Delhi District Court
35 vs State Of Maharashtra"(Supra) on 28 February, 2018
1
IN THE COURT OF KOVAI VENUGOPAL, SPECIAL JUDGE,
PC ACT (CBI)-09, CENTRAL,TIS HAZARI COURTS, DELHI
CC No. 65/2011(532196/2016)
R.C. No. 4(A)/94/CBI/SIU-X/ND
CNR No. DLCT01-000014-1996
CENTRAL BUREAU OF INVESTIGATION
VERSUS
N. Bhojaraj Shetty
S/o Late Sh. P. A. Shetty
R/o 1/12, 3rd Floor, Old Rajinder Nagar,
New Delhi-110060.
Date of Institution :19.12.1996
Date of Arguments :26.02.2018
Date of Judgment :28.02.2018
JUDGMENT
1. This case was registered by the CBI on 23.05.1994 on the basis of the complaint dated 20.05.1994 filed by Sh. H. Vasanth Shetty, the then DGM, Vijaya Bank, Zonal Office, New Delhi. It was alleged in the complaint that Vijaya Bank, R. K. Puram Branch, New Delhi was defrauded to the tune of Rs.86.99 lacs approximately during 1987 to 1990 by the Directors of M/s. R. K. B. Herbals Private Ltd., in connivance CC No.65/2011 Page 1 of 120 2 with officers of Vijaya Bank in the matter of obtaining credit facilities to the tune of Rs.1 crore.
Case of the Prosecution as mentioned in the Charge- Sheet
2. Investigation has revealed that M/s. R. K. Bhandari (Homeopaths) Private Ltd., New Delhi, had been maintaining current account bearing No. 622 with Vijaya Bank, R. K. Puram, New Delhi since 1982. Subsequently, on 14.10.1985 the name of the above company was changed to M/s. R. K. B. Herbals Pvt. Ltd. while opening the above said current account, it had disclosed that substantial working capital facilities i.e. Rs.20 lacs had been sanctioned to the company by Indian Overseas Bank (IOB), Darya Ganj, Delhi.
3. Investigation has further revealed that Indian Overseas Bank, Darya Ganj, Delhi, while according "No Objection" to Vijaya Bank, R. K. Puram, New Delhi on 13.03.1982 to the opening of the above said current account had specifically advised that no credit facilities should be extended to the said party. It has also been revealed during investigation that the conduct CC No.65/2011 Page 2 of 120 3 of the above mentioned current account was not satisfactory and there was instances of frequent over drawings and return of cheques during the year 1987.
4. Investigation has further revealed that M/s. R. K. B. Herbals Pvt. Ltd. submitted a loan application to Vijaya Bank, R. K. Puram, New Delhi on 02.02.1987 for obtaining credit facilities to the tune of Rs. 204 lacs and disclosed that it had been enjoying working capital facilities to the tune of Rs.52 lacs from Indian Overseas Bank, Darya Ganj, Delhi besides having availed of term loans aggregating to Rs.79.86 lacs from HPFC and HPSIDC. The above said loan proposal was recommended and forwarded to the Delhi Divisional office by accused N. Bhojaraj Shetty on 20.02.1987 but the said proposal was deferred by the then Divisional Manager, Delhi. Late Noel Mascarenhas on account of non obtaining of opinion of previous Lender (OPL) from IOB, Daryaganj, Delhi and the omission of the fact of default made by accused Deepak Bhandari executive Director of the Company in the repayment of personal loan taken from Vijaya Bank earlier.
5. It has also been disclosed during investigation that on CC No.65/2011 Page 3 of 120 4 24.10.1987 M/s. R. K. B. Herbals Pvt. Ltd. again submitted a loan application to Vijaya Bank, R. K. Puram Branch, New Delhi, seeking working capital facilities of Rs. 1 Crore i.e. Rs.50 lacs each under OLCC and DBP. In the above said loan application, M/s. R. K. B. Herbals Pvt. Ltd. willfully and dishonestly concealed the material fact of having obtained working capital facilities from IOB, Darya Ganj, Delhi. The above said loan application was submitted under the signature of accused Rajinder Kumar Bhandari, Managing Director of the company.
6. During the investigation, it has further revealed that accused N. Bhojaraj Shetty also willfully concealed the above said fact of the company having obtained credit facilities from IOB, Darya Ganj, Delhi, in the advance proposal as well as credit report, which was submitted by him to the Zonal Office on 25.10.1987, wherein he recommended the sanction of credit facilities applied for by the party. Investigation has also revealed that the former divisional Manager Late Noel Mascarenhas had directed accused N. Bhojaraj Shetty to obtain OPL from IOB, Darya Ganj, Delhi in respect of the CC No.65/2011 Page 4 of 120 5 loan accounts of the above said company, which he willfully and dishonestly did not obtain.
7. Investigation has further revealed that on 27.10.1987, a note was submitted to Sh. K. Shivarama Shetty the then Executive Director of the Bank and Sh. K. Sadananda Shetty, the then CMD for seeking inprinciple approval to entertain the credit proposal of M/s. R. K. B. Herbals Pvt. Ltd. The said note was submitted under the joint signatures of accused A. B. S. Shetty, Divisional Manager, Delhi, accused N. Bhojaraj Shetty Branch Manager, R. K. Puram and Sh. T. C. Shanmugham, AGM, Delhi Zone. Sh. K. Shivarama Shetty remarked on the above said note that the bank might consider sanctioning need based working capital limits subject to the party canvassing deposits of not less than Rs. 2 crores, while Sh. K. Sadananda Shetty, CMD concurred with the views of the Executive Director and instructed that the proposal might be considered subject to the establishment of financial and technical viability.
8. During the investigation, it has also been revealed that even before the processing and scrutiny of the loan proposal of the CC No.65/2011 Page 5 of 120 6 above said company by the credit department of Bank's HO and issuance of regular sanction order, accused N. Bhojaraj Shetty released credit facilities to the tune of Rs.20 lacs under OLCC and Rs.45 lacs under DBP on adhoc basis without stipulating any terms and conditions and the said adhoc release of facilities was orally permitted by A.B.S. Shetty. In this connection, accused N. Bhojaraj Shetty had written letter no 8563/87 dated 26.10.1987 to A.B.S. Shetty recommending the adhoc release of facilities and subsequently, he issued letter no. 8837/87 on 20.11.1987 to M/s. R. K. B. Herbals Pvt. Ltd., intimating therein the adhoc release of the credit facilities without stipulating any terms and conditions. Accused A. B. S. Shetty informed the Delhi Zonal Office about the adhoc release on 07.12.01987. The limits of Rs.20 lacs under OLCC and Rs.45 lacs under DBP were released by accused N. Bhojaraj Shetty on adhoc basis on 24.11.1987 and 08.011988 respectively.
9. Investigation has further revealed that on 09.05.1988, a note was put up to the CMD by the credit department of the bank recommending sanction of the limits proposed by the Delhi CC No.65/2011 Page 6 of 120 7 Zonal Office Note dated 29.02.1988 and after taking into account, the confirmation continued in letter dated 05.05.1988 addressed to the credit department by the Delhi Zonal Office, wherein it as mentioned that the turn over in the borrower's account was satisfactory, the products of the company had been well received and transactions under the bills portfolio were satisfactory as informed by accused N. Bhojaraj Shetty, Branch Manager. As per the recommendations of the Credit department, regular sanction of Rs.50 lacs each under OLCC and DBP was issued by K. Sadananda Shetty, the then CMD on 09.05.1988.
10. Investigation has also revealed that accused N. Bhojaraj Shetty allowed repeated overdrawings from the OLCC account beyond the sanctioned limit and drawing powers, in violation of the instructions of the Bank and he also did not obtain the approval of the higher authorities for the said overdrawings, nor did he submit the excess report in this regard.
11. Investigation has also revealed that the operation in the Documentary Bills Purchase (DBP) account were CC No.65/2011 Page 7 of 120 8 unsatisfactory from the very beginning. Accused N. B. Shetty purchased documentary bills under the adhoc limit of Rs.45 lacs on 08.01.1988 and a total of 130 documentary bills were purchased during the period 08.01.1988 to 01.12.1988 to the tune of Rs.154.80 lacs. Only 62 bills amounting to Rs.75.04 lacs were realised and the remaining 68 bills valued at Rs.79.76 lacs were returned unpaid. Out of 68, 21 bills amounting to Rs.34.44 lacs were adjusted by debiting OLCC account and 13 bills amounting to Rs.12.12 lacs were adjusted by cash remitted by the party. The remaining 34 bills amounting to Rs.33,20,268.35 were transferred to the funded loan account and the said amount remained outstanding to the Bank.
12. Investigation has further revealed that accused N. Bhojaraj Shetty furnished incorrect and misleading information to the Delhi Divisional Office regarding the position of realisation of discounted documentary bills. He informed the Divisional office in his letter no. OR/1142/88 dated 22.04.1988 that 11 bills amounting to Rs.23.37 lacs purchased during the period 08.01.1988 to 14.03.1988 were duly realised although the CC No.65/2011 Page 8 of 120 9 said bills were not retired by the drawees but had been returned unpaid to Vijaya Bank and adjusted in the manner explained above. The above misleading information induced the Zonal Office, New Delhi to make favourable recommendations for the regular sanction of credit facilities to M/s. R. K. B. Herbals Pvt. Ltd. on 05.05.1988.
13. Investigation has also revealed that accused N. Bhojaraj Shetty accepted Lorry Receipts (LRs) of M/s. All India General Freight Carriers and M/s. Associated Traders and Engineers Ltd. which were not IBA- approved transporters during the period 12.07.1988 to 26.08.1988 when 38 bills for Rs.35.77 lacs accompanied by the LRs of the above said transporters were purchased. The acceptance of the LRs of the unapproved transporters was a clear violation of the terms of the sanction of HO Order dated 09.05.1988, which were further communicated to the branch in terms of zonal office sanction letter dated 14.05.1988. Out of the above said bills, only 5 bills for Rs.4,19 lacs were realised and the remaining 33 bills valued at Rs.31.58 lacs were returned unpaid. Out of the above said 33 bills, 9 bills for Rs.7.73 lacs CC No.65/2011 Page 9 of 120 10 were adjusted by remitting cash and remaining 19 bills for Rs.19.97 lacs were transferred to the funded loan accounts.
14. Investigation has also revealed that accused N. Bhojaraj Shetty continued to purchase documentary bills of M/s. R. K. B. Herbals Pvt. Ltd. despite specific instructions of Sh. A. B. S. Shetty not to purchase further bills until the overdue bills were realised. Sh. A. B. S. the then Divisional Manager, visited R. K. Puram Branch of Vijaya Bank on 30.09.1988 and on 03.10.1988, he addressed a letter to accused N. Bhojaraj Shetty calling for his explanation in respect of serious irregularities observed in the loan accounts of M/s. R. K. B. Herbals Pvt. Ltd. Subsequently also A.B.S. Shetty wrote letter to accused N. Bhojaraj Shetty on 18.11.1988 and 01.12.1988, instructing him not to discount fresh bills until all the outstanding bills were realised. He also instructed accused N. B. Shetty not to allow overdrawings to the party from the OLCC account and to monitor the loan account closely but his instructions were deliberately violated by accused N. Bhojaraj Shetty and he purchased 15 bills i.e. DBP No. 131/88 to 145/88 aggregating to Rs.13.23 lacs on CC No.65/2011 Page 10 of 120 11 01.12.1988 despite specific instructions not to purchase the said bills communicated to him on 01.12.1988 itself.
15. Investigation has also revealed that the accused N. Bhojaraj Shetty failed to regulate the end-use of the funds and he caused undue favour to M/s. R. K. B. Herbals Pvt. Ltd. by allowing heavy cash withdrawals to the tune of Rs.55,93,320/- from OLCC account continuously and expenditure on 5-star Hotels to the tune of Rs.1,92,909.13 and allowed transfer of funds to the account of sister concern /personal account of the directors of the above said company to the tune of Rs.2,37,458.75 and also adjusted the bills of 5- star hotels and also adjusted the bills of 5-star hotels.
16. Investigation has also revealed that M/s. R. K. B. Herbals Pvt. Ltd. got 23 consignment books on 03.11.1988 by M/s. Associated Traders and Engineers Ltd. Chandigarh and got the LRs issued which were utilised for obtaining bill discounting facility from Vijaya Bank, R. K. Puram, New Delhi, but the said company failed to deliver the goods against the LRs till April 1989 when goods against two LRs were reportedly delivered to the above transporters which led CC No.65/2011 Page 11 of 120 12 the transporters to lodge a complaint with Chandigarh Police in February 1990 on account of the failure of the above said company to deliver the goods against LRs. However, on account of the non availability of the documents it could not be ascertained whether the goods had actually been delivered against the said LRs subsequently or not. However, the above instance shows the dishonest intention of the company.
17. Investigation has also revealed that credit facilities sanctioned to M/s. R. K. B. Herbals Pvt. Ltd. were reviewed in the Head Office and on 04.02.1989 fresh sanction order No. CH:KSS:45:89 was issued in terms of which OLCC limit of the company was enhanced to Rs.70 lacs from 50 lacs and fresh facility i.e. Drawee Bill Discounting (DBD) of Rs.25 lacs was sanctioned by simultaneously canceling DBP limit of Rs.50 lacs.
18. Investigation has further revealed that 57 drawee bills amounting to Rs.43.45 lacs were discounted during the year 1989 and 1990 which remained outstanding on account of the non retirement of the bills by the drawee M/s. R. K. B. CC No.65/2011 Page 12 of 120 13 Herbals Pvt. Ltd. although the said bills were discounted by the company with Vijaya Bank, R. K. Puram, New Delhi.
19. Investigation has further revealed that the current account no. 338 was opened by accused Sanjay Bhandari on 23.03.1989 with UCO Bank, Delhi High Court Branch in the name of M/s. Indian Herbs, declaring himself as the sole proprietor. As per the investigation M/s. Indian Herbs was a fictitious and non existent business concern and the premises shown in the address of the above said concern i.e. 21, Okhla Phase-II, Scheme-III, New Delhi, was a shed of DIDC, which was not allotted to M/s. Indian Herbs. Investigation has also revealed that the above said shed was initially allotted to accused Deepak Bhandari in 1977 for manufacturing Homeopathic medicine and was sold off to Sh. Sohan Lal Mittal on 06.07.1989 for which negotiations were held during the month of May 1989. It has been revealed that a major fire had broken out in the above said shed in 1986 and the shed was in a broken and burnt out condition when the same was purchased by Sh. Sohan Lal Mittal and no business was being run from the above said shed during CC No.65/2011 Page 13 of 120 14 the year 1989. The above said account was utilized for realizing payment of the pay orders to the tune of Rs.13,40,754.20 issued by Vijaya Bank, R. K. Puram Branch, New Delhi, in favour of M/s. Indian Herbs against the bogus hundis (drawees bills) drawn on M/s. R. K. B. Herbals Pvt. Ltd.
