Bangalore District Court
Cbi vs N Satyababu on 28 February, 2024
1 Spl.C.No.484/2017
KABC010235912017
IN THE COURT OF XLVII ADDL. CITY CIVIL &
SESSIONS JUDGE AND SPECIAL JUDGE FOR CBI CASES,
BENGALURU (CCH-48)
DATED THIS THE 28th DAY OF FEBRUARY, 2024
PRESENT
Sri Santhosh Gajanan Bhat, B.A.L., LL.B. ,
LXXXI Addl. City Civil & Sessions Judge,
Bengaluru City (CCH-82)
(Special Court exclusively to deal with criminal cases related
to elected former and sitting MPs/ MLAs in the State of Karnataka)
C/c of XLVII Addl. City Civil and Sessions Judge and Judge for
CBI Cases, Bengaluru (CCH-48)
SPL.CC.NO.484/2017
COMPLAINANT: The State of Karnataka by
CBI, ACB, Bangalore
(Sri Anil Bansal, learned Public
Prosecutor for CBI)
Vs.
ACCUSED : 1. Sri. N. Satyababu
S/o. Late. Narayanappa Gownipally
Nagappa, Aged about 51 years,
R/at.No.306/1, 2nd Main, 3rd Cross,
2 Spl.C.No.484/2017
Muniyappa Garden, K.R.Puram,
Bengaluru-560 036.
2. Smt. Shobitha Sonanth K
W/o Kenix Paul
Aged about 38 years
Secretary, M/s.Sharon School
Run by Sharon Educational Charitable
Trust
R/at: No. 20, 6th Cross,
Sharadambanagar, Jalahalli Village,
Bengaluru-560 013.
(Miss Y.B.M., Advocate for accused
No.1 and 2)
1.Date of Commission of Offence : 16.06.2014 to 23.03.2015
2. Date of Report of Offence : 29.02.2016
3. Arrest of Accused Accused are on bail
4. Name of the complainant : Sri. G.C.Matolli
5. Date of recording of Evidence : 07.03.2022
6. Date of closing Evidence : 12.02.2024
7. Offences complained of : Sec.120(B) R/w Sec.420 of
IPC and Sec.13(2) R/w
13(1) (d) of the Prevention
of Corruption Act, 1988
8. Opinion of the Judge : As per the final order
JUDGMENT
The Inspector of Police, CBI, ACB, Bengaluru filed charge sheet against accused persons for offences for the offences 3 Spl.C.No.484/2017 punishable under Sec.120B r/w 420 of IPC and under Sec.13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988 ('P.C.Act' for short).
2. It is the case of the prosecution that a case came to be registered in RC 03(A)/2016 against accused No.1 N.Satyababu on the written information filed by PW1 G.C.Matolli, Deputy General Manager, Syndicate Bank, Regional Office, North, Bangalore. It has been contended that the accused No.1 N.Satyababu was working as Senior Manager, Syndicate Bank, Jalahalli Branch, Bengaluru during the period from 16.06.2014 to 20.03.2015. It has been stated that later on he was dismissed from the service by the competent authorities while working as Senior Manager, Syndicate Bank. The main contention of the prosecution is that the accused N.Satya Babu had entered into criminal conspiracy with accused No.2 Smt.Shobitha Sonath.K who was the Secretary of M/s.Sharon School ('School' for short) run by M/s.Sharon Educational Charitable Trust, at D.J.Halli, Bengaluru. It has been submitted that accused No.2 had applied for a loan under Micro and Small Enterprises Scheme ('MSE scheme' for short) towards purchase of 4 Spl.C.No.484/2017 furniture for the use of their school and had also enclosed the quotation from St. Anthony Industries, represented by PW6 Francis.V who was also close relative of accused No.2, to avail the loan. In pursuance of said criminal conspiracy entered between accused No.1 N.Satya Babu and accused No.2 Smt.Shobitha Sonath K, accused No.1 had accommodated her to credit facility as term loan under MSE scheme and processed the application and sanctioned loan to an extent of Rs.6.50 Lakhs. At the time of sanctioning of the loan, accused No.2 Smt.Shobitha.K had furnished necessary invoice allegedly issued by PW6 Francis. Further, it has been contended that though the amount was sanctioned under MSE Scheme, accused No.2 was required to purchase furniture required for the school totally to an extent of Rs.6.50 lakhs. It has been stated that the quotation which was furnished was for a sum of Rs.8.75 lakhs out of which the remaining amount was to be construed as margin money, which was required to be deposited by accused No.2 herself. It has also been stated that the investigation being conducted by the Internal Auditor of the Bank revealed that the accused No.2 had not purchased any furniture as prescribed by her by availing 5 Spl.C.No.484/2017 term loan of Rs.6.50 lakh from the bank and in fact the end usage of the loan was not as per the terms and conditions of the loan. It is the specific contention of the prosecution that the accused No.1 N.Satya Babu who was the Branch Manager at that point of time was responsible for verifying the documents and processing the loan application in accordance with law. It is contended that the Accused No.1 was required to strictly adhere to all the circulars and guidelines issued by the Reserve Bank of India (RBI for short) and also that of the Syndicate Bank from time to time and in derogation of the same, he had sanctioned the loan without obtaining necessary documents from the accused No.2 who was Secretary of the School. It is also submitted that the accused No.1 being the Senior Manager was duty bound to verify the documents in proper perspective and also he was required to verify as to whether the loan amount which was sanctioned and disbursed was utilized by beneficiary as per the terms and conditions mentioned in the loan sanction letter. Without obtaining any such materials, the act of accused No.1 would indicate of hatching of conspiracy by accused No.1 with accused No.2 who were holding responsible position in the school and had utilized the 6 Spl.C.No.484/2017 amount not for the purpose for which it was borrowed and furnished fake quotation and invoice and accordingly had misused the loan amount which was disbursed for purchasing furniture and other materials to the School. The alleged act was noticed during the course of internal audit being conducted by the PW3 Nagesh and the same came to be reported to the higher authorities of the Bank. On the basis of the same, the higher authorities had reviewed the loan applications which were processed and sanctioned by the accused No.1 and they had unearthed an act amounting criminal conspiracy by accused No.1 and 2 and also cheating and defrauding the public exchequer in particularly of the Bank. Accordingly, written information came to be filed. On the basis of the said written information, an FIR came to be registered by the Investigating Agency in RC 3(A)/2016 for the aforesaid offences and the Investigating Agency had commenced the investigation. The Investigating Officer during the course of his investigation had visited the bank and collected necessary materials pertaining tothe loan processing and sanctioning of loan to Sharon School represented by accused No.2 Smt.Shobitha.K. It has also been 7 Spl.C.No.484/2017 contended by the Investigating officer that during the course of his investigation he had visited the school along with PW3 Nagesh and PW4 Guruprasad with a photographer and noticed that no such structure was in existence at the address which was shown in the loan application as Sharon public School. Subsequently, an independent valuer was also appointed to look in to the aspect that whether the materials were obtained and had fulfilled the conditions of the loan. It was noticed that the building in which the alleged school was set up had already been vacated by accused No.2 and on telephonic call, she had stated that they were running the school in some other premises. In this regard, the I.O., had also recorded the statement of PW7 Jitendra Singh, who had stated that accused No.2 Shobitha was running the said School and was not regular in paying rent and as such she had vacated the premises in the month of May- 2016. On collection of such materials and documents pertaining to the filing of loan application, processing and sanctioning of loan to M/s.Sharon School, it was noticed that the end usage as indicated in the loan application, was not been made by accused No.2. The investigation also revealed entering of criminal conspiracy between 8 Spl.C.No.484/2017 accused No.1 N.Satya Babu and accused No.2 Smt.Shobitha.K and accordingly, the I.O. had proceeded to file the charge sheet against them.
3. On the receipt of the charge sheet filed against the accused persons, the court had perused entire materials on record and had found that there were necessary materials to take cognizance for the offences as alleged in the charge sheet. By passing a reasoned order necessary cognizance was taken against accused No.1 and 2 and they were summoned to appear before the court. In pursuance of the summons the accused No.1 N.Satya Babu and accused No.2 Smt.Shobitha Sonath.K appeared before the court and they were admitted to bail. It is also noticed that the accused had filed necessary applications seeking for their discharge which came to be rejected and my predecessor in office had found necessary materials to frame charges against the accused persons. On the said premise, necessary charges under Sec.120B, 420 of IPC and under Sec.13(2) r/w 13(1)(d) of P.C.Act came to be framed against the accused persons. The accused persons had pleaded not guilty and claimed to be tried. The prosecution in order to prove 9 Spl.C.No.484/2017 their case had examined totally 14 witnesses as PW1 to PW14 and got marked documents as exhibits Ex.P.1 to Ex.P.61. On completion of prosecution evidence, the statement of accused came to be recorded as contemplated under Sec.313 of Cr.P.C., wherein the accused No.1 and 2 had denied all the incriminating materials appearing against them. The accused had not preferred to lead any defence evidence and as such the case was posted for arguments.
4. Learned Public Prosecutor Sri Anil Bansal appearing on behalf of CBI authority had vehemently argued that the entire case of the prosecution is required to be appreciated based on the circumstantial evidences and also from the materials which were produced by accused No.2 to the Bank. It is the first contention that the accused No.2 Shobitha who was the Secretary of the School, had clear knowledge that the amount which she had intended to borrow was not been used for the purpose of purchasing the furniture to the school and also it was clearly known to her that the same was to be misused by the school. He has also vehemently argued that the accused No.1 being the custodian of the financial management of the Bank, was required to play a very important role and he should 10 Spl.C.No.484/2017 have observed due diligence as directed by the RBI and also by the Syndicate Bank from time to time in their circulars. He has contended that though the loan under MSE Scheme does not require any securities to be obtained, at the same time, the accused No.1 being the Senior Manager was required to act in due diligence and he should have verified the loan application in proper perspective and also he should have appreciated whether end usage of the amount would be made as contemplated. He has also pointed out that the circulars will clearly indicate that the person at the first instance applying for loan was required to furnish quotation and in the case on hand, the quotation was furnished for Rs.8.75 lakhs. It is also argued at length that the pre-receipt which has been produced by the accused No.2 would indicate of handing over a sum of Rs.2.50 lakh to PW6 Francis.V. However, the said aspect has not been admitted by PW6 Francis, it would indicate that it is a concocted story being created by accused No.2 Shobitha. It is also been submitted that as per the statement of accounts on 6.1.2015 a sum of Rs.6.50 lakh was transferred to the term loan account of the School i.e., Sharon School and immediately thereafter, the amount 11 Spl.C.No.484/2017 was withdrawn for obtaining a demand draft. It is his submission that PW6 Francis has specifically deposed that he has not received any demand draft nor he had supplied any furniture to Sharon School. It is also been pointed out by the learned Public Prosecutor that there was no receipt produced by the accused No.2 Shobitha, the Secretary of the School, to indicate of purchasing furniture and other equipment as mentioned in their quotation and invoice to the bank.
5. The learned Public Prosecutor has also argued that PW6 Francis has specifically deposed that no such invoice was issued by him and in fact the signature found on the invoice and also on the pre-receipt when compared with the other materials would indicate to bare eyes that the signatures were forged by accused No.2 Shobitha. It is his submission that since the question of criminal conspiracy being involved, the court has to draw necessary inferences by looking into the conduct, coupled with the act of the accused persons. He has further argued that though a categorical admission is being made by PW6 Francis during the course of his cross-examination that he had returned back the amount which he 12 Spl.C.No.484/2017 had received through DD to an extent of Rs.6.50 lakh to accused No.2, the same will not be fatal to the case of prosecution, since it is the bounden duty of accused No.2 to offer an explanation that how and in what manner they had obtained the furniture and if at all they had purchased the furniture, why they had not required to furnish necessary documents in order to justify their contention. By pointing out all these aspects and also by pointing out to the documents which were collected by the Investigating Agency, the learned Public Prosecutor has vehemently argued that the contention of the prosecution is proved beyond reasonable doubt.
6. With respect to the act accused No.1 N.Satya Babu, learned Public Prosecutor has argued that he being the Senior Manager, should have insisted accused No.2 to furnish necessary documents with respect to the invoice and also on purchase of the alleged materials as undertaken by the School authorities. In the absence of the same, the contention of accused No.1 exercising due diligence would not be proper. It is also been submitted that accused No.2 Shobitha who was the Secretary of the School, had received the loan amount and later on had transferred the same to the SB 13 Spl.C.No.484/2017 account of the School would only fortify the case of the prosecution that the utilization of the amount was not for the purpose for which it was borrowed. The learned Public Prosecutor has also pointed out to Ex.P.44 i.e, the account extract would indicate that immediately after deposit of Rs.6.50 lakhs, on the very next day i.e., on 6.1.2015 the accused No.2 Shobitha had made several transactions towards the payment of electricity bill and also transfer of Rs.25,000/- as hand loan to some other person. Though the said amount was returned back and re-deposited to the account, in a couple of days, the same would not exonerate the accused No.2 from her liability, since she had misused the amount which was sanctioned for purchasing of furniture. By pointing out all these aspects, it is his contention that the act of accused No.1 had attracted the rigors of Sec.120B r/w 420 of IPC and also the provisions of Sec.13 of the Prevention of Corruption Act, 1988 since he has committed misconduct which would benefit him or any other persons for getting themselves enriched. Under the circumstances, the learned Public Prosecutor has sought for convicting the accused persons for the aforesaid offences.
