Karnataka High Court
Mrs N Padmini vs Superintendent Of Police on 2 May, 2025
Author: H.P.Sandesh
Bench: H.P.Sandesh
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF MAY, 2025
BEFORE
THE HON'BLE MR. JUSTICE H.P. SANDESH
CRIMINAL APPEAL NO.362/2012
BETWEEN:
1. MRS. N. PADMINI
W/O SRI. N.C.S.MAYYA
AGED ABOUT 62 YEARS
45/13, III MAIN ROAD
MOUSNT JOY ESTENTION
HANUMANTHANAGAR
BENGALURU-560 019. ... APPELLANT
(BY SRI. S.S.SRINIVASA RAO, ADVOCATE)
AND:
1. SUPERINTENDENT OF POLICE
CENTRAL BUREAU OF INVESTIGATION
BELLARY ROAD, BENGALURU. ... RESPONDENT
(BY MS. RAMULA K., ADVOCATE FOR
SRI. P. RASANNA KUMAR, ADVOCATE)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 374(2)
OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF
CONVICTION AND SENTENCE DATED 19.03.2012 PASSED BY
THE XLVI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND
SPECIAL JUDGE FOR CBI CASES AT BENGALURU CITY IN
SPL.C.C.232/2004 - CONVICTING THE APPELLANT/ACCUSED
NO.1 FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 120B,
420 OF IPC AND UNDER SECTION 13(2) R/W SECTION 13(1)(d)
OF THE PREVENTION OF CORRUPTION ACT.
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THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 28.03.2025 THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE H.P.SANDESH
CAV JUDGMENT
Heard learned counsel for the appellant and learned counsel for the respondent.
2. This appeal is filed by appellant-accused No.1 under Section 374(2) of the Code of Criminal Procedure challenging the judgment of conviction and sentence passed against her to undergo simple imprisonment for a period of one year for the offence under Section 120B IPC, simple imprisonment for a period of one year with fine of Rs.5,000/- for the offence under Section 420 IPC and simple imprisonment for a period of two years with fine of Rs.10,000/- for the offence under Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act.
3. The factual matrix of the case of the prosecution before the Trial Court is that the accused No.1 was working as Chief Manager, Canara Bank, Chamarajapet Branch, Bangalore during the period from 05.08.2002 to 14.06.2003 and had 3 entered into criminal conspiracy with accused Nos.2 to 4 to cheat Canara Bank and in pursuance of the said criminal conspiracy, the accused Nos.2 and 3, the proprietors of M/s. Empap Electronics and M/s. Empee Electronics respectively, both of which are situated in Bangalore had dishonestly and fraudulently opened a joint SB account in Canara Bank. The accused No.1, who was the Chief Manager of the Bank had introduced this joint savings Bank account herself and accused Nos.2 and 3 have dishonestly and fraudulently opened two current accounts in the name of M/s. Empap Electronics and M/s. Empee Electronics respectively.
4. It is the case of the prosecution that Sri Babulal V. Patel, who was not acquainted with accused Nos.2 and 3 was asked to introduce these two accounts, by accused No.1. After opening of the said savings account and current accounts, accused Nos.2 and 3 dishonestly and fraudulently and in connivance with accused Nos.1 and 4, got discounted the Cheques through accused No.1 and the said fraudulent amount was credited to the accounts of accused Nos.2 and 3. As per the 4 powers delegated to accused No.1, the Chief Manager, she could permit discounting of approved Cheques upto Rs.20 lakhs in respect of a party and this limit should include the transactions against the Cheques already sent or to be sent in clearing. It is also the case of the prosecution that in the joint savings Bank account of accused Nos.2 and 3, discounting of local Cheques were permitted from 12.03.2003 onwards i.e., within ten days of the opening of the account in the branch. Thereafter, the Cheques were permitted to be discounted on a regular basis, and the discounting was continued until 26.04.2003. In total 78 Cheques amounting to Rs.562 lakhs were discounted in the above three accounts from 03.03.2003 to 26.04.2003 within a period of 45 days. The same was noticed and deputed P.W.5 to examine the same and P.W.5 has submitted a report in terms of Ex.P389 and on receiving the report Ex.P389, defrauding of the bank amount to the extent of Rs.114.20 in Cheque discounting and Rs.21 lakhs towards housing loan which came to light, complaint was lodged and case was registered in R.C.No.18(A)/2003 by the CBI/ACB, Bangalore and the Investigating Officer obtained search warrant to search the 5 residential premises of the accused Nos.2 and 3. Accordingly, after recording the statement of the witnesses and after collecting the documents, they have filed the charge-sheet.
5. The accused persons were secured and they have not pleaded guilty. Hence, the prosecution examined in all 25 witnesses as P.Ws.1 to 25 and got marked the documents as Exs.P1 to P497(a). During the course of cross-examination, the defence has also got marked the documents of Exs.D1 to D8. The accused was subjected to 313 statement and accused denied the prosecution case and not chosen to lead any defence evidence.
