Karnataka High Court
B A Srinivasan vs Station House Officer on 8 August, 2018
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 8TH DAY OF AUGUST 2018
BEFORE
THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR
CRIMINAL REVISION PETITION No.834 OF 2015
BETWEEN
B.A.Srinivasan
S/o. Sri. B.V.Anantharamaiah
Aged about 62 years,
No.276, 5th Cross, 5th Main,
Canara Bank Layout, Kodigehalli,
Bangalore-560097.
...Petitioner
(By Sri. C.V.Sudhindra, Advocate)
AND
1. Station House Officer,
C.B.I/A.C.B/Bangalore,
Anti Corruption Branch
No.36, Bellary Road,
Ganga Nagar,
Bangalore-560032.
2. Shri. Udaya Kumar,
General Manager,
Vijaya Bank, Head Office,
No.41/2, M.G.Road,
Bangalore-560001,
Karnataka.
...Respondents
(By Sri. P.Prasanna Kumar, Advocate for R1,
Sri. K.N.Mahabaleswara Rao, Advocate for R2)
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This Criminal Revision Petition is filed under Section
401 of Criminal Procedure Code praying to set aside the
order dated 13.04.2015 in Spl.C.C.No.558/2014 pending
before the XXI Additional City Civil and Session Judge and
S.J. and Prl. Spl. J. for CBI cases, Bangalore City ,
consequently allow the application filed by the petitioner
under Section 227 read with 239 of Code of Criminal
Procedure.
This Criminal Revision Petition having being heard
and reserved on 17.7.2018, coming on for pronouncement
of orders this day, SREENIVAS HARISH KUMAR J.,
pronounced the following :
ORDER
Accused No.1 in Special C.C. No. 558/2015 on the file of XXI Additional City Civil and Sessions Judge and Principal Special Judge for CBI Cases, Bangalore, has preferred this revision petition challenging the order dated 13.4.2015 rejecting his application filed under Section 227 read with Section 239 Cr.P.C.
2. The events leading up to this revision petition are as follows :
Respondent No.1 launched prosecution against the petitioner and other accused alleging that they have 3 committed offence punishable under Sections 419, 420, 467, 468, 471 read with Section 120B IPC and under Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act. The petitioner is the first accused. The allegations found against the first accused are that while he was working as Assistant General Manager of Vijaya Bank, Mayo Hall Branch, Bangalore, being the branch head allowed the opening of a current account in the name of M/s Nikhara Electronics and Allied Technics, in gross violation of banking norms. The current account was opened by Muralidhara Shetty, the clerk in the said bank on the instruction of the first accused on the basis of the photo copies of the documents. He did not verify the antecedents of the firm and did not collect the documents such as PAN card and VAT returns of the firm. He did not verify the copies of the documents submitted to the bank with the originals. The first accused facilitated opening of the bank account which was later on used for committing fraud by other accused. At the time of sanctioning loan of Rs.3 crores, first accused did not independently verify and 4 collect all the relevant records as per the Due Diligence Norms. He did not obtain OPL/Confidential Opinion from Cauvery Grameen Bank, Anekal and Karnataka Bank, Nehru Nagar, Bangalore, even though the borrower had mentioned the names of these banks in their assets and liabilities statements. It is further alleged that accused No.1 entered into criminal conspiracy with accused Nos. 3 to 6 and extended undue financial accommodation to M/s Nikhara Electronics and Allied Technics, i.e., accused No.2 firm by violating the rules and regulations and norms of Vijaya Bank. Accused No.3 Lakshman and his wife Shanta Gowda, i.e., accused No.4 fraudulently created an agreement dated 10.6.2011 on a photocopy of e-stamp paper having franking No. 57724 dated 8.6.2011 and submitted the copy of the same to Vijaya Bank with dishonest claim of taking over M/s Nikhara Electronics and Allied Technics which was a proprietary concern of accused No.6 by making payment of Rs.1 crore as goodwill to accused No.6. Accused No.1 being the branch head dishonestly accepted the photocopy of the agreement and 5 did not ascertain the genuineness or authenticity of the said agreed. He omitted to verify the genuineness of the documents and abused his official position for authorizing the opening of the bank account in violation of KYC norms. It is also alleged that accused No.1 considered and accepted the inflated financial statement of accused No.2 firm submitted along with loan application. This was in gross violation of the rules and regulations. He also did not conduct mandatory pre-sanction verification at the address of the borrower firm to ascertain whether any business activity was going on in the premises of the loanee or not. Actually accused Nos. 3 and 4 created a fictitious firm in the name of M/s Nikhara Electronics and Allied Technics and therefore spot inspection was very much necessary by accused No.1. Accused No.3 forged a letter No. REFREF:SP:PT:155:2011 dated 10.8.2011 purportedly signed by JAK Partners and it is also alleged that accused No.3 had fabricated quotations/proforma invoices for the aggregate amount of Rs.2,69,60,496/- purported to be issued by V.Tech Engineering Enterprises 6 while releasing loan of Rs.300 crores. Accused No.1 being the branch head accepted these quotations without following the established procedure of the bank.
