Bangalore District Court
State By Cbi Acb vs ) Sri. S. Gopalakrishna on 11 March, 2015
IN THE COURT OF XXI ADDL. CITY CIVIL & SESSIONS
JUDGE & PRINCIPAL SPECIAL JUDGE FOR CBI CASES,
BANGALORE (CCH-4).
DATED THIS THE 11TH DAY OF MARCH, 2015
PRESENT : SRI. LAXMAN F. MALAVALLI,
B.A., LL.B., (Spl),
XXI Addl. City Civil & Sessions Judge and
Prl. Special Judge for CBI Cases, Bangalore.
Special Criminal Case No. 166/2003
Complainant State by CBI ACB, Bangalore.
(By Special Public Prosecutor)
Vs.
Accused 1) Sri. S. Gopalakrishna,
S/o. late Sri. Gundappa,
Aged about 53 years,
The then Asst. General Manager,
SSI Branch, State Bank of India,
Bangalore-560 062.
R/o No.202, 44 Cross,
8th Block, Jayanagar,
Bangalore-560 084.
2) M/s. Blue Street Fashions
Pvt. Ltd.,
Office at No.591, I Floor,
Krishna Complex, Chickpet,
Bangalore-560 053.
Factory at No.854,
PP Industrial Area,
Deepanjali Nagar,
Mysore Road,
Bangalore-560 026.
Represented by its Directors
Sri. Deepak Sharma and
Sri. Prakash Chand),
2 Spl.C.C.166/2003 J
Sri Deepak Sharma,
S/o. late M.R.Sharma,
No.21, 2nd Cross, Shanthibana,
Sanjeevini Nagar Extension,
Behind Sterling Apartment,
Sahakar Nagar Post,
Bangalore.
Sri. Prakash Chand
S/o late Roop Chand
No.108, 7th Main, 2nd Block,
Jayanagar, Bangalore-11.
(By Sri. Vipin Kumar Jain, Adv. for
A1, Sri. Kiran S. Javali, Adv. for A2)
JUDGMENT
This case arises out of the charge sheet submitted by the Police Inspector, CBI/ACB, Bangalore against Accused No.1 S. Gopalakrishna and accused No.2 M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Sri. Prakash Chand for the offences punishable under Section 120B r/w 420 of Indian Penal Code and Section 13(2) read with 13(1)(d) of Prevention of Corruption Act, 1988.
2. The facts in nutshell as per the prosecution are that: -
(a) The Accused No.1 S.Gopala Krishna, was working as Manager in the capacity of Assistant General Manager in SSI (Small Scale Industries) Branch South, State Bank of India, Bangalore between 1996 and 1998 and during that tenure, he entered into criminal conspiracy with accused No.2 company M/s Blue Street Fashions Private Ltd., represented by its directors
3 Spl.C.C.166/2003 J Sri. Deepak Sharma and Sri. Prakash Chand in the matter of extending various credit facilities and caused the bank to suffer wrongful loss of Rs.1,64,56,120/- as on 31.8.1998 and corresponding wrongful gain to themselves. Accused No.1 in furtherance of criminal conspiracy allowed M/s. Blue Street Fashions Pvt. Ltd., (A-2) to open Cash Credit Account No.01650/005157 with SSI, Bangalore, South Branch, State Bank of India with a joint operation of its Directors and allowed withdrawals up to Rs.9,10,632/- as on 6.8.1997 without sanction of any limits, while the Company was having liability with State Bank of Mysore, Chickpet Branch.
(b) It is further averred that on 28.10.1997 to honour the cheque bearing 805752 favouring State Bank of Mysore, Chickpet for Rs.1,04,00,000/- submitted by Accused No.2company on account of clearing the liability with Chickpet branch of State Bank of Mysore, accused No.1 exceeding his powers, approved excess withdrawals of Rs.75 lakhs in the account of Accused No.2 on recommendation of Deputy Manager S. Prahlad Rao. Though on 25.3.1998 an adhoc EPC (Export Packing Credit) limit for Rs.55 lakhs was recommended by accused No.1 to his controlling authority for sanction and he obtained sanction of Rs.48 lakhs from DGM (Commercial Banking 4 Spl.C.C.166/2003 J Dept) SBI, Local head Office, Bangalore and thereafter in order to bring down the irregularity in the account, accused No.1 immediately transferred Rs.46 lakhs from its EPC account of Accused No.2 company to the cash credit account of the accused No.2 and thereby reduced outstanding to Rs.1,07,50,740/- from Rs.1,53,50,740/- as against sanctioned limit of Rs.100 lakhs and thereby Accused No.1 permitted excess drawals in the account and the outstanding went up to Rs.1,64,56,120/- as on 31.8.1998 i.e. on the last day of having charge of the branch as Branch Manager. Accused No.1 also allowed M/s. Blue Street Fashions Pvt., Ltd., (Accused No.2 company) to draw the amount for repaying the term loan dues aggregating to Rs.6.50 lakhs pending with Karnataka State Financial Corporation (KSFC) while the account was irregular, which amounts to diversion of funds of the Bank. Accused No.1 had not reported the excess drawals in the account in time to his controller and had not obtained ratifications for excess drawings allowed by him. Thus Accused No.1 being a public servant, dishonestly and fraudulently entered into criminal conspiracy with Accused No.2 company and in furtherance of his criminal conspiracy, he has extended various credit facilities to M/s Blue Street Fashions Private Ltd., (Accused No.2) and cheated the Bank to suffer a wrongful loss of 5 Spl.C.C.166/2003 J Rs.1,64,56,120 as on 31.8.1998 and corresponding wrongful gain to themselves and thereby committed offence punishable under section 120B r/w 420 of IPC and Section 13(2) r/w 13(1)
(d) of Prevention of Corruption Act, 1988.
(c) The Deputy General manager (Vigilance) of State Bank of India filed complaint as per Ex.P1 against accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Sri. Prakash Chand along with this accused No.1 and Deputy Manager S. Prahlad Rao. In fact, Ex.P1 complaint was filed not only against accused No.2 company M/s. Blue Streets Fashions Pvt. Ltd., and so also M/s. Sritech Information Pvt. Ltd., Company before SP, CBI, ACB, Bangalore. The SP, CBI, ACB, Bangalore had entrusted the matter to PW.6 Ramakrishna, the Police Inspector, CBI, ACB, Bangalore for investigation. PW.6 Ramakrishna, the Police Inspector, CBI, ACB, Bangalore registered the case in RC No.29(A)/2001 on 20.11.2001 and submitted FIR to the court which is marked at Ex.P27. But thereafter PW.6 handed over the file to Sri. Jayachandra Raju, Inspector of Police, CBI, Bangalore for further investigation. PW.9 Jayachandra Raju, the Police Inspector, CBI, Bangalore collected all the documents under Ex.P9 to P13 receipt memos and after conducting major 6 Spl.C.C.166/2003 J portion of the investigation, he handed over the file to PW.10 M. Raja for further investigation. PW.10 M. Raja, the Police Inspector, CBI completed the investigation and submitted the charge sheet against Accused No.1 S. Gopalakrishna and accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., represented by its two Directors, Deepak Sharma and Prakash Chand for the offences punishable u/s 120B r/w 420 IPC and u/s 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988.
3. In response to summons Accused No.1 and both Directors of accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., appeared before the court and got released on bail.
4. After furnishing the prosecution papers and on reading the learned Special Public Prosecutor and learned counsel for accused No.1 and 2 the charges were framed and read over and explained to accused No.1 and the Directors of accused No.2 on 12.10.2004 for the offences punishable u/s 120B r/w 420 IPC and u/s 13(2) r/w 13(1) (d) of PC Act and they pleaded not guilty and claimed to be tried.
5. Since there was some defect in the charge framed on 12.10.2004, the charge was altered and it was read over and explained to Accused No.1 and both Directors of accused No.2 M/s. Blue Street Fashions Pvt. Ltd., Deepak Sharma and Prakash 7 Spl.C.C.166/2003 J Chand on 20.2.2015 and they pleaded not guilty and claimed to be tried. It is pertinent to note here that this alteration of charge was made after closure of the prosecution case and after recording 313 Cr.P.C., statement and when case stood posted for argument. After altering charge on 20.2.2015 both prosecution and both counsels for Accused No.1 and 2 have filed memo stating that they do not have further evidence and they would not recall any of the witnesses for the purpose of further examination-in-chief or cross-examination.
6. In support of its case, the prosecution has examined as many as 10 witnesses and got marked 33 documents. After closure of the prosecution side, accused No.1 S. Gopalakrishna and accused No.2 represented by its both Directors by name Deepak Sharma and Prakash Chand were examined as contemplated u/s 313 Cr.P.C., and their statements were recorded and they totally denied the case of prosecution. Accused No.1 and accused No.2 represented by Deepak Sharma and Prakash Chand have filed detailed statement while they were being examined u/s 313 Cr.P.C. Neither Accused No.1 nor Accused No.2 represented by its Directors lead defence evidence. But they have got marked some portions of entries in Ex.P8 & P6 at Ex.D1 to D9.
8 Spl.C.C.166/2003 J
7. Now the points that arise for consideration of the court are:
1) Whether the prosecution proves that the sanction order was obtained from competent authority to prosecute Accused No.1 S. Gopala Krishna being the public servant as provided u/s 19 of Prevention of Corruption Act, 1988?
2) Whether prosecution further proves that the Accused No.1 being the Branch Manager in the capacity of Assistant General Manager of SSI Branch, South of State Bank of India, Bangalore allowed accused No.2 M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Deepak Sharma and Prakash chand for drawal of excess amount from their Cash Credit Account No.06150/005157 to the tune of Rs.9,10,682/- as on 6.8.1997 without any sanction limits and Accused No.1 allowed Accused No.2 Company for withdrawing excess amount exceeding the sanctioned working capital of Rs.100 lakhs (fund based) and Rs.20 lakhs letter of credit (non-fund based) from time to time i.e., to the tune of Rs.1,53,50,740 and also accused No.1 recommended EPC limit of Rs.55 lakhs on 25.3.1998 to DGM, SBI, LHO, Bangalore in favour of accused No.2 and obtained sanction of Rs.48 lakhs and then transferred the said amount to cash credit account of accused No.2 with an 9 Spl.C.C.166/2003 J intention to bring down the excess amount of withdrawal shown in the account of Accused No.2 and accused No.1 also allowed accused No.2 to pay Rs.6.50 lakhs from their account in order to clear or discharge the loan of KFSC, and thereby Accused No.1 has allowed to divert the fund of accused No.2 company?
3) Whether prosecution further proves that the accused No.2 company represented by Deepak Sharna and Prakash Chand dishonestly and fraudulently approached the Accused No.1 and got sanctioned various credit facilities beyond the limits and without any authority and diverted the fund of the bank to clear of or discharge the loan of KSFC and other loans and thereby committed criminal conspiracy by illegal act or any other act by illegal means in pursuance of their agreement and accused No.2 represented by its Directors Deepak Sharma and Prakash Chand induced dishonestly Accused No.1 to deliver the amount of the bank by means of credit facility etc., with an intention to cheat the bank and thereby accused No.1 and accused No.2 company represented by its Directors Deepak Sharma and Prakash Chand committed offence punishable under Section 120B r/w 420 IPC ?
4) Whether prosecution further proves beyond reasonable doubt that Accused No.1 being public 10 Spl.C.C.166/2003 J servant i.e., Branch Manager in the capacity of Asst. General Manager, committed criminal misconduct by delivering the amount of the bank to accused No.2 company by corrupt or illegal means or by using his position as a public servant in order to gain pecuniary advantage to accused No.2 company and thereby committed offence punishable under Section 13(2) r/w 13(1) (d) of PC Act?
5) What order?
8. Heard the arguments advanced by learned Special Public Prosecutor and learned counsel for Accused No.1. Perused the entire records.
