Delhi District Court
1 State Of Orissa vs . Debendra Nath Padhi Air 2005 Sc 359 ... on 20 November, 2012
IN THE COURT OF SHRI L.K. GAUR, SPECIAL JUDGE
P.C. ACT (CBI09), CENTRAL DISTRICT,
TIS HAZARI: DELHI
CC No. 51/11
R.C. No. 5(E)/01
Central Bureau of Investigation
Versus
1. Shri Vinod Kumar Maheshwari
S/o Late Sh. Hira Lal Maheshwari
Formerly Chief Manager,
United Bank of India
R/o 19, Hospital Road (East),
Kasba,
Kolkata700078
2. Shri Ratan Lal Bagaria
S/o Late Sh. G.D. Bagaria.
Managing Director of
M/s Ratan Exports & Industries Ltd.
R/o 8A/12, WEA, Karol Bagh,
New Delhi110005. (Proclaimed Offender)
3. Sh. Rajan Bagaria
S/o Late Sh. G.D. Bagaria.
Former Director of
M/s Ratan Exports & Industries Ltd.
CC No.51/11 1 of 35
R/o 8A/12, WEA, Karol Bagh,
New Delhi110005. (Discharged )
4. M/s Ratan Exports & Industries Ltd.
R/o 8A/12, WEA, Karol Bagh,
New Delhi110005.
Through : Shri A.K. Chauturvedi
5. Sh. Manas Kumar Basu
S/o Late Sh. Kalipada Basu,
the then General Manager,
United Bank of India, Head office,
Kolkatta,
R/o CK95, SectorII,
Salt Lake City, Kolkatta91 (Since deceased)
6. Shri Kasibhatla Ramakrishna,
S/o Shri Ramajogayaya,
the then Zonal Manager,
United Bank of India, Zonal Office,
New Delhi.
R/o A25. Kailash Apartments,
Sector4, Dwarka,
New Delhi110045. (Discharged)
Date of Institution : 31.03.2004
Date of hearing arguments : 07.08.2012
Date of Order : 29.11.2012
CC No.51/11 2 of 35
ORDER ON CHARGE
Preliminary:
In this case the chargesheet was filed against five persons out
of which Accused no.4 is a Company M/s Ratan Exports &
Industries Ltd. (hereinafter 'Company'), Accused no. 2 Sh. Ratan Lal
Bagaria and Accused no. 3, Rajan Bagaria are stated to be Directors
of the said Company and the remaining Accused i.e. Accused no. 1
Sh. V K Maheshwari, Accused No. 5 Sh. M K Basu and Accused No.
6 Sh. K. Ramakrishna are the officers of the United Bank of India
(Public Servants).
2. Accused no. 5 Sh. M K Basu has expired and the proceedings
against him already stands abated as per the orders of the court
dated 01/10/11. Accused no. 2 Sh. Ratan Lal Bagaria has already
been declared Proclaimed Offender on 08.11.2012 . The Accused
no. 3 Sh. Rajan Bagaria and Accused no. 6 Sh. K Ramakrishna
already stand discharged by the Hon'ble High Court vide judgments
dated 29.4.09 and 6.4.12 respectively. Now practically there are only
two accused before the court. One is the Company Accused no. 4
and other Sh. V K Maheshwari, Accused no. 1, the public servant.
CC No.51/11 3 of 35
Approach to address the question of framing of Charge
3. It is important to know that at the stage of framing of charge, to
1
use the phrase used in Debendra Padhi's Judgement , is not a stage
to conduct a mini trial of the entire case so as to minutely examine
the evidence which has come on record, take into consideration the
possible defences which could be raised by the accused, as if to
invite the finding of the court as to his acquittal or conviction. It has to
be seen only from the point of view whether there is material to
proceed further with the trial. The possible defences, interpretation of
documents and the evaluation of the statements recorded can all be
left to be tested during the course of the trial. It would be apt to
reproduce here what the Hon'ble Supreme Court has laid down in
2
the S. Bangarappa's case . It is like this:
"Time and again this court has pointed out that at
the stage of framing of charge the court should
not enter upon a process of evaluating the
evidence by deciding its worth or credibility. The
limited exercise during that stage is to find out
whether the materials offered by the prosecution
to be adduced as evidence are sufficient for the
1 State of Orissa vs. Debendra Nath Padhi AIR 2005 SC 359 (Para 18)
2 State by CBI vs. Sh. S. Bangarappa AIR 2001 SC 222
CC No.51/11 4 of 35
court to proceed further. Vide State of M. P. vs.