3. Then with regard to term loan of Rs.200 Lakhs and cash credit of Rs.100 Lakhs, sanctioned to accused No.2 firm for purchasing machineries, the allegation is that accused No.2 purchased second hand machines and accused Nos. 3 and 4 created the bogus vouchers. The accused No.1 accepted these bogus vouchers without verifying the same. Further, with respect to margin money payable by accused Nos. 3 and 4, the allegation is that they did not deposit the margin money in the bank; instead they created bogus voucher to show that an amount of Rs.59,04,510/- was paid to M/s V.Tech Engineering Enterprises. Accused No.1 accepted these bogus vouchers to avoid payment of margin money to the bank. He also did not verify the genuineness and authenticity of the said vouchers and thus facilitated accused No.3 and accused No.4 to avail the term loan. 7 Apart from above, there are also allegations that accused No.1 handed over three demand drafts to another accused Lakshman instead of paying the amount through RTGS to the vendor of the machine, and it was found during investigation the said money was misutilized; secondly that when accused No.3 purchased property situate at Hospital Road, Avenue Road Cross, Chickpet, Bengaluru, he offered the said property as collateral security for availing the loan on 10.8.2011. The said property was evaluated at Rs.5 crore, but accused No.1 did not verify the same and sanctioned term loan of Rs.2 crore and cash credit of Rs.1 crore. The said property was in occupation of tenants. Accused No.1 did not conduct spot inspection. Therefore, it is alleged that accused No.1 conspired with accused Nos. 3 to 6, and accepted fabricated and forged documents, vouchers, inflated financial statements to help them.
4. The Special Court has held that allegation made against accused No.1 are substantiated, the statements of 8 the witnesses CWs 1, 5, 6, 10, 12, 14, 15, 21 to 25, 27, 28, 37, 38, 42 to 44 and CWs 64 and 96 and the investigation officer has placed documentary proof also. Therefore, there are sufficient materials to frame charge against accused No.1. With regard to obtaining of sanction to prosecute accused No.1, the Special Court has held that accused No.1 retired from service on 31.10.2012, and therefore sanction was not required.
5. Assailing the findings of the Special Court, the learned counsel for petitioner argued that the Special Court failed to notice that there were no prima facie materials to frame charges against accused, that it ought to have been noticed that the accused No.1 being branch head of the bank exercised due diligence before opening of bank account in the name of the business concern of the accused and while sanctioning loan to them. The allegations made against accused No.1 do not constitute any offence. The charge sheet does not disclose as to how the first accused is benefited and a demand by him for 9 gaining benefit by favouring the other accused. The totality of the circumstances at best may indicate some administrative lapses, but hardly they constitute any offence. On this point, he placed reliance on two judgments (1) Anil Kumar Bose vs State of Bihar [1974 SCC (Cri) 652] and (2) Rishipal Singh vs State of U.P. and another [AIR 2014 SC 2567].
