Bombay High Court
Central Bureau Of Investigation, Bank ... vs Mulangi Krishnaswamy Ashok Kumar & ... on 16 March, 1999
Equivalent citations: 1999(3)BOMCR189
ORDER M.S. Rane, J.
NATURE AND BACKGROUND OF THIS PROSECUTION:
1. The prosecution herein is sequel to security scam which broke out in the mid of the year 1992 in various types of security transactions alleged to be undertaken in active connivance with the bank officials and brokers. The principal subject matter of this prosecution is alleged fraudulent transactions in Government securities, Units of UTI etc. resorted to by the banks, financial institutions and share and stock brokers with the aim and object of illegally siphoning of the bank funds to concerned and selective brokers for their personal speculative returns and benefits. The amount alleged to be involved as at the end of May, 1992 is estimated to Rs. 434,01,20,354.78. The banks and financial institutions involved are Canbank Financial Services Ltd. (CANFINA), a subsidiary of Canara Bank, Bank of Karad Ltd., Bombay (BOK), and Metropolitan Co-operative Bank Ltd. (MCB).
2. The offences with which the accused in this case are charged principally consist of criminal conspiracy, criminal conspiracy to commit offences of cheating/of criminal breach of trust, forging of the documents and user of such documents under sections 120B, 420 and/or 409, 411, 467, 468, 477A of Indian Penal Code and sections 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The accused are also charged with aiding and abetting each other. There are 40 charges framed in this case jointly and severally vide Ex. 23 herein.
3. The prosecution is arrayed against 12 accused viz. (1) Shri Mulangi K.S. Ashok Kumar-Accused No. 1, at the relevant time functioning as Senior Vice President as also a Chief Dealer of CANFINA at its registered office at Bangalore, (2) Shri Hiten Prasan Dalal-Accused No. 2, Stock and Share Broker operating in Bombay, (3) Shri Abhay Dharamsi Narottam-Accused No. 3, Stock and Share Broker and Director of BOK at Bombay at the relevant time, (4) Shri Bhupen Champaklal Dalal-Accused No. 4 also Stock and Share Broker and a Director of BOK, Bombay at the relevant time, (5) Shri Tejkumar Balkrishna Ruia-Accused No. 5, Director of M/s. Dhanraj Mills Private Limited, Bombay, (6) Shri Jagdish Pannalal Gandhi-Accused No. 6, Stock and Share Broker, Bombay, (7) Shri Chandrashekhar Sitaram Raje-Accused No. 7, at the relevant time working as an agent with BOK, Bombay and in-charge of its Security Department, (8) Shri Sudhakar Appu Ail-Accused No. 8, a Clerk at the relevant time working with BOK in Security Department at Bombay, (9) Shri Krishan Kantilal Kapadia-Accused No. 9, being the Vice Chairman at the relevant time of MCB, Bombay, (10) Shri Madhusudan Sakharam Kushte-Accused No. 10, working as an Accountant at the relevant time in MCB, Bombay, (11) Shri Shankar Narayan Ramaswamy-Accused No. 11, the Proprietor of M/s. Excel & Company, Bombay as also a share and stock broker and (12) Shri Sarenathan Mohan-Accused No. 12, at the relevant time a Dealer of CANFINA based in its registered office at Bangalore.
ESTABLISHMENT OF THIS COURT: (BACKGROUND)
1. Two courts have been constituted and established under the Provisions of the Special Court (Trial of Offences relating to Transactions in Securities), Act, 1992 (hereinafter referred to as "the said Act"). The first Court was established in June, 1992 by the Central Government under Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992 which was promulgated on 6-6-1992. The said Court was established for speedy trial of offences relating to transactions in securities presided over by my brother Judge S.N. Variava.
2. The establishment of the second Court (i.e. the Court herein) came into being by an amendment to the said Act viz. section 5 of the said Act in January, 1997 and by a Notification dated 11-2-1997 issued by the then Chief Justice of this Court, this Court came to be constituted.
3. The Statements of objects and reasons of the said Act clearly brings forth the necessity as also urgency for the enactment of the said Act and establishment of this Court. The same reads as under :---
"In the course of the investigations by the Reserve Bank of India, large scale irregularities and malpractices were noticed in transactions in both the Government and other securities, indulged in by some brokers in collusion with the employees of various banks and financial institutions. The said irregularities and malpractices led to the diversion of funds from banks and financial institutions to the individual accounts of certain brokers.
2. The deal with the situation and in particular to ensure the speedy recovery of the huge amount involved, to punish the guilty and restore confidence in and maintain the basic integrity and credibility of the banks and financial institutions the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992 was promulgated on the 6th June, 1992. The ordinance provides for the establishment of a Special Court with a sitting Judge of a High Court for speedy trial of offences relating to transactions in securities and disposal of properties attached. It also provides for appointment of one or more Custodians for attaching the property of the offenders with a view of sic to prevent diversion of such properties by the offenders.
3. The Bill seeks to replace the said Ordinance."
4. It is thought necessary to briefly advert and/or elaborate the reasons and the circumstances in the background of the enactment of the said Act and the establishment of Special Courts on the basis of contemporaneous record in the form of reports which are available such as Report of the Joint Parliamentary Committee (J.P.C.) constituted to enquire into Irregularities in Securities and Banking Transactions in 1992 i.e. shortly after security scam surfaced and the Reports of the Committee appointed by Reserve Bank of India under the Chairmanship of Mr. Jankiraman, the then Deputy Governor to enquire into security transactions of banks and financial institutions.
5. It is noticed that somewhere in the last week of April, 1992, there appeared, precisely on 23-4-1992 in the Times of India, Bombay Edition, an article authored by Sucheta Dalal and R. Srinivasan in respect of security transactions put through by one of the brokers with the State Bank of India to the extent of Rs. 500 crores. The article also highlighted the modus re sorted to by a broker in putting through the transactions in securities. This revelation sent a shock waves and the concerned authorities, mainly the Government and the Reserve Bank of India were required to take notice and cognizance thereof. It also evoked wide reaction in media and the issue was also raised in both the Houses of Parliament and grave concern was expressed on the floors of both the Houses of Parliament. The concerned Ministry and Reserve Bank of India came under severe criticism for their alleged failure and lapses. It was alleged that the scam was of a real mega size and cleverly engineered involving an approximately estimated amount of Rs. 5000 crores. The appointment of two Committees mentioned above was the result of such debate in the Parliament and publicity.
6. It is to be further stated that considering the magnitude of this scam and ingenuous methods and devices deployed in perpetrating the same and siphoning of large public funds into the private pockets of some brokers the Government thought it necessary to entrust investigation of such scam related cases upon the Central Bureau of Investigation (C.B.I.) Accordingly some cases were reported to C.B.I. Further C.B.I on its own investigated various cases involving bank security scam and filed the same before Special Court. The case herein is one of such cases.
FACTUAL ASPECTS:
1. The prosecution herein revolves over three main transactions in security which prosecution has termed as "ostensible security transactions". Parties involved therein are CANFINA and BOK. CANFINA is the purchaser and BOK is the seller of the securities in question. A share Broker common in all the three transactions is Accused No. 2-Hiten Prasan Dalal.
2. Three transactions in securities alleged to be ostensible are as under:-
I. FIRST TRANSACTION:
(i) This transactions is stated to have taken place on 6-4-1991. The security involved is 11.5% Government of India Central Loan 2008 face value Rs. 25 crores.
(ii) It is the case of the prosecution that on 6-4-1991 CANFINA purchased the said securities of the face value of Rs. 25 crores from BOK. It is to be stated that although said Security Deal was represented to be between CANFINA and BOK, in fact, as it is apparent from the evidence, that the same was put through and routed into the account of Accused No. 3- Abhay Dharamsi Narottam, Constituent, Broker and then Director of BOK. The said security transaction was struck and finalised either by the Chief Dealer or Dealer of CANFINA, Bangalore i.e. Accused No-1 Mulangi K.S. Ashok Kumar or Accused No. 12- Sarenathan Mohan who conveyed the same over telephone to P.W. 2 Mr. Dhundiraj Gangadhar Vernekar an officer of Canara Bank at Bombay office. Mr. Vernekar who received the said telephonic message made an entry thereof in a Rough Transaction Sheet. The BOK then issue its cost memo and Bank Receipt bearing No. 3259 dated 6-4-1991 favouring CANFINA. It is to be stated that the said Bank Receipt was issued in lieu of physical delivery of the security in question containing recital in a form of undertaking that BOK would deliver the Security in the Deal to CANFINA in future. The representative of the Broker i.e. Accused No. 2- Hiten Prasan Dalal delivered the bank receipt and cost memo of BOK which was received by Mr. Vernekar P.W.2, who then issued banker's cheque for Rs. 25,81,20,354.78 drawn on Canara Bank, Bombay favouring BOK being the consideration/price of the said security. On the same day i.e. 6-4-1981 BOK received the said banker's cheque and first credited proceeds thereof to its account and then credited the same into the account of Accused No. 3 Abhay Dharamsi Narottam. It is significant that neither BR or Cost Memo give any indication to CANFINA that the Deal in question was meant to be in the account of Accused No. 3.
II SECOND TRANSACTION:
(i) The second transaction is dated 22-7-1991. The security involved therein is 16 crore Units of U.T.I. at the rate of 13.30 per unit for total value of Rs. 212,80,00,000/- which CANFINA purchased from BOK.
(ii) The said transaction was also finalized and processed in the same manner as the first transaction of 6-4-1991 mentioned hereinabove. That is to say that either the Chief Dealer or Dealer of CANFINA viz. Accused No. 1 Mulangi K.S. Ashok Kumar or Accused No. 12-Sarenathan Mohan respectively struck and finalized the said security transaction from Bangalore through BOK in Bombay and then communicated the same to Mr. Vernekar P.W. 2 at Bombay who made an entry in the Rough Transaction Sheet. The Broker involved therein was Accused No. 2-Hiten Prasan Dalal. The representative of the Broker came with BOK's cost memo and Bank receipt in respect of the said security favouring CANFINA and handed over the same to Vernekar-P.W. 2 who thereupon issued a banker's cheque of the same date i.e. 22-7-1991 drawn on Canara Bank in the sum of Rs. 212,75,00,000/- favouring BOK in exchange of BOK's Bank Receipt bearing No. 3499 dated 22-7-1991. The said BR was issued as in the first transaction by BOK undertaking to delivery the security in question to CANFINA in due course. Said Banker's Cheque was received and collected by the representative of the Broker i.e. Accused No. 2-Hiten Prasan Dalal. BOK received the same and firstly credited the proceeds thereof in its own account and then credited the same to the O/D account of Accused No. 3 Abhay Dharamsi Narottam with it on the same day. It may be stated that the total consideration of the security is Rs. 212,80,00,000/- whereas the banker's cheque issued by CANFINA is for the sum of Rs. 212,75,00,000/- i.e. a sum of Rs. 5,00,000/- less which prosecution has explained and which aspect will be dealt with later on in the appropriate context and stage.
THIRD TRANSACTION:
This transaction is dated 31-7-1991 and the security involved is 19 crore Units of UTI at the rate of Rs. 13,4442 per unit for total value of Rs. 255,43,98,000/- The said transaction was also processed in all respect like first two transactions such as finalization by the Chief Dealer Accused No. 1 Mulangi K.S. Ashok Kumar and/or Dealer i.e. Accused No. 12 Sarenathan Mohan respectively at Bangalore, communication over telephone to P.W. 2-Venerkar at Bombay, BOK issuing its cost memo and BR of the same date favouring CANFINA, representative of the Broker Accused No. 2-Hiten Prasan Dalal delivering the same to P.W. 2 Vernekar and Vernekar then issuing banker's cheque No. 77750 dated 31 -7-1991 drawn on Canara Bank, Bombay favouring BOK for the sum of Rs. 255,43,98,000/-. BOK received the same and firstly credited the proceeds thereof in its own account and then credited the same to the O/D account of Accused No. 3 Abhay Dharamsi Narottam with it on the same day.
It is the case of the prosecution that the decisions in respect of all the three transactions were taken and deals in above transactions were finalized by Dealers of CANFINA i.e. by Accused No. 1 Mulangi K.S. Ashok Kumar and /or Accused No. 12-S. Mohan at Bangalore and then the same were conveyed over telephone to Bombay office for the follow up action of execution etc. The evidence made available shows that CANFINA, Bangalore through its Bank-Canara Bank, Bangalore arranged to remit the amounts to Bombay for being paid as consideration of the transactions.
3. As far as the first transaction of 6-4-1991 is concerned the BOK on 18-4-1992 issued its S.G.L. form i.e. Secondary General Ledger form on Reserve Bank of India favouring CANFINA as substitution to its earlier BR dated 6-4-1991. However when CANFINA, Bombay lodged the said S.G.L. with the R.B.I. the same was dishonoured by R.B.I. on the ground of insufficiency of balance of security in the account of BOK account Accused No. 3-Abhay Dharamsi Narottam. Consequently the first transaction of 6-4-1991 remained outstanding in the sense that CANFINA did not receive the security of the said transaction from BOK.
4. In the second transaction dated 22-7-1991 there were two further changes/developments. In that on 15-10-1991 BOK repurchased 1.5 crore Units from CANFINA and on 18-10-1991 BOK again repurchased further 7.5 crore Units of UTI from CANFINA thus reducing the liability from 16 crore units to 7 crore units. Consequently the outstanding security in the second transaction to CANFINA remained to 7 crore units. It is the case of the prosecution and also stands made out from the evidence made available that both these transactions of 15 and 18th October, 1991, were put through and finalized by Accused No. 1-M.K.S. Ashok Kumar and /or Accused No. 12-S. Mohan at Bangalore and were processed in same way as three main Transactions as noticed earlier.
5. As far as third transaction of 31-7-1991 is concerned viz. 19 crore units of UTI the same remained outstanding. In that BOK did not deliver the security to CANFINA .
6. Thus, to sum up, according to the prosecution on account of BOK not honouring its obligations under (I) S.G.L. dated 18-4-1991 which was substitute for its BR dated 6-4-1991 in the first transaction; (ii) not delivering 7 corer Units of UTI in the second transaction dated 22-7-1991 and (iii) 19 crore units in third transaction of 31-7-1991, CANFINA suffered losses to the extent of Rs. 374,35,18,354.78.
7. Eventually BOK went under liquidation on 21-5-1992 without discharging its liability to CANFINA to the extent as mentioned earlier. It is the case of the prosecution that CANFINA after purchasing the securities from BOK as mentioned in the said three transactions and in anticipation and expectation of receiving the securities as purchasers entered into the sale transaction of the said securities with other parties. Since however BOK did not deliver the securities that CANFINA was required to purchase the securities viz. Units at higher rate on 29-5-1992 and 30-5-1992 from Syndicate Bank, National Bank, ANZ Grindlays Bank and Citibank to meet its commitment at higher rates and in that process suffered further loss of Rs. 59,66,02,000/-. The total loss thus suffered as stated earlier by CANFINA comes to Rs. 434,01,20,354.78.
8. It is also to be stated that CANFINA had filed three suits before this Special Court against the Liquidator of BOK, Hiten Prasan Dalal, Bhupen Champaklal Dalal, Abhay Dharamsi Narottam. Jagdish Pannalal Gandhi and Tejkumar Balkrishna Ruia as defendants. The said defendants 2 to 6 are respectively Accused Nos. 2, 4, 3, 6, and 5 in the case herein. The said suits are pending for disposal. Three separate suits have been field being Suit No. 7/1994, 8/1994 and 10/1994 for outstanding dues in transactions respectively dated 22-7-1991, 6-4-1991 and 31-7-1991. As the prosecution case proceeds it is necessary to elaborate the manner and modus operandi of putting through the said three security transactions in question. As noticed earlier the manner and pattern of putting through the said three transactions was similar. However briefly how the same were put through is adverted to hereinbelow:
(i) CANFINA is wholly subsidized company of Canara Bank-a Nationalized Bank. Canara Bank has its registered office at Bangalore. CANFINA had also its registered office at Bangalore. CANFINA was set up somewhere in the year 1987 at the behest of Canara Bank after obtaining requisite permission from Reserve Bank of India with the object of carrying on transaction in Government securities, merchant banking business and allied activities vide letter dated 28-5-1987. It is made available being Ex. A-1 (14). The Board of Directors constituted all officers of Canara Bank as ex-officio members.
(ii) CANFINA, Bangalore had opened an account with Canara Bank, Bangalore for its operation of security transactions. It had also account in Canara Bank, Bombay. P.W. 2 Vernekar was the officer of Canara Bank and at the relevant time was authorized by CANFINA to issued and sign banker's cheques along with other officers posted in Bombay office as also to execute necessary documents in the security dealings.
(iii) CANFINA had its office at Bombay located at Atlanta., Nariman Point, Bombay and its Managing Director used to sit in the said office. However the transactions in securities for and on behalf of CANFINA , Bangalore used to be executed in the office premises of Canara Bank, Bombay situated at Bombay Verma Chambers, Fort, where Mr. Vernekar-P.W. 2 was posted. At the relevant time P.W. 25 -Padmanabha Rao Appanna was the Managing Director of CANFINA who used to sit in the office at Atlanta, Nariman Point, Bombay. However the Managing Director of CANFINA at Bombay was not involved at all in finalization and/or execution of transactions in securities undertaken for and on behalf of CANFINA which was done by the Dealers at Bangalore who were, as stated, at the relevant time Accused No. 1 Mulangi K.S. Ashok Kumar and Accused No. 12-Sarentathan Mohan. He was also not informed about the further processing or execution of the transactions by the executing officials at Bombay viz. either by P.W. 2- D.G. Vernekar, P.W. 3 -O.S. Kukian or others, for that matter even about the outstanding BRs etc. and he used to receive periodical statements from Bangalore office relating to security transactions at much later stage. It may be stated that P.W. 3-O.S. Kukian was an employee of CANFINA posted at Bombay and at the relevant time held that post of Secretary and he used to assist and coordinate with P.W. 2 Vernekar and used to maintain the record in respect of security transactions.
(iv) At the relevant time the concerned officials/ employees of CANFINA at Bangalore were P.W. 26-Padubidri Nanyam Narayan Rao, Assistant General Manager, P.W. 29-K Satish Shetty, Senior Project Executive, P.W. 30 Bangalore Narsimhaiah Shrikantha, Secretary, P.W. 32-K. Laxminarayanan, Vice Chairman, P.W. 34 Krishna Balchandra Shenoy, Senior Manager and P.W. 64 Narayanan Balsubramanian, Assistant Vice President. Besides them Accused No. 1 Mulangi K.S. Ashok Kumar who was Executive Vice President at the relevant time was also a Chief Dealer of CANFINA and Accused No. 12-Sarenathan Mohan whose designation was Assistant Vice President and was a Dealer. Both Accused Nos. 1 and 12 used to be in the registered office at Bangalore at the relevant time according to the prosecution both Accused Nos. 1 and 12 were severally authorized to strike deals in security transactions both of sale and purchase for and on behalf of CANFINA and it is only the said Dealers who were authorized to strike and finalize such deals in securities for CANFINA. It is the case of the prosecution that either of the said Dealers used to strike the deals independently and no other officials or employees of CANFINA were involved in the process of such deals and final decision in that respect rested with the said Dealers i.e. Accused Nos. 1 and 12. At the relevant time there were no limits on financial power and both the Accused Nos. 1 and 12 could finalise the deals in securities for any amount as they would do.
(v) Further the other officials of Canara Bank at the relevant time working in its Bombay office and concerned with CANFINA's Security Deals were P.W. 4-K. Dayanand Prabhu and Venugopal who worked with P.W. 2 Vernekar.
9. The prosecution case proceeds that the said Dealers i.e. Accused Nos. 1 and 12 after finalizing the deals used to convey the same to Bombay Central Office of CANFINA over telephone. Such telephone calls were received and attended to by P.W. 2- Vernekar who used to note down the particulars in respect of security deals as would be conveyed by either of Dealers. The instructions conveyed used to be-name of the security, face value there of, rate, name of the broker and name of bank i.e. counter party. The dealers would also indicate the mode of delivery i.e. whether by means of BRs or S.G.L. or physical delivery. The particulars so received used to be noted in rough sheets known as Rough Transaction Sheets by the recipient of the calls mainly P.W. Vernekar.
10. As far impugned three transactions in securities are concerned, according to the prosecution, the same were finalized, processed and executed as under:-
"(a)(i) The first transaction as stated earlier is of 6th April, 1991. The security involved therein is GOI of face value of 25 crores. According to the prosecution either Accused Nos. 1-Mulangi K.S. Ashok Kumar and /or Accused No. 12 Sarenathan Mohan struck and finalized the said deal at Bangalore. Accused No. 2 Hiten Prasan Dalal was the broker in the said deal for and on behalf of CANFINA.
(ii) The case further proceeds that, either of the dealers i.e., Accused Nos. 1 and 12 conveyed over telephone about the conclusion of the said transaction to its Bombay office.
The said telephone call was answered and attended to by P.W. No. 2 Mr. Vernekar. The particulars which were conveyed consisted of the description of security, face value, rate, broker involved therein and the counter party. In the said transaction CANFINA was the purchaser and BOK i.e. Bank of Karad, Bombay was the seller. P.W. No. 2 Mr. D.G. Vernekar, on receipt of the said telephonic instructions noted down the gist thereof in a rough sheet known as "Rough transaction sheet". The prosecution has produced and proved the relevant entry so made which will be referred to later on. The course of events proceeds that the representative of the broker in the said transaction named above thereafter came to P.W. No. 2-Mr. Vernekar with a Cost Memo and Bank Receipt (In short B.R.) issued by BOK favouring CANFINA. The same were handed over by the representative of the broker to P.W. No. 2 who received the same and on scrutiny and verification as he found the same to be order he proceeded to act thereupon.
(iii) P.W. No. 2 then issued the Inter Bank Cheque of Canara Bank, Bombay branch account CANFINA favouring BOK for sum of Rs. 25,81,20,354.38 being the consideration/price of the said security. He i.e. P.W. No. 2 i.e. Mr. Vernekar then handed over the said Pay Order to the messenger of the said broker i.e. Accused No. 2 Hiten Prasan Dalal. The prosecution has made available the relevant documentary evidence namely, the original Cost Memo and B.R. issued by BOK as also the Pay Order issued favouring BOK which will be considered at appropriate stage.
(iv) The case further proceeds that BOK received the credit being proceeds of the said cheque on the same day.
(v) As it transpires, the prosecution proceeds to state that the BOK, after crediting the proceeds of the said Pay Order Banker's cheque into its account on the very day credited the entire amount thereof into the Over Draft account (in short O.D. Account) of Accused No. 3 with it. It is also the prosecution's case that on the very day, the said amount was transferred/diverted on the instructions of Accused No. 3 by BOK to Andhra Bank for being credited into the account of Accused No. 2 Hiten Prasan Dalal. It is thus case of the prosecution that on the very day i.e. on 6th April, 1991 the entire amount which CANFINA paid to BOK as stated hereinabove was passed on to the account of Accused No. 2 Hiten Prasan Dalal in Andhra Bank.
(vi) The B.R. of BOK received by P.W. No. 2 Mr. Vernekar came to be retained in Bombay office. The necessary entries in respect of the said purchase transaction were made in the relevant record kept and maintained at Bombay office by P.W. No. 3 Mr. Omprakash S. Kukian, the employee of CANFINA which record has also been made available before the Court. P.W. 2 Vernekar on the same day informed Dealers of CANFINA about the execution of the said Deal and receipt of B.R. etc.
(vii) At the same time the steps as were taken by and at Bangalore office for which also the prosecution has made available the evidence, would need advertence. In CANFINA's registered office at Bangalore, a cheque was issued in its account with Canara Bank, Bangalore, for the amount involved in the said security transaction. The Canara Bank, Bangalore branch where CANFINA had account for Security Deals then conveyed the same by means of Inter Bank Advice (in short I.B.A.) to its counter party at Bombay. It was necessary for the CANFINA to make requisite funds available being the consideration of the said security to its Bombay office and that is why, according to the prosecution, this mode of remittance was followed. It may be stated that prosecution has made available the evidence which comprises of documents as also oral to indicate how the process of remittance of funds from CANFINA office at Bangalore to Bombay office went through.
(viii) It needs to be stated that the prosecution has also made available the evidence in respect of the said transaction of 6th April, 1991 to show that the Deal of the said Transaction was finalized in Bangalore office. The same is in the form of "Dealers Pad" and entry as far as this transaction is concerned has been made by Accused No. 12-S. Mohan.
(b) Second Transaction:
(i) The second transaction as stated is of dated 22nd July, 1991. The security involved therein is 16 crores Units of Unit Trust of India (in short UTI). The CANFINA is the purchaser and BOK Bombay is the seller. Accused No. 2 Hiten Prasan Dalal acted as a broker for and on behalf of CANFINA. The total consideration was Rs. 212,80,00,000/-.
(ii) Same procedure and modality was followed while processing and executing the said transaction. According to the prosecution either of the dealers struck and finalized the said deal with BOK Bombay and then conveyed the same to Bombay over telephone. The telephonic call was attended to by P.W. No. 2 Mr. Vernekar as in the case of first transaction who also made entry in the Rough Transaction Sheet, nothing down in brief the details as were conveyed to him by the concerned dealers, such as, description of the security, quantum, rate, name of the counter party, face value, name of the broker, etc. The relevant entry in the Rough Transaction Sheet made by P.W. No. 2 Mr. Vernekar has also been proved and made available.
(iii) As in the first transaction, messenger of the concerned broker i.e. Accused No. 2 Hiten Prasan Dalal came with the Cost Memo and B.R. issued by BOK favouring CANFINA of that date i.e. of 22nd July, 1991 and delivered the same to P.W. No. 2- Vernekar.
(iv) P.W. No. 2- Vernekar, on receipt of the said documents, namely, the Cost Memo and B.R., as usual checked and verified the same and as he found the same to be in order, he issued Inter Bank cheque of Canara Bank, Bombay, favouring BOK, for sum of Rs. 212,75,00.000/ - being the price of the said security on account of CANFINA. He then handed over the said Pay Order to the messenger of the broker.
(v) It is the case of the prosecution that BOK received the said Pay Order of CANFINA on the same date and also received the credit of the proceeds thereof on the same day. Further, on the very day i.e. on 22nd July, 1991 BOK credited the entire amount of the said Pay Order into the O.D. Account of Accused No. 3 Abhay Dharamsi Narottam with it.
(vi) The prosecution further states that, on the very day almost the entire amount credited into the account of Accused No. 3 was transferred to various other banks under the instructions of Accused No. 3 Abhay Dharamsi Narottam. It may be stated that, it is the case of the prosecution that the amounts so transferred were diverted to the accounts of Accused No. 2 Hiten Prasan Dalal and others and were made available for the benefit of Accused No. 2 Hiten Prasan Dalal and others for their security transactions.
(vii) The remittance from Bangalore office of CANFINA in respect of the amount involved in the said transaction came to be processed as was done in the case of first transaction i.e. CANFINA issued its cheque for the said amount on Canara Bank, Bangalore in its account and Canara Bank, Bangalore in turn remitted the amount first by conveying by means of I.B.A. to Bombay office. The relevant evidence such as CANFINA's cheque issued at Bangalore and I.B.A.'s etc. have been made available to prove the same.
(viii) Bombay office, in particular, the P.W. No. 2 Mr. Vernekar who received the B.R. for the said security, kept the same in Bombay office. The necessary entries in respect of the said transaction also came to be made in Bombay office by P.W. No. 3. Mr. Kukian in Security Ledger and other relevant documents. P.W. No. 2 Vernekar also intimated Dealers in Bangalore about the execution of the said Deal, receipt of B.R., etc. on the same day.
(ix) The prosecution has also made available the entry which the dealer, namely, the Accused No. 12 Sarenathan Mohan made in Dealers Pad which was kept and maintained at Bangalore.
(c) Third Transaction:
(i) The third impugned transaction is of dated 31st July, 1991. As in the case of earlier two transactions, CANFINA was the purchaser and BOK Bombay was the selling party. Accused No. 2 Hiten Prasan Dalal was a broker involved therein for and on behalf of CANFINA.
(ii) The security involved was 19 crores Units of UTI. The total consideration was of Rs. 255,43,98,000/-.
(iii) According to the prosecution, the said deal was also struck and finalized by the dealers i.e. by Accused No. 1- Mulangi K.S. Ashok Kumar and/or Accused No. 12-S. Mohan at Bangalore and then conveyed the same to Bombay over telephone to P.W. No. 2- Mr. Vernekar who attended the telephone and took down instructions in respect of the said transaction and made entry in the Rough Transaction Sheet noting down the particulars, such as, the description of the security, quantum, rate, name of the broker and name of the counter party i.e. respectively Accused No. 2 BOK Bombay. The relevant entry in that respect has been made available.
(iv) The case proceeds as in the earlier two transactions, the messenger of the broker i.e. Accused No. 2 came with Cost Memo and B.R. in respect of the said security issued by BOK Bombay favouring CANFINA on that day i.e. on 31st July, 1991. The same was handed over to P.W. No. 2 Mr. Vernekar who received the same and on verification and checking from entry in Rough Transaction Sheet found the same to be in order being in accordance with instructions received from the dealers.
(v) P.W. No. 2 Mr. Vernekar then arranged to issue P.O. of Canara Bank favouring BOK for sum of Rs. 255,43,00,000/- being the consideration of the said security. He then handed over the said banker's cheque to the messenger of the said broker on the same day. He retained the B.R. received from BOK as also the Cost Memo in Bombay office.
(vi) On the same day, BOK Bombay received the said Pay Order issued by CANFINA which it sent for clearance and received the credit thereof on the same day. On the same day thereafter BOK credited the amount of the said P.O. into the O.D. Account of Accused No. 3-A.D. Narottam as was done in the case of earlier two occasions.
(vii) It is also the prosecution's case that thereafter under advise/ instructions of Accused No. 3-A.D. Narottam, BOK diverted the said amount to the various other banks. According to the prosecution, such diversion of the funds was for the benefit of Accused No. 2-Hiten Prasan Dalal, Accused No. 4-Bhupen Champaklal Dalal, Accused No. 5-Tejkumar Balkrishna Ruia and Accused No. 6-Jagdish Pannalal Gandhi. It is also further case of the prosecution that the said accused utilized the amounts so transferred for their speculative security transaction. It may be stated that the prosecution has adduced the evidence in respect of the said diversion and same will be dealt with at appropriate stage."
11. It needs to be stated that, as is evident from the evidence made available by the prosecution that in the case of all three impugned transactions mentioned above, there are Delivery Orders issued by Accused No. 3 Abhay Dharamsi Narottam on BOK directing BOK to deliver the security involved in the aforesaid respective transactions to CANFINA. The said delivery orders have also been produced.
12. At this stage, it needs to be stated and this is the prosecution's case that it was represented to CANFINA that the aforesaid three impugned transactions in securities were between CANFINA and BOK. However, that was not so. In fact, the transactions were routed through the account of Accused No. 3-A.D. Narottam as a constituent of BOK at the instance and with-active connivance of Accused No. 2-H.P. Dalal. The security involved in all the three impugned transactions were not available at all either on the dates of transactions or thereafter either in the account of constituent Accused No. 3 Abhay Dharamsi Narottam or with BOK. It is further the case of the prosecution that all the three BRs issued in the respective impugned transactions were not supported by requisite securities at all. It is also the case of the prosecution that BOK credited the proceeds of the three Pay Orders which were issues by CANFINA on Canara Bank favouring BOK into the account of Accused No. 3 Abhay Dharamsi Narottam in absence of such specific instructions either from CANFINA or from Canara Bank. Further, BOK thereafter did not deliver the security as per their commitment and undertaking contained in three respective BRs except 9 crores Units of UTI of the second transaction dated 22nd July, 1991 which BOK repurchased thereby reducing its liability to that extent.
13. It is transpires that on 18th April, 1992 BOK issued its S.G.L. in respect of the first transaction of 6th April., 1991 as a substitute to the earlier BR issued By BOK. The said S.G.L. was received by P.W. No. 2 Mr. Vernekar who then deposited the same with Reserve Bank of India (in short. R.B.I.) and the same was dishonoured by the R.B.I. on the ground of insufficiency of the security. The prosecution has also made available the evidence in that behalf by examining witnesses being the employees of R.B.I.
14. It will be necessary as the prosecution's case stands, how the matter was processed at the end of BOK in its Bombay office. According to the prosecution, the Accused No. 7 Chandrashekhar Sitaram Raje and Accused No. 8 Sudhakar Appu Ail were the concerned officers/employees of BOK working in its Security Department at the relevant time. Accused No. 7 was the Agent/Manager and he was empowered and authorized to sign cheques and BRs and execute security transactions in the accounts of its constituents. According to the prosecution, the Accused No. 7 Chandrashekhar Sitaram Raje would execute such deals in the accounts of the constituents of his own independently. Accused No. 8 Sudhakar Appu Ail at the relevant time worked as a clerk in the Security Department of BOK and it is he who used to prepare the necessary documents in the security dealings, such as, preparation of cost memos, writing of Pay Orders and BRs, etc. He used to also keep and maintain the record in respect of such security transactions, such as making entries in the Security Ledger, etc. The prosecution has made available and proved the relevant record in respect of the three impugned transactions as also the offshoot transactions and proved the same through concerned witnesses.
15. The prosecution case further proceeds that, after conclusion of the last transaction nothing significant has happened till 16th of September, 1991. BRs issued by BOK in all the three transactions remained un-discharged by BOK. In as much as, BOK did not arrange to deliver the securities as undertaken and as involved in the three impugned transactions mentioned above, although CANFINA had paid the entire consideration to BOK as noticed earlier. As stated earlier and as the prosecution case proceeds, that no securities were available to meet the commitments under the said three BRs with BOK in its account or in the account of its constituent Accused No. 3 Abhay Dharamsi Narottam. According to the prosecution, at that stage, the accused Herein adopted manipulative device and involved or dragged in another bank, namely, Mercantile Co-operative Bank (in short M.C.B.) Accused No. 9 Krishan Kantilal Kapadia, Accused No. 10 Madhusudan Sakharam Kushte and Accused No. 11 Shankar Narayan Ramaswamy are the concerned accused who are involved in the said manipulative device. The brief resume as to how the manipulative device was put-through is given hereinbelow:-
(a) As noticed earlier, the last of the impugned transactions was dated 31st July, 1991 which was put through notwithstanding the fact that in earlier two transactions BOK had not discharged its liability under the BRs issued by it. No steps or any action seems to have been taken at the end of CANFINA. As noticed earlier, neither in the account of BOK nor in the account of Accused No. 3-A.D. Narottam the securities in the three impugned transactions existed. However, the BRs were already issued by BOK in the three impugned transactions to CANFINA undertaking to deliver the securities. It is the case of the prosecution that, with the object of manipulating the record in respect of the Security Ledger at the end of BOK that there were securities involved in three impugned transactions in the account of Accused No. 3 A.D. Narottam that M.C.B. was got into scene. As noticed earlier, the M.C.B. was a small bank in the sense that it was the bank registered under the provisions of the Maharashtra Co-op. Societies Act and had very limited financial limits. The prosecution has produced the evidence in a form of Inspection And Audit Reports conducted by the statutory authorities which have classified and graded the said bank as poor.
(b) At the relevant time, Accused No. 9 Krishan Kantilal Kapadia was its Vice Chairman and Accused No. 10 Madhusudan Sakharam, Kushte was its Accountant. One Shri V.C. Desai was a Chairman. Accused No. 11 Shankar Narayan Ramaswamy, sole proprietor of M/s. Excel & Co. was one of the constituents of the said M.C.B. who had his account with M.C.B. in the name of Excel & Co. Accused No. 5-T.B. Ruia had also account with M.C.B.
(c) It is the case of the prosecution that on 16-9-1991, a meeting was held at the office premises of Accused No. 2 Hiten Prasan Dalal which was attended to by Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal, Accused No. 5 Tejkumar Balkrishna Ruia, Accused No. 6 Jagdish Pannalal Gandhi, Accused No. 9 Krishan Kantilal Kapadia and Accused No. 10 Madhusudan Sakharam Kushte, in which the said accused decided to put through transactions as Cover Up Transactions for the three impugned transactions. In accordance therewith, the said accused took the following steps:-
(i) On 16th September, 1991, Accused No. 11 Shankar Narayan Ramaswamy issued his Delivery Order dated 16th September, 1991 on BOK for the security, namely. 11.5% GOI face value 25 crores 2010 for consideration of Rs. 25,92,93,045.55. It is to be noticed that the amount of consideration so also the nature of security was exactly the same as per the first impugned transaction of this case which is dated 6th April, 1991. In pursuance to the Delivery Order of Accused No. 11 Shankar Narayan Ramaswamy, M.C.B. prepared its Cost Memo and B.R. favouring BOK covering the said security, namely, 11.5% G.O.I. face value 25 crores 2010. At the end of BOK Accused No. 3 Abhay Dharamsi Narottam issued his Receiving order addressed to M.C.B. Accused No. 3 also instructed BOK by his letter to issue Pay Order favouring M.C.B. with further instructions that the proceeds thereof be credited into the account of Accused No. 11 with M.C.B. Accordingly, BOK issued its Pay Order and forwarded the same to M.C.B. M.C.B. in turn forwarded its Cost Memo and BR favouring BOK in respect of the said security, namely, 11.5% G.O.I. face value 25 crores 2010.
(ii) Similarly, on the same day, the Accused No. 11 Shankar Narayan Ramaswamy issued his Delivery Order On M.C.B. in respect of the security of 16 crores Units of UTI as having sold the same to BOK. M.C.B. then issued its Cost Memo as also B.R. in respect of the said security favouring BOK. BOK on the basis of receiving order of Accused No. 3 Abhay Dharamsi Narottam as in the case of earlier transaction and on the basis thereof, issued its Pay Order favouring M.C.B. on the same day for a sum of Rs. 212,80,00,000/-. BOK forwarded the said Pay Order to M.C.B. with the covering letter containing instructions that the proceeds thereof be credited into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B. M.C.B. then forwarded its Cost Memo and B.R. to BOK. It is pertinent to note that the amounts involved in the securities in all respects tally and match as obtained in the second impugned transaction of 22nd July, 1991. M.C.B. received the Pay Order from BOK for the said amount and credited the same into the account of Accused No. 11 Shankar Narayan Ramaswamy on the same day.
(iii) On the same day i.e. on 16th September, 1991 Accused No. 11 Shankar Narayan Ramaswamy issued the third Delivery Order in respect of the security, namely, 19 crores Units of UTI showing having been sold to BOK. M.C.B. issued its Cost Memo and B.R. In respect of the said security and forwarded the same to BOK. At BOK's end, Accused No. 3 Abhay Dharamsi Narottam issued his Receiving Order upon M.C.B. in respect of the very security. The BOK issued its Pay Order favouring M.C.B. for a sum of Rs. 252,70,00,000/- being the consideration of the said security. The BOK forwarded the same to M.C.B. on the same day and after clearance credited the said amount into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B.
(iv) The prosecution made available the relevant documents in respect of the aforesaid three Cover Up transactions, such as, Receiving and Delivery Orders issued respectively by Accused No. 11 Shankar Narayan Ramaswamy and Accused No. 3 Abhay Dharamsi Narottam, Cost Memos and B.Rs. of M.C.B. Pay Orders of BOK, debit and credit memos/advice of both banks i.e MCB and BOK.
(v) It is significant to note that on the same day, M.C.B. issued its Pay Orders favouring BOK for exactly of the same amounts of the four Pay Orders issued by BOK on the same day favouring M.C.B. as noticed hereinabove except retaining 15 lacs which amount was credited into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B. It is further significant to note that BOK received the said Pay Order issued by M.C.B. on the same day and on the very day credited the proceeds of the said Pay Orders of M.C.B. into the account of Accused No. 3 Abhay Dharamsi Narottam It is further pertinent to note that on the same day, BOK issued its Pay Order exactly for the same amount favouring M.C.B. which M.C.B. received and credited into the account of Accused No. 11 Shankar Narayan Ramaswamy.
(vi) According to the prosecution, the same operation was done as and by way of square up operation and in the said operation a sum of Rs. 15 lacs came to the credit of Accused No. 11 Shankar Narayan Ramaswamy which he invested into Fixed Deposit with M.C.B. The prosecution has made available the evidence to prove the same in respect of the said cover up operation between M.C.B. and BOK through the concerned witnesses.
(vii) The fall out of the above cover up operation, it is the case of the prosecution that, on the basis thereof Accused No. 7 Chandrashekhar Sitaram Raje and Accused No. 8 Sudhakar Appu Ail then manipulated the Security Ledger Account of Accused No. 3 Abhay Dharamsi Narottam with them by showing that there were securities available into the account of Accused No. 3 Abhay Dharamsi Narottam with BOK involved in the three impugned transactions noticed earlier i.e. on 6th April, 1991, 22nd July, 1991, and 31st July, 1991 when as noticed earlier BOK had purportedly sold the same to the CANFINA. It is most important to note as evidence shows, that entries of purchase from M.C.B. and so also sale of the said Cover Up Transactions have been made by Accused Nos. 7 and 8 in the Security Ledger Account of Accused No. 3-A.D. Narottam.
(viii) It is further case of the prosecution that the account of Accused No. 3 Abhay Dharamsi Narottam in the Security Ledger with BOK was came to be manipulated to show that on the dates of the impugned transactions there was adequate security into the account of Accused No. 3. It is the case of the prosecution that Accused Nos. 7 and 8 made the entries in respect of the said three security transactions in the Security Ledger in the respective Heads of the security. The prosecution has made the evidence available wherefrom it is noticed that entries in respect of the three security transactions on the basis of BRs issued by M.C.B. on 16th September, 1991 have been made which is apparently disturbing the chronological sequence of the Security Ledger. For instance, that the entries have been made on the basis of three B.Rs. of M.C.B. in the Security Ledger Account of Accused No. 3 at much later stage. The prosecution has made available the relevant records including the security ledger entries etc.
(ix) It is case of the prosecution that Accused Nos. 9, 10 and 11 also joined the conspiracy with the object of manipulating record in respect of the security ledger of Accused No. 3 with M.C.B. to show and or to make appear that on the respective dates of impugned transactions there existed securities into the account of Accused No. 3-A.D. Narottam, with BOK when in fact it was not the position.
(x) As stated earlier, the M.C.B. was comparatively the small scale Bank and it had no capacity to undertake transactions of higher value to the extend of three impugned cover up transactions as noticed hereinabove. It appears that, as a result of its over dealings, it ran into the adverse clearance balance with R.B.I. culminating into the stoppage of clearance facility by R.B.I. following R.B.I. inspection, etc. The prosecution has made available the report of the inspection of the R.B.I. and also relied upon the joint statement of Accused 9 Krishan Kantilal Kapadia and Accused No. 10 Madhusudan Sakharam Kushte and other employee of M.C.B. P.W. No. 20 Mr. Dilip Pratapray Gandhi.
(xi) It is further the case of the prosecution that Accused No. 11-S. N. Ramaswamy in the process gained Rs. 15 lacs which he invested in the Fixed Deposit in his name and later on M.C.B. advanced him loan of Rs. 10 lacs and accepted the said Fixed Deposit as collateral Security. It is the case of the persecution that the Accused No. 9 Krishan Kantilal Kapadia, Accused No. 10 Madhusudan Sakharam Kushte and Accused No. 11 Shankar Narayan Ramaswamy clearly participated in the cover up operation with the sole object of manipulating the Security Ledger record of BOK and for gain to Accused No. 11-S.N. Ramaswamy.
(xii) It may be stated that the M.C.B. eventually went into liquidation.
16. The prosecution further proceeds that nothing significant happened till 18th April 1992. B.Rs. of BOK issued in the three impugned transactions except the reduction of liability in respect of 9 crores of Units in the second transaction dated 22nd July, 1991 remained outstanding. The CANFINA did not receive the securities from BOK as per the said BRs nor BOK arranged to discharge the liability/commitment to the CANFINA by compensating monetarily. On 18th April, 1992 Accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail issued Secondary General Ledger form as and by way of substitute to its B.Rs. dated 6th April, 1991 which he had issued as noticed earlier in the first impugned transaction favouring CANFINA. P.W. No. 2 received the said S.G.L. from BOK who arranged to lodge it in CANFINA's S.G.L. Account with R.B.I. However. R.B.I. dishonoured the said S.G.L. and for the reason that there was no sufficient balance, to honour the said S.G.L. and the securities mentioned therein and so advised CANFINA. The matter thus rested here. The prosecution has made available the evidence in respect of the said S.G.L. form as also its dishonour, etc.
17. It is the case of the prosecution that accused Nos. 2 to 6 utilised the amounts which the CANFINA paid to BOK in the three impugned transactions as noticed earlier for their own security transactions. The amounts received by BOK from CANFINA vide Pay Orders were credited into the account of Accused No. 3 Abhay Dharamsi Narottam and thereafter diverted to various places. Prosecution has made evidence available to that effect. It will be considered at appropriate stage.
18. On the basis of this factual background, it is the case of the prosecution that the CANFINA did not receive the securities from BOK under the three BRs except 9 crores units of UTI in second transaction and the total outstanding in terms of money as at the end of May, 1992 by BOK to CANFINA was to that extent of Rs. 374,35,18,354.78. The BOK went into liquidation as per order of the Court on 27th May, 1992 and position of outstanding remained there as it was.
19. It is also the case of the prosecution that CANFINA on the expectation of the fulfillment of the three impugned transactions with BOK entered into transactions of sales with various parties of the securities in question. Since however BOK did not honour its commitment and cleared the deals, CANFINA was required to purchased securities from the market at higher rate and in that process it had also suffered heavy loss which is estimated to Rs.59,66,02,000/-.
20. Thus, the total loss, according to the prosecution, suffered by CANFINA is estimated to Rs. 434,01,20,354.78.
21. The case further proceeds that, around April, 1992 there scam insecurity transactions in banks broke out evoking large publicity in the press media. The concerned authorities, the Government and the R.B.I. swung into action and after taking serious note of the same, R.B.I. conducted the inspection and investigation of certain banks and financial institutions including that of CANFINA, BOK and M.C.B.. The issue was also raised in both the Houses of Parliament and members expressed their concern considering the huge magnitude of the scam involved estimated to extent of Rs. 5000 crores. The same was fallowed by R.B.I. setting up Commission headed by its then Deputy Governor Janakiraman on 23rd April, 1991 to enquire into the situation which rendered its report after enquiry and submitted it to the Governor of R.B.I. and the Government. Then followed setting up of a Committee known as Joint Parliamentary Committee by both the Houses of Parliament somewhere in the first week of August, 1992 which has also rendered its Report highlighting the manner of manipulating transactions in securities undertaken by various banks, financial institutions with brokers.
22. Continuing narration of the prosecution case it reveals that the higher officials of CANFINA or Canara Bank were not aware of outstanding B.Rs. in respect of security transactions undertaken by CANFINA which included three B.Rs in the impugned transactions of this case. They were never informed about the same. It is suggested that the security transactions by and on behalf of CANFINA were done and finalized by the dealers of CANFINA who at the relevant time were Accused No. 1 Mulangi K.S. Ashok Kumar and Accused No. 12 Sarenathan Mohan. Accused No. 1 was a dealer and it was the responsibility of the dealers to ensure that the security deals went through smooth and all right in all respects. It is only in the month of April, 1992 that the CANFINA's then Managing Director sitting in Bombay P.W. No 25 Mr. Padmanabha Rao Appana learnt from the Inspector of R.B.I. about the outstanding B.Rs. of the BOK. He then made enquiry and got confirmed about the outstanding B.Rs. which included three B.Rs. in the three impugned transactions.
23. The case further proceeds that P.W. No. 25 after coming to know about the outstanding BRs he got in touch with Accused No. 1 Mulangi K.S. Ashok Kumar, the Chief Dealer who came down to Bombay and met him. The case proceeds that, Accused No. 1 Mulangi K.S. Ashok Kumar told P.W. No. 25 Mr. Padmanabha Rao Appana that he would contact concern brokers and would ensure that transactions under the B.Rs. get cleared. It is the case of the prosecution that thereafter Accused No. 1 Mulangi K.S. Ashok Kumar with Accused No. 2 Hiten Prasan Dalal, broker, met P.W. No. 25 when it is alleged that Accused No. 2 Hiten Prasan Dalal promised him that BOK would honour the outstanding B.Rs.
24. The case further proceeds that around the same time Accused No. 1 Mulangi K.S. Ashok Kumar and P.W. No. 28 Manjeshwar Venkateshwara Kamath who had come to Bombay informed P.W. No. 25 about the huge amount involved in the outstanding B.Rs. and about the diversion of the huge amount from BOK into the accounts of some of the brokers. P.W. No. 25 realised the seriousness and gravity of the case and it is the case of the prosecution that thereafter he contacted P.W. No. 33 Shri J.V. Shetty, the then Chairman and P.W. No. 32 Mr. K. Laxminarayanan, the then Executive Director of the Canara Bank and asked them to come to Bombay immediately to decide about the course of action. Accordingly, P.W. No. 32 and P.W. No. 33 came down to Bombay. P.W. No. 25 was also in Bombay. According to prosecution, thereafter meetings were arranged in Taj Mahal Hotel to sort out the problems of outstanding B.Rs. It is the case of the prosecution that the meetings were held in Taj Mahal Hotel in a room which was occupied by P.W. No. 28 Mr. M.V. Kamath and the same was attended by Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal and Accused No. 5 Tejkumar Balkrishna Ruia. Some other brokers also attended the said meetings.
25. The prosecution alleges that in the said meetings the issue of outstanding B.Rs. was discussed and it is further alleged that Accused No. 3 Abhay Dharamsi Narottam admitted having receiving a sum of Rs. 30 crores, Accused No. 5 Tejkumar Balkrishna Ruia admitted having received Rs. 70 crores and Accused No. 2 Hiten Prasan Dalal admitted having received Rs. 30 crores. It is further alleged that as far as Accused No. 4 Bhupen Champaklal Dalal is concerned, he remained non-committal with the assurance that he would look into the matter. The prosecution has sought to rely upon the evidence of P.W. No. 25 Mr. Padmanabha Rao Appana, P.W. No. 32 Mr. K. Laxminarayanan and P.W. No. 33 Mr. Jagannath Venkanna Shetty as also of P.W. No. 31 Mr. Jitendra Ratilal Shroff, one of the brokers, to prove the holding of the meetings in Taj Mahal Hotel and alleged admissions of the receipts of the amounts by accused Nos. 2, 3 and 5 as stated earlier.
26. The case further proceeds that, as allegedly assured by the brokers, there was no positive response and, therefore, the position continued as it was. The CANFINA thereafter decided to report the matter to the police and accordingly by letter dated 19th June, 1992, P.W. No. 1 Mr. Kota Narsimha Kamath, the then Managing Director of CANFINA addressed a letter to the Deputy Inspection General of Police, C.B.I., Bombay, which letter has been produced as Exh. 38. By the said letter, the CANFINA reported to the C.B.I. as to how the three impugned transactions were processed and CANFINA was cheated to the extent of Rs. 435,31,20,354.78. In the said letter CANFINA alleged the commission of offences, such as criminal conspiracy, criminal misappropriation and cheating and requested the C.B.I. for registering the criminal case as also carrying out investigation in detail.
27. It is revealed from the prosecution case that the said complaint letter Exh. 38 was passed on to P.W. No. 76 Mr. Bhupinder Kumar who was the then Deputy Superintendent of Police (Bank Security Cell), who after going through the said letter registered crimes against accused Nos. 1 to 6 i.e. Accused No. 1 Mulangi K.S. Ashok Kumar, Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal, Accused No. 5 Tejkumar Balkrishna Ruia and Accused No. 6 Jagdish Pannalal Gandhi and unknown officials of BOK vide C.R. No. RC-44 (A)/ 1992/ACB/ Bombay, on 20th June, 1992 at Bombay. He then registered offences against those accused named in the said F.I.R. under section 120B I.P.C. r/w 409, 420, 467, 468 I.P.C. and section 13(2) r/w 13(1)(d) of P.C. Act and substantive offences under section 409, 420, 467, 468-I.P.C. and section 13(2) r/w 13(1)(d) of PC Act, 1988 on 22nd June, 1992. The said F.I.R. was forwarded to the Special Court which was then presided over by my Brother Judge S.N. Variava. P.W. No. 76 continued incharge of the investigation of the case till the end of 27-28th July, 1992. He interrogated and recorded the statements of P.W. No. 1 Mr. Kota Narsimha Kamath, P.W. No. 25 Mr. Padmanabha Rao Appana, P.W. No. 35 Mr. Rajam Kalyan Raman, P.W. No. 33 Mr. Jagannath Venkanna Shetty, P.W. No. 32 Mr. K. Laxminarayanan and P.W. No. 28 Mr. Manjeshwar Venkateshwara Kamath. On 29th June, 1992 he arrested Accused No. 1 Mulangi K.S. Ashok Kumar. He also took charge of certain documents under seizure memos. As he was transferred on 27th July, 1992 he handed over the investigation of this case to P.W. No. 80 Mr. Rajendra Kaleshwar Prasad, the then Deputy Superintendent of Police.
28. Thereafter, P.W. No. 80 as incharge of the investigation of this case, conducted and carried out the investigation with the assistance of P.W. No. 78 Mr. Murarji Anna Waydande, Deputy Supdt. of Police, P.W. No. 79 Mr. Ashok Kutty, Inspector, the then C.B.I. Inspector P.W. No. 81 Mr. Dinesh Kumar Rai. P.W. No. 80 Mr. Rajendra Kaleshwar Prasad, during the course of investigation interrogated and recorded the statements and further statements of various witnesses, viz. (1) G.D. Vernekar, P.W. No. 2, (2) Omprakash S. Kuckian, P.W. No. 3, (3) K.B. Shenoy, P.W. No. 34, (4) N. Balasubramainan, P.W. No. 64, (5) B.N. Srikantha, P.W. No. 30, (6) P.N. Narayanrao, P.W. No. 26. (7) P.J. Subbarao, P.W. No. 38, (8) M.S. Krishnaswamy, P.W. No. 74, (9) P.B. Shinde, P.W. No. 73, (10) A.P. Rao, P.W. No. 25, (11) J.V. Shetty, P.W. No. 33, (12) K. Laksminarayan, P.W/No. 32, (13) J.R. Shroff, P.W. No. 31, (14) N.D. Parmeshwaran, P.W. No. 8, (15) S. Nagarajan, P.W. No. 70, (16) Nayan Samant, P.W. No. 6, (17) Rama Iyer Nanjappa, P.W. No. 65, (18) K.S. Rao, P.W. No. 23, (19) Shriram Gopal Khadilkar, P.W. No. 11, (20) R.L. Kulkarni, P.W. No. 13, (21) H.P. Balip, P.W. No. 12, (22) A.S. Kulkarni, P.W. No. 19, (23) M.K. Kher, P.W. No. 14, (24) M.D. Samangedkar, P.W. No. 21, (25) S.B. Mule, P.W. No. 15, (26) M.S. Khandekar, P.W. No. 72, (27) Meena M. Arbune, P.W. No. 16, (28) D.P. Gandhi, P.W. No. 20, (29) N.R. Jagtap Adv. P.W. No. 59, (30) P. Radhakrishnan, P.W. No. 63 and (31) C.R. Kanani, P.W. No. 69.
He also seized with the assistance of assisting officers, documents under various seizure memos. On 10th June, 1993 he also arrested Accused No. 12 Sarenathan Mohan.
29. Since accused Nos. 1 and 12, according to the prosecution, were the public servants being employees of CANFINA, P.W. No. 1 Mr. Kota Narsimha kamath as provided under the provisions of P.C. Act, 1988 passed the sanction order to prosecute the said accused on 8th October, 1993 in his capacity as a Managing Director of CANFINA which order has been produced as Exh. 39.
30. After completion of the investigation, the chargesheet was submitted before the Special Court then presided over by my Brother Judge Variava by the C.B.I. on 26th October, 1993 against 12 accused named hereinabove. The Investigation Officer, P.W. No. 80 thereafter under Panchnama obtained specimen writings of Accused No. 2 H.P. Dalai, Accused No. 3 A.D. Narottam, Accused No. 7 C.S. Raje, Accused No. 8 S.A. Ail, Accused No. 9 K.K. Kapadia, Accused No. 10 M.S. Kushte and Accused No. 11 S.N. Ramaswamy since there were various relevant documents of which, it is alleged that the said accused were authors or signatories thereof and then forwarded the same alongwith specimen handwritings to the Government Examiner. P.W. No. 67 Mr. Naresh Chandra Sood, the Government Examined, examined the said documents and has submitted his report. The said report forms part of the exhibits before the Court.
31. It is noticed that after filing of the chargesheet as above, the accused herein appeared before the Special Court. Some of the accused also presented applications claiming discharge, etc. The said applications were considered and came to be disposed of by rejecting the same. Then on 13th November, 1995, my Brother Judge Variava framed charges against all the accused of this case which is Exh. 8 on record. The accused were read over and explained the said charges when they abjured guilt and claimed to be tried and their pleas to that effect were separately recorded which are Exhs. 24 to 35 on record.
32. However, thereafter prosecution submitted an application for amendment of the charges and in particular addition of charges under sections 409 & 411 of Indian Penal Code (in short I.P.C.) which was opposed to by and on behalf of defence, but disallowing such opposition my Brother Judge Variava framed the revised charges with the addition of charges under sections 409 and 411 of I.P.C. on 7th January, 1997 being Exh. 23 on record. The same were read over and explained to all the accused again when they pleaded non-guilty and claimed to be tried. Their pleas have been separately recorded which form part of the record. Order framing charges dated 7th January, 1997 is Exh. 23 on record. It appears that some of the accused thereafter approached the Apex Court challenging the order dated 7th January, 1997 and framing of the charges but without success.
33. It is thought necessary to recapitulate nature of indictment/accusation against the accused of this case. The prosecution has alleged that the accused persons, in pursuance of the criminal conspiracy misrepresented the CANFINA through BRs due to which CANFINA parted with the amounts being amounts involved in the said three impugned transactions to BOK on the basis of false documents prepared and the accused thus used the same as genuine documents. The accused are charged with the offences of criminal conspiracy under section 120B cheating etc. to CANFINA for the sum of Rs. 374,35,18,354.78, under section 420 of I.P.C. and/or alternatively criminal misappropriation under section 409 of I.P.C as also under sections 411, 467, 468 and 471 of I.P.C. Accused Nos. 1 and 12 are also charged under section 13(1)(d) read with section 13(2) under P.C. Act, 1988 being the public servants.
34. Before I proceed to consider the prosecution case and various charges levelled against the accused, it will be useful to spell out the nature of evidence in this case.
NATURE OF EVIDENCE ADDUCED IN THIS CASE:
35. The evidence adduced by the prosecution consists of oral as well as documentary. In as much as the prosecution has examined 81 witnesses to bring home the charges in support of their case. Besides, they have also produced voluminous documentary evidence of as many as 800 exhibits.
36. The witnesses examined hail from various agencies being their officers or employees, tike, CANFINA, Canara Bank, Bank of Karad, M.C.B., Reserve Bank of India, Andhra Bank, ANZ Grindlays Bank, Citi Bank, Bank of America, State Bank of India, Syndicate Bank, Standard Chartered Bank, ABN Amro Bank, American Express bank, C.B.M.F. and National Housing Bank as also employees of Indian Bank Association (IBA). The prosecution has also examined one broker as also Notary before whom, it is alleged one of the accused, namely, Accused No. 2 H.P. Dalai made an affidavit, Handwriting Expert panch and Investigating Officers of C.B.I have also deposed.
