Karnataka High Court
State By Police Inspector vs Subramanya Nadar S/O. S. Armugaswamy ... on 21 February, 2023
Author: Rajendra Badamikar
Bench: Rajendra Badamikar
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CRL.A.No. 2507 of 2013
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 21ST DAY OF FEBRUARY, 2023
BEFORE
THE HON'BLE MR JUSTICE RAJENDRA BADAMIKAR
CRIMINAL APPEAL NO. 2507 OF 2013
BETWEEN
STATE BY POLICE INSPECTOR
(CBI) (ACB) BENGALURU, GANGANAGAR,
BALLARI ROAD, BENGALURU.
.....APPELLANT.
(BY SRI VENKATESH M. KHARVI, DEPUTY SOLICITOR GENERAL.)
AND
1. SUBRAMANYA NADAR
S/O. S. ARMUGASWAMY NADAR
SUJATA
SUBHASH
R/O. NO. 15, SHREYAS COLONY,
PAMMAR
04TH MAIN, 12TH CROSS,
Digitally signed by
SUJATA SUBHASH
J P NAGAR, VII PHASE, BANGALORE
PAMMAR
Location: HIGH
COURT OF
KARNATAKA,
DHARWAD
BENCH,
DHARWAD.
Date: 2023.02.23
12:11:15 +0530 2. RAJESHWARI M. AGALI
W/O. MAHADEVAPPA AGALI
NO. 19, 'VISHWAS' BANKERS COLONY,
LAXMIPUR, NEAR SIDDARUDMATH
HUBBALLI
3. MAHADEVAPPA AGALI
S/O. LATE GURUSIDAPPA
NO. 19, 'VISHWAS' BANKERS COLONY,
LAXMIPUR, NEAR SIDDARUDMATH
HUBBALLI
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CRL.A.No. 2507 of 2013
4. ARUN V. MULAMUTTAL
S/O. V.S. MULAMUTTAL
II FLOOR, MULAMATTAL BUILDING
ABOVE POOJA PAPERS,
KUBASAD GALLI, HUBBALLI
5. SHABIR AHMED CHUHE
S/O. GOUSEMODDIN
GARDEN PETH, NEAR R.R. KOPPAL HOUSE,
GARDEN PETH, HUBBALLI
.....RESPONDENTS
(BY SRI K.M.SHIRALLI, ADVOCATE, FOR R.1;
SHRI SHANKAR HEGDE AND ASSOCIATES, ADVOCATES, FOR R.2 TO
R.5.)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 378(2)(B)
OF THE CODE OF CRIMINAL PROEDURE, 1973 SEEKING TO QUASH
THE ACQUITTAL ORDER DATED 31.03.2012, PASSED BY THE
IV ADDL. DISTRICT & SESSIONS JUDGE & SPECIAL JUDGE, CBI
COURT, DHARWAD, IN SPECIAL (CBI) C.C.NO.5/2004, VIDE
ANNEXURE-A AND IMPOSE PUNISHMENT TO THE ACCUSED FOR THE
CHARGES ALLEGED, ETC.,.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 31.01.2023, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
The State through CBI, has filed this appeal challenging the judgment of acquittal dated 31.03.2012, passed by the IV Addl. District and Sessions Judge and Special Judge, CBI Court, Dharwad, in Special (CBI) C.C.No.5/2004, whereby the learned Special Judge has acquitted the accused persons for the offence punishable -3- CRL.A.No. 2507 of 2013 under sections 120-B, 420, 468, 471 of IPC and section 13(2) of the Prevention of Corruption, Act, 1988 (P.C.Act, for short).
2. For the sake of convenience the parties herein are referred with the original rankings occupied by them before the Trial Court.
