Karnataka High Court
B Kashinath S/O Late B Raja Rao vs State Of Karnataka By C B I on 15 June, 2012
Author: Anand Byrareddy
Bench: Anand Byrareddy
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 15TH DAY OF JUNE 2012
BEFORE
THE HON'BLE MR. JUSTICE ANAND BYRAREDDY
CRIMINAL APPEAL NO.1848 OF 2007
BETWEEN:
1 B KASHINATH S/O LATE B RAJA RAO
AGED ABOUT 50 YEARS,
PROP: M/S. THE BANGALORE CO.,
NO.28, K.H. ROAD,
BANGALORE.
R/AT NO.358/1, 100FT ROAD, 1 CROSS
JAYANAGAR 1ST BLOCK,NEAR ASHOKA PILLAR,
BANGALORE-11.
2 B R AMARNATH
S/O LATE B. RAJA RAO,
AGED ABOUT 57 YEARS,
R/AT. NO.740, 22ND MAIN,
14TH CROSS,2ND PHASE,
J.P. NAGAR,
BANGALORE-78.
...APPELLANTS
(by Shri S.K. Venkata Reddy, Advocate)
AND:
STATE OF KARNATAKA BY C B I
BANGALORE.
...RESPONDENT
(By Shri C.H. Jadhav, Advocate)
2
This Criminal Appeal is filed under Section 374(2) of the Cr.P.C.
against the judgment dated 31.10.2007 passed by the XXI Addl. City
Civil and Sessions Judge and Special Judge for CBI cases, Bangalore in
Spl.Case No.66/1996 convicting the appellants/accused No.2 for the
offence punishable under section 120(B) and also for the offence of
420 of IPC and accused NO.3 for the offence punishable under Section
109 read with 420 of the IPC and sentencing A2 to undergo R.I. for a
period of one year and also to pay fine of Rs.10,000/- in default to
undergo Simple Imprisonment for a period of 6 months in respect of
the offence punishable under Section 120-B of the IPC further
sentencing him to undergo R.I. for a period of 2 and half years and
also to pay a fine of Rs.40,000/- in default to undergo simple
imprisonment for a period of one year for the offence punishable
under section 420 of IPC and sentencing A-3 to undergo R.I. for a
period of one year and also to pay fine of Rs.10,000/- in default to
undergo simple imprisonment for a period of 6 months for the offence
punishable under Section 109 read with 420 of the IPC; and etc.
This appeal coming on for final hearing, this day, the court made
the following:
JUDGMENT
Heard the learned counsel for the appellant and the learned counsel for the petitioner.
2. The facts and circumstance of the case are as follows:
The present appellants were arrayed as accused No.2 and 3 in a case alleging commission of offences punishable under Sections 120-B and 420 of the Indian Penal Code, 1860 and also under Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 3 (hereinafter referred to as "the PC Act", for brevity). The first appellant, who was accused No.2 before the Court below, was the Proprietor of accused No.4 and appellant No.2, who was accused No.3, was a friend of appellant No.1. It is alleged that in respect of granting of credit facility to accused No.4, there was a criminal conspiracy between the accused No.1, who was the Branch Manager of State Bank of Patiala, J.P. Nagar Branch, Bangalore, and the other accused in respect of an amount of Rs.1,25,00,000/-, and it was alleged that accused No.1 in particular, in abuse of his official position as Branch Manager, has facilitated accused Nos.2 to 4 to engineer the illegal transaction.