Dr. Krishna Chandra Saksena, [1996(11) SCC
439]."
Submissions
4. I have heard the submissions made on their behalf as well as
the Ld. PP for CBI and have gone through the record.
Background
5. It is not in dispute that the Accused no. 4, Company had a long standing relationship with the bank. It is also not in dispute that it was a 100% export oriented company which had been exporting goods to erstwhile USSR. It enjoyed credit limits with the bank which were increased from time to time till last time they were increased to Rs.4442 lacs on 17.11.92 from Rs.1672 lacs. It is alleged that this limit was increased ignoring the adverse conditions prevailing for exports in USSR because of the political turmoil. There are allegations leveled of dishonestly against the officials of the bank who have recommended/submitted proposals for such a steep increase.
CC No.51/11 5 of 35
6. These allegations are followed by another set of allegations that FBP (foreign bill purchase) sublimit as per the above sanctions of 7/11/92 which was on DP basis (documents against purchase) was changed to DA basis(documents against acceptance), which was a much riskier position, without the approval of the competent authority i.e. the board of directors. There are also allegations of dishonestly leveled against the officers of the bank to have brought about this change. One of them, Sh. Shantanu Guha is not an accused before the court as no sanction had been granted for his prosecution, second one Sh. M K Basu accused no. 5 has already expired and Sh. K Ramakrishna Accused No. 6 already stands discharged.
7. Till this time the accused no. 1 Sh. V K Maheshwari is not in picture. He comes into picture when he is posted as the chief manager at the branch office, Janpath, New Delhi on 12.8.93 onwards and remains posted at the newly opened overseas branch of the bank at Daryaganj, Delhi from 12.9.95 till may 1997. The allegation against him is that from 12.8.93 till May 1997 he had favoured the Accused no. 4 company i.e. M/s Ratan Exports CC No.51/11 6 of 35 dishonestly by giving it undue pecuniary advantage by committing various irregularities and also not conforming to the conditions stipulated by the board of directors while sanctioning the enhanced limit on 7.11.92.
Effect of discharge of Accused No. 3 Rajan Bagaria, Accused No. K Ramakrishna and nonsanction of prosecution of Shantanu Guha etc.
8. Before proceeding further one may notice at the outset since there was no sanction for prosecution granted as against Sh. Shantanu Guha and Sh. K Ramakrishna already stands discharged the allegations with regard to foreign bill purchase on DA basis would not stick as primarily according to the chargesheet they were the persons responsible for this "unauthorized" change. The allegations also with regard to the Accused no. 4 indulging in 'inhouse' trading would also not survive i.e. the allegation that Accused no. 4 Company was trading with the foreign companies which were controlled by Sh. Rajan Bagaria, who also happened to be the Director of the Accused No. 4 Company as the Accused no. 3 Sh. Rajan Bagaria also already stands discharged.
CC No.51/11 7 of 35 Other Allegations which would also not stick
9. Following allegations also in my view would not stick as against the Sh. V K Maheshwari and the Accused no. 4 Company:
A. Acceptance of certificate by Chartered Accountant. 9.1 The allegations leveled is, as per sanction order dated 7.11.92 the accused no. 4 company was to provide matching contribution of Rs. 524.43 lacs in order to avail the sanction limit of Rs. 4442 lacs.
