Delhi District Court
Hon'Ble Supreme Court In Smt. J. Yashoda vs . Smt. K. on 31 July, 2017
1
IN THE COURT OF KOVAI VENUGOPAL, SPECIAL JUDGE,
PC ACT (CBI) - 09, CENTRAL,TIS HAZARI COURTS, DELHI.
CC No. 40/2011(532308/2016)
R.C. No. 2(E)/06/CBI/EOW-II/ND
CNR No. DLCT-01-000375-2008
CENTRAL BUREAU OF INVESTIGATION
VERSUS
1. SH. V.K. JOLLY (PUBLIC SERVANT)
S/O LATE SH. DHARAM DEV JOLLY
THE THEN SR. MANAGER
PUNJAB NATIONAL BANK
AZADPUR BRANCH
NEW DELHI.
R/O B-457, MAJLIS PARK
DELHI - 33. ......(DISCHARGED)
2. SH. D.K. MALHOTRA (RETD. PUBLIC SERVANT)
R/O HOUSE NO. 58
SEC.-G, SANIK COLONY
JAMMU.
3. SH. SEWA LAL
S/O SH. RAGHURAJ
PROP. M/S. KRISHNA TRADING COMPANY
R/O A-159, MAJLIS PARK, ADARSH NAGAR,
DELHI.
Date of Institution :21.08.2008
Date of Arguments :11.07.2017
Date of Judgment :31.07.2017
CC No.40/2011 Page 1 of 66
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JUDGMENT
1. This case was registered by the CBI on 31.05.2006 against accused persons, namely, (1) V.K. Jolly, (2) D.K. Malhotra and (3) Sewa Lal on the basis of a written complaint received from Sh. Ved Prakash Deputy Zonal Manager, Punjab National Bank, Zonal Office (North), Delhi. The allegations against the accused persons namely V.K. Jolly and D.K. Malhtora, were that they had acted in violation of the Bank's Guidelines issued with regard to the advance against the uncleared cheques.
Case of the Prosecution as mentioned in the Charge- Sheet
2. During the period from May 2001 to 08.07.2004, accused V.K. Jolly was posted as Senior Manager, Incharge, Punjab National Bank, Azadpur Branch, Delhi. Accused D.K. Malhotra the then Chief Manager, Punjab National Bank, Azadpur Branch, succeeded accused V.K. Jolly w.e.f. July 2004 but on 10.11.2004, his discretionary powers had been withdrawn.
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3. During the investigation, it is revealed that as per the instructions /guidelines issued by the Punjab National Bank vide their Circular No. 130 dated 31.12.2002, the Senior Manager and the Chief Manager had discretionary powers to purchase cheques (DD Discounting) up to Rs. 3.75 Lacs and Rs. 20 Lacs respectively, in respect of genuine trade transactions and not qua the transactions accommodative in nature. Vide the said guidelines, Senior Manager /Chief Manager were also authorized to sanction clean overdraft /temporary overdraft to the extent of Rs. 30,000/- and Rs. One Lac respectively.
4. As per the prosecution case, the modus operandi adopted by the Bank officers in connivance with the private parties was by way of fraudulent purchases of cheques in the accounts, which were issued by their associates /sister concerns. In some of the cases, the beneficiary themselves had opened the account with other banks and had issued cheques in their favour. In the process, the parties used to get immediate cash and the bank on its part got the commission. It is alleged that the practice of getting the cheques purchased CC No.40/2011 Page 3 of 66 4 was later on misused by the private parties in connivance with accused V.K. Jolly and after him, accused D.K. Malhotra and other officials of the Bank.
5. Investigation has further revealed that the cheques so purchased were frequently returned unpaid from the Drawee bank for want of "Sufficient Funds". Thereafter, the said cheques were either adjusted by purchasing of fresh cheques or by allowing advance against the cheques sent for clearing or by depositing the amount in cash.
6. Investigation has revealed that the funds so generated as a result of discounting of cheques on two consecutive days were used by the account holders for their business purposes, whereas the funds generated on the third consecutive day were utilized for payment by depositing the amount in the concerned Bank account.
7. It is alleged that accused V.K. Jolly and accused D.K. Malhotra exceeded their powers frequently and accommodated the various account holders in violation of the rules and regulations laid down in Banking norms/rules and regulations. The return of all the cheques had also not been CC No.40/2011 Page 4 of 66 5 reported to the Regional Office by accused V. K. Jolly and D.K. Malhotra.
8. The private person namely Sewa Lal in criminal conspiracy with the bank officials got opened several accounts with Punjab National Bank, Azadpur Branch, Delhi. The operation of the accounts were controlled by him only with a view to get more accommodation cheques purchased in each account as per the vested powers of the Incumbent Incharge. The following accounts got opened in this manner:-
(i) M/s. Krishna Trading Company Prop. Sewa Lal.
(ii) Ganga Prasad
9. For the purpose of getting cheques purchased in the aforesaid accounts, Sewa Lal needed accounts in other banks from where he would get issued cheques drawn in favour of aforesaid accounts. Accordingly, he got opened account no. 000705006525 in his name at ICICI Bank Ltd., Connaught Place, New Delhi and from this account, accommodatory cheques were issued and the same were purchased at the above fraudulent accounts of PNB, Azadpur, Delhi.
CC No.40/2011 Page 5 of 66 6
10. The various instances relating to the unauthorized purchase of cheques, allowing advance against clearing the cheques sent for collection and also by way of depositing the amount in cash are as under:-
(1) M/s. Krishna Trading Company Investigation has revealed that this account was opened on 29.04.2004 by Sh. A. C. Aggarwal, the then Manager, PNB, Azadpur, Delhi. The authorized signatory of this account was Sh. Sewa Lal.
Investigation has further revealed that on 08.11.2004, a cheque bearing No. 410668 for Rs.3,74,750/- was purchased vide DD No. 7720 and the party withdrew Rs.3,75,000/- through cheque drawn on self. The cheque purchased however returned unpaid by the drawee bank for the reason "Insufficient Fund" on 11.11.2004 resulting into an outstanding of Rs.3,34,354/-. On 09.11.2004 a cheque No. 410671 for Rs.3,74,750/- was purchased vide DD No. 7792 and the party withdrew the whole amount through cheque drawn on self. However, the cheque so purchased also returned unpaid by the drawee bank for the reason CC No.40/2011 Page 6 of 66 7 "Insufficient Fund" on 13.11.2004 resulting into an outstanding of Rs.7,09,104/-. Both the cheques bearing Nos. 410668 & 410671 purchased vide DD No. 7720 and 7792 were issued by Sh. Surender Kumar as Proprietor of M/s. Surender Kumar and Company from its account maintained with Union Bank of India, Azad Pur, Delhi.
Investigation also revealed that cheque nos. 410650, 410654, and 410662, which were issued by Sh. Surender Kumar, were allowed to be purchased by Sh. D. K. Malhotra, the then Incumbent Incharge. Sh. Surender Kumar has confirmed that on the request of Sh. Sewa Lal, he had given him blank cheques from his account maintained with Union Bank of India, Azadpur, Delhi.
The purchase of the accommodatory cheques issued by Sh. Surender Singh as Prop. M/s. Surender Kumar and Company, in the account of M/s. Krishna Trading Company was against the bank guidelines. Sh. Sewa Lal thus indulged in kite flying and cheated the PNB, Azadpur, Delhi, by getting the accommodatory cheques, issued by his associate firm, purchased in its account and using the funds so generated CC No.40/2011 Page 7 of 66 8 for his own business needs.
(2) Ganga Prasad Investigation has revealed that this account was opened on 16.04.2003 by Sh. V. K. Saini, the then Manager, PNB, Azadpur, Delhi, on the introduction of Sh. Sewa Lal, having account with PNB, Azadpur, Delhi. The authorized signatory of this account was Sh. Ganga Prasad.