6. The next point that the learned counsel argued was with regard to sanction. According to him, the retirement of the first accused did not absolve the requirement of obtaining sanction from competent authority before subjecting him to prosecution. Although according to Section 19 of the Prevention of Corruption Act, there is no need to obtain sanction if a public servant superannuates at the time of taking cognizance, Section 197 of the Code of Criminal Procedure requires sanction to be obtained. In this case, no sanction order was obtained even under Order 197 Cr.P.C. and therefore accused No.1 cannot be prosecuted. He should have been discharged 10 under this ground. He seeks to support his argument on this point by placing reliance on the judgments of the Supreme Court in (1) N.K.Ganguly vs CBI, New Delhi [(2016) 2 SCC 143] (2) State of Punjab vs Labh Singh [(2014) 16 SCC 807 and (3) Kalicharan Mahapatra vs State of Orissa [AIR 1998 SC 2595]. Therefore, it was his submission that the revision petition requires to be allowed and accused No.1 discharged.
7. The learned counsel for the respondent argued that the Special Court has not committed any error in dismissing the application of the petitioner. According to the learned counsel, the investigation has brought enough evidence both in the form of oral and documentary to show that the petitioner violated the guidelines of the bank in opening the current account in the name of M/s Nikhara Electronics and Allied Technics, that internal investigation report and another inspection report highlight several irregularities committed by the petitioner, that he violated banking regulations and provisions relating to credit 11 manual while sanctioning credit and disbursing the amount to the borrower, and that the materials collected by the investigation officer indicate the petitioner's collusion with the other accused. The statement of witnesses, if perused, would show that the petitioner's involvement in conspiracy. At the stage of framing charge, it is enough if the court finds that there are sufficient materials to proceed further in the matter by framing the charge and there is no need to hold a mini trial. He further argued that whenever an offence under section 13 (1)(e) is alleged, it is not necessary that the public servant concerned should derive benefit as a result of conspiring with the other accused, it is enough that if he violates the norms and rules for the benefit of others, charges can be framed. Here in this case, the petitioner's conspiracy with the other accused resulted in the latter being benefited and therefore there are no grounds to entertain the petition on this point. He placed reliance on the decisions of the Supreme Court in R.Venkatakrishnan vs Central Bureau of Investigation [(2009) 11 SCC 737] 12 [(2009) 11 SCC 737], Mir Nagvi Askari vs Central Bureau of Investigation [(2009) 15 SCC 643] [(2009) 15 SCC 643] and State through CBI vs Dr. Anup Kumar Srivastava (2017) 15 SCC 560.
7.1. With regard to sanction the learned counsel argued that it is settled law now if a public servant has retired by the time cognizance is to be taken, there is no need to obtain sanction. Here also accused no. 1 has retired from service. Section 197 Cr.P.C. is not applicable. Since the petitioner is prosecuted for the offences punishable in accordance with Prevention of Corruption Act and other IPC offences, Section 19 of Prevention of Corruption Act is applicable and not Section 197 Cr.P.C. In this view of the matter, obtaining of sanction to prosecute the petitioner was not necessary. The learned counsel placed reliance on the judgment of the Supreme Court in Kalicharan Mahapatra Vs. State of Orissa AIR 1998 SC 2595.
