution nor that the Witness PW10 Sh. K.S. Murthy that he was under any pressure from the Accused No. 1 Late Satnam Singh to process the application on the same day. If witness PW10 Sh. K S Murthy could process the application on the same day, why the Accused No.1 Late Satnam could not have passed the order of sanction of packing credit on the same day. In fact there is a reason to say that he was not under any pressure from the Accused No. 1 Late Satnam Singh, as if he had been under any pressure he would not have given adverse report on the Application of the Accused No. 3 Naresh Kumar Sikri. (It is the case of the prosecution that Accused No.1 Late Satnam Singh sanctioned the Credit Limit ignoring the objection CC No. 34/2011 68 of 101 of the witness PW10 Sh. K S Murthy).
69. In the given facts of the case I am of the view prosecution has failed to establish that there was such unusual hurry in this case which may warrant conclusion that the Accused No. 1 Late Satnam Singh was mixed up with the Accused No.3 Naresh Kumar Singh to cause him pecuniary advantage. Question of Export Code
70. There is a question raised in the process note Ex PW2/1 of Sh. K S Murthy with regard to the Export Code. He wanted a clarification to be given by the Accused No.2 proprietorship firm of the Accused No. 3. It is stated here " We also should get clarification whether the export code no. can be transferred to the proprietorship concern."
71. This is an extremely important question raised, as section 1 7 of the THE FOREIGN TRADE (DEVELOPMENT AND 1 7. No person shall make any import or export except under an Importer- exporter Code Number granted by the Director General or the officer au- thorised by the Director General in this behalf, in accordance with the proce-
CC No. 34/2011 69 of 101 REGULATION) ACT, 1992 prohibits export by any person without the Importer Exporter Code No. Needless to say code is entity specific. A partnership firm and proprietorship firm are two different entities. It appears to be most improbable if M/s Simran Exports Proprietorship could have been allowed to export the goods with Import Export Code of M/s Simran Exports partnership firm. It did deserve attention from the Accused No.1 Late Sh. Satnam Singh. He could not have allowed it to go abegging and proceed to sanction the loan.
72. I am of the view it was a serious lapse committed by Accused No. 1 Satnam Singh.
Part II of allegations Misutilization of Funds
73. It has been alleged that in this case funds released under dure specified in this behalf by the Director General.
CC No. 34/2011 70 of 101 the Packing Credit had been misutilized. It means that the fund released as packing credit to the Accused No.3 Naresh Kumar Sikri as Proprietor of Accused No. 2 M/s Simran Export had not been used for the purpose they were released. In other words, funds were not utilized for acquiring the raw material or for the manufacturing of goods to be exported that is, in all 9500 shirts of different sizes and 500 leather jackets. It was for the prosecution to have proved this fact beyond reasonable doubt.
74. There are three officials of the Andhra Bank examined in this case. One Sh. J V Ratnam, second is Sh. K.S. Murthy and third is Sh. A C Gururaj. The testimonies of the witnesses Sh. J V Ratnam and Sh. K S Murthy are by and large confined to sanction of PCL and its disbursement. As far as the utilization of funds is concerned their testimonies are silent about it. Testimony of the witness Sh. A C Gururaj is in fact supports the case of the Accused and not that of the prosecution. He states in his testimony that he had inspected the unit of M/s Simran Exports on 18/03/1994 at the instruction of the chief Manager CC No. 34/2011 71 of 101 and submitted his report on 20/03/1994. He had proved his report as Ex PW6/1. There are allegations with regard to the irregularities committed observations by the Accused No.3 Naresh Kumar Sikri but it shows without any doubt that the Accused No. 3 was seriously into getting the goods fabricated for export. I feel it would be appropriate to reproduce the report itself for the better understanding what has been stated therein. It reads as follows:
" To Manager Date 20/03/1994 Unit Inspection Report of Simran Exports (Packing Credit) on 18/03/94 by A C Gururaj) Sir, The following are observations made by me:
On the day of inspection (18/03/94 22 bundles of raw cloth bundles were available at the fabricator's place. The fabricator informed that he is solely doing the fabrication of M/s Simran Exports only. He is not getting/doing the job work for others. Each bundle of cloth contains about 90 meters of cloth costing about Rs.4500/ CC No. 34/2011 72 of 101 22 x 4500 Rs. 99000 4000x 130 Rs. 52000 Rs. 151000 About 400 shirts finished product was also available at the time of inspection costing roughly about Rs.
