Delhi District Court
Central Bureau Of vs . 1. H.S. Duggal on 14 May, 2013
1
IN THE COURT OF DINESH KUMAR SHARMA
SPECIAL JUDGE (PC ACT), CBI,
SAKET COURTS, NEW DELHI
CC No.07/12
Unique Case ID No. 02406R0779302005
Central Bureau of Vs. 1. H.S. Duggal
Investigation S/o Late Sh. Sohan Singh
R/0 E41, Kailash Colony,
New Delhi.
2. Deepak Arora (PO)
S/o Sh. R.S. Arora
R/o 2A/71, Ramesh Nagar,
New Delhi.
3. Renu Arora (PO)
W/o Sh. Deepak Arora
R/o 2A/71, Ramesh Nagar,
New Delhi.
4. Voneat Sethi
S/o Sh. Yashpal Sethi
R/o 567(297), Forest Lane
Sainik Farm, New Delhi
5. Ashok Kapoor
S/o Sh. Balwant Rai Kapoor
R/o B2/C1, Janak Puri,
New Delhi
CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 1 of 71
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RC No. : DAI2002029
u/Ss. : u/S.120B IPC r/w S.420/468/471 IPC and S.13(2) r/w
S.13(1)(d) POCA, 1988
Chargesheet filed on : 30.03.2005
Received by transfer on : 27.03.2012
Arguments Concluded on : 08.05.2013
Date of Decision : 14.05.2013
Appearances:
Sh. DK Singh, Ld. PP for CBI.
Sh. Kuldeep Mansukhani, Ld. Counsel for A1 HS Duggal
Sh. Vikas Pahwa, Ld. Sr. Counsel with Sh. Ajay Digpaul, Ld. Counsel for A4
Voneat Sethi
Sh. Rajesh Gulati, Ld. Counsel for A5 Ashok Kapoor
JUDGMENT
Accused HS Duggal (A1), Voneat Sethi (A4) and Ashok Kapoor (A5) have been tried for having entered into a conspiracy in pursuance to which loan of Rs.36.40 lacs was sanctioned and a sum of Rs.30 lacs was released in two installments by way of demand draft in favour of M/s. Dior Impex of which A4 Voneat Sethi is the proprietor and a cheque of Rs.5.3 lacs was got discounted at the instance of A1 HS Duggal which was dishonoured later on. A2 Deepak Arora and A3 Renu Arora were declared Proclaimed Offender (PO) on 31.05.2006.
CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 2 of 71 3 1.0 Briefly stated, the facts are that A2 Deepak Arora and A3 Renu Arora, partners of M/s. Pinky Zips opened an account No.5550 on 27.05.97 with Punjab & Sindh Bank, H Block, Connaught Circus, New Delhi. A2 Deepak Arora submitted a loan proposal on 14.05.97 alongwith Memorandum of Article in the name of M/s. Pinky Zips as Zips fastener manufacturing unit. M/s. Pinky Zips offered an industrial plot bearing No. 333, Udhyog Vihar, Gurgaon of M/s. Shanti Fertilizers as collateral security by way of equitable mortgage. A2 Deepak Arora and A3 Renu Arora, partners of M/s. Pinky Zips were also Directors in M/s. Shanti Fertilizers Pvt. Ltd. M/s. Pinky Zips submitted a loan proposal of Rs.150 lacs as Term Loan and Rs.60 lacs as working capital loan in Punjab & Sindh Bank, H Block, Connaught Circus, New Delhi. The loan proposal was forwarded by the Branch to Head Office through Zonal office with recommendation to sanction the loan. The Head Office (Advance Division) examined the matter in detail and found that proposal is optimistic and bank should not take exposure in this project and proposed that it may be declined. The proposal was put up before A1 HS Duggal, who was the then GM (Operations). A1 HS Duggal approved the decline proposal of M/s. Pinky Zips vide noting para 20N of HO(A) file of M/s. Pinky Zips.
On 24.11.97, A2 Deepak Arora again sent a communication to CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 3 of 71 4 the bank wherein it was requested that A2 had paid Rs.18 lacs to A4 Voneat Sethi, Proprietor M/s. Dior Impex as advance against Plant and Machinery. He further requested that validity date of quotation was going to expire. Investigation revealed that A2 Deepak Arora in conspiracy with A4 Voneat Sethi of M/s. Dior Impex arranged a fake quotation purported to be of SMB German and submitted to the bank. A4 Voneat Sethi also submitted the quotation of SMB Germany vide letter dated 18.08.97 through which he had enclosed the quotation of Taiwanese, Italian and German. A2 Deepak Arora and A4 Voneat Sethi also arranged the photocopy of letter of SMB Germany in which so called company nominated A4 Voneat Sethi & Nitin Sethi as authorized agent of their company. A4 Voneat Sethi also submitted a quotation of his own firm i.e. M/s. Dior Impex mentioning the rate and machinery of three foreign supplier i.e. Italian, Taiwanese and Germany supplier. The investigation revealed that all the quotations were prepared by A4 Voneat Sethi and handed over to A2 Deepak Arora in order to cheat the bank in the name of Import of plant.
The request dated 24.11.97 was forwarded to Zonal Office, Delhi. Sh. Manjeet Singh (PW9) who had just joined the Connaught Circus branch forwarded the letter dated 24.11.97 to Head Office and again communicated to A2 Deepak Arora about the rejection of his loan proposal. The letter dated 24.11.97 of M/s. Pinky Zips was examined by Sh. Rakesh CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 4 of 71 5 Tekriwal and opined that competent authorities may review its earlier decision. A1 HS Duggal also opined for reconsideration of the proposal and marked the file to Executive Director (ED) and Chief Managing Director (CMD). ED, Sh. BD Narang (PW18) opined that the proposal may be reconsidered if A1 HS Duggal consider it to be so, the noting of ED was approved by CMD, Sh. SS Kohli (PW19) on 06.01.98. In the meanwhile, vide circular No.1490 dated 02.01.98, the discretionary power of various sanctioning authorities were enhanced and as per said circular the project loan of M/s. Pinky Zips came under the discretionary power of Zonal Manager, Delhi.
Investigation revealed that A2 Deepak Arora in connivance with A1 HS Duggal wrote a letter dated 10.01.98 directly to A1 HS Duggal the then GM (Operations) with the request that he had paid Rs.18 lacs to A4 Voneat Sethi as advance and balance amount of Rs.36.40 lacs to be paid being 30% of the advance payment. A2 Deepak Arora also mentioned in the letter that he had mortgaged immovable property of the value of Rs.100 lacs and he is ready to mortgage additional property for above said loan and working capital loan after sanction of the proposal. A1 HS Duggal visited the H Block office on 12.01.98 in the evening and held a meeting with Sh. Manjeet Singh (PW9), Sh. Anil Malhotra and A2 Deepak Arora and directed the Branch Manager to prepare a proposal in writing. Sh. Manjeet Singh, CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 5 of 71 6 AGM vide his letter dated 12.01.98 gave a proposal in writing to A1 HS Duggal mentioning therein that it was informed by A1 HS Duggal himself that loan proposal of above firm has been reconsidered at Head Office level and the party has requested to release Rs.36.40 lacs being the 30% amount of advance to be paid to the supplier. Since 30% of the total amount comes to Rs.54.4 lacs out of which Rs.18 lacs had already been paid by the party, it was proposed that Rs.36.40 lacs may be paid to the supplier of the machinery directly after raising loan against the property offered as collateral security and said temporary loan will be adjusted and converted into loan against machinery at the time of sanction of the proposal by the competent authority. A1 HS Duggal accorded the temporary loan against the property vide his letter dated 12.01.98 in the branch itself. A1 HS Duggal mentioned in the said letter that loan against the property will be converted into loan against machinery after the sanction of complete loan proposal from the competent authority / HO. The investigation revealed that though the matter of M/s. Pinky Zips for reconsideration was approved by CMD, it was neither communicated to the branch nor it was reexamined by the concern dealing officer in HO (Advance Division). But A1 HS Duggal accorded the temporary loan of Rs.36.40 lacs to M/s. Pinky Zips as loan against property dishonestly, despite the circular dated 02.01.98, which was issued under his signatures only. Moreover, A1 HS Duggal was aware of the CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 6 of 71 7 fact that as per this circular, now the project falls under the discretionary power of Zonal office. A1 HS Duggal sanctioned the said temporary loan without any intimation to his senior officers.
The investigation also revealed that A1 HS Duggal had mentioned in the letter dated 12.01.98 that the loan amount will be disbursed only after visit of similar unit supplied by the supplier. A2 Deepak Arora in connivance with A4 Voneat Sethi arranged the visit of plant purported to be supplied by A4 Voneat Sethi at MM Associate Bhiwadi, Rajasthan. On the visit of this aforesaid plant, it was found that the plant at Bhiwadi in the name and style of MM Associate is neither Zip Manufacturing Unit nor it was supplied by M/s. Dior Impex. M/s. MM Associate turned out to be a button manufacturing unit of Voneat Sethi and his brother. A2 Deepak Arora and A4 Voneat Sethi in pursuant to their conspiracy again wrote a letter to the bank on 15.01.98 for request of immediate release of Rs.15 lacs and assured to arrange the visit of similar unit within few days. The Branch Manager on the basis of said letters send his letter to HO (Advance) for obtaining the permission for release of Rs.15 lacs and even A1 HS Duggal accorded the permission for release of Rs.15 lacs and directed for the visit of similar unit immediately. Pursuant to this sanction, banker's cheque dated 17.01.98 in the sum of Rs.15 lacs was issued in favour of M/s. Dior Impex. It is pertinent to mention here that A1 HS Duggal relaxed his own condition CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 7 of 71 8 regarding visit of unit without any justification.
The investigation revealed that A4 Voneat Sethi had not made any correspondence from so called foreign supplier. M/s. Dior Impex was not having any LC facilities from the bank and it was also found that A4 Voneat Sethi has neither any experiene in import of such type of zipper plant nor having necessary import licence.
The investigation also revealed that A1 HS Duggal did not intimate the sanction of above said loan to his seniors in violation of bank norms which require that sanction granted by the officer is to be intimated to his senior officers in his DP register by 7th of the month. The transaction of the loan of M/s. Pinky Zips was neither dealt in the concerned file of HO Advance division nor it was intimated to the CMD of the bank. Investigation further revealed that A2 Deepak Arora and A4 Voneat Sethi arranged the visit of similar unit located at Faridabad in the name and style of M/s. UJ Zippers (P) Ltd. on 21.01.98. However, the inspection team in their report dated 31.01.98 opined that this unit was also neither supplied by M/s. Dior Impex nor was similar unit in term of capacity as per the quotation. A2 Deepak Arora again vide letter dated 11.02.98 requested either to sanction project loan of Rs.2.1 crores or for release of remaining amount of Rs.21.40 lacs out of the temporary loan amount of Rs.36.40 lacs already sanctioned by A1 HS Duggal. A2 Deepak Arora addressed this communication to A1 HS CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 8 of 71 9 Duggal with the copy to Zonal Office as well as Branch. By this time, the case of M/s. Pinky Zips had been transferred to Zonal Office in pursuance to circular No.1490 dated 02.01.98. Request of A2 Deepak Arora was examined in Zonal Office and it was found that the project was not technically viable and rejected the project for further action. However, at the insistence of A2 Deepak Arora and to save the amount of Rs.15 lacs already disbursed by the bank, it was decided that only Rs.30 lakhs will be deemed sanctioned as temporary loan in place of Rs.36.40 lacs and only remaining Rs.15 lacs will be disbursed to the party with the condition that the temporary loan to be repaid on monthly installment starting 6 months after first disbursement, out of own resources. A condition was also laid down that remaining payment towards the cost of plant and machinery will be arranged by M/s. Pinky Zips from their own resources or from any other financial institution.