6. The Trial Court having considered both oral and documentary evidence placed on record, convicted the accused persons for the above offences. The accused Nos.2 and 3 though have been convicted, they passed away, hence, case against them is abated. Now, the appeal under consideration is in respect of appellant No.1, who has filed the present criminal appeal before this Court.
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7. The main contention of learned counsel for the appellant in his argument is that the Trial Court committed an error in appreciating both oral and documentary evidence placed on record and the appellant was Branch Chief Manager and overall in-charge of the Branch which is classified by the Bank as an Exceptionally large Branch having among other, a Senior Manager, 2 Managers, 6 Officers and in all more than 25 employees. The Branch in charge had no role to play in routine Banking activities to be proceeded with. Learned counsel would vehemently contend that the Trial Court failed to appreciate the fact that Banking is a commercial business and criminal intent in the name of natural justice cannot be attributed to commercial decisions taken by honest managers invoking criminal offences against them. The very fact that appellant had caused loss has not been established inasmuch as the entire amount had been fully secured even prior to the FIR being lodged. It is contended that the Court failed to take note of the fact that equitable mortgage of the assets of the accused Nos.2 and 3 had been obtained. The appellant along with P.W.1 had held a number of meetings for recovery for the money due and no loss whatsoever 7 has been caused to the Bank, as the amount was fully secured even before investigation by P.W.5 and on the date of filing of FIR. It is strange that Court has failed to take cognizance of the fact that the entire liability with up to date interest has been recovered by the Bank and therefore, the Bank has not incurred any financial loss whatsoever. The accounting methodology of the Branch requiring daily report to be sent to Circle Office were not produced and the said observation is not erroneous and the quarterly reports for ratification are sent which are not produced is also an erroneous observation and charges were not proved.
8. It is also the contention that the Trial Court failed to appreciate that Ex.P51 clearly revealed that no pending Cheques were outstanding as the same reveals nil balance. Learned counsel would vehemently contend that the Trial Court failed to take note of the fact that prosecution required sanction under Section 19 of the Prevention of Corruption Act and there was inherent lack of jurisdiction, compliance and basic lack of authority with respect to grant of sanction in proceeding against the appellant and that it does not attract Prevention of 8 Corruption Act. It is also contended that document Ex.D1 is very clear that ratification was sought and also transaction was brought to the notice of higher authority and amount in respect of dishonoured Cheques are also deposited and collateral security was given. Learned counsel would vehemently contend that even evidence of P.W.2 supports the case of accused No.1 and P.W.1 categorically admits that out of 13 Cheques, 4 Cheques are discounted by H.N.Palegar, but the same is included against the appellant. Learned counsel would vehemently contend that even P.W.24 supports the case of accused No.1 and evidence of P.W.25-Investigating Officer is clear in respect of security is concerned. Learned counsel also brought to notice of this Court that Prevention of Corruption Act cannot be invoked when there is no loss to the bank and bank has not suffered any monitory loss and the Trial Court failed to consider Ex.P51 and there was no criminal misconduct and P.W.3 also speak about addressing letter for ratification in terms of Ex.D1. When such being the case, ought not to have convicted the appellant. 9
9. Learned counsel for the appellant in support of his argument, relied upon the judgment in DILEEPBHAI NANUBHAI SANGHANI VS. STATE OF GUJARAT AND ANOTHER reported in 2025 SCC ONLINE SC 441 and brought to notice of this Court discussion made in paragraph No.6, wherein judgment of NEERAJ DUTTA's case was discussed to urge that in the absence of direct oral or documentary evidence, the Court could draw inference from the evidence available, including circumstantial, to bring home the guilt of the accused. The policy deviation is a clear pointer to the avaricious intent of the accused; to illegally profit, at the expense of the State which demonstrably suffered huge losses and no such circumstance is warranted in the case on hand. Learned counsel also brought to notice of this Court paragraph No.22, wherein discussion was made that only charge is with respect to misuse of authority which does not come under the provisions of the Prevention of Corruption Act and none of the ingredients regarding demand or obtaining or acceptance of bribe or any illegal gratification has come out. The accusation was only that the policy of the State required a tender process to be adopted but the Minister had 10 sanctioned the grant of fishing rights on an upset price, which is alleged to be misuse of authority especially since the Policy can be deviated from, only on orders of the Chief Minister or the Cabinet as per the policy document and the Rules of Business framed. The investigation report, as we observed, speaks only of an allegation of misuse of authority, without any allegation of demand and acceptance of bribe as against the appellant. The presumption under Section 20 of the Act does not arise. Learned counsel referring this discussion would vehemently contend that question of invoking Prevention of Corruption Act does not arise.
