Delhi District Court
Cbi vs Harbir Singh Harnotia on 20 March, 2026
IN THE COURT OF SH. JOGINDER PRAKASH NAHAR
ADDITIONAL SESSIONS JUDGE (FTC-01)
CENTRAL DISTRICT, TIS HAZARI COURTS, DELHI
CNR No. DLCT01-005032-2017
CRIMINAL APPEAL NO. 77/2017
CENTRAL BUREAU OF INVESTIGATION
5th B, CBI HO, CGO Complex, New Delhi ....Appellant
VERSUS
1. Harbir Singh Harnotia @ H. S. Harnotia
S/o Sh. Aasha Ram
R/o 2830, Bihari Colony
Shahadra, Delhi-32
Former Chairman
The Parishad Cooperative Bank Ltd.
Karol Bagh, New Delhi
2. Ram Prakash Nagar @ R. P. Nagar
(PROCEEDINGS ABATED
VIDE ORDER DATED 29.01.2026)
S/o Late Basant Ram
R/o B-7/67, Sector-18, Rohini
Delhi-85
The then Chief Manager
The Parishad Cooperative Bank Ltd.
Karol Bagh, New Delhi
3. Ram Nath Luthra @ R. N. Luthra
S/o Late Tirath Ram Luthra
R/o 7/377, Jwala Nagar,
Shahadra, Delhi
CA No. 77/2017
CBI Vs. Harbir Singh Harnotia & Ors. Page 1 of 43
4. Ramesh Chander Luthra @ R. C. Luthra
S/o Late Tirath Ram Luthra
R/o C-300, First Floor
Surajmal Vihar, Delhi
5. Krishan Lal Luthra @ K. L. Luthra
S/o Late Tirath Ram Luthra
R/o C-153, Surajmal Vihar
Delhi. ....Respondents
Date of Institution : 30.03.2017
Date of Judgment reserved on : 16.02.2026
Date of Judgment : 20.03.2026
JUDGMENT
APPEAL UNDER SECTION 378 (2) OF CODE OF CRIMINAL PROCEDURE, 1973 FILED BY THE APPELLANT (CBI) AGAINST THE JUDGMENT DATED 05.07.2016.
BRIEF FACTS AND REASONS FOR DECISION :-
1. The first material ground raised by the appellant / CBI is that while acquitting the accused person it was held by learned Trial Court that they are not public servants under Section 2 (viii) and (ix) of the PC Act 1988. The appellant has relied on citation titled CBI vs. Ramesh Gelli 2016 (III) SCC 788. It is submitted that it was laid down in the said citation that by virtue of Section 46A of the Banking Regulation Act 1949 the officer bearers/employees of a banking company which CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 2 of 43 includes a private banking company are public servants.
2. It is submitted by ld. Counsel for the appellant that the case had started on the basis of written complaint dated 28.06.1993 lodged by Sh. Yogender Makwana, Chairman of Parishad Cooperative Bank Ltd., Karol Bagh, New Delhi. The deceased accused no. 2 Ram Prakash Nagar/R.P. Nagar was CEO of the Parishad Cooperative Bank Ltd.
(hereinafter referred as PCB) and accused no. 1 Harbir was Chairman of the said PCB. It is submitted that accused no. 1 and 2 had entered into criminal conspiracy with accused no. 3, 4 and 5 to cheat the PCB by abusing their official position as a public servant and thereby they had caused loss to PCB. The grounds of appeal are taken separately.
3. The citation relied upon by the appellant is perused and it is noted that the law laid down by the Hon'ble Supreme Court of India is in reference to Banking Regulation Act 1949 and not in respect of Cooperative Societies Act, 1972. On this count alone the citation relied upon by the appellant is not applicable to the facts and circumstances of the present case.
4. Further during course of arguments it is admitted position between both the parties that issue of applicability of prevention of corruption under PC Act 1988 has already been decided between the same parties before the Hon'ble Court of equivalent jurisdiction.
4.1 Ld. Counsel for respondents no. 3 to 5 has relied on following citations:
(i) Ram Chandra Mawalal Vs. State of U.P AIR 1987 SC CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 3 of 43 1837
(ii) Greater Bombay Coop. Bank Ltd. Vs. United Yarn Tax Pvt. Ltd. & Ors. (2007) 6 SCC 236
(iii) CBI Vs. Ramesh Gelli (2016) 3 SCC 788
(iv) Union of India Vs. Ranjit Kumar Saha (2019) 7 SCC 505
5. The law in respect of hearing an appeal when the accused is already stood acquitted by the ld. Trial Court is discussed hereasunder:
Sunil Kumar Sambhudayal Gupta & Ors vs State of Maharashtra on 11 November, 2010 Equivalent citations: 2010 AIR SCW 7049, 2010 (13) SCC 657, AIR 2011 SC( CRI) 69, 2011 (1) AIR BOM R 30 Appeal against Acquittal:
22. It is a well-established principle of law, consistently re-iterated and followed by this Court is that while dealing with a judgment of acquittal, an appellate court must consider the entire evidence on record, so as to arrive at a finding as to whether the views of the trial Court were perverse or otherwise unsustainable. Even though the appellate court is entitled to consider, whether in arriving at a finding of fact, the trial Court had placed the burden of proof incorrectly or failed to take into consideration any admissible evidence and/or had taken into consideration evidence brought on record contrary to law; the appellate court should not ordinarily set aside a judgment of acquittal in a case where two views are possible, though the view of the appellate court may be the more probable one. The trial court which has the benefit of watching the demeanor of the witnesses is the best judge of the credibility of the witnesses.
23. Every accused is presumed to be innocent unless his guilt is proved. The presumption of innocence is a human right. Subject to the statutory exceptions, the said principle forms the basis of criminal jurisprudence in India. The nature of the offence, its seriousness and gravity has to be taken into consideration.
The appellate court should bear in mind the presumption of innocence of the accused, and further, that the trial court's acquittal bolsters the presumption of his innocence. Interference with the decision of the Trial Court in a casual or cavalier manner where the other view is possible should be avoided, unless there are good CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 4 of 43 reasons for such interference.
24. In exceptional cases where there are compelling circumstances, and the judgment under appeal is found to be perverse, the appellate court can interfere with the order of acquittal. The findings of fact recorded by a court can be held to be perverse if the findings have been arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant/inadmissible material. A finding may also be said to be perverse if it is `against the weight of evidence', or if the finding so outrageously defies logic as to suffer from the vice of irrationality. (See: Balak Ram & Anr. v. State of U.P., AIR 1974 SC 2165; Shailendra Pratap & Anr. v. State of U.P., AIR 2003 SC 1104; Budh Singh & Ors. v. State of U.P., AIR 2006 SC 2500; S. Rama Krishna v. S. Rami Reddy (D) by his LRs. & Ors., AIR 2008 SC 2066; Arulvelu & Anr. v. State, (2009) 10 SCC 206; Ram Singh alias Chhaju v. State of Himachal Pradesh, (2010) 2 SCC 445); and Babu v. State of Kerala, (2010) 9 SCC 189).
GROUNDS OF APPEAL
6. It is submitted on behalf of appellant that Hon'ble Supreme Court of India in case titled CBI Vs. Ramesh Gelli 2016 (III) SCC 788 has laid down that by virtue of Section 46A of the Banking Regulation Act, 1949 the office bearers/employees of a banking company including a private banking company are public servants. Hence the appellants have argued that the accused herein are public servants.
6.1 In case titled CBI Vs. Harbir Singh Harnotia and Ors. disposed on 22.02.2016 vide unique ID no. 02401R0034791996 where this issue has already been decided that whether the accused person are public servant or not in respect to the PCB. Initially the said case was filed by the appellant under Prevention of Corruption Act. It was held at para no. 25 in the said judgment that the accused were not public servants at the alleged time of commission of offence as defined under Section 2(c) CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 5 of 43
(viii) and (ix) of PC Act, 1988 and none of the accused therein were found public servant at the time of commission of the said offence and therefore ld. Judge, PC Act has held that there is absence of jurisdiction to conduct the trial of the said case and cannot therefore enter into merits of the said case. The period of offence is 1991-1993 which is the same period in this appeal. Hence when the appellant herein did not go in appeal nor did succeed further in the above judgment then they are not permitted to reagitate the same issue again and again and the finding already arrived at against them is binding on them. They also cannot be permitted to reagitate the same issue on the ground that they have found the new law on the same aspect. Since the jurisdiction of the present Court and the jurisdiction under PC Act in respect of public servant are different. What they had already reagitated and what is held against them cannot be permitted to be reagitated again before the present Court.
6.2 Secondly the case relied upon by the appellant titled CBI Vs. Ramesh Gelli referred above is in reference to Banking Regulation Act, 1949 and not in reference to Delhi Cooperative Societies Act, 2003. When the Acts are different and when the case titled CBI Vs. Ramesh Gelly does not pertain to the special Act of Delhi Cooperative Societies Act, 2003 then the appellant cannot be permitted to import the effect of different legislation into each other. The appellant has failed to show that such legislation could be imported against each other in the manner they have raised this appeal.