3. The brief factual matrix leading to the case are as under:
a) That accused No.1 is a public servant and was working as a Chief Manager, Corporation Bank, New Cotton Market Branch, Hubballi, from 30.08.2001 to 25.01.2002. It is alleged that he had entered into criminal conspiracy with accused No.2, the proprietrix of Shree Vinayaka Engineering, Works along with her husband accused No.3, brother-in-law accused No.4 who is also a proprietor of M/s.Abhishek Pharma and accused No.5 who is the proprietor of M/s.S.G.Enterprises, Mumbai, in order to defraud the bank in a matter of sanctioning the term loan of fifteen lakh rupees with Rs.6.05 lakhs being margin -4- CRL.A.No. 2507 of 2013 money with the guarantee of accused Nos.3 and 4, for the purchase of machineries.
b) It is further alleged that in pursuance of the conspiracy, accused No.1 sanctioned term loan of Rs.15,00,000/- on 19.01.2022 in favour of M/s. Shree Vinayaka Engineering Works of second accused on the guarantee of accused Nos.3 and 4 and on the same day, he also sanctioned cash credit of Rs.5,00,000/- to accused No.4, who is the proprietor of M/s.Abhishek Pharma. It is also alleged that accused Nos.2 and 3 did not purchase machineries but diverted it and mis-utilized the cash credit loan of Rs.5,00,000/- which accused No.4 has got sanctioned for utilizing it as part of margin money to the term loan sanctioned to the firm of accused No.2. Further, it is alleged by the prosecution that accused No.5 having received the proceeds of the loan of Rs.15,00,000/-, disbursed by way of demand draft in favour of M/s.S.G.Enterprises, Mumbai, deposited in current account number of the said firm in Karnataka Bank Limited, Fort Branch, Mumbai and after obtaining credit proceeds of that -5- CRL.A.No. 2507 of 2013 demand drafts, issued cheque for Rs.19,33,874/- in favour of self for purchase of 7 demand drafts favouring D.B.Shinde, Manjunath Inamdar and others.
c) It is also alleged that accused No.1 has also forged legal opinion issued by R.B.Neeli, Advocate, with regard to the extent of the property in CTS No.2672, Ward No.03 by altering the area from 34 Sq.yards to 113 Sq.yards and used it without ensuring sufficient security. According to the prosecution, accused Nos.2 and 3 did not purchase machinery from the term loan of Rs.15,00,000/- and margin amount of Rs.6.50 lakhs, but mis-utilized the same. It is also alleged that accused No.1 being public servant has committed criminal misconduct.
d) On the basis of the complaint by PW.1, the Investigating Officer has investigated the matter and submitted the charge sheet against the accused. After submission of the charge sheet, as there are sufficient grounds to proceed against the accused, cognizance of the alleged offence was taken. Accused have appeared and were enlarged on bail. The prosecution papers were -6- CRL.A.No. 2507 of 2013 furnished to the counsels appearing for the accused under section 207 of Cr.P.C.
e) Charge was also framed and the same was read over and explained to the accused and they pleaded not guilty and claimed to be tried.
f) To prove the guilt of accused, prosecution has examined 18 witnesses as PW.1 to PW.18 and also placed reliance on 55 documents marked at Exs.P.1 to P.55. Then the statement of accused under section 313 of Cr.P.C. was recorded and the accused have denied the incriminating evidence appearing against them and submitted their explanation. Further, DW.1 and DW.2 were examined on behalf of accused Nos.2 and 3 and Exhibits D.1 to D.14 were also got marked. The learned Sessions Judge has framed the following points for consideration.
1. Whether the prosecution proves beyond reasonable doubt that the accused Nos.01 to 05 had entered into criminal conspiracy to cheat the Corporation Bank, New Cotton Market branch, Hubli, as alleged? -7- CRL.A.No. 2507 of 2013
2. Whether the prosecution proves beyond reasonable doubt that in pursuance of the said conspiracy the accused No.01 sanctioned the term loan of Rs.15 lakhs on 19-01-2002 in favour of M/s. Shree Vinayaka Engineering Works of which accused No.02 is propritorix and with the guarantee of accused Nos.03 and 04 for the purpose of purchasing machineries and also sanctioned a cash credit of Rs.05 lakhs in favour of M/s. Abhishek Pharma of which the accused No.03 is the proprietor and accused Nos.02 to 05 had induced the accused No.01 in sanctioning of the said loans by causing loss to the bank and thus they have committed fraud, as alleged?
3. Whether the prosecution proves beyond reasonable doubt that the accused Nos.02 and 03 in pursuance of the said criminal conspiracy, accused No.01 forged certain documents such as legal opinion as to the value of the property in CTS No.2672, ward No.3, Hubli, belong to accused No.04 which was offered as security for sanctioning of the term loan to M/s.