Investigation has further revealed that the cheques were purchased in this account in DD. The cheque of Rs.3,74,750/- got purchased vide DD No. 7721/2204 on 08.11.2004 was returned on 11.11.2004 resulting into an outstanding of Rs.3,62,065/-. Similarly, the cheque of Rs.3,74,750/- got purchased vide DD No. 7793 on 09.11.2004, which returned unpaid on 13.11.2004 resulting into an outstanding of Rs.7,36,815/-. However, the party continuously deposited the money into this account and the same was regularized by 30.04.2005 much before the registration of the instant case on 31.05.2006. The account is running regular ever since.
CC No.40/2011 Page 8 of 66 9
11. After obtaining the sanction for prosecution against accused V.K. Jolly from the competent authority, CBI filed charge- sheet against all the accused persons for the offences punishable u/s 120-B IPC r/w Section 420 IPC and Section 13(2) r/w Section 13(1)(d) of The Prevention of Corruption Act,1988, as well as substantive offences thereof.
12. Vide Order dated 10.09.2012, this Court held that there is sufficient material placed on record by the Prosecution to frame charges against accused no. 2 D. K. Malhotra and accused no. 3 Sewa Lal for the offences punishable under Section 120-B read with Section 420 IPC and 13(2) read with Section 13(1)(d) of The Prevention of Corruption Act, 1988, substantive charge for the offence punishable under Section 420 IPC against accused Sewa Lal and substantive charge for the offences punishable under Section 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act, 1988 against accused D. K. Malhotra. Vide the same order, accused no. 1 V.K. Jolly was discharged for the offences under which he was booked by the CBI.
13. On 22.09.2012, charges against accused no. 2 D.K. Malhotra CC No.40/2011 Page 9 of 66 10 and accused no. 3 Sewa Lal were framed for the offences punishable under Section 120-B read with Section 420 IPC and read with Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. Substantive Charge against accused no.2 D. K. Malhotra was also framed for the offences punishable under Section 13(1)(d) punishable under Section 13(2) of the Prevention of Corruption Act, 1988. Substantive Charge against accused Sewa Lal was also framed for the offences punishable under Section 420 of IPC. Both the accused persons pleaded not guilty to the charges and claimed trial.
EVIDENCE OF THE PROSECUTION
14. The prosecution in order to prove its case has examined 22 witnesses.
15. PW-1 is Sh. Ved Prakash. He has deposed that from January 2006 to May 2007, he was posted as Deputy Zonal Manager, North Delhi Zone, Rajendra Place, New Delhi. He was working as a Second Man of the Zone and has responsibility to see all the development aspects of all branches in Delhi under their jurisdiction as well as the CC No.40/2011 Page 10 of 66 11 control aspects of the branches by providing assistance to the Zonal Manager, which included inspection and audit conducted by the Auditors and procuring business of deposits. He has further deposed that he had made a Complaint Ex. PW-1/A on behalf of Punjab National Bank, to Superintendent of Police, CBI, Delhi, related to the commission of fraud at Azadpur Branch of PNB, Delhi. The said fraud pertains to the period from November 2003 to November 2004.
16. PW-1 has further deposed that Azadpur Branch, PNB, during the said period purchased various cheques for different accounts of different banks. The said cheques were ultimately returned back unpaid with remarks "insufficient funds". He has further deposed that Zonal Office had also received at Zonal Office a letter dated 29.10.2004 Ex. PW- 1/B1 from the Bank of Baroda, Azadpur Branch, Delhi, with regard to frequent returning of the cheques due to insufficient funds. Along with the said letter Ex. PW-1/B1, list of cheques Ex. PW-1/B2 was also received.
17. PW-1 has identified his signature on letter dated 15.06.2006 CC No.40/2011 Page 11 of 66 12 Ex. PW-1/B, vide which he had forwarded certain documents as mentioned in the said letter to Inspector Ajeet Singh, CBI.
18. PW-1 has further deposed that Internal Investigation Report Ex. PW-1/B3 was filed by Sh. B. B. Chawla and Sh. R. C. Ahuja after conducting an internal investigation in the bank at the level of Chief Inspector. The said report Ex. PW-1/B3 was sent to the Zonal Office vide letter Ex. PW-1/B4. PW-1 has deposed that the total loss, which was caused to the Bank as a result of the fraud was to the tune of Rs. 3.5 Crores.
19. PW-2 is Sh. Ram Kawar Singhmar. He has deposed that w.e.f. 18.09.2006 to 20.03.2010, he was posted as Manager at Punjab National Bank, New Subzi Mandi, Azadpur Branch, Delhi. He has deposed that as per the procedure of the Bank, Manager was competent to purchase the cheque of a party after examining the cheque and reputation of the party and the Bank used to charge its commission. After purchasing the cheque, the ODD account was debited and credited to the account of the party, after deducting the commission of the Bank. Thereafter the cheque is sent for CC No.40/2011 Page 12 of 66 13 clearing to the concerned Bank. Once the cheque is cleared, the amount is credited to the ODD account and in case the cheque is not cleared, the account of the party is debited along with interest. In case, there is no sufficient balance in the account of the party, even after being notified about the same, the recovery proceedings are initiated against the party by the Bank.
20. PW-2 has further deposed that if one cheque is returned unpaid, then there was no reason for the Bank Manager to purchase another cheque in the same account till the clearing of the outstanding dues. PW-2 has deposed that vide document Ex. PW2/A, he has provided certain documents to CBI, as mentioned therein. He has proved the Account Opening Form of M/s. Krishna Trading Company Ex.PW-2/A1 (colly.) (D-4), vide which a Current Account was opened by accused Sewa Lal on behalf of M/s. Krishna Trading Company on 29.04.2004.
21. PW-3 is Sh. Bharat Bhushan Chawla. He has deposed that w.e.f. August 2004 to May 2006, he was posted as Chief Concurrent Auditor with Punjab National Bank at Nehru CC No.40/2011 Page 13 of 66 14 Place, New Delhi. As Concurrent Auditor, his duties were to audit the accounts of the Branch daily, where he was posted. In case of necessity, he was also used to be deputed to other Branches for conducting audit. The Audit Reports, which were prepared by him used to be submitted to Zonal Office as well as to the Inspection and Audit Division of the Bank. Sometimes, he was deputed for special investigation of some Branches.
22. PW-3 has identified his signature on Internal Investigation Report Ex. PW-1/B3, which was jointly prepared by him and Sh. R. C. Ahuja. He has further deposed that the inspection /audit was conducted by him with regard to the audit which was conducted by them on 07.01.2005, with regard to the unauthorized accommodation by way of purchasing of cheques in certain accounts. During the said inspection, he had found that in certain accounts, cheques were purchased by the Branch which were returned unpaid. In order to accommodate the said unpaid amount, fresh cheques were purchased to settle the unpaid amount resulting from the purchase of earlier cheques returned CC No.40/2011 Page 14 of 66 15 unpaid. He has identified his signatures on forwarding letter Ex.PW-1/B4 vide which the said Report was sent to Deputy General Manager, Zonal Office, Delhi, to the Chief FPIS, Head Office, New Delhi, to DGM, Inspection and Audit Division, Rajendra Bhawan, New Delhi and to Deputy General Manager, Zonal Audit Office, NIT Faridabad.
23. PW-4 is Sh. Surender Kumar. He has deposed that he used to buy vegetables from Azad Pur Mandi and used to sell them in Batala and also supply to Mother Dairy. He has further deposed that in the year 2003-2004, he used to work with one Bhajan Singh, who was doing his business in the name of M/s. Bhajan Singh & Company. He has further deposed that accused Sewa Lal is known to him as he used to buy vegetables from him and they had good business relationship with him. He has further deposed that he had given two signed cheques to accused Sewa Lal in advance for the vegetables to be to supplied to PW-4 as accused Sewa Lal was in need of money. He has identified his signatures on the copies of cheques Ex. PW-4/A1 and Ex.PW-4/A2 respectively. He has further deposed that the CC No.40/2011 Page 15 of 66 16 above said two cheques were filled in by his Munim.