6.3 The ld. Counsel for the appellant has heavily relied on citation CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 6 of 43 titled K. Ashoka Vs. N. L. Chandrashekhar and Ors. (2009 Criminal Law Journal 2952) = AIR 2009 SC 3288 and referred to para no. 18 wherein it is provided that Section 109 of the Karnataka Cooperative Societies Act, 1959 provides for commission of offence under the said Act. It was further held that there is no statutory embargo placed for a Court to take cognizance of a offence under the provisions of IPC. If the allegations made in the complaint petition or a FIR make out a case under IPC then Section 111 of Karnataka Cooperative Societies Act, 1959 would not constitute a bar for maintenance of cases under IPC since the Karnataka Cooperative Societies Act, 1959 is applicable only in respect of cases committed under the said Act. Ld. APP for the state has submitted that in the said citation the complainant was a third party and he was not member of cooperative society. It is argued by the Appellant that provisions of Indian Penal Code are applicable against the accused person and learned Trial Court had erred in holding that the employees of Cooperative Banks registered under Cooperative Societies Act 1972 are not liable under IPC. The bar of proceedings against officials of cooperative societies is limited to the applicability of Cooperative Societies Act, 1972 whereas IPC can be initiated against any person.
6.4 Ld. Counsel for the accused has submitted that Section 140 of the Delhi Cooperative Societies Act, 2003 has laid down that the Act overrides other laws. It is laid down that this Act shall have effect not withstanding anything inconsistent contained in any other law. Section 118 of Delhi Cooperative Societies Act, 2003 (hereinafter referred as DCS, 2003) provides under Sub-clause (6) that any officer or employee CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 7 of 43 of a cooperative society including the paid Secretary who dishonestly or fraudulently misappropriates or otherwise converts for his own use or intentionally causes loss to the property of cooperative society entrusted to him or under his control as such officer or employee or allow other person to do so then he is punishable for imprisonment upto seven years and shall also be liable to fine. Section 121 has laid down that no prosecution shall be institute under this Act without previous sanction of the Registrar and such sanction shall not be given unless the person concerned has been provided a reasonable opportunity to represent his case. Section 122 (1) (a), (b) and (c) has laid down presumption of offences when the amount is drawn or fails to disburse properly or accounted, fails to produce books and properties when requisitioned by the Registrar or makes false entry or manipulates or alters the account book. Hence as per the ld. Counsel for the accused the complaint has to be made only before the Registrar of cooperative society and the appellant cannot approach directly for registration of a FIR. It is submitted that only when the accused is a public servant then IPC is applicable and in that event Prevention of Corruption Act is applicable. It is submitted that since the accused is not a public servant therefore only DCS, 2003 is applicable. The definition clause Section 2(t) has laid down that the officer means president, vice-president, chairman, vice-chairman, managing director, secretary, manager, member, treasurer and any other person empowered under the said Act and bye laws and thereby the protection is available on the accused persons under Co-operative Society Act. It is submitted that in the citation relied upon by the appellant titled K. Ashoka Vs. Vs. N. L. Chandrashekhar and Ors. (supra) the complaint was made first to the Registrar CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 8 of 43 cooperative society who had made a report that such misconduct was committed and only on the basis of said report the complaint was lodged in the said case. It is submitted that there was compliance of Co- operative Society Act while making a complaint in the said case. Whereas there is no such compliance in the present case.
6.5 The appellant has submitted that the Yogender Makwana, the then Chairman of the Parishad Cooperative Bank Ltd., Karol Bagh, New Delhi has lodged the complaint and he can give complaint directly to the CBI under IPC without making reference to Registrar of cooperative society. However it is admitted case of the CBI that Sh. Yogender Makwana, the next Chairman have no authorisation from Board nor he has any resolution to make a complaint to CBI under IPC. It is submitted that under Section 140 of DCS, 2003 has overriding effect. However there is no bar to take action under IPC to take cognizance of the offence.
6.6 It is noted that the appellant has first prosecuted the accused person as public servants and filed their case against the accused under the Prevention of Corruption Act, 1988 which means the appellant has considered the case of the prosecution only under Cooperative Society Act and not beyond it. It was held vide judgment titled CBI Vs. Harbir Singh Harontia and Ors. disposed on 22.02.2016 vide unique ID no. 02401R0034791996 that all the accused in this case are not public servants under PC Act, 1988. The chargesheet was filed under Section 120 r/w Section 420 IPC and under Section 13(2) r/w Section 13(1)(d) of PC Act, 1988. Now it is already held that the PC Act, 1988 is not CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 9 of 43 applicable in the present case and the said decision has become final and binding between both the parties.
6.7 Ld. Trial Court at para no. 22 of the body of the judgment has held that Co-operative Society Act is a complete code in itself and provision of IPC would not be attracted. The Act in itself creates specific offences and the above Act overrides the general law laid down under IPC. Section 118 of the Cooperative Societies Act provides for offences and penalties. Section 140 of the Cooperative Society Act grants overriding effect to anything inconsistent contained in any other law. Section 121 of the Act provides for previous sanction of Registrar and such sanction shall not be given unless the concerned person was provided with reasonable opportunity to represent its case. Hence ld. Trial Court has held that prosecution of accused without sanction of Registrar of cooperative society was bad. The appellant has usurped the powers of the Registrar of cooperative society under Delhi Cooperative Societies Act. It is argued on behalf of appellant that Section 83 of Cooperative Societies Act, 1972 and Section 121 of Cooperative Societies Act, 2003 creates a complete bar for taking cognizance by the Magistrate and therefore the general law of IPC will not apply. Hon'ble Supreme Court of India in case titled Dhanraj N. Asawani Vs. Amarjeetsingh Mohindersingh Basi 2023 INSC 710 vide judgment dated 14.08.2023 has held at para no. 27 that police have an independent power and even duty under Cr. PC to investigate in to an offence once information has been drawn to their attention indicating commission of an offence. The power is not curtailed by Maharashtra Cooperative Societies Act, 1960. There is no express bar and the CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 10 of 43 provisions of the 1960 Act do not by necessary implication exclude the investigative role of the police under Cr. PC. The Section 81(5B) of the 1960 Act does not contain any express or implied bar against any person from setting the criminal law in motion and the investigation cannot be interdicted as the Maharashtra Cooperative Societies Act, 1960 cast a duty on the auditor to lodge a FIR. However any person can set the criminal law in motion. It was held at para no. 11 that when the auditor has come to an conclusion that the auditor report finds any person guilty of any offence relating to the accounts or any other offences then they are obligatory to file a specific report to the Registrar. The auditor is then required after obtaining the written permission of the Registrar to file an FIR. When the auditor fails to initiate the action then the Registrar shall cause an FIR to be filed by a person authorised by them.
6.8 However the present case pertains to Cooperative Societies Act, 1972. Section 83 of Cooperative Societies Act, 1972 specifically provides that no prosecution shall be instituted under this Act without previous sanction of Registrar and such sanction shall not be given without giving to the person concerned a reasonable opportunity to represent his case. Section 93 specifically bars jurisdiction of the Courts in respect of civil and revenue matters. Under Section 55 of the Cooperative Societies Act, 1972 the enquiry can be conducted by the Registrar. Hence there is specific bar of jurisdiction of the Court under civil and revenue matters and not in respect of criminal matters. The Chapter XII of the Delhi Co-operatives Society Act, 1972 contains Section 82 to Section 98 which has specifically laid down the CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 11 of 43 jurisdiction before the offence could not be tried. Hence cognizable offence could be tried inferior to that of a Magistrate of first class. The prosecution cannot be instituted without previous sanction of Registrar. The prosecution is in reference to offence defined under Section 82 of Delhi Co-operatives Society Act, 1972. Other than this reference is also available to Section 36 and 37 of Delhi Co-operatives Society Act, 1972. Section 36 of the Act is in reference to the prior claim of the Govt. in respect to land revenue and transfer of property in contravention of first charge of co-operative society. Section 37 is in reference to charge on immovable property of members borrowing loans from certain societies in respect of which declaration had to be made by the members with restriction to alienate such property or interest therein until the whole amount borrowed is returned and alienation of such property in contravention is punishable. Hence the offence of cheating is not covered under Section 82 of Delhi Co- operatives Society Act, 1972 and therefore the said offence of cheating under Section 420 IPC is not punishable under the Delhi Co-operatives Society Act, 1972. Section 54 of the Act provides for inspection of a cooperative society and in the event any serious irregularity discovered then the Registrar or person authorised by him may call by special order a Committee and a General Meeting. Under Section 55 the Registrar may hold an enquiry and may communicate brief summary of report of enquiry to the society/financing institutions and the person or authority at whose instance the enquiry is made. Section 59 has laid down that at any time an officer and employee of a society made any payment contrary to this Act by breach of trust or willful negligence or had misappropriated or fraudulently retained any money or other property CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 12 of 43 belonging to such society then Registrar may direct enquiry for which Registrar is required to give such person an opportunity for being heard requiring him to pay or restore the money or property which Registrar consider just an equitable. Hence the willful negligence or misappropriation or fraudulently retention of money or property is specifically covered under Delhi Co-operatives Society Act, 1972 which restrict itself to the recovery of money in the nature of civil dispute and which does not extend itself in the nature of criminal trial or punishment. Hence the Delhi Co-operatives Society Act, 1972 has not specifically dealt with the ingredients of offence of cheating under Section 420 IPC and it is not covered the said Act. A public duty is cast on the auditor or Registrar of cooperative society to file a specific report in respect of such irregularity as they are the first person to acquire knowledge about the financial irregularity in the cooperative society in the course of conducting an audit. Hence as far as criminal proceedings are concerned it obligates the auditor or Registrar to bring them to the notice of police. The Delhi Co-operatives Society Act, 1972 does not specifically provide any procedure or trial of offence which contain the ingredient of Section 420 IPC and therefore in absence of the same it cannot be said that it excludes trial of offences covered under IPC while adopting procedure prescribed under Cr. PC. Hence the criminal law can be put in to motion by any person in reference to offence committed which are public in nature and has effect on public at large. The citation titled Dhanraj N. Asawani Vs. Amarjeetsingh Mohindersingh Basi 2023 INSC 710 is relevant for the purpose of spirit of law laid down therein though the law was laid down in respect of Maharashtra Co-operatives Society Act, 1960. The relevant para no.
CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 13 of 4314 to 28 are reproduced hereasunder:
Dhanraj N. Asawani v. Amarjeetsingh Mohindersingh Basi, (2023) 20 SCC 136 : 2023 SCC OnLine SC 991 at page 142
14. The High Court was of the view that since the provisions of the 1960 Act are special in the sense that they govern cooperative societies in the State, the provisions of Section 81(5-B) would preclude the registration of an FIR at the behest of a person, such as the appellant, who is a shareholder of the cooperative society.
We are unable to accept the view of the High Court. Neither expressly nor by necessary implication does the 1960 Act preclude the setting into motion of the criminal law by any person other than the auditor or the Registrar.
15. Section 4CrPC provides that all offences under IPC shall be investigated, inquired, and tried according to the provisions of CrPC. Section 4(2) structures the application of CrPC in situations where a special procedure is prescribed under any special enactment. [ See State of Punjab v. Balbir Singh, (1994) 3 SCC 299 : 1994 SCC (Cri) 634; Enforcement Directorate v. Deepak Mahajan, (1994) 3 SCC 440 : 1994 SCC (Cri) 785.] Section 4 is extracted below:
"4. Trial of offences under the Penal Code and other laws.--(1) All offences under the Penal Code (45 of 1860) shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained.
(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."
16. Section 4(2) lays down that the provisions of CrPC shall apply to all offences under any other law apart from IPC. However, the application of CrPC will be excluded only where a special law prescribes special procedures to deal with the investigation, inquiry, or the trial of the special offence. For instance, in Mirza Iqbal Hussain v. State of U.P. [Mirza Iqbal Hussain v. State of U.P., (1982) 3 SCC 516 : 1983 SCC (Cri) 111] this Court was called upon to determine whether the trial court had jurisdiction to pass an order of confiscation under the Prevention of Corruption Act, 1947. This Court held that the provisions of CrPC would apply in full force because the Prevention of Corruption Act, 1947 did not provide for confiscation or prescribed any mode by which an order of confiscation could be made. Therefore, it was held that a court CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 14 of 43 trying an offence under the Prevention of Corruption Act, 1947 was empowered to pass an order of confiscation in view of Section 452CrPC. In determining whether a special procedure will override the general procedure laid down under CrPC, the courts have to ascertain whether the special law excludes, either specifically or by necessary implication, the application of the provisions of CrPC.
17.CrPC provides the method for conducting investigation, inquiry, and trial with the ultimate objective of determining the guilt of the accused in terms of the substantive law. The criminal proceedings kick in when the information of the commission of an offence is provided to the police or the Magistrate. Section 154CrPC details the procedure for recording the first information in relation to the commission of a cognizable offence. It provides that any information relating to the commission of a cognizable offence if given orally to an officer in charge of a police station shall be reduced into writing by them or under their direction. The information provided by the informant is known as the FIR. [T.T. Antony v. State of Kerala, (2001) 6 SCC 181 : 2001 SCC (Cri) 1048]
18. In Lalita Kumari v. State of U.P. [Lalita Kumari v. State of U.P., (2014) 2 SCC 1 : (2014) 1 SCC (Cri) 524] a Constitution Bench of this Court held that the main object of an FIR from the point of the view of the informant is to set the criminal law in motion and from the point of view of the investigating authorities is to obtain information about the alleged criminal activity to take suitable steps to trace and punish the guilty. The criminal proceedings are initiated in the interests of the public to apprehend and punish the guilty. [Sheonandan Paswan v. State of Bihar, (1987) 1 SCC 288 : 1987 SCC (Cri) 82] It is a well-settled principle of law that absent a specific bar or exception contained in a statutory provision, the criminal law can be set into motion by any individual. [Ratanlal v. Prahlad Jat, (2017) 9 SCC 340 : (2017) 3 SCC (Cri) 729]
19. In A.R. Antulay v. Ramdas Sriniwas Nayak [A.R. Antulay v. Ramdas Sriniwas Nayak, (1984) 2 SCC 500 : 1984 SCC (Cri) 277] a Constitution Bench of this Court held that the concept of locus standi of the complainant is not recognised in the criminal jurisprudence, except in situations where the statute creating an offence provides for the eligibility of the complainant. The Court observed that the right to initiate criminal proceedings cannot be whittled down because punishing an offender is in the interests of the society : (SCC pp. 508-509, para 6) "6. ... This general principle of nearly universal application is founded on a policy that an offence i.e. an act or omission made punishable by any law for the time being in force [See Section CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 15 of 43 2(n)CrPC] is not merely an offence committed in relation to the person who suffers harm but is also an offence against society. The society for its orderly and peaceful development is interested in the punishment of the offender. Therefore, prosecution for serious offences is undertaken in the name of the State representing the people which would exclude any element of private vendetta or vengeance. If such is the public policy underlying penal statutes, who brings an act or omission made punishable by law to the notice of the authority competent to deal with it, is immaterial and irrelevant unless the statute indicates to the contrary. Punishment of the offender in the interest of the society being one of the objects behind penal statutes enacted for larger good of the society, right to initiate proceedings cannot be whittled down, circumscribed or fettered by putting it into a straitjacket formula of locus standi unknown to criminal jurisprudence, save and except specific statutory exception."
(emphasis supplied)
20. The 1960 Act is a special law enacted to govern cooperative societies in Maharashtra. Section 81 of the 1960 Act casts a public duty on the auditor and the Registrar to audit cooperative societies. In pursuance of this objective, Section 81(5-B) obligates them to register an FIR in case they discover any financial irregularities in the audit reports of a cooperative society. According to the said provision, when the auditor comes to the conclusion in the audit report that any person is guilty of an offence relating to the accounts or of any other offences, they are mandated to file a specific report to the Registrar. Where the auditor has failed to do so, the Registrar is empowered to cause an FIR to be filed by a person authorised by them in that behalf. The statutory obligation is cast on the auditor and the Registrar because they are the first persons to acquire knowledge about the financial irregularities in a cooperative society in the course of conducting an audit. Since only the auditor and the Registrar are privy to such irregularity, the 1960 Act obligates them to bring the information about the financial irregularity to the knowledge of the police.2023) 20 SCC 136 : 2023 SCC OnLine SC 991 at page 145
21. The respondents have relied on the decision of this Court in Jamiruddin Ansari [Jamiruddin Ansari v. CBI, (2009) 6 SCC 316 :
(2009) 2 SCC (Cri) 1033] to contend that the 1960 Act, being a special law, will prevail over the provisions of CrPC. In Jamiruddin Ansari [Jamiruddin Ansari v. CBI, (2009) 6 SCC 316 :
(2009) 2 SCC (Cri) 1033] the issue before a two-Judge Bench of this Court was whether Section 23(2) of the Maharashtra Control of Organised Crime Act, 1999 ("Mcoca") excludes the application of Section 156(3)CrPC. Mcoca is a special law enacted by the State Legislature to prevent and control crimes by organised crime CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 16 of 43 syndicates or gangs. Section 23 of Mcoca begins with a non obstante clause. Section 23(2) provides that the Special Judge cannot take cognizance of any offence under the Mcoca without the previous sanction of a police officer not below the rank of the Additional Director General of Police. The relevant clause is extracted below:
"23. Cognizance of, and investigation into, an offence.--(1) Notwithstanding anything contained in the Code--
(a) no information about the commission of an offence of organised crime under this Act, shall be recorded by a police officer without the prior approval of the police officer not below the rank of the Deputy Inspector General of Police;
(b) no investigation of an offence under the provisions of this Act shall be carried out by a police officer below the rank of the Deputy Superintendent of Police.