A2 Deepak Arora and A3 Renu Arora submitted a declaration cum undertaking to the Branch on 26.02.98 and assured the bank and undertook that the company will arrange the remaining payment towards the price of machinery from their own resources and the banks shall not in any way liable for the same. Pursuant to the sanction of the Zonal office, amount of Rs.15 lacs was disbursed to M/s. Dior Impex on 26.02.98 vide banker's cheque.
On 28.05.98, A2 Deepak Arora visited H Block Branch and CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 9 of 71 10 requested for purchase of a cheque No.329781 for Rs.5.30 lacs dated 23.05.98 drawn by Globe Steel India. A1 HS Duggal telephonically instructed the Branch Manager to purchase the said cheque. AGM, Sh. Manjeet Singh wrote a letter dated 28.05.98 for confirmation of telephonic instructions and sought written permission. In the communication, it was also indicated that a sum of Rs.84,000/ on account of interest was due against M/s. Pinky Zips. However, despite that, A1 HS Duggal accorded the written permission for purchase of cheque of Rs.5.30 lacs and despite the fact that matter was within the power of Zonal Manager, Delhi. The said cheque was purchased by the Branch and the amount was credited in the account of M/s. Pinky Zips. However, later on, the cheque was returned back to payee bank unpaid due to insufficient fund.
It may be recalled that A2 Deepak Arora and A3 Renu Arora had offered property bearing No.333, Udhyog Vihar as collateral security by way of equitable mortgage while applying for loan. However, it turned out that property No.333, Udhyog Vihar was already mortgaged with Haryana Financial Corporation (HFC) against a loan of Rs.37.90 lacs to M/s. Shanti Fertilizers Pvt. Ltd. The investigation revealed that A2 Deepak Arora had opened a company in the name of M/s. Shanti fertilizers Pvt. Ltd. and applied for a loan of Rs.42.59 lacs on 16.03.92 with HFC. HFC sanctioned the loan of Rs.37.90 lacs and a charge was created in the office of Registrar CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 10 of 71 11 of Companies vide letter dated 05.01.93 for Rs.37.90 lacs. The account of M/s. Shanti Fertilizers was declared a NPA in the year 1996. Accused persons in pursuance to the conspiracy prepared a forged sale deed of the same property and submitted alongwith present loan proposal. A2 Deepak Arora prepared a forged sale deed with the help of his brotherinlaw Ashok Kapoor, who had signed forged sale deeds as witness and also affixed his photograph on the same. It was found that forged sale deed presented in Punjab & Sindh Bank did not bear the signatures of Sh. S.K. Malhotra, the then Registrar, Delhi. Mrs. Jasdeep Kaur Bank Pannel Advocate and Sh. Sohan Lal, the office clerk of registrar office were examined and have also confirmed that the sale deed deposited in the Punjab & Sindh Bank is a forged document. Subsequently, the property in question was sold in auction to M/s. Allport International in the year 2001 by HFC.
Since, A1 HS Duggal had retired from service on 31.12.2003, therefore, no sanction was required under the provisions of POC Act. 2.0 Chargesheet was filed on 30.03.2005 and cognizance was taken on 31.08.2005. Being a prima facie case, charges u/S.120B IPC r/w S. 420/468/471 IPC and S.13(2) r/w S.13(1)(d) POC Act was framed against all the accused persons ; substantive charge u/S.13(2) r/w S.13(1)(d) POC Act was framed against A1 HS Duggal and substantive charge u/S.420 IPC was CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 11 of 71 12 framed against A4 Voneat Sethi and u/S.468 r/w S.471 IPC was framed against A5 Ashok Kapoor vide detailed order dated 18.04.2007. Charge was framed against the accused persons to which they pleaded not guilty and claimed trial.
3.0 Prosecution examined 36 witnesses in support of its case. 3.1 PW1 Harbans Singh Bindra, the then Technical Officer proved the technical report dated 31.01.98 as Ex.PW1/A. In the cross examination, the witness stated that he conducted the inspection on the instructions of Sh. JBS Bedi (PW8). Witness stated in the cross examination that no document was prepared at the spot nor the signatures of the representative were taken. Witness also stated that Ex.PW1/DA are the guidelines to the instructions pursuant to which technical report, Ex.PW1/A was prepared.
PW2 Narender Kumar Arora deposed on oath that he was partner of M/s. Kumar & Co. and being member of Delhi Stock Exchange used to deal in the sale and purchase of shares. Witness stated that he had received two cheques dated 19.01.98 and 17.01.98 which are Ex.PW2/A & Ex.PW2/B from A4 Voneat Sethi for purchase of shares. The cheques were in the sum of Rs.4 Lacs each. Witness stated that in lieu of these cheques, the CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 12 of 71 13 shares were handed over to A4 Voneat Sethi.
PW3 Sh. S.K. Malhotra, the then Registrar identified his signatures on the sale deed Ex.PW3/1 which bear the stamp and signatures in original of Branch Manager, HFC, Gurgaon. Sh. SK Malhotra stated that on page 3 and 10 of the sale deed, Mark A, which was purported to be his signatures are forged. It is pertinent to mention here that sale deed Ex.PW3/1 has come from the possession of HFC whereas, the sale deed Mark A has come from the records of Punjab & Sindh Bank. The witness stated that if a certified copy of the sale deed is taken from the office of Registrar, the signature, contents as well as photographs on the sale deed irrespective of the number of certified copies of deed, remain similar and same. It also came on the record that the seal impressions and the entries made by the dealing clerk are different in sale deed Ex.PW3/1 and Mark A. PW4 Ms. Jasdeep Kaur, Advocate who was panel lawyer of Punjab & Sindh Bank proved her report about verification of property bearing No.333, Udhyog Vihar, Distt. Gurgaon. PW4 Ms. Jasdeep Kaur stated that bank had provided her a copy of sale deed pursuant to which she visited the office of registrar and inspected the documents of payment of fees, receipt of which was proved as Ex.PW4/A. Witness stated that it was found that the photocopy of the sale deed which she had produced, having been given by the bank, was not genuine and the stamp affixed on the back CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 13 of 71 14 of the sale deed was also forged. Witness proved her report dated 20.07.2001 as Ex.PW4/B. In the cross examination, PW4 stated that while the inspection was marked to her , she was not shown the earlier report dated 19.05.97 submitted by Sh. Saiful Islam, Advocate.
3.2 PW5 G.R. Toppo, the then official posted in the concerned branch, on being shown the account opening form of M/s. Pinky Zips deposed that account No. CA 4, CBD of partnership firm was opened on 27.05.97 by authorized signatory Sh. JBS Bedi (PW8). The witness also identified the documents relating to loan proposal, project report submitted to Branch by M/s. Pinky Zips. Sh. GR Toppo identified letter dated 29.11.1997 signed by AGM, Sh. Manjeet Singh (PW9) as Ex.PW5/A vide which M/s. Pinky Zips was intimated regarding the decision of rejection of loan. Witness also proved another letter dated 12.01.98 signed by PW9 Manjeet Singh regarding loan of M/s. Pinky Zips as Ex.PW5/B. In the cross examination, witness stated that he had never dealt with loan account of M/s. Pinky Zips. Sh. GR Toppo stated that there is a concept of temporary loan also and it is granted to customers considering their genuineness and urgency which is for temporary period. Witness admitted in the cross examination that Mr. Saiful Islam, panel lawyer of bank had recommended the grant of loan subject to certain conditions vide communication Ex.PW5/DA. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 14 of 71 15
PW6 Dilbagh Singh Bajwa the then DGM, Loan Department, Punjab & Sindh Bank deposed on oath that loan proposal of M/s. Pinky Zips was received in Head Office after being recommended by Branch and Zonal office. In the Head Office, the loan proposal was examined by Sh. Tekriwal, Sh. U.S. Sachdeva (PW7), witness himself and A1 HS Duggal. Witness stated that the file produced in the court (collectively Ex.PW6/A) is in torn condition. (It is pertinent to mention here that Ex.PW6/A is the notesheet on both the pages, in damaged condition, have been placed in lamination. PW6 stated that A1 HS Duggal the then GM (O) finally declined the loan and thereafter, no revised proposal was received from the Branch regarding this loan. Sh. Dilbagh Singh Bajwa stated that A1 HS Duggal had visited the Connaught Circus Branch of the bank, from where the proposal had come, for discussing it and A1 HS Duggal sanctioned the limit there itself. The witness stated that A1 HS Duggal was competent to sanction the limit in the Branch also on the basis of data available in the branch. Witness stated that there is a procedure in the bank that even if the relevant file is not available, the loan can be sanctioned on the basis of data available in the Branch. Witness also stated that as long as A1 HS Duggal dealt with this file, there was no change in his loan sanctioning powers.
CBI sought permission to cross examine this witness as he was found to be resiling from his previous statement. In the cross examination by CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 15 of 71 16 Ld. PP, witness stated that whatever A1 HS Duggal did was in accordance with the procedure and mandate of the CMD.
