Karnataka High Court
Smt Baby Vasantha Kumar vs The Superintendent Of Police on 29 October, 2022
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF OCTOBER 2022
BEFORE
THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR
CRIMINAL APPEAL No.225 OF 2011 C/W
CRIMINAL APPEAL No.155 OF 2011 C/W
CRIMINAL APPEAL No.226 OF 2011
IN CRL.A.NO.225/2011
BETWEEN
Shri T.Narayanappa,
S/o T.Thimmaiah,
Aged about 56 years,
Formerly Branch Manager,
Raghavendra Nagar Branch,
State Bank of Mysuru, Tumkur,
R/at Venkatadri Nilaya, 6th Cross,
Vijayanagar, Near Sree Ranga Road,
Tumkur.
...Appellant
(By Sri P.N.Hegde, Advocate)
AND
State by Inspector of Police,
CBI, represented by
Standing Counsel for CBI
in the Hon'ble High Court,
Bengaluru
...Respondent
(By Sri P.Prasanna Kumar, Advocate)
2
This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellant/accused for
the offence punishable under section 120B, 320 IPC and
under section 409, 13(1)(d) read with 13(2) of Prevention
of Corruption Act 1988.
IN CRL.A.NO.155/2011
BETWEEN
1. Smt. Baby Vasantha Kumar,
W/o. S.A.Vasantha Kumar,
Aged about 64 years,
Proprietrix, M/s. Balaji Aromatics,
Tumkur.
2. V.Raghavendra,
S/o. S.A.Vasanthakumar,
Aged about 24 years,
Proprietor,
M/s. Karnataka Copper Mills,
Tumkur.
3. V.Manikanta,
S/o. S.A.Vasanthakumar,
Aged about 18 years,
Proprietor, M/s.Balaji Products,
Tumkur.
4. Sri V.Kandaswamy,
S/o. S.A.Vasanthakumar,
Aged about 41 years,
Halusiddeswaranilaya,
Maruthinagar,
Arsikere.
3
5. Sri S.A.Vasantha Kumar,
S/o. Ambalavana Chettiar
[Appeal abated against appellant
No.5 vide order dated 25.8.2022]
...Appellants
(By Sri R.Nagendra Naik, Advocate)
AND
The Superintendent of Police,
Central Bureau of Investigation,
Ganganagar, Bengaluru.
...Respondent
(By Sri P.Prasanna Kumar, Advocate)
This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellants/accused for
the offence punishable under section 120B, 320 IPC and
etc.,
IN CRL.A.NO.226/2011
BETWEEN
Shri T.Venkataswamy
S/o T.Thimmaiah,
Aged about 50 years,
Presently R/at Venkatadri Nilaya,
6th Cross, Vijayanagar,
Near Sree Ranga Road,
Tumkur.
...Appellant
(By Sri P.N.Hegde, Advocate)
4
AND
State
By Inspector of Police,
CBI, represented by
Standing Counsel for CBI
in the Hon'ble High Court,
Bengaluru
...Respondent
(By Sri P.Prasanna Kumar, Advocate)
This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellant/accused for
the offence punishable under sections 120B, 320 IPC and
etc.
These Criminal Appeals having been heard &
reserved on 28.09.2022, coming on for
pronouncement this day, the Court pronounced
the following:
JUDGMENT
In Special C.C.No.116/2007, on the file of XXXII Additional City Civil and Sessions Judge and Special Judge for CBI Cases, Bengaluru ('trial court' for short), seven accused persons faced trial for the offences punishable under sections 120B, 420 of Indian Penal Code (IPC) and stood convicted. Accused No.1, in 5 addition to the above offences, faced trial and stood convicted for the offences under section 409 IPC and section 13(1)(d) read with 13(2) of Prevention of Corruption Act ('PC Act' for short). Hence these three appeals. Accused Nos. 2, 3, 4, 5 and 6 filed Criminal Appeal 155/2011. Because of death of accused No.6, appeal as regards him was abated. Criminal Appeal 225/2011 is filed by accused No.1 and Criminal Appeal 226/2011 is filed by accused No.7.