The Accused no. 2 Sh. Rattan Lal Bagaria (PO) the Managing Director of the Accused no. 4 company, however, had obtained a misleading certificate dated 26.11.92 from its Chartered Accountant M/s Ram Niwas Aggarwal & Co. to the effect that "the company had already employed the funds to the extent of Rs. 1450 lacs from internal approvals towards its contribution/margin money as on 30.9.92" and submitted the same for release of limits. 9.2 According to the allegations in this case what was envisaged in the resolution of the board of directors dated 7.11.92 was that the Accused No. 4 Company would arrange for fresh funds of Rs. 824.43 CC No.51/11 8 of 35 lacs as matching contribution to avail the enhanced fund export credit limit of Rs. 2500 lacs for merchandise limit (Rs. 640.23 lacs) and Hyderabad unit (Rs. 194 lacs). The certificate issued by the auditor that the company had employed a sum of more than Rs. 14.40 crores from its internal accruals towards its contribution/margin as on Sept. 30, 1992 was misleading. It was admitted by Sh. Ram Niwas Aggarwal also in his statement u/s 161 that the certificate given by him was not in tune with the requirement. 9.3 This allegation has been foisted on the Accused No.1 on the basis that it was he who "willfully, knowingly and dishonestly"
accepted "misleading" certificate dated 16.11.92. This appears to be factually not correct. There is a statement on record of one Sh. S. Basu Roy, who was posted in the same branch just before the Accused No. 1 had joined, under section u/s 161 wherein he has stated "I was posted at Janpath branch of UBI from October 1992 to August 1993. In Janpath Branch the account of M/s Ratan Export Indus ltd. was under my control". It may be noted that the said certificate was submitted on behalf of the Accused no. 4 in response to a letter dated 21.11.92 written by Sh. S. Basu Roy. It is a matter of CC No.51/11 9 of 35 record that the Accused No.1 Sh. V K Maheshwari had joined this branch, as noted above on 12.8.93 i.e. almost after 9 months of the submission of the said certificate. It would be, therefore, without any basis to say that the accused no. 1 had accepted the said misleading certificate submitted on behalf of Accused No 4 Company. I am, therefore, of the view that there is no reason to allege that the accused no 1 had acted dishonestly on this account. It may further be noted that Sh. S. Basu Roy has not been chargesheeted in this case.
B. Release of Packing Credit Limit without the Warehouse receipts.
9.4 It is alleged that Packing Credit was to be released against the Warehouse receipts of approved clearing agents but Sh. V. K. Maheshwari allowed the disbursing of the Packing Credit Limit to the borrower without fulfilling this condition. 9.5 One of the conditions approved by the board of directors while approving the enhancement of the credit limits was "Packing credit facility, if released against finished goods and packed fruit products, CC No.51/11 10 of 35 it may only be done against Warehouse receipts of clearing agents".
It may be noted that the decision of the Board of Directors with regard to the approval of proposal of enhancing the limits and the conditions related thereto were communicated at the level of the branch to the Accused No.4 Company by the letter dated 21.11.92. It has been noted in the Vigilance Enquiry Report that in this letter the fact that "packing credit of packed fruit would be available only against related warehouse receipts" was not communicated to the Accused no. 4 Company. This is the same letter which has been referred above written by Sh. S. Basu Roy to the Accused No. 4 Company. Sh. S. Basu Roy had not denied having written this letter to the accused no. 4 Company. He had admitted "I had received the sanction note of HO in the branch and accordingly a communication was sent by me to the borrower M/s Rattan Exports & Industries Ltd. informing the enhancement vide my letter dated 21.11.92. The letter has been signed by me and I admit my signatures on this letter". He had also admitted that from October 1992 to August 1993, the account of accused no 4 was in operation under his control. As it appears to me that as to how the Accused No 4 was to comply with a condition which was not communicated to it. It won't be difficult to CC No.51/11 11 of 35 say that it is not the first time Sh. V K Maheshwari who may have released the Packing Credit without the Warehouse receipts. There is no question put to Sh. S. Basu Roy that as to why he had been releasing the packing credit without the warehouse receipts. If this had been a practice which had been followed in past, suddenly the Accused no. 1 cannot be blamed for releasing the packing credit on packed fruit products without the related warehouse receipts much less that he had been releasing the packing credit limits in the absence of warehouse receipts dishonestly.
Allegations which would stick
10. This, however, is not sufficient to discharge the Accused No.1 Sh. V K Maheshwari or the Accused No. 4 Company. There are acts directly attributable to the Accused No. 1 which resulted in the pecuniary advantage to the Accused No. 4 Company. They are:
A. Purchase of Bills when the payments in respect of the previous bills were still pending in respect of the same firms.
10.1 The statement of Sh. R. K. Kaldhar, Officer ScaleII, UBI, would show that he had prepared a chart in respect of 44 bills CC No.51/11 12 of 35 showing the outstanding amount in respect of these bills and the amount of loss that was caused to Bank in respect of these bills. The said chart would show that the Accused no. 1 approved purchase of these bills when payments of the previous export bills were already due specifically in respect of the same firms. The act of Sh. VK Maheshwari to have continued to discount bills when the borrower's account had already dues on account of non receipt of payments from foreign buyers through their banks was highly irregular and prejudicial to the interest of the bank.