In the cross examination on behalf of A1 HS Duggal, witness admitted the suggestion that A1 HS Duggal had sanctioned the loan by going to the Branch on the directions of the then CMD, Sh. SS Kohli (PW19). It also came in the cross examination that A1 HS Duggal was head of the Advance department at the Headquarter of the Bank. The witness also admitted the suggestion that head of Head Office had the power to sanction any limit which was within the power of the Zonal office and branch office. He also admitted the suggestion that as per bank rules, if a proposal of a party was rejected by a bank officer, only he is competent to reconsider the same proposal. Witness also admitted that request for reconsideration of loan proposal went to CMD and was duly approved by CMD. After such approval, A1 HS Duggal was the only officer to reconsider the proposal. PW6 admitted that in maintaining the discretionary power register and making entries therein A1 HS Duggal had no role to play and said register was to be maintained by the concerned dealing hands. It is relevant to note here that witness admitted the suggestion that if out of the total loan sanctioned of Rs.36.40 lacs, total outstanding on a particular date was less than Rs.30 lacs and Branch Manager could have discounted a cheque of Rs. 5.30 lacs as the loan was secured against the property. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 16 of 71 17
PW7 Updesh Singh Sachdeva the then AGM in Advance section also reiterated that the loan proposal of M/s. Pinky Zips was declined as the unit was not found viable by GM(O) i.e. A1 HS Duggal and the same was duly ratified by ED and CMD of the Bank. Witness stated that during this period, a change of policy took place in the bank and power which was being enjoyed by GM(O) ie. A1 HS Duggal was delegated to Zonal Manager, who was also officer of the rank of General Manager and the loan case of M/s. Pinky Zips was also ordered to be dealt with by the Zonal Office. PW7 stated that the loan proposal form in the prescribed proforma is prepared by the loan officer in the concerned branch on the basis of details given in the application form submitted by the parties wishing to avail the loan. PW7 proved the letter Ex.PW13/D and Ex.PW7/A vide which the decision regarding the decline of loan proposal was sent to the Branch under his signatures. Sh. US Sachdeva stated that the letter dated 24.11.97 written by M/s. Pinky Zips for reconsideration was forwarded by the Branch and the same was duly processed and put up before him. PW7 marked the file to PW6 Sh. DS Bajwa, DGM (Advance) and Sh. Rakesh Tekriwal again wrote a note dated 17.12.97 that in the light of the facts submitted by the party, the competent authority may review its earlier decision. The proposal went through ED and CMD who proved the same (it is pertinent to mention here that it seems that the witness has deposed on the basis of photocopy of CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 17 of 71 18 notesheet which is collectively Ex.PW11/B. However, he is mentioning Ex.PW6/A). Ex.PW6/A (Colly.) are the original incomplete notesheets in damaged / torn condition. PW7 also proved that noting at page No.20 on Ex.PW6/A (read Ex.PW11/B) are in handwriting of Sh. DS Grover in para No.44 wherein officer had referred to circular ID No.1490 dated 02.01.98 and stated that henceforth the matter was to be handled at Zonal Manager Level for handling and monitoring. This note was finally approved by A1 HS Duggal on 23.01.98. Pursuance to this noting, DGM (Advance) wrote a letter dated 20.01.98 / 27.01.98, Ex.PW7/B to the Zonal Manager informing that in terms of circular ID No.1490 dated 02.01.98, the case would fall under Zonal Manager discretionary lending power therefore, the same may be dealt with or monitored on that level on the merits of the case. Witness also produced the compilation of ID circulars for the year 1998 bearing No.1490 to 1500 which included circular No.1490 dated 02.01.98. This circular was issued under the signatures of A1 HS Duggal. In the cross examination on behalf of A1 HS Duggal, witness stated that he served Punjab & Sindh Bank for 31 years in various official capacities and he used to deliver lectures to the bank officials in the training colleges of parent bank as well as of other banks. Witness stated that he is well acquainted with the rules, regulations and norms regarding functioning of Punjab & Sindh Bank. Witness stated that A1 HS Duggal was head of Advance Department of Punjab & Sindh CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 18 of 71 19 Bank as a whole and under his supervision various zonal heads and branch heads were functioning in the field of advances. PW7 stated that once a loan proposal had been declined by a bank official, then only he as well as his seniors are competent to reconsider the same. Witness stated that since the proposal for sanctioning of loan was declined by A1 HS Duggal then as per bank norms he only was competent to sanction the loan. Witness admitted as per banking norms, a senior officer can visit a branch handling the account of a borrower and he can issue an instant sanction in the branch and this is a normal practice and there is nothing illegal on the part of A1 HS Duggal having visited H Block Connaught Circus Branch on 12.01.98 and having sanctioned a temporary loan of Rs.36.40 lacs to M/s Pinky Zips. PW7 further stated in the cross examination that there is nothing wrong in sanctioning release of Rs.15 lacs by A1 HS Duggal at the request of the branch if he was satisfied as per the banking norms. The witness went on to say that there is nothing wrong in the event when due to enhancement of the powers given to the Zonal Heads to sanction the loan / limits and in this particular case the limit / loan of Rs.36.40 lacs was then falling in the power of Zonal Heads but the GM in Head Office due to the exigencies and other circumstances could exercise his discretionary power to sanction the loan to M/s. Pinky Zips. Sh. US Sachdeva stated that it was within the discretionary power of GM, Head Office to further allow purchase of the cheque for Rs. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 19 of 71 20 5.30 lacs of the above party, subject to banking norms.
PW8 Sh. Jaswant Bir Singh Bedi the then Branch Manager remained posted at H Block from December 1996 to November 1997. He identified his signatures on account opening form of M/s. Pinky Zips. Witness stated that the then Sr. Manager, Sh. D.K. Malhotra had recommended for the opening of the account and he proved the letter dated 15.09.97, Ex.PW8/A send under his signatures regarding the loan proposal of M/s. Pinky Zips in reference to the letter dated 17.07.97 and 31.07.97 received from the Head Office. Witness also proved the loan proposal of M/s. Pinky Zips, Ex.PW8/B dated 30.05.97 and copy of the forwarding letter as Ex.PW8/C. Pursuant to the filing of the loan proposal, site visit was conducted by Sh. DK Malhotra and Sh. Anil Malhotra under the instructions of PW8 Sh. JBS Bedi. The visit report dated 20.01.97 was proved as Ex.PW8/D. In the cross examination on behalf of A1 HS Duggal, witness stated that the title deeds of the property were duly verified before the proposal was sent and there was no occasion for sending any communication to ROC for creating any charge on the proposed mortgaged property, as the loan proposal was rejected by the Head Office.
PW9 Sh. Manjeet Singh the then AGM / Branch Incharge of H Block Branch stated that loan amount of Rs.2 crores or above were with the competence of the Head Office. He stated that letter dated 24.11.1997 of M/s. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 20 of 71 21 Pinky Zips, Ex.PW9/A was put up before him and in response of the same, he wrote a letter dated 29.11.97, Ex.PW9/B to M/s. Pinky Zips intimating about the rejection of loan proposal. PW9 stated that on 12.01.98, A1 HS Duggal, the then GM(O) and Incharge of Head Office (Advances), visited the Branch at about 4:30 pm along with A2 Deepak Arora and asked for the loan file of M/s. Pinky Zips. PW9 Manjeet Singh, called Mr. Anil Malhotra (PW13), Loan officer of CBD. A1 HS Duggal informed PW9 Manjeet Singh that Head Office had reconsidered the loan proposal of M/s. Pinky Zips and the regular sanction would be sent in due course. It was further informed that M/s. Pinky Zips was in urgent need of at least 30% of advance payment for purchase of machinery. Such 30% comes to Rs.54.40 lacs and since the party had already paid Rs.18 lacs, the balance of Rs.36.40 lacs is urgently required. PW9 Manjeet Singh told A1 HS Duggal that Branch would be needing sanction from the Head Office on which A1 HS Duggal told that he would give the sanction then and there. In pursuant to this, letter dated 12.01.98, Ex.PW5/B was prepared through which A1 HS Duggal had granted sanction then and there in the branch itself vide letter Ex.PW9/C. Witness stated that letter Ex.PW5/B was drafted by PW13 Anil Malhotra and the sanctioning letter Ex.PW9/C was also drafted in the bank by Sh. Jaswant Singh and Sh. Anil Malhotra as guided by A1 HS Duggal. A1 HS Duggal sanctioned the loan against property to the tune of Rs.36.40 lacs to M/s. Pinky Zips which CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 21 of 71 22 was to be converted as loan against machinery when regular sanction was to be received subject to the condition that amount should be released after a visit to a similar type of unit. Pursuant to the directions, a visit was conducted on 15.01.98 to a unit at Bhiwadi however, such unit turned out to be a button manufacturing unit. PW9 Manjeet Singh stated that on 16.01.98, he received a telephone call from A1 HS Duggal in the morning, asking him as to why he (PW9) had not released the loan of Rs.36.40 lacs to M/s. Pinky Zips. PW9 Manjeet Singh apprised A1 HS Duggal that similar type of unit has not been visited. However, A1 HS Duggal insisted that Rs.15 lacs be released to the party before visiting the unit. PW9 Manjeet Singh told A1 HS Duggal that amended sanction is required for this and at the asking A1 HS Duggal, PW9 Sh. Manjeet Singh sent a communication dated 16.01.98 Ex.PW9/D seeking permission to release a sum of Rs.15 lacs before the visit to the zip manufacturing unit. Pursuant to Ex.PW9/D, A1 HS Duggal accorded the sanction vide letter dated 16.01.98, Ex.PW9/F. This communication was also sent by fax. A1 HS Duggal permitted the release of Rs.15 lacs prior to the visit of similar unit. After completion of the formalities, banker's cheque in the sum of Rs. 15 lacs was issued in favour of M/s. Dior Impex. PW9 Manjeet Singh stated that he instructed the Corporate Bank Division to get the documents verified from local experts. Witness stated that Sh. Saiful Islam submitted his report on 19.01.98. However, he CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 22 of 71 23 had seen the documents on 17.01.98 before the payment was released. Witness stated that thereafter, a visit was arranged and report was submitted in which certain objections regarding the capacity of the unit and price of the machinery was raised. PW9 Manjeet Singh stated that in the meanwhile M/s. Pinky Zips wrote another letter in the Zonal Office for release of balance amount of Rs.21.40 lacs as the unit had been visited and after lot of queries by the Zonal office, Zonal Office gave sanction on 26.02.98 for release of only Rs.15 lacs under certain terms and conditions that no further loan would be sanctioned and repayment would also be paid of the entire amount in six monthly installments and the loan was also converted as temporary loan instead of loan against property. Witness stated that after making all the compliances, second trench of the loan of Rs.15 lacs was issued vide banker's cheque in favour of M/s Dior Impex.
PW9 Manjeet Singh stated that in May 1998, he was instructed on telephone by A1 HS Duggal to purchase a cheque of Rs.5.30 lacs on behalf of M/s. Pinky Zips and PW9 told A1 that for this he (PW9) needed a sanction. At the asking of A1, PW9 sent a communication dated 28.05.98, Ex.PW9/K seeking permission of the head office regarding purchase of cheque and on the same date, A1 HS Duggal granted the sanction by fax message, Ex.PW9/L. Witness stated that M/s. Pinky Zips was pressurizing the bank to release the balance amount of the loan and therefore, Head CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 23 of 71 24 Office constituted a team of Executives from Head Office, Zonal Office and CBD Branch for appraising the proposal afresh in May 1998. PW9 Manjeet Singh also proved letter dated 26.02.98, Ex.PW9/H vide which Zonal Office approved the release of 2nd installment of Rs.15 lacs to M/s. Pinky Zips vide certain terms and conditions. These terms and conditions were conveyed by CBD to M/s. Pinky Zips vide letter Ex.PW9/J dated 26.02.98. The terms and condition were duly accepted by A1 & A2 vide endorsement at point B on the letter. PW9 proved the photocopy of letter dated 26.02.98, Ex.PW9/A written by M/s. Dior Impex under the signatures of A4 Voneat Sethi to M/s. Pinky Zips acknowledging the receipt of Rs.50.70 lacs and the copy of this letter was sent to Punjab & Sindh Bank (It is pertinent to mention here that in statement of accused u/S.313 Cr.P.C., A4 Voneat Sethi denied to have received Rs.50.70 lacs. He stated that this amount included the cheques given by A2 and A3 to him, were either dishonoured or taken back or not presented). PW9 Manjeet Singh proved letter dated 17.01.98, Ex.PW9/P written by A2 Deepak Arora to H Block, Connaught Circus whereby the receipt of Rs.15 lacs was acknowledged.
In the cross examination on behalf of A1 HS Duggal, witness stated that he merely sent a communication received from M/s. Pinky Zips dated 24.11.97 to Head Office and did not make any recommendation of the reconsideration of the proposal. Witness stated that on 12.01.98, A1 HS CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 24 of 71 25 Duggal had come unannounced along with A2 Deepak Arora to his office and only thereafter, he called PW13 Anil Malhotra, Loan officer from CBD office along with the file of M/s. Pinky Zips. Witness stated that property was duly mortgaged in this case in accordance with the sanction and the documentation in this case was done by his Branch / Incharge of the loan sanction. It was also stated by the witness that no formal minutes were drawn of the meeting held on 12.01.98. Witness stated in the cross examination that the concurrent auditors were appointed by the Bank as per the directions of RBI and they conduct verification of day to day transactions of the bank and submitted their report on monthly / quarterly basis to the Head Office and according to the concurrent auditors, the loan transaction in this case was in order. PW9 Manjeet Singh stated that he had also directed his Corporate Banking Division to get the documents verified through lawyer. Witness stated that loan was disbursed under his directions on 17.01.98. He further stated that the technical officer of the bank raised the objection regarding the machinery and viability of the project prior to the disbursement of the second installment. He stated that the report of the technical officer was duly sent by him to the competent authority, however, the competent authority approved the second installments of Rs. 15 lacs. Witness admitted in the cross examination that he had an authority to recall the sanction and refuse to disburse the loan, if the terms and conditions of sanction are not complied CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 25 of 71 26 with. PW9 further stated that in the present case, the terms and conditions of the loan were duly complied with.