37. The officers and employees of Canara Bank and CANFINA are from both the places i.e. from Bangalore as well as from Bombay. The officers include right from the then Chairman, Managing Director to down level to the Clerk. Such officers and employees have been examined who deposed how the transactions in Government securities on behalf of CANFINA were dealt with and processed, how the deals were finalized and so on. Through the same witnesses voluminous documents have also been made available which were relevant and involved in the processes of execution of security transactions. More or leas, same is the position as far as BOK and M.C.B. are concerned. The employees of other banks named above have been examined in support of the charge of diversion of the amounts. Whereas, the officers and employees of R.B.I. have been examined to prove the operation of S.G.L. Accounts and guidelines of the R.B.I. in the matter of security transactions which were to be followed by the banks and financial institutions and issued by R.B.I. from time to time. This is done as the prosecution case stand that the impugned security transactions were done in violation of the R.B.I. guidelines.
38. The documentary evidence principally comprises of the contemporaneous relevant documentation in the process of and relating to the impugned transactions in question as well as sub-transactions which flew therefrom. There are large number of documents because as far as Canara Bank and CANFINA are concerned, such documentation used to be done at four different centres, registered office of Canara Bank at Bangalore and its branch at Bombay, registered office of CANFINA at Bangalore and its head office in Bombay.
EVIDENCE ADDUCED ON BEHALF OF THE DEFENCE;
39. (i) It is necessary and pertinent to note that the evidence has also been adduced on behalf of the accused. Accused No. 3 A.D. Narottam, in particular has himself testified on oath and given evidence as provided under section 315 of Code of Criminal Procedure (in short Cr.P.C). He has also examined witnesses in support of his defence. He has also produced various documents. The witnesses examined are mostly the employees of various banks.
(ii) Some of the accused have produced and/or caused to be produced various documents from prosecution witnesses.
(iii) The trend and tenure of defence as revealed from the cross-examination of prosecution witnesses and written submissions filed, by and large, runs like this:-
(a) Accused Nos. 1 M.K.S. Ashok Kumar and Accused No. 12 S. Mohan both have denied having struck the impugned deals. They have also denied that they were only competent or authorized to strike and finalize deals in the transactions in securities. It is suggested that the impugned deals were struck with approval and to the knowledge of the concerned superiors. It is also pleaded that the transactions in question were done in a regular and normal course of business and as a part of duty and there is nothing amiss about the same. The said accused Nos. 1 and 12 sought to suggest that the impugned transactions were not meant for the account of Accused No. 3 A.D. Narottam. It is also pointed out by the accused Nos. 1 and 12 that the BRs of the impugned securities remained outstanding because of the failure of the concerned employees of CANFINA to take proper follow up action and that they were unaware that such BRs remained outstanding. They also have questioned the validity and efficacy of the sanction order of the prosecution against them.
(b) As far as Accused No. 2 is concerned, while not disputing he having acted as a broker for and on behalf of the CANFINA in the said impugned transactions, has denied various allegations made and charges levelled against him. He denies having diverted the fund for his own benefit. He also asserts that the impugned transactions are in regular and normal course of business and there is nothing amiss. In short, according to him, he is not responsible for the alleged loss to CANFINA or otherwise.
(c) As far as Accused No. 3-A.D. Narottam is concerned, as stated earlier, there is a peculiar factor in his case as he has chosen to testify on oath before this Court by exercising the option as provided under section 315 of the Cr.P.C. He has also examined certain witnesses and also produced certain documents. It may be noted that as the prosecution case stands it shows that the proceeds of the Pay Orders issued by CANFINA favouring BOK being the consideration of the three impugned transactions in securities were credited to his account, he has tried to explain how and in what circumstances said proceeds of the said Pay Orders were credited to his account and who are or were responsible or forced him to do so. In as much as, he says that he had not received any benefit of even a single pai from the proceeds of the said Pay Orders and that the entire amount with the last rupee was transferred or paid to Accused No. 2-H.P. Dalai, Accused No. 4-B.C. Dalai, Accused No. 5-T.B. Ruia and Accused No. 6-J.P. Gandhi. According to him, he was compelled to allow to route the said three impugned transactions in securities in his account because of prevalence and insistence of Accused Nos. 2, 4, 5 and 6. He has also made reference to certain liability of Accused No. 5 T.B. Ruia in respect of L.I.C. Mutual Fund and that in order to rotate the said liability which was very large in few crores that accused Nos. 2, 4, 5 and 6 evolved a scheme for rolling over the said liability and with that object the fictitious transactions in securities were put through in his account with BOK. According to him, he did not possess the securities in question involved in three impugned transactions and yet at the insistence of the said accused the BRs were issued by BOK. The BRs favouring CANFINA were issued by BOK which were not supported by the requisite securities. He also makes reference to the operation as and by way of Cover Up which was attempted by involving M.C.B. by the said accused. He suggests that the said cover up operations and transactions purportedly put through were entirely fictitious being on paper only as a device to manipulate his Security Ledger Account with BOK in order to show that the securities in the three impugned transactions existed in his account. In short, he denies his culpability and complicity and hence claims to be innocent and pleads having been made scapegoat and being a victim of circumstances. He has set out his case in his W/S in Civil Suits which are produced and contents will be noticed later on.
(d) Accused Nos. 4, 5 & 6:-- As far as said accused are concerned, they have denied their complicity and involvement in the various offences of which they are sought to be indicted asserting and pointing out there being no evidence made available by the prosecution to bring home the various charges against them.
(e) Accused No. 7, Agent of BOK :-- While not disputing being the author and/or signatory of various documents issued at the end of BOK in security transactions as also cover up operations, he pleads that he did so under the instructions of Accused No. 3 who was the Director at the relevant time of BOK.
(f) Accused No. 8 :- The defence of Accused No. 8 more of less proceeds on the similar line that of Accused No. 7 as mentioned hereinahove. In addition, he pleads that he being an ordinary Clerk acted under and upon the instructions of Accused No. 7 who was his superior.
(g) Accused No. 9 :- It may be recalled that his involvement in the prosecution case is confined to the cover up operation put through M.C.B. According to him, he was the Vice Chairman at the relevant time, of the said M.C.B. but it was a honorary post. He was not concerned nor did he take active part in the day-to-day working of the said M.C.B. much less in security transactions. He states that the then Chairman Mr. V.C. Desai was managing and attending to the affairs of the said M.C.B. including security transactions. As far as joint statement (Exh. 352) produced by the prosecution and which the officer of the R.B.I. Mr. K.S. Rao, P.W. No. 23 has proved and before whom the said joint statement was alleged to be made/given, he says that the same should not be relied upon and read in evidence against him. He states that the said statement was obtained under duress and under compulsion by the said R.B.I. Officer. In that, the R.B.I. stopped the clearing facility at the relevant time of the M.C.B. and as a result, there was a chaotic position and confusion as also commotion because M.C.B. was not in a position to satisfy its customers/clients. In that circumstances, he was required to sign the said statement so that R.B.I. lifted the stoppage of the clearing facility of the said bank.
(h) Accused No. 10 :-- More or less, he is also adopting the same stand as that of Accused No. 9 as above. In addition, he states that whatever he did, namely, preparation of the documents in the transactions in question, was done by him under the instructions of the then Chairman Mr. V.C. Desai."
(i) As far as Accused No. 11 is concerned, while he admits he being constituent and account holder of the M.C.B. and he being proprietor of Excel & Co. he denies various charges leveled against him. According to the three transactions in securities dated 16-9-91 put through in his account in M.C.B. were in normal course.
40. Having considered broadly the prosecution's case, nature of indictment against each of the accused the nature of evidence made available by and on behalf of the prosecution as also by the defence, the following points arise for determination :---
41. The points for determination and the finalization thereof are as follows:--
Transaction dated 6-4-1991 POINTS FINDINGS
1) Whether Accused No 1 Mulangi Krishna Swamy Ashok Kumar and Accused No. 12-Sarenathan Mohan were respectively the Chief Dealer and Dealer of CANFINA in its registered office at Bangalore at the relevant time?
Yes
2) Whether Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan being dealers as such of CANFINA at the relevant time i.e. between April 1991 to May 1992 possessed authority to negotiate and finalize transactions in Government securities both for sale and purchase for and on behalf of CANFINA severally /independently and that each one of them thus were competent to take decisions independently in striking the deal in security transactions for and on behalf of CANFINA without there being any financial limits.?
Yes
3) Whether Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan were public servants under the provisions of Prevention of Corruption Act, 1988?
Yes
4) Whether sanction order is required and/ or whether the sanction order to prosecute Accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan is valid?
Yes
5) Whether Accused No. 1-M.K.S. Ashok Kumar and/or Accused No, 12-S. Mohan struck and finalized at Bangalore the transactions in Government Securities viz. transaction dated 6-4-1991 in respect of purchase of 11. 50% Government of India Central Loan 2008 securities of the face value of Rs. 25 crores from Bank of Karad, Bombay on account of A,D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA on the same date i.e. 6-4-1991?
Yes
6) Whether Accused No. 2-Hiten Prasan Dalal was involved and acted as a broker in the said transaction for and on behalf of CANFINA?
Yes
7) Whether Accused No. 3-A.D. Narottam constituent of the Bank of Karad issued his Delivery Order being Ex. 191 dated 6-4-1991 to Bank of Karad in respect of the aforesaid securities directing BOK for delivering the said securities to CANFINA and whether he held/possessed the said securities in his account with Bank of Karad to meet the commitment of the said Deal?
Yes. Accused No. 3 issued his Delivery Order without holding or possessing in his account the security in question.
8) Whether accused Nos. 7 and 8 C.S. Raje and S.A. Ail respectively issued cost memo in respect of the said securities viz, 112% GOI F. V. 25 crores being Ex. 188 favouring CANFINA and its Bank Receipt Ex. 189 for the sum of Rs. 25,99,23,8 I8/- in respective of said securities favouring CANFINA without being backed up by the said securities?
Yes
9) Whether CANFINA paid and parted with sum of Rs. 25,81,20,354.38 as price of the said securities by its Pay Order dated 6-4-1991 Ex 41 favouring Bank of Karad to Bank of Karad on the strength of said Cost Memo & BR and whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 184?
Yes
10) Whether Bank of. Karad credited the sum of Rs, 25,81,20,354/38 being the proceeds of the said pay order Ex, 41 into the O/D account No. 301 of Accused No. 3-A.D. Naro- . ttam with Bank of Karad on the same day i,e. on 6-4-1991 in absence of instructions of CANPINA/Canara Bank in that behalf?
Yes
11) Whether on the same day said amount of Rs. 25,81,20,354.38 being the sale proceeds of Pay Order Ex. 41 was diverted from the said account of Acc^ used No, 3-A.D. Narottam with Bank of Karad to other banks for being credited into account of Accused No. 2-H.P. Dalai and other accused Nos. 3, 4, 5 and 6. Only against Accused No. 2 in his account.
Yes
12) Whether Accused No. 1-M.K-S. Ashok Kumar and/or Accused No, 12-S Mohan struck and finalized the transactions in Government Securities viz. transaction dated 22-7-91 in respect of purchase of 16 crore Units of UTI from Bank of Karad, Bombay on account of A.D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA?
Yes
13) Whether Accused No. 2-H.P. Dalai was involved and acted as a broker in the said transaction for and on behalf of CANFINA?
Yes
14) Whether Accused No, 3-A.D. Narottam, Constituent of the Bank of Karad issued the Deliver Order being Ex. 194-A dated 22-7-91 to Bank of Karad in respect of the aforesaid securities directing BOK for delivering the said securities to CANF1NA held/possessed the said securities in his account with Bank of Karad?
Yes. Without holding or possessing the security in question in his account.
15) Whether accused Nos. 7 and 9 C.S. Raje and K.K. Kapadia respectively issued cost memo in respect of the said securities being Ex. 195 favouring CANFINA and its Bank receipt Ex. 196 for the sum of Rs. 212,80,00,000/- in respect of said securities favouring CANFINA without being backed up by the said securities?
Yes
16) Whether CANFINA paid and parted with sum of Rs, 212,75,00,000/- as price of the said securities by its pay order dated 22-7-91 Ex. 52 favouring Bank of Karad to Bank of Karad and whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 196?
Yes
17) Whether Bank of Karad credited the sum of Rs. 212,75,00,000/- being the proceeds of the said Pay Order Ex, 52 into the O/D account of Accused No. 3-A.D. Narottam with Bank of Karad on the same day i,e. on 22-7-1991 in absence of specific instructions of CANFINA or Canara Bank?
Yes
18) Whether on the same day said amount of Rs. 212,75,00,000/- being the sale proceeds of pay Order dated 22-7-1991 Ex. 52 was is diverted from the said account of Accused No. 3-A.D. Narottam with Bank of Karad to other banks for being credited into account of Accused No. 2 and other accused Nos. 4, 5 and 6.
Yes.
i) As far as Accused No. 2 is concerned, there is direct transfer/credit of sum of Rs. 9,73,46,938.38 into his joint account in Andhra Bank without there being any consideration and that accused No. 2 utilized the said amount for his own security transaction.
ii) As far as other accused Nos. 4, 5 and 6 are concerned it is held to have not been proved against them.
19) Whether Accused No. 1-MK.S. Ashok Kumar and/or Accused No. 12-S. Mohan struck and finalized the transactions in Government Securities viz. transaction dated 31-7-91 in respect of purchase 11.50% Government of India Central Loan 2008 securities of the face value of Rs. 25 crores from Bank of Karad, Bombay on account of Accused No. 3-A.D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA?
Yes
20) Whether Accused No. 2-H.P. Dalai was involved and acted as a broker in the said transaction" for and on behalf of CANFINA?
Yes
21) Whether Accused No. 3-A.D. Narottam Constituent of the Bank of Karad issued the Deliver Order being Ex. 265-A dated 31-7-91 to Bank of Karad in respect of the aforesaid securities viz. 19 crores Units of UTI directing BOK for delivering the said securities to CANFINA and whether he held/ possessed the said securities in his account with Bank of Karad to meet the commitment thereof?
Yes. Without holding / possessing security in question in his account.
22) Whether Accused Nos. 7 and 8 C.S. Raje and S.A. Ail respectively issued cost memo in respect of the said securities being Ex. 229 favouring CANFINA and its Bank Receipt Ex. 228 for the sum of Rs. 255,43,98,000/- in respect of said securities favouring CANFINA without being backed up by the said securities?
Yes
23) Whether CANFINA paid and parted with sum of Rs. 255,43,98,000/-as price of the said securities by its pay order dated 31-7-91 Ex. 66 favouring Bank of Karad to Bank of Karad on the strength of said cost memo and BR and Whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 228?
Yes
24) Whether Bank of Karad credited the sum of Rs. 255,43,98,000/- being the proceeds of the said Pay Order Ex. 66 into the O/D account of Accused No. 3 A.D. Narottam with Bank of Karad on the same day i.e on 31-7-1991 in absence or instructions from CANFINA of Canara Bank?
Yes
25) Whether on the same day said amount of Rs. 212,75,00,000/- being the sale proceeds of Pay Order Ex. 52 was diverted from the said account of Accused No. 3 A.D. Narotttam with Bank of Karad to other banks for being credited into account of accused No. 2-H.P, Dalai and other accused Nos. 4-B.C, Dalai, 5-T.B. Ruia and 6-J.P. Gandhi.
Yes. But only as far as Accused No. 2-H.P. Dalai is concerned, as under:
i) Rs. 13,25,00,000/- BOK by its Pay Order Ex. 272 dated 31-7-91 paid to Bank of America sumof Rs. 13,69,58,0007-without there being any security transaction/ consideration and Bank of America paid the sum of Rs, 13,25,00,000/ -by its Pay Orderdated 2-8-91 being Ex. 545 to Andhra Bank which amount was cred ited into the joint account of Accused No. 2 with Andhra Bank, without there being any consideration.
ii) A sum of Rs. 20,00,00,000/- by pay order of BOK being Ex. 270 to Andhra Bank directly credited into the joint account of accused No. 2-H.P. Dalai, without there being any consideration.
iii) Rs. 9,94,92,500/-as per debit voucher of BOK dated 31-7- 1991 being Ex. 283 for the beingh of Rs. 9,94,92,500/-and credit voucher of Andhra Bank dated 1-8-1991 for the sum of Rs. 9,94,92,5007- being Ex. 419, the said amount is directly credited into the joint account of accused No. 2 in Andhra Bank, without there being any consideration.
26) Whether accused Nos. 1 and/or 12 struck and finalized the subtrans-action on 15-10-91 in respect of sale of 1.5 crores Units of UTI from Bangalore by CANFINA to BOK, Bombay ?
Yes
27) Whether accused Nos. 1 and/or 12 struck and finalized the sub-transaction on 18-10-1991 in respect of sale of 7.5 crore Units of UTI from Bangalore by CANFINA to BOK, Bombay ?
Yes
28) Whether Accused No. 2-H.P. Dalai, 4-B.C. Dalai, 5-T.B. Ruia and 6-J.P, Gandhi utilized the amounts so diverted/received as aforesaid mentioned in point Nos. 11, 18 and 25 for their own benefits in their own security transactions ?
Yes.In so far as accused No. 2 is concerned. In case of other accused not proved.
29) Whether CANFINA was fraudulently and dishonestly induced to part with moneys covering the aforesaid three transactions ?
Considered not necessary in view of findings on point Nos. 30, 31 & 32. Yes. To the extent of Rs. 374,35,18,354-78 only.
30) Whether accused Nos. 1-M.K.S. Ashok Kumar and/or 2-H.P. Dalai in their capacity as public servants abused their positions as such public servants and by corrupt and illegal means obtained pecuniary advantage to Bank of Karad account A.D. Narottam and others to the extent of Rs. 374,35,18, 354.78 and dishonestly and/or fraudulently have put CANFINA to wrongful loss of Rs. 434,01,20,354.78?
Yes
31) Whether accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan respectively as employees of CANFINA being the Chief Dealer and Dealer respectively have dominions over the property viz. security/ funds of CANFINA and were entrusted with the same as such ?
Yes
32) Whether there is dishonest misappropriation of property viz, a sum of Rs, 374,35,018,354,78 of CANFINA?
Yes
33) Whether bankers receipts issued by Bank of Karad and signed by accused No. 7-C.S. Raje being
(i) No. 3259 dated 6-4-91 Ex. 189.
(ii) 3499 dated 22-7- 1991 "Ex. 196.
(iii) 3425 dated 31-7-1991 Ex. 228 and one SQL Transfer Form dated 18-4-1992 Ex. 190 were forged documents?
Yes
34) Whether Bankers Receipt No. 12, Ex. 344 in respect of security of 1 12% GOI 2008 face value 25 crores at the rate of 101%, No. 13, Ex. 343 in respect of security of 16 crore Units of UTI face value Rs. 16 crores at the rate of 13.30% and No. 14, Ex. 345 in respect of security of face value of Rs. 19 crores at the rate of 13.30% all dated 16-9-1991 issued by and on behalf of MCB favouring Bank of Karad were issued and/or brought into existence with the object of showing bogus purchase of securities thereunder by Bank of Karad from MCB to manipulate and to cover up lack of securities with Bank of Karad under its bankers receipts 3259 dated 6-4-91, 3499 dated 22-7-91, 3425 dated31-7-91 being Exs. 189, 196 and 228 respectively referred to above and issued in favour of CANFINA?
Yes
35) Whether the said bankers receipts of Bank of Karad bearing Nos. 3259, 3499, 3425 respectively Exs. 189, 196 and 228 and of MCB bearing Nos. 12, 13 and 14 respectively being Exs. 344, 343 and 345 were forged for use of as "genuine documents".
Yes
36) Whether there existed criminal conspiracy during April, 1991 to May, 1992 between the accused-conspirators?
Yes. In so far as accused Nos. 1, 2, 3 and 7 to 12 are concerned. Not proved against accused Nos. 4, 5 and 6.
37) Whether it is proved that Accused Nos. 2-H.R Dalai and No. 3-A.D. Narottam, No. 4-B.C. Dalai, 5-T.B. Ruia 6-J.P. Gandhi and 11-S.N. Ramaswamy dishonestly received and retained the part of the said amount and used for their own security transactions ?
Yes.
i) Accused No. 2-H.P. Dalai as held in point Nos. 11, 18 & 25 i.e. Rs. 78, 91, 27, 715.15.
ii) Yes, against accused No. 3 A.D. Narottam i.e. Rs. 295, 28, 90, 639.63.
iii) Yes. Against accused No. 11S.N. Ramaswamy a sum of Rs. 15 lakhs.
38) Whether the accused herein or any of them have committed offences with which they are charged and if so, what offences ?
against accused Nos. 4, 5 and 6.
i) Accused Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalai, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A., Ail 9-K.K, Kapadia, 1Q-M.S. Kushte, 11-S.N. Ramaswamy and 12-S. Mohan are held to be guilty being parties to a continuing criminal conspiracy between April, 199 land May, 1992 at Bangalore and Bombay, the object whereof, was to "commit criminal breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,354.78" punishable under section 120B read with section 409 of I.RC.
ii) Accused Nos. 1-M.K.S. Ashok Kumar and 12-S, Mohan are held guilty of offences under section 409 r/w section 109 of I.P.C. for the offence of committing breach of trust in respect of the property of CANFINA viz. Rs. 374,35,18,354.78.
iii) Accused Nos. 2- H.P. Dalai, 3-A.D.Narottam, 7-C.S.Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy are held guilty under section 409 read with section 109 of I.P.C. for abetting accused Nos. 1 and 12 in commission of offence of criminal breach of trust in respect of property of CANFINA with the urn of Rs. 374,35,18,353,78.
iv) Accused Nos, 1-M.K.S. Ashok Kumar, 12-S. Mohan are held guilty for the com mission of offences under section 13(l)(d) read with section 13(2) of the Prevention of Corruption Act, 1988 being public servants for abus ing their positions as such public servants and by corrupt and illegal means obtained for Bank of Karad A/c Accused No. 3-A.D. Narottam, Accused No. 2-No. Dalai, Accused No. 11-S.N. Rama swamy pecuniary advantage of Rs. 374,35,18,354,78 and caused wrongful loss to CANFINA to the extent of the said amount.
v) Accused Nos. 2-H.P. Dalai, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A.Ail, 9-K.K. Kapadia, ID-MS. Kushteand 11-S.N. Ramaswamy are held guilty under section 13(l)(d) read with section 13(2) of the Prevention . of Corruption Act, read with section 109 of I.P.C. for abetting accused Nos. 1 and 12 in the offence of criminal misconduct and corrupt practice being public servants.
vi) Accused Nos. 2- H.R Dalai, 3-A.D. Narottam, 7-C.S. Raje, 8-S,A. Ail each one of them held to be under section 467 of I. P.O. r/w section 120B for the offence of forging documents viz.cost memo dated 6-4-9 1 Ex, 188, BR dated 6-4-91 Ex, 189, cost memo dated 22-7-91 Ex. 195, BR dated 22-7-91 Ex. 196, cost memo dated 31-7-91 Ex.229 and BR dated 31-7-91Ex, 228 of BOK and SQL formdated 18-4-92 Ex. 190purported to be valuable security with the common object of receiving properly viz. sum of Rs, 374,35,18,354.78 from CANFINA.
vii) Accused Nos, 2-H.P. Dalai, 3-A.D. Narottam, 7-C.S.Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushteand 11-S.N. Ramaswamy each one of them held to be guilty section 467/r/w 120B of I.P.C. for the offence and forging documents viz. cost memo dated 16-9-91 Ex. 667. BR dated 16-9-91 Ex. 344, cost memo dated 16-9-91 Ex. 668, BR dated 16-9-91 Ex. 343, cost memo dated 16-9-91 Ex. 669, BR dated 16-9-91 Ex. 345 of MCB, purported to be valuable security with the object of receiving property viz. the sum of Rs. 374,35,18,354.78 from BOK A/c CANFINA.
viii) Accused Nos. 2-H.P, Dalai, 3-A.D, Narottam and 11-S.N. Ramaswamy each one individually are held guilty under section 411 of I.P.C for dishonestly receiving and retaining the property out of Rs. 374,35,18,354.78 i.e. as under :
i) Accused No. 2-H.P. Dalai Rs. 78,91,27,715.15.
ii) accussed No. 3-A.D. Narottam.Rs. 295,28,90,639.63
iii) AccusedNo,ll-S.N. Rarnaswamy Rs. 15 lakhs received from CANFINA knowing and believing the same to be stolen property.
ix) As far as accused Nos. 4-B.C. Dalai, 5-T.B. Ruia and 6-J.P. Gandhi are con cerned, it is held that charges levelled against them have not been proved by and equate evidence.
42. Point No. 1:---i) There is overwhelming and clinching evidence to the effect that at the relevant time i.e between April, 1991 to May, 1992 Accused No. 1 and 12 viz. M.K.S. Ashok Kumarand S. Mohan respectively were Chief Dealer and Dealer of CANFINA in its registered office at Bangalore. Such evidence consists of oral as well as documentary. The official designation of Accused No. 1-M.K.S. Ashok Kumar was Executive Vice President of CANFINA and that of accused No. 12-S. Mohan was Assistant Vice President. Both were the employees of CANFINA and their official designations were respectively as Chief Dealer and Dealer.
(ii) It has been deposed to by various witnesses examined in this case particularly officers and employees of CANFINA and Canara Bank the official positions and designations of Accused No. 1 and 12. P.W. No. 1-K.N. Kamath the Managing Director has clearly deposed to that effect in his, evidence and he has been corroborated by P.W. No. 2 D.G. Vernekar, P.W. No. No. 3 O.S. Kukian, P/W. 25-P.R. Appana, P.W. 26-P.N. Narayan Rao, P.W. 29-K.S. Shetty, P.W. 30-B N. Shri Kantha, P.W. 34-K.B. Shenoy and P.W. 64-N. Balasubramanian. All these witnesses have deposed with one tune that Accused No. 1- M.K.S. Ashok Kumar and 12-S. Mohan were the Dealers of CANFINA based in its registered office at Bangalore. Apart from the fact that the evidence of the said witnesses corroborates to each other there is no challenge on behalf of the said witnesses corroborates to each other there is no challenge on behalf of the said accused to the said part of evidence of these witnesses. It may further be stated that in the written statements of the said accused filed in these proceedings the fact that they were dealers of CANFINA at the relevant time has been admitted. This is also the position which is reflected in their respective explanations offered under section 313 of Criminal Procedure Code.
43. Therefore taking into consideration such evidence there is no difficulty in answering the said point in affirmative.
44. Point No. 2---i) This point is very crucial and assumes crucial significance in the context of the prosecution case and the charges which they are facing vis-a-vis the roles played and attributed in the impugned Security Deals.
ii) The prosecution has made available oral as well as documentary evidence to establish the fact that Accused Nos. 1 M.K.S. Ashok Kumar and 12-S. Mohan acting as dealers of CANFINA at the relevant time possessed the authority to negotiate and finalize transactions in Government securities both of sale and purchase for and on behalf of CANFINA. The evidence has also been adduced to establish that both the Accused Nos. 1 and 12 possessed authority severally and independently and each one of them was competent to take decisions independently in striking the deals in security transactions for and on behalf of CANFINA. The witnesses who have deposed that Accused No. 1 and 2 as dealers were thus severally and independently striking and finalizing CANFINA'S transaction in security deals are P.W. 1 K.N. Kamath, P.W. No. 2 D.G. Vernekar, P.W. No. No. 3 O.S. Kukian, P.W. 25-P.R. Appana, P.W. 26-P.N. Narayan Rao. P.W. 29-K.S. Shetty, P.W. 30-B N. Shri Kantha, P.W. 34-K.B. Shenoy and P.W. 64-N. Balasubramanian. The said witnesses at the relevant time were employees either of CANFINA or Canara Bank and were associated and concerned in one capacity or the other in the process of putting through Security Deals since CANFINA was subsidiary of Canara Bank they also had to play roles in the system operations of the security transactions of CANFINA. In their cross-examinations nothing contrary has been indicated. As far as Accused No. 12-S. Mohan is concerned he has attempted to suggest that he worked under Accused No. 1 M.K.S. Ashok Kumar and did not enjoy and possess independent authority and power to undertake and finalize transactions in securities for and on behalf of CANFINA. He has also tried to make out that he did not possess financial power and since no such powers were delegated by the Board of Directors of CANFINA he could not and in fact did not execute security transaction on his own.
iii) However on the strength of overwhelming evidence made available by the prosecution through the various witnesses as referred to earlier the stand taken by Accused No. 1-M.K.S. Ashok Kumar 2 sic 12 S. Mohan does not hold water good.
iv) In this respect it is useful to refer to other aspect of the evidence viz. the Resolutions passed by the Board of Directors of CANFINA delegating powers to its various officers. It may be stated that various such notes and resolutions have been made available before the Court by and on behalf of Accused No. 1 M.K.S. Ashok Kumar and the same are Exs. A-1 (5), A-1(8), A-1(9), A-1(10) and A-(11) respectively being CANFINA'S Resolutions and Board Notes being dated 25-1-1991, 28-1-1991, 12-3-1990, 30-11-1991 and 10-8-1989. It may be stated that vide above Board Notes and Resolutions of CANFINA'S Board of Directors had delegated powers to its various officers including the officers of Canara Bank in the matter of operation of the bank accounts and processing security transactions on behalf of CANFINA etc. Board Note and Resolution Ex. A-1(11) dated 10-8-1989 of CANFINA is the most relevant in the context of this point The said Board Note-Resolution makes reference to its earlier resolution dated 12-6-1989 and which proceeds on the following lines:-
"RESOLVED THAT Mr. R. Lakshminarayanan, Executive Vice President, Registered Office, Mr. M. K. Ashok Kumar, Vice President, Registered Office, Mr. K.C. Poulose, Senior Vice President, Bombay, Mr. A. Kalaimani, Vice President, Bombay, Mr. V.K. Nayak, Senior Vice President. Bombay, Mr. M.N. Baliga, Group Executive, Bombay, Mr. Anwer Saheb, Vice President, Bombay, Mr. S. Mohan, Senior Project Executive, Registered Office and Mr. S. Srinivasan, Project Executive, Bombay of CANBANK FINANCIAL SERVICES LTD. are hereby severally authorized to sell, purchase, transfer, endorse, negotiate and /or otherwise deal in Government securities and securities of Industrial Finance Corporation (I.F.C.) and National Bank for Agricultural and Rural Development (NABARD) to sign letter of indemnity, 1 execute bond of indemnity, guarantee, sign declaration and also authorized to receive interest and principal thereof on behalf of Canbank Financial Services Ltd."
(Underline mine which refers to Accused No. 1 and 12).
The names of Accused Nos. 1 and 12 also appear in the list of various officers who were authorized and to whom powers were delegated severally in various matters as specified therein. It would show that since 12-6-1989 the authority existed in favour of Accused Nos. 1 and 12.
v) It is further noticed from the said Ex. A-1(11) that in the meeting of 10-8-1989 the following resolution was passed:-
"Resolved that Sri. S. Mohan, Senior Project Executive, Regd. Office, Shri R. Ganapathi, Senior Project Executive. Delhi, Shri. S. Srinivasan, Project Executive, Bombay, Shri. M.N. Baliga, Group Executive, Bombay of CANBANK FINANCIAL SERVICES LTD. are hereby "severally" authorized to sell, purchase, transfer, endorse, negotiate and/or otherwise, deal in securities of I.D.B.I. (Industrial Development Bank of India), U.T.I. (Unit Trust of India) Debentures of Public Limited Companies and Bonds of Public sector Corporations, besides Government, I.F.C.I. & NABARD Securities, to sign letter of indemnity, execute bond of indemnity, guarantee, sign declaration and are also authorized to receive interest and principal thereof on behalf of Canbank Financial Services Ltd."
(Underline mine which refers to Accused No. 12).
It will he noticed by reading the contents of the said resolution that Accused No. 12. S. Mohan is one who was also authorized to undertake security deals for and on behalf of CANFINA. It is necessary to note that in the said resolution as will be evident by reading the portion reproduced hereinabove that no financial, limits of restrictions were imposed in the security transactions that would be undertaken and finalized by those upon whom such power was delegated vide said Resolutions which include the name of Accused No. 12-S Mohan.
vi) At this juncture it is also necessary to note that CANFINA imposed restrictions and put limits with a view to streamline the functions of its Funds Department by its board resolutions dated 30-11-1991 being Ex. A-(10). It clearly emerges and shows that as on the dates when the impugned transactions in this case were undertaken i.e on 6-4-1991, 22-7-1991 and 31-7-1991 and sub-transactions on 15-10-1991 and 18-10-1999 their existed no financial limits as such. It also further clearly shows that on the dates of the transactions being the subject matter in this case both the Accused No. 1 and 12 possessed and enjoyed authority to undertake transactions in securities independently. That being so on consideration of the evidence as discussed hereinabove Point No. 2 has to be answered in affirmative.
45. Point No. 3: i) The answer to this point need not detain us any longer. While considering Point No. 1 hereinabove it is held that Accused Nos. 1 and 12 were the employees of CANFINA at the relevant time were respectively Executive Vice President and Assistant Vice President and they were also Chief Dealer and Dealer respectively. It therefore clearly shows that they were employees as such of CANFINA.
46. Now one has to see what is the status of CANFINA. It is undisputed position and there is in evidence of so many witnesses in particular the officials and employees of CANFINA and Canara Bank viz. P.W. 1-K.N. Kamath, P.W. No. 2-D.G. Vernekar, P.W. No. 3-O.S. Kukian, P.W. 25-P.R. Appana, P.W. 26 -P.N. Narayan Rao, P.W. 29-K.S. Shetty, P.W. 30--B. N. Shri Kantha, P.W. 34 K.B. Shenoy and P.W. 64 N. Balasubramanian that CANFINA was the wholly subsidized company of Canara Bank which in turn is a Nationalized Bank. This aspect has also been highlighted by P.W. No. 65 Rama Iyer Nanjappa an officer of the Reserve Bank of India who had conducted investigation and rendered his reports of findings which have been produced as Exs. 642. 643, 644 and A-1(16). The said reports relate to the inspection in respect of security deals of CANFINA which the said officer carried out as officer of the Reserve Bank of India under the instructions of his superior and authorized officers under the provisions of Reserve Bank of India Act and Banking Regulation Act. In the said report he has mentioned the status of CANFINA and has also deposed in his evidence before the Court. His version before the Court and what he has recorded in the reports also lends corroboration to the evidence of various witnesses mentioned above who have stated that CANFINA was subsidiary of Canara Bank.
47. There is further piece of evidence and that is Ex. A-1(14) being letter bearing No. CAD. 3485/C. 446 (LF)CB/CF. SL-87 dated 28-5-1987 addressed by the Chief Officer of the Reserve Bank of India to the Chairman and Managing Director of Canara Bank, Head Office, Bangalore giving the approval of the R.B.I. to Canara Bank for the establishment/constitution of CANFINA as it subsidiary. By the said letter the R.B.I. has specified the ambit of activities which CANFINA was permitted to undertake as a subsidiary of Canara Bank which included to deal in various securities i.e. Government securities as well as other securities. This document clearly shows that CANFINA is wholly subsidiary of Canara Bank. Section 2(c) of the Prevention of Corruption Act (P.C. Act) and section 21 of Indian Penal Code (I.P.C.) enumerate officials who would fall in the category of public servants. It is pertinent to note that both the said Acts do not define public servant but describe them by enumeration. Since CANFINA is wholly owned subsidiary of Canara Bank, which is Nationalised Bank, it follows that Canara Bank holds 100% of the Share Capital of CANFINA and as such becomes a Government Company. Section 617 of the Indian Companies Act, defines Government Company thus:
"S.617 Definition of "Government Company" for the purpose of (this Act) Government company means any company in which not less than fifty one per cent of the (paid-up share capital) is held by the Central Government, or by any State Government or Governments, or partly by the Central Government, and partly by one or more State Government, (and includes a company which is a subsidiary of a Government company as thus defined)."
The plain reading of the quoted section makes it clear that CANFINA is a Government company and that being so, Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan being its employees are public servants. This point stands answered accordingly.
48. Point No. 4: i) While considering Point No. 3 above it is held that Accused Nos. 1 and 12 at the relevant time were public servants. That being so, since in this case there are allegations of criminal mis-conduct by public servants and dishonest and fraudulent misappropriation of the properties of CANFINA as required under section 19 of P.C. Act sanction from the appropriate and competent Authority to prosecute as far as said Accused Nos. 1 and 12 are concerned is necessary
ii) In this case the prosecution has produced sanction order which is Ex. 39 being dated 8-10-1993 passed by P.W. 1-K.N. Kamath then M.D. of CANFINA. The said sanction order sets out the status of all the 12 accused, the impugned transactions and how the same were processed. Accused No. 1 and 12 being the employees of CANFINA; abusing there official position as public servants and affording pecuniary advantage to accused in this case; how the transactions were put through, CANFINA parting with the money; BOK issuing BRs without there being security etc. The concluding part of the said sanction order which is relevant reads as under :
"AND WHEREAS I, Sri. K.N. Kamath, Managing Director being the authority competent to remove the said Sri. M.K. Ashok Kumar and Sri. S. Mohan from the Office, after fully and carefully examining the material before me in regard to the said allegations and the circumstances of the case, consider that the said Sri M.K. Ashok Kumar and Sri. S. Mohan should be prosecuted in a Court of Law for the said offence/offences.
NOW, THEREFORE, I do hereby accord sanction under section 19(1)(c) of the Prevention of Corruption Act, 1988 for the prosecution of the said Sri. M.K. Ashok Kumar and Sri. S. Mohan for the said offence/ offences and any other offences punishable under other provisions of Law in respect of the acts aforesaid and for taking of cognizance of the said offences by a Court of competent jurisdiction."
iii) This witness P.W. 1 K.N. Kamath sanctioning officer in his deposition has deposed:
"20. While issuing sanction orders, I went through the report of the Investigating Agency, the record kept and maintained by CANFINA and after gathering the information from the concerned employees of the said Company and I was satisfied that there was a prima facie case for launching prosecution against Accused Nos. 1 and 12 that I issued/passed the said sanction order."
iv) It has to be noted and as will be dealt with hereinafter that the prosecution has produced voluminous evidence to establish how the impugned transactions being the subject matter of this prosecution were processed and put through. The most of the documentary evidence made available consist of contemporaneous record of CANFINA at Bombay and Bangalore as also of Canara Bank at Bombay and Bangalore where CANFINA had its accounts and through which accounts the transactions in question were processed as also such record at the end of BOK. This witness has stated having gone through such record before passing the sanction order. He has also made reference to the report of investigating agency which CANFINA received after lodging the complaint on 19-6-1992 vide CANFINA's letter which has been produced as Ex. 38. As a matter of fact, this witness was subjected to cross examination by and on behalf of almost all the accused. An attempt was directed to elicit this officer having not applied his mind and that he had accorded sanction vide Ex. 39 to prosecute accused Nos. 1 and 12 without application of mind and without examining the relevant record. But this witness has reiterated and reaffirmed that he did go through the relevant record and applied his mind while according said sanction. He has also stated that he got the said sanction order drafted from the Legal Department of CANFINA. It needs to be stated that the provision as contained in section 19 of P.C. Act is the sort of measure to safeguard a public servant from unnecessary harassment. It is therefore necessary to have well considered opinion of the superior authority before prosecution became necessary. The Court has to see whether the sanctioning authority had before according sanction applied its mind to the facts of the case constituting the offences. The order must exhibit that the sanctioning authority has objectively applied its mind and also must reveal that there was prima facie evidence which prompted the sanctioning authority to record. In my view, reading the sanction order Ex. 39 it is to be held that the same fulfils the requirement of the statute as also satisfies the conscious of the Court. In view of this the point herein stands answered that accused Nos. 1 and 12 being public servants such sanction order was necessary and that the said sanction order Ex. 39 is valid.
49. Before I take up for consideration next point for determination being Point No. 5 onwards, it is thought appropriate to mention, at this stage itself, certain common and almost similar features and aspects of the evidence that has been made available by the prosecution before the Court in this case which revolves even three impugned transactions and two sub-transactions in securities between CANFINA and BOK being dated 6-4-1991, 22-7-1991, 31-7-1991, 15-10-1991 and 18-10-1991.
i) As far as first transaction dated 6-4-1991 is concerned, which was entered into by means of Bank Receipt on 6-4-1991. On 18-4-1992 the BOK issued its S.G.L. as substitution to the said BR which on presentation with RBI, came to be dishonoured on account of insufficiency of balance.
ii) As far as second transaction of 22-7-1991 is concerned, there were two further as and by way of sub-transactions. That is to say that on 15-10-1991, BOK re-purchased 1.5 crore units from CANFINA and on 18-10-91 BOK re-purchased 7.5 crore units of UTI from CANFINA reducing the liability under BOK's BR issued on 22-7-1991 transaction for 16 crore units by 9 crore Units, thus leaving balance of 7 crore Units. Thus there are 5 occasions when transaction in securities between CANFINA and BOK have been processed through.
50. It is to be stated and as would be noticed in the light of evidence made available, that pattern and manner of execution and processing of the said transactions right from the stage of striking deals to execution, the methodology adopted and followed is almost similar. That is to say, according to prosecution, Accused No. 1 M.K.S. Ashok Kumar and /or Accused No. 12-S. Mohan who were dealers of CANFINA struck and finalized the said deals i.e three main transactions as also two sub-transaction for and on behalf of CANFINA, from Bangalore with BOK, Bombay in which Accused No. 2 H.P. Dalai was the common broker. Personnel, being the employees of the concerned institutions, namely, CANFINA, Canara Bank and BOK involved in the process of execution of the said security transaction were the same and prosecution has examined all those who were concerned in that process as its witnesses before the Court. The prosecution has also made available the contemporaneous documentary evidence which is voluminous, relating to the said transactions.
51. As stated earlier, the methodology is almost similar in all the transactions. The prosecution has adduced evidence in each of the transactions separately and rightly so. Hence Point Nos. 5, 12, 19,26 and 27 are considered separately and independently. There is likely to be repetition and or overlapping while dealing with the evidence. But in the circumstances same seems to be inevitable. However certain aspects which have clearly emerged from evidence, are mentioned as under:-
i) CANFINA had its registered officer at the relevant time at Bangalore. It is wholly subsidiary of Canara Bank, Bangalore. Canara Bank had also its registered office at Bangalore. CANFINA had its account with Canara Bank at Bangalore as also in Bombay Branch which were used by it for its security transactions.
ii) CANFINA had at the relevant time its Office located at Bombay at Atlanta Building, Nariman Point, Bombay where its Managing Director used to be incharge.
iii) Canara Bank had its Branch Office in Bombay and its Money Market Group was at the relevant time located at Verma Chambers, Fort, Bombay. CANFINA had its Current Account with Canara Bank, Bombay situated at B.S. Marg, Bombay. The Canara Bank had also Funds and Investment Section located at Verma Chambers, Fort, Mumbai.
iv) At the relevant time P.W. 2-Mr. Dhundiraj Gangadhar Vernekar who was although the officer of Canara Bank, was authorized by CANFINA by Board Resolution to sign cheques, BR's and such relevant documents in connection with the security transactions. Mr. K.D. Prabhu and Mr. R. Venugopalan were the other Officers of Canara Bank, Bombay Office were also authorized by CANFINA in that respect.
v) P.W. 3 Mr. Omprakash S. Kukian, an employee of CANFINA was posted in Bombay Office and he used to assist P.W. 2 Mr. Dhundirai Gangadhar Vernekar in the security transactions of CANFINA by maintaining records etc. Both these witnesses P.W. 3 Mr. Omprakash S. Kukian and P.W. 2- Mr. Dhundiraj Gangadhar Vernekar have deposed before the Court to that effect and it may be stated that the said evidence has not been questioned or challenged by and on behalf of defence.
vi) Bank of Karad Ltd., a Schedule Bank had its registered office at Sangli being District place in Maharashtra and its concerned branches dealing in securities were located at Rajabahadur Compound, Hamam Street, Bombay and Oake Lane, Fort Bombay.
The Security Department of BOK was located in the Branch situated at Oake Lane, Bombay.
vii) At the relevant time Accused No. 7 -C.S. Raje was attached to the said Security Department of BOK as an agent. Similarly, Accused No. 8-S.A. Ail also worked during the relevant time as a clerk in the said Department.
viii) Accused No. 3- A.D. Narottam had its Over Draft account. Current Account and Saving Account with the BOK which were kept and maintained in its Branch at Oake Lane, Fort Bombay where Accused No. 7-C.S. Raje functioned as an agent and Accused No. 8-S.A. Ail worked as a Clerk. Accused No. 3-A.D. Narottam was the Share Broker and used to operate his accounts with BOK for his security transactions.
ix) At the relevant time Accused No. 3-A.D. Narottam and Accused No. 4 B.C. Dalai were the Directors on the Board of Directors of BOK.
52. Point No. 5: i) This aspect of the matter has considerable significance as it goes to the root of the prosecution case as to who struck and finalized the security deal in question being dated 6th April, 1991 and how and who further processed it. It is to be noted that this aspect will be most crucial in all the impugned transactions of this case including two sub-transactions dated 15th October, 1991 and 18th October, 1991. Also one of the offences being of criminal conspiracy, the transaction of 6th April, 1991 being the first one, as the prosecution case stands, is a starting point of conspiracy.
ii) The evidence germane as far as this point is concerned will be of P.W. No. 2 Mr. D.G. Vernekar, P.W. No. 3 Mr. Omprakash S. Kukian, P.W. No. 29 Mr. K. Satish Shetty, P.W. No. 30 Mr. Bangalore Narsimhaiah Shrikantha and P.W. No. 64, all being officers/employees of Canara Bank and CANFINA. While considering Point Nos. 1 and 12 hereinabove, it is held that at the relevant time Accused No. 1 and 12 were dealers of CANFINA based at its registered office at Bangalore and they possessed authority to strike and finalized security deals without there being any financial limits as such. As far as deal in question being of 6th April, 1991 is concerned, evidence as the prosecution has made available as also the documents tendered would need advertance.
iii) The first witness to depose about this is P.W. No. 12 Mr. Vernekar. He was the Officer of Canara Bank posted in its Bombay Office which was located at Verma Chambers, Bombay. This witness has deposed that Money Market Group at the relevant time was located in the said office and he used to sit in the said office. He also possessed the necessary authorization and delegation from the Board of CANFINA to take necessary steps in its dealings in security transactions. He was assisted by P.W. No. 3 Mr. Omprakash S. Kukian, who was an employee of CANFINA posted in Bombay Office. He has deposed that he used to receive instructions from either of the said dealers from Bangalore over telephone in respect of transactions in securities finalized by the dealers at Bangalore. As far as present transaction dated 6th April, 1991 is concerned, he has testified that on 6th April, 1991 he was on duty in his office when he received instructions over telephone from one of the dealers of CANFINA from Bangalore for the purchase of security, namely. 11.05% GOI Loan Maturing 2008 for the face value of Rs. 25 crores. He was also informed the name of the counter party being BOK Bombay and broker Hiten P. Dalai, Accused No. 2. He has further stated that he made entry in the Rough Transaction Sheets which he used to keep and maintain in respect of the instructions received noting down the particulars received over telephone from the dealers. He has produced and proved the said entry dated 6th April 1991, being Exh. 58 which reads as "B-25 crores 2008 HPD/BOK 100/85".
He proved the said entry stating that he made the entry just at the time when he received the telephonic call from the dealer from Bangalore. He has explained expression appearing in the said entry-"B" signifies Bought, "HPD" signifies initials of broker Hiten P. Dalai who is Accused No. 2 and "BOK" signifies Bank of Karad. The date of the said entry is 6th April, 1991. It needs to be stated that it is the first and earliest in time that a piece of contemporaneous written record of the said Deal of 6-4-1991 made as far as Bombay officer is concerned. He has further stated that he received the instructions as reflected in the said entry either from Accused No. 1 or Accused No. 12. Although he was unable to pin point who of the two Accused Nos. 1 and 12 gave instructions he is categoric and specific in his assertion that it was definitely either Accused No. 1 or Accused No. 12 and none else. He has stuck up to his said version even in lengthy and penentrating cross-examination from the defence and nothing has been elicitated to ingratiate his said testimony in the cross examination by and on behalf of defence and particularly by Accused No. 1 and 12. The said testimony of P.W. No. 2 Mr. Vemekar has also been corroborated by P.W. No. 3 Mr. Kukian who has stated that, at the relevant time he was working as a Secretary of CANFINA and posted at Verma Chambers and used to assist P.W. No. 2 Mr. Vernekar in the execution of security transactions of CANFINA and used to maintain record in that respect, such as, Transaction Register, Security Ledger, B.R. Purchase Register. Physical Stock Register, etc. He further stated that during trading hours between 10 a.m., to 3 p.m. he used to sit in the officer at Verma Chambers where Canara Bank had its Funds & Investment Section and where P.W. No. 2 used to sit, He has also stated that P.W. No. 2 used to get instructions in respect of security transactions from the dealers over telephone from Bangalore. It is relevant to note that, as far as that part of his evidence is concerned, the same has not been dealt with in cross-examination at all.
iv) The next material witness to depose in this respect and who has produced and made available the evidence is, P.W. No. 29 Mr. P.N. Narayan Rao. He has stated that Accused No. 1 Mr. M.K.S. Ashok Kumar and 12 Mr. Saranathan Mohan were the dealers of CANFINA at Bangalore working in Funds Department used to carry out the security transactions both of sale and purchase for and on behalf of CANFINA and that the said Accused Nos. 1 and 12 used to maintain record in respect thereof. He has produced the register known as Dealers Register Book also known as Dealers Pad, containing entries in respect of the security transactions of CANFINA for the period covering 1st April, 1991 to 31st July, 1991 kept and maintained at its registered office at Bangalore, being Exh. 394. He has referred to one entry in the said register being dated 6th April, 1991 and has proved the said entry dated 6th April 1991 which reads as-
"SGL PUR.
Hiten BOK 25 crores 11.50 2008 @ 100.05 25,01,25,000.00 23/11 133/360 1,06,21,527.78 79,95,354.78 26,26,173.00 BR 25,81,20,354.78"
The said entry has been proved by this witness as being in the handwriting of Accused No. 12 Mr. Saranathan Mohan, he being familiar with his hand writing. He has explained the said entry saying that same relates to the purchase of 11.50% GOI Maturing 2008 at the rate 100.05 face value 25 crores and interest, etc. consideration of Rs. 25,81,20,354.78. The same security was purchased by CANFINA from BOK and name Hiten written therein is for the broker Accused No. 2 Hiten P. Dalai. The abbreviations SGL and BR appearing therein have been explained by this witness as being, respectively "Secondary General Ledger" and "Bank Receipt". From the evidence of this witness. It is clearly borne out that the said entry has been made by Accused No. 12 at Bangalore. It is to be noted that the particulars mentioned in the said entry are corresponding to the entry which P.W. No. 2 Mr. Vernekar made in the rough sheet being Exh. 58 as noted earlier. Both the entries in the Dealers Pad and in the Rough Transaction Sheets are of the same date. It is pertinent to note that in the cross- examination of this witness, as far as his evidence about the said entry in the Dealers Pad, particularly, on behalf of Accused Nos. 1 and 12, nothing has been brought out as far as he proving the said entry being Exh. 394(1). He was questioned with regard to the said entry by and on behalf of Accused No. 1 which has been noted down in question and answer form and which is crucial one and, therefore, quoted as it appears in paragraph 27 on page 789 of his evidence. The same proceeds as under:-
"(Witness is shown entry Exh. 394(1) in Dealers Pad Register Exh. 394) Q. Except knowing the hand writing/author of the said entry, you have no persona] knowledge about the transaction as reflected in the said entry?
A. The transaction must have been done by either of the dealers."
The said reply is very significant and is further lending corroboration to the evidence of P.W. No. 2 and connecting to Accused No. 1 and 12 as those who struck the said Deal.
v) The next witness to depose about the work of the dealers, is P.W. No. 30 Mr. Bangalore Narsimhaiah Shrikantha. This witness was at the relevant time working in the registered office of CANFINA at Bangalore in the same department where Accused Nos. 1 and 12 were posted. He has stated that Accused Nos. 1 and 12 were the dealers of CANFINA. As far as nature of work of this witness is concerned, he has stated that he used to prepare and maintain record, such as, vouchers manual, Security Register, preparing cheques, etc. in respect of security transactions. This witness has further stated that he used to maintain Stock of Security Register of CANFINA which has been produced as Exh. 398 and he has further stated that he used to make entries in the said register in respect of the security transactions on the basis of Dealers Transaction Book i.e. Exh. 394. He has identified entry in respect of security transaction of 6th April, 1991 which is Exh. 398(1) which he has co-related to the entry in Dealers Pad Exh. 394(1) as noticed earlier. It may be stated that, on perusal of both the said entries, Exh. 394(1) and 398(1), the particulars mentioned therein are co-relating to each other.
vi) The next witness to depose in this regard is P.W. No. 64 Mr. Narayanan Balsubramanian, who was also at the relevant time working in the registered office of CANFINA at Bangalore and was attached to Security Department and his duty was to maintain record in respect of security transactions put through by the dealers, such as, Clients Register, Stock of Security Register, Generating vouchers, etc. He has stated that he used to maintain the record about the security transactions on the basis of Dealers Pad. He has stated that Accused Nos. 1 and 12 at the relevant time were the dealers and dealers also used to make entries in the Dealers Pad. His testimony so far germane to the point under consideration appears in para 27 (page 1378 of notes of evidence) which is significantly brought out in the cross-examination on behalf of Accused No. 1. The same is extracted and which will speak for itself. It is as under:-
"Dealers used to enter into security transactions either with the counter party directly or through the broker over telephone. After striking deals, the dealer would communicate concerned officers attached to the respective centers about the transaction/deal over telephone. It is correct that at the relevant time, as far as Bombay Centre is concerned, the concerned officer was Mr. D.G. Vernekar (P.W. No. 2 )".
This clearly substantiates and corroborates the version of other witnesses on this point as noticed earlier. It is further to be noted that in his further cross-examination (refer para 30 page 1380 of notes of evidence), he has reiterated that P.W. No. 2 Mr. Vernekar had no option but to carry out the instructions of dealers of CANFINA in respect of security transactions. In para 34 on page 1383, he has stated that till 30th November, 1991 there were no financial restrictions upon the powers of the Chief Dealer in execution of the security transactions. Then his version in para 35 on page 1384, is most revealing and which is though necessary to reproduce:-
"At the relevant time Accused Nos. 1 and 12 were the dealers of CANFINA and each one could enter into security transactions independently."
Reading the evidence of these witnesses, particularly of P.W. No. 29 Mr. K. Satish Shetty, P.W. No. 30 Mr. Bangalore Narsimhaiah Shrikantha and P.W. No. 64 Mr. N. Balasubramanian, who were the employees of CANFINA working at the relevant time in the registered office at Bangalore in close proximity with Accused Nos. 1 and 12 and who had immediate and first hand knowledge as to how the transactions in securities were processed, it leaves no manner of doubt that the transaction of 6th April, 1991 was struck by the dealers, namely, either by accused No. 1 or Accused No. 12. It is noticed earlier that entry in Dealers Pad in respect of the said transaction being Exh. 394(1) is in the handwriting of Accused No. 12 which has been proved beyond any doubt.
vii) There is further piece of contemporaneous documentary evidence lending corroborating to the aforesaid conclusion and that is the reports rendered by the Inspector of R.B.I. in respect of security transactions of CANFINA at Bangalore covering the period during which three main transactions and two sub-transactions of this case have taken place, as also the earlier period. The inspection/investigation was carried out by Rama Iyer Nanjappa P.W. No. 65, the then Joint Chief Officer of the R.B.I. and at the relevant time posted in Bangalore office of R.B.I. P.W. No. 65 has deposed he having undertaken scrutiny of security transactions of CANFINA at Bangalore for the period covering 1-4-1991 to 30-11-1991 under the instructions of his superiors. He has further stated that he undertook such scrutiny under the provisions of R.B.I. Act, 1934 and Banking Regulations Act, 1949 and he has produced three sets of report which he submitted recording his findings of the scrutiny being Exs. 642, 643 and 644 on record. The said sets of reports are running into hundreds of pages as the same cover all the security transactions of CANFINA during the period of scrutiny.
viii) It needs to be stated that since the findings of this scrutiny of this witness vis-a-vis impugned transactions of this case including two sub-transactions, have been reflected in the said reports the said officer Mr. Nanjappa has been examined as a prosecution witness and he has proved the said reports and vouched for the contents therein and has proved his findings therein as having been based on the scrutiny and examination of the relevant record and what he gathered from the concerned officers of CANFINA. There is one more report which this witness has also produced which is at the instance of Accused No. 1 in respect of the inspection carried out by this witness at the registered office of CANFINA with particular reference to its position as on 31st January, 1991. It would be noticed that the said inspection period does not cover the period of transactions of this case but still, however, at the behest of Accused No. 1 same report has been produced and which also this witness has proved being Exh. A-1(16) on record. The said report also runs into several pages. However, it is clarified that this Court only consider those parts of the reports which have been specifically accussed and highlighted during the examination and cross-examination of the said R.B.I. Officer.
53. It is to be mentioned that, on behalf of the defence, the objection is raised for admitting and/or reading in evidence the said reports. It is contended that said reports are not statutory reports and, therefore, cannot be read in the evidence. It may be stated that there are other reports relating to Mercantile Co-operative Bank (in short M.C.B.) which Court would consider at the later stage in the appropriate context. The Court intends to thrash out the said objection of the defence at later stage. Suffice however to indicate at this stage that such a objection is not tenable and, therefore, requires to be rejected for the reasons as would be indicated hereinafter.
54. As far as striking of the deals of the security transactions are concerned, in its first part of the report Exh. 642 on page 13 he in para 2(i) he records his findings which is reproduced and which would speak for itself, as under:-
"Acceptance of money from public sector Corporations/private sector companies, banks, brokers and its investment in securities, bonds, bonds, shares, constitute the main activity of the Funds Department which was headed by the Executive Vice President (E.V.P.) He was also the Chief Dealer and enjoyed enormous powers for putting through deals."
Further in para 2(iv) on page 14 of the said part of the report, the said Officer records as under:-
"The decision taken by the Chief Dealer regarding purchase/sale of securities were conveyed over phone to other offices for implementation, such oral communications were not followed up by telex or written communications."
Although the reference is made to the Chief Dealer, the said findings of the R.B.I. Officer reveals how the transaction in securities were struck and finalized by the dealers at Bangalore and conveyed to Bombay over telephone. It would thus be noticed that even the findings of the R.B.I. Inspector in his said report lends corroboration to the oral testimony of the various witnesses as noticed hereinabove.
55. The findings of the said witness (Mr. Nanjappa) in his report Exh. A-1 (16) which has been produced by none else but by Accused No. 1 himself who, as stated, was at the relevant time, Chief Dealer vis-a vis, the power and control exercised by the Chief Dealer in the operation of security transactions of CANFINA is revealing. On page 31 of the said report it is how he records:-
'In the sphere of management control, while the bank had some control over the leasing and margin banking activity, the management has absolutely no control either on policy or day-to-day operation relating to funds management which involves huge turnover and is the highest source of income. This area where the operations are conducted by a single official calling of the shots without direct/ immediate control or supervision by any other executive or functionary at any stage".
Since the officer concerned was not named by this witness in the said part of the report reproduced above, he was questioned to identify the same and what followed is recorded in the notes of evidence on page 1456-S para 105 in question and answer form which is as under:-
"Q. Could you identify who "a single officer" was?
A. It was the Chief Dealer."
This evidence made available by the prosecution through the R.B.I. Officer, who is an independent un-interested person, in a sense, no personal motive or bias, could be imputed to him qua the Accused No. 1 who was the dealer, clearly shows that the security transactions of CANFINA were done and finalized by the dealers in registered office of CANFINA and then for further processing and execution conveyed over telephone to the concerned personnel. This witness was subjected to searching or somewhat penetrating cross-examination with regard to his findings and he was emphatic in his assertion that his findings are based on his objective assessment of all the relevant records and it is not his opinion as such.