24. Ld. P.P. for the CBI was allowed to cross examine the PW-4 as he resiled from his statement made before the CBI/ Investigating Officer.
25. PW-5 is Sh. Prem Kumar. He has deposed that in the year 2008, he was posted as Clerk at the Azadpur Branch of PNB. As a clerk, his duties were to post the cheques in the records and to issue Fixed Deposits Receipts. He has identified his signature on Ex. PW-5/A vide which he had supplied the cheques and deposit vouchers i.e. Ex. PW-5/A1 to PW-5/A12 to the CBI.
26. PW-5 has also identified his signatures on Ex. PW-5/B, vide which he had supplied the cheques and deposit vouchers Ex. PW-5/B1 to Ex. PW-5/B12 to the CBI.
27. PW-6 is Sh. K.K. Gaur. He has deposed that at the relevant time, he was posted as Deputy Manager with Punjab National Bank of Azadpur Branch, Delhi. He has deposed about the procedure for purchasing the cheques. Procedure for discounting cheques explained by PW-6 is same as stated by PW-2 Sh. Ram Kawar Singhmar in his evidence. CC No.40/2011 Page 16 of 66 17
28. PW-6 has further deposed that Credit Vouchers Ex. PW-6/A2 to Ex. PW-6/A5 and Ex. PW-5/B8 to Ex. PW-5/B12 in the name of M/s. Krishna Trading Company were purchased by Sh. D.K. Malhotra.
29. PW-7 is Sh. Sudershan Kumar. He has deposed that he was having a business by the name of M/s. K. P. Fruits at New Subzi Mandi, Azadpur, Delhi and he had an account in the name of M/s. K. P. Fruits Company with PNB, Azadpur, Delhi. He has identified his signature on Account Opening Form Ex. PW-2/A1 of M/s. Krishna Trading Company. He knew accused Sewa Lal as he was having business in the same Mandi.
30. PW-8 is Sh. Ashok Kumar Kapoor. He has deposed that in the year 2006-2007, he was posted as Manager Scale-II at Punjab National Bank, Azadpur Branch, Delhi. He has identified his signature as well as signature of Sh. V. K. Gupta, the then Chief Manager, on Certificate Ex. PW-8/A under Section 2(A) of the Bankers Book Evidence Act with regard to the Statement of Account of Current Account No.21127840 of M/s. Krishna Trading Company Ex. PW-6/B. CC No.40/2011 Page 17 of 66 18
31. PW-8 has also identified his signatures on Production Cum Seizure Memo Ex. PW-8/B, vide which he had handed over the documents including the cheque Ex. PW-6/A6 to the CBI.
32. PW-8 has also identified his signatures on Production cum Seizure Memo Ex. PW-8/C, vide which he had handed over the (1) Statement of Demand Draft received back unpaid for dates 25.11.2004, 17.11.2004, 13.11.2004, 11.11.2004, 09.11.2004, 04.11.2004 and 30.10.2004 (20 sheets) Ex. PW- 8/C1, which were sent to the Regional Office. (2) Certified copy of details of cases pending in the court of Ld. M.M. Delhi, Ex. PW-8/C2A1 (3) Letters dated 01.09.2003, 01.11.2004, 14.09.2004 written by the Branch to the Senior Manager (Audit), Regional Office Ex. PW-8/C2A2 to Ex. PW- 8/C2A4. (4) Letters received from the PNB, North Delhi Region Audit Section dated 22.08.2003, 30.10.2004, 13.09.2004 & 26.08.2004 Ex. PW-8/C2A5 to Ex. PW-8/C2A8 and (5) Letter dated 09.09.2004 received from Bank of Baroda Ex. PW-8/C2A9., to the CBI. It is the same as Ex. PW-1/B1.
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33. PW-9 is Sh. Raj Pal. He has deposed that during the period from 2001 to 2005, he was posted in Punjab National Bank, Panchwati Branch, Azadpur, Delhi, as Computer Operator. He has deposed that his job involved making all the credit and debit entries in the computer at his desk. Being Senior most, he was working as Special Assistant thereby he had some wide powers relating to passing of cheques etc. such as he could pass the cheques for cash payment upto Rs.20,000/- and pass the cheques upto Rs.50,000/-, which were to be credited through clearing.
34. PW-9 has further explained the terms like "Shadow Balance"
and "Clean Overdraft". PW-9 has identified his handwriting on the cheques Ex. PW-5/B2 and Ex. PW-5/B5. He has further deposed that as against the cheques Ex. PW-5/B2 and Ex. PW-5/B5, the payments were made to accused Sewa Lal from the account of M/s. Krishna Trading Company, which were passed by Sh. V. K. Saini Manager.
35. PW-10 is Sh. Ram Kumar Chawla. He has deposed that he had joined the Punjab National Bank in the year 1978. In July 2007, he was posted at North Delhi Zonal Office at CC No.40/2011 Page 19 of 66 20 Rajendra Place, New Delhi, in the Inspection Department. He has further deposed that the Circulars were issued defining the loan powers of the officers of the different levels and how they are to be sanctioned and released from time to time. He has further deposed that the Circular Ex. PW-10/A for the relevant time i.e. in the year 2003-2004, was personally handled by him and used this Circular during the course of his official duties.
36. PW-10 has further deposed that at page no. 7 at serial no.
4(ii) of Ex. PW-10/A, it is noted that the powers of Senior Manager and Chief Manager with regard to the purchase of cheques were Rs.3.75 lacs and Rs. 20 lacs respectively, which were the powers with regard to advance against clearing instruments. It is also noted that these powers were to be exercised only "in respect of cheque representing genuine trade transactions" and not to be exercised "for cheques of the allied and associate concerns." It is further noted that "Advance is not to be allowed in any shape against the cheques / pay orders /drafts issued by Co- operative Banks including State Co-operative Banks." CC No.40/2011 Page 20 of 66 21
37. PW-10 has further deposed that Clean Overdraft in Banking terms means advance or loan given to a party without any security and Advance against Clearing means when a customer presents a cheque of another bank and sent for collection to the paying bank through clearing and during this period of time, the account of the party is credited without waiting for the clearance of the cheque.
38. PW-10 has also identified the several entries of Ex. PW-6/B pertaining to two cheques i.e. PW-4/A1 and Ex. PW-4/A2.
39. PW-11 is Sh. Suresh Kumar Gupta. He has deposed that from September 2004 to June 2005, he was posted as Concurrent Auditor at Azadpur Branch of PNB. He has further deposed that the Azadpur Branch and Khan Market Branch of PNB were in his jurisdiction. He has further deposed that as Concurrent Auditor, his duties were to ensure that the system and procedures of the Bank are followed properly and if there is any deviation, he was supposed to report the same to his higher officers. For this purpose, he was required to examine the day to day working of the Branch and look for deviation, if any. He was also CC No.40/2011 Page 21 of 66 22 required to submit quarterly report to the higher authorities but in case of any deviation is being found, it was his duty to immediately bring to the notice of the Manager of the Bank.
40. PW-11 has further deposed that during his posting at the Azadpur Branch as Concurrent Auditor, accused D. K. Malhotra was the Chief Manager, Sh. V. K. Saini was the Manager and Sh. K. K. Gaur was the DD Incharge.
41. PW-11 has further deposed that he had conducted the audit of the Azadpur Mandi Branch for the period 02.09.2004 to 11.09.2004 and thereafter he had gone to attend a training at Faridabad. After returning back from the training, he was to complete his audit report of the Khan Market Branch. After submitting the said Quarterly Report related to Khan Market Branch, he had rejoined the Azadpur Branch on 08.10.2004. On joining the branch, he had examined the working at the Branch in which, he had found that the clearing cheques were sent for clearing and the amount was given to the party against the clearing. The clearing cheques returned unpaid sometimes with the reasons "insufficient funds". The party was then to deposit the money either by cash or by transfer CC No.40/2011 Page 22 of 66 23 so that the entry in that account may be adjusted. He has also found that in many of the Accounts, it was not so done and Over Draft (OD) was created in the Account. He had prepared a detailed report of all such accounts and pointed out the irregularities, which were committed in respect of the said accounts and had submitted the same to their Zonal Audit Office at Faridabad. He also sent a copy of the same to the Zonal Manager, Senior Regional Manager and Chief Manager of the Branch. He had identified his signatures on Ex. PW-11/A. He has further deposed that after submission of his Report, Senior Concurrent Auditor Sh. R. C. Ahuja and Chief Concurrent Auditor Sh. B. B. Chawla were directed to conduct Special Investigation.