3.3 PW10 Sh. B.M. Sharma stated that specimen signatures of Sh. SK Malhotra were taken at pages, Ex.PW10/A1 to A9.
PW11 Sh. Lalit Kumar Gulati was a formal witness. He had handed over the noting of M/s. Pinky Zips and a damaged certificate vide production cum seizure memo, Ex.PW11/A. Witness stated that the documents which were handed over by him are the notings Ex.PW6/A (13 sheets), its certified copies, Ex.PW11/B (20 sheets) and damage certificate, Ex.PW11/C and forwarding letter Ex.PW11/D. 3.4 PW12 Sh. Sameer Chawla deposed on oath that M/s. Dior Impex used to purchase zips from "Delhites" where he (PW12) was working in 199798 and A4 Voneat Sethi used to make payment through cheques. The witness proved the cheques Ex.PW12/A in the sum of Rs.7 lacs dated 17.01.98 and cheque Ex.PW12/B in the sum of Rs.1 lac dated 10.02.98 issued by M/s. Dior Impex under the signatures of Voneat Sethi in favour of Delhites. Witness stated that some of other cheques were also issued by M/s. Dior Impex but they bounced and suit and the complaint u/S.138 NI Act was filed against them.
CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 26 of 71 27
PW13 Sh. Anil Malhotra deposed regarding opening of account of M/s. Pinky Zips and proved the documents filed along with it. Witness also proved the loan proposal as Ex.PW8/B and appraisal form as Ex.PW13/B. He also proved proposal form, Ex.PW13/C (It is pertinent to mention here that in the appraisal form, Ex.PW13/B, M/s. Pinky Zips has specifically mentioned regarding the mortgage of property No.333, Udhyog Vihar). Witness stated that the site was inspected by himself and PW34 Sh. Dinesh Malhotra and report Ex.PW8/D was prepared.
3.5 PW14 Sh. Daljeet Singh was an official in the advance section of the Head Office and had processed the loan file of M/s. Pinky Zips at initial stage.
PW15 Sh. Gurdeep Singh was a formal witness who had handed over certain documents to CBI vide production cum seizure memo Ex.PW15/A. PW16 Sh. Sube Singh proved the account opening form of current account No.1153 in State Bank of Patiala, Okhla Phase - I, New Delhi as Ex.PW16/B. The witness also stated that subsequently current A/c No.1153 was closed and CC Account was opened on 01.01.93. The copy of statement of CC Account of M/s. Dior Impex from the period January 98 to March 2000 (running into 34 sheets) is proved as Ex.PW16/C. PW16 also CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 27 of 71 28 proved the letters addressed to M/s. Pinky Zips by A4 Voneat Sethi as Ex.PW16/D, Ex.PW16/E and Ex.PW16/J. He also proved the 11 receipts on the letter head of M/s. Dior Impex for different amount of cash / cheque / demand draft as Ex.PW16/F, Ex.PW16/G and Ex.PW16/H1 to H9. Witness stated that 8 cheques pertaining to CC Account of M/s. Dior Impex, Ex.PW16/K1 to K8 and 7 credit slips , Ex.PW16/L1 to L7 were handed over alongwith letter Ex.PW16/K. He stated that all the cheques were signed by A4 Voneat Sethi.
3.6 PW17 Sh. Ranbeer Singh Parmar the then Manager (Vigilance), Punjab & Sindh Bank, deposed on oath that M/s. Pinky Zips had initially opened an account in Corporate Division. However, later on, all operations of Corporate Bank Division were merged with H Block Branch. Witness stated that M/s. Pinky Zips were the defaulter and vigilance department had filed a complaint with CBI. The witness stated that A1 HS Duggal who was the then GM(O) at Head Office, personally went to H Block branch and held a meeting with PW9 Manjeet Singh and Desk Officer Mr. Arora and in the said meeting, it was decided that since the loan proposal is pending reconsideration before Head Quarter as an interim measure a loan of Rs.36.40 lacs be allowed as loan against property to be converted later on into loan against machinery after the sanction. Witness stated that first CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 28 of 71 29 installment of Rs.15 lacs was released immediately after the approval. However, subsequently since the loan amount came within the jurisdiction of zonal office, the next installment of Rs.15.00 lacs was released by the zonal office. Witness stated that thereafter, under the instructions of A1 HS Duggal, PW9 Sh. Manjeet Singh purchased a cheque of Rs.5.30 lacs which dishonoured later on. In the cross examination, witness stated that all the bad debts of the bank are not referred to vigilance department. However, this transaction was referred to vigilance branch as the then Chief Vigilance Officer Sh. N. R. B. Patnaik had got an information that the property in the present case is a fictitious property. Witness further stated that Sh. S. Islam, Advocate after verification of the title deed had given a suggestion that loan could be sanctioned in this case. Witness further stated that there is no bar in the reconsideration of the loan proposal even if it has been rejected earlier. The reconsideration of the loan proposal is undertaken by the Advances Deptt. only at the level of A1 HS Duggal, who was General Manager at the relevant time. Witness further stated that the sanction accorded by general manager is also submitted to the higher authority for approval. He also stated that there was no pressing compulsion for the zonal manager to release the second installment after the release of first installment.
PW18 Sh. Bhagwan Dass Narang the then Executive Director, proved his hand writing on the noting Ex.PW18/A and Ex.PW18/B. Sh. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 29 of 71 30 Bhagwan Dass Narang proved that he had made a noting that "if GMO is satisfied we may consider the proposal ,if he is not we may decline the proposal. I shall appreciate if final decision is taken in consultation with the CMD". PW18 also proved that as per noting Ex.PW18/B he had noted that ""I endorse the recommendations of GMO, we may reconsider the proposal". PW18 BD Narang also proved the circular dated 02.01.98 regarding delegation of discretionary power as Ex.PW18/C. In the cross examination, witness stated that the present loan proposal was regarding a small scale industries and the proposed loan amount fell within the domain of CMD and it should have gone upto the CMD and rejected / approved by him only. PW18 further stated in the cross examination that all the rejected proposals are not necessarily required to be put up before CMD. However, he voluntarily stated that in the case of SSI Loan cases, it was norm that it should be put to an officer one higher in rank.
Sh. S.S. Kohli, the then CMD appeared as PW19 and proved his signatures on notings Ex.PW19/A and Ex.PW19/B. Witness stated that a proposal for loan in favour of M/s. Pinky Zips was recommended by branch and declined by A1 HS Duggal, who was GM(O) at that time, on 29.09.97. PW19 SS Kohli stated that thereafter, a note was put up for reconsideration of proposal and the same was put up to A1 HS Duggal and to PW18 Sh. BD Narang, the then ED. Pursuant to the note of ED, the note was put up before CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 30 of 71 31 him. The witness made a note Ex.PW19/C to the effect that A1 HS Duggal i.e. GM(O) and PW18 BD Narang, ED to discuss about the loan proposal and thereafter, PW18 BD Narang the then ED endorsed the proposal of A1 HS Duggal to reconsider the proposal and this was proved by PW19 vide note Ex.PW19/D. In the cross examination, PW19 stated that by reconsideration he does not mean the approval. Sh. SS Kohli also stated that normally the loans are sanctioned with the process of the file, however, there may be instances where loans are sanctioned in the meeting. But the minutes of such meeting should be duly recorded and should be duly conveyed to the party. 3.7 PW20 Sh. HPS Arora, Managing Director of M/s. Allport International Ltd. stated that his company purchased property No.333, phase
- II, Udhyog Vihar, Gurgaon in public auction from Haryana Financial Corporation for a sum of Rs.51 lacs in the year 2001. Witness stated that during verification, they suspected that this property might have been mortgaged with Punjab & Sindh Bank, H Block, Connaught Place on which they gave an advertisement Ex.PW20/A in the Economic Times. Witness stated that he also met the Chairman and Managing Director of Punjab & Sindh Bank who states that this property is not mortgaged with them. Witness stated that the property was ultimately transferred in his favour and he still owned and possessed it. PW20 stated that A2 Deepak Arora and A3 CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 31 of 71 32 Renu Arora were earlier the owner of this property from whom HFC has repossessed it.
PW21 Sh. Sohan Lal the then UDC in the office of Registrar, Delhi identified the signatures of Sh. SK Malhotra on sale deed Ex.PW15/F3 and at point Q18 on the last page Ex.PW21/A. He stated that these signatures are not genuine signatures of Sh. SK Malhotra. In the cross examination, witness stated that at the relevant time, it was not necessary to affix the photograph of witness and the witness was required to sign the last page of the document and the presentation part of the document. The purpose was only to identify the vendor.
PW22 Sh. JP Bishnoi the then Sr. Manager, HFC stated that M/s. Shanti Fertilizers had taken a loan from HFC and lonee had offered a collateral security. The witness had handed over certain documents to CBI vide memo Ex.PW22/A. PW23 Sh. MP Singh, the then Manager (Technical), Punjab & Sindh Bank and PW24 Sh. Satinder Pal Singh, the then Manager, Financial Analyst at HO, Punjab & Sindh Bank, were part of the technical committee constituted for the study of viability of M/s. Pinky Zips for the purpose of grant of loan. He stated that the report was not positive regarding sanction of loan.
PW25 Sh. Kundan Lal Manchanda, the then Branch Manager, CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 32 of 71 33 HFC stated that property No.333, Udhyog Vihar, Phase II, Gurgaon was mortgaged with HFC against a loan of Rs.37.90 lacs and since the party was committing default in payment of the dues of the corporation, therefore, the entire loan was recalled and possession of the property was taken u/S.29 HFC Act, 1951. Witness stated that thereafter, property was put to sale by calling open tender and agreement to sale was executed with M/s. Allport International Pvt. Ltd. This agreement was duly confirmed vide letter Ex.PW25/B. Witness specifically stated that sale deed of the property was in possession of HFC from 01.01.93 till date.
PW26 Sh. Sat Pal Vashisth the then AGM, HFC proved his signatures on documents Ex.PW25/A and Ex.PW25/B. 3.8 PW27 Sh. Rajesh Kumar Tekriwal, the then Scale II Manager in Advances Department, Punjab & Sindh Bank had dealt with the loan proposal file of M/s. Pinky Zips. Witness stated that the file was presented to him for reconsideration and he did not find any merit in the case and same was declined by him.
PW28 Sh. Harjeet Singh Sawhney the then Personnel Manager, Disciplinary Action Cell, HRD Deptt. Punjab & Sindh Bank merely identified the signatures of complainant Sh. Devender Singh on complaint Ex.PW28/A. In the cross examination witness stated that he cannot make any CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 33 of 71 34 comment regarding complaint Ex.PW28/A as he never dealt with the file relating to loan of M/s. Pinky Zips.
PW29 Sh. Jagmohan Singh the then Private Secretary to A1 HS Duggal proved seizure memo Ex.PW29/A vide which he had handed over the documents to CBI.