56. Taking into consideration the evidence discussed hereinabove, both oral as well as documentary, the inescapable conclusion is that the said deal in security of 6th April, 1991 was struck and finalized by either of the dealers i.e. Accused No. 1 M.K.S. Ashok Kumar or Accused No. 12-S. Mohan from CANFINA and then conveyed to Bombay Central Office to P.W. No. 2-Mr. D.G. Vernekar. It also stands proved that entry in Dealers Pad in respect of the said transaction, which is a first and earlier written record at Bangalore office, where from the said transaction was finalized, is in the hand writing of Accused No. 12-S. Mohan.
57. Now the question is, whether the said transaction was on account of Accused No. 3 A.D. Narottam. Constituent and broker of BOK. It is to be noted that the contemporaneous documentary evidence, such as entries in Deal Pad, Rough Transaction Register, Security Ledger, Cost Memo and BRs of BOK all do not figure the name of accused No. 3-A.D. Narottam. And therefore this aspect will have considerable bearing and significance in a different context of considering the culpability, and complicity of the accused in the charge of conspiracy, etc. which will be dealt with separately at appropriate stage. Presently, the Court has to consider whether the said transaction of 6th April, 1991 entered into with CANFINA and which was stated to be between BOK and CANFINA was in fact put through and routed into the account of Accused No. 3 A.D. Narottam as a constituent of BOK.
58. As noticed earlier, Accused No. 3 A.D. Narottam had his account with BOK and he used to operate the security transactions as a constituent of BOK through his Over Draft Account as also Current Account with BOK . The prosecution has made available the evidence to show and establish that the transaction in question was in fact routed into the account of Accused No; 3 A.D. Narottam. The first piece of evidence is the Delivery Order bearing No. 1242 dated 6th April, 1991 issued by Accused No. 3 favouring BOK instructing BOK to- (reproduced as has been written therein):-
"Delivery to Hiten P. Dalai (Can fin Services Ltd.)".
The security to be delivered was 11.05% GOI 2008 face value Rs. 25 crores by means of BR. It is to be noted that reference to "Hiten P. Dalai" is to Accused No. 2 and "Can Fin Services Ltd." is to CANFINA. The mention of the name of Accused No. 2 H.P. Dalai will have considerable significance which will be considered and dealt with at appropriate stage. This document has been proved by the prosecution through P.W. No. 14 Mr. Mukund Krishnaji Kher, the then Officer of the BOK as also P.W. No. 67 Mr. Naresh Chandra Sood, the Handwriting Expert as being authored and signed by Accused No. 3 A.D. Narottam which is Exh. 309. It may be stated that even Accused No. 3 has not denied or disowned the said document. By the said document, BOK is instructed to deliver the said security mentioned therein by means of BR.
59. The next document is the Cost Memo of BOK being dated 6th April, 1991 which has been produced and proved as Exh. 188. The said document has been signed by accused No. 7 C.S. Raje, the then Agent of BOK and who was incharge of the Security Department of that Bank and is in the handwriting of accused No. 8-S.A. Ail, who was working as a clerk in the Security Department of that bank. The said document has been proved by P.W. No. 14 Mr. Kher as also by Handwriting Expert, P.W. No. 67. The said document reads, BOK having sold the security, namely, 11.05% Central Bank 2008 of face value of 25 crores with consideration of Rs. 25,81,20,354.78 to CANFINA. It is relevant to note that there is no mention made of the name of accused No. 3 A.D. Narottam as a Constituent. This aspect will be elaborated later on. It may be stated that accused No. 7 C.S. Raje as a signatory thereof and accused No. 8 S.A. Ail as a author thereof have not disowned or disputed they being respectively signatory and author thereof. Their defence is otherwise, which will be considered later on.
60. The next document is the BR which BOK has issued being No. 003559 dated 6th April, 1991 favouring CANFINA in respect of very security as mentioned in the Delivery Order and Cost Memo as noticed earlier. The said BR has also been signed by Accused No. 7 and prepared by Accused No. 8. The said document has been proved by P.W. No. 14 Mr. Kher as also by Handwriting Expert P.W. No. 67. It may be stated that even accused Nos. 7 and 8 respectively being signatory and author thereof, do not disown or dispute the said document. By the said document, namely, BR, BOK has undertaken (relevant portion quoted) :-
"Securities/Debentures/Bonds of the face value of Rs. 25,00,00,000/-will be delivered when ready in exchange for this receipt duly discharged and in the meantime the same will be held on account of Can bank Finance."
Said BR is Exh. 189 before the Court. It is to be noted that number of the said BR has also been noted down in the Cost Memo dated 6-4-1991 and which is Ex. 188. Witness Mr. Kher - P.W. No. 14 has co-related the said three documents, namely, Delivery Order, Cost Memo and BR to each other and being in respect of security transaction of 6th April, 1991. It is in the evidence of P.W. No. 2 Mr. Vernekar that on receipt of telephonic instructions of the dealer on that day i.e. on 6th April, 1991, the messenger of the concerned broker came to him with the said Cost Memo and B.R. of BOK and he on verification of the price of the security as mentioned by him in the rough sheet as also on BOK's Cost Memo and BR, he issued Pay Order on the same day i.e. on 6th April, 1991 being bankers cheque No. 907578 dated 6th April, 1991 for Rs. 25, 81, 20, 354. 78 drawn in favour of BOK Ltd. and handed over the same to the said messenger of the broker. The said Pay Order has been produced being Exh. 41 and has been proved by P.W. No. 2-Mr. Vernekar, he having signed and issued the same. It is also in his evidence that BOK then received the credit of the proceeds of the said Pay Order. It may be stated that P.W. No. 14 BOK's officer Mr. Kher has admitted BOK having received the proceeds of the said Pay Order. It is also in the evidence of Mr. Kher that on the very day the entire amount of the said Pay Order Exh. 41 was credited into the over Draft Account of Accused No. 3 A.D. Narottam with BOK. The relevant evidence, such as, debit/credit vouchers as also the statement of account of Accused No. 3 A.D. Narottam with the said credit entry have been produced.
61. Thus, the aforesaid evidence noticed above, clinchingly establishes that the transaction was routed into the account of Accused No. 3 A.D. Narottam with BOK.
62. Before I consider the next point in sequence, I propose to take point No. 12 which is in respect of second impugned transaction dated 22nd July, 1991 and point No. 19 which is in respect of transaction dated 31st July, 1991 and point Nos. 26 &27 respectively, in respect of transactions dated 15th October, 1991 and 18th October, 1991 as the same points also relate to the striking of the respective deals by the dealers of CANFINA from Bangalore with BOK. The evidence on these points has also been made available through the same witnesses and documentary evidence is virtually is of the same nature. This has also been done to avoid overlapping discussion and it will be convenient that similar points are dealt with and thrashed out at one place.
63. Point No. 12: i) Under this point, transaction in security on 22-7-91 is being considered. The security involved in this transaction is 16 Crores Units of UTI @ 13.30% per Unit, total value of Rs. 212.80,00,000/-. As in the first transaction of 6-4-1991, purchaser here is CANFINA and selling party is BOK. This transaction is routed, as the evidence shows into the account of Accused No. 3 A.D. Narottam with BOK. Witnesses who have deposed about this transaction are the same who have also deposed in respect of first transaction dated 6-4-91. Nature of documentary evidence is also similar in this transaction.
64. The contemporaneous record made available, which is first in time, is the entry in Dealer's Pad which Ex. 394(2). The said entry has been proved by the prosecution through its witness P.W. 29-K. Satish Shetty. The said entry No. 29 reads as:
Pur BOK HPD 16 Crores Units @ 13.30% of Rs. 212,80,00 It is also deposed by the said witness that the said entry is in the hand writing of Accused No. 12- S. Mohanand security in question is in respect of purchase by CANFINA from BOK, broker being Accused No. 2-H.P. Dalai. It is to be stated that the said Deals Pad as noticed earlier while considering point No. 5 earlier is the record kept and maintained by the Dealers in the registered office of CANFINA at Bangalore. The relevant version of P.W. 2-Mr. Dhundiraj Gangadhar Vernekar about this transaction is as under:
i) That on 22-7-91 when he was on duty, he received telephonic instructions from the Dealer of CANFINA, Bangalore office CANFINA having purchased 16 crores Units of UTI for total consideration of Rs. 212, 80, 00, 000/- crores from BOK. Broker involved was Accused No. 2-H.P. Dalai. When he received the telephonic instructions, he as per his practice, made a note in Rough Transaction Sheet recording particulars received from the Dealers and the relevant entry has been proved as Ex. 51 in the Rough Transaction Sheet. The said entry reads:-
"Buy 16 crores Units at the rate of 13.30% BOK/HPD".
The said entry has been explained that CANFINA bought from BOK (short form of Bank of Karad) 16 crores Units of UTI, HPD signifying Hiten P. Dalai, the Accused No. 2 being the Broker.
65. Process of documentations went through at the end of BOK and CANFINA is the same as the first transaction noticed earlier. To put it briefly:
i) Delivery Order of Accused No. 3 of that day which has been produced and proved as Ex. 194 by P.W. 14-Mr. Mukund K. Kher and P.W. No. 67-Mr. Naresh Chandra Sood, the hand writing expert, instructing BOK to deliver the Security of 16 Crores Units to CANFINA which Accused No. 3 in his evidence before the Court as also in his explanation, admitted having issued the same, and which also mentions the BR No. 3499 of BOK.
ii) Cost Memo of BOK of that day which has been produced and proved at Ex. 195 through witness Mr. Kher-P.W. 14, BOK's Officer, addressed to CANFINA for consideration of Rs. 212, 80, 00,000/-which also mentions BR number as 3499 of BOK and
iii) BOK's BR bearing No. 003499 of the said date favouring CANFINA with recital/undertaking:
"Security will be delivered when ready in exchange for this receipt------------- and----------. The same will be held on account of CANFINA".
It may be stated that on the reverse of the said BR, there are endorsements made on 15-10-91 and 18-10-91 indicating the reduction of liability on the two dates respectively for 1.50 lakhs and 7.50 lakhs Units which aspect will be considered in details later on in point Nos. 26 and 27.
65. It is in the evidence of P.W. 2-Mr: Vernekar that representative of the Broker came to him on that day with BOK's said Cost Memo and BR and on scrutiny as he found that the amount of consideration of said security mentioned in the Cost Memo was Rs. 212,75,00,000/- as against Rs. 212,80,00,000/- that is Rs. 5 lakhs less he contacted Dealer at Bangalore who advised him that said differences of Rs. 5 lakhs was to be adjusted in the transaction of Rs. 10 Crore Units with City Bank. He then issued Canara Bank's Pay Order favouring BOK on that day for sum of Rs. 212,75,00,000/-favouring BOK which is produced and proved at Ex. 52 by Mr. Vernekar. It is in his evidence that on the very day he handed over the said Pay Order to the representative of the Broker. It is further in the evidence of this witness that BOK received the credit of the process of the said Pay Order on the very day and this fact has also been confirmed and corroborated by P.W. No. 14-Mr. Mukund Krishnaji Kher. P.W. 2-Mr. Vernekar has also deposed having followed the usual procedure of preparation of IBA and dummy IBA at registered office of Canara Bank at Bangalore and confirmation thereof from Canara Bank, Bangalore.
66. The evidence adduced by the prosecution as to who struck and finalized the said Deal is the same and identical as adduced in respect of transactions of 6-4-1991 noticed earlier. Concerned witnesses to depose are same i.c P.W. NO. 2 D-G. Vernekar, 3-O.S. Kukian, 13-R.L. Kulkarni, 29-K.S. Shetty, 30 B.N. Shrikantha and 64-N. Balasubramanian whose versions are identical as in the earlier transaction dated 6-4-91 and who with their own voices stated that it was Dealer who used to settle and finalize and deals in security at Bangalore.
67. Vernekar-P.W. 2 in particular is very affirmative and categorical in evidence that it was either Accused No. 1 or Accused No. 12 and none else conveyed him over telephone about the said Deal. He has further stated that he acted on the instruction of Dealers and issued Pay Order for sum of Rs. 212,75,00,000/- favouring BOK. The said evidence unerringly and conclusively goes to prove that the said deal in security was struck and finalized by Accused No. 1 and or Accused Nd. 12 as Dealers of CANFINA at Bangalore. It is relevant to note that entry in the Deal Pad in respect of the said transaction, as noticed earlier is in the hand writing of Accused No. 12. The entries in respect of the said transactions have been made in a relevant records in Bombay as also in Bangalore. It is in the evidence of Vernekar- P.W. 2 that on the very day of the execution of the said deal he informed the dealers of CANFINA about execution of the deal to the Dealers as also about the receipt of BR of BOK in lieu of physical security.
68. Point No.: 19---i) This concerns the transactions of 31-7-1991. Security involved is 19 crores Units of UTI CANFINA having purchased from BOK., Bombay with Accused No. 2 as broker.
ii) As in the cases of first two transactions the Prosecution has made available the same type of evidence both oral and documentary to prove that said Deal was also struck and finalized by dealers of CANFINA, that is either by Accused No. 1 and/or that Accused No. 12, in registered office at Bangalore. The first document is the deals pad entry being Ex. 394(3). The said entry has been proved as have been in hand writing of Accused No. 1 and reads as:
"Date 31-7-91, Purchase-19 Crores of Units From BOK-@ 13.4442%-Hiten P. Dalai Rs. 255,43,98,000/-BR".
The said entry is in the abbreviated form and has been explained as meaning Canfina having purchased 19 Crores Units at the rate mentioned therein from BOK with Broker Hiten i.e. Accused No. 2 for consideration mentioned therein. The said entry also makes reference to BR that is Bank Receipt.
69. At this juncture there is also documentary evidence made available by the prosecution at the end of CANFINA Bangalore office and that is CANFINA's cheque dated 31-7-91 drawn on Canara Bank, Bangalore office for Rs. 1080,11,57,421,97 mentioning Rayee name as "Yourself IBA on F & J section, Bombay". It has been deposed By P.W. 26-Padubidri Nanyam Narayan Rao, who at the relevant time was the officer of CANFINA at Bangalore having issued the said cheque being total consideration of the security transaction of CANFINA finalized by the Dealer at Bangalore office in their Central at Bombay. The said cheque has been proved as Ex. 390. It may be stated that similar is the position of remittance of funds by CANFINA, Bangalore to its Bombay office in cases of earlier two transactions of 6-4-91- and 22-7-1991 when the cheques of the similar types drawn by CANFINA on Canara Bank, Bangalore were issued and amounts required for meeting the CANFINA'S commitment in security transactions at Bombay were remitted from Bangalore office. A cheque dated 6-4-91 being Ex. 389 for Rs. 143, 80,52,980.90 and a cheque dated 22-7-1991 being Ex. 388 for Rs. 358,80,17,715.53 were issued in the same manner noticed earlier and witnesses to depose about this transaction are the same as in the earlier two transactions.
70. P.W. 2 has testified on 31-7-1991 he having received a telephonic instructions from dealer of CANFINA, Bangalore to the effect that CANFINA had purchased 19 Crores Units of UTJ from Bombay broker Mr. H.P. Dalai, Accused No. 2. He has referred and proved the entry which he made as per his usual practice in Rough Transaction Sheet on that day and that entry is at serial No. 26 of the transaction dated 31-7-1991 being Ex. 65 and reads as:-
"19 Crore Units @ 13.4442-BOK/HPD"
It is pertinent to note that particulars as mentioned in the said entry in Rough Transaction Sheet at Ex. 65 and that of in Deals Pad Ex. 394(3) are identical.
71. It is the evidence of P.W. 2 -Mr. Vernekar and P.W. 3-Mr. Omprakash S. Kukian as well as to what followed after telephonic instructions from Dealers at Bangalore. The same is exactly in the same manner as in previous two transactions. As in the case of earlier two transactions, Accused No. 3-A.D. Narottam issued his Delivery Order being No. 1738 dated 31-7-1991 addressed to BOK Bombay instructing to deliver to CANFINA, 19 Crore Units of UTI at the rate of 13,4442. The said Delivery Order has been proved as Ex. 265(A) by two witnesses, namely, P.W. 14-Mr. Mukund Krishnaji Kher, then officer of BOK and P.W. 67-Mr. Naresh Chandra Sood, Hand Writing Expert. What is most important fact, as far as this Delivery Order is concerned, that same has been proved to be in the hand writing of Accused No. 2-H.P. Dalai and signed by Accused No. 3-A.D. Narottam. This will have considerable relevance in the context of role of Accused No. 2 H.P. Dalai, who acted as appear to have been shown as a broker. It is significant that he himself wrote the said Delivery Order which is on the letter head of Accused No. 3A.D. Narottam as also signed by him i.e. Accused No. 3. This circumstance clearly lends corroboration to the case of Accused No. 3-A.D. Narottam that the impugned deals were routed into his account at the instance of Accused No. 2-H.P. Dalai. It is further relevant that Accused No. 2 H.P. Dalai has not repudiated being the author of said document nor explained the same which document has been proved by the prosecution. This would clearly show how Accused No. 2, who is the common player at both the sides, i.e. as a broker of CANFINA on one hand and also operating on behalf of BOK and Accused No. 3-A.D. Narottam in the documentation process. His dual role thus shows how he was actuated and throws light on his mind and intention. As it proved this was done when he knew that there existed no securities at all with BOK to back up BRs issued by it to CANFINA on the strength of which CANFINA parted with the monies. It also provides link between the important player of the CANFINA i.e. the Dealers viz. Accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan. The same also mentions BR No. as 3427.
72. The next document is the Cost Memo issued by BOK in respect of the said security flavouring CANFINA which has been proved to be in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje for and on behalf BOK. P. W. 14-Mr. Mukund Krishnaji Kher, Handwriting expert P.W. 67 and P.W. 6 Mr. Nayan Vinayak Samant have proved the said document having signed by Accused No. 7-C.S. Raje and written by Accused No. 8 -S.A. Ail. The same also mention BR No. as 3425. Amount of Cost Memo is Rs. 255, 43,98,000/-. Particular mentioned in the said Cost Memo as also in the Delivery Order referred to earlier correspond and -co-relate to each other. The said BR has been proved to be in the hand writing of Accused No.8- S.A. Ail and having signed by Accused No. 7-C.S. Raje begin Ex. 228. This has been also corroborated by hand writing expert P.W. 67- Mr. Naresh Chandra Sood.
73. As in the cases of earlier two transactions as per evidence of P.W. 2-Mr. Dhundiraj Gangadhar Vernekar and P.W. 3-Mr. Omprakash S. Kukian the representative of the concerned broker came to P.W. 2- Mr. Vernekar in his office with the said Cost Memo and BR of BOK and handed over the same to P.W. 2-i.e. Mr. Vernekar. Mr. Vernekar then verified the said document from the entry made by him in the Rough Transaction Sheet, being Ex. 65 and then issued Pay Order favouring BOK on same day on Canara Bank, Bombay for sum of Rs. 255,43,98,000/- dt. 31-7-1991 which is at Ex. 66. It is in the evidence of Vernekar that he handed over the said Pay Order bearing No. 077750 to the messenger of the broker and it is in his further evidence that BOK received the credit of the proceeds of the said Pay Order into its account on the very day.
74. It is in the evidence of P.W. 2-Mr. Vernekar and P.W. 3-Mr. Omprakash S. Kukian that entries in respect of the said transaction, including issuance of Pay Order etc. were made in the relevant record kept and maintained at Bombay office. It is to be stated that transaction is also reflected in the record kept and maintained at Bangalore including in periodical statements submitted by CANFINA, Bangalore including in periodical statements submitted by CANFINA, Bangalore Office to its M.D. who used to sit at Bombay.
75. As stated earlier there are two more transactions in securities which will have relevance in this case. First is dated 15-10-91 and second dated 18-10-91. Both the transactions in securities are off-shoots of the second transaction dated 22-7-1991 notice hereinabove. Both these transactions have also been processed in similar manner as that of three main transactions discussed hereinabove. As far as these two sub-transactions are concerned the same are in the nature of reversal i.e. the position is that CANFINA, Bombay is selling party and BOK, Bombay is purchasing party-security being the same viz. Units of UTI in said main impugned transaction and in these two reversal transactions.
76. Point No. 26:
TRANSACTION DATED 15-10-1991.---i) The security is 1.50 Lakh units of UTI sold by CANFINA to BOK Bombay Broker Hiten P. Dalai Accused No. 2. The entry in respect thereof is reflected in the transaction book being Ex. 396, kept and maintained at the relevant time in Bangalore office and which P.W. 29-Mr. K. Satish Shetty has produced and proved being Ex. 396(1) being in the hand writing of Accused No. 12-S. Mohan. The reference is made to IBI number in the said entry
ii) Same set of witnesses were involved in further process of said transaction who have testified in respect of other transactions noticed hereinabove, viz. P.W. 2 Mr. Vernekar and P.W. 3 Mr. Kukian. Their evidence shows that this transaction was put through in the same manner as three main transactions. Mr. Vernekar P.W. 2 has deposed that on 15-10-1991 while he was on duty, he received telephonic instructions from either of the dealers of which he made an entry in the Rough Transaction Sheet. The said entry has been produced and proved by him as Ex. 71 which reads as:-
"S-1.50 crore-BOK-13. 90/HPD".
iii) The next document is Receiving Order of Accused No. 3-A.D. Narottam of that day to BOK being Ex. 236 proved by P.W. 14 Mr. Mukund Krishnaji Kher and P.W. 67-Mr. Naresh Chandra Sood being written and signed by Accused No. 3-A.D. Narottam. It may be stated that Accused No. 3-A.D. Narottam has admitted issuance of said Receiving Order whereby BOK has been instructed to receive 1.50 Lakh Units of UTI from CANFINA.
iv) Ex. 72 is a Cost Memo of CANFINA favouring BOK in respect of the said security which also mentions the name of Hiten P. Dalai-Accused No. 2 as broker. The said document has also been proved by P.W. 2-Mr. Vernekar and P.W. 3-Mr. Kukian.
v) The next important document is the BR bearing No. 1144 dated 15-10-94 issued by CANFINA favouring BOK. The said document is produced and proved by P.W. 2 Mr. Vernekar who has singed as a authorized signatory for and on behalf of CANFINA being at 145.
vi) Then there is a Pay Order/Inter Bank Chequer of that day issued by BOK favouring Canara Bank for sum of Rs. 20,85,00,000/- being the consideration of the said security which is produced as Ex. 239 and has been proved by P.W. No. 14-M.K. Kher. It is in the evidence that CANFINA received the credit of the said Pay Order.
77. The entry in respect of the said transaction is also reflected in the computerized statement prepared by CANFINA'S registered office at Bangalore on 15-10-91 produced and proved at Ex. 381.
78. Mr. Vernekar. P.W. 2, has stated having received the telephonic instructions from Bangalore in respect of the said security transaction from either of the dealers at Bangalore. As noticed earlier, the entry in respect thereof was made in Dealers Transaction Book by Accused No. 12-S. Mohan. It is pertinent to note that although CANFINA issued its Cost Memo and BR and BOK paid the consideration thereof by its Pay Order as noticed earlier, what was done was that the liability of BOK in respect of its earlier BR pertaining to second transaction dated 22-7-91 when CANFINA purchased 16 Crore Units of UTI from BOK and for which BOK issued its BR dated 22-7-1991 being Ex. 196 was reduced and endorsement on the reverse of the said BR to that effect has been made which has been proved by P.W. 14 -Mr. Mukund Krishnaji Kher having made by Accused No. 7-C.S. Raje. Thus leaving the outstanding liability as on 15-10-1991 to Rs. 14,50,00,000/- Units of UTI of second transaction. It is to be noted that Receiving Order, Ex. 236 in respect of the said security has been issued by Accused No. 3A-D. Narottam. However the Accused No. 3-A.D. Narottam nowhere figured in the said document, i.e. either in the BR or in the Cost Memo. Evidence thus made available clearly shows that the said transaction of 15-10-91 was originated and finalized by the either of the dealers at Bangalore. It is relevant to note that this was done at the stage when BOK had to deliver to CANFINA 35 crore Units covering two security transactions of 22-7-91 and 31-7-91 and what was done was that only endorsement of reversal in previous BR of BOK to CANFINA and physical security did not see the light of the day.
79. Point Ho. 27:---i) This relates to transaction of 18-10-91. The evidence as far as this transaction is concerned, is almost the same, both oral as well as documentary. Same witnesses have deposed about the same. As far as this transaction is concerned, same relates to sell of 7.50 crore units of UTI by CANFINA to BOK.
80. Mr. Vernekar P.W. 2 has stated having received telephonic instructions from one of the dealers from Bangalore in respect of which he made entry in Rough Transaction Sheet which he has proved and produced as: "S.BOK/HPD/7.50 CR. UNITS. 13/365".
81. He explains the same as relating to the sale of 7.50 Crore Units by CANFINA to BOK broker Accused No. 2-H.P. Dalai.
82. The most important factor, as far as this transaction is concerned is that the Receiving Order bearing No. 11935 dated 18-10-1991 is on the letter head of Accused No. 2-H.P. Dalai in a printed format addressed to BOK with instructions to receive from CANFINA 7.50 crore Units of UTI at the rate of Rs. 13/365 which is at Ex. 683 and the evidence of Hand Writing Expert P.W. 67- Mr. Naresh Chandra Sood shows the same being in the hand writing of Accused No. 2-H.P.Dalal as also signed by him. It is also relevant to note that there is also a Receiving Order of the same dated issued by Accused No. 3-A.D. Narottam and addressed to BOK, instructing BOK to receive from CANFINA 7.50 Crore Units of UTI at the rate of 13/365. The same also mentions BR number as 3499 which is the BR issued by BOK favouring CANFINA on 22-7-91 proved to be in the hand writing of Accused No. 7-C.S. Raje with indorsement -"Our BR 3499 reduced" by P.W. 14-Mr. Mukund Krishnaji Kher. The said Receiving Order of Accused No. 3-A.D. Narottam is produced and proved as Ex. 242.
83. What is most significant and curious fact as far as the sub-transaction dated 18-10-91 is concerned is that:
i) There are two Receiving Orders in respect of the same security as noticed earlier, viz. Ex. 683 issued by Accused No. 2-H.P. Dalal on his letter head and Ex. 242 issued by Accused No. 3-A.D. Narottam.
ii) Both the orders mentions the same security, namely, 7.5 crore Units of UTI at the same rate i.e 13.365% per unit. Both are addressed to BOK with instructions to deliver the said security to CANFINA.
iii) There is a endorsement made in the hand writing of Accused No. 7-C.S. Raje reading as "Our BR No. 3494 reduced to 7 Crores". The said BR as noticed earlier relates to the Security Transaction of 16 Crore Units dated 22-7-91 issued by BOK favouring Canara Bank that there endorsement made by Accused No. 7-C.S. Raje on the reverse of the said BR Ex. 196 dated 22-7-91 showing reduction of 7.5. Crores Units of UTI.
iv) As noticed earlier the said BR Ex. 196 is respect of Security Transaction of purchase of 16 Crore Units of UTI by CANFINA from BOK on 22-7-91.
v) This transaction, as noticed earlier has also been struck and finalized by the dealers of CANFINA from Bangalore either by Accused No. 1 M.K.S. Ashok Kumar or Accused No. 12-S. Mohan as deposed to by P.W. 2 Mr. Vernekar as noticed earlier.
vi) There is evidence which is remained absolutely unchallenged as deposed to by handwriting expert Mr. Sood P.W. 67 that the said Delivery Order Ex. 683 is in the handwriting of Accused No. 12-H.P. Dalai as also signed by him which shows how Accused No. 2-H.P. Dalai has played his Game in Operation.
vii) It is also most important to note that Accused No. No. 2-H.P. Dalal was specifically questioned with regard to the said document, namely. Deliver Order Ex. 683 alongwith other documents which P.W. 67-Mr. Sood, hand writing expert has examined and stated to be in the handwriting of Accused No. 2-H.P. Dalai in his report Ex. 649 Collectively when Accused No. 2-H.P. Dalai replied "I am not concerned and not aware of the same" (Refer questions and answers to question No. 662 to 664). It is also interesting to note, how Accused No. 2 has explained the circumstances which are put to him in respect of obtaining of his specimen hand writing by the Investigating Agency in presence of Panchas. It was put to him, on the basis of evidence of Panch-Mr. Vijay Tukaram Patinge-P.W. 68 about obtaining of his (i.e. of Accused No. 2) specimen hand writing before the panchas when he answered (It is quoted" I am not aware of it"). It is to be noted that Accused No. 2-H.P. Dalal has not denied or dis-owned the authorship of the said Delivery order as also of his signature.
viii) In chain of set of circumstances and course of events the said aspects are of considerable significance and bearance while considering the roles of each of the conspirators in particular of Accused Nos.1-M.K.S. Ashok Kumar, 2-H.P. Dalai, 3-A.D. Narottam, 7-C.S. Raje and 8-S.A. Ail.
84. The next document is the Cost Memo of CANFINA of that date in favour of BOK with the name of broker as Accused No. 2-H.P. Dalai and that endorsement regarding:" Your BR 3409 dated 22-7-91". The consideration involved in the said BR is Rs. 100,23,75,000/-.
85. The next document is Pay Order No. 190841 dated 18-10-91 issued by BOK favouring Canara Bank for sum of Rs. 100,23,75,000/- which has been proved and produced as Ex. 243 by P.W. 14- Mr. Mukund Krishnaji Kher being in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje. It is in the evidence that the amount of said PO was debited into the account of Accused No. 3-A.D. Narottam. Mr. Vernekar -P.W. 2 had testified having received the said cheque from BOK as also receipt of the Credit there under as consideration of sale of 7.50 lakh units of UT1 by the CANFINA to BOK under the transaction herein.
86. What in fact was done by the BOK in this transaction is that it reduced the liability to the extent to 7.50 Crore Units of UTI from its earlier BR Ex. 196 issued favouring CANFINA in the second security transaction dated 22-7-91 and endorsement to that effect was made on the reverse of said BR Ex. 196 from 14.5 crore Units. Thus leaving balance of 7 crore units in the said second transaction. The endorsement to that effect has been made by Accused No. 7-C.S. Raje and which has been-proved by P.W. 14-Mr. Mukund Krishnaji Kher.
87. What emerges and clearly bears out from the evidence discussed above is that in two sub transaction of 15-10-91 and 18-10-91 without delivering the security in physical form, the liability of BOK in second transaction was reduced by only being paper entries.
88. Considering the evidence, it was sought to be urged by and on behalf of the Accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan that the prosecution has not been able lay before the Court as to who amongst two dealers struck and finalized the respective deals. That being so the Accused No. 1-M.K.S. Ashok Kumar & Accused No. 12-S. Mohan cannot be said to be those who actually struck and finalized the deals. However, considering overwhelming and clinching evidence, both oral and documentary which is discussed hereinabove in very great detail, there leaves no manner of doubt that the transactions in question were struck and finalized by the dealers, viz. Accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan. Of the two main transactions of 6-4-91 and 22-7-91, the entries in respect thereof in the Dealers Pad which was record earliest and first in time, are in the hand writings of Accused No. 12 and that of third transaction of 31-7-91 is in the handwriting of Accused No. 1 M.K.S. Ashok Kumar. It is in the evidence as noticed earlier, the transactions in security for and behalf of CANFINA used to be finalized and decided only by the dealers. It is in the evidence and which has been conclusively proved that at the relevant time there were only two dealers of CANFINA and they were only two dealers of CANFINA and they were accused Nos. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan who were employees of CANFINA and who were striking and finalizing the deals for and on behalf of CANFINA in security transactions at and from Bangalore. As the evidence shows, both of them could strike the deals independently. There is one point which needs advertance. It was stated that on 18-10-91 there was a public holiday in Bangalore on account of "Dassera" festival and that being so the office of CANFINA was closed on that day and therefore there was no possibility of dealers striking the deals. However, it is in the evidence of so many witnesses who have deposed with regard to the finalization of the said transaction that on that day there was no public holiday in Bombay where transaction was to be executed. The dealers had, as the evidence shows, struck and finalized the transaction from their residence and then gave telephonic instructions to P.W. 2-Mr. Vernekar. In my view, taking into consideration the overwhelming evidence on record, the totality of facts and circumstances, as far as transaction of 18-10-1991 is concerned, as also other relevant transactions, there is convincing and clinching evidence made available and that the prosecution has succeeded in establishing that even the transaction to 18-10-91 was struck by either of the dealers. Thus the point No. 12 and 19 and 26 and 27 are answered in affirmative to the effect that all these five transactions have been finalized and decided either by the Accused No. 1 and Accused No. 12 only and none else.
89. Point No. 6, 13 and 20:---These points concern as to whether Accused No. 2-H.P. Dalai acted as broker in all the aforesaid five transactions in securities between CANFINA and BOK, namely, 6-4-91, 22-7-91, 31-7-91 and sub transaction dated 15-10-91 and 18-10-91. Apart from the facts that the contemporaneous documentary evidence which has been referred to hereinabove while determining finalization of the transactions by the dealers such as entries in the Deal Pad, Rough Transaction Sheet, Cost Memos, Security ledgers, both at Bombay and Bangalore, the record such as Delivery Orders, BRs, all these reflect that Accused No. 2-H.P. Dalai was common broker in all these transactions for and on behalf of CANFINA. The prosecution has established the said fact leaving no doubt whatsoever. It may be stated that Accused No. 2-H.P. Dalai as also in his explanation under section 313 of Cr.P.C. as also written submissions filed has admitted he having acted as broker in these transactions on behalf of CANFINA. Apart from admission as noticed earlier there is clinching evidence made available by the prosecution which shows that Accused No. 2-H.P. Dalai was the common broker in all these transactions dated 6-4-1991, 22-7-91, 31-7-91, 15-10-91 and 18-10-91.
90. It is also to be noted that the Accused No. 2-H.P. Dalai has filed his written statement being, Ex. A-2(4) and in para 3, thereof he states thus admitting "This accused admits these three transactions between CANFINA and Bank of Karad and he further admits that he was broker for and on behalf of CANFINA for all the said three transactions". To repeat the contemporaneous evidence made available in respect of these five transactions, namely entries in Deal Pads and Rough Transactions Sheet, Security Ledgers, Delivery Orders, Receiving Orders, Cost Memos and BRs. etc. in each of the transaction name of Accused No. 2-H.P. Dalai figures as broker. It therefore stands convincingly proved that Accused No. 2-H.P. Dalai was the broker of CANFINA in the main three transactions as also in two sub-transactions.
9 1. Point Nos. 7, 14 & 21:---These points are thrashed out at one place.
92. Point No. 7:---This point relates to the issuance of Delivery Order by Accused No. 3 A.D. Narottam in respect of security transaction dated 6th April, 1991 consisting of 11.05% GOI 2008 face value 25 crores, purchased by CANFINA Bangalore from BOK. As far as this transaction is concerned, the document in question, namely, the Delivery Order issued by Accused No. 3 A.D. Narottam which is on his letter head and in the printed format bears No. 1242 dated 6th April, 1991 addressed to BOK, reading as "Delivery to Hiten P. Dalai (Can fin services Ltd.)". The said Delivery Order has been proved being in the handwriting of Accused No. 3 A.D. Narottam as also signed by him, by P.W. No. 14 Mr. Mukund Krishnaji Kher and Handwriting Expert P.W. No 67 Mr. N.C. Sood which is Exh. 309. The Accused No. 3 A.D. Narottam has also in his explanation under section 313 of the Criminal Procedure Code (in short Cr.P.C.) and in his evidence given before the Court under section 345 of Cr.P.C. has admitted having issued the said Delivery Order. It is also in the evidence of the Investigation Officer that the possession thereof was taken from the custody of BOK during the course of the investigation. By this Delivery Order Accused No. 3-A.D. Narottam has directed/instructed BOK to deliver the security in question, namely, 11.05-GOI 2008 face value 25 crores to H.P. Dalal (CANFINA). In the light of the said evidence, both oral and documentary, it has to be held that the fact that Accused No. 3 issued his Delivery Order being Exh. 191. The mention of name of Accused No. 2-H.P. Dalai in the said D/O has special significance in the background of the roles he played and attributed in the entire game.
93. The later part of the said point, as to whether Accused No. 3 A.D. Narottam held and possessed the said security in his security account with BOK on that date, is most crucial and vital. The prosecution has made available the Security Ledger kept and maintained by BOK in Security Department pertaining to the security account of Accused No. 3 A.D. Narottam, which is Exh. 309 on record. P.W. No. 14 Mr, Kher, the officer of BOK has proved the said Security Ledger and through whom the prosecution has produced the same. The particulars/position of the security account of Accused No. 3 in respect of 11.05% GOI 2008 indicates on Page No. 26 of the said Security Ledger Exh. 309. The entries contained therein start from 13th November, 1990 to 6th April, 1992. Various entries have been made in chronological sequence and order. As noticed earlier, the transaction in question in the said security is of dated 6th April, 1991. It, therefore, follows that while noticing whether there was adequate balance in the said security into the account of Accused No. 3 A.D. Narottam, it has to be considered what was the position as on the opening of 6th April, 1991 in the transaction in question when that security was put through. It is noticed that the earlier entry of 6th April, 1991 in respect of the security transaction in the said security into the account of Accused No. 3 as it shows, on page No. 26 of Exh. 309 is dated 14th January, 1991 and balance shown in the balance column in that Ledger at a close of 14th January, 1991 is Rs. 1,300/-. The next entry after 14th January, 1991 is of dated 9th April, 1991 which shows there being a transaction of purchase of that- security for the face value of 5 crores into the account of Accused No. 3 having purchased from ANZ Grindlays Bank. On the same day, there is also an entry to show that the said security of 5 crores face value was sold to Standard Chartered Bank. So, at the end of 9th April, the balance appearing in the said Ledger is Rs. 1300/- only. It, therefore, clearly follows from the said document namely, the Security Ledger which P.W. No. 14 Mr. Kher, the Officer of BOK has stated, was maintained by BOK in the Security Department in the ordinary course of business that there was no balance of the said security, namely, 11.05% GOI face value 25 crores into the account of Accused No. 3 A.D. Narottam as on 6th April, 1991 i.e. on the date when he issued the said Delivery Order as noticed earlier to BOK instructing it to deliver the said security to CANFINA. Reading the evidence of P.W. No. 14 Mr. Kher and the position as reflected in the Security Ledger Account of Accused No. 3 A.D. Narottam noticed earlier, it clearly bears out that as on 6th April, 1991 there was balance of Rs. 1300/- only of the said security and there was no sufficient balance in the said security to meet the commitment as contained in the said Delivery Order Exh. 191.
94. At this juncture, it is also necessary to note that even Accused No. 3 A.D. Narottam in his explanation under section 313 of Cr.P.C. as also his oral testimony given on oath under section 315 of Cr.P.C. has admitted that there was no balance on 6th April, 1991 of the security viz. 11.05% GOI 2008 in his security account with BOK so as to meet his commitments of delivery as mentioned in his Delivery Order Exh. 191. Court hastens to act at this stage, while referring to the evidence of Accused No. 3 which was given under section 315 of Cr.P.C. and credit-worthiness of the same, to consider in the light of submissions/objections raised by and on behalf of the defence, separately. Court is making reference of the same as and by way of corroboration only to the prosecution evidence discussed hereinabove.
95. At this stage, it is necessary to make a reference also to two more entries appearing on page 26 of the Security Ledger Account of Accused No. 3 A.D. Narottam in respect of the very security, namely, 11.05% GOI 2008. Those entries are proved and marked Exhs. 213 and 192. Both the entries are purported to be of dated 6th April, 1991. Entry Exh. 213 shows BOK having purchased 11.05% GOI 2008 face value 25 crores, in account of Accused No. 3-A.D. Narottam, from Mercantile Co-operative Bank (in short M.C.B.) vide Delivery Order No. 1819 of the said M.C.B. The immediate next entry is Exh. 193 which is also of the same date viz. 6-4-91 showing Accused No. 3 having sold the said security, namely, 11.05% GOI 2008 face value 25 crores to CANFINA vide his Delivery Order No. 1242. The most significant factor about these two entries, Exhs. 213 and 192, is that the same have been made breaking the chronological sequence and order. In as much as, the immediate prior entry of Exh. 213 in respect of purchase of the said security from M.C.B. as noticed earlier is dated 26th November, 1991. It clearly follows that both these entries, Exhs. 213 and 192 purported to be of 6-4-91 have been made on or 26th November, 1991. It is also significant to note that Delivery Order mentioned in the column of "Delivery Order No." in the said Security Ledger in entry Exh. 192, which is in respect of purported sale of the security namely, 11.05% GOI 2008 face value 25 crores, is 1242. Incidentally, it needs to be stated that the number of Delivery Order being No. 1242 appearing in the said entry is the number of Delivery Order issued by Accused No. 3 A.D. Narottam on 6th April, 1991 being Exh. 191. It is therefore clearly evident that the entry Exh. 192 in the said Security Ledger in the account of Accused No. 3 in respect of sale of said security to CANFINA shown to be of 6th April, 1991 has been made on or after 26th of November, 1991 as is clearly manifested from the said Ledger, thus disturbing and breaking the chronological sequence. It is also important to note that the Receiving Order No. 1819 appearing in the said entry Exh. 213 pertains to the Receiving Order issued by Accused No. 3-A.D. Narottam on 16th September, 1991 which he has addressed to BOK directing BOK to receive the security, namely, 11.05% GOI 2008 face value 25 crores from M.C.B. which is Exh. 212 and has been proved to be in the handwriting of Accused No. 3-A.D. Narottam as also signed by him, by P.W. No. 14-Mr. Kher as also corroborated by the Handwriting Expert Mr. Sood, P.W. No. 67 who has stated the same being in the handwriting of Accused No. 3 and also signed by him. It is necessary to note that even Accused No. 3 has admitted having issued the said Receiving Order Exh. 212 on 16th September, 1991.
96. As noticed earlier, involvement of M.C.B. as prosecution evidence shows in the conspiracy came at this stage. This Court will deal with the same in different context while considering the complicity of accused Nos. 9, 10 and 11 who are concerned with M.C.B. For the present, it stands amply proved that when the transaction in respect of 11.05% GOI 2008 face value 25 crores security dated 6th April, 1991 took place in which CANFINA supposed to have purchased the said security form BOK, there was no balance of the said security into account of Accused No. 3-A.D. Narottam. It is in the evidence of Officer of BOK P.W. No. 14 Mr. Kher, that even on that date there was no balance to the extent of that transaction into the account of BOK also. It, therefore, clearly shows that when accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan struck the said deal in which Accused No. 2-H.P. Dalai acted as a broker and when Accused No. 3-A.D. Narottam issued the Delivery Order Exh. 191 on 6th April, 1991 directing BOK to delivery said security to CANFINA, he did not possess the said security in his security account. As deposed to by P.W. No. 14 Mr. Kher, even BOK did not hold the security to that extent in its own account.
97. Point No. 14:---This has reference to the second security transaction dated 22nd July, 1991 in respect of purchase of 16 crores Units of UTI by CANFINA from BOK for the face value of Rs. 212, 80, 00, 000/-. The Delivery Order issued by Accused No. 3-A.D. Narottam which is on his letter head and in the printed format bears No. 1716 dated 22nd July, 1991 addressed to BOK instructing BOK to delivery to CANFINA 16 crores Units of UTI. The said Delivery Order is produced and proved as Exh. 194-A by P.W. No. 14 Mr. Kher as also proved to be in the handwriting and bearing the signature of Accused No, 3 A.D. Narottam by Handwriting Expert P.W. No. 67 Mr. Sood. The fact that the said Delivery Order was issued by Accused No. 3 has been proved by the prosecution and what is necessary to note that even Accused No. 3 in his evidence before the Court as also in his explanation admitted having issued the said Delivery Order. The first part of the said point that Accused No. 3 has issued the said Delivery Order Exh. 194-A in respect of the security, namely, 16 crores Units of UTI to CANFINA, stands clearly established.
98. Now it is necessary to notice what was the position of the security account of Accused No. 3 A.D. Narottam in respect of the said security namely, Units of UTI as on 22nd July, 1991. Again the same documents, namely, the Security ledger of Accused No. 3 A.D. Narottam being Exh. 309 referred to earlier is a crucial and important record. The particulars in respect of the said security Units of UTI are appearing on pages 102 onwards of the said Security Ledger. On page 103 it is noticed that there is an entry dated 31st May, 1991 showing purchase of Units for the face value of Rs. 6,70,000/- and balance at the end of that date i.e. on 31st May, 1991 is Rs. 15 crores. It is also noticed that on the same day there is also an entry immediately after the said purchase entry which shows sale of 15 crore Units of UTI on the same day to some other party. So, as on 31st May, 1991 the balance column shows there being Nil balance. The next entry after 31st May, 1991 is of dated 31st July, 1991 which pertains to Accused No. 3 having bought Units of Rs. 7,50,00,000/- form Standard Chartered Bank and on 2nd August, 1991 having sold the said Units of UTI of Rs. 7,50,00,000/- to the said party, namely, the Standard Chartered Bank showing on 2nd August, 1991 as Nil balance in the Balance column. The said entry dated 31st July, 1991 in respect of purchase and sale respectively of Units of UTI of Rs. 7,50,00,000/- has been marked as Exh. 266 and Exh. 297 dated 2nd August, 1991 which will have bearing in some different context. As far as the position of balance of the security in Units in the account of Accused No. 3-A.D. Narottam as on 22nd July, 1991 is concerned, the said Security Ledger shows that there was Nil balance. It is, therefore, clear that as on 22nd July, 1991 when accused Nos. 1-M.K.S Ashok Kumar and 12-S. Mohan struck the said deal and in which Accused No. 2-H.P. Dalai was a broker and when the Accused No. 3-A.D. Narottam issued Delivery Order in the second transaction which relates to sale of 16 crores Units of UTI of BOK to CANFINA, there was no balance at all to meet the said commitments in the security account of Accused No. 3 with BOK. Apart from the fact that the said documents clearly establishes the same, even Accused No. 3 in his evidence under section 315 of Cr.P.C. as also in his explanation under section 313 of Cr.P.C. has admitted that there was no balance in the said security account to meet the commitment of the sale of that security to CANFINA on 22nd July, 1991.
99. It is proved that the entries in the Security Ledger are in the handwriting of Accused No. 8 and bear initials of Accused No. 7. This has been proved by P.W. No. 14 Mr. Kher. the Officer of BOK and it is to be stated that there is no challenge to the said evidence of authorship of Accused No. 8 as also of initials of Accused No. 7 from the said Accused No. 7 C.S. Raje and Accused No. 8 S.A. Ail.
100. As in the first transaction, there is also peculiar and interesting feature which is apparent from the Security Ledger Exh. 309 and it is as under:-
On 16th September, 1991 in the said Security Ledger on page 103 there is an entry dated 16th September, 1991 in the account of Accused No. 3 which is proved to be in the handwriting of Accused No. 8 S.A. Ail and bearing initials of Accused No. 7 C.S. Raje pertaining to purchase of 16 crores Units by Accused No. Son that day i.e. on 16th September, 1991 from M.C.B. vide Receiving Order No. 1820 dated 16th September, 1991 and the said entry is Exh. 216 in the said register. The prosecution has produced and proved the said Receiving Order bearing No. 1820 dated 16th September, 1991 on the printed letter head of Accused No. 3-A.D. Narottam which is proved to be in his handwriting and also bearing his signature, by P.W. No. 14 and corroborated by the Handwriting Expert P.W. No. 67-Mr. Sood whereby Accused No. 3 by the said Receiving Order addressed to BOK has instructed to receive 16 crores Units of UTI against the consideration of Rs. 212,80,00,000/- from M.C.B. The said Receiving Order is Exh. 217. The number of the said Receiving Order appears in the Delivery Order No. column in the said entry. It is important to note that the description of the security including it quantity, rate and consideration is exactly the same as of transaction dated 22nd July, 1991 as noticed earlier and has reflected in the Delivery Order of Accused No. 3 of 22nd July, 1991 being Exh. 194-A which relates to the sale of 16 crores Units of UTI by BOK to CANFINA. The said entry, therefore, shows that on 16th September, 1991 Accused No. 3 has bought 16 crores Units of UTI from M.C.B.
101. There is also an entry which is immediately next of an entry dated 16th September, 1991 in the said Security Ledger, which shows the sale of 16 crores Units of UTI at the rate of 13.30% to CANFINA vide Delivery Order No. 1716. It is necessary to state that, that No. 1716 is of the Delivery Order issued by Accused No. 3-A.D, Narottam in respect of the said transaction to CANFINA on 22nd July, 1991 and which is already produced and proved as Exh. 194-A. It, therefore, clearly emerges that entry in respect of sale which is Exh. 216, considering the number of Delivery Order mentioned therein, it is apparent that although the said entry is made on 16th September, 1991, the same is pertaining to the Delivery Order dated 22nd July, 1991 being Exh. 194-A.
102. It is therefore, on consideration of the evidence as above, clear that entries dated 16th September, 1991 in the Security Ledger Account of Accused No. 3-A.D. Narottam (Ex. 309) of purchase from M.C.B. and sale to CANFINA relate to the same security viz. 16 crore Units of UTI, when CANFINA purchased 16 crores Units of UTI against payment of Rs. 212, 80, 00, 000/- from BOK on 22-7-91. It, therefore, clearly emerges that as on 22nd July, 1991 when Accused No. 3 A.D. Narottam or BOK entered into transaction of sale of 16 crores Units of UTI to CANFINA there was no balance of that security either in the account of Accused No. 3 or with BOK nor that much security was available with BOK as is clearly borne out from the evidence of P.W. No. 14 Mr. Kher. It, therefore, follows that when accused Nos. 1 and/or 12 struck the said deal in which Accused No. 2-H.P. Dalai was a broker and when Accused No. 3-A.D. Narottam issued his Delivery Order Exh. 194-A on 22nd July, 1991 directing the BOK to deliver 16 crores. Units of UTI against payment of Rs. 212,80,00,000/- to CANFINA when there was no balance serf that security into his account. It is necessary to note that even Accused No. 3-A.D. Narottam in his evidence admitted the said fact.
103. Point No. 21:---This relates to the security transaction dated 31st July, 1991 in respect of purchase of 19 crores Units of UTI by CANFINA from BOK for total consideration of Rs. 252,70,00,000/-.
104. While considering the factual position as far as this transaction of 31st July, 1991 is concerned, vis-a-vis, the balance in the security account of Accused No. 3 A.D. Narottam with BOK or with BOK itself it needs to be stated that the position is exactly the same and identical as in the case of transaction dated 22nd July, 1991 in respect of 16 crores Units of UTI as noticed earlier while considering Point No. 14. In that, in the said Security Ledger Exh. 309 on page 103, there is an entry dated 16th September, 1991 just next to the entry in respect of 16 crores Units of UTI on 22nd July, 1991 showing purchase of 19 crores Units of UTI on 16th September, 1991 vide Delivery Order No. 1821 from M.C.B. The said entry is marked as Exh. 221 which is proved to be in the handwriting of Accused No. 8 S.A. Ail and bearing initials of Accused No. 7 C.S. Raje. The same shows Accused No. 3 having purchased the said security, namely, 19 crores Units of UT! at the rate of 13.30% from M.C.B. on 16th September, 1991. The Receiving Order of Accused No. 3 addressed to BOK bears No. 1821 dated 16th September, 1991 whereby he has instructed BOK to receive from M.C.B. the said security of 19 crores Units against payment of Rs. 252,70,00,000/-. The said Receiving Order has been proved as Exh. 222 being in the handwriting of Accused No. 3 A.D. Narottam and also bearing his signature by P.W. No. 14 Mr. Kher and P.W. No. 67 Mr. Sood, the Handwriting Expert. It may be stated that Accused No. 3 A.D. Narottam has also admitted about the issuance of the said Receiving Order. The said Receiving Order bearing No. 1821 also appears in the said entry Exh. 221 in the Receiving Order column in Ex. 309-Security Ledger.
105. On the same date immediately after the said entry Exh. 221, there is also one entry in the said ledger which has been marked as Exh. 227 and proved to be in the handwriting of Accused No. 8 and bearing the initials of Accused No. 7 indicating Accused No. 3 having sold 19 crores Units of UTI to CANFINA vide his Delivery Order No. 1738 which number is mentioned in the Delivery Order No. column in that entry. It is necessary to note that said Delivery Order No. 1738 mentioned in the said entry dated 16th September, 1991 is of that Delivery Order dated 31st July, 1991 being Exh. 265-A which Accused No. 3 has issued upon BOK instructing to delivery CANFINA 19 crores Units of UTI which security is the subject matter of security transaction of 31st July, 1991 as noticed earlier. It is most important to note that the said Delivery Order Ex. 265-A is proved to be in the handwriting of Accused No. 2-H.P. Dalai by Handwriting Expert Mr. Sood P.W. 67 which evidence has remained unchallenged. It, therefore, clearly follows that the said entry dated 16th September, 1991 being Exh. 227 showing the sale of 19 crores Units of UTI by BOK to CANFINA, although mentions date as 16th September, 1991 pertains to the sale of 31st July, 1991 transaction. As stated it is pertinent to note that the said Delivery Order is proved to be in the handwriting of Accused No. 2 H.P. Dalai and bearing the signature of Accused No. 3 A.D. Narottam. The evidence of the P.W. Nos. 14 and 67 in this respect has remained absolutely unchallenged and unrepudiated by Accused No. 2. In fact Accused No. 3 has admitted issuance of the said Delivery Order Exh. 265-A.
106. The net result of the discussion and consideration of the evidence clearly shows that, even as on 31st July, 1991 there was no balance of the security, namely, Units of UTI into the account of Accused No. 3 A.D. Narottam with BOK to meet the commitments in respect of sale of 19 crores Units of UTI to CANFINA.
107. In the context and in the circumstances, it is also worthwhile to notice how the Accused No. 7 C.S. Raje and Accused No. 8-S.A. Ail who were concerned in maintaining the record in Security Ledger, Exh. 309 and who have made the entries.
have to say in their explanations offered under section 313 of the Cr.P.C.
108. As far as accused Nos. 7 and 8 are concerned, this specific aspect, which is undoubtedly incriminating the said three entries being not in chronological sequence and order was put to the said accused Nos. 7 and 8. Q. No. 116 relates to the entry in respect of transaction dated 6th April, 1991 which was proved as stated earlier by P.W. No. 14 Mr. Kher. The said question which is common to both the accused is reproduced and which reads as:-
"Q. 116. the said witness (i.e. P.W. No. 14-Mr. Kher) has also further pointed out that entry Exh. 213 has been made indicating date as 6-4-1991 which is after the entry dated 26-11-1991 and he has further clarified that entries in the Security Ledger ought to have been made in chronological sequence and he was unable to explain about the discrepancy in the date. He has stated that the said entry Exh. 213 is in the handwriting of Accused No. 8-Sudhakar Appu Ail and entry preceding the said entry dated 26-11-1991 in the said Security Ledger is also in the handwriting of Accused No. 8. What you have to say about it?"
The explanation offered by Accused No. 7 C.S. Raje to the same is as under:-
"A. The entry of the transaction of 6th April, 1991, was not made in the Security Ledger on that day and the same was kept under suspense account and thereafter the entry shown to me has been made. As there was no adequate balance the entry was made later on".
The explanation offered by Accused No. 8 S.A. Ail to the same is as under:-
"A. On 6th April, 1991 when Accused No. 3 gave me said order, there was no balance in his account. 1 therefore asked Accused No. 7 what to do in the matter when Accused No. 7 told me that BR in respect thereof was expected and that entry should be made after its receipt. I could not made the posting entry on 6th April, 1991 in respect of the said transaction as there was no balance in the account of Accused No. 3 and such account could not be kept in debit balance. On 16-9-1991 when M.C.B. sent its BR to BOK, the entry was made in the account of Accused No. 3".
109. This is how even the accused Nos. 7 and 8 have explained about absence of entry of 6th April, 1991 transaction. More or less their explanation proceeds on the similar line in respect of other two entries relating to transactions dated 22nd July, 1991 and 31st July, 1991. The said explanation of Accused Nos. 7 and 8, who were concerned in making of the entries in the Security Ledger lends corroboration to the evidence of the prosecution discussed hereinabove. At this stage, it has to be stated that even Accused No. 3-A.D. Narottam who has examined himself on oath under section 315 of Cr.P.C. has stated that on the dates in question i.e. 6-4-91, 22-7-91 and 31-7-92 when delivery orders were issued on BOK instructing BOK to deliver the securities mentioned in his respective Delivery Orders he did not hold and possess in his account the securities involved in the said three main impugned transactions. It therefore stands established and proved that Accused No. 3-A.D. Narottam or even BOK did not possess and hold the securities in the main impugned transactions for delivering the same to CANFINA. It also stand established that BOK issued its cost memos and BRs favouring CANFINA and delivered the same to CANFINA without holding and possessing the securities in three impugned transactions.
110. Point Nos. 8, 15 & 22:---These points are also dealt with and considered at one stage as the same relate to the issuance of Cost Memos and Bank Receipts (in short BRs) issued by BOK favouring CANFINA in respect of three impugned transactions in securities dated 6th April, 1991, 22nd July. 1991 and 31st July, 1991.
111. Point No. 8:---No elaborate discussion is needed in this regard since while considering Point No. 7 above it has already been held to have been proved by the prosecution by cogent and convincing evidence that on the date i.e. on 6th April, 1991 when BOK issued Cost Memo and BR in respect of security transaction dated 6th April, 1991 on the strength of Delivery Order of Accused No. 3, there was no adequate balance in the account of Accused No. 3 A.D. Narottam. So was the position in the account of BOK also. The Cost Memo issued in respect of the said security is Exh. 188 dated 6th April, 1991 and the BR is Exh. 189 dated 6th April, 1991 in respect of the said security for sum of Rs. 25,99,23,818/-. It is in the evidence that the said Cost Memo and BR have been proved by P.W. No. 14 Mr. Kher being in the handwriting of Accused No, 8 S.A. Ail and bearing signature of Accused No. 7 C.S. Raje. It is proved that the said Cost Memo and BR were issued by BOK. P.W. No. 67 has also proved the said document being in the handwriting of Accused No. 8 and bearing the signature of Accused No. 7, which evidence has remained unchallenged. It is in the evidence of P.W. No. 14 Mr. Kher that, at the relevant time Accused No. 7 was an Officer working in the Security Department of BOK in Fort Branch and was in-charge of that department and he was authorized to execute the security transactions. The said evidence of the P.W. No. 14 Mr. Kher has remained unaffected and unimpeached. As a matter of fact, the trend of cross-examination on behalf of accused Nos. 7 and 8 indicates that they did issue the said Cost Memo and the said B.R. but it was under the instructions of Accused No. 3 A.D. Narottam which Accused No. 3 has denied.
112. P.W. No. 2-D.G. Vernekar has admitted having received the said Cost Memo and B.R. on 6th April, 1991 itself from BOK and he has also identified the same. Thus, the evidence clearly shows that the said Cost Memo and B.R. both dated 6-4-1991 came to be issued by accused Nos. 7 and 8 and that when the same were issued there was no security in question in the account of Accused No. 3-A.D. Narottam or with BOK.