20. Investigation has further revealed that the bogus invoices and hundis of M/s. Indian Herbs were signed by accused Sonia Bhandari w/o accused Sanjay Bhandari as "S. Mehta"
and handwriting expert has confirmed her signatures on the relevant invoices and hundis. Her act of signing bogus hundis and invoices in above manner establishes mens rea on her part and complicity in criminal conspiracy to cheat Vijaya Bank in the guise of fraudulent DBD transactions. It has also been revealed during investigation that the proceeds of the above said pay orders were withdrawn by accused Sanjay Bhandari by means of a number of cheques during the period 23.03.1989 to 05.05.1989 and apart from the above said transactions there were no transactions in the above said account which became virtually inoperative since CC No.65/2011 Page 14 of 120 15 May 1989 which further establishes that M/s. Indian Herbs was a fictitious business concern floated on paper by accused Sanjay Bhandari for misappropriating funds of Vijaya Bank. The bills of M/s. Indian Herbs were purchased by accused N. Bhojaraj Shetty on behalf of Vijaya Bank.
21. Investigation has also revealed that an amount of Rs.2.61 lacs was released by Sh. K.V. Shetty, the then Branch Manager, Vijaya Bank, R. K. Puram, at the instances of M/s. R. K. B. Herbals Pvt. Ltd. to M/s. All India General Freight Carriers as advance freight by debiting OLCC account of M/s. R. K. B. Herbals Pvt. Ltd. for re-booking of goods. However, there is no evidence to show that the said goods were actually re-booked.
22. Investigation has revealed that against the various credit facilities obtained by M/s. R. K. B. Herbals Pvt. Ltd. from Vijaya Bank, an amount of Rs.86.99 lacs excluding the element of accrued interest remained outstanding causing wrongful loss to Vijaya Bank on account of the non-liquidation of the liabilities by the above said borrower. The said funds were obtained by misrepresentation of facts with an intent to CC No.65/2011 Page 15 of 120 16 cheat the Vijaya Bank.
23. The allegations of criminal conspiracy and criminal misconduct on the part of Sh. A.B.S. Shetty contained in the FIR could not be substantiated. There is no evidence to establish that he had knowledge of M/s. R. K. B. Herbals Pvt. Ltd., having obtained credit facilities from IOB, Darya Ganj, Delhi. There is also no evidence to indicate that he had knowledge about the non entertainment of the earlier proposal dated 02.02.1987 of the above said party since the same had been dealt with by his predecessor Late Noel Mascarenhas and Sh. A.B.S. Shetty had taken charge of Delhi Divisional Office on 05.06.1987. Since, the above said vital material facts had been willfully and dishonestly concealed by accused N. Bhojaraj Shetty in his credit report as well as advance proposal dated 25.10.1987, the allegations of misrepresentation with the intention to cheat can not be substantiated against Sh. A.B.S. Shetty. Further, there is ample evidence to show that Sh. A.B.S. Shetty repeatedly instructed accused N. Bhojaraj Shetty in writing, not to allow overdrawings to the above said party from the CC No.65/2011 Page 16 of 120 17 OLCC account and not to purchase fresh bills till the overdue bills were realised which were violated by accused N. Bhojaraj Shetty for which A.B.S. Shetty recommended transfer as well as disciplinary action against N. Bhojaraj Shetty in his letters dated 01.12.1988 and 02.12.1988. However, the action on the part of Sh. A.B.S. Shetty in permitting the release of credit facilities on adhoc basis was found to be irregular and without authority and as such Regular Departmental Action for Major Penalty has been recommended against him.
24. The allegations of criminal conspiracy and cheating on the part of accused Deepak Bhandari as contained in the FIR also could not be substantiated in the absence of evidence to establish overtacts on his part. Although, he was one of the directors of M/s. R. K. B. Herbals Pvt. Ltd., the documents on the basis of which the funds were fraudulently obtained by the company from Vijaya Bank were signed and executed by accused Rajinder Kumar Bhandari and Sanjay Bhandari. There is also no evidence to establish any overtact on his part which can be stated to have been committed in CC No.65/2011 Page 17 of 120 18 furtherance of the above said criminal conspiracy to cheat Vijaya Bank.
25. The allegations regarding forgery for the purpose of cheating and use of forged documents as genuine as contained in the FIR could not be substantiated on account of the non availability of the documents pertaining to the transportation of goods (Lory Receipts).
26. Although Sh. Rajinder Kumar Bhandari and Mrs. Sonia Bhandari were not mentioned as accused in the FIR, their role surfaced during the investigation and on the basis of evidence collected during investigation, it has been established that they have also committed offences of cheating and criminal conspiracy as discussed above.
27. Investigation has also revealed that Sh. K. V. Shetty, former Branch Manager of Vijaya Bank, R. K. Puram, New Delhi and successor of accused N. Bhojaraj Shetty committed violation of instructions of the Bank and failed to exercise due care and caution in monitoring the loan accounts of M/s. R.K.B. Herbals Pvt. Ltd. and as such Regular Departmental Action for Major Penalty has been recommended against him. CC No.65/2011 Page 18 of 120 19
28. Investigation has established that accused Rajinder Kumar Bhandari, Sanjay Bhandari, M/s. R.K.B. Herbals Pvt. Ltd., and Sonia Bhandari have committed acts of criminal conspiracy with accused N. Bhojaraj Shetty with an intent to cheat Vijaya Bank, R. K. Puram Branch, New Delhi, by way of misrepresentation of facts, submitting bogus documents and misappropriating/misutilising the funds to the tune of Rs.86.99 lacs so obtained which caused corresponding wrongful gain for the accused Directors of the company. Accused N. Bhojaraj Shetty has also committed criminal misconduct by causing undue favour to M/s. R. K. B. Herbals and its Directors accused Sanjay Bhandari, Rajinder Kumar Bhandari by abusing his official position as public servant, in the matter of getting loan to the tune of Rs. 1 crore sanctioned by willfully and dishonestly concealing material facts and misrepresenting the factual position regarding the realisation of bills of the above said party to his higher authorities.
29. The above facts constitute offences punishable as under:-
(i) 120B IPC r/w 420 IPC and 5(2) r/w 5(1)(d) of PC Act, 1947 CC No.65/2011 Page 19 of 120 20 and corresponding section of 13(2) r/w 13 (1)(d) of PC Act, 1988 and substantive offences under Section 5(2) r/w 5(1)(d) of PC Act, 1947 and corresponding section 13(2) r/w 13(1)(d) of PC Act, 1988 against accused N. Bhojaraj Shetty.
(ii) 120B IPC r/w 420 IPC and 5(2) r/w 5(1)(d) of PC Act, 1947 and corresponding section of 13(2) r/w 13(1)(d) of PC Act, 1988 and substantive offences under Section 420 IPC against accused Sanjay Bhandari.
(iii) 120B IPC r/w 420 IPC and 5(2) r/w 5(1)(d) of PC Act, 1947 and corresponding section of 13(2) r/w 13(1)(d) of PC Act, 1988 and substantive offences under Section 420 IPC against accused M/s. R. K. B. Herbals Pvt. Ltd.
(iv)120B IPC r/w 420 IPC and 5(2) r/w 5(1)(d) of PC Act, 1947 and corresponding section of 13(2) r/w 13(1)(d) of PC Act, 1988 and substantive offences under Section 420 IPC against accused Rajinder Kumar Bhandari.
(v) 120B IPC r/w 420 IPC and 5(2) r/w 5(1)(d) of PC Act, 1947 and corresponding section of 13(2) r/w 13(1)(d) of PC Act, 1988 and substantive offences under Section 420 IPC against accused Sonia Bhandari.CC No.65/2011 Page 20 of 120 21
30. Sanction order for the prosecution of accused N. Bhojaraj Shetty has been issued by the Competent Authority, which was enclosed in original with the Charge Sheet.
31. Vide Order dated 23.11.2006, prima facie case under Section 120-B read with Section 420, 467, 468, 471, r/w Section 5(1)
(d) and Section 5(2) of The Prevention of Corruption Act, 1988 was made out against accused N. Bhojaraj Shetty, Accused Sanjay Bhandari and Accused Sonia Bhandari. Proceedings against accused Rajinder Kumar Bhandari have been abated on account of his death and proceedings against accused M/s. R.K.B. Herbals Pvt. Ltd. have been dropped on account of its dissolution. Substantive Charge was also framed against accused N. Bhojaraj Shetty under Section 420, 471 IPC and Section 5(1)(d) and 5(2) of Prevention of Corruption Act 1947 and Section 13(1)(d)(ii) and 13(2) of the Prevention of Corruption Act, 1988. Substantive charge was also framed against accused Sanjay Bhandari under Section 420 and 471 of IPC. Substantive Charge was also framed against accused Sonia Bhandari under Section 420, 467 and 471 IPC. Accused persons CC No.65/2011 Page 21 of 120 22 pleaded not guilty to the charges and claimed trial.
32. The case against accused No. 2 Sanjay Bhandari and accused no. 4 Sonia Bhandari, directors of M/s. R. K. B. Herbals Pvt. Ltd. is quashed by the Hon'ble High Court of Delhi vide Order dated 29.06.2015 in Crl. M.C. No. 5798/2014. As it is already stated above, Proceedings against accused no. 3 Rajinder Kumar Bhandari have been abated on account of his death and Proceedings against accused no. 5 M/s. R.K.B. Herbals Pvt. Ltd. have been dropped on account of its dissolution. Hence, the present case proceeds against accused no. 1 N. Bhojaraj Shetty. EVIDENCE OF THE PROSECUTION
33. The prosecution in order to prove its case has examined 33 witnesses.
PW-1 is Sh. Shomvir Singh working as Consultant with M/s. Techno Come, 260/27, Karishma Apartments, I. P. Extension, New Delhi, who was working as Assistant Manager (Purchase) with M/s. R. K. B. Herbals Pvt. Ltd. in the year 1988-1989 and he deposed about the company affairs. CC No.65/2011 Page 22 of 120 23 PW-2 is Sh. Jagdish Prasad Tyagi, Manager, DSIDC, N-36, Bombay Life Building, Cannaught Place, New Delhi, who was posted and working in Recovery Division of DSIDC in the year 1995. He has deposed regarding the allotment of Plot at Site No. 2, Scheme-III, Okhla Industrial Area, DSIDC Shed to Sh. Deepak Bhandari for the purpose of manufacturing Homeopathic Medicines.
PW-3 is Sh. Onkar Singh S/o Sh. Chattar Singh, R/o House No. 1447/2, Sector-29B, Chandigarh, who was working as Manager with M/s. Associate Traders and Engineers Limited. He has deposed about the booking of consignments of M/s. R. K. B. Herbals, Kasoli from Chandigarh to various cities in India and also deposed that he got registered an FIR against the company M/s. R. K. B. Herbals Pvt. Ltd. with Chandigarh Police.
PW-4 is Sh. Lakshmi Narayan S/o Sh. R. Venkateshwar, retired as Deputy Chief Officer, Indian Overseas Bank, R/o E- 4, Shivani, Block-I, 40, East Coast Road, Thiruvanmiyur, Chennai, who was working as Officer in Indian Overseas Bank, Darya Ganj, Delhi in the year 1982 and he has deposed that M/s. R. K. Bhandari Homeopathic Pvt. Ltd. was availing credit facilities from Indian Overseas Bank, Darya Ganj Branch, Delhi.
CC No.65/2011 Page 23 of 120 24 PW-5 is Sh. Jagdish Prasad, Clerk, M/s. Vijaya Bank, Bhikaji Cama Place Branch, New Delhi, who was working as a Clerk with M/s. Vijaya Bank, R. K. Puram Branch, New Delhi in the month of June 1987 and he deposed about the transaction in the account of M/s. R. K. B. Herbals with Vijaya Bank, R. K. Puram Branch, Delhi during his tenure. He also brought on record the registers of DBD and DBP accounts of the company as Ex. PW-5/A and Ex. PW-5/B respectively. PW-6 is Ms. Suchitra Bali, Manager of Vijaya Bank, Kochi, Kerala, who deposed that during the year 1987 to 1990, she remained posted as Assistant Manager, M/s. Vijaya Bank, R. K. Puram Branch, New Delhi. She has deposed that she used to look after one seat like clearing, deposit accounts, loan accounts. She also deposed that the bills of M/. R. K. B. Herbals Pvt. Ltd. used to be presented before accused N. Bhojaraj Shetty, the then Branch Manager, for the purpose of discounting and the pay in slip and vouchers were also used to be prepared after instructions of accused N. Bhojaraj Shetty.
PW-7 is Capt. P. S. Tatwani S/o Dr. C. L. Tatwani, Retired, R/o House No. D-201, Brindawan Apartments, Plot No. 10, Sector-12, Dwarka, New Delhi-110075, who has deposed that he was posted as Chief Manager with UCO Bank, Delhi High Court Branch in the year 1995. He has deposed CC No.65/2011 Page 24 of 120 25 regarding the Pay orders and Cheques issued by the Prop. Of M/s. Indian Herbs.
PW-8 is Sh. Anil Maheshwari S/o Sh. P. S. Maheshwari, Chartered Accountant, R/o B-87, Gulmohar Park, New Delhi- 110049, who has deposed that during the year 1986, he was working with M/s. R. K. B. Herbals and used to look after the accounts of M/s. R. K. B. Herbals Pvt. Ltd. He has further deposed that he was also sent by the company to the factory situated at Parwanoo to look after the accounts including disbursement of loans.
PW-9 is Sh. Vasant Shetty S/o Late Sh. B. Sanjeeva Shetty, Retired R/o House No. 440, 3rd Cross Budha Marg, Sidhartha Nagar, Mysoor-11, who deposed that during the year 1994, he was working as Deputy General Manager, Zonal Office, Vijaya Bank, Delhi. He has deposed that he lodged the complaint Ex. PW-9/A on the instructions of his senior Officers, who sit in Head Office at Bangalore and on the basis of his complaint Ex. PW-9/A, FIR Ex. PW-9/B was registered by the CBI on 23.05.1994.
PW-10 is Sh. K. Prabhakar Hegde, S/o Sh. K. Dasa Hegde, Retired, R/o House No. 3-117A, V&PO Hirevettu, Taluka & District Udupi (Karnatka), who had granted Sanction order Ex. PW-10/A dated 28.11.1996 for prosecution against CC No.65/2011 Page 25 of 120 26 accused N. Bhojaraj Shetty, Senior Manager Scale-III. PW-11 is Sh. M. M. Semson S/o Sh. P. D. Semson, Retired as an Officer, R/o House No. 34, 6th Cross, Kanaka Nagar, Bangalore-32, who has deposed that during the period from February 1986 to May 1989, he was deputed for inspection of the factory and stocks of the said company at Parvanoo, Himachal Pradesh. In the year 1989, he went to Parvanoo for inspection of the company M/s. R. K. B. Herbals Pvt. Ltd. regarding the physical stock available in the production unit of the company and gave his stock statement for verification. PW-12 is Sh. A. Sripathi Rao S/o Sh. S. Ananthaniah, R/o 190,6/B Cross, 2nd Main, Vijaya Bank Colony, Belekahlly, Bangalore-76, who has deposed that he remained posted at Divisional Office and Zonal Office of Vijaya Bank from 1984-
89. He has deposed regarding the loan proposal of M/s. R. K. B. Herbals Pvt. Ltd. and the sanction of communication letter.
