Delhi District Court
Cbi vs Ms Harpreet Fashions Pvt. Ltd. Through ... on 3 June, 2024
IN THE COURT OF SHRI HASAN ANZAR,
SPECIAL JUDGE (PC ACT) CBI-03,
ROUSE AVENUE DISTRICT COURTS,
NEW DELHI.
CNR NO. DLCT11-000380-2019
Registration/CC No. 80/2019
RC. No. 12(E)/2011
PS: CBI/EO-I/New Delhi
U/s : 120-B IPC r/w Sections 420/467/468/471 IPC and Section
13(2) read with Section 13(1)(d) of Prevention of
Corruption Act 1988.
In re:
Central Bureau of Investigation (CBI)
Versus
(1) M/s Harpreet Fashion Pvt. Ltd. Through its Director Smt.
Harpreet Kaur, Registered Address : Danish Road Laktokia,
Guwahati, Assam-781001, India.
Correspondence Address : 3/5136, Krishan Nagar, Karol
Bagh, New Delhi and Factory Address : 362, M.I.E.,
Bahadurgarh, Haryana (India).
(2) Mohanjit Singh Mutneja
S/o Late Shri Manjit Singh
R/o House No. 23/62, Punjabi Bagh West,
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 1 of 336
New Delhi-110026.
(3) Gunjit Singh Mutneja
S/o Late Manjit Singh
R/o House No. 23/62, Punjabi Bagh West,
New Delhi- 110026.
(4) Smt. Harpreet Kaur Mutneja
W/o Shri Mohanjit Singh Mutneja
R/o House No. 23/62, Punjabi Bagh West,
New Delhi-110026.
(5) Harmendra Singh
S/o Late Sardar Gyan Singh
R/o 62, Lajpat Kunj, Civil Lines, Agra, Uttar Pradesh.
(6) Raman Kumar Aggarwal
S/o Late Shri Chiranji Lal
R/o H. No. N-69, South City-I,
Gurgaon, Haryana.
(7) Darwan Singh Mehta
S/o Late Shri Prem Singh Mehta
R/o New Khushal Nagar, Station Road, Moradabad (UP) and
Permanent Address : Village & PO Dinapani, Distt.
Almora, Uttrakhand.
(8) T.G. Purushothaman
S/o Late Shri K.C.G. Nair
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 2 of 336
R/o 80, Canara Apartments, Sector-13, Rohini, Delhi-85.
(9) C.T. Rama Kumar
S/o Late Shri C.R. Thevar
R/o Sree, Akshara Nagar, Pallipuram,
PO Palakkad District, Kerala.
Date of Institution : 26.11.2015
Date on which judgment was reserved : 22.05.2024
Date of Judgment : 03.06.2024
Memo of Appearance
Ms. Rohini Anand, Ld. PP for CBI.
Shri Harsh Kumar Sharma, Ms. Vaibhavi Sharma and Shri Lakshya Parasher, Ld.
Counsels for A-1, A-2 & A-4.
Sh. Rohit Priya Ranjan and Ms. Ridhima Sharma, Ld. Counsel for A-3.
Shri K.K. Sharma, Ld. Counsel for A-5.
Shri M.K. Gupta and Shri Vijay Kumar, Ld. Counsels for A-6, A-7 & 9.
Mr. Shri Singh, Ld. Counsel for A-8.
JUDGMENT
1. An FIR under section 120-B read with Section 420, 467, 468 & 471 Indian Penal Code (Hereinafter to be referred as IPC) and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 (hereinafter referred to as "PC Act") was registered on the basis of written complaint dated 26.09.2011 by Shri K.S. Chandramouli, Deputy General Manager, Canara Bank, Circle Office, New Delhi against (1) Mohanjit Singh Mutneja, Director of M/s. Manjit Footwear Industries Pvt. Ltd.: (2) Smt. Tripat Kaur, Director of M/s. Manjit CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 3 of 336 Footwear Industries Pvt. Ltd.; (3) Rajinder Pal Singh, Director of M/s Manjit Footwear Industries Pvt. Ltd.; (4) Gunjit Singh Mutneja, Proprietor, M/s G. M. Exim; (5) Smt. Seema Mutneja, Partner of M/s Ginna World Trade; (6) Kuldeep Singh, Partner of M/s Ginna World Trade; (7) Smt. Harpreet Kaur Mutneja, Director of M/s Harpreet Fashion Pvt. Ltd.; (8) Badal Juneja, Director of M/s Harpreet Fashion Pvt. Ltd.; (9) K. N. Aithal, the then Chief Manager, Chandni Chowk Branch, Canara Bank, Delhi; (10) U. R. Adiga, the then Asstt. General Manager, Chandni Chowk Branch, Canara Bank, Delhi; (11) Raman Kumar Aggarwal, the then Asstt. General Manager, Parliament Street Branch Canara Bank, New Delhi (hereinafter referred to as 'Parliament Street Branch') and unknown bank officials of Canara Bank and other unknown private persons and pursuant to which the investigation was undertaken by the CBI and chargesheet is filed in the present case.
2. It is alleged in the charge-sheet that investigation had revealed that there were four separate criminal conspiracies hatched during the years 2003 to 2007 by the accused persons involving two branches of Canara Bank i.e. (1) Parliament Street Branch, New Delhi and (2) Chandni Chowk Branch, Delhi and the charge-sheet in the present CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 4 of 336 case relates to defrauding/cheating the Parliament Street Branch of Rs.4.80 Crores.
3. It is alleged that M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) was incorporated on 10.03.2004 with Mohanjit Singh Mutneja (Accused No. 2) and Badal Juneja as Directors with a capital base of Rs.6.00 lacs and as per the incorporation details, the core business of the company was export of readymade garments. M/s Harpreet Fashion Pvt. Ltd. (A-1) had opened a Current Account No. GWCA 000005489 with authorized signatory Mohanjit Singh Mutneja (Accused No. 2), Badal Juneja and Smt. Harpreet Kaur (Accused No.
4) on 28.09.2004 on the basis of the introduction given by Mohanjit Singh Mutneja (Accused No. 2) himself on behalf of his firm M/s Manjit Overseas.
4. It is further alleged that A-1 M/s Harpreet Fashion Pvt. Ltd. had applied for credit facility of Rs.250.00 Lacs as Packing Credit and FDB/FBE of Rs.350.00 Lacs at Parliament Street Branch by submitting an application Ex.PW37/1 (Colly) (D-3) to the Branch Manager Raman Kumar Aggarwal, AGM (Accused No. 6).
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 5 of 3365. It is further alleged that T.G. Purushothaman (Accused No. 8), Manager (Credit) prepared the proposal and the same was also signed by PW-37 Shri Mahesh Kumar Singh, Sr. Manager on 26.10.2004, and the Branch Manager, Raman Kumar Agarwal, AGM (Accused No. 6) forwarded the proposal for grant of credit facility to the Circle office on the same day.
6. It is alleged that for the purposes of credit facility, hypothecation of stocks and book debts were proposed as a primary security. Factory land and building situated at 362, ΜΙΕ, Bahadurgarh, Haryana in the name of Smt. Harpreet Kaur (Accused No. 4) valued at Rs.110.00 lacs was proposed to be kept as collateral security apart from personal guarantee of Mohanjit Singh Mutneja (Accused No. 2), Badal Juneja and Smt. Harpreet Kaur (Accused No. 4) was also furnished. In the Circle office, the proposal was processed by Shri Rakesh Gupta, Senior Manager (PW-22) who noted certain adverse features in the proposal. The file was further processed by Shri Rakesh Gupta who proposed imposition of certain conditions prior to the sanction of credit facility to M/s Harpreet Fashion Pvt. Ltd before forwarding it to the next authority in command. Some of the conditions proposed by him were as follows :
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 6 of 336i. Since collateral comfort is low as compared to exposure. therefore 3% cut back deposits be stipulated on the bills discounted.
ii. Before release of the limit, branch to put through equitable mortgage property and perfect the same in all respects.
iii. D & B reports of the buyers to be obtained.
iv. Opinion letters for other sister concerns to be obtained from Chandni Chowk branch and ensure that the same is satisfactory.
v. Branch to obtain an undertaking from the company to increase the equity to Rs. 200 lacs by 31.3.2005 by raising the authorized capital accordingly and converting the unsecured loan into equity.
vi. Enhanced limits for the year 2005-06 are to be released only after evaluating performance of the company based on the ABS/PBS as on 31.3.2005.
vii. As the collateral offered is valued only Rs. 110 lacs as against a proposed exposure of Rs. 480 lacs, we may advise the branch to explore the possibility of obtaining additional collateral security.
7. The above referred proposal of M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) was subsequently recommended for sanction by Sh. A.R. Jayaprakash, AGM on 11.12.2004 and he proposed approval of credit facility subject to compliance of two conditions before release of the limits i.e. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 7 of 336 i. the promoter have agreed to induce Rs. 180 lacs as secured loan before availing the limit and this should be a pre-condition.
ii. Branch should ensure that over dues in the name of associate concerned are cleared in full and a confirmation with this effect is obtained from Chandni Chowk Branch.
8. Thereafter, the proposal was put before Shri K. Gopalakrishnan, DGM vide note dated 06.01.2005 who concurred with the proposal subject to the compliance of the two conditions raised by AGM Shri A.R. Jaiprakash and thereafter, the proposal was further put to the next higher authority i.e. Shri P. Prakash Malaya, the then General Manager. Shri P. Prakash Malaya(Ultimate Sanctioning Authority) vide his note dated 13.01.2005 sanctioned the credit cash limit with an observation that financial status of the company are not satisfactory and directed to ensure compliance of above based conditions before release of the limits. It is further averred that Shri Rakesh Gupta, Sr. Manager, Circle Office, vide letter dated 15.01.2005, intimated the Branch regarding sanction of Credit Limit of Rs.240 Lacs (PC 100 lacs + FDB 140 lacs) for the year 2004-05 and Rs.480 Lacs (PC 200 lacs + FDB 280 lacs) for the year 2005-06, which was to be released after compliance of following conditions :
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 8 of 336i. Before release, the branch to ensure that overdue in the name of Associate Concerns are cleared in full and a confirmation to that effect is to be obtained from Chandni Chowk Branch.
ii. Branch to obtain an undertaking from the company to increase the equity to Rs.200.00 lacs latest by 31.03.2005 by raising the Authorized Capital accordingly and converting the unsecured loan into equity. The date to increase the equity to Rs.200.00 lacs was extended to 30.06.2005 by Circle Office vide it's note dated 01.03.2005.
iii. Enhanced limit for the year 2005-06 are to be released only after evaluating performance of the company based on the ABS/PBS as at 31.03.2005.
iv. There were other terms and conditions also such as induction of unsecured loan, 3% Cut back deposit, perfection of EMT, lease agreement for godown etc. (Comments : These are the final conditions which were imposed while sanctioning the grant of cash credit limit to the accused).
9. It is further alleged that conditions as stipulated in the sanction letter were not complied by T.G. Purushothaman, Credit Manager (Accused No. 8) and Raman Kumar Aggarwal, Branch Manager (Accused No. 6), and the limit was released on 13.05.2005 by Manager (Credit) T.G. Purushothaman (Accused No. 8) and AGM Raman Kumar Agarwal ( Accused No. 6) in favour of the borrower M/s Harpreet Fashion Pvt. Ltd (Accused No. 1).
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 9 of 33610. It is further alleged in the charge-sheet that during the course of the investigation, it was found that bank officials in conspiracy with private persons have not complied with the conditions as imposed in the sanction letter and also committed other illegalities. It is alleged that the condition "before release, the branch to ensure that overdue in the name of associate Concerns are cleared in full and a confirmation to that effect is to be obtained from Chandni Chowk Branch" was not complied. It is further alleged that vide letter dated 21.05.2005, Canara Bank, Chandni Chowk Branch had informed about the overdue position in the group accounts maintained by M/s Manjeet Footwear Industries Ltd., M/s Ginna world Trade and M/s G.M. Exim and vide letter dated 22.05.2005 Shri Rakesh Gupta, Sr. Manager of Circle Office had also informed the Branch about the irregularities in the account of the Group Companies. It is further alleged that another condition which was prescribed in the sanction letter for increasing the capital up to 200 lakhs by 30.06.2005 was also not complied by bank officials till 12.07.2005 and rather, the limit was released to A-1 without obtaining confirmation about the overdues and clearance of the dues in the associate concern from Canara Bank, Chandni Chowk Branch and the bank official(s) i.e. Raman Kumar Aggarwal (A-6) gave undue favor to A-1 and other accused persons.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 10 of 33611. It is further alleged that enhanced limit was also permitted by A- 6 to the borrower without evaluating the performance of the borrower (A-1).
12. It is further alleged that other illegalities were also observed by the Circle Office in their note i.e. Undertaking Letter from the party for increasing equity to Rs.200 lacs by 31st March, 2005 was not obtained resulting into extremely high gearing ratio, Equitable Mortgage against the limit of 480 lacs was not obtained from the borrower and perfection of available mortgage valued Rs.110 lacs was not ensured and the enhanced limit of Rs.480 lacs for the consecutive financial year 2005-06 was released even after poor performance by the company i.e. actual sell of Rs.127.82 lacs against the projected sell of Rs.600 lacs, Branch has also not obtained buyer-wise policy IPSG of ECGC (Export Credit Guarantee Corporation) as stipulated in the sanction, other sanctioned terms and conditions such as lease agreement for the godown situated close to the factory was also not complied by the Branch and D&B report of the buyers were not complied.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 11 of 33613. It is further alleged that renewal proposal for the limit was forwarded despite irregularities in the operation of the account of A-1, to the Circle Office on 06.07.2006 after six months from the original date of expiry of limit i.e. 12.01.2006 and later on the same was renewed at the same level up to 20.03.2008 by Executive Director of the Bank (Shri Alok Mishra) and the same was conveyed to Branch by Head Office vide letter dated 26.03.2007 and the usance period was extended from 90 days to 150 days.
14. It is alleged that the ECGC had informed the Branch on 19.07.2007 that a sister concern of the firm M/s Manjit Overseas defaulted to Bank of Baroda, Parliament Street Branch and advised them to obtain prior approval before granting any fresh advances to the firm. ECGC had again informed the Branch vide letter dated 06.08.2007 not to extend PC limit or discount any Foreign Bills and it was only after receipt of information from ECGC that the account of M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) was declared NPA on 30.09.2007 with total liability of Rs.4.80 Crores.
15. The investigation had also revealed that during the sanction period, Smt. Harpreet Kaur (Accused No. 4) wife of Mohanjit Singh CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 12 of 336 Mutneja (Accused No. 2) had replaced her husband as Director, which was only paper change as Mohanjit Singh Mutneja (Accused No. 2) continued to sign on the papers as Authorized Signatory but there is no document available on the record to show that Mohanjit Singh Mutneja (A-2) was authorized signatory of the company. It is also alleged that the Branch failed to notice that letters/ Balance Sheet/ Stock Statement etc. were signed by other person who was not the authorised director or authorized signatory.
16. It is also alleged that Raman Kumar Aggarwal, AGM (Accused No. 6) had functioned as Branch Manager at Parliament Street Branch from 22.05.2004 to 20.07.2006, during the period the credit facilities were sanctioned to M/s Harpreet Fashion Pvt. Ltd. (Accused No.1). Raman Kumar Aggarwal (Accused No. 6) had previous acquaintance with the Promoter/Directors of the Company and enjoying good relations and had previous knowledge about irregular operation of accounts, DRI raids, heavy overdue position of the group concerns as he had earlier worked in Overseas Branch of Canara Bank, Agra and Chandni Chowk Branch, Delhi wherefrom group concerns M/s Manjeet Exports, M/s Manjeet Overseas, M/s Hinna International, M/s GM Exim, M/s Ginna World Trade and M/s Manjeet Footwear CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 13 of 336 Industries Pvt. Ltd. were availing credit facilities and despite the same, he proposed credit facilities to the A-1
17. It is further alleged that six overdue bills worth Rs.196.04 lacs (as detailed in the charge-sheet) were adjusted through release of fresh PCs by the bank, which was violation of PC norms as the PC was granted for procurement of goods against the orders received by borrower and not for the adjustment of overdue bills. It is further alleged that packing credits released to M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) was siphoned off by Mohanjit Singh Mutneja (Accused No. 2) through account opened in the name of sister concerns/associate firms and M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) did not have any business with the associate firms, which were all controlled by Mohanjit Singh Mutneja (Accused No. 2). It is further alleged that a total sum of Rs.4.56 Crores was transferred to sister concerns, wherein Rs.80.09 Lacs was transferred to M/s Manjeet Overseas, Rs.35.80 lacs to M/s Manjeet Exports, Rs.124.17 lacs to M/s Rajni Worldwide, Rs.166.90 lacs to M/s Chozee Knitwear and Rs.50.00 lacs to M/s G. M. Exim (as detailed in the charge-sheet). It is further alleged that the bank had provided only 29 original cheques out of 47 original cheques and vide its letters dated 20.06.2014 and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 14 of 336 26.06.2014 informed that remaining cheques were not traceable. It is further alleged that all the aforesaid firms, wherein the credits facilities were diverted, to the following Family Controlled Firms;
S.No Name of the Sister Concern Particulars 1 M/s Manjeet Overseas Sh. Mohanjit Singh Mutneja (Accused No. 2) is proprietor and signatory of this firm.
2 M/s Manjeet Exports Smt. Harpreet Kaur (Accused No. 4) and Sh. Mohanjit Singh Mutneja (Accused No. 2) are the partners of this firm 3 M/s Rajnit Worldwide Sh. Mohanjit Singh Mutneja (Accused No. 2) is proprietor and signatory of this firm.
4 M/s Chozee Knitwear Sh. Mohanjit Singh Mutneja (Accused No. 2) and Smt. Harpreet Kaur (Accused NO. 4) are the signatory of this firm and Gunjitt Singh Mutneja (Accused No. 3) is the authorised signatury of this firm.
5 M/s GM Exim Gunjit Singh Mutneja (Accused No. 3) is the proprietor and signatory of this firm and Sh. Mohanjit Singh Mutneja (Accused no. 2) is signatory of this firm.
18. It is alleged that when the account became NPA, following amounts released in PC credits remained un-paid, which was granted by branch official on the request of borrower M/s Harpreet Fashion Pvt. Ltd.:-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 15 of 336S. PC released and Transferred to Outstandin PC released by No. date g 1 Rs.17.50 Lacs Rs.12,31,076/- cash Rs.1,000/- Sh. D.S. Mehta withdrawal by 5 Manager. (A-7).
persons. However,
Rs.17.49 Lacs received
from proceeds of Bill of
discounting.
2 Rs.22.90 Lacs Rs.20.00 Lacs Rs. 1000/- Sh. D.S. Mehta
28.02.2007 transferred to M/s Manager (A-7).
Chozee Knitwear on
same date. However,
Rs. 10.20 Lacs was
adjusted from Bill
discounting and
Rs.12.69 Lacs from
Export proceeds.
3 Rs.41.50 Lacs Rs.30.00 Lacs Rs. 32.32 Sh. D.S. Mehta
06.03.2007 transferred to M/s Lacs Manager (A-7).
Chozee Knitwear on
06.03.2007.
4 Rs.43.00 Lacs Rs.29.90 Lacs 43.00 Lacs Sh. D.S. Mehta
08.03.2007 transferred to M/s Rajni Manager (A-7).
Worldwide on
08.03.2007.
5 Rs.17.00 Lacs Rs.15.00 lacs 17.00 Lacs Sh. D.S. Mehta
16.03.2007 transferred to M/s Manager (A-7).
Chozee Knitwear and
cash withdrawal of Rs.
1.80 Lacs.
6 Rs.26.50 Lacs Rs. 25.00 Lacs to M/s 26.50 Lacs Sh. D.S. Mehta
20.03.2007 Chozee Knitwear on Manager (A-7)
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 16 of 336
20.03.2007.
7 Rs.31.50 Lacs Rs. 27.00 Lacs to M/s 31.50 Lacs Sh. D.S. Mehta
21.03.2007 Chozee Knitwear Manager (A-7)
19. It is further alleged that from the payment received as exports proceeds, Rs.96.45 Lacs was diverted to the sister concern companies despite the fact that bills were overdue and discounted bills were being adjusted through issuance of fresh PCs released by D.S. Mehta (Accused No. 7), Manager, Forex, Parliament Street Branch.
20. It is further alleged in the charge-sheet that ten Forex Bill bills (as detailed in the charge-sheet) were discounted by the Branch however, it remained remained unpaid including three forex bills in which three airway bills were fabricated and the accused persons fraudulently inserted the name of Dubai based bank as Consignee, whereas the goods were exported to Afghanistan which was a restricted cover country.
21. It is further alleged that M/s Harpreet Fashion Pvt. Ltd.
(Accused No. 1) had obtained number of purchase orders from (i) Md. Essa Fashion Co., Dubai, (ii) Greenbelt Readymade Garments Trading, (iii) Al-Mezhar Corner Trading, Dubai through fax for CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 17 of 336 supply of ready-made garments. It is further alleged that as per Dun and Bradstreet Report obtained by Parliament Street Branch and ECGC, in all these three foreign firms, two relatives of Mohanjit Singh (Accused No. 2) i.e. Harmendra Singh (Accused No. 5 - brother-in-law) and Gunjit Singh Mutneja (Accused No. 3 - brother) were working as Director and Managing Director respectively. It is further alleged that M/s Harpreet Fashion Pvt. Ltd., in connivance with Harmendra Singh (Accused No. 5) and Gunjit Singh Mutneja (Accused No. 3), had obtained number of purchase orders from Md. Essa Fashion Co. Dubai, Greenbelt Readymade Garments Trading, Al-Mezhar Corner Trading Dubai through Fax for supply of ready- made garments (as detailed in the charge-sheet). In these supply orders earlier there was no conditions but later it has been found that a clause was added that ".....you are directed to send goods to the final destination Kabul, Afghanistan as per instructions through telephone, Fax as per requirement of our consignee. You are requested to send the goods to our consignee directly and send the documents to our banks as per instructions.......". (Comment ; Interestingly neither during the course of investigation no such purchase order having signatures of these persons were sent to FSL for analysis and even no record was produced to the effect by which number the fax was sent CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 18 of 336 or received and moreover, during the course of trial, the prosecution has not brought into record even by way of marking!).
22. It is further alleged that some of the items exported in the above mentioned bills were other than ready-made garments which were not mentioned in the purchase orders {Comment : No Purchase Order was marked/exhibited or even brought on record during the trial} and for which credit facilities were not specified and against the specified good in purchased orders, other goods were exported to importers included cosmetic goods, FMCG etc. It is alleged that these bills have also been found discounted by the bank which were not the finished products produced by the companies which shows that Packing Credit was mis-used by the borrower and these bills should have not been discounted by the Branch officials C.T. Ramakumar, Officer (Export) (Accused No. 9) and D.S. Mehta, Manager (Forex) (Accused No. 7). It is further alleged that some of the export goods were directly shipped to Afghanistan, which was categorized under the restricted cover countries by ECGC, for which specific permission on case to case basis is to be obtained but no such permission was obtained. It is also alleged that documents as obtained from the Custom Department CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 19 of 336 revealed that the exports were made to Afghanistan as per the quantity mentioned in the airway bills.
23. It is alleged that after shipping the goods were directly exported to Afghanistan, Mohanjit Singh Mutneja (Accused No. 2) in connivance with bank officials had fraudulently managed to discount some bills as the copy of Airway Bill submitted to Bank and shipper's copy are different. The shipper copy of the Airways Bills of Ariana Airways which was collected from Shri Hemant Choudhary of Airworld Cargo Services shows that there was no alteration in the Airways Bills of shipper's copy, whereas the copy of Bill submitted to Bank shows alteration. Investigation also revealed that the exporter M/s Harpreet Fashion (Accused No. 1) camouflaged the export transactions to Afghanistan and shown the documents to be routed through a bank from Dubai. It is alleged that airway bills were actually meant for Tajmit Import & Export, Saraya, Sargur, Kabul, Afghanistan as only his descriptions were mentioned on the actual bills (cutting free) but to get it discounted from the bank typed insertion with respect to name of the foreign importers based at Dubai and consignee bank based at Dubai were made in the airways bills and after insertions these bills were presented to the bank for discounting.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 20 of 336However, without verifying the authenticity of the bills, the bank discounted these altered bills despite the fact that para 4.7.3 at page no. 87 export general updated upto 30.06.2006, warns the discounting of Altered Airways Bills and advised for scrutiny of documents in view of the instances of fraudulent transactions.
24. It is further alleged that no export proceeds were received from the consignee bankers at Dubai and instead the adjustments were made after the receipt of the payments from Exchange House at Dubai and this discounting of bill was in violation of the Reserve Bank of India Circular No. AP (DIR Series) No. 28 which restricts receipts of more than Rs.2,00,000/- on each transaction and the same was done within an ulterior motive to cheat the bank. It is alleged that the Airway Bills No. API 86810012786, API 86810012683 and API 86810012952 were fabricated after the shipment of export with an intention to discount from the bank by inserting the name of the bank. It is alleged that all three altered Airway bills submitted by the Company were discounted, but payment against these bills was not received from Dubai based buyers firms which were being run by the family members of Mohanjit Singh Mutneja (Accused No. 2). It is further alleged that during investigation, it is revealed that as many as CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 21 of 336 ten bills (as detailed in the charge-sheet) discounted to M/s Harpreet Fashion (P) Ltd. (A-1) were overdue, when the account was declared NPA on 30.09.2007 due to non-receipt of payments from foreign buyers. It is alleged that during investigation, a search was conducted on 15.06.2012 at the house of Mohanjit Singh Mutneja (Accused No.
2) and a file of export bills of M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) was seized in which photocopy of export bill along with altered copies submitted to Branch were found.
25. It is alleged that as per as per ECGC Norms, the firms exporting goods to a foreign firm controlled by relative of the exporter shall be liable for additional premium. However, the factum of engagement of relatives in the importer firms was not disclosed by M/s Harpreet Fashion Pvt. Ltd. (Accused No. 1) in order to pay less premium and the said fact came to the notice of bank when Dun and Bradstreet report was received by the bank and the said fact was not taken into consideration by the bank.
26. It is submitted that the CFSL opinion has confirmed the signatures of Mohanjit Singh Mutneja (Accused No. 2), Gunjit Singh Mutneja (Accused No. 3) and Smt. Harpreet Kaur (Accused No. 4) on CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 22 of 336 the various letters, cheques, Bill of Exchange. Invoices, Covering letters submitted to Branch of Canara Bank for discounting of altered Airways bills and application for credit facilities (Ex.PW37/DX-1) (D-3) as well loan documents (as detailed in the charge-sheet). It is also alleged that M/s Harpreet Fashion Pvt. Ltd. was the beneficiary of the wrongful gain. It is alleged that Mohanjit Singh Mutneja is the main accused in the case and beneficiary of misappropriated funds and was responsible for altering the airway bills for the purpose of discounting and was responsible for directly exporting the goods to Afghanistan and connived with his two relatives namely Gunjit Singh and Harmendra Singh controlling the importer firms based at Dubai and bank officials and causing loss to the bank. It is further alleged that Gunjit Singh Mutneja who is the brother of Mohanjit Singh Mutneja, was Manager of the buyer firm M/s Al-Mezhar Corner Trading LLC. Dubai (as per Dun and Bradstreet Report) and had conspired with his brother in causing loss to the bank by misappropriation of funds. It is alleged that Smt. Harpreet Kaur (Accused No. 4) is the wife of Mohanjit Singh Mutneja and was made Director of M/s Harpreet Fashion Pvt. Ltd in place of Mohanjit Singh Mutneja and put signature on the altered Airway Bills submitted for discounting.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 23 of 33627. It is alleged that accused Raman Kumar Aggarwal (Accused No.
6) was the Branch Manager of Canara Bank, Parliament Street Branch from May 2004 to July 2006 and he was aware about the previous conduct of group companies of the firm M/s Harpreet Fashion Pvt. Ltd. and yet he recommended the credit facilities to the firm and released the facility after sanction without adhering the terms and conditions of the sanction and also failed to monitor the diversion and proper utilization of PCs. It is alleged that accused Darwan Singh Mehta (Accused No. 7) was Senior Manager (Forex) in the Branch since June, 2005 and he did not scrutinize altered airways bill properly. He adjusted the overdue bill by releasing fresh PC and also did not ensure the end use of fund. It is alleged that accused T.G. Purshothaman (Accused No. 8) was the Manager (Credit) of the Branch from 11.09.2002 to 26.07.2007, processed all the loan applications given by M/s Harpreet Fashion Pvt. Ltd. and failed to act on the early warning signal such de-linking of discounted bills and realization of bills from other source. It is further alleged that accused C.T. Ramakumar (Accused No. 9) was Officer(Export) in the Branch from June, 2002 to June, 2007 and he did not scrutinize the altered airways bills properly. It is alleged that he also accepted the export CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 24 of 336 receipt from Exchange Houses based at Dubai in violation of RBI rules.
28. It is alleged that the public servants Raman Kumar Aggarwal (Accused No.6) and Sh. T.H. Purushotaman (Accused No.8) have already retired from service and hence sanction of prosecution under Section 19(1) (e) of the Prevention of Corruption Act, 1988 is not required. Sanction under section 19 of Prevention of Corruption Act has been obtained from the competent authority against A-7 Darwan Singh Mehta and A-9 C.T. Rama Kumar and a charge sheet under section 120-B r/w Sections 420/467//468 and 471 IPC and Section 13(2) r/w Section 13(1)(d) of Prevention of Corruption Act was filed.
29. On the basis of material submitted through charge-sheet, cognizance was taken. Accused persons were summoned and copy of charge sheet alongwith documents were supplied to the accused persons and arguments were heard on the charge.
30. Vide detailed order dated 19.08.2017, the charges were directed to be framed against all the accused persons named in the charge sheet.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 25 of 33631. A common charge was framed against A-1 to A-9 for committing offence under section 120-B IPC r/w Sections 420/467/468/471 IPC and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act 1988.
32. A-1 M/s Harpreet Fashion Pvt. Ltd. and A-5 were separately charged for committing offence under section 420 IPC.
33. Accused A-2, A-3, A-4 were also separately charged under sections 420/467/468/471 of IPC.
34. A-6, A-7, A-8 and A-9 were also separately charged under sections 13(2) r/w Section 13(1)(d) of Prevention of Corruption Act 1988. All the accused persons pleaded not guilty and claimed trial.
35. Thereafter, the matter was listed for P.E. In order to prove its case, the CBI has examined as many as 37 witnesses.
36. The prosecution examined the following witnesses to prove its case :
37. PW-1 Shri Prem Kumar Malik, Assistant General Manager, Circle Office, Canara Bank, Delhi was the disciplinary authority for CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 26 of 336 Delhi Circle. He accorded prosecution sanction under section 19 of Prevention of Corruption Act against Rama Kumar C.T. and Darwan Singh Mehta. He brought into record the following documents :
i. Ex.PW1/1 (D-96) Sanction Order for prosecution of Rama Kumar C.T. dated 04.08.2015 ii. Ex.PW1/2 (D-96) Sanction for prosecution of accused Rama Kumar C.T. dated 04.08.2015
38. PW-2 Mohd. Saheb Raza is the witness to the specimen signatures of Mohan Jeet Singh Mutneja vide Ex.PW2/1 (D-76), Gunjit Singh Mutneja vide Ex.PW2/2 (D-77), Harpreet Kaur vide Ex.PW2/3 (D-78), Badal Juneja vide Ex.PW2/5 (D-80), Tript Kaur vide Ex.PW2/6 (D-81) and Rajender Pal Singh vide Ex.PW2/7 (D-82). PW-2 deposed that pursuant to the directions of his Asstt. General Manager the specimen signatures were taken.