2. The gist of the prosecution is :
While accused No.1 was working as branch manager of Raghavendra Nagar Branch of State Bank of Mysore at Tumkur, in between the dates 11.7.2004 and 29.10.2004, he conspired with accused 2 to 5 and extended credit facilities to them beyond his discretionary power. He discounted cheques and purchased fraudulent bills of accused 2 to 5 exposing the bank to pecuniary loss of ` 57,00,000/-. In 6 violation of Banking Rules and Norms, accused No.1 sanctioned cash credit limit of ` 10,00,000/- even though the borrower had only applied for cash credit limit of ` 5,00,000/-. There were also allegations that accused No.1 sanctioned two loans under SSI scheme for a sum of ` 20,00,000/- to M/s Karnataka Copper Mills of accused No.3 and loan of ` 5,00,000/- to accused No.3 towards cost of machinery, but he misutilized the money in conspiracy with accused 1 and 2, and diverted the money to M/s Lakshmi Perfumery Works of accused No.4. In the charge sheet details of transactions are mentioned.
3. The prosecution examined twenty one witnesses, and produced the documents marked Exs.P1 to P176. The accused got marked the documents as per Exs. D1 to D24.
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4. The trial court has recorded findings that the prosecution has proved the transactions such as cash credit facility of ` 10,00,000/-, two loans under SSI scheme for ` 20,00,000/- in favour of accused No.3 who was the Proprietor of Karnataka Copper Mills, loan of ` 1,00,000/- in favour of accused No.4, V.Manikanta and cash credit of ` 10,00,000/- in favour of accused No.2. All these transactions indicate that accused No.1 circumvented bank procedures and exceeded his discretionary power. In order to arrive at these conclusions, the trial court, instead of examining whether the prosecution was able to prove the charges, proceeded to examine the defence version and came to conclusion because defence theory had failed, the case of prosecution would be accepted.
5. Assailing the findings of the trial court, Sri Nagendra Naik, learned counsel for appellants in 8 Criminal Appeal 155/2011 raised the contentions that no witness examined by the prosecution would speak to the effect that accused No.1 had intention to cheat the bank and in furtherance of the same there was conspiracy between him and other accused. The bank did not lodge complaint, the CBI proceeded to launch prosecution based on source report. The allegation against accused No.1 was that he did not submit control report to his next higher authority and he exceeded his discretionary limit while sanctioning loans. Therefore the prime witnesses have spoken about procedural irregularities. Referring to Exs.P4 and P5 he submitted that the loans sanctioned lay within the discretionary limit of accused No.1. No witness would refer to any particular circular which was said to have been violated. Even if there was violation, it would not lead to criminal prosecution and at best departmental enquiry could have been 9 initiated, which was also not done. Therefore the judgment of conviction should be set aside.
6. Sri P.N.Hegde, learned counsel for the appellants in Criminal Appeal 225/2011 and Criminal Appeal 226/2011 argued that the charge sheet does not indicate any offence being committed. The prosecution witnesses have not at all deposed against accused No.1, who was the branch manager. Prosecution case appears to be that the kickback given to accused No.1 was routed through accused No.7, but to this effect the charge sheet is silent. The main allegation against accused No.1 is that he did not submit Control Return but PW6 has admitted in the cross-examination that accused No.1 submitted the Control Return on 30.10.2004. Late submission of Control Return would not warrant prosecution. The evidence of PW9 shows that loans sanctioned by accused No.1 was within his financial power. There is 10 no evidence to show that bank suffered loss of ` 57,00,000/-. Therefore he argued for setting aside the conviction.