130/ each.
i.e. only actually physical stock of Rs. 151000/ worth about Rs.151000/ was available at the time of inspection at the fabricators place.
Fabricator has informed that stock worth Rs.3.50 Lacs was given for fabrication by fabricator himself in order to be able to give finished product to Simran Export by 20/04/94. No proof/ evidence was produced for the same. Further, the fabricator has admitted that he has not got the insurance done for the stock worth Rs. 3,50 Lac for further fabrication. The party may be advised to look into the matter as the stock worth considerable amount is being given by the fabricator himself and the same remains uninsured stock at second fabricator's place who is in no way responsible pr answerable to Simran Export.
At the time of inspection 7 persons were seen actually working and 3 persons were reportedly gone out for tea.
CC No. 34/2011 73 of 101 As the fabricator is doing job work exclusively for Simran Export only, party may be advised to display "Hypothecation board" at fabrication centre. When asked if the fabricator has past experience for undertaking this kind of time bound assignments he admitted he has done.
It is reported that Fabricator has thus far delivered 1300 pieces and has to deliver further 5500 pieces, finished product by 20/4/94. As the Fabricator has no previous experience for this kind of assignments undersigned enquired from the party whether the work going on is on schedule or not. The party admitted thus far the working going on behind the schedule. But added, it is because of late arrival of raw material.
Due to the points 5 and 6, undersigned has apprehension as to whether the Fabricator will be able to fulfill his commitment of delivering 55 pieces by 20/4/94 which are definitely required by party for exporting the same by 13/5/94.
Invoice worth Rs.3,50,000 of Avtar Textiles is not produced for verification. Party said he would produce them later.
Leather stock worth Rs.6.00 lac are lying at a CC No. 34/2011 74 of 101 different place. Party said inspection of the same is not possible before Tuesday 22.3.94.
The undersigned was instructed by Chief Manager to inspect the stock lying at Uttam Nagar when informed about the same, party said he was late for some appointment and hence could not accompany. However, he said I could go alone to his place to verify the stock and his wife would help in this regard. That since the party was not able to accompany the stock at Uttam Nagar was not inspected.
Insurance Cover note Photocopy for Rs.12,00,000/ covering fabrication centre was produced. The same is dated 16.3.94. But fabrication work is going on prior to that.
In undersigned's opinion the fabricator may not be able to deliver finished product by 20/4/94 in view of lack past experience on such matters. Party may be advised to pursue with fabrication in this regard to be abel to export the goods on time."
75. One may also look at another report proved by the prosecution itself. There is no clarity on which date this inspection was conducted as also the place where it was CC No. 34/2011 75 of 101 conducted but at appears to have been conducted before the above inspection was conducted and the place where this inspection was conducted was the place where the Unit of M/s Simran Exports was located. It becomes clear from the fact at the end of the report it is mentioned "The party informed they will be shipping the entire stock in single lot and are getting the fabrication done in Karol Bagh area." The reading of this report as well gives an impression that work was in progress with regard to fabrication. It refers to procurement of finished goods worth 2 Lacs for which invoices had also been shown. The relevant part of the report reads as under:
"The stocks, finished products, worth approximately Rs.80,000/ was available at the time of inspection. The party informed they had received raw material work about Rs.2,00,000/ so far and expect further delivery of raw material stock shortly. The invoice for about Rs.2,00,000/ was produced for verification. The party informed they will be supplying the entire stock in single lot and are getting the fabrication done in Karol Bagh area.
The finished products mainly consisted of shirts and pants in smaller percentage."