(2) No Special Court shall take cognizance of any offence under this Act without the previous sanction of the police officer not below the rank of Additional Director General of Police."
22. In Jamiruddin Ansari [Jamiruddin Ansari v. CBI, (2009) 6 SCC 316 : (2009) 2 SCC (Cri) 1033] , this Court held that the provisions of the Mcoca will prevail over the provisions of CrPC. The Court held that a Special Judge is precluded from taking cognizance of a private complaint and order a separate inquiry without the previous sanction of the police officer not below the rank of Additional Director General of Police : (SCC p. 330, para 67) "67. We are also inclined to hold that in view of the provisions of Section 25 of Mcoca, the provisions of the said Act would have an overriding effect over the provisions of the Criminal Procedure Code and the learned Special Judge would not, therefore, be entitled to invoke the provisions of Section 156(3)CrPC for ordering a special inquiry on a private complaint and taking cognizance thereupon, without traversing the route indicated in Section 23 of Mcoca. In other words, even on a private complaint about the commission of an offence of organised crime under Mcoca cognizance cannot be taken by the Special Judge without due compliance with sub-section (1) of Section 23, which starts with a non obstante clause."
23. In view of the stringent provisions of the Mcoca, Section 23 provides a procedural safeguard that no information of an offence alleged under the Mcoca shall be recorded without the prior approval of an officer below the rank of the Deputy Inspector General of Police. No investigation can be carried out by an officer below the rank of Deputy Superintendent of Police. Section 23(2) CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 17 of 43 contains a specific bar against the taking of cognizance by a Special Judge without the previous sanction of a police officer not below the rank of Additional Director General of Police.
24. In Rangku Dutta v. State of Assam [Rangku Dutta v. State of Assam, (2011) 6 SCC 358 : (2011) 2 SCC (Cri) 964] this Court interpreted the purport of Section 20-A(2) of the Terrorist and Disruptive Activities (Prevention) Act, 1987 ("TADA"), which was similar to Section 23 of the Mcoca. Section 20-A of the TADA is extracted below:
"20-A. Cognizance of offence.--(1) Notwithstanding anything contained in the Code, no information about the commission of an offence under this Act shall be recorded by the police without the prior approval of the District Superintendent of Police. (2) No court shall take cognizance of any offence under this Act without the previous sanction of the Inspector General of Police, or as the case may be, the Commissioner of Police."
This Court in Rangku Dutta case [Rangku Dutta v. State of Assam, (2011) 6 SCC 358 : (2011) 2 SCC (Cri) 964] held that the above provision was mandatory for two reasons : first, it commenced with an overriding clause; and second, it used the expression "No" to emphasise its mandatory nature. The Court observed that the use of the negative word "No" was intended to ensure that the provision is construed as mandatory.
25. Section 81(5-B) of the Act casts a positive obligation on the auditor or the Registrar to file an FIR. It does not use any negative expression to prohibit persons other than the auditor or the Registrar from registering an FIR. Therefore, it would be contrary to basic principles of statutory construction to conclude that Section 81(5-B) debars persons other than the auditor or the Registrar from filing an FIR. The ratio of the decision of this Court in Jamiruddin Ansari [Jamiruddin Ansari v. CBI, (2009) 6 SCC 316 : (2009) 2 SCC (Cri) 1033] is predicated on a provision of law distinct from the statutory provision applicable to the present case.
26. Further reliance has been placed by the respondent on the decision of this Court in Jeewan Kumar Raut [Jeewan Kumar Raut v. CBI, (2009) 7 SCC 526 : (2009) 3 SCC (Cri) 475] to contend that Section 81(5-B) debars by necessary implication any person other than the auditor or the Registrar from filing an FIR. In that case, the issue before this Court was whether the provisions of the Transplantation of the Human Organs Act, 1994 ("the TOHO Act") barred the applicability of Section 167(2)CrPC pertaining to the grant of default bail. Section 22 of the TOHO Act prohibits taking of cognizance by courts except on a complaint made by an appropriate authority. This Court held that the TOHO Act is a CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 18 of 43 special statute and will override the provisions of CrPCso far as there is any conflict between the provisions of the two enactments. The Court further held that the police report filed by CBI can only be considered as a complaint petition made by an appropriate authority under Section 22 of the TOHO Act. Therefore, the filing of a police report in terms of Section 173(2)CrPC was held to be forbidden by necessary implication. Since CBI could not file a police report under Section 173(2), Section 167(2)CrPC was also held to be not applicable.
27. Exclusion by necessary implication can be inferred from the language and the intent of a statute. [Union of India v. Popular Construction Co., (2001) 8 SCC 470] In Jeewan Kumar Raut [Jeewan Kumar Raut v. CBI, (2009) 7 SCC 526 : (2009) 3 SCC (Cri) 475] , this Court looked at the words of the statute as well as the overall scheme of investigation under CrPC to infer that Section 22 of the TOHO Act bars the applicability of Section 167(2)CrPC by necessary implication. In the present case, the 1960 Act casts a positive obligation on the auditor or the Registrar to file an FIR when they discover a financial irregularity in a cooperative society. Section 81(5-B) demands accountability and vigilance from the auditor and the Registrar in performance of their public duty. Moreover, a plain reading of the said provision does not lead to the conclusion that the legislature intends to debar any person other than the auditor or the Registrar from registering an FIR. Section 81(5-B) cannot be interpreted to mean that any other person who comes to know about the financial irregularity on the basis of the audit report is debarred from reporting the irregularity to the police. In the absence of any specific provision or necessary intendment, such an inference will be against the interests of the society. The interests of the society will be safeguarded if financial irregularities in cooperative banks are reported to the police, who can subsequently take effective actions to investigate crimes and protect the commercial interests of the members of the society. In view of the above discussion, it is not possible for us to infer that Section 81(5-B) of the 1960 Act bars by necessary implication any person other than an auditor or the Registrar from setting the criminal law into motion.
28. From the narration of submissions before this Court, it appears that on 31-5-2021, the Minister in charge of the Cooperative Department has set aside the audit report while directing a fresh audit report for 2016-2017 and 2017-2018. The order of the Minister has been called into question in independent proceedings before the High Court. This Court has been apprised of the fact that the proceedings are being heard before a Single Judge of the High Court. The proceedings which have been instituted to challenge the order of the Minister will have no bearing on whether the CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 19 of 43 investigation by the police on the FIR which has been filed by the appellant should be allowed to proceed. The police have an independent power and even duty under CrPC to investigate into an offence once information has been drawn to their attention indicating the commission of an offence. This power is not curtailed by the provisions of the 1960 Act. There is no express bar and the provisions of Section 81(5-B) do not by necessary implication exclude the investigative role of the police under CrPC.
6.9 In view of the above it is held that ld. Trial Court has erred in holding that the offence under IPC could not be investigated until and unless Registrar of cooperative society does not set criminal law into motion. Hence the above finding is modified accordingly and it is held that appellant could have filed the proceedings under IPC independent to that of Registrar of cooperative society.
7. The appellant has submitted under para (x) of grounds of appeal that the MD Sh. H.S. Harnotia/accused/respondent no. 1 could be prosecuted without impleading the company M/s. Indo Dutch Food Pvt. Ltd. The respondent no. 1 while acting as Chairman of PCB has committed offence with respondent no. 2 R.P. Nagar/official and they have not committed the offence as office bearer. The respondent has submitted that they cannot be prosecuted independently since the appellant has claimed that the company is the beneficiary and without impleading the beneficiary company, who is an independent juristic entity, they cannot be prosecuted. It was held by the Hon'ble High Court of Delhi in case title "Nilesh Agarwal Vs. Income Tax Office"
2025 SCC Online Delhi 6433, that for maintaining prosecution against the Directors under a vicarious liability provision the arraigning of the companies is imperative. The Hon'ble High Court of Delhi has laid CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 20 of 43 down at para no. 7 to 12 that omission to implead the company is not a mere technical irregularity but it goes to the root of jurisdiction. It was laid down that for maintaining prosecution against directors under a vicarious liability provision the arraigning of the company is imperative. The company being a juristic person has to be impleaded as an accused and without it the directors cannot be prosecuted. The commission of offence by the company is the foundation and only thereafter any liability is extended to its Directors. In the said case Hon'ble High Court of Delhi has relied on case title "Aneeta Hada Vs. Godfather Travels & Tours Pvt. Ltd." AIR 2012 SC 2795, wherein it was laid down that company being a juristic person has to be impleaded as an accused and without it the Directors cannot be prosecuted. The commission of the offence was by the company which is the foundation and only thereafter, liability can be extended to its Directors. Without impleading the company the prosecution against the Directors cannot survive when no independent allegation is made against them in their personal capacity which therefore goes to the root of the jurisdiction of the case. When the act of offence arise against the company then its Directors cannot be prosecuted in isolation. It was held in case titled "Sunil Bharti Mittal Vs. CBI" (2015) 4 SCC 609 at para no. 42 that it is cardinal principal of criminal jurisprudence that there is no vicarious liability unless the statue provides so. The above principal was reiterated in the case titled "Mr. R. Seshasayee Vs. State of Odisha" on 03.09.2025 in Crn. MC No. 460/2017 from Hon'ble High Court of Orissa. Hence, it is held that when M/s. Indo Dutch Food Pvt. Ltd. was not made an accused then its' Managing Director who is H.S. Harnotia cannot be prosecuted and cannot be vicariously liable. Hence, the above CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 21 of 43 ground of the appellant is rejected.