7. Sri P.Prasanna Kumar, learned standing counsel for CBI, appearing for respondent in all the appeals argued that the borrowers submitted their applications for loan of ` 5,00,000/-, but accused No.1 sanctioned ` 10,00,000/-, exceeding the cash credit limit of the borrowers. Accused No.1 violated the banking norms and procedure for showing favour to accused Nos. 2 to 7. His argument was that for the offence of conspiracy, direct evidence cannot be obtained and inferences must be drawn from other proved facts and circumstances. The prosecution witnesses have given evidence that all the accused cheated the bank, and accused No.1 in particular misappropriated the funds under his dominion. 11
8. Before examining the impugned judgment in the backdrop of the points of arguments, the essential ingredients of sections 120B, 409, 420 IPC and section 13(2) read with section 13 (1)(d) of PC Act may be noted here.
8.1. Section 120B of IPC deals with punishment for conspiracy. Section 120A IPC is the defining provision, its ingredients are
(i) agreement between two or more persons
(ii) agreement must be with regard to doing or causing to be done
(a) an illegal act
(b) an act which is not illegal in itself but is done by illegal act 8.2. Section 409 deals with criminal breach of trust by a public servant or by banker, merchant or agent. This offence requires proof of committing criminal breach of trust by a public servant or a 12 banker or merchant being entrusted with or having dominion over a property.
8.3. To constitute an offence under section 420 IPC, the ingredients to be proved are the person cheated and deceived must have been induced to deliver any property to any person, or to make alter or destroy the whole or any part of valuable security or anything which is signed or sealed, and which is capable of being converted into valuable security. It is needless to say that the ingredients of section 415 IPC are innate in section 420 IPC.
8.4. Section 13(1)(d) deals with obtaining of valuable thing or pecuniary advantage by a public servant for any other person by corrupt or illegal means or by abusing his position as a public servant or without any public interest.
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9. It may be noted now itself that the offence under section 13 (2) read with section 13(1)(d) could not have been invoked, because if there is allegation of criminal breach of trust punishable under section 409 IPC, the appropriate corresponding offence under PC Act is section 13(2) read with section 13 (1)(c).
10. Sri P.Prasanna Kumar has placed reliance on some authorities. In the case of R.Venkatkrishnan vs CBI [(2009) 11 SCC 737], the Hon'ble Supreme Court dwelling, on the scope of conspiracy, has held :
"72. Criminal conspiracy in terms of Section 120B of the Code is an independent offence. It is punishable separately. Prosecution, therefore, must prove the same by applying the legal principles which are applicable for the purpose of proving a criminal misconduct on the part of an accused. A criminal conspiracy must be put to action and so long a crime is merely 14 generated in the mind of the criminal, it does not become punishable. Thoughts, even criminal in character, often involuntary, are not crimes but when they take concrete shape of an agreement to do or cause to be done an illegal act or an act which is not illegal but by illegal means then even if nothing further is done, the agreement would give rise to a criminal conspiracy.
73. The ingredients of the offence of criminal conspiracy are:
(i) an agreement between two or more persons;
(ii) the 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, therefore, for holding accused persons guilty of a charge of criminal conspiracy must, therefore, be considered on the anvil of a fact which 15 must be established by the prosecution, viz., meeting point of two or more persons for doing or causing to be done an illegal act or an act by illegal means."
11. In Mir Nagvi Askari vs CBI [(2009) 15 SCC 643], the Hon'ble Supreme Court has reiterated the scope of section 120B IPC in paras 60 and 61, and of section 409 IPC in paras 167 and 168. Sri Prasanna Kumar's argument was that even violation of banking norms, and established practices and procedure would amount to violation of direction of law. In paras 175 and 176, the following are the observations :
"175. Moreover, it must be noted in this respect that Banking norms and established practices and procedures would contain directions of law prescribing the mode in which the trust is to be discharged. The expression "direction of law" in the context of sections 405 and 409 16 would include not only legislations pure and simple but also directions, instruments and circulars issued by an authority entitled therefor. The trust in this regard would therefore have to be discharged in terms of such directions. Acting in violation thereof causing wrongful gain to A3 and loss to the Bank would bring the action within Section 409 IPC.