10. Learned counsel for the respondent-CBI would vehemently contend that complaint was given in terms of Ex.P1 and that too, after making an enquiry. The accused No.1 herself introduced in opening the bank account and opened two current accounts and one savings bank account. Learned counsel also would vehemently contend that appellant had only limit of Rs.20 lakhs, but continuously discounted the Cheques and exceeded the limit. Ex.P51 also discloses regarding dues and P.W.1 given complaint to CBI and collateral security is only upto Rs.75 lakhs. 11 But here is a case of discounting of Cheques for more than Rs.120 lakhs. Learned counsel would vehemently contend that P.W.5 investigated the matter and came forward to settle the matter after noticing the fraud by the appellant along with accused Nos.2 to 4. Learned counsel would contend that though letter was sent for ratification after noticing fraud, no ratification was made. P.W.2 speaks regarding approved Cheques and P.W.3 also speaks about Exs.P2 to P14 i.e., in total 13 Cheques were dishonoured. P.Ws.2 and 5 have also spoken about their responsibility. Learned counsel would vehemently contend that appellant not disputes discounting of Cheques and Rs.526 lakhs was disbursed within a span of 45 days. Learned counsel would vehemently contend that while invoking Section 120B IPC, the Court has to take note of circumstantial evidence and P.W.6 categorically deposed that account was opened at the instance of accused No.1 in the name of accused Nos.2 and 3. Learned counsel would vehemently contend that Ex.P389-report is very clear regarding discounting of Cheques and collateral security was given after discounting of Cheques. It is contended that the citation given by the appellant is not applicable to the case on 12 hand and here is a case where the appellant favoured accused Nos.2 and 3 and the appellant is the main accused, who indulged in such act, in order to favour accused Nos.2 and 3, exceeded the limit without there bring any ratification.
11. Learned counsel for the respondent in support of her argument, relied upon the judgment in the Apex Court in MIR NAGVI ASKARI VS. CENTRAL BUREAU OF INVESTIGATION reported in (2009) 15 SCC 643 and relied upon paragraph Nos.59 to 66, wherein observation is made that moreover, it must be noted in this respect that Banking norms and established practices and "Criminal conspiracy, it must be noted in this regard, is an independent offence. The courts, however, while drawing an inference from the materials brought on record to arrive at a finding as to whether the charges of the criminal conspiracy have been proved or not, must always bear in mind that a conspiracy is hatched in secrecy and it is difficult, if not impossible, to obtain direct evidence to establish the same. The manner and circumstances in which the offences have been committed and the accused persons took part are relevant. 13
12. The counsel also relied upon the judgment of the Apex Court in SUDHIR SHANTHILAL MEHTA VS. CENTRAL BUREAU OF INVESTIGATION reported in (2009) 8 SCC 1 and relied upon paragraph No.8, wherein Apex Court held that having regard to the fact that the Reserve Bank of India exercises control over the Banking Companies, we are of the opinion that the said Circular letter was binding on the Banking Companies. The officials of UCO Bank were, therefore, bound by the said circular letter.
13. The counsel also relied upon the judgment of the Apex Court in R. VENKATAKRISHNAN Vs. CENTRAL BUREAU OF INVESTIGATION reported in (2009) 11 SCC 737 and relied upon paragraph Nos.82, 83 and 167, wherein the Apex Court held that applying the principles of law to the facts of the present case, we may take note of certain broad features. Indisputably, maintaining of cash reserve ratio is a statutory requirement. All the Scheduled Banks are bound to carry on the statutory instructions issued by the Reserve Bank of India in this behalf. It is for the maintenance of this cash reserve ratio that 14 UCO Bank used to participate in call money transactions in the money market, decision in respect whereof used to be taken at its Head Office at Kolkata. In paragraph No.167, it is observed that each one of them played a specific role in diversion of funds from NHB to the account of Harsad Mehta, all ostensibly under a call money transaction. They thereby in our opinion facilitated Harshad Mehta to obtain pecuniary advantage within the meaning of the section. The acts were anything but intended to be in public interest. On the contrary the public loss and suffering occasioned thereby was immeasurable. Though it is true, as has been argued before us that all the funds diverted have subsequently been returned to NHB and no actual loss has been occasioned there by either to the UCO Bank or the NHB. But it must not be forgotten that white collar crimes of such a nature affect the whole society even though they may not have any immediate victims.
14. The counsel also replied upon the judgment of the Apex Court in VINAYAKA NARAYAN DEOSTHALI VS.
CENTRAL BUREAU OF INVESTIGATION reported in (2015) 4 15 SCC 353, wherein Apex Court held that criminal breach of trust by banker/public servant, appellant was employer of securities department of UCO Bank, by abusing his official position and violating banking laws felicitated trading with respect of securities account of UCO Bank to the benefit of the accused Harshad Mehta under a criminal conspiracy and hence convicted for offences criminal conspiracy, breach of trust along with for offence obtaining pecuniary advantage under PC Act.