7.1 It was held by Hon'ble High Court of Delhi in case titled Praveen Singh vs Religare Finvest (P) Ltd. 2025 SCC Online Delhi 10832 at para no. 38 to 50 that mere directorship does not create automatic liability under the Act. Section 149 (12) of the Companies Act 2013 provides a protected framework for independent directors and non executive directors by limiting their liability. It holds then accountable only for the Acts of omission or commission by the Company, the act occurred with their knowledge gained through Board processes and with their consent, connivance or due to their failure to act diligently. The vicarious liability flows only if it is shown that the accused was incharge of and he was responsible for conduct of the business of the company at the time of commission of offence. The relevant paras are reproduced here as under:
Praveen Singh v. Religare Finvest (P) Ltd., 2025 SCC OnLine Del 10832
38. No specific role has been ascribed to the Petitioner (referred to as Accused No. 3 in the said Complaint). Mere bald assertion that the Petitioners were responsible for day to day affairs, is not enough to attract provisions of N.I. Act unless it is explained as to how and in what manner Petitioners are in charge of and responsible for conduct of the business of the Company.
39. Furthermore, DIR 12 reflects that the Petitioner has been categorised as a "Director" within the class of "Non-Executive Directors" with her date of Appointment being 29.09.2017.
40. The role and responsibility of Non-Executive Directors was considered by Apex Court in the case of Pooja Ravinder Devidasani v. State of Maharashtra,(2014) 16 SCC 1wherein it was observed that "while taking into consideration that a non-executive director plays a governance role and are not involved in the daily operations or financial management of the Company, held that to CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 22 of 43 attract liability under Section 141 of the NI Act, the accused must have been actively in-charge of the company's business at the relevant time. Mere directorship does not create automatic liability under the Act. The law has consistently held that only those who are responsible for the day-to-day conduct of business can be held accountable."
41. The Apex Court in the case of Chitalapati Srinivasa Raju v.
Securities and Exchange Board of India, (2018) 7 SCC 443, held that "non-executive directors are, therefore, persons who are not involved in the day-to-day affairs of the running of the company and are not in charge and are not responsible for the conduct of the business of the company."
42. These observations made in the case of Pooja Ravinder Devidasani (supra) have been endorsed by the Apex Court in the recent case of Kamal Kishor Shrigopal Taparia v. India Ener Gen Private Limited, 2025 INSC 22.
43. Similar observations have been made in Ashok Shewakramani v.State of Andhra Pradesh, (2023) 8 SCC 473 and reiterated in Hitesh Verma v.M/s Health Care at Home India Pvt. Ltd., Crl. Appeal No. 462/2025.
44. Thus, it is clear that Non-Executive Directors, including Independent Directors, are typically not involved in the day-to-day operations of the Company, which further limits the scope of their potential liability.
45. Further,Section 149(12) of the Companies Act, 2013 provides a protective framework for Independent Directors and Non- Executive Directors (not being promoter or key managerial personnel), by limiting their liability. It holds them accountable only for acts of omission or commission by the Company that occurred with their knowledge gained through Board processes and with their consent, connivance, or due to their failure to act diligently.
46. The Petitioner is a Non-Executive Director of the accused Company, and no specific role has been imputed to her in the Complaint except for the general averments that she is a Director of the accused Company. Her designation is evident from the DIR- 12 Form placed on record and the relevant details from the same are described hereunder.
47. Therefore, it cannot be said that she was in-charge or responsible for the day today working of the Accused Company and is entitled to be discharged.
CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 23 of 4348. In view of Section 141 NI Act and Section 149 of Companies Act, 2013, the Petitioner could have been held vicariously liable only if it was shown that she was in charge of and was responsible for the conduct of the business of the Company at the time of commission of offence. However, nowhere in the Complaints is there even a single word to explain her day to day involvement which assumes significance as she is a Non-Executive Director, who by definition not hold any security or interest in the Company.
49. Petitioner Praveen Singh is therefore, entitled to be discharged.
Relief:
50. The Petition CRL.M.C. 989 of 2021 is allowed and the Summoning Order dated 04.10.2018 in respect of Praveen Singh is hereby, set aside.
8. It is submitted by the appellant at para no. (xi) and argued that respondent no. 1 H. S. Harnotia with deceased respondent no. 2 R. P. Nagar has siphoned funds from the fictitious account of M/s. Premier Industries to the account of M/s. Indo Dutch Food Pvt. Ltd. in which respondent no. 1 H. S. Harnotia is the Managing Director. In this regard, para no. 16 and 28 of the judgment of the Ld. Trial Court is referred. Ld. Trial Court has observed that there is no evidence to show that R.P. Nagar has signed account opening form in the name of Pradeep Kumar. The PW-1 Pratap Singh Atal was allegedly holding grudge against accused R.P. Nagar as PW-1 was suspended twice from service during tenure of accused R.P. Nagar. In the CFSL Report no conclusive opinion was given in respect of signature of Pradeep Kumar if account opening form was signed by R.P. Nagar. There is no evidence to show that the amount of commission paid towards deposit mobilization was pocketed by R.P. Nagar. At para no. 28 Ld. Trial Court has given finding that there is insufficient evidence to conclude conspiracy between accused no. 1 H.S. Harnotia who was Honorary CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 24 of 43 Chairman of PCB who used to come to bank occasionally. The Manager/CEO was looking after day to day working of PCB and the Board of Directors were controlling its functioning. It is further observed that there is no evidence to show that vouchers of commission paid towards deposit mobilization are the name of accused no. 1 H.S. Harnotia were pocketed by him. They are at best entries made without knowledge of accused no. 1 H.S. Harnotia. The appellant is arguing that there is conspiracy. However they do not have any evidence proved on record to substantiate that the amount mentioned in the voucher was actually in the knowledge of accused no. 1 H.S. Harnotia or that the said amount was pocketed by him in absence of which the appellant has miserably failed to prove knowledge of this amount with accused no. 1 or that such amount was ever transferred with accused no. 1 for his personal benefit. The account opening form by co-accused R.P. Nagar does not prove that the account was opened by him in the name of Pradeep Kumar in absence of inconclusive CFSL Report of handwriting expert. Hence, the appellant has failed to advance its case against the accused person any further then it was available before Ld. Trial Court. Hence, it is held that the appellant has failed in proving conspiracy between accused no. 1 H.S. Harnotia and accused no. 2 Ram Prakash Nagar for alleged siphoning of funds from the fictitious account of M/s Premier Industries to the account of M/s Indo Dutch Food Pvt. Ltd.