CC No. 34/2011 76 of 101
76. One may further note that during the Course of investigation there was search conducted at the premises of the Accused No. 3 Naresh Kumar Sikri. The search and seizure memo prepared was exhibited during the testimony of the investigating officer Sh. P Balachandran PW 14 as Ex PW 14/C. According to the Ld defence counsel there was no raid conducted at the premises as claimed. The CBI officers who had conducted the so called raid have not been examined and the witness PW 14 Sh. P Balachandran who got report exhibited by identifying the signatures of other official mentioned on the seizure memo had not himself conducted the said raid. In any case it was submitted by the Ld defence counsel though the said documents shown to have been recovered during the raid but these documents were handed over to CBI by the Accused himself to show his innocence. He further submitted that the CBI has concealed the said documents from the Court and therefore an adverse inference be drawn against the case of CBI. I have seen the list of documents seized vide the said search cum seizure memo. I would like reproduce in particular the CC No. 34/2011 77 of 101 documents at serial no. 2. The same reads as under:
"2. One green file marked guide containing bills, blank letter pads, statement of account of PNB, C.C STL of Suvidha, bills of Avtar, Dhingra Trading photocopy pay order of Andhra Bank, photocopy receipt of Vandana Enterprises and other bills related to Simran, Sudesh, Vandana, Avtar etc. containing total pages 1 to 113."
77. It is only the seizer memo which has been placed on record and none of those documents seized vide the said memo.
78. I feel there is force in the submission of the Ld defence counsel. If they were the documents which could have had any bearing on this case the prosecution could not have concealed the same from the Court. As can be seen, these documents were bills etc which related to M/s Vandana Enterprises and also Avatar Textiles in whose favor the pay orders had been issued by the Bank. The bills would have helped in establishing CC No. 34/2011 78 of 101 the fact there had not been misutilization of the funds by the accused no.3 Naresh Kumar Sikri.
1
79. It can be presumed under section 114 ( g) of the Indian if the prosecution had produced the said documents, it would have shown that there had not been any misutilization of the funds by the Accused No.3.
Other evidence on record Internal Inspection Report of Bank
80. There is an Internal Inspection Report of the Bank Ex PW3/2 filed on the record. This is report was prepared by Sh. G D Bhalla Ex PW3 with the assistance of PW4 Sh. Madan Mohan Tyagi after having inspected the record related to the Account. There is not one but number of irregularities pointed out in this report having been committed by the Branch in sanction of packing credit and monitoring of its subsequent utilization. It 1 Section 114 (g) that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it CC No. 34/2011 79 of 101 may be noted that these allegation are primarily against the Accused No.1, the Chief Manger of the Bank Late Satnam Singh, who was the best person to have answered these question it would be unfair if the Accused No. 3 Naresh Kumar Sikri is called upon defend these allegations. It may further be noted that these irregularities had any meaning if they had been proved during the trial of this case. The conclusion reached by the Inquiry Officer cannot be said to be binding on this Court. They would have not even been binding on any Disciplinary Authority of the Bank as well, as the allegation would have been still required to be proved against any official charged on the basis of this inquiry. I have also noted that in the report there is reference to 18 annexures, in all but the report has been filed sans these annexures. This report,therefore, cannot be used to establish that there had been any irregularity committed either at the time of the sanction of the packing credit or in the monitoring of utilization of the same.
CC No. 34/2011 80 of 101
81. Similarly there was an inspection conducted by one Sh. R K Bansal internal auditor of the Bank, who had also submitted a report of inspection to the Bank. Though he has been made named as witness in this case but his report was not collected during the course of investigation by the Investigating Officer. Ld Defence Counsel had gone to the extent of saying that it has been deliberately with held by the prosecution as it would have shown the innocence of the Accused. I would,however, not jump to such a conclusion but only add that the testimony of this witness is of no consequence.
Testimonies with regard to the opening and operation of accounts of M/s Dhingra Traders, M/s Vandana Enterprises , M/s Avatar Textiles and M/s Vinny Impex
82. Testimonies of the witnesses PW8 Sh. Devi Dass and PW9 Sh. Rakesh Krishan Gupta are the officials of the Allahabad Bank and Oriental Bank of Commerce from Chandni Chowk Branch, relate to M/s Dhingra Traders, M/s Vandana Enterprises , M/s Avatar Textiles .Their testimonies,however, do not touch the aspect of utilization of funds.