PW-13 is Sh. K. Krishna Rai S/o Late Sh. K. Venkappa Rai, Former Exe. Director, Allahabad Bank, Sobha Aster, Flat No. 1053, 5th Main, SRS Nagar, Bilakahalli, Banner Ghatta Road, Bangalore-76, who has deposed that during the year 1992- 93, he was working as Deputy General Manager of Vijaya Bank, Head Office, Bangalore. He conducted the CC No.65/2011 Page 26 of 120 27 investigation with regard to the irregularities in the account of M/s. R. K. B. Herbals Pvt. Ltd. at the R. K. Puram Branch, New Delhi and filed his Report Ex. PW-13/1. On conclusion of enquiry whatever Irregularities / illegalities were observed by him have been mentioned in the Report Ex. PW-13/1. PW-14 is Sh. T. S. Marla S/o Late Sh. Thimmaya Marla, Senior Manager, R/o House No. 225, 31 st Road, J. P. Nagar, VI- Phase, Bangalore-78, who has deposed that in the year 1996, he was posted as Senior Branch Manager, Vijaya Bank, R. K. Puram Branch, New Delhi. He has handed over Documentary Bill Purchase, (DBP), Supply Bill Purchase Register (SBP), Clean Bill Purchase (CBP), Single Register and Bill Discount Register (BD) to the CBI. PW-15 is Sh. Surinder Sharma S/o Late Sh. D. C. Sharma, Govt. Employee, R/o J-25, Laxmi Nagar, Delhi, who has produced the file pertaining to M/s. R. K. B. Herbals Pvt. Ltd. from Office Record of Registrar of Companies, NCT of Delhi and Haryana at Delhi.
PW-16 is Head Constable Gopi Chand Meena, CBI/BS&FC, Chanakya Puri, New Delhi, had brought photocopy of Investigation report dated 10.06.1993 regarding the irregularities in the Credit Limits of M/s. R. K. B. Herbals Pvt Ltd. at Vijaya Bank, R. K. Puram Branch, New Delhi. CC No.65/2011 Page 27 of 120 28 PW-17 is Sh. B. C. Rai S/o Sh. B. N. Rai, Retired Bank Employee, R/o 176/9/2, 2nd Cross, Wilson Garden, Bangalore. He handed over documents to the CBI in course of investigation.
PW-18 is Sh. Sohan Lal Mittal S/o Sh. Prem Chand Mittal, R/o 1697, Pratap Gali, Chuna Mandir, Paharganj, New Delhi, who had purchased one Shed No. 21 in DSIDC Okhla Phase-II, Scheme No. 3, New Delhi from Sh. Deepak Bhandari.
PW-19 is Sh. Subrata Bhattacharya S/o Late Sh. B. C. Bhattacharya, Retired Life, R/o B/B-10H, Munirka, DDA Flats, New Delhi, who deposed that he was posted in Vijaya Bank as an Assistant Manager on 08.04.1988 and when he took charge of Loans Department, M/s. R. K. B. Herbals Pvt. Ltd. were already enjoying certain credit facilities viz Cash Credit Limit (CC), Demand Bills Purchase Limit (DBP) and also Drawee Bills Discount Limit (DBD). He also deposed about the certain banking practice to deal with OLCC, DBP and DBD accounts. He also deposed about certain cash withdrawals, Over drawings and Money Transfers in OLCC Account and tried to prove the loose sheets of ledger books of the said OLCC Account of the company as Ex. PW-19/K. CC No.65/2011 Page 28 of 120 29 PW-20 is Sh. Akhilesh Behari S/o Late Sh. Chhail Behari, R/o Panchwati Apartments, White Field, Kondapur, Hyderabad. Nothing is proved by this witness.
PW-21 is Sh. M. P. Baby S/o Sh. Ittan Paily, R/o A-2, Gulmohar, M. M. Road, Kandarpada, Dahisar West, Mumbai., who has deposed that he was working as Manager, Indian Banks Association during the relevant time. He has deposed regarding the scheme of recommending transport operators to its member banks and one who fulfills the criteria laid down in the scheme is recommended to the member banks.
PW-22 is Sh. K. V. Bhatt S/o Sh. Anant Bhatt, Retired Bank Officer, R/o "Savitri Anant", Vidya Nagar, Perampalli, Udupi, Karnataka, who has deposed that from June-July 1987 to April-May 1990, he had served at the Divisional Office of Vijaya Bank and he was looking after the work pertaining to Credit /Loans. He also deposed about the loan application form Ex. PW-12/DB submitted by M/s. R. K. B. Herbals Pvt. Ltd. in R. K. Puram Branch, for the grant of Cash Credit and Bills Purchased facility to the tune of Rs. 204 lacs in total. PW-23 is Sh. S. Kannan S/o Late Sh. Santhana Gopala Iyer, Ex. Bank Employee, R/o Door No.8, Plot No. 4092, Sriram Koli Street, Ram Nagar North, Madipakkam, Chennai, who CC No.65/2011 Page 29 of 120 30 during the year 1987-1990, was posted as Manager, Vijaya Bank, Zonal Office, Delhi and taking care of Loans, Advances proposals, carrying out processing of Loan Proposals received from Delhi Divisional Office pertaining to Delhi branches.
PW-24 is Sh. K. Shankar Shetty, Retired Bank Officer, S/o Sh. Sheena Shetty, Retired Bank Officer, R/o 1321, Double Road, Indira Nagar, Second Stage, Bangalore, who had served as Zonal Manager, New Delhi zone between 09.05.1988 to 18.02.1991. He deposed about the circumstances under which the loan application of M/s. R. K. B. Herbals Pvt. Ltd. was processed.
PW-25 is Sh. Sanjay Talwar S/o Sh. S. L. Talwar, R/o 143/1, Site 1, DDA, New Rajinder Nagar, New Delhi, who was working with M/s. R. K. B. Herbals Pvt. Ltd. as Senior Product Development Executive in the year 1987. He identified the signatures of Sh. Sanjay Bhandari, Director of M/s. R. K. B. Herbals on Ex. PW-1/A9, Ex. PW-1/A10 to Ex. PW-1/A20 and Ex. PW-25/A. PW-26 is Sh. K. N. Kochhar S/o Late Sh. P. N. Kochhar, Retired Bank Officer, R/o BE-93, Janakpuri, New Delhi, who was posted as Senior Manager with UCO Bank, Delhi High Court in July 1996. According to him, he handed over certain CC No.65/2011 Page 30 of 120 31 documents to the CBI vide Production Memo Ex. P-15. However, the said documents could not be traced by the Ld. PP for CBI and they were not brought on record. PW-27 is Sh. M. Balachandran S/o Late Sh. K. V. G. Nair, Retired Bank Officer, R/o 102, Rose Date, 15, Hutchins Road, Cooke Town, Bangalore, who has deposed that in the year 1984, he was posted in the Credit Department of Vijaya Bank, Head Office at Bangalore and upto 1994, he remained posted there. He had dealt with the loan proposal of M/s. R. K. B. Herbals Pvt. Ltd. He has deposed about the note Ex. PW-19/D placed before the ED and CMD wherein the grant of credit facility were agreed in principle and other documents pertaining to the loan proposals and sanction to M/s. R. K. B. Herbals Pvt Ltd.
PW-28 is Sh. B. Soorya Kumar Rai S/o Sh. S. Chennapparai, Retired Bank Officer, R/o House No. 4, First C Main, Chandra Reddy Layout, Koramangla, Bangalore, who was working as Chief Manager of R. K. Puram Branch, New Delhi in the year 1996. He handed over 38 original ledger sheets relating to the Cash credit Account of M/s. R. K. B. Herbals pvt. Ltd. for the period 24.11.1987 to 09.07.1991 (Ex. PW-19/K) to CBI. PW-29 is Sh. S. B. Sharma, S/o Late Sh. Baleshwar Nath, Retired Bank Officer, R/o 1419, Ground Floor, Sector-7, CC No.65/2011 Page 31 of 120 32 Babadurgarh, Haryana, who was posted as Chief Manager at Indian Overseas Bank, Darya Ganj Branch, New Delhi in the year 1995. He has deposed regarding the account of M/s. R. K. B. Herbals Pvt. Ltd. which was lying stagnant during the relevant time.
PW-30 is Sh. Ajay Kumar S/o Late Sh. J. Prasad, Government Servant, R/o Flat No. 42, Hyderabad Estate, Napean Sea Road, Mumbai. He is the second Investigating Officer in the present case.
PW-31 is Sh. Satish Dagar S/o Sh. Banwari Lal, Government Officer, R/o 983/5, Patel Nagar, Gurgaon, Haryana. He is the first Investigating Officer in the present case. PW-32 is Sh. Arvind Kumar Jain S/o Sh. Manak Chand Jain, Bank Officer, R/o 342, Shri Gopal Nagar, Gopalpura Bypass, Jaipur. He was posted as Branch Manager of ICICI Bank Ltd. at Kishanpole Bazar, Jaipur. He has deposed that the summoned record i.e. Inward Bills for Collection Register for the period 1988 was destroyed by the Bank as the same is old record in terms of Circular Ex. PW-32/A. PW-33 is Sh. Partha Mukherjee S/o Sh. Ram Gopal Mukherjee, R/o 704, Maitri Apartments, 255, NSC Bose Road, Kolkata. He was the 3rd Investigating Officer of the CC No.65/2011 Page 32 of 120 33 present case and after completion of the investigation, he filed the charge sheet before the Court.
STATEMENT OF ACCUSED U/S 313 CR.P.C.
34. After completion of the prosecution evidence, the statement of the accused was recorded u/s 313 Cr.P.C. All the incriminating evidence which has come on record against the accused was put to the accused in his Statement recorded under Section 313 Cr.P.C.
35. Accused N. Bhojaraj Shetty has submitted that the conduct of two accounts of M/s. R.K.B. Herbals Pvt. Ltd., was as per the instructions, awareness and knowledge of his higher authorities. The operation of the said two accounts was subject to the interference of the higher authorities. His actions were guided by the larger interest of the Bank and as per procedure. There was no dishonest intention in his actions. He has further submitted that the investigation in the instant case has been done in an unfair and biased manner. Documents which go to exonerate him have been suppressed.
CC No.65/2011 Page 33 of 120 34
36. Accused has not examined any witness in his defence.
37. I have heard Sh. A. K. Kushwaha, Ld. P.P. for the CBI and Sh. Manu Sharma Ld. Counsel for accused N. Bhojaraj Shetty. I have also perused the record of the case and the case law relied upon by the Ld. PP as well as Ld. Defence Counsel.
Arguments of the Ld. P.P. for CBI.
38. Ld. PP for CBI has vehemently argued that, not obtaining the OPL from IOB, Darya Ganj Branch with regard to the credit facilities availed by the company M/s. RKB Herbals Pvt. Ltd. and the speed with which accused has forwarded the loan application of the company i.e. within a day of submitting the loan application and further allowing repeated overdrawals, cash withdrawals are sufficient to prove that the accused has conspired with other accused to cheat the Bank, thereby, committed an offence under section 120-B of IPC r/w 420 of IPC. Ld. PP further argued that the conspiracy charge on the accused survives despite quashing of the case against accused A-2 and A-4 by the Hon'ble High Court as case CC No.65/2011 Page 34 of 120 35 against another accused namely, R.K. Bhandari was not quashed but only abated due to his death. The abatement of the criminal case against the accused R.K. Bhandari who died before framing of the charges does not absolve the conspiracy charge against the accused. The Ld. PP for CBI relied upon the judgment of Hon'ble High Court in Natwar Riateria v. CBI, wherein it is held -
"22. In the instant case, there is no finding on merits that the offence of conspiracy is not proved against A-1 (since expired) so as to extend the benefit of view taken in the judgments relied upon by the petitioner to him. Rather, the position is otherwise. After both the accused i.e. A-1 and the petitioner herein were charge- sheeted for conspiracy, separate charge for the offence of conspiracy was framed against both of them. Both the accused were put to trial when A-1 died during trial and proceedings had to e abated qua him. In such a situation, the prosecution deserves to be afforded an opportunity to produce its witnesses for proving the charge of conspiracy against the CC No.65/2011 Page 35 of 120 36 petitioner. The Court would be well within its right to pronounce the verdict against the petitioner after holding full trial against him. I concur with the view taken by the Bombay High Court in the matter of "Pradumna Shriniwas Auradkar and etc. vs. State of Maharashtra"(supra).
39. The Ld. PP for CBI further argued that in pursuance of the conspiracy and cheating, the property of the complainant Bank was delivered at the time when adhoc limits were granted without any prior sanction by the higher authorities and thereby the offence of cheating is completed. It is also argued that the intention of the accused in conspiracy with other accused to cheat the bank can be made out from the circumstances even in the absence of direct evidence. It is also argued that on 23.03.1987, a meeting took place between Sanjay Bhandari, Director of the company, Sh. ABS Shetty, Divisional Manager and accused Branch Manager, where the conspiracy took place and second loan application was submitted on the very next day. It is argued that there is no need of direct evidence to prove the intention of the CC No.65/2011 Page 36 of 120 37 accused and the same can be proved by way of circumstantial evidence. The Ld. PP for the CBI has relied upon the judgment of Hon'ble Apex Court in Devender Kumar Singla v. Baldev Krishan Singla, wherein it is held -
"As was observed by this Court in Shivanarayan Kabra v. State of Madras, AIR(1967) SC 986 it is not necessary that a false pretence should be made in express words by the accused. It may be inferred from all the circumstances including the conduct of the accused in obtaining the property. In the true nature of things it is not always possible to prove dishonest intention by any direct evidence. It can be proved by number of circumstances from which a reasonable inference can be drawn."
40. The Ld. PP for CBI also argued that the contention of the defence that the second loan application is for financing only herbal division of the company and therefore different from the first loan application which was for homeopathic division, is not sustainable in view of the fact that the applicant in both the loan applications is same i.e. M/s. RKB Herbals Pvt. Ltd. CC No.65/2011 Page 37 of 120 38 It is also argued that the haste with which the second loan application was forwarded by the accused without obtaining OPL(opinion of previous lender) from IOB, Darya Ganj itself is sufficient circumstance to prove the criminal intention to cheat the Bank.
41. The Ld. PP for CBI also argued that the accused has evaded giving proper explanation during his examination under 313 Cr.P.C. and an adverse inference can be drawn. To question no. 51, the accused Branch Manager gave a wrong answer by saying "as per instructions received from my higher authorities", though there are no such instructions from any higher authority. The Ld. PP for the CBI also argued that the accused has not adduced any defence evidence in this regard. The Ld. PP also referred to the evidence of PW-3 to show that the Directors of M/s. RKB Herbals Pvt. Ltd. were not honest in doing their business.