9. The appellant has argued at para no. (xiv) that the act of accused in disbursement of loan amount of Rs. 5 lakh which is Rs. 1.50 lakh above the sanctioned limit to the borrower was committed without seeking approval from the Board of Directors. Para no. 10 at page no. 9 CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 25 of 43 of judgment of Ld. Trial Court is perused where PW-2 O.P. Khem member of Board of Directors deposition is appreciated. It was observed that loan committee in the meeting held on 28.07.1991 had recommended loan of Rs. 3.50 lakhs to R.G. Luthra, since expired and accused no. 1 H.S. Harnotia was present in that meeting. It is argued by the ld. Counsel for the accused that no loan was sanctioned for a sum of Rs. 5 lakh or Rs. 5.50 lakh as claimed by the appellant in the appeal. PW-22 Chander Kishore Malhotra, recorded at page no. 11 of the judgment of ld. Trial Court, who was Manager cum CEO of the PCB in August 1989 had stated in his deposition that he does not know whether R. G. Luthra, since deceased had submitted all the documents in the bank before disbursal of loan. Whereas in his examination-in-chief he has deposed that documents were not sufficient to sanction loan for housing construction. Hence, his both the deposition are contrary to each other. When he does not know that whether all the documents were submitted or not by R.G. Luthra the accused since expired then he is not at all in the capacity to state that whether the documents were sufficient or not or not to sanction housing construction loan. DW-12 Jagpal Singh, Government Valuer of the property has stated that he calculated the valuation of the property bearing no. C-300, Surajmal Vihar, Delhi and submitted report in the PCB bank. It is not the case of the prosecution that the valuer has submitted report to the PCB bank without looking into the documents of the property in question as in normal cause of nature the valuer has to consider the documents submitted by applicant for sanction of loan. DW-2 Satyapal, Officer from DDA had produced file of house no. C-300, Surajmal Vihar, Delhi as well as original C-form and D-form. At para no. 29 of the judgment CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 26 of 43 of ld. Trial Court it is recorded that DW-2 Satyapal has produced the file of constructed house to show that requisite forms were submitted with the authority. It is also observed that there is evidence to show that the bank obtained a letter of hypothecation, power of attorney and also secured an equitable mortgage of the constructed property before disbursing the housing loan. The entire loan was also repaid in installments. Hence, it has come on record that all documents were submitted before hand to the PCB for the purpose of creation of equitable mortgage and therefore the prosecution cannot say that the loan was sanctioned with incomplete documents as there is no evidence to substantiate the same. Further the sanction was also obtained from DDA for carrying out such construction which is deposed by DW-1 S. S. Bhatia. DW1 has also deposed that expenditure of Rs.7,16,000/- was incurred on the construction of the house. The valuation report submitted by him is Ex.DW1/A. The 'C' Form and 'D' Form issued by DDA are Ex.DW1/D and Ex.DW1/C. Ld. Counsel for the accused has submitted that the loan amount applied was Rs. 5.50 lac only and the amount of loan disbursed was Rs.3.50 lac only whereas the appellant in the appeal has claimed that disbursement of loan amount was Rs.5,00,000/- which is neither the loan amount applied for nor the amount of Rs.3.50 lac the alleged limit of loan prescribed by PCB. Further, PW16 Ramjilal founder Director of the bank has deposed that under the bylaws of the bank there is no provision for constituting loan committee. However, he had agreed to the suggestion that Board of Directors has no power to disagree with the recommendation of the loan committee. PW2 Sh. O.P. Khem, Member of Board of Directors has deposed that the Loan Committee in its meeting held on 28/7/1991 CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 27 of 43 recommended the loan of Rs.3.50 lac to deceased/accused R.G. Luthra. Thereby when the loan recommended was Rs.3.50 lac then the same amount must have been disbursed and not amount of Rs.5.00 lac or Rs.5.50 lac as claimed differently at different places by the appellant. Hence, when the own witness of the prosecution Sh. O.P. Khem/PW-2, Member of Board of Director has deposed sanctioning of loan of Rs.3.50 lac then there is no substance in the arguments of the appellant of sanctioning or disbursement of loan of Rs.5.00 lac.
10. PW-2 at page 2 of his examination-in-chief dated 27.08.2003 has deposed that Ex.PW2/G is the loan application of accused no. 3 Ram Nath Luthra for a sum of Rs.5.26 lakhs in the name of Luthra Polythene Bags. The signature at point D are of accused no. 1 H.S. Harnotia with remarks in his handwriting. In cross-examination it is deposed that the loan was approved by the Board of Directors in spite of remarks. PW-2 was member of that board. It is further deposed in cross-examination that the said loan was sanctioned by the loan committee on the basis of loan application and the report of CEO. At page 2 of his examination-in-chief dated 26.08.2003 it is deposed by PW-2 that in the minutes of meeting dated 31.01.1991 which he had attended vide minutes Ex.PW2/D loan of Rs.3.50 lakhs was earlier sanctioned on 28.07.1991. It is not the case of the prosecution that the loan could not have been sanctioned beyond 3.50 lakhs by the committee under any circumstance and when it is so sanctioned then action has to be taken against all the members of the committee which is not so taken in the present matter. It is deposed that the proceeding dated 18.07.1991 Ex.PW2/C were not signed by accused no. 1 H.S. CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 28 of 43 Harnotia but he was present in the meeting as the Chairman. Hence the alleged loan was not approved under the signature of accused no. 1. Further, the disbursement of loan amount by proper evidence is not proved in deposition of PW-2 since the sanctioning of loan amount is one thing and its disbursement is totally another. The disbursement can be for a lesser amount. Hence the prosecution has failed to lead any substantive argument to show that what was the exact amount disbursed on the said loan amount. Further, when the loan was sanctioned and it was duly recovered when multiple authorities are involved in sanctioning of house plan and in absence of necessary proof on record to show that M/s. Ramesh Engineering Works was a fictitious firm then it cannot be said that in this appeal the appellant could have successfully raised the plea of disbursement of amount of loan while claiming that it was sanctioned without seeking prior approval of Board of Directors whereas contrary to the own evidence of the prosecution the loan was sanctioned with the approval of Board of Directors.
11. It is submitted and argued by the appellant at para no. (xv) that out of funds obtained from loan the respondent no. 3 R.G. Luthra transferred Rs. 25,000/- to the account of M/s. Indo Dutch Food Pvt. Ltd. which was owned by respondent no. 1 H.S. Harnotia and he has acted as its Managing Director. PW29 Jyoti Joshi, employee of PCB has deposed that the cheque of Rs.25,000/- vide which an amount was transferred from the account of the deceased/accused R.G. Luthra to M/s Indo Dutch Food Pvt. Ltd. was en-cashed. It is argued by ld. counsel for the accused that the deceased/accused R.G. Luthra was Chartered Accountant of M/s Indo Dutch Food Pvt. Ltd. However, no CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 29 of 43 cogent evidence is led by the prosecution to substantiate the above allegations of criminal conspiracy between deceased/accused R.G. Luthra and accused no.1 H.S. Harnotia. The accused has explained this entry for purchasing shares of M/s Indo Dutch Food Pvt. Ltd. The amount was transferred from saving account of deceased R.G. Luthra for purchasing of alleged shares of company. In the said saving account of deceased R.G. Luthra the loan was disbursed. In the same saving account, deceased R.G. Luthra used to deposit his personal money and this fact and explanation is not controverted in evidence by the prosecution and, therefore, the said defence is found probable and believable due to which benefit of doubt is liable to be extended to the accused person in that this amount was transferred not from the loan disbursed but from personal savings which was deposited in the said account of R.G. Luthra. When the shares of a company purchased which is M/s Indo Dutch Food Pvt. Ltd. then the company is going to benefit against whom allegation is made by the prosecution but the company is not arrayed as an accused by the prosecution in absence of which vicarious criminal liability does not extend against accused no.1 H.S. Harnotia. Further, when the loan was sanctioned for a sum of Rs.3.50 lac and the house construction was for a sum of Rs.7,16,000/- then it cannot be said that only out of the loan amount Rs.25,000/- was transferred by the deceased/accused R.G. Luthra from his savings account. Funds were available with him other than the loan amount to purchase share of the company M/s Indo Dutch Food Pvt. Ltd. Hence, there is no proof or evidence of conspiracy on record between deceased/accused R.G. Luthra and accused no.1 H.S. Harnotia. There is no evidence on behalf of the prosecution to show that deceased/accused CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 30 of 43 R.G. Luthra did not have Rs.25,000/- or more in his saving bank account other than the loan amount disbursed. Ld. Counsel for the accused has argued that loan amount obtained from PCB Bank was completely utilized by the accused persons. This fact is also not controverted by the prosecution and, therefore, on this account also it cannot be said that accused had any intention to cheat the PCB Bank. PW34 Sh. S.C. Dhandiyal in his cross examination dated 25th July, 2008 at page 3 at the bottom of the page has deposed as correct that deceased/accused R.G. Luthra was depositing his personal saving in the said saving bank account and there was no bar for him to utilize the money lying in the said account. He cannot say whether the amount of Rs.25,000/- transferred to Indo Dutch Food was for the purchase of the share of the said company. He does not remember if from the said Indo Dutch Food Company, he carried out investigation about allotment of share to Ms. Chanchal Luthra, wife of deceased/accused R.G. Luthra. He does not have knowledge that beside the loan amount the deceased/accused R.G. Luthra had spent further money on construction of house C-300, Surajmal Vihar. Hence, the prosecution has no supporting evidence to show that there was insufficient amount in the saving bank account of deceased R.G. Luthra from which he could not have purchased share of the company of M/s Indo Dutch Food Pvt. Ltd. PW34 at page 6 has deposed that he has no knowledge whether the entire loan amount was repaid by the borrower with interest prior to the filing of the charge-sheet. PW34 has no knowledge whether the MTL loan account was fore-closed by PCB or PCB had directed the borrower to return the outstanding loan amount prior to the expiry of period of loan.
CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 31 of 4311.1 The prosecution has failed to dispel the law laid down in the case titled Sapan Haldar and Anr. Vs. State 2012 VIII AD 533 and the law laid down in case titled State of U.P. Vs. Rambabu Mishra AIR 1980 SC 791 as relied upon by the ld. Trial Court at para no. 32 of the body of the judgment.
12. It is submitted by the appellant that PW-27 Darshan Singh has deposed that respondent no. 4 R.C. Luthra who is brother of respondent no. 3 R.N. Luthra had opened an account in the name of M/s. Ramesh Engineering Works in the OBC/Oriental Bank of Commerce. The respondent no. 4 is proprietor of M/s. Ramesh Engineering Works. While opening the said account the brother of respondent no. 3 and 4 namely K.L. Luthra/respondent no. 5 has became introducer. After deposit of Rs.2.19 lakh in the said account the amount was withdrawn by respondent no. 3 R.N. Luthra and respondent no. 4 R.C. Luthra through different cheques. Thereafter the account was closed. It is submitted by the appellant that in conspiracy the direct evidence is seldom available since it is hatched in secrecy. The act and omission can be proved only by circumstantial evidence. It is submitted that PW- 6/Rakesh Khandelwal, PW-8/Om Prakash has deposed that M/s. Ramesh Engineering Works was a non existing firm.