CC No. 34/2011 81 of 101
83. Witness PW11 Ravinder Kapoor as well is of no help, he only identified his signatures and the signatures of Sh. K K Chopra on the documents related to opening of account in the name of M/s Vinny Impex and also certain cheques being issued from this account. Unlike other accounts which were in operation long before the pay orders were deposited in the said accounts, in the case Vinny Impex the account was opened with the pay order of 5 Lacs issued in its favour by Andhra Bank as packing credit. Though pay order was issued on 06/12/1993 but in the letter of request of the Accused No. 3 Naresh Kumar Sikri dated 05/12/1993 for release of packing credit, the name of M/s Vinny Impex is also there. There is also statement of account of M/s Vinny Impex on record which shows after the Rs. 5 Lacs had been credited in this account on 10/12/1993, there were two bearer cheques dated 11/12/1993 issued one for Rs. 3 Lacs in the name of M/s Cosmo Traders and the other in name of Extrovert Designs for Rs.2 Lacs and on the same day by way of cash the money was withdrawn from this account. Thereafter there is no activity in this case till 26/03/1994the last entry CC No. 34/2011 82 of 101 noted in this account. There could be possibility of saying the that Accused No. 3 knew Sh. K.K. Chopra even before, therefore, he had got the pay order issued in its name only to corner the money of the Bank as this account was opened with the purpose of depositing this pay order and just taking out the money from this account and M/s Vinny Impex actually was not doing any business. Unfortunately this possibility in the light of the evidence collected and the evidence adduced has been reduced to just a speculation.
84. There is a way in which a statement of account is 1 required to be certified under the Banker's Book Evidence Act 2 to be able accepted as evidence in a case . What we have is 1 Section 2 (8) " certified copy" means a copy of any entry in the books of a bank together with a certificate written at the foot of such copy that it is a true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business, and that such book is still in the custody of the bank, 1[ and where the copy was obtained by a mechanical or other process which in itself ensured the accuracy of the copy, a further certificate to that effect, but where the book from which such copy was prepared has been destroyed in the usual course of the bank' s business after the date on which the copy had been so prepared, a further certificate to that effect, each such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title.] 2 4. Mode of proof of entires in bankers' books. Subject to the provisions of this Act, a certified copy of any entry in a banker' s book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the CC No. 34/2011 83 of 101 photocopy of document, which is very poor. There are a number of additions/ overwriting made in this document. At the end only words written are "certified with original". It does not bear the name of the person who put signatures on it although below the signature it is mentioned " Br Manager". It does not even bear the date on which it was so signed. No one appeared from the Bank to identify the officer who had signed the same. I am constrained to say that this document cannot be said to have been certified as required under the Banker's Book Evidence Act and thus cannot be accepted as prima facie evidence what is stated therein. This document was merely exhibited during the testimony of the investigating officer Sh. P Balachandran on his identifying the document as being collected during the investigation.
85. There is another angle to it. If one were to say opening of this account was a device to deprive the bank of its money then Sh. K K Chopra would also have been a coconspirator. matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.
CC No. 34/2011 84 of 101 Since he is not an accused in this case one may assume that the Investigating officer found nothing wrong with this transaction. If there was nothing wrong with this transaction then it would also be difficult to say that funds released on the request of the Accused No. 3 were misused by way of having issued pay order in favour M/s Vinny Impex.
86. During the investigation there was also no attempt made to rule out the possibility that M/s Cosmos Traders or M/s Extrovert Designs were fake entities and they had some connection with the Accused No. 3 Naresh Kumar Sikri himself so as to give a reason to say that by this method the Accused No 3 Naresh Kumar Sikri in this manner siphoned off the money of the Bank.
Release of packing credit in cash
87. It was submitted by the Ld Public Prosecutor for CBI that th according to the record after the PCL sanctioned on 5 of December 1993 just after one day Rs.50,000/ in cash was CC No. 34/2011 85 of 101 allowed to be released to the Accused No.3 Naresh Kumar Sikri from the limit released and this was not possible as per the testimony of the witness PW2 Sh. J V Ratnam " because this could have been done only after procurement of raw material and preparation of finished goods for making payment of labour and other miscellaneous expenses", it is apparent finished goods could not have been ready in this short period of time.
88. It is stated in the statement of witness PW2 Sh. J V Ratnam " .... Accused Naresh Sikri, sole proprietor of M/s Simran Exports, had to procure raw material and process the same as a step towards preparation of the finished goods and it is only thereafter that he could have applied for cash withdrawal from Current Account, wherein the money stood credited from the Packing Credit Loan Account, for making payment to the labour and for other miscellaneous expenses."