42. The Ld. PP further argued that the further finance facilities after the tenure of the accused granted to the company by the complainant Bank was only an act to revive the sick company so as to recover the dues from the company. CC No.65/2011 Page 38 of 120 39 Therefore, the further extension of loan facility by the complainant Bank to the company cannot be considered as approval of misdeeds by the accused.
Arguments on behalf of the accused N. Bhojaraj Shetty.
43. The Ld. Defence Counsel has argued that the accused Branch Manager has not committed any fault at any stage while dealing with the accounts of M/s. RKB Herbals Pvt. Ltd. which subsequently went into a default. The Ld. Counsel also argued that the accused as Branch Manager has done the job on his part to the best of his ability. It is also argued that the entire record with regard to the account of the company was also available with the Divisional Office specifically in view of the earlier loan application and therefore, no fact can be presumed to have been suppressed by the accused. It is also argued that the adhoc limits under OLCC and DBP were extended to the company only on the instructions of the then Divisional Manager Sh. ABS Shetty which is evident from the documents and depositions of witnesses on record.
44. It is also argued by the Ld. Defence Counsel that it is very CC No.65/2011 Page 39 of 120 40 common in normal banking business to allow overdrawals and cash withdrawals to a limited extend in exigencies and under some special circumstances like expecting higher sanctions therefore, nothing can be attributed to the accused Branch Manager in this regard. It is also argued that the said overdrawals and cash withdrawals were allowed in the company's account even by the successor of the accused Branch Manager which itself is sufficient to show that there was nothing abnormal much less criminal intention in allowing the overdrawals and cash withdrawals from the OLCC Account. It is also argued that there is absolutely no material against the accused to say that he has obtained any pecuniary advantage to himself or to any other person while dealing with the OLCC, DBP or DBD Accounts of the company.
45. The Ld. Counsel also argued that the adhoc limits granted by the accused on the advice of the Divisional Manager Sh. ABS Shetty was later ratified by the Credit Department which itself shows that there was nothing wrong committed by the accused. It is also argued that an ordinary default by sick CC No.65/2011 Page 40 of 120 41 company was given a color of criminal case by the complainant Bank victimising the accused Branch Manager alone leaving other officers like ABS Shetty, the then Divisional Manager and the successor Branch Manager. The Ld. Counsel for the accused has extensively referred to the documents on record and depositions of various witnesses to support his version. The Ld. Counsel also argued that the loose sheets of a ledger of OLCC Account cannot be considered as admissible in evidence in view of the dicta laid down by the Hon'ble Apex Court in CBI v. V.C. Shukla (1998) 3 SCC 410, Zenna Sorabji and others vs. Mirabelle Hotel Co. (Pvt.) Ltd. and others 1980 SCC OnLine Bom 11 and Shukhkaran Rameshwarlal Agarwal vs Durgaprasad Private Ltd. 1971 SCC OnLine Guj 25.
46. The Ld. Counsel for the accused also argued that the default of the loan by the company M/s. RKB Herbals Pvt. Ltd. has to be considered only as a consequence of business failure. It is also argued that the complainant Bank has made complaint to the CBI only as an arm twisting method to recover its dues. It is also argued that the complainant Bank CC No.65/2011 Page 41 of 120 42 has settled all its dues before the DRT with the Directors of the company in OTS Scheme and thereby withdrawn all its claims. As per the norms of the OTS Scheme, the fraudulent and wilful defaults cannot be settled and by settling the dispute with the Directors of the company, the Bank has admitted that the present default by the company M/s. RKB Herbals Pvt. Ltd. is neither fraudulent nor wilful. It is further argued that in view of the said settlement under OTS Scheme, the Directors Sanjay Bhandari A-2 and Sonia Bhandari A-4 have filed a quash petition before the Hon'ble High Court vide petition Crl. M.C. No. 5798/2014. It is also submitted that the Hon'ble High Court has considered each and every aspect of the entire case and proceeded to quash the criminal case against Sanjay Bhandari and Sonia Bhandari. It is further argued that in view of the above OTS settlement, the complainant Bank also closed the departmental proceedings against the accused Branch Manager by withdrawing the charge sheet and all the retiral benefits were released to the accused.
CC No.65/2011 Page 42 of 120 43 Discussion Suppression of fact by the Accused Branch Manager
47. The company M/s. RKB Herbals Pvt. Ltd. had a current account in Vijaya Bank, R.K. Puram Branch since 1982. The company submitted a loan application dated 30.01.1987 for working capital limits amounting to 204 lacs vide Ex. PW12/BB through its Managing Director, Dr. R.K. Bhandari and the same was forwarded by the Branch Manager to the Divisional Office. The Divisional Manager vide Ex. PW12/DA deferred the proposal. In the said letter dated 26.02.1987, Divisional Office of the complainant Bank raised issues with regard to the default in the loan earlier availed by Mr. Deepak Bhandari, Executive Director of the company and absence of OPL(opinion of previous lender) report from the Indian Overseas Bank. It is further mentioned in the said letter Ex. PW12/DA that there was credit squeeze from Head Office. Hence the proposal was deferred for the time being.
48. The company M/s. RKB Herbals Pvt. Ltd. submitted another application i.e. Ex. PW7/X through Sh. R.K. Bhandari, CC No.65/2011 Page 43 of 120 44 Managing Director seeking finance for working capital for RS. 50 lacs under OLCC and Rs. 50 lacs under Bills Purchase Discount(DBP). The said application was forwarded by the accused as Branch Manager along with his credit report Ex. PW19/C.
49. The allegation of the CBI is that the accused has suppressed the fact with regard to default committed by Mr. Deepak Bhandari in repayment of personal loan and further with regard to the loan facilities availed by the company from Indian Overseas Bank while recommending the loan facility to the company. It is seen from the record that the loan proposal of the company is approved by the Divisional Manager and a note i.e. Ex. PW19/D was put up before the Executive Director during his camping in Delhi. In the said note Ex. PW19/D, the Executive Director has agreed to consider sanctioning need based working capital limits subject to the condition that the Directors of the company canvass 'deposits' for the branch which may not be less than 2 Crores. The said note was signed by Branch Manager i.e. accused, Divisional Manager and Assistant General CC No.65/2011 Page 44 of 120 45 Manager. Pursuant to the approval by the Executive Director and the Chairman, the Branch Manager proceeded to allow the adhoc loan facility to the company on 24.11.1987 for Rs. 20 lacs under OLCC and on 08.01.1988 for Rs. 45 lacs under DBP. The credit report by the accused while recommending the loan application does not mention about the credit facility availed by the company from Indian Overseas Bank, Darya Ganj, Delhi. However, the company which has applied for loan is not a new customer to the Vijaya Bank and its earlier application which reveals the credit facility availed by the company from Indian Overseas Bank is already on the records of the Divisional Office. Infact, the account opening form, which is Ex. PW6/B, of the company also shows that the credit facility is enjoyed by the company from Indian Overseas Bank.
50. The prosecution has examined one Mr. Shankar Shetty as PW-24. The said witness was working as Zonal Manager, New Delhi from 09.05.1988 to 18.02.1991. The examination- in-chief of this witness reveals some important facts with regard to the involvement of higher authorities like Divisional CC No.65/2011 Page 45 of 120 46 Manager and Zonal Manager in granting credit facilities to the company. In a specific question put to him by the Ld. PP for CBI, the answer given is as below-
"Q. Do you have some personal
knowledge about the loan of M/s. RKB
Herbals Pvt. Ltd. ?
A.: Yes, I am aware of this account. When I joined the Zonal Office, New Delhi on 09.05.1988, a Head Office sanction letter approving limit of Rs. 50 lacs OLCC and Rs. 50 lacs DBP was received. The application for the same loan was made sometime in 1987, I do not remember the exact date, from the correspondence and the relevant file later I found this sanction was consequent upon the releasing of an ad-hoc limit of Rs. 20 lacs OLCC and Rs.
45 lacs DBP to the party. The ad-hoc limit, as stated above, was released on the basis of a note put up earlier by the Branch and the Divisional Office to the Chairman and the Executive Director while they were camping in Delhi. While approving the same in principle, Chairman made a specific remark that the limits CC No.65/2011 Page 46 of 120 47 could be considered only after studying the financial, economical, technical and other feasibilities. However, the limits were released on the advise of the Divisional Office by the Branch Manager in the meanwhile for which regular sanction was received on 09.05.1988. This entire episode took place before I joined the Zonal Office, Delhi.
...........
Q. Whether the Divisional office or the Zonal office had at any time recommended the renewal or enhancement of the limits in respect of M/s. RKB Herbals Pvt. Ltd. ?
A.: Neither the Divisional office nor the Zonal office had recommended the renewal or enhancement of the limits in respect of M/s. RKB Herbals Pvt. Ltd. At the time of request of the party for renewal and enhancement, Divisional office was not in favour of the same and Zonal office also kept pending the proposal. In the meanwhile the borrower went to the Head Office directly and took up the matter with them. The letter written CC No.65/2011 Page 47 of 120 48 by the party was retransmitted to the Zonal Office for collecting relevant information and submission to the Head Office. Accordingly, the proposals were forwarded to the Head Office in accordance with the decision of the meeting of the Branch Manager, Divisional Manager, Zonal Manager and the party."
51. From the above it is clear that the ad-hoc limits for working capital were released by the Branch Manager on the advice of the Divisional Office. It is also clear that the loan proposal and further recommendations have actually taken place after the borrower went to the Head Office directly and took up the matter with them. The proposals were forwarded to the Head Office in accordance with the decisions of the meeting of the Branch Manager, Divisional Manager, Zonal Manager and the Borrower. After providing adhoc working capital limits, the bank has also considered for final sanction of OLCC and DBP limits of Rs. 50 lacs each as sought by the company in its application.
52. It is argued by the Ld. Counsel for accused that the company CC No.65/2011 Page 48 of 120 49 has sought the loan facility for its herbal division unit which is also financed by Himachal Pradesh State Finance Corporation and HPSIDC Ltd. Ld. Counsel also contends that since the above said finances by HPSFC and HPSIDC were given to the herbal division of the company, the same are only mentioned in the application form. Ld. Counsel further contends that the Indian Overseas Bank has financed Homeopathic division of the company and therefore it need not be mentioned in the loan application nor it is required to be mentioned by the accused Branch Manager in his recommendation i.e. Ex. PW19/C. Per contra, the Ld. PP for CBI has argued that the applicant in both the loan applications is the same i.e. M/s. RKB Herbals Pvt. Ltd. and its directors are also the same and therefore, whether the finance sought for homeopathic division or herbal division that does not make any difference.
53. Ex. PW2/DA is a note for the Chairman and Managing Director dated 20.10.1989 by the Credit Department regarding the irregular accounts of M/s. RKB Herbals Pvt. Ltd. at the R.K. Puram branch of the complainant Bank. It is CC No.65/2011 Page 49 of 120 50 observed in this note by the Credit Department that the Homeopathic Division of the Company has borrowed from the Indian Overseas Bank and the complainant Bank has financed the Herbal Division. The relevant paragraph on page 3 of the Ex. PW2/DA is reproduced as below -
"b) While granting the credit limits originally, it was not informed to us that Homeopathic Division of the company has borrowed from the Indian Overseas Bank.
How the division is running is not known to us. IOB, vide its letter dated 11-9-1989 has indicated that the party has been satisfactorily dealing with them for over a decade. The facilities are collaterally secured by mortgage of the residential property belonging to the Directors, estimated to cost Rs. 95 lakhs. The IOB has declined the request of the party to provide a II charge on the same in our favour. IOB has further asked us to take over the liability, since we have financed the Herbal Division without its permission/NOC."
54. It is clear from the above that the Indian Overseas Bank has CC No.65/2011 Page 50 of 120 51 financed the Homeopathic Division of M/s. RKB Herbals Pvt. Ltd. and the Vijaya Bank has financed the Herbal Division of the company.
55. As per Ex. PW5/C, the inspection of the unit was also conducted by the Branch Manager along with Senior Manager from the Divisional Office on 14.11.1987 which also shows that the Divisional Office was equally involved in verifying with the unit particulars, stock position and other details of the company. Since, the earlier loan application dated 30.01.1987 and account opening particulars were already available with the higher authorities i.e. Divisional Office and Office of Assistant General Manager, it cannot be said that the working capital limits were sanctioned only on account of suppression of the said fact by the Branch Manager. The contents of the note i.e. Ex. PW19/D clearly show that the Divisional Manager and Assistant General Manager are fully convinced with the loan proposal of the company thereby recommending the limits proposed by the branch. As stated earlier this note i.e. Ex. PW19/D is signed by the Divisional Manager and the Assistant General CC No.65/2011 Page 51 of 120 52 Manager and further the same was approved and signed by the Executive Director. The documents available on record and contents of the said documents clearly show that the Divisional Manager and the Assistant General Manager were fully aware of the company and its history. There is nothing on the record which suggest that a particular fact with regard to the borrower company was suppressed by the accused which was not in the knowledge of Divisional Office. The evidence on record also shows the involvement of the higher authorities like Divisional Manager, AGM in the entire process of sanctioning adhoc credit limits to the company. Discussion with regard to OLCC Account
56. The Ld. PP for CBI argues that the excess withdrawals by the company during the adhoc sanction and after the final sanction were allowed by the accused Branch Manager with a malafide intention to do favour to the Directors of the company and thereby the accused has committed the offence under section 13(1)(d) of the PC Act. On the other hand, the Ld. Counsel for accused argued that the Branch CC No.65/2011 Page 52 of 120 53 Manager in his discretion can allow certain excess withdrawals which is common in normal banking business.
57. The R.K. Puram branch of Vijaya Bank with the permission of Divisional Office provided adhoc facility of OLCC and DBP to the M/s. RKB Herbals Pvt. Ltd. The said adhoc limit was released on 24.11.1987 by the accused for Rs. 20 lacs under OLCC and on 08.01.1988 for Rs.45 lacs under DBP. The facility of OLCC was intimated to the firm vide letter dated 20.11.1987. Thereafter, the company started utilizing the facility under OLCC and DBP from Vijaya Bank, R.K. Puram Branch. Several transactions had taken place under these two Accounts of the company i.e. OLCC and DBP. As per Ex. PW19/K, there are some instances of excess withdrawals from the OLCC Account pending final sanction. Witness PW- 19 was examined by the prosecution to prove certain transactions that have taken place under OLCC and DBP Accounts and brought on record the relevant ledger sheets as Ex. PW19/K. It is relevant to reproduce the deposition of PW-19 with regard to the statement of cash credit account(OLCC) of M/s. RKB Herbals Pvt. Ltd. for the period CC No.65/2011 Page 53 of 120 54 24.11.1987 to 09.07.1991, which is as follows-
"I can identify the document (D-142) just shown to me. It is the statement of Cash Credit Account of M/s R.K.B Herbals Pvt. Ltd. for the period 24.11.1987 to 9.7.1991. These documents are original and taken out from the ledger. This statement of account is of the R.K Puram Branch of the bank. It is now Ex.PW19/K, which runs into 38 sheets.
I have seen the part of the statement relating to the period from 17.12.1987 to 31.12.1990.