14 Spl.C.No.484/2017
7. Per contra, the Sri Venkataramana N.Nayak and Miss. Yashodha appearing on behalf of accused No.1 and 2 have vehemently argued that the prosecution has utterly failed to prove their case beyond reasonable doubt. The learned counsels for accused have taken this court in detail about the evidence which has been recorded before this court and also tenor of the cross- examination. It is their contention that a duty was casted upon accused No.1 N.Satya Babu who was the then Senior Manager of Syndicate Bank, Jalahalli branch to discharge his duties in accordance with law, wherein he had exercised due diligence as required under the provisions of law. It is also been argued at length that the circulars which were produced through PW4 Guruprasad would only indicate that certain formalities were required to be adhered to. It is his further submission that the evidence of PW3 Nagesh who was the Internal Investigator would clearly indicate that accused No.2 who was the Secretary of Sharon School was the existing customer of the Bank and they had availed several benefits from the Bank. It is his submission that PW3 Nagesh had in fact admitted during the course of his cross-examination that the school 15 Spl.C.No.484/2017 had furnished Trust Deed for availing some other loan and in none of the loan availed by them they had defaulted in making payments.
8. Further, the learned counsel for accused contended that as per Ex.P.23 loan application and Ex.P.25 pre-sanction receipt, it was mandated that the School was required to furnish a quotation and with respect to the same, they had furnished the quotation as per Ex.P.24. He has also argued that during the course of cross-examination of PW6 Francis, it was elicited that he was the relative of accused No.2 Shobitha and he was not in good terms with her. It is also been argued that the witness though had deposed in his chief-examination that he had not received any amount from the School authorities nor he had supplied any furniture, he had categorically admitted that he had received the amount during the course of his cross examination. In order to butters his submission, the learned counsel has taken this court to the deposition wherein at the first instance, PW6 Francis has denied of receiving any amount and subsequently, he has deposed that only recently he came to know that the amount was credited to his account. He has further volunteered that he had returned back the amount within four days 16 Spl.C.No.484/2017 to accused No.2 Shobitha who had obtained his cheque at the time of receiving quotation from him. Further he has stated that he had mentioned about the receipt of Rs.6.50 lakhs in his Income tax Returns for the year 2014-15. By pointing out the same the learned counsel for accused No.1 and 2, has argued that the prosecution has failed to appreciate the fact of existing animosity existing between the PW6 Francis and accused No.2 Shobitha. It is his contention that during his cross-examination, he has elucidated that due to the said animosity and non-co-operation by PW6 Francis, accused No.2 was unable to purchase any material from him and they had in fact purchased the furniture from Pan Office System Pvt Limited. It is further argued that though it is submitted by prosecution that the School was not in existence, the materials would indicate that the school was in existence even to this date. He has argued that since the building in which the School was being run, was in dilapidated condition as adduced from the evidence of PW7 Jitendra Singh and also PW8 Venkatesh, and hence the school was shifted to other premises. He has also submitted that the evidence of PW4 Guruprasad and also that of I.O. PW14 Rakesh Ranjan would only 17 Spl.C.No.484/2017 indicate that subsequently, when they had visited the premises, also it was stated by accused No.2 that she was running the school in other premises after obtaining necessary permission from the Block Education Officer to shift the premises. By relying upon the said aspect, it is his contention that at no point of time the amount was misused and in fact the account extract would clearly indicate that the accused No.2 Shobitha had transferred the amount in favour of PW6 Francis and in fact he was unable to meet the demands of accused No.2 and later on he had returned their amount. After the receipt of the same, the accused No.2 had purchased the materials from M/s.Pan Office Systems Pvt Limited as pointed out and also the valuation which was conducted by the Investigating Agency would fortify their contention. By pointing out all these aspects and also since the account was never classified as non-performing asset, it is submitted that the contention of the bank authorities itself was wrong. The bank authorities failed to appreciate the fact the School was the existing customer for the last 20 years and they had furnished all the documents which were required to be submitted on their behalf at the time of filing their application and also it was 18 Spl.C.No.484/2017 elucidated that the Trust document was also submitted to the bank for availing loan which was also with the bank authorities. Under the circumstances, the allegations leveled by PW3 Nagesh who was the Internal Investigator, that the Manager has not complied the KYC norms and also not processed the loan application properly, were not proper and correct. Since the accused No.2 had preferred to deposit the amount in its entirety, the bank had refused to receive the same as above case was already registered by the CBI authorities.
9. Lastly the learned counsel for the accused No.2 has also pointed out that as per the loan documents, Ex.P.49 which was hypothecation document would indicate that the documents were signed by all the Trustees of the School. Under the circumstances, fastening of liability on accused No.2 Shobitha was not proper and even the amount which was remitted and transferred and once again received back by way of cheque being issued by PW6 Francis was also drawn upon the School account itself, it would indicate that no malafides or criminal intention were attached to the act of accused 19 Spl.C.No.484/2017 No.1 and 2. By pointing out the same he has submitted that the prosecution has failed to prove their case beyond reasonable doubt.
10. The learned Public Prosecutor has also filed written synopsis. In order to butters his submission and in furtherance of the same he has relied upon the judgments of the Hon'ble Apex Court as detailed below:
1) (2002) 7 SCC 334 (Mohammed Khalid Vs. State of West Bengal) wherein the Hon'ble Apex Court had discussed about the modalities of ascertaining the existence of criminal conspiracy as per sec.120B of IPC.
2) (2023) SCC OnLine SC 1261 (Balvir Singh Vs. State of Uttarkhand) wherein once again the Hon'ble Apex Court has discussed and held that the concept of conspiracy is hatched in darkness and at the time of trial the court is required to consider the same by looking in to the circumstantial materials which has been produced on the basis of circumstances indicated therein.
3) (2020) 2 SCC 153 (SHO, CBI/ACB, Bangalore Vs. B.A.Srinivasan and another) wherein it has been held that the mandate of Sec.19 of obtaining 20 Spl.C.No.484/2017 prior sanction against an employee who has been retired or dismissed from the services, is not required.
4) (2005) 9 SCC 15 (Devender Kumar Singla Vs. Baldev Krishan Singla) wherein it was held that the provision of section 420 of IPC would indicate the necessity of dishonest inducement to deliver a property and the essential ingredients are making of a false representation and it is not necessary that a false pretense should be made in express words, but it may be inferred from all circumstances including the conduct of accused in obtaining the property. It is also been held that the proof of direct evidence was not possible in respect of considering the existence of mens rea and also requirement under sec.415 of IPC to indicate that cheating was that deception of a new person whereby he was fraudulently and dishonestly induced to deliver a property.
11. By pointing out the said authorities, the learned Public Prosecutor has argued during the course of his reply that the prosecution has proved their case beyond reasonable doubt and accordingly, he has sought for convicting the accused persons. 21 Spl.C.No.484/2017
12. Per contra, the learned counsel for accused has also relied upon various authorities of Hon'ble Apex Court reported in:
1) (2021) 18 SCC 70 (N.Raghavender Vs. State of Andhra Pradesh, CBI) wherein the principles of Sec.420 of IPC has been discussed by the Hon'ble Apex Court and it has been held that mens rea of the accused at the time of inducement is a condition precedent. By pointing out the same, the learned counsel for accused has argued that the accused No.2 had never entertained any idea nor mens rea to commit the offences.
2) (2016) 12 SCC 273 (K.Sivaprakash Vs. State of Kerala) wherein it was held that in the matters pertaining to committing criminal misconduct by abusing the position by the public servant the evidence of obtaining pecuniary advantage for himself was mandatory and the mandatory ingredients to attract the provisions of Sec.13(1)(d)(i) was also succinctly discussed.
3) (1980) 3 SCC 110 (Abdulla Mohammed Pagarkar vs State (Union Territory Of Goa, Daman And Diu) wherein Hon'ble Apex Court has held that mere disregard of relevant provisions of general financial rule as well as ordinary norms of procedural 22 Spl.C.No.484/2017 behaviour of Government officials would not be construed as an offence coming within the purview of the Prevention of Corruption of Act.
4) (2007) 13 SCC 410 (Radha Pisharassiar Amma vs State Of Kerala) wherein the same principles with respect to attracting criminal conspiracy and rigors of the P.C.Act was succinctly discussed.
13. By pointing out the said authorities along with the infirmities in the above case, the learned counsel for accused has vehemently argued that the prosecution has utterly failed to prove their case beyond reasonable doubt and has accordingly sought for acquittal of Accused persons.
14. Heard the arguments of both the parties and perused materials. The points that would arise for my consideration are as follows:-
1) Whether the prosecution proves that obtaining of prior sanction to prosecute accused No.1 N.Satya Babu under Sec.19 of Cr.P.C., is not required in the wake of his dismissal from service of the Bank as a public servant?23 Spl.C.No.484/2017
2) Whether the prosecution proves beyond reasonable doubt that accused No.1 being public servant and working as the then Senior Manager of Syndicate Bank, Jalahalli Branch between 16.6.2014 and 20.03.2015 had entered in to a criminal conspiracy with accused No.2 Shobitha Sanath.K, Secretary of M/s.Sharon School, Jalahalli, Bengaluru with respect to Sanction of Term Loan under MSE scheme and extended credit facility to the accused No.2 to an extent of Rs.6,49,542.39 without adhering to the banking principles and conditions and thereby committed offence punishable under Sec.120-B of IPC?
3) Whether the prosecution proves beyond reasonable doubt that the accused No.1, in furtherance of criminal conspiracy and by gross abuse of his official position with dishonest intention to cheat and defraud the bank, had sanctioned and disbursed loan to accused No.2 without following banking procedures and caused loss to the bank and thereby committed an offence of criminal misconduct punishable under Sec.13(1)(d) r/w 13(2) of P.C.Act, 1988?
24 Spl.C.No.484/2017
4) Whether the prosecution proves beyond reasonable doubt that the accused No.2 in furtherance of criminal conspiracy for the aforesaid period mentioned above had fraudulently and dishonestly applied for a term loan of Rs.6.5 lakhs in the name of School and submitted quotation with a clear knowledge that no such materials would be purchased from M/s.St.Anthony Industries run by Francis.V who was none other than her relative and got the loan sanctioned and utilized the amount for her own purpose and thereby committed offence punishable under Sec.420 of IPC?
5) Whether the prosecution proves beyond reasonable doubt that the accused No.1 being Senior Manager of the Syndicate Bank, Jalahalli Branch, had abused his official position and had processed loan to an extent of Rs.6.50 lakhs in favour of M/s.Sharon School of which accused No.2 Shobitha was Secretary and had sanctioned and disbursed the loan without conducting the pre and post sanction inspections and had caused wrongly loss to the bank to an extent of Rs.6,49,542.32 paise and thereby made wrongful gain for himself 25 Spl.C.No.484/2017 and committed offence punishable under Sec.420 of IPC.
6) What order?
15. My answer to the above points are as follows:-
Point No.1: In the Affirmative Point No.2: In the Negative Point No.3: In the Negative Point No.4: In the Negative Point No.5: In the Negative Point No.6: As per final order for the following:-
REASONS
16. Before adumbrating to the factual aspects of the case, the facts in narrow compass is that the accused No.1 N.Satya Babu was the then Senior Manager of Syndicate Bank of Jalahalli Branch during the period 16.6.2014 to 20.3.2015 and accused No.2 Shobitha was the Secretary of M/s.Sharon School and had applied for a term loan of Rs.6.50 lakhs for purchasing furniture to the School and had also produced quotation from PW6 Francis who was the proprietor of St.Anthony Industries and on the basis of the said quotation, the accused No.1, without following the due process 26 Spl.C.No.484/2017 of law and ignoring the banking guidelines and circulars, had sanctioned loan under MSE scheme and disbursed the amount directly to the term loan account of the School, without verifying the end usage had got the amount credited to the account of the School and the School in turn had not purchased any furniture and had utilized the said amount for their own purpose and thereby it is alleged that the accused No.1 had misused his official position grossly and illegally and had committed criminal misconduct, which would attract the provisions of Sec.13(1)(d) r/w 13(2) of P.C.Act and also in furtherance of their criminal conspiracy as contemplated under Sec.420 of IPC, the accused No.1 and 2 deceitfully obtained the loan through the loan process and had caused loss to the extent of Rs.6.45 lakhs and thereby attracting provisions of Sec.420 of IPC.
17. To substantiate the above allegations, the evidence which has been lead before the court by the prosecution is also to be looked into. The case came to be registered on the basis of written information filed by PW1 G.C.Matolli, who has deposed that he was the Deputy General Manager of the Syndicate Bank 27 Spl.C.No.484/2017 during the relevant period of time and at the instance of the Chief Vigilence Officer, who had authorized him, he had lodged the complaint against accused No.1 and 2 on the grounds of cheating, fraud, misrepresentation, false and fabricated information, creating and submission of false documents, criminal breach of trust and misappropriation of public money. It is his contention that the complaint at Ex.P.1 consisted of his signature and during the course of his cross-examination he has admitted that he does not know anything about the acts committed by accused No.1 and 2 personally and he had acted only upon the directions being issued upon him.
18. PW2 Venkatesh is the Asst. General Manager of the Syndicate Bank, deposed of receiving directions by the office at Ex.P.2, wherein the accused No.1 was dismissed from service. Apart from denial, nothing has been elicited from him.