9. My findings on the above points are Point No.1 - In the negative, Point No.2 - In the affirmative, Point No.3 - In the negative, Point No.4 - In the negative, Point No.5 - As per final order, for the following :
REASONS
10. The prosecution has examined totally 10 witnesses and got marked 33 documents whereas defence has not lead oral evidence and got marked some portions of the entries in the prosecution document at Ex.D1 to D9. PW.1 Venugopal is the 11 Spl.C.C.166/2003 J complainant and DGM (Vigilance) SBI. PW.2 H.K. Venkatesh Murthy was working as Chief Manager, SSI Branch, Bangalore South of SBI from May 2002 i.e., subsequent to accused No.1. PW.3 P.C. Pillai was working as Circle Credit Officer in SBI during 2002. PW.4 Jagadish Wadekar was working as Deputy Manager in SSI Branch during 1997-99, when accused No.1 was working in the said branch and when alleged offence took place. PW.5 Pradeep Kumar was AGM, Rehabilitation Cell, Local Head office, Bangalore and he investigated the irregularities conducted in SSI, Bangalore South Branch, SBI and submitted the report marked at Ex.P32. PW.6 Ramakrishna is Police Inspector, CBI who registered the case. PW.7 Prahlada Rao was working as Assistant Manager (Advances) in SSI Branch at Bangalore South, SBI during 1997-98 along with accused No.1. PW.8 Mythili Rangarajan was Chief General Manager of SBI and sanctioning authority. PW.9 Jayachandra Raju and PW.10 M. Raja are Police Inspector, CBI, who investigated the matter and submitted charge sheet against Accused No.1 and accused No.2 represented by its Directors Sri. Deepak Sharma and Prakash Chand.
11. POINT No.1: - In the present case, Accused No.1 was working as Asst. General Manager and Branch head of SSI South 12 Spl.C.C.166/2003 J Branch of SBI, Bangalore during 1996 and 1998. Since Accused No.1 was public servant at the time of commission of offence, the sanction as required u/s 19 of Prevention of Corruption Act, 1988 is required.
12. PW.8 Mythili Rangarajan is the sanctioning authority and she has accorded sanction to prosecute Accused No.1 and said sanction order is marked at Ex.P.28. PW.8 Mythili Rangarajan states in her evidence that she was working as Chief General Manager at Bangalore Circle of State Bank of India during 2002 and being the Chief General Manager, she was the appointing as well as the removing authority to the officer of the grade of Asst. General Manager of State Bank of India. She further states that the CBI had requested her to accord sanction to prosecute Accused No.1 and they had furnished copy of FIR, statement of witnesses and other relevant documents relating to the said case for perusal and she went through all those documents and satisfied herself that it was a fit case to accord sanction to prosecute accused No.1 and accordingly she accorded sanction. She identifies the sanction order accorded by her at Ex.P28.
13. The contention of the counsel for Accused No.1 is that PW.8 being Chief General Manager was not vested with power of 13 Spl.C.C.166/2003 J appointing or removing Asst. General Manager i.e., the Officer of the Cadre of Accused No.1 and said suggestion was made to PW.8 at page No.5 & 6 of her cross-examination and PW.8 denied the same. PW.8 clearly admits in page No.3 of her cross- examination that State Bank of India is a public limited company and it is the Board of Directors who will confer the power to the individual officer of the State Bank of India including the power of appointing of officers as well as their removal. She further states that in September or October 2001 she took the charge of post of Chief General manager and she does not remember whether among the documents furnished by CBI there was any document or any letter that SSI branch was taken over the loan account of the company of M/s. Blue Street Fashions Pvt. Ltd., from State Bank of Mysore, Chickpet Branch. No doubt she admits in her cross-examination that she doe not remember the details of the document which she had gone through while according sanction.
14. As stated supra, the main contention of the Accused No.1 is that the Chief General manager of SBI had no authority to appoint or remove the officers of the Grade of Assistant General Manager of State Bank of India. But in order to establish the fact that the Chief General Manager of SBI is the 14 Spl.C.C.166/2003 J authority to appoint and remove the officers of the cadre of Asst. General Manager of SBI, the prosecution has not at all produced any documents.
15. As stated supra, Ex.P28 is the sanction order issued by PW.8. Even in Ex.P28 order PW.8 has nowhere stated by which Act or Rules or Regulations of the SBI, the Chief General Manager has been authorized to appoint and remove the officers of the cadre of Asst. General Manager like that of accused No.1.
16. The learned counsel for Accused No.1 relied on the decision reported in 2006 (6) Supreme 560 in State represented by Inspector of Police, Vishakapatnam vs. Surya Sankaran Kurri and in para-22 of the judgment it is held that "PW.37 being the Senior Divisional Operation Manager was not competent to accord sanction for prosecution of the respondent and he has not produced the documents to show that he had been delegated with the power of removing the Chief Commercial Inspector."
17. The learned counsel for the accused also relied on the decision reported in 2014(2) AKR 527 in B.M. Janardhana vs. Inspector General of Stamps & Commissioner for Registration, Bangalore, wherein it is held that the validity of sanction can only be challenged in course of trial and not before filing charge sheet. The learned counsel for the accused No.1 also relied on 15 Spl.C.C.166/2003 J the decision reported in (2007) 4 Crimes 22 in State of Karnataka vs. Ameerjan wherein it is held that the sanctioning authority is best person to judge whether sanction is to be granted or refused and he should apply mind and application of mind is imperative. He also relied on the decision in 2013 (4) AKR 257 in B.P. Krishna vs. Union of India wherein it is held that sanction for prosecution is not sought, accused is entitled for acquittal.
18. In the present case, the FIR was submitted against accused No.1 as well as one Prahlad Rao, the Deputy Manager (Advances) of SSI Branch (South) Bangalore of SBI. But subsequently the said Prahlad Rao has been left out on the ground that the sanction was not accorded to prosecute Prahlad Rao. In column No.2 of charge sheet it is clearly stated that the sanction to prosecute Prahlad Rao, the Asst. Manager (Advances) was refused and therefore he is not cited as a accused and the said Prahlad Rao has been made as a witness. He has been examined as PW.7 in the case. Though in para-4 of Ex.P28 sanction order the name of Prahlad Rao is taken, no reasons are assigned for having refused sanction to prosecute him. It is not known whether any separate sanction order is passed refusing sanction to prosecute Prahlad Rao. Along with 16 Spl.C.C.166/2003 J Ex.P28, no documents are produced to show that Chief General Manager has been authorized to appoint or remove the Officers of the cadre of Assistant General Manager.
19. PW.9 Jayachandra Raju, the Police Inspector, CBI, ACB has conducted major portion of the investigation. He has obtained sanction from PW.8 and he states in page No.4 at para- 8 that on 27.12.2012 he received prosecution sanction order against Accused No.1, which is marked at Ex.P28. He clearly states in page No.11 at para-19 of his cross-examination that he has not secured any guidelines or Circular or Regulations issued by State Bank of India in the course of his investigation and he has not collected Circular or Guidelines by the said bank or from the witness examined in this case to know about regular banks or irregular drawings of the account. Therefore, it is clear that PW.9 has not secured any documents like Rules, Regulations to show that the Chief General Manager is appointing or removing authority of the cadre of Assistant General Manager i.e., accused No.1. Under Sec. 19 of the Prevention of Corruption Act, the court cannot take cognizance of an offence punishable u/s 7, 10, 11, 13 and 14 of Prevention of Corruption Act unless previous sanction from the competent authority is obtained to prosecute the public servant. Under clause (c) of sub-section 1 of Sec.19 17 Spl.C.C.166/2003 J in case of the employees other than employees of Central Government and State Govt., the authority competent to remove such public servant is competent to accord sanction to prosecute. Though sanction is accorded by PW.8 as per Ex.P28, no documents are produced before the court to show that PW.8 being Chief General manager is competent person to appoint or remove the officer of cadre of Asst. General Manager i.e., Accused No.1. Accordingly Point No.1 is held in the negative.
20. POINT No.2: - It is the case of prosecution that accused No.1 being the Manager in the capacity of Assistant Manager, SSI Bangalore, South State Bank of India, Bangalore during the period 1996-98 allowed accused No.2 M/s Blue Street Fashions Private Ltd., represented by its Directors Deepak Sharma and Prakash Chand to open the Cash Credit Account No.01650/00515 and allowed the joint operation of the same and allowed accused No.2 company to withdrawal of an amount of Rs.9,10,632/- as on 6.8.1997 without sanction and accused No.1 also allowed accused No.2 company to withdraw the amount exceeding the sanctioned limit of Rs. 100 lakhs towards working capital (fund based) and Rs.20 lakhs letter of credit (non-fund based) and thereafter accused No.1 allowed accused No.2 company from time to time to exceed the said limit of 18 Spl.C.C.166/2003 J Rs.1,20,00,000/-. It is the case of the prosecution that accused No.1 allowed accused No.2 company to withdraw Rs.1,50,00,000/-, Rs.1,53,50,740/- and finally Rs.1,64,56,120/- from time to time. In order to prove said facts, the prosecution has mainly relied upon the evidence of PW.4.
21. PW.4 Jagadish Wadekar was working as Deputy Manager (Advances) in SSI South Branch, SBI, Bangalore from July 1997 to June 1998 when Accused No.1 was working in same branch and thus he deposed with regard to irregularities had occurred. It has come in the evidence of PW.4 that S. Prahlad Rao, Deputy Manager, recommended the loan proposal of M/s. Blue Street Fashions Private Ltd., (Accused No.2) and Accused No.1 sanctioned the said loan of Rs.100 lakhs (fund based) and Rs.20 lakhs (non-fund based). PW.4 clearly states that accused No.1 has signed the sanction order marked at Ex.P3. He clearly states that Ex.P3 is the attested copy of proposal appraiser and recommendation in respect of M/s. Blue Street Fashions Pvt. Ltd. No doubt Ex.P3 is marked subject to objection of the accused and same will be dealt with while discussing the point No.4 and
5. The statement of account of accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., was also got marked as Ex.P4 through this PW.4. PW.4 clearly states in his evidence that the 19 Spl.C.C.166/2003 J outstanding amount of M/s. Blue Street Fashions Pvt. Ltd., was Rs.1,59,61,640=49 as against the sanction limit of Rs.100 lakhs as on 29.10.1997. He further states that the acount was taken over on 29.10.1997 itself and the amount of Rs.1,04,00,000/- was given to State Bank of Mysore, Chickpet Branch on same day and he identifies the entries for having given the cheque for Rs.1,04,00,000/- to SBM, Chickpet at Ex.P4(b).
22. Ex.P3 is loan application, appraisal and recommendation of accused No.2 company M/s. Blue Street Fashions Pvt. Ltd. Ex.P3 totally contains 29 sheets and in page No.1 it is clearly mentioned that Rs.40 lakhs towards cash credit hypothecation and Rs.60 lakhs towards stock against receivable towards debt and Rs.20 lakhs towards letter of credit (non-fund based) was recommended and same was sanctioned. In page No.29 of Ex.P3 it is clearly stated that Rs.40 lakhs towards cash credit hypothecation and Rs.60 lakhs cash credit hypothecation bills against receivable debt and Rs.20 lakhs towards letter of credit inland and foreign was recommended by PW.7 Prahlada Rao and it was sanctioned by accused No.1. PW.4 has identified signature of accused No.1 at Ex.P3(b) and signature of PW.7 Prahlad Rao at Ex.P3(a). Therefore as can be seen from Ex.P3 it 20 Spl.C.C.166/2003 J is clear that totally Rs.1,20,00,000/- was sanctioned to Accused No.2 company M/s. Blue Street Fashions Pvt. Ltd.
23. Ex.P4 is statement of account of M/s. Blue Street Fashions Pvt. Ltd., pertaining to cash credit commencing from 21.7.1997 to 22.10.1999. Ex.P4 clearly reveals that as on 23.7.1997 an amount of Rs.3,00,300/- was allowed to be withdrawn by accused No.2 company. But Ex.P3 sanction was made on 6.8.1997.