39. PW-3 Shri R.N. Kher, ARM of Canara Bank, Arya Samaj Road, Karol Bagh and vide seizure memo Ex.PW3/1, he handed over the documents to PW-30 Inspector Jitender Sharma.
40. PW-4 Shri Raj Pal Singh, Manager, Canara Bank, Assets Recovery Branch, Arya Samaj Road, Karol Bagh, New Delhi, and vide seizure memo Ex.PW-4/1, he handed over the documents to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 27 of 336 PW31 Shri B. M. Pandit, ASP, CBI. PW-4 in his cross-examination stated that he is neither aware about the contents of the documents nor the same bears his signatures as he had simply handed over the same to the CBI.
41. PW-5 Shri Mrinal Singh deposed that he used to work with Dun & Bradstreet Information Services from 2001 to 2015. He further deposed that the company used to provide third party information of the Companies in the World. He has also brought on record the forwarding letter dated 04.05.2005 regarding report of Mohd. Essa Fashion Company LLC is Ex.PW5/4 (Part of D-37), letter dated 23.05.2005 regarding report of M/s Essa Fashion Company LLC is Ex.PW5/5 (Part of D-37) and letter dated 10.10.2005 regarding report of Al Mezhar Corner Trading LLC, Dubai is Ex.PW5/6 (Part of D-37) bearing the initials of Shri Sandesh Vichare, the Customer Support Executive and the reports and communication was received in a routine manner through prescribed channel and on the basis of the name written on the said communication, PW5 assumed that it was initial of Sh. Sandesh Vichare. PW5 brought on record the following documents :
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 28 of 336(1) Ex.PW5/2 & Ex.PW5/2 : Report on Mohd. Essa Fashion Company LLC, Dubai;
(2) Ex.PW5/3 : Report on Al Mezhar Corner Trading (LLC), Dubai;
(3) Ex.PW5/4 : Forwarding letter regarding Essa Fashion dated 04.05.2005;
(4) Ex.PW5/5 : Letter regarding Al Mehzar dated 23.05.2005 and (5) Ex.PW5/6 : Letter regarding Al Mehzar dated 23.05.2005 (5) Ex.PW5/6 : Letter regarding Al Mehzar dated 10.10.2005.
42. PW-6 Shri Sudhir Kapoor explained the procedure relating to the discounting of the bill. He deposed that he joined Canara Bank as a Clerk in 1978 and was promoted on 01.04.2000 and retired on 30.11.2016 as an Officer. He deposed that Forex bill(s) is the bill pertaining to the export of goods to other countries. He also stated that purchasing/discounting of export bill is made in Indian currency at the prevailing rate although the currency of the importer country could be in Dollar or some other currency. He explained the procedure of delinking of forex bills in order to save the bank from the losses. He further stated that loss is borne by the exporter and the profit is passed to the exporter if the bill is delinked within a period of 15 days and no profit is passed to the exporter if it is beyond 15 days. He also stated that bank does not suffer any loss as the transaction is covered in the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 29 of 336 interbank market. He further stated that the Telegraphic Transfer (TT) Rate is always less than TT Selling Rate. He further stated that the bank recover losses from running/current/business accounts.
43. PW-6 also explained the meaning of "SWIFT" i.e. "Society Worldwide for Inter-Bank Financial Telecommunication" which is used for inter bank payment or fund transfer from foreign countries. A specific Bank Identification Code is issued to all the banks and authenticated messages are sent. The Canara Bank is associated with SWIFT and carries out its transaction through SWIFT by way of a software provided to the Canara Bank managed by the Department of Information, Technology at Head Office of Canara Bank. He further explained that receipt of message from foreign bank is determined by input, output time mentioned on the formatted messages and the date and time only tells whether the message is old or new. He also deposed that the message has its own time in the form of input output time mentioned on top of the formatted message. The output of the message even if it is taken after gap of time of one week or more would not be affect the date of the message mentioned on top of the formatted messages.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 30 of 33644. PW-6 further explained that packing credit and bill can be discounted by the concerned officer after sanction limit is in place. He further deposed that authorised signatory of a the private limited company makes a request for disbursement of packing credit or discounting of bills and only authorised signatory can sign the letter for disbursement of packing credit or discounting bill and no other persons other than authorised signatory can make request for grant of PC or discounting of bills. He further deposed that in case of any shortcoming i.e. over drawing in the account , the discrepancy in the documents only the Branch In-charge can permit the same. In his cross-examination, he deposed that there is a manual called instruction manual on export credit other than bills, he admitted that packing credit cannot remain unadjusted once, the shipment is made. He further admitted that even if the documents are discrepant the packing credit should be adjusted as the shipment had already taken place. He further deposed that Scale-I Official of the bank does not have the power to discount the discrepant documents or documents with shortcomings, cuttings and altercations and only Branch In-charge has power to give permission for the discounting. He further stated in his cross-examination that the person who handles the accounts of the parties and who clears the cheque ensures the end use of the packing CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 31 of 336 credit. He further stated that when there is an overdue then, subsequent bills are not discounted, however, it can be discounted when the packing credit is outstanding to liquidate the PC liability. He further admitted in cross-examination that all Scale-I officer of the bank are provided with Key Responsibility Area in writing.
45. PW-7 Shri T.Y. Prabhu, General Manager, Canara Bank, Circle Office, New Delhi and In-charge of Development of Bank's business. He deposed that office note vide Ex.PW-7/1 (D-32) dated 12.05.2006 of M/s Harpreet Fashion was prepared by Sh. Chetan Sanjan Dutta and vide this note the advance section had recommended for the suspension of the limit and thereafter, PW7 passed an order for tripartite meeting at Circle Office to discuss irregularities and to obtain action plan, details of ground accounts, liability position/security available, whether ECGC guarantee available and default report was submitted or not. The purpose of meeting was to discuss three group accounts namely, M/s Ginna Overseas, M/s GM EXIM and M/s Manjeet Footwears since these accounts had overdue liabilities. He further deposed that if limits were not extended from the date of its expiry i.e. 12.01.2006 then accounts would have NPA and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 32 of 336 thus the limits were extended till 12.04.2006 (wrongly typed as 12.04.2005).
46. PW-8 Shri Sunil Dutt works for Custom House Agent Sh. Chander Sharma. He was also a G Card Holder and his job is to get custom clearance of the goods exported from the Customs. He brought on record following documents after identifying the signature of Shri Anil Nathaniel, Custom Superintendent :
1. Shipping bill No. 1098D-253420-06 vide Ex. PW8/1 (D-11) (Page No. 19) having the seal and signature of Suptd. Anil Nathaniel at Point A.
2. Shipping Bill no. 1098D-253420-06 vide Ex. PW8/2 (D-11) (Page no. 20 to 23) having the seal and signature of Suptd. Anil Nathaniel at Point A and Point B.
3. Shipping Bill no. no. 1098D-253420-06 vide Ex. PW8/3 (D-11) (Page no. 24) having the seal and signature of Suptd. Anil Nathaniel at Point A.
4. Shipping Bill no. 1098D-253420-06 vide Ex. PW8/4 (D-11) (Page no. 25 to 28) having the seal and signature of Suptd. Anil Nathaniel at Point A and Point B.
5. Shipping Bill no. 1098D-253404-06 vide Ex. PW8/5 (D-13) (Page no. 24) having the seal and signature of Suptd. Jai Bhagwan at Point A. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 33 of 336
6. Shipping Bill no. 1098D- 253404-06 vide Ex. PW8/6 (D-13) (Page no. 25 to 28) having the seal and signature of Suptd. Jai Bhagwan at Point A and Point B.
7. Shipping Bill no. 1098D- 253404-06 vide Ex. PW8/7 (D-13) (Page no. 29) having the seal and signature of Suptd. Dev Kumar Sharma at Point A.
8. Shipping Bill no. 1098D-253404-06 vide Ex. PW8/8 (D-13) (Page no. 30 to 33) having the seal and signature of Suptd. Dev Kumar Sharma at Point A and Point B.
47. He explained the procedure of Custom Clearance of goods to be exported i.e. the exporter has to provide import export code number (IEC number) and authorised dealer code and invoice, packing list, air way bill (wrongly types as year way bill), SDF Form and goods. He further deposed that check list are prepared from the CMC, EDI system and the documents are submitted for issuance of number of shipping bills. Air way bills and shipping bill numbers is provided to the IATA Agent and the goods are sent to the Custom Area by the exporter through Custom House Agent and the relevant entries are made by the Custom Department in EDI System after inspections of the goods by Custom Officer, thereafter, the Superintendent Custom permits the export of the goods and then, goods were sent to loading/bounded area and the goods are handed over the Airlines for further lifting it for export destination. He further deposed that after CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 34 of 336 goods were air lifted, an EGM number is provided which indicates the goods that were being exported. He further deposed that an Airline having the airway bill could tell whether the goods had reached its destination or otherwise. He further stated that Air way bills are filled by GSA on the basis of the invoice given by the shipper and the airway bills for export of goods cannot be modified as customs does not clear/altered modified airway bill and airline would also not receive the same unless the changes are authenticated by the Custom and Airlines. He further stated that consignee name could be changed only before the custom clearance and for the same, the shipping bill change is made through CHA and Airway Bill can be changed through GSA. PW 8 further stated that in order to change the consignee name after the custom clearance, a request letter is to be addressed to Deputy Commissioner, Customs through concerned Custom Inspector/Superintendent charges the penalty and for alteration the custom department puts file number against the correction. PW 8 further stated that M/s Harpreet Fashion Pvt. Ltd., M/s Manjeet Footwear India Pvt. Ltd, M/s G.M Eim and M/s Ginna World Trade had never requested for change of shipper /airline bills. and no such changes were made by them (CHA). He further stated that custom clearance was given on the basis of shipping bills issued CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 35 of 336 by Custom officials as per the particulars of the consignee in the original bill which was not altered. PW-8 further deposed that after export of the goods, exporter gets an exchange control copy and export promotion copy. The shipper bill/airway bill remained with the exporter. He further deposed that he had not returned any altered airway bill to the exporter as airway bill was not altered by him and no custom clearance is given on the basis of the altered bills.
48. PW-9 Shri K.S. Chandramouli was Deputy General Manager from January 2010 to February, 2012 in Canara Bank,Circle Office Nehru Place, Delhi and lodged a complaint vide Ex. PW9/A (D-1) in CBI regarding fraud in accounts of M/s Manjeet Footwear Industries Pvt. Ltd., M/s GM Exim, M/s Ginna World Trade and M/s Harpreet Fashion Pvt. Ltd as the firms were unable to repay the bank. ( A Court observation was also made that the original complaint is not on record and the IO Sushil Kumar is unable to produce the same in the Court. )
49. PW-10 Shri Rajender Singh works for Innovative Cargo Services (Custom House Agent) and a G Card Holder which was allotted to him in the year 1999 and his job was to get custom clearance of the goods exported on behalf of Custom House Agent.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 36 of 336He brought on record following documents after identifying the signature of the persons :-
1. Shipping/Airway bills 1098D-253352-06 vide Ex. PW10/1 (D-10) (Page no. 18) having the seal and signature of Suptd. S.S. Dhaiya at Point A.
2. Shipping/Airway bills 1098D-253352-06 vide Ex. PW10/2 (D-10) (Page no. 19 to 23) having the seal and signature of Suptd.
S.S. Dhia at Point A and Point B.
50. He stated that documents were processed by him with custom authority at IGI Airport for custom clearance of the goods to be exported vide shipping bills and there were no modifications in the shipping bills/ Airway Bills when he had signed the same. He further deposed that shipper bills or airway bill cannot be modified by Custom House Agent on the request of the exporter and the same can be done only with the permission of appropriate custom authority. He further stated that if there is any alteration in shipper bill/airway bill, the goods cannot be exported and he never came across any such case in which there were alteration. PW-10 further stated that alteration can be permitted by the custom authority after levy of the appropriate charge. He further deposed that he did not return the altered airway bill and no clearance is given by the custom on the altered airway bills.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 37 of 33651. PW-11 Shri Binod Kumar Singh works for Innovative Cargo Services (Custom House Agent) and he was was also a G Card Holder which was allotted to him in the year 1999 and his job was to get custom clearance of the goods exported on behalf of Custom House Agent. He brought on record following documents after identifying the signature of the persons :
1. Shipping/Airway bills 1098D-253337-06 vide Ex. PW11/1 (D-12) (Page no. 18) having the seal and signature of Suptd.
Kailash Chand at Point A.
2. Shipping/Airway bills 1098D-253337-06 vide Ex. PW11/2 (D-12) (Page no. 19 to 23) having the seal and signature of Suptd. Kailash Chand at Point A and his employee Pradeep Sinha at Point B.
3. Copies of Shipping/Airway bills No. 4360069 and 4320069 vide Ex. PW11/3 and Ex. PW11/4 dated 19.01.2013 having the signature of PW 11 at Point A.
4. Ex. PW11/5 is the attested copy of G-Card of PW 11 and bearing his signatures at Point A.
52. PW-11 further deposed the shipping bills are prepared on the basis of invoice prepared by the exporter M/s Harpreet Fashion through their forwarder for obtaining the custom clearance and custom clearance was obtained. He further stated that Form SDF vide Ex.PW10/1 and Ex.PW11/1 were provided by M/s Harpreet Fashion and its authenticity was not verified as Harpreet Fashion had CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 38 of 336 approached through forwarder Air World Cargo services. PW-11 further stated that Pradeep Sinha and Rajendra Singh were his employees from 2006 to 2012 and they used to arrange custom clearance. He further stated that their G Card were surrendered to the Custom Authority after they had left their jobs and he identified his signature on the attested copy of G card vide Ex. PW11/5. He explained the duties of the custom house agent to check the documents from invoice and packing list and further to obtain shipping bill number and date from CMC in the office of Custom Authorities. He further stated that goods were received at warehouse after payment of the terminal charges and thereafter the inspection is carried out at the Cargo Export Shed as per the description on their system and a report is prepared which is sent to the Superintendent and on that basis the Superintendent permits the exports of goods. He further deposed that five copies of shipping bills were prepared (i) one copy is exporter copy retained by the airlines, (ii) second copy is retained by the custom, (iii) third copy retained by the exporter, (iv) fourth copy is retained by the DEPB and (v) fifth copy is also retained by the exporter which is required to be signed by the CHA G-Card Holder and Suptd. Of Customs, Air Cargo at International Airport, New Delhi. He further stated that goods are exported alongwith the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 39 of 336 necessary documents. He further stated that if an airway bill is not issued by the airline then, terminal charges cannot be paid and custom clearance cannot be obtained in the absence of airway bills and only after clearance from custom authorities the goods could be handed over to the airline for sending them to their destination. He further stated that he provided self attested photocopy of the shipping bills alongwith invoices, packing list and copy of airway bills except shipping bill no. 4360069 and shipping bill no. 4320069 dated 19.01.2013 to the IO of the case vide Ex.PW11/3 and Ex.PW11/4 bearing his signature.
53. He asserted that there was no cutting in the airway bills and the copy of the airway bills was taken when the goods were kept in the export shed of airlines and in case of cutting in the airway bills, Airlines and Airport Authority never accept such goods for export. He further stated that airway bills cannot be modified and the changes can only be authenticated by the Custom and Airline Authorities after request and payment of charges and no request for alteration was made by the exporter through him and he also did not return any altered bill to the exporter. He further deposed that consignee of the goods would get the delivery order from the airlines who exported the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 40 of 336 goods and would obtain the custom clearance for taking the delivery of the goods and an airline can provide the details of the consignee to whom the goods were delivered. He also stated that there was no alteration or cutting on the airway bills on page no. 18 A of D-10 and page no. 18 A of D-12 either by him or any of his employee. He further stated that he provided the self attested copy of airway bills in which there was no alteration and he further stated that alteration might have been done subsequently thereafter. He further stated that if there is an alteration in the shipping bill and airway bill then same is also mentioned by the custom authorities that amendment is allowed by referring to their number. He further deposed that airway bill cannot be altered by the airlines and the airlines could only alter the date of the goods and the dimensions of the goods to be exported.
54. PW-12 Shri Chander Sharma works for Custom House Agent (CHA) from the year 2006 to 2016 having license no. CHA-R- 011/2006. He deposed that as CHA he works for clearing of export and import goods of importer/exporter. He further deposed that as per the procedure, the exporter/importer submits the documents i.e. invoices, airway bills, bill of lading with Importer Exporter Code (IEC) number in the computer system which is online Custom Site CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 41 of 336 'ICE GATE' for the purpose of verification. The IEC number is issued by Director General Foreign Trade on the application of the exporter/importer. He further deposed that duties of CHA was to get clearance of goods of exporters from the Custom Authorities. The G- card holders are authorized by the Custom Department to sign the documents on behalf of CHA which are to be submitted to the Custom Department for export of the goods. He further deposed that as per the procedure, for getting clearance of export goods, firstly exporter provides invoice and packing list of items to be exported alongwith the IEC number and Authorized Dealer Code (ADC) of the bank and SDF form issued by the exporter and thereafter, CHA used to file check list in CMC, EDI system which is authorized by the Custom Department and later on CHA checks the details of items and submits the documents to CMC, EDI system for issuance of shipping bill with number. The exporter/IATA agent provides the airway bill to CHA. Thereafter the CHA deposits the Terminal Charge (TC) with the Airport Authority of India. Thereafter, the goods are sent to Custom Area for their endorsement that the goods had been received by the Custom Department for clearance. He deposed that thereafter, the goods are examined/inspected by the Custom Officers as per the instructions given on the shipping bills. Thereafter, the Superintendent CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 42 of 336 of Custom allows or disallows the export of the goods. After examination of the goods, the goods are handed over to Air Cargo, Export Shed, IGI Airport and thereafter the goods are handed over to the particular Airlines for airlifting for destination/to the consignee. The address of the consignee and exporter are mentioned on the airway bills and shipping bills. He further deposed that on the instructions of exporter, General Shipping Agent (GSA) fills the airway bills on the basis of documents provided by the exporter. He further deposed that the airway bills cannot be modified in any manner by the CHA, even on the request of shipper however, it can only be done when it is requested by the shipper i.e. the exporter to the Airline/shipping line. Unless the modification/alteration in the airway bills authenticated by the Customs and Airlines, the clearance of the export goods is not possible. He further deposed that the name of the consignee and destination can be modified by the Custom Authorities and Airlines on the payment of charges and CHA has no role to play in any modification/alteration in airway bills. PW-12 further deposed that after the export of the goods, CHA returns two copies of shipping bills i.e. one Exchange Control Copy (ECC) and Export Promotion Copy (EPC) and a copy of airway bill to exporter.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 43 of 33655. PW-12 was shown the shipping bills Ex.PW8/2, Ex.PW8/4, Ex.PW8/6, Ex.PW8/8 and shipping bill bearing no. 4396706 dated 25.11.2006 vide Ex.PW12/1 and after going through the same, he stated that clearance of the same were done by his agency as CHA for M/s Harpreet Fashion Pvt. Ltd.
56. PW-12 brought on record the airway bills bearing no. 86810012952 dated 12.12.2006 vide Ex.PW12/2 (internal page 19 of D-11), airway bill bearing no. 86810012683 dated 22.11.2006 vide Ex.PW12/3 (internal page 37 of D-13) and airway bill bearing no. 86810012786 dated 25.11.2006 Ex.PW12/4 (internal page 97 and 199 of D-19) stated that the cutting by way of typing at point Y-1, Y-2, Y- 3, Y-4 Y-5, Y and XXX were not done by any employee of his agency and the name of the bank has been added later on which at Point-Z by someone else. He further stated that Ex.PW12/5 does not bear any cutting and the name of the said bank also mentioned therein and the same is the copy which was provided to his agency by the exporter i.e. M/s Harpreet Fashion. He further deposed that if there was any cuttings/alteration was existing prior to the airway bills being submitted to the airlines then the Airline would mention the same under the official stamp and signature of its authorized official and if CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 44 of 336 the cuttings/alteration on the shipping bills were already existing prior to submitting the same to the Custom Department then the official concerned would mention the same under his official stamp and signature.
57. PW-13 Shri Pradeep Sinha works for Innovative Cargo Services (Custom House Agent) and he was was also a G. Card Holder bearing no. 135/03 and CHA no. R-14/1999 which was allotted to Sh. Binod Kumar Singh (PW-11) by Commissioner of Customs and his job was to get custom clearance of the goods exported on behalf of Custom House Agent. PW-13 on being shown Ex.PW10/1 and after going through the same he identified the seal and signatures of Suptd. S.S. Dahiya.
58. PW-13 further shown Ex.PW10/2, from page 19 to 23, and on being shown the same, he identified the seal and signatures of Suptd. S.S. Dahiya and Rajendra Singh (PW10) and witness after going through Page 18-A stated that this is an altered copy of airway bills and when his firm had handed over the goods at export shed of the Airline, the said bill was not altered. PW-13, on being shown Ex.PW11/1, also identified the seal and signature of Suptd. Kailash CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 45 of 336 Chand and after going through Ex. PW11/2, he again identified the seal and signature of Suptd. Kailash Chand.
59. PW-13 further deposed that the shipping bills were prepared on the basis of invoice provided by the exporter M/s Harpreet Fashion Pvt. Ltd. through forwarder Airworld Cargo Services for obtaining custom clearance through CHA and accordingly they obtained the custom clearance.
60. PW-13 further deposed that Rajendra Singh (PW10) and he used to work for Sh. Binod Kumar Singh during 2006 to 2012 and their duties were to arrange custom clearance. He further deposed that duty of CHA was to check document as per invoice and packing list and to obtain the shipping bill number and date from the MC in the office of Custom Authorities and thereafter goods were received at warehouse after paying the terminal charges.
61. PW-13 further deposed that after getting the five copies of shipping bills from the custom i.e. (i) one copy is exporter copy retained by the airlines, (ii) second copy is retained by the custom, (iii) third copy retained by the exporter, (iv) fourth copy is retained by the DEPB and (v) fifth copy is also retained by the exporter which is CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 46 of 336 required to be signed by the CHA G-Card Holder and Suptd. Of Customs, Air Cargo at International Airport, New Delhi. He further stated that goods are exported alongwith the necessary documents. Thereafter all the documents i.e. airway bills, exporter copy of the shipping, location slip alongwith goods, the airlines authorities export the goods as per the availability of space in the aircraft and if the airway bill is not issued by the airline terminal, charges cannot be paid for the goods to be exported and in such a condition in the absence of airway bill the custom clearance cannot be obtained in absence of airway bills.
62. PW-13 further stated that if there is cutting in the airway bills, airlines and Airport Authority never accepts the goods for exporting and they cannot modify/alter the airway bills and it is required to be authenticated by the Custom and Airlines by moving an appropriate request to the Custom Authorities and also by paying fee for alteration and the exporter never requests for alteration of bills through CHA and PW13 further deposed that he had never altered any airway bill.
63. PW-13 further deposed that the consignee of the goods would get the delivery order from the Airlines who export the goods and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 47 of 336 obtain the custom clearance for the delivery of goods and airline can provide the details of the consignee to whom goods were delivered.
64. He further deposed that airway bills were not altered by him or by any employee of CHA and there was no cutting or alteration in the airway bills and the self attested copy of the airway bill was provided by him to the IO with no alteration.
65. PW-14 Shri Prakash P. Mallya (Malaya) worked as General Manager, Canara Bank, Circle Office during the period of December 2002 to June 2005. PW-14 identified the signatures of Members of Core Credit Group-II, Delhi Office i.e. Shri Rakesh Gupta, Sr. Manager and Shri A.R. Jai Prakash, AGM in the office note dated 09.12.2004 vide Ex.PW14/1 (D-31) whereby sanction for the new credit facility was put up before him. He also deposed that office note was also recommended by Shri Gopal Krishna. He deposed that he sanctioned the note on 13.01.2005. He further stated that note was sanctioned with the condition that party to induct Rs.180 lacs in the form of unsecured loan for improving the capital base and clearance of dues of the account of associate concerned and it was also stipulated that account should be regularly monitored. PW-14 also referred to the observation given by Shri Rakesh Kumar Gupta in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 48 of 336 respect of adverse features as well as the overdues in the group account. PW-14 also pointed out towards Ex.PW14/A and further stated that limits were sanctioned as per the conditions which were set out in the relevant pages of Ex.PW14/1.
66. PW-14 after referring to office note vide Ex.PW7/1 (D-32) dated 01.03.2005 alongwith branch note vide Ex.PW14/2 (Part of D-
33) deposed that he sanctioned the note on the basis of the proposal emanated from Parliament Street Branch. He further stated that vide note Ex.PW14/2 dated 01.03.2005, relaxations were recommended by the CC Group-II of Delhi Office and he sanctioned the said note on the basis of recommendation of AGM and DGM. He further explained the rationale for relaxing the condition as mentioned at page no. 2 of the note as Group Companies were export oriented units which were required to be encouraged for getting foreign exchange as it was a national priority and project department had stated in respect of viability and technical feasibility of the unit. PW-14 further reasoned that proposal had emanated from Parliament Street Branch as it has better expertise and infrastructure for handling such proposal and the branch was headed by an Assistant General Manager.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 49 of 33667. PW-15 Shri Suresh Paunikar, Assistant Manager, Export Credit Guarantee Corporation (ECGC) explained the procedure adopted in ECGC. He deposed that ECGC provides risk cover to exporter and financial institutions. He further deposed that ECGC has two types of security cover i.e. insurance policy and guarantee cover. The buyer is covered under Insurance Policy and exporter is covered under the Guarantee Cover which is known as Export Credit Insurance for Bank (ECIB). He also explained that Whole Turn Over Packing Credit Guarantee (WTPCG) is the risk cover for packing credit and same is on the basis of the maximum outstanding PC advances given by the Bank during the month and he further stated that premium is paid on the average daily products of the amount. He further explained that Individual Post Shipment Guarantee (INPSG) covers the risk involved after the export of goods. He further explained the mechanism under ECGC by which the head office Buyer Underwriting Department, Mumbai used to collect the data base of all major exporters and importers from various firms such as Dun & Bradstreet, Mira Inform., COFACE France, Graydon UK and ECGC have prepared huge data base in respect of the relationship of the firms with each other.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 50 of 33668. PW-15 further stated that ECGC covers the risk export business done through third country and cover is not allowed for the restricted countries except on specific approval of competent authority in ECGC. He further stated that ECGC charge 75% premium applicable in billing country of goods added to 25% of premium applicable in the country of destination of goods. PW-15 further deposed that the export business being done between sister concerns are also covered under ECGC, however, the premium for risk cover is higher than normal business. PW-15 identified letter written by Ms. Niranjana Nagpal, Parliament Street Branch in respect of the default by A-1/Harpreet Fashion under WTPCG and INPSG vide Ex.PW15/1 (D-5).
69. PW-17 Shri Charan Jiv Arora, Retd. Chief Manager, Canara Bank deposed that if the bills of the parties were overdue de-linked and returned unpaid, then authority has to decide for discounting of the bills. He further deposed that there is a circular, as per which the bills should not be discounted if the earlier bills were overdue. He further stated that same could be done after considering the track record of the exporter client, buyer abroad and the same is to be decided by the authorities as per the delegated power. PW-17 further CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 51 of 336 deposed that packing credit is a pre-shipment, credit limit and bill discounting is post shipment credit limit. The limits released in packing credit limit are liquidated from discounting of foreign bills submitted by the parties and the bills are submitted after the goods were shipped alongwith shipping bills issued by the Custom Authority. He further explained that if the bill at sight, the same is called Bill Purchased and if the bill is under usance period, then the same is called Discounted. He further explained that for taking packing credit, an application is to be submitted alongwith purchase order received from the foreign buyer and the application should detail the item, number and the value of a unit to be exported and the total value of purchase order in freely convertable foreign currency. He further deposed that banks would notify packing credit to ECGC for covering the limit under WTPCG and the bank would release the packing credit to the extent of application minus applicable margin which is 25% of the purchase order. He further deposed that ECGC will notify the cover and would inform the bank in writing. He further stated that a separate PC account will be opened in the name of the party alongwith its limit as per sanction letter which is usually 90 days.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 52 of 33670. PW-17 further deposed that bill alongwith required documents for purchase/discounting of the export documents are received then packing credit is liquidated and the bill discounting limit is debited and the post shipment credit facility takes place. He further deposed that if the bill limit is available, the bill is purchased/discounted and the proceed will be credited to the packing credit account of the party and bank charges interest for bill for the usance period. He further deposed that if the payment of the bill is received by due date, then bill discounting account will be liquidated and if the amount is not received from 15 days from the due date, the bill is de-linked from the foreign currency component to avoid exchange risk and such an amount of the bill is called overdue bill under export receivable.
71. PW-17 further deposed that packing credit limit can be released in full as per sanction and the number of purchase order could be combined either by opening a single PC account or different PC accounts could be opened for different purchase orders and there is no requirement to seek confirmation from buyer. He further deposed that the opinion of D&B Street is taken prior to the release of packing limit to a particular buyer at the time of release of payment. He further deposed that prior to sanction of PC limit, a visit is also made by the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 53 of 336 bank at ECGC site for caution list of exporters and any warning about the abroad buyers.
72. PW-17 further deposed that export documents required to be taken are foreign demand bill, foreign bill of exchange, packing list, bill of lading or airway bill, Statutory Declaration Form (SDF), insurance, if any, and covering letter for the bill purchased as per the terms of the contract. He further deposed that name of consignee/buyer is mentioned in invoice, bill of lading/airway bill and shipping bills and other connected documents as per the contract and if there is any alteration in bill of lading/airway bill, the same should be authenticated by an agency/shipping authority. He further stated that buyer and the bank should be of the same country and in case of third party export, the name of buyer in the third country will also be notified as per the terms of contract. He further deposed that record in respect of application for packing credit limit alongwith necessary details are maintained in the computer system, the copy of bills submitted by the parties are subsequently sent to the foreign banks, GR forms, shipping bills, covering bills, de-linked bills, unpaid bills in original. He further deposed that foreign bank is an agent to collect the documents, if the same are in order, but, is under no obligation to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 54 of 336 collect proceeds and remit the collection of the bill. He further deposed that when an export bill is submitted for discounting, the banker verifies the outstanding bill liability and overdue export bill to verify the status of buyer group to avoid non-payment/non-acceptance of the bill and photocopy of the bill of lading and airway bills are retained in the bank, whereas originals are sent to the banker/buyer abroad. PW-17 referred to chapter IV of the manual of instruction regarding Export General: updated till 30.06.2006 vide Ex.PW17/1 (D-36 total pages 381) and stated that same is relevant with regard to the bill discounting and purchase. PW-17 in his cross-examination stated that he did not have the personal knowledge about the transaction of the group companies and he denied the suggestion that sanctioning authority has power to permit the discounting of new bills despite the overdue bills and rather stated that it was the delegated power of the respective authority for permitting the discounting of bills when the bills were already outstanding overdue in the account and PW-17 expressed his inability to state that he made a statement to the CBI vide Ex.PW17/DX1 to the effect that " Question No. 3 who is competent to permit to discount bills in case if previous bills are overdue ? Ans. Sanctioning authority is competent to Permit... "
{Meaning thereby that permission of sanctioning authority is not CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 55 of 336 required. No witness had stated that if there are overdue bills and the bills are to be discounted then permission of the sanctioning authority is required}.