13. The appellant has further argued at para no. (xvi) that PW-27 has proved that accused no. 4 R.C. Luthra opened an account in name of M/s Ramesh Engineering Works in the OBC bank while claiming proprietor of M/s. Ramesh Engineering Works. The bank account was CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 32 of 43 introduced by accused no. 5 Krishan Lal Luthra. It is argued that after deposit of Rs.2.1 lakh the aforesaid amount was withdrawn by accused no. 3 R.N. Luthra and accused no. 4 R.C Luthra through different cheques after which the account was closed. Ld. Trial Court at para no. 32 of the judgment has observed that the alleged signature of Pradeep Kumar in the account opening form of M/s. Premier Industries are not conclusive. It was further held that the positive finding regarding signature of R.N. Luthra on the cheques, pertaining to such withdrawal by accused no. 3 R.N. Luthra from the account of M/s. Ramesh Engineering Works is inadmissible since the signature of accused were obtained without permission of the Court. It is submitted by the appellant that the taking of specimen of handwriting of respondent no. 3/accused R.N. Luthra without permission of the Court is not in contravention of Section 73 of Indian Evidence Act. It is submitted that under proviso to Section 311A Cr. PC the stipulation that no order shall be made under the Section unless the person has at some time being arrested in connection with such investigation or proceedings. It is submitted that Section 311A Cr. PC does not apply to the present case because respondent no. 3/accused R.N. Luthra was not arrested in the present case and therefore his signatures could be obtained by the investigating agency.
14. The loan of Rs.2.19 lakh was disbursed for purchase of machinery and loan was given to accused no. 3 R.N. Luthra. It is submitted by the accused that it was a Mudra loan. Ld. Trial Court at para no. 30 of the judgment has found improper investigation in respect of the fact that whether the purchased machinery was lying at premises CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 33 of 43 of M/s. Luthra Plastic Industries. IO has deposed that he does not remember whether he had visited the premises of M/s. Luthra Plastic Industries and subsequently he has admitted that he did not visit the factory. The para no. 29 of the judgment at page no. 27 passed by ld. Trial Court has observed that there is no concrete evidence to show that M/s. Ramesh Engineering Works was a fictitious firm. PW-6 Rakesh Khandelwal has admitted that there are 13 cabins on the first floor of the plot no. Y-8/2, Loha Mandi, Naraina, Delhi and he cannot tell the name of all the occupants occupying those cabins and in what capacity. This therefore creates doubt if the occupation by M/s. Ramesh Engineering Works was not there. PW-6 has admitted his knowledge that Surender Kharbanda was his tenant and RC Luthra the accused was coming on the plot. PW-8 Om Prakash in cross-examination has admitted familiarity with the face of accused R.C Luthra coming at the plot. He does not know the name of all the firms working at the said plot. PW-9 Dilip Kumar had seen accused R.C Luthra coming to the building to meet Surender Kharbanda. He cannot tell the name of firms operating from the said building in the year 1992. Surender Kharbanda/DW-3 has deposed that accused R.C. Luthra used his office at Loha Mandi for running his business of purchasing and selling of machinery.
15. PW-6 Rakesh Khandelwal has deposed that the plot Y-8, Loha Mandi, Naraina, Delhi was divided between PW-6 and his two brothers in the year 1984-85. His elder brother owned 50% share and he had 25% share on the plot. The 25% share was numbered as Y8-1. Another 25% share of the plot was bearing no. Y8-2. There was no office of CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 34 of 43 M/s. Ramesh Engineering Works at plot no. Y8/2. The construction on p lot no. Y8/1 and Y8/2 was done in the year 1984-88. the construction on the plot in Y8 was done in the year 1990. In cross-examination it is deposed that he cannot tell the name of the tenants of all the 13 cabins who were occupying in the year 1990 or 1991 or 1992. It is deposed that he knew Surender Kharbanda. He had seen accused Ramesh coming to their plot and accused Surender Kharbanda was his tenant. He did not knew the name of accused was Ramesh. The office of Surender Kharbanda was at first floor. Hence the investigation is incomplete in respect of all the plots numbering Y8-1, Y8-2 or Y8/1 or Y8/2. The prosecution witnesses has consistently admitted visit of accused RC Luthra at the said plot. There is incomplete investigation for not bringing on record the occupant of each and every cabin and associated space in the plot Y-8, Loha Mandi, Naraina. It cannot be said that accused was not having office space in the said building used for commercial purpose when the own evidence of the prosecution shows regular visit by accused R.C Luthra at the said place. PW-6 was doing business of hardware at the ground floor of the said plot. It is argued on behalf of accused that the prosecution had investigated in respect of plot no. Y8-1 whereas accused RC Luthra was doing the business by the name of M/s. Ramesh Engineering Works in the cubical space provided by Surender Kharbanda/DW-3 at plot no. Y8-2. PW-6 being owner of plot no. Y8-1 cannot tell about the legal rights whether on lease or rent or ownership in plot no. Y8-2. The receipt Ex.PW31/GF shows address of M/s. Ramesh Engineering Works as Y-8/2, Loha Mandi which is part of chargesheet filed by the prosecution.
CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 35 of 4316. PW-34 in cross-examination dated 02.03.2009 does not remember the floors of the building. It is deposed by him that he did not visit factory of R.N. Luthra the accused and he had interrogated him by calling him at the office of CBI. He did not ask accused RN Luthra to show the machine by producing the same before him. It is deposed by him that he visited the address of M/s. Ramesh Engineering Works, Loha Mandi, Naraina and he did not find factory there which is contrary to his earlier deposition that he did not visit the factory of RN Luthra. It is deposed further by him that he cannot tell the dimension of the building nor he can tell about the floors of the building. He does not remember whether there was any open area. Hence he cannot give any satisfactory description of the building he had visited which creates serious doubt in the case of the prosecution for the reason that PW-34 had created his report while sitting at the office by inquiring accused RN Luthra at the office of CBI. It is further deposed by him that he did not visit the factory of accused RN Luthra himself and CBI team might have visited his factory. The name of such member of CBI team are also not disclosed by PW-34. Hence the best available evidence was not even investigated much less the collection of best available evidence. The receipt Ex.PW31/GF is available on record which is document of prosecution. It is letter head of M/s. Ramesh Engineering Works. It mentions address of office on 03.03.1999 as Y-8-2, Loha Mandi, Naraina, Delhi. Hence address of the company was already available with the prosecution and nobody had went at the said address despite of having address of M/s. Ramesh Engineering Works vide Ex.PW31/GF. PW-6 is owner of plot no. Y-8/1 and therefore it cannot be said that he is in position to tell who are the correct occupants of plot no. Y-8/2 and CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 36 of 43 tenants therein. The receipt Ex.PW31/GF is a receipt issued by accused RC Luthra in favour of accused RN Luthra, proprietor of M/s. Luthra Plastic for having received. the standing order for specific machinery and plant of PVC, conduit pipe, waste grinder, extra dyes, trade mark, printing machine and high speed mixture for a sum of Rs.1,22,790/-. The said machines were not inspected at the premises of M/s. Ramesh Engineering Works and therefore it cannot be said that these machines were not supplied to M/s. Ramesh Engineering Works for such amount.
17. PW-31/Sh. Hari Smrit Singh Dutt has deposed that accused no. 1 H.S. Harnotia, the Chairman and accused RP Nagar, the manager of PCB bank had asked to mobilise the funds of the bank on which he would be paid commission at the rate of 2%. He had signed voucher on reverse side for having received the mobilise commission. He cannot tell the name of the person who paid him the amount as mentioned in voucher Ex.PW7/U44, Ex.PW7/U45 and Ex.PW7/U34. He does not state that how much amount was mobilized by him and in which manner and from where and on which mobilized amount what commission was received by him. He cannot tell how many times Chairman asked him to mobilize the deposit. It is deposed that the Chairman did request him atleast once. It is deposed that he might have met Chairman 7-10 times. Hence the deposition of PW-31 in respect of mobilization of amount at the instigation of accused is vague and non specific and it is uncertain as to the amount of deposit with reference to their commission and therefore the same cannot be relied upon to arrive at a specific conclusion. Hence this evidence cannot be relied upon for the purpose of conviction of the accused. Hence it is held that CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 37 of 43 prosecution has failed to substantiate its case of misappropriation of Rs.2.19 lakhs the loan advance to M/s. Ramesh Engineering Works by the accused RC Luthra and accused RN Luthra.