B. Not taking Post Shipment ECGC Cover 10.2 The statement of the witness Sh. P. Basu, General Manager (Credit & IB) and Sh.Gopinath Das Gupta Chief Manger Corporate Accounts would show that as per the prevalent practice ECGC coverage for post shipment bills used to be obtained by the borrower and that was required to be ensured by the concerned branch manager. In this case the Accused No. 4 Company was required to obtain ECGC coverage and it was the responsibility of the branch manager i.e. Accused No. 1 to ensure that such coverage was CC No.51/11 13 of 35 available before discounting of bills by the branch manager. As per the records ECGC coverage was not taken in respect of the bills of the company M/s Continental Trading Co., M/s Arvee International Pvt. Ltd. and M/s Interlog Pvt. Ltd. (Ref. statement of Sh. Gopinath Dasgupta, Chief Manager, corporate accounts).
C. Funds released in packing credit accounts used to adjust packing credit account of borrower.
10.3 As per the statement of Sh. G. N. Gupta, Chief Manager, Corporate Accounts, in a number of instances it was found that the funds were released in packing credit accounts only to adjust the packing credit account of the borrower. To say the least it was highly irregular and it was meant only to favour the Accused no. 4. D. Discounting of export bills where no buyerwise policy existed and was taken in violation of terms of policy where it existed.
10.4 ECGC cover was an important consideration for the bank to safe guard the interest of the bank. It was, therefore, important that before the bills were discounted it was required to be ensured that CC No.51/11 14 of 35 the shipments to be made had proper ECGC cover and that the conditions thereof were complied with. The 44 shipments referred in this case related to three buyers namely M/s Continental Trading Co., M/s Arvee International Pvt. Ltd. and M/s Interlog Pvt. Ltd. The buyerwise policy which was taken from ECGC was only in respect of M/s Interlog Pvt. Ltd. As per the statement of Sh. G. M. Ganpati, General Manager, ECGC, in respect of M/s Arvee International Pvt. Ltd. ECGC cover was refused and also no ECGC cover was granted in respect of M/s Continental Trading Co. Moreover as per the statement of Sh. H. C. Vaze, Branch Manager, ECGC as per the terms & conditions of the policy, the policy would be effected only if export had been made when no bill of the same buyer was pending for payment within the stipulated time. Also the ECGC policy would be effected in respect of any consignment within the insured amount. According to him "In the instant case, as per Chart, the exporter M/s Ratan Exports & Industries Ltd. made exports to M/s Interlog Pvt. Ltd. one after another even when a number of payments from the same firm have not been received by the Bank making the insurance policy ineffective. Further, as per the chart, exports had been made one after another sometimes totaling more than Rs. 75 lacs and CC No.51/11 15 of 35 since the policy cover was only for Rs. 75 lacs on DA basis, question of getting benefit, if any, from ECGC for the exports for more than Rs. 75 lacs does not arise.
E. The allegations in the Vigilance report 10.5 The reading of the vigilance report would show that the report is based on through investigation conducted by the concerned officers. There are many issues raised in the report. I am of the view that the prosecution deserves opportunity to be given to prove the said allegations. There are definite allegation in this investigation report against the Accused No. 1 and also the accused No. 4. Some of them are:
(i) Fresh P/C was being released without examining the quantum of overdue P/C, the reason thereof and follow up of overdue P/Cs.
(ii) The advance account was classified as Health Code 2 on 27.10.1993 and the branch was required to obtain specific approval from ECGC for disbursement of P/C of above 50.00 Lacs CC No.51/11 16 of 35 ( discretionary limit) in each case of disbursement. But the Branch released P/C without any such approval.
(iii) P/C was being continued for 180 days in all cases without taking cognizance to shipment schedule as per firm order.