113. Point No. 15:---No elaborate discussion is needed in this regard since while considering Point No. 14 above, it has already been held to have been proved by the prosecution by cogent and convincing evidence that on the date i.e. on 22nd July, 1991 when BOK issued Cost Memo and BR in respect of security transaction dated 22nd July, 1991 on the strength of Delivery Order of Accused No. 3, there was no adequate balance in the account of Accused No. 3 A.D. Narottam. So was the position in the account of BOK also. The Cost Memo issued in respect of the said security is being Exh. 195 dated 22nd July, 1991 and the BR is Exh. 196 dated 22nd July, 1991 in respect of the said security for sum of Rs. 212,80,00,000/-. The said Cost Memo and BR have been proved by P,W. No. 14 Mr. Kher being in the handwriting of Accused No. 8 S.A. Ail and bearing signature of Accused No. 7 C.S. Raje. It is proved that the said Cost Memo and BR were issued by BOK. P.W. No. 67 has also proved the said document being in the handwriting of Accused No. 8 and bearing the signature of Accused No. 7, which evidence has remained unchallenged. It is in the evidence of P.W. No. 14 Mr. Kher that, at the relevant time Accused No. 7 was an Officer working in the Security Department of BOK in Fort Branch and was in-charge of that department and he was authorized to execute the security transactions. The said evidence of the P.W. No. 14 Mr. Kher has remained unaffected and unimpeached. As a matter of fact the trend of cross-examination on behalf of Accused Nos. 7 and 8 indicates that they did issue the said Cost Memo and the said B.R., but it was under the instructions of Accused No. 3 A.D. Narottam which Accused No. 3 has denied.
114. P.W. No. 2 Mr. D.G. Vernekar has admitted having received the said Cost Memo and B.R. on 22-7-1991 itself from BOK and he has also identified the same. Thus, the evidence clearly shows that the said Cost Memo and B.R. came to be issued by accused Nos. 7 and 8 and that when the same were issued there was no security in question in the account of Accused No. 3 A.D. Narottam or with BOK.
115. Point No. 22:---No elaborate discussion is needed in this regard also since while considering Point No. 7 and 14 above, it has already been held to have been proved by the prosecution by cogent and convincing evidence that on the date i.e. on 31st July, 1991 when BOK issued Cost Memo and BR in respect of security transaction dated 31st July, 1991 on the strength of Delivery Order of Accused No. 3, there was no adequate balance in the account of Accused No. 3 A.D. Narottam. So was the position in the account of BOK also. The Cost Memo issued in respect of the said security is Exh. 229 dated 31st July, 1991 and the BR is Exh. 228 dated 31st July, 1991 in respect of the said security for sum of Rs. 255,43,98,000/-. The said Cost Memo and BR have been proved by P.W. No. 14 Mr. Kher being in the handwriting of Accused No. 8 S.A. Ail and bearing signature of Accused No. 7 C.S. Raje. It is proved that the said Cost Memo and BR were issued by BOK. P.W. No 67 has also proved the said document being in the handwriting of Accused No. 8 and bearing the signature of Accused No. 7, which evidence has remained unchallenged. It is in the evidence of P.W. No. 14-Mr. Kher that, at the relevant time Accused No. 7 was the Officer working in the Security Department of BOK in Fort Branch and was incharge of that department and he was authorized to execute the security transactions. The said evidence of the P.W. No. 14-Mr. Kher has remained unaffected and unimpeached. As a matter of fact, the trend of cross-examination on behalf of accused Nos. 7 and 8 indicates that they did issue the said Cost Memo and the said BRs, but it was under the instructions of Accused No. 3 A.D. Narottam which Accused No. 3 has denied.
116. P.W. No. 2 Mr. D.G. Vernekar has admitted having received the said Cost Memo and B.R. on 6th April, 1991 itself from BOK and he has also identified the same. Thus, the evidence clearly shows that the said Cost Memo and B.R. both dated 31-7-1991 of BOK came to be issued by accused Nos. 7 and 8 and that when the same were issued there was no security in question in the account of Accused No. 3 A.D. Narottam or with BOK.
117. Point Nos. 9, 16 & 23:---These points are considered and dealt with at one stage.
Point No. 9:---This point relates to the payment by CANFINA to BOK in respect of the first transaction dated 6th April, 1991. The amount involved as noticed earlier is Rs. 25,81,20,354.38. The fact that the CANFINA made the said payment to BOK by Inter Bank Cheque/Pay Order issued on Canara Bank, Bombay favouring BOK, Bombay, is not disputed and questioned at alt. In as much as, P.W. No. 2 Mr. Vernekar who was concerned with the issuance of the said Pay Order has deposed that on receipt of the Cost Memo and B.R. of that date of BOK in respect of the security involved in the said transaction dated 6th April, 1991 through the messenger of the broker, he paid the consideration thereof amounting to Rs. 25,81,20,354.38 by the Inter Bank cheque drawn on Canara Bank, Bombay favouring BOK for and on behalf of CANFINA. It is also in the evidence that on the same day BOK received the credit thereof into its account. He has also proved the said bankers cheque being Exh. 41.
118. He has further stated that he arranged to make the payment thereof as a consideration of the securities being the subject matter of the said transaction whereby CANFINA purchased the said security from BOK. It is also in his evidence that he arranged to make the said payment at the instructions of dealers of CANFINA. He further deposed that in respect of the said payment he also received Inter Bank Advice (IBA) from Canara Bank, Bangalore about remittance by CANFINA, Bangalore. There is a detail evidence made available about the issuance of the said Pay Order, such as, debit and credit advices, entries in the relevant ledgers kept and maintained at the end of CANFINA as also with Canara Bank. It is necessary to note that this aspect of the evidence of P.W. No. 2 Mr. Vernekar has not been questioned or dislodged in the cross-examination.
119. As far as recipient party of the said Pay Order which is BOK, there is also evidence made available from the end of BOK and P.W. No. 14-Mr. Kher, the officer of BOK has deposed having received the said Pay Order and crediting the proceeds thereof into the account of BOK. In that respect also the said witness P.W. 14 Mr. Kher has made reference to the necessary evidence, such as, debit and credit advices, entries in the relevant record of the Bank kept and maintained in the normal course of business etc. It is also to be noted that there is no challenge to the said evidence of P.W. No. 14-Mr. Kher which proves that BOK on 6th April, 1991 received the proceeds of the said Pay Order received from CANFINA amounting to Rs. 25,81,20,354.38. It is to be noted that there is no dispute about the receipt of the said payment of BOK.
120. Point No. 16:---The Point No. 16 relate to the payment made by CANFINA on 22nd July, 1991 to BOK. The Inter Bank cheque/Pay Order issued by CANFINA on Canara Bank favouring BOK on 22nd July, 1991 is Exh. 52 which has been proved by P.W. No. 2 Mr. Vernekar. The evidence and documents proceed on the similar lines as far as this point is concerned as noticed while considering Point No. 9, except the dates and amounts of the Pay Order and exhibit numbers. So is the position in respect of Point No. 23 which relates to the payment made on 31st July, 1991.
121. The payment being the subject matter of this point relates to the payment by CANFINA to BOK in respect of the second transaction dated 22nd July, 1991. The amount involved as noticed earlier is Rs. 212,75,00,000/-. The fact that the CANFINA made the said payment to BOK by Inter Bank Cheque/Pay Order issued on Canara Bank, Bombay favouring BOK, Bombay, is not disputed and questioned at all. In as much as, P.W. No. 2-Mr. Vernekar who was concerned with the issuance of the said Pay Order has deposed that on receipt of the Cost Memo and B.R. of that date from BOK in respect of the security involved in the said transaction dated 22nd July, 1991 through the messenger of the broker, he issued the consideration thereof amounting to Rs. 212,75,00,000/- by the Inter Bank cheque drawn on Canara Bank, Bombay favouring BOK for and on behalf of CANFINA. It is also in the evidence that on the same day BOK received the credit thereof into its account. He has also proved the said bankers cheque being Exh. 52.
122. He has further stated that he arranged to make the payment thereof as a consideration of the securing sic securities being the subject matter of the said transaction whereby CANFINA purchased the said security from BOK. It is also in his evidence that he arranged to make the said payment on the instructions of dealers of CANFINA. He further deposed that in respect of the said payment he also received Inter Bank Advice (IBA) from Canara Bank, Bangalore about remittance for the said security from CANFINA, Bangalore office. There is a detail evidence made available about the issuance of the said Pay Order, such as, debit and credit advices, entries in the relevant ledgers kept and maintained at the end of CANFINA as also Canara Bank. It is necessary to note that this aspect of the evidence of P.W. No. 2 Mr. Vernekar has not been questioned or dislodged in the cross-examination.
123. As far as recipient party of the said Pay Order which is BOK, there is also evidence made available from that end P.W. No. 14 has deposed having and received the said Pay Order and having credited the proceeds thereof into the account of BOK. In that respect also, the said witness, P.W. 14.-Mr. Kher has made reference to the evidence, such as, debit and credit advices, entries in the relevant record of the Bank kept and maintained in the normal course of banking business, etc. It is to be noted that there is no challenge to the said evidence of P.W. No. 14-Mr. Kher that BOK on 22nd July, 1991 received the proceeds of the said Pay Order received from CANFINA amounting to Rs. 212,75,00,000/-.
124. Point No. 23:---This point relates to the payment by CANFINA to BOK in respect of the third transaction dated 31st July, 1991. The amount involved as noticed earlier is Rs. 255,43,98,000/-. The fact that the CANFINA made the said payment to BOK by Inter Bank Cheque/Pay Order issued on Canara Bank, Bombay favouring BOK, Bombay is not disputed and questioned at all. In as much as, P.W. No. 2 Mr. Vernekar who was concerned with the issuance of the said Pay Order has deposed that on receipt of the Cost Memo and B.R. of BOK of that date in respect of the security involved in the said transaction dated 31st July, 1991 through the messenger of the broker, he issued the consideration thereof amounting to Rs. 255,43,98,000/ - by the Inter Bank cheque drawn on Canara Bank, Bombay favouring BOK for and on behalf of CANFINA It is also in the evidence that on the same day BOK received the credit thereof into its account He has also proved the said bankers cheque being Exh. 66.
125. He has further stated that he arranged to make the payment thereof as a consideration of the securing being the subject matter of the said transaction whereby CANFINA purchased the said security from BOK. It is also in his evidence that he arranged to make the said payment at the instructions of dealers of CANFINA. He further deposed that in respect of the said payment he also received Inter Bank Advice (IBA) from Canara Bank, Bangalore about remittance. There is detailed evidence made available about the issuance of the said Pay Order, such as, debit and credit advices, entries in the relevant ledgers kept and maintained at the end of CANFINA as also Canara Bank. It is necessary to note that this aspect of the evidence of P.W. No. 2 Mr. Vernekar has not been questioned or dislodged in the cross-examination.
126. As far as recipient party of the said Pay Order which is BOK, there is also evidence made available from that end and P.W. No. 14 has deposed having received the said Pay Order and having credited the proceeds thereof into the account of BOK. In that respect also, the said witness P.W. 14-Mr. Kher has made reference to the evidence such as, debit and credit advices, entries in the relevant record of the Bank kept and maintained in the normal course of its banking business. It is to be noted that there is no challenge to the said evidence of P.W. No. 14-Mr. Kher that BOK on 31st July, 1991 received the proceeds of the said Pay Order received from CANFINA amounting to Rs. 255,43,98,000/-.
127. Considering the evidence as discussed hereinabove in respect of Point Nos. 9, 15 and 23, it clearly stands proved and established by the prosecution beyond any shadow of doubt that on dates in question when three main impugned transactions of this case in securities took place and CANFINA purchased the securities in the said three transactions from BOK, CANFINA arranged to make payments to BOK by issuance of its Pay Orders drawn on its banker Canara Bank, Bombay and BOK received the proceeds of the three Pay Orders on the very day itself. It also stand clearly established that CANFINA parted with the moneys under the said three Pay Orders and paid the same to BOK on the respective dates on the basis of Cost Memos and B.Rs. which were issued by BOK ad which were delivered to CANFINA on the respective dates.
128. At this juncture, it is also necessary to mention one more important fact which will have considerable bearing in the context of prosecution case, evidence, charges levelled against the accused and the stand taken up by he concerned accused. There is a charge of cheating as also of criminal conspiracy, misappropriation of funds of CANFINA. The payments under the Pay Orders being subject matter of Point Nos. 9, 16 and 23, were made and/ or parted with in Bombay. The said payments were made by P.W. No. 2 from Bombay against the receipt of Cost Memos and B.Rs. of BOK from BOK. It is sought to be contended that on that basis the payments were made on three different dates as noticed earlier for and on behalf of CANFINA by P.W. No. 2 Mr. Vernekar. The moneys were thus parted at Bombay.
129. But, there is a very vital aspect in this respect and for which the evidence has been made available by the prosecution. As noticed earlier, the registered office of CANFINA at the relevant time was at Bangalore. The dealers who were accused Nos. 1 & 12, namely, M.K.S. Ashok Kumar and S. Mohan, respectively, at the relevant time had struck and finalized three deals in question at Bangalore. It is also noticed, while considering Point Nos. 1 and 2 hereinabove earlier that the Accused No. 1-M.K.S. Ashok Kumar and No. 12-S. Mohan had at the relevant time power to strike and finalise Deals of CANFINA. In the stand taken by the defence, in particular by Accused No. 1 M.K.S. Ashok Kumar, Accused No. 2 H.P. Dalal and Accused No. 12 S. Mohan it is sought to be suggested, in the context of offence of cheating and criminal misappropriation of funds that, since funds were parted in Bombay by P.W. No. 2 Mr. Vernekar, the main ingredient of the offence of cheating or dishonest misappropriation or deceit are lacking. In the context of offence of criminal misappropriation, it is suggested that there is no evidence of entrustment of dominion of property as such. It is, therefore, necessary to thrash out the said aspect at this juncture.
130. The evidence of P.W. No. 26-Mr. Padubidri Nanyam Narayan Rao is very crucial in this respect as it is lending corroboration to the testimony of P.W. No. 2 Mr. Vernekar. P.W. No. 2 in his evidence has stated that, at the relevant time, he was an Officer in the employment of Canara Bank but he was attending to security transactions of CANFINA in its Bombay office and for that purpose he was authorized by CANFINA to issue cheques and take necessary steps in respect of execution of security transactions, etc. He has, however, as noticed earlier, in a categorical manner asserted and which part of his evidence has remained absolutely unaffected that he used to take various steps relating to the security transactions of CANFINA strictly in accordance with and in conformity with the instructions that he used to receive from the dealers of CANFINA at Bangalore. He has deposed that at the relevant time accused Nos. 1 and 12 were the only Dealers of CANFINA, who used to finalise security Deals of CANFINA from Bangalore, There was an attempt made on behalf of defence, in particular. Accused Nos. 1 and 12 that P.W. No. 2 was empowered independently to execute the Deals and therefore without there being any instructions either from the dealers or from any one and therefore he could take necessary steps including issuance of Pay Order on behalf of CANFINA, etc. However he has emphatically denied and repudiated the said suggestion. In any event, as far as impugned three transactions are concerned, he has stated that he acted strictly in accordance with the instructions of dealers either Accused 1 or Accused No. 12.
131. Further evidence of this witness also shows that the payments required to be made for the security transactions of purchase for and on behalf of CANFINA used to be received from its Bangalore office which was a registered office. He has further stated that since the process of remittance from Bangalore to Bombay would take sometimes by means of Inter Bank Advices, the particulars were conveyed over telephone from Bangalore to Bombay and on the basis thereof he used to proceed ahead in execution of the security transactions including making payment to the counter party being the consideration of the security in the event of CANFINA being the purchaser. It is also in his evidence that later on in due course, Bombay office would also receive the necessary credit and debit advices from Canara Bank, Bangalore and there used to be responding process thereto from Bombay office, Apart from the fact that this evidence of this witness has not been challenged, there is voluminous documentary evidence which is relevant, such as, IBAs, Dummy memos, entries in the books of accounts, statements, etc. which have been made available. This aspect, however, is not in dispute namely, the remittance from Bangalore and issuance of IBAs etc.
132. There is further clinching and cogent evidence in this regard and it has been made available before the Court by the prosecution by examining P.W. No. 26 Mr. P.N. Narayan Rao who at the relevant time worked as the Executive Vice President of CANFINA in its registered office at Bangalore. This witness has produced a cheque dated 6th April, 1991 issued by CANFINA. Bangalore office on Canara Bank, Bangalore for a sum of Rs. 143,80,52,980.90 which is Exh. 389. The cheque has been signed by this witness. It is in his evidence that the said cheque was drawn mentioning Payee as "Yourselves IBA on FXJ section, Bombay". It is in his evidence that the said payment was made by CANFINA. Bangalore, for being remitted to its Bombay Office for meeting its commitments in security transactions of that date. The date of the cheque, it may be noted, is 6th April, 1991 and the first transaction of this case is also of that date.
133. Similar cheque has also been issued which this witness has proved, on 22nd July, 1991 by CANFINA Bangalore on its banker Canara Bank, Bangalore which is for a sum of Rs. 358,80,17,715.53. The said cheque is at Exh. 388. Yet another cheque has also been issued on 31st July, 1991 by CANFINA Bangalore in the same manner for a sum of Rs. 1080,11,57,421.97 being Exh. 390. The said witness has proved the said cheques and has further deposed about the negotiations of the said cheques and remittance to Bombay into the credit of CANFINA's account with Canara Bank, Bombay. The necessary documentation which is normally kept and maintained by the Bank, such as, debit/credit advices, IBAs. dummy IBAs, statements of accounts, etc. have been made available and referred to in the evidence before this Court. Since, however, the fact that remittances on said three dates to Bombay were originated from Bangalore, stands amply proved and which aspect has not been challenged, it is unnecessary to refer to the other evidence. It stands clearly proved and established by the prosecution that the funds required by CANFINA at Bombay for meeting its commitments in the security transactions struck and finalized by dealers of CANFINA at Bangalore used to be originated from CANFINA's head office at Bangalore. It follows what P.W. No. 2 in Bombay was required to do was to make the payments to different and concerned parties being counter parties in security transactions as per instructions of the dealers. It is therefore crystal clear from the above evidence that the amounts were received from CANFINA's Bangalore office to Bombay for its Security Deals, which were as noticed, finalized by either Accused No. 1-M.K.S. Ashok Kumar or Accused No. 12-S. Mohan at Bangalore and it is most important to note that only thereafter remittances were originated from Bangalore. It is therefore clearly proved that it is the Dealers who at the relevant time were accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan who had dominion over the funds of CANFINA.
134. Point Nos. 10,17 and 24:- These three points would throw light as to how BOK dealt with the proceeds of three Pay Orders, which CANFINA as noticed earlier issued in three different main transactions on 6-4-91, 22-7-91 and 31-7-91. While considering Point Nos. 9, 16 and 23, it is already held and having convincingly proved by the prosecution that the said Pay Orders in all the three transactions were issued by P.W. 2 Mr. Vernekar favouring BOK on Canara Bank, Bombay for and on behalf of CANFINA. It is also in the evidence of P.W. 2-Mr. Vernekar that thereafter he handed over the said Pay Orders on the dates when the same were issued to the messenger of the broker involved in the transaction. It is also in the evidence of the said witness that BOK had received the credits of the proceeds of all the said three Pay Orders. It is to be stated that the said evidence of P.W. 2-Mr. Vernekar about the receipts of the said Pay Orders as also credits of the proceeds of the said three Pay Orders on respective dates to the account of BOK has also been deposed and corroborated by P.W. 14, the then Officer of BOK with support of relevant record already noticed. It is to be noticed as to whether the BOK credited the entire proceeds of the said three Pay Orders on the respective dates when the same were issued and received by BOK, into the account of Accused No. 3-Mr. Narottam bearing No. 201 with BOK and further it did so in absence of instructions/advices of either of CANFINA or Canara Bank.
135. P.W. 14-Shri Mukund Krishnaji Kher, the officer of BOK is the main witness who has deposed in this respect. He has also made available relevant documentary evidence which is contemporaneous one, in respect of the credits of the proceeds of the said Pay Orders, such as Statement of Account pertaining to the said O/D account of Accused No. 3 and corresponding debit and credit vouchers, etc.
136. As far as credit of proceeds of pay Order dt. 6-4-91 for amount of Rs. 25,81.20,354.78 is concerned, the statement of Over Draft account of Accused No. 3-Mr. Narottam bearing No. 201 has been produced which is marked as Ex. 198, collectively for the period from 1-4-91 to 30-12-91. There is a credit entry on page No. 2 of the said statement made on 6-4-91 for sum of Rs. 25,81,20,354.78. The amount of credit mentioned therein is the same that of Pay Order dated 6-4-91 issued by CANFINA on Canara Bank favouring BOK as on that day. In the column of "particulars" of the said entry it is mention as "Clearing". It therefore stands proved that BOK credited the proceeds of the said Pay Order Ex. 41 into the Over Draft account of Accused No. 3-Mr. Narottam with it on the very day. Thus the amount of Pay Order/inter bank cheque of Canara Bank dated 6-4-91 corresponds to the said credit entry.
137. It is to be noted that the evidence of P.W. 2-Mr. Vernekar, that when the said Pay Order was issued and delivered to BOK through the messenger of a Broker, no instructions were given for and on behalf of CANFINA or Canara Bank to BOK for crediting the proceeds of the said Pay Order into the account of Accused No. 3 or into account of any third party. It is also in the evidence of the said witness that the said Pay Order Ex. 41 was being Banker cheque was "Non Transferable" meaning thereby that the said Pay Order has to be negotiated for clearance into the account of its Payee as named therein. It is relevant to note that the said part of the evidence of P.W. 2-Mr. Vernekar has not been questioned or challenged at all. It therefore, clearly shows that BOK credited the proceeds of the said pay Order which was issued in its favour into the Over Draft account of Accused No. 3-Mr. A.D. Narottam with it without there being any specific instructions either from CANFINA or Canara Bank to that effect.
138. It is also necessary to note that the said fact, namely, the credit of all the proceeds of the said cheque into the account of Accused No. 3 has also been admitted by Accused No. 3-Mr. Narottam in his explanation under section 313 and in his evidence under section 315 of Cr.P.C. as also in his written statement which he has filed in Special Civil Suit No. 8 of 1994 in this Court filed by CANFINA in respect of the recovery of the amount involved in the said transaction of 6-4-91 in which Accused No. 3-Mr. Narottam is one of the defendants and same has been produced as Ex. A-2(5(A) by and on behalf of Accused No. 2- Mr. Hiten P. Dalal. The said written statement has been declared on oath by Accused No. 3-Mr. Narottam on 12-7-1995 and relevant portion referred to herein appears in para 15-J. It is further to be noted that even Accused No. 7 - Shri Chandrashekhar Sitaram Raja & 8-Shri Sudhakar Apu Ail who were the concerned employee of BOK in the process of credit of proceeds of the said Pay Order have not disputed and denied the said fact.
139. Point No. 17: This point relates to the credit of proceeds of Pay Order dated 22-7-1991 for sum Rs. 212, 75,00,000/- issued by Canara Bank, Bombay on account of CANFINA favouring BOK being Ex. 52. The evidence even in respect of issuance and crediting the proceeds thereof into the Over Draft account of Accused No. 3-Mr. Narottam, bearing No. 201 with BOK is almost of the same type and nature. P.W. 2-Mr. Vernekar has stated that when he handed over the said Pay Order, no instructions were given to BOK either by CANFINA or Canara Bank for crediting the proceeds of the said Pay Order to any third party other than payee named therein, that is BOK, which evidence has remained absolutely unchallenged.
140. It may be stated and as noticed earlier, the total consideration involved in the said Security Transaction of 22-7-91 is for Rs. 212,80,00,000/ -. However, the Pay Order was issued for a sum of Rs. 212,75,00,000/-. As mentioned in the relevant Cost Memo and BR, this witness P.W. 2-Vernekar has explained that the sum of Rs. 5 lakh was to be adjusted from the credit to be received from Citi Bank as per instructions of dealer of CANFINA. i.e., either Accused No. 1 - Shri Mulangi Krishna Swamy Ashok Kumar or Accused No. 12 Shri Sarenathan Mohan.
141. It is to be noted that in the statement of Over Draft account of Accused No. 3 at Ex. 198, there is a credit entry dated 22-7-91 for a sum of Rs. 212, 80,00,000/- which has been specifically marked as Ex. 198(1) and which has been proved by P.W. 14-Mr. Kher. In the column of particulars, it is mention as "CLG" indicating that the said credit related to the amount received as a result of clearance of the cheque/Pay Order. There is another document, namely, credit voucher of 22-7-91 of BOK addressed to CANFINA which is produced as Ex. 329 and proved by P.W. 14-Mr. Kher being in the handwriting of Accused No. 8-Shri Sudhakar Appu Ail and bearing signature of accused No. 7-Shri Chandrashekhar Sitaram Raje for the said amount of Rs. 212,80,00,000/- showing that the amount was credited in the Over Draft account of Accused No. 3-Mr. Narottam. This evidence clearly shows that the proceeds of the said Pay Order were credited into the account of Accused No. 3-Mr. Narottam by BOK. This fact has also been admitted by accused No. 3-Mr. Narottam in his explanation under section 313 of Cr.P.C., his evidence given before the Court under section 315 of Cr.P.C. as also in his written statement at Ex. A-2 (75) filed in Special Civil Suit No. 7 of 1994 in this Court by CANFINA in respect of the said transaction of 22-7-91 in which the Accused No. 3-Mr. Narottam is one of the defendants. In para 14-J he has admitted the credit of the proceeds of said Pay Order into his account.
142. Point No. 24:-The point relates to the Pay Order Ex. 66 issued by Canara Bank favouring BOK on 31-7-91 for sum of Rs. 255,43,98,000/-. The credit entry in respect of the amount of the said cheque is also reflected in the Over Draft Account No. 201 of Accused No. 3 with BOK on that date which entry has been marked as Ex. 235 in statement of account Ex. 198 and which has been proved by P.W. 14-Mr. Kher. In the column of particulars, it is mention as "CLG" indicating that the said credit related to the amount received as a result of clearance of the cheque/Pay Order. There is another document, namely, credit voucher of 31-7-91 of BOK addressed to CANFINA which is produced as Ex. 329 and proved by P.W. 14-Mr. Kher being in the handwriting of Accused No. 8-Shri Sudhakar Appu Ail and bearing signature of Accused No. 7-Shri Chandrashekhar Sitaram Raje for the same amount of Rs. 255,43,98,000/- showing that the amount was credited in the Over Draft account of Accused No. 3. This evidence clearly shows that the proceeds of the said Pay Orders were credited into the account of Accused No. 3 by BOK. This fact has also been admitted by Accused No. 3 Mr. Narottam in his explanation under section 313 of Cr.P.C. his evidence given before the Court under section 315 of Cr.P.C. as also in his written statement at Ex. A-2-6(A) filed in Special Civil Suit No. 7 of 1994 in this Court by CANFINA in respect of the said transaction of 31-7-91 in which the Accused No. 3-Mr. Narottam is one of the defendants. In para 14-J he has admitted the credit of the proceeds of the said Pay Order into his account.
143. The evidence discussed and considered above with regard to the issuance of three Pay Orders of Canara Bank, Bombay in account of Canara Bank favouring BOK on three different dates i.e 6-4-91, 22-7-91 and 31-7-91 and BOK crediting the proceeds of the said three Pay Orders into Over Draft Account of Accused No. 3-Mr. Narottam with it stands clearly established. The fact that the said instruments were Inter Bank Cheques/Pay Orders and Non Transferable and that there were no instructions from Canara Bank or CANFINA to BOK to credit the proceeds of the said Pay Orders into the account of Accused No. 3 Mr. Narottam also stands convincingly proved. The evidence clearly shows that BOK proceeded to credit the proceeds of the said Pay Orders into Over Draft account of Accused No. 3-Mr. Narottam. Point Nos. 10,17 and 24 therefore answered affirmatively.
144. Point Nos. 11, 18 & 25: These points are considered at one place as the same relate to the further utilization and diversion and/or outflow from the over draft account of Accused No. 3-A.D. Narottam with BOK. While considering Point Nos. 10, 17 and 24 earlier it is already held to have been proved that although Canara Bank issued its Pay Orders on three different dates for the diverse amounts in favour of BOK and although the said instruments viz. Pay Order being inter bank cheques and as such were non-transferable, even in the absence of instructions from Canara Bank issuing Pay Order in question as also from CANFINA, BOK credited the proceeds of the said Pay Orders into the O/D account of Accused No. 3. It becomes therefore necessary on the basis of evidence that is made available as to what happened to that amount and how and where the same traveled further.
i) Point No. 11: This is in respect of transaction of 6-4-91 wherein the amount involved is Rs. 25,81,20,354.78. In the statement of account Ex. 198 produced and proved by P.W. 14-M.K. Kher, officer of BOK as stated earlier it is noticed that on 6-4-1991 there are various credit entries made into the account of Accused No. 3 on that day i.e on 6-4-91 which include the credit entry in respect of proceeds of Pay Order Ex. 41. On the same day there are also various debit entries into the said account of Accused No. 3. However it is not necessary to refer to all of them. One such debit entry of that date i.e. 6-4-1991 is for the sum of Rs. 25,97,88,276.77 which proximates and close to the credit entry of Rs. 25,81,20,354.78 being the amount of Pay Order Ex. 41. There is evidence made available in respect of the said debit entry by the prosecution through its witness P.W. 19-A.S. Kulkarni, an officer of BOK. He has produced and proved inter bank cheque/Pay Order of BOK of 6-4-91 issued by it in favour of Andhra Bank of the said amount i.e for the sum of Rs. 25,97,88,276.77. It is in the evidence of the said witness P.W. 19 that on that date i.e on 6-4-1991 BOK had issued its Pay Order for the sum of Rs. 25,97,88,276.77 debiting the amount thereof into the O/D account of Accused No. 3 in favour of Andhra Bank. The said Pay Order has been produced as Ex. 335 and proved to be in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje. The handwriting expert P.W. 67-N.C. Sood has also proved the said document being of the authorship of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje. It has to be stated that Accused Nos. 7 and 8 have also not disputed or denied the said evidence.
145. The prosecution has also produced the evidence from the side of Andhra Bank. It has examined P.W. 37-S.P. Kamat being an officer of Andhra Bank, at the relevant time, who worked in the Funds Department. He has deposed that Accused No. 2-H.P. Dalal was having current account bearing No. 4819 with Andhra Bank. He has also identified Accused No. 2-H.P. Dalal sitting in the Court as being the same account holder. This witness has testified Andhra Bank having received Pay Order of BOK dated 6-4-1991 being Ex. 335 on 6-4-91 and has produced the extract of cheque clearing register of that date kept and maintained by the Andhra Bank being Ex. 425 and entry in respect of receipt of the said Pay Order Ex. 335 is at Sr. No. 16 which has been marked as Ex. 425(1) and he has co-related the said entry with the said Pay Order an has stated the said Pay Order having been forwarded by Andhra Bank on that day for clearance.
146. Then this witness has further deposed having prepared a debit voucher on 6-4-1991 for the sum of Rs. 25,97,88,276.77 on the prescribed format of Andhra Bank which is Ex. 423 and entry in respect of the said Pay Order has been marked as Ex. 423(1) and this witness has co-related the said entry to the said Pay Order Ex. 335. This debit voucher has been signed by him. Then this witness has also produced the credit voucher of Andhra Bank of the said date which is also prepared and signed by him being Ex. 424 and has further deposed that the same relates to the credit of the amounts into the current Account No. 4819 of Accused No. 2-H.P. Dalal of the proceeds of various cheques received from different banks on that day. As far as we are concerned there is a credit entry for the sum of Rs. 25,97,88,276.77 which has been marked as Ex. 424(1) and this witness has deposed that the said entry co-relates to the said Pay Order Ex. 335. The evidence of this witness shows that the proceeds of the said Pay Order Ex. 335 which as noticed earlier was issued by BOK debiting the amount into the O/D account of Accused No. 3-A.D. Narottam has been directly credited into the current account of Accused No. 2 in Andhra Bank on 6-4-91, without there being any consideration.
147. There is further piece of evidence which is very germane and most vital piece throwing light on direct involvement and complicity of Accused No. 2-H.P. Dalal in siphoning of the funds for his own security transaction for his own benefit which is Ex. 421 being the cost memo of Andhra Bank dated 6-4-1991 favouring BOK in respect of security transaction of 11.1/2% GOI 2010 face value 25 crores total consideration of Rs. 25,97,88,276.77 into the account of Accused No. 2-H.P. Dalal, P.W. No. 37-S.P. Kamat, officer of Andhra Bank has proved the said document and his evidence shows that the said cost memo pertains to the sale of security as mentioned in cost memo Ex. 421 by Andhra Bank into the account of Accused No. 2-H.P. Dalal as its Constituent to BOK.
148. It will be useful to reproduce the relevant text of the said cost memo of Andhra Bank dated 6-4-91 :
"Cost 112% GDI 2010, face value of 25,00,00,000/- at Rs. 101/15 interest from 11-12-90 to Date-Month-115 days less income tax 24.725.
THIS IS ON ACCOUNT OF CLIENT Hiten P. Dalal Please send your Bankers/ RBI Cheque Rupees 25,97,88,276/77."
This cost memo is the proof of the fact that the Andhra Bank sold the said security to BOK into the Account of Accused No. 2-H.P. Dalal for which funds were received from the account of Accused No. 3-A.D. Narottam with BOK. It is significant to note that the amount which CANFINA paid to BOK on that day being consideration of the first transaction for CANFINA proximates to the amount which BOK paid to Andhra Bank. This witness has further stated that the number mentioned in the said cost memo reading as 085458 corresponds to the Pay Order/inter bank Cheque dated 6-4-1991 being Ex. 335 issued by BOK favouring Andhra Bank which, as noticed was issued by debiting into the O/D account with BOK of Accused No. 3-A.D. Narottam. The evidence of the said witness P.W. 37 shows that this was a security transaction which was executed for and into the account of Accused No. 2-H.P. Dalal. This witness has mentioned about issuance of SGL by Andhra Bank favouring BOK in respect of said security. However it is to be noted and which is most crucial and important that for the said security transaction of Accused No. 2-H.P. Dalal through Andhra Bank with BOK payment has been made from the amount which was flown from the O/D account of Accused No. 3-A.D. Narottam from BOK as noticed earlier. The evidence discussed above and in particular various documents in the form of original Pay Orders, debit and credit advices of Andhra Bank, it clearly shows that the proceeds of the said Pay Order Ex. 335 was credited into the Account of Accused No. 2-H.P. Dalal by Andhra Bank without there being any specific instructions from BOK to do so. Ex. 335 as noticed earlier is an interer bank cheque/Pay Order issued in favour of Andhra Bank. Andhra Bank has, it is clearly apparent, given credit of the proceeds of the said Pay Order to Accused No. 2-H.P. Dalal in his account with it without any instructions to that effect from BOK or even from Accused No. 3-A.D. Narottam from whose account the said Pay Order was issued. It clearly shows that on 6-4-1991 Accused No. 2-H.P. Dalal had received the amount of BOK's Pay Order Ex. 335 of Rs. 25,97,88,276.77 and that is on the same date when CANFINA made payment to BOK by pay order of Canara Bank Ex. 41 for Rs. 25,81,20,354.38.
149. It is further to be stated that the evidence of the prosecution discussed hereinabove also receives corroboration from the testimony of Accused No. 3-A.D. Narottam under section 315 of Cr.P.C., his explanation under section 313 of Cr.P.C. as also written statement filed by him, in Special Case No. 8 of 1994 certified copy whereof has been produced as Ex. A-2(5A) by Accused No. 2 himself, wherein Accused No. 3-A.D. Narottam has stated as to how the said amount came to be transferred to Andhra Bank under the instructions of Accused No. 2-H.P. Dalal. This is the evidence in respect of diversion as far as transaction of 6-4-1991 is concerned being the subject matter of Point No. 11 which shows that the amount of transaction of 6-4-91 of Rs. 25,81,20,354.78 paid by CANFINA to BOK was diverted into the a ccount of Accused No. 2- H.P. Dalal on the same day which Accused No. 2 utilized for his own purported transaction of security. The said evidence, in particular cost memo of Andhra Bank Ex. 421, clearly shows that the said security transaction was put through by Accused No. 2-H.P. Dalal in his own account with BOK, for which consideration was paid and received from the account of accused No. 3-A.D. Narottam from BOK. It is not sheer coincidence that the date of the said payment happens to be 6-4-1991, when CANFINA paid to BOK as noticed earlier on the same date for its transaction in which Accused No.2- H.P. Dalal was a broker.
ii) Point Ho. 18: In this point, outflow of the amount in respect of the credit of transaction dated 22nd July, 1991 is to be considered. While considering Point No. 17, it is already held that the Over Draft Account of Accused No. 3-A.D. Narottam with BOK was credited with the sum of Rs. 212,80,00,000/- on 22nd July, 1991 and entry to that effect has been reflected in the statement of account of BOK and it has been produced and proved as Exh. 198(1). The employees of BOK, in particular, P.W. No. 14 Mr. Kher have proved the said entry. On the same day, there are various debit entries in the said account of Accused No. 3 A.D. Narottam and as the evidence made available through P.W. No. 14 and the relevant documents, it is noticed that on that day i.e. on 22nd July, 1991 following debit entries as per particulars mentioned below have been made relating to Pay Orders which BOK issued on that day favouring the banks as mentioned hereinbelow against the amounts:-
(i) Rs. 19,41,21,554.78 Canbank Mutual Fund
(ii) Rs. 68,27,83,561.64 Citi Bank
(iii) Rs. 35,17,36,986.30 Citi Bank
(iv) Rs. 50,44,10,958.00 Canara Bank
(v) Rs. 29,76,00,000.00 Canara Bank
(vi) Rs. 09,73,46,938.38 Andhra Bank Rs. 212,79,,99,999.10 It is evident that on 22nd July, 1991 the entire amount of Rs. 212,80,00,000/-received as credit into the O.D. Account of Accused No. 3 was passed on to the banks named above. It is the case of the prosecution that the said outflow was for facilitating Accused Nos. 2,4,5 and 6 to utilize the said amount for their security transactions. According to the prosecution, the end beneficiaries of the said outflow were the said Accused Nos. 2, 4, 5 and 6. It is also the case of Accused No. 3 that the amounts as aforesaid, by issuance of Pay Orders in the respective banks named earlier was done by him at the instance and under the instructions of Accused No. 2-H.P. Dalal. This he has stated in his deposition before the Court and has also in his written statement which he has filed in Special Court Suit No. 7 of 1994, certified copy of which has been produced as Exh. A-3(75-A). In as much as, this is what in para 14(j) Accused No. 3-A.D. Narottam who is third defendant has stated in his written statement :-
"This defendant states that from the bank statement of his O/D A/c. No. 201 with Bank of Karad, if becomes clear that on 22-7-1991, the 2nd defendant deposited in the aforesaid account of this defendant a sum of Rs. 212,80,00,000/- in course of routing his business through the account of this defendant. On the same day i.e. on 22-7-1991 the 2nd defendant instructed this defendant to instruct the Bank of Karad to issue Bankers cheques for the following amounts and in favour of banks as mentioned against each:"
(The particulars of the debit have already been reproduced hereinabove, therefore, not repeated again). Defendant No. 2 refers Accused No. 2.
150. The Court at this stage wishes to clarify that aspect of legality as also of creditworthiness at the evidence of Accused No. 3 on oath before the Court in the light of legal provisions and submissions made by the defence against the reception and reading of the said evidence will be considered at the later stage. Suffice, however, to state that this written statement has been filed by Accused No. 3 in the said suit on 4th of July, 1995 and which suit relates to and which has been filed by CANFINA to recover its dues relating to transaction of 22nd July, 1991.
151. It is necessary to note that the said written statement of Accused No. 3 A.D. Narottam in the said suit as also in other two suits have brought into picture in this case and got produced at the instance and at the behest of Accused No. 2 during the course of cross-examination of Accused No. 3 by and on behalf of Accused No. 2. The Accused No. 3 was subjected to cross-examination with reference to the contents of the said written statements. The relevant part of the evidence appears at para 111 at page 1861 of the notes of evidence of Accused No. 3 A.D. Narottam when on behalf of Accused No. 2 the reference to the said written statement was made and which is thought necessary to reproduce as the same will speak for itself. It runs as under:-
"111. (At the instance of Mr. Ovalekar, the written statement of this witness who is defendant No. 4, declared on 4th of July, 1995 and filed in the Court on 21st July, 1995 is shown to this witness). This is the written statement which I have filed in that said suit. I have signed and verified the same and the contents thereof are true and I reiterate the same. The said suit relates to the security transaction dated 22nd July. 1991."
152. With regard to the contents of the written statement of Accused No. 3 A.D. Narottam as appearing in para 14 sub-paras (a) to (1) (portion of which as appearing sub-para (j) has already been reproduced hereinabove), it was put to the Accused No. 3 in cross-examination and it would be worthwhile to quote the answer given as it appears in para 114 on page 1863 of the notes of evidence:-
"114. (Witness is referred to para 14 of the written statement). The contents of the said para are true and I have set out my case in the said para in respect of transaction dated 22nd July, 1991 which is the subject matter of the said suit."
Therefore, for the present, it is to be stated that the evidence of Accused No. 3 with regard to the outflow of amount of the credit of 22nd July, 1991 from his account as set out by him in his written statement in civil suit also gets support from the document, namely, the statement of account being Exh. 198 of BOK, which has been proved by the prosecution. The same also receives corroboration from the evidence of Accused No. 3 deposed on oath under section 315 of Cr.P.C. It is pertinent to note that the said statement has been filed much before framing of the charges in this case and commencement of the trial. What is more, the correctness of the relevant part of the written statement has been got reiterated, reaffirmed and reconfirmed in the cross-examination as is clearly demonstrated from the answer given by Accused No. 3 in the cross-examination on behalf of Accused No. 2 reproduced hereinabove. If the said evidence is taken into consideration, coupled with the debit entries in the statement of accounts Exh. 198, it clearly stands proved that on the same day the entire amount of Rs. 212 ,80,00,000/- was passed on from the account of Accused No. 3-A.D. Narottam with BOK to various banks.
153. In this context, there is also relevant evidence made available by the prosecution in support of the said outflow and which is being adverted to entrywise, as under:-
(1) Rs. 50,44.10,958.00 in respect of Pay Order referred to in Item (iv) hereinabove favouring Canara Bank:
It is in the evidence, as has been made available by the prosecution through P.W. No. 2 Mr. Vernekar that on 22nd July, 1991 there is a security transaction between BOK and CANFINA in which CANFINA sold and BOK purchased the security, namely, 13% NPC for face value of 50 crores-total consideration Rs. 50,44,10,958.00-broker being Accused No. 2. Carbon copy of the Cost Memo issued by CANFINA in respect of the said transaction has been produced and proved as Exh. 79 by P.W. No. 2. So also, B.R. dated 22nd July, 1991 issued by CANFINA favouring BOK in respect of the said transaction and for the amount of consideration mentioned in the Cost Memo has also been produced and proved being Exh. 80 by P.W. No. 2 Mr. Vernekar. It is in the evidence of P.W. No. 2 that as per normal and usual practice he received telephonic instructions from the dealers of Bangalore in respect of the said transaction and he made an entry in the Rough Sheets which he has produced and proved as Exh. 78 and which shows the sale of the said security by CANFINA to BOK through broker Accused No. 2. The Pay Order issued by BOK on that day for a sum of Rs. 50,44,10,958.00 favouring Canara Bank has also been produced and proved being Exh. 665. It is in the evidence that CANFINA received the proceeds of the said cheque on the same day. The above evidence clearly shows that on the very day when CANFINA purchased 16 crores Units of UTI from BOK and issued its Pay Order on Canara Bank against the B.R. of BOK, on the same day CANFINA sold this security, namely, NPC Bonds to BOK and issued its BR. The noteworthy points to be noted are-
(a) Date of both transactions is the same.
(b) In one case CANFINA is purchaser and BOK is selling bank.
(c) In another transaction CANFINA is seller and BOK is buying party.
(d) Broker is common in both the transactions who is Accused No. 2.
(e) The documents mentioned above clearly show the transaction of sale by CANFINA is between CANFINA as selling party and BOK as buying party. But still the consideration has been flown from the account of Accused No. 3.
(f) However in said transaction of sale of CANFINA, Accused No. 3 A.D. Narottam does not figure in any of the documents.
(2) Rs. 29,76,00,000/- in respect of Pay Order issued in favour of Canara Bank and as shown at Sr. No. (v) above.:
The evidence as made available through P.W, No. 2 and P.W. No. 14 in respect of the said payment is like this :-
On that day i.e. on 22nd July, 1991 there is another security transaction between CANFINA and BOK in which CANFINA sold CANSTAR Bonds face value 24 crores, total consideration Rs. 29,76,00,000/-. In this regard, the evidence of the prosecution more or less proceeds on the same line as that of earlier transaction. In that there is one entry in the Rough Sheet made by P.W. No. 2 and it has also been proved by him in respect of the said transaction being Exh. 82 showing sale of the said security by CANFINA to BOK through Accused No. 2 H.P. Dalal. There is also Cost Memo produced and proved being Exh. 83 of that date in respect of the said security.
The next document is the B.R. dated 22nd July, 1991 issued by CANFINA favouring BOK which has been produced and proved by P.W. No. 2 and is Exh. 84. The Cost Memo and the rough sheet entry mention the Accused No. 2 being broker in the said transaction. The next document is the Pay Order issued by BOK for the said amount on 22nd July, 1991 favouring Canara Bank debiting the amount thereof into O/D account of Accused No. 3-A.D. Narottam which is produced and proved by P.W. No. 14. Mr. Kher, being Exh. 664. The similar features as mentioned in the previous transaction being (a) to (1) are also present in the transaction herein.
(3) Rs. 68,27,83,561.64 the entry at Sr. No. (ii) hereinabove concerning payment by Pay Order favouring Citi Bank :
As far as this outflow is concerned, the evidence made available shows that the said payment relates to sale of 9% HUDCO Bonds - face value of 66 crores - by Citi Bank to BOK. The prosecution has made available the evidence in this regard of P.W. No. 49 Mr. Vishwanath Narayan Shenoy, the Officer of Citi Bank and he has produced and proved the Deal Slip of the said Bank in respect of the said transaction mentioning counter party as BOK and broker - V.B. Desai, which is Exh. 533. The said witness has also produced and proved the B.R. of Citi Bank of that date in respect of the same security favouring BOK being Exh. 534, On the reverse of the said B.R. there is also signature of Accused No. 7 C.S. Raje with the rubber stamp of BOK as an Agent. There is a Pay Order which is produced, issued by BOK favouring Citi Bank for the said amount of Rs. 68,27,83,561.64 favouring Citi Bank, produced and proved by P.W. No. 14. It is pertinent to note that the debit entry appearing in the statement of account of O.D. Account of Accused No. 3 Exh. 198 which is also supported by debit memo of BOK addressed to Accused No. 3 being Exh. 202, produced and proved by P.W. No. 14. The said Pay Order has been issued by debiting the amount of the said Pay Order into his account.
The specific feature as far as this outflow is concerned, is that although the payment has flown from the account of Accused No. 3 with BOK, the documents namely, the Cost Memo and B.R. etc. do not reflect the name of Accused No. 3 A.D. Narottam and Accused No. 3 does not figure anywhere. Rest features are same as mentioned in (a) to (f) in first item above, except the broker is Mr. V.B. Desai in place of Accused No. 2.
(4) Payment of Rs. 9,73,46,938.38 as mentioned at Sr. No. (vi) above : This outflow from the O.D. Account of. Accused No. 3 A.D. Narottam of BOK relates to the issuance of Pay Order by BOK favouring Andhra Bank on 22nd July, 1991. The evidence made available by the prosecution through P.W. No. 14 Mr. Kher, the officer of the BOK, shows, apart from the debit voucher in respect of issuance of said P/O and debit entry in the statement of account Exh. 198 of Accused No. 3, there is also Pay Order produced and proved being issued by BOK on that date being Exh. 339. The same has been issued for a sum of Rs. 9,73,46,938.38 by BOK favouring Andhra Bank. It is in the evidence of P.W. No. 14 that Andhra Bank received the payment of said Pay Order on 22nd July, 1991 itself. The next evidence from the side of Andhra Bank is that of P.W. No. 37 Mr. Suratkal Prabhakar Kamat, the Officer of the said Bank who has deposed about the receipt of the said Pay Order from BOK. He has produced the debit advice of that date in respect of the said Pay Order known as Bank Manager Receivable showing the debit of a sum of Rs. 9,73,46,938.38 which is Exh. 416. The said Pay Order also bears the Pay Order No. of BOK. It also mentions HPD i.e. the initials of Accused No. 2-H.P. Dalal. Then there is a credit voucher of the same date of the Andhra Bank which has been produced and proved by the said witness P.W. No. 37, as Exh. 415. The said credit voucher shows that the sum of Rs. 9,73,46,938.38 was credited directly into the account of Accused No. 2 bearing No. 4819. It is to be noted that the entry in respect of the said credit has also been reflected into the statement of account bearing No. 4819 of Andhra Bank in the joint name of M/s. Bimal S. Gandhi and Hiten P. Dalal, which entry is marked as Exh. 445 (7).
The said evidence clearly shows that the proceeds of the said Pay Order Exh. 416 of BOK were credited into the account of Accused No. 2 H.P. Dalal. The evidence as discussed clearly shows that the said Pay Order was issued by BOK by debiting the amount into the account of Accused No. 3 with it which is clearly indicated in an entry in the statement of account of Accused No. 3 of that date and also the debit advice of that date of BOK for the said amount, produced and proved as Exh. 210 by P.W. No. 14. The another peculiar feature is that the proceeds of the said Pay Order have been credited into the account of Accused No. 2 by Andhra Bank in absence of any instructions of BOK, the issuing bank or Accused No. 3, on whose account the said Pay Order was issued nor there is any evidence that the said payment was related to any security deal. It, therefore, clearly shows that the said amount of Rs. 9,73,46,938.38 has gone into the account of Accused No. 2 H.P. Dalal out and out.
(5) Rs. 35,17.36.986.30 being entry made at Sr. No. (iii) above:
This relates to the issuance of Pay Order by BOK favouring Citi Bank on 22nd July, 1991 for the amount mentioned earlier. The evidence made available, besides the debit entry into the O.D. Account of Accused No. 3 with BOK in respect of issuance of the said Pay Order, there is a Pay Order itself issued by BOK which has been produced and proved by P.W. No. 14 being Exh. 253 favouring Citi Bank for the said amount. There is also a debit voucher of BOK being Exh. 204 produced and proved by - P.W. No. 14 in respect of the issuance or the said Pay Order. The said Pay Order bears the rubber stamp of Citi Bank dated 22nd July, 1991 itself signifying the said bank i.e. the Citi Bank having received the credit of the proceeds of the said Pay Order.
It needs to be stated that the prosecution has not adduced any evidence nor even Accused No. 3 A.D. Narottam in respect of the said payment to Citi Bank and that being so, it is not possible to say anything more in that respect, save and except, that the amount was flown out of the account of Accused No. 3.
(6) As far as the sum of Rs. 19,41,21,554.78 being the (i) entry mentioned above, there is no evidence made available by the prosecution or even by Accused No. 3 A.D. Narottam in respect of outflow of the said amount from the O.D. Account of Accused No. 3 A.D. Narottam, hence no comments.
154. To sum up, therefore, as far as outflow of the proceeds of Rs. 212,80,00,000/- from the account of Accused No. 3 being the proceeds of the Pay Order received from CANFINA drawn on Canara Bank as a consideration of second transaction of 16 crores Units of UTI and as discussed hereinabove, it emerges that, (i) a sum of Rs. 9,73,46,938.38 has directly gone into the account of Accused No. 2 H.P. Dalal in Andhra Bank; (ii) in case of payment of Rs. 29,76,00,000/-, it relates to the Pay Order favouring Canara Bank. The same, as evidence made available shows, were towards the purchase of the securities by BOK from CANFINA in which Accused No. 2 H.P. Dalal is a common broker and the said securities although the deals were between CANFINA and BOK, the amounts have been passed on from the account of Accused No. 3 A.D. Narottam with BOK.
(iii) Point No. 25: - This is in respect of the transaction of 31-7-91, security being 19 crores Units of UTI purchased by CANFINA from BOK and in which total consideration involved is 255,43,98,000/ while considering point No. 23 and 24 above, it is noticed that CANFINA made the said payment to BOK by Pay Order of Canara Bank favouring BOK on 31-7-1991 on which date BOK also received the credit thereof. The credit entry in respect thereof is also appearing in O.D. Account of Accused No. 3 with BOK and which entry has been proved and marked as exhibit 235. It may be stated that in addition to the said amount there is also credit entry of sum of Rs. 29,76,00,000/- in to the said account of Accused No. 3-A.D. Narottam on that day i.e. on 31-7-1991 as is evident from the statement of account Exhibit 198. However, no evidence is made available about the source of the credit of the said amount.
155. The out flow of the amount from the said account of Accused No. 3-A.D. Narottam with BOK which prosecution has high lighted so also Accused No. 3-A.D. Narottam is as under. Amounts and names of the banks in whose favour BOK issued its Inter Bank Cheques:-
1. i. Rs. 13,69,58,000/- Bank of America.
ii. Rs. 6,11,49,500/- ANZ Grindlays Bank.
iii. Rs. 9,94,92,500/- Andhra Bank.
iv. Rs. 81,81,68,548/- Canara Bank.
v. Rs. 101,62,50,500/- Std. Chartered Bank.
vi. Rs. 51,99,29,452.05 Citi Bank.
v. Rs. 20,00,00,000/- Andhra Bank.
It is the case of prosecution that Accused No. 3-A.D. Narottam on that day by written letters instructed BOK to issue Pay Order/Bankers Cheque debiting amounts thereunder by its two letters both dated 31-7-1991 which have been produced and proved as Ex. 268 and 269. The said letters are in the hand writing of Accused No. 3-A.D. Narottam and also asigned by him and both addressed to BOK and P.W. 14-Mr. Mukund Krishnaji Kher has produced and proved the said letters so also Hand Writing Expert-P.W. 67-Mr. Naresh Chandra Sood. It may be stated that even Accused No. 3-A.D. Narottam has admitted having written the said letters. By the said letters Accused No. 3-A.D. Narottam instructed BOK to issue Banker Cheques on the various Banks for the different amounts as per particulars mentioned herein below. He further advised BOK to debit the amounts of the said Banker Cheques to his Over Draft Account No. 201 with BOK. The particulars of the Banker's Cheque sought to be issued as stated in the said letters Ex. 268 and Ex. 269 are as under :--II.
II. i. Rs. 13,69,58,000/- Fvg. Bank of America.
ii. Rs. 6,11,49,500/- Grindlays Bank.
iii. Rs. 9,94,92,500/- Andhra Bank.
iv. Rs. 81,81,68,548/- Canara Bank.
v. Rs. 51,99,29,455.05 Citi Bank.
vi. Rs. 20,00,00,000/- Andhra Bank.
(Mentioned at Sr. Nos. i, ii, iii, iv, vi and vii respectively above at I.)
156. It is to be stated that there are debit entries in the statement of account of Accused No. 3, being Ex. 198, made on 31-7-91 of the amounts as mentioned in the said letters and as mentioned hereinabove. It is further to be noted that in letter Ex. 268 there is a noting made reading as "Ch. issued on 31-7-1991 which is identified and proved to be in the handwriting of Accused No. 7." It is also in the evidence, which is undisputed, that the said Pay Orders were issued and signed by accused Nos. 8 and 7 as in other cases.
157. The evidence made available in respect of passage of amounts from the account of Accused No. 3-A.D. Narottam on 31-7-1991 as noticed hereinabove is considered and dealt with in seriatum, itemwise as mentioned hereinbelow:-
Item No. (i): Rs. 13,69,58,000/-.---The said Pay Order, as the evidence stands is for sum of Rs. 13,69,58,000/- issued by BOK in favour of Bank of America and the said Pay Order has been produced and proved by P.W. 14-Mr. Mukund Krishnaji Kher being Ex. 272. There is a rubber stamp of Bank of America of that date on the said Pay Order showing that Bank of America received the credit of the proceeds of the said cheque on the same day. BOK has also issued debit memo in respect of the said debit which has been produced and proved by P.W. 14-Mr. M.K. Kher at Ex. 280. P.W. 53-Mr. Prasad Mahadeo Kelkar, an officer of BOA has produced and proved the carbon copy of the debit voucher dated 31-7-1991 of Bank of America being Ex. 576 in respect of the sum of Rs. 13,69,58,000/-. The narration in the said debit voucher reads "Bk of Karad (Units) BCD" Said witness has explained the same narration as sale of Units to BOK. He has also co-related the said debit voucher to the BOK's Pay Order on that date referred to earlier and being at Ex. 272.
158. It is worth while to advert to the evidence made available by the prosecution as to what Bank of America did further and which has been deposed by the same witness P.W. 53-Mr. Prasad Mahadeo Kelkar. This witness has stated (referred para 9 on page 1270 of his evidence of the notes of evidence.) that on 2-8-91 Bank of America issued its Cashier Cheque favouring Andhra Bank for sum of Rs. 13,25,00,000/- on 2-8-1991 and forwarded the same to Andhra Bank with instructions "Please credit the proceed to the account of M/s. Hiten P. Dalal with you for the amount of Rs. 13,25,00,000/-. (As per instructions from you)". The said credit advise has been produced and proved by the said witness being Ex. 577. The Cashier Cheque in question for the said amount issued by Bank of America favouring Andhra Bank which corresponds and co-relates to the said credit advise has also been proved and produced being Ex. 545 by P.W. 51-Mr. Mahavir Meghawat, the then employee of Bank of America. The said cheque bears rubber stamp of Andhra Bank on 2-8-1991 which indicates Andhra Bank having received the credit of the amount of the said cheque. It is further to be noted that in the joint statement of account of 4819 in the name of accused No. 2-H.P. Dalal and Mrs. Gandhi there is a credit entry of the said amount of Rs. 13,25,00,000/- on 2-8-1991 with caption "By transfer" which is at Ex. 445 produced and proved by the same employee of Andhra Bank-P.W. 39-Mr. Racharkonda Suryanarayana Dhandumar. It is to be noted that :
i) That the amount so credited into the account of accused No. 2 in Andhra Bank proximates to the Pay Order amount of BOK as referred to earlier.
ii) The said credit is given into the account of accused No. 2 in Andhra Bank on the following next working day after Bank of America received the proceeds of the credit of BOK's Pay Order referred to above i.e. to say BOK's Pay Order is dt. 31-7-91 and said amount into the account of accused No. 2-H.P. Dalal of Andhra Bank is transferred on 2-8-1991, 1-8-91 being Bank Holiday.
Item No. (ii) : Rs. 6,11,49,500/-.---The evidence is made available with regard to the issuance of Pay Order by BOK favouring Grindlays Bank on 31-7-1991 for sum of Rs. 6,11,49,500/-. The Pay Order is Ex. 273 of the said amount dated 31-7-1991 and which has been produced and proved by P.W. 14-Mr. M.K. Kher. The same bears the rubber stamp of the Grindlays Bank of that date indicating that the Payee Bank has received the credit of the same amount. It may be stated that there is also debit voucher of BOK of that date which has been produced and proved by P.W. 14-Mr. M.K. Kher debiting the amount of the said Pay Order into the O.D. account of accused No. 3-A.D. Narottam.
159. As far as Grindlays Bank is concerned, the prosecution has made available the evidence by examining P.W. 41-Mr. Anandkumar Yeshwant Limaye, the officer of Grindlays Bank who has deposed there having one deal in security transaction on 31-7-1991 in respect of sale of 45 Lakh Units to NOCIL broker Hiten P. Dalal.