3. The particulars of the allegations are as follows:
That during the year 1993-94, accused No.1, who was the Branch Manager of the said Bank as aforesaid, had extended credit facilities to accused No.4 apart from other banking facilities to accused N.2 and 4. The account had been opened in March 1993, and in furtherance of the criminal conspiracy hatched by the accused, they had presented four cheques, all in the name of accused No.4, totaling 4 to Rs.27,50,000/-. and the four cheques, as aforesaid, i.e. for a sum of Rs.2,00,000/- on 4th March 1993; for a sum of Rs.50,000/- on 15 th March 1993; for a sum of Rs.11,00,000/- on 30 th March 1993; and for a sum of Rs.14,00,000/- on 30th March 1993. It was alleged that in the ordinary course, the cheques were to be sent for clearing and thereafter the amounts had to be credited to the account of the firm. But, accused No.1, in his capacity as a Manager and abusing his official position and in order to cause pecuniary advantage to accused No.2 and 4, had dishonestly authorised the debit of clearing adjustments in respect of those cheques and permitted the said amount to be encashed through the account of accused No.4 by giving credit to the sum of Rs.27,50,000/-. It was alleged that the accused No.1, not only permitted the said cheques to be credited to the current account of the accused No.4, but also permitted the debit entry to remain in the same condition of outstanding loan amount for a long period and thereby caused wrongful loss to the Bank. It was also alleged that accused No.3 was a close friend of accused No.2 and on issue of two cheques for Rs.11,00,000/- and for Rs.14,00,000/- in the name of accused No.4 through accused No.3, though accused No.1 5 was fully aware of the fact that accused No.3 was not having sufficient balance in the account, and upon the cheques being presented, accused No.1 permitted the cheques, passed and gave credit entry in respect of those two cheques, thereby dishonestly authorising debit of clearing adjustment account and allowed accused No.4 fraudulently to avail of the banks fund of Rs.25,000/- and caused wrongful loss to the Bank. It was further alleged by the prosecution that insofar as the sanction of credit facility of Rs.1.00 crore in favour of accused No.4, accused No.2 had submitted an application in the name of accused No.4 seeking such credit facility under Inland Loan of Credit facility to the extent of Rs.30.00 lakh and cash credit of Rs.70 lakh. The duty of the Manager, viz. the accused No.1, was to state as to whether any outstanding loan existed in respect of any current account of the applicant, but, accused No.1, in order to show favour to the accused No.4 while making a recommendation dated 27 th March 1993, described the balance position as outstanding balance in the account of accused No.4 as nil, even though as on that day a sum of Rs.2,50,000/- was due towards the current account. In the usual course, it was alleged by the prosecution, that accused No.1 ought to 6 have debited the said outstanding sum of Rs.2,50,000/- to the account of the accused which would have resulted in overdraft of the current account of accused No.4 as there was insufficient funds. But accused No.1, had dishonestly debited the clearing thereby causing loss to the Bank. This was deliberately done by accused No.1 to extend pecuniary advantage illegally to accused No.2 and 4 and by suppressing the true facts relating to the outstanding balance shown in the books of account and hence abetted the criminal act of cheating the Bank by accused No.2 and 4. It was further alleged that on any loan sanctioned for any business transaction, the bank's practice was to insist upon arranging margin amount of 25% by the customer himself. In the instant case, the accused No.2 had applied for credit facility to the tune of Rs.30,00,000/- for the purpose of releasing the goods under bills of different dates. Therefore, accused No.2 was required to arrange marginal amount of Rs.7,50,000/- in order to be entitled to create the Letter of credit facility of Rs.30,00,000/-. But in order to circumvent this requirement, it was arranged that a cheque of Rs.3,00,000/- and a cheque for Rs.2,75,000/- and yet another cheque for a sum of Rs.2,00,000/- in the name of the accused No.4 and 7 though the same were not encashed, was considered as the margin amount by giving credit to the current account of the accused No.4. This was yet another circumstance to indicate the criminal conduct of the accused in availing of banking facilities without complying with the requirement of actual deposit of monies. It was further alleged that in respect of five bills demand drafts were issued by debiting to the account of No.4 without actually receiving the payment in respect of the said bills and it had resulted in exceeding the cash credit limit sanction of Rs.20,00,000/- granted to accused No.4 and accused No.1 had deliberately suppressed the information to the branch where the bills were submitted as regards non-payment of previous bills before remitting the proceeds of the settlement, thereby he had fraudulently enabled accused No.2 to obtain possession of goods pertaining to above bills without actually receiving payment and illegally permitted accused No.4 to exceed the permitted inland letter of credit limit of Rs.50,00,000/- and thereby the bank was exposed to loss. It was further alleged that though accused No.1 had no authority to issue any letter without the permission of the Head Office of the Bank, had issued a letter to one Christopher to the effect that the Bank would 8 undertake to transfer the amount received in U.S.Dollars to the Christian Children Fund of Bangalore and Delhi after the foreign remittance, and in furtherance of this undertaking given, one M/s. New York Bay Company, had sent US$7,24,387.00 on 23 rd July 1993 to the account of one Mr. Basin of Bangalore for onward transmission of the amount to the account of Christian Children Fund of Bangalore. But it was alleged that accused No.1 did not transfer the amount to Christian Children Fund of Bangalore but fraudulently induced Mr. Basin to invest a sum of Rs.1,25,00,000/- out of the said foreign remittances into the account of M/s. Madhura International, of which the wife of accused No.2 and his sisters were partners and subsequently the same was not at all transferred to the account of Christian Children Fund and the Bank had to reimburse the same amount to the rightful parties. It is alleged that this has caused loss to the Bank and the accused had committed the offence of cheating.