(iv) Follow up of overdue bills immediately after they fell due is absent. Follow up letters whatever found were at belated stage.
(v) As against the sanctioned term of financing DA bills with usance of maximum of 60 days, drawings have been allowed on bills with 120 to 150 days usance more or less continuously.
(vi) Foreign Bills drawn on defaulted drawees were purchased without restriction.
Effect of settlement of dispute
11. It may noted that this Court has power to be exercised only under section 320 of the Code of Criminal Procedure, 1973, when it comes to compounding of offences. This Court has no power like CC No.51/11 17 of 35 section 482 of the Code. To notice the stark distinction between the two powers one may here refer to the observations of the Hon'ble Supreme Court in the case Gian Singh V State of Punjab SLP ( Crl) No. 8989 of 2010:
"Quashing of offence or criminal proceedings on the ground of settlement between an offender and victim is not the same thing as compounding of offence. They are different are no interchangeable. Strictly speaking, the power of compounding of offences given to a court under section 320 is materially different from the quashing of criminal proceedings by the High Court in exercise of its inherent jurisdiction. In compounding of offences, power of a criminal court is circumscribed by the provisions contained in section 320 and the court is guided solely and squarely thereby while, on the other hand, the formation of opinion by the High Court for quashing a criminal offence or criminal proceeding or criminal complaint is guided by the material on record as to whether the ends of justice would justify such exercise of power although the ultimate consequence maybe acquittal or dismissal of indictment."
CC No.51/11 18 of 35
12. The fact the Bank may have settled this matter with the Accused No.4 Company as far as the civil liability is concerned can be a reason for quashing the present proceedings under section 482 of the Code but it cannot be said to be a reason to say that this case has been compounded in terms of section 320 of the Code. First of all except for Section 420 none of the other offences are compoundable and secondly to compound an offence under section 420 IPC it would be necessary to have the permission of the Court that certainly is non existence in this case. I am therefore of the view that because the Bank has compounded its civil liability with the Accused No. 4 Company is no reason to discharge either Accused No. 1 or the Accused No. 4.
No dishonest intention on the part of the Accused No.1
13. It was submitted by the Ld defence Counsel that the Accused No. 1 joined the Branch in September 1993 and in the same month he had submitted the report to zonal manager commenting adversely as against the Accused No. 4 Company. The Accused No. 4 Company had actually made complaint against the Accused No. 1 CC No.51/11 19 of 35 which is evident from the telex sent by the accused No.4 to General Manger (credit) at head office dated 05/10/1993. There are letters dated 7/12/1993, dated 4/01/1994 on record which would show that the Accused No. 1 had written to the zonal manger that he had not been discounting bills of the Accused No.4 as they were not in accordance with the mandate of the superior officers. For which also the Accused No. 4 had made complaints against the Accused No. 4 for refusing the packing credit not backed by Letter of Credit. Also according to him because of the effort of the Accused No. 1 the crystallized overdue bills had been reduced from 1500 to Rs. 780 Lacs by January, 1994. Accused No. 4 had made a complaint that the Accused No. 1 was not discounting the bills not supported by letter of credit.
14. I am of the view that first of all it is too early to jump the conclusion that on the basis of above facts, even if held to be correct, Accused had been honest in his dealings with the Bank, specially in view of the large scale irregularities found to have been committed in the operation of the account of Accused No. 4 Company by the Accused No. 1.
CC No.51/11 20 of 35 Mortgage Letters of guarantee etc
15. According to the allegations in this case it was the responsibility of the Accused No. 1 to get the charge over the land and building of the company, which was equitably mortgaged with the bank as collateral security, registered with the registrar of the company as per the sanction but the accused No. 1 failed to do so. He also failed to get the mutation done to this effect in the record of DDA. It is further alleged that the Accused without verifying the personal worth of the directors of the Company accepted their personal guarantee. It is further stated in the chargesheet that directors of the company namely Vijay Bagaria and Ajay Bagaria were nor financially capable of standing as the guarantors for the Limit sanction to the Accused No. 4 to the tune of Rs. 4442 Lacs.