3.9 PW30 Sh. VK Khanna, the then Principal Scientific Officer deposed on oath that as per report Ex.PW30/A, the authorship of questioned English signatures marked A26 to Q31 could not be connected with the specimen English signatures marked S1 to S9 attributed to SK Malhotra. Witness stated that further report Ex.PW30/C was submitted by him vide letter Ex.PW30/D. PW31 Sh. Jatinder Singh Arora the then Chief Manager, H Block Branch, Punjab & Sindh Bank proved the certified copy of cheque No. EM/C 0329781 dated 23.05.98 of Rs.5.30 lacs as Ex.PW31/B. He also proved the photocopy of statement of account as Ex.PW31/C. PW32 Sh. Nalin Sehgal merely proved the signatures on seizure memo Ex.PW32/A. PW33 Sh. Subhash Chand Arora deposed that 2nd Floor of property No. B104, Okhla Phase - I, was taken on rent by M/s. MM Associates which was being run by A4 Voneat Sethi and his brother Nitin CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 34 of 71 35 Sethi. Witness stated that this has also a sister concern namely M/s. Dior Impex.
PW34 Sh. Dinesh Malhotra, the then Sr. Manager Punjab & Sindh Bank proved the file Ex.PW15/B regarding opening of account of M/s. Pinky Zips and the loan proposal. Sh. Dinesh Malhotra stated that in the instant matter, Sh. Saiful Islam Advocate who was on bank panel, gave opinion that the documents have been duly signed in order and the bank provisions were duly complied with. Witness proved the valuation report as Ex.PW34/A. PW34 Sh. Dinesh Malhotra was also signatory to the visit report dated 20.06.97, Ex.PW8/D along with PW13 Sh. Anil Malhotra. Witness stated that initially the loan proposal of M/s. Pinky Zips was rejected and it was duly communicated to the party. M/s. Pinky Zips made another recommendation on 24.11.97 for reconsideration of loan proposal which was sent to Head Office. PW34 stated that A1 HS Duggal visited the H Block Branch, Connaught Place on 12.01.98 and gave sanction for temporary loan against property to the caption firm for a sum of Rs.36.40 lacs. This sanction was given with a clause that the loan will be converted to loan against machinery after the sanction of complete loan procedure from the competent authority and compliance of specific requirement of immovable property for machinery as per ID circular 1476. Sh. Dinesh Malhotra deposed regarding the sanction given by A1 HS Duggal and also CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 35 of 71 36 permission for release of first installment. Witness stated that 2nd installment was released on 26.02.98. In the cross examination, witness stated that valuation report of the property offered as collateral security is prepared by approved valuer of the Bank.
PW35 Sh. Devender Singh proved his complaint Ex.PW28/A. In the cross examination, witness stated that complaint was filed by him on the basis of records. Witness stated that as per records, security in the form of property was suggested to be taken, instead of loan against project. Witness admitted that as per legal opinion the property kept as collateral security was in accordance with the bank lending norms.
3.9 PW36 Insp. AK Pandey IO deposed on oath that FIR RC DAI2002029, Ex.PW36/A was registered on the complaint of PW35 Sh. Devender Singh on the basis of written complaint Ex.PW28/A of PW35 Sh. Devender Singh. He proved the seizure of documents and investigation conducted by him. IO stated that A2 Deepak Arora and A3 Renu Arora also joined the investigation but at later stage they also disappeared from their residence. IO proved various seizure memos vide which the documents were seized. In the cross examination, IO stated that during investigation, he found that parents of Voneat Sethi were not doing any business and even Voneat Sethi was not doing any business. It also came in the cross examination of IO CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 36 of 71 37 that evidence against Deepak Arora and Renu Arora had come on the very first day when the case was registered and searches were made. However, Deepak Arora and Renu Arora took a plea that actually they have been cheated by Voneat Sethi and at that time Voneat sethi was not traceable and after 2 years Voneat Sethi could be traced by that time Deepak Arora and Renu Arora had absconded. It is pertinent to mention here that vide letter dated 10.01.98 A2 Deepak Arora addressed to A1 HS Duggal, requested for release of Rs.36.40 lacs immediately and also assured that they had offered immovable property of market value of Rs.100 lacs and further offered to mortgage property for term loan and working capital loan. 4.0 In his statement u/S 313 Cr.PC, accused HS Duggal stated that he is innocent and has been falsely implicated in this case. Accused stated that at the relevant time, he was shortlisted to be posted as Executive Director of Nationalized Bank. Some of his senior colleagues were not happy with this development and they involved him in this false case. The original notings Ex.PW18/A & B and Ex.PW19/B, C and D were intentionally withheld and removed from the records. Fortunately, these could be find out from the garbage in the year 2004 and only thereafter, he was exonerated in the departmental enquiry and it was held that the present loan was sanctioned in accordance with the norms and procedure. Accused further CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 37 of 71 38 stated that he got this information under RTI and the letter received from General Manager along with noting are Mark A and Mark B. Accused initially stated that he would like to examine the CMD who had exonerated him from the departmental proceedings but lateron did not choose to examine him.
Accused Voneat Sethi in his statement u/S.313 Cr.P.C. stated that he only knew that M/s Pinki Zips had applied for loan for supply of machine. However, he pretended ignorance about other proceedings and documents. In respect of other incriminating evidence regarding process of loan, accused continued to pretend ignorance. In respect of the visit to button manufacturing unit, accused stated that he never directed any bank official regarding visit. Accused Voneat Sethi stated that at the request of A2 Deepak Arora, he had merely suggested to visit his own button manufacturing unit at Bhiwadi. Accused stated that this plant was imported from Italy and he had no knowledge that A2 Deepak Arora wanted to see this machinery. Accused stated that he had not asked for any advance prior to the visit of similar unit. However, he had asked for 30% for confirming the order and the total value of the machinery to be imported for supplying Pinky Zips was around Rs.1 crores 80 lacs, out of which around 54 lacs was to be given in advance for the order to be initiated. Accused admitted to have received banker's cheque No. MC 196/98 dated 17.01.98 in the sum of Rs.15 lakhs from A2 Deepak CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 38 of 71 39 Arora in his office. In respect of the issuance of the cheque dtd. 17.01.98 and 10.02.98, to DELHITES, the accused admitted to have issued the same in the normal business transactions. Accused stated that he did arrange for the visit of M/s UJ Zippers (Pvt) Ltd. at the request of A2 Deepak Arora. Accused stated that he had no knowledge about the report submitted by the bank and he was asked by A2 Deepak Arora to arrange for a visit of a unit where a plant supplied by proposed supplier had already been installed. Accused stated that he received only Rs. 30 lakhs by way of pay order from A2 Deepak Arora and remaining cheques were never presented by him except for one or two cheques which were dishonoured on presentation. This receipt of Rs.50.70 lacs included the cheques given by A2 Deepak Arora which were either not presented or returned dishonoured on presentation. In respect of the cheques Ex.PW2/A and Ex.PW2/B dtd. 19/1/98 and 17/1/98 of Rs. 4 lakhs each in favour of M/s Kumar & Co., for purchase of shares, the accused stated that the cheques were issued during the course of normal business transactions and it has nothing to do with the present transaction. Accused stated that his relation with A2 & A3 were purely commercial and he has nothing to do with the sanction and disbursement of the loan to them. Accused stated that he himself and his brother have been in the business of Zippers and buttons since 1984 and had imported the first plant for Zipper manufacture from Japan in 1984 beginning and further had imported button CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 39 of 71 40 manufacturing plant from Italy in 1996. Accused stated that as import of machinery was very difficulty in 1984 they had acquainted themselves with the procedure to import and installation of such machinery/plants as well as gained experience in the manufacture of Zips as well as buttons. Accused stated that they were the agents of a very big manufacturer of Zips in Bombay now Mumbai in which they were dealing with all kinds of Zippers giving them the knowledge of the marketing of all kinds of zippers. Accused stated that they were given sales tax registration in 1984 for the sale of manufacture zippers vide certificate Mark A. Accused stated that they were also having certificate of importerexporter code dated 18.3.94 Mark B. and another importexport code in the name of Dior Impax issued on 20.5.1997 mark "C". Accused stated that he was approached by A2 Deepak Arora in his office for a supply of integrated zipper plant in the year 1996 for which he ie. A4 had convinced him to import the machinery from Taiwan against machinery available in Germany and Japan as Taiwanese manufacture had full knowledge of the Indian market and technologically adapted to the buyers in the local market and on his insistence A4 had provided him proforma invoices for similar plant from Germany , Italy and Taiwan.
A5 Ashok Kapoor in his statement u/S 313 Cr.PC prominently feigned his ignorance and stated that no witness has deposed against him. The accused stated that he is innocent and has been falsely CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 40 of 71 41 implicated.
5.0 Sh. DK Singh, Ld. PP for CBI has argued that prosecution has successfully proved its case against the accused persons. Ld. PP submitted that A4 Voneat Sethi was in conspiracy with A2 Deepak Arora & A3 Renu Arora since beginning and A2 & A3 had applied for the bank loan on the basis of the quotations supplied by A4. The accused persons never intended to buy or supply any machinery. The intention was to misappropriate the money and cheat the bank since the beginning and to achieve this plan, the entered into conspiracy with A1 HS Duggal and A5 Ashok Kapoor was also involved in the conspiracy by making him into sign the forged agreements. Ld. PP submitted that in such like cases it is not possible to get the direct evidence, however, the circumstances and material on record do indicate that the accused persons were in conspiracy in pursuance of which A1 committed misconduct and the accused persons cheated the bank on the basis of forged and fabricated documents.