15. The counsel also relied upon the judgment of the Apex Court in VINAYAK NARAYAN DEOSTHALI VS. CENTRAL BUREAU OF INVESTIGATION reported in (2015) 2 SCC 553 and relied upon paragraph No.15 , wherein Apex Court held that it is not necessary to prove that the accused had derived any benefit or caused any loss to the Bank.
16. The counsel also relied upon the judgment of the Apex Court in NEER YADAV VS. CENTRAL BUREAU OF INVESTIGATION reported in (2017) 8 SCC 757, wherein the Apex Court held that accused was entrusted with management, abused her position by committing gross irregularities in 16 allotment and conversion of lands. The court held that obtaining valuable thing to herself and her daughters caused grave loss to the authority and confirmed the conviction. The counsel also relied upon paragraph Nos.16 and 17, wherein the Apex Court held that under Section 13(1)(d)(i) obtaining any valuable thing or pecuniary advantage by corrupt or illegal means by a public servant in itself would amount to criminal misconduct. On the same reasoning "obtaining a valuable thing or pecuniary advantage" by abusing his official position as a public servant, either for himself or for any other person would amount to criminal misconduct.
17. The counsel also relied upon the judgment of the Apex Court in CENTRAL BUREAU OF INVESTIGATION VS. HARI SINGH RANKA AND OTHERS reported in (2019) 16 SCC 687 and relied upon paragraph No.19, wherein Apex Court held that civil settlement of the controversy would not suffice to wipe off the criminal liability. The case reflects fiscal impurity and, in a way, financial fraud. The modus operandi as narrated in the charge sheet cannot be put in the compartment of an 17 individual or personal wrong. It is a social wrong and it has immense societal impact. This court has further observed that accepted principle of handling of finance that whenever there are manipulation and cleverly conceived contrivance to avail of this kind of benefits it cannot be regarded as a case having overwhelmingly and predominantly of civil character. The gravity of the offence creates a dent in the economic spine of the nation. The quashing of the case was set aside as social interest would be in peril.
18. The counsel also relied upon the judgment of the Apex Court in SURESH CHANDRA JANA VS. STATE OF WEST BENGAL AND OTHERS reported in (2017) 16 SCC 466 and relied upon paragraph Nos.15 and 16, wherein Apex Court held that in our opinion, it is almost impossible to come across a single case where the investigation was completely flawless or absolutely foolproof. The function of the criminal court is to find out the truth and it is not the correct approach to simply pick up the minor lapses of the investigation and acquit the accused, particularly when the ring of truth is undisturbed. It may be 18 mentioned that it is not every doubt but only a reasonable doubt of which benefit can be given to the accused. The accused is entitled to get benefit of only reasonable doubt, i.e. the doubt which rational thinking man would reasonably, honestly and conscientiously entertain and not the doubt of a vacillating mind that has no moral courage and prefers to take shelter itself in a vain and idle skepticism.
19. In reply to the argument of learned counsel for the respondent-CBI, learned counsel for the appellant would vehemently contend that Ex.P51 is very clear that amount was shown as zero balance and Cheques are dishonoured only the ground of insufficient balance and Cheques are dishonoured on 28.04.2003, 29.04.2003 and 30.04.2003 and letter was written on 02.05.2003 immediately when the Cheques were dishonoured. Learned counsel would vehemently contend that there was a target in banking business and hence, Cheques are dishonoured.
20. In reply to the reply argument of learned counsel for the appellant, learned counsel for the respondent would contend 19 that target cannot be for violation of banking rules. Hence, it does not require any interference of this Court.
21. Having heard learned counsel for the appellant and learned counsel for the respondent, the points that would arise for consideration of this Court are:
(1) Whether the Trial Court committed an error in convicting the accused for the offence under Sections 120B and 420 IPC and for the offence under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act and it requires interference of this Court by exercising appellate jurisdiction?
(2) What order?