42. PW-12 is Sh. R. C. Ahuja. He has deposed that from July 2003 to August 2005, he was posted as Senior Concurrent Auditor at Subzi Mandi, Ghanta Ghar Branch of PNB, Delhi. His duties as the Concurrent Auditor was to observe that the systems and the procedures of the Bank are adhered to in the day to day working of the Branch and report the same to the Incumbent Incharge on day to day and also submit CC No.40/2011 Page 23 of 66 24 monthly and quarterly reports, in case the irregularities pointed out are not removed within the specified time, to the Zonal Audit Office with copies to the Controlling Office and the Branch.
43. PW-12 has further deposed that he had conducted the investigation with his senior colleague Sh. B. B. Chawla, Chief Internal Auditor, regarding irregularities committed in the Azadpur Branch of PNB. After concluding the investigation, a Report was submitted by them to Zonal Office. He has identified his signatures on Ex. PW-1/B3.
44. PW-12 has also identified his signature on Forwarding Letter Ex. PW-1/B4, whereby the report Ex. PW-1/B3 was forwarded to DGM, Zonal Office with copies to DGM, Zonal Audit Office, Chief, FPIS and DGM, Inspection and Audit Division.
45. PW-13 is Sh. M. C. Joshi. He has deposed that the documents of this case were submitted by SP, CBI, EOW-II, New Delhi vide letters Ex. PW-13/A1 to Ex. PW-13/A4 for scientific examination and opinion. He has further deposed that the following documents were supplied to him:- CC No.40/2011 Page 24 of 66 25
(i)Red enclosed signatures stamped and marked Q-263 on Ex. PW-6/A6,
(ii) For Scientific examination and comparison of question documents/ items, Specimen Signatures of accused Sewa Lal S-193 to S-199 i.e. Ex. PW-13/B1 to Ex. PW-13/B7, were supplied to him.
46. PW-13 has further deposed that all the above questioned items and specimen signatures were examined by him by using various scientific aids, such as magnifying glasses, stereo microscope and "docu-centre expert". After careful and thorough examination of the questioned items with the supplied specimen items, he expressed his opinion that "the signature in the enclosed portion stamped and marked Q-263 and S-193 to S-199 have been written by one and the same person". He has filed his Report Ex. PW-13/C1 with the reasons Ex. PW-13/C2. He has also identified signature of Dr. B. A. Vaid on Report Ex. PW-13/C1.
47. PW-13 has further deposed that all the documents including the documents relating to this case were sent back to SP, CBI along with his opinion and detailed reasons vide letter CC No.40/2011 Page 25 of 66 26 Ex. PW-13/C3. It is to be noted that Q263 is a cheque of Sewa Lal, by which he has withdrawn the amount from the Bank.
48. PW-14 is Sh. Ashok Kumar. He has deposed that in the year 2007, he was posted in CBI at Delhi in the diverted capacity. His posting in CBI w.e.f. October 2005 to April 2008 in the CGHS Scam Cases. He has identified his signatures on Ex. PW-13/B1 to Ex. PW-13/B7.
49. PW-15 is Sh. Vikas Joshi. He has deposed that in the year 2008, he was posted as Assistant Manager in ICICI Bank, Connaught Place Branch, New Delhi. He has deposed that vide Production cum Seizure Memo dated 10.06.2008 Ex. PW-15/A, he had provided the Account Opening Form in original of Account No.000705006525 in the name of Sh. Sewa Lal along with documents Ex. PW-15/B (colly.).
50. PW-16 is Ms. Ramanjeet Kaur. She has deposed that the pay in slips dated 08.11.2004 and 09.11.2004 for depositing the cheque nos.410668 and 410671 dated 08.11.2004 and 09.11.2004 for Rs.3,74,750/-each of Union Bank of India, Azadpur Branch in the account of M/s. Krishna Trading CC No.40/2011 Page 26 of 66 27 Company were summoned from the Bank, but she has not brought the original of the same as the same are not lying in their branch. She has further deposed that as per procedure, when the Branch hands over any documents of the Branch to anyone, record thereof is maintained in the Bank and the copy of such documents is also retained in the Bank.
51. PW-16 has further deposed that after inquiry about the documents, she came across on internal correspondence with her Asset Recovery Branch from which it appears that these instruments were produced in the court of Ld. Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi but she does not know the name of the Court.
52. PW-17 is Sh. Ajay Malhotra. He has deposed that he was posted in Punjab National Bank, Azadpur Branch, Delhi w.e.f. April 2003 to April 2006 as Deputy Manager. During that period, Sh. V. K. Jolly was the Incumbent Incharge of the Branch. Sh. D. K. Malhotra the then Chief Manager became the Incumbent Incharge of the Branch but he does not remember the date and year. He has further deposed that Manager Sh. V. K. Saini, Manager Sh. A. C. Aggarwal, CC No.40/2011 Page 27 of 66 28 Deputy Manager Sh. K. K. Gaur and Officer Sh. S. C. Chaddha were also posted in the said Branch during that period. Statement of this witness is redundant and insignificant.
53. PW-18 is Sh. Avinash Chandra Agarwal. He has deposed that from May 2003 to April 2004, he was posted as Manager in Azadpur Branch of PNB. He has further deposed that an account bearing No. 21127840 of M/s. Krishna Trading Company was opened by him vide Account Opening Form Ex. PW-2/A1. He has further deposed that accused Sewa Lal was the Proprietor of the said company. He has also identified the signature of accused Sewa Lal on Ex. PW-2/A1, Specimen signature Card Ex. PW-2/A1 (colly.)
54. PW-19 is Sh. Ashwani Kumar Gupta. He has further deposed that during the period July 2002 to November 2007, he was posted as a clerk at PNB, Azadpur Branch, Delhi. He has further deposed that during that period, Sh. V. K. Jolly the then Senior Manager was the Incumbent Incharge and after him, Sh. D. K. Malhotra the then Chief Manager had become Incumbent Incharge of the said Branch. CC No.40/2011 Page 28 of 66 29
55. PW-19 has further deposed that his work was to look after the posting of cheques at the counter of the Bank and forward the same to the officer for passing. When the cheque was presented for encashment at the counter, the name of the person, who present the cheque was mentioned on the cheque and the entry of the said cheque was posted in the account of the parties on computer. The computer creates a specific ID number for particular entry and the same number was mentioned on the cheque. A stamp "Pay to" was also put on cheque where the name of person, who presented the cheque for receiving was written. After that, the cheque was presented before the officer for passing the same.
56. PW-19 has further deposed that in case there was insufficient balance in the account of the person who issued the cheque, then they brought this fact to the knowledge of the officer /Passing Authority. If the Passing Authority asked for entering the cheque then they enter and after following the above said procedure, the cheque was sent to the Officer for passing the same. After that, the payment was made by the Cashier. CC No.40/2011 Page 29 of 66 30
57. PW-19 has further deposed that Cheques Ex. PW-5/A1, Ex.
PW-5/B1, Ex. PW-5/B3, Ex. PW-5/B4 and Ex. PW-5/B6 were presented before him for the encashment by accused Sewa Lal and after entering the same in the computer, he put the entries number generated by the computer in his handwriting. He also put the stamp "Pay to" on the said cheques.
58. PW-20 is Sh. Pritam Dass Khurana. He has deposed that in June 2008, he joined as Chief Manager in ARMB, PNB and remained on the same post till 30.04.2009. He has further deposed that vide letter Ex. PW-20/A, he had provided the details of Recovery made in various accounts related to the case RC No.2E/2008/EOU-II.