The entry of 17.12.1987 at point A1 reflects that on that day the sanction limit was exceeded by Rs.20 lakhs at that time. The entry of 8.2.1988 at point A2 reflects that on that day the sanction limit was exceeded by Rs5,77,758.20 which was Rs. 20 lakhs at that time.
The entry of 30.3.1988 at point A4 reflects that on that day the sanction limit was exceeded by Rs6,53,145.50 which was Rs.20 lakhs at that time.
The entry of 26.4.1988 at point A5 reflects that on that day the sanction limit was CC No.65/2011 Page 54 of 120 55 exceeded by Rs.3,00,033.87 which was Rs.20 lakhs at that time.
The entry of 23.5.1988 at point A6 reflects that on that day the sanction limit was exceeded by Rs25,36,147.02 which was Rs.20 lakhs at that time.
The entry of 2.6.1988 at point A7 reflects that on that day the sanction limit was Rs.50 lakhs and the money withdrawn did not exceeded the limit.
The entry of 15.7.1988 at point A8 reflects that on that day the sanction limit was exceeded by Rs.1,88,140.95 which was Rs.50lakhs at that time.
The entry of 16.8.1988 at point A9 reflects that on that day the sanction limit was exceeded by Rs.4,02,886.86 which was Rs.50 lakhs at that time.
The entry of 7.9.1988 at point A10 reflects that on that day the sanction limit was not exceeded which was Rs.50 lakhs at that time.
The entry of 3.10.1988 at point A11 reflects that on that day the sanction limit was exceeded by Rs.7,22,093.27 which was Rs.50 lakhs at that time.CC No.65/2011 Page 55 of 120 56
The entry of 18.11.1988 at point A12 reflects that on that day the sanction limit was exceeded by Rs.4,50,646.08 which was Rs.50 lakhs at that time.
The entry of 1.12.1988 at point A13 reflects that on that day the sanction limit was not exceeded by which was Rs.50 lakhs at that time.
The entry of 17.1.1989 at point A14 reflects that on that day the sanction limit was exceeded by Rs.5,31,416.35 which was Rs. 50 lakhs at that time.
The entry of 22.2.1989 at point A15 reflects that on that day the sanction limit was exceeded by Rs.5,52,206.39 which was Rs. 50 lakhs at that time.
The entry of 30.3.1989 at point A16 reflects that on that day the sanction limit was exceeded by Rs.1,48,506.67 which was Rs. 70 lakhs at that time.
The entry of 7.4.1989 at point A17 reflects that on that day the sanction limit was exceeded by Rs.2,84,878.11 which was Rs. 70 lakhs at that time.
The entry of 25.5.1989 at point A18 reflects that on that day the sanction limit was CC No.65/2011 Page 56 of 120 57 exceeded by Rs.3,26,541.81 which was Rs. 70 lakhs at that time.
The entry of 30.6.1989 at point A19 reflects that on that day the sanction limit was exceeded by Rs.8,50,487.35 which was Rs. 70 lakhs at that time.
The entry of 5.7.1989 at point A20 reflects that on that day the sanction limit was exceeded by Rs.8,83,607.65 which was Rs. 70 lakhs at that time.
The entry of 6.8.1989 at point A21 reflects that on that day the sanction limit was exceeded by Rs.8,59,117.26 which was Rs. 70 lakhs at that time.
The entry of 28.9.1989 at point A22 reflects that on that day the sanction limit was exceeded by Rs.12,55,743.36 which was Rs. 70 lakhs at that time.
The entry of 25.10.1989 at point A23 reflects that on that day the sanction limit was exceeded by Rs.13,65,634.91 which was Rs. 70 lakhs at that time.
The entry of 16.11.1989 at point A24 reflects that on that day the sanction limit was exceeded by Rs.13,12,578.39 which was Rs. 70 lakhs at that time.CC No.65/2011 Page 57 of 120 58
The entry of 31.12.1989 at point A25 reflects that on that day the sanction limit was exceeded by Rs.16,84,039.55 which was Rs. 70 lakhs at that time.
The entry of 25.1.1990 at point A26 reflects that on that day the sanction limit was exceeded by Rs.17,24,039.55 which was Rs. 70 lakhs at that time.
The entry of 1.2.1990 at point A27 reflects that on that day the sanction limit was exceeded by Rs.29,99,989.55 which was Rs. 70 lakhs at that time.
The entry of 30.3.1990 at point A28 reflects that on that day the sanction limit was exceeded by Rs.14,00,480.60 which was Rs. 30.73 lakhs at that time.
The entry of 20.4.1990 at point A29 reflects that on that day the sanction limit was exceeded by Rs.14,38,369.90 which was Rs. 30.73 lakhs at that time.
The entry of 24.5.1990 at point A30 reflects that on that day the sanction limit was exceeded by Rs.18,01,854.90 which was Rs. 30.73 lakhs at that time.
The entry of 13.6.1990 at point A31 reflects that on that day the sanction limit was CC No.65/2011 Page 58 of 120 59 exceeded by Rs.9,57,065.73 which was Rs. 38.41 lakhs at that time.
The entry of 12.7.1990 at point A32 reflects that on that day the sanction limit was exceeded by Rs.12,42,487.50 which was Rs. 38.41 lakhs at that time.
The entry of 20.8.1990 at point A33 reflects that on that day the sanction limit was exceeded by Rs.14,74,212.92 which was Rs. 36.47 lakhs at that time.
The entry of 28.9.1990 at point A34 reflects that on that day the sanction limit was exceeded by Rs.19,37,356.79 which was Rs. 34.16 lakhs at that time.
The entry of 8.10.1990 at point A35 reflects that on that day the sanction limit was exceeded by Rs.19,18,371.79 which was Rs. 34.16 lakhs at that time.
The entry of 23.11.1990 at point A36 reflects that on that day the sanction limit was exceeded by Rs.19,11,505.47 which was Rs. 34.16 lakhs at that time. The entry of 31.12.1990 at point A37 reflects that on that day the sanction limit was exceeded by Rs.21,74,186.47 which was Rs. 34.16 lakhs at that time."CC No.65/2011 Page 59 of 120 60
58. It is seen from the evidence of PW-19, as stated above, there are about 37 entries in Ex. PW19/K which show that the company was allowed to exceed the sanctioned limits in OLCC Account. From the above 37 entries, there are only 5 entries at points A1 to A5 on Ex. PW19/K where the excess withdrawals were shown during the adhoc sanction i.e. prior to final sanction. The entries at points A6 to A18 i.e. about 13 entries where excess withdrawals were shown during the tenure of the accused as Branch Manager of RK Puram Branch, after final sanction. It is to be noted that the accused/Branch Manager was transferred from R.K. Puram branch on 27.06.1989. Entries at points A19 to A37 on Ex. PW19/K show the excess withdrawals after the tenure of the accused i.e. after 28.06.1989 up to 31.12.1990, by the company in its OLCC Account. Points A19 to A37 indicate that on 19 occasions, the company was allowed to overdraw form the OLCC Account by the successor of the accused at RK Puram Branch which is infact more than the number of overdrawls allowed by the accused during his tenure. The successor Branch Manager of the accused was not made CC No.65/2011 Page 60 of 120 61 accused in the present case. Therefore, holding the present accused only responsible for the overdrawls by the company is highly illogical.
59. The Ld. Counsel for the defence has also argued that the loose sheets of the Ledger Book i.e. Ex. PW19/K cannot be considered as Books of Account to be relevant under section 34 of The Indian Evidence Act. The Ld. Counsel has relied upon the judgment CBI Vs. V.C. Shukla & Ors. wherein it is held as follows-
"39. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible in evidence under 34) are admissible under Section 9 of the Act to support an inference about the former's correctness CC No.65/2011 Page 61 of 120 62 still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations levelled against them for there is not an iota of independent evidence in support thereof. In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr. Altaf Ahmed in this regard. Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far as they are concerned and not others. In other words, the statements of the above witnesses cannot be independent evidence under Section 34 as against the above two respondents. So far as Shri Advani is concerned Section 34 would not come in aid of the prosecution for another reason also. According to the prosecution case itself his name finds place only in one of the loose sheets (Sheet No. 8) and not in MR 71/91. Resultantly, in view of our earlier discussion, Section 34 cannot at all be pressed into service against him."CC No.65/2011 Page 62 of 120 63
60. The Ex. PW19/K is the document containing 38 loose sheets of the OLCC Account of the Company M/s R.K.B. Herbals Pvt. Ltd.. It is not clear why the CBI has filed loose sheets instead of the entire Ledger Book. The prosecution has also not explained the circumstances under which the Ledger/Account Book of the OLCC Account of the Company is separated into loose sheets. In the absence of any such explanation, it is doubtful whether to consider these loose sheets as Books of Accounts to be relevant under section 34 of the Evidence Act. Keeping this point aside even considering the Ex. PW19/K (loose sheets of OLCC Account) as relevant, the same will only prove that there are more number of excess withdrawals allowed by the successor Branch Manager than the number of overdrawals allowed by the accused Branch Manager during his tenure, which makes it clear that it was, though irregular, allowed as normal practice.
61. In this regard again it is pertinent to see the evidence of PW-
19. The deposition of PW-19 when asked specifically with CC No.65/2011 Page 63 of 120 64 regard to the overdrawn entries is as follows:-
"Q.: What is indicated by the overdrawn entries referred to above and whether this account is regular or not?
A.: As far as overdrawn entries are concerned, it indicated that the sanctioned limits have been exceeded on the dates specified above and that the operation of this account may be considered irregular. There are two aspects in the continuous overdrawal in the account which may be due to the interest factor which gets added to the account every quarter and as such gets compounded and also may be that the Branch Manager anticipates the sanction of higher limits in due course of time. Q.: Whether continuous overdrawal is permissible in the books of instructions of Vijaya Bank?
A.: No. Q.: If some overdrawal is allowed, what for it is allowed and what precautions should be taken by the Branch Manager before allowing overdrawal?
A.: Overdrawings are allowed by the CC No.65/2011 Page 64 of 120 65 Branch Manager in keeping with the business interest of the company on a day to day basis. Branch Manager is expected to ensure as and when the time limit expires which is either seven days or as permitted by the Divisional Office that the amount exceeded should be cleared. Q.: If the overdrawing is not cleared in the stipulated period, whether further overdrawing can be allowed or should be allowed?
A.: Normally no, however at times due to interference of higher authorities the limit can continuously be overdrawn for an unspecified period.
Q.: What do you mean by interference of Higher Authorities?
A.: Experience shows that during the conduct of banking operations conflict of interest arises. Branch Manager are expected to continuously monitor the health of the account and as such allow their discretionary powers to be exercised which on many occasions are overruled by the Higher Authorities."
62. From the above statement of PW-19, it is understood that the CC No.65/2011 Page 65 of 120 66 overdrawals in the account may be due to interest factor or may be the Branch Manager allowing the overdrawals anticipating the higher limits in due course of time. In the present case, the working capital limits sought by the company by way of its application Ex. PW12/DB was Rs. 50 lacs under OLCC and Rs. 50 lacs under DBP. The statement of PW-19 clearly shows that sometimes there is interference by the higher authorities to allow the overdrawals.
63. Vide letter dated 04.04.1988 Ex. PW19/J, the Divisional Office sought the report of the Branch Manager with regard to the health of the Account of the company. By letter dated 22.04.1988, the Branch Manager has given the details of the Bills purchased with the dates of the realization. The Ld. PP for CBI argues that some of the Bills which were purchased by the branch were realized from OLCC Account and in reality they were returned unpaid by the parties. The Ld. PP further submits this fact was deliberately suppressed by the accused Branch Manager in his report dated 22.04.1988 Ex. PW1/A1 amounts to mis-representation thereby misled the higher authorities of the complainant Bank. However, there is CC No.65/2011 Page 66 of 120 67 no evidence on record to show that any of the Bills mentioned in Ex. PW1/A1 are realized from OLCC Account of the company. The prosecution also has not brought on record the Bills which alleged to have been realized from the OLCC Account of the company in its evidence.
64. It is also the argument of the prosecution that the accused Branch Manager has allowed the transfer of funds from the OLCC Account of the company to the personal Accounts of the Directors of the company and further allowed cash withdrawals from the OLCC Account on several occasions. It is also argued by the Ld. PP for CBI that the accused Branch Manager has allowed the payments to 5 Star Hotels from the OLCC Account to the tune of Rs.1,92,909.13/- thereby committed an act of misconduct by using his official position as Branch Manager. The Ld. Counsel for the defence has argued that there is no bar in the OLCC sanction letter for cash withdrawals, transfer of funds to the other accounts and payments to the Hotels. The Ld. Counsel also argued that company has to deal with various situations while doing the business and sometimes company has to give the self CC No.65/2011 Page 67 of 120 68 cheques towards business payments as per the demand of the parties in the market. Ld. Counsel also argued that even otherwise such facilities like cash withdrawals were extended to the company even after the tenure of the accused as Branch Manager of R. K. Puram Branch, therefore, the accused alone cannot be held responsible for the same. Ld. Counsel also argued that the company was well within its limits to utilize the facility of OLCC Account to make payments to 5 Star Hotels where business meetings are held.
65. On perusal of the sanction letters of the OLCC facility, it is found that there is no stipulation which bars any cash withdrawals from the OLCC Account. The entries at points B1 to B132 on Ex. PW19/K show the cash withdrawals against the self cheques from the OLCC Account of the company. Out of the above said 132 entries, B1 to B114 are the cash withdrawals during the tenure of the accused as Branch Manager and remaining entries at points B115 to B132 are the cash withdrawals allowed by the successor of the accused. PW-19 in his statement before the court has stated CC No.65/2011 Page 68 of 120 69 that the cash withdrawals can be allowed in some exigencies. In this connection the deposition of PW-19 is relevant and the same is reproduced as below-
Q. It is my suggestion to you that in this particular case the payments being made to hotels, cash withdrawals and transfers of funds to sister concerns of M/s RKB Herbals Pvt. Ltd. and transfer of funds to its Directors was absolutely wrong and improper and against the banking norms and guidelines of the bank. What have you to say?
Ans. Normally it is not permitted but there can exigencies arising out of business needs of borrower, which may necessitate the limited payments, as stated above."
66. From the above statement of PW-19 it can be understood that there is no absolute bar against cash withdrawal and the same can be allowed in certain exigencies. There is no evidence on record to prove that the cash withdrawals by the company from its OLCC Account were allowed for purposes other than the business requirements or exigencies.
67. Entry at point A45 on Ex. PW19/K also shows some transfer CC No.65/2011 Page 69 of 120 70 of amount to the account of Sanjay Bhandari on 27.07.1989 by the successor Branch Manager after transfer of the accused from the RK Puram Branch. The above said entries at points B115 to B132 clearly show that the facility of cash withdrawal was extended to the company by the RK Puram branch of the complainant Bank even after the tenure of the accused as Branch Manager.