Point No.(1)
22. Having heard learned counsel for the appellant, learned counsel for the respondent and also the grounds urged which have been urged by both the counsel and also principles laid down in the judgments referred by learned counsel for both the parties, this Court has to analyze the material on record, since this appeal is filed by accused No.1 and specific charge is 20 also against accused No.1 that Smt. N. Padmini, who was functioning as Chief Manager, Chamarajapet Branch during the period from 05.08.2002 to 14.06.2003 and being the Chief Manager of the Bank, she had indulged in conspiracy with accused Nos.2 and 3 and accused No.4 with an intention to cheat Canara Bank and in pursuance of the said criminal conspiracy, dishonestly and fraudulently, accused Nos.2 and 3 have opened a joint savings Bank account and current account and those accounts are opened on the introduction of Sri Babulal V. Patel, who was not known to them on 11.04.2003 and after opening the said savings Bank account and current account, in connivance with accused No.1, accused No.4 got discounted the Cheques and said fraudulent amount was credited to the accounts of accused Nos.2 and 3 and accused No.1 permitted discounting of local Cheques in the joint savings Bank account of accused Nos.2 and 3 from 12.03.2003 onwards i.e., within 10 days from the date of opening of the account in the branch and accused No.1 permitted discounting of Cheques in that account on a regular basis and amounts were credited to those accounts and the accused No.1 exceeded her powers and out of 18 21 Cheques, 3 Cheques were returned unpaid for want of funds and remaining 13 Cheques were discounted beyond her discretionary powers and those Cheques have remained unpaid, due to which Canara Bank had suffered wrongful loss of Rs.120.4 lakhs with corresponding wrongful gain to accused Nos.2, 3 and 4. Hence, the accused No.1 committed offence under Section 120B read with Section 420 IPC. The Trial Court also convicted the accused No.1 for the said offence and regarding other offences i.e., for the offence under Sections 467, 468 and 471 IPC, the Trial Court acquitted the accused and convicted the accused for the offence under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act and ordered to undergo simple imprisonment for a period of two years with fine of Rs.10,000/-, for offence under Section 120B IPC ordered to undergo simple imprisonment for a period of one year and for the offence under Section 420 IPC, ordered to undergo simple imprisonment for one year with fine of Rs.5,000/-.
23. The prosecution mainly relies upon the evidence of P.W.5. Based on his report, case was registered and he 22 conducted preliminary investigation and gave the report. He was examined as P.W.5 and in his evidence, he says that he was working as a Senior Manager (Advances) in Circle Office, Bangalore. He was asked by their AGM to investigate into the irregularities in Cheque discounting in the branch at Chamarajanagar, Bangalore. On 04.06.2003, he went to the said Branch to investigate the matter and collected the challans of savings bank and two current accounts. It is stated that on the challans, there was authorization by accused No.1 to discount the Cheques and accused No.1 had authority to discount the Cheques upto Rs.20 lakhs party-wise in current account. If there is any outstanding amount, Cheque discounting facility cannot be given beyond prescribed limit. But, during his inspection, he noticed that accused No.1 had exceeded her limits in extending Cheque discounting facility to both current accounts for M/s. Empap Electronics and M/s. Empee Electronics. In savings bank account, Cheque discounting is allowed only upto Rs.25,000/- for self-Cheque and accused No.1 exceeded her limits in extending Cheque discounting facility to savings bank account of accused Nos.2 and 3. Accused No.1 had sanctioned more housing loan 23 than her delegated powers to accused Nos.2 and 3. After going through all the documents and noticing irregularities, he prepared the report and submitted to GM in terms of Ex.P389 and identifies his signature in the report as Ex.P389(a).
24. This witness was subjected to cross-examination. In the cross-examination, he admitted that a letter dated 02.05.2003 written by accused No.1 to the Circle Office was not brought to his notice and he is acquainted with signature of accused No.1, but he cannot identify the signature of accused No.1 in her letter dated 02.05.2003. It is elicited that he was not aware of accused Nos.2 and 3 availing housing loan of Rs.21.50 lakhs before commencing his investigation. It was not brought to his notice that accused Nos.2 and 3 had opened two savings bank accounts in the Branch and he was also not aware that accused Nos.2 and 3 had submitted a credit proposal for discounting of Cheques. It was not brought to his notice that accused Nos.2 and 3 had furnished three properties worth Rs.75 lakh as collateral security for Cheque discounting facility. He also admits the Cheque discounted register. The uncleared Cheques 24 will not figure in such a register, they will appear in the register after realization, which is normally 24 hours. Such a register will be some assistance at the time of discounting of the Cheque provided verification is made regarding uncleared Cheques. He also admits that he has not made this register as part of his report Ex.P389. After clearance amount is given to credit in register, which will reduce the liability. If this register shows zero liability, it would help the officer to discount the Cheque. The entire discounting of Cheques in the branch is shown in Ex.P51. In every branch, a register of equitable mortgages is maintained and admits that he has gone through such a register in this branch and legal opinion has to be taken before any such equitable mortgage. In this case also, equitable mortgage had been taken, but he has not referred to that document. But, he says there was no sanction for discounting of Cheque, but there was security by way of equitable mortgages. He also admits that whenever a Branch Manager exceeds his or her powers in discounting of Cheques, the same has to be informed to the Circle Office and ratification has to be taken. The report regarding exercise of emergency power under CDB for the 25 quarter ending September 2002, December 2002 and March 2003 are not brought to his notice and says that he has not verified in the Circle Office about the reports sent for ratification during 01.04.2003 to 12.06.2003. If the report is received and ratification is made, then the Officer in the Circle Office could be the better person to speak about it, copies of reports could be available in the branch office and he has not referred to such copies.