Vinayaka Engineering Works of the -8- CRL.A.No. 2507 of 2013 accused No.02, by altering the area of the property from 34 sq.yards to 113 sq.yards and exposing the bank to great risk, as alleged?
4. Whether the prosecution proves beyond reasonable doubt that the accused No.01 in pursuance of the said conspiracy, the accused No.01 knowingly or reason to believe that the legal opinion issued by Rajashekhar Neeli-advocate, in respect of the property in CTS No.2672, ward No.3 Hubli belong to accused No.04 was tampering to alter its area from 34 sq.yards to 113 sq.yards, used it and sanctioned term loan of Rs.15 lakhs in favour of M/s. Vinayaka Engineering Works of which accused no.02 is proprietor and cash credit of Rs.05 lakhs in favour of M/s.Abhishek Pharma of which accused No.03 is proprietor and along with the guarantee of accused Nos.03 and 04, in violation of the procefures and guidelines of the bank and that facilitated misutilization of the proceeds of that loans, as alleged?
5. Whether the prosecution proves beyond reasonable doubt that the accused No.01 -9- CRL.A.No. 2507 of 2013 being a public servant and while functioning as such committed the act of forgery dishonestly and fraudulently in sanctioning loan to accused No.02 and cash credit to accused No.04 for personal gain and caused loss to the Corporation Bank, New Cotton Market branch, Hubli and thereby committed the criminal misconduct, as alleged?
6. What order?
g) After hearing the arguments and after appreciating the oral as well as documentary evidence, the learned Special Judge has answered the points under consideration in the negative and ultimately acquitted the accused of the offences alleged against them. Being aggrieved by this judgment of acquittal, the State has filed this appeal.
4. Heard the arguments advanced by the learned Special Public Prosecutor appearing for State and learned counsels appearing for respondents-accused. Perused the records.
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CRL.A.No. 2507 of 2013
5. The learned Special Public Prosecutor appearing for the State would contend that the learned Special Judge has failed to appreciate the oral and documentary evidence properly and the acquittal is only based on the ground of repayment of the amount which is improper. He would also contend that there is no dispute regarding the transactions, but admittedly the machineries were not purchased from accused No.5 and the cash credit obtained by accused No.4 was utilized as margin money and there was admittedly manipulation of the legal opinion and he would contend that the learned Special Judge has failed to appreciate any of these aspects and in a mechanical way he has acquitted the accused which has resulted in injustice. Hence he would seek for allowing the appeal by setting aside the impugned judgment of acquittal and prayed for convicting the accused-respondents herein.
6. Per contra, the learned counsels appearing for respondents-accused would contend that PW.1 being the zonal manager does not depose anything about the transaction and he admits that he only lodged the
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CRL.A.No. 2507 of 2013complaint, but he do not know the contents of it. All the loans were secured loans and the security is double than the loan amount and as such question of cheating does not arise at all. They would further contend that all along it is alleged that machineries were not purchased from accused No.5, but in fact the evidence disclose that the said machineries itself were sought to be attached before DRT and paper publication was also issued for auction. They would also contend that the accused does not have any control over legal opinion and the legal opinion disclose that it is pertaining to 34 Sq.yards and out of 113 Sq.yards and that cannot be termed as manipulation. It is also alleged that all along the prosecution has claimed that notice issued to accused No.5 is returned as not claimed. But the said notice is not placed before the Court for the best reasons known to the Investigating Officer and admittedly no steps were taken to recover the amount and the civil litigation was given the colour of criminal litigation only in order to target accused No.1.