4. While it was specifically alleged against accused no.1 that he had committed offences punishable under Sections 13(2) read with 13(1)(d) of the PC Act. It was on these allegations that the charges were framed. The prosecution having examined 25 witnesses and 9 having marked 207 documents, on the plea of the accused that they were not guilty and having claimed to be tried. The following points were framed for consideration:
1. Whether the Prosecution proves beyond reasonable doubt that in the case on hand the evidence led by the prosecution is sufficient to proceed with against the accused persons in this case in this Court of Special Judge, constituted under the Prevention of Corruption Act, 1988?
2. Whether non-examination of the Prosecution Sanctioning Authority is fatal in this case?
3. Whether the Prosecution proves beyond reasonable doubt that the accused 2 and 4 have committed the offence of cheating within the meaning of Section 320 of the Indian Penal Code?
4. Whether Prosecution proves that accused No.3 has committed the offence of abetting other accused in cheating and thereby committed offence punishable Under Section 109 read with 420 Indian Penal Code?
5. Whether the Prosecution proves beyond reasonable doubt that the offence of criminal conspiracy is established?10
6. What Order?
5. The Court below has held points No.1 and 2 in the negative and the points No.3, 4 and 5 in the affirmative and sentenced accused No.2 to undergo rigorous imprisonment for a period of one year and to pay a fine of Rs.10,000/- in respect of the offence punishable under Section 120-B of the Indian Penal Code and to undergo Rigorous imprisonment for two years and six months and to pay fine of Rs.40,000/- in respect of the offence punishable under Section 420 of the Indian Penal Code and accused No.3 was directed to undergo rigorous imprisonment for a period of one year and to pay a fine of Rs.10,000/- in respect of the offence punishable under Sections 109 read with 420 of the Indian Penal Code, for which he had been convicted. It is that, which is under challenge in this appeal.
6. It is to be taken note of that accused No.1, who was the principal accused in these proceedings, had died during the pendency of the case before the Trial Court and therefore the case against accused No.1 has abated.