73. PW-17 further stated in his cross-examination that as per RBI rules, the bill discounting can be done by the bank without the name of the foreign buyer's bank on the airway bill and when it happens, one has to go by the instructions and norms issued by bank from time to time. He admitted that bill discounting of the group companies were permitted as the same was within the limit granted by the bank. He further stated that an acknowledgement is received from the banker of buyer after the documents were sent and the acknowledgement is received through courier and SWIFT message. He further stated that in case of usance bill (FBE) which was accepted by the foreign buyer, a SWIFT message is received. PW-17 further stated that after receipt of foreign bills Delivery Against Acceptance (DA), the PC liability is liquidated and bill liability is raised at the notional date for the purposes of accounting system in the bank. PW-17 further stated in his cross-examination that he did not peruse the record of branch or Circle Office during his examination in CBI office. PW-17 denied making any statement vide Ex.PW17/DX1 to the effect (1) Bills discounted CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 56 of 336 proceeds were adjusted towards clearing the old dues bills liability, (2) Fresh bills discounting was undertaking on the same buyer despite return of bills unpaid and overdue bills outstanding, (3) There was no ECGC policy available of the overseas buyer which was exporter group concerns have to undertake as per sanction terms and conditions. Copy of the Opinion Report from The Overseas Banker not available, (4) There is no permission available for discounting the bills on the same buyer when other bills are outstanding/overdue. Further discounting was undertaken but no permission is available, (5) No follow up of the overdue bills returned unpaid with exporter client for repatriation of the proceed for the shipment affected, (6) There is cutting on some Airway Bills of exports in consignee column which should have been authenticated by the concerned Airlines. Otherwise the same should have been verified independently before discounting the said bill, (7) Contract for insurance (in-transit insurance) of goods is not available and (8) "On Board" notation on the bill of the lading in case of shipment dispatched by sea and consignee copy in original of Airway Bill should have been submitted alongwith bill for discounting in case goods were dispatched by Air." It substantially demolishes the case of prosecution.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 57 of 33674. PW-17 further stated in his cross-examination that in normal course, the overdue bills are recovered by granting packing credit and subsequently the bills were realised from the importer but GR will be realised after receipt of the payment. He further stated in his cross- examination that responsibilities of the concerned official is provided in the document titled "Key Responsbility Areas" issued by the bank.
75. PW-18 Shri Vikas Chaudhary was Manager Exports in M/s V.K. Jain & Company, (Custom House Agent) and was G-Card holder bearing no. 8612000 issued by Customs Authorities. He deposed that company had provided custom clearance services to M/s Harpreet Fashion. He also stated that he is also director of M/s Committed Logistics Pvt. Ltd. which is a freight forwarding agent and the M/s Harpreet Fashion was the client of the company. He brought into record the documents vide Ex.PW18/2 to Ex.PW18/5 bearing his signatures on all the pages and the same were seized vide seizure memo Ex.PW18/1 dated 13.03.2012 (D-40). He also stated that when he handed over the documents to CBI, there were no cutting/alteration. He further stated that goods were exported after customs authorities had cleared the goods after examination. He further stated that when Custom Authority gives "LEO i.e. Let Export CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 58 of 336 Orders" then the system generates 6 sets of shipping bills i.e. the exporter copy, E.P. copy, Custom copy, TR1 copy, TR2 copy and G.R. copy.
76. PW-19 Shri R. Subramanian, Senior Manager who had also worked in Zonal Inspectorate, Delhi and Chennai deposed that he conducted the internal investigation with respect to the account of M/s Harpreet Fashion alongwith S. Ramasubramaniam, the then Divisional Manager in the year 2009, and the accounts of M/s Harpreet Fashion and the role of Parliament Street and a detailed study report was presented to General Manager, Inspection Wing, Bangalore vide Ex.PW19/1, bearing his signatures as well as that of Sh. S. Ramasubramaniam. He referred to the irregularities/fraud committed by M/s Harpreet Fashion on page no. 6 to 10 and the lapses committed by bank officials of Parliament Street Branch namely Raman Kumar Aggarwal, Shri S. V. Sudarshan, T. G. Purushothaman, Darwan Singh Mehta, Ram Kumar C.T. from page no. 11 to 14 of his study report vide Ex. PW19/1.
77. PW-20 Shri Sushil Kumar Singhal, then officer Canara Bank, Chandni Chowk Branch (Posted as Manager, Canara Bank, Hauz Kazi Branch, Delhi-06 at the time of deposition) and he provided the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 59 of 336 documents from the old record available with the Branch after search as per the request made by the CBI. PW20, after going through the cheque bearing no. 757636 dated 27.04.2005 vide Ex.PW20/1 (D46) issued by M/S Harpreet Fashion Pvt. Ltd. in favour of CHOZEE Knitwear Industries of Rs.25,00,000- from its account bearing no. 5489 debited on 27.04.2005 from the account stated that prior to issuing this cheque, the packing credit amount Rs. 25 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW-20 after going through the cheque bearing no. 757673 dated 24.06.2005 Ex.PW20/2 (D47) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Rajni World Wide for amount of Rs. 20,00,000/- from its account bearing no. 5489 which was debited on 24.06.2055 from its account stated that prior to issuing this cheque, the packing credit amount Rs.28 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW20 after going through the cheque bearing no. 565758 dated 08.07.2005 vide Ex.PW2013 (D48) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Rajni Worldwide for amount of Rs.9,70,000/- debited from its account bearing no. 5489 on 8.07.2005 stated that prior to issuing this cheque, the packing credit amount of Rs.15 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 60 of 33678. PW-20 after going through the cheque bearing no. 757637 dated 07.09.2005 vide Ex.PW20/4 (D49) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Manjit Exports for amount of Rs. 9,00,000/- debited from its account bearing no. 5489 on 7.9.2005 stated that prior to issuing this cheque, the packing credit amount Rs.40 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW20 stated that the cheque bearing no. 757638 dated 14.09.2005 Ex.PW20/5 (D-50) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Rajni World Wide for amount of Rs. 15,00,000/- was debited from its account bearing no. 5489 on 14.09.2005.
79. PW-20 after seeing the cheque bearing no. 708680 dated 14.10.2005 vide Ex.PW20/6 (D51) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Manjit Exports for amount of Rs. 7,00,000/- from its account bearing no. 5489 which was debited on 14.10.2005 from its account deposed that prior to issuing this cheque, the packing credit amount Rs.10 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW-20 after seeing the cheque bearing no. 708682 dated 02.12.2005 vide Ex.PW20/7 (D52) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Manjit Overseas for amount of Rs.10,00,000/- from its account bearing no. 5489 which was debited CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 61 of 336 on 2.12.2005 from its account deposed that prior to issuing this cheque, the packing credit amount Rs. 35 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW-20 after seeing the cheque bearing no. 764745 dated 1.2.2006 Ex.PW2018 (D53) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Manjit Overseas for amount of Rs.10,00,000/- from its account bearing no. 5489 which was debited on 01.02.2006 from its account deposed that prior to issuing this cheque, the packing credit amount Rs. 10 lacs was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd. PW20 after seeing the cheque bearing no. 764742 dated 30.01.2006 vide Ex.PW2019 (D54) issued by M/s Harpreet Fashion Pvt. Ltd. in favour of Manjit Overseas for amount of Rs.5,00,000/- from its account bearing no. 5489 which was debited on 2.2.2006 from its account deposed that prior to issuing this cheque, the packing credit amount was disbursed in the account of M/s Harpreet Fashion Pvt. Ltd.
80. PW-21 Ms. B.S. Kanthimathi, Manager in Parliament Street Branch brought into the record the documents which were seized vide Ex.PW21/1 (D-20) i.e. seizure memo dated 02.05.2012.
81. Ex.PW21/2 (D-20) are the details of the cheques issued by M/s Harpreet Fashions). PW21 further brought on record certificate U/s 21 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 62 of 336 of Banker's Book of Evidence Act vide Ex.PW21/3 (D-21) and also the bill discounting register of A-1/Harpreet Fashion for the period 01.01.2004 to 19.06.2008 vide Ex.PW21/4 (D-21) (Colly 41 sheets). PW-21 further brought on record the statement of account i.e. P.C. Ledger Printouts vide Ex.PW21/5 (colly, 32 sheets) (D-22) alongwith certificate U/s 2-A of Banker's Book Of Evidence Act 1891 vide Ex.PW21/6 (D-22). PW21 also brought on record the statement of account from 27.09.2004 to 31.12.2007 i.e. Current Account of M/s Harpreet Fashion already Ex.PW20/30 (Colly) alongwith certificate U/s 2A vide Ex.PW21/7. PW-21 also brought on record seizure memo dated 19.12.2011 vide Ex.PW21/8 (D-25) vide which PW-21 handed over documents like Current Account Opening Form of M/s Harpreet Fashion Pvt. Ltd. Alongwith supporting documents Ex.PW21/9 (Colly 35 sheets) (D-26) which were used for opening the bank account. PW-21 also brought on record the letter Ex.PW21/10 dated 02.07.2015 addressed to Inspector Sushil Kumar and the details of the documents provided to the CBI is mentioned at Portion 'B' of the said letter. PW-21 also brought on record seizure memo dated 21.02.2012 vide Ex.PW21/11 (D-23) and identified the signatures of Shri Balraj Singh Gill, Special Assistant during her tenure and vide letter dated 14.02.2012 Ex.PW-21/12 (D-24) she identified the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 63 of 336 signatures of S. Jayakumar and the letter was addressed to Inspector B.M. Pandit.
82. PW-22 Shri Rakesh Gupta, Sr. Manager in Core Credit Group- II, Circle office, Delhi deposed that he used to process and sanction the proposal sent by bank branches. PW22 identified the note regarding Harpreet Fashion Private Limited vide Ex.PW14/1 (D-31) dated 09.12.2004 bearing his signature. He further deposed that Shri A.R. Jai Prakash, the then AGM, had recommended the note vide dated 06.01.2005. and it was further recommended by Shri K. Gopalkrishnan the then DGM vide his note dated 11.01.2005. He identified the signature of Shri A.R. Jai Prakash and Shri Gopal Krishnan on the notes as he has seen them signing during official course of his duties. He further deposed that proposal was sanctioned by Shri Prakash Malaya vide note dated 13.01.2005. He further deposed that in his note vide Ex.PW14/1 he had mentioned the adverse feature under heading "Other Information" (Para VIII) on Page No. 12 of his note.
83. PW-22 deposed that he submitted note vide Ex.PW14/2 (D-34) bearing his signature and the note was recommended by Shri K.V. Kamath, the then AGM on 02.03.2005 and it was further CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 64 of 336 recommended by Shri K. Gopal Krishnanan, the then DGM and it was further sanctioned by Shri Prakash Mallya the then General Manager on 08.03.2005. He further explained that the purpose of the note was to permit the waiver of margin upto 25 Per cent on the bills and a time upto 30.06.2005 for raising the equity capital to Rs.200 Lacs subject to the compliance of conditions mentioned in the original sanction. He further deposed that branch had not sought any ratification.
84. PW-22 identified the signature of Shri Chetan Sanjan Dutta, Officer and Shri S.K. Gupta, Sr. Manager on the office note dated 12.05.2006 vide Ex.PW7/1 (D-32) of M/s Hapreet Fashions Pvt. Ltd. for second extension of tenability limits. He deposed that the note was recommended by AGM and DGM but not permitted by Shri T.Y. Prabhu, GM vide his note dated 20.05.2006. He identified the signature of Shri T.Y Prabhu on note dated 20.05.2006. He also referred to the adverse features mentioned at Para VII at Page no. 3, 4 and 5 of the said note.
85. PW-23 Shri N. Balasubramanian, the Divisional Manager in Zonal Inspection, Bangalore. He was looking after the work of investigation of Vigilance Wing from May 2009 to March 2011 and submits the report to Chief Vigilance Officer of the bank as per the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 65 of 336 instructions/investigation order. PW-23 conducted investigation in the case of M/s Harpreet Fashion in the month of August 2010 on the direction of his General Manager & Chief Vigilance Officer in furtherance of the report of Mr. Ramasubramanian, Divisional Manager, Inspecting Wing at Bangalore. PW23 deposed that he scrutinized the file relating to the sanction/renewal/follow up of credit limit sanctioned to M/s Harpreet Fashion and group of Firms/Comapanies and found that :
1. The Group Accounts were regularly asking adhoc limits stating bulk orders, delay in realisation of bills in spite of some overdues in other group accounts. The request were favourably considered by the sanctioning authority.
2. The constitution of the firm were changed frequently. For example, M/s. Ginna Trade World was earlier known as M/s.
Manjit Overseas as a proprietorship firm which was changed in the name of M/s. Ginna World Trade with partnership firm. The reason for doing so was that a DRI case for misuse of non-quota entitlement against export to Russia was pending against M/s. Manjit Overseas. Therefore, they changed the proprietorship firm to partnership firm and named as M/s. Ginna World Trade. The Prop. of M/s. Manjit Overseas was Sh. Mohanjit Singh Mutneja whereas Sh. Mohanjit Singh and Sh. Kuldeep Singh were the partners of M/s. Ginna World Trade. The entire assets and liability of M/s. Manjit Overseas were taken over by M/s Ginna World Trade.
3. Not seeing the Group Accounts becoming technically NPA, while permitting adhoc limit in another account of the group. This CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 66 of 336 fact should have been taken into account while recommending/permitting the adhoc limits.
4. Not seeking ratification of exceeding the delegation powers in spite of HO asking the Circle to take up for ratification.
5. Not bringing out the fact in proposal submitted in 2007, that 3 buyer firms in Dubai were managed by the brothers of Mr. Mohanjit Singh Mutneja which was found by Circle Office Officials in 2006 and not asking the branch to seek specific cover from ECGC.
6. Not scrutinizing the proposals properly by going through the orders enclosed to the proposal which clearly stated that direct shipment has to be made to buyer in Afghanistan & Kajakistan which are restricted countries-3 occasions/firms.
7. Recovery of overdue export bills by fresh discount of export Bills.
8. Not adhering to Group Concept while permitting fresh limit to Manjit Exports by Regional Office, Agra.
86. PW-23 brought on record the investigation report dated 07.09.2010 vide Ex.PW23/1 (D-37) running into 71 pages alongwith its Annexures-I bearing his signatures. PW23 deposed that as per his investigation report, M/s Harpreet Fashion was sanctioned PC/FDB/FBE and TOD in Current account, the facilities were availed at the Chandni Chowk Branch of the Bank and were purchased/discounted under this facility. For availing the facility, the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 67 of 336 party had to submit the documents like bill of exchange or hundi or draft drawn on the foreign buyer, invoice for the goods exported, packing lists, airway bill/bill of landing issued by the shipping company, Electronic Data Interchange (EDI) or shipping bill certified by Custom Department, the purchase order/contract enter into between buyer and exporter.
87. PW-24 Shri K. Athimoolan was Sr. Manager, Canara Bank, Parliament Street Branch from August 2006 to August 2008. He deposed that when he joined the Branch, Shri S.V. Sudarshan (PW-
36) was AGM, Shri D.S. Mehta (A-7) was Manager (Forex), Purshotaman (A-8) was Manager (Credit), Smt. Sadhna Suresh was the Officer (Advances), C.T. Ramakumar (A-9) was the Officer (Export) and Shri D.K. Sharma was Officer (Import). He further deposed that Shri Mukesh Kumar was Sr. Manager prior to his joining in the branch. In his further statement, PW24 stated that the proposals were prepared by the Credit Officer and verified and scrutinized by the Manager (Credit) and thereafter being a Sr. Manager of the branch, and used to forward it to the AGM, who is Branch Head. PW24 further deposed that M/s Harpreet Fashion was availing various credit facilities in the Branch. PW24 brought into record the letter CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 68 of 336 dated 23.10.2006 vide Ex.PW24/1 (D-4 - page 65) vide which M/s Harpreet Fashion Pvt. Ltd. was requested to expedite the submissions of audited balance sheets as on 31.03.2006 for renewal of limits. PW24 further brought on record the letter dated 25.10.2006 vide Ex.PW24/2 to M/s Harpreet Fashion Pvt. Ltd. to furnish clarifications sought by the Head Office mentioned in the letter at marked at Portion-B for renewal of limits by the Head Office. PW24 also brought on record letter dated 26.09.2006 vide Ex.PW 24/3 addressed to Circle Office in reference to letter of the Circle Office. PW24 also brought on record letter dated 07.12.2006 vide Ex.PW24/4 (D-4, page no. 3) to Circle Office. PW24 after going through CR File No. 1002 (volume-3) of M/s Harpeeet Fashions Pvt. Ltd. and page no. 388 of (D-5) stated that the letter dated 24.11.2006 vide Ex.PW24/5 (D-5, page 388) is regarding the limits and liabilities of M/s Harpreet Fashion Pvt. Ltd. as on 23.11.2006. PW24 after seeing the letter dated 28.11.2006 vide Ex.PW24/6 (D-5, page 362) bearing his signature addressed to M/s Harpreet Fashion Pvt. Ltd. wherein the request for regularizing the account was made and the party was also directed to submit the papers for renewal of Credit Limit. PW24 further shown letter dated 11.11.2006 vide Ex.PW24/7 (D-5, page
363) addressed to the Branch by the Circle Office directing to answer CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 69 of 336 the queries pertaining to M/s Harpreet Fashion Pvt. Ltd. and he stated that in reply to the said letter, letter Ex.PW24/6 was written by the branch to Circle Office. PW24 identified signature of Shri K.V. Kamath, AGM as well as the seal of the Parliament Street Branch encircled at Point-B. PW24 identified page no. 358 to 361 as monthly credit monitoring of account of A-1/Harpreet Fashion which was submitted to the Core Credit Group-II, Delhi Circle Office giving the details of limits/liabilities and overdues of the party, identifying his signature, as well as of Shri D.S. Mehta (A-7) and signature of Shri S.V. Sudarshan on the letter vide Ex.PW24/8 (D-5).
88. PW-24 stated that letter dated 18.12.2006 was addressed to the Manager, Parliament Street Branch for an adhoc limt of Rs.200 Lakhs for M/s Harpreet Fashion Pvt. Ltd. and the said letter alongwith its annexures is marked as Mark PW24/A (page 353 to 357). PW24 stated that letter dated 23.05.2007 vide Ex.PW23/9 (page no. 254/D-5) {The exhibit mark 23/9 should have been given in the deposition sheet, however, it appears that instead of 23/9, 24/9 was mentioned} was written to M/s Harpreet Fashion Pvt Ltd. asking to submit the statement/details to clear the discrepancies pertaining to their account. PW-24 also brought on record letter dated 17.04.2007 vide CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 70 of 336 Ex.PW24/9, bearing his signature at Point-A to the Circle Office. PW-24 stated that letter dated 28.04.2007 vide Ex.PW24/10 was written in reference to the letter vide Ex.PW-24/11 of Sh. K.V. Kamath. PW-24 identified his signatures at Point-A on Ex.PW24/12 vide which the proposal to review and allot ASC Code to the account and to review the rate of interest was submitted to the Circle Office. He also pointed out the liabilities and overdues at Portion Mark-B.
89. PW-25 Shri Balraj Singh Gill, Special Assistant in Canara Bank, that vide seizure memo Ex.PW21/11(D-23), he had handed over the documents to CBI.
90. PW-26 Shri Vijay Verma, Sr. Scientific Officer, Grade-II-cum- Assistant Chemical Examiner, Government of India, CFSL, CBI examined the questioned documents and documents containing the admitted signatures marked as A-1 to A-72. He deposed that FSL Report in respect of signatures and handwritings was prepared by him vide Ex.PW26/1 dated 25.02.2014. He also stated that the examination was conducted with the help of scientific instruments which are mentioned in his report. He further stated that the said report was forwarded to SP, CBI by his Director vide letter no. CFSL/2013-D-1738/0959 dated 13.03.2014 vide Ex.PW26/2. PW26 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 71 of 336 gave another report no. 2014/D-963 dated 30.09.2014 vide Ex.PW26/3 and deposed that the abovementioned report was forwarded to CBI-EO-I vide letter no. CFSL/2014-D-963/3530 vide Ex.PW26/4.
91. PW-27 Shri Bindeshwari Prasad deposed that he accompanied the CBI officials for the search and pursuant to the search, the documents were prepared. He brought on record the search list Ex.PW27/1 bearing his signature as well of Shri Sreevatsan. He also stated that an export file was seized during the search vide Ex.PW27/2 in which he had put his initials. After going the search list vide Ex.PW27/1 (D-18), PW27 stated that he went to a residential House No. 2362 Punjabi Bagh West, New Delhi.
92. PW-28 Shri Sreevatsan deposed that he accompanied the CBI officials to conduct the search and pursuant to the search, the documents were prepared. He identified his signatures on the search list vide Ex.PW27/1. His testimony is on the similar line as that of PW27.
93. PW-29 Shri S. Ramanathan, Senior Manager, Circle Office, Canara Bank, Delhi deposed that vide seizure memo Ex.PW29/1 (D-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 72 of 3366), he had handed over the documents (mentioned Ex. PW29/2 (colly) D-7 to D-17.
94. PW-30 Inspector Jitender Sharma deposed that the investigation of the case was handed over to him on 01.10.2012. He examined witnesses and also collected other documents. He identified his signature on seizure memo Ex.PW31/1 (D-27) vide which he seized documents from Shri R.N. Kher, Officer, Canara Bank, ARM Branch, New Delhi and thereafter the investigation was transferred to Inspector Sushil Kumar on 01.07.2013 and he handed over the documents to him.
95. PW-31 Shri Brij Mohan Pandit (First Investigating Officer). He was assigned investigation of the case RC 219-2011(E)/0012 and FIR of the case vide Ex.PW-9/A. He deposed that during investigation, he had recorded statements of number of persons and he collected number of documents through seizure memo vide Ex.PW31/1 and Ex.PW29/1. He also deposed that he received 11 original bills alongwith enclosures of M/s Harpreet Fashion Pvt. Ltd. vide letter Ex.PW31/2, written by Shri S.K. Halder, AGM, Canara Bank, Circle office, Nehru Place, New Delhi to Shri Bhupender Kumar, the then Sr. PP, CBI, EO-I, New Delhi. He identified his signature on the search CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 73 of 336 list vide Ex.PW31/3 dated 15.06.2012 which was prepared at the residence of accused Mohan Jit Singh Mutneja and Gunjit Singh Mutneja, both directors of Manjit Footwear Industries Pvt. Ltd. at 23/62, Punjabi Bagh (West), New Delhi and through the same, he had seized the documents which are mentioned in the seizure memo Ex.PW31/3 (D-18). He also identified his signature on the seizure memo vide Ex.PW21/1 (D-20) vide which he collected documents from Smt. B.S. Kanthimathi, Manager, Parliament Street Branch, New Delhi. He also identified his signature on the seizure memo vide Ex.PW21/11 (D-23) vide which he collected documents from Shri Balraj Singh Gill, Special Assistant, Canara Bank, Parliament Street Branch, New Delhi.
96. PW-31 deposed that vide letter Ex.PW21/12 (Part of D-23) dated 14.02.2012 of Shri Jai Kumar, AGM, Canara Bank, Parliament Street Branch, he received statement of account of M/s Harpreet Fashion Pvt. Ltd. He also identified his signature on the seizure memo vide Ex.PW21/8 (D-25) vide which he collected documents from Smt. B.S. Kanthimathi, Manager, Canara Bank, Parliament Street Branch, New Delhi. PW31 also identified his signature on the seizure memo vide Ex.PW31/4 (D-38) vide which he collected CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 74 of 336 documents from Shri Hemant Chaudhary, Proprietor of M/s Air World Cargo Services, Janakpuri, District Centre, New Delhi. He also identified his signature on the seizure memo vide Ex.PW18/1 (D-40) vide which he collected documents from Shri Vikas Chaudhary, Managing Director, M/s Committed Logistics Pvt. Ltd., Okhla Phase- I, New Delhi. PW31 further deposed that thereafter investigation was transferred to Inspector Jitender Sharma.
97. PW-32 Shri Chetan Sanjan Dutta referred to the adverse feature in the note vide Ex PW-37/1 of Harpreet Fashion. He noted that dealings of the parties were not satisfactory and other group accounts of the parties were having overdues etc. and he recommended that the tenability limits be not extended and recommended for suspension of limits. He further deposed that he advised the Bank to submit the renewal papers for regular renewal of limits immediately. He also deposed that he asked the bank to provide reason for non-compliance and also advised the branch to take steps for clearance of the over dues and for obtaining ECGC cover and put the note before Sr. Manager S.K. Gupta whose signatures were at Point B.
98. PW-33 Shri N. Vaidhyanathan explained the procedure being followed in the foreign exchange branches of the bank. He stated that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 75 of 336 that packing credit is used by the borrower for procurement of raw material, processing of goods and packing of the goods including transportation of the goods to the yard in a time limit of 90 days extending up to 180 days. He also stated that a borrower has to provide the letter of credit with shipment details of the goods to be exported. He further explained about clearance of payments by the buyer bank. He further stated that if a buyer failed to make payment, the bank (Bank of Buyer, however, wrongly typed as 'opening bank') will have to make payment to the exporter as per terms and conditions of the letter of credit after verification of relevant documents. He also explained that bankers usually deals in three foreign currencies i.e. Dollar, Euro and Pound and borrower/exporter has to provide the details of his bankers like SWIFT Code. The buyers bank would send authenticated letter of credit to the borrower/exporters bank by way of SWIFT messages in prescribed format. He further deposed that bank would handover the original letter of credit under acknowledgement to the exporter and exporter would start production as per terms and conditions of the letter of credit. He further deposed that prior to the expiry of letter of credit an exporter is required to finish the production and documentation for the shipment of the goods and goods are required to be shipped atleast 21 days from the date of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 76 of 336 expiry of Letter of Credit. He furnished the details of the documents to be submitted at the time of shipment and further deposed that shipment documents received by the banks are to be dispatched through courier to the foreign banks with the covering letter containing the terms and conditions of the payment as per Letter of Credit and name of the exporter/importer, tenure of the bill, amount and payment settlement terms. He explained the terms FDB i.e. Foreign Discounted Bills are the bills in which payment would be received within 25 days from the date of dispatch and the foreign bank would handover the documents to the buyer after receipt of payment and LC would be opened by the foreign bank. He further stated that the documents would then be submitted by the exporter to the foreign bank and bill of exchange would have words "At Sight" of "CAD" "At Sight" means payments to be made on showing of the documents and "CAD" means Cash Against Delivery of the documents. PW33 further explained the meaning of term FBE i.e. Foreign Bill of Exchange. He also explained that usance period of bill of exchange can be 60 days or 90 days extending upto 180 days as per RBI guidelines from the date of bill of lading. He further explained that usance period is the period in which the credit for making payment is allowed by the parties but within the prescribed period as CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 77 of 336 per RBI guidelines. He further stated that bill of lading contains the name of the foreign banks to facilitate to make an endorsement on the original bill of lading in the name of buyers. He further explained that if the payment is not received within a period of 180 days, the Indian Bank has to report to the RBI if the amount is more than US 25,000 Dollars and the follow up is also to be taken up with the exporter for realisation of the amount which is done on half yearly basis and L.C. cannot be opened in every case and goods can be exported as per terms and conditions between buyer and exporter. PW-33 further explained that goods can be exported by the exporter without opening LC and for the said purpose the documents are required to be submitted as per the sanction terms. He further deposed that bank would purchase the said bills and discount the usance bill on the basis of the credibility of exporter after obtaining opinion letter from the buyer and He further stated that the documents in this situation are sent to be buyers banker and the payment is received in the bank from the buyer's banker. He further deposed that bill of lading should be addressed in the name of buyer's bank and if such a bill of lading is in the name of buyer, such documents are not purchased/discounted by the bank unless permitted by the order of sanction. He further deposed that an exporter cannot directly sent the negotiated/ CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 78 of 336 purchased/discounted documents to the buyer unless specific permission obtained from the competent authority. In case of export through third country exporter has to declare the same and also export in no case could be made to the restricted countries such as Syria, Afghanistan, Sudan, Myanmar, etc.
99. PW-33 further deposed that an exporter is to obtain buyers policy from ECGC and a premium is to be paid on monthly basis for pre-shipment and post-shipment export during the relevant month. He further explained that ECGC cover would make the loss good the extent of 60 to 75%, in case of non-payment. He further deposed that if the documents are not accepted by the foreign buyer, or the documents are received after 15 days from the due date, the payment is recovered from the exporter by de-linking the bill. He further stated that in order to check the overdue bills, the balance of export wise check is made on daily basis. If the payment of bills is delayed beyond 15 days from the due date, the bill will be delinked and recovered.
100. PW-34 Shri Sushil Kumar is the Final Investigating Officer and he was handed over the investigation on 08.07.2013 from Inspector Jitender Sharma. During the investigation, PW-34 collected CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 79 of 336 documents pertaining to the bank and other organization and recorded statements of witnesses namely Sh. Chander Sharma (CHA), Sh. Binod Kumar Singh (CHA), Sh. Rajender Singh (G. Card Holder). Sh. Pradeep Sinha (G. Card Holder), Sh. Sunil Dutt (G. Card Holder), Sh. Saheb Raza (AG-III, FCI), Sh. Badal Juneja, Sh. Suresh Paunikar (Asstt. Manager, ECGC), Sh. Mirnal Singh (Deputy Head D&B), Sh. Rakesh Gupta, AGM, Canara Bank, Sh. Sushil Kumar Singhal (Officer, Canara Bank), Sh, Chetan Sanjan Dutta (Sr. Manager Canara Bank), Sh. T.Y. Prabhu (Ex. GM, Canara Bank), Sh. Prakash P. Mallya (Ex. GM, Canara Bank) and Sh. R. Subramanian (Ex. Sr. Manager, Canara Bank). He deposed that he had collected the documents through letter dated 20.06.2014 vide Ex.PW34/3 (Colly) (D-45) of AGM Canara Bank, Parliament Street Branch New Delhi.
101. PW-34 further deposed that during investigation, he also seized documents vide seizure memo dated 23.06.2014 Ex.PW16/1 (D-86) from Sh. Sushil Kumar Singhal, Officer Chandni Chowk Branch. He further deposed that he received two letters dated 20.06.2014 vide Ex.PW16/2 and 27.06.2014 vide Ex.PW16/3 from the Chandni Chowk Branch detailing cheques and vouchers handed over to CBI vide seizure memo Ex.PW16/1. He further deposed that in the letter CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 80 of 336 vide Ex.PW16/2, it was informed by the bank that certain documents pertaining to M/s Ginna World Trade, M/s G.M. Exim AND Manjit Footwears are not available.