59. PW-21 is Inspector Ajeet Singh. He has deposed that FIR Mark PW-21/A of this case was registered on 31.05.2006 on the basis of written complaint from PW-1 Ved Prakash, the then Zonal Manager, PNB, which was assigned to him for investigation.
60. PW-21 has further deposed that during investigation, he collected relevant documents from Azadpur Branch of PNB and also from other Banks vide different Seizure Memos and CC No.40/2011 Page 30 of 66 31 forwarding letters. He also examined the relevant witnesses and recorded their statements. He also obtained the specimen signatures /writing of accused persons and forwarded the same to GEQD for opinion.
61. PW-21 has further deposed that vide Production cum Seizure Memos Ex. PW-2/A, Ex. PW-8/B, Ex. PW-5/A, Ex. PW-5/B, Ex. PW-15/A, Ex. PW-8/C, Ex. PW-10/B, letter Ex. PW-20/A, letter Ex. PW-1/B, copy of Internal Investigation Report Ex. PW-1/B3 and copies of letter dated 29.10.2004 Ex. PW-1/B1 and letter dated 09.09.2004 Ex. PW-1/B2 of Bank of Baroda, and letter Ex. PW-10/C, were seized by him.
62. PW-21 has further deposed that he has also received the Certified copies of cheques along with Pay-in-slip and cheque returning Memos Ex. PW-6/A4, Ex. PW-4/A1, Ex. PW-6/DX1, Ex. PW-6/A5, Ex. PW-4/A2 and Ex. PW-6/DX2. He has further deposed that he had obtained the specimen signatures of accused Sewa Lal PW-13/B1 to Ex. PW-13/B7 in the presence of independent witness Sh. Ashok Kumar.
63. PW-21 has also identified the statement of Sh. Surender Kumar Ex. PW-4/PX1, which was recorded under Section CC No.40/2011 Page 31 of 66 32 161 Cr. P. C.
64. PW-21 has further deposed that after completion of the investigation, he had prepared and submitted the charge sheet in the court against the accused persons mentioned in the charge sheet on the basis of evidence collected during investigation.
65. PW-22 is Sh. D. K. Chaudhary. He has deposed that in the year 2006, he was posted as S. P. in CBI, EOW-II, New Delhi. He has further deposed that on 31.05.2006, he has registered the FIR No.2(E)/2006/EOW-II, New Delhi Ex. PW- 18/A on the basis of the complaint of complainant Sh. Ved Prakash Deputy Zonal Manager, PNB, Rajendra Place, New Delhi. The said FIR was marked to Inspector Ajeet Singh for investigation.
STATEMENTS OF ACCUSED PERSONS U/S 313 CR.P.C.
66. After completion of the prosecution evidence, the statements of the accused persons were recorded u/s 313 Cr.P.C. All the incriminating evidence which has come on record against the accused persons were put to the accused persons in their Statements recorded under Section 313 Cr.P.C. CC No.40/2011 Page 32 of 66 33
67. Accused D. K. Malhotra has stated in his statement recorded under Section 313 Cr. P. C. that he is innocent and he has been falsely implicated in this case. Investigation was not conducted fairly. The questioned cheques pertained to genuine business transactions and the same were within his purchasing powers. No loss has been caused to the Bank by his act of purchasing the genuine cheques. He has neither abused his official position nor obtained any pecuniary advantage while purchasing the cheques.
68. Accused Sewa Lal has stated in his statement that the two cheques in question, which were issued by Sh. Surender Kumar for purchasing vegetables, were presented by him against the genuine trade transactions. Sh.Surender Kumar used to purchase vegetables from him time to time and used to make the payment by way of cash and cheques. He has further stated that the whatever amount withdrawn by him, he has already paid to the Bank with interest and the Bank has already issued "No Dues" Certificate dated 02.01.2012 in respect of his account in the name of M/s. Krishna Trading Company. He has further stated that the Bank CC No.40/2011 Page 33 of 66 34 has neither initiated the proceedings under Section 138 of NI Act against him nor has sent his account for any inquiry or scrutiny to any concerned authority as alleged. The said account was running properly without any objection from the Bank. He has further stated that the PNB has received full and final payment including interest from him in respect of his account after settlement by Senior Manager, PNB, Azadpur, Delhi and there are no dues left against him in respect of the cheques in question.
69. In defence, only one witness was examined on behalf of accused Sewa Lal. Accused D. K. Malhotra did not opt to lead any evidence in defence.
Evidence led by accused Sewa Lal
70. DW-1 is Sh. Ajay Kumar. This witness is working as Clerk of Punjab National Bank, Azadpur Branch, Delhi, who has brought the Statement of Account with respect to Current Account No.0618002100127840 in the name of M/s. Krishna Trading Company Mark DW-1/A. He has also brought the Authority Letter issued by PNB, G.T Road, Azadpur, Delhi, Mark DW-1/B. The No Due Certificate Mark DW-1/C, issued CC No.40/2011 Page 34 of 66 35 by Chief Manager, PNB, G. T. Road, Azadpur, Branch, Delhi. The Current Account of M/s. Krishna Trading company has no outstanding dues against the said customer. The Bank has also issued the No Dues Certificate Mark DW-1/D to accused Sewa Lal.
71. I have heard Sh. A. K. Kushwaha Ld. P.P. for the CBI, Sh. I.D. Vaid Advocate for accused D. K. Malhotra and Sh. Sanjay Mishra Advocate for accused Sewa Lal. I have also perused the file, written submissions filed on behalf of accused Sewa Lal and also the case law relied upon by the defence counsel.
72. The point for determination is whether the prosecution has proved its case beyond reasonable doubt.
Findings
73. As stated above the investigating agency i.e. CBI initiated action on receipt of the written complaint Ex. PW 1/A from Zonal Manager of PNB. The complainant who is examined as PW-1 states that an internal investigation was conducted wherein certain irregularities with regard to purchasing of cheques and overdraft were made out. Based on such CC No.40/2011 Page 35 of 66 36 internal investigation report i.e. Ex. PW1/B3, a written complaint was made to the CBI. The said internal investigation was conducted by PW-3, Chief Accounts Officer and PW-12, Sr. Concurrent Auditor. The report is duly proved in examination of the said witnesses. It is according to PW-3 and PW-12 that they were asked to conduct investigating/audit of the Azadpur branch of PNB, Delhi by the Zonal Manager. After receiving the instructions PW-3 and PW-12 proceeded to conduct investigation with regard to the irregularities in Azadpur Branch of PNB. It is mentioned in the report, and as per the statements of the witnesses, that the auditors/witnesses found that there was unauthorized accommodation for purchase of cheques which were not supported by genuine trade transactions and the said cheques were returned unpaid repeatedly in certain accounts and were adjusted by purchase of fresh cheques of the similar nature. If was also found, as per Ex. PW-1/B3 that this phenomenon was occurring repeatedly in certain accounts.
74. The procedure for purchasing the cheques explained by PW-6 and as well as PW-10. The purchasing of cheques is CC No.40/2011 Page 36 of 66 37 not an unusual practice. As per the statement of PW-6, customer approaches the Incumbent Incharge of the branch and makes request for purchase of cheques in ODD(outward demand draft). Thereafter, the Incumbent Incharge sanctions the ODD and it goes to CTO (Computer Operator) who makes entries in the account of the party and also gives an entry number on the credit voucher and then the ODD incharge passes the entry in the system thereby the account of the party is credited. For purchasing the cheques the bank charges some commission. It is also stated by the witness in cross-examination that in the absence of Incumbent Incharge the second man in the branch shall purchase the cheques of the same parties of which, the Incumbent Incharge used to purchase. PW-10, who is a Chief Manager of PNB refers to a circular no. 130 issued by the PNB in the year 2003-2004 which contains guidelines for purchasing cheques. The circular is taken on record as Ex. PW-10/A. According to which the Senior Manager and Chief Manager have powers to purchase the cheques upto 3.75 lacs and 20 lacs respectively. The prosecution case is that the then Chief CC No.40/2011 Page 37 of 66 38 Manager D. K. Malhotra A-2 and Sewa Lal A-3 entered into a conspiracy in pursuance of which the two cheques of Sewa Lal were purchased which resulted in loss to the bank to the tune of Rs. 7 lacs. It is also the case of prosecution that by doing the above said act, the accused D.K. Malhotra has committed an offence u/s 13(1)(d) of PC Act and Sewa Lal had cheated the bank which is an offence u/s 420 IPC. Though the CBI has charge sheeted three accused initially but this court vide order dated 10.09.2012 discharged the accused namely V. K. Jolly, A-1.