16. There is also statement of Sh. N L Jaitly Chief Manager, wherein he has stated in this case as per the record he had examined both in the 1992 ( when the Accused No. 1 was not in picture) and in 1995 ( when the accused no. 1 was in picture) letter of guarantee were accepted without verifying the credit worthiness of CC No.51/11 21 of 35 guarantors. According to him such letters had any meaning only if such person had assets worth matching the loan amount.
17. It was submitted by the Ld Defence Counsel that as far the question of net worth of directors is concerned it was always in the knowledge of the board of directors, while the limits were enhanced. Resolutions with regard to the mortgaging of Karol Bagh property were passed before Accused had joined the Bank. He had added if these properties were not mortgaged then, the Accused No. 1 can not be blamed for it. According to him it was the Accused No.1 who had got not only this property mortgaged but also one farm house of the Managing director and it was these properties mortgaged to Bank which made the recovery of dues possible by the Bank.
18. I am of the view it too early express view on this aspect of the matter. It would be better that this matter be left to be decided at the stage of the trial and also its impact on the overall inference which could be drawn on the basis of the facts prosecution is able to establish.
CC No.51/11 22 of 35 Decision to file civil suit and not to lodge first information report
19. It was submitted that since the Bank did not file any criminal complaint in this case but only a civil suit for recovery of dues it would show that the Bank considered that there was no criminal angle involved in this case. I am of the view this submission does not have any meaning. This case would not become of civil nature merely because the Bank did not take steps to initiate criminal proceedings but civil proceeding. This is an issue which is purely to be decided on the basis of the material collected. Cognizance has already been taken in this case on the basis of the material presented before this Court. At this point of time as well on the basis of the material collected by the investigation and the statements of witnesses recorded it would not be possible to say out rightly that this case is of civil nature and the Accused persons should be discharged.
Discounting bills was nothing commercial transaction
20. It was submitted that the discounting of bills was normal banking function it cannot be a reason to say that Accused have CC No.51/11 23 of 35 committed any criminal offence. As per the allegation made in this case and the material placed in this case the discounting of bills was done against all the norms, jeopardizing the interest of the Bank. I am of view at this stage it would not possible to discharge the Accused on this ground.
According to decision of Hon'ble High Court in K. Ramakrishna no case was made out even after all the facts are taken into account.
21. It was submitted that as per the observations made by the Hon'ble High Court in the petition related to Accused K Ramakrishna no case was made out against in this case. It may be noted the observation made in the case decided by the Hon'ble High Court with regard to Sh. K Ramakrishna cannot be applied as such as against the allegations made against the Accused No.1 and Accused No.4 Company. It is clear that the material had been examined in that case keeping in mind the Accused Sh. K Ramakrishna and not the Accused No. 4 or the Accused No.1 CC No.51/11 24 of 35 Account directly controlled by head office
22. It was submitted that this account was directly controlled by the head office and they knew what was happening at the branch. Accused No.1 was just obeying the directions of the superiors. Even if it assumed for the sake of argument that the Accused No. 4 was a highly valued customer and the Head Office was keeping a watch on this account that did not give the reason to the Accused No. 1 to flout the norms of the normal banking. It may also be noted that the Bank at the level of board of directors or the head office could have only given the broader guidelines with regard to the operation of the account of the Accused no. 4 or facilities to be enjoyed by the Accused No. 4. But to ensure that all the compliance had been made at the level of the Bank was the responsibility of the Accused No. 1. Report of the vigilance department would show large scale violations made at the level of the Branch. The Accused No. 1, therefore, cannot simply say that he should be discharged because Head Office knew what was happening at the Branch.
CC No.51/11 25 of 35 Submission of irregularities report - No dishonest intention
23. It has been submitted that the accused was submitting irregularities report to the higher officer and they were aware of the concerned account, therefore, the Accused No.1 cannot be said to be having the dishonest intention. The reference has been made to the statement of the Sh. V N Bhattacharya. This witness has stated that the after seeing the irregularities reports submitted by the Accused No.1 from June 1994 to December 1995 he could say that they had been seen by Sh. K Ramakrishna and One S. Dutta Chief Manger and therefore, they were aware of performance of the concerned account. I am view it is yet to be tested that what was content these reports. It is also not clear as to whether it also took into the account the lapses directly attributable to the Accused No. 1. I am of the view at this it would be premature to reach any such conclusion.