5.1 Sh. Kuldeep Mansukhani, Ld. Counsel for A1 HS Duggal submitted that in this case the legal search report of the collateral security of the industrial plot No. 333, Udyog Vihar, Gurgaon was got verified through Sh. Saiful Islam and property was valued at Rs. 80.84 lakhs by the bank CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 41 of 71 42 approved valuer. Ld. Counsel submitted that none of the prosecution witnesses have deposed against his client A1 and rather they clarified the false allegations by commenting both on the procedure of the bank and that A1 has not committed any offence nor was any conspiracy with the borrowers. Ld. Counsel relied upon PW6 Sh. Dilbagh Singh, PW7 Sh. Updesh Singh Sachdeva, PW8 Sh. Jaswant Singh and PW9 Sh. Manjeet Singh. Sh. Kuldeep Mansukhani, Ld. Counsel pointed out that PW9 Sh. Manjeet Singh in his statement stated that the property in question was duly mortgaged in accordance with the sanction and the documentation was done by the Branch Incharge of the loan sanction. Ld. Counsel also pointed out that PW9 confirmed that according to the Concurrent Auditors, the loan transaction was in order. Ld. Counsel pointed out that the testimony of the prosecution witnesses goes to prove that only A1 could have reconsidered or sanctioned the loan since he was the one who had declined the proposal. Ld. Counsel also pointed out that subsequently, in the departmental proceedings, the accused was exonerated. Sh. Kuldeep Mansukhani, Ld. Counsel submitted that infact this was a case of conspiracy against A1 who was expected to become Executive Director of the bank. In support of his contention, Ld. Counsel also cited PS Rajya Vs. State of Bihar, 1996 SCC (9) 1, Ajay Kumar Tyagi Vs. State, 2008 (TLS) 141293, State of NCT of Delhi Vs. Ajay Kumar Tyagi, Crl. Appeal No. 1334 of 2012 (SLP (Crl.) No. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 42 of 71 43 1383 of 2010), Standard Chatered Bank & Ors Vs. Directorate of Enforcement & Ors., Civil Appl No. 1748 of 1999, Surkhi Lal Vs Union of India, 2006 DLT 131 (12), BS Joshi & Ors Vs. State of Haryana & Anr., Crl. Appeal No. 383 of 2003, KK Agarwal & Anr. Vs. Enforcement Directorate, Crl. MC No. 1621/2007, Judgment delivered on 02/02/09. 5.2 Sh. Vikas Pahwa, Ld. Sr. Advocate appeared on behalf of A4 Voneat Sethi and submitted that prosecution has miserably failed to prove its case against his client. Sh. Vikas Pahwa, Ld. Sr. Advocate assisted by Sh. Ajay Digpaul, Ld. Counsel argued at length that to bring home the point that the prosecution has failed to prove the necessary ingredients of Section 120B IPC and Sec. 420, 468 and 471 IPC. Ld. Sr. Counsel submitted that prosecution has also miserably failed to prove its case u/S 13(1)(d) r/w 13(2) of the POC Act, 1988. Sh. Vikas Pahwa, Ld. Sr. Counsel argued that his client Voneat Sethi (A4) had merely given the quotation to A2 & A3 on their asking for supply of machinery. The machinery was to be imported from abroad and as per terms and conditions the buyers were required to give 30% as advance before finalising the order. Ld. Sr. Counsel submitted that in order to convict a person for the offence of conspiracy, there has to be some material on record to show the meeting of mind. The accused cannot be convicted merely at the asking of the prosecution. It was submitted that CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 43 of 71 44 though there may not be direct evidence but atleast the prosecution is required to prove some circumstances on the record which could show that accused persons were in conspiracy with each other. Ld. Sr. Counsel submitted that in the present case, there is not even an iota of evidence to substantiate the charges framed against the accused. In regard to the charge under POC Act, Ld. Senior Counsel submitted that though his client has nothing to do with it, yet there is no misconduct on the part of A1 HS Duggal in regard to the sanction of the loan. Ld. Sr. Counsel submitted that since his client has been charged for the offence of conspiracy r/w Sec. 13(1)
(d) r/w 13(2) of the POC Act, 1988, it is desirable for him to show that the offence u/S 13(1)(d) r/w 13(2) POC Act, 1988 is also not made out. Sh. Vikas Pahwa, Ld. Sr. Counsel took this Court through the evidence of the prosecution witnesses and stated that loan in this case was granted in accordance with the rules and there were no irregularities. Sh. Vikas Pahwa, Ld. Sr. Counsel argued that initially, M/s Pinky Zips had applied for loan against machinery, but this loan proposal was rejected by the bank on 6/10/97 and Pinki Zips again requested to consider the proposal of their company mentioning therein of taking a fresh quotation from Dior Impex on behalf of DMB, West Germany. Ld. Sr. Counsel submitted that vide letter dtd. 10/1/98 M/s Pinky Zips offered his property at 333, Udyog Vihar to be mortgaged for loan against property and on the basis of this the decision was CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 44 of 71 45 taken to release a sum of Rs. 36.40 lakhs to the supplier directly by raising a loan against property offered as collateral security. Sh. Vikas Pahwa, Ld. Sr. Counsel submitted that the perusal of the record would show that this time the loan was not sanctioned on the basis of the quotation submitted by A4 and the loan was actually sanctioned against the property and it was stipulated that it would be converted into loan against machinery after the formal sanction. It was pointed out that on 26/2/98 also Zonal office confirmed the sanction of Rs. 30 lakhs as temporary loan granted only against the property. In support of his contentions, Ld. Counsel for the accused on the point of dishonest intention and mensrea an essential ingredient for the offence u/S 13(2) POC Act, has relied upon the following judgments:
1. M. Narayanan Nambiar Vs. State of Kerala, 1963 (Suppl) 2 SCR
724.
2. CK Jaffer Sharief Vs. State (through CBI), 2013 (1) SCC 205.
3. State of MP Vs. Sheetla Sahai, 2009 (8) SCC 617.
4. Major SK Kale Vs. State of Maharashtra, 1977 (2) SCC 394.
5. SP Bhatnagar Vs. State of Maharashtra 1979 (1) SCC 535.
6. Abdulla Mohd. Pagarkar Vs. State, 1980 (3) SCC 110.
7. B. Balakrishnan Pillai Vs. State of Kerala, 2003 (9) SCC 700.
Sh. Vikas Pahwa, Ld. Sr. Counsel submitted that the offence u/S CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 45 of 71 46 13(1)(d) r/w 13(2) POC Act, 1988, cannot be attracted in this case as the transaction involved is a sanction of a "loan against property" to an individual by a General Manager of a bank and is not connected with any public interest. In support of his contention, Ld. Sr. Counsel has relied upon Runu Ghosh Vs. CBI in Crl. Appeal No. 482/02 dtd. 21/12/2011.
In order to press his point that the prosecution has failed to prove the necessary ingredients of the offence u/S 420 IPC, Ld. Counsel has relied upon SVL Murthy Vs. CBI, 2009 (6) SCC 77, Devendra Vs. State of UP, 2009 (7) SCC 495. Sh. Vikas Pahwa, Ld. Sr. Counsel submitted that it is not the case of the prosecution that the quotation submitted by A4 is fake and fabricated. IO also failed to check the authenticity of SMB Germany or to substantiate his argument that the quotation supplied by A4 is fake and fabricated. In support of his contention, Ld. Counsel has relied upon State Vs. Surya Sankaram Karri, 2006 (7) SCC 172. Sh. Vikas Pahwa, Ld. Sr. Counsel submitted that there is no evidence of criminal conspiracy on record and in support of his contention, Ld. Counsel has relied upon State of MP Vs. Sheetla Sahai, 2009(8) SCC 617, SVL Murthy Vs. State, 2009 (6) SCC 77, Yogesh @ Sachin Jagdish Joshi Vs. State of Maharashtra, 2008(10) SCC 394. Sh. Vikas Pahwa, Ld. Sr. Counsel submitted that merely because the money has come into the hands of his client A4 cannot be convicted. Ld. Sr. Counsel relied upon para 15 of Nand Kumar Singh Vs. State of Bihar, CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 46 of 71 47 1992 Supp. (2) SCC 111, in which it was inter alia held as under :
"15. The questions are (1) whether both the trial court and the High Court are correct in drawing the conclusion that this appellant is also a party for cheating the LIC simply because he received the premium commission, bonus etc. and (2) whether the appellant was a party alongwith accused DN Singh in conspiring and then forging the policies. From the evidence which we have extracted above, it is manifest that the appellant has not been a party either for any conspiracy or for forging the documents and making use of the same, but it is a case of the prosecution that it was the accused DN Singh who forged the signature of P.K. Prasad as well as the appellant on the Agent's Confidential Report and used the documents which ultimately resulted the LIC sustaining some wrongful loss. The bonus commission, the incentive bonus etc. permissible to the appellant in accordance with the law in respect of the two policies were credited to his account only in the normal course. Further there is no acceptable evidence that the accused D.N. Singh did all with the knowledge and consent of the appellant. In these circumstances, as rightly pointed out by the learned Counsel Mr. Gobind Mukhoty the present appellant cannot be held liable for any of the offences with which he now stands convicted,in the absence of any reliable evidence that the accused D.N. Singh did everything with the consent or knowledge of the appellant. Evidently, this must have been the reason for exonerating the appellant from any liability in the departmental inquiry."
Ld. Sr. Counsel also relied upon Shreya Jha Vs CBI, 2007 (3) JCC 2318. Lastly, Ld. Sr. Counsel submitted that if the charge for substantive offence fails, the charge of conspiracy cannot be levied. Ld. Counsel has relied upon Joseph Kurien Philip Jose Vs. State of Kerala, 1994 (6) SCC
535. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 47 of 71 48 5.3 Sh. Rajesh Gulati, Ld. Counsel for A5 Ashok Kapoor argued that prosecution has failed to prove its case against his client A5 Ashok Kapoor. Ld. Counsel submitted that prosecution has relied upon the signatures of accused Ashok Kapoor on forged sale deed in order to prove the charge. However, the CFSL report has not supported the case of the prosecution.
6.0 Accused persons have been charged for the offence u/S.120B IPC r/w S.420/468/471 IPC and S.13(2) r/w S.13(1)(d) POC Act.
The sum and substance of the case of the prosecution is that A2 to A5 entered into a conspiracy amongst themselves and with A1 HS Duggal and in pursuance to that conspiracy, forged the property documents and cheated the Punjab & Sindh Bank of Rs.36.40 lacs on account of loan against property. A1 HS Duggal who was General Manager (Operations) at the relevant time has also allegedly abused his official position and allowed pecuniary advantage to be obtained by A2 to A5. The prosecution has largely examined the witnesses from bank to substantiate its charge that forged sale deed was produced before the bank with the signatures of A5 Ashok Kapoor as a witness and A1 HS Duggal sanctioned the loan flouting all the norms and the money in terms of the loan so sanctioned was transfered into the CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 48 of 71 49 account of A4 Voneat Sethi. A2 Deepak Arora and A3 Renu Arora did not even join the complete investigation, and they were declared proclaimed offenders.
6.1 The defence has assailed the case of the prosecution primarily on the ground that prosecution has not been able to bring any material on record which could lead to the fact that there was conspiracy amongst the accused persons. The defence has also taken a plea that A1 HS Duggal has acted within the parameters of rules and norms and he sanctioned the loan having duly been authorized by ED and CMD of his bank. Loan was released after following and observing all the norms and even the internal mechanism of the bank did not find any fault with the loan so sanctioned. Till 2001, it was a case of loan default and only in 2001, it was transpired that A2 and A3 had presented the forged sale deed of the property, which was kept as collateral security. The property no.333, Udhyog Vihar, Phase II, Gurgaon had already been mortgaged with Haryana Finance Corporation (HFC) by M/s. Shanti Fertilizers of which A2 and A3 were Directors and on the failure of M/s. Shanti Fertilizer to repay the loan, HFC seized the property and auctioned the same in public auction. M/s. Allport International Ltd. bought the property and thereafter, PW20 HPS Arora on being found that this property is already mortgaged with Punjab & Sindh Bank in the record of CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 49 of 71 50 Registrar of Companies, contacted the then CMD of Punjab & Sindh Bank which lead to the filing of the present complaint. The plea of the defence is that A1 HS Duggal was implicated falsely on account of internal politics in the bank as the then top ranked officers did not want A1 HS Duggal to go ahead in his career and therefore, was implicated in this case.
A4 Voneat Sethi received the money under the contract. He had never been part of conspiracy. A4 Voneat Sethi only gave a quotation to A2 and A3 for supply of a Zip manufacturing machine. The condition in the quotation was that order would be confirmed only after the payment of 30% advance and since M/s. Pinky Zips of which A2 and A3 were the Directors, failed to pay 30%, this advance amount stood forfeited.
The plea of A5 Ashok Kapoor is that the prosecution has not been able to bring any evidence to show that he was in conspiracy with the accused persons in any manner. The prosecution has also not been able to bring any evidence of even namesake, which could show his involvement and furthermore, even the CFSL handwriting expert report, has been inconclusive in this regard.