19. PW3 Nagesh was the Senior Manager of the Bank and he has deposed that he was authorized by Senior officials to conduct internal investigation of Jalahalli Branch for the period of 28 Spl.C.No.484/2017 June-2014 to March-2014 and at that point of time, he has recovered certain documents and transactions which were made during the tenure of accused No.1 and had found that the accused No.1 had not followed the banking principles and he had also not followed the KYC norms and sanctioning authority was not appraised of disbursal of loan and nor necessary permission were obtained and on completion of his internal investigation, he had furnished report. He has also identified his signature on the seizure memo at Ex.P.3 and the report at Ex.P.4. Further he has produced several circulars with respect to the functioning of the bank which were issued by the higher authorities and RBI and he has also identified the loan application which was filed by the School as per Ex.P.23 and he has deposed that the loan was sought for a sum of Rs.6.5 lakhs towards purchase of furniture and fixtures from St.Anthony Industries as per the quotation at Ex.P.24 and a pre- receipt of paying Rs.2.50 lakh produced as per Ex.P.25 and loan review format and process note were filed as per Ex.P.26 and 27. It is his contention that the said loan documents were processed by accused No.1 single handedly. He has also identified the joint 29 Spl.C.No.484/2017 inspection report as per Ex.P.32 and it is his specific evidence that though the School was being run during the course of his investigation, but no such furniture and fixtures were purchased. He has explained in detail about the procedure to be adopted by the bank authorities with respect to processing of loan and its disbursing. During the course of his cross-examination, he has deposed that as per the oral instructions, he has conducted the internal investigation, which had taken 6 months for him to submit his report to the higher authorities and in order to do so he has taken the assistance of PW4 Guruprasad. He has also admitted that the accused No.1 at that point of time had power of sanctioning the loans pertaining to the above case and also for sanctioning MSE scheme loans and term loan. He has also admitted that all the borrowers were the existing customers of the bank and they had availed several facilities from the Bank. He has also admitted of taking assistance of accused No.1 to visit the units for which the loan was processed and disbursed. Further, he has admitted that the higher authorities were satisfied with the reports submitted by him and also he had made visit to the Sharon School in the month of 30 Spl.C.No.484/2017 November 2016. Further, it is his evidence that at the time of his visit in the month of November 2016, they came to know that the School was shifted to some other premises at K.G.Halli, Bengaluru and also they had not seized any loan papers pertaining to accused No.2. Apart from that nothing much has been elucidated from him.
20. PW4 Guruprasad was the Assistant Manager of Syndicate Bank, had deposed of assisting PW3 in conducting the Internal Investigation and also he has furnished several circulars. He has also deposed about furnishing statement of account of the School pertaining to the period 01.01.2014 to 14.08.2015 as per Ex.D.44. During the course of cross-examination, he has admitted that he was not working at said branch at the time of disbursal of the amount, nor he has any personal knowledge with respect to the loan amount. Apart from that nothing much has been elicited from him.
21. PW5 A.M.Vasudevan has deposed that he had worked as Senior Manager of Syndicate Bank, Jalahalli Branch and he has 31 Spl.C.No.484/2017 produced loan document pertaining to CW1 and had issued the acknowledgment. Nothing much was elicited from him.
22. PW6 Francis is the Proprietor of M/s.St.Anthony Industries who has deposed of issuing quotation as per Ex.P.24 in favour of accused No.2 who was running the School in the year 2014-15. He has deposed that accused No.2 had not approached him for purchasing furniture nor he has supplied any furniture to the School. He has specifically denied of issuing invoices in this regard and had also denied the signature found in the cash voucher at Ex.P.25. During the course of his cross-examination, he has feigned his ignorance with respect to availing of loan by accused No.2. He has specifically admitted the Photostat copy of his bank account maintained with Karnataka Bank, Gokula Branch, Bengaluru. However, the same was not marked since the accused had submitted that he would summon the original with process. The witness has also deposed that his current account No. was 104 maintained at Karnataka Bank and has categorically admitted of crediting of Rs.6.25 lakh to his account on 20.01.2015. He has further deposed that the accused No.2 within four days had 32 Spl.C.No.484/2017 received back the said amount through cheque which was deposited to her account. However, he has deposed of informing the aforesaid transaction to his auditor at the time of filing his ITR for the year 2015. Apart from that nothing much has been elicited from him.
23. PW7 Jitendra Singh was the owner of the premises where the School was run in the year 2011 and has deposed that subsequently accused No.2 was not able to pay the rent properly and accordingly, they had vacated the premises in the month of May 2016.
24. PW8 N.Venkatesh is the valuer, who has deposed in respect of furnishing the Inspection Report as per Ex.P.47.
25. PW9 Amar Devendra Nasi was the Manager in Regional Inspectorate, who has deposed collecting certain documents with respect to internal audit.
26. PW10 Anand was the photographer, who has deposed of visiting the units along with the CBI authorities.
27. PW11 A.Balasami is the scientific expert who has deposed of working as Deputy Director and Scientist at CFSL, 33 Spl.C.No.484/2017 Hyderabad and had deposed about verifying and inspecting the specimen signature of accused No.2 Shobitha along with the loan application.
28. PW12 Rajendra Kumar.S was the Senior Manager who has deposed of conducting verification of papers and during the course of cross-examination he has admitted that with respect to the loan pertaining Sharon School, necessary securities were obtained and apart from that nothing has been elicited.
29. PW13 R.K.Shivanna was the Inspector of Police, who had deposed of registering of FIR as per direction issued by his higher authorities in RC 3(A)/2016 as per Ex.P.60. He has deposed of commencing investigation and recording statement of various witnesses and also collecting of materials.
30. PW14 Rakesn Ranjan is the Investigating Officer who had received the case file on 2.9.2016 and verified the same. It is his evidence that he had recorded the statement of witnesses and also he had visited the School premises on 23.11.2016 and had come to know that the School was not in existence at the address 34 Spl.C.No.484/2017 mentioned in the loan application. However, a notice was displayed in the said premises of shifting the School to some other premises along with some contact numbers which they were unable to get connected. He has deposed of drawing proceedings as per Ex.P.3 and also after completion of the investigation he has deposed about filing of the charge sheet. Apart from denials nothing much was elicited from him during the course of cross-examination.
31. Point No.1:- In the instant case, it has been specifically contended that the accused No.1 N.Satya Babu at the time of commission of offence was working as Senior Manager at Jalahalli Branch of the then Syndicate Bank. It is not in dispute that the alleged incident had taken place during the period 2014-15. Under the circumstances, when the provision of Prevention of Corruption Act is invoked, it would be bounden duty of the prosecution to establish the fact that the question of obtaining sanction is not required in the instant case. The learned Public Prosecutor has vehemently argued that the evidence of PW2 Venkatesh would clarify the position of law in this regard. It is his contention that PW2 Venkatesh who had appeared before the court 35 Spl.C.No.484/2017 has specifically deposed that accused No.1 N.Satya Babu was dismissed from the service which is evident from the letter marked as Ex.P.2 in the instant case. On perusal of the said document, it indicates that the correspondence had taken place between the Investigating Agency and also with the competent authority of the Bank. It has been stated that upon initiation of Departmental proceedings against accused No.1, he was found guilty and accordingly, he was dismissed from the services as per the orders passed by the Disciplinary Authority in No.117/PD-IRD/DA-6 dated 22.3.2017. Hence, it is stated that the question of according sanction to prosecute him does not arise. The provision of law with respect to according of sanction under Sec.19 of Cr.P.C., is also very clear, which would indicate that only if the persons are in service, then necessary sanction is required. By considering the said aspect, it is crystal clear that no sanction is required to prosecute accused No.1 as he was already dismissed from the services. Accordingly, the Point No.1 is answered in the Affirmative.
32. Point No.2 to 5: Now with respect to the facts which are alleged in the above case, it is required to appreciate the 36 Spl.C.No.484/2017 allegations leveled against the accused persons. At the cost of repetition, it is the first and foremost contention alleged by the Investigating Agency that the accused No.1 N.Satya Babu who was the then Senior Manager of Syndicate Bank, Jalahalli branch, Bengaluru, had entered into criminal conspiracy with accused No.2 Shobitha who was the Secretary of M/s.Sharon School. In furtherance of the said criminal conspiracy to cheat and defraud the bank, accused No.1 sanctioned loan under MSE Scheme to an extent of Rs.6.50 lakhs without following due process of law and he had not adhered to the guidelines and circulars issued by the RBI and Syndicate Bank from time to time. Hence, the main aspect which is to be appreciated at the first instance is entering into criminal conspiracy between accused No.1 and 2. It is well settled principles of law that criminal conspiracy will be hatched up in darkness and will be executed for which there will not be any direct evidence. It is also relevant to appreciate that when an allegation of criminal conspiracy is alleged, the same is required to be considered on the basis of the materials available on record and at 37 Spl.C.No.484/2017 times, the circumstantial evidence is also required to be looked into.
33. The learned Public Prosecutor has vehemently argued that the material which has been placed before the court i.e., the loan application at Ex.P.23 would indicate that the accused No.2 had filed necessary application to borrow the loan amount, which she never intended to utilize for the purpose for which it was sought. It is his contention that if at all the Manager i.e., accused No.1 had acted diligently and in accordance with the circulars guidelines issued by the RBI and by the Bank from time to time, question of granting of such amount would not have arose. In order to point out the said aspect, he has relied upon the report filed by PW3 Nagesh which is marked as Ex.P.4. On perusal of the report Ex.P.4 which is but Internal Investigation Report, would indicate that several allegations has been leveled against the Manager- accused No.1. It is pertinent to note that the main allegation which has been leveled against accused No.1 and 2 in the above case is that the Branch Manager was required to consider whether the supplier of the furniture was in existence or not. It has been 38 Spl.C.No.484/2017 observed in the report in particularly at Internal Page No.8 of Ex.P.4 that M/s.St.Anthony Industries had issued quotation favour of the School for supplying furniture and fixtures. The Loan amount was sanctioned by the Manager and it was credited to the S.B.Account of the School and it was also withdrawn by cash. It has been stated that at the time of investigation, they had jointly visited the place and found that there were no new furniture and fixture made available. Further, it has been stated that the borrower had allegedly misappropriated the bank fund with connivance of accused No.1 N.Satya Babu. It is also narrated that as per the Manual of Instructions the Manager, before remitting the loan proceeds, was required to conduct due diligence of supplier i.e., the credential of the Supplier, genuineness of quotation issued by the supplier and he should have ascertained their standing in the market and after satisfying the said formalities, the loan proceeds were required to be finalized. Lastly the bank officials were also required to visit the place in order to confirm the end use of the funds. However, no such acts were made by the accused No.1. It is also been stated that the operation of the OD Account shall be 39 Spl.C.No.484/2017 monitored and both withdrawals and debit of cheques should only be made through NEFT/RTGS and also the funds should not be diverted. It is stated that the accused No.1 had not taken necessary precaution in this regard. On perusal of the records, the main allegations which could be culled out are as under:
a) accused No.1 had not exercised due diligence with respect to sanctioning the loan and had not conducted pre-visit and post visit on sanctioning of the loan amount,
b) should have verified the genuineness and the quality and quantity of the materials being supplied by the supplier M/s. St.Anthony Industries
c) he should have ensured that the loan amount disbursed should not be deviated for any other usage.
34. By looking in to the said report, the allegations indicate entering of criminal conspiracy between accused No.1 and
2. In the instant case, as already noticed the allegation of conspiracy is required to be proved on the basis of the circumstances which are prevailing in the above case. It is the settled principles of law that the concept of criminal conspiracy 40 Spl.C.No.484/2017 cannot be proved in normal circumstances by way of direct evidence. However, the same may be proved by indicating the circumstances which would lead to draw inference that a miner irregularity was not an act of conspiracy. In the instant case as noticed above, some irregularities were being committed by accused No.1. Under the circumstances, the moot aspect which is required to be determined is whether such irregularity amounts to entering into criminal conspiracy. In this regard, the authority which has been relied upon by the learned Public Prosecutor is required to be considered which is reported in (2002) 7 SCC 334 (Mohammed Khalid Vs. State of West Bengal) wherein the Hon'ble Apex Court has held as follows:
"17. It would be appropriate to deal with the question of conspiracy. Section 120B of IPC is the provision which provides for punishment for criminal conspiracy. Definition of 'criminal conspiracy' given in Section 120A reads as follows:
"120A-When two or more persons agree to do, or cause to be done,- (1) all illegal act, or (2) 41 Spl.C.No.484/2017 an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy;
Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.' The elements of a criminal conspiracy have been stated to be: (a) an object to be accomplished,
(b) a plan or scheme embodying means to accomplish that object, (c) an agreement or understanding between two or more of the accused persons whereby, they become definitely committed to co-operate for the accomplishment of the object by the means embodied in the agreement, or by any effectual means, (d) in the jurisdiction where the statute required an overt act. The essence of a criminal conspiracy is the unlawful combination and ordinarily the offence is complete when the combination is framed. From this, it necessarily follows that unless the statute so requires, no overt act need be done in furtherance of the conspiracy, and that the object of the combination need not be accomplished, in order to constitute an indictable 42 Spl.C.No.484/2017 offence. Law making conspiracy a crime, is designed to curb immoderate power to do mischief which is gained by a combination of the means.