68. It is argued by the Ld. PP for CBI that the accused Branch Manager cannot be absolved of his acts merely on the ground that his successor also committed the same but not made accused. In the present case, what the acts done by the accused as Branch Manager of the complainant Bank cannot be said to be per se criminal and the same acts like allowing cash withdrawals, overdrawals, done by the successor and also that the same were done with the knowledge and supervision of higher authorities like Divisional Manager, Zonal Manager and Assistant General Manager would only show that the said facilities in OLCC and DBD Accounts were extended to the company in a routine way.
CC No.65/2011 Page 70 of 120 71
69. In the above circumstances, especially in the absence of any rule which specifically bars the cash withdrawal from the OLCC Account, indicting the accused alone for allowing the cash withdrawals from the OLCC Account of the company is not justified.
70. There is also no specific bar in the sanction letter against usage of OLCC facility to make payments to the Hotels. Generally, the business meetings and conferences of the companies are held in Hotels. Such expenses incurred by the companies for business meetings or the conferences are considered as part of business expenses for which the company can utilize the credit facility given by the Bank under OLCC Account to foot such bills. In this connection also the deposition of PW-19 is relevant and the same is reproduced as below-
"Q. Whether transfer of the funds from a Cash Credit Account is permissible to hotels or to the accounts of the Directors of the borrowing company?
Ans. Transfer of funds from borrower's account by way of payment of hotel bills CC No.65/2011 Page 71 of 120 72 is not permissible. But payments in due course of the business is permissible to hotels as well, such as, the bonafide payments made for any business meeting, conferences etc. Similarly, even in the case of Directors, transfer of funds would be illegal but if there are legitimate expenses incurred by the Directors for business, the payments to them can be made from Cash Credit Account/CC Account."
71. From the above statement of PW-19, it can be made out that for expenses incurred by the company towards the business meetings and conferences etc., the OLCC Account can be allowed to be utilized to pay the Bills to Hotels and as such the accused Branch Manager has not committed any misconduct in allowing the same. The prosecution has not brought on record any material nor examined any witness to prove that the Directors have used the OLCC Account for their personal enjoyment in 5 Star Hotels and that accused Branch Manager was in knowledge of such personal enjoyments of the Directors in 5 Star Hotels. In the absence CC No.65/2011 Page 72 of 120 73 of any such material no oblique motive can be attributed to the accused for allowing the company to utilize its OLCC facility to foot the hotel bills.
Discussion with regard to DBP facility
72. It is also the case of the prosecution that the accused has discounted the bills under DBP(Drawee Bill Purchase) facility to the tune of Rs.33.20 Lakhs during his tenure. In this regard the prosecution has brought on record a DBP Register maintained by Vijaya Bank, R.K. Puram Branch, Delhi as Ex. PW-5/B. It is alleged that some of the Bills purchased by the Bank were realised by way of adjustment in OLCC Account of the company and some Bills returned unrealised. As per para no. 9 of the charge sheet, as many as 34 Bills of the company were purchased under DBP facility which were not realised and there total value is to the tune of Rs.33.20 Lakhs.
73. It is argued by the Ld. Counsel for the accused that the prosecution has utterly failed to prove this allegation as the original Bills which were returned unpaid are not brought on CC No.65/2011 Page 73 of 120 74 record. It is also argued that mere entries in Register are not sufficient proof of the above said allegation against the accused.
74. The DBP Register Ex. PW-5/B shows the entries of the Bills of the company purchased by the Bank under DBP facility. The said Register contains the details, like amount of the Bill, name of the company, in whose favour the Bill is made, Invoice & LR numbers, name of the transporter, commission details, to whom it was sent, date paid or returned unpaid and remarks. The prosecution has entirely relied on this Register for the purpose of proving its case against the accused with regard to alleged favours made by the accused to the company by purchasing the Bills under DBP facility.
75. In this connection the statement of PW-5 during his cross-
examination is relevant. It is stated by PW-5 that ".....after the Bill is returned unpaid, the same is given to the officer. The unpaid Bill remain in the Bank. Today I am not shown any unpaid Bill. ............ When a bill is returned, it is accompanied by a letter of drawee's Bank to the effect that the bill is being returned unpaid and CC No.65/2011 Page 74 of 120 75 reason is also mentioned. Today I have not shown any such letter in the court. I do not remember if such letter was shown to me by the investigation officer during investigation. The bank is supposed to keep that letter. I am not aware if the bank is supposed to write a letter informing the drawer of the bill that he bill has been received back unrealised. This could be the only mode by which the drawer of bill can be informed of. Today I have not shown any such letter. I am not aware if the letter Ex. PW 1/A dated 22.04.88 is in response of zonal office letter dated 04.04.88. I am not aware if the copy of the letter dated 22.04.88 was sent to party or not. The copy of this letter is not supposed to be sent to the party i.e., M/s. R K B Herbals Pvt. Ltd. It was an official letter. When a letter is received by the Sr. Manager, he will mark it to Asstt. Branch Manager who will either reply himself or mark it to concerned department for replying. If the letter is to be replied, then it has to be sent under signature of the Branch Manager."
76. As per the procedure explained by PW-5 with regard to the CC No.65/2011 Page 75 of 120 76 Bills under DBP Account there is no due date for bill clearance, however the time limit is 30 days from the date of discounting of the Bills and the collecting Bank is to realise the amount and send the proceeds to the Bank. In case the Bill is not realised, the collecting Bank returns the Bill. The Bills which were received unrealised means that the amount was not deposited by the party on which the Bill was drawn. Therefore, all the Bills which were allegedly returned unrealised are understood to be in the custody of the complainant Bank. However, the prosecution has not brought even a single unrealised Bill of the company purchased by the accused as Branch Manager under the DBP facility on record. As per Section 34 of the Evidence Act, the entries in books of accounts, regularly kept in course of the business, are relevant but such statements shall not alone are sufficient evidence to charge any person with liability.
77. The Hon'ble Supreme Court in Zenna Sorabji and others vs. Mirabelle Hotel Co. (Pvt.) Ltd. and others 1980 SCC OnLine Bom 11 held as follows-
"34. Moreover by consent, proof of the CC No.65/2011 Page 76 of 120 77 document may be dispensed with, but if the document is intrinsically inadmissible in evidence, no amount of consent by any party can confer the status of admissibility upon the said document. If an authority is necessary for this proposition, it is to be found from the Judgment of the Madras High Court in Kamulammal Avergal v. Athinkari Sangali Subha Pillai (1918) 35 LJ 11 : (AIR 1919 Mad 758 (2)). At page 14 (of Mad LJ) : (at p. 760 of AIR) of the said Judgment, the Learned Judges state as follows : -
'Mr. Justice Benson and Mr. Justice Sundaram Aiyar after reviewing all the authorities on the question point out in Shri Rajah Prakasarayanim Garu v. Venkata Rao, (1912) ILR 38 Mad 160 "consent or want of objection to the reception of evidence which is irrelevant cannot make the evidence relevant. The ledger book which is sought to be produced becomes relevant only under the provisions of Section 34 of the Evidence Act and if the document does not qualify as relevant document within CC No.65/2011 Page 77 of 120 78 the contemplation of the said section, then the document is wholly irrelevant and any amount of consent by the plaintiffs would not convert the irrelevancy into relevancy.
35. We can analyse this aspect even further. If the ledger was accompanied by Rojmel or cash book or day book and if defendant No. 3 had facilitated the crosschecks and cross verification, for ought I know, the document could have got relevant. I have been still open for the plaintiffs to contend that the ledger was a sham document. The point, however, is that even when a duly bound ledger book, incapable of being tampered with, that is to say, of a foolproof character was produced, all by itself, without production of the corresponding journal or Rojmel or day-book, the ledger would not by itself be admissible in evidence as a relevant document. It would become relevant only in conjunction with the cash book, rojmel or day book. If any authority is needed, it is to be found in Chandni Ram v. Jamini Kanta, AIR 1952 Assam 92. In that case a CC No.65/2011 Page 78 of 120 79 Division Bench of the Assam High Court was dealing with the question whether the repayment claimed by the defendant could be proved by the account books relied upon by him. This is what the learned Judges have observed in that connection (Para 6) :
"In order to be relevant, they must be kept regularly in the court of business. They must be in conformity with some known system of accounting. The books produced in this case do not fulfill these requirements. They are not supported by any day book or roznamcha. They do not contain entries of transactions as they take place. There is no daily opening or closing balance in the ledger accounts. What has been shown from these books is that there was plaintiff's account and in that account entries were made. These entries could all have been made on any one day. These books, therefore, cannot be regarded as relevant under Section 34 of the Evidence Act."
78. The Hon'ble High Court of Gujrat in a case Shukhkaran Rameshwarlal Agarwal vs Durgaprasad Private Ltd. 1971 CC No.65/2011 Page 79 of 120 80 SCC OnLine Guj 25 has observed as under-
"10. In my opinion the Learned District Judge was in error in treating the statement of accounts, Ex. 26 as an additional evidence for purposes of proving the payment of money appearing in the books of accounts in the respondent-Company so as to charge the appellant-defendant with the liability for the amount due at the foot of the said accounts. There appears to be some confusion about the evidentiary value of the entries in books of account. Though the entries from the books of accounts may be relevant for the purposes of determination of any question, they cannot be the sole basis for fixing the liability upon a person to whose account the payments may have been constantly interpreted as laying down a rule of evidence that the entries in the books of accounts would not be sufficient for purposes of fixing the liability against a person. There should be additional evidence, independent, of those entries which would prove the factum of payment CC No.65/2011 Page 80 of 120 81 in respect of which the entries are made in books of accounts. Therefore, the Courts have considered that the entries from Books of Accounts are corroborative piece of evidence and they would not by themselves be sufficient evidence on the basis of which a liability can be fixed against a person. The observations of the Supreme Court in AIR 1967 SC 1058 at P. 1060 make it clear that where the entries are not admitted, it is the duty of a party, seeking to enforce the liability of such entries, to produce evidence in support thereof to show that the money was advanced as indicated therein and thereafter the entires would be of use as accounts may be relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability. In other words, there should be additional independent evidence by which the factum of payment is to be proved, and in that case the entries would be corroborative evidence. It is no doubt true that what should be the CC No.65/2011 Page 81 of 120 82 nature of additional evidence is always a question of fact depending on the circumstances of each case. It may, as has been held by the Courts, consist of vouchers, receipts, bills or any other oral evidence of witness having personal knowledge of the affairs of the transaction."
79. In view of the law as explained in the above referred cases, in the absence of the original Bills, mere entries in the register i.e. Ex. PW-5/B with regard to the purchasing of the Bills of the company, the entries of the Bills returned unpaid and their value cannot be considered as sufficient evidence to prove the allegation that the accused Branch Manager has purchased the said bills of the company under DBP facility during adhoc sanction or after final sanction, are returned unrealised.
80. It is also necessary to consider certain documents which are on record in this aspect. The Divisional Manager vide letter dated 05.05.1988 wrote to the Deputy General Manager recommending for the OLCC and DBP limits of Rs.50 lacs CC No.65/2011 Page 82 of 120 83 each to be considered for the company i.e. M/s. RKB Herbals Pvt. Ltd. In this letter the Divisional Manager has mentioned entire review of the OLCC and DBP limits for 5 months i.e. from the date of adhoc sanction which was stated to be satisfactory by the Divisional Manager. The Divisional Manager by another letter dated 04.04.1988 i.e. Ex. PW24/B has written to the Assistant General Manager, infact acknowledging that some initial Bills have not been realized within the specified period and this delay can be accepted as the unit has commenced the sales recently and with course of time the realization might be prompt. The relevant portion of the said letter i.e. Ex. PW24/B is reproduced as follows-
"The justification for release of adhoc limits to the extent of Rs. 20 lacs each for CC & DBP has already been given by us in our letter No. DO:EST:3616/88 dated 25.3.88. The sales by the company has already commenced and working capital permitted by us was need based. The bills to the extent of Rs. 21.82 lacs purchased by the branch during the month of January has all been realised, indicating CC No.65/2011 Page 83 of 120 84 the acceptability of the product in the market. From the statement of bills purchased and realised, annexed by the branch alongwith their letter No. OR:914/88 dated 4.4.88, it may be observed that the product has been launched all over the country and initial response is reported to be encouraging. The initial bills have not been realised within the period of 45 to 60 days. This delay can be accepted by us as the unit has commenced the sales recently and with course of time, the realisation might be prompt."
81. From the above letter, it is clearly made out that the Divisional Manager was aware of the fact that some times there was delay in realization of the Bills and the same was due to the fact that the unit has commenced the sales recently. By going through the contents of the documents Ex. PW24/B and Ex. PW12/D, it is clear that the Divisional Office of the Bank was in knowledge of the transactions in the OLCC and DBP Accounts of the company and the health of CC No.65/2011 Page 84 of 120 85 the said Accounts. Therefore, it cannot be said that the accused Branch Manager has suppressed or misrepresented any fact to the Divisional Manager with regard to the delay in realization of the Bills purchased under DBP facility.
82. A note dated 09.05.1988 Ex. PW19/DA3 was put up before the Chairman & Managing Director to approve the final sanction of working capital limits on account of M/s. RKB Herbals Pvt. Ltd. It is signed by Divisional Manager and Deputy General Manager(Credit). In this note the existing and future prospectives of the company were discussed. Two relevant paras of this note Ex. PW19/DA3 on page no. 2 are as follows-
"During March-1988, the zonal office submitted a detailed note recommending sanction of an OLCC limit of Rs. 20.00 lakhs as well as a DBP facility of Rs. 20.00 lakhs on account of the captioned company. On perusal of the note, we also noticed that the Divisional Manager, D.O., Delhi had permitted the branch to make available to the company an OLCC limit of Rs. 20.00 lakhs and a DBP facility of Rs.
CC No.65/2011 Page 85 of 120 86 45.00 lakhs. Since this did not have our prior permission and as the note contained certain observations of the Zonal office indicating that the bills discounted are not promptly realised, etc., we have been corresponding with the Zonal Office, seeking clarifications so that we can take a final view in the matter.
On 6.5.1988 we have received a letter from the Zonal Office indicating that the turnover in the party's account is satisfactory, the products of the company have been well received by the market, the transactions under the bills protfolio have been satisfactory, the unit is capable of achieving the projected sales level of Rs. 1400.00 lakhs for the period ending 31.3.1989, the permissible bank finance as worked out by them is Rs. 100.00 lakhs and therefore an OLCC limit of Rs. 50.00 lakhs may be sanctioned on account of the party."