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8. After considering the arguments of the learned counsel, with regard to the findings of the Special Court that there are materials to frame charge against first accused, it has to be stated that at the time of framing charge what is required is to find out whether the evidence collected by the investigation officer discloses sufficient materials for framing the charge. Here in this case the allegation against the first accused is that he conspired with the other accused to facilitate them obtain financial assistance from the bank and in this connection he floated the guidelines and norms governing banking transactions. Whenever conspiracy is alleged, it requires strict proof because direct evidence to prove conspiracy is difficult to be obtained. The circumstances surrounding the transactions have to be assessed and evaluated to find out whether there was conspiracy amongst the accused or not. Apparently it may appear as if there were administrative lapses and that the first accused discharged his duties being the branch head of the bank. But there are allegations against other accused also. In the statement of 14 the witnesses, it is found that the first accused simply accepted some documents from other accused for facilitating them to obtain loan from the bank. They have stated that they all acted on the instructions given to them by the first accused. In this context it may be useful to place reliance on the judgment of the Supreme Court in the case of R.Venkatakrishnan vs Central Bureau of Investigation [(2009) 11 SCC 737]. In para 167 of the said judgment it is held as below : -
"167. All the accused were at the relevant time public servants. Each one of them played a specific role in diversion of funds from NHB to the account of Harsad Mehta, all ostensibly under a call money transaction. They thereby in our opinion facilitated Harshad Mehta to obtain pecuniary advantage within the meaning of the section. The acts were anything but intended to be in public interest. On the contrary the public loss and suffering occasioned thereby was immeasurable. Though it is true, as has been argued before us that all the funds diverted 15 have subsequently been returned to NHB and no actual loss has been occasioned there by either to the UCO Bank or the NHB. But it must not be forgotten that white collar crimes of such a nature affect the whole society even though they may not have any immediate victims. We, accordingly, hold accused A1 to A3 and A6 guilty of criminal misconduct under s. 13 (1) (d) (iii) of the Prevention of Corruption Act".
9. In another case, i.e. Mir Nagvi Askari vs Central Bureau of Investigation [(2009) 15 SCC 643] the prosecution case was that accused nos.1, 2, 4 and 5 being officials of bank violated the departmental instructions and allowed credit to the account of accused no.3, a broker in securities. He illegally used the public money for his personal use. All the accused were charged for various offences including criminal conspiracy under Section 120B IPC. They were all convicted. When the matter reached the Supreme Court it was held : - 16
"60. Criminal conspiracy, it must be noted in this regard, is an independent offence. It is punishable separately. A criminal conspiracy must be put to action; for so long as a crime is generated in the mind of the accused, the same does not become punishable. Thoughts even criminal in character, often involuntary, are not crimes but when they take a concrete shape of an agreement to do or caused to be done an illegal act or an act which is not illegal, by illegal means then even if nothing further is done, the agreement would give rise to a criminal conspiracy.
61. The ingredients of the offence of criminal conspiracy are:
(i) an agreement between two or more persons;
(ii) an agreement must relate to doing or causing to be done either (a) an illegal act; (b) an act which is not illegal in itself but is done by illegal means.
Condition precedent for holding the accused persons to be guilty of a charge of criminal conspiracy must, therefore, be considered on 17 the anvil of the fact which must be established by the prosecution, viz., meeting of minds of two or more persons for doing or causing to be done an illegal act or an act by illegal means.
62. The courts, however, while drawing an inference from the materials brought on record to arrive at a finding as to whether the charges of the criminal conspiracy have been proved or not, must always bear in mind that a conspiracy is hatched in secrecy and it is difficult, if not impossible, to obtain direct evidence to establish the same. The manner and circumstances in which the offences have been committed and the accused persons took part are relevant. For the said purpose, it is necessary to prove that the propounders had expressly agreed to it or caused it to be done, and it may also be proved by adduction of circumstantial evidence and/ or by necessary implication. [See Mohammad Usman Mohammad Hussain Maniyar v. State of Maharashtra (1981) 2 SCC 443]".
Therefore, accused no.1, alleged to be involved in conspiracy, cannot, at the stage of framing charge, say 18 that materials do not exist to frame charge against him. Evidence must be threadbare discussed.