75. In the present case the alleged fraud has been committed in transaction of purchasing two cheques i.e. Ex. PW-4/A1 and Ex. PW-4/A2. PW-4 Sh. Surender Kumar, who is a proprietor of Surender Kumar & Co., has stated that he has been in the business of vegetables and he used to purchase vegetables from M/s. Krishna Trading Co. whose proprietor is Sewa Lal A-3. The PW-4 has regular business transaction with the company of A-3 Sewa Lal. It is further stated that on asking by A-3, PW-4 had given two cheques to A-3, i.e. cheque no.410668 dated 08.11.2004 for an amount of Rs.3,74,750/- CC No.40/2011 Page 38 of 66 39 and other cheque no.410671 dated 09.11.2004 for an amount of Rs. 3,74,750/-. Photocopies of the said cheques were identified by the witness PW-4 and the same are Ex. PW-4/A1 and Ex. PW-4/A2 respectively. It is also according to PW-4 that the said cheques were filled in by his Munim and handed over to A-3. The witness PW-4 was declared hostile on the request of the Ld. PP for CBI on the ground that he has resiled form the statement made by him before Investigating Officer and was allowed to be cross- examined. The Ld. PP has cross-examined the witness PW-4 with regard to the particulars of his Munim and further confronted with his statement made before the Investigating Officer. The Ld. PP in his arguments contends that the statement of hostile witness has to be examined with extra caution as he is trying to help the accused. Thereafter, prosecution has examined PW-5, PW-6, PW-8, PW-10 and PW-11, who were working in various positions in PNB at relevant time. Certain documents were handed over to CBI by PW-5 Sh. Prem Kumar which are not denied. PW-6, who was a Deputy Manager PNB brings on record certain CC No.40/2011 Page 39 of 66 40 documents including credit vouchers to prove that transactions in the nature of purchasing cheques, have been done at relevant time by M/s. Krishna Trading Company. The relevant entries which pertain to the transactions of purchasing cheques in question i.e. Ex. PW-4/A1 and Ex. PW-4/A2 are at serial no. 18 and 19 in deposition of PW-6. The credit vouchers for purchasing the cheques /transactions in question are Ex. PW-6/A4 and PW-6/A5. It is pertinent to mention that the original two cheques in dispute and their credit vouchers are not on record and only the photocopies are exhibited, subject to objections raised by defence. The prosecution tried in vain to produce the original documents i.e. originals of Ex. PW-4/A1, Ex. PW-4/A2, Ex. PW-6/A4 & Ex. PW-6/A5 by summoning the Manager, Azadpur Branch PNB, one Ms. Ranjeet Kaur. The said Manager appeared before court and examined as PW-16. The said PW-16 has expressed her inability to produce the originals of documents Ex. PW-4/A1, Ex. PW-4/A2, Ex. PW-6/A4 & Ex. PW-6/A5 and further stated that original record is not available in the branch. The said witness also not clear in her deposition, as CC No.40/2011 Page 40 of 66 41 to what happened to the original record. On record there are only the photocopies of cheques, corresponding pay-in-slips and vouchers available for consideration. It is to be noted that the above said documents are given exhibit numbers subject to objections raised by defence counsel.
76. The Ld. PP contends that in the absence of original document, the photocopies on record of the documents Ex. PW-4/A1, Ex. PW-4/A2, Ex. PW-6/A4 & Ex. PW-6/A5 can be considered as secondary evidence under Section 63 of Evidence Act. The said contention of Ld. PP is strongly opposed by the Ld. Counsel for defence. In order to consider rival submissions it is necessary to take note of Sections 63 and 65(a). Sections 63 of Evidence Act reads as follows:-
"63: Secondary Evidence - Secondary evidence means and includes (1) certified copies given under the provisions hereinafter contained;
(2) copies made from the original by mechanical processes which in themselves ensures the accuracy of the CC No.40/2011 Page 41 of 66 42 copy and copies compared with such copies;
(3) copies made from or compared with the original;
(4) counterparts of documents as against the parties who did not execute them; (5) oral accounts of the contents of a document given by some person who has himself seen it.
77. The Ld. Counsel for defence relied on the judgment of the Hon'ble Supreme Court in Smt. J. Yashoda vs. Smt. K. Shobha Rani in SLP (c) No. 12625 of 2005. The Hon'ble Supreme Court in the above said judgment did not allow the photocopies of the documents to be received in secondary evidence on the ground that the conditions as specified for recording secondary evidence u/s 65 of the Evidence Act are not fulfilled. The relevant para is as follows-
"Secondary evidence, as a general rule is admissible only in the absence of primary evidence. If the original itself is found to CC No.40/2011 Page 42 of 66 43 be inadmissible through failure of the party, who files it to prove it to be valid, the same party is not entitled to introduce secondary evidence of its contents. Essentially, secondary evidence is an evidence which may be given in the absence of that better evidence which law requires to be given first, when a proper explanation of its absence is given. The definition in Section 63 is exhaustive as the Section declares that secondary evidence "means and includes" and then follow the five kinds of secondary evidence.
The rule which is the most universal, namely that the best evidence the nature of the case will admit shall be produced, decides this objection that rule only means that, so long as the higher or superior evidence is within your CC No.40/2011 Page 43 of 66 44 possession or may be reached by you, you shall give no inferior proof in relation to it. Section 65 deals with the proof of the contents of the documents tendered in evidence. In order to enable a party to produce secondary evidence it is necessary for the party to prove existence and execution of the original document. Under Section 64, documents are to be provided by primary evidence.
Section 65, however permits secondary evidence to be given of the existence, condition or contents of documents under the circumstances mentioned. The condition laid down in the said Section must be fulfilled before secondary evidence can be admitted. Secondary evidence of the contents of a document cannot be admitted without non-
production of the original being first CC No.40/2011 Page 44 of 66 45 accounted for in such a manner as to bring it within one or other of the case provided for in the Section."
78. In the present case as well the prosecution has not fulfilled the conditions as laid down under Section 65 of the Evidence Act, so as to consider the photocopies of the documents as secondary evidence. The objections raised by the Ld. Counsel of defence with regard to considering the photocopies of the above said documents as secondary evidence are sustained in view of settled legal propositions.
79. Other documents which are relied by the prosecution and brought on record are mainly statement of accounts i.e. Ex.PW-6/B, which is supported by a certificate u/s 2A of The Bankers' Books Evidence Act. The statement of account at points X2 and X4 show that amount against the purchase of disputed cheques is credited to the account of M/s. Krishna Trading Co. on 08.11.2004 and 09.11.2004 respectively. The statement of account Ex. PW-6/B also shows at points X3 and X4 that the amount against the said cheques which is credited to the account of M/s. Krishna Trading Co. is CC No.40/2011 Page 45 of 66 46 withdrawn by accused A-3 on the same day. It is to be noted that all the entries were made by the bank officials in statement of account and as such cannot be sufficient evidence to prove the transactions in the absence of original cheques against which such transactions stated to have taken place.
80. The Ld. PP for CBI contends that the accused have conspired to cheat the bank and the discounting of cheques presented by A-3 and allowed by A-2 are done with malafide intention and further that they cannot be said to be arising out of genuine trade transactions. It is also argued by the Ld. PP that the accused Sewa Lal has not denied the purchasing of two disputed cheques Ex. PW-4/A1 and Ex. PW-4/A2 and withdrawal of the amount credited into his account. Ld. PP further submits that non production of original cheques on record, therefore, does not effect the case of the prosecution.