176. Established banking norms are binding on an officer of the Bank in the matter of discharge of the trust i.e. in dealing with the money entrusted to him. He is required to follow the same and that would be an implied term of his contract of service as an officer of the bank. The accused before us here acted in breach of the same. We are therefore of the opinion that the prosecution has sufficiently been able to prove the involvement of A1, A2 and A4 as regards the offence of criminal breach of trust."17
12. Sudhir Shantilal Mehta vs CBI [(2009) 8 SCC 1] also discusses the scope of the expression "Direction of Law". In para 100, the Supreme Court has held as below :
"100. Even if the words "directions of law" are to be given literal meaning, it would include a direction issued by the authorities in exercise of their statutory power as also the power of supervision. We have opined heretobefore that it has been accepted at the Bar that both the RBI circulars as also the Manual of UCO Bank were binding on the authorities."
13. Sri Nagendra Naik sought to distinguish the above judgment on facts, but it becomes clear that Sri P.Prasanna Kumar relied on Mir Nagvi Askari and Sudhir Shantilal Mehta to emphasize the point that since accused No.1 violated the banking norms and 18 circulars issued from time to time, all the transactions concerning accused 2 to 4 amounted to offences.
14. Keeping the above principles in mind, the evidence on record must be analysed to find out whether any offence is proved or not. It is not necessary to refer to oral testimonies of all the witnesses, examination is confined to evidence tendered by PW1, PW2, PW5, PW6, PW7, PW9, PW15, PW20 and PW21.
15. PW1-K.Rengan was the Chief Manager of Advances Section, Region No.V, State Bank of Mysuru, Tumkur. At that time accused No.1 was working as Branch Manager at Raghavendra Nagar branch of SBM, Tumkur. PW1 has stated that having verified the performance report of accused No.2, he noticed that accused No.1 had sanctioned various loans, but had failed to submit 'Control Return' in connection 19 with advances. He gave telephonic instructions to accused No.1 to submit Control Return, but when accused No.1 did not submit the Control Return, he issued reminders to him as per Ex.P1 to P3. He has also stated that accused No.1 had purchased cheques, Ex.P4 and P5 exceeding his financial power and in regard to this transaction also, accused No.1 failed to submit Control Return.
16. While cross-examining PW1, he was suggested that 'Control Return' had in fact been submitted by accused No.1, and of course he denied this suggestion. But he admitted another suggestion that accused No.1 had the power to sanction loan up to ` 10,00,000/- for small scale industries. Then PW1 is sought to be discredited by questioning him that he was in the habit of giving complaint against bank officers, and he admitted a suggestion that he had given a report against his predecessor. Cross- 20 examination to this effect does not matter much, but his another admission has some relevancy. He admitted the suggestion that if the manager was found to have exceeded the discretionary limit in some cases, the same would be rectified. And he was again suggested that accused No.1 submitted Control Return on 30.10.2004, he stated that he wanted to verify the records.
17. PW2-Putteri was working as Special Assistant in the Raghavendra Nagar Branch at the time when accused No.1 was the branch manager. His evidence in examination-in-chief gives entire picture of transactions of loan sanction, and cheque and bill discounting permitted by accused No.1. His cross-examination shows that under Ex.P26, request was made for loan of ` 5,00,000/- towards working capital. He has admitted a suggestion that Karnataka Copper Mills made an application to KSSID as per 21 Ex.D1 seeking allotment of an industrial shed. Another suggestion admitted by him is that loan of ` 10,00,000/- was sought under Ex.P16 and Ex.P24 and that ` 10,00,000/- was sanctioned to Balaji Aromatics. His prominent admission is that Control Return was submitted on 30.10.2004.