160. It may be stated that the Cost Memo of Grindlays Bank Ex. 496 mentions the name of broker "Hiten Dalal' i.e. Accused No. 2. This witness has produced and proved the relevant Cost Memo of Grindlays Bank in respect of the said Security which is at Ex. 496 which shows sale of 45 lakh units to NOCIL. The consideration mentioned therein is Rs. 6,10,89,750.00. He has also produced and proved the corresponding BR of Grindlays Bank bearing No. 273 in respect of the said security for sum of Rs. 6,10,89,750/- in the name of NOCIL being Ex. 495. The said cost memo, deal slip and BR suggest there being sale of 45 lakh units of UTI by Grindlays Bank to NOCIL.
161. The most significant and interesting part, as far as this security transaction is concerned, is that the prosecution has examined the concerned employee of NOCIL as P.W. No. 45-Ms. Mehar Eruch Fouzder, who at the relevant time worked as Head of the Treasury Department with NOCIL. The said witness has given the full name of the NOCIL as "National Organic Chemical Industries Ltd". She has deposed how the transactions in security on behalf of NOCIL used to be finalized and executed and manner in which the record in respect thereof used to be maintained by NOCIL. By referring to the relevant record, particularly transaction in Units security, she has deposed that on 31-7-91 there was no transaction at all with Grindlays Bank or with any one in respect of purchase of Units of UTI by NOCIL. It is most significant to note that the evidence of the said witness has remained absolutely unchallenged and un-controverted in absence of cross-examination on behalf of the defence.
162. The shady nature of the said Deal with NOCIL is amply demonstrated from the evidence mostly documentary viz. BR issued by Grindlays Bank being dt. 31-7-91 being Ex. 495 favouring NOCIL and the Cost Memo Ex. 496 as the evidence of the Prosecution shows that the same were found in the possession and custody of the Grindlays Bank and from whose custody CBI by its seizure memo/receipt memo dated 11-7-92 which has been produced and proved by Ashok Kutty, C.B.I. Officer P.W. 79, the same were taken charge of as Ex. 771. The above documents, namely, BR, Cost Memos and Deal Slip are respectively at serial Nos. 1, 2 & 3 in the said Memo at Ex. 771. The said Memo shows that one Shri S.A. Khambadkone, the Officer of the Grindlays Bank who has been examined by the Prosecution as P.W. 43, produced the said document from the custody of Grindlays Bank before the said C.B.I. Officer on 11-7-92. The said witness P.W. 43 has also subscribed his signature on the said Seizure Memo.
163. Said Mr. Kutty- P.W. 79 has deposed about taking charge of the said documents and under the said seizure memo and he has also identified the said documents before the Court. It is relevant to note that the said evidence of the said witness has not been challenged at all. What is important to note is that the said cost memo and B.R. of Grindlays Bank, if it was a genuine transactions, then the said documents should have been found in possession of the buying party i.e., NOCIL. However the same were found as noticed earlier with Grindlays Bank itself-the selling bank. This mysterious aspect becomes more curious when, as noticed earlier, it is proved that on the date in question NOCIL had not purchased any such security from Grindlays Bank.
164. The above evidence therefore clearly spells out that :
i) on 31-7-1991 BOK issued its Pay Order for the amount mentioned therein favouring Grindlays Bank.
ii) the amount of said Pay Order was debited into the account of accused No. 3-A.D. Narottam.
iii) Pay Order was issued favouring Grindlays Bank.
iv) Grindlays Bank had no transaction with BOK or with accused No. 3-
A.D. Narottam on that day.
v) On the other hand, Grindlays Bank as per evidence made available by the prosecution through its above named Officer purported to have transaction of sale of 75 Lakh Units of UTI to NOCIL consideration of which proximates to the amount of the said Pay Order issued by BOK. when in fact there was no such transaction with NOCIL.
vi) It is relevant to note that if there was really a sale of the security in question by Grindlays Bank to NOCIL then the original cost memo as also original BR ought to have been in the custody of the counter party viz. NOCIL being the buying party. Curiously enough the said documents were found in the custody of Grindlays Bank.
vii) It is further to be noted that accused No. 2-H.P. Dalal is the broker named in the documents referred to earlier.
viii) However, from the evidence of the prosecution made available through the officer of NOCIL, it clearly shows that in fact and in reality there was no transaction of that time between the Grindlays Bank and NOCIL.
xi) It is most relevant to note that accused No. 2-H.P. Dalal figures in the said transaction as broker.
Item No. (iii): Rs. 9,94,92,500.00.---This outflow relates to the amount of Rs. 9,94,92,500.00 out of O/D account of accused No. 3-A.D. Narottam with BOK to Andhra Bank and which is reflected in the statement of account of accused No. 3 with BOK being Ex. 198 as noticed earlier. Further as noticed before for the issuance of the said Pay Order accused No. 3 by his letter dated 31-7-1991 addressed to BOK being Ex. 269 has instructed BOK to issue the said pay order and BOK has issued the said Pay Order accordingly favouring Andhra Bank debiting the amount thereof into the O/D account of accused No. 3 with it and relevant debit/credit vouchers have also been made available through P.W. 14-M.K. Kher the then officer of BOK. The important piece of evidence in this connection is a letter dated 1-8-1991 addressed by BOK to Andhra Bank forwarding therewith its said Pay Order bearing No. 685592 for the sum of Rs. 9,94,92,500.00 with instructions to credit the proceeds of the said amount to the account of accused No. 2 with Andhra Bank. The said letter has been produced and proved as Ex. 292 being in the hand writing of accused No. 8-S.A. Ail and signed by accused No. 7-C.S. Raje. The Andhra Bank received the said Pay Order and on 1-8-1991, after crediting the same to its account as it was in its favour, made a corresponding debit entry in its account in respect of the said amount, vide its a debit voucher dated 1-8-1991 produced and proved by P.W. No. 37-S.P. Kamat, an officer of Andhra Bank being Ex. 420. The narration as it appears therein needs to be noted:
"Amount of BCR No. 685592 received from Karad Bank to the credit of HPD."
It is relevant to note that number of the pay order, the date and amount as mentioned in BOK's letter Ex. 292 are reflected in the said debit voucher. According to version of the said witness P.W. 37-S.P. Kamat, Andhra Bank credited the proceeds of the said cheque of Rs. 9,94,92,500.00 into the current account of accused No. 2 with it. The next evidence evidencing the said payment by accused No. 2-H.P. Dalal is an entry appearing in the current account No. 4819 of accused No. 2 of that date which is proved as Ex. 445(5).
165. Thus the evidence discussed above clearly establishes that on 31-7-1991 as per instructions of accused No. 3 BOK issued its Pay Order favouring Andhra Bank from the account of Accused No. 3 with it and ultimately the said amount came to be credited into the account of Accused No. 2 with Andhra Bank. It is most significant to note that various documents referred to hereinabove do not indicate or show that the said payment was in respect of any transaction as such. It clearly shows that the said amount of Rs. 9,94,92,500.00 was out and out credit into the account of accused No. 2-H.P. Dalal.
Item No. (iv): Rs. 81,81,68,548/00.---The amount involved in this item is Rs. 81,81,68,548.00 and BOK has issued its cheque of RBI favouring Canara Bank Mutual Fund (CMF) for the said amount as per instruction letter of accused No. 3 to BOK being Ex. 268 noticed earlier. As seen earlier there is a debit entry into O/D account of Accused No. 3 with BOK made on 31-7-1991 for the said amount. There is debit memo of BOK of that date debiting the said amount into the account of accused No. 3 with the narration of issuance of cheque of RBI favouring CMF and which memo has been produced and proved by P.W. 14-M.K. Kher as being in the hand writing of accused No. 8-S.A. All and signed by accused No. 7-C.S. Raje. The hand writing expert P.W. 67-N.C. Sood has also corroborated the same having been signed by accused No. 7 and being in the hand writing of accused No. 8. There is no challenge by and on behalf of accused Nos. 7 and/or 8 to the said evidence with regard to the issuance of the Pay Order and debiting the amount into the account of Accused No. 3 on 31 -7-1991.
166. It needs however to be stated that neither prosecution nor accused No. 3-A.D. Narottam has made available evidence in respect of further track of the said payment to CMF. Accused No. 3 as stated earlier in his evidence on oath as also in his written statement filed in Special Case No. 10 of 1994 being Ex. A-2(6-A) on record has stated having issued the said Pay Order as also other Pay Orders of that date under instructions of accused No. 2 which statement he reiterated and reaffirmed as being true before the Court in the cross examination by and on behalf of accused No. 2. However the prosecution has not made available evidence in that respect.
Item No. (v): Rs. 101,62,50,000/00.---This item pertains to debit entry of Rs. 101,62,50,000.00 into the OD account of accused No. 3 with BOK. The prosecution has produced a Pay Order/inter bank cheque issued by BOK on that day i.e. 31-7-1991 for the said amount favouring Standard Chartered Bank (SC Bank) and which has been produced and proved as Ex. 295 being in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje through P.W. 14-M.K. Kher, its then officer. The fact that the said pay order is in the hand writing of Accused No. 8-S.A. Ail and bears the signature of accused No. 7-C.S. Raje has also been corroborated by P.W. No. 67-N.C. Sood, hand writing expert. There is no challenge to the said evidence for and on behalf of accused Nos. 7 and/or 8. As noticed earlier the debit entry in respect of the said amount is also reflected in the O/D account of accused No. 3 Ex. 198 and debit note corresponding to the said entry made by BOK on that date to that effect which is produced and proved by P.W. 14 being Ex. 294.
167. The prosecution has made available the evidence to show that the said payment related to the purchase of 7,50,00,000 Units of UTI by BOK account Accused No. 3 from S.C. Bank and receiving order of accused No. 3 bearing No. 1739 dated 31-7-1991 addressed to BOK has been produced and proved having been written and signed by accused No. 3-A.D. Narottam being Ex. 293. Similarly the evidence in respect of the said transaction at the end of counter party viz. SC Bank evidencing the said transaction has been produced such as SC Bank's deal slip of that date being Ex. 601, credit voucher of the said amount being Ex. 602, debit voucher of the said amount being Ex. 603, batch initialization slip Ex. 604, BR issued by it in respect thereof favouring BOK as Ex. 605. These documents have been produced and proved by P.W. No. 56-G.A. Hatkar being the officer of CMF. The entry in respect thereof has also been reflected in the security ledger account of accused No. 3 with BOK Ex. 309 and marked as Ex. 266. This evidence clearly shows that there was a transaction in respect of 7,50,00,000 Units of UTI purchased by BOK from SC Bank. It is however to be noted that various documents referred to above which came to be prepared in respect of said transaction at the end of SC Bank show there being direct sale transaction by it to BOK and name of accused No. 3-A.D. Narottam as counter party does not figure anywhere. At this juncture it may also be stated that BR Ex. 605 issued by SC Bank has been reversed subsequently and on the reverse thereof there is a signature of accused No. 7 with rubber stamp of BOK. In that respect the prosecution has also made available a deal slip of SC Bank dated 7-8-1991, SC bank's banker's cheque dated 7-8-1991 for the sum of Rs. 101,47,50,000.00 being Ex. 598 and corresponding debit and credit voucher being Ex. 599 and 600 which have been produced and proved by P.W. 56-G.A. Hatkar. It may be stated that entry in respect of said reversal has also been reflected in the security ledger account of accused No. 3 kept and maintained by BOK. Therefore it clearly emerges that there has been transaction between SC Bank and BOK in respect of securities viz. 7,50,00,000 Units of UTI and payment of Rs. 101,62,50,000.00 flown from the account of accused No. 3-A.D. Narottam was in respect thereof. The receiving order issued by Accused No. 3 mentioned hereinabove shows that the said transaction was put through by him. It is however to be noted that accused No. 3 in para (J) of his written statement filed in Special Case No. 10 of 1994 being Ex. A-2(6-A) has averred that he issued the said receiving order and got issued the Pay Order for the said amount under the instructions of accused No. 2. However the evidence made available by the prosecution does not show any involvement of accused No. 2 therein.
Item No. (vi): Rs. 51,99,79,452.05.---The amount involved in this item is Rs. 51,99,79,452.05. Accused No. 3 in his letter dated 31-7-1991 referred to above being Ex. 268 has instructed BOK to issue its banker's cheque for that amount favouring Citi Bank. Accordingly BOK issued its Pay Order for the said amount on that date which has been produced and proved as Ex. 271 by P.W. No. 14 being in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje. The endorsement with rubber stamp appearing therein shows Citi Bank as payee having received the credit of the said amount of the Pay Order on the same day. The prosecution has made available the evidence from and at the end of Citi Bank through its officers/employees being P.Ws. 46-S.R. Kumar, 48-G. Shiva, 49-V.N. Shenoy and 50-T. S. Siva. From their evidence it is noticed that the said payment of Rs. 51,99,79,452.05 relates to three different transactions of sale in securities viz. 9% HUDCO and IRFC bonds made by Citi Bank to BOK on that day, common broker in all three transactions being Accused No. 2-H.P. Dalal. The transactions are as under :
i) 9% HUDCO, face value 20 crores;
ii) 9% HUDCO face value 25 crores;
iii) 9% IRFC bonds face value 5 crores.
Deal slips and BRs in respect of these three transactions have been produced and proved respectively being Exs. 535, 526 and 524 (Deal Slips) and Exs. 532, 527 and 525 (BRs) issued by Citi Bank favouring BOK. All the said three BRs on reverse bear the signatures of Accused No. 7 with rubber stamp of BOK reading as "agent/officer." There are also cross lines on each of the BR indicating discharge of obligation of Citi Bank under the said BRs. 168. From the evidence of the said witnesses of Citi Bank and the documents viz. deal slips and BRs referred to hereinabove, it is noticed, that Citi Bank has sold the said securities to BOK on that day with broker being Accused No. 2-H.P. Dalal. The considerations of each of the above three transactions are as under :---
i) Rs. 25,97,73,972.60;
ii) Rs. 5,29,91,780/82 and
iii)Rs. 20,82,13,698/63 The total of which comes to Rs. 51,99,79,452.05 which corresponds to the said Pay Order Ex. 271 and debit entry in the O/D account of Accused No. 3 with BOK. It is therefore obvious that the said payment by BOK represents the consideration of three security deals referred to above between Citi Bank and BOK. On perusal of the security ledger account of Accused No. 3 Ex. 309 it is noticed that in respect of 9% IRFC bonds face value Rs. 5 crores there is an entry dated 31-7-1991 showing purchase of the said security on 31-7-1991 from Citi Bank and there is an entry on 14-8-1991 which is reversal showing sale of the very security to Citi Bank which entries have been marked respectively as Exs. A-3(12) and A-3(16). Similarly in respect of 9% HUDCO bonds of face vatue of 25 crores and 20 crores there are entries in the said security ledger account of Accused No. 3 on page No. 160 which shows purchase of said security of face value of Rs. 25 crores and 20 crores on 31-7-1991 by BOK and sale thereof to Citi Bank on 14-8-1991. The said entries have been produced and proved by Accused No. 3 through P.W. 14 respectively marked as Exs. A-3(13), A-3(14), A-3(20) and A-3(18). It therefore shows that the said three transactions made on 31-7-1991 were in the nature of ready forward transactions reversed on 14-8-1991 put through by Accused No. 3-A.D. Narottam.
169. The significant feature to be noted on consideration of the evidence above as far as these transactions of 31-7-1991 are concerned, are:---
i) Accused No. 2-H.P. Dalal is a common broker;
ii) The transactions shown to be between BOK and Citi Bank; and
iii) However the payments being the considerations thereof have passed from the account of Accused No. 3-A.D. Narottam.
Item Ho. (vii): RB. 20,00,00,000.00.---This item relates to outflow of Rs. 20 crores from the account of Accused No. 3 as per instructions of Accused No. 3 contained in his letter dated 31-7-1991 addressed to BOK being Ex. 268. He had instructed for issuance of the banker's cheque favouring Andhra Bank for the said amount. The banker's cheque issued by BOK accordingly on that day for the said amount favouring Andhra Bank has been produced and proved as Ex. 270 by P.W. 14-Mr. Kher who has stated the said pay order being in the hand writing of Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje. The said cheque bears the rubber stamp of Andhra Bank of 31-7-1991 showing receipt of payment thereof by Andhra Bank on the same day as the payee of the said cheque. The next piece of evidence is hand written letter dated 31-7-1991 by BOK addressed to Andhra Bank forwarding the said banker's cheque to Andhra Bank and instructing it to credit the proceeds thereof into the account of Accused No. 2 with Andhra Bank, The said letter has been produced and proved by P.W. 14 being in the hand writing (if Accused No. 8-S.A. Ail and signed by Accused No. 7-C.S. Raje and marked as Ex. 291.
170. It would be worthwhile to notice the evidence that is made available at and from the end of Andhra Bank. There is a debit advice dated 31-7-1991 of Andhra Bank which has been produced and proved by P.W. 37, Mr. Kamath by the officer/employee of Andhra Bank examined as prosecution witness, for the sum of Rs. 20,81,25.000/-. The said debit voucher is a combine voucher in respect of two cheques which were credited into the account of Accused No. 2 on 31-7-1991 for Rs. 20 crores and another for Rs. 81,25,000/-. The narration of cheque for Rs. 20 crores appearing in the said voucher reads :-
"amount of banker's cheque No. 685586 drawn on BOK received to the credit of HPD 4819."
The number of the cheque and the amount mentioned therein corresponds to the banker's cheque of BOK favouring Andhra Bank for the sum of Rs. 20 crores being Ex. 270 noticed earlier. Then the said, witness P.W. 37 has also produced and proved combined: credit vouchers dated 31-7-1991 in respect of two cheques one for Rs. 20 crorea and another for Rs. 81,25,000/-. The said credit voucher is in the name of Accused. No. 2-H.P. Dalal and account number is mentioned 4819. The narration as far as payment of Rs. 20 crores is concerned as it appears in the said credit voucher which is proved and produced as Ex. 418 by P.W. 37 reads as :
'the amount of banker's cheque No. 685586 drawn on BOK received to the credit of your account Rs. 20 crores."
It has to be noted that the particulars of the said cheque as it appears in the form of narration in the said credit voucher clearly prove that the same correspond to the payment of the said banker's cheque of BOK Ex. 270 which as noticed earlier was issued by BOK on 31-7-1991 on the instructions of Accused No. 3-A.D. Narottam favouring Andhra Bank and proceeds of which directly came to be credited into the account of Accused No. 2 in Andhra Bank. The fact that the said amount was credited into the account of Accused No. 2 with Andhra Bank is also reflected in an entry in the statement of his account, Ex. 445 the said entry being marked as Ex. 445(2).
171. It therefore clearly emerges that Accused No. 2-H.P. Dalal received the sum of Rs. 20 crores from the account of Accused No. 3-A.D. Narottam with BOK on 31-7-1991. It further shows that the said payment was out and out direct payment without there being any consideration for the same. The Accused No. 3 has stated in his evidence as also in the written statement in Special Case No. 10 of 1994 being Ex. A-2(6-A) that the said payment was out and out direct payment to Accused No. 2-H.P. Dalal made at his instructions (i.e. Accused No. 2-H.P. Dalal).
172. On the point of diversion/utilization, reference is also need to the evidence of prosecution about the meetings which were held in May, 1992 in Taj Mahal Hotel at Mumbai. The prosecution has, by adducing the said evidence sought to prove who were "the end beneficiaries" of the funds which CANFINA was induced to part with.
173. The witnesses examined are; P.W. No. 1-Mr. Kota Narsimha Kamath, the Managing Director of CANFINA, P.W. No. 25-Mr. Padmanabha Rao Appana, the then Managing Director of CANFINA, P.W. No. 28, Mr. Manjeshwar Venkateshwara Kamath, the then General Manager of Canara Bank, Bangalore, P.W. No. 31-Mr. Jitendra Ratilal Shroff, one of the share brokers. P.W. No. 32-Mr. K. Laxminarayanan the then Vice Chairman of CANFINA at Bangalore, P.W. No. 33-Mr. Jagannath Venkanna Shetty, the then Chairman of Canara Bank at Bangalore and P.W. No. 63-Mr. Parambath Radhakrishnan, an employee of Taj Mahal Hotel at Mumbai.
174. The evidence of the above witnesses shows there being three or four meeting. First was held on 19th May, 1992 in Taj Mahal Hotel in a room in a suit which was engaged for Mr. J.V. Shetty, P.W. No. 33 and on following successive days further two or three meetings were held. According to the prosecution, on behalf of CANFINA and Canara Bank P.W. No. 25-Mr. P.R. Appana, P.W. No. 2-Mr. M.V. Kamath, P.W. No. 32-Mr. K. Laxminarayanan, P.W. No. 33-Mr. J.V. Shetty and Accused No. 1-M.K.S. Ashok Kumar attended the said meetings. Further besides Accused No. 1-M.K.S. Ashok Kumar, the other accused who attended the said meetings were Accused No. 2-H.P. Dalal, Accused No. 3-A.D. Narottam, Accused No. 4-B.C. Dalal and Accused No. 5-T.B. Ruia. The aforesaid witnesses are unanimous about the attendants stated earlier of the said meetings. P.W. No. 63-Mr. Parambath Radhakrishnan, an employee of Taj Mahal Hotel has been examined to prove that at the relevant dates when the meetings were held, a suit was booked in Taj Mahal Hotel for Mr. J.V. Shetty, P.W. No. 33. The said witness has also made available the records in respect of the said booking which is not disputed.
175. The evidence of the prosecution as made available through the aforesaid witnesses indicates that the back ground and purpose of such meetings was to sort out and find out some way-out to clear the outstanding BRs issued by BOK favouring CANFINA as according to the prosecution, by then, it had come to light and became known to the officials of CANFINA and Canara Bank that the funds of the three impugned transactions between the CANFINA and BOK, for which BOK issued its BRs were not supported or backed by the securities and that funds which CANFINA parted with in favour of BOK were diverted through the account of Accused No. 3 with BOK for the benefit of Accused No. 2-H.P. Dalal, Accused No. 3-A.D. Narottam, Accused No. 4-B.C. Dalal and Accused No. 5-T.B. Ruia. All the said accused except Accused No. 5, were share brokers as also the end beneficiaries of the said funds. The hire-ups of CANFINA and Canara Bank i.e. P.W. No. 25-Mr. P.R. Appana, P.W. No. 28-Mr. M.V. Kamath, P.W. No. 32-Mr. K. Laxminarayanan, P.W. No. 33-Mr. J.V. Shetty, thought it prudent to sort out the matter across the table by prevailing upon the end beneficiaries to settle the matter and to bring back the moneys so received. The said purpose of the meetings has been deposed to by the officials of Canara Bank and CANFINA with one voice and it needs to be stated that as far as this aspect of the evidence is concerned, there is nothing which is elicitated in the cross-examination to dislodge the said part of the evidence. On the other hand, Accused No. 1-M.K.S. Ashok Kumar and Accused No. 3-A.D. Narottam who attended the meetings have admitted their presence as also holding of such meetings. It has to be noted however that as far as Accused No. 2-H.P. Dalal, Accused No. 4-B.C. Dalal and Accused No. 5-T.B. Ruia are concerned, they expressed their reservations about the receipt of funds and have denied their presence in the meetings. In fact, they have denied there being any such meetings at all.
176. P.W. No. 25-P.R. Appana Rao who was then the Managing Director of CANFINA in Mumbai has deposed that when he came to know somewhere in the end of April, 1992 about the outstanding B.Rs. from the R.B.I. Inspector, he called the Accused No. 1-M.K.S. Ashok Kumar to Mumbai and had discussion with him. He also makes reference to the meeting held in the office of Canbank Mutual Fund when Accused No. 1-M.K.S. Ashok Kumar and Accused No. 2-H.P. Dalal met him and when Accused No. 2-H.P. Dalal promised that he would ensure that BOK honoured all the outstanding B.Rs. The other witness who has deposed about the said meeting and corroborated with him is P.W. No. 28-M.V. Kamath. It needs to be stated that this part of the evidence has not been dealt with by Accused No. 2-H.P. Dalal in the cross-examination of both these witnesses i.e. P.W. No. 25-P.R Appana Rao and P.W. No. 28-M.V. Kamath.
177. As far as Taj Mahal Hotel meetings are concerned, as stated earlier, there were three or four meetings and the evidence of the above witnesses, in particular, that of P.W. No. 28-M.V. Kamath, P.W. No. 32-K. Laxminarayanan P.W. No. 33-J.V. Shetty as a senior-most officer, being the then Chairman of Canara Bank, opened the topic about the outstanding B.Rs. and called upon the concerned brokers to clear the outstanding liability under the B.Rs. in the impugned transactions of CANFINA.
178. It is further in the evidence of all these witnesses that the discussion ensued thereafter among the brokers i.e. Accused No. 2-H.P. Dalal, accused No. 3-A.D. Narottam, Accused No. 4-B.C. Dalal and Accused No. 5-T.B. Ruia and the outcome of that discussion has been thus deposed to P.W. No. 25-P.R. Appana Rao, which is quoted (part of para 23 on pages 616 and 617 of the notes of evidence) :--
"In the discussion in the said meetings the Accused No. 3 admitted having used Rs. 30 crores for himself. Accused No. 5-T.B. Ruia admitted he having taken Rs. 70 crores, Accused No. 2 admitted he having received Rs. 30 crores and assured to repay the same. Accused No. 3 and Accused No. 5 also assured to repay the amounts."
179. This part of the evidence has also been reiterated and corroborated by the other witnesses like P.W. No. 28-M.V. Kamath and P.W. No. 32-K. Laxminarayanan. It is also relevant to note that P.W. No. 31-J.R. Shroff, who is one of the brokers and who has not supported the prosecution case as has been revealed in his statement recorded by the investigation agency under section 161 of Cr.P.C., about the holding of the meetings and his attending the same, he has corroborated the other witnesses. Therefore, taking into consideration the evidence which is made available with regard to the holding of the meetings, it has to be held that there is enough evidence which goes to prove that such meetings were held and amongst its attendants included Accused No. 2-H.P. Dalal, Accused No. 3-A.D. Narottam, Accused No. 4-B.C. Dalal and Accused No. 5-T.B. Ruia and as the evidence shows, they i.e. accused Nos. 2-H.P. Dalal, 3-A.D. Narottam and 5-T.B. Ruia admitted about the receipt of amounts as mentioned earlier by each one of them and promised to repay the same. It needs further to be stated that the said part of the evidence can be considered to be as an admissions at least by accused Nos. 2-H.P. Dalal, Accused No. 3-A.D. Narottam and Accused No. 5-T.B. Ruia about the receipt of the amounts as stated, by each one.
180. All these witnesses were submitted to lengthy cross-examination by and on behalf of defence, which tends to suggest, in the first instance, there being no meetings at all. It was also suggested that accused Nos. 2 to 5 did not attend the said meetings nor accused Nos. 2-H.P. Dalal and Accused No. 5-T.B. Ruia admitted having received any amounts as deposed by them. However, the same have been denied by these witnesses. It has been brought out that no written record of the said meetings such as minutes was kept and the witnesses have admitted the same explaining that purpose of the said meetings was to thrash out the matter by way of persuasion and prevailence. It may be stated that something can be said about the manner in which such meetings were conducted, especially when the topmost officials of both the institutions, namely of Canara Bank and CANFINA attended the said meetings, like P.W. No. 28-M.V. Kamath, P.W. No. 32-K Laxminarayanan and P.W. No. 33-J.V. Shetty. The evidence of the said officials, the Court is constrained to note, only indicated lack of diligence and a sort of complacent and casual attitude on their part all throughout in the working of Security Section of CANFINA and which aspect has been more appropriately dealt with by Mr. Nanjappa, R.B.I. Officer-P.W. No. 65, in his reports. It is indeed deplorable and matter of grave concern that the top officials of such financial institutions, who owned and who carried heavy responsibility and accountability, as they were heading the financial institutions which were dealing with public moneys should adopt such casual attitude. This further demonstrates inept handling of serious issues by top bosses of the said institutions and reflects lackadaisical administrative apparatus. In as much as, even while testifying before the Court, the Court could also notice sort of casual attitude on the part of these witnesses. However, all said and done and taking charitable view of their such attitude, the evidence made available by the prosecution as far as meetings of May, 1992 it stands proved that meetings were held and admissions on the part of Accused No. 2-H.P. Dalal and Accused No. 3-A.D. Narottam as also accused No. 5 -T.B. Ruia. However, it may be stated that, as far as Accused No. 5-T.B. Ruia is concerned, unlike accused Nos. 2 and 3, there being no substantive evidence made available by the prosecution about his precise involvement in three impugned transactions as also cover up operations, the said admission of Accused No. 5-T.B. Ruia as far as he is concerned, would not further advance the case of the prosecution to hold him guilty of the charges leveled against him.
181. To sum up, therefore, as far as the evidence of the said meetings are concerned, it stands proved that accused Nos. 2-H.P. Dalal and 3-A.D. Narottam having admitted receipt of part of the funds flown from the impugned security transactions of this case. That's all as far as evidence of meetings is concerned. This lends further corroboration to the evidence of diversion discussed hereinabove.
182. Point No. 34 :---This aspect of the prosecution case crops in and which can be conveniently titled as "Cover Up Operation". Mercantile Co-operative Bank (in short M.C.B.) gets involved therein. Prosecution has thought it necessary to bring in the involvement of M.C.B. in each of the said transactions and some of its employees to show that the main transactions of this case which as noticed earlier, are of 6-4-1991, 22-7-91 and 31-7-91 between CANFINA and BOK.
183. While considering the evidence in respect of said transactions earlier, it is noticed and it also stood established by cogent and convincing evidence that although the said transaction were shown to be between CANFINA and BOK, but in reality it was not so and the transactions were routed through and into the account of Accused No. 3-A.D. Narottam with BOK. It is also noticed while considering point No. 8, 15 & 22 that on the dates in question when the main transactions in securities took place in which CANFINA purportedly purchased the security involved in each of the transactions from BOK, and which were routed through and into the account of Accused No. 3-A.D. Narottam, the fact of the matter was that on the respective dates of the transactions, neither Accused No. 3-A.D. Narottam in his security account with BOK or even the BOK held and possessed the security in question being the subject matter of three transactions for meeting the commitments of CANFINA. It is noticed that on the receipt of consideration of the securities for the said three transactions from CANFINA, BOK proceeded to issue its BRs which contained recitals incorporating an undertaking to deliver the securities later on to CANFINA. It so happened and which is clearly established from the evidence discussed that except some part of the security of the second transaction, liability of BOK to CANFINA remained outstanding.
184. As far as cover up operation is concerned, everything has happened on 16-9-1991 on which date cover up operations haw been put through. The prosecution has made available the evidence before the Court with regard to the said cover up operation by examining following witnesses.
i) P.W. 12-Mr. Hanmant Bhau Balip who at the relevant time worked as a Joint Registrar in the office of the Registrar, Co-operative Society, Bombay and who issued order of liquidation of the said MCB under the provisions of Maharashtra Co-operative Societies, Act 1960 (hereinafter in short Co-op Societies Act.) The orders in question were issued on 20-6-92 being interim order and 21-7-1992 being final order.
ii) P.W. 13-Mr. Raghunath Laxman Kulkarni who was sub auditor at the relevant time attached to the Office of the Registrar of the Co-operative Societies and who carried out auditing in respect of M.C.B. for the period covering 1-7-1990 to 30-6-1991 and who prepared the report in respect of his audit which is produced at Ex. 186. He has classified the said M.C.B., on the basis of working of M.C.B., which he noticed in course of his audit in "D" category meaning very poor performance/ working". It may be stated that the said Bank was a Co-operative Bank registered under the provisions of the Co-operative Act.
iii) P.W. 20-Dilip Pratapray Gandhi, who at the relevant time was an employee of M.C.B.
iv) P.W. 22-Mr. O.K.M. Nambiar, also the employee at the relevant time of MCB and
v) P.W. 23-Mr. Kundala Suryanarayana Rao, the officer of R.B.I. who conducted inspection of the said Bank and who had made report being Ex. 386 collectively.
185. The accused involved in this Cover Up Operation and as prosecution case stands are accused No. 2, 3, 5, 9, 10 and 11. Accused Nos. 2 and 3 as mentioned earlier were Share brokers, Accused No. 5 was the Director of Dhanraj Mills Pvt. Ltd. having account with said M.C.B., Accused Nos. 9 & 10 were at the relevant time respectively director/Vice Chairman and employee of M.C.B. Accused No. 11 was the proprietor of the M/s. Excel and Co. dealing with securities as broker and who had his account with M.C.B. at the relevant time. As it is noticed, so called Cover Up Operation has been put through into his account with M.C.B.
186. It will be necessary to say something about standing of the said MCB. It will suffice to refer to the report produced by R.B.I. Officer, P.W. 23 Kundala Suryanarayana Rao, in respect of his inspection being Ex. 386. In para 2 of the said report which he has also deposed before the Court, and which is not subjected to challenge this is what is stated:--
"The Metropolitan Co-operative Bank Ltd., Bombay is a licensed non-scheduled small urban Co-operative bank with only one office located at 67, Hanumant Building, 1st Floor, Tambakanca, Mumbadevi Road, Bombay 400 004. The bank was established in the year 1972 and the same was issued a license to conduct banking business on 28 September, 1972. The last inspection of the bank was conducted with reference to its financial position as on 31 March, 1990. On the basis of the inspection the bank was Found to be not complying with section 11(1) of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies). The Bank, as such, was classified as a weak Bank and continues to be so as per the financial review as on 30-6-1991. The total deposits and advances of the bank as on 31-3-1992 amounted to Rs. 4.39 crores and Rs. 3.86 crores respectively. Thus, the bank is one of Small means but was found to have indulged in large-scale security deals by issue of bank receipts (BR) for huge amounts."
187. The said MCB went into liquidation as per order passed by P.W. 12-Mr. Hanmant Bhau Balip on 21-7-1992 which he has produced and proved at Ex. 184. The status of MCB, at the commencement of the trial of this case, continued to be in liquidation.
188. P.W. 12-Mr. Hanmant Bhau Balip has explained in his evidence the circumstances in which he was required to pass an order of liquidation. He has stated that as required under the statute, he passed the said liquidation order after getting approval of R.B.I.
189. As and by way of Cover Up Operation, there are three transactions in securities all of the same date, viz. 16-9-1991. The brief account as it emerges from the evidence made available in respect of each of the transactions, is given hereinbelow.
190. According to the prosecution the said Cover Up Operation by involving MCB was undertaken as and by way of devise of camouflage and to manipulate the record in respect of Security ledger account of accused No. 3 in respect of Security involved in three impugned Transactions of this case. It is the case of prosecution, this was done with an Object of showing that there was a balance of the securities into the security account of accused No. 3 with BOK on the respective dates of the transactions. It is further case of the prosecution that in fact, as the evidence clearly indicated, that on the dates when three impugned transactions were put through, neither accused No. 3 or BOK possessed or held the securities to meet the commitment of the said three transactions with CANFINA.
191. It is the case of the prosecution that MCB was very small Bank with very meager standing assets capital and deposits etc. While considering status of the said Bank we noticed the part of Report of RBI Inspector being Ex. 386 recorded by P.W. 23-Mr. Kundala Suryanarayana Rao. Yet the Cover Up Operation involving the amount of three impugned transactions, to the extent of Rs. 375 crores was master minded through the said MCB which by any reckoning and considering its standing was far beyond its financial capacity.
192. The prosecution case as it stands that there used to be meetings either in the office of accused No. 2-H.P, Dalal or in the Security Department of BOK and used to be attended to by the accused Nos. 2, 3, 5, 6, 7, 8, 9, 10 and 11. The prosecution has relied, in support of such holding of session/meetings between the above named accused a document being the joint statement dated 22-5-1992 of accused No. 9-K.K. Kapadia and 10-M.S. Kushte and P.W. 20-Mr. Pratapray Gandhi, first being Vice Chairman, second being Accountant, third being employee of MCB at the relevant time which statement its makers viz. Accused No. 9-K.K. Kapadia and 10-M.S. Kushte and P.W. 20-Mr. Pratapray Gandhi gave to P.W. 23-Mr. Kundala Suryanarayan Rao, the R.B.I. Officer at the time of inspection by R.B.I. More will be stated about the said joint statement at later stage.
193. Now I will turn to what was done and series of steps undertaken while resorting to the said Cover Up Operation by referring to the evidence made available by the Prosecution, mainly through P.W. Nos. 20-Mr. Gandhi, 22-Mr. Nambiar and 23-K.S. Rao, R.B.I. Inspector as far as MCB is concerned. As far as BOK is concerned, the prosecution has made available the evidence of P.W. 14-Mr. M.K. Kher, then officer of BOK. According to the prosecution the players involved in the said operations are Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 5-T.B. Ruia, 6-J.P. Gandhi, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy. The documentary evidence relating to such Cover Up Operation has also been made available. At the outset it is to be stated that the transactions in such Cover Up Operation were put through in such a way and manner so as to match, in every respect to the main three impugned transactions. That is to say, the nature of security, quantity, rate, consideration etc. Each such cover up transaction is considered as mentioned hereinbelow:--
I. FIRST TRANSACTION MATCHING/CORRESPONDING IMPUGNED TRANSACTION OF 6-4-1991 of 112% GOI F.V. 25 crores consideration Rs. 25,81,20,354.38 sold by BOK to CANFINA:
1. On 16-9-91 accused No. 11, as the proprietor of Excel and Co. addressed a letter in printed format to MCB which described as Delivery Order bearing No. 003672 of that date and instructed MCB to deliver to BOK 25 Crore, 11.5% Bonds of 2008 @ 101/- which delivery order has been produced at Ex. 676 and proved to be in the handwriting of accused No. 11 and as also signed by him P.W. 20-Mr. Gandhi and by P.W. 67-Mr. Sood Expert, being Exhibit 676. It may be stated that accused No. 11 also in his explanation has owned the said document.
2. The next document is BR bearing No. 012 dated 16-9-91 issued by MCB favouring BOK in respect of said security, viz. 112% F.V. 25 crores GOI for consideration of Rs. 25,92,93,045.55 which has been produced and proved by P.W. 20-Mr. Gandhi being Ex. 344 being in the handwriting of accused No. 10 as also signed by accused No. 10. The same has also been proved to be in the handwriting of accused No. 10 as also bearing his signature by hand writing expert P.W. 67-
Mr. Sood. By the said BR MCB undertook to BOK to deliver the security covered by it at later date.
3. The next document is a Cost Memo of MCB dated 16-9-91 in favour of BOK in respect of the said security, namely, 11.5% GOI 2008, Face Value 25 Crores for Rs. 25,92,93,045.55 which has been proved by the hand writing expert P.W. 67 being in the hand writing of accused No. 10-M.S. Kushte and signed by him and which has been marked at Ex. 667. It is pertaining to note that description of the said security in the said Cost Memo and BR tallies to each other.
4. There is a corresponding receiving order bearing No. 1819 dated 16-9-91 of accused No. 3 addressed to BOK, instructing BOK to receive the said security from MCB viz. 25 Crore GOI 11.5%, 2008 which has been produced and proved at Ex. 212 being in the handwriting of accused No. 3 as also signed by him by P.W. 14-Mr. Kher as also handwriting expert P.W. 67-Mr. Sood. Accused No. 3 has also admitted the same being in his handwriting and signed by him.
5. The next document is Pay Order/Int. Bank Cheque dated 16-9-91 issued by BOK on 16-9-91 favouring MCB for sum of Rs. 25,92,93,045.55 which has been produced and proved by P.W. 14-Mr. Kher as being in the handwriting of accused No. 8-S.A. Ail and signed by accused No. 7-C.S. Raje being at Ex. 214. The said Pay Order bears the rubber stamp of MCB of 16-9-91 in token of having received the payment thereunder on that date.
6. There is a debit entry being Ex. 372(4) in to the Over Draft account of accused No. 3-A.D. Narottam with BOK of 16-9-1991 showing debit of sum of Rs. 25,92,93,045.55 which amount corresponds to the Pay Order Ex. 359 referred to earlier and which was issued in favour of MCB.
7. The next document is a carbon copy of the Credit advise of MCB addressed to BOK being dated 16-9-91 crediting a sum of Rs. 25,92,93,045.55 into the account of Excel & Co. with MCB which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar, an officer of MCB, being in the handwriting of accused No. 10-M.S. Kushte as also signed by him being Ex. 371 and which document has not been disputed even by accused No. 10-M.S. Kushte, he being author and signatory therein. It may be stated that said amount corresponds to the Pay Order of BOK being exhibit mentioned at serial No. 5 above.
8. Next document is the statement of account of M/s. Excel and Co. of which accused No. 11-S.N. Ramaswamy, as noticed earlier was the sole proprietor and which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar, the officer of MCB being Ex. 364 and said statement shows credit entry of Rs. 25,92,93,045.55 into the current account of Excel & Co. of Rs. 25,92,93,045.55 on 16-9-91 which is marked as Ex. 372(1).
The above evidence shows :--
i) There is a transaction of sale of 11.5% GOI. Face Value 25 Crores by MCB on 16-9-91.
ii) The description of the said security as also quantity and rate etc. correspond to that of the description of the security, in all respect to the security of impugned transaction of 6-4-1991 between BOK and CANFINA.
iii) The payment, being consideration thereof has flown from the account of accused No. 3-A.D. Narottam with BOK.
iv) MCB has credited the amount received from BOK as consideration of the said security into the account of accused No. 11-S.N. Ramaswamy.
v) MCB issued its BR favouring BOK undertaking to deliver the security in question to BOK at later stage.
vi) Evidence shows that there existed no security to back up the said transaction and consequent issuance of BR, either in the account of MCB or accused No. 11-S.N. Ramaswamy's concern M/s. Excel & Co.
vii) BOK is the common party to the said transaction of 16-9-91 as also to the impugned transaction of 6-4-91.
viii) With BOK transaction is routed into the account of accused No. 3-A.D. Narottam.
ix) Accused No. 2-H.P. Dalal is the common broker in both the transactions i.e. between CANFINA and BOK and MCB and BOK.
II. SECOND TRANSACTION MATCHING/ CORRESPONDING IMPUGNED TRANSACTION OF 22-7-91 16 crore Units of UTI consideration Rs. 212,80,00,000/- sold by BOK to CANFINA:
1. On 16-9-91 accused No. 11, as the proprietor of Excel and Co. addressed a letter in printed format to MCB which described as Delivery Order bearing No. 003674 of that date and instructed MCB to deliver to BOK 16 Crore Units of UTI which delivery order has been produced at Ex. 677 and proved to be in the handwriting of accused No. 11 and as also signed by him P.W. 20-Mr. Gandhi and P.W. 67-Mr. Sood Expert. It may be stated that accused No. 11 also in his explanation has owned the said document.
2. The next document is BR bearing No. 013 dated 16-9-91 issued by MCB favouring BOK in respect of said security, viz. 16 crores Units of UTI for consideration of Rs. 212,80,00,000,00 which has been produced and proved by P.W. 20-Mr. Gandhi and P.W. 67-Mr. Sood, an expert being in the handwriting of accused No. 10 as also signed by accused No. 10 marked as Ex. 343. The accused No. 10 has in his explanation owned the said document. By the said BR, MCB like in first transaction undertook to BOK to deliver the security in question at later date.
3. The next document is a Cost Memo of MCB dated 16-9-91 in favour of BOK in respect of the said security, viz. 16 crore units of UTI for Rs. 212,80,00,000/- which has been proved by the hand writing expert P.W. 67 Mr. Sood being in the hand writing of accused No. 10-M.S. Kushte and signed by him and which has been marked at Ex. 668. It is pertaining to note that description of the said security in the said Cost Memo and BR tallies to each other.
4. There is a corresponding receiving order bearing No. 1819 dated 16-9-91 of accused No. 3 addressed to BOK, instructing BOK to receive the said security from MCB of 16 Crore units of UTI which has been produced and proved at Ex. 217 being in the handwriting of accused No. 3 as also signed by him by P.W. 14-Mr. Kher as also handwriting expert P.W. 67-Mr. Sood. Accused No. 3 has also admitted the same being in his handwriting and signed by him.
5. The next document is Pay Order/Int. Bank Cheque dated 16-9-91 issued by BOK on 16-9-91 favouring MCB for sum of Rs. 212,80,00,000/- which has been produced and proved by P.W. 14-Mr. Kher as being in the handwriting of accused No. 8-S.A. Ail and signed by accused No. 7-C.S. Raje being at Ex. 219. The said Pay Order bears the rubber stamp of MCB of 16-9-91 in token of having received the payment thereunder on that date.
6. There is a debit entry into the Over Draft account of accused No. 3-A.D. Narottam with BOK of 16-9-1991 showing debit of sum of Rs. 212,80,00,000/- which amount corresponds to the Pay Order Ex. 362 referred to earlier and which was issued in favour of MCB.
7. The next document is a carbon copy of the Credit advise of MCB addressed to BOK being dated 16-9-91 crediting a sum of Rs.
212,80,00,000/- into the account of Excel & Co. with MCB which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar an officer of M.C.B. being in the handwriting of accused No. 10-M.S. Kushte as also signed by him being Ex. 368 and which document has not been disputed even by accused No. 10-M.S. Kushte, he being author and signatory therein. It may be stated that said amount corresponds to the Pay Order of BOK being exhibit mentioned at serial No. 5 above.
8. Next document is the statement of account of M/s. Excel and Co. of which accused No. 11-S.N. Ramaswamy, as noticed earlier was the sole proprietor and which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar, the officer of MCB being Ex. 364 and said statement shows credit entry of Rs. 212,80,00,000/- into the current account of Excel & Co. on 16-9-91 which is marked as Ex. 372(2).
The above evidence shows as in first transaction that :--
i) There is a transaction of sale of 16 crore Units of UTI F.V. Rs. 212,80,00,000/- by MCB to BOK on 16-9-91.
ii) The description of the said security as also quantity and rate, etc. corresponds to that of the description of the security, in all respect to the security of impugned transaction of 22-7-1991 between CANFINA and BOK.
iii) The payment, being consideration thereof has flown from the account of accused No. 3-A.D. Narottam with BOK.
iv) M.C.B. has credited the amount received from BOK as consideration of the said security into the account of accused No. 11-S.N. Ramaswamy.
v)M.C.B. issued its BR favouring BOK undertaking to deliver the security in question to BOK at later stage.
vi) Evidence shows that there existed no security to back up the said transaction and consequent issuance of BR, either in the account of MCB or accused No. 11-S.N. Ramaswamy's concern M/s. Excel & Co.
vii) BOK is the common party to the said transaction of 16-9-91 as also to the impugned transaction of 6-4-91.
viii) With BOK transaction is routed into the account of accused No. 3-A.D. Narottam.
ix) Accused No. 2-H.P. Dalal is the common broker in both the transactions i.e. between CANFINA and BOK and MCB and BOK.
III. THIRD TRANSACTION MATCHING/CORRESPONDING IMPUGNED TRANSACTION OF 31-7-1991 of 19 crore Units of UTI crores consideration Rs. 252,70,00,000/- sold by BOK to CANFINA:
1. On 16-9-91 accused No. 11, as the proprietor of Excel and Co. addressed a letter in printed format to MCB which described as Delivery Order bearing No. 003694 of that date and instructed MCB to deliver to BOK 19 Crore Units of UTI which delivery order has been produced at Ex. 678 and proved to be in the handwriting of accused No. 11 and as also signed by him P.W. 20-Mr. Gandhi and P.W. 67-Mr. Sood Expert. It may be stated that accused No. 11 also in his explanation has owned the said document.
2. The next document is BR bearing No. 014 dated 16-9-91 issued by MCB favouring BOK in respect of said security, viz. 19 crore Units of UTI for consideration of Rs. 252,70,00,000/- which has been produced and proved by P.W. 20-Mr. Gandhi and P.W. 67-Mr. Sood, an expert being in the handwriting of accused No. 10 as also signed by accused No. 10 marked as Ex. 345. The accused No. 10 has in his explanation owned the said document. By the said BR, MCB like in first transaction undertook to BOK to deliver the security in question at later date.
3. The next document is a Cost Memo of MCB dated 16-9-91 in favour of BOK in respect of the said security, viz. 19 crore units of UTI for Rs. 252,70,00,000/- which has been proved by the hand writing expert P.W. 67 Mr. Sood being in the hand writing of accused No. 10-M.S. Kushte and signed by him and which has been marked at Ex. 669. It is pertaining to note that description of the said security in the said Cost Memo and BR tallies to each other.
4. There is a corresponding receiving order bearing No. 1821 dated 16-9-91 of accused No. 3 addressed to BOK, instructing BOK to receive the said security from M.C.B. of 19 Crore units of UTI which has been produced and proved at Ex. 222 being in the handwriting of accused No. 3 as also signed by him by P.W. 14-Mr. Kher as also handwriting expert P.W. 67-Mr. Sood. Accused No. 3 has also admitted the same being in his handwriting and signed by him.
5. The next document is Pay Order/Int. Bank Cheque dated 16-9-91 issued by BOK on 16-9-91 favouring M.C.B. for sum of Rs. 252,70,00,000/- which has been produced and proved by P.W. 14 Mr. Kher as being in the handwriting of accused No. 8-S.A. Ail and signed by accused No. 7-C.S. Raje being at Ex. 224. The said Pay Order bears the rubber stamp of M.C.B. of 16-9-91 in token of having received the payment thereunder on that date.
6. There is a debit entry into the Over Draft account of accused No. 3-A.D. Narottam with BOK of 16-9-1991 showing debit of sum of Rs. 252,70,00,000/- which amount corresponds to the Pay Order Ex. 360 referred to earlier and which was issued in favour of M.C.B.
7. The next document is a carbon copy of the Credit advise of M.C.B. addressed to BOK being dared 16-9-91 crediting a sum of Rs. 212,80,00,000/- into the account of Excel & Co. with M.C.B. proprietary concern of accused No. 11-S.N. Ramaswamy which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar, an officer of M.C.B., being in the handwriting of accused No. 10-M.S. Kushte as also signed by him being Ex. 369 and which document has not been disputed even by accused No. 10-M.S. Kushte, he being author and signatory therein. It may be stated that said amount corresponds to the Pay Order of BOK as mentioned earlier dated 31-7-91.
8. Next document is the statement of account of M/s. Excel and Co. of which accused No. 11-S.N. Ramaswamy as noticed earlier was the sole proprietor and which has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar, the officer of M.C.B. being Ex. 364 and said statement shows credit entry of Rs. 252,70,00,000/- into the current account of Excel & Co. on 16-9-91 which is marked as Ex. 372(2).
The above evidence as in case of two transactions stated earlier shows that:--
i) There is a transaction of sale of 19 crore Units of UTI F.V. Rs. 252,70,00,000/- by MCB to BOK on 16-9-91.
ii) The description of the said security as also quantity and rate, etc. corresponds to that of the descriptions of the security, in all respect to the security of impugned transaction of 31-7-1991 between CANFINA and BOK.
iii) The payment, being consideration thereof has flown from the account of accused No. 3-A.D. Narottam with BOK.
iv) M.C.B. has credited the amount received from BOK as consideration of the said security into the account of accused No. 11-S.N. Ramaswamy.
v) M.C.B. issued its BR favouring BOK undertaking to deliver the security in question to BOK at later stage.
vi) Evidence shows that there existed no security to back up the said transaction and consequent issuance of BR, either in the account of M.C.B. or accused No. 11-S.N. Ramaswamy's concern M/s. Excel & Co.
vii) BOK is the common party to the said transaction of 16-9-91 as also to the impugned transaction of 6-4-91.
viii) With BOK transaction is routed into the account of accused No. 3-A.D. Narottam.
ix) Accused No. 2-H.P. Dalal is the common broker in both the transactions i.e. between CANFINA and BOK and MCB and BOK.
194. There is one more transaction of such nature dated 16-9-91 between MCB and BOK which, although not connected to the three impugned transactions of this case to require reference. The prosecution has made available evidence in respect thereof and which will have limited bearing but vital one. The transaction in question is of sale of 11.5% GOI 2010 of Face Value 42,00,00,000/- which accused No. 11-S.N. Ramaswamy sold through MCB as in their earlier transaction to BOK on 16-9-91 and same documents as done in case of earlier three transactions have been made available and proved by same set of witnesses such as :
i) Delivery Order of M/s. Excel & Co. to M.C.B. instructing to deliver the said security to BOK (Ex. 679).
ii) M.C.B.'s BR No. 011 for sum of Rs. 43,16,94,426.33 favouring BOK (Ex. 346).
iii) M.C.B.'s Pay Order Memo favouring BOK for sum of Rs. 43,16,94,426.33 (Ex. 361).
iv) M.C.B.'s Cost Memo favouring BOK in respect of the said security for the amount mentioned hereinabove (Ex. 670).
v) BOK's Pay Order of 16-9-91 favouring M.C.B. for sum of Rs. 43,16,94,426.33 (Ex. 341) issued after debiting the amount thereof into the O/D account of accused No. 3-A.D. Narottam with BOK.
vi) MCB's Credit advise for sum of Rs. 43,16,94,426.33 crediting sum amount into the account of accused No. 11-S.N. Ramaswamy (Ex. 370) and credit entry into the statement of account of accused No. 3 being Ex. 372(3).
What is important to note is that what the evidence shows is that the flow of money from the O/D account of accused No. 3-A.D, Narottam with BOK to MCB into account of accused No. 11-S.N. Ramaswamy in all these four transactions.
195. There is also debit entry of Rs. 15 lakhs into the account of accused No. 11-S.N. Ramaswamy in statement Ex. 364 of MCB made on 16-9-91 showing transfer of the said amount of Rs. 15 lakhs towards interest in his name in MCB in the Fixed Deposit. Said entry is at Ex. 365(3). There is a corresponding debit voucher of MCB of that date addressed to M/s. Excel & Co. for sum of Rs. 15 lakhs with narration "Being amount transferred to F/D A/c. for 1 years as per your letter" (Re-produced from the said voucher itself.) The relevant fixed deposit receipt for 12 months, bearing No. 2103 dated 16-9-91 of M.C.B. favouring M/s. Excel & Co. for sum of Rs. 15 lakhs has been produced and proved by P.W. 20-Mr. Dilip Pratapray Gandhi being Ex. 355 which shows that sum of Rs. 15 lakhs were transferred from the said current account of accused No. 11-S.N. Ramaswamy for investment in fixed deposit for 12 months on 16-9-91 itself when the Cover Up Operation transaction were put through.
196. The further evidence made available by the prosecution is a letter dated 13-4-1992, in printed format of M.C.B. addressed by accused No. 11-S.N. Ramaswamy as proprietor of M/s. Excel and Co. to MCB with a request to allow him to sanction him a loan against the lien/co-lateral security of the said FDR, Ex. 355, to him. Said letter has been produced and proved being Ex. 353 as signed by accused No. 11-S.N. Ramaswamy.
197. There is also a letter on the letter head of M/s. Excel and Co. dt. 1-4-1992 addressed to Manager, M.C.B. which is produced and proved as Ex. 356 by P.W. 20-Mr. Dilip Pratapray Gandhi, wherein accused No. 11-S.N. Ramaswamy has requested M.C.B. to sanction him a loan of Rs. 10 lakhs against the said Fixed Deposit Receipt. Further important aspect appearing in the said letter is an endorsement in Red Ink reading as "As per instructions from Mr. K.K. Kapadia on 11-4-1992" which endorsement P.W. 20 Mr. Dilip Pratapray Gandhi has proved to be in the handwriting of accused No. 10-M.S. Kushte and being his i.e. accused No. 10's initials.
198. Accused No. 10-M.S. Kushte has also not denied the said evidence. It is to be noted that the name reading as "K.K. Kapadia" is that of accused No. 9-K.K. Kapadia.
199. The above evidence shows that on 16-9-1991 accused No. 11-S.N. Ramaswamy received a credit of sum of Rs. 15 lakhs which he invested on same date into the FDR for 12 months.
200. It further shows that on 13-4-1992 he requested for the loan of Rs. 10 lakhs from MCB against the said FD. The name of accused No. 9 K.K. Kapadia figures in the said endorsement in the letter Ex. 356 and endorsement is proved to be in the handwriting of accused No. 10-M.S. Kushte.
201. There is another most very vital piece of evidence which is revealing and which is made available by the prosecution i.e. a letter dated 16-9-91 on the letter head of M/s. Excel & Co. addressed by accused No. 11-S.N. Ramaswamy as a proprietor to MCB. The said letter is proved to be in the hand writing of accused No. 11. By this letter accused No. 11-S.N. Ramaswamy has instructed MCB to issue 4 Manager's Cheque for the different amounts in favour of BOK with further instructions to instruct BOK (Payee Bank) to credit the amounts of said cheques into the Over Draft Account No. 201 of accused No. 3-A.D. Narottam with it i.e. BOK. The said letter has been proved to be in the hand writing of accused No. 11-S.N. Ramaswamy as also signed by him by handwriting expert P.W. 67-Mr. Naresh Chandra Sood and which evidence has not been denied by accused No. 11-S.N. Ramaswamy. In fact, accused No. 11-S.N. Ramaswamy has admitted having written the said letter. Since, said letter, as stated earlier is most important and vital link, its text is reproduced:--
"Please issue 4 Manager's cheques for the following amounts in favour of the Bank of Karad Ltd. with a Memo on them to credit the amount to the A/c. of A.D. Narottam (No. 201) and oblige.
i. 212,80,00,000/-
ii. 252,56,00,000/-
iii. 43,16,94,426.33 iv. 25,92,93,045.55.
Thanking You"
Incidentally, the amounts of pay order at Sr. Nos. (i) and (iv) are exactly the same as BOK's pay orders favouring M.C.B., issued on 16-9-91 being Exs. 219 and 214, respectively, noticed earlier, which are related to second and first transactions, respectively. Amount at ST. No. (iii) above is the same as that of fourth transaction of 16-9-91. As far as Sr. No. (ii) above is concerned the said amount is less by 15,05,345/- of the Pay Order of BOK to MCB, Ex. 224, which will be explained later on.
202. Accordingly M.C.B. has issued the Manager Cheques/Pay Orders as per said letter Ex. 680 favouring BOK on the same date i.e. 16-9-91 for the amounts as mentioned in the said letter which are respectively Ex. 359, 360, 361 and 362 favouring BOK. The said Pay Order bear the rubber stamp of BOK of 16-9-91 showing that the BOK received the proceeds of the said Pay Orders on the same date.
203. It is further to be noted that there is consolidated debit entry into the account of accused No. 11-S.N. Ramaswamy with M.C.B. made on 16-9-91 for sum of Rs. 534,59,87,471.88 which is at Ex. 365(1) represents the total of all the said four Pay Orders which M.C.B. issued favouring BOK on that date. It is further to be noted that form the statement of Over Draft Account of accused No. 3-A.D. Narottam with BOK produced and proved by P.W. 14-Mr. Mukund Krishnaji Kher being Ex. 198 there are four credit entries of the same date i.e. 16-9-91 for sum of Rs. 25,92,93,045.55, Rs. 2,52,55,00,000/-, Rs. 43,16,94,426.33 and for Rs. 212,80,00,000/- which entries have been marked as Ex. 230, 231, 232 and 233 respectively and duly proved by P.W. 14-Mr. Mukund Krishnaji Kher. It is to be stated that the respective amounts of said credit represents and corresponds to the Pay Orders which M.C.B. issued favouring BOK as referred to earlier, it shows that as per instructions of accused No. 11-S.N. Ramaswamy the said M.C.B. issued Pay Orders favouring BOK and as per his instructions contained in letter Ex. 680 referred to earlier, BOK has credited the said amounts of four Pay Orders into the account of accused No. 3-A.D. Narottam. It is very significant to note that on the very day BOK issued its four Pay Orders for the purported sale of four securities as noticed earlier to M.C.B., on the same day M.C.B. issued its four Pay Orders, noticed above favouring BOK without there being any consideration and amounts have been credited into O/D account of accused No. 3-A.D. Narottam in BOK from where fund was flown on the same day to MCB. To recapitulate the emerging facts are:
i) on the very day i.e. on 16-9-91 BOK issued four Pay Orders debiting the amounts into the account of accused No. 3-A.D. Narottam, as noticed earlier favouring M.C.B. being the consideration of four transactions.
ii) It is further pertinent to note that on the same date M.C.B. received the said credit and issued its Cost Memos and BRs favouring BOK in four transactions of securities as per instructions of accused No. 11-S.N. Ramaswamy and again.
iii) On the very day MCB paid the sum of Rs. 534,59,87,471.88 to BOK by four different Pay Orders without there being consideration whatsoever.
iv) It is relevant to note that the said amount of Rs. 534,59,87,471.88 which MCB re-paid to BOK on 16-9-91 is less by Rs. 15 lakhs, which as stated earlier, was credited into the account of accused No 11.S.N. Ramaswamy for being invested in Fixed Deposit and sum of Rs. 5,345/ - which MCB deducted towards its commission for issuance of Pay Orders in favour of BOK and in respect whereof debit voucher of 16-9-91 for sum of Rs. 5,345/- in the name of M/s. Excel & Co. has been produced and proved by P.W. 22-Mr. O.K.M. Nambiar at Ex. 367. The narration in the said debit voucher shows that the amount was charged by MCB as a commission for issuing Pay Orders favouring BOK.