81. It is also argued by the Ld. PP for the CBI that the amount credited to the account of M/s. Krishna Trading Company against the purchase of cheques Ex. PW-4/A1 and Ex. PW- 4/A2 was withdrawn by accused Sewa Lal vide self cheque CC No.40/2011 Page 46 of 66 47 Ex. PW-6/A6. The signature of accused Sewa Lal on withdrawal cheque Ex. PW-6/A6 is proved by Expert Witness PW-13. On the other hand, the main contention of the defence is that the transactions, if any, have taken place with regard to the discounting of cheques are the genuine transactions and no malafide can be attached to the transactions.
82. Though prosecution has not brought the original cheques i.e. Ex. PW-4/A1 and Ex. PW-4/A2 on record, the purchasing of the said cheques was not denied by accused Sewa Lal. The Expert Witness PW-13 has been examined to prove that the withdrawal cheque Ex. PW-6/A6 bears the signatures of accused Sewa Lal. The Expert witness has given his opinion after comparing the signature of accused Sewa Lal on withdrawal cheque Ex. PW-6/A6 with specimen signatures taken by the Investigating Officer. It is pertinent to mention here that purchasing of two disputed cheques Ex. PW-4/A1 and Ex. PW-4/A2 and subsequent withdrawal vide withdrawal cheque Ex. PW-6/A6 are not specifically denied by accused persons. In view of the above, it becomes all the more CC No.40/2011 Page 47 of 66 48 necessary to examine whether the disputed cheques were issued in course of regular genuine trade transactions or not.
83. Cheque discounting is a facility given by banks to their customers for improvement of their business and services. There is no denial of the fact that it is practiced by all banks in their regular course of business and the said fact is also deposed by PW-2 and PW-6. It is not out of place to mention here that the rate of interest charged by the bank for providing such facility to the customer is higher than the normal transactions. However, there are some guidelines issued by the banks to prevent the misuse of cheque discounting facility.
84. PW-10 in his evidence speaks about the guidelines issued by the bank in this regard vide separate circular. It is stated by PW-10 that at the relevant time i.e. in the year 2003-04 circular no. 130 dated 31.12.2002 provides the guidelines to be followed by the bank while providing cheque discounting facility to the customers. The circular is taken on record as Ex. PW-10/A. As mentioned at page no. 7 at serial no. 4(ii) of the circular, powers of the Senior Manager and Chief CC No.40/2011 Page 48 of 66 49 Manager with regard to purchase of cheques are of Rs. 3.75 lacs and Rs. 20 lacs respectively. It is also, as per the said circular, that the powers are to be exercised only in respect of cheques representing genuine trade transactions and not to be exercised for the cheques of the allied or associated concerns. To a specific question, during the cross- examination, the witness PW-10 answered that the discounting of disputed cheques are within the financial powers of the Chief Manager. From the evidence of PW-10 it can be safely concluded that discounting of two cheques in question are within the powers of Chief Manager as per the guidelines issued by the bank vide circular 130 which is Ex. PW-10/A.
85. The next point to be considered is whether the disputed two cheques were given in course of genuine trade transactions. It is the case of the prosecution that disputed cheques were issued by one Sh. Surender Kumar who is proprietor of M/s. Surender Kumar & Co. drawn on Union Bank of India at Azadpur Mandi. Sh. Surender Kumar has been examined as PW-4. It is categorically stated by PW-4 before the court that CC No.40/2011 Page 49 of 66 50 he is a vegetable vendor and used to purchase vegetables from one Sewa Lal and he has good business relations with him. It is further stated by the witness that on asking by Sewa Lal, he gave him in advance two signed cheques for supply of vegetables and the said cheques were filled in by his clerk (Munim). Witness was only shown the photocopies of the said two cheques which were given the exhibit numbers as Ex. PW-4/A1 and Ex. PW-4/A2. The Ld. PP sought permission to cross-examine the witness on the ground that he has resiled from his statement given to the CBI during investigation. The request was allowed and the Ld. PP was allowed to cross-examine the witness. PW-4 was cross-
examined at length and was asked certain particulars about his Munim who has stated to have filled the cheques and further confronted with the statement made by him to the CBI. PW-4 in cross-examination by the Ld. PP has stated that one person named Vijay Kumar had worked with him for 3-4 years and was paid Rs.3,500/- per month. However, the witness stated that he was not filling Income Tax Returns and could not say how much he was earning annually. The Ld. PP CC No.40/2011 Page 50 of 66 51 suggested to the witness that the blank cheques had been given by him to A-3 knowing well that there was no sufficient money in his account. In the entire cross-examination of PW- 4 by the Ld. PP for CBI nothing is elicited which can effect the case of the defence. The evidence of PW-4 clearly goes to show that PW-4 who is a vegetable vendor under the name and style of M/s. Surender Kumar & Co. had regular business transactions with Sewa Lal who is a Prop. of M/s. Krishna Trading Co. It is to be noted here that PW-21 who is the Investigating Officer of the present case also stated in the cross-examination that M/s. Krishna Trading & Co. and M/s. Surender Kumar & Co. trade in fruits and vegetables. The evidence of PW-4 coupled with the evidence of PW-21 makes it clear that there are business relations between M/s. Surender Kumar & Co. and M/s. Krishna Trading & Co. and the disputed cheques were issued in course of business transactions between the above said firms.
86. Though it is stated by the Investigating Officer in his cross-
examination that the cheques were not issued for genuine trade transaction, there is no material brought on record by CC No.40/2011 Page 51 of 66 52 the prosecution to support his contention. In this connection it is important to refer to the evidence of PW-6 and PW-12. The PW-6 in his examination-in-chief has given the details of the cheques/transactions of M/s. Krishna Trading Co. in a tabular form and the relevant documents were brought on record through this witness with exhibits Ex. PW-6/A4 and Ex. PW- 6/A5. To a question put by the Ld. Counsel for defence, it is specifically answered by the said witness that all other cheques presented by A-3 except the 2 cheques in question had been cleared. The relevant portion of the cross- examination reads as under:-
I have checked the record including the statement of account now Ex. PW-6/B. (For the purpose of reference only not to be treated as the document having been proved.) and I can say that except for the two cheques bearing nos.410668 and 410671 referred to in the credit vouchers Ex. PW-6/A4 and Ex. PW-4/A5, all cheques of the accused had been cleared. It is CC No.40/2011 Page 52 of 66 53 correct that both these cheques relate to M/s Surender Kumar & Co. I do not know if M/s Surender Kumar & Co. was also in the vegetable business. (Vol. This cheque related to not our bank but Union Bank of India and, therefore, I have no idea about M/s Surender Kumar & Co.)
87. It is also equally important to refer to the deposition of PW-
12, Sh. R. C. Ahuja who has done internal investigation and filed report Ex. PW-1/B3 with regard to the alleged irregularities committed in the Azadpur branch of PNB during the relevant period. It is clearly stated by this witness that there is no reference of the account of M/s. Krishna Trading & Co. in his report Ex. PW-1/B3. It is further made clear by this witness that the facility of cheque discounting was in practice in Azadpur branch of PNB even prior to the posting of Sh. D. K. Malhotra.
88. It is pertinent to note that the CBI had referred to certain other cheques i.e. cheques no. 41650, 41654 and 410662 in the charge sheet, which were allowed to be purchased by CC No.40/2011 Page 53 of 66 54 accused D. K. Malhotra (A-2). The said three cheques were as per charge sheet issued by PW-4 Sh. Surender Kumar. However, the CBI has not brought any material on record to show that the said three cheques were also dishonoured. In the absence of any such material to show the dishonour of the abovesaid three cheques of PW-4 Sh. Surender Kumar, it is assumed that the said three cheques were honoured and the bank has not suffered any loss by purchasing the said three cheques. This further shows that apart from the two disputed cheques, there are three other cheques issued by PW-4 Surender Kumar to accused Sewal Lal (A-3), which strengthens the case of the defence that there were regular trade transaction between M/s. Surender Kumar and Company and M/s. Krishna Trading Company.