24. PW.4 further states in para-5 of his evidence that as on 29.10.1997 the outstanding amount of M/s. Blue Street Fashions Pvt. Ltd., was Rs.1,59,61,640=49. The perusal of Ex.P4 statement of account clearly reveals that on 29.10.1997 cheque for Rs.1,04,00,000/- was given to SBM, Chickpet in order to discharge the loan of M/s. Blue Street Fashions Pvt. Ltd., and to take over the account from SBM, Chickpet and the total outstanding amount as on 29.10.1997 from Accused No.2 Company was Rs.1,59,61,640=49. The said relevant entry is marked at Ex.P4(b). But it is pertinent to note that as per Ex.P3 the sanction loan facility to accused No.2 company was Rs.100 lakhs, (fund based) and Rs.20 lakhs (non-fund based). PW.4 further states that on 14.3.1998 the outstanding balance in the account of accused No.2 was Rs.1,63,90,259=80 and Ex.P4 21 Spl.C.C.166/2003 J statement of account also clearly reveals the same and said entry is marked at Ex.P4(d). As on 1.12.1997 the outstanding balance from the accused No.2 company was Rs.1,75,75,365/-. It is also pertinent to note here that the prosecution has produced the cheque referred and returned register which is marked at Ex.P16. The cheques pertaining to Accused No.2 M/s. Blue Street Fashions Pvt. Ltd., are mentioned in page No.65 and 66 of Ex.P16. Nearly 59 cheques presented by accused No.2 were discounted to the account of accused No.2 and they are shown in Ex.P4 and all the entries shown in Ex.P16 cheque referred and returned register have been marked as Ex.P16(a) to (z) and Ex.P16(aa) to Ex.P16(mm) and corresponding entries in Ex.P4 statement of accounts are also marked and said entries shown in Ex.P16 and Ex.P4 clearly go to show that accused No.1 had allowed accused No.2 company to withdraw more than Rs.1.20 crores. Ex.P4 and Ex.P16 clearly reveal that as on 1.12.1997 the outstanding amount from accused No.2 company was Rs.1,75,75,365/- and same is supported by the entries marked at Ex.P16(a) and Ex.P4(d) & (e) entries shown in the statement of account. As on 3.12.1997 the outstanding balance from accused No.2 company was Rs.1,75,45,397=32 and said entry is marked at Ex.P4(f) and said entries were made in 22 Spl.C.C.166/2003 J pursuance of the cheque discount made in the account of accused No.2 in pursuance of Ex.P16(e) and (f) cheques presented on that day. As on 4.12.1997 the outstanding balance of accused No.2 was Rs.1,75,77,211=32 and the same is supported by entry marked at Ex.P4(g) and on that day one cheque was presented and the said entry for having presented the cheque for discounting is marked at Ex.P16(g). As on 5.12.1997 the outstanding balance from accused No.1 was Rs.1,77,05,175=32 and it is supported by the entry marked at Ex.P4(h) and on that day 6 cheques were presented and said cheques were passed by accused No.1 and said cheques were shown at entry marked at Ex.P16(j) and the initial of accused No.1 is marked at Ex.P16(k). As on 8.12.1997 the outstanding balance of accused No.2 was Rs.1,78,29,401=32 and it is revealed in Ex.P4(j) and on that day 8 cheques were presented by accused No.2 company for discount and said cheques altogether were marked at Ex.P16(i) and accused No.1 passed the cheques and his initial is marked at Ex.P16(m). As on 9.12.1997 the outstanding balance in the account of accused No.2 was Rs.1,82,05,259=32. The same is shown in Ex.P4 statement of account marked at Ex.P4 (k1 to k8) and on that day totally 8 cheques were presented for discount and they are 23 Spl.C.C.166/2003 J shown at Ex.P16(n) entry. It is also in the evidence of PW.4 that on 10.12.1997 the outstanding balance in the account of accused No.2 Rs.1,84,59,094=09 and it is revealed in Ex.P4 statement of account marked at Ex.P4(i) and on that day 3 cheques were presented and debit was made in account of Accused No.2 and said cheque entry is marked at Ex.P16(p) and accused No.1 has passed the cheques and his initial is marked at Ex.P16(q).
25. PW.4 further states that as on 17.12.1997 the outstanding balance from accused No.2 was Rs.1,85,72,500/- and on that day 3 cheques were presented by M/s. Blue Street Fashions Pvt. Ltd., and all those cheques were passed and discounted by accused No.1 and said entry in the statement of account is marked at Ex.P4(m) and said cheques discounted are shown at Ex.P16(r) and the accused No.1 has passed the said cheques by making initial marked at Ex.P16(s). PW.4 further states that on 19.12.1997 there was outstanding balance of Rs.1,87,87,186/- in the account of accused No.2 and the said amount is clearly revealed in Ex.P4 statement of account and entry is marked at Ex.P4(n) and on that day accused No.2 company had presented one cheque and it was discounted and said cheque is shown in Ex.P16 and entry is marked at Ex.P16(t) 24 Spl.C.C.166/2003 J and initial of accused No.1 for having passed the said cheque is at Ex.P16(u). PW.4 also states as on 22.12.1997 outstanding balance in the account of accused No.2 was Rs.1,92,96,262=02 and on that day one cheque was presented and accused No.1 passed the said cheque for payment and entry pertaining to the cheque is marked at Ex.P16(v) and entry in the statement of account is marked at Ex.P4(o). He further states that as on 23.12.1997 the outstanding balance in the account of accused No.2 was Rs.1,95,06,223=07 and on that day two cheques were presented by accused No.2 for discount and the said cheques were entered in Ex.P16 register and entry is marked at Ex.P16(s) and initial of accused No.1 for having passed the cheque at Ex.P16(y) and the said amount of Rs.1,95,06,226=07 is shown in the statement of account at Ex.P4(p). As on 24.12.1997 an amount of Rs.1,95,17,223/- was due from accused No.2 company and on that day accused No.2 company has presented two cheques for discount and said cheque were passed for payment by accused No.1 and same is shown at Ex.P16(bb) and amount of Rs.1,95,17,233=07 is shown in the statement of account at Ex.P4(q).
26. It has come in the evidence of P.W.4 that as on 26.12.1997, 29.12.1997, 27.1.1998, 2.2.198, 4.2.198, there 25 Spl.C.C.166/2003 J were outstanding balance in the account of accused No.2 to the tune of Rs.1,94,78,942/-, Rs.1,93,234,419/-, Rs.1,87,31,009/-, Rs.1,76,57,919/- and Rs.1,78,31,276/- and these amounts are shown in Ex.P4 statement of account and said relevant entries are marked at Ex.P.4(r), Ex.P4(s), Ex.P4(t), Ex.P4(u) and Ex.P4(v) respectively and the cheques presented by accused No.2 were also discounted and all these cheques were passed by Accused No.1 and entries pertaining to the said cheques have been marked at Ex.P16(cc), Ex.P16(ee), Ex.P16(gg), Ex.P16(hh), Ex.P16(jj), Ex.P16(kk) and Ex.P16(ii) respectively. The aforesaid deposition of PW.4 coupled with the entries shown in Ex.P4 statement of account and Ex.P16 Register of Cheque Referred & Returned Register clearly go to show that accused No.1 allowed accused No.2 company for drawal of excess amount than the sanctioned amount of Rs. One crore towards cash credit facility of Rs.20 lakhs letter of credit. Aforesaid all these entries clearly go to show that accused No.1 has exceeded the limit of Rs.1,20,00,000/- and allowed accused No.2 company to withdraw more than Rs.1,20,00,000/-.
27. PW.4 H.K. Venkatesh Murthy, the subsequent Chief Manager, SSI Branch of accused No.1 also states in his evidence that only cash credit hypothecation of Rs.40 lakhs and cash 26 Spl.C.C.166/2003 J credit bills of Rs.60 lakhs and letter of credit of Rs.20 lakhs was sanctioned to Accused No.2 company but accused No.1 allowed accused No.2 for drawal of the amount exceeding his authority.
28. It is the case of prosecution that subsequently Accused No.1 allowed Accused No.2 the Export Packing Credit (EPC) and he recommended for proposal of Export Packing Credit and DGM sanctioned Rs.48 lakhs and said amount sanctioned was transferred to cash credit account of Accused No.2 only with an intention to bring down the excess amount or excess cash credit facility allowed to accused No.2. PW.2 states in his evidence that the proposal for adhoc export limit of Rs.55 lakhs was submitted by the Branch to the controlling office vide letter dated 25.3.1998 and said proposal is produced before the court and got marked at Ex.P6. Ex.P7 is the sanctioning order of said Export Packing Facility.
29. PW.7, Prahlad Rao was the then Asst. Manager who was working with accused No.1. He has made proposal and recommended for cash credit as well as EPC (Export Packing Credit). P.W.7 clearly states in his evidence that he had prepared the proposal for recommending the OD facility to accused No.2 company and he identifies his signature at Ex.P3(a) and signature of accused No.1 for having signed the 27 Spl.C.C.166/2003 J same at Ex.P3(b). He also states that on 27.3.1998 he put up a note to AGM for release of EPC limit on the basis of the application submitted by accused No.2 as per Ex.P6. PW.7 has made proposal on Ex.P6 itself and he identifies his signature at Ex.P6(a) and signature of accused No.1 for having accepted his proposal and for having made recommendation to the controlling office at Ex.P6(b).
30. It is pertinent to note here that as per prosecution as on 14.3.1998 the outstanding balance from accused No.2 company was Rs.1,63,90,259/- whereas in Ex.P6 accused No.1 and PW.7 had recommended the EPC limit of Rs.55 lakhs and in Ex.P6 the existing loan was shown as Rs.99.96 lakhs only. It is the case of prosecution that in Ex.P6 the amount of Rs.99.96 lakhs as outstanding from accused No.2 shown wrongly though as on that day the outstanding due was Rs.1,63,90,259/-. Perusal of Ex.P6 the proposal for EPC reveals that the limit sanctioned to accused No.2 was Rs.100 lakhs whereas the outstanding as on 14.3.1998 was shown as Rs.99.96 lakhs. But Ex.P4 statement of account clearly reveals that as on 14.3.1998 an amount of Rs.1,63,90,259/- was due from accused No.2 company. Therefore, it is clear that the wrong amount of Rs.99.96 lakhs was shown in Ex.P6 by accused No.1 for getting 28 Spl.C.C.166/2003 J sanctioning the Export Packing Credit of Rs.48 lakhs as per Ex.P7.
31. The learned Special Public Prosecutor vehemently urged that the transaction pertaining to disbursement of loan and compliance with procedure requirement are within the knowledge of Bank Manager - Accused No1. and burden of proof lies on him to prove the compliance of procedure requirement and for this proposition of law he relied on the decision reported in (2013)1 SCC Cri 891 and (2013)2 SCC 162 in N.V. Subba Rao v/s. State through Police Inspector, Vishakapatnam, wherein it is held that when transactions pertaining to disbursement of loan and compliance with procedural requirement are concerned they are within the knowledge of Bank Manager and burden lies on him to prove the same. He also relied on the decision reported in AIR 1994 SC 1407 in P.S. Rao vs. State of Andrapradesh wherein it is held when accused was working as Bank Manager of the bank that the defence that the irregularities, omissions and commissions are committed by the staff cannot be accepted and the evidence of the witnesses cannot be brushed aside only on the ground that the said witnesses were working under accused.
32. On the other hand, the learned counsel for the accused No.1 vehemently urged that the prosecution has withheld the 29 Spl.C.C.166/2003 J original of Ex.P3 and Ex.P3 is Xerox copy and Ex.P3, P6, P7 and P18 to 20 cannot be believed. He relied on the decision reported in (2009) 14 SCC 541 in Musauddin Mohd. Vs. State of Assam, wherein it is held that when materials was evidence is withheld court may draw adverse inference notwithstanding the onus of proof did not lie on the said party and it was not calling upon to produce the said evidence. The learned counsel for accused No.1 also relied on the decision reported in 2007 AIR SCW page 2713 in Smt. T. Yashoda vs. Smt. K. Shobha Rani wherein it is held that superior or higher document is in possession of party and in order to produce secondary evidence, it is necessary for the party to prove the existence and execution of original documents. He also relied on the decision reported in (2011) 2 Civil CC 405 in H. Siddiqui dead by LRs vs. A. Ramalingam wherein it is held that secondary evidence relating to the contents of the document is inadmissible until the non- production of original is accounted for and court has an obligation to decide the question of admissibility of document in secondary evidence before making endorsement thereon.