204. The said cover up operation of MCB accompanied by issuance of BRs without holding securities, was subject of RBI Inspections. Mr. Rao, P.W. No. 23, who conducted the inspection has deposed about his inspection as also preparation of Report recording his findings on the assessment and examination of relevant record of MCB which is Ex. 386 (certified copy being Ex. 386-A), the contents of which are proved by the said witness Mr. Rao, P.W. 23.
205. At this stage vital aspect of the evidence of the prosecution, made available before this Court, in support of its case, in the background of three impugned transactions as also cover up operation transactions would need careful consideration. The same is in a form of reports of the officials of RBI rendered in respect of inspection/investigation of security transactions of CANFINA and MCB undertaken by means of BRs. As far as MCB is concerned such Report as stated earlier, is produced and proved as Ex. 386 made by P.W. 23-K.S. Rao. The Reports in respect of scrutiny of security transactions of CANFINA are Exs. A-1(16) and 386 prepared by P.W. 65-Mr. Nanjappa. Both these officials have proved and testified about their respective Reports and vouched for the authenticity of contents thereof. The defence has objected to the reception of the said evidence for being read in evidence, asserting that the said Reports are not statutory Reports, This Court proposes to consider this aspect separately. At this stage, Court seeks to consider the said evidence.
206. Report of MCB:---The report as stated earlier is prepared by the Inspector/Officer of R.B.I. Mr. Kundala Suryanarayana Rao, P.W. No. 23, who conducted general investigation in respect of security transactions of the said Bank in May, 1992 and the report in question is Exh. 386, copy whereof has been produced as Exh. 386-A alongwith joint statement dated 22nd May, 1992 of accused No. 9-K.K. Kapadia, then Vice Chairman, accused No. 10-M.S. Kushte and P.W. No. 20-D.P. Gandhi, the then employees of MCB which was submitted to the said Officer at the time of investigation. Prosecution has proved the said report in respect of investigation in the security transactions of M.C.B. and the joint statement being annexure to Exh. 352. The said joint statement is proved by this witness P.W. No. 23-Mr. Rao as also by P.W. No. 20-D.P. Gandhi who is a co-maker, co-signatory thereof alongwith accused No. 9-K.K. Kapadia and accused No. 10-M.S. Kushte.
207. It is the case of the prosecution that the three Cover Up transactions of 16th September, 1991, in securities put through MCB, even though there existed no security with it or into the security account of accused No. 11-S.N. Ramaswamy was an attempt as a part of conspiracy of the accused, to fabricate and/or manipulate the record in the Security Ledger of accused No. 3 with BOK to show that accused No. 3 held and possessed the securities on the respective dates of three impugned transactions being the subject matter of this case, when in fact, there was no balance of the respective securities into the account of accused No. 3-A.D. Narottam with BOK or with BOK itself on the respective dates or even thereafter any time. According to the prosecution, it is a part of conspiracy and device of camouflage and act of forgery. In that context, it is necessary to consider the evidence which has been made available by the prosecution with regard to the standing as also financial capacity of M.C.B. to undertake such transactions on the basis of finding in the report of the R.B.I. Inspector. Before I consider admissibility and the evidentiary value of the said report as also the evidence of the R.B.I. Inspector P.W. No. 23-Mr. K.S. Rao, it would be worthwhile to consider the evidence concerning cover-up security operation of M.C.B. as such. The prosecution has examined two officers of M.C.B. who were working in the said bank at the relevant time. They are Mr. Gandhi P.W. 2 and Mr. Nambiar P.W. 22 worked as a Chief Executive Officer of the said Bank at the relevant time.
208. P.W. No. 22-Mr. Nambiar has stated that the M.C.B. was a very small bank and that it had never dealings in the security transactions (refer para 3 of his evidence on page 546 of notes of evidence). This witness was subjected to cross-examination by and on behalf of accused Nos. 9 and 10 with reference to the said evidence but he stuck up to the same. He stated that although in the Bye-Laws of the said M.C.B. there existed provision for security transactions, but the same was never implemented, as M.C.B. was a very small bank with meager Capital and Deposits. It is necessary to note that this witness was a senior-most Officer of M.C.B. and, therefore, what he has said about the total security operation of the M.C.B. has considerable significance.
209. In this respect, it will be also necessary to consider the evidence of P.W. No. 20 D.P. Gandhi being the Officer of the said Bank at the relevant time. This witness has also stated that M.C.B. did not deal in the security transactions thus corroborating P.W. No. 22-Mr. Nambiar and this part of his evidence has not been dealt with at all in the cross-examination by and on behalf of any of the accused in particularly, accused No. 9 K.K. Kapadia, accused No. 10 M.S. Kushte and accused No. 11 S.N. Ramaswamy.
210. This witness has deposed he having visited the BOK accompanied by accused No. 9 K.K. Kapadia. It will be appropriate to reproduce his version to prove the link and nexus in the context of charge of conspiracy as he has deposed on oath before the Court. Paras 7 and 8 on page Nos. 530 and 531 which are relevant are reproduced hereinbelow :
"7. I know that there was a Bank known as Bank of Karad Ltd. I first time visited the said BOK alongwith accused No. 9 Mr. V.C. Desai, Chief Executive Officer also accompanied us when we so visited. I accompanied accused No. 9 as he had told me that pay order of huge amount was to be brought from BOK. It was the Security department of BOK where I was taken.
8. After going to BOK accused No. 9 introduced me the personnel of BOK. Accused No. 9 then asked me to prepare cost memo. I prepared the coat memo as instructed by Accused No. 9. I signed the said cost memo. Shri V.C. Desai also signed the said cost memo. The Accused No. 9 had also carried with him bank receipt of the Metropolitan Co-op. Bank Ltd. which was already prepared by someone. I signed the said Bank receipt as per instructions of accused No. 9 as an Accountant. The Pay Order book and cost memo of the Metropolitan Co-op. Bank Ltd. were with Accused No. 9 and they were in his bag."
The above deposition of this witness clearly shows that (i) his visit with the accompany of Accused Ho. 9 to BOK in Security department, (ii) collection of Pay Order issued by BOK, (iii) accused No. 9 K.K. Kapadia carrying with him B.R. of M.C.B. which was already prepared, (iv) the Pay Order and Cost Memo of M.C.B. being with Accused No. 9 in his bag and (v) Delivering M.C.B.'s BR to BOK. It is pertinent to note that this part of the evidence of this witness has not been dealt with or touched by arty of the accused, in particular, by Accused No. 9 about his visit alongwith accused No. 9 to BOK in the Security Department of BOK, Accused No. 9 carrying with him in his bag M.C.B.'s B.R. and Cost Memo, etc.
211. The next relevant and also crucial part of his evidence is with regard to the joint statement dated 22nd May, 1992, referred to earlier being Exh. 352 to which he is also one of the signatories alongwith Accused No. 9-K.K. Kapadia and 10 M.S. Kushte. As noticed earlier, the said joint statement was handed over to P.W. No. 23 by its authors/signatories i e. by P.W. No. 20 Mr. Gandhi and Accused Nos. 9 & 10 respectively Mr. Kapadia and Mr. Kushte when P.W. No. 23 visited MCB with his team, for carrying out investigation, as stated earlier, P.W. No. 23 has also deposed accordingly. Since this witness is one of the signatories to the said joint statement, it will be appropriate to notice as to how the said statement came to be prepared and handed over to the P.W. No. 23 from the words of this witness itself. This is how he has deposed before the Court in para 12 of his notes of evidence on page Nos. 535 and 536:-
"The RBI officers inquired with me about the security transactions/BRs and I narrated whatever I knew and we were visiting BOK Ltd. The said statement was typed out by one of the clerks of the M.C. Bank. The said officers of the RBI also made enquiries with Accused Nos. 9 and 10 and joint statements of myself and Accused Nos. 9 and 10 was taken which was typed by the clerk as stated earlier. Thereafter on the same day my signature as also the signatures of Accused Nos. 9 and 10 were taken. (Witness is shown typed statement on the letter head of M.C. Bank Ltd. dated 22-5-1992 running into three pages signed on the last page by K.K. Kapadia, Vice Chairman, M. S. Kushte, Accountant and D.P. Gandhi Officer.) It is the same statement. Same has been signed by Shri K.K. Kapadia-Accused No. 9 as the Vice Chairman, Mr. M.S. Kushte-Accountant and myself-as officer and I identify the signatures of Accused No. 9 and 10 and mine. I am familiar with the signatures of Accused Nos. 9 and 10."
212. It is also most important to note that, in the cross-examination by and on behalf of Accused Nos. 9 and 10 who are also the signatories to the said joint statement, nothing has been elicitated to ingratiate or dislodge the said testimony reproduced above of this witness. In as much as, this is how this witness was put to in the cross-examination by and on behalf of Accused No. 9-K.K. Kapadia (refer para 18 on page 540-B of his notes of evidence and how he responded).
"The Clerk of M.C. Bank by name Mr. Mhaskar typed the statement Exh. 352.
Q. Is it that Mr. Rao, the officer of the Reserve Bank recorded your statement Exh. 352 as you went on narrating the same?
A. Myself and Accused Nos. 9 and 10 were present together. Accused Nos. 9 and 10 narrated the statement and I gave my concurrence to the same. The said statement was taken down but I do not know whether it was by Mr. Rao or by other officer accompanying him.
19. I did not narrate myself to the officer of the Reserve Bank. However, when accused Nos. 9 and 10 were narrating to Mr. Rap, the Reserve Bank officer used to ask me about the correctness thereof and I used to give my concurrence. The Reserve Bank officers recorded the statement as the same was narrated. The process of recording of statement on that day commenced at about 11 or 11.30 a.m. and at about 3.30 p.m. on that day, typed statement became ready."
As far as Accused No. 10 -M.S. Kushte is concerned, this aspect has not been dealt with at all.
212-A. If one reads the testimony of this witness in examination-in-chief as also in the cross-examination which is reproduced in extenso above, it clearly bears out that the statements as contained in the joint statement Exh. 352 were voluntarily made by its authors namely, by P.W. No. 20 Mr. D.P. Gandhi, accused No. 9-K.K. Kapadia and accused No. 10 M.S. Kushte. " In the cross-examination of this witness, on behalf of Accused Nos. 9 and 10, nothing has been attributed to him as to why he had deposed against them, i.e. against Accused Nos 9 and 10. Nothing has been suggested in the cross-examination, save and except that on behalf of Accused No. 10 it was suggested that he had given false evidence to oblige the C.B.I. which, to say the least, does not appeal to the reason at all as to why C.B.I. should falsely implicate Accused Nos. 9 and 10 in this case on the strength of this statement.
213. By and large, the evidence of P.W. No. 23 -Mr. K.S. Rao, the officer of R.B.I. to whom the said statement was handed over has also deposed in the similar line as testified by P.W. No. 20 as noticed herein above. On behalf of Accused No. 9, the suggestion was put to this witness he having obtained the said statement by administering threat to the makers of the said joint statement of cancellation of the R.B.I. license granted to M.C.B. However this witness has empathetically repudiated the same. It is most significance to note that no such suggestion, even remotely, was made to P.W. No. 20 -Mr. D.P. Gandhi, who is also one of the signatories to the said joint statement. On the contrary, as noticed earlier, in the cross-examination by and on behalf of Accused No. 9 what is elicitated clearly shows that the said joint statement was voluntary one. It may be stated that Accused No. 9 in his explanation under section 313 of Cr.P.C. particularly, in reply to Q. No. 528 has tried to introduce a different story suggesting that P.W. No. 20 was on leave on the day when the joint statement was given i.e. on 22nd May, 1992. However, it is relevant to note that no such suggestion was put to P.W. No. 20 in his cross-examination. Accused No. 9, in reply to the said Q. No. 528 admitted having signed the same but stated that he did so in duress because on that day clearing facility of M.C.B. was suspended by R.B.I. However, no such suggestion was made to P.W. No. 20 in his cross-examination and who also happens to be, as stated earlier, one of the parties to the said statement As noticed, P.W. No. 23-Mr. K.S. Rao has categorically denied having administered threats etc.
214. Taking into consideration the evidence discussed above, there is no doubt whatsoever that the said joint statement Exh. 352 came to be executed by P.W. No. 20-Mr. D.P. Gandhi, Accused No. 9 K.K. Kapadia and Accused No. 10-M.S. Kushte of their own volition and it is a voluntary statement. There is no merit whatsoever in so called case of duress, coercion, etc. as suggested in giving of the said statement.
215. The question whether the said statement can be read into evidence in a criminal trial, as in the case in hand, against its makers like Accused Nos. 9 and 10 which aspect is being dealt with separately in the light of Statutory provisions, which this Court proposes to do immediately herein after. However this Court, at this stage, indicates that the said joint statement can be read in evidence as would be elaborated later on. It is made clear at this stage that the contents of the said joint statement are being read in evidence as corroborative evidence, not as substantive one and how far the same lends corroboration to the evidence of the prosecution adduced before the Court. The material part of the said joint statement dated 22nd May, 1992, which is typed one and on the letter head of M.C.B. is reproduced herein below:-
"Issue of Bank Receipts by The Metropolitan Co-op. Bank Ltd.
On the basis of an informal arrangement with the Bank of Karad Ltd. Standard Chartered Bank and some constituents of our Bank who were dealing in shares/securities etc. our Bank has been issuing Bank Receipts to the two banks named above. The constituents involved are:
1) Excel and Co.-(Share Broker)
2) Dhanraj Mills Pvt. Ltd. -(Mfg. Textile).
The Bank Receipts were issued by the Metropolitan Co-op. Bank Ltd. in respect of the securities understood to be held by the above constituents. The Modus Operandi of the transactions was as under:
The representatives of the Metropolitan Co-op. Bank Ltd., viz. Vice Chairman and Accountant or Vice Chairman and Manager (Chief Executive Officer)/Officer used to go that the Security Dept. of Bank of Karad Ltd. at Share Bazar or at the Officer of the Share Broker namely M/s. Hiten P. Dalal and receive the Pay Orders issued by either, Bank of Karad Ltd. or Standard Chartered Bank in favour of the Metropolitan Co-op. Bank Ltd. and issue Bank receipts equivalent to the amount of the Pay Orders, indicating the sale of securities as detailed therein, and undertaking to deliver the securities at a later date. Even when the printed receipts state that securities will be delivered when ready, we have never received or delivered the securities and this work probably was handled by the clients themselves. The description of securities were written on the Bank receipts as informally indicated by the concerned constituents/brokers who were also present on the occasion. At the same time, the Metropolitan Co-op. Bank Ltd. was also issuing a Pay Order/sk for an equal or near about amount to Bank of Karad. For this purpose, a requisition from the constituents was obtained in some cases directing the Bank to issue the Pay Orders. The necessary entries in the ledgers were being made after returning to the Bank. Although the pay orders received from the Bank of Karad Ltd., /Standard Chartered Bank were favouring Metropolitan Co-op. Bank Ltd., the pay orders were credited to the current account of the above constituents on the basis of informal understanding. The return Pay Order issued by the Metropolitan Co-op Bank Ltd. on the same occasion was also indicated as by debit to the above current accounts of the constituents. The dealings in respect of Standard Chartered Bank was also taking place at the above premises of the Bank of Karad Ltd./Broker."
216. Thus if one reads the contents of the said joint statement, the portion of which reproduced hereinabove alongwith the evidence of the prosecution as discussed hereinabove, such as, testimonies of P.W. No. 20 Mr. Gandhi, P.W. No. 22-Mr. Nambiar and P.W. No. 23-Mr. Rao and the voluminous documents in a form of Cost Memos, B.Rs. Pay Orders, Delivery Orders. Receiving Orders, debit and credit vouchers/entries in statement of accounts etc. which went through the process of documents in cover-up transactions, it will be evident that the statement, as appearing in the said joint statement Exh. 352 are in conformity with the overwhelming and voluminous evidence of the prosecution made available both documentary as also oral and thus lending corroboration to the prosecution case and evidence. Court clarifies that the said statement is being read into evidence as and by way of corroboration only and it is not considered as a substantive piece of evidence as such.
217. At this stage Court also thinks appropriate to take into consideration, how far contents of investigation report of P.W. 23-Mr. Rao being Exhibit 386 lends support and assistance to the prosecution case as far as issuance of BRs. of M.C.B. in Cover Up Operation transactions. It may be added that the said report of investigation relates to and covers various transactions which were put through by M.C.B. by issuance of its BRs. As far as case in hand, we are concerned only with three BRs of MCB issued on 16-9-91 favouring BOK undertaking to deliver securities covered under the respective BRs in three transactions which were matching three impugned transactions of 6-4-91, 22-7-91 and 31-7-91 between CANFINA and BOK. Particulars of said BRs are mentioned hereinbelow in tabular form.
MCB's BR to BOK Co-relates to BOK's BRs to CANFINA in respect-of the same securities.
No. & Dt.
Amount Court Ex.
Security Dt.
Amount Court Ex.
1) 012 16-9-91 25,92,93,045,55 344 GOI 2008 F.V. 25 Crs.
11.5% 6-4-91 25,99,23,818.11 189
2) 013 16-9-91 212,80,00,000/-
34316 crs. Units of UTI 22-7-91 212,80,00,000/-
1963) 014 16-9-91 252,70,00,000/-
34519 Crs. Units of UTI.
31-7-91 255,43,98,000/-
228218. The description of the Security mentioned in the BRs issued by BOK to CANFINA as stated above are identical to that mentioned in the BRs issued by MCB to BOK. The reference to the said BRs of M.C.B. appears to annexure "A" to the said report Exhibit 386 and the respective entries of the said BR are marked as Ex. 386(2) to 386(4) respectively in the said annexure. The said annexure Ex. "A" of the said report in column 12 shows that the said three BRs were outstanding as on 22-5-92 and this has been indicated by abbreviation "O/S" and it has been so stated at the foot of the said annexure "A". P.W. 23 Mr. Rao has testified the position as reflected in the said annexure having been put in tabularised statement after gathering information from the Bank Officials of the M.C.B. which included Accused Nos. 9 and 10 and on the basis of relevant documentary evidence and record made available at the time of his investigation. It is further pertinent to note that said annexure has been signed by accused No. 9 as Vice Chairman, Accused No. 10 as Chief Accountant and P.W. 22 -Mr. O.K.M. Nambiar as Chief Executive Officer and it has been so indicated in annexure "A" of the said report. It is mentioned in the said report by P.W. 23 Mr. Rao that the said BRs which were issued, were contrary to the Guide lines issued by R.B.I. in July, 1991 and by I.B.I. and Indian Bank Associations in May, 1991.
219. This is what P.W. 23-Mr. Rao records in his said report about the issuance of BRs by M.C.B. "As per the guidelines issued by the Indian Banks Association (I.B.A.) in May 1991, and instructions from Reserve Bank of India (R.B.I) in July, 1991, only member banks of I.B.A. and certain other specified financial institutions could deal/trade in securities through the medium of bank receipts. This bank is not a member of the I.B.A. and as such could not have issued these bank receipts, especially those relating to the period after the issue of the aforesaid instructions. It is strange 'that the Bank of Karad and Standard Chartered Bank who ought to be aware of the same had accepted the BRs issued by the captioned Bank. The bank receipts issued were also not pin the form prescribed by the I.B.A. Further as per I.B.A. guidelines banks cannot issue bank receipts in respect of securities which are not held on their portfolio i.e. in respect securities held by their constituents/Brokers".
220. Further on the letter part of the said report (page No. 10 of Ex. 386 (A) the said witness P.W. 23-Mr. Rao has specifically noted and highlighted the state of affairs as existed when M.C.B. issued its BRs and under what circumstances. The part of said Report graphically sets thus:-
"Thus, by issuing BRs in its name without itself receiving any payment into its own account and without holding any securities on its portfolio as also without any knowledge of whether the so called sellers viz. M/s. Dhanraj Mills Pvt. Ltd., and M/s. Excel and Co. had any securities in their possession on the date the deals were put through or not even establishing as to how they would be in a position to honour the commitment to deliver securities at a future date, the bank had become a willing accomplice in the clandestine deals that were put through allegedly by M/s. Dhanraj Mills Pvt. Ltd. and M/s. Excel and Co. with the connivance of Bank of Karad and Standard Chartered Bank and the brokers Shri. J.P., Gandhi, Manubhai, Abhay Narottam, T. B. Ruia and Hiten Dalal".
221. At this juncture it will be necessary to notice how the process of investigation was undertakes by P.W. 23 -Mr. Rao and what transpired he has testified in para 12 and 14 of his deposition which appear on page No. 569 to 570. This witness on oath has deposed and highlighted which is quoted as the same would bring for the entire gamut of the matter in the context, namely of issuance of BRs of M.C.B. "12 On the same day of my visit, I contacted the Vice Chairman of the said Bank. The Chief executive Officer Mr. Nambiar had informed me that the BRs were carried out by the Vice Chairman in his brief case. I made inquiry about the same with the Vice Chairman. This I did on the same day. I contacted and inquired from all the officers of the said bank who were concerned with the said BRs and the modus operandi in respect of the issuance of BRs. The concerned officers of the said Bank recorded their statements and handed over the same to me. One Mr. Kapadia was the Vice Chairman of that Bank."
"14 As mentioned in my report, the M.C. Bank Ltd. was a very small bank having working capital to the extent of about Rs. 8 crores and that being so, it was not permissible for the said bank to resort to the issuance of BRs for the amounts to the extent of Rs. 1944.51 crores. The paper for the format of the BR was prescribed as a security paper however the said bank had not used the said paper. There was also format prescribed for the BR and the BRs issued by the said Bank were not in accordance with such formats. The paper and format were prescribed by the Indian Bank. Association (I.B.A) as per guidelines issued by the RBI. I found some of the BRs issued by the said bank which were outstanding as on the date of investigation. My Assistant prepared list of such outstanding BRs which is an accompaniment to my report. The BRs were made available by the Vice Chairman of the said Bank after he arrived in the Bank. He took out the same from his bag."
222. It is to be noted that nothing has been elicitated to impeach the said testimony of the said witness as to what he has testified in para 12 and 14 above on behalf of the defence save and except that it was suggested to him in a nebulous manner that there was no statutory prohibition or ban upon M.C.B. for the use of BRs, which he had denied.
223. Thus reading the evidence of the prosecution with regard to the issuance of BRs by M.C.B. favouring BOK on 16-9-91 in so called Cover Up Operation Security Transaction, adduced by the prosecution and noticed earlier, it clearly emerges that testimony of P.W. 23-Mr. Rao and his report Ex. 386 is lending corroboration in all respect to the said evidence of the prosecution. As stated earlier Court will deal with the nature of evidence and its reception in evidence made available by P.W. 23 -Mr. Rao an Officer of R.B.I., including contents of his report, shortly hereinafter in the course of its judgment.
224. The evidence discussed and noticed hereinabove as far as Cover Up Operation undertaken on 16th September, 1991, is concerned, between M.C.B. on one hand and BOK on the other the accused who figured in the said operation are Accused No. 2-H.P. Dalal, Accused No. 3-A.D. Narottam, Accused No. 7-C.S. Raje, Accused No. 8-S.A. Ail, Accused No. 9-K.K. Kapadia, Accused No. 10-M.S. Kushte and Accused No. 11-S.N. Ramaswamy, it may be stated that Accused No. 5 also figures in the said evidence. There is reference to the Dhanraj Mills Pvt. Ltd. of which he was a Director at the relevant time and the evidence, in particular the investigation report Ex. 386-A mentions some security transactions on his behalf. However, there is no evidence made available before the Court in that respect.
(i) The securities involved in the cover up operations arc exactly the same as that of securities in the impugned three transactions being the subject matter of this case.
(ii) Cover up transactions have been entered into with BOK into the account of Accused No. 3-A.D. Narottam and as noticed earlier whose account 9 (i.e of accused No. 3) the three impugned transactions of this case were routed on the respective dates of each of the transactions.
(iii) The amounts as and by way of consideration are almost the same of the impuged three transactions.
(iv) The said cover up operations were undertaken just to manipulate the record of BOK in respect of Security Ledger of Accused No. 3 A.D. Narottam and which is clearly reflected and as it clinchingly proved, the manner in which the entries, thereof have been made in the Security Ledger Account of Accused No. 3-A.D. Narottam Ex. 309 breaking and/or disturbing the chronological sequence order.
(v) It clearly and clinchingly stands proved that on the dates when the three impugned transactions supposed to be between CANFINA and BOK put through, no securities existed with BOK or in the account of Accused No. 3 A.D. Narottam.
(vi) It also stands clearly borne out that cover up operation through M.C.B. was a means of camouflage to keep the funds rolling over when even M.C.B. did not possess or hold any security in question.
(vii) It also stands proved that M.C.B. had no capacity or standing or financial ability to undertake transactions in securities of such a huge value.
(viii) Even M.C.B. did not possess the said security at all.
(ix) So is the case of accused No. 11 S.N. Ramaswamy.
(x) On the same day i.e. on 16-9-1991 when BOK made payments by its Pay Order to M.C.B. the very day i.e. 16-9-91 itself M.C.B. had repaid the amounts to BOK.
(xi) There is a evidence clearly pointing out and establishing Accused No. 11-S.N. Ramaswamy having received a sum of Rs. 15 lacs which he invested in the Fixed Deposit on the same day i.e. on 16-9-91.
(xii) It also stands proved that it was Accused No. 9 as a Vice Chairman a master brain at the end of MCB assisted by accused Nos. 10 and 11 who undertook the said security transactions which were bogus and superflous.
(xiii) There is credible and clinching overwhelming evidence which absolutely remained unchallenged that Cost Memos and B.Rs. of MCB used to remain with accused No. 9-K.K. Kapadia and which he used to keep and carry in his own bag.
(xiv) It is not the matter of co-incidence or accident that the description of the securities in cover up operations transactions are matching and corresponding to the three main impugned transactions between CANFINA and BOK, dated 6-4-91, 22-7-91 and 31-7-91 in all respect.
(xv) The evidence thus clearly demonstrates the object behind undertaking such cover up transactions.
(xiv) In the light of back ground of the case of the prosecution that this cover up through MCB was done as and by way of camouflage to manipulate the Security Ledger Account of accused No. 3 with BOK only stands established beyond any shadow of doubt. The conspectus of the above discussion on Point No. 34 stands answered in affirmative.
ADMISSIBILITY-ACCEPTANCE RECEPTION in evidence of the report of the R.B.I. Officers, etc.
225. In the course of the judgment this Court has made reference to the evidence which prosecution has made available viz. the Reports of the officers of RBI such as, Inspectors in respect of state of affairs of two institutions, namely CANFINA and M.C.B. in the back ground of reported irregularities committed by them in their respective Government security transactions undertaken by means of BRs, which include impugned transactions between CANFINA and BOK and BOK & MCB.
226. The prosecution has made available such reports as also examined the concerned officials/inspectors who conducted inspection/investigation/scrutiny and prepared their reports i.e. to say, the makers of the reports. In the case of M.C.B. the Inspecting Officer recorded joint statements of those who were concerned in the security transaction operation of the said Bank at the relevant time which included (1) Accused No. 9-K.K. Kapadia, (2) Accused No. 10-M.S. Kushte and (3) P.W. No. 20-D.P. Gandhi, the first being the Vice Chairman and the second and third being its then employees.
Such reports and their makers are as under:
(i) CANFINA : Report tendered are Exhs. 642, 643, 644 and A-1(16). The concerned officer of the R.B.I. being the author of the said reports is P.W. No. 65-Mr. Rama Iyer Nanjappa.
(ii) M.C.B. :
(a) The report of R.B.I. Inspector is Exh. 386 and 386-A and the Joint Statement mentioned above, the concerned officer who is examined as their witness is P.W. No. 23 Kundala Suryanarayana Rao being Exh. 352.
(b) The Audit Reports of M.C.B being Exh. 186 conducted by the Special Auditor under the provisions of Maharashtra Co-operative Societies Act, 1961. The witness being P.W. No. 13 R.L. Kulkarni.
227. On behalf of the defence, objection was raised for receiving the aforesaid evidence of the prosecution on record at the stage when same was sought to be made available and tendered before the Court. Arguments were advanced for and against from both the sides at considerable length by the prosecution and defence and this Court by its order dated 22nd September, 1997, on consideration of submissions made for and against as also the relevant statutory provisions proceeded to over rule the objection of the defence and held that the reports in question were prepared by the public officers acting under the relevant statutory provisions and for the interest of public in general and the same will be admissible under section 74 read with sections 76 & 78 of the Indian Evidence Act. Court then allowed the prosecution to examine the concerned officers making such reports as also allowed to tender the reports as mentioned earlier.
228. The makers of the said reports in the case of both the institutions named earlier have testified as to what they noticed on inspections/investigations/scrutiny of the affairs of both the institutions in respect of security transactions undertaken by each one of them. References to the contents of the reports in that context have also been made. The prosecution has brought out and highlighted certain salient features of the said reports germane to the security transactions being subject matter of this case as also highlighted the procedural aspect of the respective institutions in undertaking such security transactions both for sale and purchase right from striking deals to the payments.
229. These officers have emphasized the precautions to be exercised while undertaking the Government security transactions by the banks and authorized financial institutions and also the guidelines and prudent norms laid down by the R.B.I. which were necessary and imperative to be observed and followed. As is transpired that there was no adherence on the part of the above two institutions. The officials came across various breaches and irregularities by these two institutions viz. CANFINA and MCB which they noticed in their scrutiny/inspection of security transactions. These aspect ,have been particularly reflected in their reports as also highlighted by them before the Court in their testimonies.
230. This Court has indicated earlier that this Court would consider admissibility of such evidence would be dealt and elaborated at later stage. Hence this aspect is being thrashed out.
231. P.W. No. 13-Mr. R.L. Kulkarni, Special Auditor has produced Audit Report concerning MCB, conducted by him under the direction of the Registrar of Co-operative Societies under the provisions of Maharashtra Co-op. Societies Act, 1961. The said audit report, as stated earlier, is Exh. 186 which P.W. No. 13 Mr. Kulkarni has already tendered and also proved the contents thereof as true. The audit period does not cover the period when cover up transactions were put through on 16-9-91 However, the prosecution has though, it necessary to adduce the evidence in the form of audit report of M.C.B. to bring home the point about the status financial position as such of M.C.B., its capacity and/or capability of undertaking security transactions of higher stakes. Apart from the fact that there is no challenge made to the said audit report of M.C.B. being Exh. 186, it is thought unnecessary to dwell over the same in detail. The purpose of placing before the Court the said report of the Auditor was to show the financial standing of the M.C.B. and general working which aspect has already been considered and dealt with earlier, needing no further elaboration.
232. Now, as far as reports of the R.B.I. Officers of both these institutions, namely Exh. 642, 643, 644 and A-1(16) of CANFINA and Exhs. 386 and 386-A of M.C.B. are concerned, it is thought appropriate to consider and thrash out the said aspect to eliminate any doubt about the reception and admission of the said part of the evidence of the prosecution, which this Court has allowed to be adduced.
233. As far as M.C.B. is concerned, there is no doubt and also no dispute as such that it is a Bank/Banking Company as defined under the provisions of Banking Regulations Act, 1949 (in short hereinafter referred to as the Banking Regulations Act). That being so, the Reserve Bank of India, under the provisions of the said Banking Regulations Act, as also under Reserve Bank of India Act, 1934 (in short, hereinafter referred to as the RBI Act) as a Central Bank, will have control and supervision over the said bank i.e. M.C.B.
234. As far as CANFINA is concerned, it is sought to be contended, particularly on behalf of accused No. 1 that (it is reproduced as it appears in the brief summary of submissions submitted on his behalf on page 121 of Exh. 826 in para 221)--
"The report has not been as a result of the inspection or scrutiny as contemplated under section 35 of the Banking Regulations Act, 1949. CANFINA is not a banking company and therefore, the said Act does not apply to it."
On the basis of this it is asserted that, CANFINA although it is a subsidiary of Canara Bank, which is Nationalized Bank, has been carrying on business inter alia of Merchant Banking which would include dealings and tradings in securities. Therefore the provisions of Banking Regulations Act or RBI Act will not apply to CANFINA.
235. As would be pointed out, the said submissions are devoid of any merits and misconceived too. It is in the evidence and not disputed but admitted that CANFINA is wholly subsidized Company of Canara Bank. Canara Bank is a Nationalized Bank and, therefore, Government owned Company. While considering Point Nos. 3 and 4 above, this Court has already extensively considered and dealt with the status and position of CANFINA. It is held that since CANFINA is wholly subsidized Company of Canara Bank, which is a Nationalized Bank owned by the Government, it is the Government Company as defined under section 617 of the Indian Companies Act, which means the Canara Bank owns 100% of the share capital of CANFINA.
236. It is further to be noted that R.B.I. by its letter dated 28-5-1987, addressed to the Chairman and Managing Director of Canara Bank, allowed the Canara Bank for the establishment of CANFINA as its subsidiary on terms and conditions as stipulated in the said letter, which is produced by Accused No. 1 M.K.S. Ashok Kumar himself, as Exh. A-1(14). One of the conditions which is relevant in the context of the supervision and control of R.B.I. over the working of the said subsidiary, namely, CANFINA is spelt out in Condition No. 7 thereof which mentions as under :--
"The Bank may sent a report to us at half yearly intervals on the activities of the subsidiary, the business transacted by it and the position as at the end of June/December every year, separately in respect of equipment leasing business, Merchant Banking and venture Capital business."
This would clearly show that the activities and operations that CANFINA would undertake were subject to the supervisory control of R.B.I.
237. Both R.B.I. officers Mr. Rao-P.W. No. 23 who has conducted inspection of MCB and Mr. Nanjappa, P.W. No. 65 who has conducted investigation of CANFINA have deposed in one voice that they undertook investigation and scrutiny under the order and directions of their superiors. They have also deposed and which aspect has also been reflected in their respective reports that such inspections/investigations were undertaken as they were directed to do so under the provisions of R.B.I. Act and Banking Regulations Act. In fact, it is noticed that such inspections by R.B.I. of both these institutions were conducted regularly even prior to the reports in question.
238. It is to be stated that while making submissions as aforesaid, the defence has overlooked the provisions as contained under the R.B.I. Act, 1934, in particular in section 45-I(c)(ii) of the R.B.I. Act. The said section contains the definition of Banking Financial Institutions, Non-Banking Company, etc. The relevant as stated is as contained in sub-clause (c)(ii) which is for convenience reproduced below :--
"45-I(c)(ii) -Financial institution" means any non-banking institution which carries on as its business or part of its business in any of the following activities, namely,
(i).............................
(ii) Acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature."
The said provision appears in Chapter III-B of the R.B.I. Act under title "Provisions relating to non-banking institutions, receiving deposits and financial institutions", which is very important to note. So, it will be noticed that under the provisions of R.B.I. Act, financial institution would include non/banking institutions which carry on business as mentioned in sub-clause (ii) of sub-Clause (c) quoted above and it will be under the supervisory control of the central bank i.e. the R.B.I. under the provisions of R.B.I. Act as also under the said Banking Regulations Act.
239. It is further to be noted that the R.B.I. is a main controlling bank in respect of banking operations of all the banks in this country. It is R.B.I. who is empowered and authorized to frame policies and issue guidelines for ensuring smooth and proper working of the banks. For that purpose, R.B.I. is also under the said Acts empowered to lay down a policy known as Banking Policy. The Banking Regulations Act, defines what is the scope and extent of such policy. It is reproduced as it appears in section 5(c-a) of the Banking Regulations Act-
"Banking Policy" means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits in other resources of the Bank and the need for equitable allocation and efficient use of these deposits and resources."
The above section makes it very plain that the power that R.B.I. enjoys in laying down the policies in respect of banking operations in this country. It; therefore, follows that the banks and its subsidiaries like CANFINA who undertake activities in Government securities and those falling under the policy frame work of the R.B.I. have to be amenable to the control and discipline in the management of its business by the Central Bank, namely, the R.B.I. Section 21 of the said Banking Regulation Act gives power to the R.B.I. to lay and formulate the policy expedient in the public interest and the said section further mandates that all banks and banking companies including financial company like CANFINA would be bound by such policy. It is a matter of record, also undisputed position, that R.B.I. has issued various circulars laying down guidelines which have been made available and produced and reference of which has also been made by the above two officers of the R.B.I. as also other officers of R.B.I. and banks and financial institutions who appeared before this Court as witnesses. In fact many of such circulars have also been produced as exhibits even by the defence. Further more, as noticed earlier, even for the establishment of CANFINA it is the R.B.I. who has given permission. CANFINA is a wholly owned subsidiary of Canara Bank. Canara Bank is a Government Company. Therefore, the moneys that CANFINA would be investing or using in its security transactions would be of Canara Bank and it would be thus a public money. That being so, the contention raised by and on behalf of the defence that CANFINA is not subject to the control of R.B.I. therefore requires to be rejected outright. It is held that CANFINA being financial institution within the meaning of the said Acts viz. R.B.I. Act and Banking Regulation Act, is very much under the control and supervision of the R.B.I.
240. It is further necessary to note that inspection/investigation in respect of CANFINA as also of M.C.B. has been carried as deposed to by P.W. No. 23-Mr. K.S. Rao and P.W, No. 65-Mr. Nanjappa under the provisions of the said R.B.I. Act and Banking Regulations Act. There are certain provisions which are overlapping in both the Acts. Section 35 of the Banking Regulations Act, of which reference was made and which provides for inspection by the R.B.I. of the banks and financial institutions as defined under section 45-I(c)(ii) above. Similar provision is also appearing in section 45N of the R.B.I. Act, which provides:--- (Relevant portion thereof is quoted below) :---
"Section 45N. Inspection.---(1) The Bank may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons (hereinafter in this section referred to as the inspecting authority).
(i) of any non-banking institution, including a financial institution, for the purposes of verifying the correctness or completeness of any Statement, information or particulars furnished to the Bank or for the purpose of obtaining any information or particulars which the non-Banking institution has failed to furnish on being called up to do so; or
(ii) of any non-banking institution being a financial institution, if the Bank considers it necessary or expedient to inspect that institution."
241. It would therefore be clear, from the above that R.B.I. possesses power to undertake inspection of the institutions, including financial institutions like CANFINA. This would also show the futility in the objection of the defence to say, at the first instance that R.B.I. has no power to undertake inspection and further inspection carried out and the reports rendered by the R.B.I. Officers, as in the cases herein, are not statutory reports as envisaged under the provisions of section 74 of the Indian Evidence Act. It has to be held and so held that in the light of provision as contained in R.B.I. Act and Banking Regulation Act, as adverted to above, such Reports are statutory Reports and admissible under section 74 of Indian Evidence Act. That being so, the prosecution is justified in adducing the evidence by examining the said officers of the R.B.I. P.W. No. 23-Mr. Rao and P.W. No. 65-Mr. Nanjappa and tendering the reports made by them in respect of the security operations of both these institutions, namely of M.C.B. and CANFINA. The said officers of R.B.I. have acted strictly in accordance with the provisions of section 45N of the R.B.I. Act and section 35 of the Banking Regulations Act. They are thus officers who acted under the statute and reports prepared by them regarding their findings after inspection/scrutiny/investigation in respect of both these institutions are held to be statutory reports and therefore admissible in evidence as provided under section 74 as also under section 35 of the Indian Evidence Act. Such reports have been made by the said officers of R.B.I. in discharge of their official duties.
242. Further more, this Court has as stated earlier, while overruling the objection raised by and on behalf of the defence when the prosecution sought to tender the said evidence before the Court in support of its case, by its order dated 2nd September, 1997, proceeded to reject the objection of the defence to receive the same. The Court referred to certain decisions of the Apex Court and that of Calcutta High Court and thus proceeded to observe and hold as under highlighting the principles in the light of pronouncements of the Apex Court and that of Calcutta High Court. The relevant portion which deals with the same is reproduced as under :---
"It may be pointed out that the Apex Court in the case of P.C. Purushothama Reddiar v. Perumal, has posited by referring to section 35 of the Evidence Act in particular its first part that Reports made by the public officials in discharge of their official duties are relevant and hence admissible. In that case before the Supreme Court it is noticed that the police officials made reports in respect of election meetings addressed by the contesting candidate which were held relevant and hence admissible in the context of issue of corrupt practices. Head Note (F-G) states:
"(F-G) In an issue whether the returned candidate has arranged certain election meetings on certain dates, the reports made by the police officers, who have been deputed by their superiors to cover the meetings in question, are extremely relevant and in the absence of anything to show that the officials are inimically disposed towards the candidate or his party the reports carry greatest possible weight"
This ratio has been reiterated by the Apex Court in its later judgment in the case of Shri Kanwar Lal Gupta v. Amar Nath Chawla & others, . Usefully reference be also made to the decision of the Calcutta High Court in the case of Octavious Steel Co. Ltd. v. Endogram Tea Co. Ltd., in which the documents sought to be tendered related to the papers in the custody of the C.B.I. and contained inter departmental communication between Reserve Bank of India and other concerned parties which was objected to by the defence in the case which was registered under FERA. Relying upon the decision of the Supreme Court in the case of Kanwar Lal Gupta, (supra) it was observed in para 13 as under :
"13. The rule of hearsay may not stand in the way of proving public documents because once it is proved that the documents are official records or official correspondence the Court has to raise the presumption under section 114(e) of the Evidence Act. The question of "hearsay" was not expressly taken in but the Counsel for the respondent did expressly object against the admissibility of the chart on the ground that he would not be able to cross examine the writer or the person who used to maintain the public records out of which the charge was prepared. But the Supreme Court overruled the objection by saying "That is no argument." This establishes that in the opinion of the Supreme Court, the facts that the C.I.D. officer was not on oath and was no cross examined, were immaterial for the purpose of admitting in evidence the contents of that chart. It has been expressly held by the Supreme Court in this case that the contents of a public document will be admissible in evidence in spite of the fact that the writer is not called as a witness. In respectful agreement with this decision I hold that the documents sought to be tendered by Mr. Bhabra are admissible in evidence without calling the writers thereof but this evidence being very weak in its probative value can be treated as corroborative evidence only. If however the writer is called as a witness, there the contents can be treated as an independent piece of evidence. In view of my finding 1 overrule the objections taken on behalf of the plaintiff against the admissibility of the contents in Exts- 120-A, 120-B and 120-C and direct that these documents should go in as Exhibits unconditionally.
The conspectus of the above decision makes it abundantly clear that the report prepared and maintained by the public officer if relevant will be admissible in evidence. However as cautioned by the Apex Court the same will have a corroborative value and it is a weak type of evidence. This Court is conscious of the same."
243. I may also make a reference to the judgment of my Brother Judge Variava, presiding over other Special Court rendered on 9th/10th February, 1995, in Civil Suit No. 13 of 1991 on the file of this Special Court. There, the question was of admissibility of the report known as Janakiraman Committee Report which Committee was appointed by the R.B.I. for enquiring into the irregularities committed by certain banks and financial institutions in the transactions in Government securities. The said Committee submitted three or four of its reports. The Committee was appointed by the Governor of R.B.I. When the said report was sought to be tendered, objection was raised on various grounds, including the grounds dealt with hereinabove. My Brother Judge, in his said judgment rejected the objection holding and observing that the report in question was prepared under the statutory authority, namely, the statutory powers given to R.B.I. under section 35 of the Banking Regulations Act, 1949, in respect of matters which were of the great public importance and with which public was very much concerned and interested. It is further held that the said report was a document forming the acts and records of acts of a official body viz. R.B.I. and its officers and, therefore, it is a statutory report as also public document. The view taken by my Brother Judge in the said case is also in consonance with the view that this Court has taken.
STATEMENT BEFORE R.B.I. RECEPTION IN EVIDENCE-
244. In this context, there is one more aspect which would need due consideration and i.e. with reference to the Joint Statement dated 22nd May, 1992, given by accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and P.W. No. 20 D.P. Gandhi respectively being at the relevant time, Vice Chairman, an Accountant and an Officer of MCB. The relevant part of the said Joint Statement has already been referred to by this Court as also reproduced certain portion thereof while considering point No. 34- The same is Exh. 352 on record. This Court has already held the said report as also the contents thereof having been proved by the prosecution. P.W. No. 20-D.P. Gandhi one of the signatories thereof as also P.W. No. 23-Mr. K.S. Rao, the R.B.I. Officer to whom the said statement was handed over by its makers, have proved the same. It needs to be stated that the said statement clearly shows how the operations in security transactions as and by way of "Roil over" was undertaken and put through between the said MCB and BOK and other Bank, namely, Standard Chartered Bank. We are not concerned with Standard Chartered Bank. It is in the evidence and stands clearly proved that MCR put through the cover up transaction and consequent issue of its BR to BOK without there being any securities to back up such transaction. The said joint statement also makes reference to the issuance of BR by MCB favouring BOK at the instance and at the behest of Accused No. 2-H.P. Dalai, Accused No. 3-A.D. Narottam, Accused No. 5-T.B. Ruia, accused No, 6-J.P. Gandhi and accused No. 11-S.N. Ramaswamy. The statement also makes reference to accused No. 7-C.S. Raje and accused No. 8-S.A. Ail. It also refers to the meetings and how the roll over or cover up operations, including the issuance of BRs etc. were resorted to. It would be recalled that as far as this case is concerned, the cover up operation of 16th September, 1991, between MCB and BOK, being the subject matter of discussion of Point No. 34, has relevance and in that context, the roles attributed to the accused figured therein in particular, accused Nos. 2-H.P. Dalai. Accused No. 3-A.D. Narottam, accused No. 5-T.B. Ruia, Accused No. 6-J.P. Gandhi, Accused No. 7-C.S. Raje, accused No. 8-S.A. Ail & Accused No. 11-S.N. Ramaswamy have become relevant in the back ground of their indictment in various charges in this case.
245. The question that arises for consideration is whether the said statement will offend the provisions as contained in Clause 3 of Article 20 of the Constitution of India, viz. accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte, they being the makers of the said statement one also signatories thereto. Sub-Clause 3 of the said Article provides :--
"No person accused of any offence shall be compelled to be a witness against himself."
The said clause gives protection to the person accused of any offence against compulsion to be a witness against himself. There is thus complete immunity which Constitution has mandated to the accused of being a witness against himself.
246. It is to be noted that this aspect is no more res integra as far as this Court is concerned in view of enunciation of law on this topic by the Apex Court in the case between Raja Narayanlal Bansilal v. Maneck Phiroz Mistry & another, which arose from the decision of this Court rendered by Division Bench .
247. In that case, the position was somewhat similar and identical as obtained in the matter in hand. The provisions of the statute, namely, the Indian Companies Act, 1956, were for consideration before the Apex Court which were para materia with the provisions as obtained in the R.B.I. Act and Banking Regulations Act, namely section 45N of R.B.I. Act and section 35 of Banking Regulations Act. The provisions for consideration before the Apex Court in the said matter were section 235 and 240 of the Companies Act. In that case, as provided under sections 235 and 240 of the Companies ; Act, the Government was empowered to appoint competent persons as Inspectors to investigate into the affairs of the Company registered under the . provisions of the Companies Act and report thereon in such matter to the Central Government. Section 240 of the Companies Act provided for an appointment of the Inspector for such investigation and who was authorized to examine on oath concerned person in relation to the affairs of the Company. The Inspector so appointed under section 240 of the Companies Act could issue notice requiring the concerned official of the Company to produce certain documents, etc. After inspection and enquiry, under section 240 the said Act provides for initiation of appropriate action for offences against those found having breached certain provisions of the Companies Act in relation to the conduct of affairs of the Company and on that back ground the objection was raised by one of its Directors against whom criminal prosecution was launched. It is to be noted that provisions as contained under section 240 of the Companies Act and that of section 35 of the Banking Regulations Act and section 45N of the R.B.I. Act as stated earlier proceed almost on similar line.
248. The Apex Court rejected the objection raised in the context of provisions as contained in Article 20 Clause 3 of Constitution of India. In fact, this was also repelled by this Court and the Apex Court upheld the said decision of this Court. The Apex Court has luminously posited and explained the principles as it appears in para 24 which are reproduced hereinbelow :
Thus the scope of the enquiry contemplated by section 234 is clear; wherever the Registrar has reason to believe that the affairs of the company are not properly carried on he is empowered to make an enquiry into the said affairs. Similarly under section 235 inspectors are appointed to investigate the affairs of any company and report thereon. The investigation carried on by the inspectors is no more than the work of fact finding commission. It is true that as a result of the investigation made by the inspectors it may be discovered that the affairs of the company disclose not only irregularities and malpractices but also com* mission of offences and in such a case the report would specify the relevant particulars prescribed by the circular in that behalf. If, after receiving the report, the Central Government is satisfied that any person is guilty of an offence for which he is criminally liable, it may, after taking legal advice, institute criminal proceedings against the offending person under section 242(1); but the fact that a prosecution may ultimately be launched against the alleged offender will not retrospectively change the complexion or character of the proceedings held by the inspector when he makes the investigation. Have irregularities been committed in managing the affairs of the company; if yes, what is the nature of the irregularities? Do they amount to the commission of an offence punishable under the criminal law? If they do who is liable for the said offence? These and such other questions fall within the purview of the inspector's investigation. The scheme of the relevant sections is that the investigation begins broadly with a view to examine the management of the affairs of the company to find out whether any irregularities have been committed or not. In such a case there is no accusation, either formal or otherwise, against any specified individual; there may be a general allegation that the affairs are irregularly, improperly or illegally managed; but who would be responsible for the affairs which are reported to be irregularly managed is a matter which would be determined at the end of the enquiry. At the commencement of the enquiry and indeed throughout its proceedings there is no accused person, no accuser and no accusation against anyone that he has committed an offence. In our opinion a general enquiry and investigation into the affairs of the company thus contemplated cannot be regarded as an investigation which starts with an accusation contemplated in Article 20(3) of the Constitution. In this connection it is necessary to remember that the relevant sections of the Act appear in Part VI which generally deals with management and administration of the companies."
249. In my view, the principles as laid down would squarely apply to this case also vis-a-vis Joint Statement Exh. 352. The said statement is dated 22nd May, 1992, when there was no complaint lodged in this case before the C.B.I. or the Police. As noticed earlier, the complaint was lodged first time on 22nd June, 1992 by CANFINA with the C.B.I. Bombay. Even in the said complaint dated 19th June, 1992 being Exh. 38 Accused No. 9-K.K. Kapadia and accused No. 10-M.S. Kushte did not figure as accused. So also in F.I.R. which came to be registered by the C.B.I. on the basis of the said letter. Therefore, at the material time i.e. on 22nd May, 1992 when the said statement Exh. 352 was handed over by Accused Nos. 9 and 10 and another, they were not accused as such and that being so, the question of offending Clause 3 of Article 20 of the Constitution of India would not arise. It is held therefore, that joint statement Ex. 352 having been duly proved, can be read in the evidence in support of prosecution case.
250. section 315 Cr.P.C. - Evidence of Accused No. 3 A.D. Narottam; One point of considerable importance as also of implications is required to be dealt with in this case, which is somewhat peculiar and unique. As mentioned earlier, Accused No. 3-A.D. Narottam has exercised his right and option of examining himself on oath before the Court as available under section 315 of Cr.P.C., 1973. Accused No. 3 has been appearing throughout in person. He is an aged person of about 67 years old. He chose to conduct his defence in person. Considering his advanced age as also intricate and complicate nature of the case, there being voluminous evidence, both oral and documentary. Court, on number of occasions, during the course of trial, suggested accused No. 3 A.D. Narottam that it would be appropriate for him to engage Advocate to defend him in this matter. But same did not find favour with him. Court also informed him that he would be entitled to the assistance of an Advocate under the Legal Aid Scheme and that he should apply for the same. But he declined the said offer. Court also indicated for the appointment of an Advocate to defend him as an amicus curie. Even then he remained firm in conducting his defence himself.
251. The Accused No. 3 thus conducted his defence all throughout. He cross-examined various witnesses and got produced from some of them certain documents.
252. When the stage of recording of statement under section 313 of Cr.P.C. reached in this trial, as required under the said section, various incriminating circumstances on the basis of prosecution evidence were put to him, to which also he offered his explanations. At the concluding stage of section 313 Statement, Accused No. 3 was asked, as was done in the cases of other co-accused, whether he wanted to examine him on oath and adduced evidence in his defence as also to file written statement, to which he answered in affirmative. Thus indicating that he wanted to exercise option of adducing evidence in his defence by testifying on oath, in disproof of the charges made against him. This accused so indicated on 6th July, 1998, in the open Court. At that stage, the relevant questions put to this accused No. 3-A.D. Narottam by the Court, under section 313 of Cr.P.C. and answers given by him are Q. Nos. 755 and 757 which proceed in this manner:-
"Q.755. Do you wish to examine yourself as a witness on oath?
A. Yes. I request to defer my examination on oath at the end i.e. after completion of recording of the statements of other co-accused in this case.
Q.757. Do you wish to lead any evidence or examine any other witness on your behalf ?
A. I will examine some witnesses. I will furnish the list of such witnesses in the next week i.e. on Monday, the 13th July, 1998."
253. Thereafter accused No. 3 presented written application dated 30-7-1998 being Ex. 823 before this Court in consonance with his earlier indication of availing of the option as provided under section 315 of Cr.P.C.
254. At that stage, some of the accused, in particular, Accused No. 2-H.P. Dalai, Accused No. 4-B.C. Dalai, Accused No. 5-T.B. Ruia presented Miscellaneous Applications bearing Nos. 359 to 363 of 1998, vehemently Opposing the said application of Accused No. 3 A.D. Narottam. In as much as, almost all the accused strenuously opposed the move of accused No. 3-A.D. Narottam to adduce evidence on oath. Inter-alia, it was contended on behalf of the accused, in support of their oppositions that (the points of opposition as were summarized in the order dated 31st July, 1998, of this Court are reproduced hereinbelow) :-
"(i) Accused No.3-Abhay Dharmasi Narottam is not the competent witness for the defence so as to give evidence on oath in disproof of the charges made against him by reason of the fact of admission made by him in his explanation offered by him in the statement recorded under section 313 of the Code:
(ii) It is stressed that because of the admissions made by him there is no scope left for him to disprove the charges made against him as envisaged under the provisions of section 313 of the Code;
(iii) It is apprehended, I would say, so strongly expressed and highlighted, by all the applicants with one voice that the said accused No. 3 may give evidence which will be adverse and prejudicial to other co-accused and which would jeopardize their interest/defence.
(iv) Therefore the consent of the other co-accused for accused No. 3 for giving such evidence is necessary.
(v) Fear and apprehension is expressed that prosecution in the cross-examination of accused No. 3, after he gives evidence may elicit something incriminating against the other co-accused and that will provide an opportunity to the prosecution to fill in the lacuna left in their case. It is submitted that at the threshold itself this Court should clarify that the accused No. 3 be not permitted to give incriminating evidence against the other co-accused and if given the same must not be relied upon and the same should be excluded and ignored;
(vi) It is emphasized that accused No. 3 is offering himself to be examined as defence witness with some ulterior purpose, not to lead evidence in his defence for disproving the charges but giving evidence against the co-accused; and
(vii) That the Court should impose strict restrictions or fetters upon the scope of the evidence which accused No. 3 proposes to give. In that it is hinted that such evidence should be confined only to his defence in disproof of the charges against him and nothing more."
255. This Court, on consideration of the objections raised and submissions made by and on behalf of the applicants-accused in the said applications proceeded to reject the said applications observing in paras 40 & 41 as under:
"40. 1 may further add that there is a definite underline principles behind the said provision. In a criminal trial, it is imperative for the prosecution to establish its case in accordance with charges levelled against the accused beyond reasonable doubt. For variety of reasons, without imputing any motive, prosecution may not place before the Court all the material relevant in its case in support of charges. Such material kept away may be helpful to accused in a trial before the Court. It is in such situation, it is reasonable to think, that section 315 of the Code would come into play. Just as the prosecution has to establish and prove its case/charges against the accused, equally it is also to the accused to disprove the charges levelled against him by the prosecution. It is this aim and object that this section 315 of the Code seeks to achieve and statutorily confers the said right upon the accused. It is the same right that Accused No. 3 is wanting to exercise, which it is pertinent to note, is opposed by the applicants herein who are co-accused.
41. Therefore taking into consideration all these facts, I do not find any merits in the objection raised or even apprehension expressed by and on behalf of the applicants accused. No fetters or restrictions can be imposed as have been repeatedly and vehemently canvassed before this Court upon Accused No. 3 when he would step into the witness box as witness. Apart from the fact that same will be most unjust and unreasonable it will be contrary to the statute. In as much as, as noticed earlier, section 315 of the Code as it reads does not call for such imposition, or restrictions or fetters as sought to be urged. To do so would be contrary to the statute and will be denying accused No. 3 the exercise of the statutory right. In dispensing criminal justice the Court is conscious of its duty in order to discover the truth and to advance the course of justice in impartial manner. The various provisions in the Code are aimed to ensure that an accused person gets complete and fair trial. It has to strike balance while dealing with conflicting claims. In case in hand, as noticed earlier, the accused No. 3 who is an aged person, is defending himself without aid or assistance of the trained legal expert. That itself, it must be clarified, is no reason or justification to give him different treatment as such which may not accord with Rules of procedure and may operate as prejudicial to the other co-accused. As noticed earlier, in this case, he has been exercising his statutory right to examine himself on oath and volunteered to relegate himself to the position of the witnesses, subjecting himself bound to the rules tike any other witnesses. This being the position, on so called assumption, apprehension and speculation to deny or deprive him to exercise an option which he has opted for would be most unjust and injudicious. None of the grounds put forth by the applicants-accused justify the grant of relief sought for by them in their above applications."
What is stated in these paras 40 and 41 while disposing of the miscellaneous applications, this Court wishes to reiterate and reaffirm the same position even in this final judgment which spells out the underlined principles behind the said statutory provisions, namely section 315 of Cr.P.C.
256. It is necessary to mention that this Court while rejecting the said miscellaneous applications and recording its reasons as appearing in paras 40 and 41 of the said judgment reproduced hereinabove relied upon the decision of the Apex Court in the case of Tribhuvan Nath v. The State of Maharashtra, reported in A.I.R. 1973 S.C. page 450, which is squarely on the point in issue. More on this judgment of the Apex Court later on.
257. It is further to be noted that there were stiff opposition by the co-accused in particular by Accused Nos. 2-H.P. Dalai, 4-B.C. Dalai, 5-T.B. Ruia, 6-J.P. Gandhi, 7-C.S. Raje and 8-S.A. Ail at every stages when Accused No. 3-A.D. Narottam commenced his deposition on oath. Court was required to deal with the same then and there, making clarificatory notes wherever necessary in the matter of precautions and prudent norms of rules of evidence. Court would observe while appreciating evidence so adduced by Accused No. 3 and assigning reasons by overruling the objections and allowing Accused No. 3 to proceed ahead with his evidence. It may be stated that Accused No. 3 also examined few witnesses in his defence and got produced certain documentary evidence also.