102. PW-34 further deposed that he also took the specimen signatures of Mohanjit Singh Mutneja vide Ex.PW2/1 (D-76), Gunjit Singh Mutneja vide Ex.PW2/2 (D-77), Harpreet Kaur vide Ex.PW2/3(D-78), Seema Mutneja vide Ex.PW2/4 (D-79), Badal Juneja vide Ex.PW2/5 (D-80), Tripat Kaur vide Ex.PW2/6 (D-81), Rajender Pal Singh vide Ex.PW2/7 (D-82) and also identified his signatures at Points-C on Ex.PW2/1 to Ex.PW2/7. He further deposed that Sh. K.R. Chaurasia, the then SP CBI, EOU-III had sent the specimen signatures sheets alongwith questioned writing to CFSL vide Ex.PW34/1 (D-75) and Ex.PW34/2 (D-84). PW-34 further deposed that CFSL reports vide Ex.PW26/4 (D-85) and Ex.PW26/2 are received from the CFSL. He further deposed that he had obtained the prosecution sanction vide Ex.PW1/1 for the prosecution of accused Darwan Singh Mehta. He further deposed that he had obtained the prosecution sanction vide Ex.PW1/2 for the prosecution of accused C.T. Ramakumar.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 81 of 336103. PW-34 further deposed that he had received a letter dated 08.07.2014 vide Ex.PW34/6 (D-93) from Sh. S.K. Bhatnagar, AGM, Canara Bank, Parliament Street Branch informing that they were unable to trace Packing Credit application submitted by M/s Harpreet Fashion Pvt. Ltd. PW-34 deposed that he had also received letter dated 30.06.2015 vide Ex.PW34/7 (D-98) from Sh. Prem Kumar Malik, AGM, Circle Office, Canara Bank informing that T.G. Purushothaman and D.S. Mehta had already retired from the services. PW-34 further deposed that he had also received letter dated 02.07.2015 vide Ex.PW21/10 (D-99) vide which packing credit applications filed by M/s Harpreet Fashion Pvt. Ltd. were received from Sh. B.S. Kanthimathi, Manager Canara Bank.
104. PW-34 deposed that accused had cheated the bank by misrepresentation of facts and utilised the companies floated by them to encash the credit facility from bank by way of fabricated/forged bills, order copies, altered airway bills, consigning the goods directly to ultimate buyers in Kabul (Afghanistan) which is restricted country as per Export Credit Guarantee Corporation and subsequently altering the name of the consignee based at Dubai, to avail credit facility and thereby caused wrongful loss to the bank to the tune of Rs.4.80 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 82 of 336 Crores. PW-34 further deposed that as per ECGC norms prior to export of goods to Afghanistan, permission is required to be taken on case to case basis but, no such permission was obtained and he further deposed that ECGC covers the obligation of the bank if the payment is not made by the foreign buyer. He also deposed that M/s Harpreet Fashion did not disclose that importer company was their sister concern and if the same was disclosed then ECGC would have charged the higher risk premium. PW-34 further disclosed that non- disclosure of the consignee name by the exporter shows that export intend to cheat the bank from inception.
105. PW-34 further deposed that accused Mohanjit Singh Mutneja applied for credit facility which were recommended by A-6 and A-8 and both the accused failed to comply with the condition of sanction and the same has caused loss to the bank. He further deposed that accused Mohanjit Singh Mutneja and Harpreet Kaur had made group transactions after release of PC limit against the sanction terms and conditions of the loan in which the diversion of funds were prohibited. PW-34 further deposed that inter-group transactions were made on the firm controlled by Mohanjit Singh Mutneja, Gunjit Singh Mutneja, Seema Mutneja and Harpreet Kaur (same family members). PW-34 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 83 of 336 further deposed that packing credit is granted for procuring material and packing for exports and the same is to be adjusted from the proceeds of export bill discounting and the discounted bills should be adjusted from the realization of export bills. He further stated that some of the overdue export discounting bills were adjusted from the proceed of the fresh bill discounting as well as from the release of fresh packing credit and due to which the end use of the funds were not ensured by the branch official D.S. Mehta and C.T. Ramakumar. He further stated that D.S. Mehta and C.T. Ramakumar did not properly scrutinize the export bills discounted by them as they had ignored cutting/alteration in some of the airway bills submitted alongwith export bills and he further stated that accused/borrowers had struck the consignee name and inserted the name of overseas buyer and overseas bank and both these officials have not properly scrutinized the bills as FDBP limit was sanctioned for export of ready- made garments but they discounted the bills for the export of cosmetic goods, Fast Moving Consumer Goods (FMCG), etc. He further deposed that Mohanjit Singh and Harpreet Kaur had submitted various orders of Dubai based relative buyer to bank to get the PC limit released and the foreign bills were accepted by Dubai based firms for discounting of the bills. PW-34 further deposed that after discounting CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 84 of 336 the foreign bills, funds were not received from the Dubai and the firms were controlled by two relatives of accused Mohanjit Singh Mutneja i.e. his brother Gunjit Singh Mutneja and his brother-in-law Harmindra Singh.
106. PW-35 Shri Badal Juneja was one of the Director in Harpreet Fashion. He brought into record the following documents :-
i) Ex.PW35/1 (Colly) (D-3) : Form 3 CD Statement of particulars required to be furnished U/s 44AB of the Income Tax Act.
ii) Ex.PW35/2 (Colly (D-3) : Form 3 CD Statement of particulars required to be furnished U/s 44AB of the Income Tax Act.
iii) Ex.PW35/3 (Colly (D-3) : Form 3 CD Statement of particulars required to be furnished U/s 44AB of the Income Tax Act.
(Ex.PW35/1 to Ex.PW35/3 ARE THE SAME DOCUMENTS)
107. PW-35 identified his signatures on Ex.PW35/1 to Ex.PW35/3 and subsequent to his statement, documents bearing his signatures, he CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 85 of 336 was cross-examined by Ld. PP for the CBI in which PW-35 denied that he made a statement to the effect that signature appearing on undated guarantee letter and undated balance sheet does not belong to him. (The Point-A to A1 on Ex.PW-35/PX-1 was inadvertently not marked in statement under section 161 Cr.P.C.).
108. PW-36 Shri S.V. Sudarshan, AGM, Parliament Street Branch (He succeeded A-6 as Branch Manager, Canara Bank, Parliament Street Branch) and he deposed that Shri S.K. Athimoolan was the Sr. Manager of the Branch looking after the day-to-day functioning of the branch. He deposed that Shri Purushotaman was Manager (Credit) and Shri S. Shankar was also the Manager (Credit). He further deposed that Manager (Credit) looks after the processing of credit proposal, day-to-day credit transactions of the parties, supervise godown inspection, follow up terms, conditions of sanction, mortgage transactions and recovery of overdue bills in the account. He deposed that Shri D.S. Mehta, Incharge, Forex Branch used to deal with discounting of foreign bills, import export transactions, realization of bills, de-linking of bills in case of non-realization and to follow up overdue bills. PW-36 after referring to Ex.PW36/1 deposed that being Head/Incharge/AGM of the Branch, he had recommended one ad-hoc CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 86 of 336 proposal of Rs.200 lacs to M/s Harpreet Fashion Pvt. Ltd. vide Ex.PW36/1 dated 22.12.2006 (page 351 of D-5) to the Circle Office, New Delhi. He further deposed that the limit enjoyed by the party's sister concern are mentioned at Portion 'X' and existing limits of the party are mentioned at Portion X-1 and the facilities are secured by securities mentioned at Portion X-2 and the proposed limits of M/s Harpreet Fasshions (P) Ltd. are mentioned at Portion X-3 on Ex.PW36/1. PW36 further deposed that he had sent a letter vide Ex.PW36/2 dated 23.01.2007 (Page 320 of D-5) to the Circle Office, New Delhi in respect of ad-hoc limit of PC of Rs.50 lacs and FBE of Rs.200 lacs as the party had requested vide its letter dated 18.12.2006 (Mark PW24/A (Colly) (D-5, page no. 353) and letter dated 06.01.2007 (Mark PW36/A (Colly) (D-5), page no. 336-337) for the facilities. He deposed that the Circle office had not considered the request of the party and renewal proposal was pending at Head office, Bangalore. PW36 identified his signature on letter Ex.PW36/2 dated 23.01.2007.
109. PW-36 deposed that prior to his joining, M/s Harpreet Fashion Pvt. Ltd. was enjoying the credit facilities and the inspection of the godown of the party was not done regularly. PW-36 after referring to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 87 of 336 Stock Audit Report dated 30.03.2007 (D-5, page no. 259-267) deposed that stock audit report as on 28.02.2007 was prepared by Panel Valuer Anil Chadha & Associates and he identified signature, seal and initials of Shri Anil Chadha on the Stock Audit Report vide Ex.PW36/2 (D-5, page no. 259-267).
110. PW-36 after referring to stock inspection report (NF-814) deposed that the same was submitted by Officer Shri S. Shankar, Manager (Credit) who had conducted the inspection of the godown of the party situated at 362, MIE, Bahadurgarh regarding the stock inspected by him on 31.07.2007 regarding the stock of Harpreet Fashion Pvt. Ltd. as on 30.07.2007 vide Ex.PW36/3 (Colly) (D-5, page no. 167-181) and PW36 identified signature of S. Shankar on the stock inspection report.
111. PW-36 further deposed that export bills are discounted by Manager, Forex Department after submission of the export bills as per the terms and conditions of sanction and ECGC guidelines vide Ex.PW17/1 (D-36) and he further stated that Afghanistan is mentioned as a restricted country at Annexure No. 17-C. He further deposed that an export can be made to a restricted country after obtaining the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 88 of 336 approval of ECGC. He further stated that usance period of 90 days was enhanced to 150 days as mentioned in portion X-3 at Ex.PW36/1. He further deposed that if there is an overdue and returned unpaid bills of the parties then export bills cannot be discounted. He further deposed that Branch Incharge is competent to permit discounting of export bills if export bills are overdue and then it is to be reported to the sanctioning authority i.e. Circle Office and no office note was prepared at the time of discounting of each bill. He further deposed that if a party was having a regular limit then bill can be discounted within the limits and if the limits are not available, then office note should be prepared and if there is any deviation in the terms and conditions, such as exceeding of usance period, alteration in the column of consignee name and address, the office note should be prepared. In case of export bills of M/s Harpreet Fashion no such office note were prepared for each export bill.
112. PW-36 after perusing the note dated 07.12.2006 states that it was prepared by by C.T. Ramakumar and recommended by D.S. Mehta, Manager(Forex), T. Purushotaman, Manager (Credit) and K. Athimoolan, Sr. Manager of the Branch with the remark that as the goods has left the country and bill was not covered by WTPCG for the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 89 of 336 PC, the bill may be discounted and adjusted to the PC. Thereafter, on these recommendations, PW-36 had permitted the same and amount was adjusted to PC. PW-36 deposed that due to the reason that goods had already been exported from country and if bill are not adjusted, the bank would have suffered the loss of ECGC cover for the PC.
113. PW-36 further deposed that Forex Manager can release the PC within the sanction limit and when no adverse features are noticed in the accounts and end use has to be ensured and the Branch Incharge can permit discounting of bills beyond the limit but within the discretionary power and Branch Incharge has power to permit up to 25% of the sanction limit in emergent cases and it is not necessary for the Bank to obtain opinion letter on foreign buyers which is required to be obtained at the time of sanction of the credit limit and for the new buyer, it can be obtained before the discounting of bill. PW36 after perusing Ex.PW21/4, stated that two bills at page nos. 24 and 25 were discounted by the Branch on which there were overdues and the party had received direct payment from the buyers and the amount of these bills were recovered from the current account of the party alongwith interest. He further deposed that sanction limits were renewed vide sanction memorandum Ex.PW24/DX-6 dated CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 90 of 336 26.03.2007 vide which the sanction PC limit was Rs.200 lacs and FDB/FBE limit was Rs.280 lacs and usance period was extended from 90 days to 150 days. PW-36 brought into record a letter vide Ex.PW36/4 dated 14.11.2006, addressed to Harpreet Fashion where an intimation was given for updating monthly declaration to ECGC for payment of premium to avail the facility of discounting of bills and he further deposed that this letter was written to him after receipt of letter vide Ex.PW19/DX-5 dated 09.11.2006. PW36 also brought into record a letter vide Ex.PW36/5 dated 11.11.2006 by which Harpreet Fashion was asked to provide the detail for renewal of the limit required by the Head office. He further deposed that he reviewed the account of the party and visited the unit on 18.09.2006 and discussed the position of the account with party and clearances of the overdues. He further deposed that he wrote a letter to the Circle Office vide Ex.PW36/6 dated 19.09.2006 in respect of the position of the account and for enhancement of usance period from 150 to 80 days and waiver of the buyerwise policy. PW36 further deposed that the party was not aggreable for buyer wise policy or getting bills on LC basis due to high cost of premium. He further explained that buyerwise policy means that buyer has to obtain policy from ECGC for each buyer. PW36 brought in record letter vide Ex.PW36/7 dated 24.07.2007 by CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 91 of 336 which he forwarded the copy of ECGC letter dated 19.07.2007 whereby ECGC had advised the bank to obtain its prior approval before making fresh advance to Harpreet Fashion.
114. On referring the ratification note dated 21.12.2006, PW36 stated that it was prepared by the Branch and sent to the Circle Office informing the Circle office that branch had discounted two foreign bills amounting to Rs.64.94 lacs on 18.12.2006 and Rs.30.27 lacs on 21.12.2006 for the reason that party had already shipped the goods and ECGC cover will be made available by the bank by making payment to the ECGC and therefore, branch had discounted these two bills and adjusted the amount to the PC. PW36 further stated that the action of the branch was ratified by the Circle Office vide letter Ex.PW24/DX-5 dated 03.04.2007 (page no. 256 of D-5). PW36 deposed that the amount qua the bills was not realized by the bank as mentioned at page no. 34 of Ex.PW21/4 (D-21) at Point X-2 and Point X-3 on page no. 35.
115. PW-36 brought into record letter vide Ex.PW36/8 dated 26.12.2006 whereby party was asked to provide information to process renewal proposal and also for clearance of irregularities such CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 92 of 336 as dishonour of cheque, non-payment of premium to ECGC, proper maintenance of stock and stock statement, book debt statement. He further deposed that vide Mark PW36/B dated 02.01.2007, the borrower had furnished explanation to the abovementioned letter vide Ex.PW36/8 and the letter Mark Ex.PW36/B was marked to the Circle Office through covering letter vide Ex.PW36/9 dated 11.01.2007. PW36 further brought into record letter vide Ex.PW36/10 dated 23.02.2007 in respect of the irregularities in the account and clearance of overdue bills and he further stated that Ex.PW36/10 was written after receipt of letter from the Circle Office vide Ex.PW36/11 dated 23.01.2007 under the signatures of DGM Shri M.K. Kamath.
116. PW-36 further deposed that the Circle Office vide letter Ex.PW24/DX-7 dated 09.02.2007 had ratified the action of branch by allowing temporary overdraft on various dates at Point-A to A-1 and the due amount was recovered from Point B to B-1 in a letter Ex.PW24/DX-7. He further deposed that Harpreet Fashion vide Mark PW36/C made a request for enhancement of credit limits but proposal was not considered vide letter Ex.PW36/12 dated 30.07.2007 and in the said letter, a request was made for regularization of the account. PW36 further referred to letter vide Ex.PW15/1 dated 06.08.2007 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 93 of 336 from ECGC where default regarding Harpreet Fashion under WPCG and INPSG were mentioned and the default was communicated to the Circle Office vide letter Ex.PW36/13 dated 20.08.2007. He further stated that he made a request vide letter Ex.PW36/14 dated 28.08.2007 and letter vide Ex.PW36/15 (page 93 and 94 of D-5) to clear the overdues in the account and pending irregularities etc and to regularize the account before 15.09.2007 otherwise recovery measures will be initiated against the party.
117. PW-36 further deposed that vide his letter vide Ex.PW36/16 (page 86 of D-5) dated 10.09.2007, he had requested the party to submit quarterly and half yearly operating statements for the period 31.03.2007 to 30.06.2007, however, the party M/s Harpreet Fashion did not respond to the letter Ex.PW36/16. He further deposed that due to the poor performance and non-regularization of the account, the physical possession of the stock was observed in which he alongwith Ravi Bhatia, the then AGM Circle Office and Shri Satish Kumar, Chief Manager, Corporate Service Branch, Nehru Place, New Delhi visited and inspected the godown of Harpreet Fashion on 09.11.2007 and found the stock of the party deficient and stock statement of the firm was not properly maintained and a report in NF-814 format vide CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 94 of 336 Ex.PW36/17 (page 17 and 18 of D-5) was prepared by PW36 and the same was submitted to Circle Office vide his report Ex.PW36/18 dated 10.11.2007 (page no. 6 to 10 of D-5). PW36 deposed that all the shortcomings in the stock and stock statements discussed with the party on 12.10.2007 and an endorsement regarding this fact was made by him at Portion X-1 on last page of Ex.PW36/18. PW36 deposed that in the said letter the account of the party was classified as NPA on 30.09.2007 and permission was sought from the Circle office to take action for taking possession of the property occupied by the borrower as security. PW36 further deposed that he had again requested the party vide his letter Ex.PW36/19 dated 12.10.2007 (page 2 to 4) to clear the overdues in the account and pending irregularities etc and to regularize the account, failing which recovery proceedings would be initiated against it.
118. PW-37 Shri B. Mahesh Kumar Singh deposed that he was looking after the work of Second Line Incharge of the Branch and T.G. Purushotaman, the then Manager was looking after the credit business of the branch. He deposed that the Manager (Credit) looks after the processing of credit proposals, day to day credit transactions of party, supervise godown inspection, follow up of the terms and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 95 of 336 conditions of sanctions, obtention of loan papers, mortgage transactions and recovery of overdues in the accounts. PW-37 deposed that D.S. Mehta being Manager (Incharge) of Foreign Exchange (Forex) of the branch, deals with discounting of foreign bill, export-import transaction of borrower, booking of forward contractors, realization of bills, de-linking of bills in case of non- realization, to follow up overdue bills and to supervise godown operation. He further deposed that Raman Kumar Agarwal was the Branch Manager of Parliament Street Branch, Delhi. PW37 further deposed that that original application form vide Ex.PW37/1 (Colly) (Page no. 367 to 376 of D-3) dated NIL, for working capital limit of Harpreet Fashion Pvt. Ltd. was submitted to the Bank in the bank loan application format NF 740. PW37 deposed that M/s Harpreet Fashion Pvt. Ltd. has two directors namely Mohanjit Singh Mutneja and Shri Badal Juneja and the registered address of the company was 601, Pargati Tower, 26, Rajendra Place, New Delhi and factory address was 362, Modern Industrial Estate, Bahadurgah, and the borrower had applied for Packing Credit of Rs.250 lacs and bill discounting facility of Rs.350 lacs, and the prime security of the loan was proposed as hypothecation of stock and book debt and collateral security as Equitable Mortgage (EMT) of factory land and building at 362, CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 96 of 336 Modern Industrial Estate, Bahadurgah with market value of Rs.1.10 Crore as per valuation report vide Ex.PW37/2 (Colly) (Page 4-7 to 414 of D-3) dated 16.10.2004. He deposed that the loan proposal was prepared by T.G. Purushothaman. PW37 deposed that no separate pre-sanction note was prepared but the observation of pre-sanction visit was mentioned at page no. 364-365 of office note vide Ex.PW37/3 (D-3).
119. PW-37 further deposed that Mohanjit Singh Mutneja, main Director of the company was associated with other group accounts maintained with Chandni Chowk Branch in which he was associated as Partner or Proprietor or Director and these firms are M/s Hinna International, M/s Manjit Overseas and M/s Manjit Footwear Industries Pvt. Ltd. and Shri Mohanjit Singh Mutneja had enclosed copies of orders vide Ex.PW37/4 (Colly) (Page no. 380 to 383 of D-
3), received from M/s Al Mezhar Corner Trading, M/s Green Belt Ready-made Garments Trading, Dubai and M/s International Logistic Partner, Finland for support of his business. PW37 deposed that as a matter of practice, the order submitted by borrower applicant used to be be verified but Mohanjit Singh Mutneja was long associated with the bank so the bank did not verify the orders received from the party.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 97 of 336He deposed that they received opinion letter from Chandni Chowk Branch, Delhi regarding Manjit Footwear Industries Pvt. Ltd., M/s Ginna World Trade (earlier known as M/s Manjit Overseas) and M/s G.M. Exim (earlier known as M/s Hinna International) and the same were satisfactory. He deposed that the borrower had submitted projected balance sheet for the period ending 31.03.2005 alongwith projections for March 2006 and March 2007 vide Ex.PW37/5 (Colly) (Page No. 384 to 407 of D-3).
120. PW37 further deposed that the process note vide Ex.PW37/6 (Colly) (Page 360 to 365 of D-3) was prepared by T.G. Purushothaman and recommended by Raman Kumar Agarwal to Circle Office. He deposed that it was recommended by the Office note to sanction packing credit limit of Rs.250 lacs and foreign bill discounting limit of Rs.350 lacs. PW37 further deposed that packing credit limit (PCL) is made available to the borrower for acquiring raw materials and for processing the raw materials into finish goods for exporting. He deposed that the liability under packing credit would be clear out from the proceeds of the bills after the export has been made and the bill is submitted for discounting. PW37 further deposed that FDB/FBE stands for purchasing or discounting the bills submitted by CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 98 of 336 the borrower to the bank as per which the bank will purchase the bill immediately and provide funds to the party. He deposed purchased bill would be sent to the buyers bank abroad for collection and foreign bank would present the bill to the buyer abroad seeking payment of the same and the bill will be handed over to the buyer only against payment in case of sight bill and against acceptance of the bill by buyers in case of usance bills. He deposed that once the buyers makes the payment to the bankers abroad, the proceeds of the bill will be remitted to them by way of realization of the bill sent by the bank for collection.
121. PW-37 further deposed that the Circle Office had sanctioned the limit vide Ex.PW37/7 (Colly) (page no. 261-264 of D-4) i.e. the sanction letter no. DCA/CCG-II/S-542/2004-05 dated 15.01.2005. He deposed that the limit was sanctioned as under :
Limit 2004-05 2005-06
PC 100 lacs 200 lacs
FDB/FBE 140 lacs 280 lacs
122. PW-37 deposed that the limit was sanction with the following important conditions :-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 99 of 336a) Before availing the limits unsecured loans from Directors to the extent of Rs.180 lacs to be induced by the promoters. CA Certificate to be obtained before release.
b) Before release, the branch to ensure that the overdues in the name of associate concerns are cleared in full and a confirmation to that effect is to be obtained from Chandni Chowk Branch.
c) 3% cut back deposit to be collected on the bill discounted to improve collateral comfort.
d) Before release of the limit branch to ensure that the party has entered into a suitable lease agreement for the godown situated close to the factory lease agreement to be obtained and verified.
e) D&B report on the buyers to be obtained.
f) Branch to obtain OPL from Chandni Chowk Branch and ensure that the same is satisfactorily.
g) Branch to obtain an undertaking from the company to increase the equity to Rs.200 lacs latest by 31.03.2005 raising the authorize capital accordinlgy and converting the unsecured loan into equiry.
123. PW-37 deposed that there was no document confirming clearance of the overdues of the group concern. He further deposed that borrower M/s Harpreet Fashion Pvt. Ltd. had requested for modification of certain conditions stipulated during sanction vide Ex.PW37/8 (Colly) (page 199 to 201 of D-3), but the Circle Office did not consider the waiver of cut back deposit of 3%. He deposed that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 100 of 336 the limit to the extent of Rs.240 lacs was released in the account of the borrower on 13.05.2005.
124. PW-37 further deposed that the borrower submitted a renewal application for working capital limits alongwith the CMA form, provisional balance sheet as on 31.03.2006 and projected balance sheet as on 31.03.2007 alongwith the request for enhancement in working capital limit vide Ex.PW37/9 (Colly) (Page 143 to 210 of D-
4) to the tune of Rs.600 lacs. He deposed that the proposal was processed by Smt. Sadhana Suresh (Officer), verified by T.G. Purushothaman and also signed by him (PW37) at Point-C, and forwarded by Raman Kumar Agarwal to Circle Office, Delhi duly recommended for renewal of the limit at the existing level vide their credit report dated 06.07.2006. PW37 further deposed that the branch had released an amount of Rs.17.25 lacs on 04.03.2005 and was transferred to M/s Manjit Overseas, a group concern having account with Chandni Chowk Branch. He deposed that as per statement of account of M/s Harpreet Fashion Pvt. Ltd., current account no. 5489 vide Ex.PW20/30 (D-24), there is a debit entry of Rs.17.25 lacs dated 04.03.2005 favouring M/s Manjit Overseas.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 101 of 336125. PW-37 further deposed that as per sanction letter vide Ex.PW37/7 (Colly) dated 15.01.2005, under heading other condition, condition no. 2 says "Before release, the branch to ensure that overdues in the name of associate concerns are cleared in full and a confirmation to that effect is to be obtained from Chandni Chowk Branch. Under Point no. 7, it is stipulated that Branch to obtain Opinion Letter (OPL) from Chandni Chowk Branch and ensure that the same is satisfactory. PW37 deposed that as per letter dated 09.03.2005 for modification of certain sanction condition, it is stipulated under condition no. 2 that Branch to get confirmation from Chandni Chowk Branch that the group concerns are regularised. PW37 deposed that as per audited balance sheet of M/s Harpreet Fashion Pvt. Ltd. vide Ex.PW37/10 (Colly) (Page no. 13-39 of D-4) dated 31.03.2006, Smt. Harpreet Kaur Mutneja is Director of the company in place of Mohanjit Singh Mutneja.
126. After recording the statement of the prosecution witnesses, the prosecution evidence was closed vide order dated 28.09.2018.
STATEMENT UNDER SECTION 313 CR.P.C.
127. Statements of accused persons under section 313 Cr.P.C. were recorded. In support of their defence, accused persons have examined CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 102 of 336 one witness i.e. DW1 Shri Surender Singh, Taxation Inspector, Office of Dy. Excise & Taxation Commissioner, Jhajjar, Haryana.
128. In their separate statements recorded under section 313 Cr.P.C., A-1, A-2, A-3 and A-4 denied all the incriminating evidence against them. They stated that they are innocent and have been falsely implicated by the CBI and that they have not committed any offence for which the charges have been framed. In their separate statement, the directors have also stated that they were never involved in the day to day affairs of the accused company. They stated that they have never met with any of the bank officials with respect to the financial facility, sanction, enhancement and disbursement to the accused company from time to time and the entire payment of the bank has been duly realized since the inception of the financial transactions with the bank i.e. from 1999 to November 2006. They further stated that the payment of few of the discounted bills could not be realized as in the year 2006-07, the value of Indian rupees became stronger against US Dollar which was causing huge loss to them in case of Export and since the foreign buyers based in Dubai was not ready to re-negotiate on the price and took took a business decision not to export any further goods to Dubai based buyers and in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 103 of 336 retaliation buyers choose not to make payment of the goods already received by them. It is also stated that there was no diversion of funds rather the funds were the payments made to group concerns against the purchase of raw material and the readymade goods as it was available at a cheaper rate than from the open market and there is no evidence that they diverted the funds, as no export had taken place. It was also stated that the Afghanistan was never a restricted country otherwise the custom would have not allowed the export and since Afghanistan was not a restricted country and hence, no occasion for making higher premium for ECGC Insurance cover. They stated that the bank has taken the ECGC cover at the cost of the accused company to cover the losses, if any, and several crores of rupees have been paid by the accused company towards the ECGC insurance cover taken by the Bank. It is also stated that the Dubai based importer company are not the sister concern of the accused company rather the same was owned and controlled by Mohd. Essa and Mr. Debu. It is also stated that none of the accused persons had any control or controlling shareholding in the said Dubai based firms/company.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 104 of 336129. A-1 (Harpreet Fashion), A-2 (Mohanjit Singh Mutneja), A-3 (Gunjit Singh Mutneja) and A-4 (Smt. Harpreet Kaur Mutneja) categorically denied that modification/alteration in the airway bills were made by the accused company/accused persons and stated that the details were wrongly filed in the airway bills, the air cargo company made the corrections on the copy of the airway bill of the exporters and thereafter handed over the same to the exporter and a plea was also taken in the past when such mistake had occurred then same were rectified by the air cargo company and the rectified airway bills were submitted with the bank and even the payments against such bills were duly received by the bank. It is also stated if there was an any intention to cause fraud by the alteration, the bank would not have received the payments. It is also averred that they had not entered into any conspiracy with any of the bank officials, more particularly the officials who are the co-accused in the present case. It is also stated that the financial facilities to the accused company was sanctioned and subsequently enhanced from time to time by the Circle office and head office of the bank of their own and not by the Branch office or on the recommendation of Branch office. It is also submitted that the financial facilities granted by the banks were secured by the bank by taking the collateral securities of the moveable CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 105 of 336 and immovable assets of the accused company, its directors and guarantors as well as for taking the ECGS cover at the cost of the accused company.
130. A-1, A-2, A-3 and A-4 stated that there is no reason for the accused company to alter the airway bills by incorporating the name of Foreign bank as it was not essential and mandatory for the purpose of discounting of the bills. Bank had already initiated SARFEASI proceedings which are pending adjudiciation in DRT against the borrowers and its guarantors and some of the properties were sold by the bank to recover the losses. It is also submitted that if there is any intention to cheat the bank, the accused company would not have furnished the collateral securities in the form of moveable and immovable assets of accused companies, its directors and its guarantors.
131. A-1, A-2, A-3 and A-4 also stated that if there was any intention to cheat the accused company, the accused company would not have actually purchased the material from group companies and did not export the goods after transferring the funds to its group companies and would not have submitted the requisite form 'H' CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 106 of 336 issued by the Sales Tax Authority. It is also submitted that the payments of the bills after November 2006 could not be realized, as the value of the Indian rupees become stronger in terms of US Dollars which was causing huge loss to their business and despite their request with the foreign buyer to re-negotiate the price, the foreign buyer refused to re-negotiate the price. It is further submitted that due to higher litigation expenses and lack of infrastructure, the legal action was not initiated against the buyers.
132. A-5 Harmendra Singh denied all the incriminating evidence against him in his statement under section 313 CrPC. He asserted his innocence and stated that he has been falsely implicated in the case.
133. A-6 Raman Kumar Aggarwal in his statement under section 313 Cr.P.C. denied all the incriminating evidence and circumstances against him. He submitted that the complaint was without verification on the basis of which the FIR was lodged. He also stated that D&B report did not suggest any relation between importer and exporter. He also stated that the proposal was analysed independently at the circle office by various officers and thereafter it was sanctioned through office note. A-6 further stated that during his tenure, CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 107 of 336 accounts were properly monitored, bills and PCs were realized and there is no outstanding liability during his period. It is also contended that despite irregularities, the credit limit was sanctioned and it is further contended that the end use of the fund was ensured on receipt of payment in foreign currency. A specific plea was taken by A-6 in his statement under section 313 Cr.P.C that PW37 was Sr. Manager of the branch during his tenure and was overseeing the functioning of branches including Advance and Forex Sections. It is also stated that various adhoc limits were granted to A-1 does not pertain to his period. A-6 has also contended that he had worked within the framework of guidelines. He also filed a written submissions vide Ex.C-1 and the written submissions are basically the written arguments as filed on behalf of A-6.
134. A-7 Darwan Singh Mehta in his statement under section 313 Cr.P.C. denied all the incriminating evidence and circumstances against him and reiterated his innocence and asserted that duties were performed as per banking norms.