18. PW5 has stated that accused No.1 passed several cheques. PW6 has deposed about passing of cheques by accused No.1. PW7 has given evidence that the CBI Officer enquired him at SBM, Dharwad regarding return of the cheques, Ex.P4, P5, P40, P42 and P44 which were sent for collection to Indian Overseas Bank, Sapthapuva Branch, Dharwad from SBM, Raghavendra Nagar Branch, Tumkur.
19. PW9, S.R.Srivastha has stated that he worked as Manager, Advances Section, SBM Regional Office, Tumkur in between June 2003 and December 22 2004. In the year 2004, he visited Raghavendra Nagar Branch on the instruction of Assistant General Manager. He came to know increases in the level of advances, and accused No.1 had not taken security for loan of ` 10,00,000/- each advanced to Karnataka Copper Mills, Balaji Aromatics and Balaji Products. He has stated that loan sanctioned by accused No.1 was within the discretionary power of accused No.1 but security documents were not properly filled and accused No.1 had not reported the sanction of loans to the Regional Office.
20. In the cross-examination it was elicited from him that Karnataka Copper Mills had given loan application as per Ex.D3, that Baby Vasanta Kumar (accused No. 2) stood as guarantor for the loan and that equitable mortgage had been obtained for the loans. In this regard, he stated further that creation of equitable mortgage was subsequent to his 23 inspection. Another answer elicited from him was that the AGM had given good performance report concerning accused No.1, and security was not necessary for loans up to ` 1 crore under credit guarantee scheme for small and medium enterprises.
21. Another important witness is PW15 V.Ramesh who worked as a Manager at SBM Regional Office, Tumkur in between the period 2004 and 2005. His evidence is that the AGM, Regional Office, SBM, Tumkur directed him to visit Raghavendra Nagar Branch and verify the accounts of Balaji Aromatics, Karnataka Copper Mills, Balaji Products and other accounts. He noticed that pre-sanction and post- sanction inspection had not been conducted and the manager had exceeded that discretionary power, that he had not submitted Control Returns and that stocks had not been insured. He has also stated that one bill of Balaji Products was returned from Goa and 24 therefore he again visited Raghavendra Nagar Branch for inspection. He stated that he visited ABT services at Goa along with the manager of Goa Branch and took possession of the cans available in the godown. At that time he noticed that five cans were not properly sealed and in that regard, he gave a report as per Ex.P159. In the cross examination he denied the suggestion that accused No.1 had discretionary limit up to ` 10,00,000/- and Control Return had been filed by accused no.1. But he admitted that loan up to ` 7,00,000/- had been repaid. Another answer elicited from him was that procedural irregularities were common in the back ground of pressure of work.
22. PW20, K.V.Ananth Raj Shetty worked as Deputy Manager, SBM, Raghavendra Nagar Branch, Tumkur. His evidence is that the CBI Officer asked him to furnish the copy of the statement of accounts in connection with current account of Karnataka 25 Copper Mills and accordingly the branch manager issued the statement of accounts as per Ex.P86. The said statement showed that a DD was purchased for `5,00,500/- on 07.08.2004. Seeing another statement of account as per Ex.P88 in connection with cash credit account of Karnataka Copper Mills, he stated that two DDs purchased for ` 7,00,700/- and ` 3,00,300/- were encashed. He also stated that Ex.P89 was the statement of account in connection with cash credit account of Balaji Aromatics and a DD which was purchased for ` 8,00,800/- was encashed at SBM, Dharawad Branch. Like that another DD purchased for ` 5,00,500/- relating to cash credit account of Balaji Products had been purchased and it was encashed at SBM, Dharwad Branch.
23. His cross examination shows that performance report of accused No.1 was excellent and admissions that Control Report had been filed in 26 October 2004 and the bank had collected commission on purchase of cheques and bills. He also stated in the cross-examination that he passed cheques in connection with transactions of Balaji Aromatics, Balaji Products and Karnataka Copper Mills and for all the transactions, equitable mortgage was created.