258. In fairness, Court, at that stage, in view of stand and apprehensions expressed by the defence indicated that evidence of the accused No. 3-A.D. Narottam will be considered, evaluated and assessed as like any other witness. That is to say, that evidence as a whole will be considered including how he fared in the cross-examination. It needs to be stated that accused No. 3 was cross-examined on behalf of almost all the accused. It is to be noted that accused No. 3 has not been subjected to cross-examination by and on behalf of the prosecution.
259. This Court while considering, assessing and sifting the evidence made available by the prosecution in the background of various charges against the accused herein and particularly in view of there being charge of criminal conspiracy, against all the accused, has made reference to the evidence of accused No. 3 so made available. But this Court has so done keeping and bearing in mind at its fore-front the most salient principle that the same was not read as being substantive evidence as such. That is to say, the Court has exercised caution in giving credence to the evidence so adduced by accused No. 3 keeping in mind that accused No. 3 is very much accused in this case facing the charge of criminal conspiracy alongwith co-conspirators.
260. The legal position which permits the accused of any offence and gives option to him to be a competent witness appears in section 315 of Cr.P.C. The relevant part of the said section reads as under :--
"315. Accused person to be competent witness.---(1) Any person Accused of an offence before a Criminal Court shall be a competent witness for the defence and may give evidence in oath in disproof of the charge made against him or any person charged together with him at the same trial:
Provided that -
(a) he shall not be called as a witness except on his own request in writing;
(b) his failure to give evidence shall not be made the subject of any comment by any of the parties or the Court or give rise to any presumption against himself for any person charged together with him at the same trial."
261. This section 315 first time came to be inserted in the Cr.P.C. in the year 1995 giving option to the accused by amending 342(A) of the Old Code. In the new Code, the provision in that respect is to be found in the separate section, namely, section 315 of Cr.P.C. By this section, the competency of an accused to testify on his own behalf is recognized which existed in England.
262. The Apex Court has occasion to consider this aspect in the case of Tribhuvan Nath v. State of Maharashtra and another), reported in A.I.R. 1973 S.C. page 450. That was a case which arose under the Old Criminal Procedure Code, of 1898, relevant provision being section 342(A) which is identical to section 315 of the new Code. In that case, the criminal conspiracy was one of the charges and there were more than one accused. One of the accused exercised the option of testifying himself on oath in his defence. The trial Court allowed the said accused to do so. The said accused was also subjected to cross-examination by the other accused so also by the prosecution. Objection was raised by the other co-accused as done in this case but without success before the trial Court as also before the High Court. When the matter was taken up before the Apex Court, contention was raised that the trial Court was not justified in reading the evidence given by the accused who exercised the option as a witness in his defence. However, the Apex Court rejected the said contention positing and enunciating the principles on the point as appear in para 29 of the said judgment. The Apex Court proceeded to lay down as under :
"29. The first question is, whether the trial Judge was right in using the evidence given by accused 3 which he gave as a witness in his defence?
The position with regard to such evidence is that when a person, accused alongwith others voluntarily steps in the witness box as a wit ness in defence, he is in the same position as an ordinary witness see Peoples Insurance Co. Ltd. v. Sardar Sardul, and Jibachh Shah v. The State, and is therefore subject to cross-examination by the prosecution Counsel and evidence brought out in such cross-examination can be used against his co-
accused. See The King v. James Paul, (1920)2 K.B. 183 at p. 185. If such a witness incriminates his co-accused the other accused, jointly tried with him, has the right to cross-examine him if he wants so to do.
Rex v. Hadwen, (1902)1 K.B. 882 at pp. 887-888. This has been the position in England after 1898 when accused persons were made competent witnesses. The same consequences must also flow after accused persons have been made competent witnesses for the defence under section 342-A of the Code of Criminal Procedure. As Counsel for the appellant informed us, since accused 3 volunteered to enter the wit ness box as a witness in his defence he was in fact cross-examined not only by the prosecution but also by Counsel for the other accused. Of course, an accused person cannot be compelled to give evidence as a prosecution witness in view of the expression "in disproof of the charges"
in section 342-A. But once his evidence as a witness for the defence is on record, under section 10 of the Evidence Act, 1872, evidence, as to the communications between one conspirator and the other during the time that the conspiracy is going on and relating to implementing that conspiracy, is relevant evidence. The statements by one accused to another and the evidence as to the acts done by him disclosing participation by the other accused in the conspiracy are also relevant. As to whether they merit reliance or not is another question depending upon their credibility."
263. The position and the principled underlined said section 315 of Cr.P.C. has been so luminously explained by the Apex Court needing no further elaboration.
264. Usefully I may also refer to the recent judgment of the Apex Court in the case of Gajendra Singh & others v. State of Rajasthan, , directly on the point. In that case, as the facts disclosed, the Trial Court allowed the accused to examine him on oath in his defence. However, the said accused was not permitted to produce certain documents and application made by the accused was rejected. The accused approached the High Court but without success. Then he moved the Apex Court. The position as explained by the Apex Court in para 3 so far relevant, meets the point in question. Para 3 reads as under --
"We have heard the learned Counsel for the appellant as well as the State of Rajasthan. Once the Court allowed the application of the accused to be examined as a defence witness and commenced recording of his evidence, we fail to appreciate why he was not allowed to produce the documents on which he desired to rely. Merely because he did not produce the documents before his evidence was recorded is no reason why once the Court permitted him to step into the witness box he was denied the opportunity to produce the documents on which he desired to rely to support his evidence."
265. It is true that in the said judgment of the Apex Court, the Apex Court was only required to consider the right of the accused of exercising option to adduce evidence in his defence and which right has been upheld by the Apex Court without imposing any fetters as such. The said judgment of the Apex Court recognizes the statutory right of accused to exercise option under section 315 of Cr.P.C.
266. Certain submissions were advanced during the course of the arguments as was done at the time when this Court heard the miscellaneous applications referred to earlier opposing the permission to accused No. 3 to examine himself as a defence witness. But in view of the legal position and the principles as laid down by the Apex Court as noticed earlier, this Court holds that there are no merits in the contentions of the defence. The position in this respect has also been more lucidly and succinctly stated in the Commentary on the Treaty, Sarkar on Criminal Procedure, VII Edition Reprint 1998 and which appears on page 957 under said section 315. In my view, the same also makes the position very explicit and which I propose to quote :-
"In disproof of the charges made against him & c". - These words do not appear to have any special significance other than that the accused has the right to examine himself as a defence witness for himself or his co-accused at the same trial. When an accused examines himself as a defence witness, he does so of course with the object of clearing himself of the charge. Any argument that if the evidence of the accused be not in disproof of the charges against him or the co-accused, he cannot be a competent witness would only be legalistic quibbling. An accused coming as a witness is in the same position as that of any other witness and the evidence given by him may help his or the co-accused defence, or it may amount to an admission of incriminating facts or of guilt going against him; or his evidence may also go against the co-accused. In many cases it may well be that in trying to disprove the charge against him, an accused may throw the entire blame on the co-accused- By electing to give evidence like any other witness, he impliedly waives his rights as an accused and he must take the consequences of his action if the statements in his evidence are self-criminative."
267. To sum up, therefore, it is held that option exercised by Accused No.3-A.D. Narottam to testify on oath and adduce evidence is in complete accord with the provision of section 315 of Cr.P.C. and that evidence which he has adduced can be read in evidence, applying the test as is done in the case of any other witnesses under the Rules of Evidence. He is like any other witness competent to testify unless he suffers from any disqualification or handicaps as provided under section 118 of the Evidence Act.
268. The Court wishes to clarify once again that while evaluating, assessing and sifting the evidence of Accused No.3-A.D. Narottam, the Court has first taken into consideration the evidence that the prosecution has made available and then has referred to the evidence of Accused No.3 - A.D. Narottam as and by way of corroborative evidence as far as this case is concerned.
ISSUANCE OF BANK RECEIPTS (BRS) SECONDARY GENERAL LEDGER TRANSFER FORMS (SGLTFS) IN SECURITY TRANSACTIONS SO CALLED PRACTICE. etc.
269. As noticed and discussed earlier that three impugned security transactions of this case were between CANFINA and BOK put through by means of issuance of Bank Receipts (BRs). In the said three transactions of 6-4-91, 22-7-91 and 31-7-91, CANFINA was the purchaser and BOK was a selling party of the Security in question. In case of purchase the purchasing party pays consideration of the security to the selling party accompanied by simultaneous delivery of the security by the selling party to the purchasing party. However, in three impugned transactions BOK did not deliver the security and instead issued its BRs favouring CANFINA. There are three BRs so issued by BOK favouring CANFINA. Later on, BOK substituted its BR dated 6-4-1991 with SGLTF on 18-4-1992.
270. There are three more BRs figuring in this case, which as noticed earlier, were issued by MCB on 16-9-91. Apparently it is tried to be made out that BOK was a purchasing party of the securities mentioned in three BRs and MCB was a selling party. As seen earlier, MCB was brought into picture at a stage, what is described earlier as "Cover Up Operations". The evidence discussed earlier proves that in three security transactions, BOK paid the consideration to MCB by its pay orders. However instead of delivering the Security physically, MCB issued and passed on its Bank Receipts favouring BOK.
271. Thus it would be noticed that there are six BRs in this case which the prosecution has made available-three issued by BOK being Ex. 189, 196 and 228 favouring CANFINA and three issued by MCB being Ex. 343, 344 and 345 favouring BOK.
272. The said BRs issued by BOK and MCB are in a printed formats on the letter head of respective parties i.e. of BOK and MCB and content identical recitals. It is therefore, thought appropriate to notice as illustration, contents of the BR, so as to understand what for the instrument seek to achieve and purpose of which the same is issued in security transactions like in this case. Let us take BR of BOK being Ex. 189 dated 6-4-91 :--
NOT TRANSFERABLE Registered Office:
Raviwar Peth, Karad, (Dist :Satara) THE BANK OF KARAD LTD. Revenue BOMBAY OFFICE Stamp Nagindas Master Road, Fort.
Bombay-400 001.
G.P.D. No. 003259/ADN Date : 6-4-1991.
RECEIVED from Canbank Financial Services Limited the sum of Rupees 25,99,23,818.11 being the cost of Securities/Debentures/Bonds of 11.5% Central/Central Loan 2008 face value of Rs. 23-11-90 @ Rs. 100.05% with interest from 23-11-90 to date. The Securities/Debentures/Bonds of the face value of Rs. ................. are delivered herewith and Securities/Debentures/ Bonds of the face value of Rs. 25,00,00,000/- will be delivered when ready in exchange for this receipt duly discharged and in meantime the same will be held on account of Canbank Financial FOR THE BANK OF KARAD LTD.
Rs. 25,99,23,818.11 Agent/Accountant.
As far as MCB is concerned as an example let us see BR Ex. 344 dated 16-9-91 for the same security as mentioned in BOK's BR noticed earlier:
NOT TRANSFERABLE.
67, Hanuman Bldg., Mumbadevi Road, Tambakanta, Bombay-400 003 Phone:33 51 01/33 59 58.
METROPOLITAN Co-operative Bank Ltd.
BOMBAY No.012. Date 16-9-91 RECEIVED from Bank of Karad Ltd. the sum of Rupees Twenty Five Crores Ninety Two Lacs Ninety Three Thousand Forty Five and Paise Fifty Five being the cost of Securities /Debentures/Bonds of 11.5% Central /GOI Loan 2008 face value of Rs.
25,00,00,000/- @ Rs. 101/-% with interest from 23-5-1991 to date. The Securities/ Debentures/Bonds of the face value of Rs. ------------are delivered herewith and securities /Debentures/Bonds of the face value of Rs. 25,00,00,000/- will be delivered when ready in exchange for this receipt duly discharged and in the meantime the same will be held on amount of Bank of Karad Ltd.
For THE METROPOLITAN CO-OP BANK LTD.
Rs. 25,92,93,045.55 Accountant/Manager/.
Both the BRs relate to the Security Transaction of 6-4-91 between CANFINA and BOK.
273. It will be noticed from both the BRs that both contained recitals to the effect-"Securities/Debentures/Bonds of the face value of Rs. 25,00,00,000/-will be delivered when ready in exchange for this receipt duly discharged and in meantime the same will be held on account of Canbank Financial." The said recital would clearly show that there is a definite commitment made by the institutions issuing BR that the Security as described in the said BR would be delivered when ready in exchange for BR duly discharged and in the mean time the same was to be held on account of the selling party. It is in the evidence that such BRs were issued by the respective institutions and were also received by the parties in whose favour the same were issued and on the strength of receipt thereof, purchasing party, paid the consideration to the selling party. It is pertinent to note P.W. No. 2 -Mr. Vernekar, in his evidence stated that he handed over Pay Orders of Canara Bank made out favouring BOK on receipt of BRs in all the three impugned transactions as he considered the same i.e. BRs as valuable securities.
274. The plea of almost all the accused is that at the relevant time security deals in Government securities were permissible by means of issuance of BRs. There was thus practice in the market to that effect and institutions like Banks and financial bodies were freely undertaking their security transactions by means of their BRs.
275. It is also suggested that two parties involved in impugned three transactions, CANFINA and BOK had many such security transactions, in which BRs were issued and exchanged. It is therefore sought to be made out that there was nothing wrong putting through three impugned transactions by means of BRs. Market practice then allowed such course. That being so, there is no question of committing any offences or there being illegality as such. It is further contended that the impugned transactions were put through in usual course of business by these two institutions i.e. CANFINA and BOK and there was nothing wrong. It is further suggested that the transactions failed because BOK who had issued its BRs favouring CANFINA on receipt of consideration of the security, failed to honour its commitment under the respective BRs. At the most, according to the defence, same would involve civil liability and that there will be no commission of criminal offences as such.
276. The prosecution has through various witnesses brought evidence with regard to the use of BRs in the security Transactions put through by the financial institutions, such as BOK and MCB. The evidence is to show when and in what circumstances, course of issuance of BR in Security transactions was permissible. In what conditions same i.e. BR can be issued, etc. Such witness are some of the officials of the concerned institutions as also officials of RBI and Indian Banks Association (IBA). Reference to certain circulars issued by RBI laying down guidelines in that respect have also been made. The officers of the R.B.I. have also deposed about such RBI's circulars containing guidelines.
277. First witness is P.W. 2 Mr. Vernekar who as stated earlier was one who received the BRs of BOK in three impugned transactions. In his evidence he has stated (refer para 24 on page 55 of the notes of evidence) that BRs were in the nature of acknowledgement of the BR issuing bank of the receipt of the consideration of the Security from the purchasing bank and undertaking that it possessed the security and would deliver the same to the purchasing party at later stage.
278. It is to be noted that the recital in the BRs in questions which are reproduced hereinabove also lends corroboration to the said testimony of this witness i.e. P.W. No. 2 -Mr. Vernekar. It is also in the evidence of this witness that such BRs were considered to be the valuable security and thus kept and retained by the bank receiving it with it till discharge thereof by the issuing party as undertaken.
279. It is most crucial and important to note that this part of the evidence of this witness has not been impeached at all in the cross-examination. In fact not touched at all.
280. It is, therefore, most crucial and important factor that emerges from the evidence of P.W. No. 2 D.G. Vernekar, as adverted to hereinabove, that the said witness accepted BRs issued by BOK favouring CANFINA in respect of securities of three impugned transactions of this case because of the recital contained in the B.Rs. whereby issuing Bank gave undertaking "to deliver the securities in physical form at later date". Further, the BRs also acknowledged the receipt of the payments of the consideration made by the purchasing bank to the selling bank i.e by CANFINA to BOK.
281. The above referred evidence of P.W. 2-D.G. Vernekar, who is the key and star witness of the prosecution since it is he from whose hands the CANFINA'S funds were made over and parted with and paid to BOK in three impugned transactions. This is so on the back ground of offences with which the accused herein are indicted. Offences are under section 409 -Criminal Misappropriation and section 420- Cheating and section 477A of I.P.C. The said witness, as his evidence shows, received and accepted the B.Rs. issued by BOK in three impugned transactions as a valuable security as such and only on receipt of the said B.Rs that he made the payment to BOK. The evidence of P.W. No. 2 -D.G. Vernekar, as noticed earlier, which as stated, has remained absolutely unimpeached, clearly bears out the same. The said evidence also, as noticed earlier, spells out the significance of the document, namely, BR, its value, its importance and its implications as was taken and understood by the said witness. His evidence in the Trial spells out the object of issuance of BR in lieu of actual delivery of the security in a physical form.
282. What Mr. Vernekar, P.W. No. 2 has deposed and has spelt out the relevance of B. Rs in a security transaction also receives sufficient corroboration and credence from the evidence made available by the prosecution by examining the officers from R.B.I. The said officers are (1) P.W. No. 8-Mr. N.D. Parmeshwaran, an ex-employee pf the R.B.I. and who at the relevant time worked as a Chief Officer in the Department of Banking Operation and Development which department used to regulate and supervise the operations of the Commercial Banks. (2) P.W. No. 23-K.S. Rao, General Manager, Inspection Department, Central Law Office of R.B.I. and who at the relevant time worked as Joint Chief Officer in the Bombay regional office and which department used to look after all the operations as well as conduct inspections of Co-operative Urban Banks in Maharashtra. It may be stated that this is the officer who has conducted inspection of M.C.B. and produced report of his findings as noticed earlier; and (3) P.W. No. 65 Rama Iyer Nanjappa, who at the relevant time worked as Joint Chief Officer in R.B.I office at Bangalore and whose function was to undertake inspection of banks and their subsidiary and financial institution. It may be stated that, he is the officer who had carried out inspections or scrutiny in respect of security transactions of CANFINA in its registered office at Bangalore and has produced the reports being Exhs. A: 1(16), 642, 643 and 644 on record.
283. I would first consider What P.W. No. 8 N.D. Parmeshwaran has to say about the use of BRs and SGLs. This witness was directly concerned officer of the RBI in its department of B.O.D. which used to regulate and supervise the operations of the banks. He is the officer who was closely connected to the issuance of guidelines of the RBI to the various banks in respect of security transactions. His evidence further shows that prudent norms or guidelines were issued from time to time to the banks and financial institutions for the purpose of observance and adherence in their operations in security transactions. It is this officer who was closely involved in issuance of circular on behalf of RBI being dated 26-7-1991 in that behalf and which is produced as Exh. 174.
284. He has spelt out in his evidence criteria and parameters for the issuance of BRs and SGLs by the banks, stating that the banks were not expected to resort to the issuance of BRs/SGLS without actual holding the securities and without having sufficient balance in their SGL Account with RBI. It may be stated that this aspect has been also highlighted in a RBI Circular dated 26th July, 1991.
285. It is also most significant to note that and which would bring to the fore the state of affairs as prevailed at the relevant time when the BRs being the subject matter of this case referred to earlier came to be issued. This witness has stated that, at the relevant time, when the scrutiny of the security transactions of some of the banks were carried out, RBI noticed disturbing feature's and irregularities committed by the banks in their such operation i.e. security transactions by means of BRs and SGLs. He deposes thus: (Refer para 12 on page 297 of his evidence where he enumerate the same as) "The disturbing features which we noticed were. 1. the banks were short selling securities i.e. they were selling securities which they did not have; 2 in many cases banks were issuing BRs and SGLS on behalf of their brokers which was not a healthy practice; 3, there were large number of returns of SGL forms by the Public Debt Office of the RBI on the ground of insufficiency of securities."
The said part of the evidence of P.W. No. 8- N.D. Parmeshwaran clearly points out as to when and in what circumstances and conditions banks and financial institutions were expected to and permitted to use the BRs in their security operations. To put it neatly, it clearly points out that possession/existence of the securities was must with the banks at the time of issuance of BRs.
286. This evidence of P.W. No.8-N.D. Parmeshwaran receives corroboration from P.W. No. 23-K.S. Rao- As stated earlier, this witness is one who conducted inspection of M.C.B. with the definite focus on the issuance of BRs by it. His evidence (refer pages 599-Z & 599-AA of notes of evidence which is brought out in the cross- examination) clearly goes to show that issuance of BRs is in lieu of physical delivery of the security at the initial stage which has necessarily to be followed by actual physical delivery of the security covered under the particular BR at later stage and there is no exception or other alternate to the same. He has been emphatic when he stated compensation in a monetary form is also no substitute or solution to the actual and physical delivery of the security covered under the BR. This would clearly imply and would indicate imperative requirement that holding and possessing the security at the point of time of issuance of BR by the Bank was a must.
287. Mr. Nanjappa, P.W. No. 65 in his report has made reference to the practice of issuance of BRs and he has by and large stated the same thing and has some perspective about BRs as then indicated by P.W. No. 8-N.D. Parmeshwaran and P.W. No. 23-K.S. Rao, Mr. Nanjappa has also made passing references about the outstanding BRs of CANFINA in his said report. One aspect that has been made out by Mr. Nanjappa would require specific mention. In that, he has pointed out in his report as also stated before the Court that issuance of BR in Government of India securities was not permissible and it could be put through by means of SGL only. Apart from the fact that this part of his evidence has not been contradicted, it requires to be noted that in case of first impugned transaction dated 6th April, 1991, BOK, in the first instance, issued its BR in favour of CANFINA and it is only-on 18th April, 1992, i.e. after a lapse of over an year, that it issued its SGL as a substitute to its said BR and for which evidence is made available. This step on the part of BOK is further corroboration to the evidence of RBI Officers that in GOI security, like in first impugned transaction resort to BR was not permissible and the same has to be put through by means of SGLs only. It may be stated that eventually RBI on 20th June, 1992, issued circular laying down more comprehensive guidelines and virtually it has prohibited resort to the issuance of BRs by the banks in Government securities. The said Circular in Exh. A-(7) on record.
288. From the evidence of the above witnesses, it clearly follows that the financial institutions were allowed to issue BRs in specific type of securities and were not authorized to issue BRs in Government securities in respect of which they could avail of SGL facility and that BR could be issued for transactions only were the scripts were to be issued and concerned Bank held the allotment advice, the Bank physically held the securities in question at its different centres and would be in a position to physically transfer the same within a short period and the case where the formalities in respect of transfer of securities were to be completed but the bank possessed the necessary record of its possession. In any case issuance of BR as substitute to physical delivery was permissible only if Bank concerned held the security as noticed earlier and not otherwise.
289. What therefore follows from the above discussion is that the banks and financial institutions could issue and use BRs in their transactions in Government securities but that should be legitimately and properly resorted to following the prudent norms in that behalf. It did not, as sought to be suggested on behalf of the defence, that any Bank could resort to the issuance of BR even without holding or possessing the security and by use of such BR induce the other party i.e. purchasing Bank to part with the money being the consideration thereof against BR not backed by the requisite security.
290. Issuance of BR was permissible for the legitimate security dealings. It was not a free and unfettered license to anyone to indiscriminately go on issuing the same without holding and possessing the securities in question as is the position in the matter in hand. In such circumstances, the contention raised by and on behalf of the defence of so called market practice in respect of issuance of BRs even without holding securities would require to be rejected outright. There is no substance nor any evidence to show justifying such nefarious practice. On the other hand, the evidence of officials of RBI, as noticed earlier is other wise.
291. As noticed earlier and as has been clearly borne out that BOK when it issued three BRs in three impugned security transactions on account of accused No. 3-A.D. Narottam, it did not possess the security at all. Apart from the fact that accused No. 3-A.D. Narottam in whose account the said transactions were routed through has stated that he did not possess the security in question at all. Even BOK did not hold the said security and yet its officer Accused No. 7-C.S. Raje and Accused No. 8 S.A. Ail issued the said BRs flavouring CANFINA and on the strength thereof made CANFINA to part with the moneys.
I.B.A.'s Officials:-
292. I do not think it necessary to make detail reference to the evidence which prosecution has made available through the office bearers of IBA. (i.e. Indian Bank Association). Passing reference thereto would suffice. The witnesses examined are P.W. No. 9-Natin Shantilal Parekh, an employee of IBA and P.W. No. 10-Beladi Ratnakar Keshav Kamath, Secretary of IBA. The evidence of these two witnesses shows that IBA. is a "Think tank" of banking industry providing services to its members and is a voluntary body not even registered and does not possess any authority as such for enforcing any rules made by it against its members. The evidence of these two witnesses shows that the said Association undertakes to issue guidance and guidelines to its members on the basis of various directives and guidelines of the RBI. What they have stated about the issuance of and use of BRs by the banks, by and large, is in consonance with what the RBI officer, as noticed, have stated. Therefore there needs no detail reference to this part of the evidence.
293. On the back ground as noticed above it is to be seen whether the three impugned transactions dated 6th April, 1991, 22nd July, 1991 and 31st July, 1991, put through by means of BR even without holding security by BOK were genuine and undertaken in usual course of banking business as sought to be made out.
294. This is what the defence has sought to contend. It is stated by and on behalf of the defence, particularly, on behalf of Accused No. 1-M.K.S. Ashok Kumar, Accused No. 2-H.P. Dalai and Accused No. 12-S. Mohan that the transactions of this case between CANFINA and BOK were put through in the normal course of banking business. The transactions are well documented in all respects and, therefore, there is no question of there being any criminality as such.
295. It is, however, necessary to state that what matters, while considering, analysing and examining the nature of the transactions, is not the formal aspect of the transaction but its substance and in effect what the same were and how and in what circumstances same were put through.
296. As evidence made available which is overwhelming, voluminous and clinching and well documented, at every stage and point, that when the dealers of CANFINA i.e. accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan struck the deals in three impugned transactions, with accused No. 2 H.P. Dalai as a broker, the same were shown to be between CANFIAN and BOK. But the evidence on the record proves convincingly and beyond any shadow of doubt that it was not so. The transactions were routed through the account of Accused No. 3-A.D. Narottam. The moneys were also received and credited into the account of Accused No. 3-A.D. Narottam. Neither the BOK nor even Accused No. 3-A.B. Narottam in his security account with BOK held and possessed the securities in transactions in question. Yet, Accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail issued BRs and other documents and induced CANFINA to part with the moneys. Not only BOK made CANFINA to part with the moneys in the manner as aforesaid, moneys so received were diverted to the account of Accused No. 3-A.D. Narottam by crediting the proceeds of Pay Orders, in absence of specific instructions of payer Bank and there from the same were further flown out of his accounts to the benefits of others including Accused No, 2-H.P. Dalai who is supposed to be a broker as noticed earlier.
297. Further, it transpired BRs and SGLS which were issued by BOK remained outstanding and CANFINA did not receive he securities. Eventually, in the last week of May, 1992, BOK went into liquidation for the reasons well know, Accused No. 2 H.P. Dalai who is stated to have acted as a broker for CANFINA in the said three transactions, as the evidence discussed herein-above shows is also and beneficiary and recipient of the substantial part of the said amount.
298. The further aspect to be mentioned in this context is the attempt made to camouflage the fraud by involving MCB into the picture and through it undertaking so called Cover Up Operation transactions which were fictitious and bogus unsupported by any security and this was done to fabricate and manipulate the Security Ledger Account of Accused No.3-A.D. Narottam with BOK as has been so clinchingly, convincingly and satisfactory proved by the credible evidence. In fact accused No. 3-A.D. Narottam has admitted that he did not possess the requisite securities to support the said BRs. Further accused Nos. 7 and 8, employees of BOK stated having made entries in security ledger to show existence of security in account of accused No. 3-A.D. Narottam at later stage, when MCB's BRs were received on 16-9-91.
299. If all these facts and circumstances which are cogent and revealing are taken into consideration, the futility in the said plea of the defence becomes clear needing no further comment.
300. It also cannot be said that there is a failure on the part of BOK in not honouring its commitments for the reasons beyond its control. It is indeed proposterous that such a contention has been put into service on the teeth of overwhelming evidence and facts and circumstances as obtained in the case which shows otherwise. It is one thing to say so called failure of a security transaction entered into and or put through with the genuine desire and in a legitimate manner and it is one thing to say that the transactions as in the case herein which were put through with the full knowledge, object and dishonest intention to commit a fraud and induce CANFINA to part with the money. The evidence made available clearly shows how the entire operation was masterminded and executed by the players of it running into hundreds of crores. These clandestine deals were put through to camouflage fraud solely with the object of knocking out and siphoning of the monies of CANFINA for the personal benefit of its players. In such circumstances to say such transaction as genuine, put through in usual course of business, etc. to say the least, is travesty of reality. One cannot lose sight of the fact what it eventually led to BOK going in liquidation and CANFINA loosing its monies.
F.I.R. - CREDENTIAL VALUE
301. On behalf of the defence, in particularly, on behalf of accused No. 2-H.P. Dalai, it is urged that the complaint lodged by CANFINA on 19th June, 1992, with CBI does not disclose any criminal offences and that investigation agency has falsely cooked up and concocted a story. In as much, it is submitted that the complaint as lodged also does not mention the names of some of the accused.
302. The complaint lodged by CANFINA which is treated as F.I.R. has been produced as Exh. 38.
303. P.W. No 76-Mr. Bhupinder Kumar, who registered a crime has been extensively cross-examined especially on behalf of accused No. 2-H.P. Dalai to the extent that almost each and every line of the contents of the said complaint letter Exh. 38 has been put to him to bring home the point as to what offences the said F.I.R. disclosed. According to the defence, as stated earlier, the said complaint does not disclose any offences against the accused.
304. It may be stated that section 154 of the Cr.P.C. provides for lodging of the complaint relating to commission of cognizable offence. Thus F.I.R. is a creature of the said section. If it is lodged orally, the said section requires the Police to reduce into writing and obtain a signature of the informal. The substance thereof, then has to be entered into a relevant record kept and maintained at the Police Station. Sub-section (3) of section 154 provides for further investigation in case of their being disclosure of the commission of cognizable offence.
305. The Investigation Officer P.W. No. 76-Mr. Bhupinder Kumar who recorded the F.I.R. in his evidence has stated :--
"On the basis of written complaint of CANFINA vide letter Exh. 38 i recorded F.I.R. in the case on the same day i.e. on 20th June, 1992 at 4.30 hrs. against those accused named in the said F.I.R. under section 120B I.P.C. r/w 409, 420, 467, 468- I.P.C. and section 13(2) r/w 13(1)(d) of the P.C. Act and substantive offences under section 409, 420, 467, 468-I.P.C. and section 13(2) r/w 13(1)(d) of P.C. Act, 1988".
The accused named in F.I.R. were - (1) Shri M.K. Ashok Kumar, Executive Vice President, CANFINA, Bangalore -accused No. 1, (2) Shri Hiten P. Dalai-accused No. 2. (3) Shri Abhay Narottam-accused No. 3, (4) Shri Bhupen Dalai -accused No. 4, (5) Shri T.B Ruia- accused No. 5. (6) Shri J.P. Gandhi -accused No. 6 and (7) Unknown officers / officials of Bank of Karad Ltd. of Bombay and Karad.
306. It is to be stated that accused Nos. 1 to 6 named in the F.I.R are accused in this case. Accused No. 7-C.S. Raje and accused No. 8-S.A. Ail are the employees of BOK. The names of accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy who are connected with MCB do not figure in the FIR. Accused No. 12-S. Mohan is the dealer of CANFINA. The said complaint letter Exh.38 is running into six full scape papers and sets out about the status of the accused as named in the F.I.R. as also impugned transactions in question and issuance of BRs by BOK as also non-honouring of the same. After stating the details of impugned transactions, the said informal who is P.W. No. 1-K.N. Kamath, the then Managing Director of CANFINA has stated -
"persons mentioned above have therefore committed the offences punishable under section 120B, 409 and 420 of the Indian Penal Code on account of the aforesaid dishonest and /or fraudulent transactions."
The said letter also in the last, contains a request to the CBI that-
"a criminal case may please be registered and investigation taken up."
307. Thus, reading the evidence of the CBI officer who recorded the F.I.R., it becomes clear that such registration was done on the strength of the said written complaint of CANFINA being Exh.38. P.W. No. 1-Mr. K.N.Kamath has already proved the contents of the said letter. The said letter mentions the offences under section 120B, 409 and 420 of I.P.C. Further the request is made to investigate into the matter.
308. On consideration of the contents of the letter Exh.38 and evidence of P.W.No. 1-K.N. Kamath the informal and P.W. No. 76-Bhupinder Kumar, I do not find any substance in the contentions raised by the defence. As is clear that letter Exh.38 contents the graphic details of the impugned transactions and the fate thereof and CANFINA sustaining losses. It is not expected as also not required that such information should contain each and every aspect of the evidence in minute details that may be available or that may be produced during the trial. The purpose of lodging information is to facilitate investigation in the offences and if one reads the said letter, it becomes clear that necessary ingredients for inquiry and investigation have been made out. The names of accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy do not figure in the said complaint letter as also in the F.I.R and the reason is obvious, since, as on that date when the complaint was lodged and F.I.R was registered, the involvement of M.C.B. was not known to the informant. In the circumstances, the contention raised by and on behalf of the defence that F.I.R does not indicate any criminal offences, etc. requires to be rejected.
309. It is also submitted that the offence of charge of criminal conspiracy has not at all been established by the prosecution against the accused in this case. It is submitted that there is no evidence direct or circumstantial against the accused to prove the said charge to suggest there being conspiracy to commit various offences of this case. There is no evidence for establishing link and connection and agreement between the accused. It is asserted that an agreement amongst the conspirators is the gist of this offence, which is wanting.
310. Ld. P.P. Submitted that there is voluminous evidence both oral and documentary which has been made available on record. The witnesses have deposed about the respective roles, acts or omission of the accused is series of steps in course of events. The witnesses are associated in one capacity or the other with the concerned institutions and thus they have first hand knowledge as to how things happened. The documentary evidence which is voluminous is clear testimony of the contents there of and the same are contemporaneous written record evidencing the specific course of events, roles played by the various parties including the accused herein and which were kept and maintained in usual course of businesses of each of concerned institutions. He submits that most of the witnesses are the employees of concerned banks and of CANFINA and documents which have been produced and proved have been kept and maintained by such institutions in the course of their normal banking business activities. He further submits that the evidence adduced has to be considered appreciated by applying rules of evidence as provided under section 10 of Indian Evidence Act. Offence being of criminal conspiracy.
311. On careful consideration of all the submissions advanced for and against as also critical analysis and scrutiny of the evidence made available in this case it has to be held that the prosecution has succeeded in establish the charge of conspiracy against accused Nos. 1,2,3 and 7 to 12.
312. The offence of conspiracy consists in the combination of agreement between two or more persons to do unlawful act or to do a lawful act by unlawful means. This is the gist of offence of criminal conspiracy. Section 10 of the Evidence Act which is special provision in the context of offence of criminal conspiracy, provides that there has to be prima facie evidence in support of the existence of criminal conspiracy between two or more conspirators and it is then only that anything said, done or written by any one of them can be used against the other. The said section envisages that there should be reasonable ground to believe that two or more persons conspired together to commit an offence or an actionable wrong.
313. Section 120A of I.P.C defines criminal conspiracy, the main ingredient of this offence is the engagement and the association of more than one per son to break the law. There has to be an agreement between the conspirators and the evidence to prove the same.
314. Conspiracy is hatched in utmost secrecy and it would not be that easy to prove the same by direct evidence. In such circumstances, the same has to be inferred from facts, statements and conduct of the parties to the conspiracy. Section 10 of the Evidence Act renders assistance in such situation. It is further to be noted that the onus lays on the prosecution to prove the charge of conspiracy by cogent evidence which may be direct or circumstantial.
315. The application of Rule of law embodied in section 10 is strictly conditional upon there being reasonable ground to believe that two or more persons have engaged themselves in any joint enterprise i.e. criminal conspiracy. Agency is a predominant factor of the provision of section 10. On this branch of law, the Apex Court has in its numerous decisions crystallized the principles bearing in mind that the conspiracy is hatched in secrecy and possibility of having direct evidence to prove the same becomes difficult. Often such matters are required to be considered on circumstantial evidence. Criteria and guidelines are laid down as to how circumstantial evidence should be sifted, examined and appreciated. The main thread is that circumstances relied upon must be clinching and cogent pointing to the culpability of the accused of conspiracy and have to be totally incompatible to his innocence. It has also been posited that doubt howsoever grave will never be a substitute to the proof.
316. I propose to consider the various circumstances and facts which have been clearly born out in this case on the basis of evidence.
317. On careful examination and critical analysis of the evidence, facts and circumstances of the evidence adduced in this case it clearly stands proved and which is summed up in brief as hereinbelow to have clear appraisal about the links, amongst accused inter se, their roles in various deals and steps, over acts, clandastine devices, circumstances attendant to their every action vis-a-vis each institutions involved to highlight as to how a cleverly engineered fraudulent plans were perpetrated, at all stages.
(A) CANFINA:
i) CANFINA is wholly owned subsidiary of Canara Bank being under the category of Government Company and was authorized to undertake transactions in Government Security.
ii) At the relevant time Company had registered office at Bangalore and office at Bombay.
CANFINA's Security Transactions were originated from its registered office at Bangalore by its Dealers only.
iii) At the relevant time its dealers accused No. 1-M.K.S. Ashok Kumar and 12-S. Mohan being the employee of CANFINA, respectively Chief Dealer and Dealer were authorized to strike and finalize deals in Government security of CANFINA of its all centres including its Bombay office. After striking and finalized deals, accused No. 1-M.K.S. Ashok Kumar and 12-3. Mohan used to make entries in the dealers pad and such entries in dealer's pad have been proved relating to impugned transactions.
iv) Monies required for purchase of securities in Bombay were remitted from Bangalore office to Bombay, for which purpose CANFINA at Bangalore issued and drew its cheques for the amounts required upon Canara Bank and by means of I.B.A same were remitted to Bombay office of CANARA Bank.
v) After striking and finalizing the deals of impugned transactions accused No. 1-M.K.S Ashok Kumar and 12-S. Mohan conveyed the same to Bombay office for further process and for implementation and execution.
vi) After execution of the deals, Bombay office reverted back to the registered office at Bangalore and reported about the same to the dealers and particulars conveyed in reporting were the payments to counter party, the position/mode of delivery, i.e. to say whether physical or through BR or SGL.
vii) At the relevant time P.W. 2-Mr- Vernekar and P.W. 3-Mr. Kukian and some other officers of CANARA BANK were concerned in execution of the security transactions at Bombay who on the basis of instructions of the dealers i.e accused Nos. 1 and 12 took further steps in execution of transactions, strictly in accordance with the instructions of the dealers received over telephone.
viii) P.W. 2-Mr. Vernekar received such telephonic instructions in respect of the security transactions from the dealers from Bangalore and then made entries in the Rough Transaction Sheets which have been produced and proved.
B. PROCESS OF EXECUTION.
i) In telephonic instructions accused Nos. 1- M.K.S,. Ashok Kumar and 12-S. Mohan the dealers used to convey particulars, such as, name of Counter party and broker involved, descriptions of the security, quantity, rate and mode of delivery etc..
ii) In the said impugned purchase transactions, the representative of broker i.e accused No. 2-H.P. Dalai came with the Cost Memos and BRs of Counter Party Bank i.e. BOK to Canara Bank's Bombay office on the respective dates of the transactions.
iii) P.W. 2-Mr. Vernekar after checking the particulars of the security and its particulars etc. with the instructions received over telephone from the dealer as recorded by him in Rough Transactions Sheet, issued Pay Orders on behalf of CANFINA favouring BOK in its account with Canara Bank for which he was delegated with powers and then handed over the same to the messenger of the broker coming with the BRs and Cost Memos.
iv) The required record in respect of the security transaction as also the payments made was made in the relevant registers etc. as required in Bombay office.
v) Bombay Office of CANFINA had sent periodical statements of the security transactions by Courier Services to the registered office of CANFINA at Bangalore mentioning all the requisite particulars.
C. SOME MORE PARTICULARS, AS EMERGED FROM THE EVIDENCE DISCUSSED EARLIER AS TO HOW THE IMPUGNED THREE TRANSACTIONS WERE PUT THROUGH:
i) Procedure followed and steps taken were the same as mentioned herein-above. The Deals were struck by the Dealers i.e. accused No. 1-M.K.S. Ashok Kumar and/or accused No. 12-S. Mohan at Bangalore and conveyed over telephone to P.W. 2-Mr. Vernekar.
ii) Dealers made entries in the dealers pad at Bangalore and P.W. 2-Mr. Vernekar made entry in a Rough Transaction Sheets at Mumbai noting down the particulars of instructions received from the dealers from Bangalore over telephone. BOK Bombay was the counter party. Entries in Dealers Pads in respect of 1st and 2nd of 15th October, 1991 are in the handwriting of accused No. 1-M.K.S. Ashok Kumar, Accused No. 2-H.P. Dalal was the broker.
iii) The representatives of the broker in all ..... handed over the same to P.W. No. 2-Mr. Vernekar.
iv) Mr. Vernekar- P.W. 2 on verifying and checking with the entries in the Rough Transaction Sheets issued Pay Orders on Canara Bank favouring BOK and handed over the same to representative of the broker.
v) BOK received the credit of the proceeds of the said Pay Orders on the very day. Same were issued by Canara Bank favouring BOK. P.W. 2-Mr. Vernekar received BRs which he kept treating same as a valuable securities on the basis of recitals thereof whereby BOK undertook to deliver the securities to CANFINA later on. P.W. No. 2-D.G. Vernekar made the payment on the basis of recitals in the BRs.
vi) In respect of first transaction of 6-4-91. On 18-4-92 BOK substituted its BR with SGL which when P.W. No. 2-Mr. Vernekar lodged with Reserve Bank, was bounced on the ground of insufficiency of balance.
vii) On 15-10-91 and 18-10-91 CANFINA received..... procedure followed was the same as mentioned earlier.
viii) As a result of repurchase of said security as mentioned in (vii) above, BOK reduced its liability under the BR dated 22-7-1991 issued in second transaction by making endorsement on the reverse of the relevant BR to that effect. Endorsement has been made and signed by accused No. 7-C.S. Raje as an officer of BOK.
D. BOK BOMBAY
i) At the relevant time accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail were the concerned employees working in the security department and used to attend the work of security transactions of BOK.
ii) Accused No. 7-C.S. Raje was an Officer and was authorized to sign cheques and BRs as also Cost Memos for and on behalf of BOK. Accused No. 8 was working under accused No. 7-C.S. Raje and who used to prepare Cost Memos, BRs, etc. and used to keep and maintain the record with regard to the security transactions by making entries in the security ledger, etc.
iii) Accused No. 3-A.D. Narottam was at the relevant time Director of BOK.
iv) Accused No. 4-B.C. Dalal was also at the relevant time Director of BOK.
v) Accused No. 3-A.D. Narottam had his accounts with BOK, both Over Draft Account and Savings Account. Accused No. 3-A.D. Narottam used to operate the O.D. Account for his security transactions.
E. LINKS CONNECTION BETWEEN ACCUSED INTER-SE.
i) Accused No. 1-M.K.S. Ashok Kumar & 12-S. Mohan as noticed earlier were respectively the Chief Dealer and Dealer and employees of CANFINA and such public servants.
ii) Accused No. 2-H.P. Dalal, 3-A.D. Narottam, 4-B.C. Dalal and 6-J.P. Gandhi were the Share Brokers.
iii) Accused No. 2-H.P. Dalal and 4-B.C. Dalal are related as Nephew and uncle.
iv) Accused No. 6-J.P. Gandhi also a Share Broker related to accused No. 2-H.P. Dalal and 4-B.C. Dalal.
v) Accused No. 3-A.D. Narottam also Share Broker and Director of BOK was having account with BOK as stated earlier. He was associated with accused No. 4-B.C. Dalal being the employee of his firm known as Champaklal Devidas which was started by father of accused No. 4-B.C. Dalal, since deceased.
vi) Accused No. 4-B.C. Dalal and his son were also the Directors of BOK.
vii) Accused No. 6-J.P. Gandhi also was associated and worked with the said Company of accused No. 4-B.C. Dalal.
viii) Accused No. 5-T.B. Ruia was a Director of Dhanraj Mills Pvt. Ltd. and had account with BOK and MCB had association with Accused Nos. 2-H.P. Dalal, 4-B.C. Dalal, 6-J.P. Gandhi and 9-K.K. Kapadia.
ix) Evidence shows, which has been made available by Accused No. 3-A.D. Narottam that some where in the year 1990, there was huge liability upon the accused No. 5-T.B. Ruia in respect of L.I.C. Mutual Funds and it is further case of accused No. 3-A.D. Narottam that, accused No. 4-B.C. Dalal and 6-J.P. Gandhi as also accused No. 2-H.P. Dalal, with a view to role over the said liability, started putting through fictitious and bogus security transactions of routing the same into his account with BOK and he being ex-employee of accused No. 4-B.C. Dalal allowed to do so as he was promised that every thing would be done allright.
x) Accused No. 3-A.D. Narottam has made reference to another case lodged by CBI Case No. 23 of 1993 being No. RC. 7(S)/93-Bom. on the file of this Special Court in respect of liability of LIC Mutual Fund in which he as also Accused Nos. 2-H.P. Dalal, 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi and other are accused.
F. ROLL OVER IN THE ACCOUNT OF ACCUSED NO. 3-A.D. NAROTTAM:
i) Accused No. 3-A.D. Narottam, allowed to operate such Role Over Security Transactions with CANFINA in his account with BOK under the instructions of accused No. 2-H.P. Dalal, 4-B.C. Dalal and 6-J.P. Gandhi. He admits the issuance of deliver orders as also receipts and credits of Pay Orders issued by CANFINA in three impugned transactions into his O/D account with BOK.
ii) According to accused No. 3-A.D. Narottam when the three impugned transactions were put through nor he or BOK held or possessed the security in question and BRs issued by BOK favouring CANFINA were not supported or backed by the requisite security thus evidence of accused No. 3-A.D. Narottam lends corroboration to prosecution evidence in this respect.
G. DIVERSION/SIPHONING OFF.
i) The monies of the three transactions received from CANFINA and which were credited into account of accused No. 3-A.D. Narottam on the respective dates in BOK, to the last rupee, were transferred to various Banks, like Andhra Bank, Citi Bank, Grindlays Bank, Bank of America etc. which was done under instructions of accused No. 2-H.P. Dalal.
ii) Evidence shows that major part of funds had gone into the account of accused No. 2-H.P. Dalal.
iii) As far as accused Nos. 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi are concerned, there is no clear cut evidence to show and prove passage of monies into their accounts. There is also no evidence against accused No. 4-8.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi of their involvement in putting through impugned transactions and or two sub transactions or with regard to the diversion or being beneficiaries of the funds.
H. ROLES OF ACCUSED NO. 7-C.S. Raje AMP 8-S.A. All.
i) At the relevant time they were admittedly the employees of BOK working in the Security Transactions.
ii) Cost Memos and BRs having issued by them and as also prepared and signed by them.
iii) The Pay Orders issued by CANFJNA on Canara Bank favouring BRs were received by them and who after crediting the proceeds thereof into the account of BOK transferred the same into the Over Draft Account of accused No. 3-A.D. Narottam in absence of any instructions from the payer Bank i.e. Canara Bank or from CANFINA.
iv) They admit that BRs were issued in three impugned transactions which were not backed up by the requisite securities.
v) They admit having issued Pay Orders on the instructions of accused No. 3-A.D. Narottam favouring various Banks and debiting the amount thereof into Over Draft account of accused No. 3. They also admit the payees of the said Pay Orders having received the credits of the proceeds of the said Pay Orders.
vi) They admit the receipt of MCB's BRs and Cost Memos on 16-9-1991.
vii) They admit the receipt on Receiving Orders for receiving securities from MCB. They also admit the receipt of letters of accused No. 3 and issuance of Pay Orders on 16-9-1991 favouring MCB.
viii) They also admit the receipt of Pay Order from MCB on 16-9-91 for sum of Rs. 534, 59, 87, 471.88 and having credited amount thereof into the Over Draft account of accused No. 3-A.D. Narottam on the same day i.e. on 16-9-91.
ix) They admit that on 16-9-91 entries were made in the security ledger account of Accused No. 3-A.D. Narottam, Ex. 309 in respect of three impugned transactions of 6-4-91, and 22-7-91 and 31-7-91, breaking the chronological sequence so as to show balance at the securities of three impugned transactions on their respective dates in the account of accused No. 3-A.D. Narottam.
x) They admit that such entries were made breaking and disturbing chronological sequence, since on the respective dates when three impugned transactions were put through, into the security account of accused No. 3-A.D. Narottam, there existed no securities to meet the commitments to CANFINA.
I. MCB-COVER UP OPERATIONS.
i) Accused No. 9-K.K. Kapadia was Vice Chairman and accused No. 10 was its employee.
ii) Accused No. 11-S.N. Ramaswamy, the proprietor of M/s. Excel and Co. and share broker was having an account with MCB.
iii) The evidence shows that accused No. 9-K.K. Kapadia and Mr. V.C. Desai, the then employee of MCB used to attend security transactions of MCB.
iv) MCB used to issue BRs and Cost Memos which used to be handled exclusively by Accused No. 9-K.K. Kapadia.
v) Accused No. 11 had issued its Delivery Orders upon MCB for delivering securities in three Cover Up Transactions of 16-9-91 to BOK.
vi) MCB had issued Cost Memos and BRs, both prepared and signed by Accused No. 10-M.S. Kushte favouring BOK in respect of three cover up transactions, which are matching the securities of three impugned transactions in all respect.
vii) Proceeds of Pay Oders received from BOK favouring MCB on 16-9-91 were credited into the current account of Accused No. 11-S.N. Ramaswamy with MCB.
viii) There is a evidence of transfer of Rupees 15 lakhs into the current account of Accused No. 11-S.N. Ramaswamy for investment into FOR on 16-9-91 itself.
ix) There is a letter also of accused No. 11-S.N. Ramaswamy to MCB for issuance of Pay Orders favouring BOK for sum of Rs. 534,59,87,471/ 88 on 16-9-91 and Pay Orders were issued by MCB on the same day.
x) A documentary evidence in respect of various transactions with MCB has been made available.
xi) There is a evidence that accused No. 11 did not hold or possess the securities of three Cover Up transactions. MCB also did not possess and hold the said securities on the day in question.
xii) On the same day i.e. 16-9-91 whatever amount received from the account of Accused No. 3-A.D. Narottam from BOK vide Pay Orders, was repaid to BOK by MCB on the same day, minus sum of Rs. 15,00,5324/ -, 15 lakhs credited/invested in FOR into the account of Accused No. 11 and balance of Rs. 5324/- was charged by MCB as its commission for issuance of Pay Order.
J. INSPECTION OF MCB BY RBI.
i) Evidence of P.W. 23-Mr. K.S. Rao and his inspection report Ex. 386 and 386-A.
ii) Joint statement of accused No. 9-K.K. Kapadia, 10-M.S. Kushte and P.W. 20-Mr. D.P. Gandhi dated 22-5-92 being Ex. 352 admitting the security transactions and issuance of BRs etc. and meetings in the offices of BOK and Accused No. 2-H.P. Dalal.
K. OUTSTANDING BRs AND SOL OF BOK ISSUED TO CANFINA.
i) The BRs/SGL issued by BOK to CANFINA in three impugned transactions remained outstanding.
ii) R.B.I. Inspection of CANFINA.
iii) P.W. I-Kamath, the then M.D. of CANFINA came to know about the outstanding of BRs from Inspector of R.B.I. in the last week of April, 1992.
iv) He contacted Accused No. 1-M.K.S. Ashok Kumar to Bangalore and arrival of Accused No. 1-M.K.S. Ashok Kumar at Bombay had discussions and meeting with accused No. 2-H.P.Dalal.
v) Meetings in Taj Mahal Hotel.
vi) Meetings were held in Taj Mahal Hotel which were attended by officials of CANFINA and Canara Bank. Meetings were also attended by Accused Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalal, 3-A.D. Narottam, 4-B.C. Dalal and 5-T.B. Ruia.
vii) The admission by accused Nos. 2-H.P. Dalal, 3-A.D. Narottam and 5-T.B. Ruia of receipt of amounts.
viii) In the meeting efforts were made to persuade the brokers to bring back the monies received by them and as admitted by them.
ix) Lodging of complaint by CANFINA on 20-6-1992 by letter Ex. 38 with CBI.
x) Security by P.W. 65-R.I. Nanjappa in respect of security transactions of CANFINA at Bangalore Office and report Ex. 342,343 and 344 and A-160.
L. EVIDENCE OF R.B.I. OFFICIALS AND OFFICE BEARERS OF THE IBA ABOUT THE USE OF BRs etc. M. EVIDENCE OF ACCUSED NO. 3-A.D. Narottam ORAL AS ALSO DOCUMENTARY - HIS WRITTEN STATEMENT IN CIVIL SUITS FILED BY CANFINA IN THIS SPECIAL COURT:
i) Accused No. 3 admits rolling over of funds into and through his O/D account at the instance of Accused No. 2-H.P. Dalal and putting through bogus impugned security transactions, issue of delivery orders, cost memos, BRs, receipt of credits From CANFINA, diversion from his account to various Banks, including direct transfer of substantial amount into the account of Accused No. 2-H.P. Dalal in Andhra Bank, issuance of pay orders favouring various banks under instructions of accused No. 2 cover up operations of 16-9-91 without backed by securities, etc. Says he being used by accused No. 2 as conduit etc. N. i) Evidence discussed earlier and as summarized hereinabove clearly speaks out that it was accused No. 2 and Accused No. 3 (and other stock brokers who are named as accused in this case but prosecution has not been able to get concrete evidence against them) who were running and managing treasury desks of BOK and BOK's management completely humbled down to their wishes. BOK went on readily and willingly funding accused Nos. 2 and 3 lending its name to put through their transaction in security. At the relevant time accused No. 3 and accused No. 4 as also son of accused No. 4 happened to be on the Board of Directors of BOK. Other important players, i.e. Accused No. 2 and accused No. 6 were well connected to them. As far as accused Nos. 2 and 6, as noticed, they were related to Accused No. 4 by blood. Accused No. 6 was managing broking business of Accused No.4. These show link and nexus among the said accused.
ii) The impugned transaction as noticed were put through by means of BRs and which BRs were not supported by security. Stakes involved were of hundred of crores.
iii) R.B.I. which is supposed to be regulatory watchdog and Central Bank merely blinked of its eyes to the exploitation of the system and criminal intend of the said accused to defraud CANFINA by resorting to such murky security deals by means of issuance of BRs/SGLs without support of requisite security.
iv) The stakes involved in second and third impugned transaction of 22-7-91 and 31-7-1991 respectively being 212.80 lakhs and 255 crores (approximately) which were beyond capacity of the Bank like BOK considering its financial position and status. Yet accused No. 1 and or accused No. 12 put through deals for such huge amounts.
v) Entry in the dealers pad of CANFINA's office which is the first record in time and earliest record in respect of first and second impugned transaction are in the handwriting of accused No. 12 and that of third transaction of 31-7-1991 is in the hand writing of accused No. 1.
vi) Transaction of 15-10-91 and 18-10-91, when BOK alleged to have purchased the security from CANFINA were also put through by Accused No. 1 and Accused No. 12 and what was done was that the liability under the BRs issued in second transaction of BOK came to be reduced which clearly manifests that Accused No. 1 and Accused No. 12 were aware about the outstanding BRs. It is relevant to note that sub-transaction dated 18-10-91, as evidence shows was struck by Accused No. 1 and by Accused No. 12 from Bangalore from their residence when there was a Public Holiday for the Bank at Bangalore.
vii) Accused No. 1 and 12 were very much aware of the mode of delivery in all the impugned transactions as the same has been reflected in the entries in the dealers pad made by themselves and these lends corroboration to the evidence of P.W. 2-Mr. Vernekar who has testified that he reported the said fact to the dealers at Bangalore on the same day.
viii) Pay Orders in three impugned transaction issued by Canara Bank on behalf of CANFINA favouring BOK were credited into the account of accused No. 3. BOK on the same day, without there being any instructions either from CANFINA or Canara Bank, on the very days. The said amounts were diverted to other accounts. There is a evidence made available about the said diversion into the account of accused No. 2.
ix) Evidence shows continuation of conspiracy from April, 1991 till end of May 1992 by the following overt acts.
a) On 15-9-91 Cover Up operation through MCB.
b) On 15th and 10th October, 1991 two sub-transactions.
c) On 18-4-1992 BOK issued its SQL as substitute to its BR issued by it to CANFINA in first security transaction dated 6-4-91 which was dis-honoured by R.B.I, when presented by CANFINA on the ground of not sufficiency of balance.
d) On April, 1992 accused No. 1-M.K.S. Ashok Kumar in the company of accused No. 2-H.P. Dalal met P.W. 25-P.R. Appana Rao in the office of Canbank Mutual Fund in connection with BOK's outstanding BRs and the assurances of accused No. 2.
e) In the third week of the May 1992 meetings in the Taj Mahal Hotel were held and admissions by accused Nos. 2, 3 and other accused of the receipt of proceeds of CANFINA's money.
f) All these would show that conspiracy continued and links and connections between the accused.
g) Most importantly, accused No. 2-H.P. Dalal figures as broker in all the transactions three impugned transactions and two sub-transactions as also in other various transactions with different parties put through on the payment flown from account of accused No. 3 from CANFINA's payments.
318. The chain and course of events in the back-ground of impugned security transactions which are back bones of this case, as enumerated herein-above, stand established and proved by the prosecution beyond shadow of doubt. While discussing and considering the evidence of the prosecution and facts as gathered in the context of each of the points mentioned hereinabove, Court has already considered the same and held prosecution having established the conspiracy between accused Nos. 1, 2, 3 and 7 to 12.
319. Agreement, as stated, amongst the conspirators is main ingredient of conspiracy. The parties to such agreement may execute certain acts collectively together or by few of them or even by one of them with the object of achievement and fulfillment of the object.
320. The evidence discussed and the points enumerated hereinabove establish the nexus and links between the accused herein as part of conspiracy. To summarise it:
a) In striking deals of the impugned transactions accused No. 1 and 2 being the dealers of CANFINA were involved and the evidence shows that accused No. 2 was the common broker in all the impugned transactions. This shows association and link of accused Nos. 1, 2 and 3.
b) The said impugned deals were routed into the account of the account of accused No. 3 Mr. A.D. Narottam with BOK. Accused Nos. 7 and 8 were the concerned employees of the said Bank and who have, as noticed earlier taken necessary steps for the execution of the said deals. As noticed earlier, Cost Memos and BRs were issued by accused Nos. 7 and 8 on the strength of Delivery Order of accused No. 3 favouring CANPINA although there existed no security in the account of accused No. 3 with BOK or with BOK itself. It is to be noted that the said security transactions were shown to be between CANFINA and BOK although it was not so. Thus accused Nos. 1, 2 8s 3 and 7, 8 and 12 come into picture in chain of events.
c) In the Cover Up Operations put through MCB, on 16-9-1991 accused Nos. 9, 10 and 11 appeared on the scene. The said Cover Up operation as noticed earlier by cogen and clinching evidence, were undertaken for manipulating the security ledger account of accused No. 3 with the object of preparing record in the security ledger that there existed the securities in the account of accused No. 3 covered under three impugned transactions. The entries eventually were made in the security ledger account of accused No. 3 with BOK breaking chronological order and sequence and it has been proved that the sole object of such cover up operation was to fabricate the record of BOK. Thus link between accused Nos. 9, 10 and 11 with accused Nos. 2, 3, 7 & 8 also stands established. Documentary evidence, namely joint statement of accused Nos. 9. 10 and one Mr. Gandhi (P.W. 20) of MCB, which has been produced and proved as Ex. 352 and to which accused Nos. 9 & 10 are the signatories, which statement is proved shows links between accused Nos. 9, 10 and 11 and MCB on one part and that of accused Nos. 2, 3, 7 & 8 on the other. In fact the Cover Up Operation was result of outcome of such meetings. These thus establish as links between accused Nos. 2, 3, 7, 8, 9, 10 and 11.
d) As noticed earlier accused Nos. 1 & 12 being the dealers have struck the deals with accused No. 2 the broker and accused No. 2 as noticed earlier is a common connecting link between other conspirators i.e. accused Nos. 1, 3, 7 to 12. It is in the evidence, clearly proved that BOK's, BRs and Cost Memos used to be collected by the messenger of accused No. 2 from CANFINA and used to collect CAN FIN A's pay orders favouring BOK, against delivery of cost memos and BRs etc.
e) Evidence further shows direct involvement of accused No. 2-H.P. Dalal in the process of documentations in impugned transactions as already noticed above. In as much as, some documents such as D/Os and R/ Os of accused No. 3-A.D. Narottam are in his hand writing.
f) It is also proved that substantial part of amounts passed into his (i.e. accused No. 2-H.P. Dalal) account.
g) CANFINA is a victim as a result of what was done.
h) The other causalities are BOK and MCB which went into liquidation.