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CRL.A.No. 2507 of 2013
7. They would also contend that address given in Ex.D.9 and deposed by PW.9 are similar and what is the base for asserting the cheating is not at all forthcoming. The allegations regarding purchase of different machineries is not established as their own evidence led by the prosecution falsifies the story, as the machineries were attached and were put for sale. It is also denied that the term loan sanctioned to accused No.4 is used as margin money. It is contended that only on the ground that denominations referred in the deposit slip are one and the same, it cannot be presumed and even the denomination referred there does not tally and no evidence in this regard is forthcoming. It is asserted that no doubt there is a delay in supply of machineries, but cogent reasons were given and that has been already reported to the bank and only with some vengeance, the complaint came to be lodged without application of mind, which is abuse of process of law. Hence they would contend that the learned Special Judge has considered all these aspects in a proper perspective by analyzing the evidence and has arrived at a just decision by acquitting
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CRL.A.No. 2507 of 2013the accused. Hence they would contend that the judgment of acquittal passed by the learned Special Judge does not call for any interference.
8. Having heard the arguments and perusing the records, now the following point would arise for my consideration.
"Whether the judgment of acquittal
passed by the learned Special Judge is
erroneous, arbitrary and capricious, so as to call for any interference by this Court?"
9. It is an undisputed fact that accused No.1 was Chief Manager of Corporation Bank, New Cotton Market Branch, Hubballi and he sanctioned the loan of Rs.15,00,000/- to accused No.2 who was the proprietor of Shree Vinayaka Engineering Works with the guarantee of accused Nos.3 and 4 for purchase of machineries from M/s.S.G.Enterprises, Mumbai, which is a proprietorship of accused No.5. It is also an undisputed fact that the cash credit of Rs.5,00,000/- was sanctioned to accused No.4 who was the proprietor of M/s.Abhishek Pharma. The
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CRL.A.No. 2507 of 2013allegations of prosecution that accused Nos.1 to 5 conspired and after having got sanctioned Rs.15,00,000/- and margin money of Rs.6,00,000/- was utilized from cash credit loan of Rs.5,00,000/- sanctioned to accused No.4 and the money was not used for purchasing the machineries, but it was diverted. It is also alleged that there are certain forgeries and manipulations of the document by altering the area from 34 Sq.yards to 113 Sq.yards.
10. The entire burden is on the prosecution to prove the allegations beyond all reasonable doubt as put forward by the prosecution. Further, at the same time the prosecution is required to show that there was an intention on the part of the accused to defraud the bank. It is also well established principle of law that mere irregularity does not mean that there is an intention or motive to cheat the bank and mere irregularity which does not affects the prosecution case does not have much relevancy.
11. Apart from this, admittedly these transactions are between the parties and if there is a breach of
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CRL.A.No. 2507 of 2013contract, if there is an intention, then the offence of cheating is attracted, otherwise mere breach of contract cannot give any room for criminal prosecution without there being any material evidence, unless dishonest intention is shown, at the inception of the prosecution. It is settled law that when the dues of the bank had been cleared subsequently, in view of the compromise arrived between the parties, continuation of the prosecution initiated by the bank would be a futile exercise as observed by the Apex Court in the case of Nikhil Merchant vs. CBI and another, reported in 2008(3) Crimes 3737 (SC). IN the light of these settled principles of law, will have to appreciate the evidence of the prosecution.
12. As per the prosecution, though accused No.2 has availed the loan, the machineries were not purchased but PWs.2, 3 and 16 have admitted that the loan advanced to accused No.2 with guarantee of accused Nos.3 and 4 was a secured loan. The accused Nos.3 and 4 have not only offered their own property as a security to the tune of
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CRL.A.No. 2507 of 2013Rs.22.55 lakhs but also property of accused No.3 to the tune of Rs.28.05 lakhs. This fact is evident from Ex.P.4. The total value of the property offered as security was more than Rs.36.60 lakhs, which is not under serious challenge and the loan advanced was only Rs.15,00,000/-. The panel advocate has also valued these properties and if at all accused Nos.2 to 4 had an intention to cheat the bank or defraud it, they would not have offered genuine security of more than double the value of the loan advanced. Hence it is evident that the loan was fully secured loan.
13. As regards the delay, accused No.2 has explained the delay by addressing a letter and the same is admitted by PWs.2 and 16. It is also evident that a case was also filed before the Debt Recovery Tribunal and there was a prayer for confiscating the machinery, which is mentioned in schedule 'C' for which the loan was sanctioned. If this evidence is accepted, then it is evident that machinery was already there and a public notice was also issued regarding sale of machineries purchased by
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CRL.A.No. 2507 of 2013accused No.2 by availing the loan. Further, from Exs.D.7 and D.8, it is evident that accused No.2 has repaid the loan and hence it can be inferred that there was no intention to cheat the bank from very inception.