24. PW21 was the investigating officer whose evidence shows details of evidence collected by her on different dates.
25. Now if the entire oral evidence of the prominent witnesses is assessed, it does not become clear as to what was the illegality committed in sanctioning of loan and purchase of cheques and bills. No witness has implicated accused No.1, and their evidence does not help in any way to draw inference as to existence of conspiracy among all the accused. It appears that Control Return was not submitted on 27 time and it was the reason for reminders being issued to accused No.1. But PW2 and PW20 have admitted that Control Return was submitted on 30.10.2004. It has come in evidence that equitable mortgage was also obtained and that the bank collected commission when cheques and bills were purchased. This being the evidence, it does not become clear as to how the accused came to be prosecuted. There might be some procedural infractions, which could be set right or rectified as stated by PW1 in his cross examination. PW15 has given an admission that procedural irregularities were common because of pressure work.
26. In regard to allegation that accused No.1 had exceeded his discretionary limit, there is no consistent evidence. If one witness says that accused No.1 had exceeded the limit, another says that he had not exceeded. PW9 has very specifically stated in examination-in-chief itself that accused No.1 had not 28 exceeded discretionary limit. Moreover the prosecution should have produced a circular or notification which specified the discretionary power of branch manager. Above all as the evidence shows AGM had given good performance report concerning accused No.1. The evidence of the investigating officer is of no use at all. In a case of this type, the evidence of investigating officer must disclose as to on what basis he could form an opinion that offences had been committed. The prosecution case is that the bank suffered loss of ` 57,00,000/- but no witness has stated that the bank suffered loss. Even the investigating officer does not state about it. Rather it is elicited from the investigating officer that accused No.1 had discretionary power up to ` 10,00,000/- and could purchase cheques up to ` 2,00,000/- and bills up to ` 5,00,000/-. As regards involvement of accused No.7, no witness has spoken against him, but 29 PW21, the investigating officer has stated that the receiving or acceptance of cheques by accused No.1 showed conspiracy between him and other accused. This answer has no basis. To this kind of evidence, a judgment of the Supreme Court in the case of S.V.L Murthy vs State represented by CBI, Hyderabad [(2009) 6 SCC 77], cited by Sri Nagendra Naik may be appositely referred here. In para 55, it is held , "55. The upshot of our discussions is:-
(a) The prosecution did not lay down any foundational facts to arrive at a finding of dishonest intention on the part of the appellants, nor any such finding has been arrived at by the trial court or the High Court.
(b) The circumstances which were considered sufficient to bring home the charges against the appellants were: the cheques of accused 1, 2 and 3 were discounted after purchasing cheques;30
cheques were deposited after a gap of 1 to 4 days; only later the amounts were deposited in the account which circumstances, in our opinion, are not sufficient to hold the appellants guilty for commission of offence under Section 420 of the IPC as all the actions on the part of the bank officers were in consonance with the long standing banking practice.
(c) Accused 4 had taken care of having adequate security to ensure that the bank does not suffer any loss, the gain if any was caused to the Bank.
(d) The appellants acted on instructions by the higher authority.
(e) The prosecution evidence does not establish any conspiracy on their part vis- a-vis Accused 1, 2 and 3."
27. Therefore the conclusion to be drawn is the prosecution has failed to establish the offences punishable under sections 120B, 420, 409 of IPC and IPC and section 13 (1) (2) read with 13(1)(d) of PC 31 Act. The judgment of the trial court cannot be sustained at all. Hence the following :
ORDER All the appeals are allowed, the judgment of the trial court in Spl.C.C.No.116/2007 on the file of XXXII Additional City Civil and Sessions Judge and Special Judge for CBI cases, Bengaluru is set aside. All the accused are acquitted of the offences with which they stood charged.
The bail bonds of the accused stand cancelled.
Sd/-
JUDGE ckl