321. The evidence discussed hereinabove and what emerged therefrom enumerated hereinabove is squarely borne out from the evidence that has been adduced by the prosecution in this case. Major portion of the evidence consist of documentations. Such documentations is of contemporaneous record which speaks volume on the aspect sought to be bring forth therefrom by the prosecution. Such documentation itself is the process in consequence and thus circumstances in the background of various acts of commission and omission that occurred in the whole operation of the transactions in securities. The Court has relied upon such circumstances as the same stood proved and clinchingly established with reference to the various acts to which concerned accused were direct parties.
322. As stated earlier while accepting the circumstantial evidence the Court had to exercise utmost precaution and prudent rules of evidence required to be judicially applied while considering circumstantial evidence. This what the Apex Court has posited in the case of S.P. Bhatnagar v. State of Maharashtra & another, reported in 1979 Cri.L.J. 566:
"The circumstances from which the conclusion of guilt is to be drawn should in the first instance be fully established, and all the facts so established should be consistent only with the hypothesis of the guilt of the accused. Again, the circumstances should be of a conclusive nature and tendency and they should be such as to exclude every hypothesis but the one proposed to be proved. In other words, there must be a chain of evidence so far complete as not to leave any reasonable ground for a conclusion, consistent with the innocence of other accused and it must be not to leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that within all human probability the act must have been done by the accused. Foll."
323. Bearing these principles in mind this Court as discussed hereinabove has assessed and weighed each of the circumstances while assessing the complicity and involvement of the concerned accused in various acts. The circumstances as made out which have been sufficiently supported by contemporaneous documents are of conclusive nature and tendency and point out to the guilt of the concerned accused.
OFFENCE UNDER SEC. 4O9 OF I.P.C.
ENTRUSTMENT / DOMINION.
324. The criminal breach of trust by public servant of property in his capacity of a public servant is a main offence of this case is directed against the accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan, the dealers at the relevant time of CANFINA who struck and finalized the deals in security transactions being the subject matter of this prosecution. It is noticed from the evidence discussed earlier, the entire scenario upon which the prosecution case has been set up is based on what consequences that ensued as a result of the said security transactions of CANFINA being not fructified. It stands amply proved that, as a result of the said security deals, CANFINA parted with the moneys which was its property as envisaged under the provisions of the said section and ultimately suffered losses.
325. As held earlier, accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan have already been held to be public servants. The question whether it can be said that there was an entrustment over CANFINA's prop-erty to the accused Nos. 1 & 12. It is not in dispute that moneys which CANFINA parted were as considerations of the securities in respect of the deals struck and finalized by accused Nos. 1 and/or 12 as its dealers. The transactions in securities were for and on behalf of CANFINA. It, therefore implies that CANFINA was the owner of the property and accused Nos. 1 & 12 being its employees and dealers, were entrusted with the property and said to have dominion over its property. Said entrustment flew from the delegation of powers conferred upon accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan by CANFINA under its Board Resolution dated 10th August, 1989 being Exh. A-1(11) on record which is already considered hereinabove in the context of authority and power of accused No. 1 and/or accused No. 12 to strike and finalize deals. By the said resolution, (CANFINA, a corporate body, has delegated powers and authorized accused No. 1 M.K.S. Ashok Kumar and accused No. 12-S. Mohan to strike and finalize deals in security transactions on its behalf without there being limits.
326. It is noticed earlier that although at the relevant time, there were no comprehensive guidelines as such framed by CANFINA, nevertheless, such transactions were to be undertaken by following and observing prudential banking norms and policy and guidelines as laid down by R.B.I. Such delegation of powers by CANFINA to accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan made it imperative to the said accused to handle the property of CANFINA in a particular manner and not in violation of any prudential banking norms, banking policy and guidelines of R.B.I, in best interest and profitable to CANFINA. It must be also noted that with such type of power/delegation there is implicit and inherent obligation cast upon the dealers to use and exercise the powers with regard to the security transactions by acting honestly and in any event to ensure not to dispose of the same dishonestly in violation of the authority. What is criminal breach of trust has been defined under section 405 of I.P.C.
327. Entrustment as such is not necessarily a term of law. It may have different implications in different contexts when a body like CANFINA which; is a corporate body possesses the property and authorizes by delegating powers to its employees like, accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan to handle the same in a particular manner. The ownership of benefits and interest in the property remains with it. It has been held by the Apex Court in the case of Rashmi Kumar (Smt) v. Mahesh Kumar Bhada. reported in 1997(4} Bom.C.R. page 145 (S.C.) that in order to establish en-trustrnent of dominion over the property to an accused person, mere existence of that person dominion over the property is not enough and it must be further shown that the dominion was the result of the entrustment. It follows that there has to be evidence of entrustment. In my view the Resolution of Board of Directors of CANFINA dated 10th August, 1989 Exh.A-l (11) is the document whereby accused Nos. 1-M.K.S. Ashok Kumar & 12-S. Mohan have been delegated powers to deal with CANFINA's property, namely, securities including Government securities. The said document Exh. A-1(11) is a proof of entrustment of dominion of the property of the CANFINA-security upon accused Nos. 1 & 12.
328. As already discussed earlier and it has been proved beyond any shadow of doubt that in respect of transactions being the subject matter of this pros ecution, it is Accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S Mohan as the dealers who struck and finalized the deals and thus they handled the property of CANFINA.
329. As noticed earlier, there is in the evidence and it has been proved be yond doubt that ail the transactions of this prosecution were finalized by accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan and all the necessary further steps in respect of implementation/execution thereof were taken strictly in accordance with the instructions/directions of the said accused. It is only after the deals were struck and finalized at Bangalore that the payments came to be remitted from Bangalore to Bombay and which thereafter was paid over to BOK. But for striking and finalizing the deals in the transactions of this case by dealers i.e. Accused Nos. 1 & 12, CANFINA could not have parted with the moneys. Therefore, considering the evidence discussed hereinabove and the manner and the circumstances in which the money came to be parted it clearly shows that whatever Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan did, was in pursuant to the trust reposed upon them by CANFINA by delegating the powers.
330. As the evidence shows and which has been proved that the said deals in question were shown to be although between CANFINA and BOK, in reality, it was not so. The moneys of CANFINA travelled into the account of accused No. 3-A.D. Narottam and therefrom to other sources. The role played by Accused No. 2-H.P. Dalal has already been discussed above. It is accused No. 2-H.P. Dalal who acted as a broker and Accused No. 1-M.K.S. Ashok Kumar and/or Accused No. 12-S. Mohan who struck the deals. It is, therefore, legitimate to infer that they did so, in consultation and in close association with Accused No. 2-H.P. Dalal, a broker. As it happened and already proved by evidence that eventually CANFINA suffered losses. The manner in which the course of events took place respecting all the transactions of this case, is clear manifestation of a dishonest intention on the part of accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan which is the gist of this offence.
SECTION 467 OF I.P.C.
FORGING OF VALUABLE SECURITIES-
BRs & COST MEMOS, ETC.
331. As noticed earlier, there are six BRs and six cost memos which figured in this case being issued by BOK favouring CANFINA on 6th April, 1991, 22nd July, 1991 and 31st July, 1991 in the respective impugned transactions between CANFINA and BOK of the respective securities mentioned therein. Three BRs and cost memos have been issued by MCB favouring BOK on 16th September, 1991 in respect of respective securities as mentioned therein. It stands already proved that BRs were the documents to be reckoned as "Valuable securities". It is to be noted that, on the strength and basis of BRs, CANFINA paid the moneys to BOK accepting the said BRs of BOK as valuable securities. There are many witnesses who have stated as discussed hereinabove that BRs were in par with a document of valuable securities. The said BRs also contain recitals of the receipt of considerations. The same also contain the recitals that till discharge thereof the CANFINA was to hold the same on account of BOK. All this would show that BR is a document of valuable security.
332. It is already held and proved that when BOK issued these three BRs, there existed no securities under the respective BRs with it at all and BOK was not in a position at the dates when it issued the said BRs or even thereafter and thus was not in position to deliver the securities under the BRs to CANFINA. It is, therefore, evident that the documents, namely, the said BRs were prepared purporting to be a valuable security, without there being any securities to back up the same.
Section 467 of I.P.C. which is relevant is reproduced below :--
"467. Whoever forges a document which purports to be a valuable security, or a Will, or an authority to adopt a son, or which purports to give authority to any person to make or transfer any valuable security, or to receive the principal, interest, or dividends thereof, or to receive or deliver any money, moveable property, or valuable security, or any document purporting to be an acquittance or receipt acknowledging the payment of money, or an acquittance or receipt for the delivery of any moveable property or valuable security, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."
The plain reading of the said section 467 I.P.C. makes it clear that any document, which is meant to be a valuable security prepared and/or executed with the object as appearing in the said section would; constitute an offence of forgery. In the instant case, it is already proved that there existed no security at all to back up the issuance of BRs with BOK or MCB. Yet, Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje and 8-S.A. Ail, as far as BOK is concerned got the said BRs forged for using the same as valuable securities and on the strength of which made/induced CANFINA to part with the moneys. As far as MCB is concerned, the position is the same that BRs were issued by Accused No. 9-K.K. Kapadia and accused No. 10-M.S. Kusthe in active connivance with accused No. 2-H.P. Dalal, accused No. 3-A.D. Narottam, Accused No. 7-C.S. Raje, Accused No. 8-S.A. Ail and Accused No. 11-S.N. Ramaswamy without there being requisite securities. Delivery orders or receiving orders were issued and exchanged by BOK and MCB in respect of security transactions which securities did not exist at all. On the strength of said BRs issued by MCB favouring BOK, BOK paid the moneys to MCB. Although the said BR.s of MCB were brought into picture in a Cover Up operations, the fact remains that the same were issued with the definite object and intention for being used as a valuable securities to facilitate receipt of the money from BOK, when issuance of the same was not backed up by requisite securities.
333. Considering the evidence discussed hereinabove as also earlier in the relevant context, it has to be held that concerned accused, namely accused No. 2-H.P. Dalal, accused No. 3-A.D. Narottam, accused No. 7-C.S. Raje and accused No. 8-S.A. Ail as far as BRs of BOK is concerned and accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy, as far as BRs of MCB is concerned, were responsible for forgery of said BRs which were the valuable securities and which each one of them know that the same was to be used as such. Thus, ingredients of section 467 of I.P.C. squarely apply to the said accused and hence held guilty for the said offences.
CERTAIN ASPECTS CONCERNING INVESTIGATING AGENCY- C.B.I. CONDUCT OF PROSECUTION BEFORE THE COURT :--
334. It is the C.B.I. who carried out investigation in this case as also many other cases relating to tainted security deals. It collected voluminous evidence, interrogated several witnesses. It must be said that in the cases of such types, criminal elements involved therein, do not fall in the category of traditional crimes i.e. crimes under I.P.C. like murders, gangwars, etc. Same involve consummate and ingenious skills of perpetrators, who possess proficiency not easily comprehensible. Such criminals are not traditional and conventional which professional agency must bear in mind while conducting investigation.
335. These are so to say new types of crimes, with change of pattern. A murder may be committed in the heat of moment upon passion being aroused. However, offence of the types as in this case are committed with cool calculations and deliberate design with an eye on personal profit regardless of the consequences as is manifested in this case. As noticed, both the banks-BOK and MCB had tragic end going into liquidation.
336. Although CBI was very much aware that all the financial institutions involved in such fraudulent deals were subjected to inquiry, inspection and scrutiny by RBI, which is a Central Statutory Authority under RBI and Banking Regulations Acts, whose reports of such findings were and could be available, no efforts to co-ordinate with the RBI appears to have been made as ought to have been done. It is something strange and intriguing that when prosecution, during the course of conduct of trial realized the importance, relevancy and utility of such RBI findings and when attempts were made by issuance of Court processes requiring RBI to produce such findings concerning CANFINA, RBI through its Counsel vehemently opposed such production by use of shield of claim of privilege. This is indeed ironical and unfathomable. RBI there by only exhibited its ignorance about the nature of its such Reports and their statutory character and evidentiary relevance in the trial of offences of the type herein before the Court of law. Indeed, Court was required to, after examining the statutory aspects, to rule that such Reports were Statutory Re-ports and in public interest their disclosure was necessary. For that matter, making available before the Court, was RBI's prime duty. This clearly illustrates lack of co-ordination between the investigating agency and supervising and controlling agency i.e. RBI as also ignorance of statutory provisions.
337. Further, just as investigation and collection of material and evidence was vital, it was equally crucial to present the same before the Court in definite orderly and coherent and systematic manner during the conduct of trial. As it transpired, this did not happen. In this case, in the midst of trial, prosecutors were changed and replaced. All these resulted in wasting precious judicial time of the Court and same caused inconvenience to all. It is necessary that investigation agency would ensure to involve with it those well experienced and proficients in Banking operational systems. It is to be noted that the Reports of Auditors statutory as also internal of the concerned institutions, were not collected and made available before the Court being contemporaneous record having corroborative value. It was also observed that, even some senior officials of CBI were unaware of the existence of statute, namely, Bankers Book Evidence Act and which Act permits and allows for the tender of certified copy of any entry in the Banker Book in all legal proceedings as a prima facie evidence and that the certified copy of extracts in respect of any relevant entry has to be duly certified and authenticated by an authorized officer of a Bank, in a manner as provided in the said Act. The investigating agency being unaware of this important provision, seized such record which was very bulky, like, Security Ledger, Account Ledger containing record of the Bank, etc. Said ledgers contain record required in many other cases before various courts. The record was, apart from its bulkiness, in keeping and preserving it, there used to be repeated demands from other courts for the same record in some other cases and applications after applications for such movement were required to be entertained wasting time of the Court as also causing inconvenience. There is also damage caused in the process of such handling. Even in this case, several of such ledgers have been produced containing record pertaining to various other cases pending in different courts. It is expected that investigating agency shall take notice of this important statutory provision and shall follow it in future. It is to be noted that recently Central Vigilance Commission (CVC) has added Special Chapter in its Manual concerning matters/cases of Banks put through irregularly, Bank frauds, etc. laying down guidelines to tackle the cronic problems. It is hoped that con-
cerned agencies, like CVC, CBI and RBI would ensure meaningful and purposeful co-ordination in handling cases of the types, including investigations.
338. However, in the given circumstances, Court expresses its sincere appreciation over the valuable assistance rendered by the Prosecutor as well by the defence. The trial of the case has dragged on for quite a long time. That is because of voluminous evidence that has been made available before the Court as also unconventional and untraditional nature of facts, somewhat intricate and of complicated nature as obtained herein. Some accused, namely, Accused No. 3-A.D. Narottam and Accused No. 11-S.N. Ramaswamy appeared in person all throughout and conducted their defences. As far as Accused No. 12-S. Mohan is concerned, he also appeared in person except that at the last stage, for the argument, he engaged his Advocate. Accused No. 3-A.D. Narottam, as stated earlier, also adduced evidence by examining himself on oath. He also examined certain witnesses. All these contributed to the consumption of good deal of time of the Court. But by and large the conduct of the trial was smooth and the credit of it goes to every one concerned in this case.
DEFENCE PLEAS-UNDER GENERAL EXCEPTIONS:
339. One aspect would need consideration in the background of the stand taken by some of the accused in their defence claiming exceptions under the provisions of Chapter 4 of the I.P.C. This is particularly done by Accused No. 3, 7, 8 and 10. It is necessary to note that accused in any case when he claims exceptions, burden lies of proving the existence of such circumstances upon him. Section 105 of the Evidence Act specially provides for the same.
i) Accused No. 3:--Accused No. 3 has pleaded that he was compelled to allow him to use his account in BOK by Accused Nos. 2, 4, 5 and 6. His defence indicates that there was huge liability upon accused No. 5 in respect of LIC Mutual Fund and for rolling over the same, accused Nos. 2, 4, 5 and 6 evolved a scheme by undertaking fictitious security deals. He was employee of accused No. 4 for considerable period. Accused No. 6 had worked with his firm. Accused No. 6 was also associated to Accused No. 4. The Accused Nos. 2, 4 and 6 prevailed upon him to allow such role over operation in his account with BOK. He therefore pleads that he was used as conduit in such role over security transaction operation and was forced to issue Delivery Orders or Receiving Orders etc., in support of security transactions although he did not possess the same. He claims that he was assured by the said accused in particular, by accused No. 4 that everything would be properly done.
ii) Accused Nos. 7 & 8:---As far as accused Nos. 7-C.S. Raje and 8-S.A. Ail are concerned, they are the employees of BOK and they have pleaded that they did whatever required in execution of security transactions with CANFINA into the account of accused No. 3, they did it under instructions of accused No. 3 who was its Director.
iii) Accused No. 10:---He was an employee of M.C.B. and admits having singed Cost Memos and BRs of M.C.B. in Cover Up Operations as also Pay Orders. He has stated that he did so under the instructions of then Chairman of M.C.B. Mr. Desai.
340. Considering the pleas of the above accused, it will be necessary to advert to the relevant provisions as contained in Chapter 4 of I.P.C. under title "General Exceptions". Sections 76,79 and 94 will be the relevant sections in the background of pleas as raised by the above accused, mentioned earlier.
341. Section 76 provides excuse to a person who had done what by law is an offence under a misconception of facts leading him to believe in good faith that he was bound by law to do it. Whilst section 79, which provides some what similar to section 76 does, as noticed earlier, only requires one more fact that talks of justification for doing particular act.
342. Section 94 provides for justification when any person is compelled to do some thing by administering threats.
343. On careful consideration of the statutory provisions noticed herein-above and the pleas that aforesaid accused have put forth as justification claiming exceptions, stated above, it need to be stated that taking into account the standings and status of the accused and nature of work they were doing and their duties and functions, etc. the same does not hold water good.
344. As far as Accused No. 3 is concerned, the evidence shows that he had worked and had long and sufficient experience in share broking and security transactions. As a matter of fact and as evidence shows he was also engaged in such operations since long. It therefore clearly follows that he had sufficient knowledge and also understanding of nature of transactions being the subject matter of this case and inevitable consequences that would ensue by putting through the transactions in securities in the manner the same were done as in the case herein. His evidence clearly shows that he was all along aware and conscious of the fact as to what was being done. In fact, he himself was an active participant in the operations. Transactions worth hundred of crores were routed into his Bank account without there being any security. As experienced Share Broker he knew what such transactions meant. It is difficult to believe and accept his plea that he readily and willingly acceded to the suggestion of Accused Nos. 2,3,4,5 and 6 as sought to be made out. There is no question of mistaken fact of law or fact that can be inferred in his case. Further the transactions were spread over for long period of time and he did not do anything despite being aware of the nature of the transactions and the consequences if he was so innocent as claimed now.
345. As far as acceded Nos. 7 & 8 are concerned, they were the employees of BOK working in the security department and they knew and were very much aware of the nature of their work, duties and responsibilities attached thereto. Accused No. 7 was an officer authorized and empowered by BOK to sign cheques, BRs etc. He as also Accused No. 8 had experience of work relating to the security transactions and operations of accounts. For that matter, they were aware of the significance and importance as also purpose of BRs in the security transactions. In such circumstances there mere plea of they having acted upon the instructions of the Accused No. 3 who at the relevant time was a Director of BOK does not appeal to the reason. If indeed it was so then there were other superior officers and the Managing Directors and Chairman etc. of the said Bank and it is not explained as to why they did not take up the matters to them. This conduct of their rules cut the merits of their defence plea.
346. Now coming to the plea of Accused No. 10 it may be stated that two officers of the M.C.B. P.W. 20 D.R. Gandhi and P.W. 22-O.K.M. Nambiar in their defence stated that the security transactions used to be attended by accused No. 9. They have proved and identified the various documents relating to such cover up operation transactions of M.C.B. dated 16-9-1991. It is most pertinent to note that in the cross examination Accused No. 10 has not made any suggestion or elicited anything which would make the said plea even reasonably probable.
347. Therefore, taking into consideration all these facts, I do not find any substance in the pleas whereby Accused Nos. 3,7,8, and 10 have claimed exceptions and the same stands rejected
348. Before parting, this Court thinks it expedient to put it on record, certain most disturbing features concerning working of the banks involved in this case, viz. Canara Bank and its subsidiary CANFINA, BOK, M.C.B. and A.N.Z. Grindlays Bank, with regard to their so called transactions in Government securities being subject matter of this case. This is being done from and on the basis of evidence that has been made available before this Court by the prosecution as also by the defence which Court has critically and most carefully sifted and examined while considering various points to which this a Court addressed itself.
349. Vis-a-vis, security transactions impugned in this prosecution, viz. three main impugned transactions and two sub-transactions with CANFINA and BOK and three Cover Up transactions between BOK & M.C.B. were undertaken by means of BRs although there existed no securities with the concerned Banks to support issuance of BRs. SGL issued by BOK as substitute to its earlier BR was also without sufficient balance in its PDO with RBI. culminating to its dishonour on the ground of insufficiency of securities. Evidence shows that, in case of one security transaction stated to be between ANZ Grindlays Bank and NOCIL, in fact had not taken place at all. NOCIL purported to be purchasing party has testified to that effect. Still Grindlays Bank had issued its BR for the said security. CANFINA's dealers went on in putting through successive transactions of hundreds of crores stake with BOK when its earlier transactions by means of BRs were outstanding. M.C.B. which was very small Bank, with four crores deposit capacity, issued BRs to the extent of four hundred crores, that too without holding and possessing the requisite securities. This was done, as is evident, to manipulate security account of Accused No. 3 A.D. Narottam with BOK which had earlier issued its BRs to CANFINA without holding requisite securities and on strength of which CANFINA paid the moneys to BOK.
350. It stands clearly borne out from, the evidence discussed that resort to the issuance of BRs in the transactions of this case, is a key factor behind entire mischief and malpractice resorted to by its perpetrators with sole aim of facilitating the brokers, in particular Accused No. 2 H.P. Dalal , Accused No,. 3-A.D. Narottam and Accused No. 11-S.N. Ramaswamy of illegally siphoning of moneys of CANFINA for their speculative returns and benefits which is blatant criminal misuse of Bank money, a public fund. BRs were issued by brazenly flouting the healthy banking system, guidelines of RBI and prudential norms of banking. This is amply demonstrated from further fact that BOK could not honour its commitments under its BRs issued to CANFINA and eventually went into liquidation. M.C.B. also met with the same fate.
351. Those who actually participated in perpetrating frauds have been held guilty. They happen to be employees of the concerned institutions and the brokers involved in the fraudulent security transactions. The question of considerable importance as also of great concern that comes to the front as to how the administrative apparatus of the concerned institutions in par-
ticular of Canara Bank and CANFINA, in particular, their Higher Ups allowed such thmgs to happen and what did they do to avert the scenario. Were there or not existed system of internal checks and balances with the said institutions? Did they not so also RBI , which is a Central Bank, controlling and guiding the banking operations of all the Banks in this country, realize or had no means to know that small Banks like BOK and M.C.B. were being used as conduits by the brokers, some of whom were on their Boards of Directors. Especially so when atleast in one instance, SGL issued by BOK in April, 1992, as substitute to its earlier BR was dishonoured by RBI (P.D.O) on the ground of insufficiency of balance.
352. This Court is constrained to note and with grave concern, considering the way the top bosses of these institutions, viz., Canara Bank and CANFINA, who were examined as witnesses, acted and reacted while holding responsible positions in such prime financial institutions, dealing with public funds. This Court, with full sense of its responsibility but with great reluctance is constrained to observe that the conduct of such higher ups amply demonstrated complete lack of accountability on their part in monitoring and overseeing the dealings in the public funds holding responsible positions in the said institutions. The state of affairs which existed with regard to the security transactions of CANFINA for the year 1990 i.e. prior to the period of impugned transactions was graphically highlighted and exposed in the Inspection Report (Ex. a-l(16)) rendered by Mr. Nanjappa (P.W. No. 65) RBI Inspector, submitted to RBI. The picture which existed in CANFINA was grim and disturbing. Despite this, it is shocking and strange that neither RBI nor Higher Ups of CANFINA or Canara Bank thought it prudent to act timely and swiftly to retrieve and or to improve the situation and functioning and avert such nefarious malpractices until the scam in security transactions of Banks surfaced in April 1992, by the time, CANFINA was deprived of hundreds of crores of rupees by such fraudulent deals by clandistine manner. Although scam was revealed in last week of April, 1992 it took RBI to awake from slumber three months to issue circular in July, 1992 laying down guidelines. Had it been done promptly, perhaps position would have been different. This did not happen. No convincing explanation is offered for such criminal apathy by the higher ups of Canara Bank and CANFINA. Their lackadaisical, indifferent and complacent attitude is baffling. This Court thinks it necessary to highlight this state of affairs to emphasize that the manner in which transactions of this cases in securities were put through, it clearly manifests that the issuance of guidelines remained in papers and followed in breaches only. Committees after committees are appointed, headed by competent and proficient men, who make recommendations suggesting means to improve the system. But what is of most and crucial importance is the personnel engaged and concerned in the day-to-day banking operations that matters most. Working of all system will depend upon the personnel who operate it. These fraudulent security transactions of this case clearly reveals that system failure is occurred due to failure of the persons, operating it and their fraudulent deeds": What is most deplorable and regrettable aspect noticed by this Court is the casual and mechanical way the top officials of Canara Bank and CANFINA testified before this Court without there being any indications of remorseness. In an important aspect of banking business, some of the senior officials ex-
hibited their ignorance of the existence of important statute like Bankers Book Evidence Act and how certification of authentication was to be done thereunder in respect of extracts of ledgers. No point in multiplying but these are few as illustrative. However, all said and done as far as findings of this Court in respect of culpability and involvement of the accused in this case, as held herein the same will not get detracted as the evidence clearly shows their complicities in the various offences of which they are held guilty. One cannot say or justify one's criminal Act or omission with a plea that he committed crime because there was no policeman to prevent him from doing so. Crime if so committed and proved, its perpetrator cannot escape its inevitable consequences.
353. Taking over all appraisal of the evidence, totality of a the facts and circumstances, the entire evidence made available and discussed, the roles played by concerned accused the legal position, the Court comes to the con clusion and holds, that: -
i) Accused Nos. 1-M.K.S. Ashok Kumar, 2 H.P. Dalal, 3-A.D. Narottam, 7, C,S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte, 11-S.N. Ramaswamy and 12-S. Mohan are held to be guilty being parties to a continuing criminal conspiracy between April, 1991 and May, 1992 at Bangalore and Bombay, 'the object whereof was to "commit criminal breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,345.78" punishable under section 120B read with section 409 of I.P.C.
ii) Accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan are held guilty of offences under section 409 read with 109 of I.P.C. for the offence of committing breach of trust in respect of the property of CANFINA viz. Rs. 374,35,18,354.78.
iii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy are held guilty under section 409 read with section 109 of I.P.C. for abetting Accused Nos. 1 and 12 in commission of offence of criminal breach of trust in respect of property of CANFINA with the sum of Rs. 374,35.18.353.78.
iv) Accused Nos. 1-M.K.S. Ashok Kumar, 12-S. Mohan are held guilty for the commission of offences under section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act, 1988 being public servants for abushing their positions as such public servants and by corrupt and illegal means obtained for Bank of Karad A/c. Accused No. 3-A.D. Narottam, accused No.2-H.P. Dalal, Accused No. 11 -S.N. Ramaswamy pecuniary advantage of Rs. 374,35,18,354.78 and caused wrongful loss to CANFINA to the extent of the said amount.
v) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-SN. Ramaswamy are held guilty under section 13(l)(d) read with section 13(2) of the Prevention of Corruption Act, read with section 109 of I.P.C for abetting Accused Nos. 1 and 12 in the offence of criminal misconduct and corrupt practice being public servants.
vi) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail each one of them held to be guilty under section 467 read with section 120B of I.P.C. for the offence of forgoing documents viz. cost memo dated 6-4-91 Ex. 188, BR dated 6-4-91 Ex. 189, cost memo dated 22-7-91 Ex. 195, BR dated 22-7-91 Ex. 196, cost memo dated 31-7-91 Ex. 229 and BR dated 31-7-91 EX. 229 of BOK and S.G.L. form dated 18-4-92 Ex. 190 purported to be valuable security with the common object of receiving property viz. sum of Rs. 374,35,l8", 354/78 from CANFINA
vii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy each one of them held to be guilty under section 467 read with section 120B of I.P.C. for the offence and forging documents viz. cost memo dated 16-9-91 Ex. 667., BR dated 16-9-91 Ex. 344, cost memo dated 16-9-91 Ex. 668, BR dated 16-9-91 Ex. 343, cost memo dated 16-9-91 Ex.669, BR dated 16-9-91 Ex. 345 of M.C.B, purported to be valuable security with the object of receiving property viz. the sum of Rs. 374,35,18,354.78 from BOK A/c. CANFINA.
viii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam and 11-S.N. Ramaswamy each one individualy are held guilty under section 411 of I.P.C. for dishonestly receiving and retaining the property out of Rs. 374.35,18,354.78 received from CANFINA knowing and believing the same to be stolen property, as under:
i) Accused No. 1-M.K.S. Ashok Kumar Rs. 78,91,27,715.15;
ii) Accused No. 3-A.D. Narottam Rs. 295,28,90,639.63.
iii) Accused No. 11-S.N. Ramaswamy Rs. 15,00,000/-.
ix) As far as Accused Nos. 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi are concerned, it is held that charges leveled against them have not been proved by adequate evidence, same appearances as above.
All accused present.
354. On 11th March, 1999 this Court pronounced its findings holding Accsued Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8 S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte, 11-S.N. Ramaswamy and 12--S. Mohan guilty of offences as already indicated hereinabove. On that day applications were made by and on behalf of the defence for adjournment for making submissions on the quantum of sentences and the matter was adjourned today.
355. Today this Court heard the Counsel for the respective accused viz. Accused Nos. 1,2, 3 and 7 to 12. Court also heard the learned Public Prosecutor in the matter. The said accused have also submitted their written says.
356. I would briefly summarize the gist of submissions made by and on behalf of the defence through Counsel as also stated in their written says on the quantum of sentences.
357. Accused No. 1 M.K.S. Ashok Kumar: Mr. Thacker, learned Counsel for Accused No. 1 submitted that since the entire judgment has not been made available to Accused No. 1 he is handicapped on making comprehensive submissions on the quantum of sentence. He further submitted that the evidence as made available does not disclose any overt act attributing accused No. 1 of his involvement in the various offences . In as much as the learned Counsel submitted that there is no evidence to show that accused No. 1 had played any active role in the commission of various offences with which he has been convicted vis-a-vis impugned transactions in securities put through by and on behalf of CANFINA. He further submitted that accused No. 1 had played a very important role as an employee of CANFINA and was responsible for giving good returns to his employer i.e. CANFINA in various security deals and testimony of the same is that he came to be praised and complimented by Board of Director of CANFINA. It may be stated that learned Counsel also made submission concerning merits of the matter in respect of which the Court has already rendered its findings in the judgment.
358. Accused No. 2-H.P. Dalal : ---As far as accused No. 2 is concerned, by and large the submissions made were also in the terms as have been done by and on behalf of accused No. 1. Similar grievance is also voiced by accused No. 2 of being handicapped for want of entire judgment for facilitating submissions on quantum of sentence.
359. Mr. Ovalekar, Ld. Counsel made reference to the provisions of I.P.C. under which accused No. 2 has been held guilty and submitted that there is nothing made available in the evidence by the prosecution attributing precise and distinct role to accused No. 2. At the outset it may be stated that this aspect touches the merits of the findings of this Court in respect of complicity and involvement of accused No. 2 in this case.
360. Mr. Ovalekar tried to make a point that since the prosecution has not made available evidence about the precise and distinct role of the accused No. 2 in the commission of various offences while awarding sentences, the Court must take into consideration the said fact.
361. Accused No. 3-A.D. Narottam :---As far as accused No. 3 is concerned he is appearing in person. Reading his written submissions of accused No. 3 at the outset the same contains what he has already testified before the Court when he examined himself on oath as provided in section 315 of Cr.P.C. The Court has already discussed in its judgment that part of evidence of accused No. 3. Accused No. 3 again reiterates that he has been made scapegoat. His account was used as conduit by other accused. He has not receive any benefit etc.
362. He has further stated that he is 67 years old person and therefore prayed that the Court must show leniency to him.
363. Accused Nos. 7-C.S, Raje & 8-S.A. Ail: -As far as Accused Nos. 7 and 8 are concerned reading the written submissions and what is submitted across, it is gathered that what is sought to be highlighted is that the said Accused Nos. 7 and 8 state that they being the employees of BOK had to carry out instructions of their superiors. They had no intention to commit any offences. It is also stated that the said accused are bread earners for their respective families and therefore the Court should be merciful to them while awarding sentences.
364. Accused No. 9-K.K. Kapadia:---As far as Accused No. 9 is concerned, referring to the oral submissions by his Counsel and by reading the written submission what is sought to be put forth is that the said Accused No. 9 is responsible businessman and in his capacity as Vice Chairman of M.C.B. he was rendering honorary services to the said Bank. It is also submitted that there is no evidence made available by the prosecution indicating his positive roles in the operations.
365. Accused No. 10-M.S. Kushte:---Accused No. 10 in his written submissions and oral submissions by his Counsel has highlighted his family background, it is pointed out that responsibility of his family is on his head he being only earning member in the family. It is submitted that he was an ordinary employee of MCB and whatever he did was under the instructions of his superiors.
366. Accused Ho. 11-S.N. Ramaswamy:---As far as accused No. 11 is concerned he appeared in person. The sum and substance of oral as also written submissions is that according to him he had not committed any crime. He also did not receive any benefits. He has also stated about his family back-
ground and his responsibility to his family. He has also prayed for leniency in the matter of awarding sentence.
367. Accused No. 12-S. Mohan---As far as Accused No. 12 is concerned his submissions in his written say as also advanced across can broadly be divided into two parts. Firstly, it is sought to put forth that Accused No. 12 at the relevant time was working under Accused No. 1 and that whatever he did was under instructions of Accused No. 1 who was his superior. The second point that is made out is about his family background he being young, his poor financial condition and being without job etc. He prayed for leniency in award of sentence.
368. Having considered the submissions on the point of sentences it is thought necessary to advert to what the learned Public Prosecutor has submitted.
369. Learned Public Prosecutor, Mr. Pradhan as far as quantum of sentences is concerned submitted that the offences involved in this case with which the accused have been held guilty are of serious nature. He submits that in cases of economic offences tike these Court has to be very firm and exemplary sentences will required to be awarded to the perpetrators of the crime. He submits that these are not ordinary offences against any individual but same are offences against the society and public at large and therefore stringent view is called for.
370. It may be stated that reference was made by and on behalf of defence as also by prosecution to certain decisions of the Apex Court as also of this Court to highlight the principles the Court should follow in awarding sentences crux of which is that the approach of the Court should be corrective and reformative and should not be vindictive. It may be stated that various decisions which were referred to related to those where the offences involved were of traditional types like murders, dacoities etc. Whereas the offences in this case are of different type-economic offences.
371. Mr. Pradhan, Ld.P.P has made reference to certain decisions of the Apex Court which have highlighted that the Court should be very strict in the matter of dealing with culprits in economic offences, as in the case herein, as the same relate to the swindling of public funds on large scales for their selfish gain and as such offences against the society having deadly repercussions at the economic structure of the nation. He has urged for exemplary sentences.
372. As held earlier the offences in this case are not of conventional or traditional types. The huge funds running into hundreds of crores of the Banks, which are public money, have been diverted and siphoned by perpetration of fraud by undertaking fraudulent security transactions which were ostensibly shown as genuine. The evidence clearly establishes that there was a well planned strategy and everything that was done was done with cool head knowing fully well the consequences thereof.
373. It is relevant to note that transactions in question and various steps taken by its players/ perpetrators at various and different stages have spread over a period of 13 months. As held earlier it would be crystal clear that each and every action that was taken, right from the first transaction in April, 1991 till end of May, 1992 by the convicted accused will indicate what was actually sought to be achieved and how in cleverly planned strategy, clandestine operations were carried out. Each player had played his crucial and vital role at every stage.
374. The fact that the transactions in security being the subject matter of this case were not legitimate and everything was amiss is amply demonstrated from the fact that both the banks involved viz. BOK and M.C.B met with deadly end. Both the institutions have gone into liquidation. The evidence has already established how the accused in this case were operating in these banks as if their private property. CANFINA is not the only victim but thousands of depositors of both the banks.
375. The Court is of view that in ultimate analysis such types of crimes and its perpetrators cannot be equated and compared with ordinary criminals like thieves or robbers. Such crimes have very serious repercussions and impact upon the economic structure of the country. There is more damage caused to the society and to the nation. That being so there is no question of being lenient as has been sought to be made out in the matter of awarding sentences. In the submissions made by and on behalf of convicted accused, I do not find any mitigating circumstances to justify to be lenient.
376. Of late, there is phenomenal rise in magnitude of such type of white collar crimes which has posed a grave threat to the economic structure of the country. Scams after scams, in the financial sphere are surfacing involving huge amounts. Process is unabated. In fact, if judicial notice is to be taken, what is happening around in this country, there is increase in such scams involving crores and crores. It has shocked the conscience of the people and there is growing feelings amongst them that regulatory watchdog agencies are incapable to prevent and check such evils or deliberate corroborators to the same. Such belief is strengthened from the fact as to how and in what manner the R.B.I., which is central body having enormous powers under statutes, to decide and lay down policy and guidelines for observance of banks and financial institutions in this country, and whose power and authority have been given approval by the highest Court of this country in its numerous pronouncements, responded or failed to rise to the occasion by its prompt action or inaction when security scam in bank securities broke out in 1992, which this Court has already dealt with earlier. This Court has also highlighted how higher-ups in the management of the Canara Bank conducted themselves. It has become common phenomena these days that Controllers, Regulators and Managers of the statutory Agencies awake after escape of horse from stable. Judicial process is also slow as is evident that this Court could reach the final stage in this case after 8 years of commission of offences although Special Act has been brought into force to ensure "speedy trials" in these type of offences. Existing legal system, as is, may appear paradoxical that it has to apply penal statute enacted in the year 1861 i.e. 139 years ago, Rules of Evidence embodied in Indian Evidence Act, 1872, 125 years old statute when such type of offences in particular economic offences, bank frauds, etc. committed with ingenuity and consummate skills and by deploying very sophisticated new technique, as in this case, were not even comprehended thereunder. A poor hungry person stealing bread, Government servant in grade III defrauding 500 rupees and those looting and plundering huge public funds of Rs. 500 crores are considered as same crimes and dealt with on one legal platform and similar type of punishments are prescribed for the criminal in the Penal Code. It is necessary that such white collar crimes involving high stake which are committed which cool calcula-
tions and deliberate design with an eye on personal profit regardless of the consequences to the community devoid of any scruples are dealt with iron hand.
377. I would like to refer to a decision of the Apex Court which is directly on the point and outlines the approach of the Court in awarding sentences in economic offences and what should be borne in mind. The decision in question is reported in the case of State of Gujrath v. Mohanlal Gitamalji Porwal & another . This is what the Apex Court has posited:-
"The cause of the community deserves equal treatment at the hands of the Court in the discharge, of its judicial functions. The community or the State is not a persona nongrata whose cause may be treated with disdain. The entire community is aggrieved if the economic offenders who ruin the economy of the state are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless, of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage: done to the National Economy and National Interest."
378. In my view the above observation of the Supreme Court in all force and in all respect would require to be applied to the offenders of this case.
379. Accused Nos. 1 and 12:---In the case in hand, it is very important to note that all the accused, who have been held guilty, were fully aware and conscious as to what they were doing and consequences thereof. Coming to accused Nos. 1 and 12 who were the dealers of CANFINA, they knew how and with whom they were dealing with. All the three impugned transactions and two sub-transactions have been put through in successive order. The first transaction of 6-4-91 was around Rs. 25,00,00,000/-, while the second transaction was to the extent of Rs. 212,80,00,000/- which was put through on 22-7-91 while third transaction was still of a larger stake to the extent of about Rs. 255,00,00,000/-. They knew that instead of physical delivery of the security BOK had issued its BRs to CANFINA without holding securities. The transactions in all the deals were between CANFINA and BOK. We have already noticed earlier the standing and status of BOK as such. Although it was a scheduled Bank the evidence made available shows its standing capacity and financial status having deposit etc. to the extent of about 78 crores. Still the transactions in securities one after the other notwithstanding the fact that earlier transactions were not cleared the said Dealers went on putting successive deals.
380. Accused No. 2:---As far as Accused No. 2 is concerned he is common player in every field. He has acted as broker on papers but evidence as clearly discussed earlier shows how he was managing curtain from behind. In as much as in three impugned transactions and two sub-transactions, as noticed earlier there are atleast four documents to which Accused No. 2 is a party being author and/or signatory thereof and to which there is absolutely no explanation offered by said accused. In one instance, although he purported to act as a broker, he issued his own Delivery Order. He knew that the Deals were not between CANFINA and BOK, but put through the account of accused-No. 3 and of one such D/O of accused No. 3 he himself is an author. Evidence clearly shows that he is an allround player, striking shots, with well calculated and consummate skill, in every part of the filed. He figures as a common broker in all the tainted security transactions being the subject matter of this case, i.e. three impugned transactions, two sub-transactions, in cover up operation, all the transactions except one put through but of funds diverted from the account of accused No. 3 from BOK and what is more direct recipient of the substantial part of the funds. Therefore accused No. 2 being stock broker knew what he was doing and the consequences of its deals. As noticed earlier substantial amount of the transaction on the very days were routed has travelled into own account from BOK.
381. Accused No. 3: ---As far as Accused No. 3 is concerned he has tried to take stand being innocent and being victim of circumstances. However it needs to be stated that he has been in the security market working as stockbroker for last so many years. He himself was operating as broker in his own transactions. He knew how and what were being done to which he was a direct parry. In as much as noticed earlier there are various documents in the form of D/Os, R/Os, Advices to the Bank for issuing P/Os. etc. of him he himself is the author. He knew what he was doing and the consequences thereof.
382. It is true that he has admitted everything before the Court although at such belated stage faced with the evidence that the prosecution has gathered. As a matter of fact, the entire operation could be possible being the subject matter of this case as he readily and willingly allowed the transactions to be routed through his account. It is true that he is an aged person but considering the role which he has played in the entire operation and the consequences thereof the Court cannot consider his prayer for mercy. It is further to be noted that at the relevant time he has also on the Board of Director of BOK. Director of corporate body is like a trustee of its property and has been so held by the Apex Court in the case of R.K. Dalmia & others v. Delhi Administrations, .
383. Now coming to Accused Nos. 7 and 8, admittedly they were employees working in the Bank viz. BOK. -They were working in security department and therefore they knew what was the work they were doing and the consequences thereof. It is in the evidence that there was no balance at all of the securities involved in impugned three transactions either in the account of accused No. 3 or with BOK. Yet they issued BRs and Cost Memos and what is more relevant, Pay Orders from CANFINA on the strength thereof. Further on the very day without any instructions from CANFINA, they credited proceeds of all the pay orders into the account of accused No. 3 and passed on the amounts to various sources. This was not permissible at all and accused Nos. 7 and 8 should have known the same. They ought to have realised that-being employees of Bank, they were custodian of public funds.
384. Accused Nos. 9. 10 and 11---Coming to accused Nos. 9, 10 and 11 as stated they were concerned with MCB. The evidence shows and it has been sufficiently and adequately documented, that MGB was a Bank of small standing with hardly capital of Rs. 4 crores and on 16-9-91 when so called cover up operations in security transactions at the behest of Accused No. 11 were put through, there existed no security at all either in the account of Accused No. 11 or with MCB. Still BRs and Cost Memos were issued on the same day i.e. 16-9-91 for the amounts over 400 crores and on the strength thereof received Pay Orders from BOK. There is cogent evidence made available by the prosecution in this respect.
385. Accused Nos. 9. 10 and 11:---Accused Nos. 9 and 10 were the employees of the MCB and they knew what they were doing and the consequences that would ensue of their actions. So is the position as far as accused No. 11 is concerned. He was share and stock broker and has readily and willingly come forth to issue D. O.s etc. on the single day i.e. 16-9-91 for a huge amount of over 400 crores. Accused No. 9 was at the relevant time Vice Chairman of M.C.B. and was like a trustee as per ratio of Apex Court in Dalmia's case (supra).
386. Therefore taking into consideration all these facts, in my view, this is not the case where accused would deserve any leniency. As a matter of fact as indicated by the Apex Court in the case mentioned hereinabove such offences have to be dealt with firm hand.
387. In the circumstances the sentences are being awarded as would be indicated in the operative part of the judgment.
388. Before parting with the judgment, this Court is constrained to make some observations about the conduct of one of the witnesses in this case who happened to be a member of the Bar and has also been appointed as a Notary under the Notaries Act, 1952. Section 8 of the said Act lays down functions of Notaries which includes as per Clause l(e) thereof "administer oath to, or take affidavit from, any person". Court is required, with great reluctance "to make certain observations and recommend some action in the circumstances explained hereinbelow against the said witness.
389. It is noticed that somewhere in May, 1992 Accused No. 2 made an affidavit before the Notary Mr. Niranjan Raosahib Jagtap, examined as P.W. 59 in this case. It is noticed that the said witness was also interrogated by Investigating Agency and his statement under section 161 of Cr.P.C. was also recorded. Although he was cited as one of the witnesses in this case yet he accepted the brief in this case for and on behalf of one of the accused i.e. Accused No. 11. He also has filed his appearance on his behalf and at some stages appeared and represented said accused before this Court. Court hastens to clarify that just as a litigant has a right to choose his Advocate of his choice same principle could be extended to the Advocate. However some sense of discipline and purity requires that when P.W. No. 59 being a Notary, entrusted with important duty in his capacity as Notary and who was very much aware that he was one of the witnesses and recording of his statement under section 161 of Cr.P.C. in this case, chose to accept the brief from one of the accused in this case as stated earlier.
390. The matter does not end there. When he was called as witness by the prosecution, he deviated from his version as reflected in the statement recorded under section 161 of Cr.P.C. The Court again hastens to clarify that it is not the aspect with which this Court is concerned. Ultimately the statement recorded by the police under section 161 of Cr.P.C. has no credential value as such before the Court.
391. What is most disturbing feature and fact that this Court is required to make observation is that his evidence shows that he was appointed as Notary by Maharashtra Government under the Notary Act in the year 1983 and has been continuously acting Notary as such since then. Affidavit in question was made somewhere in May, 1992. His evidence shows and which he has clearly admitted that when accused No. 2-H.P. Dalal declared the said affidavit before him, he did not ensure that accused No. 2 read and under-stood the contents thereof. His evidence suggests and clearly indicates that it was not part of his duty as Notary to ensure that the declarant of the affidavit has to understand the contents of the affidavit as also truthfulness and correctness thereof. It is necessary to note that Notary Act (the relevant provision referred to earlier) talks of "oath" and "Affidavit". P.W. 59 himself being a lawyer, he would understand the efficacy of oath and the affidavits which are to be made before him in his capacity as the Notary. Needless to add that statement contained in such affidavits have to be truthful and accurate and maker of it before he affirms must know that the same are true and correct. This is basic requirement of the statement on "oath". Thus it was a basic requirement that P.W. 59 acting as Notary under the statute to ensure that the declarant of the affidavit has understood the contents of the affidavit. However as stated, Jus evidence shows that he did not bother to ensure that accused No. 2-H.P. Dalal while declaring the said affidavit, had understood the contents thereof. On the contrary the evidence of this witness shows that he only mechanically saw to it that accused No. 2 signed before him without knowing the contents thereof. It is to be stated that the said affidavit of accused No. 2-H.P. Dalal could not be received in evidence as proved document.
392. There are provisions in the said Notary Act as also Rules made thereunder which oblige a Notary and makes it imperative that such affidavits be declared in a particular manner. For that matter it is necessary for a Notary to ensure that the declarant of it has understood the contents thereof. As noticed earlier evidence of this witness before this Court same shows that he has not done so. Notwithstanding that since 1983 he has been acting as Notary.
393. The institution of Notary has been brought into picture by the statute to facilitate the needy people to make affidavits to avoid ordeals of going to the Court etc. Such affidavits are made with the specific object of recording something in black and white at particular point of time. Such affidavits are required to be made on oath. It is indeed strange and regretable that the said Notary P.W. 59 who has been acting Notary as such since 1983 did not know this basic requirement that he was to follow.
394. The Court wishes to add that the said conduct of the Notary is not at all satisfactory and convincing and reflects on his conduct and Court expresses its disapproval for the same.
395. The office of this Court is directed to forward the relevant paragraphs of this judgment to the Chief Secretary, Maharashtra State for necessary action. The office of this Court shall also forward the copy of his testimony as appearing on pages 1326 to 1333 of the Notes of Evidence to the Chief Secretary for his perusal. Court is not suggesting any course of action as such and leaves it to the Chief Secretary and the Government to take appropriate action it may deem fit and proper.
396. As held earlier the sentences passed upon accused are as follows:
ORDER
1. (i) 1 sentence accused No. 1-MuIangi Krishna Swamy Ashok Kumar, accused No. 2-Hiten Prasan Dalal, accused No. 3-Abhay Dharamsi Narottam, accused No. 7-Chandrashekhar Sitaram Raje, accused No. 8-Sudhakar Appu Ail, accused No. 9-Krishan Kantilal Kapadia, accused No. 10-Madhusudan Sakharam Kushte, accused No. 11-Shankar Narayan Ramaswamy and accused No. 12-Sarenathan Mohan being the members of continuing criminal conspiracy between April, 1991 to May 1992 at Bangalore and Bombay. The object whereof was to "commit criminal breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,354.78" punishable under section 120B read with section 409 of IPC to serve rigorous imprisonment for a term of 7 years and also to fine in a sum of Rs. 25,000/- each, in default of payment of fine the said accused shall undergo rigorous imprisonment for further term of 1 year.
ii) I sentence accused No 1-Mulangi Krishna Swamy Ashok Kumar, and accused No. 12-Sarenathan Mohan for offences under section 409 of IPC for the offences of committing breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,354.78 to serve each of them rigorous imprisonment for a term of 7 years and also a fine in a sum of Rs. 25,000/-, in default of payment of fine the said accused shall undergo rigorous imprisonment for a further term of 1 year.
iii) I sentence accused No. 1-Mulangi Krishna Swamy Ashok Kumar, and accused No. 12-Sarenathan Mohan for offence of criminal misconduct under section 13(1)(d) read with 13(2) of the Prevention of Corruption Act, 1988 and serve rigorous imprisonment for a term of 2 years and also fine in a sum of Rs. 50,000/-, in default of payment of fine the said accused shall undergo further rigorous imprisonment for a term of 1 year.
iv) I also sentence accused No. 2-Hiten Prasah Dalal, accused No. 3-Abhay Dharamsi Narottam, accused No. 7-Chandrashekhar Sitaram Raje, accused No. 8-Sudhakar Appu Ail, accused No. 9-Krishan Kantilal Kapadia, accused No. 10-Madhusudan Sakharam Kushte, and accused No. 11 -Shankar Narayan Ramswamy for the commission of the offences under section 13(i)(d) read with section 13(2) of the Prevention of Corruption Act, read with section 109 of I.P.C. for abetting accused No. 1-Mulangi Krishna Swamy Ashok Kumar and accused No. 12 Sarenathan Mohan in the offences of criminal misconduct and corrupt practice being public servants and serve rigorous imprisonment for a term of 2 year and also fine in a sum of Rs. 25,000/-, in default of payment of fine the said accused shall undergo further rigorous imprisonment for a term of 1 year.
v) I sentence accused No. 2-Hiten Prasan Dalal, accused No. 3-Abhay Dharamsi Narottam, accused No. 7-Chandrashekhar Sitaram Raje, and accused No. 8-Sudhakar Appu Ail in the commission of offence under section 467 of IPC. for the offence of forging documents viz. Cost Memo dated 6-4-91, Ex. 188, BR dt. 6-4-91 Ex. 189, Cost Memo dated 22-7-91, Ex. 195, BR dt. 22-7-91, Ex. 196, Cost Memo dated 31-7-91, Ex. 229 and BR dt. 31-7-91, Ex. 228 of BOK and SOL account dated 18-4-92, Ex. 196 purported to be valuable security with the object of receiving property viz. sum of Rs. 374,35,18,354.78 from CANFINA to serve rigorous imprisonment for a term of 7 years and also fine in a sum of Rs. 50,000/-, in default of payment of fine the said accused shall undergo further rigorous imprisonment for a term of 1 year.
vi) I sentence accused No. 2-Hiten Prasan Dalal, accused No. 3-Abhay Dharamsi Narottam, accused No. 7-Chandrashekhar Sitaram Raje, accused No. 8-Sudhakar Appu Ail, accused No. 9-Krishan Kantilal Kapadia, accused No. 10-Madhusudan Sakharam Kushte, and accused No. 11-Shankar Narayan Ramaswamy in the commission of offence under section 467 of IPC for the offence of forging documents viz. Cost Memo dated 16-9-91, Ex. 667, BR dt. 16-9-91 Ex. 344, Cost Memo dated 16-9-91, Ex. 668, BR dt. 16-9-91, Ex. 343, Cost Memo dated 16-9-91, Ex. 669 and BR dt. 16-9-91, Ex. 345 of MCB purported to be valuable security with the object of receiving property viz. sum of Rs. 374,35,18,354.78 from CANFINA to serve rigorous imprisonment for a term of 7 years and also to fine in a sum of Rs. 50,000/- each, in default of payment of fine the said accused shall undergo further rigorous imprisonment for a term of 1 year.
vii) I sentence accused No. 2-Hiten Prasan Dalal, accused No. 3-Abhay Dharamsi Narottam, and accused No. 11-Shankar Narayan Ramaswamy under section 411 of IPC for dishonestly receiving and retaining the property out of Rs.374,35,18,354.78 received from CANFINA knowing and believing the same to be stolen property i.e.:
i) accused No. 2 Hiten Prasan Dalal- Rs. 78,91,27,715.15
ii) accused No. 3 Abhay Dharamsi Narottam Rs. 295,28,90,639.63
iii) accused No. 11 Shankar Narayan Ramaswamy Rs. 15,00,000.00 and sentence each of them R.I. for 2 years.
2. I direct that all the sentences of R.I. as above against each of the accused shall run concurrently.
3. Convicted and sentenced accused to get set off under section 428 of Cri.P.C. in respect of period of detention undergone by each one of them during trial. Prosecution to furnish statement containing particulars of such detention to the office of this Court within two weeks from today.
4. Accused Nos. 4 Bhupen Champaklal Dalal, accused No. 5-Tejkumar Balkrishna Ruia and accused No. 6-Jagdish Pannalal Gandhi are acquitted from all the charges levelled against them.
5. The Bail Bonds of accused Nos. 4-Bhupen Champaklal Dalal, accused No. 5-Tejkumar Balkrishna Ruia and accused No. 6-Jagdish Pannalal Gandhi, executed in this case stand cancelled.
6. Accused No. 1 Mulangi Krishna Swamy Ashok Kumar, accused No. 2-Hiten Prasan Dalal, accused No. 3-Abhay Dharamsi Narottam, accused No. 7-Chandrashekhar Sitaram Raje, accused No. 8-Sudhakar Appu Ail, accused No. 9-Krishan Kantilal Kapadia, accused No. 10-Madhusudan Sakharam Kushte, accused No. 11-Shankar Narayan Ramaswamy and Accused No. 12-Sarenathen Mohan are given time to make payment of fine till 30th March, 1999.
7. At this stage, the request is made on behalf of convicted accused for suspension of sentences awarded by this Court to them for the reasonable period to enable them to approach the Apex Court in Appeal. Learned Counsel for the said accused point to the Court a judgment of my brother Judge Variava presiding over other-Special Court in Central Bureau of Investigation v. Mulangi Krishnaswamy Ashok Kumar, Special Case No. 7 of 1994 delivered on 6/7/13/14-8-1998 in a case under the provisions of Special Court Act. It is stated that accused in that case were convicted. However on the application made by and on behalf of the convicted accused my brother Judge suspended the sentences for the period as mentioned therein to enable the said accused to approach the Apex Court.
8. Mr. Pradhan, Ld. P.P. has opposed such request and he made submission to the effect that once this Court pronounces judgment and passes sentences above three years against the accused this Court will not have jurisdiction to suspend its sentences.
9. The Court wishes to clarify that it does not wish to go into the submissions made by and on behalf of the prosecution as above. However the Court wishes to quote the circumstances which persuaded my brother Judge Variava to accede to the request of convicted accused in the case referred to earlier and suspension of sentences which is appearing in para 263 of the said judgment (Page 861 of Bom.C.R.):
"263. The question whether Court can exercise power under section 482 of the Criminal Procedure Code has recently been considered by this Court in a Judgment dated 15th June, 1998 in Misc. Application No. 432 of 1997 in Special Case No.4 of 1995. The Court has accepted submission that this Court was not the High Court. However, this Court does not require powers under section 482 of the Criminal Procedure Code. Under Section 9(4) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, this Court is empowered to adopt such procedure as it deems fit consistent with the principles of natural justice. Normally the accused would have been able to approach an higher Court in this city without any difficulty. By virtue of the Special Court (Trial of Offences Relating to the Transactions in Securities) Act the accused has now only approach the Supreme Court. Court must take note of fact that some time would be required for the accused to approach the Supreme Court. In my view principles of natural justice require that in cases like this, where personal liberty is at stake, some time must be given to accused to effectively exercise that right of Appeal. In my view Section 9(4) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, will empower this Court to suspend the sentence of imprisonment for some time. Accordingly I suspend the sentences of imprisonment for two weeks."
10. It is stated by and on behalf of the defence that the accused who were convicted in the said case and where sentences were suspended approached the Apex Court in Appeal and the said order of suspension of sentences of my brother Judge has been continued till the disposal of the Appeal.
11. Judicial discipline and comity require this Court, which is of co-ordinate jurisdiction, to follow the same course as done by my brother Judge Variava. With that view of the matter the Court passes the following order:
i) The sentences of imprisonment passed against accused Nos.1-M.K.S. Ashok Kumar, 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte, 11-S.N. Ramaswamy and 12-S. Mohan are suspended for the period of four weeks i.e. till 13-4-1999.
ii) It stated that the said accused were ordered to be released on bail in this case on their personal bonds. The said accused are given four weeks time from today to execute their personal bonds on the same terms as done in this case earlier.
iii) Office is directed to furnish copies of the judgment to the convicted accused on 20-3-1999.