25. Having taken note of this admission, it is very clear that, even if the Branch Manager exceeds his or her limit, the same could be ratified by sending a information to the Circle Office. It is also very clear that entire discounting of Cheques in the branch is shown in Ex.P51. Learned counsel for the appellant also brought to notice of this Court Ex.P51 which disclose no dues. Hence, it is clear that in terms of Ex.P51, no dues were found and the accused with a bonafide intention proceeded to discount the Cheques. The evidence of P.W.5 is very clear that uncleared Cheque will not figure in such a register in the Cheque discounted register and such a register 26 will be of some assistance at the time of discounting of Cheque, provided verification is made regarding uncleared Cheques and P.W.5 also categorically admits that he has not made this register as part of his report and his report contains the information that more number of Cheques are discounted.
26. The witness P.W.1 in his evidence says that accused exceeded discounting of Cheques worth of Rs.114.20 lakhs and house loan of Rs.21 lakhs. In the cross-examination, P.W.1 also admits that he does not remember that on 20.05.2003, accused No.2 has written a letter that he has discounted Cheques worth Rs.1,14,20,000/- and it is his responsibility to clear the same and he had offered security worth more than Rs.2.50 Crores and he is not aware of the letter dated 10.06.2023 forwarded by accused No.1 to DGM, Canara Bank. He says that when his statement was being recorded, CBI people have not shown him the register of equitable mortgages, but only he says that based on the report given by P.W.5, he has given his complaint. After receiving the report from P.W.5, he has not made further enquiries before filing the complaint Ex.P1. He admits that in the 27 report Ex.P389, there is a mention of collateral security furnished by the party. In the complaint Ex.P1 given by him, there is no reference of collateral security furnished by the party but in the complaint Ex.P1 payment of Rs.1,80,000/- on 12.07.2003, Rs.6,50,000/- on 28.06.2003 and Rs.10 lakhs cash on 28.06.2003 are not mentioned and also admits that he is not aware whether original file is taken away by CBI or not and he cannot say whether report was given to CBI police along with Ex.P1 or not and also admits that it is true that Branch Manager is entitled to exercise emergency powers upto certain limits. The evidence of P.W.1 is also very clear that he cannot say whether CBI has given any report Ex.P389 along with complaint Ex.P1 and also it is very clear that while lodging the complaint, the report Ex.P389 was not enclosed and there is a clear mention that in Ex.P389, there is a mention of collateral security furnished by the party and in the complaint Ex.P1, there is no reference of collateral security furnished by the party.
27. The other material witness relied upon by the bank is P.W.2, who also speaks about discounting of Cheques. In the 28 cross-examination, he admits that all discounted Cheques will be taken in a printout at the end of the day and such a computerized statement was not brought to his notice by CBI. He is also not aware that the party had availed housing loan prior to submitting bill discounting. At the time of discounting of Cheque, Bank Manager is expected to see how many Cheques are discounted and how many outstanding and he has to see what is the outstanding liability and what was the position as to previous day evening. The witness clarifies that if Cheques are to be discounted on 16.03.2004, he has to look into the position as on 15.03.2004 and also admits that such a statement was not shown by CBI and CBI had not come to ask him regarding powers of Scale-4 Officer and showed him Cheques and pay-in- slip. Having considered the evidence of P.W.2 also, it is very clear that computerized statement is not brought to his notice by CBI and also witness clarifies that Cheques are to be discounted, he has to look into the position as on 15.03.2004, but such a statement was not shown to him by CBI.
29
28. No doubt, prosecution mainly relied upon the evidence of P.W.6, he comes and deposes before the Court that he only introduced accused Nos.2 and 3 for opening of account at the instance of Bank Manager, since Bank Manager has asked him to introduce them and Exs.P18 and 20, two accounts opening forms are marked through this witness. But, in the cross-examination, he admits that he is having account in Canara Bank, Chamarajpet Branch, Bangalore since several years and he is having current account and he also categorically admits that it was not brought to his notice that accused Nos.2 and 3 had already opened their savings bank account prior to this account. Hence, it is clear that accused Nos.2 and 3 were having savings bank account prior to opening of this current account. He also categorically admits that, it was not brought to his notice that both of them had availed housing loan and it was also not brought to his notice that only a current account holder can introduce the party for opening his current account. Hence, it is clear that accused Nos.2 and 3 already had their accounts and the same was not brought to notice of P.W.6. No doubt, though P.W.5 has introduced accused Nos.2 and 3 and the 30 admission given by P.W.6 is also very clear that accused Nos.2 and 3 were already having their accounts. Hence, the very case of the prosecution that with a dishonest intention account was opened cannot be accepted. It is confronted to the witness that a letter was sent in terms of Ex.D1, wherein also, a request was made to ratify the discounting of Cheque and no dispute that letter was sent in terms of Ex.D1. But only contention of learned counsel for the respondent is that though letter was sent, the same was not ratified. But, the fact is that P.Ws.1, 2 and 5 categorically admit in their evidence that there was a equitable mortgage and the same was not enclosed along with complaint Ex.P1 and there is a clear admission on the part of P.W.5 that there was a mention of equitable mortgage to the extent of Rs.75 lakhs and the same is noted in the report Ex.P389. When such admission is given and security is given to the extent of Rs.75 lakhs by giving the property and in respect of remaining amount is concerned i.e., Rs.114 lakhs, already letter was sent for ratification in terms of Ex.D1 i.e., on 02.05.2003. No doubt, no such ratification was made, but the fact that accused No.1 sent letter for ratification is not in dispute and also P.Ws.1, 2 and 31 5 have categorically admitted that, if a Manager exceeds his or her powers, the same can be ratified by the concerned and accordingly, accused No.1 made all her efforts to get the same ratified by sending the letter Ex.D1 which was confronted and marked.