The encouragement and support which co-
conspirators give to one another rendering enterprises possible which, if left to individual effort, would have been impossible, furnish the ground for visiting conspirators and abettors with condign punishment. The conspiracy is held to be continued and renewed as to all its members wherever and whenever any member of the conspiracy acts in furtherance of the common design. (See: American Jurisprudence Vol. II Sec. 23, p. 559). For an offence punishable under section 120-B, prosecution need not necessarily prove that the perpetrators expressly agree to do or cause to be done illegal act; the agreement may be proved by necessary implication. Offence of criminal conspiracy has its foundation in an agreement to commit an offence. A conspiracy consists not merely in the intention of two or more, but in the agreement of two or more to do an unlawful act by unlawful means. So long as such a design rests in intention only, it is not indictable. When two agree to carry it into effect, the very plot 43 Spl.C.No.484/2017 is an act in itself, and an act of each of the parties, promise against promise, actus contra actum, capable of being enforced, if lawful, punishable if for a criminal object or for use of criminal means.
18. No doubt in the case of conspiracy there cannot be any direct evidence. The ingredients of offence are that there should be an agreement between persons who are alleged to conspire and the said agreement should be for doing an illegal act or for doing illegal means an act which itself may not be illegal, Therefore, the essence of criminal conspiracy is an agreement to do an illegal act and such an agreement can be proved either by direct evidence or by circumstantial evidence or by both, and it is a matter of common experience that direct evidence to prove conspiracy is rarely available. Therefore, the circumstances proved before, during and after the occurrence have to be considered to decide about the complicity of the accused."
35. On appreciating the above said dictum, it is clear that the prosecution is required to prove the circumstances under which an offence is committed which would be construed as conspiracy 44 Spl.C.No.484/2017 i.e., there should be an object to be accomplished, plan or scheme embodying means to accomplish the object, an agreement or understanding between 2 or more accused persons and in the juxtaposition where the statue is required to commit an overt act. In other words, the essence of criminal conspiracy is the unlawful combination and ordinarily the offence is complete when the combination is framed. In the instant case it requires to be considered that whether the sanctioning of the loan with some irregularities would amount to conspiracy. Time and again it has been held by various dictums that the criminal conspiracy is an independent offence. Further the prosecution is required to prove the same by producing necessary materials to indicate criminal misconduct on the part of the accused. In other words, the acts, which have been committed by the accused persons, should be the one, wherein the accused has to take definite steps to an agreement which they had entered upon to do an illegal act or to do an act which is legal, but with illegal means. Hence, in simple manner the concept of conspiracy can be explained if it consists following ingredients.
45 Spl.C.No.484/2017
a) that there should be an agreement between 2 or more persons
b) that the said agreement should be for doing of an illegal act or for doing by illegal means an act which by itself may not be illegal.
36. When the said ingredients are established, then only the prosecution may contend that the accused persons had entertained an intention to commit an offence. At this juncture it would be appropriate to appreciate and rely upon the passage of Russell on Crimes (12th Edition a Volume No.1) which reads as follows:
"The gist of the offence of conspiracy then lies, not in doing the act, or effecting the purpose for which the conspiracy is formed, nor in attempting to do them, nor in inciting others to do them, but in the forming of the scheme or agreement between the parties. Agreement is essential. Mere knowledge, or even discussion, of the plan is not, per se enough".
37. If the said aspect is appreciated with the case on hand, it would indicate that the accused No.1 had sanctioned loan which was sought by the accused No.2 on behalf of the school. In this 46 Spl.C.No.484/2017 regard, reliance is placed on the loan application Ex.P.23 which indicates that the accused No.2 had filed application seeking for financial accommodation to an extent of Rs.8.50 lakhs. In fact Ex.P.23 loan application clearly describes that the school is being maintained under a Trust for which Mr.G.Rajarathnam, accused No.2 Smt.Shobitha Sonath K and Mr.V.Kanix Paul were the Trustees. In column No.8 it has been specifically stated that the activity which has been carried out by the Trust was with respect to education and they have proposed to avail loan for purchasing furniture. Further, they had sought for a term loan of Rs.6.50 lakh for purchase of desks and other school furniture from supplier M/s. Anthony Industries. In the 3rd page of the loan application the name of the Trustees and also their photograph are forthcoming, wherein the founder Trustee, the accused No.2 Secretary and the Treasurer have affixed their signatures to the loan application and also a quotation as per Ex.P.24 is forthcoming which is issued by St. Anthony Industries, wherein he had issued the same for Rs.8.75 lakhs. The said quotation is being admitted by PW6 Francis is the one he had issued. The document at Ex.P.25 is the receipt for 47 Spl.C.No.484/2017 having received a sum of Rs.2.50 lakhs by cash by St.Anthony Industries. However, the witness who was examined on behalf of St. Anthony Industries PW6 Francis has specifically denied of receiving any amount by way of cash. At this juncture, if the investigation report is to be appreciated at Ex.P.4, the main allegation which was leveled against accused No.1 is that he had disbursed the loan amount to an industry which was not at all in existence and the supplier St.Anthony Industries was not genuine and amount was disbursed to them. For the sake of convenience and also at the cost of repetition the evidence of PW6 is to be appreciated. During the course of his chief examination, it is his specific evidence that he had not supplied any furniture or materials to the Sharon School and also he has deposed that no invoice was being supplied by him. It is also relevant to note at this juncture, that he has admitted issuing quotation as per Ex.P.24 and has deposed that he had not received any advance amount to the extent of Rs.2.50 lakh through cash from the School. With this evidence, if the Internal Audit Report as per Ex.P.4 is to be appreciated, it would indicate that the internal investigator i.e., PW3 Nagesh had 48 Spl.C.No.484/2017 observed that no materials were purchased from St.Anthony Industries nor the said industry itself was in existence. If for the sake of convenience, the evidence of Investigation Officer PW14 Rakesh Ranjan is appreciated, it would indicate that he had recorded the statement of PW6 Francis on 25.01.2017. He has stated that the witness Francis had specifically narrated to him that the accused No.2 was his relative and he had issued blank quotation form and the contents were filled up by accused No.2 herself. With this evidence, the cross-examination of PW6 Francis is required to be appreciated. During the course of cross-examination, the witness has admitted that he was not in good terms with accused No.2 Shobitha and also he has specifically admitted that she was his distant relative. The undisputed fact which could be noticed from the above said aspect is that the witness as well as accused No.2 knew each other and though they were relatives they were not in good terms. It is relevant to note at this juncture that during the course of cross-examination, the witness was elicited with his bank account which he had maintained with Karnataka Bank. Though it is not in dispute that an account extract was produced before the 49 Spl.C.No.484/2017 court, which was also admitted by the witness and subsequently objection was raised by the learned Public Prosecutor with respect to its admissibility. The provision of Indian Evidence Act is very clear that when a document is confronted to a witness and though it is xerox copy and if the witness admits the same, the document could be marked for the purpose of evidence. It is also well settled principle of marking of document is only ministerial act and whereas the admission of a document is judicial act. Unfortunately, the said document was not marked in the instant case, since the accused had undertaken to summon the document through proper channel, which he had not made at the time of trial. Even otherwise, if the entire tenure of cross-examination is appreciated, it indicates that PW6 Francis had limpidly agreed that he received amount of Rs.6.41 lakh from School on 20.01.2015. It is also relevant to note at this juncture with respect to the transaction that had taken place. At the outset account extract which is more fully marked as Ex.P.44 would indicate the transfer of amount to an extent of Rs.6.41 lakh is forthcoming from the records wherein the same was transferred to the term loan account of the School. 50 Spl.C.No.484/2017 Subsequently, it is also noticed that on 20.01.2015, said amount was transferred wherein Demand Draft was purchased which is reflected from the account extract dated 20.01.2015 for a sum of Rs.6.25 lakh. At this juncture, if for a moment, observation made by the Internal Auditor is to be appreciated which is already discussed supra in the earlier part of the judgment that the end usage of the amount has to be given directly to the supplier, the purchasing of DD in favour of the supplier would indicate of complying the said stipulation. At this juncture, what is to be appreciated is whether any deviations are being made by the Manager of the Bank, if at all the accused No.1 and 2 had any intention to cheat and defraud the bank and had entered in to criminal conspiracy with each other. If the said aspect is to the considered in proper perspective, then the prosecution has to answer why the amount after its deposit to term loan account would be handed over to the supplier by way of demand draft. In the circumstances, it would indicate that the amount which was credited after disbursal to the term loan account was released in favour of the supplier himself by way of Demand Draft. 51 Spl.C.No.484/2017
38. Be that as it may, at this juncture, the learned Public Prosecutor has vehemently argued that the end usage was utilized for the purpose for which it was sanctioned. It is his contention that after the amount was credited to the account on 6.1.2015 i.e., a sum of Rs.6,41,120/- the same was utilized by Accused No.2 for other purposes other than the one for which it was disbursed. In order to butters his contention he has relied upon the account extract and would indicate that a sum of Rs.4 lakh was withdrawn by the accused No.2 on the same day and also a sum of Rs.1.50 lakh , Rs.25,000/- 60,000/- was permitted to be withdrawn by the accused No.2 commencing from the 6th to 8th January, 2015 wherein a cheque was also issued in favour of BESCOM. At this juncture, if for a moment is considered that the accused No.2 had withdrawn the amount from her term loan account also, it is relevant to note at this juncture, that the learned counsel for accused has argued that the amount was withdrawn by the accused No.2 Shobitha, since, the supplier had insisted for making the payment by way of cash itself, since it was against the banking procedure, later on she had got it deposited back to the bank i.e., also within a span of two days 52 Spl.C.No.484/2017 and the records indicate that a sum of Rs.7 lakhs was being credited again to the account on 20th January itself. On the very same day, the demand draft for Rs.6.25 lakhs was purchased in the name of the supplier PW6-Francis. If once again the contention of the prosecution i.e., Internal Auditor PW3 Nagesh is appreciated, it indicates that he had not verified the accounts in proper perspective. That apart a duty was also casted upon the investigating agency i.e., the PW14 Rakesh Ranjan to appreciate the fact that whether PW6 was having a hostile attitude towards accused No.2. In other words the Investigating officer was entrusted with an onerous duty to verify the veracity of the witness before drawing any inference. Even otherwise, it is very much apparent from his cross-examination that he was not in good terms with accused No.2 Shobitha. Then the presumption which could be drawn at this juncture is that due to said animosity prevailing between then, he has not supported accused No.2 and has not deposed the true facts of incident. It is also relevant to note the amount of Rs.6.25 lakhs was credited to his account through DD. When the amount is handed over or deposited to the account 53 Spl.C.No.484/2017 through DD, it is the person in whose name the DD is purchased, is required to submit the same to his account for its encashment. If it was an account transaction made by using RTGS or NEFT, then it could have been assumed that the said transfer of amount would not have come to the knowledge of PW6 Francis. However, when he was specifically handed over with the DD as per the account extract at Ex.P.44, would indicate that the knowledge on the part of PW6 Francis of receiving the amount. The prosecution cannot blow hot and cold in one breath to indicate they were relying on the account extract which would indicate of purchase of DD of Rs.6.25 lakhs in favour of PW6 Francis, who had categorically admitted of having knowledge of the same subsequently. With the appreciation of evidence in chief and that of cross-examination coupled with the report of Internal Investigator at Ex.P.4 and with that of the evidence of Investigating Officer PW14 would only indicate that the Investigating Agency have not furnished or placed entire records before the Court. If for the sake of arguments, prosecution accepts the crediting of amount of Rs.6.25 lakhs through DD in favour of PW6 Francis, then the I.O. should have produced copy of 54 Spl.C.No.484/2017 the said DD or brought forth to the knowledge of the Court about the existence of such DD. However, the investigating Agency has not brought the same to the notice of the court, nor had taken any pains to collect the DD. The amount which was credited in to the account of Sharon School in the term loan account was transferred in favour of PW6 through DD. It is further interesting to note that PW6 in his cross-examination has further stated that he was an income tax assessee and he had also informed his auditor about the crediting of the said amount to his account. If for the sake of argument, it is accepted, then once again the case of the prosecution would be falsified for the reason that PW6 was not deposing truth before the court. He has deposed that he came to know of depositing of the amount only about four months prior to his evidence before the court. However, the categorical admission by him that he had informed his auditor about its deposit in the year 2015 itself while filing ITR would raise a serious question mark over the veracity of the witness who is appearing before the court. When a witness appears before the court, the court is duty bound to consider the fact whether he is deposing truly before the court and 55 Spl.C.No.484/2017 whether he is a sterling witness. The court is always concerned with the quality of the witness rather than the quantity of the witness who are being examined before the court.
39. The learned Public Prosecutor has also requested the Court to invoke the provisions of Sec.73 of the Indian Evidence Act to compare the receipt at Ex.P.25 which indicated of furnishing amount of Rs.4 lakh by way of cash to PW6 Francis, which was stoutly denied by him. It is the settled principles of law, the courts should always be slow in invoking the provision of section 73 of the Indian Evidence Act. In this regard the court has relied upon the judgment of the Hon'ble Apex court reported in (2008) 4 SCC 530 (Thiruvengadam Pillai V Navaneethammal) wherein it is held as:
16. While there is no doubt that court can compare the disputed handwriting/ signature/ finger impression with the admitted handwriting/signature / finger impression, such comparison by court without the assistance of any expert, has always been considered to be hazardous and risky. When it is said that there is no bar to a court to compare the 56 Spl.C.No.484/2017 disputed finger impression with the admitted finger impression, it goes without saying that it can record an opinion or finding on such comparison, only after an analysis of the characteristics of the admitted finger impression and after verifying whether the same characteristics are found in the disputed finger impression. The comparison of the two thumb impressions cannot be casual or by a mere glance.