18. It is argued by the appellant at para no. (xix) under the grounds of appeal that Section 73 of the Evidence Act empowers the Court to direct any person present in the Court to write any word or figure for the purpose of comparison. Section 73 of the Evidence Act does not prevent investigating agency from taking the specimen handwriting/signatures for the purpose of investigation. However the appellant has failed to dispel the law laid down and discussed by the ld. Trial Court at para no. 32 of the body of the judgment. The appellant has relied on citation titled Sukhwinder Singh Vs. State of Punjab AIR Online 1994 SC 545 where Section 73 of Evidence Act is discussed. In that case the specimen writing of one Sukhdev Paul was taken by Tehsildar Magistrate. It was held that the implication of words " for the purpose of enabling the Court to compare" under Section 73 of the Evidence Act is not for the purpose of enabling or investigating or prosecuting agency to obtain and produce as evidence in the case the specimen writings for their ultimate comparison with the disputed writings. When the investigation is still pending then the accused cannot be compelled to give his specimen writings. Section 73 of the Evidence Act does not permit any Court to give direction to the accused to give his specimen writing for comparison in a proceeding which may subsequently be instituted in other competent Court. Section 73 of Evidence Act cannot be made use of for collecting specimen writing during the investigation and recourse to it can be had only when the CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 38 of 43 enquiry or the trial Court before which proceedings are pending requires the writing for the purpose of enabling it to compare the same. Hence the evidence as such collected by the prosecution which are specimen signature of the accused are not collected under Section 73 of Evidence Act. The prosecution has failed to bring the evidence of witness having seen accused writing with which the disputed writing could be compared when there is no cause pending before the Court for its determination. Then the question of obtaining for the purpose of comparison of the handwriting of the person may not arise at all and therefore in such case the provision of Section 73 of Evidence Act would have no application. Hence it was held in said case that the specimen handwriting obtained by the Tehsildar could not be made use of during the trial and the report of handwriting expert when considered in above light was rendered of no consequence at all and it cannot be used against the accused to connect him with crime. Hence it is held that prosecution has failed to show that it has validly collected the evidence of specimen handwriting of the accused which can be relied upon during trial and no merit is found in the submission of the appellant and the hence the same is rejected. The citation relied by the appellant titled the The State of Bombay vs Kathi Kalu Oghad And Others at relevant para is reproduced hereasunder:
The State of Bombay vs Kathi Kalu Oghad And Others on 4 August, 1961 Equivalent citations: 1961 AIR 1808, 1962 SCR (3) 10, AIR 1961 Supreme Court 1808, 1961 ALL. L. J. 936, 1961 BLJR 840, 1963 (1) SCJ 195, 1962 3 SCR 10, 1963 MADLJ(CRI) 97, 1961 KER LT 74, 64 BOM LR 240 (Coram:11) The Judgment of S. K. Das, Sarkar and Das Gupta, JJ.was delivered by Das Gupta, J.-Is a person compelled "to be a witness"
against himself within the meaning of Art.20(3) of the Constitution CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 39 of 43 when he is compelled to give his specimen handwriting or signature, or impressions of his fingers, palm or foot to the investigating officer? Is he compelled "to be a witness" against himself within the meaning of the same constitutional provisions when he is compelled to give his specimen handwriting and signature for the purpose of comparison under the provisions of s. 73 of the Indian Evidence Act? These are the main questions canvassed before us and they have both been answered in the negative in the judgment just pronounced by my Lord the Chief Justice. We agree with these answers; but as we have reached the same conclusion, by a somewhat different approach, and for different reasons, these have to be briefly indicated.
19. The prosecution is required to show that the evidence/signature of accused were obtained not under compulsion and it was voluntary though accused does not become witness by giving evidence in such manner. Such voluntariness in giving signatures by the accused is not proved on record. The compliance with Section 73 of Evidence Act is absent. The respondent/accused has challenged the validity of taking of signature since very beginning. The appellant was required to show that such signatures were taken after due compliance under law. The burden of proof is on the prosecution that such signature were taken under due compliance of law and without any duress and which is not proved on record. The spirit of law in respect of taking of signature were also codified later on under Section 311A Cr. PC. The relevant citation titled MCR. Vyas vs. Inspector of Police is reproduced hereasunder:
MCR. Vyas v. Inspector of Police, 2014 SCC OnLine Mad 4930 on 6 August, 2014 in Crl.OP.Nos.12751, 12754 to 1260/2014
70. Section 311A has been inserted and come into force with effect from 23.6.2006 which provides for investigation of the case and powers of the Magistrate to issue directions to any person including an accused person to give specimen signatures and writings pursuant to the pronouncement of the Honourable Supreme Court in State of UP v. Ram Babu Misra (1980) 2 SCC CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 40 of 43 343 which suggested a suitable legislation be made on the analogy of Section 5 of the Identification of Prisoners Act, 1989 to invest the Magistrate with powers to issue directions to any person including an accused to give specimen signatures and handwriting.
After insertion of Section 311A of Cr.PC, the Respondent/CBI is duty bound to get permission from the concerned Magistrate for obtaining specimen signatures or handwritings of the accused persons. In the instant case, no such specimen signatures or handwritings of the Petitioners were obtained before the Magistrate as provided under Section 311A of Cr.PC. This court in the judgement dated 3.12.2008 (K. Sankaranarayanan v. Special Police Establishment) has held that the specimen signatures or handwritings of the accused persons taken without the permission of Magistrate cannot be considered as a valid piece of evidence. In paragraphs 43 and 44, it is held as follows:-
"43. The learned counsel for the Appellant would contend that the specimen signature from the accused and witnesses were not taken as per Section 311A of Cr.PC wherein it has specifically been provided that the specimen signature and handwriting of the accused shall be taken before the Judicial Magistrate. But in this case there is absolutely no evidence on record to show that the specimen signatures of the accused under Ex.P84 were taken in the presence of a Magistrate. Hence, the learned counsel for the Appellant would contend that no reliance can be placed on Ex.P85 opinion or on Ex.P86 report of the Expert to sustain the conviction and sentence awarded by the learned trial judge. Section 311A of Cr.PC, 1973 runs as follows:-
Ïf a Magistrate of the first class is satisfied that, for the purposes of any investigation or proceeding under this Code, it is expedient to direct any person, including an accused person, to give specimen signatures or handwritings he may make an order to that effect and in that case the person to whom the order relates shall be produced or shall attend at the time and place specified in such order and shall give his specimen signatures or handwritings; provided that no order shall be made under this section unless the person has at some time been arrested in connection with such investigation or proceedings."
20. In view of the above it is held that appellant/CBI has failed to make the case into its own merits and failed to satisfy the charges levelled against the respondents herein. The appellant has failed to CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 41 of 43 show that judgment of ld. Trial Court is perverse. It is settled law that equally if two views are possible then it is not permissible to set aside an order of acquittal merely because the Appellate Court finds the way of conviction to be more probable. The relevant citation titled The State of Rajasthan Vs. Kistoora Ram is reproduced hereasunder:
Hon'ble Supreme Court of India in case titled The State of Rajasthan vs Kistoora Ram on 28 July, 2022 in Criminal Appeal NO. 2119 OF 2010 has laid down as under:
8. The scope of interference in an appeal against acquittal is very limited. Unless it is found that the view taken by the Court is impossible or perverse, it is not permissible to interfere with the finding of acquittal. Equally if two views are possible, it is not permissible to set aside an order of acquittal, merely because the Appellate Court finds the way of conviction to be more probable.
The interference would be warranted only if the view taken is not possible at all.
9. The High Court has elaborately discussed the evidence. Undisputedly, Hamira Ram (PW-7) has turned hostile. The trial court itself had disbelief the alleged recovery of the incriminating material allegedly recovered at the instance of the respondent- accused.
10. That only leaves with the extrajudicial confession allegedly made by Guman Singh (PW4). The High Court, relying on the judgment of this Court in the case of State of Punjab v. Bhajan Singh and Others (1975) 4 SCC 472, so also in the case of Gopal Sah v. State of Bihar (2008) 17 SCC 128 has held that extra- judicial confession was a weak piece of evidence and unless there was some corroboration, the conviction solely on the basis of extrajudicial confession could not be sustained. The view taken by the High Court cannot be said to be either impossible or perverse meriting our interference.
21. Accordingly judgment of ld. Trial Court is upheld with modification recorded above in reference to applicability of IPC, 1960. The appeal is hence dismissed. In terms of Section 481 of BNSS/437A Cr. P.C, respondent no. 1, 3, 4 and 5 have furnished their bail bond as CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 42 of 43 directed which will be in force for a period of six months from the date of this judgment.
Copy of the judgment be sent to the learned Trial Court alongwith Trial Court record as per rules.
Criminal Appeal file be consigned to Record Room.
Digitally signed by Announced in the open Court JOGINDER JOGINDER PRAKASH PRAKASH NAHAR on 20.03.2026. NAHAR Date: 2026.03.20 15:21:38 +0530 (JOGINDER PRAKASH NAHAR) ADDITIONAL SESSIONS JUDGE (FTC-01) CENTRAL/TIS HAZARI COURT DELHI CA No. 77/2017 CBI Vs. Harbir Singh Harnotia & Ors. Page 43 of 43