Offence under section 420 IPC or under section 409 IPC/ 109 read with section 409IPC etc.
24. The Bank here is an artificial person if it were to be cheated it CC No.51/11 26 of 35 could only have been cheated by any of its officials or officers being deceived by someone. Here the allegation is not that any of the officers of the Bank, had been deceived by the Accused No.4 Company or Accused No. 2, its managing director. Here the allegation is, that Accused No. 1 had dishonestly favored the Accused No.4 Company by causing pecuniary advantage to it by abusing his position. It may be noted that Accused No. 1 was the chief manager of the Bank; he was the custodian of the money of the Bank. By the nature of duties he was discharging it can be said without any doubt that it was part his contract of service with the Bank that he would work to protect the interest of Bank. He would not do anything which may expose the Bank to financial risks or loss. Further he would neither misappropriate himself nor allow anyone to misappropriate money of bank . Above all it was his duty to take care that interest of Bank is not jeopardize at any stage. I am of the view in the given facts of the case it can be said that the Accused No. 1 has committed breach trust and the accused No. 2& 4 have abetted criminal breach of trust by the Accused No. 1 by conspiring with him commit the offence of criminal breach of trust.
CC No.51/11 27 of 35
25. For support one may refer to case of Sailendra Nath V Emperor AIR 1944 Cal 92. In this case the Manager of the Bank had allowed a customer to open an overdraft account against govt. securities with a margin of ten percent. Manager had dominion over the securities. He, however, in violation of the contract returned the security to customer before the overdraft was satisfied; thus allowing the customer to have the benefit of the same by pledging it to some other Bank. It was held that when Manager handed over security back to customer he committed criminal breach of trust within the meaning of section 405. The fact that the Manger did not benefit from such acts was immaterial as far as commission of offence under section 405 IPC was concerned. It was held that the customer (like the Accused No. 4 in this case) was guilty of abetting criminal breach of trust committed by the Manager.
26. For support one may also to refer to the Judgment of the Hon'ble Supreme Court in case AIR 2010 SUPREME COURT 528 "Mir Nagvi Askari v. C.B.I." Although there is no exact factual parity between the said case and the present case except to say that in that case as well because of the dishonest acts of the officers of the CC No.51/11 28 of 35 Bank a share broker had been able to get the credits in his account and for that reason Bank Officers were charged under section 409 IPC and the same was upheld by the Hon'ble Supreme Court. The relevant part of the Judgment reads as under ( A3 refers to the share broker) :
" 221. The accused in the present case indisputably had dominion over the funds of the bank. They through their acts facilitated misappropriation of the funds to the account of A3. Without the assistance provided by the other accused, the main accused herein A3 would not have been able to withdraw from his account amounts of money to which he was not entitled to under law. The accused herein being public servants had an additional responsibility of ensuring that the funds of the public were not misappropriated in any manner or form, whatsoever."
27. One may also refer here to the Judgment of the Hon'ble Supreme Court in the case R K Dalmia v Delhi Administration 1962 AIR 1821. In this case the allegation was against the Chairman of an insurance Company of having diverted its funds. It was held in this case that "word property used in S. 405 of the Indian Penal Code CC No.51/11 29 of 35 could not be confined to 'movable property' defined in section 22 of the Code. The question whether a particular offence could be committed in respect of any property depended not on the meaning of the word 'property' but on whether that property could be subjected to that offence.' property' in a particular section could, therefore, mean only such kind of property with respect to which that offence could be committed. The funds of the Bharat Insurance Company referred to in the charge amounted to property within the meaning of S. 405 of the Indian Penal Code.
28. In the present case also there can be no hesitation in the saying that the funds which the Accused No. 1 made available to the Accused No. 4 Company would constitute 'property' within the meaning of section 405 IPC. Accused No.1 is public servant within the meaning of section 21 of the Indian Penal Code being an employee of Nationalized Bank and he was in a position to allow or disallow the funds to be made available to the Accused No. 4 Company, it can be said that he exercised dominion over the funds of the Bank.