14. The other contention is delay, but admittedly the accused have explained the reason for delay of delivery of machineries because of Gujarath riots. Further there is no material evidence placed to show that accused No.2 has received back the money from the suppliers and though it is alleged that accused No.2 has not purchased the machineries, but the prosecution records and evidence itself falsifies this statement as the machineries were put for auction in DRT proceedings and public notice was also given.
15. The allegation regarding tampering 34 sq.yards to 113 sq.yards has no relevancy, as the evidence of advocate in this regard is not beyond suspicion as in the first page itself there is clear reference that the valuation was for 34 yards out of 113 sq. yards. Hence mere
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CRL.A.No. 2507 of 2013overwriting or inconsistencies cannot be termed that it was a manipulated document.
16. The other contention regarding accused No.4 mis-utilizing the term loan for payment of margin money and in this regard the prosecution is relying only on denominations referred in deposit slip. However the denominations mentioned in Exs.P.9, 12 and 13 does not tally and merely because the said denomination amount is referred, it cannot be presumed that the term loan is utilized for margin payment. Hence the said contention of the prosecution appears to be a cinematic which cannot be accepted.
17. It is also important to note here that the investigation is done by PW.16, but no document is produced to show that he was authorized to investigate the matter under section 17 of the Prevention of Corruption Act, 1988. Hence the investigation itself is done by a person who is not authorized and the entire investigation stands vitiated. The investigation also disclose that it was only eye wash effort.
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CRL.A.No. 2507 of 2013
18. As regards non existence of M/s.S.G.Enterprises, the contention of the prosecution cannot be accepted as the prosecution is relying on the evidence of PW.10, but the returned postal envelop is not produced. Further the address given is entirely different and that cannot be a ground that too when the entire loan is fully satisfied.
19. Further, as observed above, there is no material evidence to show that the borrowers have taken the money back from accused No.5 and in the absence of any material evidence, the said contention of the prosecution cannot be accepted. Further, PWs.2 and 3 admitted that the loans were fully secured loans and further regarding forgery, the evidence of PW.6 disclose that it was in his handwriting. Further as admitted by PW.2, no proceedings under SARFAESI Act have been initiated, which disclose the intention of the officials of the bank.
20. PW.10 admitted that the address of S.G.Enterprises is G/13 Monarch Chamber, Near Theatre, Fort, Mumbai-01 and the registered postal cover is not
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CRL.A.No. 2507 of 2013produced by the prosecution for the best reasons known to it. PW.9 claims that he did not accept the notice because it is not in his name and this cannot be a ground to assert that the entity does not exist in the said place and prosecution has failed to substantiate the said contention by producing any material record. Even PW.1 who has lodged the complaint has not produced any authorization letter given to him. The prosecution has relied on Ex.P.24 but the evidence of PW.10 falsifies Ex.P.24 regarding non existence of S.G.Enterprises. It is evident that the entire case of the prosecution is based on assumptions and presumptions. However strong suspicion will not take the place of proof and the prosecution utterly failed to bring home the guilt of the accused beyond all reasonable doubt. The entire case of the prosecution is based on assumptions and presumptions.
21. The trial Court has appreciated the oral and documentary evidence in a proper perspective and has arrived at a just decision. The judgment of acquittal passed by the trial Court cannot be said to be erroneous or
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CRL.A.No. 2507 of 2013illegal so as to call for any interference by this Court. Hence, the appeal filed by the appellant/State is devoid of any merits and the State has failed to establish any grounds for interference with the said judgment of acquittal. Under such circumstances, the point under consideration is answered in the negative and as such the appeal fails.
Accordingly, I proceed to pass the following:
ORDER The appeal is dismissed, by confirming the judgment of acquittal dated 31.03.2012, passed by the IV Addl. District and Sessions Judge and Special Judge, CBI Court, Dharwad, in Special (CBI) C.C.No.5/2004.
Send back the TCRs to the Trial Court along with a copy of this judgment.
Sd/-
JUDGE MRK