29. Apart from that, document Ex.P1 does not disclose any dues in the statement. Learned counsel for the appellant also mainly relies upon the same and Ex.P51 is the certified copy of register of clean demand bills maintained in Canara Bank, Chamarajpet Branch, Bangalore maintained for the period from 03.03.2003 to 26.04.2003 and the same does not disclose any dues. When the document disclose no dues and with bonafide belief, the accused proceeded in discounting of Cheques and in order to prove the factum of conspiracy, there must be circumstantial evidence before the Court that there was conspiracy between accused Nos.1, 2, 3 and so also accused No.4 and this was done in a business transaction. When the prosecution witness, particularly P.W.5 categorically admits that he was not aware that accused Nos.2 and 3 had submitted a 32 credit proposal for discounting of Cheques, he categorically admits that it was not brought to his notice that accused Nos.2 and 3 had furnished three properties worth Rs.75 lakhs as collateral security for Cheque discounting facility and he was also not aware of accused Nos.2 and 3 availing housing loan of Rs.21.50 lakhs before commencing his investigation and all these factors were not brought to the notice of P.W.5 before conducting investigation. The admission of P.W.5 is very clear that uncleared Cheques will not figure in such a register and such register will be of some assistance at the time of discounting of Cheque, provided verification is made regarding uncleared Cheques and also he has not made the said register as part of report in Ex.P389. When such material is available on record and these are the answers elicited from the mouth of witnesses, particularly, who conducted the preliminary investigation, it was not brought to his notice regarding collateral security.
30. No doubt, it was the case of the respondent that limit was only upto Rs.20 lakhs, but in the case on hand, it has 33 emerged during the course of evidence and also admission that Rs.75 lakhs was furnished as collateral security for Cheque discounting facility by accused Nos.2 and 3. Apart from that bank had not suffered any loss and all the amounts were also recovered. He also admits that report regarding exercising of emergency power under CDB for the quarter ending, September 2002, December 2002 and March 2003 are not brought to his notice and he has also not verified in Circle Office about the report sent for ratification during 01.04.2003 to 12.06.2003 i.e., the period taken for registration of the case against the accused and the entire discounting of the Cheques in the branch is shown in Ex.P51. He also categorically admits that in every branch, a register of equitable mortgage is maintained and also categorically admits that in this case also, equitable mortgage had been taken, but he has not referred to the document.
31. Having taken note of evidence available on record and these are the admissions elicited from the mouth of P.Ws.1, 2, 5 and 6, dishonest intention of the accused cannot be gathered considering these material on record. The prosecution 34 also mainly relies upon the evidence of P.W.25, who was working as PI, ACB, CBI, Bangalore. He conducted the investigation in the matter and number of documents are also marked through this witness. He also categorically admits that he does not remember whether P.Ws.5 and 1 have brought to his notice about collateral security about Rs.1 Crore taken from the borrowers and both of them have not brought to his notice about the equitable mortgage created in favour of Canara Bank prior to filing of FIR and also he does not remember about the practice of sending daily information to the Circle Office regarding discounting of Cheque. He also says that he does not remember if they have brought to his notice about the practice and the methodology of the ratification of the acts of Branch Office by the Circle Office and he also not asked P.Ws.1 to 5 about Ex.P51 and also he has not asked P.W.2 about working in the said branch before recording his statement. He also admits that he has not sent Mr. Palegar and Mr. Manjunath B. Shet for trial. It is evident from the records that 4 Cheques are discounted by Mr. Palegar and the same has emerged during the course of evidence. He also admits that on one or two occasions, 35 Mr. Palegar has discounted Cheques but, Mr. Manjunath B. Shet has not discounted the Cheques. But, the said Mr. Palegar has not been made as accused in the case on hand and also he categorically admits that he does not remember whether it was brought to his notice that accused Nos.2 and 3 had filed an application for bill discounting facility and produced the documents of title which were under scrutiny and during the course of his investigation and before filing of charge-sheet, it was not brought to his notice that both accused Nos.2 and 3 had furnished security for their liability.