Further, a finding in the judgment that there appeared to be no marked differences between the admitted thumb impression and disputed thumb impression, without anything more, cannot be accepted as a valid finding that the disputed signature is of the person who has put the admitted thumb impression. Where the court finds that the disputed finger impression and admitted thumb impression are clear and where the court is in a position to identify the characteristics of fingerprints, the court may record a finding on comparison, even in the absence of an expert's opinion. But where the disputed thumb impression is smudgy, vague or very light, the court should not hazard a guess by a casual perusal.
57 Spl.C.No.484/2017
17. The decision in Murari Lal [(1997) 7 SCC 110 : 1997 SCC (Cri) 992] and Lalit Popli [(1980) 1 SCC 704 : 1980 SCC (Cri) 330] should not be construed as laying a proposition that the court is bound to compare the disputed and admitted finger impressions and record a finding thereon, irrespective of the condition of the disputed finger impression. When there is a positive denial by the person who is said to have affixed his finger impression and where the finger impression in the disputed document is vague or smudgy or not clear, making it difficult for comparison, the court should hesitate to venture a decision based on its own comparison of the disputed and admitted finger impressions. Further, even in cases where the court is constrained to take up such comparison, it should make a thorough study, if necessary with the assistance of counsel, to ascertain the characteristics, similarities and dissimilarities. Necessarily, the judgment should contain the reasons for any conclusion based on comparison of the thumb impression, if it chooses to record a finding thereon. The court should avoid reaching conclusions based on a mere casual or routine glance or perusal.
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40. The dictum of the Hon'ble Apex court would clearly indicate that the courts should be slow in ascertaining the veracity of the document when it is required to be compared. In the instant case, the witness has denied of affixing his signature on the document and it is asserted by the Accused that it was PW-6 Francis who had affixed his signature on the pre receipt. In that event of serious dispute being raised it would not be appropriate for the court to invoke the provision of section 73 of the Indian Evidence Act and compare the signature. That apart, the materials placed before the court would indicate that a sum of Rs.2.50 lakh which is allegedly the margin amount released through cash in favour of PW6 Francis. However, during the course of cross- examination PW6 has deposed that after about 4-5 days he had returned back the amount to accused No.2 through cheque which she had received from him at the time of obtaining the quotation. This particular evidence would indicate that the amount which he had received through DD was returned by him through cheque. It is relevant to note at this juncture, subsequently as per the S.B. 59 Spl.C.No.484/2017 account of the School the cheque which was issued by PW6 Francis was cleared and the amount was credited in to S.B. Account. Once again at the cost of repetition, if only the accused No.2 had entertained a criminal intention to cheat and defraud the bank, would have utilized the amount which was deposited to the term loan account itself. However, the amount was credited back in favour of the Sharon School itself through SB account. Though it is canvassed by the learned Public Prosecutor that no materials were produced to prove that end usage was promptly made by the accused No.2, a duty is also casted upon the prosecution to prove their case beyond reasonable doubt. The preponderance of burden will always would resting with the prosecution to establish their case beyond reasonable doubt. However, in the instant case, no such act is forth coming. In this regard it is submitted that as per the report of internal investigation, a visit to school was made by the valuer and he had not found any materials being purchased by the School. It is relevant to note that a serious dispute with respect to internal investigation is being raised by the Accused persons and as such the investigating officer instead of relying upon the materials 60 Spl.C.No.484/2017 allegedly collected during internal investigation by bank, should have independently examined the veracity of the same and should have arrived at definite conclusion. It is settled law, that whenever there are two views, obviously the view favoring the accused is required to be accepted.
41. The learned Public Prosecutor has also pointed out to the evidence of PW7 Jitender Singh who was the landlord of the premises. It is his contention that immediately after receiving the loan amount in the year 2016 itself, the School had vacated the premises which was forthcoming in the inspection report which was conducted by the I.O. PW14 Rakesh Ranjan. It is relevant to note at this juncture, that the accused No.2 Shobitha had specifically contended that since the building was in dilapidated condition, she had shifted the same by obtaining necessary permission from the concerned authorities in May 2016. Even the said suggestion was put forth to PW7 Jitender Singh and also to the I.O. PW.14 Rakesh Ranjan. It is relevant to note that the I.O. has feigned his ignorance with respect to the same. The I.O. if only, had arrived at the conclusion that the School was been run in some 61 Spl.C.No.484/2017 other place or premises, then he should have visited the office of Block Education Officer to ascertain that the School was shifted and the reason for shifting the same. Unless the same is established by the prosecution, a stray allegation being leveled against the School of cheating and defrauding the bank cannot be maintained.
42. At this juncture, it is pertinent to note that PW6 Francis has specifically contended that he had not received any amount by way of cash to an extent of Rs.2.50 lakh from Sharon School. It is his specific assertion that the receipt at Ex.P.25 does not contain his signature. Learned Public Prosecutor has vehemently argued that the court can verify the receipt at Ex.P.25 with that of the signature which is furnished in the invoice at Ex.P.24. At this juncture, it is relevant to note that during the course of investigation, specimen signature of accused was allegedly collected by the I.O. and had sent the same to the scientific examination with the application which was signed by accused No.2 Shobitha. At the cost of repetition, it is once again reiterated that the bounden duty of proving the case always rests with the prosecution and if the prosecution intended to prove the 62 Spl.C.No.484/2017 document i.e., the receipt at Ex.P.25 was not being signed by PW6 Francis, then they should have sent the same for authentication to hand-writing expert since they were already sent the undisputed application form to hand writing expert. Said aspect assumes importance since the Internal Investigator himself has opined that PW6 Francis who was the proprietor of St. Anthony Industries was not at all in existence. However, at the time of recording his statement under Sec.161 of Cr.P.C., he has specifically deposed of issuing the quotation as per Ex.P.24 and also has denied of receiving any amount as per receipt at Ex.P.25. In that event in order to ascertain the veracity of the same, as the amount transacted as per Ex.P.47 indicated of transferring a sum of Rs.6.50 lakh to the account of PW6 Francis from the account of Sharon School. The I.O. should have sent the same for the scientific examination. Even otherwise, the extent to which the evidence of experts can be relied upon has been succinctly discussed by the Hon'ble Apex Court in the judgment rendered in (2017)5 SCC 817 (S.P.S.Rathod Vs. CBI), wherein it has been held as follows:-
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"The evidence of a handwriting expert, unlike that of a fingerprint expert, is generally of a frail character and its fallibilities have been quite often noticed The courts should, therefore, be wary to give too much weight to the evidence of handwriting expert. In Sri Sri Sri Kishore Chandra Singh Deo v. Babu Ganesh Prasad Bhagat this Court observed that conclusions based upon mere comparison of handwriting must at best be indecisive and yield to the positive evidence in the case."
It is thus clear that uncorroborated evidence of a hand writing expert is an extremely weak type of evidence and the same should not be relied upon either for the conviction or for acquittal. The courts, should, therefore, be wary to give too much weight to the evidence of handwriting expert. It can rarely, if ever, take the place of substantive evidence. Before acting on such evidence, it is usual to see if it is corroborated either by clear, direct evidence or by circumstantial evidence."
43. In the aforesaid judgment Hon'ble Apex Court had opined that the opinion of hand-writing expert is also relevant in view of Sec.45 of the Evidence Act, but it cannot be considered as 64 Spl.C.No.484/2017 conclusive evidence. It has been held by the Hon'ble Apex Court that in catena of cases sole evidence of hand-writing expert is not normally sufficient for recording a definite finding about the writings being of a certain person or not. It follows that it is not only essential that hand-writing expert must be examined in a case to prove or disprove the disputed writing but the same should be supported by necessary corroboration. The evidence of the hand- writing expert would have added as corroborative factor to the case of the prosecution and also to point out the malafide intention being entertained by accused persons, if only, the report indicated that the signature found on Ex.P.25 was not belonging to PW6 Francis. The evidence assumes importance for another reason that the PW6 Francis has not deposed truth in its entirety during the course of his chief-examination. As already discussed above, PW6 has specifically deposed during the course of his chief-examination that he had not received any amount from Sharon School or from accused No.2 Shobitha towards supplying the materials. It is his specific evidence that he had only issued the quotation, but he had not issued invoice.
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44. At the cost of repetition, the invoice at Ex.P.24 was found in the application which was allegedly submitted by the accused No.2 on behalf of M/s.Sharon School. If for the sake of argument it was established by the prosecution that the accused No.2 had furnished the receipt which was not being signed by PW6 Francis, then it would have been appropriate on the prosecution to indicate that the accused No.1 and 2 had hatched up a conspiracy to misuse the funds which were disbursed for purchasing the furniture to the School. However, the prosecution has not taken pains to send the said receipt to the hand-writing expert to ascertain the signature found on the same. In the absence of the same, the request of the learned Public Prosecutor to consider the signatures on Ex.P.25 receipt with that of the loan application and the quotation at Ex.P.24 would not be appropriate. The veracity and credibility of the witness who was examined as PW6 was totally shaken during the course of his cross-examination. Under the circumstances, the evidence which has been tendered by PW6 could not be believed in its entirety.
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45. Unless and until the prosecution are able to establish based on the circumstances of the case, that the accused No.1 N.Satya Babu had entered into conspiracy with accused No.2 Smt.Shobitha, they cannot make a claim for proving the allegations U/s.13(1)(d) r/w 13(2) of P.C.Act. Prior to that it would be appropriate to look in to the manner in which the investigation is being conducted. In the instant case, it is alleged that accused No.2 being Trustee of Sharon School had availed loan to an extent of Rs.6.50 lakh under MSE Scheme from Syndicate Bank where accused No.1 was working as Manager. In this regard, once again the loan application at Ex.P.23 is required to be looked into. It is noticed that the application at Ex.P.23 has been signed by accused No.2 Shobitha. However, at column No.16 she has affixed her signature along with other two Trustees i.e., the founder Trustee G.Rajarathnam and Treasurer V.Kanix Paul. If for the sake of arguments, it is to be accepted that the accused No.2 had entertained and shared an idea to cheat and defraud the bank, then the Investigating Agency are required to explain that why the other two Trustees of the School are left out. If the prosecution contends 67 Spl.C.No.484/2017 that the other Trustees were not involved in the commission of said offence, then why the Manager who had entertained such a conspiracy and malafide intention, had obtained signature of other trustees. The obtaining of signature of other Trustees would indicate the fact that then Manager N.Satya Babu had discharged his duty in due diligence. That apart, I have also appreciated the hypothecation agreement which was executed by the accused No.2 Shobitha on behalf of the Sharon School. The hypothecation agreement is marked as Ex.P.49 which would once again indicate that the same was being signed by all the Trustees of the School. The allegation which has been leveled against accused No.2 is of misappropriating the amount which was released for purchasing furniture and fixtures for the School and if for the sake of argument, the contention of the prosecution is to be accepted, then they have to offer an explanation that why the other Trustees of the School were left out. It is not the definite case of prosecution that the accused No.2 Shobitha alone had entertained such an intention and in derogation of her duty as Secretary, had conspired with 68 Spl.C.No.484/2017 accused No.1 N.Satya Babu, Manager of the Bank and obtained loan from the Bank.
46. The other aspect which is required to be looked in to at this juncture, is whether a sole Trustee can be roped in as accused when loan has been availed by the School and also when the prosecution is not explaining the specific overt role of accused No.2 alone acting on behalf of the School and misappropriating the funds. In this regard, I have placed reliance on the judgment rendered by the Hon'ble Apex Court reported in (2011) 1 SCC 74 (Iridium Idea Telecom Ltd., Vs. Motorola Inc). In the said judgment, it has been held by the Hon'ble Apex Court as follows:-
"38. From the above it becomes evident that a corporation is virtually in the same position as any individual and may be convicted of common law as well as statutory offences including those requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, it would be necessary to ascertain that the degree and control of the person or body of 69 Spl.C.No.484/2017 persons is so intense that a corporation may be said to think and act through the person or the body of persons. The position of law on this issue in Canada is almost the same. Mens rea is attributed to corporations on the principle of 'alter ego' of the company.
39. So far as India is concerned, the legal position has been clearly stated by the Constitution Bench judgment of this Court in the case of Standard Chartered Bank Vs. Directorate of Enforcement On a detailed consideration of the entire body of case laws in this country as well as other jurisdictions, it has been observed as follows:
"There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact that they involve personal malicious intent, a corporation may be subject to indictment or other criminal process, 70 Spl.C.No.484/2017 although the criminal act is committed through its agents."
This Court also rejected the submission that a company could avoid criminal prosecution in cases where custodial sentence is mandatory. Upon examination of the entire issue, it is observed as follows:-
"27. In the case of Penal Code offences, for example under Section 420 of the Indian Penal Code, for cheating and dishonestly inducing delivery of property, the punishment prescribed is imprisonment of either description for a term which may extend to seven years and shall also be liable to fine; and for the offence under Section 417, that is, simple cheating, the punishment prescribed is imprisonment of either description for a term which may extend to one year or with fine or with both. If the appellants' plea is accepted then for the offence under Section 417 IPC, which is an offence of minor nature, a company could be prosecuted and punished with fine whereas for the offence under Section 420, which is an aggravated form of cheating by which the victim is dishonestly induced to deliver Supra 71 Spl.C.No.484/2017 property, the company cannot be prosecuted as there is a mandatory sentence of imprisonment.