7. The learned counsel for the appellants Sri S.K. Venkat Reddy 11 would submit that without entering upon the several details of the case, it would be sufficient to consider one outstanding circumstance in the present case on hand. Insofar as the present appellants are concerned, the allegations are of having committed acts which are offences punishable under Section 120B read with Section 420 of the Indian Penal Code. As against accused No.1, the allegations made are of having committed offences punishable under Section 13(2) read with 13(1)(d) of the PC Act. Therefore, it is irrelevant to address the circumstances pertaining to the offences alleged against accused No.1, which ought not to colour the conduct of the present appellants in the transaction, which are alleged to be illegal. At the outset, it is pointed out that the primary allegations are that four cheques, as already stated, were presented between the period 4th March 1993 and 30th March 1993, when there were no funds available in the account of accused No.2 as on that date and knowing fully well that there were insufficient funds, accused No.1 had cleared the same even though he was also fully aware that accused No.2 did not have sufficient funds and the cheques having been presented and having been dishonoured were repeatedly presented to facilitate the transfer of funds in the 12 meanwhile and in order to enable the accused Nos.2 and 4 to have the benefit of deposits that were made subsequently and thereby claim that there was no irregularity in the transaction. Insofar as this aspect of the matter is concerned, the learned counsel would submit that this cannot be characterised as criminal conduct on the part of appellant No.2, who in fact, had issued the cheques. It may be termed as an irregularity but not necessarily an illegal act. In any event, the cash credit has been extended to the proprietary concern of accused No.2 viz. accused No.4 and the account was regularized as on 28 th July 1993 not only to make good the shortfall that was outstanding but including the interest on such amounts as would have been due to the Bank on the date of such regularization. Therefore, the only irregularity was that the balance being outstanding in the account of accused No.4 which was facilitated by accused No.1 on the assurance of the present appellant that the account would be regularized in due course and this having been regularized as early as on 28 th July 1993 and the above complaint making the above allegations having been launched in the year 1995, when the entire transaction was between March 1993 and July 1993, and this being the admitted position 13 whereby PW2 in his deposition has clearly stated at the time of filing of the charge sheet, that it was ascertained by him that accused No.2 has discharged the said loan and, in fact, there was outstanding credit balance of Rs.42,000/- and Rs.22,000/- as on 28 th July 1993, it cannot be said that there was a criminal act in respect of which the complaint was maintainable. Even though accused No.1 may have exposed himself disciplinary to action under the Conduct and Disciplinary Rules of the Bank by which he was employed, the acts on the part of the present appellants, could not be characterised as a criminal offence as there was no intention to deprive the bank of its monies nor has any loss been caused to the concerned bank. The allegations against accused No.1 also are to the effect that by acts of accused No.1, he had exposed the bank to risk and loss, but there was no actual loss caused to the Bank. In that view of the matter, it was not tenable to hold that the charges against the accused have been brought home, in that, the allegations have been proved beyond all reasonable doubt that the present appellants having committed the offence alleged. In this regard, reliance is placed in the case of HIRA LAL HARI LAL BHAGWATI v. C.B.I., NEW DELHI reported in 2003(3) CRIMES 100 14 (SC) in support of the contention that from the facts and circumstances it cannot be said there was commission of any such offence as alleged nor was any such intention present as is evident from the subsequent conduct of the appellants.
8. The learned counsel for the respondent, on the other hand, would vehemently oppose the appeal and would point out the fact that there was no serious dispute about the gross irregularities. In that, the appellants candidly admit the issuance of cheques being fully aware that there was no sufficient funds in the account on which date the cheques were issued and that unless there was an active conspiracy between accused no.1 and these appellants, it was not possible to have engineered the subsequent regularization of the accounts. The mere fact that there has been regularization of the account, several months after the transactions were initiated, would not absolve the appellants of the offences alleged. The fact that accused No.1 is no more and the he was the principal accused against whom serious allegations have been made, would not enable the appellants to claim that they are outsiders and cannot be accused of conspiracy with accused no.1. It is for the benefit of these appellants 15 that accused no.1 had committed the offence alleged against him and therefore the appellants are equally liable in criminal action. In this regard, he would submit that there are a catena of decisions to hold that any settlements arrived at in civil proceedings where both civil and criminal proceedings are involved, would not absolve the accused of criminal liability and in this regard he would submit, by the same token of reasoning notwithstanding the appellants claiming that as the concerned bank accounts have been regularized, there was no outstanding as on the date of complaint or well prior to the date of complaint, the initial intention of the appellants as well as accused no.1 was sufficient to bring home the charge of criminal conspiracy and cheating insofar as the present appellants are concerned. The mere fact that the appellants claim to have subsequently made good the shortfall in the account, does not absolve them of criminal liability and in this regard reliance is placed on the following citations:
1. INSPECTOR OF POLICE, CBI, v. B. RAJA GOPAL AND OTHERS (2003 SCC CRIMES 1238);
2. SMT. RUMI DHAR v. STATE OF WEST BENGAL AND ANOTHER (AIR 2009 SC 2195) 16
3. CENTRAL BUREAU OF INVESTIGATION v. A. RAVISHANKAR PRASAD AND OTHERS [2009(6) SCC 351]
9. In the above facts and circumstance, since the arguments canvassed are restricted to whether or not the appellants can be absolved of their criminal liability in the above circumstance is concerned, it is not in dispute that the accused No.4, which is a proprietary concern of accused No.2, had opened an account with State Bank of Patiala, J.P. Nagar Branch, Bangalore as on March 1993 and four cheques, referred to above, were deposited by the accused No.2 and accused No.3 between the period 4th March 1993 and 30th March 1993 and as on 28th July 1993 the outstanding debit balance in the account stood closed and there was a credit balance of Rs.42,000/- and Rs.22,000/- in the account of accused No.4, viz. the proprietary concern of Accused No.2. Therefore, as on date of complaint, which was given two years later i.e. in the year 1995, and thereafter a charge sheet having been filed, the question is whether the appellants, who claim that there was no criminal offence committed by them and when there was no indication of such criminal intention could be presumed against them having regard to the 17 admitted circumstance that cheques were deposited with knowledge that the accounts on which the same were issued did not have sufficient funds, whether can be construed as a criminal offence punishable under the sections which are invoked. Or would it be lesser offences under other penal laws, such as the Negotiable Instruments Act, 1880.