135. A-8 T.G. Purushothaman in his statement under section 313 Cr.P.C. denied all the incriminating evidence and circumstances CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 108 of 336 against him. He stated that he is innocent and charges framed against him were not proved by the CBI and took a stand that CBI failed to understand the functioning of Exceptionally Large Branch such as Parliament Street Branch where work was divided amongst the officers and the CBI has wrongly conflated the work of other departments with that of the Credit Department. He stated that his department did not handle day to day transactions of export accounts such as bill discounting, disbursal of packing credit, ECGC obtention, monthly godown inspections, obtaining Dun & Bradstreet reports and de-linking of accounts. A-8 further stated that if the CBI would have understood the division of responsibility by seizing the relevant Key Responsibility Area (KRA) documents that were issued by the bank for each officer. He further stated that in none of the report or in the statement of any of the witnesses any fault was found in preparing the proposal and the same was also approved by PW37 and thereafter, the sanction was granted by the Circle Office. He also stated that conditions for the sanctions were complied by the branch and he was not responsible for compliance of all the conditions. He also stated that the sanction was granted by the Circle Office for one year which expired in January 2006 and thereafter as per applicable credit policy, the tenability of limits could be extended for a period of three months CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 109 of 336 and the said period continued till April 2006 and thereafter Branch made proposal to the circle office and circle office asked the branch to submit a renewal proposal instead of permitting a second extension of three months to the party and accordingly, the renewed proposal was forwarded to the Circle Office and Head office and the Head Office after considering the renewal proposal, renewed the limits on 21.03.2007 by ratifying the acts of the branch. He also contended that sanction and renewal were performed by Circle Office and Head office. He generally denied the allegations made against him.
136. A-9 C.T. Rama Kumar in his statement under section 313 Cr.P.C. denied all the incriminating evidence and circumstances against him. He also took the plea that he did not open the bank account of M/s Harpreet Fashion and also did not introduce the party (Private Accused Persons) or that the party (Private Accused Persons) was known to him. He spoke about his glorious service record. He further stated that the alteration in airway bill was brought to the notice of his superior authority in the form of office notes and the same was considered by his superior i.e. PW36. He also stated that the investigation report prepared by PW19 did not consider the office note prepared by him and he further submitted that he cannot deal CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 110 of 336 with any discrepant bill and he further stated that he cannot take any decision about accepting or rejecting the bills etc. He further submitted that cheques were not cleared by him.
DEFENCE EVIDENCE
137. In support of its defence, A-1 has examined D1W1 Shri Surender Singh and he was asked to bring the copy of Form 'H' of M/s Harpreet Fashion from 2003 to 2007, however, the relevant record was not brought by him despite opportunities as same was stated to be not traceable by the witness.
138. No DE was led by other accused persons. However, some of them initially expressed their willingness to lead defence evidence.
IMPORTANT MISCELLANEOUS APPLICATIONS WHICH HAS SUBSTANTIAL BEARING IN THE CASE
139. A-8 T.G. Purushothaman had moved an application under section 91 Cr.P.C. for summoning of certain documents/record from the Canara Bank, Parliament Street Branch and Recovery Section of Circle Office of Canara Bank, details of which are as under :-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 111 of 3361. Certified copy of circular No. 112/2004 dated 13.05.2004 dated 13.05.2004 issued by the Credit Policy Section of the Head Office, Canara Bank.
2. Certified copy of Credit Monitoring Format as on 30.06.2006 for M/s Harpreet Fashions Pvt. Ltd. prepared by Parliament Street Branch, addressed to Advances Section, Core Credit Group-III, Delhi Circle Office.
3. Renewal Sacntion dated 26.03.2007 pertaining to M/s Harpreet Fashions.
4. Key Responsibility Area (KRA) document for Vinod Khanna, Credit Manager (30th April, 2012).
5. Key Responsibility Area (KRA) document for Somesh Gambhir, Forex Officer, Exports (2011-2012).
6. Key Respondent Area (KRA) document for Ms. Kantimati, Forex Manager (2012-2013).
7. Key Responsibility Area (KRA) document pertaining to Mr. Ram Kumar, Forex Officer, Export (2006-2007).
8. Letter dated 11.02.2005, 26.02.2005 and a CA certificate dated 24.02.2005 sent by M/s Harpreet Fashion to Canara Bank, Parliament Street Branch.
9. Stock statement file M/s Harpreet Fashion for the period 2005-
2006 from Recovery Section of the Circle Office of Canara Bank.
140. The aforesaid application of A-8 T.G. Purushothaman was allowed vide order dated 13.02.2018 with the following observation :
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 112 of 336"I have considered the rival contentions. The documents which the applicant/accused is seeking to summon/production, are stated to be relevant for the purpose of cross-examination of witnesses. In the interest of justice, the application is hereby allowed and the documents/records as mentioned in para 4 and 5 of the application, are permitted to be summoned for next date and permitted to be put to the witnesses upon showing the relevance of the same at the time of examination of the witnesses. The application under section 91 Cr.P.C. is accordingly disposed off.
141. A-6 Raman Kumar Aggarwal had moved an application under section 91 Cr.P.C. for summoning the documents from Canara Bank and for seeking permission to read the documents of group accounts i.e. D-3, D-38 and D-80 placed in connected case titled 'CBI Vs. Manjeet Footwear Pvt. Ltd. and vide order dated 07.08.2018, the application was partly allowed and A-6 Raman Kumar Aggarwal was permitted to read the documents i.e. D-3, D-38 and D-80.
SUBMISSIONS OF LD. PP FOR THE CBI
142. It is contended by Ms. Rohini Anand, Ld. Public Prosecutor for the CBI that prosecution has proved its case beyond reasonable doubt and the evidence as sufraced during the trial would indicate that private accused persons in conspiracy with bank officials had applied for the credit facility at Canara Bank, Parliament Street Branch, New Delhi with an intention to cheat and defraud the bank. It is further CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 113 of 336 contended that although the proposal of A-1 was having adverse features and conditions were imposed by the Sanctioning Authority vide Ex.PW14/2, however, bank officials in conspiracy with the private persons did not ensure the compliance of the conditions and facilitated the private persons to misuse the loan granted to them. It is also contended that 6 overdue bills worth Rs.196.04 Lacs were adjusted by using PC limits in violation of the PC norms which provide that PC limits can be used only for the purpose of procurements of goods to enable the borrower to purchase the raw material and to utilize the fund in such manner so that he is able to discharge his obligations for exporting the goods and not for the purposes of adjustment of overdue bills. It is also vehemently contended that bank officials have fraudulently discounted three unpaid bills when goods were exported to a restricted country as bank officials did not properly scrutinised the bills. It is also contended that Dun & Bradstreet report establishes that firms/concerns namely M/s Md. Essa Fashion Company, Dubai, M/s Greenbelt Readymade Garments Trading and M/s Al-Mezhar Corner Trading, Dubai were managed by accused Gunjit Singh Mutneja and Harmendra Singh. It is also contended that bank officials dishonestly and fraudulently discounted the bills/altered the bills despite the fact that finished CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 114 of 336 products were not readymade garments. It is also contended that private accused persons after getting the credit limits have fraudulently and dishonestly diverted the funds to the family controlled firms namely M/s Manjit Overseas, M/s Manjit Exports, M/s Rajni Worldwide, M/s Chozee Knitwear and M/s G.M. Exim and the relevant witnesses i.e. PW20 has established the diversion of funds to the sister concerns of A-1. It is also contended that accused persons were asked to clear the dues and discrepancies in their account vide letter Ex.PW36/16 in which A-1 was asked to provide quarterly and half yearly statement for the period 31.03.2007 to 30.06.2007, however, A-1 and other private persons did not respond to the same. It is also contended that PW36 Shri S.V. Sudarshan had proved that 2 bills at portion 'X' on page 24 and one bill at portion 'X-1' on document Ex.PW21/4 (Colly) (D-21) were discounted by the branch and these bills were overdue and as the party had directly received the payment from the buyer. Letter dated 23.02.2007 Ex.PW36/10 (page no. 303 of D-5) to Circle office regarding the irregularities in the account and clearance of overdue bills etc. due to poor performance of the accused company M/s Harpreet Fashion Pvt. Ltd. and non- regularization of the account, on 09.11.2007 PW36 alongwith Shri Ravi Bhati and Shri Satish Kumar had visited and inspected the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 115 of 336 godown of the accused company M/s Harpreet Fashion Pvt. Ltd., situated at E-362, MIE, Bahadurgarh, Haryana and found the stock of the party deficient and stock statement of the firm was not properly maintained and a report in NF-814 format Ex.PW36/17 (page 17 and 18 of D-5)was prepared. It is also contended that the account of the party was classified as NPA on 30.09.2007 and permission was sought from the Circle office to take action for taking possession of the property occupied by the borrower as security. It is also contended that vide letter dated 12.10.2007 Ex.PW36/19 (page 2 to 4) to clear the overdues in the account and pending irregularities etc. and to regularize the account, failing which recovery proceeding will be initiated against the borrower. It is also contended that accused persons have forged and fabricated the airway bill and the branch officials in conspiracy with private accused persons have discounted the bills. It is contended that A-1 to A-5 have committed offences under section 420/467/468/471 and 120B IPC. It is also contended that accused persons in conspiracy with branch officials have diverted and mis-utilized the funds with an intention not to make payment to the bank.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 116 of 336143. It is also contended that during trial, accused persons had failed to controvert the charges levelled against them and they have conspired with an intention to cheat the bank and it is also contended that conspiracies are generally hatched in secrecy and which can only be deduced from the facts and circumstances of the case as direct evidence of conspiracy is hardly available. It is also contended that bank officials have violated the post sanction condition for the grant of the credit facility by the Circle Office and hence committed an offence under section 13 of Prevention of Corruption Act. It is also contended that sufficient oral and documentary evidence and the chain of circumstances establishes the guilt of the accused persons beyond reasonable doubt and hence, accused persons are liable to be convicted for the offence charged against them and elaborated the submissions in line of the written arguments filed by the prosecution.
SUBMISSIONS ON BEHALF OF A-1, A-3 & A-4
144. It is contended by Shri Harsh Kumar Sharma, Ld. Counsel for A-1 (Harpreet Fashion), A-2 (Mohanjit Singh Mutneja) & A-4 (Ms. Harpreet Kaur Mutneja) that prosecution has failed to establish its case beyond reasonable doubt and no offence was committed by any of the accused persons and the dispute between the bank and the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 117 of 336 accused persons was given the colour of criminality, whereas the dispute is of civil nature. It is also contended that investigation has not been conducted in a proper manner as all the investigating officers have merely copied the material collected by the previous investigating officer and no analyses were made either in the charge sheet or in the case diary. It is also submitted that the investigating officers have merely collected the documents and recorded the statements of witnesses without making any proper analyses and the investigation was defective and the benefit of the defective investigation should go to to the accused person. It is also contended that even if the prosecution is taken at its best, it would be a mere case of irregularities without any criminality and, therefore, the accused persons are liable to be acquitted. It is also contended that bare perusal of the record would indicate that accused company and its sister concerns are dealing with the bank since 1993 and issue had arisen in the present case only during the period of 2003 to 2007. It is further contended that in order to constitute the offence for cheating, the intention to commit the cheating should be from the inception and since there was no intention to cheat, so no offence is made out against the accused. It is also contended that prosecution has failed to produce any evidence or material to indicate that there was any CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 118 of 336 conspiracy to cheat the bank by way of false purchase order and if such a purchase order was false then export would not have taken place. It is also contended that if there was any intention to cheat the bank since inception then borrower and guarantor would not have furnished the adequate collateral security, moveable and immovable property to the bank. It is also contended that accused company had taken the relevant insurance policy as reflected from the statement of account and also from the statement of the witnesses and regular payments were made by the accused company to the bank. It is also contended that financial facilities were granted by the Circle Office and Head Office and there is no evidence to indicate that there was any conspiracy to commit fraud or cheating. It is also contended that prosecution has failed to establish that accused Harpreet Kaur was looking after the day to day affairs of the company or that she had visited the bank in connection with the financial facilities. It is also contended that accused company was incorporated on 10.03.2004 with Mohanjit Singh Mutneja and Badal Juneja being its Directors, whereas Harpreet Kaur was not the director at the time of the commencement of the conspiracy in the year 2003. It is also contended that it is an admitted case of the prosecution that Harpreet Kaur had replaced Mohanjit Singh Mutneja as Director but it was a paper change as the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 119 of 336 activities of the accused company was being looked after by Mohanjit Singh Mutneja. It is also contended that it is an admitted case of the prosecution that fabricated airway bills for discounted in connivance with the bank officials were not furnished by Harpreet Kaur and therefore, Harpreet Kaur cannot be charged for the said offence. It is also contended that at the time of the search, photocopy of export bill alongwith altered copies on 15.06.2012 were not found from her home but from the accused Mohanjit Singh Mutneja. It is also contended that PW-20 Shri Sushil Kumar Singhal deposed that Harpreet Kaur Mutneja was neither the authorized signatory nor the signatory of A- 1/Harpreet Fashion and same establishes that she was only a sleeping director and was not involved in the affairs of the company and reference is made to Ex.PW20/DX-1. It is also contended that PW- 34/IO Sushil Kumar has admitted that when financial facilities were granted, Harpreet Kaur Mutneja was not the Director of the company and it is further contended that IO has admitted that altered airway bill for bank discounted was not furnished by accused Harpreet Kaur Mutneja and, thus, no offence under section 420/468 and 471 IPC is proved against Harpreet Kaur.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 120 of 336145. It is also contended that prosecution has failed to establish whether there there was any prohibition that the goods cannot be exported to the sister concern or in a firm controlled by an Indian. It is also contended that no evidence/material was brought on record to indicate that foreign firms were under the control of accused or his relatives. It is also contended that no investigation was conducted from ROC, Dubai by the investigating agency or by Dun and Bradstreet whose reports were relied by CBI to show that Directors of the company were related to accused company. It is also contended that vide Ex.PW5/1 and Ex.PW5/2, the Investigating Officer has admitted that accused Gunjit Singh Mutneja is not involved in any capacity with M/s Md. Essa Fashion Company. It is also contended that vide Ex.PW5/3 (D-37, page 383), it was admitted by the Investigating Officer that accused Gunjit Singh Mutneja has no association with M/s Al Mezeher Corner Trading (LLC). It is also contended that there was no inquiry from any of the importer companies with regard to their shareholding pattern and even no inquiries were made from Dubai Chamber of Commerce about the directorship and shareholding of the company incorporated in Dubai to know about the person controlling the company. It is also contended that the Dun & Bradstreet report was not proved in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 121 of 336 accordance with law as PW5 was not the author of reports vide Ex.PW5/1 to Ex.PW5/4 and he was also not personally aware about the contents of the reports. It is also contended that no certificate under section 65B of Indian Evidence Act was produced by the prosecution in support of Dub & Bradstreet report.
146. It is also contended that prosecution has failed to establish that funds were diverted to the sister concern to cheat the bank. It is also contended that no rules and regulations were brought into record by the prosecution that there was any prohibition in respect of group sale transaction from RBI or by the Bank. It is also contended that all the transactions made between A-1/Harpreet Fashion and sister concerns are duly reflected in the balance sheet. It is also contended that prosecution has not even alleged that no material was purchased from the sister concern or that no exports had taken place or rather, the funds have been transferred to the sister concern which is utilized for some other purpose and it is contended that without purchase of raw material, no export can take place and it is further submitted that perusal of the record indicates that till November 2006, the payments had been realized against the pending dues and the reason for purchase of raw goods from the sister concern is the availability of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 122 of 336 material at a cheaper price than in an open market and the same cannot be termed as diversion of the funds. It is also contended that in cross-examination of PW31, it has come on record that no investigation was conducted in respect of the transaction in between the group company from bank or borrower. It is also contended that no investigation was conducted from Sales Tax Department in respect of the sale of ready-made goods of group companies. It is also contended that balance sheet of the group companies would indicate that there was no diversion of fund except that materials were purchased. It is also contended that in so far as the allegations that airways bills were forged by altering the name of the consignee and its director and its bankers for the purposes of discounting the bills is patently baseless and devoid of merits as altered bills were not sent to CFSL and that there was no evidence or material to show that Harpreet Kaur had forged or fabricated or altered the bills. It is also contended that details in the airway bills are not filled by the exporter but by shipping agency and the exporter copy is provided for permitting the export. It is also contended that prosecution has failed to prove as to who had altered the details in the airway bill and no seal or typewriter has been seized from any of the accused person to show that any alteration/cutting is made by the accused persons. It is also CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 123 of 336 contended that prosecution has failed to establish as to who made the cutting/alteration in the airway bill. It is also contended that if there was any alteration in the airway bill, the foreign bank would not have accepted the bill and the payment would not have been received. It is also contended PW-17 deposed that as per RBI, the bill discounting can be done by the bank without having the name of foreign buyer/bank on airway bill and in the present case, the bill bears the initial and stamp of the concerned company which leaves no scope that alteration was done by the Air Cargo Company and not by the accused persons. It is also contended that PW31 in his cross- examination has admitted that no conclusion about the cutting on airway bill was given and no investigation was conducted whether the foreign bank had accepted the altered airway bill having cutting/alteration and it is also contended that the alteration in the airway bill was not put to any of the witness. It is also contended that PW34 in his cross-examination dated 28.09.2018 had admitted the details in the airway bills are filled by the Air Cargo Company which provided copy of the airway bill to the exporter after the export. It is also contended that the details filled in the shipping bill and the airway bill have to be the same and no cutting was found in the shipping bill and therefore, it leaves no scope that details were wrongly filled in the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 124 of 336 airway bill and the same does not match with the shipping bill and which was corrected by the Air Cargo Company and no investigation was conducted from the Cargo Company to confirm whether the seal and signature on the alleged altered bill belongs to them or not. It is also contended that no signature or seal of the company was taken to confirm from FSL that whether it belongs to the Air Cargo Company or not and no typewriter was seized to indicate as to who forged the same. It is also contended that prosecution has failed to establish that Afghanistan is a restricted country in which the export is not permitted and if Afghanistan was a restricted a restricted country then export would not have been allowed. It is also contended that there was no intention to cheat as collateral security was also provided by the borrower and guarantor. It is also contended that complaint on the basis of which the FIR was registered only relates to irregularities but no allegation in respect of fraud was made. It is also contended that PW7 has accepted that when recommendation for enhancement of sanction was made, no fraud was discovered. It is also contended that PW9 has accepted that if the bank had received the outstanding amount then no criminal proceedings would have been initiated and it reflects that the criminal proceedings were ostensibly initiated for the purposes of recovery of dues of the bank. It is contended that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 125 of 336 witnesses have deposed that decision to grant sanction and to further enhance the credit limit rests with the Circle Office and Head Office and the recommendation made by the branch is not binding. It is also submitted that the financial facilities were granted after taking independent decision by the Circle Office and Head Office and therefore, the charge of conspiracy against bank officials at Parliament Street Branch does not make out. It is also contended that payments after 2006 were not realized as the value of Indian Rupee had enhanced, resulting into loss to the borrower and the importer was not ready to re-negotiate the price, rather insisting upon supply of material on the same rate which was not profitable or viable and the borrower had refused to send further goods and in retaliation payments were stopped. It is also contended that PW-36 in his cross-examination dated 09.08.2018 stated that if there was any fraud or collusion between the bank officials then he would not have recommended the proposal dated 22.12.2006 of Rs.200 Lacs to the accused company. It is also contended that on 22.12.2006 when proposal for adhoc sanction limit was made, there were no overdues. It is also contended that PW36 S.V. Sudarshan has accepted in his cross-examination that bank can allow the discounting of the bills even if the earlier bills are overdue and usance period has not expired. It is also contended that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 126 of 336 PW36 further admitted in his cross-examination that had there would have been any fraud or cheating by the borrower in collusion of the bank officials, the Head office would not have sanctioned the PC limit for Rs.200 Lacs and FDB limit up to 280 Lacs on 21.03.2007. It is also contended that he has further admitted in his cross-examination that had there would have been any fraud or cheating by the borrower in collusion with the bank officials, he would not have made a recommendation on 19.09.2006 for enhancement of usance period to 180 days. It is also contended that PW36 further admitted in his cross-examination that had there would have been any fraud or cheating by the borrower in collusion of the bank officials, the ratification note dated 21.12.2006 would not have been ratified by the Circle Office vide its letter dated 09.02.2007.
147. It is also contended that PW37 Mahesh Kumar Singh has stated in his cross-examination that adequate security was provided to the bank against the PC limit and bill discounting facility. It is also contended that letter vide Ex.PW15/1 would indicates that premium was paid up to the month of June 2007 and even if it is assumed that premium was not paid then prosecution should have established that premium for insurance was not received by examining the relevant CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 127 of 336 witness and letter Ex.PW15/1 (D-5) is also not very clear about the nature of default. It is also contended that Section 415 illustration 'g' is squarely applicable in the present case and there were running transactions between the borrower and the bank. Collateral Securities as well as the primary securities were furnished to the bank and borrowers have also furnished their personal guarantee. A specific contention is raised to the effect that vide Ex.PW37/7 and Ex.PW37/8, no conditions were put to the effect that buyerwise policy is to be taken by the borrower. Ld. Counsel has also invited the attention of the court to Ex.PW9/A in which no allegations were made that accused persons have cheated the bank. It is also contended that the cross-examination of the IO/PW34 demolishes the case of the prosecution.
148. Ld. Counsel for A-1, A-2 & A-4 has placed reliance on the judgments, (1) Anil Kumar Bose Vs. State of Bihar, (1974) 4 SCC 616 (Para 11, 12, 15); (2) C. Chenga Reddy & Ors. Vs. State of A.P., (1996) 10 SCC 193 (Para 22); (3) A. Sivaprakash Vs. State of Kerala, (2016) 12 SCC 273 (Para 17 to 21) and (4) Harshit Aggarwal & Ors. Vs. Union of India & Ors., (2021) 2 SCC 710 (Para 10).
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 128 of 336SUBMISSIONS ON BEHALF OF A-3 (GUNJIT SINGH MUTNEJA
149. Shri Rohit Priya Ranjan, Ld. Counsel for A-3 had advanced the submissions mirroring the submissions on behalf of A-1, A-2 and A-4 with modification that A-3 was not the Director of the company when financial facilities were sanctioned and it is an admitted case of the prosecution that A-3 had not furnished the altered bill for discounting. It is also contended that no offence was committed by A-3. It is also contended that witnesses from Sales Tax Department were examined which proved that there was sale and purchase of raw material/readymade goods between the group companies. It is also contended that the prosecution has to establish its case beyond reasonable doubt and in the present case, in the name of investigation, only statements were recorded without any analysis and co-relation. It is also contended that the charge sheet and on the basis of which the charge was framed is not sustainable by the mere fact that the prosecution has alleged that there was a conspiracy since 2003 to 2007 when admittedly, the credit limits were applied in October 2004. It is also contended that merely a person is opening an account cannot be made basis for construing the conspiracy when the total credit is about Rs.6 crores and there is no question of any conspiracy when the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 129 of 336 security offered by the borrower is more than the credit limit. It is also contended that since it was the Circle Office which granted the credit facility so there is no question of cheating on the part of the branch or by the private accused persons. It is also contended that had there was any interse conspiracy between the private accused persons or the public servant then private accused persons would not have made payment qua the loan amount and it is also contended that till March 2007, the payment etc. were being made by the borrower to the bank and it is also contended that PW24 had stated that the accounts were running satisfactorily and PW24 while referring to Ex.PW19/DX-4 had exonerated the present accused Gunjit Singh Mutneja. It is also contended by the Ld. Counsel that mere fact that some dues were payable and if the borrower for the reason beyond his control does not make payment, the charge of cheating does not survive. It is also contended that prosecution has never contended that exports had not taken place or no manufacturing activity was undertaken when packing credit was granted to A-1/Harpreet Fashion. It is also contended that no efforts were made to ascertain from any authority that A-3 Gunjit Singh Mutneja was associated with importer company and reference was made to the cross-examination of PW-34. It is also contended that in the present case, prosecution has merely CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 130 of 336 exhibited certain documents without proving the contents of the documents. It is also contended that three investigating officers did not make any independent investigations either from D&B and ECGC. It is also contended that there is no evidence that accused persons have committed the offence of forgery and cheating. It is also contended that number of the prosecution witnesses had testified to the effect that payment etc. were made to Bank. It is also contended that prosecution has failed to prove its case beyond reasonable doubt.
150. Ld. Counsel has placed reliance on the judgments, (1) State of Uttarakhand Vs. Jarnail Singh (SLP (Crl.) No. 1651/2015); (2) Mayaben Sundarbhai Kodnani Vs. State of Gujrat Criminal Appeal No. 1713/2012; (3) A. Siva Prakash Vs. State of Kerala, (Crl. Appeal No. 131/2007); (4) R. Sai Bharathi Vs. J. Jaylalitha & Ors., 2004 (2) SCC 9; (5) C.K. Jaffer Sharief Vs. State Through CBI, 2013 (1) SCC 205; (6) C. Chenga Reddy & Ors. Vs. State of AP, 1996 (10) SCC 193; (7) Hriday Ranjan Prasad Verma & Ors. Vs. State of Bihar & Ors., 2000 (4) SCC 168; (8) Alpic Finance Ltd. Vs. P. Sadasivan & Ors., 2010 (3) SCC 513; (9) Uma Shankar Vs. State of Bihar, 2005 (10) SCC 336; (10) Dalip Kaur & Ors. Vs. Jagnar Singh & Ors., 2009 (9) SCC 184; (11) Anil Kohli & Ors. Vs. State NCT of Delhi & Ors., CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 131 of 336 2002 (95) DLT 173; (12) Alok Ranjan & Ors. Vs. CBI, (Delhi High Court) Crl. M.C. No. 456/2012; (13) Veer Prakash Sharma Vs. Anil Kumar Aggarwal, Crl. Appeal No. 980/2007; (14) Sunil Bharti Mittal Vs. CBI, 2015 (4) SCC 609; (15) Arjun Pandit Rao Khotkar Vs. Kailash Kashan Rao Gorantyal, (2020) SCC Online (SC) 571.
SUBMISSIONS ON BEHALF OF A-5 (HARMENDRA)
151. It is contended by Shri K.K. Sharma, Ld. Counsel for A-5 that A-5 has been falsely implicated in the present case. It is also contended that no evidence was brought into record to show that there was any transaction between A-5 Harmendra Singh with any of the accused persons. It is also contended that no document was produced to indicate that he had made any application for grant of any credit facility in the bank or that he had misappropriated funds of the bank. It is also contended that A-5 did not have any role/designation in any company ie. Manjeet Fotwear, Harpreet Fashion, Ginna World and G.M. Exim. It is also contended that no material was placed on record by the prosecution that A-5 was working as a Director in M/s Md. Essa Fashion. It is also contended that no offence is made out against the present accused and it is also contended that Dun & Bradstreet report on the basis of which the accused was implicated in the present CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 132 of 336 case was not proved by the prosecution and even otherwise the report has no relevance to establish the allegations against the A-5.
SUBMISSIONS ON BEHALF OF A-6 RAMAN KUMAR AGGARWAL
152. It is contended by Shri M.K. Gupta, Ld. Counsel for A-6 that A- 6 was working in branch from 22.05.2004 to 20.07.2006 as AGM Incharge. It is contended that prosecution has not led any evidence to the effect that prior to joining the Branch, the present accused was aware about the accounts of sister concern when he forwarded the proposal of loan of A-1 to the Circle Office. It is also contended that investigating officer/PW34 has accepted that Raman Kumar did not work at Chandni Chowk Branch and therefore, A-6 cannot be aware about the conduct of the sister concern at Chandni Chowk Branch. It is also contended that group concern was provided with the credit facilities even prior to 2004 and reference is made to the testimony of PW4. It is also contended that the proposal for credit facility had emanated from the Parliament Street for the reason that it has better expertise and infrastructure to handle the proposal as the branch is headed by Asstt. General Manager. It is also contended that when a proposal is made to the branch, then it is dealt by different sections, CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 133 of 336 managed by Managers and Sr. Managers over seeing the proposal. It is also contended that Advance Section handles the credit proposal and after analysing it, the same is placed before the Sr. Manager and further the proposal is put before the Asstt. General Manager of the branch. The Advance Section used to deal with documentation and the compliance of terms and conditions and other related work to the advance portfolios and it is contended that proposal of Harpreet Fashion was dealt by Manager (A-8) and the proposal was put before Sr. Manager Shri Mahesh Kumar. A-6 Raman Kumar Agarwal submitted the proposal to the Circle Office as per the extant policy since the proposal for the grant of credit facilities were in excess of the delegated power of the branch, the proposal was submitted to the Circle Office. The Circle Office makes its own assessment from its own independent department. It is also contended that the Circle Office being the sanctioning authority could admit or deny the proposal on merit. It is also contended that the Circle Office has assessed the proposal on merit at their end independently and accorded sanction. It is also contended that Shri Rakesh Gupta (PW22) and Shri Prakash P. Mallya (PW14) deposed that proposal was sanctioned by the Circle Office after considering all the aspects/irregularities in the accounts of group concerns at Chandni CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 134 of 336 Chowk branch. It is also contended that the Circle Office is the Sanctioning Authority for both the branches i.e. Parliament Street and Chandni Chowk. It is also contended that PW-14 and PW-22 have explained in detail about the consideration of the proposal and there was no irregularity in granting the credit facilities to the accused company. It is also contended that sanctioning authority was aware about the credit or financial position of the sister concern at Chandni Chowk and therefore, the branch official cannot be blamed in respect of the financial condition of the borrower and the sister concern. It is further contended that two conditions imposed prior to the release of limits to Harpreet Fashion were complied by the branch. It is contended that despite the fact that there were compliances by the branch and more specifically by A-6, the investigating agency has failed to place on record the requisite documents and reference is made to Ex.PW37/DX-4 and these documents were supplied after application under section 91 Cr.P.C. of the accused was allowed. It is also contended that the factum in respect of the compliance was narrated in the evidence of PW19, PW24, PW32 and PW37. It is also contended that prior to the release, it was ensured that there was no overdue in the name of the sister concern and reference is made to Ex.PW22/DX-5 which was written by PW37 and reference is made to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 135 of 336 the testimony of PW37 that over dues of the sister concern were cleared and the term loan of Manjit Footwear were rephased and it is also contended that the said fact was also admitted by PW34 that no confirmation was made from Chandni Chowk Branch in this regard.
153. It is also contended that the limits had expired on 12.01.2006 and was extended up to 12.04.2006 as per the settled credit policy and the second extension was sought from the competent authority and the circle authority had permitted the same and the reference is made to testimony of PW-22 and PW-37. It is also contended that PW-19 who had prepared the study report has also deposed that there were no irregularities in renewing the limits. It is also contended that till A-6 Raman Kumar Aggarwal was posted, there was no overdues and A-6 was relieved and transferred from duty on 20.07.2006.
154. It is also contended that usance period of FBE was consistently recommended by all the successors of accused and it is also contended that the renewal of the credit facility was also ratified by the branch and the said fact was also admitted by the investigating officer/PW-34 in his deposition. It is also submitted that the renewal proposal was received by Circle office on 24.07.2006 and all the queries were dealt CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 136 of 336 by his previous successor and the limit was renewed in March 2007. It is also contended that usance period of 180 days was not recommended by the accused but by his successor. It is also contended that the case of the prosecution was that letter, balance sheet, stock statements were submitted without any authority by A- 1/Harpreet Fashion and it is submitted that no evidence was led to establish the same. It is also contended that Shri Badal Juneja (PW-
35) had admitted his signatures on the balance sheet. It is also contended that the board resolution dated 01.09.2004 has authorized Harpreet Kaur Mutneja to operate the bank account and further activities and it is further submitted that vide Ex.PW21/29, Mohanjit Singh Mutneja and Badal Juneja were the constituted attornies to operate the account and the said fact was admitted in the cross- examination and it is also contended that FSL report corroborates the same, meaning thereby that letters, balance sheets, stock statements were duly submitted by authorized signatory.