32. Having taken note of evidence of P.W.25 also, it is very clear that a half hearted investigation was made by P.W.25. Having taken note of oral evidence of these witnesses, it is very clear that the Manager can exceed his limit, but he or she has to seek for ratification and accordingly, the accused has sent a letter in terms of Ex.D1 for ratification. The Trial Court failed to take note of all these aspects, while considering the material on record, while answering point Nos.1 and 2 with regard to conspiracy and in respect of conspiracy is concerned, no material 36 on record, except discounting of Cheques and the same is also permissible and it requires ratification as deposed by the witnesses, who have been examined before the Trial Court.
33. I have already pointed out with regard to opening of the account with the help of P.W.6 and before opening the said account, already accused Nos.2 and 3 were having account with the very same bank. Hence, accused Nos.2 and 3 are not strangers and they were not introduced as a fresh account holders and these are the aspects ought to have been taken note by the Trial Court while appreciating the evidence and instead proceeded in an erroneous approach and observed in paragraph No.55 that accused discounted Cheques worth Rs.20 lakhs to a party and she has exceeded her limit in respect of joint account and the fact that there was a security is not in dispute and the same is admitted to the extent of Rs.75 lakhs and there was equitable mortgage. Though learned counsel for the respondent contend that said equitable mortgage was given subsequent to noticing of discounting of Cheque, but admission of witness, particularly P.W.5 is very clear in the report Ex.P389 regarding 37 mentioning of security. The Trial Court in paragraph No.58 has observed that it is true that discounting of Cheque is a normal banking activity in so many banks, however, Bank Manager has to follow the rules and regulations of the bank. In the instance case, it is specifically stated that accused No.1 had not exceeded her limit once or twice, but many times, but the fact is that when the limit was exceeded, ratification was sought in terms of Ex.D1 and the same has not been discussed by the Trial Court in detail. Though the Trial Court mentioned in paragraph No.59 that Ex.D1 is the letter written by accused No.1 seeking ratification of her acts, may be she has intimated about Circle Office about the irregularities in discounting of Cheques, but there is no evidence forthcoming to show that Circle Office had ratified all the irregularities committed by accused No.1. The fact that letter was sent is not in dispute and also Ex.D1 goes to show that accused has not suppressed irregularities in discounting of Cheques. But, the Trial Court has taken the same in other away and when the letter was sent for ratification, the Trial Court ought to have taken note of the same and when a provision is made for ratification, if the limit is exceeded and when the 38 accused No.1 has exceeded her limit, the same ought to have been considered by the Trial Court in proper perspective and instead, the Trial Court proceeded in an erroneous approach and comes to the conclusion that there is a conspiracy and with dishonest intention, the same has been done and the ingredients of conspiracy and dishonest intention that with an intention to cheat the bank, the accused acted upon in such a manner is not forthcoming, having considered over all evidence on record, particularly evidence of P.Ws.1, 2, 5 and 25, who conducted investigation and answer elicited from the mouth of P.W.25 is very clear that he does not remember about the material which have been placed before him during the course of investigation and benefit of doubt goes in favour of accused and when such being the case, the Trial Court ought to have extended the benefit of doubt in favour of the accused and the same is not done and committed an error and not appreciated the material on record in proper perspective.
34. The Trial Court has also invoked Prevention of Corruption Act and in order to invoke the said Act also, there 39 must be misconduct by the accused No.1 with an intention to cheat the bank. In the case on hand, to invoke the said Act also, no sanction was taken and material placed on record before the Court does not disclose ingredients of the offence of the said Act and the Trial Court committed an error in invoking penal provision under the Prevention of Corruption Act and the same is also erroneous. Accordingly, I answer point No.(1) as 'affirmative' that the Trial Court committed an error in convicting the accused and this Court can exercise the appellate jurisdiction.
Point No.(2)
35. In view of the discussion made above, I pass the following:
ORDER
(i) The criminal appeal is allowed.
(ii) The impugned judgment of conviction passed against accused No.1 for the offence under Section 120B and 420 IPC and for the offence under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, is hereby 40 set aside. Consequently, the appellant/accused No.1 is acquitted.
(iii) The bail bond executed by the
appellant/accused No.1 stands cancelled.
(iv) If the appellant/accused No.1 has deposited
any fine amount, the same is ordered to be
refunded in favour of the appellant/accused
No.1 on proper identification.
Sd/-
(H.P. SANDESH)
JUDGE
ST