33. The learned counsel for Accused No.1 vehemently urged that Ex.P3, the loan proposal sanction and Ex.P6, P7, P18 to P21 are not admissible, since originals are not produced. But 30 Spl.C.C.166/2003 J principles enunciated in the aforesaid decision are applicable to other secondary evidence like copy of agreement etc. The copy of agreement cannot be accepted as secondary evidence unless the party producing the same proves the execution, existence of the original agreement with the other side. But these Ex.P3, P6 and P7, P18 to P21 are bank documents. Though Ex.P3 contains 9 sheets on the last page, the certification is made. So also the counsel for accused No.1 drew the attention of the court to Sec. 2(8) of Bankers Book Evidence Act, wherein the word certified copy of is defined. The certified copy of the bank is to be certified and it is to be noted that they have been maintained in ordinary books of bank and was made in usual and ordinary course of business and they should be true copy. But sec.4 of Banker's Book Evidence Act, 1891 clearly reveals that the certified copy of any entry of the Banker's Book shall in all the legal proceedings be received as a prima facie evidence of the existence of such entry and they shall be admitted as evidence. Admittedly in the present case Accused No.1 was Asst. General Manager and he was having knowledge with regard to the maintenance of the bankers book and procedure required to be adopted. If really, the Ex.P3, P6 and P7, Ex.P18 to P21 are not the true copies of the originals, the accused might have 31 Spl.C.C.166/2003 J summoned the original, though the burden of proving the same does not lie on the accused. But the principle enunciated in the decision reported in (2013) 1 SCC Cri. 891, (2013) 2 SCC 162 N.V. Subba Rao vs. State through CBI Inspector, Vishakapatnam is aptly applicable to the case in hand. Accused No.1 has contended in his 313 statement that on the basis of the recommendations made by PW.7 he had signed and he had reposed trust in PW.7 who was Field Officer and therefore he has signed Ex.P3, P6 and P7. But said contention cannot be accepted in view of the principle enunciated in the decision reported in 1984 SC 1407 in P.S. Rao vs. State of A.P. relied upon by the learned Public Prosecutor. Therefore, prosecution has clearly established that accused No.1 has committed irregularity and he has allowed accused No.2 company for drawal of the amount more than the sanctioned amount of Rs.1.20 lakhs. Accordingly, Point No.2 is held in the affirmative.
34. Point Nos.3 & 4: - Since points No.3 and 4 are interconnected and they are dealt with together for discussion to avoid repetition of discussion.
35. In order to prove the ingredients of offence punishable u/s 120B IPC, the prosecution has to establish
(i) that the accused agreed to do or caused to be done an act;
32 Spl.C.C.166/2003 J
(ii) that such act was illegal or was to be done by illegal means;
(iii) that some overt act was done by one of the accused in pursuance of the agreement.
36. In order to prove the ingredients of offence punishable Sec.420 IPC., the prosecution has to prove
(i) the person has dishonestly induced another person to deliver any property to any person, or;
(ii) to consent that any person shall retain any property, or
(iii) to make, alter or destroy the whole or any part of a valuable security, or
(iv) to make, alter or destroy anything which is signed or sealed and which is capable of being converted into a valuable security.
37. In order to prove the ingredients of offence punishable u/s 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988, the prosecution has to prove
(i) that the public servant has committed criminal misconduct 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 for any other person any valuable thing or pecuniary advantage or;
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest.
38. The main contention of the prosecution is that accused No.1 being the Branch Manager in the capacity of Asst. General 33 Spl.C.C.166/2003 J Manager, SSI Branch (South), SBI, Bangalore during 1996 and 1998 entered into criminal conspiracy with M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Sri. Prakash Chand and in furtherance of said criminal conspiracy Accused No.1 allowed accused No.2 company to open cash credit account No.06150/005157 in his bank and allowed them to operate the account jointly and accused No.2 dishonestly and fraudulently submitted loan application and accused No.1 though sanctioned Rs.100 lakhs towards working capital (fund based) and Rs.20 lakhs letter of credit (non-fund based), allowed accused No.2 to withdraw more amount like Rs.1,53,50,740/-, Rs.1,64,56,120/- etc., from time to time and accused No.1 had also recommended Export Banking Credit limit of Rs.55 lakhs on 25.3.1998 to DGM, SBI Head office, Bangalore and accordingly Rs.48 lakhs was sanctioned and said sanction amount was taken to the cash credit account of accused No.2 company only with an intention to bring down the outstanding liability in the account of accused No.2 with an intention to show that the withdrawal limit exercised by accused No.2 was within the sanctioned limit. The learned counsel for Accused No.1 vehemently urged that in the absence of any evidence of conspiracy or any wrongful gain by the public servant, the 34 Spl.C.C.166/2003 J provisions of Sec. 13(1)(d) of PC Act are not attracted and for this proposition of law, he relied on the decision reported in (2009) 6 SCC 77 in S.V.L. Murthy vs. state represented by CBI, Hyderabad. The learned counsel for Accused No.1 also relied on the decision reported in 2012 (2) AIR Karnataka Report 845 in Ismail Khan Shah vs. State by CBI, Bangalore and in para-28, 30, 32 of the decision the Hon'ble High Court has held that when there is no evidence to show that accused had intention to cheat the bank when they had made application for credit facility and merely because accused had not repaid the loan amount, it cannot be inferred that accused had committed offence of cheating. He also relied on the decision reported in 2013 AIR SCW 3281 in Sujith Biswas vs. state of Assam in para-6, 9 and 10, the Hon'ble Supreme Court has held that suspicion however strong cannot take the place of proof and reasonable doubt means, fair doubt, based on reasons and common sense and not an imaginary, trivial or merely a probable doubt.
39. On the other hand, the learned Special Public Prosecutor relied on the decision reported in (2010) 1 SCC (Cri) 164 and (2009) 11 SCC 737 in P. Venkatakrishnan vs. CBI wherein it is held that the criminal conspiracy can be proved on the basis of circumstantial evidence or by necessary implication, 35 Spl.C.C.166/2003 J since it is difficult to avail direct evidence to that effect. In point No.(f), it is held that when bank officials made huge bank fund available to private person, offence of criminal misconduct provided u/s 13(2) r/w 13(1)(d) of PC Act is proved. He also relied on the decision reported in IV (2009 B.C. (Banking Cases) 243 (SCI) in Mir Nagri Askari vs. CBI wherein it is held that when accused had dominion over fund of the bank and through his act facilitated misappropriation of fund by accused, he has committed criminal misconduct as provided u/s 13(1)(d) r/w 13(2) of PC Act.
40. Keeping the aforesaid principle in mind, we shall see whether there was dishonest intention on the part of the accused No.1 and 2 to cause wrongful loss to the bank and to make wrongful gain for themselves at the time of filing the loan application by accused No.2 before accused No.1. No doubt, as observed in Point No.2 Accused No.1 being the Branch Manager in the capacity of Asst. General Manager has allowed accused No.2 company for drawal of the amount in excess of sanctioned limit shown in Ex.P3 to the extent of Rs.100/- lakhs towards credit facility and Rs.20 lakhs through letter of credit non fund based). In the present case, PW.1 Venugopal lodged complaint as per Ex.P1 before SP, CBI which is marked at Ex.P1. P.W.1 36 Spl.C.C.166/2003 J has mainly pointed out the irregularity of duty of accused No.1 and one Prahlad Rao as follows: -
(a) Accused No.1 and Prahlad Rao exceeded their authority in grant of advances to the accused No.2 company.
(b) They failed to report to their controllers.
(c) They misrepresented the facts that a particular security hitherto given to SBI the title was not clear, whereas against the same property advances were given subsequently to a sister concern of accused No.2 namely Chaitanya Clothing Pvt. Ltd.,
(d) They misrepresented the outstanding balances in their communication to their controllers i.e., local head office (LHO) These four allegations are made by PW.1 in Ex.P1 complaint as well as in his evidence. But PW.1 clearly admits in page No.5 of his cross-examination that the power of sanction of loan depends upon the grade and the branch and he is not aware that at the relevant time of this case SSI branches had power of drawing clean loans upto Rs.10 lakhs for industrial unit and he is not aware that the SSI units were transferred to SSI branches. He further states that it is normal practice to take over the credit facilities of one unit by another bank within the guidelines of the bank and he does not remember now as to whether there was any sanction letter to the effect that M/s. Blue Street Fashions Pvt. Ltd., (Accused No.2) accounts were taken over by the SSI
37 Spl.C.C.166/2003 J branch of which accused No.1 was the Manager. It is pertinent to note here that the prosecution has not at all produced any documents to show what was the limit of power of advance of the Assistant General Manager i.e., Accused No.1. Though, it is contended that the loan of accused No.2 company was taken over from SBM, Chickpet to this SSI branch by accused No.1 without the approval of higher authorities Ex.P6 at page No.14 reveals as follows: - "The conduct of the account is satisfactory. The account was taken over from the State Bank of Mysore, Chickpet Branch, Bangalore, LHO approval vide letter No. DGM/ CAC SB/45 dated 29.7.1997 and the above limits were sanctioned on 6th August 1997, after receiving satisfactory opinion from their previous bankers." This portion of the statement at Ex.P6, the proposal of head of Export Bank Credit was got marked by defence at Ex.PD9. This entry clearly reveals that while taking over the account of loan from SBM, Chickpet by this SSI, the approval was taken from the local head office, through the aforesaid letter. But prosecution has not produced the said letter for the reasons best known to it.
41. PW.1 admits in page No.6 of his cross-examination that accused was not Field Officer and one Prahlad Rao was Field Officer at that time. He also admits that in the normal course it 38 Spl.C.C.166/2003 J is Deputy Manager who processes the proposal of the loan and he is not aware as to who put up loan proposal of M/s. Blue Street Fashions Pvt. Ltd., pertaining to this case. As per Ex.P3 PW.7 Prahlad Rao had proposed for sanction of the cash credit facility and letter of credit facility to Accused No.2 company. PW.1 further clearly admits in page No.7 at para-6 that "one of the duties of the field officer is to verify the core proposals, credentials, the account statement and the conduct of the parties with other banks". He also admits that in the complaint lodged by him he had alleged that Mr. Prahlad Rao misrepresented the outstanding of the accounts of accused No.2 company in the communication to the controller. These admissions of PW.1 clearly go to show that there was a main part of. PW.7 in the loan proposals of accused No.2 company made by him and in intimating the outstanding in the account of accused No.2 to the controller. It is also pertinent to note here that the controller of SBI, SSI (South) Branch i.e., any responsible officer from Local Head Officer has not been examined to prove that the misrepresentation was made by accused No.1 with regard to the outstanding of accused No.2 account while getting sanctioning Export Banking Credit limit of Rs.48 lakhs or in the monthly reports or in irregularity reports.