CC No.51/11 30 of 35
29. The Ld Defence Counsel for the Accused No. 4 Company had made reference to the Judgment of the Hon'ble Supreme Court in the case CBI v Duncans Agro 1996(6) SC 227 and submitted that to attract section 409 IPC the 'entrustment' and 'misappropriation' both should exist. According to him in this case both these elements are missing. I have already discussed above that in my opinion the Accused No. 1 had the dominion over the funds of the Bank and he by his acts allowed the Accused No. 4 to misappropriate the same.
30. To capitulate the substantive offence which can be said to have been committed in this case would not under section 420 IPC. It would be under section 409 IPC by the Accused No. 1 and by Accused No. 4 under section 109 IPC read with section 409 IPC. Amount of Wrongful gain to Accused No 4
31. In the charge sheet the wrongful loss to the Bank and the pecuniary advantage to the Accused No.4 is stated to be Rs. 3,15,57,073/ , arising out of the foreign bills discounted during the period from 05.05.1995 to 22.12.1995 drawn on M/s Arvee CC No.51/11 31 of 35 International Pte Ltd Singapore, M/s Interlog Pte. Ltd. Singapore, M/s Continental Trading Co. Poland. The transaction in all are 44 in number and except one related to M/s Arvee International Pte Ltd and one related to M/s Continental Trading Co. all the transactions relate to M/s Interlog Pte Ltd. Singapore. I see no reason to doubt this figure of loss caused to the Bank and pecuniary advantage to the Accused No. 4 as result of the acts of the Accused No.1. Primafacie commission of offence under section 13(1)(d) read with section 13( 2) of the Prevention of Corruption Act by Accused No. 1 and commission of offence under section 109 IPC read with 13(1)(d) r/w section 13( 2) of the Prevention of Corruption Act by Accused No. 2(PO) and Accused No.4 Company.
32. The figure of Rs. 3,15,57,073/ would have not reached in this case by incessantly discounting the Bills of mainly of only party despite no money being received against such bills. Only inference which can be drawn is that Accused No.1 was going out and out of his way to cause advantage to the Accused No. 4 Company by bending the normal banking rules and conditions relating to purchase of Bills. This was not possible unless he had abused his position and CC No.51/11 32 of 35 he had dishonest intention to help Accused No. 4 Company to benefit it. It was also not possible unless he had been abetted by Accused No.2 (PO) and Accused No.4 Company to abuse his position as public servant to cause pecuniary advantage to the Accused No. 4 Company by conspiracy. It can be said the Accused No. 1 primafacie committed substantive offence under section 13(1)
(d) read with section 13(2) of the Act and Accused No. 4 Company has committed the offence under section 109 IPC read with section 13(1)(d) read with section 13(2) of the Act.
Conspiracy
33. It is evident unless there had been some conspiracy between the Accused No.1, Accused No.4 company and the Accused No. 2 (Proclaimed offender) the Managing director of the Accused No. 4 Company in the given facts of the case the offence 409 IPC and section 13(1)(d) read with Section 13(2) of the Act and offence by Accused No. 4 Company under section 109 read with section 13(1)
(d) read with Section 13(2) of Prevention of Corruption Act and 409 IPC could not have been committed. In other word primafacie it can CC No.51/11 33 of 35 be said that there was conspiracy among Accused No. 1. Accused No. 2 ( PO) and Accused No. 4 to commit the offences under section 13(1) (d) read with section 13(2) of the Act by Accused No. 1 and under section 109 IPC read with section 409 IPC and read with section 13(1)(d) read with section 13(2) of the Act by Accused No. 4. Conclusions
34. In view of the foregoing discussion and the facts and circumstances of the case, I conclude that at this stage there is prima
-facie case to frame charge:
(i) Against the Accused No.1 and Accused No. 4 under section 120B IPC read with section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act,1988 and read with section 409 IPC;
(ii) Against the Accused No.1 for substantive offence under section 13(1)(d) read with 13(2) of the Prevention of Corruption Act, 1988 and section 409 IPC ;and
(iii) Against Accused No. 4 offence under section 109 IPC read with section section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act,1988 and 409IPC.
Let the charges be framed accordingly.
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35. It is made clear here that anything said or any opinion expressed in this order is only tentative and subject to the final outcome of the case.
Announced in the Open Court ( L. K. GAUR )
on 29 November, 2012
th
Special Judge (CBI)09
Central District, Delhi.
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