7.0 Before proceeding further, it would be advantageous to go through the complaint dated 29.04.2002, Ex.PW28/A on the basis of which RC No.DAI2002029, Ex.PW36/A was lodged on 16.05.2002. The perusal CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 50 of 71 51 of the complaint, Ex.PW28/A would indicate that M/s. Pinky Zips opened an account on 27.05.97 and this account was opened without introduction at the instance of A1 HS Duggal and thereafter, the loan application of M/s. Pinky Zips was rejected by Head Office (Advance) department on 06.10.93. Complainant further stated that on 12.01.98, A1 HS Duggal visited the bank and asked the Manager to accommodate A2 and A3 with a temporary loan of Rs.36.40 lacs against property pending regular sanction. A1 HS Duggal further instructed the bank to purchase a cheque of Rs.5.30 lacs vide letter dated 28.05.98, which was later on dishonoured. The complaint further reads that the borrower had kept the property bearing No.333, Udhyog Vihar, Phase II, as collateral security. In this regard, legal opinion of penal advocate was taken. Sh. Saiful Islam vide opinion dated 19.05.97 stated that the property can be equally mortgaged subject to certain formalities. It is pertinent to mention here that the complaint then straightway came to 01.05.2001 when a complaint was received from M/s. Allport International Ltd. regarding forged documents of above said property Initially, the bank conducted internal inquiry and Mrs. Jagdeep Kaur, Advocate vide his legal opinion dated 20.07.2001 stated that the title deed of the property kept as collateral security with the bank was not genuine / authentic. It was also found that M/s. Shanti Fertilizer Pvt. Ltd. had filed a forged document regarding the satisfaction of charge bearing forged signatures of bank CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 51 of 71 52 official. It was complained that M/s. Pinky Zips represented by A2 and A3 cheated the bank by taking a loan of Rs.36.40 lacs and by not repaying it, by inducing the bank to purchase cheque of Rs.5.30 lacs which was later on dishonored and by forging the signatures of bank official and submitting the forged document papers. It was also informed that branch had filed a civil suit of recovery for an amount of Rs.51.22 lacs on 14.03.2000.
It is interesting to note that in this complaint, the primary allegation was that A1 HS Duggal sanctioned the loan despite having been denied by the Head Office and A2 & A3 presented the forged documents and also forged the signatures of bank officials on the documents filed before the Registrar of Companies regarding the satisfaction of charge. It is also pertinent to note here that the bank received the complaint from M/s. Allport International Pvt. Ltd. in May 2001 and took almost one year for filing the complaint before CBI, as the complaint was filed in the end of April 2002. CBI also took more than a fortnight to register the FIR and thereafter, the investigation was conducted and chargesheet was filed on 30.03.2005.
The quality of the investigation in this case is also much less than desired. It is disappointing to note that the IO in his testimony before the court stated that initially A2 and A3 were available and they have taken a plea that actually they have been cheated by A4 Voneat Sethi. A4 Voneat Sethi was not available for around 2 years and after 2 years, when Voneat CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 52 of 71 53 Sethi was available, A2 and A3 absconded. It is beyond comprehension to understand that despite the specific complaint on record that A2 and A3 had presented the forged sale deed before the bank, how their plea that they have been cheated by A4 Voneat Sethi could be believed by the IO. It would not be out of place of mention here that it seems that long rope was given to A2 and A3 to cross the course of justice and investigation from the day one was conducted in a manner so as to only complete the formality. 8.0 Now coming first to the case of A1 HS Duggal.
A1 HS Duggal, who was the then General Manager (Operations) has been charged for the conspiracy with the accused persons and for committed misconduct as provided u/S.13(1)(d) r/w S.13(2) of POCA, 1988. The law regarding conspiracy is very well settled. Recently in State of Madhya Pradesh Vs. Sheetla Sahai & Ors., (2009) 8 SCC 617 it has been inter alia held as under :
"38. A criminal conspiracy must be put to action inasmuch as so long a crime is generated in the mind of an accused, it does not become punishable. What is necessary is not thoughts, which may even be criminal in character, often involuntary, but offence would be said to have been committed thereunder only when that take concrete shape of an agreement to do or cause to be done an illegal act or an act which although not illegal by illegal means and then if nothing further is done the agreement would give rise to a criminal conspiracy. Its ingredients are :
(i) an agreement between two or more persons;
(ii) an agreement must relate to doing or causing to be done either (a) an illegal act; or (b) an act which is not illegal in itself but is done CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 53 of 71 54 by illegal means.
39. What is, therefore, necessary is to show meeting of minds of two or more persons for doing or causing to be done an illegal act or an act by illegal means. While saying so, we are not oblivious of the fact that often conspiracy is hatched in secrecy and for proving the said offence substantial direct evidence may not be possible to be obtained. An offence of criminal conspiracy can also be proved by circumstantial evidence.
40. In Kehar Singh and Ors. v. State (Delhi Administration), 1988 (3) SCC 609, this Court has quoted ( at SCC p. 731, para 271], the following passage from Russell on Crimes (12th Edn. Vol 1):
"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."
41. In State (NCT) of Delhi v. Navjot Sandhu [(2005) 11 SCC 600], this Court stated the law, thus:
"101. One more principle which deserves notice is that the cumulative effect of the proved circumstances should be taken into account in determining the guilt of the accused rather than adopting an isolated approach to each of the circumstances. Of course, each one of the circumstances should be proved beyond reasonable doubt. Lastly, in regard to the appreciation of evidence relating to the conspiracy, the Court must take care to see that the acts or conduct of the parties must be conscious and clear enough to infer their concurrence as to the common design and its execution."
42. We may also notice that in Ram Narayan Popli v. CBI [(2003) 3 SCC 641], it was held:
"342. ...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 coconspirators give to one another rendering enterprises possible which, if left to individual effort, would have CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 54 of 71 55 been impossible, furnish the ground for visiting conspirators and abettors with condign punishment."
43. In Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra [(2008) 6 SCALE 469], this Court opined:
"25. Thus, it is manifest that the meeting of minds of two or more persons for doing an illegal act or an act by illegal means is sine qua non of the criminal conspiracy but it may not be possible to prove the agreement between them by direct proof. Nevertheless, existence of the conspiracy and its objective can be inferred from the surrounding circumstances and the conduct of the accused. But the incriminating circumstances must form a chain of events from which a conclusion about the guilt of the accused could be drawn. It is well settled that an offence of conspiracy is a substantive offence and renders the mere agreement to commit an offence punishable even if an offence does not take place pursuant to the illegal agreement."
Thus, in order to prove the charge of criminal conspiracy amongst the accused persons, the prosecution may not be expected to produce direct evidence. However, the court must have advantage of some evidence indirect or circumstantial evidence which could show meeting of mind of conspirators. The court can also from such material infer the meeting of mind or some material on the record from which agreement may be proved by necessary implications. However, the court cannot forget the basic principle that each and every fact must be clearly established by reliable evidence and if the court wants to rely on the circumstantial evidence, the circumstances so proved must form a chain of events from which only irresistible conclusion of the guilt of the accused. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 55 of 71 56 8.1 In the light of the settled law, the prosecution in the present case, has mainly relied upon the circumstances that A2 Deepak Arora wrote a letter dated 10.01.98, Ex.PW36/DA directly to A1 HS Duggal in which he informed that 30% of the total cost of the machinery has to be paid as advance for ordering the same out of which Rs.18 lacs has already been paid by them to the supplier. A2 Deepak Arora also enclosed the receipt alongwith letter and stated that the balance amount of Rs.36.40 lacs has to be paid out of the term loan sanctioned against the machinery by the bank. A2 Deepak Arora requested that pending consideration of the loan proposal, a sum of Rs.36.40 lacs may be released immediately or otherwise, the amount already paid to the supplier shall stand forfeited. A2 Deepak Arora also offered to mortgage the property of around 100 lacs to the bank for availing of term loan and working capital. The plea of the prosecution is that pursuant to this letter, A1 HS Duggal visited the branch on 12.01.98 alongwith A2 Deepak Arora and sanctioned the loan in the bank itself. If this fact is read in isolation, it may lend a credence to the story of the prosecution. However, the court cannot read any fact in isolation. Here, the plea of A1 HS Duggal that he was made a target seems to be little plausible as in the complaint dated 29.04.2002, the complainant did not mention about the fact that M/s. Pinky Zips had moved an application dated 24.11.97 for reconsideration of the loan CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 56 of 71 57 proposal and this proposal after being forwarded by the Branch and Zonal office reached to the Head Office and the then ED and CMD had agreed for the reconsideration of the loan proposal on 06.01.98. It has also come in the evidence of the prosecution witnesses that the norms of the bank is that an officer who rejects the proposal is only entitled to reconsider the loan proposal. It has also come on the record that initially, the loan was rejected by A1 HS Duggal only and therefore, after the reconsideration was approved by the CMD and ED themselves, it was A1 HS Duggal himself who had declined the proposal, was entitled for its reconsideration. A1 HS Duggal, who was GM(O) and was posted in the Head Office itself, was aware of the fact that reconsideration has been allowed by the CMD on 06.01.98 and therefore, it cannot attribute any criminality if A1 HS Duggal visited the branch on 12.01.98 in regard of this loan.
Here, we will also have to understand that the banking business is carried out on personal trust and faith. A2 & A3 had applied for loan and it would not be unnatural if A2 and A3 had come to know that their proposal for reconsideration has been accepted and now it is for A1 HS Duggal to take the step. Therefore, merely because A2 had written a letter to A1 HS Duggal would not lead to an inference that there was some conspiracy between them. The prosecution has also relied heavily on the fact that power to grant this loan had been delegated to Zonal Manager vide circular dated 02.01.98 and CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 57 of 71 58 therefore, it was improper on part of A1 HS Duggal to sanction the loan. It has also come on the record that A1 HS Duggal was head of the advance department in Head Office and the present loan has never been beyond his powers. Vide circular dated 02.01.98, the power of the Zonal Office was enhanced, but in any case, A1 HS Duggal being a senior officer, loan in question remained within his power and it has also come in the testimony of prosecution witnesses that a senior officer can always sanction the loan which is within the power of his junior. Therefore, it is not a case where A1 HS Duggal exceeded his power. The entire testimony of the prosecution witnesses has not been able to show any evidence which could lead to an inference that there was some meeting of mind between A1 HS Duggal and other accused persons.
Similarly, in respect of A4 Voneat Sethi and A5 Ashok Kapoor, there is no cogent and creditworthy evidence which could lead to an inference that there was some element of conspiracy between A4 & A5 and A2 & A3. On this core, the investigating agency has failed possibly because A2 and A3 did not even fully join the investigation. Therefore, the complete evidence in this regard has not been gathered. Therefore, A4 Voneat Sethi and A5 Ashok Kapoor are also entitled for benefit of doubt in regard to the conspiracy charge.
CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 58 of 71 59 8.2 Accused HS Duggal has also been charged for the offence u/S. 13(1)(d) of POCA, 1988, which reads as under :
"13. Criminal misconduct by a public servant -
(1) A public servant is said to commit the offence of criminal misconduct,
(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."
It has been held in catena of judgments that dishonesty and misconduct are essential ingredients of Section 13(1)(d) of POCA. However, recently, in Runu Ghosh's case (Supra), the Hon'ble Delhi High Court held that for the charge u/S.13(1)(d)(iii), mensrea is not an essential ingredient. However, the question is that whether in the present case, there was any misconduct at all on the part of A1 HS Duggal. In this regard, if we go through the testimony of the prosecution witness, PW6 DS Bajwa in his testimony stated that A1 HS Duggal was competent to sanction the limit in CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 59 of 71 60 the branch also on the basis of data available in the branch. Witness further stated that there is a procedure in the bank that even if the relevant file is not available, the loan can be sanctioned on the basis of data available in the branch.