39 Spl.C.C.166/2003 J Though, prosecution has relied upon Ex.P19 and 20 alleging that they are irregularity report, but in fact they are only covering letter accompanying irregularity report with regard to Ex.P19 and 20, the discussion will be made while analyzing the evidence of PW.4. PW.1 further states in his page No.8 of his cross- examination that at the time of lodging of complaint outstanding liability of accused No.2 company was about one crore and so. Ex.P4 statement of account clearly reveals that the liability of SBI, Chickpet was Rs.1,04,00,000/- and same was paid through cheque in order to clear the liability of accused No.2 with SBM, Chickpet. PW.1 further states in page No.9 of his cross- examination that he lodged complaint on the basis of report given by the Investigating Officer of their bank and the legal opinion will be sought whenever collateral securities are offered in the form of landed property and there is a book regarding delegation of powers of the various officers of the bank regarding sanction of loan and advances and the circulars relating to the delegation of powers are subject to changes from time to time. It is the defence of the accused that the power of accused No.1 i.e., Asst. General Manager for sanction of loan and advances was more than Rs. One crore. But it is pertinent to note here that this PW.1 had not produced the investigation 40 Spl.C.C.166/2003 J report of the Investigating Officer or legal opinion obtained while taking over the loan of account of accused No.2 from SBM, Chickpet and any circular or booklet relating to delegation of powers of various officials of bank including Asst. General Manager. These material documents have been withheld by the prosecution for the reasons best known to it and the decision relied upon by the counsel for accused No.1 reported in (2009) 14 SCC 541 in Musaddin Ahmed vs. State of Assam stated supra aptly applicable.
42. PW.2 H.K. Venkatesh Murthy was working as Chief Manager, SSI Branch, SBI, Bangalore from 2001 to 2002 i.e., subsequent to accused No.1. PW.2 has produced Ex.P2 to Ex.P8 before the Investigating Officer and said documents were produced through Receipt Memo marked at Ex.P9 to P13. PW.2 has deposed with regard to the Ex.P2 to P8. Ex.P2 is the account opening form of accused No.2 company. Ex.P3 is proposal for sanction of credit facility to accused No.2 company. Ex.P4 is statement of account of accused No.2 company. Ex.P5 is application cum recommendation for adhoc facility of Export Packing Credit. As per Ex.P5 the recommendation was made for adhoc facility of Rs.55 lakhs to accused No.2 company and accused No.1 has recommended for sanction of the same. Ex.P6 41 Spl.C.C.166/2003 J is adhoc proposal for Export Banking Credit to accused No.2 company to the extent of Rs.55 lakhs and proposal was submitted by the branch to the controlling authority on 25.3.1998 and Ex.P6 is note put up by PW.7 Prahlad Rao and in pursuance of the same Deputy General Manager has sanctioned EPC of Rs.48 lakhs on 27.3.1998. PW.2 has deposed only on the basis of documents since he had taken charge subsequent to accused No.1 in SSI (South) Branch of SBI, Bangalore. He clearly admits in page No.9 of his cross-examination that his knowledge about the case is only to the extent based on the document which he had gone through and handed over to CBI. He further clearly states that subsequently he was posted to that branch and he had gone through the documents. PW.2 clearly admits in page No.10 of his cross-examination that the powers of sanctioning loan was given at grade level and if SSI branch is headed by Asst. General Manager then the powers of the branch head will be the power of Asst. General Manager and he does not know what was the powers of the Asst. General Manager (AGM) during that period. He further admits in para-13 at page No.10 that as per the banking norms the Branch Manager is authorized to sign the account opening form to open account. Therefore, there is nothing wrong in opening the account of accused No.2 42 Spl.C.C.166/2003 J company as per Ex.P2 by accused No.1. As stated supra, the booklet containing the powers of sanctioning loan of all the Grade Officers is not produced before the court. PW.2 further clearly admits in page No.11 of his cross-examination that "the take over of the loan should be with the approval of the controller of respective SSI branches." As stated supra, and as can be seen from Ex.D9 portion marked in Ex.P6 at page No.14 the account of accused No.2 from SBM, Chickpet was taken over by this SSI (South) branch of SBI on 29.7.1999 with approval of controller. PW.2 further states in page No.11 of his cross- examination that even if there is a proposal of take over till it is finalized bankers will permit to withdraw the legitimate withdrawals. It is not out of place here to mention that as per Ex.P5 the recommendation for sanction of Rs.175 lakhs to accused No.2 was made on 28.10.1997 and same was approved by accused No.1 and proposal was made by PW.7 Prahlad Rao. Therefore, it appears that accused No.1 had allowed accused No.2 for drawals of amount of more than Rs.1.20 crores in pursuance of Ex.P5 snactioning order.
43. It is defence of accused No.1 and 2 that many cheques were deposited by accused No.2 company and the amount was credited to Ex.P4 statement of account and Ex.P4 statement of 43 Spl.C.C.166/2003 J account does not disclose the same. It has come in the evidence of PW.2 in page No.14 and 15 that Ex.P4 is not the exact format containing 6 columns and if aforesaid statement of account at Ex.P4 had contained 6 columns it would shown the deposit made by the account holder. PW.2 clearly states in page No.16 of his cross-examination that he is not aware as to how many cheques were credited to the account from 21.7.1997 to 31.8.1998 and if the account extract Ex.P4 at the columns of amount of withdrawal and amount deposited, it would have been shown the reasons for withdrawal. PW.2 further clearly admits in unequivocal terms in page No.16 that during the period 21.7.1997 to 31.8.1998 a sum of Rs.2,54,77,591/- might have been deposited to the account of accused No.2. If really accused No.1 and 2 had dishonest intention to cheat the bank from the inception i.e., from the date of opening account or availing the cash credit facility and letter of credit facility, so much amount would not have been deposited to the account of accused No.2.
44. It is pertinent to note that Ex.P8 is statement of account of accused No.2 company with regard to Export Packing Credit (EPC). PW.2 clearly states in his cross-examination at page No.16 and 17 that the amounts on 20.5.1998, on 2.6.1998, 2.9.1998, 19.10.198, 29.10.1998, 18.11.1998, 44 Spl.C.C.166/2003 J 16.2.1999 were credited, since export bills were submitted by accused No.2. All these entries for having credited the amount to the account of accused No.2 marked at Ex.P8 were got marked by defence at Ex.D1 to D8. These circumstances also clearly go to show that even the EPC account of accused No.2 wherein the EPC credit limit of Rs.48 lakhs was sanctioned was under process and amounts were credited to the account of accused No.2 for having negotiated export bills. If really accused No.2 had an intention to cheat the bank these amounts shown at Ex.D1 to D8 would not have been credited to the account of accused No.2. These entries at Ex.D1 to D8 further clearly reveal that accused No.2 company was carrying on export business and it had availed the EPC limit of Rs.48 lakhs in order to carry on business and not with intention to cheat the bank with dishonest intention.
45. PW.2 admits in page No.20 of his cross-examination that EPC cash credit register will be available in the bank and extract of said register will not be given to the customer. But said EPC Cash Credit Register is not produced before the court. PW.2 further admits in page No.21 that the action of taking over the account of M/s. Blue Street Fashions Pvt. Ltd., (accused No.2) was confirmed by their controller and said fact has been 45 Spl.C.C.166/2003 J mentioned in page No.14 of Ex.P6. As stated supra, the said relevant entry is got marked by defence at Ex.D9. The entry marked at Ex.D9 clearly reveals that the approval of the controller LHO was taken and then account of accused No.2 was taken over from SBM, Chickpet to this SSI (South) SBI Branch.
46. PW.2 further admits in page No.22 of his cross- examination that it may be true that the circular bearing No. ORG/2/95-96 dated 29.9.1995 is with regard to delegation of financial powers for advance and allied matters to the SSI units to the bank officials and said circular might have been delegated the scheme of delegation of financial powers 1995 (advances of SIB Segment). But he denies that he has withheld said circular deliberately. If said circular was produced it would have revealed that what was the sanctioning limit of accused No.1 being the Assistant General Manager.
47. Though PW.2 has produced Ex.P2 to P8 along with receipt memo marked at Ex.P9 to P13, he clearly states in page No.24 of his cross-examination that he is not acquainted with handwritings and signatures of accused No.1. He further clearly admits that he is not personally aware as to what had transpired in the bank before he took over the charge in the branch. He further states in page No.25 of his cross-examination that after 46 Spl.C.C.166/2003 J he took over the charge immediately he did not bring to the notice of his controller about the irregularities pertaining to accused No.2 company. He also admits in page No.26 of his cross-examination that whatever he has stated before the CBI was based on the contents of the documents and his presumption. He further admits in same para that the circular, directions are modified from time to time depending upon the business transactions of the bank and exercise of powers of any officers are depending on the circular prevailing on that day and without looking that circular, direction or instructions he cannot say what was the powers of concerned officers of the bank on a particular day or relevant time. He further clearly admits that he has not produced any such circulars to the CBI Officers at the time of recording his statement. As stated supra, the delegation of power, circular with regard to limit of advance of Asst. General manager cadre of relevant period is not produced before the court and if it was produced it would have revealed whether accused No.1 had power to sanction or authority to allow party to withdraw to the extent of Rs.1,64,50,120/- which is the allegation against accused No.1.
48. PW.3 P.C. Pillai was working as Circle Credit Officer during 2001 to 2002 in SBI. He has deposed with regard to the 47 Spl.C.C.166/2003 J cash credit limit and EPC limit sanctioned by accused No.1. He clearly states in page No.3 at para-3 that the recommendation was for Rs.175 lakhs and it was approved to that extent. As stated supra, Ex.P5 also reveals the same. During the course of cross-examination PW.3 clearly states that he does not remember as to whether there was any instruction from the Head Office directing to take over account of accused No.2 company from SBM, Chickpet and he does not remember as to whether he had seen Ex.P5 the recommendation during the course of his enquiry. But he admits in page No.6 of his cross- examination that before taking over the account, the appraisal report, the legal opinion will be taken. It is pertinent to note here that this PW.3 had conducted departmental enquiry against Accused No.1 with regard to these irregularities and therefore he has been examined before the court. Hence, it appears that PW.3 does not have personal knowledge with regard to the transaction involved in this case. But PW.3 states in page No.7 of his cross-examination that one more development had occurred and he became controller of SSI branch and CBI Inspector enquired him while he was working as controller. It is the contention of the prosecution that accused No.1 had suppressed the fact of sanctioning credit limit of Rs.1 crore 20 48 Spl.C.C.166/2003 J lakhs and he had not reported the said excess withdrawals by accused No.2 and he misrepresented facts and figures and he had shown the withdrawals of Accused No.2 less than the actual withdrawal. If that is the case this PW.3 being the controller of SSI (South) branch would have produced documents to show that accused No.1 and PW.7 had misrepresented the local head office with regard to the excess withdrawal allowed by accused No.1 to accused No.2 company. But no such documents are produced before the court.
49. PW.4 Jagadish Wadekar is material witness in this case. He has deposed with regard to the Ex.P3 and P4 and he has identified the signature of accused No.1 and PW.7 on Ex.P3 and other documents, since he was also working as Deputy Manager in SSI (South) Branch, SBI, Bangalore during relevant period along with accused No.1. So far as the excess withdrawal allowed by accused No.1 to the accused No.2 company are concerned the discussion has already been made in point No.2. There is no much dispute that accused No.1 had allowed accused No.2 company for drawal of excess amount than the sanctioned limit. But whether it was with dishonest intention to cheat the bank or not is to be considered.
49 Spl.C.C.166/2003 J
50. PW.4 has deposed in detail with regard to the sanction of loan and taking over the account of accused No.2 company from SBM, Chickpet to SSI (South) Branch, SBI and allowing the excess withdrawal under Ex.P4 statement of account and recommendation of EPC (Export Packing Credit) limit in his examination-in-chief. But PW.4 clearly admits in page No.33 of his cross-examination that whatever evidence he has given in this case is based exclusively on the contents of record and he does not have any personal knowledge pertaining to the case and PW.7 Prahlad Rao is having personal knowledge regarding the transaction of accused No.2 company. He further admits that he does not have personal knowledge as to what were the documents considered for sanction of loan proposal of accused No.2 company and he is not aware as to what transaction had taken place between 6.8.1997 to 29.10.1997 with regard to the accused No.2 company. Therefore, it is clear that the evidence of PW.2 is based on the documents produced before the court. No doubt, those documents are certified copies and they are admissible u/s 4 of Bankers Book Evidence act, 1891.