155. It is also contended that purpose of packing credit was to provide funds for preparation of goods for export and after the goods are exported and the bills are raised by the parties on the importer, the bills are discounted under Bill Discounting (FBE) and the liability of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 137 of 336 PC is recovered. The FBE gets recovered when payment is received from the overseas importers, realization of bills and receipt of payment discounting. It is also contended that till A-6 was incharge of the bank, neither FBE nor PC remained outstanding. It is once again reiterated that in an export oriented facilities, if PC is cleared out of proceeds of the export bills i.e. FBF/FDB and the FBE/FDB liability is cleared by realization of the export bills, it means that end use of funds is ensured and reference is made to testimony of PW9, PW22 and PW34. It is also contended that charge of diversion of funds against A-6 is not established as prosecution has relied upon the diversion of funds by making reference to Ex.PW20/1 to Ex.PW- 20/29 i.e. 29 cheques and out of which number of cheques pertains to the period subsequent to the tenure of A-6. It is also contended that post July 2006 to September 2007, the concerned branch was managed by other officials who were cited as prosecution witnesses and the role of the officials from 2004 to 2007 was not bifurcated by the investigating agency. It is further pitched that transaction between group concern are not barred and are to be disclosed in the balance sheet and the same was admitted by PW-37 in his evidence that transactions are not barred but disclosure has to be made under Income Tax Act. It is also contended that at the time of considering CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 138 of 336 the proposal for grant/renewal of limit, the sanctioning authority was having the balance sheet and other documents and it has never recorded that inter group transaction was an irregularity or diversion.
156. It is also contended that A-6 has ensured 3% cut back for each bill. It is also contended that proper collateral security was taken by the bank and reference is made to Ex.PW22/DX-1. It is also contended that even opinion letters were obtained from the branch and reference is made to Ex.PW19/DX-1. It is also contended that policy which was issued by ECGC had taken into consideration, the interse relationship between foreign buyer and exporter.
157. It is also contended that an undertaking was obtained from the company to raise equity to Rs.200 Lakhs by 31.03.2005 was relaxed by the Circle office vide letter dated 09.03.2005 vide Ex.PW32/DX-4. It is also contended that the undertaking was obtained in compliance of the condition which was confirmed by PW37. It is also contended that PW24 had stated that funds by way of borrowing do not convert into capital were available in the working system of the company. It is also contended that allegations with respect to the adjustment of two overdues discounted bills after release of fresh PC against banking CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 139 of 336 norm against A-6 is not sustained as PW9 had stated that adjustment of over dues bills by release of fresh PC was made on 22.12.2016 in the tenure of PW-36 Shri S.V. Sudarshan. It is also contended that prosecution witnesses have deposed that in normal case, the overdue bills were recovered by granting packing credit and subsequently the bills were realized from the importers in foreign currency. Reference is made to the testimony of PW19 and PW24. It is also contended that adjustment of overdue bills from PC has in no way affected the interest of the bank or resulted in increase in exposure to the borrower. The end use of the funds is ensured once the FBE gets realized on receipt of payment from the overseas importers. It is also contended that allegations that the previous bill overdue new bill of the same buyer should not be discounted. In this regard, it is specific submission is that 11 outstanding FBE pertains to the period subsequent to the tenure of A-6. It is also contended that clearance of the altered bills had happened subsequent to the tenure of A-6. It is also contended that investigation in the present case was faulty and defective and investigating officer has failed to analyse the role of branch officials vis-a-vis key responsibility area of the officials of the branch and blindly made allegations against A-6. It is also contended that role of officials from circle office and head office were not CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 140 of 336 examined and no investigation was conducted in this regard. It is also contended that except for collecting the documents, no analyses was made by any investigating officers. Reference is also made to the testimony of PW17. It is also contended that bank officials are government servants as Canara Bank is a government concern and sanction under section 197 Cr.P.C. for offences under Cr.P.C. are required to be taken. It is also contended that sanction is necessary for retired government servants. It is also contended that no offence under section PC Act is made out against A-6. It is also contended that A-6 has been falsely implicated in the present case on the basis of defective investigation.
SUBMISSIONS ON BEHALF OF A-7 (DARWAN SINGH MEHTA)
158. It is contended by Shri M.K. Gupta, Ld. Counsel for A-7 that investigating officers failed to analyse the various responsibilities and the role of bank officials and rather relied upon the study report made by the bank. It is also contended that packing credit provides funds for preparation of goods for export, once the goods are exported and bills are raised by the party on the importer, the bills are discounted under Bill Discounting and the liability of PC is recovered and same CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 141 of 336 ensures the end use of the funds and on that basis it is submitted that A-7 was working in Foreign Department and the recovery of the overdue bills from PC was permitted by AGM Shri S.V. Sudarshan. Reference is made to Ex.PW21/4. It is also contended that PW11 has deposed that in Afghanistan was a restricted country then export of the goods to Afghanistan would have not been permitted and Custom would not have cleared the payment of the same. It is also contended that in the internal investigation in which it is clearly disclosed that the shipment is to be made to buyer in Afghanistan and Kazakistan. It is also contended that the allegations of change in the destination by altering the airway bill is baseless as there was no alteration in the place of destination and reference is made to Ex.PW11/1 and Ex.PW10/1. It is also contended that PW17 has stated in his examination-in-chief that if there is any alteration/cutting in the airway bill, then same is required to be initialled and authenticated and as those documents were initialled and signed so it cannot be said that so called altered bills were knowingly passed despite the same being forged in nature. It is also contended that once a bills are tendered by the borrower for discounting for which some PC is outstanding, the same have to be discounted. It is also contended that various decisions in respect of the clearance of discounting bill and packing CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 142 of 336 credit or if there is any discrepancy in the export bill and if same exceed the limit, only Head of branch can pass such an order and in that regard, it is submitted that at the relevant point of time, Shri Athimoolan and S.V. Sudrarshan were incharge of the bank and the present accused had presented the same to his superiors for instructions. It is also contended that altered airway bills were brought to the notice of superior vide office notes Ex.PW36/DX-2 to Ex.PW36/DX-4 by which PW-36 had permitted the discounting. It is also admitted that the bill dated 18.12.2006 and 21.12.2006 of Rs.64.94 Lacs and Rs.30.27 lacs respectively were allowed by the branch and obtained ratification from the circle office and it is further contended by the Ld. Counsel for A-7 that PW23 who was examined by the prosecution has deposed that his report pertains to the acts done by circle office and head office. It is also contended that as per memorandum of article of association, the company was permitted to export in number of activities. It is also contended that investigating officers were not aware about the operating guidelines pertaining to export in the banking industries and the foreign transactions. It is contended that faulty investigation was conducted in the present case and A-7 is liable to be acquitted of the charges leveled.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 143 of 336SUBMISSIONS ON BEHALF OF A-8 (T.G. PURUSHOTHAMAN)
159. It is contended by Shri Singh, Ld. Counsel for A-8 that investigating officer has failed to take note of KRA (Key Responsibility Area) of different officials of the bank and also suppressed the power of branch officer for renewal and extension. It is also contended that merely making a proposal vide Ex.PW37/6 after considering the application vide Ex.PW37/DX-1 (D-3), no criminality can be fastened on the accused as the proposal was forwarded by A-6. It is also contended that mere forwarding the proposal in expeditious manner would not make it a criminal liability. It is also contended that nothing has come on record as to when the proposal was prepared or it was processed on the same day. It is also contended that as per the record, the proposal was received at Branch on 12.10.2004 and was prepared on 22.10.2004 and the same was further signed by PW37 on 26.10.2004 and thereafter it was forwarded to A-6 and hence, it cannot be said that proposal was prepared in a single day. It is also contended that it is not within the domain of A-8 to reject any proposal and the proposal can only be rejected by the next higher authority. Reference is made to circular no. 112/2004. It is also contended that it has come in the deposition of PW6 that the person CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 144 of 336 who was handling the account of the parties or the person who used to clear the cheques could state about the diversion of the funds and the current account department was responsible for monitoring the end use of the funds and not the credit department. It is submitted that various documents such as board resolution of the company dated 01.09.2004 Ex.PW21/29(Colly) authorised A-4 to operate the account, deposit/withdraw cash, sign cheques, receive and deposit drafts and bonds on behalf of A-1 were made by duly authorized person. It is also contended that inspection of godown stock was not the responsibility of A-8 and reference is made to testimony of PW19.
160. It is also contended that the responsibility for obtaining ECGC was on forex department and not on A-8 who was the Manager (Credit) and the monitoring of the export oriented account was on forex department and not on the credit department. It is also contended that the action of A-8 was constantly reviewed and re- evaluated by the officials of branch office, circle office and head office who had access to all the accounts of A-1/Harpreet Fashion and sister concerns. It is also contended that since each and every action of A-8 was ratified by the circle office, A-8 is not responsible for any loss to the bank. It is also contended that as per applicable credit CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 145 of 336 policy, once limits are sanctioned a mid term review of account was conducted by the branch office and forwarded to the circle office and it is submitted that the mid term review dated 25.07.2005 vide Ex.PW37/DX-3 has enumerated both positive and negative features of the account and the same was signed by A-8, A-6 and PW37 and which was forwarded to the circle office. It is also contended that for the similar act, A-8 and A-6 were made accused, whereas PW37 was made a witness. It is also contended that after the circle office had sanctioned the limit and thereafter A-1 released the limit on 13.05.2005. It is also contended that the CBI alleged that even though credit limits of A-1 were set to expire in January 2006, the Branch granted an extension for three months to A1. The CBI failed to note that the Branch was empowered by Circular 112/2004 (Part of Ex.PW21/DX-1) to grant an extension of three months. It is submitted that PW-34 in his statement, recorded on 28.09.2018 stated that the tenability of limits can be extended twice for a period of three months each without any regular renewal. It is also contended that even otherwise ratification was also obtained and the Head Office had ratified the acts of the Branch. It is also contended that renewal proposal was submitted as it was directed by the Circle Office and pursuant to which a renewal proposal vide Ex.PW37/9 was placed CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 146 of 336 before the Branch by A-1 and it is also contended that the renewal proposal was prepared by one officer and was verified by A-8 and PW37, thereafter it was forwarded to the circle office by A-6. It is also contended that similarly placed persons discharging similar duty were made as witness, whereas A-8 was made as an accused. It is also contended that conditions were relaxed by the Circle Office vide Ex.PW24/DX-6 (D-5). It is also contended that the CBI had alleged that despite irregularities in the account of Harpreet Fashion, the renewal proposal was forwarded by A-8 and this allegation was without considering the mid term review dated 25.07.2005 vide Ex.PW37/DX-3 (D-3) in which the branch has updated the circle office about the status of account of A-1. Reference is made to Ex.PW22/DX-2 and Ex.PW22/DX-3 (D-2 & D-3). It is also contended that renewal limit was permitted by Executive Director Shri Alok Mishra on 21.03.2007 as deposed by PW-9. It is also contended that prosecution has failed to establish as to what specific condition and the responsibility was not fulfilled by A-2 to bring home the charge under section 13(1)(d) of PC Act against the A-8. It is also contended that prior approval for granting fresh advance from ECGC was called on 19.07.2007. It is also contended that there were no allegations that A-8 has forged any document or electronic record and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 147 of 336 all the documents prepared by A-8 were ratified by the officers at the Circle Office and Head Office.
161. Ld. counsel for A-8 has placed reliance on the judgments, Lennart Schlusser v. Directorate of Enforcement [(1970) 1 SCC 152], Vijayan v. State of Kerala [(1993) 3 SCC 54], CBI v. K Narayana Rao [(2012) 9 SCC 512], Jahar Lal Das v. State of Orissa [(1991) 3 SCC 27], Prem Chand v. State [AIR 1953 All 381], SVL Murthy v. State [(2009) 6 SCC 77], ARCI and Ors. v. Nimra Cerglass Technics Pvt. Ltd. and Anr. [(2016) 1 SCC 348], A. Jayaram and Ors. v. State of Andhra Pradesh [AIR 1995 SCC 2128], CK Jaffer Sharief v. State (Through CBI) [2013 (1) SCC 205], SVL Murthy v. State [(2009) 6 SCC 77]; Stephen Seneviratne v. King [(1936) 44 LW 661] and Tomsao Bruno Vs. State of UP (2015) 1 SCC 498.
SUBMISSIONS ON BEHALF OF A-9 (C.T. RAMA KUMAR)
162. It is contended by Shri M.K. Gupta, Ld. Counsel for A-9 that A- 9 was Scale-I Officer and he had no delegated power to discount any bill having alteration/discrepancy or rejection as the said power rest with the Branch Incharge (AGM) and the reference is made to testimony of PW21, PW34 and PW-37. Reference is also made to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 148 of 336 Ex.PW45/DX-1 as relied in CBI Vs. Seema Mutneja's case. It is also contended that Import Section used to handle the adjustment of export bill purchase discounted and negotiated. Reference is also made to Ex.PW37/DX-7 i.e. Key Responsibility Area. Reference is also made to testimony of PW24 that adjustment of the export bill was handled by Forex Department which was maintained by Shri D.K. Sharma. Reference is also made to testimony of PW37 exonerating A-9 from any wrong doing. It is further contended that there is no material available on record to indicate that A-9 had prepared any any note which was put for approval of the higher authority. It is further contended that PW36 Shri S.V. Sudarshan has stated that discount and modification were permitted by him as per the recommendation made by the Section and it is also contended that bills dated 18.12.2006 and 21.12.2006 of Rs.64.94 lacs and 30.27 lacs were allowed by the Branch and the same was ratified by the Circle Office vide Ex.PW24/DX-5 (D-5, page 256). It is further contended that the allegations that accused has failed to monitor the diversion and proper utilization of packing credit is without any basis and justification as the bank official who handles the accounts of the parties and clears the cheques would ensure the end use of packing credit and reference is made to the testimonies of PW6, PW24 and PW37. It is further CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 149 of 336 contended that PW24 has stated that the sanction renewal and enhancement were made by Circle Office and Head Office from time to time and branch has nothing to do with the same.
CHARGES AGAINST THE RESPECTIVE ACCUSED PERSONS VIDE CHARGES DATED 26.08.2017.
A-1 Harpreet Fashion Pvt. Ltd.
163. Common charge of the conspiracy under section 120-B IPC to cheat the bank to the tune of Rs.4.80 crores and in furtherance of the said conspiracy, Mohanjit Singh Mutneja and Harpreet Kaur Mutneja opened an account for the credit facility at Canara Bank, Parliament Street Branch, New Delhi.
164. A substantive charge under section 420 IPC was also framed against A-1/Harpreet Fashion on the premise that in pursuance of the conspiracy, it obtained credit facility and after the grant of sanction, the funds were diverted to Family Controlled Firms and the purchase orders were obtained from the foreign firms and the relatives of Directors were at Dubai. The forged airway bills were submitted after the shipment of goods so as to seek the bill discounting from the Parliament Street Branch, New Delhi and the goods were exported to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 150 of 336 a restricted country without obtaining any permission and causing a loss to the tune of Rs.4.80 crores.
A-2 Mohanjit Singh Mutneja
165. Mohanjit Singh Mutneja applied for the credit facility, altered the bill no. 1098D253352-06 to induce bank to discount the bill and the funds were diverted and utilized for the purpose other than it was granted and funds were diverted to the family controlled firms and exports were made to a restricted country, thereby causing a loss to Parliament Street Branch, New Delhi. He was charged for committing offences under sections 420, 467, 468, 471 IPC apart from charge under section 120B IPC.
166. It was alleged that A-3 Gunjit Singh Mutneja was authorised signatory and Director of Al Mezhar and Greenbelt Ready-made and in pursuance of the criminal conspiracy, he gave purchase orders from his family controlled firm at Dubai and submitted forged airway bill no. 1098D253420-06. He was charged for committing offences under sections 420, 467, 468, 471 IPC apart from charge under section 120B IPC.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 151 of 336A-4 Harpreet Kaur
167. She had obtained the purchase order from a family control firm at Dubai for supply of readymade garments and submitted a forged and fabricated airway bill no. 1098D253404-06. She was charged for committing offences under sections 420, 467, 468, 471 IPC apart from charge under section 120B IPC.
A-5 Harmendra Singh
168. It was alleged that he was director of M/s Essa Fashion Pvt. Ltd. and in pursuance of the criminal conspiracy, he gave purchase order from his family controlled firm within an intention to help co-accused A-1/Harpreet Fashion to export the goods to a restricted country with an intention to induce Parliamnent Street Branch, New Delhi to discount the bill. He was charged for committing offences under sections 420 IPC apart from the charge under section 120B IPC.
A-6 Raman Kumar Aggarwal
169. By corrupt or illegal means and by abusing his official position, A-6 forwarded the proposal for the grant of credit facility to A-1/Harpreet Fashion dated 26.10.2004 vide Ex.PW-37/6 (Colly) to the Circle Office. A-6 had released the credit limit on 13.05.2005 in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 152 of 336 favour of A-1/Harpreet Fashion in violation of the sanction memorandum vide Ex.PW-37/7.
170. It was also alleged that after about six months from the date of the expiry of the limit, A-6 had dishonestly forwarded the renewal proposal for grant of credit limit despite irregularities in the operation of the account of A-1/Harpreet Fashion. It is also alleged that A-6 had failed to take note or pointed out that letters, balance sheets, stock statements were submitted without any authority by A-1/Harpreet Fashion to the Bank.
171. It is further alleged that A-6 had knowledge about the irregular operation of account, heavy overdue position of the group account as A-6 had worked at Canara Bank, Agra and Chandni Chowk Branch, New Delhi and yet he made the recommendations for the grant of credit facility to A-1/Harpreet Fashion. It is further alleged that A-6 did not obtain clearance from Canara Bank, Chandni Chowk Branch, Delhi prior to release of funds as mandated under the terms of sanction and A-6 had failed to monitor the diversion and proper utilization of packing credit and thus, he committed offence under section 13 of the Prevention of Corruption Act. He was charged for CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 153 of 336 committing offences under sections 120B r/w Sections 420/467/468/471 IPC and section 13(1)(d) of Prevention of Corruption Act, 1988.
A-7 Darwan Singh Mehta
172. The charge against A-7/Darwan Singh Mehta is to the effect that he cleared six overdue bills worth Rs.196.04 lacs through fresh PC in violation of the PC norms for procurement of the goods against the order received by A-1/Harpreet Fashion. The PC limit was not to be used for the adjustment of the overdue bills and it was further alleged that A-7 did not ensure end use of the fund.
173. Dishonest and fraudulent release of fund and failure to monitor the diversion and proper utilization of packing credit and thus, he committed offence under section 13 of the Prevention of Corruption Act. He was charged for committing offences under sections 120B r/w Sections 420/467/468/471 IPC and section 13(1)(d) of Prevention of Corruption Act, 1988.
A-8 T.G. Purushotaman
174. A-8 T.G. Purushotaman had fraudulently prepared the proposal on 26.10.2004 to the Circle Office and released the limit without CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 154 of 336 following the conditions as stipulated in the sanction letter. It was also alleged that on 06.07.2006 A-8 forwarded renewal proposal despite irregularities in the account of the A-1/Harpreet Fashion. It is also alleged that A-8 also did not check as to who was the proper authority who could have submitted documents on behalf of A-1/Harpreet Fashion. It was also alleged that A-8 has fraudulently and by corrupt means released the funds and failed to monitor the diversion and proper utilization of packing credit and thus, he committed offence under section 13 of the Prevention of Corruption Act. He was charged for committing offences under sections 120B r/w Sections 420/467/468/471 IPC and section 13(1)(d) of Prevention of Corruption Act, 1988.
A-9 C.T. Ramakumar
175. A-9 C.T. Ramakumar did not properly scrutinized the bills at the time of discounting of airway bills/altered bills even when the finish products were not ready-made garments and the products were not produced by A-1/Harpreet Fashion. A-9 adjusted the discounted bills through payment received from Exchange House in violation of RBI circular no. AP (DIR Series) 28 which restricts receipts of more than Rs. Two lacs from each transactions. It is also alleged that A-9 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 155 of 336 discounted the overdue bills despite the fact that previous bills were overdue. It is also alleged that A-9 by corrupt and illegal means released the funds and failed to monitor the diversion and proper utilization of packing credits and thus, he committed offence under section 13 of the Prevention of Corruption Act. He was charged for committing offences under sections 120B r/w Sections 420/467/468/471 IPC and section 13(1)(d) of Prevention of Corruption Act, 1988.
ANALYSIS & FINDINGS
176. The prosecution case could be broadly compartmentalized to fix the role of the accused persons in the commission of the offences as alleged in the charge sheet. The prosecution seeks to invoke the criminal charges on account of the illegalities committed by the accused persons. The illegalities are alleged to have taken the colour of criminality in the following stages :
i. A broader conspiracy in between the public servants and private persons to cheat Canara Bank of Rs.4.80 Crores and in pursuance of the broader conspiracy, various substantive offences were committed by the accused persons.
ii. Illegality in making recommendation for the credit proposal of A-1 by public servants in conspiracy with private persons to the Circle Office.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 156 of 336
iii. The act of bank officials whereby they failed to discharge their public duty by permitting the discounting of bills and granting packing credit without taking note of its end use and by discounting the forged and fabricated airway bills and also not monitoring the diversion of fund by private persons and flouting various circulars and guidelines of the bank failure to comply with the conditions stipulated in the Sanction Memorandum.
iv. The act of private persons by diverting the credit limit to their sister concerns.
v. The act of private persons by submitting forged and fabricated airway bills to seek discounting of bill and other acts thereby causing cheating to the bank of Rs.4.80 Crores.
177. It is the case of the prosecution that proposal for the grant of credit facility, release of the limits after the sanction i.e. packing credit limit and passing of Forex Bills for the purpose of discounting by different bank officials in total dis-regard to the banking norms and due to which the public servants i.e. bank officials committed offence under section 13 of the Prevention of Corruption Act. It is also alleged that illegalities were committed by different public servants in pursuance to the criminal conspiracy with private accused persons.
178. A-6 to A-9 were the public servants at the time of alleged commission of offences and were working in different capacities at CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 157 of 336 Parliament Street Branch. The assertion on behalf of A-6 to A-9 in respect of the prosecution sanction are two folds, (i) Prosecution sanction under section 197 Cr.P.C. was not obtained and (ii) defects/irregularities in respect of the prosecution sanction under section 19 of Prevention of Corruption Act 1988.
Sanction under Section 197 CrPc
179. I will first take up the issue of prosecution sanction under section 197 Cr.P.C. It is also contended in the written submission that prosecution has not obtained sanction under section 197 Cr.P.C. from the competent authority in respect of the offences under Indian Penal Code.
180. The question is whether prosecution sanction under section 197 Cr.P.C. is required for A-6 to A-9 who were bank employees. In order to decide this issue, it would be relevant to refer to judgment of A. Sreeniwasa Reddy Vs. Rakesh Sharma & Anr., (2023) INSC 682 in which issue before the Hon'ble Supreme Court was whether an Assistant General Manager, State Bank of India is removable from his office save by or with the sanction of the State Government so as to make Section 197 of the Cr.P.C. applicable. Hon'ble Apex Court CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 158 of 336 after considering the provisions of Section 197 Cr.P.C. and plethora of judgments i.e. K. Chaudhary Prasad Vs. Smt. J. Vanalatha Devi & Ors. reported in (1987) 2 SCC 52 in which Section 197 Cr.P.C. was relied and it was observed that :
"6. It is very clear from this provision that this Section is attracted only in cases where the public servant is such who is not removable from his office save by or with the sanction of the Government. It is not disputed that the appellant is not holding a post where he could not be re- moved from service except by or with the sanction of the Government. In this view of the matter even if it is held that appellant is a public servant still provisions of Section 197 are not attracted at all."
181. The above referred judgment was also reiterated in S.K. Miglani Vs. State (NCT of Delhi), (2019) 6 SCC 111 and in paragraph no. 49 of A. Sreeniwasa Reddy (Supra), the Hon'ble Apex Court was pleased to observe:-
"49. It is pertinent to note that the banking sector being governed by the Reserve Bank of India and considered as a limb of the State under Article 12 of the Constitution and also by virtue of Section 46A of the Banking Regulation Act, 1949, the appellant herein is deemed to be a "public servant' for the purpose of provisions under the PC Act, 1988. However, the same cannot be extended to the IPC. Assuming for a moment that the appellant herein should be considered as a "public servant" for the IPC sanction also, the protection available under Section 197 of the CrPC is not available to the appellant herein since, the conditions in built under Section 197 of the CrPC are not fulfilled."CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 159 of 336
182. In view of the above authoritative pronouncement of Hon'ble Supreme Court, no prosecution sanction under section 197 Cr.P.C. is required as A-6 to A-9 are not the government servants, and judgments cited in this regard on behalf of accused persons are not applicable in deciding the issue of sanction under section 197 Cr.P.C. in respect of the bank employees.
Sanction under Prevention of Corruption Act, 1988
183. The next point for consideration is in respect of obtaining the sanction under section 19 of Prevention of Corruption Act 1988.
184. In the present case, prosecution sanction vide Ex.PW-1/1 and Ex.PW-1/2 was granted by PW-1 Shri Prem Kumar Malik, Assistant General Manager, Circle office, Canara Bank, Delhi. PW-1 also deposed that he granted the request of CBI for prosecution of sanction after going through the relevant documents including statements of the witnesses. Perusal of cross-examination of PW-1 would reveal that not much challenge was laid to the effect that prosecution sanction was wrongly granted by the Sanctioning Authority except for the fact that witness was unable to tell whether he has perused any internal inquiry report or he had gone through the Key responsibility. The material available on record indicate that sanctioning authority had CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 160 of 336 applied its mind in granting the prosecution sanction of Darwan Singh Mehta (A-7) and Rama Kumar C.T. (A-9). It would be appropriate to rely upon Vinod Kumar Garg Vs. State (NCT of Delhi), (2020) 2 SCC 88 in which it was observed by the Hon'ble Supreme Court as under :-
"25. On the said aspect, the later decision of this Court in State of Maharashtra Vs. Mahesh G. Jain, (2013) Part 8 SCC 119 has referred to several decisions to expound on the following principles of law governing the validity of sanction:
"14.1. It is incumbent on the prosecution to prove that the valid sanction has been granted by the sanctioning authority after being satisfied that a case for sanction has been made out.
14.2. The sanction order may expressly show that the sanctioning authority has perused the material placed before it and, after consideration of the circumstances, has granted sanction for prosecution.
14.3. The prosecution may prove by adducing the evidence that the material was placed before the sanctioning authority and its satisfaction was arrived at upon perusal of the material placed before it.
14.4. Grant of sanction is only an administrative function and the sanctioning authority is required to prima facie reach the satisfaction that relevant facts would constitute the offence.
14.5. The adequacy of material placed before the sanctioning authority cannot be gone into by the court as it does not sit in appeal over the sanction order.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 161 of 336
14.6. If the sanctioning authority has perused all the materials placed before it and some of them have not been proved that would not vitiate the order of sanction.
14.7. The order of sanction is a prerequisite as it is intended to provide a safeguard to a public servant against frivolous and vexatious litigants, but simultaneously an order of sanction should not be construed in a pedantic manner and there should not be a hypertechnical approach to test its validity." The contention of the appellant, therefore, fails and is rejected.
28. This Court in Ashok Tshering Bhutia Vs. State of Sikkim, (2011) 4 SCC 402 referring to the earlier precedents has observed that a defect or irregularity in investigation however serious, would have no direct bearing on the competence or procedure relating to cognizance or trial. Where the cognizance of the case has already been taken and the case has proceeded to termination, the invalidity of the precedent investigation does not vitiate the result, unless a miscarriage of justice has been caused thereby. Similar is the position with regard to the validity of the sanction. A mere error, omission or irregularity in sanction is not considered to be fatal unless it has resulted in a failure of justice or has been occasioned thereby. Section 19(1) of the Act is matter of procedure and does not go to the root of the jurisdiction and once the cognizance has been taken by the court under the Code, it cannot be said that an invalid police report is the foundation of jurisdiction of the court to take cognizance and for that matter the trial.
185. No defect is found or noticed in granting the prosecution sanction under section 19 of Prevention of Corruption Act 1988 against A-7 & A-9.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 162 of 336
186. Raman Kumar Aggarwal (A-6) and T.G. Purushothaman (A-8) had already retired from the service at the time of filing of the charge sheet. In Subramanian Swamy Vs. Manmohan Singh & Anr., (2012) 3 Supreme Court SCC 64, it is held that no sanction is necessary to prosecute a retired public servant under section 19 of the Prevention of Corruption Act. It was also held that crucial date for considering the question, whether sanction under section 19 of PC Act is required is to be considered in light of the fact whether the court could have taken the cognizance in case when charge sheet was filed and in reference to the present case, on the date of the the cognizance of the offence, the accused had already retired from his service and, therefore, there is no requirement to take sanction under section 19 of Prevention of Corruption Act 1988.
187. It would be appropriate to take note of the fact that charge under section 13(2) read with section 13(1)(d) of Prevention of Corruption Act was framed against A-6 to A-9.
188. At the cost of reiteration, the common and the separate contentions of Ld. Counsels for A-6 to A-9 submissions were to the effect that bank officials had performed their duties to the best of their CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 163 of 336 capabilities as per the acceptable banking norms. It is also contended that prosecution has failed to prove that any of the public servants had committed any offence under section 13 of the Prevention of Corruption Act. It is also contended that none of the public servant had abused their duties as a public servant. It is also contended that A-6 to A-9 who were the branch officials had conducted themselves according to the instructions and guidelines given by the Circle Office and Head office from time to time and they had also apprised the Circle Office/Head Office in respect of the accounts of A-1/Harpreet Fashion and the action of the branch officials were also ratified by the Circle Office and Head office as different documents placed on record would justify the same. It is also contended by Ld. Counsels for A-6 to A-9 that no criminal misconduct was committed by any of the public servant and there is no evidence or material which suggest that any of the branch officials had obtained any valuable thing or pecuniary advantage or that any corrupt or illegal means were adopted by any of them or that they had abused their position or had acted without public interest and therefore, ingredients of offence under section 13(1)(d) do not make out against any of the accused persons..
189. Section 13(1)(d) of Prevention of Corruption Act, 1988 Act CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 164 of 336 reads as under :-
"If any -
(i) by corrupt or illegal means, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing o r p e c u n i a r y advantage; or
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or"
190. Section 13(2) of PC Act is a punishable section when ingredients of offence under section 13(1)(d) of the PC Act are made out against the public servant. Section 13 of PC Act provides that, if a public servant obtains for himself or for any other person valuable thing or pecuniary advantage by corrupt or illegal means. Secondly, if a public servant abuses his position as a public servant obtains either for himself or for any other person any valuable thing or pecuniary advantage. Thirdly, when a public servant obtains for any person any valuable thing or pecuniary advantage without any public interest.
191. The Division Bench of Hon'ble Delhi High Court in Runu Ghosh Vs. CBI in Crl. Appeal No. 482/2002 (DoD : 21.12.2011) was pleased CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 165 of 336 to observe that :
"74. Having now settled the true interpretation of whether the offence under Section 13(1) (d) (iii) requires proof of mens rea, it would now be vital to settle what really the prosecution would have to establish to say that the public servant‟s actions or decisions, which result in a third party obtaining a pecuniary advantage or valuable thing, without public interest. The expression "public interest" is known to law; at the same time its meaning is not rigid, and takes colour from the particular statute".