In the cross examination by Ld. PP, the witness reiterated that the action of A1 HS Duggal were in accordance with the procedure and was under mandate of CMD. It also came in the testimony of this witness that A1 HS Duggal was head of the advance department at headquarter of the bank and he had the power to sanction any limit which was within the power of Zonal Office and Branch Office. PW9 Manjeet Singh stated in the cross examination on behalf of A1 that as per bank rules, if the proposal of a party is rejected by bank officer, only he is competent to reconsider the same proposal and therefore, A1 HS Duggal was the only officer to reconsider the proposal. In regard to the maintaining DP register, witness stated that A1 HS Duggal had no role to play and said register was to be maintained by the concerned dealing hand.
PW7 US Sachdeva also reaffirmed that only A1 HS Duggal was competent to reconsider the loan proposal as he had declined the same earlier. This witness also confirmed that as per banking norms, a senior officer can visit the branch handling the account of a borrower and he can issue an instant sanction in the branch and this is a normal practice and there CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 60 of 71 61 is nothing illegal on the part of A1 HS Duggal having visited H Block, Connaught Circus Branch on 12.01.98 and having sanctioned a temporary loan of Rs.36.40 lacs to M/s. Pinky Zips. This witness who was the then AGM in advance section, also stated that there was nothing wrong in the event when due to enhancement of the powers given to the Zonal Heads to sanction the loan / limits and in this particular case, the limit / loan of Rs. 36.40 lacs was then falling in the power of Zonal Heads but the GM in Head Office due to the exigencies and other circumstances could exercise his discretionary power to sanction the loan to M/s. Pinky Zips. Sh. Sachdeva stated that it was within the discretionary power of GM, Head Office to further allow purchase of the cheque of Rs.5.30 lacs to M/s. Pinky Zips, subject to banking norms. Sh. Sachdeva, the then AGM confirmed that A1 HS Duggal had sanctioned loan against property to M/s. Pinky Zips which was to be converted against loan against machinery on the regular sanction. It also came in the testimony of this witness that the title deeds submitted by the party were got verified and search report prepared by Mr. Saiful Islam, Ex.PW5/F was prepared in which Sh. Saiful Islam vide its report dated 19.01.98 had recommended the grant of loan subject to certain conditions. It also came in the testimony of PW9 Manjeet Singh that the property was duly mortgaged in the case in accordance with the sanction and the documentation in this case was done by Branch / Incharge of the loan CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 61 of 71 62 section. It is pertinent to mention here that PW9 Manjeet Singh admitted in the cross examination that the concurrent auditors of the RBI conducted the verification of day to day transactions of the bank and according to the concurrent auditors, the loan transaction in this case was in order. Thus, if we go through the testimonies of these witnesses, it is crystal clear that there was no element of misconduct on the part of A1 HS Duggal. A1 HS Duggal had sanctioned the loan observing all the formalities. It has come on the record that the loan was sanctioned against property. The title deeds were duly verified by panel lawyers. I consider that the material on record has not been able to bring any material on the basis of which misconduct can be attributed against A1 HS Duggal.
8.3 Accused persons have also been charged for the offence of cheating and forgery. Sh. Vikas Pahwa, Ld. Sr. Counsel for A4 Voneat Sethi has argued at length that ingredients of cheating are not made out.
Section 415 of the Indian Penal Code defines cheating as under :
"Section 415. Cheating Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to `cheat'."
An offence of cheating cannot be said to have been made out CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 62 of 71 63 unless the following ingredients are satisfied :
"i) deception of a person either by making a false or misleading representation or by other action or omission;
(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."
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 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.
In S.V.L. Murthy Vs. State, 2009 (6) SCC 77, it was inter alia held as under :
"42. 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 CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 63 of 71 64 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.""
43. 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 allegation has been made that he had an intention to cheat the respondent from the very inception.
14. What has been alleged in the complaint petition as also the statement of the complainant and his witnesses relate to his subsequent conduct. The date when such statements were allegedly made by the appellant had not been disclosed by 33 the witnesses of the complainant. It is really absurd to opine that any such statement would be made by the appellant before all of them at the same time and that too in his own district. They, thus, appear to be wholly unnatural.
15. In law, only because he had issued cheques which were dishonoured, the same by itself would not mean that he had cheated the complainant. Assuming that such a statement had been made, the same, in our opinion, does not exhibit that there had been any intention on the part of the appellant herein to commit an offence under Section 417 of the Penal Code.
44. ...
45. In R. Kalyani v. Janak C. Mehta & Ors. [2008 (14) SCALE 85], this CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 64 of 71 65 Court held:
"29... As there had never been any interaction between the appellant and them, the question of any representation which is one of the main ingredients for constituting an offence of cheating, as contained in Section 415 of the Indian Penal Code, did not and could not arise.
30. Similarly, it has not been alleged that they were entrusted with or otherwise had dominion over the property of the appellant or they have committed any criminal breach of trust."
...
52. So far as the submission of learned Additional Solicitor General that this Court, having regard to the concurrent findings of fact as regards the commission of offence arrived at by the learned Special Judge as also the High Court, should not exercise its discretionary jurisdiction under Article 136 of the Constitution of India is concerned, we do not find any substance therein. Appellants have been charged under wrong provisions. Proper charges have not been framed against them."
In Devendra and Others Vs. State of UP and Anr., (2009) 7 SCC 495, it has been inter alia held as under :
"16. In V.Y. Jose v. State of Gujarat and Anr. [(2009) 3 SCC 78], this Court opined:
"14. An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:
i) deception of a person either by making a false or misleading representation or by other action or omission;
ii) fraudulently or dishonestly inducing any person to deliver any property; or 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.
For the purpose of constituting an offence of cheating, the CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 65 of 71 66 complainant is required to show that the accused had fraudulent or dishonest intention at the 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."
It is, therefore, evident that a misrepresentation from the very beginning is a sine qua non for constitution of an offence of cheating, although in some cases, an intention to cheat may develop at a later stage of formation of the contract.
17. In Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr., [(2000) 4 SCC 168], this Court held:
"14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 66 of 71 67 guilty of cheating it is necessary to show 11 that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
The above said judgments remind that in order to convict a person u/S.420 IPC, it has to be brought on record by way of positive evidence on record that there was dishonest intention since inception. Failure to fulfill the promise is one thing and having dishonest intention is another thing. One cannot be booked for the offence of cheating merely on account of his inability to complete the transaction. The prosecution is required to prove that there was dishonest intention and inducement at the inception and victim or the complaint was induced in a fraudulent manner by misrepresentation.
8.4 The allegation against A4 Voneat Sethi was that he submitted fake quotations alongwith loan proposal and on the basis of such fake quotations, the bank sanctioned the loan and bankers cheque were issued in the name of A4 Voneat Sethi directly. The case of the prosecution is that in this manner, A4 Voneat Sethi, who had never an intention of supplying machinery colluded with A2 Renu Arora and get the payment from the bank on the basis of forged document. CBI it seems went to the deep slumber after making this allegation and did not take any pain to substantiate the same. CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 67 of 71 68
In the present case, CBI has not even led any evidence that the quotation supplied by A4 Voneat Sethi was forged nor is there any evidence to show that A4 Voneat Sethi had never intended to supply the plant and machinery. It is also not the case of the prosecution that the money which went to the account of A4 Voneat Sethi was actually meant for A2 and A3. Rather, the prosecution led the evidence that the money which went to the account of A4 Voneat Sethi was utilized by him for purchasing the share or making payment to the persons from whom he was purchasing material. Sh. Vikas Pahwa, Ld. Sr. Counsel seems to have rightly relied upon Nand Kumar Singh Vs. State of Bihar, 1992 Supp. (2) SCC 111, wherein it was held that merely because a person is beneficiary cannot be held liable.
While analysing the case of A4 Voneat Sethi for a moment, this court also thought that since the public money had gone to the account of A4 Voneat Sethi, he is liable for the same. However, this court thought, of a propositions that suppose X comes to Y for buying a Car and makes a payment of Rs.10,000/ (this money is also paid as loan having taken from bank) and says that he would make the part payment after having received loan from bank and ensures that remaining payment would be made as and when released by the bank. Now suppose the bank does not release the remaining loan, what would the car owner do. Should he go the bank and say that I had received the part payment from the proposed buyer and since he CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 68 of 71 69 has not bought the car, you please take back the money or should he run after the proposed buyer and request him to take the car. In this case, on these facts, the proposed seller cannot be held liable but if the facts are twisted and suppose it is shown that proposed seller had no car at all and the money which came from the bank in the account of the proposed seller, then was passed on to the account of proposed buyer then in this case, the proposed seller can be held liable.
8.5 Now coming to the facts of the present case. The prosecution has not led any evidence to show that A4 Voneat Sethi had never intended to supply the machinery or money received from the bank was passed on to A2 and A3. In the cases, where machinery of high value is to be imported, there has to be some advance from the proposed buyer and if the proposed buyer fails to make the payment then there is no other alternative for the proposed seller but to forfeit the advance money. However, there is one suspicion in this case which is that A4 Voneat Sethi had given a receipt to A2 and A3 of the amount which actually he had not received. In fact, these receipts might have persuaded the bank to release the amount. However, I consider that merely on this evidence, A4 cannot be held liable. The material / evidence on the record is not that sufficient which is sufficient for holding him liable. Therefore, on this account, A4 Voneat Sethi is entitled for benefit of CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 69 of 71 70 doubt.
As far as the case of A5 Ashok Kapoor is concerned, the case of the prosecution is that A5 Ashok Kapoor had put his signatures on the forged sale deed presented before the bank by A2 and A3. It has been proved on record that the sale deed presented before the bank was forged. The property in question was already mortgaged with HFC and the original title deeds were with HFC only. A5 Ashok Kapoor alleged to have signed on the forged sale deed as a witness. However, prosecution again failed to bring any credible evidence in this regard. Even the CFSL report is not supporting the case of prosecution. The evidence regarding A5 Ashok Kapoor is very weak and therefore, he is also entitled for benefit of doubt.
This court is at pain to observe that the alleged main culprits in this case are still at large even after the 15 years of commission of offence and case against A4 Voneat Sethi and A5 Ashok Kapoor was also weak on account of the non collection of material evidence.
9.0 In view of the discussions made herein above, A1 HS Duggal is acquitted of the charge u/S.120B IPC r/w S.420/468/471 IPC and Sec. 13(2) r/w 13(1)(d) POC Act and substantive charge u/S 13(2) r/w Sec. 13(1)(d) POC Act, 1988 in RC No. 29(A)/02.
A4 Voneat Sethi and A5 Ashok Kapoor are acquitted giving CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 70 of 71 71 benefit of doubt, of the charge u/S 120B IPC r/w Sec. 420/468/471 IPC and Sec. 13(2) r/w Sec.13(1)(d) POC Act, 1988 and substantive charge u/S 420/468/471 IPC in RC No. 29(A)/02 Accused persons are on bail. Their bail bonds are canceled. Sureties are discharged. Original documents, if any, on record be released to them against proper acknowledgment.
Trial against A2 Deepak Arora and A3 Renu Arora be initiated as and when they arrested.
10.0 File be consigned to Record Room.
Announced in Open Court (Dinesh Kumar Sharma )
on 14.05.2013 Spl. Judge (PC Act) : CBI01
Saket Courts : New Delhi.
CBI Vs. H.S. Duggal & Ors. CC No.07/12 Page 71 of 71