10. Insofar as the cases cited by the appellant in HIRALAL (supra), there were both civil and criminal proceedings initiated in respect of the alleged evasion of customs duty and insofar as the civil proceedings were concerned and there was a settlement arrived at between the competent authorities and the appellants. This was urged as absolving the appellants of criminal liability. The Apex Court, while placing reliance in the case of SUSHILA RANI (SMT.) v. COMMISSIONER OF INCOME TAX AND ANOTHER [2002(2) SCC 697] as well as in the case of CENTRAL BUREAU OF INVESTIGATION, SPE, SIU(X), NEW DELHI v. DUNCANS AGRO INDUSTRIES LIMITED, CALCUTA [1996(5) SCC 591], has concluded that the appellants were absolved of all charges and allegations once the customs duty had been paid and the alleged offence had been compounded and once the 18 civil case has been compromised and the alleged violation has been compounded, the alleged offence and criminal proceedings could not be continued as it would amount to an abuse of the judicial process and it has also observed at paragraph 44, thus:
"44. It appears that despite the statement of settlement having been filed under Section 88 of the Act of 1998, an FIR was lodged and a case was registered on 6.1.1999 on the basis of which, later on a charge sheet was also submitted. On the one hand final settlement was made after determining the tax liability on the premises that the appellants were neither convicted nor criminal proceedings were pending, relating to any offence under Chapter IX or XVII of the IPC, yet the criminal proceedings are being prosecuted which is apparently against the very spirit of the Scheme promulgated under the Finance (2) Act of 1998. If a person against whom criminal proceedings were pending, relating to offence under Chapter IX or XVII of the IPC or who stood convicted under any of the provisions of those chapters, he would not have been eligible to seek benefit under the Scheme and after accepting that position and the due settlement, there was no occasion to initiate and continue the criminal proceedings, which could bring about the conviction of the 19 same persons, in case prosecution ended successfully in favour of the State and against the appellants. If such a condition is provided that on a particular date a criminal proceeding should not be pending against a person nor he should have been convicted of an offence, as a condition precedent for a settlement, and on that basis a settlement is brought about, it does not mean that later on, one could turn around and get the declarant convicted for a criminal offence too, after settlement f the liability. More so when in view of Section 90 clause (iv) of the Scheme the declarant is obliged to withdraw an appeal or proceedings regarding tax liability pending before the High Court or the Supreme Court, which had also been done in the case in hand. That is to say on one hand declarant is not permitted to pursue the remedy regarding tax liability, which is already pending before the courts of law, as they are either deemed to be withdrawn by operation of law or they have to be withdrawn by a positive act of the party and yet prosecute such persons for their conviction as well. The declarant could not be dragged and chased in criminal proceedings after closing the other opening making it a deed end. It is highly unreasonable and arbitrary to do so and initiation and continuance of such proceedings lack bonafides."20
11. Insofar as the decision referred to by the learned counsel for the respondent in the case of B. RAJA GOPAL (supra), that when the trial was in progress and had reached almost the penultimate stage, the criminal proceedings had been quashed by the High Court and the State was in appeal before the Apex Court. It was contended that there was a compromise between the Bank officials and the accused and the amount had been paid later. The Apex Court, taking note of that circumstance held that perhaps that would have been a ground for pleading mitigation at the final stage and held the criminal proceedings could not have been quashed.