89. Section 415 of the Indian Penal Code defines cheating as under:-
"Section 415 - Cheating - Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any CC No.40/2011 Page 54 of 66 55 person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to 'cheat'"
90. The Ld. Counsel for defence has relied upon a judgment of Hon'ble Apex Court "S.V.L. Murthy vs. State, Represented by CBI Hyderabad 2009 CRI. L. J. 3930". In the said case the Hon'ble apex court was dealing with a case of cheque discounting facility and the facts therein are similar to the facts of the present case. It is held by the Apex Court that "An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:-
(i) deception or a person either by making CC No.40/2011 Page 55 of 66 56 a false or misleading representation or by other action or omission;
(ii) fraudulently or dishonestly inducing any person to deliver any property; or
(iii) to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.
For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation.
Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of CC No.40/2011 Page 56 of 66 57 the Indian Penal Code can be said to have been made out.
We may reiterate that one of the ingredients of cheating as defined in Section 415 of the Indian Penal Code is existence of an intention of making initial promise or existence thereof from the very beginning of formation of contract."
91. In the above case, Hon'ble Apex Court referred to Hira Lal Hari Lal Bhagwati v. CBI ((2003) 5 SCC 257), wherein it is held:
"40. It is settled law, by a catena of decisions, that for establishing the offence of cheating, he complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his making failure to keep promise subsequently, such a culpable intention right at the CC No.40/2011 Page 57 of 66 58 beginning that is at the time when the promise was made cannot be presumed. It is seen from the records that the exemption certificate contained necessary conditions which were required to be complied with after importation of the machine. Since, the GCS cold not comply with it, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as office- bearers right at the time of making application for exemption."
92. In Vir Prakash Sharma V. Anil Kumar Aggarwal ((2007) 7 SCC 373), noticing, inter alia, the aforementioned decisions, Hon'ble Apex Court held:-
CC No.40/2011 Page 58 of 66 59
"13. The ingredients of Section 420 of the Penal Code are as follows:
(i) Deception of any persons;
(ii) Fraudulently or dishonestly
inducing any person to deliver any
property; or
(iii) To consent that any person shall
retain any property and finally
intentionally inducing that person to do or omit to do anything which he would not do or omit.
No act of inducement on the part of the appellant has been alleged by the respondent. No allegation has been made that he had an intention to cheat the respondent from the very inception.
What has been alleged in the complaint petition as also the statement of the complainant and his witnesses relate to his subsequent conduct. The date CC No.40/2011 Page 59 of 66 60 when such statements were allegedly made by the appellant had not be disclosed by the witnesses of the complainant. It is really absurd to opine that any such statement would be made by the appellant before all of them at the same time and that too in his own district. They, thus appear to be wholly unnatural."
93. It is proved by way of evidence of PW-6 that the earlier transactions of M/s. Krishna Trading & Co. are clear except the present two disputed cheques i.e. Ex. PW-4/A1 and Ex.PW-4/A2. Mere dishonour of the cheques issued by some other firm with whom A-3 has business relations cannot give rise to any presumption that accused A-3 had any intention to cheat the bank which is essential ingredient of offence of cheating u/s 415 and 420 IPC. It is worth noting that A-3's company i.e. M/s. Krishna Trading & Co. and M/s. Surender Kumar & Co. are neither sister concerns nor allied concerns. Admittedly as per the evidence of Investigating Officer PW- CC No.40/2011 Page 60 of 66 61 21, they are totally different proprietorship firms and that there is no relationship between PW-4 proprietor of M/s. Surender Kumar & Co. and Sewa Lal A-3 proprietor of M/s. Krishna Trading Co. It is settled law by catena of decisions that for establishing the offence of cheating the complainant is required to show that the accused had fraudulent and dishonest intention at the inception. There is no material on record to show that accused A-2 and A-3 have any such intention to cheat the Bank or hatched any conspiracy in pursuance of such intention.
94. As far as the role of D. K. Malhotra is concerned, the act attributed to him that he has purchased the cheques to give an illegal benefit to the A-3 Sewa Lal is not substantiated by any material on record. As discussed above, the purchase of two cheques by D. K. Malhotra as Chief Manager was well within his powers as per the guidelines under Circular 130 i.e. Ex. PW-10/A. There is absolutely no evidence to show that A-2 D. K. Malhotra has received any illegal benefit or advantage from A-3 Sewa Lal or any other source.
95. It will be of benefit to reproduce the relevant part of the CC No.40/2011 Page 61 of 66 62 Section 13 of PC Act, which is as follow:-
"Section 13. Criminal Misconduct by a Public Servant. (1)A Public servant is said to commit the offence (7 of 11) CRLA No.685/2016) of criminal misconduct;
(a) ..............
(b) ..............
(c) ...............
(d) if he, -
(i) by corrupt or illegal means, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(iii) while holding office as a public servant, obtains for any person any CC No.40/2011 Page 62 of 66 63 valuable thing or pecuniary advantage without any public interest; or
(e) ...............
...........................(2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall not be less than one year but which may extent to seven years and shall also be liable to fine."
96. In A. Subair V. State of Kerla, reported in 2009 Crl. L. J.
3450, the Hon'ble Supreme Court held as under:-
"8 Insofar as Section 13(1)(d) of the Act is concerned, its essential ingredients are:
(1) that he should have been a public servant; (ii) that he should have used corrupt or illegal means or otherwise abused his position as such public servant and (iii) that he should have obtained a valuable thing or pecuniary CC No.40/2011 Page 63 of 66 64 advantage for himself or for any other person."
97. On bare perusal, it appears that while (1) using corrupt or illegal means or (2) abusing the position of a public servant or (3) by holding office as a public servant, if a public servant obtains for himself or for any other person any valuable thing or pecuniary advantage, he is said to commit the offence of criminal misconduct.
98. It is important to note that prosecution has not led any evidence nor brought any material on record to prove that D.K. Malhotra A-2 has received any advantage pecuniary or otherwise for his act of discounting cheques of M/s. Krishna Trading & Co. The A-3 was having account with the Azadpur branch of PNB even before the posting of A-2 as Chief Manager and availed the facilities of the bank in the past as well.
99. I am fully convinced with the argument advanced by learned counsel for the accused-appellant that in the matter in hand there is not even an iota of evidence that the accused D. K. Malhotra obtained for himself or any other person any CC No.40/2011 Page 64 of 66 65 valuable thing or pecuniary advantage. None of the prosecution witnesses says that any such demand was even made by the said accused or such thing or advantage was obtained by the accused.
100. In view of the forgoing discussion and the facts and circumstances of the case, I conclude that the prosecution has not been able to prove the offences punishable under Section 120-B read with Section 420 IPC and read with Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 against accused D. K. Malhotra and accused Sewa Lal. The prosecution has also not been able to prove that the accused D. K. Malhotra has committed the offence punishable under Section 13(1)(d) punishable under Section 13(2) of the Prevention of Corruption Act, 1988 as charged. The prosecution has also not been able to prove that accused Sewa Lal has committed the offence punishable under Section 420 of IPC as charged. Accordingly, accused persons D. K. Malhotra and Sewa Lal are acquitted of all the charges.
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101. The bail bonds of the accused persons are cancelled and their sureties are discharged. Sh. D. K. Malhotra and Sh. Sewa Lal are directed to furnish Personal Bonds in sum of Rs.10,000/- each with one surety of the like amount as required under Section 437-A of Cr. P. C.
102. File be consigned to Record Room.
ANNOUNCED IN THE OPEN COURT TODAY i.e. ON 31.07.2017 (KOVAI VENUGOPAL) SPECIAL JUDGE, PC ACT, CBI-09, CENTRAL, TIS HAZARI COURTS, DELHI.
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