89. It may be noted that the questions relating to the release of Packing Credit are policy decisions; they are subject to CC No. 34/2011 86 of 101 change in terms of policies of the Govt. of the day, circular of the Reserve of Bank of India and sometimes may even by the policies of Bank itself. Usually such things are well documents in shape of guidelines and circulars of the Bank. In the absence of any document being placed on record like office order or circular by the prosecution I would find it extremely unsafe to reach such a conclusion just on the basis of oral statement of the Prosecution witness that it was against banking norms to have released a small amount of Rs. 50,000/ out the limit of Rs.15, 000, 00/ to meet miscellaneous expenses, may be even before the goods have been manufactured.
Hypothecation of Goods, Non -Export of Goods, Disposal of Goods and not returning of Money to Bank.
90. It was submitted by the Ld Public Prosecutor that there was no hypothecation of goods in this case, there also was no export of goods and there had been no returning of money to the Bank by the Accused No.3, Naresh Kumar Sikri . According CC No. 34/2011 87 of 101 to Ld Public Prosecutor, it would lead to the conclusion that the funds of the Bank had been misutilized.
91. It may be noted as far as the question of hypothecation goods is concerned it is something which was to done at the time of sanctioning or releasing of the packing credit.
92. In the documents filed on record there is one Application for Advance, Ex PW10/1. At serial No. 5 relating "facilities required", there is one column "Primary Security Offered" where it is mentioned "Hyp. OF STOCKS GOODS IN PROCESS FOR EXPORTS". Then there is also Packing Credit Agreement which the Accused No. 3 Naresh Kumar Sikri had on behalf of M/s Simran Exports executed with the Bank Ex PW10/5. The relevant part reads as under:
" ... ... ... I/we desire to obtain from you advances to the extent of Rs. 18,00,000/ against the same and in consideration of your discretion, I/we agree and undertake:
CC No. 34/2011 88 of 101 •To hold the shipment and all the said goods and relative documents and proceeds thereof as your agent and in trust for you solely on your account as property exclusively hypothecated to you to be dealt with only according to your discretions against all advances made by you thereon with relative interest and expenses until payment thereof."
93. Neither in the testimony of Witness PW2 Sh. J V Ratnam nor in the testimony of Witness PW10 Sh. K S Murthy a word has been stated that there was any other document required to be executed by the Accused No. 3 for M/s Simran Exports for the hypothecation of goods and it was not done. Thus, it would not be possible to say that there had been no hypothication of Goods in this case.
94. The Accused No.1 Late Satnam Singh had been relived from the Bank in the year 1994 itself. According to the extended period of Letter of Credit the export could be made up to August1994. The case of the prosecution is completely silent about the fact as to whether there was any attempt made by the CC No. 34/2011 89 of 101 Bank to seize the Goods lying finished or unfinished with the Accused No.3 Naresh Kumar Sikri and they were not found. Instead the Bank chose to file a suit for recovery against the Accused No.3 Naresh Kumar Sikri in the name of M/s Simran Exports. (It has already come by way of defence evidence that the suit already stands settled and the Accused No.3 has already made payment way back in the year 2006.) Once the Bank had waived the right to seize the Goods hypothecated to the Bank, now it cannot be said that the accused should not have disposed of the Goods. One may refer to the Judgment of our Hon'ble High Court of Delhi in Syndicate Bank vs Official Liquidator, Prashant AIR AIR 1985 Delhi 256, wherein it was laid down:
"8. Unlike a mortgage, a pledge or hypothecation does not have the effect of transferring any " interest" in the property in favor of the pledge or the hypothecated. The pledge and hypothecation, however create a special property in the goods in favor of the pledge or the hypothecate. In the case of pledge, the special property is to keep possession of the pledged goods and to dispose them of for the realisation of the debt for CC No. 34/2011 90 of 101 which it is held as security. In the case of hypothecation, possessions remains with the hypothecator but the hypothecate has the right to take possession of the hypothecated property ad to sell it for the realisation of the debt secured by hypothecation. It was open to the bank to take possession of the debt secured by hypothecation. It was open to the bank to take possession of the hypothecated property on its own or though the court, but it failed to do so. It was also open to the bank to enforce the security by the suit that it filed but there again the bank chose to seek a simple money decree. Mere mention of hypothecation in the suit was sufficient. The bank would, therefore, be deemed to have waived its right as hypothecate and was satisfied with a simple money decree. The bank having filed a suit for the recovery of money and having failed to make a claim on the security, any claim on the security or the sale proceeds thereof would now be barred under Order2, rule2, of the Civil Procedure code, 1908, with the result that the bank has no subsisting claim on the machinery or any part of the sale proceeds thereof and must rank as an unsecured creditor along with the other creditor along with the other creditors of the company, an prove its claim before the official liquidator at the appropriate time. See Official Assignee of Bombay v. Chimniram Motilal and CC No. 34/2011 91 of 101 Official Assignee of Bombay v. Abdul Hayee, AIR 1933 Bom 437. The bank is itself to blame for the course that it chose to adopt.