12. In the case of A RAVISHANKAR PRASAD AND OTHERS (supra), the respondents therein had committed serious offence such as forgery, fabrication of documents and used those documents as genuine, and that they had entered into a criminal conspiracy with the officials of the Bank in the matter of recommending, sanctioning and disbursing huge credit facilities and at the stage when criminal proceedings had reached an advanced stage and 92 witnesses had been examined in recovery 21 proceedings there was a settlement between the respondent and the concerned bank. Since the High Court had intervened and quashed the proceedings, the same was challenged before the Apex Court. In those circumstances, the Supreme Court held that the proceedings could not have been quashed under Section 482 of the Criminal Procedure Code, 1973 and the Court was primarily concerned with whether the Court shall exercise powers under Section 482 of the CrPC at that stage in respect of the trial which had progressed substantially.
13. In the case of SMT. RUMI DHAR (supra), the appellant and her husband, along with other officers of Bank were prosecuted for alleged commission of offences punishable under various sections of Indian Penal Code and under the provisions of PC Act. The charge sheet was filed against the appellant and seven others and proceedings were also initiated for recovery of certain amounts due from the appellant whereby the settlement was entered into before the Debt Recovery Tribunal. Thereafter, the appellant had filed an application under 239 of the Code of Criminal Procedure seeking discharge before 22 the Trial Court where the criminal proceedings were conducted. The application was dismissed by the trial Court, which was carried in revision before the High Court and the High Court in turn expressed that the settlement, by itself, would not exonerate the accused insofar as the charge of conspiracy was concerned, and while referring to the decision in the case of DUNCANS AGRO INDUSTRIES LIMITED, CALCUTTA (supra), the Apex Court distinguished the circumstances and held that that was a case where the matter was still under investigation, whereas in the present case on hand the investigation had been completed and the trial was on, therefore, there was no warrant for exonerating the appellant.
14. In the light of these decisions that are relied upon by the either side, in the view of this Court from a conspectus of the law laid down by the Apex Court, it is material to address as to whether the criminal proceedings had proceeded to an extent where it would make no difference if there was a subsequent settlement between the accused and the concerned party which is said to have suffered loss. In the instant case on hand, even before the complaint could be 23 lodged, the irregularity, if any, in the account of the appellants, had been regularized and there was no loss caused even if there was an intention to have caused loss illegally, to the Bank, of which accused No.1 was the Manager. That by the subsequent conduct of the appellants such intention is belied. This would make a difference as to whether the appellants could be exonerated of any such criminal liability. In all the cited cases referred to hereinabove, the outstanding circumstance is that the civil and criminal laws had been invoked simultaneously and it is after the proceedings have gone on for some time that there is a settlement on the civil side, which is either taken as a circumstance which would absolve the accused of criminal liability or otherwise. The deciding factor is whether there was simultaneous initiation of such proceedings. In the present case on hand, as already pointed out, there was no irregularity which could be alleged against the accused as on the date of complaint. The concern was of the exposure to risk of loss to the Bank in which the account was opened, for it transpires that by virtue of accused No.1 having favoured the present appellants in facilitating certain transaction which were not regular, which is the basis of the allegations for offences 24 punishable under Sections 120-B and 420 of the Indian Penal Code, when no such intention has been carried out and that the account has been regularized in the usual course of business, it cannot be said that the criminal liability continued or persisted in respect of which the prosecution could have been launched. In that view of the matter, this Court is of the opinion that the entire proceedings were not warranted in view of the admitted facts and circumstances and that on the death of accused No.1, the allegations would pale into insignificance as the seriousness of the allegations would not survive in view of the facts and circumstances.
15. Accordingly, the appeal is allowed. The judgment and sentence imposed by the Court below is set aside. The bail bonds furnished by the appellants stand cancelled and the fine amount deposited by the accused are to be refunded.
Sd/-
JUDGE lnn