10. But, the learned counsel for the petitioners argued about administrative lapses which, according to him do not constitute an offence. In Anilkumar Bose vs State of Bihar [1974 SCC (Cri) 652], a case cited by him, what is held is that a failure on the part of the concerned employee to perform their duty or observe the rules of procedure laid down in the Duty Chart in a proper manner may be an administrative lapse on their part and may be at the highest a case of error of judgment or breach of performance of duty which per se, cannot be equated with dishonest intention. Mens rea is one of the essential ingredients of the offence of cheating under Section 420 IPC. In relation to very same ground, the learned counsel has placed reliance on another authority of the Supreme Court in Rishipal Singh vs State of U.P. and Another [AIR 2014 SC 2567]. These aspects of administrative lapses, it is to be stated, cannot be 19 considered at the time of framing charge. Unless the witnesses are subjected to cross examination, no finding can be given whether the omission in following the procedure amounts to administrative lapse or was deliberate. Therefore, this point of argument cannot be a ground for discharging accused no.1. Therefore, given a conclusion, it can be opined that the materials on record are sufficient to frame against accused no.1, the findings of the Special Court in this regard do not indicate non- application of mind or, any infirmity or illegality in coming to an opinion that accused no.1 cannot be discharged on this ground. This finding needs to be sustained.
11. However, another finding regarding sanction cannot be sustained. The special court has held that the sanction is not necessary as accused no.1 has retired by the time charge sheet was filed. But the argument of petitioner's counsel is that sanction in accordance with Section 197 Cr.P.C is necessary. Before adverting to this point, I think it necessary to opine that the offences triable 20 by Special Judge relate to time when an accused was in service as a public servant. Sanction under Section 19 of Prevention of Corruption Act is necessary to see that a public servant is not entangled in a frivolous and false case. Sanction insulates a public servant from a false or vexatious or frivolous prosecution. Therefore a protection available to a public servant while in service should also be available after his retirement. It cannot be forgotten that even after retirement , he is prosecuted for offences under Prevention Corruption Act. Indeed, the retirement removes one from the garb of a public servant; but justice requires that same protection should be available even after one's retirement. The Hon'ble Supreme Court in Kalicharan Mahapatra vs. State of Orissa (AIR 1998 SC 2595) has referred to its earlier decision in R.Bala Krishna Pillai Vs. State of Kerala [1996 (1) SCC 478] where observation of Law commission has been extracted. The same is extracted here under:-
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"12. It appears to us that protection under the section is needed as much after retirement of the public servant as before retirement. The protection afforded by the section would be rendered illusory if it were open to a private person harbouring a grievance to wait until the public servant ceased to hold his official position, and then to lodge a complaint. The ultimate justification for the protection conferred by Section 197 is the public interest in seeing that official acts do not lead to needless or vexatious prosecutions. It should be left to the Government to determine from that point of view the question of the expediency of prosecuting any public servant."
12. The view taken by the Hon'ble Supreme Court in Kalicharan Mahapatra (supra), is that the court can take cognizance of the offence without any sanction if a public servant retires by the time cognizance is taken. Probably the present tense form of verb to be 'is' in Section 19 of Prevention of Corruption Act could be the reason for this interpretation. But the learned counsel has 22 placed reliance on another authority of the Hon'ble Supreme Court in State of Punjab Vs. Labh Singh (supra) and N.K.Ganjuly (supra) to lay stress on the point that sanction under Section 197 Cr.P.C was necessary for protecting accused no.1.
13. In Labh Singh (supra), it is held as below:-
"10. However as regards charges for the offences punishable under the Penal Code concerned the High Court was absolutely right in setting aside the order of the Special Judge. Unlike section 19 of the PC Act, the protection under section 197 of Cr.P.C. is available to the public servant concerned even after retirement. Therefore, if the matter was considered by the sanctioning authority and the sanction to prosecute was rejected first on 13.09.2000 and secondly on 24.09.2003, the court could not have taken cognizance insofar as the offences punishable under the Penal Code are concerned. As laid down by this Court in State of Himachal Pradesh v. Nishant Sareen [(2010) 14 SCC 527], the recourse in such cases is either to challenge the order of the 23 Sanctioning Authority or to approach it again if there is any fresh material."