51. PW.4 further admits in page No.34 of his cross- examination that whatever loans that has been sanctioned by the loan sanctioning authority are based exclusively on the 50 Spl.C.C.166/2003 J recommendation of the field officer and it is the duty of field officer to personally inspect the concerned unit and do the needful before it is recommended by him and banking operation is based exclusively on the mutual trust reposed by the officers amongst themselves working in the banking sector. It is pertinent to note here that as can be seen from Ex.P3, P5, P6 and P7, PW.7 Prahlad Rao being the Deputy Manager (Advances) and Field Officer had recommended for sanctioning the loan. It is not out of place here to mention that PW.7 Prahlad Rao was made as accused in the complaint and subsequently he has been left out since sanction to prosecute him was refused. On the basis of the recommendation made by PW.7 Prahlad Rao, the loan came to be sanctioned by accused No.1.
52. PW.4 further states in page No.34 and 35 of his cross- examination that there were about 60 small scale industries and they were having accounts and they had huge banking transactions and it was the field officer who was monitoring all the accounts of the SSI unit. PW.4 further admits in page No.35 that the loan proposals are always routed through Field Officer and entry relating to accused No.2 company in Ex.P16 commences with transaction dated 1.12.1997. But PW.4 pleaded ignorance stating that the total deposit of 51 Spl.C.C.166/2003 J Rs.2,54,77,591/- was made to the account of accused No.2 during 21.7.1997 and 31.8.1998. But it is pertinent to note here that PW.2 S.K. Venkatesh Murthy the subsequent Chief Manager of SSI branch has clearly admitted in page No.16 of his cross- examination that an amount of Rs.2,54,77,591/- was deposited in the account of accused No.2 during that period. The said version clearly goes to show that there was no dishonest intention on the part of the accused No.2 and the business was being carried on by accused No.2 and amount were being deposited and withdrawals were also being made.
53. PW.4 further clearly admits in page No.38 of his cross- examination that merely because any particular SSI unit has exceeded the loan sanction limit, on that ground alone they cannot stop payment of cheques pertaining to the said unit and the reason for not stopping further transaction is that the said unit should continue to function and thereby their loan with them is safe. He also admits that if any SSI Unit is having any export order and also there is a letter of credit in favour of such SSI Unit, it means that the payment is guarantee and there is banking practice to the effect that where the sanction limit of any particular SSI unit has exceeded and at the same time there is an export order for the said SSI unit, Bank Manager is entitled 52 Spl.C.C.166/2003 J to exceed further sanction limit and sanction further amount and release further amount to SSI unit awaiting further approval for such exceeded limit from the higher authorities. These admissions clearly reveal that Ex.P22 to Ex.P25 cheques and other cheques shown in Ex.P16 register were discounted and passed by accused No.1 only with an intention to facilitate accused No.2 company to carrying business and to make the loan safe and no dishonest intention on the part of accused No.1 and 2 can be attributed.
54. PW.4 further states in page No.39 of his cross- examination that the payment pertaining to Ex.P4 relates to either payment towards purchase of raw materials or salary or wages and statutory payment and cheques presented relating to payment of wages or salary as well as the payment relating to statutory payment, will be honoured. This admission of PW.4 clearly reveal that all the amount withdrawn under Ex.P4 by accused No.2 and all the cheques got discounted which have been shown in Ex.P16 have been utilized properly by accused No.2 company in order to run the business and said amount was not misutilised.
55. PW.4 further admits in page No.40 of his cross- examination that the Field Officer is expected to visit SSI unit 53 Spl.C.C.166/2003 J atleast once in a month to ascertain the said unit is working or not. In the present case, PW.7 Prahlad Rao was the Field Officer at relevant point of time and accused No.2 company was attached to him. If really accused No.2 was not properly carrying on business, PW.7 would have intimated or reported the same to accused No.1 or the branch. But no such materials are forthcoming.
56. PW.5 P. Pradeep Kumar was working as Assistant General Manager, SBI. It is the case of prosecution that this PW.5 made investigation with regard to irregularities and submitted his report. It is the case of the prosecution that some portion of the loan amount was paid to KSFC and thereby accused No.1 and 2 diverted the funds of the bank for the purpose other than for which the sanction was made. No doubt, PW.5 states that Rs.14.5 lakhs was paid to KSFC and said amount was debited to the account of accused No.2. It is also the case of prosecution that accused No.1 had not taken the immovable property which was offered as collateral security to SBM, Chickpet as a collateral security while sanctioning the present loan and subsequently same property was mortgaged by the sister concern of accused No.2 company by name M/s. Chaitanya Clothing Pvt. Ltd., and loan of about Rs.35 lakhs was 54 Spl.C.C.166/2003 J sanctioned to M/s. Chaitanya Clothing Pvt. Ltd. PW.5 deposes the same in his evidence. He also deposes with regard to the export packing credit limit of Rs.55 lakhs recommended by accused No.1 to accused No.2 company and while recommending the said loan the outstanding due of accused No.2 company was shown as Rs.99,96,000/- though actual outstanding was Rs.163.90 crores. But so far as the property offered by accused No.2 company as collateral security to SBM, Chickpet and said property was not taken by accused No.1 as collateral security in the present case on the ground of defective title and subsequently same property was mortgaged by M/s. Chaitanya Clothing Pvt. Ltd., for sanction of loan of Rs.35 lakhs are concerned, the prosecution has not produced any documentary evidence and it's oral say of this witness. But so far as diverting fund of Rs.14.50 lakhs to KSFC by allowing accused No.2 to withdraw the said amount is concerned PW.5 admits in page No.9 of his cross-examination that when amount due to KSFC is over due for a long time, they would seize machineries relating to said loan and Ex.P26 is the letter of KSFC which was issued to accused No.2. He further admits in page No.10 of his cross-examination whenever any such letter is issued by KSFC or any other financial institution putting a threat 55 Spl.C.C.166/2003 J of seizure or attachment, the bank officials do not take it casually. PW.5 further clearly admits in page No.10 of his cross- examination that his investigation has revealed that by issuing cheque against the account of the bank of accused No.2 in favour of KSFC, payment has been made towards the loan amount due to the KSFC. Therefore, it is clear that accused No.1 had allowed accused No.2 to withdraw 14.50 lakhs in order to pay the loan due of accused No.2 to KSFC with an intention to save attachment or seizure of the machineries of accused No.2 company and to facilitate accused No.2 to run the business and thereby loan of SBI (SSI) is made safe. Therefore, any how the said amount has not been misutilised for the personal gain of accused No.1 and 2.
57. PW.7 Prahlad Rao. S. is material witness in the case and he was working as Assistant Manager (Advances) in SSI branch, Bangalore during 1997-98 when this accused No.1 was working in the same branch. No doubt PW.7 states with regard to the recommendation of sanction of cash credit facility, letter of credit facility, export banking credit facility to accused No.2 company and he identifies his signature as well as signature of accused No.1 on Ex.P3, P5, P7. As stated supra, all these documents are certified copies of the document of the bank and 56 Spl.C.C.166/2003 J they are admissible u/s 4 of the Bankers Book Evidence Act, 1891. But we have to see whether there was dishonest intention on the part of the accused No.1 and 2 at the beginning i.e., at the time of submitting loan application. PW.7 has also deposed with regard to Ex.P3 to P8, P21. PW.7 clearly admits in page No.7 of his cross-examination that Ex.P3 proposal was prepared by him after actually visiting the factory premises, by perusing account books and also by ascertaining the credibility of the said company from the previous bankers. He voluntarily states that inspection of the said unit (i.e., accused No.2 company) was jointly conducted by him and accused No.1. He further admits that before the said credit facility was sanctioned to accused No.2 company and in order to ascertain about the credibility of said company and to know about the availment of loan, if any, by KSFC he had visited the office of Karnataka State Financial Corporation and in the said proposal he had mentioned about the loan facility availed from KSFC. He further admits that he had submitted his proposal after collecting data like previous year balance sheet, stock statement, name of suppliers, their customers, the marking information relating to said company and after satisfying himself that the said loan proposal is viable, he had prepared the said proposal at Ex.P3 and submitted the 57 Spl.C.C.166/2003 J same to accused No.1. He also admits in page No.9 that before preparing said proposal he had also ascertained various facts and secured particulars from the State Bank of Mysore, Chickpet branch regarding credibility of said company. He further admits that before he had taken charge of the said post, approval had already given from DGM from taking over the loan account of accused No.2 company pending with State Bank of Mysore, Chickpet branch. All these admissions clearly go to show that accused No.1 had taken all required precaution before taking over the account of accused No.2 from SBM, Chickpet and before sanctioning the cash credit facility and letter of credit (non-fund based) facility to accused No.2 company. Therefore, taking over of account of accused No.2 from SBM, Chickpet may not be with dishonest intention.
58. PW.7 further states in page No.10 of his cross- examination that as can be seen from Ex.P4 entry in the statement of account, a cheque for Rs.1,04,00,000/- was issued in the name of State Bank of Mysore, Chickpet Branch for discharging the existing loan of accused No.2 company with said bank. He further admits that the said proposal of Ex.P3 for taking over the said liability of accused No.2 company pending with State Bank of Mysore, Chickpet branch was prepared by 58 Spl.C.C.166/2003 J him. He also states that as can be seen from Ex.P4 statement of account as on 28.10.1997, the amount due by accused No.2 to their bank was Rs.55,61,640/- and said loan amount in the credit facility was given to accused No.2 company for taking over the loan from State Bank of Mysore, Chickpet branch and also as working capital for running the industrial unit. He further admits that as on 28.10.1997 the loan limit was not exceeded the sanctioned limit and the moment the said loan from State Bank of Mysore, Chickpet Branch was taken over by their branch, the loan limit has exceeded the sanctioned limit. Anyhow the taking over of account of accused No.2 from SBM, Chickpet to SSI branch was made with the approval of Deputy General Manager, as can be seen from the averments made in Ex.P6 which portion is marked at Ex.D9. These admissions of PW.7 clearly go to show that earlier to taking over the account of accused No.2 from SBM, Chickpet, the loan sanctioned to accused No.2 had not exceeded the sanctioned limit and approval from D.G.M. was taken for taking over account and therefore sanctioned limit exceeded. PW.7 further admits in page No.11 and 12 of his cross-examination that as Field Officer of said branch it was he who was monitoring the accounts of loan of SSI unit and at the end of the each month the loan irregularity report were being 59 Spl.C.C.166/2003 J prepared by him. It is the contention of the prosecution that accused No.1 had misrepresented the local head office or controlling officer with regard to the excess withdrawal made by accused No.2 and he had shown wrong figures but version of PW.7 in page No.12 clearly reveals that this PW.7 was preparing irregularity report. According to prosecution, Ex.P19 to 21 are said irregularity report. But perusal of Ex.P19 to 21 clearly go to show that they are not irregularity report and they are only covering letters. Moreover many notings have been made in Ex.P19 and it is not proved as to who had made said notings in red ink. But on the contrary, PW.7 admits in page No.12 that he had no occasion to see the loan irregularity report prepared by him and submitted to accused No.1 for onward submission, but not actually sent. As stated supra, no controlling officer of SSI branch or any official from local head office have been examined to prove that such irregularity report pertaining to accused No.1 branch were submitted to the controlling office by misrepresenting and showing less amount than the sanctioned limit.
59. PW.7 further admits in page No.13 of his cross- examination that as can be seen from Ex.P4 as on 30.9.1997 the interest of Rs.68,049.12 was debited and as on 31.12.1997 a 60 Spl.C.C.166/2003 J sum of Rs.5,57,513.50 has been debited as interest to the said account and as on 31.3.1998 a sum of Rs.7,22,057.47 was debited. These admissions of PW.7 clearly go to show that some interest amount is also included in Ex.P4 statement of account and therefore Ex.P4 statement of account reveals the excess amount of withdrawal than the sanctioned limit.