28. So also there are several other offences in the Indian Penal Code which describe offences of serious nature whereunder a corporate body also may be found guilty, and the punishment prescribed is mandatory custodial sentence. There are a series of other offences under various statutes where the accused are also liable to be punished with custodial sentence and fine.
30. As the company cannot be sentenced to imprisonment, the court has to resort to punishment of imposition of fine which is also a prescribed punishment. As per the scheme of various enactments and also the Indian Penal Code, mandatory custodial sentence is prescribed for graver offences. If the appellants' plea is accepted, no company or corporate bodies could be prosecuted for the graver offences whereas they could be prosecuted for minor offences as the sentence prescribed therein is custodial sentence or fine.
31. As the company cannot be sentenced to imprisonment, the court cannot impose that 72 Spl.C.No.484/2017 punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that there is a blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of mandatory imprisonment. The corporate bodies, such as a firm or company undertake a series of activities that affect the life, liberty and property of the citizens. Large-scale financial irregularities are done by various corporations. The corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the 73 Spl.C.No.484/2017 corporation to a criminal law is essential to have a peaceful society with stable economy.
32. We hold that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment prescribed is mandatory imprisonment (sic and fine). We overrule the views expressed by the majority in Velliappa Textiles on this point and answer the reference accordingly. Various other contentions have been urged in all appeals, including this appeal, they be posted for hearing before an appropriate Bench."
40. These observations leave no manner of doubt that a company / corporation cannot escape liability for a criminal offence, merely because the punishment prescribed is that of imprisonment and fine. We are of the considered opinion that in view of the aforesaid Judgment of this Court, the conclusion reached by the High Court that the respondent could not have the necessary mens rea is clearly erroneous."
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47. Further in another judgment of Hon'ble Apex Court reported in (2009) 1 SCC 516 (R.Kalyani Vs. Janak C.Mehtha) wherein it is held as:
26. Whereas, thus, no allegation whatsoever has been made against Respondent 1, the only allegation against Respondent 2 was that he had forwarded the said letter dated 10-1-2002 to the National Stock Exchange. The act of forgery on/or fabrication of the said letter had been attributed to Respondent 3.
Respondents 1 and 2 herein were sought to be proceeded against on the premise that they are vicariously liable for the affairs of the company.
28. In the aforementioned factual backdrop, we although do not agree with the approach of the High Court, concur with its conclusion.
29. The allegations contained in the first information report, therefore, do not disclose an offence against Respondents 1 and 2. They have in their individual capacity been charged for commission of offences of cheating, criminal breach of trust and forgery. As there had never been any interaction between the appellant and them, the question of any 75 Spl.C.No.484/2017 representation which is one of the main ingredients for constituting an offence of cheating, as contained in Section 415 of the Penal Code, did not and could not arise.
33. In Sham Sunder v. State of Haryana [(1989) 4 SCC 630 : 1989 SCC (Cri) 783] this Court held:
(SCC p. 632, para 9) "9. But we are concerned with a criminal liability under penal provision and not a civil liability.
The penal provision must be strictly construed in the first place. Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not."
34. Yet again, in Radhey Shyam Khemka v. State of Bihar [(1993) 3 SCC 54 : 1993 SCC (Cri) 591] the law has been laid down by this Court, thus: (SCC pp. 58-59, para 6) "6. But, at the same time, while taking cognizance of alleged offences in connection with the registration, issuance of prospectus, collection of moneys from the investors and the misappropriation of 76 Spl.C.No.484/2017 the fund collected from the shareholders which constitute one offence or other under the Penal Code, court must be satisfied that prima facie and offence under the Penal Code has been disclosed on the materials produced before the court. If the screening on this question is not done properly at the stage of initiation of the criminal proceeding, in many cases, some disgruntled shareholders may launch prosecutions against the promoters, Directors and those in charge of the management of the company concerned and can paralyse the functioning of such company. It need not be impressed that for prosecution for offences under the Penal Code the complainant has to make out a prima facie case against the individuals concerned, regarding their acts and omissions which constitute the different ingredients of the offences under the Penal Code. It cannot be overlooked that there is a basic difference between the offences under the Penal Code and acts and omissions which have been made punishable under different Acts and statutes which are in nature of social welfare legislations. For framing charges in respect of those acts and omissions, in many cases, mens rea is not an essential ingredient; the concerned statute imposes a duty on those who are in charge of the management, to follow the statutory 77 Spl.C.No.484/2017 provisions and once there is a breach or contravention, such persons become liable to be punished. But for framing a charge for an offence under the Penal Code, the traditional rule of existence of mens rea is to be followed."
48. The sum and substance of both the judgments are that whenever allegation is leveled against a company or a trust the fastening of vicarious liability on the persons running the affairs of the company, the prosecution has to establish, the person who have been roped in as accused had knowledge of the fact and the same was forged and fabricated one and it was not known to the other Trustees. However, in the instant case the loan application at Ex.P.23 and also the signing of the hypothecation agreement at Ex.P.49 would unequivocally indicate that the other two Trustees of the School were aware of availing of the loan. It is also relevant to note, at this juncture that accused No.2 Shobitha had not remitted the amount in to her account after allegedly collecting it back from PW6 Francis, but indeed had deposited to the SB account of the School. All these aspects once again raises a doubt in the mind of 78 Spl.C.No.484/2017 the Court, that whether the other two Trustees had also entertained any malafide intention or whether the accused No.2 alone indeed entered in to a criminal conspiracy with accused No.1 to cheat and defraud the Bank. The contention of the prosecution seems to be a farrago which is contrary to each other.
49. At this juncture, the court is also required to appreciate the invocation of Sec.420 of IPC against accused No.1 and 2. At the cost of repetition, the accused No.1 Manager is alleged to have entered into criminal conspiracy with accused No.2 Shobitha.K and had transferred the term loan to the account of Sharon School. It is already discussed in detail that the allegation of conspiracy is not appropriately proved by the prosecution for the reason that there are no materials to indicate that accused No.1 and 2 had entertained a malafide intention to cheat and defraud the bank. It is appropriate to note at this juncture, that the Investigation Agency are not able to decipher the act of other Trustees from that the accused No.2 who was also Secretary of the School. If only, for the reason that accused No.2 had entertained a separate malafide intention than that of other trustees, she could have arraigned as accused No.2 and 79 Spl.C.No.484/2017 also if accused No.1 Manager had conspired with her with an intention to cheat and defraud the bank, then the invocation of Sec.120B of IPC would have been appropriate. However, no such materials have been forthcoming in the above case.
50. That apart, the other aspect which is required to be appreciated is whether the provision of Sec.420 of IPC is attracted. As noticed, the charges are also framed and altered subsequently, wherein it is alleged that both the accused No.1 and 2 had entertained to cheat and defraud the bank. In order to indicate the said aspect, firstly the prosecution has to establish that there was an inducement made by one of the accused person to part with a property or the concept of fraud was entertained by the accused persons with malafide intention from its inception. The entertaining of malafide intention is condition precedent and sine qua non for attracting the rigors of Sec.420 of IPC. In other words, the prosecution should have established that accused No.1 and 2 had an intention to cheat and defraud the bank. Said aspect requires to be elaborated succinctly for the reason that the application which was filed at Ex.P.23 indicates that the accused No.2 being the Secretary 80 Spl.C.No.484/2017 of the School had filed necessary application on behalf of the School and also it indicates that the other two trustees also affixed their signatures to the loan application. If only, the accused No.1 the Manager had entertained such a malafide intention, he would not have obtained signatures of other two trustees. Even otherwise, for the sake of arguments, if it is contended that the accused No.2 alone had entertained such a malafide intention, then also the prosecution is required to produce materials to indicate the said aspect. It is well settled principles of law that in order to attract the rigors of Sec.420 of IPC, the entertaining of malafide intention from inception is required to be proved. In other words, the ingredients of cheating requires to prove the existence of intention at the time of making initial promise or at the time of formation of contract. The said aspect has been rendered by the Hon'ble Apex Court in the judgment reported in (2009) 6 SCC 77 (S.V.L.Murthy Vs. State) wherein it is held as:
"For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the 81 Spl.C.No.484/2017 time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Indian Penal Code can be said to have been made out.
We may reiterate that one of the ingredients of cheating as defined in Section 415 of the Indian Penal Code is existence of an intention of making initial promise or existence thereof from the very beginning of formation of contract. In Hira Lal Hari Lal Bhagwati v. CBI [(2003) 5 SCC 257], this Court held :
"40. It is settled law, by a catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his making failure to keep promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed. It is seen from the records that the exemption certificate contained necessary conditions which were required to be complied with after importation of the machine. Since 82 Spl.C.No.484/2017 the GCS could not comply with it, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as office-bearers right at the time of making application for exemption."
[See also Indian Oil Corporation v. NEPC India Ltd. & Ors. [(2006) 6 SCC 736] In Vir Prakash Sharma v. Anil Kumar Agarwal [(2007) 7 SCC 373], noticing, inter alia, the aforementioned decisions, this Court held:
"13. The ingredients of Section 420 of the Penal Code are as follows:
(i) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to deliver any property; or
(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.
No act of inducement on the part of the appellant has been alleged by the respondent. No 83 Spl.C.No.484/2017 allegation has been made that he had an intention to cheat the respondent from the very inception.
22. It may be that there had been certain procedural irregularities in the transaction.
However, sufficient evidence is available on record to show that the Officers had done so for the purpose of promoting the business of the Bank. In relation whereto or in respect whereof, initiatives had been taken by P.Ws. 19 and 20. It is furthermore not denied or disputed that after the cheque discounting facility was stopped in April, 1989 by Accused No. 4, there has been a meeting at the residence of P.W. 20. In his deposition, the said witness categorically admitted that the said meeting was arranged at the instance of Accsued No. 1. It is incomprehensible that a meeting has been arranged at his residence on the day he was on leave at the instance of Accused No.1. He must have developed grievance against the Accused No. 4 as regards the stoppage of the said facility. If immediately thereafter the said facility had been restored by the Accused No. 4, a stand taken by him that it was done under the oral instructions of the higher authorities appears to be plausible.
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23. The prosecution apart from the fact that it had utterly failed to bring on record any evidence of conspiracy must also be held to have failed to bring on record any evidence of wrongful gain so as to attract the provisions of the Prevention of Corruption Act, 1988 or otherwise.
31. The upshot of our discussions is:-
(a) The prosecution did not lay down any foundational facts to arrive at a finding of dishonest intention on the part of the appellants, nor any such finding has been arrived at by the trial court or the High Court.
(b) The circumstances which were considered sufficient to bring home the charges against the appellant were: the cheques of accused Nos. 1, 2 and 3 were discounted after purchasing cheques; cheques were deposited after a gap of 1 to 4 days; only later the amounts were deposited in the account which circumstances, in our opinion, are not sufficient to hold the appellants guilty for commission of offence under Section 420 of the IPC as all the actions on the part of the bank officers were in consonance with the long standing banking practice.85 Spl.C.No.484/2017
(c) Accused No. 4 had taken care of having adequate security to ensure that the bank does not suffer any loss, the gain if any was caused to the Bank.
(d) Appellants acted on instructions by the higher authority.
(e) The prosecution evidence does not establish any conspiracy on their part vis-`-vis Accused Nos. 1, 2 and 3."
51. Even in the above said case, similar question posed before the Hon'ble Apex Court wherein the Bank Manager and his collegues were prosecuted for the offences punishable under Sec.415 and 420 of IPC. In the said case, though conviction was awarded, subsequently Hon'ble Apex Court has held that the entertaining of intention to cheat is required to be established by the prosecution since from the time of making initial promise or from the time of formation of contract. Hon'ble Apex Court had further held that the prosecution had not laid down any foundational fact to arrive at a finding of dishonest intention on the part of the parties and also the circumstances which were considered sufficient to 86 Spl.C.No.484/2017 bring home the guilt. As such the evidence did not establish the conspiracy and accordingly, they were acquitted.
52. The facts in the instant case are quite similar wherein, it is alleged that the loan amount was sanctioned in favour of M/s.Sharon School which was being represented by the accused No.2 Secretary i.e., Smt.Shobitha.K and the amount was directly transferred to the term loan account which was withdrawn by the accused No.2. However, the materials on record indicates that the accused No.2 had affixed her signature to the loan application along with the other two Trustees and acted with due diligence and also it is elicited from PW3 Nagesh and PW4 Guruprasad that necessary security was also obtained by accused No.1 Manager. Under the circumstances, the allegation of the prosecution that accused No.1 had not followed due procedure as per the guidelines of the RBI was not at all proper. Even otherwise the evidence of PW3 Nagesh and PW4 Guruprasad indicates that subsequently an internal investigation was conducted and internal audit was also being made. During the course of their cross-examination it is noticed that the irregularities which were noted were all rectified. 87 Spl.C.No.484/2017 In particularly, the evidence of PW12 Rajendra Kumar.S who was working as Senior Manager, Inspection Department of Syndicate Bank assumes importance. During the course of cross-examination it has been suggested to him that after the audit all the irregularities were rectified by the Manager on Deputation. The admission given by the said witness is required to be considered with the evidence tendered by PW3 Nagesh and also PW4 Guruprasad, both of them have categorically deposed before the court that immediately an internal audit was conducted and also during the said period certain rectification work was also made. PW3 and PW4 have also deposed with respect to obtaining of KYC documents and CIBIL report. It is important to note that in the event of Trust property, the same will be furnished by the individual members. It is also forthcoming from the cross-examination of PW3 that the School was being run by the Trust and in fact they were the customers of the bank for several years and they had furnished their Trust document to the bank itself. If the said aspect is once again revisited with the recommendation or the report furnished at Ex.P.4 it would indicate that non-fulfilling of KYC materials and non-compliance of KYC 88 Spl.C.No.484/2017 document and CIBIL report was not at all fatal to the procedures of the bank and also since it was deposed by PW12 that the irregularities were rectified by the Branch Manager, the contention of the prosecution with respect to the irregularities becomes redundant.