14. In N.K.Ganguly (supra), the clear observation of Supreme court is as follows :-
35. From a perusal of the case law referred to supra, it becomes clear that for the purpose of obtaining previous sanction from the appropriate government under Section 197 of CrPC, it is imperative that the alleged offence is committed in discharge of official duty by the accused. It is also important for the Court to examine the allegations contained in the final report against the Appellants, to decide whether previous sanction is required to be obtained by the respondent from the appropriate government before taking cognizance of the alleged offence by the learned Special Judge against the accused. In the instant case, since the allegations made against the Appellants in the final report filed by the respondent that the alleged offences were committed by them in discharge of their official duty, therefore, it was essential for the learned Special Judge to correctly decide as to whether the previous sanction from the Central 24 Government under Section 197 of CrPC was required to be taken by the respondent, before taking cognizance and passing an order issuing summons to the appellants for their presence."
The learned standing counsel for CBI submitted in so far as offences under Indian Penal Code are concerned, they cannot be said to have been committed in discharge of official duty; sanction therefore is not necessary even under Section 197 Cr.P.C. If the allegations levelled against the first accused are seen, and particularly with reference to conspiracy, it is to be stated at the stage of framing charge, it is difficult to discern whether offences can be connected to official capacity or not. Thorough trial requires to be held. If facts in N.K.Ganguly (supra) are seen, there also the accused were sought to be prosecuted for the offences under Prevention of Corruption Act in addition to some of the offences under Indian Penal Code. Thus seen, the first accused should get the benefit of discharge for absence of sanction under Section 197 of CPC. Hence the following order:-
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(1) The revision petition is allowed.
(2) The order dated 13.4.2015 in Spl.
C.C.558/2015 on the file of XXI Additional City and Civil Judge and Principal Special Judge for CBI cases is modified. The application filed under Section 227 read with 239 Cr.P.C.
concerning accused No.1 is allowed. Accused No.1 is discharged of the offences he is sought to be prosecuted.
Sd/-
JUDGE SHKJ:
13.08.2018 ORDER ON 'FOR BEING SPOKEN TO' Since the learned standing counsel for respondent CBI has sought permission to obtain the sanction from the competent authority, the case is posted before the court for being spoken to.
The learned counsel submits that this court has come to the conclusion that the accused needs to be discharged of the offences implicated against him for want 26 of sanction. For this reason it is necessary that the prosecution be permitted to obtain sanction from the competent authority and to resubmit the charge sheet thereafter. In support of his argument he placed reliance on the judgment of the Hon'ble Supreme Court in the case of Nanjappa Vs. State of Karnataka [(2015) 14 SCC 186]. On the other hand the learned counsel for the petitioner submits that the case of Nanjappa is not applicable here because in that case the prosecution had obtained sanction, but it was found to be invalid. For these reasons liberty was accorded for obtaining fresh sanction. Same is not the position here. He also refers to the amendment brought to Prevention of Corruption Act. He submits further that according to the amended provisions sanction is necessary even if the public servant is retired from service on the date cognizance is taken.
After hearing both the sides it is to be stated that the case of Nanjappa cannot be made applicable here. In the said case prosecution had taken sanction, but it was not 27 proper and valid. Probably for these reasons, the Hon'ble Supreme Court observed that in such a situation discharge of accused would not come in the way of obtaining fresh sanction for prosecuting the accused. The circumstances are slightly different here. Because the petitioner had retired from services on the date the cognizance was taken, sanction was not obtained. Now a finding is given that sanction was very much necessary. Even if the amendment brought to the provisions of Prevention of Corruption Act in the year 2018 are seen, it can be said that sanction was necessary. The amendment has been brought by 'substitution' and not 'insertion' of a new provision. Therefore I am of the opinion that in these set of circumstances liberty cannot be granted to the prosecution to obtain sanction again for the purpose of prosecuting the accused.
Sd/-
JUDGE ckl/sd