60. PW.7 further admits in page No. 13 of his cross- examination that the letter of Export Packing Credit adhoc facility of Rs.48,00,000/- was sanctioned to accused No.2 company and before sanctioning the same, accused No.2 has submitted letter of credit worth of more than Rs.61.50 lakhs and said letter of credit was in terms of US dollars of the first class bank and as such if orders are executed, payment was guaranteed. He also admits in page No.13 that the said over drawings of the said company was of the period prior to sanction of EPC facility. He further admits in page No.14 of his cross- examination if accused No.2 had awaited sanction of EPC loan, it would have lost the export order and in order to prevent the loss of export order of Rs.1.57 lakhs dollars export business, which may come in terms of Indian money of Rs.61.50 lakhs and in order to prevent the loss of export order, excess drawings was permitted by their bank and when the said EPC of Rs.48 lakhs 61 Spl.C.C.166/2003 J was sanctioned by their bank, the same was appropriated towards excess cash credit balance permitted for export orders. He further admits that as can be seen from Ex.P8 statement of account of EPC loan account the export proceeds relating to the accused No.2 company has been directly credited to the said account as per entries and said excess drawings relating to the said account has not been misutilised. He further admits in page No.15 of his cross-examination that the sum of Rs.1,04,00,000/- relating to the entry dated 29.10.1997 in Ex.P4 was released for discharge the due of accused No.2 in State Bank of Mysore, Chickpet branch and said amount has not been misutilised. He further states that by presenting said related cheque the loan existing in the chickpet branch has been discharged. These admissions of PW.7 clearly reveal that neither the EPC limit of Rs.48 lakh sanctioned to accused No.2 nor Rs.1,04,00,000/- sanctioned for discharging the liability of accused No.2 in SBM, Chickpet have been misutilised and they have been properly utilized by accused No.2 company. Therefore, there was no dishonest intention on the part of the accused No.1 and 2 to cheat the bank at the time of submitting loan application and availing the loan facilities like cash credit facility, letter of credit facility and export banking credit facility. The counsel for 62 Spl.C.C.166/2003 J accused No.2 vehemently urged that mere disregard of relevant provisions of financial rule would not constitute offences and he relied on the decision reported in 1980 SCC (Cri) 546 in Abdulla Mohamed Pagarkar vs. State (Union Territory, Goa Daman & Diu) wherein it is held that mere disregard of relevant provision of financial rule as well as ordinary norms of procedural behaviour of Govt., officials and contractors, in the absence of showing beyond reasonable doubt about guilt, may raise strong suspicion against accused, but would not constitute the offence. The principles enunciated in the aforesaid decision is aptly applicable to the case in hand. No doubt, there are some irregularities committed by accused No.1 and strong suspicion arise against accused No.1 for having allowed accused No.2 to withdraw the excess amount than the sanctioned limit. But it does not by itself constitute offence unless there was dishonest intention on the part of the accused No.1 and 2 to misappropriate the funds of the bank for their personal gain. The learned counsel for accused No.2 also relied on the decision reported in 1995 Criminal Law Journal 4181 in B.H. Narasimha Rao vs. Govt. of A.P. represented by CBI and in Point No. 'B' it is clearly held that failure of charge u/s 120B IPC against the accused - other charges lose their roots and complicity of 63 Spl.C.C.166/2003 J accused to cause loss of money which bank had suffered on account of fictitious and forged telegraphic transfer not proved, accused is entitled for acquittal. In the present case, the prosecution has failed to establish that there was dishonest intention on the part of the accused No.1 and 2 to misuse the fund of the bank at the initial stage and therefore the ingredients of Sec.420 IPC are not attracted. Under such circumstances the charge u/s 120B would not stand. The learned counsel for Accused No.2 also relied on the decision reported in 2012(2) AIR Kar 845 in Ismail Khan Shah and others vs. State by CBI, Bangalore wherein it is clearly held that merely because accused had not repaid the loan it cannot be inferred that accused had committed the offence of cheating unless it is proved that accused had intention to cheat the bank when they had made application for credit facility and the court cannot convict separately for the offence punishable u/s 120B IPC unless the ingredients of offence punishable u/s 420 IPC are proved.
61. The principles enunciated in the aforesaid decision is aptly applicable to the case in hand. No doubt criminal conspiracy will be committed in secrecy and direct evidence to that effect will not be available and circumstantial evidence is to be relied upon. No doubt the circumstances allowing accused 64 Spl.C.C.166/2003 J No.2 company by accused No.1 to withdraw the excess amount than the sanctioned limit would show that there were some circumstances to infer the criminal conspiracy. But overall evidence of the witnesses especially PW.1 to 4, PW.5 and 7 clearly reveal that there were no dishonest intention on the part of the accused No.1 and 2. All the excess amount withdrawn under cash credit facility, letter of credit facility and export packing facility were being utilized by accused No.2 company to carry on the business i.e., either to purchase raw materials or to pay for the salary of the employees and other dues.
62. The learned counsel for accused No.2 also vehemently urged that in criminal case the burden of proving, the guilty of accused always lies on the prosecution and it will not shift and the standard of proof required to prove the defence plea is not the same which is required to prove prosecution case. For this proposition of law he relied on the decision reported in AIR 1990 SC 1459 in Vijayee Singh vs. State of U.P. AIR 1979 SC 1455 in Man Singh vs. Delhi Administration, 1972 SCC (Cri) 258 Dr. S.L. Goswami vs. State of M.P. and 1994 SCC (Cri) 29 Ram Swaroop and others vs. State of Haryana.
63. PW.6, 9 and 10 are Investigating Officers. PW.6 has registered the case. PW.9 Jayachandra Raju has conducted 65 Spl.C.C.166/2003 J major portion of the investigation. The prosecution has produced one Investigating report at Ex.P32. but it is pertinent to note that Ex.P32 was not seized during the course of investigation and it has come in the evidence of PW.10 that during the course of trial in the year 2006 he collected said Ex.P32 report at the request of the then Public Prosecutor and produced the same before the court. It is also pertinent to note here that Ex.P32 is not complete report and only some portions of the report is produced and some pages of said report are missing. No doubt, PW.10 has stated that he has collected only relevant paras pertaining to this case and he collected only page No.5 to 13 and 25 to 29, since the said pages pertain to this case. The learned Special Public Prosecutor urged that though a document is not seized during the course of investigation and if such document is produced subsequently it can be relied upon and for this proposition of law, the learned Special Public Prosecutor has relied on the decision reported in AIR 2002 SC 1644 in the CBI v/s R.S. Pai and another wherein it is held that when some documents were not submitted with charge sheet and subsequently said document can be allowed which were produced which were gathered prior to or subsequent to the investigation. But on the other hand the learned counsel for 66 Spl.C.C.166/2003 J accused No.1 relied on the decision reported in (2011)4 Supreme 611 in Noorul Huda Maqbool Ahmed vs. Ram Deo Tyagi wherein it is clearly held that observation and finding in the report of enquiry commission are only made for the information of the Govt., and it has no evidentiary value in the criminal case. No doubt the prosecution has not mainly based its case on Ex.P32 report. But admittedly Ex.P32 report was not seized during the course of investigation and it was seized subsequent to filing this case in the year 2006. PW.5 Pradeep Kumar had conducted said investigation and submitted the report. But Ex.P32 was not produced when this PW.5 was examined before the court on 16.3.2006, but PW.5 was summoned again on 13.6.2007 and Ex.P32 was got marked through him. But Ex.P32 was marked subject to objection of the other side and finding with regard to admissibility of said document was kept open to be decided during the course of judgment. Even it has come in the evidence of PW.9 and 10 Investigating Officers that they had not conducted any investigation on Ex.P32 report. Therefore, under such circumstances Ex.P32 cannot be relied upon.
64. As stated supra, PW.9 and 10 have conducted major portion of the investigation. PW.9 has clearly admitted in page No.10 of his cross-examination as can be seen from Ex.P4 67 Spl.C.C.166/2003 J statement of account amount of Rs.2,54,77,591/- was received in the said account of accused No.2 in between the period from 21.7.1997 to 31.8.1998. The said admission clearly reveals that accused No.2 company was carrying on the business continuously and therefore the said amount of Rs.2,54,77,591/- was credited to the account of accused No.2. The said circumstance clearly reveals that there was no dishonest intention on the part of the accused No.1 and 2 to defraud the bank and to make wrongful gain to themselves by causing wrongful loss to SSI branch (South) SBI, Bangalore. Moreover, it has come in the evidence of PW.9 at page No.10 that the proceedings were instituted before Debt Recovery Tribunal for recovery of the amount. Accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., was wound up as per the order of Hon'ble High Court of Karnataka dated 13.8.2000. Subsequently accused No.2 company had got compromised with SSI (South) Branch, SBI and paid entire amount, in pursuance of the compromise arrived at before the Lok Adalath. The learned counsel for Accused No.2 filed memo on 7.3.2015 with letter issued by Dy. General Manager of SBI which reveals that Accused No.2 company has paid entire amount pursuance of award passed by Lok Adalath. The said circumstance also clearly 68 Spl.C.C.166/2003 J reveal that there was no dishonest intention on the part of the accused No.1 and 2 to defraud the bank and to cheat the bank.
65. The learned counsel for Accused No.1 relied on the decision reported in 2015 SCC online SC 18 2015, AIR SCW 642 in Sunil Bharati Mittal vs. CBI wherein it is held that criminal liability of persons controlling the affairs of the accused company. There has been a specific act attributed to the Director or any other person allegedly in control and management of the company to the effect that such a person was responsible for the acts committed by or on behalf of the company. If a person or group of persons who control the affairs of the company commit any offence with a criminal intent, their criminolity can be imputed to the company as well as they are "Alter Ego" of the company. The principle not to be applied in an exact reverse scenario. He also relied on the decision reported in (2010) 10 SCC 479 in Maharashtra State Electricity Distribution Company Limited and another vs. Datar Switchgear Ltd., and another.
66. The learned counsel for accused No.2 relied on the decision reported in (2005) 4 SCC 530 in Standard Chartered Bank and another vs. Directorate of Enforcement and others wherein it is held that a company or corporation can be sued and 69 Spl.C.C.166/2003 J fine can only be imposed though offence is punishable with imprisonment and fine.
67. In the present case, the charge sheet has been submitted only against accused No.2 company and not against the Directors of the company personally. M/s. Blue Street Fashions Pvt. Ltd., has been made as accused No.2 company represented by its Directors Deepak Sharma and Prakash Chand. Even PW.10 clearly admits in page No.2 of his cross-examination that the charge sheet was submitted against Accused No.1 Gopalakrishna and the company of accused No.2 represented by Deepak Sharma and Prakash Chand. He further clearly admits that in the charge sheet he has not mentioned that the charge sheet has been submitted against Mr. Prakash Chand and Deepak Sharma in their individual capacity. Moreover, no witnesses have deposed with regard to the criminal act which can be attributed personally to Deepak Sharma and Prakash Chand. Under such circumstances, even if accused No.2 company is found guilty, only fine has to be imposed as provided in the decision of Hon'ble Supreme Court of India reported in (2005) 4 SCC 530 in Standard Chartered Bank and others vs. Directorate of Enforcement and others.
70 Spl.C.C.166/2003 J
68. To constitute an offence, not only the actus reas but also mens rea is necessary. The guilty mind to commit offence can be gathered from motive for committing offence and other circumstances like circumstantial evidence of conspiracy. In the present case, the main offence alleged against accused No.1 and 2 is punishable u/s 420 IPC wherein the dishonest intention to cheat the bank is essential. The dishonest intention is to cause wrongful loss to the SBI, SSI Branch, South, Bangalore and to cause corresponding wrongful gain to the accused and such dishonest intention must be in existence from the inception i.e., from the date of filing application for credit facility, letter of credit facility. Mere non-payment of loan does not constitute cheating unless dishonest intention to cheat was in existence from inception.