83. From the contents of the first para as above, it can be understood that the adhoc sanction of Rs.20 lacs under OLCC limit and Rs.45 lacs under DBP facility was permitted CC No.65/2011 Page 86 of 120 87 by the Divisional Manager, Delhi and the Zonal Office was also in knowledge that the bills discounted were not promptly realised and in this regard the signatories of this document i.e. the Divisional Manager and the Deputy General Manager were corresponding with the Zonal Office. It also can be understood from the second para that there was a letter from the Zonal Office indicating that the turnover in the party's account was satisfactory, the products of the company were well received by the market, transactions under the bills have been satisfactory and the unit was capable of achieving the projected sales. Accordingly, it was recommended for sanction of working capital limits of 1 Crore i.e. Rs.50 lakhs under OLCC limit and Rs.50 lakhs under DBP facility. The company was sanctioned working capital limits upto 1 crore by the Bank on 09.05.1988. Therefore, it can be understood that as on the date of final sanction, the higher management of the Bank was in knowledge of the entire transactions of the account of the company in its OLCC & DBP Accouns and proceeded to grant final sanction of higher working capital limits. It is clear from the above that any overdrawings during CC No.65/2011 Page 87 of 120 88 this period or any delay in realization of the bills were considered as routine by the higher management of the Bank.
84. As stated above in para no. 78, the higher management is aware vide Ex. PW24/B, about the non realisation of the Bills of the company which were purchased under the DBP facility given to it. In letter dated 20.10.1989, the credit department infact taken note of the return of the Bills and overall condition of the account and further recommended a funded loan of Rs.110 lakhs and a temporary loan of Rs.30 lakhs. This also clearly shows that the higher management of the Bank was aware of the non realisation of the Bills of the company purchased under DBP facility and there is nothing to suggest with regard to the criminal intention or involvement of the accused N. Bhojaraj Shetty in the said discounting/ purchase of the Bills and there delayed or non-realisation, under DBP facility.
Discussion with regard to DBD facility
85. It is alleged by the prosecution that the accused allowed discounting of 'Drawee Bills' (DBDs) of the company M/s. CC No.65/2011 Page 88 of 120 89 RKB Herbals Pvt. Ltd. which resulted in the loss of Rs.43.45 lakhs out of the total loss of Rs.86.99 lakhs to the complainant Bank. It is also alleged that the accused has knowingly discounted forged Bills under DBDs which were drawn on M/s. Indian Herbs. It is argued by the prosecution that the accused committed an act of misconduct by dishonestly allowing the discounting of drawee bills of the company which resulted in huge loss to the complainant bank. Ld. PP for CBI also argued that the accused has discounted some forged bills knowingly and thereby obtained pecuniary benefits to the company by abusing his position as Branch Manager of R.K. Puram Branch of the complainant Bank.
86. The prosecution has brought on record DBD Register as Ex.
PW5/A. The said Register Ex. PW5/A is maintained by the R. K. Puram Branch of the complainant Bank separately for the company's DBD Account. The said Register contains the details of B.D. Number, Bill Number, amount of the Bill, Invoice number, Goods consigned, Drawers name & address, Acceptor's name & address, from whom discounted, CC No.65/2011 Page 89 of 120 90 amount discounted, due date of Bill and interest claimed by the Bank.
87. As per the Register Ex. PW5/A and also the charge sheet, there are 57 bills in total which were discounted under the DBD facility. This facility of DBD for the first time granted by Zonal Office vide its letter dated 13.02.1989 Ex. PW12/A. As per this letter Ex. PW12/A, the nature of advance sanctioned is as follows-
1. OLCC : Rs.70.00 Lakhs (Enhancement from Rs. 50.00 lakhs to 70.00 lakhs)
2. DBP : Rs.50.00 lakhs against irrevocable letters of Credit opened by a prime Bank (This limit becomes operative only when the existing outstanding under DBP is fully liquidated)
3. Drawee Bills Discounting : Rs.25.00 lakhs (FRESH)
88. The above said proceeding of the Zonal Office granting DBD facility to the company to the tune of Rs. 25.00 lakhs was granted based on the approval given vide note dated CC No.65/2011 Page 90 of 120 91 30.01.1989 Ex. PW27/A which was signed by the Divisional Manager, Deputy General Manager and Chairman & Managing Director. There is no role of the accused in granting of DBD facility to the company nor there is any evidence in this regard against the accused. Since the DBD facility was sanctioned by the higher authorities of the complainant Bank vide Ex. PW27/A and Ex. PW12/A, accused Branch Manager has no option but to allow the facility of DBDs to the company within the sanctioned limits.
89. It is the allegation of the prosecution that the accused has allowed the DBDs of the company which resulted in a loss of Rs.43.45 lakhs. The limit of DBD facility given to the company is of Rs.25 lakhs vide Ex. PW27/A and Ex. PW12/A. It is seen from the contents of Ex. PW5/A, i.e. DBD Register, in total there are about 57 Bills of the company which were discounted under DBD facility during the period 23.03.1989 to 09.07.1990. It can be recalled that the accused was transferred from the R. K. Puram Branch on 27.06.1989 and during this period only 29 Bills were discounted out of 57 Bills. There is no evidence to prove that the accused has CC No.65/2011 Page 91 of 120 92 allowed the discounting of Bills under this facility for more than the sanctioned limit of Rs.25 lakhs. The total value of drawee bills discounted by the accused during his tenure as mentioned in charge sheet in para no. 18 at serial no. 1 to 28 comes to Rs. 24,35,331.55 which is within the sanctioned limit of Rs. 25 lakhs. Infact, as per Zonal Office letter dated 16.11.1989, the DBD overdue is Rs.25.03 lakhs (Page no. 4 of the letter). It is clear from the contents of this letter that if any Bills were discounted by the accused during his tenure i.e. upto 27.06.1989, that was within the sanctioned limits. It is pertinent to mention here that the Bills of the company were discounted even after the tenure of the accused i.e. after 27.06.1989 upto 09.07.1990. As many as 28 Bills were discounted by the successor of the accused Branch Manager out of total 57 Bills as mentioned in the charge sheet. The total outstanding in this DBD Account is, as per charge sheet, Rs.43.45 lakhs. Therefore, it is a fallacy to say that it is only the accused who is responsible for the entire outstanding in DBD Account of the company. Infact, the major component of this outstanding i.e. beyond the sanctioned limit of Rs.25 CC No.65/2011 Page 92 of 120 93 lakhs is actually accrued due to the discounting of the Bills by the R.K. Puram Branch of the complainant Bank after the tenure of the accused. It is also petinent to mention that the first bill of the company discounted by the accused Branch Manager under DBD facility was on 23.03.1989 and the time limit for its realization was 90 days by which time the accused was transferred from the R.K. Puram Branch of the complainant Bank. That is to say that the accused did not have an occasion to actually verify whether the Bills discounted under DBD facility were realised or not.
90. The entire material on record clearly shows that the accused Branch Manager had no role to play in granting DBD facility vide Ex.PW27/A and Ex.PW12/A to the company, nor anytime crossed the sanctioned limit while discounting the Bills of the company nor he is responsible for entire outstanding of Rs.43.45 lakhs of the company in this account. The evidence available on record clearly shows that the allegation of the prosecution that the accused is responsible for the loss to the complainant Bank to the tune of Rs.43.45 lakhs under the DBD Account does not hold any CC No.65/2011 Page 93 of 120 94 merit.
91. There are 4 Drawee Bills of the company brought on record by the prosecution which were discounted by the accused during his tenure i.e. Ex. PW5/A-5 to A-8. The allegation of the prosecution that these 4 Bills were forged by the accused A-2 and A-4 and the present accused knowingly discounted these forged Bills thereby committed an offence under section 120-B IPC r/w section 471 IPC. The case against A-2 and A-4, who were charged with substantive offence of forgery under section 471 IPC, is quashed by the Hon'ble High Court vide its order dated 29.06.2015 in Crl. M.C. No. 5798/2014. In view of the quashing of substantive charge against A-2 and A-4, the charge against accused under section 120-B r/w 471 IPC does not survive.
92. It is also necessary to look into certain developments with regard to the company's transactions with the Bank after the tenure of the present accused as Branch Manager at R K Puram Branch. The credit department vide its letter dated 20.10.1989 has reviewed the entire account of the company and recommended sanction of a funded loan of Rs.110 lacs, CC No.65/2011 Page 94 of 120 95 reinstatement of the OLCC limits of Rs.70 lacs, reinstatement of DBD limits of Rs.25 lacs and temporary loan of Rs.25 lacs. In the said report Ex. PW2/DA on page no. 4 & 5, it is observed as follows-
"14. Background of the account - On account of the adhoc sanctions made by the Divisional Office, Delhi (OLCC limit of Rs. 20 lakhs and DBP limit of Rs. 45 lakhs in November, 1987), which we ratified in May 1988, we have not had an opportunity to study the viability of the unit, make a proper credit assessment or establish the credit worthiness of the borrower. By the time we ratified the adhoc sanction itself, the DBP portfolio had gone bad. The procedural lapses on the part of the branch concerned, inadequate supervision and control etc., have also largely contributed to the accounts becoming irregular. In February, 1989, we enhanced the OLCC limit by Rs. 20 lakhs and also sanctioned a DBP limit of Rs. 25 lakhs (subject to the condition that the overdue DBP liability of Rs. 35 lakhs should be fully adjusted) to enable CC No.65/2011 Page 95 of 120 96 the party achieve the projected sales target. This facility has been misutilised by the borrower and non compliance with the terms of sanction has resulted in the overdue DBP liability remaining unadjusted.
The ICD, HO, has scrutinised the back papers, and it is of the opinion that the project has failed, mainly on account of the following :-
(a) Cost overrun.
(b) lack of experience on the part of the promoters.
(c) overambitious approach, ignoring competition from others.
(d) inadequate investment/promoter's stake.
(e) diversion of bank finance for product promotion expenses etc. The ICD is also of the opinion that unless the party brings in adequate long term funds on their own/obtains additional term loans from institution/keeps up the tempo of the sales promotion campaign etc., the unit will not be able to operate profitably/service its heavy debt burden.CC No.65/2011 Page 96 of 120 97
The zone has not been able to establish the viability of the unit and the ICD, HO, is also of the opinion that an external agency will have to be involved to determine this aspect.
The company however has projected an ambitious sales program, by improving the product mix etc. To what extent it will be able to achieve the same remains to be seen."
93. From the above, it is clear that the project has failed for varied reasons like cost overturn, lack of experience, being over ambitious, inadequate investments and diversion of Bank Finance for product promotions etc. In the entire report, there is not even a single observation that the company has committed fraud with intention to cheat the Bank and drawn the funds by using the facilities under OLCC, DBP and DBD. The reasons for product failure as mentioned in the report clearly show that it is a business failure and nothing more than that. A passing observation was made in this report against the accused Branch Manager by stating that there are procedural lapses on the part of Branch concerned, CC No.65/2011 Page 97 of 120 98 inadequate supervision etc. which has also largely contributed to the accounts becoming irregular. There is no allegation against the accused in this report that the accused has committed cheating on the Bank in connivance with the Directors of the Company and further abused his position to obtain some monetary gain to the Company. The observations in this report against the accused at the most amount to his inefficiency in dealing with the Company's Account and nothing more than that.
94. The account of the Company was declared irregular by the Bank in the year 1991 when it stopped the facilities to the company and called for internal investigation. The Bank has filed a recovery suit against the company on 30.06.1993 before the Debt Recovery Tribunal. On 22.04.1994, the Bank was allowed to realise its dues by selling hypotheticated stocks. The Bank could not realise its entire dues of the Company by the above said proceedings in recovery suit and a complaint was lodged by the Bank to CBI on 23.05.1994 as a last resort to recover its dues. The CBI filed charge sheet on 19.12.1996 against the present accused Branch Manager, CC No.65/2011 Page 98 of 120 99 Company and its Directors. It is not denied that the Bank has settled the dispute before DRT with the Directors of the Company vide settlement dated 12.02.2004 under OTS scheme.
95. The OTS scheme was floated by RBI and as per its rules, is not available in cases of Fraud and Cheating. By settling the dispute with the Directors of the Company, the Bank has clearly admitted that it is not a case of fraud but only a case of ordinary default. After the said settlement with the Bank and obtaining no dues certificate from the Bank, the Directors of the Company namely, Sanjay Bhandari A-2 and Sonia Bhandari A-4 have filed a quash petition before the Hon'ble High Court and Hon'ble High Court vide order dated 29.06.2015 quashed the proceedings against the Directors of the Company namely, Sanjay Bhandari and Sonia Bhandari.
96. By consent the parties have settled all disputes in the recovery suit before the DRT and a consent decree was passed by the DRT. By settling the dispute with the parties before the DRT the Bank has exonerated the accused A-2 to A-5 of all liabilities. The said settlement has taken place CC No.65/2011 Page 99 of 120 100 under the OTS scheme floated by the Reserve Bank of India. Under the said OTS scheme, only genuine liabilities can be settled by the Bank and the cases of willful default, fraud and malfeasance cannot be settled. By settling the dispute, the complainant Bank has indirectly declared that the liabilities of the company M/s RKB Herbals Pvt. Ltd. and its Directors were not out of fraud or willful default. It can also be understood from the settlement that the complainant Bank has made the complaint to the CBI only for the purpose of recovering its dues and once it has recovered the dues under the OTS scheme, it has exonerated the company and its Directors from all the liabilities, civil and criminal. The Hon'ble High Court has extensively dealt with this issue while quashing the case against accused A-2 and A-4 vide its order dated 29.06.2015. It is observed by the Hon'ble High Court in the said order as follows-
"42. The question that comes to require consideration is, whether the complainant bank acknowledged the exoneration of the criminal liability of the accused company? The answer appears to be clearly yes.CC No.65/2011 Page 100 of 120 101
This is evidenced both in letter and conduct of the complainant bank. Reliance is placed on the No-Objection Letter, and also the Joint Application before the DRT more fully enunciated in Para 4(d) above. Further reliance is placed on the OTS Scheme under which the settlement was drawn up, which by its very nature excluded any accounts relating to wilful defaults, fraud and corruption. From the year 1994, when the complainant bank filed the criminal complaint with the CBI, till the time of driven settlement with the accused company in 2004, a significant time of almost a decade had past. It is during this period during which both by the letter and conduct of the complainant bank, it has exonerated and released the accused company of all liabilities and claims.
43. It is stated in the settlement application before the DRT that the said settlement was made within the scheme of the OTS. By executing the settlement application within the OTS Scheme, the complainant bank has not only intended CC No.65/2011 Page 101 of 120 102 to compound the alleged offences, but also given up its criminal complaint, which was initiated by the CBI on the behest of the complainant bank."