IIn a later decision, LIC of India vs Consumer Education & Research Centre (1995) 5 SCC 482, it was held that:
- public authorities or those whose acts bear insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e. fair, just and equitable, after taking objectively all the relevant options--
Further in Noida Entrepreneurs Association v. Noida & Ors ., (2011) 6 SCC 508, in the light of provisions of Section 13 (1) (d), The court held that:
The State or the public authority which holds the property for the public or which has been assigned the duty of grant of largesse, etc. acts as a trustee--
75. It would be profitable to emphasize that public servants are an entirely different class, and the level of trust reposed in them by the society is reflected in the high standards of behaviour and rectitude expected of them, both in the discharge of their duties, and otherwise.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 166 of 336
* * * *
78. Therefore, when a public servant‟s decision exhibits complete and manifest disregard to public interest with the corresponding result of a third party obtaining pecuniary advantage or valuable thing, he is fastened with responsibility for "criminal misconduct" under Section 13(1) (d) (iii). There is nothing reprehensible in this interpretation, because the "act" being "without public interest" is the key, the controlling expression, to this offence. If one contrasts this with "abuse" of office resulting in someone "obtaining" "pecuniary advantage or valuable thing", it is evident thatSection 13(1)(d) (ii) may or may not entail the act being without public interest. This offence-
under Section 13(1) (d) (iii) advisedly does not require proof of intent, or mens rea, because what Parliament intended was to punish public servants for acts which were without public interest. This kind of offence is similar to those intended to deal with other social evils, such as food and drug adulteration, (offences under Prevention of Food Adlteration Act, Section 13(1), Drugs & Cosmetics Act; Section 7(1) Essential Commodities Act, 1955, Section 25 Arms Act (1959), possession of explosives, air and water pollution, etc.
192. The Hon'ble Supreme Court in Neera Yadav Vs. CBI in Crl. Appeal No. 253 of 2017 was pleased to observed that :
"15. Section 13 of the P.C. Act in general lays down that if a public servant, by corrupt or illegal means or otherwise abusing his position as a public servant obtains for himself or for any other person any valuable thing or pecuniary advantage, he would be guilty of 'criminal misconduct'. Sub-section (2) of Section 13 speaks of the punishment for such misconduct. Section 13(1)(d) read with Section 13(2) CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 167 of 336 of the P.C. Act lays down the essentials and punishment respectively for the offence of 'criminal misconduct' by a public servant. Section 13(1)(d) reads as under:
"13. Criminal misconduct by a public servant.-- (1) A public servant is said to commit the offence of criminal misconduct,
(d) if he,--
(i) by by corrupt or illegal means, obtains for himself or for any other person any valuable thing or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any other person any valuable thing o r p e c u n i a r y advantage; or
(iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or"
A perusal of the above provision makes it clear that if the elements of any of the three sub-clauses are met, the same would be sufficient to constitute an offence of 'criminal misconduct' under Section 13(1)(d).
Undoubtedly, all the three wings of clause (d) of Section 13(1) are independent, alternative and disjunctive. Thus, under Section 13(1)(d)(i) obtaining any valuable thing or pecuniary advantage by corrupt or illegal means by a public servant in itself would amount to criminal misconduct. On the same reasoning "obtaining a valuable thing or pecuniary advantage" by abusing his official position as a public servant, either for himself or for any other person would amount to criminal misconduct.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 168 of 336193. The word 'Misconduct' was considered in the case titled as State of Madhya Pradesh Vs. Sheetla Sahai and Ors., (2009) 8 SCC 617, in paragraph 46 it was observed as under :
"In State of Punjab v. Ram Singh it was stated:
Misconduct has been defined in Black's Law Dictionary, 6th Edn., at p. 999, thus:
''Misconduct. A transgression of some established and definite rule of action, a forbidden act, a dereliction from duty, unlawful behavior, willful in character improper or wrong behavior; its synonyms are misdemeanor, misdeed, misbehavior, delinquency, impropriety, mismanagement, offence, but not negligence or carelessness.'' Misconduct in office has been defined as:
''Misconduct in office Any unlawful behavior by a public officer in relation to the duties of his office, willful in character. Term embraces acts which the office holder had no right to perform, acts performed improperly, and failure to act in the fact of an affirmative duty to act.'' In P. Ramanatha Aiyar's Law Lexicon, 3rd Edn., at p. 3027, the term 'misconduct' has been defined as under: 'Misconduct. The term ''misconduct'' implies a wrongful intention, and not a mere error of judgment.
MISCONDUCT is not necessarily the same thing as conduct involving moral turpitude.
The word ''misconduct'' is a relative term, and has to be construed with reference to the subject matter and the context wherein the term occurs, having regard to the scope of the Act or statute which is being, construed. ''Misconduct'' literally means wrong conduct or improper conduct."CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 169 of 336
337. As to when conduct of a public servant becomes criminal misconduct within the meaning of PC Act, it was observed in paragraphs 35 and 47 as under:
''35. Section 13 of the Act provides for criminal misconduct by a public servant. Such an offence of criminal misconduct by a public servant can be said to have been committed if in terms of Sections 13(1) (d)(ii)(iii) a public servant abuses its position and obtains for himself or for any other person any valuable thing or pecuniary advantage; or while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest. Subsection (2) of Section 13 provides that any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than one year but which may extend to seven years and shall also be liable to fine.
47. Even under the Act, an offence cannot be said to have been committed only because the public servant has obtained either for himself or for any other person any pecuniary advantage. He must do so by abusing his position as a public servant or holding office as a public servant. In the latter category of cases, absence of any public interest is a sine qua non. The materials brought on record do not suggest in any manner whatsoever that Respondents 1 to 7 either had abused position or had obtained pecuniary advantage for Respondents 8, 9, and 10, which was without any public interest."
194. A perusal of the charges as invoked in the charge sheet as well as the substantive charge which was framed against all the public servants, it is not specified in which specific clause of section 13(1) ( d) the prosecution invokes the culpability of A-6 to A-9. However, CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 170 of 336 to be fair to the prosecution, on 26.08.2017, a charge under section 13(1)(d) r/w Section 13(2) of PC Act was framed against the bank officials and the trial has proceeded on the assumption trial is being conducted under all clauses of Section 13(1)(d) of PC Act. A little reference to Clause (i) and Clause (ii) of Section 13(2) of the PC Act would reveal that in invoking Section 13(1)(d)(i) and 13(d)(ii) of PC Act, the prosecution is bound to establish that there was a dishonest intention. "Dishonesty" is defined under section 24 of the Indian Penal Code. Section 24 laid emphasis on the intention i.e. if a person with an intention to cause wrongful gain to one person or wrongful loss to other person then the said person is doing such an act with dishonesty. Section 23 of the IPC defines wrongful gain and wrongful loss. In assessing the conduct of all the public servants, it is also required to be considered if the act of the public servants were shaped by the dishonest intention. The dishonest intention could be perceived by way of a direct material or by way of the different circumstances as put together by the prosecution in form of documentary or ocular evidence. The third part of Section 13(d) of the PC Act shall be dealt after the entire material is examined to consider whether the acts committed by different bank officials had assumed the criminal character by which public servants had abused their position. Even if CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 171 of 336 the prosecution is not successful in establishing that accused persons had dishonest intention, the prosecution is bound to establish that the act of the accused persons was without any public interest. Hence, this court is deliberately and consciously shall deliberate each and every clause of Section 13(d) of the PC Act. In "C.K. Jaffer Sharief Vs. State", 2013 (1) SCC 205, it was observed that "dishonest intention is the gist of the offence under section 13(1)(d) is implicit in the words used i.e. corrupt or illegal means and abuse of position as a public servant. A similar view has also been expressed by this court in M. Narayanan Nambiar Vs. State of Kerala, AIR 1963 SC 1116 while considering the provisions of Section 5 of the 1947 Act."
195. The applicability of Section 13(2) of the PC Act is not dependent on the fact that the public servants should have obtained a valuable thing or a pecuniary advantage for themselves. An offence under section 13 of the PC Act can be said to have been committed in terms of Sections 13(1)(d)(ii)& (iii), when a public servant abuses his position and obtains for himself or for any other person any valuable thing or pecuniary advantage; or while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest. Hence, it is not necessary that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 172 of 336 pecuniary advantage or a valuable thing has been procured by public servant for himself, it could be a third party. The word 'illegal' has not been defined under the PC Act but the same is defined in Indian Penal Code. Section 43 of Indian Penal Code defines illegal, legally bound to do when any action is an offence or is prohibited by law or which furnishes grounds for a civil action, the person is said to be legally bound to do whatever it is illegal in him to omit.
196. The ratio of the judgments of " Runu Ghosh" and "Sahai"
(supra) would reveal that while considering the conduct of a public servant, the element of a public interest is also required to be considered.
197. One of the point for determination is whether there is any evidence to establish that the case of the bank officers come within the fold of Section 13(1)(d)(iii) of PC Act. In order to bring home the charge under clause (iii) of 13(1)(d) of the PC Act, the prosecution is required to establish that public servant had acted without any public interest as discerned from the evidence available on record, it is vivid that A-6 to A-9 were bank officers who were dealing with various processes of commercial transactions by granting the credit limit or CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 173 of 336 facilitating the process by which the credit limit is granted to the borrower under the different heads as per the sanction. Undoubtedly, the loan granted to the private persons had turned NPA but mere fact that a loan had turned into NPA would not be the criteria to draw an inference/conclusion that bank officials had acted without any public interest. The term "Public Interest" and "Public Duty" have different connotation for different public servants. The term "Public Interest"
have different meanings for a Minister or for a Head of an Institution or for a Middle Level Public Servant. In construing the conduct of a public servant that whether he had acted in total disregard to the public interest, the reference can be had to be the type of a work/industry in which such a public servant is employed. When a court is confronted with an impugned action of a public servant by exalting it to the status of a criminality, the nature and job of such a public servant is required to be understood. Banking Sector is a core service area sector which services myriad group of persons from different sections of the society by making the requisite finance available to public at large and banker makes money by providing services such as loan/credit facility to the needy persons and also acting as a custodian of large amount of money being pumped in by small and large masses of different height, colours or of different CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 174 of 336 geographical location. Granting credit facility to firms/companies/corporations is a major source of income as the loan/limit advanced by a bank is subjected to various charges as well as interest and the borrower would make a payment to the bank. When a banker deals with various files and grants a credit facility to a borrower and the borrower fails to make the payments, can it be said that grant of credit facility was without public interest? Answer would be "No", as grant of credit facility is in the interest of public as well as in the interest of the bank as the same not only generates the income to the bank, but also plays a vital role in strengthening the economy of a country. To say that the credit facility given to to a borrower without public interest, it would be incumbent upon the prosecution to bare it with hard facts and evidence that credit facility was granted in such a negligent and a careless manner in total disregard to the accepting banking norms and the act was so reckless that no prudent public servant would have performed the act. The banking norms could be the settled banking practice or a code which suggest as to how a particular task is to be performed and the variation in performance of such a task against the accepted norms would be one of the indices by which the conduct of a public servant is required to be adjudged. It is also noteworthy to mention that different CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 175 of 336 guidelines are coded or had been reduced into a writing but still decision making has human imprint. The human imprint could be inspired by number of factors such as the perception of a public servant to different guidelines, different practices performed over a period of time, the target given to a bank officer/public servant to bring business to the bank by facilitating the grant of loan etc. and to ensure that his acts does not result in depriving the bank of loss etc. and various instructions of the superior and a last minute business decision which is usually based on hunch. Section 13(d)(iii) of the PC Act does not require a mens rea as an essential ingredient to determine the culpability of a public servant. (Runu Ghosh vs CBI). It would be sufficient if the prosecution establishes that a public servant "obtains by his act pecuniary advantage or a valuable thing to other without public interest and the inclusion of the word 'public interest' tips the scale in favour of the construction that mens rea is not an essential ingredient." It is also necessary to observe that every act which results in loss of public interest or that is contrary to public interest would be prosecutable offence. If, in a trial, a public servant is able to show that he had followed all essential safeguards and reasonable precautions despite that there was a loss and mere codal violation by a public servant in the discharge of the duty would not bring home the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 176 of 336 charges under the PC Act and therefore, on the basis of these settings and the provision of law as interpreted by the superior courts, the case of prosecution against the public servants would be analyzed.
SUBMISSION OF APPLICATION FOR THE CREDIT FACILITY AT BRANCH BY A-1/HARPREET FASHION
198. A-1/Harpreet Fashion submitted an application for working capital limits for medium and large scale industries in the proforma loan application form vide Ex.PW37/1 alongwith necessary documents for grant of the credit facility vide covering letter Ex.PW37/DX-1 dated 09.10.2004 (Date of receipt is shown as 12.10.2004). The application for credit facility was appraised by officials at Parliament Street Branch in the FORMAT FOR RECOMMENDATIONS FROM THE BRANCHES TO THE CREDIT GROUP FOR FURTHER APPRAISAL AT CIRCLE OFFICE and the same was dealt by branch officials A-6, A-8 and PW37 Shri B. Mahesh Kumar vide note Ex.PW37/3 in which the proposal given by the borrower was discussed about the proposal and made unanimous recommendation to the Circle Office. Ex.PW37/6 i.e. the format starts with the heading "Based on the financial statements and business projections submitted by the above party, we CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 177 of 336 furnish here below our recommendations for further processing/appraisal/risk rating at Circle Office." The office note vide Ex.PW37/3 gives one of the date as 26.10.2004 by Sr. Manager. For the convenience, a brief flow chart indicating the consideration of the loan application of borrower vide Ex.PW37/1 would indicate the persons involved in the consideration of the proposal for credit facility from Parliament Street Branch to the Circle Office.
Proposal by M/s Harpreet Fashion ⬇️ A-8 Purshothaman and B. Mahesh Kumar (PW37) ⬇️ A-6 Raman Kumar Aggarwal (Branch Incharge) ⬇️ Proposal Forwarded to Circle Office ⬇️ Rakesh Kumar ⬇️ K.V. Kamath ⬇️ Jai Prakash ⬇️ CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 178 of 336 K.G. Gopalkrishanan ⬇️ Prakash P. Mallya (PW-14) Sanctioning Authority
199. Proposal for grant of credit facilities to A-1/Harpreet Fashion was considered by above-named bank officials at Parliament Street Branch and Circle Office. The officials at the Circle Office who considered the proposal at the Circle office had noted both positive and negative feature of the proposal of A-1/Harpreet Fashion and despite all positive and negative feature, the ultimate sanctioning authority in its wisdom granted the credit facilities to A-1/Harpreet Fashion. The adverse features noted by various officials at Circle Office was richly mentioned in the charge sheet as if the branch officials had ignored the adverse feature. One of the point for determination is whether a proposal for grant of the credit facility having positive and negative feature could be called as lapse or a deliberate attempt on the part of the Branch to mislead the Circle Office to seek its consent for approval of the credit facility. Secondly, when a superior office gives it nod of approval after understanding all relevant aspect, whether Branch official could be held liable when no specific misrepresentation was made by them to the superior authority.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 179 of 336200. It is further the case of prosecution that A-6 was acquainted with the promoters/directors of A-1/Harpreet Fashion and was aware of the fact that the accounts of A-1/Harpreet Fashion were irregular, DRI raids were also conducted and there is heavy overdue position of the group concerns since he had worked in the Overseas Branch of Canara Bank, Agra and Chandni Chowk Branch where group concerns were availing credit facilities and yet A-6 proposed credit facilities to the A-1.
PROPOSAL FOR CONSIDERATION OF CREDIT FACILITY & THE SANCTION OF LIMIT AND THE RELEASE OF THE CREDIT LIMIT BY THE BRANCH
201. The foremost question for consideration is whether any criminality is attached in forwarding the proposal/application for the grant of credit facility and limit submitted by A-6 on behalf of the Branch. Perusal of the depositions of PW-14 Shri Prakash P. Mallya, PW-22 Shri Rakesh Gupta and PW-19 Shri R. Subramanium would reflect that in so far as the credit proposal which was submitted by the Branch alongwith documents no fault was attributed by the Circle Office or the Head Office and no witness has deposed anything contrary in respect of the proposal for grant of the credit facility. The CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 180 of 336 reason that Circle Office was able to notice various adverse features in the proposal of A-1 as the Circle Office was the sanctioning authority for both the Branches i.e. Chandni Chowk and Parliament Street Branch where A-1/Harpreet Fashion and sister concern had also availed the credit facility. The Circle Office was having the complete record of both A-1/Harpreet Fashion and sister concern and as such it is aware about financial condition of A-1/Harpreet Fashion and sister concern. No witness deposed that prior to the grant of sanction of credit limit or prior to forwarding the proposal for the credit facility to Circle Office, either A-6 or A-8 were aware about the account position of the sister concern at Chandni Chowk Branch. Moreover, even if it is assumed that both A-6 and A-8 were aware about the account position of the sister concern, there is no embargo either in law or in guidelines or the practice that a firm or company cannot make a proposal for the credit facility or the Branch cannot forward the proposal for the grant of credit facility to a borrower, especially in a situation when grant or rejection of such a credit facility is not in the hand of Branch but is to be dealt by the sanctioning authority at Circle Office. Merely forwarding a proposal to the superior authority having adverse feature, would not mean that officials concerned have failed to discharge their duty or connived with private persons in putting up CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 181 of 336 the proposal. It has not been indicated as to what specific facts were concealed by the branch officials. It has also come in evidence that Branch has only made forwarded/recommednation for the grant of credit facility on the basis of the record available before it and whether it is to be accepted or not laid with the hand of the sanctioning authority at Circle Office. The allegations of the prosecution that A-6 was aware about the account position of the sister concern of A-1 and that DRI raid was conducted on the sister concern of A-1 as he had worked with Chandni Chowk Branch is demolished/crumbled by the fact that during the trial, not a single witness was examined by the prosecution to the effect that A-6 had ever worked in any capacity at Chandni Chowk Branch and even no witness deposed that A-6 had ever worked at the branches of Canara Bank at Agra or Chandni Chowk. In this regard, PW34/IO Sushil Kumar in his cross- examination dated 27.09.2018 stated hat "It is correct that Raman Kumar did not work at Chandni Chowk Branch from 2002 to 2007." PW-34 further stated that he also did not make any inquiry or collected any record from Head Office/Circle Office regarding posting of A-6 Raman Kumar at Chandni Chowk Branch or Overseas Branch Agra. PW-34 had also deposed that the recommendation made by the Branch is not binding on the Circle Office and Head Office as both of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 182 of 336 them have their own Credit Department by which decisions are taken on merit whether to grant financial facilities including the sanction, renewal, PC limit, adhoc limit, bill discounting and enhancement and he did not make any inquiry in this regard from the Head office. Even during the trial, no specific fact was brought into the record indicating in clear and precise manner as to what fault was made by the Branch Officer in making recommendation of the credit proposal to the Circle office.
202. As noted above, the record of the case would indicate that the proposal for the credit facility was dealt by PW-37 Shri B. Mahesh Kumar alongwith A-8 Purshothaman, to A-6 Raman Kumar Aggarwal in the Branch and thereafter, the proposal was dealt by the number of the officials at the Circle Office as indicated in the above flow chart. No criminality or fault of A-6 or A-8 is found in making the recommendation of the proposal to the Circle office and no allegations were substantiated or established by the prosecution that any forged or fabricated documents were given by the private persons or that there was any specific concealment of the fact in making the proposal. As per the record, the proposal was received at Branch on 12.10.2004 and was prepared on 22.10.2004 and the same was further signed by PW-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 183 of 33637 on 26.10.2004 and thereafter it was forwarded to A-6 and hence, it cannot be said that proposal was prepared in a single day and as such it cannot be said that there was any undue haste in forwarding the proposal to the Circle Office. Hence, no apparent criminality or violation of any specific guidelines or rule is established by the prosecution in forwarding the proposal to the Circle Office and prosecution has failed to point out any specific short coming in forwarding the proposal to the Circle Office. No apparent fault was pointed out by the prosecution in respect of the proposal forwarded to the Circle Office and no prosecution witness has stated anything contrary in respect of the notes vide Ex.PW37/3. Notably, the proposal/recommendation for the credit facility by the Bank was also accompanied with relevant documents such as valuation report, statement of account and other details which were not disputed either by the prosecution or the defence and thus, one could safely say that at the time of making the proposal, no material concealment of fact was made by the borrower or by the officials in recommending the proposal. Subsequent notes of the Circle Office further provides that various documents were taken into consideration when it vetted the proposal for the grant of credit limit.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 184 of 336APPRAISAL OF PROPOSAL FOR THE GRANT OF CREDIT FACILITY BY THE CIRCLE OFFICE BY DIFFERENT OFFICIALS AND GRANT OF SANCTION OF THE CREDIT LIMIT BY THE SANCTIONING AUTHORITY.
203. Ex.PW14/1 (Vide reference no. DCO:CCG II ON 281:04-05 Dated 09.12.2004) contains office note made on different dates by Shri Rakesh Gupta, Shri A.R. Jai Prakash (AGM) and Shri Gopal Krishan (DGM) from Core Credit Group-II Delhi Circle Office to the General Manager, Delhi Circle Office i.e. PW-14 Shri Prakash P. Mallya in which the above-mentioned persons/prosecution witnesses made different notes in respect of the credit proposal of A-1/Harpreet Fashion. The notes were put before PW-14 by the Core Credit Group- II Delhi Circle Office and thereafter, on 13.01.2005, he sanctioned the note vide Ex.PW14/1 by directing that the party should induct Rs.180 Lacs in the form of unsecured loans till the capital base improves, clearance of overdues from the sister concern and monitoring of the account on the regular basis.
204. Based on the approval granted by PW14/Shri Prakash P. Mallaya, General Manager, after considering the various notes, PW-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 185 of 33622/Shri Rakesh Gupta issued a sanctioned memorandum vide Ex.PW- 37/7 with conditions :
i. Before release, the branch to ensure that overdue in the name of Associate Concerns are cleared in full and a confirmation to that effect is to be obtained from Chandni Chowk Branch.
ii. Branch to obtain an undertaking from the company to increase the equity to Rs.200.00 lacs latest by 31.03.2005 by raising the Authorized Capital accordingly and converting the unsecured loan into equity. The date to increase the equity to Rs.200.00 lacs was extended to 30.06.2005 by Circle Office vide it's note dated 01.03.2005.
iii. Enhanced limit for the year 2005-06 are to be released only after evaluating performance of the company based on the ABS/PBS as at 31.03.2005.
iv. There were other terms and conditions also such as induction of unsecured loan, 3% Cut back deposit, perfection of EMT, lease agreement for godown etc.
205. Relevantly, PW-14/Shri Prakash P. Mallya deposed that PW- 22/Shri Rakesh Gupta reported in respect of the overdues in the Group Accounts and he relaxed the conditions on the basis of note vide Ex.PW14/2 recommendations made by the Department of the Circle Office i.e. Core Credit Group-II. The condition for retention of 25% margin for FDB/FBE was waived and the condition for infusion to expand the capital base was also extended upto 30.06.2005 with the condition to obtain a certificate from Chartered Accountant for raising CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 186 of 336 unsecured loan of Rs.180 lacs as well as an undertaking from the party to retain the same till it is converted into capital. As per PW-14, he agreed on these conditions, put in the note vide Ex.PW14/2 on 08.03.2005 by DGM. A perusal of Ex.PW14/2 reflects that this proposal was basically received from the Branch pursuant to the request made by the borrower. However, during the trial, the prosecution has not placed on record the request by the borrower as well as the proposal by the Branch. It is noteworthy to mention that Annexure to Ex.PW14/2 had made positive recommendation for the grant of the credit limit for the perusal of its senior officers and it was specifically brought to the notice of the senior officers in respect of the financial condition of the sister concerns namely M/s Ginna World Trade, M/s G.M. Exim and M/s Manjit Footwears Pvt. Ltd. It is also necessary to mention that when proposal was forwarded by the branch to the Circle Office, the Circle Office was completely aware about the financial position of A-1/Harpreet Fashion and its sister concern who were having accounts at Canara Bank, Chandni Chowk Branch which is apparent from various notes vide Ex.PW14/1 and the notings made by different officials at the Circle office in respect of the adverse features were copiously referred in the charge sheet. At this juncture relevantly in his cross-examination PW22 stated that adverse features CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 187 of 336 of the group account which were recorded in the office note vide Ex.PW14/1 were not communicated to the Parliament Street Branch.
206. Vide Ex.PW37/7 (Sanction Memorandum based on which credit sanction letter dated 20.01.2005 vide Ex.PW37/DX-2 was issued by PW-37), proposal of the Branch was sanctioned by the Circle Office subject to the fulfilment of the conditions. Two conditions were required to be complied prior to the release of limits i.e. (i) Obtention of CA certificate with respect to induction of unsecured loans of Rs.180 lacs from Promoters and (ii) Before release, the branch to ensure that the overdues in the name of associate concerns are cleared in full and confirmation to that effect to be obtained from the Chandni Chowk Branch. It is pertinent to mention that vide Ex.PW37/8 (Colly), A-1/Harpreet Fashion made request for the modification of certain conditions, however, the Circle Office did not consider to waive of the cut back deposit of 3%. PW-36 gave this cut back of 3% to the borrower and noting has come on record that either A-6 or other accused public servants have any role to play in granting the cut back. It is quite natural that every borrower would desist any such charge being levied on him and would always requests for its removal.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 188 of 336207. Perusal of the written submissions as well as the submissions of the Ld. PP for the CBI and the charge sheet, it was alleged that bank officials had failed to comply with the condition of release of limits and released the limits to A-1/Harpreet Fashion. This was indicated as one of the circumstances to infer conspiracy as well as to press the charges under section 13 of Prevention of Corruption Act against the A-6 and A-8. The Ld. Counsel for the accused persons rebutted the arguments advanced by the Ld. PP for the CBI and pointed out that both these conditions were complied by the public servants and it was also submitted that allegations on this account is based on suppression of material facts by the investigating agency and reference is made to the deposition of the witnesses and various documents which were put to the prosecution witnesses during trial would indicate that allegations were far from truth.
208. For the sake of continuity and in order to appreciate the allegations as well as the charge dated 26.08.2017 and more specifically the substantive charge against Raman Kumar Aggarwal and T.G. Purushothaman, the charge was that limit was released without essentially complying the first two conditions as per the sanction memorandum vide Ex.PW37/7.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 189 of 336209. In order to negotiate the charge dated 26.08.2017 to the effect that branch had released the credit limit without complying with the first two conditions of the sanction memorandum. Accused persons separately moved application under section 91 Cr.P.C. seeking production of various documents from the bank as well as some of the documents which were part of the charge sheet of the other case in the present case, the application was allowed vide order dated 13.02.2018.
210. Vide order dated 13.02.2018, number of documents as detailed in the order were directed to be supplied to the accused persons as those documents were stated to be relevant for the purposes of cross- examination and accordingly, the documents were supplied to the accused persons and one of the document was put to PW37 Shri B. Mahesh Kumar, who deposed that unsecured loan of Rs.180 lacs was available with the System when he was shown the letter dated 26.02.2005 sent by A-1/M/s Harpreet Fashion to the Manager, Canara Bank, Parliament Street by enclosing a copy of C.A. Certificate to the effect that the party has introduced a sum of Rs.1,82,04,550/- as unsecured loan from Mohanjit Singh, the Director of the company vide Ex.PW37/DX-4 (Colly) {Documents were supplied under section CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 190 of 336 91 Cr.P.C. by Canara Bank vide its letter dated 06.08.2018 and was put to the witness during the cross-examination}.
211. The perusal of the documents vide Ex.PW37/DX-4 (Colly) contains the certificate dated 24.02.2005 issued by the Chartered Accountant, in which it is mentioned that amount of Rs.1,82,04,550/- is introduced as an unsecured loan and the same is based on the information as per documents and book of accounts.
212. During trial, the audited report and audited statement of account of A-1/Harpreet Fashion Pvt. Ltd. vide Ex.PW19/DX-2 (Page No. 14 to 39 of D-4) in which the details of unsecured loans were shown for the year 2005 and 2006 in which the amount of Rs.1,82,04,550/- is mentioned by the Auditor.
213. PW-24 Shri K. Athimoolan has also conceded in his deposition that funds by way of borrowing from the Directors were available in the System and similar statement is also made by PW22 Shri Rakesh Gupta to the effect that funds were available in the System.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 191 of 336214. It would be profitable to refer to the deposition of PW-24 Shri K. Athimoolan when he was shown letter dated 05.05.2005 vide Ex.PW24/DX-1 (Page no. 1341, D-4) that amount of Rs.185 lacs was available in the System in the form of unsecured loan on 31.03.2005 and an audited financial papers vide Ex.PW24/DX-2 (Page No. 1981, D-5) would reveal that as on 31.03.2007, Rs.178.72 lacs unsecured loan was available in the System. The undertaking of the borrower is available on record to indicate that they would not withdraw the unsecured loan prior to the written consent of the bank.
215. It is a well settled law that in Criminal Law, the burden is on the prosecution to prove a particular allegation against the accused persons. The positive allegations are to the effect that accused/public servant failed to ensure the compliance of the necessary conditions of the sanction. In a given case, whether public servant has complied with the instruction of his superior is dependent on the fact whether the instructions were oral or documentary. Certain oral instructions are to be mandatorily followed and the written instructions are also required to be followed mandatorily/directory and whether non- compliance of such a direction by a public servant of his superior is a criminal misconduct depends on the fact whether same fall foul to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 192 of 336 Section 13 of the Prevention of Corruption Act. In respect of the above charge, the sanction memorandum cast a duty on the Branch to ensure the first two compliance. The accused/public servants in order to dispel the charge has brought the record from the Bank and to meet out the specific allegations against them and got specific answer from the prosecution witnesses without any demur.
216. The upshot of the above discussion and the material as brought on record from the prosecution itself, it can be safely said that the abovementioned conditions as imposed by the Sanctioning Authority prior to the release of the limit were substantially complied by A-6 and A-8. It is also relevant to mention that there was no cross- examination or re-examination by the Public Prosecutor disputing the fact in respect of the availability of the funds. Moreover, the documents which were shown to the witness were part of the relied upon documents of the prosecution and were produced from the bank. Notably, PW-34/Investigating Officer, has admitted in his cross- examination dated 27.09.2018 as follows :
"It is correct that the directors/promotors had inducted unsecured loans of Rs.185 lacs before the limits were released."CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 193 of 336
217. The second condition that is required to be complied was that the branch shall ensure that overdues in the name of Associate Concerns are cleared in full and a confirmation to that effect is obtained from Chandni Chowk Branch. In this regard, it is necessary to observe that after receipt of the sanction of credit limit from the Sanctioning Authority, PW-37 Shri B. Mahesh Kumar Singh, the then Sr. Manager, Parliament Street Branch and was looking after the Second Line Incharge of the Branch. During cross-examination, his attention was drawn to a letter which was addressed by him to Chandni Chowk Branch seeking its confirmation with regard to the clearance of overdue liability of group concern and to which PW-37 confirmed the authorship of the letter dated 05.04.2005 vide Ex.PW22/DX-5 (D-3, a relied upon document by which the bank had asked for the opinion letter).
218. It is also relevant to mention that condition was also imposed on Branch to obtain opinion letter from Chandni Chowk Branch. It is a matter of record that vide Ex.PW19/DX-1 (D-3), the three different satisfactory opinion letter of the sister concern were obtained by the Branch and the same is attached with PW-19/DX-1. It is also necessary to observe that this document was part of the relied upon CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 194 of 336 document of the prosecution, however the prosecution did not bring the same into record from any of the prosecution witnesses, however the same was put by the he defence in the cross-examination without any demur from the prosecution.