69. No doubt, as discussed in point No.2, accused No.1 had allowed accused No.2 company for drawal of amount in excess of sanctioned limit. Perusal of Ex.P4, statement of account, Ex.P8 EPC the statement of account clearly reveal that accused No.2 had operated its account from 21.7.1997 to 31.8.1998 and many export credit bills were submitted and all the amount of credit bills were credited to the account of accused No.2 as can be seen from the entries marked at Ex.D1 71 Spl.C.C.166/2003 J to D in Ex.P8 statement. Nearly Rs.2,54,77,591/- was credited to the account of accused No.2 during 21.7.1997 to 31.8.1998 and it has come in the evidence of witness, PW.2 to PW.5, PW.7. It has also come in the evidence of PW.1 to 5 and 7 that all the amount withdrawn by accused No.2 company was being utilized for purchasing raw materials of the business, for paying the salary of the employees etc. Therefore, it is clear that the amount withdrawn by accused No.2 company was not misutilised or diverted for the purpose other than for which it was sanctioned. Therefore, the prosecution has failed to establish that accused No.1 and 2 conspired together and entered into illegal agreement to cheat the SBI, SSI South Branch fraudulently. The ingredients of the offence punishable u/s 13(1)(d) r/w 13(1) (2) of PC Act are also analogous to the ingredients of Sec. 420 IPC. Accordingly, point No.3 and 4 are held in the negative.
70. Point No.4: - For the foregoing reasons and in view of above discussions, I proceed to pass the following ORDER Accused No.1 and accused No.2 company M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Sri. Prakash Chand are found not guilty.
72 Spl.C.C.166/2003 J Acting under Section 235(1) of Cr.P.C., accused No.1 and 2 are acquitted of the offences punishable under Section 120B r/w 420 IPC and Accused No.1 is also acquitted of the offence punishable u/s 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988.
Accused No.1 and accused No.2 M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Prakash Chand are directed to furnish personal bond for Rs.5,00,000/- (Rs. Five lakhs only) each with one surety in the likesum for appearance before the appellate court as provided u/s 437 (A) Cr.P.C., and said bail bond and surety bond shall remain in force for 6 months from today.
(Dictated to the Judgment-Writer, transcribed by him, corrected and then pronounced by me in open Court this the 11th day of March 2015) (LAXMAN F. MALAVALLI) XXI Addl. City Civil & Sessions Judge And Prl. Special Judge for CBI Cases, Bangalore City.
ANNEXURE LIST OF WITNESSES EXAMINED FOR THE PROSECUTION:
P.W.1 - S. Venugopal P.W.2 - H.K. Venkateshmurthy P.W.3 - P.C. Pillai P.W.4 - Jagadish Wadikar P.W.5 - Pradeep Kumar P.W.6 - Ramakrishna P.W.7 - Prahlad Rao P.W.8 - Smt. Maithily Rangarajan P.W.9 - M. Jayachandra Raju P.W.10 - M. Raja 73 Spl.C.C.166/2003 J LIST OF WITNESS EXAMINED FOR DEFENCE:
NIL LIST OF DOCUMENTS EXHIBITED FOR THE PROSECUTION:
Ex.P.1 Complaint (3 sheets)
Ex.P.1(a) Signature of P.W.1
Ex.P.2 Account opening form of M/s. Blue Street Fashions
Ex.P.2(a) Signature of A1
Ex.P.3 Attested copy of loan proposal of M/s. Blue Street
Fashions Pvt. Ltd., (29 sheets)
Ex.P.3(a) Signature of PW.7
Ex.P.3(b) Signature of Sri. Gopalakrishna Ex.P.4 Statement of Cash Credit Accounts of Blue Street Fashions (35 sheets) Ex.P.4(a) Entry at sheet No.1 Ex.P.4(b) Entry at page-7 Ex.P.4(c) Entry at page-9 Ex.P.4(d) Relevant entry Ex.P.4(e) Four Relevant entry Ex.P.4(f) Relevant entry (two) Ex.P.4(g) Relevant entry Ex.P.4(h) Relevant entry (correspondent P16 J) Ex.P.4(j) Relevant entry (P16 l) Ex.P.4(k) to P(k8) Relevant entry P16 Ex.P.4(l) Relevant entry (P16(p) Ex.P.4(m) Three cheque relevant entry (P16(R) Ex.P.4(n) Relevant entry (P16(H) Ex.P.4(o) Relevant entry (P16(v) Ex.P.4(p) Relevant entry (P16(x) Ex.P.4(q) Relevant entry (P16(aa) Ex.P.4(r) Relevant entry (P16(cc) Ex.P.4(s) Relevant entry (P16(ee) Ex.P.4(t) Relevant entry (P16(gg) Ex.P.4(u1) P4(u2) P4(u3) Relevant entry (P16(jj) Ex.P.4(v) Relevant entry (P16(ll) Ex.P.4(w) Relevant entry Ex.P.4(x) Relevant entry Ex.P.5 Application cum Recommendation for ad-hoc facilities Ex.P.5(a) Signature of A1 Ex.P.5(b) Signature of PW.7 Ex.P.6 Proposal (Attested copy) (15 sheets) 74 Spl.C.C.166/2003 J Ex.P.6(a) Signature of P.W.7 Ex.P.6(b) Signature of Sri. Goplakrishna Ex.P.7 Certified copy of Note Ex.P.7(a) Signature of PW.7 Ex.P.7(b) Signature of Sri. Gopalakrishna Ex.P.8 Certified Extract of Statement of Export Package (4 sheets) credit facilities Ex.P.8(a) Entry dt.
Ex.P.8(b) "
Ex.P.9 Receipt Memo Ex.P.9(a) Signature of PW.2 Ex.P.9(b) Signature of Investigating Officer Ex.P.10 Receipt Memo dt.
Ex.P.10(a) Signature of PW.2 Ex.P.10(b) Signature of Investigating Officer Ex.P.11 - Receipt Memo Ex.P.11(a) Signature of PW.2 Ex.P.11(b) Signature of Investigating Officer Ex.P.12 - Receipt Memo Ex.P.12(a) Signature of PW.2 Ex.P.12(b) Signature of Investigating Officer Ex.P. 13 - Receipt Memo Ex.P.13(a) Signature of PW.2 Ex.P.13(b) Signature of Investigating Officer Ex.P. 14 - Cheque dt: 27.4.98 Ex.P.14(a) Signature of Deepak Chand Ex.P. 15 - Letter dt. 27.4.98 Ex.P.15(a) Signature of Director Prakash Chand Ex.P. 16 - Cheque referred returned register Ex.P.16(a) Relevant two entry at page 65 Ex.P.16(b) Initial of A1 Ex.P.16(c) Relevant four entries Ex.P.16(d) Initial of A1 Ex.P.16(e) Two relevant entries Ex.P.16(f) Initial of A1 Ex.P.16(g) Relevant entry Ex.P.16(h) Initial of A1 Ex.P.16(j) Relevant entry (six) Ex.P.16(k) Initial of A1 Ex.P.16(l) Relevant entry (8.12.97) (eight cheques) Ex.P.16(m) Initial of A1 Ex.P.16(n) On 9.12.97 relevant entry (eight cheques) Ex.P.16(o) Initial of A1 Ex.P.16(p) (10-12-97) relevant entry (three cheques) 75 Spl.C.C.166/2003 J Ex.P.16(q) Initial of A1 Ex.P.16(r) (17-12-97) Relevant entry (three cheques) Ex.P.16(s) Initial of A1 Ex.P.16(t) 19-12-97 Relevant entry Ex.P.16(u) Initial of A1 Ex.P.16(v) (22-12-97) Relevant entry Ex.P.16(w) Initial of A1 Ex.P.16(x) 23-12-97 Relevant entry (Two cheques) Ex.P.16(y) Initial of A1 Ex.P.16(aa) 24.12.97 Relevant entry (Two cheques) Ex.P.16(ab) Initial of A1 Ex.P.16(cc) Relevant entry two cheques Ex.P.16(dd) Initial of A1 Ex.P.16(ee) 29.12.97 Relevant entry (two cheques) Ex.P.16(ff) Initial of A1 Ex.P.16(gg) 27.11.1988 Relevant entry (four cheques) Ex.P.16(hh) Initial of A1 Ex.P.16(jj) Feb 98 Relevant entry (three cheques) Ex.P.16(kk) Initial of A1 Ex.P.16(ll) 4.2.98 relevant entry (Nine cheques) Ex.P.16(mm) Initial of A1 Ex.P.17 - Debit Slip Ex.P.17(a) Signature of A1 Ex.P.18- Letter dt:
Ex.P.18(a) Initial of A1 Ex.P.19 - Letter dt. 2.5.98 Ex.P.19(a) Signature of A1 Ex.P.20 - Letter dt: 1.7.1998 Ex.P.20(a) Signature of A1 Ex.P.21 - Letter dt. 15.7.98 Ex.P.21(a) Signature of A1 Ex.P.22 - Cheque dt: 9.8.97 Ex.P.22(a) Signature of Deepak Sharma Ex.P.22(b) Signature of Prakash Chand Ex.P.22(c) Endorsement & Initial of A1 Ex.P.23 -Cheque dt: 22.10.97 Ex.P.23(a) Signature of Deepak Sharma Ex.P.23(b) Signature of Prakash Chand Ex.P.24 Cheque dated 30.10.97 Ex.P.24(a) Signature of Deepak Sharma Ex.P.24(b) Signature of Prakashchand Ex.P.25 Cheque dt. 14.1.98 Ex.P.25(a) Signature of Deepak Sharma Ex.P.25(b) Signature of Prakashchand
76 Spl.C.C.166/2003 J Ex.P.26 Attested copy of letter dt: 11.2.98 Ex.P.27 FIR Ex.P.27(a) Signature of P.W.6 Ex.P.28 Sanction order Ex.P.28(a) Signature of PW.8 Ex.P.29 Letter dated 19/2/1998 Ex.P.30 Letter dt. 11.7.1998 Ex.P.31 Letter dt: 18/7/2002 Ex.P.32 Investigation Report dt.7.5.99 Ex.P.32(a) Signature of PW.5 Ex.P.32(b) Letter dt. 24.2.2006 of DG (VIG) SP to SP, CBI produced on 5.2.15.
Ex.P.33 Letter dated 24.3.2006 of PW.10.
LIST OF MATERIAL OBJECTS MARKED FOR PROSECUTION:
- NIL -
LIST OF DOCUMENTS EXHIBITED FOR THE DEFENCE:
Ex. D1 Entry dt. 20.5.98 in Ex.P8
Ex. D2 Entry in Ex.P.8
Ex. D3 Entry in Ex.P.8
Ex. D4 Entry in Ex.P.8
Ex. D4 Entry in Ex.P.8
Ex. D2 Entry in Ex.P.8
Ex. D5 Entry in Ex.P.8
Ex. D6 Entry in Ex.P.8
Ex. D7 Entry in Ex.P.8
Ex. D8 Entry in Ex.P.8
Ex. D9 Relevant entry at page No.14 in Ex.P.6
(LAXMAN F. MALAVALLI)
XXI Addl. City Civil & Sessions Judge
And Prl. Special Judge for CBI Cases,
Bangalore City.
77 Spl.C.C.166/2003 J
Judgment pronounced in the open
Court (vide separate order)
Accused No.1 and accused No.2
company M/s. Blue Street Fashions Pvt.
Ltd., represented by its Directors Sri.
Deepak Sharma and Sri. Prakash Chand
are found not guilty.
Acting under Section 235(1) of
Cr.P.C., accused No.1 and 2 are
acquitted of the offences punishable
under Section 120B r/w 420 IPC and
Accused No.1 is also acquitted of the
offence punishable u/s 13(2) r/w
13(1)(d) of Prevention of Corruption Act, 1988.
Accused No.1 and accused No.2 M/s. Blue Street Fashions Pvt. Ltd., represented by its Directors Sri. Deepak Sharma and Prakash Chand are directed to furnish personal bond for Rs.5,00,000/- (Rs. Five lakhs only) each with one surety in the likesum for appearance before the appellate court as provided u/s 437 (A) Cr.P.C., and said bail bond and surety bond shall remain in force for 6 months from today.
(LAXMAN F. MALAVALLI) XXI Addl. City Civil & Sessions Judge And Prl. Spl. Judge for CBI Cases, Bangalore City.