97. It is also pertinent to mention here that there is no allegation against the accused N. Bhojaraj Shetty that he had ever accepted any gratification from the company and its Directors. The complainant Bank did not make any allegation of such sort against the accused in its complaint nor their was any mention about it in the charge sheet filed by the CBI. In entire investigation, the CBI has not found any material to suggest that the accused N. Bhojaraj Shetty has accepted any illegal gratification or obtained any valuable thing or pecuniary advantage. An internal investigation was ordered to be conducted by the Bank in April 1992 vide letter dated 30.04.1992 with regard to the irregularities in the account of M/s. RKB Herbals Pvt. Ltd. and the said investigation was conducted by Mr. K. Krishna Rai, the then Deputy General Manager, Mr. Natane Sabhapati, the then Chief Manager and Mr. A. C. Shiv Kumar Swamy. Mr. K. Krishna Rai is examined CC No.65/2011 Page 102 of 120 103 as PW-13 and stated that after conducting the investigation in the year 1992-93, the report was submitted to the Vigilance Department. PW-13 deposed in his cross-examination as below-
"It is correct that as per Ex. PW13/DB as mentioned in page 6 thereof, the IDBI approved consultants had indicated that the Unit could be made economically viable provided adequate working capital facilities were available and that the Market Survey Report indicated that the existing as well as the proposed products of the unit were acceptable. It is correct that the loan requirement of M/s. RKB Herbals Pvt. Ltd. was Rs. 1.00 Crore, out of which Rs. 65.00 lacs was released on 24.11.1987 and the balance of Rs. 35.00 lacs was sanctioned on 09.05.1988 and released on 24.05.1988. Thereafter, on 04.02.1989 an encashment of Rs. 20.00 lacs was given on 23.03.1989 and additional Rs. 25.00 lacs towards DBD in March, 1989. It is correct to say that various limits were sanctioned from time to time for establishing the Herbal unit CC No.65/2011 Page 103 of 120 104 and when it became sick rehabilitation limits were sanctioned to revive M/s. RKB Herbals Pvt. Ltd. It is correct that in case of efforts were made by M/s. RKB Herbals Pvt. Ltd. and financial support from the bank, the unit could have been successful. It is correct that in many cases sick companies got revived due to efforts of the promoters and the bank. It is true that the lapses noticed in Ex. PW13/1 were of a general nature. It is correct that no allegations of corruption against A1 were brought to the notice of the Investigating Team headed by me."
98. It is clear from the above statement of PW-13 that there was no allegation of corruption against accused during his tenure as Branch Manager, RK Puram Branch of complainant Bank while dealing with the account of M/s. RKB Herbals Pvt. Ltd.
99. The argument of the prosecution is also that the accused has committed cheating on the complainant Bank by conspiring with the Directors of the company thereby committed an offence u/s 120-B and 420 of IPC.
100. The said argument of the prosecution is bereft of any CC No.65/2011 Page 104 of 120 105 evidence on record. The accused as Branch Manager meeting his customers i.e. the Directors of M/s. RKB Herbals Pvt. Ltd. in this case is part of his job and nothing can be inferred from that in connection with the alleged offence charged. It is not the case of the prosecution nor anything brought on record that the accused had any private meeting outside the Bank with the Directors of the company nor entertained any valuable gifts from them. Infact, the alleged meeting of the accused with the Director Sanjay Bhandari on 23.10.1987 in the presence of Divisional Manager Sh. ABS Shetty further strengthens the case of the accused that his meetings with the Directors of the company are only part of his official bank work. Even otherwise there is nothing uncommon for a Bank Manager, Incharge of a branch, to meet his customers in course of his regular work either depositors or borrowers. Mere processing the second loan application of the company at the earliest by the accused Branch Manager does not prove that the accused has conspired with the Directors of the company to cheat the Bank. There is no dispute with regard to the legal proposition CC No.65/2011 Page 105 of 120 106 as contended by the Ld. PP for CBI that the charge of conspiracy does not end merely because one of the conspirators is not facing the trial due to his death. But, in the present case there is no evidence to prove that the accused has conspired with one of the Directors of the company namely R.K. Bhandari to cheat the Bank. Infact, there is no evidence at all to show that accused has ever met R.K. Bhandari, as the allegation was that the accused met only Sanjay Bhandari another Director on 23.10.1987 and on other occasions in regular course, against whom the case is quashed by the Hon'ble High Court.
101. Not obtaining the OPL from the IOB, Darya Ganj branch by the accused Branch manager while forwarding the second loan application appears to be a lapse on the part of the accused Branch Manager and the same may raise some amount of suspicion on the conduct of the accused. But that itself is not sufficient to conclude that the accused Branch Manager had done it with an intention to cheat the Bank. It is a cardinal principle in criminal jurisprudence that suspicion and conjectures are no substitute for proof. It is the primary CC No.65/2011 Page 106 of 120 107 duty of the prosecution to prove its case beyond all reasonable doubt and it cannot be relieved from its duty by creating suspicion in the mind of the Court or by proving suspicion circumstances against the accused in the case. In Ashish Batham v. State of M.P., (2002) 7 SCC 317, the Hon'ble Apex Court has held that "suspicion by itself, however strong it may be is not sufficient to take the place of proof and the courts shall take utmost precaution in finding the accused guilty on the basis of circumstantial evidence, and graver the charge, greater has to be a standard of proof. The courts must keep in mind that there is a long mental distance between may be true and must be true. Even a serious suspicion against the accused is not by itself sufficient to hold him guilty of offence."
102. It is the case of the prosecution that the accused has committed an offence under Section 5(1)(d) punishable under Section 5(2) of the Prevention of Corruption Act, 1947 for releasing the adhoc limits to the tune of Rs.65 lakhs and other acts during the year 1987. The new PC Act has come CC No.65/2011 Page 107 of 120 108 into force in the year 1988. For the alleged acts during the period 1988-90, the accused has been chargesheeted for the offence under Section 13(1)(d) punishable under Section 13(2) of the PC Act, 1988. Accordingly, the charges were also framed by the court on 05.12.2006.
103. Essentially the offence under Section 5(1)(d) and 5(2) of the PC Act, 1947 and offence under Section 13(1)(d) and 13(2) of the PC Act, 1988 are same. The Section 5(1)(d) of the PC Act, 1947 is reproduced as under -
"Section 5 :Criminal misconduct in discharge of official duty (1) A public servant is said to commit the offence of criminal misconduct
(a) ....
(b) ....
(c) ....
(d) if he, by corrupt or illegal means or by otherwise abusing his position as a public servant, obtains for himself or for any other person any valuable CC No.65/2011 Page 108 of 120 109 thing or pecuniary advantage."
104. It will also be of benefit to reproduce the relevant part of the Section 13 of PC Act, which is as follows:-
"Section 13 : Criminal Misconduct by a Public Servant.
(1) A Public servant is said to commit the offence of criminal misconduct;
(a) ..............
(b) ..............
(c) ...............
(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 CC No.65/2011 Page 109 of 120 110
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or
(e) ..........................................
(2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall not be less than one year but which may extent to seven years and shall also be liable to fine."
105. In A. Subair v. State of Kerla, reported in 2009 Crl. L.J. 3450, the Hon'ble Supreme Court held as under:-
"8. In so far as Section 13(1)(d) of the Act is concerned, its essential ingredients are: (1) that he should have been a public servant; (ii) that he should have used corrupt or illegal means or otherwise abused his position as such public CC No.65/2011 Page 110 of 120 111 servant and (iii) that he should have obtained a valuable thing or pecuniary advantage for himself or for any other person."
106. In Major S. K. Kale v. State of Maharashtra (1977) 2 SCC 394, the Hon'ble Apex Court held -
"9. We are satisfied that the judgment of the High Court runs counter to the principles laid down by this Court in the case cited above, and the High Court does not appear to have applied that principle in deciding the truth of the case presented by the prosecution against the appellant. In the instant case it is not alleged that the accused had used any corrupt or illegal means. It has not been shown that the accused himself accepted any illegal gratification or pecuniary benefit nor has it been shown that he violated any statutory rule or order. Thus, even on the prosecution allegation the case of the appellant falls only within the second part of Section 5(1)(d), namely, abusing his position as public servant. The abuse of CC No.65/2011 Page 111 of 120 112 position, as held by this Court, must necessarily be dishonest so that it may be proved that the appellant caused deliberately wrongful loss to the Army by obtaining pecuniary benefit for PW-2."
107. On bare perusal, it appears that while (1) using corrupt or illegal means or (2) abusing the position of a public servant or (3) by holding office as a public servant, if a public servant obtains for himself or for any other person any valuable thing or pecuniary advantage, he is said to commit the offence of criminal misconduct.
108. I am fully convinced with the argument advanced by learned counsel for the accused that in the matter in hand there is not even an iota of evidence that the accused N. Bhojaraj Shetty obtained for himself or for any other person any valuable thing or pecuniary advantage. None of the prosecution witnesses says that any such demand was even made by the said accused or such thing or advantage was obtained by the accused.
109. The evidence would show that the accused was not the approval authority and instructions for the approval, CC No.65/2011 Page 112 of 120 113 continuance and further increase of the credit facilities given to the company were coming from the Zonal Manager, Executive Director up to the Chairman of the complainant Bank. It is the Executive Director of the complainant Bank who made the first approval of the credit facilities after being recommended by the Divisional Manager and Assistant General Manager as per Ex. PW19/D, however, none of the said approving higher officers of the Bank have been charged. In this aspect, the observation of the Supreme Court in CBI vs. Duncuns Agro reported in 1996 (5) SCC 591 becomes pertinent to reproduce-
"In the facts of the case, it appears to us that long after the completion of civil suits, the further investigation in connection with the complaints may not be expedient. It may be noted that the opinion given by the Senior Manager (Legal) that the credit facility given to DAIL for its tobacco devision should be transferred to the newly formed Company, namely, New Tobacco Company Limited, it cannot be held to be per se malafide or CC No.65/2011 Page 113 of 120 114 illegal in view of the provisions of Section 394 of the Companies Act, 1956. The apart, the legal opinion of the said Senior Manager (Legal) was placed for consideration by the highest administrative body of the Bank, i.e. the Board of Directors and the decision was taken by the Board the credit liability which stood in favour of DAIL should be transferred in favour of New Tobacco Company Limited. In the aforesaid circumstances, it appears to us that even if Senior Manager (Legal) or any other officer of the Bank had not acted properly, in view of the fact that the ultimate decision as taken by the Board of Directors, it cannot be reasonably held that some of the officers of the bank connived and misled the Board. It may be noted that no allegation has been made against the members of the Board."
110. The argument of the Ld. PP for the CBI that the financial gain was obtained by the Directors of the company in view of the recommending of their loan by the accused Branch Manager attracts the ingredients of Section 13(1)(d)(ii) of the PC Act as CC No.65/2011 Page 114 of 120 115 it covers obtaining pecuniary advantage for any other person. The said argument of the Ld. PP for the CBI does not have any merit. The Directors of the company who obtained loan are only customers to the Bank and no other relation is attributed with them to the accused Branch Manager nor there is any special nexus between them is established in evidence. The accused Branch Manager was not a beneficiary to the loan or part of it, advanced by the complainant Bank to the company. If this contention of the Ld. PP is accepted, the Branch Manager would be accused of obtaining financial gain to every borrower of the Bank which sounds illogical as lending is the main business of the Banks.
111. The Ld. Counsel for the accused submitted that the Bank has given all retrial benefits to the accused pending Departmental Enquiry in view of the order dated 06.10.2004 passed by the Hon'ble High Court in writ petition No. 1235/2003. It is further submitted that in view of the settlement between the complainant Bank and the Directors of the Company, the Hon'ble High Court has ordered the release of all the retrial CC No.65/2011 Page 115 of 120 116 benefits to the accused. Ld. Counsel further submits that since there is nothing found in Departmental Enquiry against the accused, that itself is a sufficient ground for acquittal of the accused.
112. It is not disputed that vide order dated 06.10.2004 in Writ Petition Civil No. 1235/2003, the Hon'ble High Court has ordered for the release of all the retiral benefits to the accused by the complainant Bank. The relevant portion of the said order as mentioned on page no. 36 of order dated 29.06.2015 is as below -
"The main plank of the petitioner's submission is that the bank has reached a settlement with the Party and a no-due certificate has been annexed as Annexure A-1 and the amount of settlement has been duly paid by the said party.
In view of the forgoing discussion, I am of the view that prima facie no case is made out in favor of the respondents which would enable them at this stage to withhold the retiral benefits namely contribution to provident fund and gratuity. The enquiry itself based on the CC No.65/2011 Page 116 of 120 117 charge sheet has been stayed by this Court which is another factor showing that prima facie, the petitioner has made out a good case for interference.
In view of the forgoing discussion, the application is allowed and the retiral benefits of the petitioner be released by the respondents.
The application is disposed of
accordingly."
113. It is also stated that the complainant Bank did not challenge the said order of Hon'ble High Court. In this regard, the Hon'ble High Court while quashing the criminal case against accused A-2 and A-4 in its order dated 29.06.2015 has held -
"59. DRT Consent Decree (arising out of the settlement between the parties) was passed in February, 2004 and relying upon which, this Court released the retirement benefits of the said A1 in October 2004. In compliance of the said order of this Court, the complainant bank, not only released the entire retirement benefits, by way of its letter dated 15th February, 2005, but went many steps further and withdrew the CC No.65/2011 Page 117 of 120 118 entire charge sheet that had initiated the departmental proceedings against the said A1.
60. By releasing the retirement benefits, read together with the complainant's bank abandonment of departmental proceedings against the said A1, is to be further read in juxtaposition with the judgment of the Supreme Court in the case of P S Raja vs. State of Bihar reported in (1997) Supreme Court Cr.R. 137:-
"The standard of proof required to establish the guilt in a criminal case is far higher than the standard of proof required to establish the guilt tin the departmental proceedings. In the present case, the charge in the departmental proceeding and in the criminal proceeding is one and the same. There is no dispute as to the findings rendered in the departmental proceedings and the ultimate result of it. On those premises, there is no difficulty in accepting the case of the appellant. For if the charge which is identical could not be established in departmental proceedings CC No.65/2011 Page 118 of 120 119 and in view of admitted discrepancies in the reports submitted by the valuer, one wonders what is there further to proceed against the appellant in criminal proceedings. On the peculiar facts of this case, the criminal proceedings against the appellant cannot be pursued."
114. It is clear from the conspectus of the above order and the conduct of the complainant Bank by withdrawing the departmental proceedings against the accused, that the accused Branch Manager was never suspected of committing any offence by the complainant Bank.
115. The perusal of the documentary evidence as well as deposition of the witnesses examined in the Court, it does not in my opinion lead to an unerring certainty that accused acted with any dishonest or corrupt motive or abused his official position as Branch Manager.
116. In view of the material available on record and forging discussion, I conclude that the prosecution has not been able to prove the offences punishable under Section 120-B read with Section 420, 467, 468, 471 read with Section 5(1)(d) CC No.65/2011 Page 119 of 120 120 punishable under Section 5(2) of PC Act, 1947 and Section 13(1)(d)(ii) punishable under Section 13(2) of PC Act, 1988 against accused N. Bhojaraj Shetty. Accordingly, accused N. Bhojaraj Shetty is acquitted of all the charges.
117. The bail bond of the accused N. Bhojaraj Shetty is cancelled and his surety is discharged. N. Bhojaraj Shetty is directed to furnish fresh Personal Bond in sum of Rs.25,000/- with one surety of the like amount as required under Section 437-A of Cr.P.C.
118. File be consigned to Record Room.
Announced in the open Court KOVAI Digitally signed by KOVAI VENUGOPAL today i.e. on 28.02.2018. VENUGOPAL Date: 2018.03.01 16:15:45 +0530 (KOVAI VENUGOPAL) SPECIAL JUDGE, PC ACT, (CBI)-09 CENTRAL, DELHI CC No.65/2011 Page 120 of 120