95. It is trite law, non returning of money by itself does not constitute a criminal offence. In this case it may be seen from the inspection report by Bank Officer Sh. A C Gururaj, reproduced in full above, that the failure to export was largely because of mismanagement of affairs and not because of any dishonest intention.
96. I do not thus find force in the above submission of the Ld Public Prosecutor.
Facts Established
97. To sum up the facts established as per paras 60 and 70, 71, 72 are:
(a) Letter of credit in the case did not relate to M/s Simran Export Proprietorship A/s No. 1526 but M/s Simran Export A/c No. OCC/ 1354, therefore, Packing Credit Limit could not have sanctioned; and CC No. 34/2011 92 of 101
(b) Accused No.1, Chief Manager of the Bank, Late Satnam Singh had overlooked the query of the witness PW10 Sh. K.S. Murthy as to whether export code held earlier in the name of M/s Simran Export, when it was a partnership firm, could be transferred to the M/s Simran Export Proprietorship firm. This question was important firstly ImporterExporter Code are entity specific a partnership firm and a proprietorship firm are not same entities and as per section 7 of the THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 no export is possible without an ImporterExporter Code being granted under the said Act. Since M/s Simran Export Proprietorship firm did not have an ImporterExporter Code it could not have exported goods under the Letter of Credit in question and,therefore, could not have been sanctioned Packing Credit Limit.
Offences Committed,if any,
98. To recapitulate the Accused No. 3 Naresh Kumar Sikri has been charged for having committed offence of conspiracy CC No. 34/2011 93 of 101 punishable under section 120 B IPC read with section 13(2) read with Section 13(1)(d) of the PC Act and read with section 420 IPC and also substantive offence of cheating punishable under section 420 IPC.
99. The question,there would be is it possible on the above facts established that Accused No.3 Naresh Kumar Sikri has commited both or any of the two offences.
100. Let me first of all say that the fact as per para 97 (a) established came to light when I was examining the documents. This is not a fact alleged either in the chargesheet or in the process note Ex PW2/1 of witness PW10 Sh. K.S Murthy. It also does not form part of the submissions made on behalf of CBI. Thus it would not be far fetched to say that at the time when the Application was submitted for Packing Credit, everyone was under the impression that it would be possible to sanction the Packing Credit Limit to M/s Simran Export Proprietorship Firm of the Accused No. 3 who was also the Partner of the CC No. 34/2011 94 of 101 Partnership firm of same name earlier and they failed make a distinction that they could be considered to different entities and not one. It is also evident the Accused No.3 Sh. Naresh Kumar Sikri did not deceive the Bank on this account as the subsequent inspection would show he had been getting the goods manufactured for export and not just that he had also applied for the extension of time of export and it was accepted by the foreign buyer.