53. That apart in order to attract the rigors of Sec.420 of IPC, as already discussed the fact of cheating and committing fraud is required to established by the prosecution independently. Fraud is such an act which vitiates all solemn act committed by a party. In order to appreciate the same, once again the evidence is required to be revisited. Apart from allegations being leveled by the investigating agency, that the accused No.1 in derogation of his duty, had processed and disbursed the loan amount, there are no materials to indicate that he had entered into criminal conspiracy with accused No.2. Even otherwise, till disbursal of the loan amount, it is crystal clear that the same was disbursed in accordance with the RBI circulars. It is also not in dispute that the loan amount was credited to the term loan account of Sharon School and it is argued by the learned Public Prosecutor that the 89 Spl.C.No.484/2017 amount could not have been credited directly to the account of the borrower. It is relevant to note that the borrower herself has purchased DD in favour of the supplier i.e., St. Anthony Industries run by PW6 Francis. Though it has been submitted that subsequently, PW6 had repaid the amount through cheque and it was once again credited to the account of the School, the same requires corroboration and materials. Even if some irregularities are pointed out, the same would not be considered as of such a magnitude which should attract the rigors of Sec.13(1)(d) of P.C.Act. With respect to certain irregularities, the court has relied upon the authority reported in (1996) 1 SCC 193 (C.Chenga Reddy Vs. State of Andhra Pradesh) para-22 "On a careful consideration of the material on the record, we are of the opinion that though the prosecution has established that the appellants have committed not only codal violations but also irregularities by ignoring various circulars and departmental orders issued from time to time in the matter of allotment of work of jungle clearance on nomination basis and have committed departmental lapse yet. non of the circumstances relied upon by the 90 Spl.C.No.484/2017 prosecution are of any conclusive nature and all the circumstances put together do not lead to the irresistible conclusion that the said circumstances are compatible only with the hypothesis of the guilt of the appellant and wholly incompatible with their innocence. In Abdulla Mohammed Pagarkar v. State (Union Territory of Goa, Daman and Diu), [1980] 3 SCC 110, under somewhat similar circumstances this Court opined that mere disregard of relevant provisions of the Financial Code as well as ordinary norms of procedural behaviour of government officials and con-tractors, without conclusively establishing, beyond a reasonable doubt, the guilt of the concerned officials and contractors, may give rise to a strong suspicion but that cannot be held to establish the guilt of the accused. The established circumstances in this case also do not establish criminality of the appellants beyond the realm of suspicion and, in our opinion, the approach of the trial court and the High Court to the requirements of proof in relation to a criminal charge was not proper. That because of the actions of the appellants in breach of codal provisions, instructions and procedural safeguards, the Stale may have suffered financially, particularly by allot-ment of work on nomination basis without inviting tenders, but those 91 Spl.C.No.484/2017 acts of omission and commission by themselves do not establish the commission of criminal offences alleged against them."
54. Learned counsel for accused has relied upon another authority of Hon'ble Apex Court reported in (1980) 3 SCC 110 (Abdulla Mohammed Pagarkar vs State (Union Territory Of Goa, Daman And Diu) wherein Hon'ble Apex Court has held as follows:
19. Now this is hardly a proper approach to the requirements of proof in relation to a criminal charge.
The onus of proof of the existence of every ingredient of the charge always rests on the prosecution and never shifts. It was incumbent therefore on the State to brief out, beyond all reasonable doubt, that the number of labourers actually employed in carrying out the work was less than that stated in the summaries appended to the bills paid for by the Government. It is true that the total number of labourers working on a single day has been put by the prosecution witnesses mentioned above at 200 or less, while according to the summaries appended to the bills it varied on an average from 370 to 756. But then is it safe to rely on the mere impression of the prosecution witnesses, 92 Spl.C.No.484/2017 testified too long after the work had been executed, about the actual number of labourers employed from time to time? The answer must obviously be in the negative and the justification for this answer is furnished by the variation in the number of labour employed from witness to witness. 24. Learned counsel for the State sought to buttress the evidence which we have just above discussed with the findings recorded by the learned Special Judge and detailed as Items (a) to (e) in para 9 and Items (i) and (iii) in para 10 of this judgment. Those findings were affirmed by the learned Judicial Commissioner and we are clearly of the opinion, for reasons which need not be restated here, that they were correctly arrived at. But those findings merely make out that the appellants proceeded to execute the work in flagrant disregard of the relevant rules of the G.F.R. and even of ordinary norms of procedural behaviour of government officials and contractors in the matter of execution of works undertaken by the Government. Such disregard however has not been shown to us to amount to any of the offences of which the appellants have been convicted. The said findings no doubt make the suspicion to which we have above adverted still stronger but that is where the matter rests and it 93 Spl.C.No.484/2017 cannot be said that any of the ingredients of the charge have been made out.
55. The above authority is aptly applicable to the case on hand, since in that case, the Hon'ble Apex Court has observed that the nodal violations which was committed by ignoring various circulars and departmental orders from time to time in the matter of allotment of work would have resulted in departmental lapses, but no dishonest intention on the part of the accused were proved. If the said ratio is applied to the case on hand, the prosecution should have established entertaining of a dishonest intention by accused No.1 and 2 right from the inception and in furtherance of the same, they should have misused the amount. It is relevant to note at this juncture that the amount was directly credited to the term loan account of Sharon School and subsequently, the demand draft was purchased in favour of the supplier PW6 Francis and later on it was again credited to the account of the Sharon School itself. No doubt it has been submitted that the end usage was not utilized by the School authorities, the same have to be established by producing cogent materials.
94 Spl.C.No.484/2017
56. At this juncture, the evidence of the valuer who was examined before the court is also required to be appreciated. PW8 Venkatesh who was the panel valuer has deposed of visiting Sharon School to value the furniture and fixtures as per the direction of the Branch Manager i.e., accused No.1 and later on he had submitted his report which is part of Ex.P.47 which is marked as Ex.P.47(a). This would clearly indicate that the accused No.1 had taken necessary steps for obtaining valuation report prior to entertaining the loan account. However, it is submitted that the valuation report was obtained for other loan accounts. However, the prosecution in the absence of furnishing necessary materials, to indicate the availment of various loan by the School, said contention cannot be accepted. That apart, the evidence of PW12 Rajendra Kumar.S is also required to be appreciated. In his evidence he has deposed that the infirmities where the accused No.1 had not verified and authenticated the KYC documents, the certificate issued by the Education Department was not found, CIBIL report was not generated, School was not visited and end use of loan was not ensured. On verifying the materials, it indicates 95 Spl.C.No.484/2017 that the School was the customer of the Bank from a long period of time and all the necessary KYC documents were available in their record itself and for the sake of convenience, it is submitted by the prosecution that the School availed various loan facilities from the bank, then it obviously indicates that they had furnished KYC document, CIBIL report and other documents with respect to their School at the time of obtaining some other loan. Further it has been deposed that the Branch Manager cannot sanction the loan and release the amount without any process note and recommendation by second line officers. However, he had also deposed that the Branch Manager alone is empowered to grant Government sponsored scheme. During the course of cross-examination he has deposed that he had randomly chosen the loan accounts which were sanctioned by accused No.1 Manager and also he has categorically admitted that a probationary officer was deputed, he was not having any knowledge about banking documents. He has also deposed that the accused No.1 had obtained necessary securities for the loan which were sanctioned. Hence, it would indicate that accused No.1 had taken all necessary care and precaution at the time of 96 Spl.C.No.484/2017 disbursing of loan. Though there are certain infirmities or irregularities committed by him with respect to the loan amount being disbursed, the same cannot be construed as an act being committed with a malafide intention so as to attract the rigors of Sec.420 of IPC. Further there are no materials to indicate that both accused persons had entertained the intention to cheat and defraud the Bank right from the inception. As already discussed above, mere irregularity cannot be construed as fraud and further in the absence of materials indicating of entertaining malafide intention from inception will not be a ground for attracting the rigors of section 420 of IPC.
57. With respect to Sec.13(1)(d) of P.C. Act, a serious allegation has been leveled against accused No.1 that he has disbursed loan amount without ensuring end usage. The provision of Sec.13(1)(d) of P.C.Act is required to be extracted herein for the sake of convenience, which reads as follows:-
13. Criminal misconduct by a public servant. --
(1) A public servant is said to commit the offence of criminal misconduct, --97 Spl.C.No.484/2017
(a)****; or (b) ****; or (c) ****; or
(d) if he, --
(i) by corrupt or illegal means, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or
(e) ***."
58. On perusing of the same, it indicates that there are certain irregular activities committed by the accused No.1 Manager, whether the same would be suffice in ordinary parlance to hold that he had committed an offence which would attract the rigors of offence punishable under Sec.13(1)(d) of P.C.Act. On perusal of the said provision, the main ingredient which is required to be established by the prosecution is with respect to entertaining of a criminal intention. In this regard, the learned counsel for the accused relied upon the judgment of Hon'ble Apex Court reported 98 Spl.C.No.484/2017 in (2007) 13 SCC 410 (Radha Pisharassiar Amma vs State Of Kerala) wherein Hon'ble Apex Court has held as follows:- "11. The conviction of accused Nos. 4 to 7
recorded by the High Court under Section 13(1)(c) read with Section 13(2) of the Act, it is urged, is not at all warranted inasmuch as there is no evidence that the accused dishonestly or fraudulently misappropriated or otherwise converted any property entrusted to them or under their control as public servants or allowed any other person to do so. It is further contended that the property was not at all entrusted to A-4 to A-7 under their control and there is no question of the accused being dishonestly or fraudulently misappropriated it or otherwise allowed any other person to do so.
15. From the evidence of PW-5, it can be revealed that a conspiracy was hatched between A-1, A-10, A-2, A-8 and A-9. As already noticed, A-4 to A-7 were working as Sub Treasury Officers at Devikulam.
The prosecution has failed to prove that a copy of the original sanction letter (Exhibit P26a) was also sent to S.T.O., Devikulam. On the other hand, the alleged forged allotment letter dated 22.8.1990 (Exhibit P-5) 99 Spl.C.No.484/2017 showing that the amount of Rs.1,70,000/- under the head `TA' was sent to S.T.O., Devikulam where the accused A-4 to A-7 were working. It is the specific case of the accused that they did not receive any allotment order other than the allotment letter dated 22.8.1990 (Exhibit P-5) showing the allotment of Rs.1,70,000/- under T.A. to Devikulam Sub Treasury. The prosecution has miserably failed to establish the essential ingredients of the conspiracy under Section 120-B of I.P.C. by leading cogent and convincing evidence against A-4 to A-7.
16. It is by now well-established principle of law that for the offence under Section 409, 467 and 471, the existence of mens rea (guilty mind) must be proved. It is on record that the Respondent Nos. 4 to 7 were working as S.T.Os., Devikulam. From the prosecution evidence, it appears that the conspiracy was hatched at Chithirapuram, Primary Health Centre. So far with regard to the offence under Section 467, I.P.C. is concerned, there is no evidence to show that the appellants before us, forged a document which purported to be a valuable security. There is also no evidence that the appellants had knowledge of fact that the allotment letter was a forged letter. Again for an offence under Section 409 it must be proved that 100 Spl.C.No.484/2017 the person entrusted with the property, or any dominion over property in his capacity as a public servant committed criminal breach of trust in respect of such property as defined in Section 405, I.P.C. The evidence must show that he dishonestly misappropriated or converted to his own use that property or dishonestly used or dispossessed that property in violation of any direction of law prescribing the mode in which such trust is to be discharged. In the present case, there is no evidence that A-4 to A-7 dishonestly misappropriated or converted to their own use the amount of T.A. On record it is established that A-4 to A-7 are not the beneficiaries of the misappropriated amount.
17. In the absence of any evidence to show that A-4 to A-7 were acting in conspiracy with A-1, A-2, A- 8, A-9 and A-10 and that A-4 to A-7 have fraudulently and dishonestly prepared forged bill on the basis of forged allotment letter, the offences under Sections 467, 471, 477-A or Section 409 are not proved against the appellants. Consequently, the offence under the provision of the Prevention of Corruption Act is also not made out. The trial court was, therefore, not justified to convict A-4 to A-7 under the aforesaid sections of law."
101 Spl.C.No.484/2017
59. The perusal of the said judgment indicates that a criminal intention is required to be established by the prosecution from the beginning. However, in the instant case, the prosecution has not established according of pecuniary advantage to accused No.1 or to any other person as required under Sec.13(1)(d) of P.C.Act. In this regard the court has relied on the judgment of (2016) 12 SCC 273 (K.Siva Prakash Vs. State of Kerala) "The prosecution has sought to cover the case of the appellant under sub-clause (ii) and not under sub-clause (i) and sub-clause (iii). Insofar as sub- clause (ii) is concerned, it stipulates that a public servant is said to commit the offence of criminal misconduct if he, by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage. Thus, the ingredients which will be required to be proved are:
(1) The public servant has abused his position.
(2) By abusing that position, he has obtained for himself or for any other person any valuable thing or pecuniary advantage.102 Spl.C.No.484/2017
It was not even the case set up by the prosecution that appellant had taken that money from some person and had obtained any pecuniary advantage thereby. It was the obligation of the prosecution to satisfy the aforesaid mandatory ingredients which could implicate the appellant under the provisions of Section 13(1)(d)(ii). The attempt of the prosecution was to bring the case within the fold of clause (ii) alleging that he misused his official position in issuing the certificate utterly fails as it is not even alleged in the chargesheet and not even iota of evidence is led as to what kind of pecuniary advantage was obtained by the appellant in issuing the said letter."
60. In the said case Hon'ble Apex Court has held that the accused had used his official position by issuing certificate for obtaining pecuniary advantage for him or for any other persons. If only, the prosecution establishes the fact that accused No.1 had provided financial accommodation to accused No.2 to drive a pecuniary advantage to him, then only the provision of Sec.13(1)(d) would attracted. It is settled principle of law that the provision of Sec.13(1)(d) and the concept of misconduct, both has been 103 Spl.C.No.484/2017 differentiated by a very thin line. The word Misconduct has been defined in Black's Law Dictionary, 6th Edn., at page 999, as follows:
"Misconduct.--A transgression of some established and definite rule of action, a forbidden act, a dereliction from duty, unlawful behavior, willful in character, improper or wrong behavior; its synonyms are misdemeanor, misdeed, misbehavior, delinquency, impropriety, mismanagement, offense, but not negligence or carelessness."
Further Misconduct in office has been defined as:
"Misconduct in office.--Any unlawful behavior by a public officer in relation to the duties of his office, willful in character. Term embraces acts which the office holder had no right to perform, acts performed improperly, and failure to act in the face of an affirmative duty to act."
Further the term Misconduct has been defined in P. Ramanatha Aiyar's Law Lexicon, 3rd Edn., at p. 3027, wherein it has been defined as hereunder:
104 Spl.C.No.484/2017
'Misconduct.--The term "misconduct" implies a wrongful intention, and not a mere error of judgment.
Misconduct is not necessarily the same thing as conduct involving moral turpitude. The word "misconduct" is a relative term, and has to be construed with reference to the subject-matter and the context wherein the term occurs, having regard to the scope of the Act or statute which is being, construed.
"Misconduct" literally means wrong conduct or improper conduct.'
61. When the aforesaid judgment is appreciated it indicates that the word 'Misconduct' is a generic term and it is required to construe with reference to the subject matter and the context wherein the term has occurred. In the instant case, if the prosecution contends that accused No.1 who was the Manager had committed Misconduct, the same is required to be considered with reference to the act allegedly committed by him. On recapitulation of the entire materials it indicates that the Manager had acted in due 105 Spl.C.No.484/2017 diligence at the time of disbursing of loan, however with respect to non compliance of ensuring the end usage necessary materials has not been produced by the prosecution. By looking in to the said aspects, it is crystal clear that the prosecution has failed to prove their case beyond reasonable doubt.
62. Lastly, the investigating Agency has also failed in their duty to discharge their burden by collecting necessary materials since the Trust Deed which was very much essential to prove the malafides being attached and entertained by the accused No.2 with accused No.1, was not at all being collected by the I.O. Unless the Trust Deed is furnished before the Court, the court will not be in a position, whether the accused No.2 had availed loan by entertaining mala fide intention than that of the other Trustees of the School or whether all other Trustees had also entertained the same intention. Only if the prosecution is able to establish the said fact, the rigors of the P.C.Act as well as Sec.420 of IPC would be attracted. However, in the instant case, the non-recovery of the Trust Deed would only raise a serious question mark with respect 106 Spl.C.No.484/2017 to the case of the prosecution. As such the prosecution has utterly failed to prove their case beyond reasonable doubt.
SUMMATION
63. The prosecution has contended that accused No.1 Manager had entered into a criminal conspiracy with accused No.2 Shobitha.K who was the Secretary of Sharon School and in furtherance of the same, he had processed and disbursed the term loan of Rs.6.50 lakhs to the term loan account of the School, towards purchase of furniture and fixtures to the School, which was withdrawn and a DD was purchased in favour of the supplier i.e., St.Anthony Industries which was run by the PW6 Francis. However, it has been noticed that the amount was once again credited back to the account of the School. Though it is also suggested that the School authorities had purchased materials from M/s.Pan Office System Private Limited, the prosecution has contended that the irregularities were committed only with a malafide intention to cheat and defraud the bank. However, the entertaining of dishonest intention right from inception was not established by the prosecution since the loan application which was 107 Spl.C.No.484/2017 filed by the School authorities were all jointly signed by the Trustees, whereas only the Secretary has been arraigned as accused No.2 in the instant case. Unless the overtact of accused No.2 is established by proving the fact that she alone entertained a malafide intention to the non-inclusion of the other two Trustees of the School, would be fatal to the case of the prosecution, since there is no provision of attracting vicarious liability under criminal law. Further, the Investigating Agency had failed to collect the Trust documents which are available in the bank itself, wherein it has been categorically admitted that the School had availed various other facilities from the same bank by producing the Trust Deed, KYC document, CIBIL Report, certificate issued by Education Department, etc. It is also forthcoming from the evidence led before the court that the loan account had not attained the status of NPA till the completion of investigation and subsequently. It is also elicited from the evidence of PW12 that the irregularities with respect to the loan account were all rectified. By pointing out all the said aspects, it is crystal clear that the prosecution has failed to prove their case beyond reasonable doubt and hence, the benefit of 108 Spl.C.No.484/2017 doubt is required to be given to the accused No.1 and 2 and sequentionally, I answer, Point No.2 to 5 in the Negative.
64. Point No.6: In view of my findings on point No.1 to 5 supra, I proceed to pass the following order:
ORDER Acting under Sec.235(1) of Cr.P.C., the accused No.1 Sri N.Satya Babu and accused No.2 Smt.Shobitha Sonath.K are found not guilty of the offence punishable under Sec.120-B r/w 420 of IPC and Sec.13(1)(d) r/w 13(2) of the Prevention of Corruption Act, 1988 and accordingly, they are acquitted.
Bail bonds of the accused No.1 and 2 stands cancelled.
(Dictated to the Stenographer Grade-I, transcribed by him, revised and corrected by me and then pronounced in the Open Court on this the 28th day of February, 2024).
(Santhosh Gajanan Bhat) LXXXI Addl. City Civil & Sessions Judge, Bengaluru City (CCH-82) (Special Court exclusively to deal with criminal cases related to elected former and sitting MPs/MLAs in the State of Karnataka) C/c of XLVII Addl. City Civil and Sessions Judge and Judge for CBI Cases, Bengaluru (CCH-48) 109 Spl.C.No.484/2017 ANNEXURES LIST OF WITNESSES EXAMINED ON BEHALF OF PROSECUTION :
PW.1 : G.C.Matolli PW.2 : Venkatesh PW.3 : Nagesh S.H. PW.4 : Guruprasad PW.5 : A.N.Vasudevan PW.6 : Francis.V PW.7 : Jitendra Singh PW.8 : N.Venkatesh PW.9 : Amar Devendrappa Nasi PW.10: Anand PW.11: A.Balasami PW.12: Rajendra Kumar S. PW.13: R.K.Shivanna PW.14: Rakesh Ranjan LIST OF EXHIBITS MARKED ON BEHALF OF PROSECUTION: Exhibits of Particulars Prosecution Ex.P.1 Certified copy of the complaint Ex.P.1(a) Signature of PW.1 Ex.P.2 Certified copy of the reply Ex.P.2(a) Signature of PW.2 Ex.P.3 Seizure memo Ex.P.3(a) Signature Ex.P.4 The report Ex.P.4(a) Signature of PW.3 Ex.P.5 Seizure memo dated 03.08.2015 110 Spl.C.No.484/2017 Exhibits of Particulars Prosecution Ex.P.5(a) Signature of PW.3 Ex.P.6 Seizure memo dated 14.08.2015 Ex.P.6(a) Signature of PW.3 Ex.P.7 to Circulars of the Bank dated 04.01.2013, Ex.P.13 11.03.2013, 12.10.2013, 21.10.2013, 28.11.2013, 25.08.2014, 13.10.2014 Ex.P.7(a) to Ex.P.13(a) Signatures of PW.3 Ex.P.14 to Circulars dated 14.10.2014, 21.02.2011, Ex.P.16 06.08.2014 Ex.P.14(a) to Ex.P.16(a) Signatures of PW.3 Ex.P.14(b) to Certificates issued under Sec.65(B) of the Ex.P.16(b) Indian Evidence Act Ex.P.14(b-i) to Ex.P.16(b- Signatures of PW.3 i) Ex.P.17 to Circulars-sanctioning power to the branches of Ex.P.21 the bank, appraisal approval and delivery of credit, risk monitoring and control,
operation guidelines to credit policy, efforts to achieve fresh sanction at all levels Ex.P.17(a) to Ex.P.21(a) Signatures of PW.3 Ex.P.17(b) to Certificates issued under Sec.65(B) of the Ex.P.21(b) Indian Evidence Act Ex.P.17(b-i) to Ex.P.21(b- Signatures of PW.3
i) 111 Spl.C.No.484/2017 Exhibits of Particulars Prosecution The circular dated 02.01.2013 Ex.P.22 Ex.P.22(a) Signature of PW.3 Ex.P.22(b) Certificate issued under Sec.65(B) of the Indian Evidence Act Ex.P.22(b-i) Signature of PW.3 loan application of SHARON Educational Ex.P.23 Charitable Trust St. Antony Industries-quotation Ex.P.24 Signature of PW.6 Ex.P.24(a) receipt for Rs.2,50,000/-
Ex.P.25 Loan Review Format and Process Note Ex.P.26 &27 Letter of sanction Ex.P.28 2 blank Stock Statements Ex.P.29 & 30 List of Furnitures and Fixtures submitted by Ex.P.31 SHARON English School Joint Inspection Report Ex.P.32 Signature of the PW.3 Ex.P.32(a) Report Ex.P.33 Signature of the PW.3 Ex.P.33(a) Production memo dated 30.01.2017 Ex.P.34 112 Spl.C.No.484/2017 Exhibits of Particulars Prosecution Signature of PW.4 Ex.P.34(a) Copy of the Circular for financing Synd MSE Ex.P.35 Scheme Signature of PW.4 Ex.P.35(a) Receipt memo dated 01.02.2017 Ex.P.36 Signature of PW.4 Ex.P.36(a) Receipt memo dated 08.02.2017 Ex.P.37 Signature of PW.4 Ex.P.37(a) Letter dated: 08.02.2017 along with Ex.P.38 CIBIL reports Copy of loan account status Ex.P.39 Signature of PW4 Ex.P.39(a) Receipt memo dated 15.02.2017 Ex.P.40 Signature of PW.4 Ex.P.40(a) Statement of account-SHARON School for the Ex.P.41 period 01.04.2014 to 14.08.2015 Signature of PW.4 Ex.P.41(a) Certificate issued under Sec.2(A) of Ex.P.42 Banker's Book Evidence Act Signature of PW.4 Ex.P.42(a) Certificate issued under Sec.65(B) of Indian Ex.P.43 Evidence Act 113 Spl.C.No.484/2017 Exhibits of Particulars Prosecution Signature of PW.4 Ex.P.43(a) The statement of account-SHARON Ex.P.44 School for the period 01.01.2014 to 14.08.2015 Signature of PW.4 Ex.P.44(a) Certificate issued under Sec.2(A) of Ex.P.45 Banker's Book Evidence Act Signature of PW.4 Ex.P.45(a) Certificate issue under Sec.65(B) of Indian Ex.P.46 Evidence Act Signature of PW.4 Ex.P.46(a) Entire loan record of SHARON School Ex.P.47 Report Ex.P.47(a) Signature of PW.8 Ex.P.47(a-i) Ex.P.48 Certified copy of receipt memo Ex.P.49 Hypothecation agreement Ex.P.50 Guarantor Deed Ex.P.51 Statement of account Ex.P.51(a) Signature of witness Ex.P.24(a) Signature Ex.P.47(a) Report Ex.P.47(a-1) Signature Ex.P.52 Receipt memo Ex.P.53 Risk Based internal report 114 Spl.C.No.484/2017 Exhibits of Particulars Prosecution Ex.P.54 Photo Ex.P.55 Certificate Ex.P.55(a) Signature Ex.P.56 Specimen Signatures Ex.P.57 Report Ex.P.57(a) Signature Ex.P.57(b) Relevant portion Ex.P.57(c) Para-29 Ex.P.58 Manual of instructions Ex.P.59 Mannual of instructions Ex.p.60 FIR Ex.P.61 VAT Certificate LIST OF MATERIAL OBJECTS MARKED THROUGH PROSECUTION: NIL LIST OF WITNESSES EXAMINED ON BEHALF OF DEFENCE:
NIL LIST OF DOCUMENTS MARKED THROUGH DEFENCE SIDE:
NIL (Santhosh Gajanan Bhat) LXXXI Addl. City Civil & Sessions Judge, Bengaluru City (CCH-82) C/c of XLVII Addl. City Civil and Sessions Judge and Judge for CBI Cases, Bengaluru (CCH-48)