101. The other fact established as per para 97(b) is not something which would speak for itself( res ipsa loquitur) or is stand alone sufficient to prove that there was an agreement between the Accused No. 1 Late Satnam Singh and the Accused No. 3 Naresh Kumar Sikri to commit an offence punishable and section 13(2) of PC Act and under section 420 IPC so as to say that he has committed offence under section 120B IPC or that he has committed substantive offence punishable under section 420IPC, especially in view of the fact that the prosecution has failed to establish that there had been CC No. 34/2011 95 of 101 subsequent misutilization of funds. There is also no allegation that Accused Late Satnam Singh had pressurized any of his subordinates to give report in favour the Accused No. 3 Naresh Kumar Sikri. The precise allegation is he overruled them and sanctioned the Limit. It is settled law when it comes to appreciation of circumstantial evidence "the circumstantial evidence in order to sustain conviction must be complete and incapable of explanation of any other hypothesis than that of the guilt of the accused and such evidence should not only be consistent with the guilt of the accused but should be 1 inconsistent with his innocence." The possible explanation for the conduct of Accused No. 1 Late Satnam Singh can be that he was reckless or careless while overruling objection of PW10 Sh. K S Murthy, in above circumstances, when he wrote:
"This is the highest value of LC received by any of our client so far. The party is now functioning well and has all the qualities to get more orders for export under LCs. In view of the top priority accorded for finance to exporters, we sanction PC of Rs. 18 lacs against the said LC."
1 Padala Veera Reddy v. State of A.P. and Ors AIR 1990 SC 79 CC No. 34/2011 96 of 101
102. If it is so, it cannot be said beyond reasonable doubt that the Accused No. 1 Late Satnam Singh and Accused No. 3 had hatched a conspiracy to cheat the bank or for Accused No.1 Satnam Singh to abuse his position as Public servant to cause pecuniary advantage to the Accused No. 3 Naresh Kumar Sikri. I am,therefore, of the view that the Prosection has failed to prove that the Accused No.3 Naresh Kumar Sikri committed of offence punishable under section 120IPC read with section 13(2) of PC Act r/w Section 13(1)(d) of the PC Act and under section 420 IPC
103. It is also well settled that mere failure to repay would not constitute an offence punishable under section 420 IPC, , it is also evident from the from illustration (g) appended with section 415 IPC. It reads as follows:
(g) A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery. A cheats; but if A, at the time of obtaining the money, intends to CC No. 34/2011 97 of 101 deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable to a civil action for breach of contract.
104. It may noted that mensrea is one of the essential ingredient of Section 420IPC. More often than not there is no direct evidence available to it and it is discerned from the facts and the circumstances of the case, where subsequent conduct of the Accused is also an important factor. The Supreme Court in Hridaya Ranjan Prasad Verma v. State of Bihar: (2000) 4 SCC 168 held: "In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction that is the time when the offence is said to have been committed. Therefore it is the intention which is the CC No. 34/2011 98 of 101 gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed." ( Emphasis Supplied) [ Reproduced from Cogent Silver Fiber Pte Ltd v. State of Hon'ble Delhi High Court, CRL. REV. P. 276/2006 Judgment delivered on: 17.04.2007]
105. In this case the subsequent conduct of the Accused No. 3 Naresh Kumar Sikri is such which completely negatives the proposition that he had dishonest intention to cheat the Bank. As the facts would show that he actually got into manufacturing of Goods to be exported. If he had dishonest intention to corner the money of the Bank I am sure he would devised some ways to keep the money with himself and not use it for the acquiring raw material or manufacturing of goods.
106. It is not the case of the prosecution that the Accused No. 3 Naresh Kumar Sikri made any false representation to the CC No. 34/2011 99 of 101 Bank or tried to conceal anything from the Bank in terms of the information required to be supplied or there was any kind of deception on the part of the Accused No.3 Naresh Kumar Sikri which led the Bank to sanction Packing Credit Limit.
107. I am of the view that the prosecution has failed establish that the Accused No. 3 committed offence under section 420 IPC.
Conclusion
108. In view of the forgoing discussion and the facts and circumstances of the case, I conclude that the prosecution has failed to prove that the Accused Naresh Kumar Sikri has committed the offence punishable under section 420 IPC and also the offence punishable under section 120B IPC read with section punishable under section 13(2) and c Section 13(1)(d) of the Prevention Corruption, 1988 and section 420 IPC and accordingly acquitting the Accused Naresh Kumar Sikri, as charged. His bail bond is cancelled and surety discharged.
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109. The documents seized in this case from different banks and proved during the course of the trial be returned to the respective Banks on a proper application being submitted after being substituted with the certified copies thereof.
File be consigned to record room.
Announced in the Open Court ( L. K. GAUR )
on 18th December, 2012 Special Judge (CBI)9
Central District, Delhi.
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