219. During the course of trial and to establish that public servants have complied with one of the condition of the sanction i.e. the status about the pending overdues in the Chandni Chowk Branch, the defence filed an application for summoning the documents as well as permission to read the documents of the Group Documents i.e. D-3, D-38 and D-80 relied by the prosecution in case titled as CBI Vs. Manjit Footwear vide CC No. 15/2017 . The application was partly allowed vide order dated 07.08.2018 by permitting the defence to read documents i.e. D-3, D-38 and D-80 in the present case and the copies of the same were placed into the record.
220. During cross-examination, PW-37 was shown Ex.PW11/5 (D-
38), Ex.PW26/5 (D-80 and D-3, pages 7, 8, 10, 14 and 20 of D-3 of M/s Manjit Footwear Pvt. Ltd. and PW-37, after referring to the documents deposed as under :-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 195 of 336"The earlier overdues of Rs.22.50 lacs under FBE ad-hoc was cleared on 07.04.2005 and further overdues appeared in the account only on 17.05.2005. There were no overdues in the accounts of the group concerned at Chandni Chowk Branch as on 13.05.2005 when the limits were released at Parliament Street Branch in the account of Harpreet Fashion Pvt. Ltd except the term loan of Manjeet Footwear. The Circle Office has rephased the Term Loan of Manjeet Footwear vide Sanction dated 13.07.2005 (part of Ex.PW37/DX-5) and the earliest overdue prevailing in the group concern as on the date of letter was 17.05.2005."
221. In this regard, one of the contention of the Ld. Counsel for A-6 and A-8 is to the effect that during investigation no efforts were made by any of the investigating officer in respect of the pending dues of the sister concern. It is also contended that since the prosecution had alleged that dues of the sister concern were not cleared and the condition for sanction was violated by the public servants, it was then incumbent upon the prosecution to establish the said fact and reference is made to the deposition of PW-34 (Investigating Officer) in which PW-34 stated that :
"It is correct that the limits were released on 13.05.2005. I did not inquire from the Chandni Chowk Branch during my investigation as to whether there were overdues in the three group concerns as on the date on release of limits to Harpreet Fashion i.e. on 13.05.2005...."CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 196 of 336
222. Interestingly, when PW34 had answered the question in his cross-examination, he voluntarily pointed out towards a letter dated 21.05.2005 from Chandni Chowk Branch to Parliament Street Branch vide Ex.PW34/DX-1 informing about the overdues in the group concerns at the Chandni Chowk Branch. It is necessary to observe that letter vide Ex.PW34/DX-1 was not tendered in the examination- in-chief, although it was one of the relied document of the prosecution and no reason and justification was given as to why the said document was not brought in the examination-in-chief of PW-34 or any other witness and even the maker of the said letter was also not examined by the prosecution and even prosecution has also not shown any intent to examine the maker of the said letter. The act of PW-34 in picking up one of the letter from the bunch of the document during the cross examination after he had admitted that no document was collected from the Chandni Chowk Branch. Even otherwise, a careful perusal of the letter vide Ex.PW-34/DX-1 would indicate that as on the date when the limits were released in favour of A-1, there were no overdues in terms of the satisfactory opinion letter given by Chandni Chowk Branch and even no investigation was conducted in respect of the pending dues of the sister concern by perusing the accounts of the sister concern or by examining the relevant witnesses in this regard.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 197 of 336PW-19 further admitted that satisfactory opinion letter was provided. There is substantial merit in the contention of the Ld. Counsels for the accused persons that the branch officials had no control in the account relating to export and import as overdues and/or no dues are normal Banking practice. For example, if a borrower has taken a particular amount as packing credit and had submitted the bill for the discounting and there is an usance period, then it cannot be said that there are any payable outstanding dues as due date of payment is yet to come, however, the outstanding amount would always be reflected and in order to establish that there were over dues in the sister concern of such a level that no credit limit could have been released then prosecution is bound to examine the necessary witnesses to establish the aforesaid facts and hence, an adverse inference is required to drawn against the prosecution. It is also observed that if the over dues were of such a magnitude that no credit limit could have been granted in favour of the borrower then Circle Office would not have made recommendation for the release of the limit and same shows that what is required on the part of the Branch to see that accounts of sister concern are satisfactory and moreover, the Circle Office was very well aware about the financial condition of all the sister concern as it was CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 198 of 336 being apprised through various ways and means and separate department is also maintained at the Circle Office.
223. There were some other conditions which were also imposed prior to the release of the limit by the branch i.e. equitable mortgage of property offered as security perfect in all respect. In this regard, it is observed that it was not the case of prosecution that the said condition was not complied by A-1 and even no fault was attributed in this regard. The relevant security i.e equitable mortgage of immovable property situated at 362, ΜΙΕ, Bahadurgarh, Haryana valued for Rs.110 lacs was furnished on behalf of A-1. Another condition that was imposed was that prior to the release of limit, the branch was directed to ensure that there was a lease agreement for godown situated close to the factory. In this regard, it is observed that there was not much issue or challenge by the prosecution in this regard and even a letter dated 11.02.2005 was written by A-1 to the bank that they had not taken any godown on rent as the productions/sales were not up to expected level was brought to the knowledge of superior authority i.e. Circle Office but it did not make any adverse observation and permitted the release of limit and also renewed the limit and granted the temporary overdraft facility.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 199 of 336ILLEGALITIES/LAPSES ON THE PART OF THE BRANCH OFFICIALS CONSEQUENT TO THE GRANT OF CREDIT LIMIT.
224. As per prosecution, the credit limits were released firstly on 13.05.2005. It is also the case of the prosecution that A-6 had dishonestly forwarded the renewal proposal of account operation of A-1/Harpreet Fashion after six months from the date of expiry of limits. As per the sanction note vide Ex.PW14/1 and the letter of sanction vide Ex.PW37/7 dated 15.01.2005 (D-4), the mid term review of the account was to be conducted. The mid term account review of Harpreet Fashion/A-1 was conducted/prepared by A-8, A-6 and PW-37 vide Ex.PW37/DX-3 (D-3). Surprisingly, the mid term account review of A-1/Harpreet Fashion was not brought into record by the prosecution during the trial by the prosecution, although it was a relied upon document of the prosecution and rather the same was brought into the record by the defence, in the cross-examination of PW-37. Perusal of mid term review vide Ex.PW37/DX-3 dated 25.07.2005 would unveil that three of its officers i.e. two accused (A- 6 & A-8) as well as PW-37 from the Branch had noted both positive and adverse features in the mid term review alongwith the relevant documents and forwarded the same to the Circle Office for its perusal.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 200 of 336225. Further case of the prosecution against A-6 is that, on 06.07.2006, he forwarded renewal proposal for extending the credit facility to A-1/Harpreet Fashion after expiration of the limit to the Circle Office. In this regard, it is observed that not a single prosecution witness has deposed that A-6 was not competent to make recommendations for renewal of the limits which had expired. The available material on record indicate that the limits had expired on 12.01.2006 and thereafter it was extended up to 12.04.2006 at the Branch as per the existing credit policy. PW-22 Shri Rakesh Gupta who was examined by the prosecution stated that office note vide Ex.PW7/1 (D-32) for second extension of tenability limit was prepared by Shri Chetan Sajan Dutta, Officer and Shri S.K. Gupta, Sr. Manager. The said office note records few adverse features. During his cross-examination, the attention of the witness/PW22 was drawn to two documents i.e. Ex.PW22/DX-2 and Ex.PW22/DX-3 (D-3) in which the Circle Office had advised the Branch to submit the renewal proposal.
CANARA BANK (H.O. BANGALORE), CIRCLE OFFICE, NEW DELHI ADVANCES SECTION - 4 6th Floor, Ansal Towers, Nehru Place, New Delhi.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 201 of 336REF. DCA-IV/CR-1050/2230/2006CSD DATE : 31.03.2006 CANARA BANK B/O Parliament Street, NEW DELHI Dear Sir, SUB : M/s Harpreet Fashion - RENEWAL OF LIMITS This has reference to the above. The subject limit is expiring on 12.4.2006 (Extended date). We request you to submit the renewal papers before the expiry of limits in order to enable us to do the needful.
Yours faithfully, Senior Manager CANARA BANK (H.O. BANGALORE), CIRCLE OFFICE, NEW DELHI ADVANCES SECTION - 4 6th Floor, Ansal Towers, Nehru Place, New Delhi.
REF. DCA-IV/CR-1050/12975/2006/ CSD
DATE : 27.04.2006
CANARA BANK
B/O Parliament Street, Reminder
NEW DELHI
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 202 of 336
Dear Sir,
SUB : M/s Harpreet Fashion - RENEWAL OF LIMITS
This has reference to the above. The subject limit has expired on 12.4.2006. We had, vide our letter dt. 31.03.2006, requested you to submit the renewal papers before the expiry of limits. However, we are yet to receive the same. We again requst you to submit the renewal papers immediately in order to enable us to do the needful.
Yours faithfully, Senior Manager
226. PW-37 Shri Mahesh Kumar who was the Sr. Manager of the Branch during the relevant period had signed the renewal proposal, has admitted in his cross-examination that first extension of the tenability of the limit for the three months in the account of M/s Harpreet Fashion Ltd. was within the delegated powers of the Branch. He further accepted that Branch had informed the Circle Office about having extended tenability limit up to 12.04.2006 vide Ex.PW37/DX- 6 bearing the signature of accused Purushotaman at Point-A. PW-37 also stated that both positive and negative features of the account were analysed and while forwarding the application for renewal alongwith his views and analyses vide Ex.PW37/9, to the Circle Office. He also deposed that he was satisfied with the documents of the party i.e. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 203 of 336 borrower when he processed the file for grant of loan facility or its renewal. PW19 who had submitted the study report also stated that he did not find any irregularity in the preparation of the proposal for renewal of limit. It is also evident from the record that even after the receipt of the mid term review vide Ex.PW37/DX-3 dated 25.07.2005, the Circle Office did not instruct the Branch or its officials from not releasing the credit limits to A-1/Harpreet Fashion. Moreover, prosecution has failed to establish as to what dishonesty was committed by Branch Official in recommending the renewal. The renewal application is based on the sound business decision and is specifically made on the instruction of circle office and following the direction of superior officer which per se, is not illegal and would not make branch official guilty of any criminal wrong doing and even no irregularity is observed in this case. The allegation is contrary to the document relied by the prosecution and accepted in the cross examination by the witness and cast a doubt on the story of prosecution that renewal application has been moved by the Bank despite overdues knowing fully well that that it was the Circle Office which had instructed the Branch to move an application and the same appears to be a conscious decision on the part of the Circle Office and the branch office as it did not want the accounts to turn into NPA or to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 204 of 336 make the process of recovery of money as difficult. The intention of any banking organization was to ensure that it earns the profit and also to ensure that a creditor keeps on paying the dues to a banking company and in this regard, various decisions are taken at the spot. The position and the sentiments (in terms of finances) as on the day dictate the decisions of the banker. Faulty decision without any dishonesty cannot be made subject of any criminal proceedings.
227. PW9/Complainant of the case submitted that PW-36 Shri S.V. Sudarshan had joined subsequent to the tenure of Raman Kumar had answered the query of the Circle Office and the Head Office permitted the renewal on 21.03.2007. A reference was also made to Ex.PW24/DX-6 by which the Circle Office had renewed the limits. PW-34 in his cross-examination stated that the proposal for renewal was received at Circle Office on 24.07.2006 after the transfer of A- 6/Raman Kumar Aggarwal and other correspondences between Circle Office and Branch were dealt by Shri S.V. Sudarshan as AGM and K. Athimoolan, Sr. Manager. Further deposition of PW-24 would indicate that there were no overdues in the account of Harpreet Fashion till 26.09.2006. PW-9 Shri K.S. Chandramali/complainant in his cross-examination had accepted that various queries pertaining to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 205 of 336 the renewal proposal were satisfactorily answered by PW-36 i.e. successor of A-6 Raman Kumar Aggarwal.
228. PW-36 deposed that he wrote a letter dated 26.12.2006 vide Ex.PW36/8 to borrower to furnish information for processing of renewal proposal and thereafter the borrower had written a letter Mark PW36/B which he forwarded to the Circle Office vide Ex.PW36/9. PW36 had stated that vide Ex.PW24/DX-7, the Circle Office had ratified the action of Branch by allowing the temporary overdraft in the account of the parties.
229. It appears from the depositions of PW-9, PW-19, PW-24, PW- 34, PW-36 and PW-37 that renewal proposal was called by the Circle office and the proposal was analysed at the Branch by PW37 Shri Mahesh Kumar who recorded his satisfaction in respect of the operation of the accounts. The renewal proposal was received in Circle Office on 24.06.2006 and where it was dealt by number of officials and all the queries of Circle office were resolved by PW-36 and PW-24 and limits were finally renewed in March 2007 by the Head Office. PW-36 Shri S.V. Sudarshan referred to a letter dated 19.09.2006 vide Ex.PW36/6 that he made a recommendation for the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 206 of 336 enhancement of usance period of 180 days as well as waiver of buyerwise policy. In the light of such admission made by PW-36, apparently there seems to be no case of any wrong doing or illegal favour by A-6 Raman Kumar Aggarwal or other bank officials. The last nail in the case of prosecution that branch officials had recommended for renewal of the limit despite irregularities when PW- 34 admitted in his cross-examination that branch had submitted the renewal proposal and the Head Office sanctioned the same vide Ex.PW24/DX-6 (D-5), a relied upon document, PW-34 has further admitted in his cross-examination that the proposal for renewal of credit facility was ratified by the branch by making the working capital limits beyond expiry till the date of renewal. Existence of Ex.PW24/DX-6, a relied upon document, as well as the admission made by the prosecution would unveil that prosecution was fully aware that there was no wrong doing and yet it had chosen to prosecute those officers who were in lower hierarchy without questioning the business decision of the superior authority.
230. It is palpable from the deposition of the various witnesses as well as from the examination of various witnesses such as PW-36, PW-37 & PW-24 that renewal proposal which was received at the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 207 of 336 Circle Office and ultimately approved by the Circle Office and the Head Office was dealt by number of officials and a conscious and deliberate decision was taken to continue with the limits in the month of March 2007 and pursuant to which various limits were released.
231. A perusal of the charge sheet as well as the charge asserts that the public servants have diverted Rs.196.04 lacs towards overdue bills i.e. 1098D-253314-05, 1098D-256317-05, 1098D-256316-05, 1098D- 253130-06 and 1098S-253131-06 by way of packing credits viz (i) 06RPC252 (Packing Credit) of Rs.64,10,000, (ii) 06RPC398 (Packing Credit) of Rs.63,00,000/-, (iii) 06RPC675 (Packing Credit) of Rs.27,90,000/- and (iv) 06RPC678/679 (Packing Credit) of Rs.50,00,000/- by D.S. Mehta, Manager (A-7). As per prosecution, the PC limit is granted for procurement of goods against the order of borrowers not for clearance of overdues. The moot question that arises for consideration would be whether any criminality could be associated by the release of packing credit towards the pending overdue bill and whether such an act is criminal in nature.
232. It is relevant to mention that adjusted bills as referred above were neither exhibited nor attached with the charge sheet and no CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 208 of 336 witness was examined by the prosecution in this regard. The case of prosecution in this regard only rests only on the basis of statement of account and no document is available on record to indicate as to who released the packing credits against the pending overdue bill. It is relevant to mention that two packing credits of dated 17.04.2006 and 30.06.2006 pertain to the period when Raman Aggarwal (A-6) was working in the bank, whereas remaining packing credits relate to the tenure of Raman Kumar Agarwal (A-6) consequent to his transfer from the branch and it was not explained by the prosecution as to how A-6 could be made responsible for the release of the said packing credit consequent to his transfer from the bank. It is also alleged that D.S. Mehta (A-7) had released the packing credit in the account of Harpreet Fashion (A-1). No document was produced by the prosecution as to who was responsible for the release of packing credit on the dates as stated above. Specially in a situation when prosecution asserts that packing credit was released by D.S. Mehta (A-7).
233. PW-17 Shri Chiranjiv Lal Arora was examined by the prosecution who stated that in normal course overdue bills are recovered by granting the packing credit and subsequently the bills are getting realized from the Importers. However, the GR would be CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 209 of 336 realized after the payment is received from the importers in NOSTRO Account. It is also relevant to mention that in his cross-examination, PW17 stated that the discounting of bills are permitted by the respective authority as per their delegated power and more importantly he denied making any statement in his statement vide Ex.PW17/DX-1 that sanctioning authority is competent to permit discounting of bill in case previous bills are overdues. This witness has also denied making statement vide Ex.PW17/DX-1 that bill discounted proceeds were adjusted towards the old liability or fresh bills were discounted of the same buyer despite return of unpaid bills and outstanding overdue bills. He also denied that he made the statement that there is no permission available for discounting the bills on the same buyer when other bills are outstanding/overdue. He also denied that he made the statement no follow up of overdue bills returned unpaid with exporter client for repatriation of the proceed for the shipment effected was made by him. PW-17 has also dis-owned substantial part of his statement recorded under section 161 Cr.P.C. and he also expressed his ignorance that Branch Incharge had over ruled the objections in office notes put up by accused no. 9 in respect of discounted and the altered bills.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 210 of 336234. Moreover, PW-19 Shri R. Subramanium was examined by the prosecution and in respect of the aforementioned packing credit of Rs.196.04 lacs and deposed that packing credits were cleared and aforementioned overdues were realized in the books of the bank, after perusing page no. 29, 33 and 34 of Ex.PW20/30 (statement of account) of A-1/Harpreet Fashion. Pertinently Investigating Officer/PW34 in his cross-examination has admitted that above packing credit were realized and adjusted in the book of the bank and he further admitted that packing credits were adjusted by the export bills and in his further cross-examination he stated that :
"... It is correct that no export bill was discounted and adjusted towards overdue bill, it is correct that M/s Harpreet Fashion Pvt. Ltd. had not withdrawn any amount from their account when the above mentioned PCs were adjusted to overdue bills."
235. PW-22 Shri Rakesh Gupta, then Sr. Manager in the Circle Office, in his cross-examination has stated that "Permitting overdues and subsequently getting realized is a normal banking feature since banking is a commercial activity."
236. It is thus, apparent from the discussion that clearance of the overdue bills from the packing credit was normal practice as deposed by the prosecution witnesses and realization of overdue bills from the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 211 of 336 packing credit does not affect the exposure of the borrower as bills were realized by payment from the importer in the foreign currency. The amount of Rs.196.04 lacs stands realized as apparent from the documentary and oral evidence and hence no criminality of A-7 is found.
237. A-7 Darwan Singh Mehta and A-9 C.T. Rama Kumar were Manager in Parliament Street Branch and the allegations against both of them were that they abused their position as a public servant by dishonestly and fraudulently, adjusted the 10 overdue bills despite the fact that previous payments were overdue and it was also alleged that A-9 C.T. Rama Kumar had discounted one of the over due bill, although payments were received from Exchange House in violation of Circular No. APDIR Series No. 28 vide Ex.PW34/DX-3 which restricts receipt of more than Two Lakhs for each transaction. It was also alleged that Darwan Singh Mehta had fraudulently discounted the unpaid bills including three false and fabricated bills as consignee whereby goods were exported to the restricted cover country Afghanistan. Meaning thereby that prosecution alleges the criminality on both A-7 and A-9 with slight variation but basic substratum of the allegations are that they had discounted the forex bills despite CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 212 of 336 overdues which contains altered airway bill. In order to sustain the charge, the prosecution is required to explain as to how and in what manner the accused had played role in the discounting of the unpaid bill and as to how altered bills were dealt by them. A perusal of the relied upon documents in the charge sheet and material witnesses examined from the Branch as well as from the Circle Office did not indicate the work profile of both A-7 and A-9 with sufficient clarity and even the testimonies of PW-31, PW-32 and PW-34/IO are totally silent and it appears that name of A-7 and A-9 were picked up and roped in the present case as their names had surfaced in the report Ex.PW19/A and independent material was brought by the prosecution showing the linkage of A-7 and A-9 in dealing with the case were not brought by the prosecution. It would be apt to say that no documentary evidence was relied by the prosecution to show that A-7 and A-9 dealt the overseas bill although prosecution alleges that they were part of the conspiracy in permitting the release of limit despite overdue bills. The investigating officer during the course of investigation has not collected any material to independently evaluate the role of A-7 and A-9 in dealing with the overdue bills. PW-6 Shri Sudhir Kumar in his cross-examination deposed that Scale-I Officer of the Bank does not have the power to discount the discrepant CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 213 of 336 documents or documents with short comings, cutting and alteration and only the Branch Manager has got such power. PW-37 Shri Mahesh Kumar Singh, another prosecution witness, also corroborated the statement of PW-6 by stating that as per the delegation of the powers in Canara Bank, a Scale-I Officer does not have any authority to permit discount of export bills having alteration material discrepancies or rejection and such authority is vested with the Branch. It is also relevant to mention that PW-37 in his cross- examination has also explained that Branch Incharge had permitted the discount of export bills since insurance cover from the ECGC will be lost, in case the goods had been exported. He further deposed that prior to permitting such a discount, the complete information in respect of the details of the limit, liability, overdues and the identifying discrepancies shall be placed before the Branch Incharge for his decision. PW-37 has also stated that the reason for giving discount to an export bill if discrepancies and alterations are noted as packing credit advance is the limit given for raw material and other expenditure to meet the export order and this packing credit could be liquidated by discount of bills. Similar is the deposition of PW-21 that only the Branch Incharge was competent to discount the export bills having some discrepancies. PW-21 in her examination in respect CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 214 of 336 of the role of A-9 C.T. Ramakumar stated that "Import Section used to handle the adjustment of export bills, purchased discounted and negotiated. I was the import officer during the abovesaid tenure. Accused C.T. Ramakumar was working in the branch during the abovesaid time. I cannot tell whether the adjustment of export bill, purchased discounted and negotiated was done by accused C.T. Ramakumar. The Head of the Branch is the competent authority to permit discount of export bills having some discrepancies in consignees name and address. It is correct that accused C.T. Ramakumar was working in Export Section and it was not his duty to adjust export bills purchased, discounted and negotiated as it was performed by the Import Section only." It is relevant to mention that prosecution has also failed to explain whether it was the duty of A-9 C.T. Ramakumar to monitor the diversion and proper utilization of packing credit as PW-21 clearly deposed that it was not the duty of C.T. Ramakumar to make adjustment of the bill and moreover, no material was placed by the prosecution in respect of the duties to be performed by A-9 C.T. Ramakumar and even no documents were brought into record that A-9 used to make adjustment of the bill.
238. Numbering of relied documents were not referred in the in the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 215 of 336 examination chief of the prosecution, however the relied upon documents were put to the prosecution witnesses by the defence without any demur from the prosecution. The issue to be determined, how to consider the documents which were relied by the prosecution but were not relied during the examination-in-chief and whether such documents can be used by the accused persons to their advantage.
239. In Lallu Singh Vs. State of M.P., MANU/MP/0515/1996, a dying declaration though filed with the charge sheet was not proved during the course of trial and the injury report of the accused was not proved during the trial. Hon'ble Madhya Pradesh High Court criticised the prosecution and was pleased to observe that despite the fact that in the absence of the formal proof of the document, the same can be made use of by the accused in his defence. Accused can take advantage of the document even without proof of the same. It was further observed that if a document which is a part of the record and was produced alongwith the police report, the same can always be considered by the court and it was relied in Balu Vs. State of MP, MANU/MP/367/2011 and Bhagwanti Bai Vs. State of MP, MANU/MP/0707/2002 wherein it was observed that though CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 216 of 336 roznamcha not exhibited or proved at the trial, can be used by the defence if it is favourable to the accused.
240. In Raj Bahadur Vs. State, MANU/DE/0449/1991, Crl. Appeal No. 237 of 1987, the issue before the Hon'ble Delhi High Court was an MLC of deceased was prepared by the doctor, however, the said doctor was not examined i.e. prosecution has not proved the said document. It was observed that an accused can place reliance on such a document even in the absence of its proof.
241. In Ram Dayal Vs. State of MP, MANU/MP/0214/1992, the question was whether an FIR which was a document of prosecution if it remained unexhibited and unproved, can it be used by the accused. The Hon'ble Madhya Pradesh High Court was pleased to hold that if the prosecution suggests that the relied upon document was a garbled document then it should have given evidence to that effect and in the absence of such evidence by the prosecution, the defence is entitled to use a prosecution document although unexhibited and unproved and relied upon a decision of Sheo Prasad Vs. Emperor, 39 CLJ 917.
242. In Ramesh Kumar Vs. State of Delhi & Ors., MANU/DE/2946 of 2016, Hon'ble Delhi High Court has referred Ram Dayal (supra), CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 217 of 336 Raj Bahadur (supra) and Ashitosh Verma Vs. CBI, MANU/DE/3375/2014 and in paragraph no. 45, it was pleased to observe that
45. In civil trials, the documents filed by one party but not formally proved, are deemed as admitted by the party which filed the same and an admission on its part. Such documents, if relied upon by the opposite party, need not be formally proved under sections 17 to 21 of the Evidence Act. Such documents are, at the behest of the opposite party, so read into evidence. The same principle would thus apply to documents which have been collected by the prosecution during a criminal investigation and have been filed along with the chargesheet, though not formally proved in evidence. It would be considered fairness on the part of the prosecution to place such documents even though they do not support the prosecution theory but support the case of the defence on record. The defence would be entitled to utilize such documents even if the prosecution has not led formal proof thereof. ..........
48. The site plan thus has not been proved on record by the prosecution. However, in view of the position in law, this document having been filed by the prosecution, it was open to the defence to rely upon the same.
243. PW-36 Shri S.V. Sudarshan, Branch Head was confronted with various office notes no. D-253353-06 dated 09.10.2006 vide Ex.PW36/DX-2, D-253404-06 dated 18.12.2006 vide Ex.PW36/DX-3 and D-253420-06 dated 21.12.2006 vide Ex.PW36/DX-4 respectively, and he admitted that he had permitted the modifications as mentioned in the above credit notes as per the recommendation of the section.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 218 of 336244. PW-36 was also confronted with various notes in relation to different bill nos. D-253337-06 dated 22.09.2006 vide Ex.PW36/DX- 5, D-253072-07 dated 27.02.2007 vide Ex.PW36/DX-6, D-253073 dated 28.02.2007 vide Ex.PW36/DX-7, D253022-7 dated 28.02.2007 vide Ex.PW36/DX-8, D-253023-07 dated 08.03.2007 vide Ex.PW36/DX-9, D-253024-07 dated 20.03.2017 vide Ex.PW36/DX- 10 and D256028-07 dated 21.03.2007 vide Ex.PW36/DX-11 that the above-referred bills were discounted and modifications were permitted by him as recommended by the Section and the same bear his signature. PW-36 also admitted that two bills dated 18.12.2006 and 21.12.2006 for Rs.64.94 lacs and Rs.30.27 lacs respectively were allowed by the Branch and obtained ratification from the Circle Office vide Ex.PW24/DX-5. Meaning thereby that there was no criminal wrong doing on the part of the branch officials.
245. Notably, PW-19 who had submitted a study report vide Ex.PW19/1 (D-37) in which he mentions about the role of the bank official, has expressed his inability whether any office note was prepared by C.T. Ramakumar (A-9), he was unable to tell whether such notes were shown to him. The above-referred notes clearly indicate that in arriving at his finding against C.T. Ramakumar (A-9) CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 219 of 336 and D.S. Mehta (A-7), no such notes were considered by him and if the notes were not considered then finding made in the study report are liable to be excluded while considering the present case as the same is required to be evaluated in an independent manner.
246. Pertinently in his cross-examination, PW19 Shri R. Subramanian stated that FBE becoming overdue and subsequently getting realized was a regular feature in these group accounts.
247. The study report vide Ex.PW19/1 which is a relied upon by the prosecution, did not speak about the illegalities but it was only in respect of the irregularities. It is notable to mention that a study report prepared by the bank or its official does not have much relevance for the purposes of the criminal trial as the requisite ingredients of an offence in respect of an individual is to be established during the trial. A perusal of Ex.PW19/1 i.e. study report would not indicate that it has obtained any input from the bank officials who were the subject of scrutiny. It is also reflected from the cross-examination of PW-19 that he did not consider large number of documents while preparing the study report and moreover, he has also not reported about the occurrence of fraud in the account of A-1/Harpreet Fashion.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 220 of 336Moreover, in Radhyshyam Kejriwal Vs. State of West Bengal, (2011) 3 SCC 581 after referring to Standard Chartered Bank (I) Vs. Diectorate of Estate (2006) 4 SCC 278 and Collector of Customs Vs. L.R. Melwani, AIR (1970) SC 962 it was observed in para 38(iii) that "Adjudication proceeding and criminal proceeding are independent in nature to each other and in para 38(iv) "The finding against the person facing prosecution in the adjudication proceeding is not binding on the proceeding for criminal prosecution" and in para 38(v) Adjudication proceeding by the Enforcement Directorate is not prosecution by a competent court of law to attract the provisions of Article 20(2) of the Constitution or Section 300 of the Code of Criminal Procedure.
248. In Iqbal Singh Marwah Vs. Meenakshi Marwah, (2005) 4 SCC 370, it was observed as under :-
24. Coming to the last contention that an effort should be made to avoid conflict of findings between the civil and criminal Courts, it is necessary to point out that the standard of proof required in the two proceedings are entirely different. Civil cases are decided on the basis of preponderance of evidence while in a criminal case the entire burden lies on the prosecution and proof beyond reasonable doubt has to be given. There is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the basis of the evidence adduced therein.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 221 of 336
249. Hence, any finding in any study report/internal report has no bearing or relevance in the criminal trial and the facts have to be established in accordance with the law as standard of proof in a criminal trial stands at much higher pedestal than in any inquiry or any internal report. Moreover, it is also clear that there was no participation of the bank officials from the Branch in the preparation of the so called study report and therefore, Ex.PW19/1 cannot be taken into consideration for any purposes in reference to the present case.
250. Perusal of the office notes vide Ex.PW36/DX-2 to Ex.PW36/DX-4 would reveal that both accused A-9 C.T. Ramakumar and A-7 D.S. Mehta had correctly recorded all the adverse features pertaining to the limit of A-1/Harpreet Fashion and they made full and complete disclosure and also made recommendation for the discount and for the adjustment of the overdue facility. The notes were approved by the next Sr. Official i.e. Sr. Manager as well as by PW- 36, in which it was clearly brought to the knowledge of the superior officers that there were alteration in the name of the consignee and noting shows that the application of mind by the superior officers of A-7 and A-9. A public sector bank works in a hierarchical fashion CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 222 of 336 where a junior officer puts up a note making his recommendation for the perusal of his senior officer and if such a junior officer makes any recommendation without concealing any material fact for the perusal of his superior officer and if such a note is approved by a superior officer then no criminality could be attached without any dishonesty. It is also relevant to mention that Ex.PW36/DX-3 also records the detailed reasons of the superior officer of A-7 and A-9 and which was also approved by Asstt. General Manager. Ex.PW36/DX-4 records the negative features by both the accused persons for the perusal of their senior officers and senior officers with their open eyes have taken the decision to permit the discounting of the bill.
251. A perusal of the notes vide Ex.PW36/DX-5 to Ex.PW36/DX- 11 would reveal that in all the notes, presenting officer has detailed all the negative features in the notes for the perusal of his seniors such as PW-36 and other officers. It appears that decision in respect of the discounting of the bills and as well as adjustment with the packing credit was not made by the accused persons, rather the same was the decision which was taken up by the Sr. Manager and Asstt. General Manager. The notes reflect a conscious decision was taken by the seniors of A-7 and A-9. PW-36 Shri S.V. Sudarshan and PW-24 Shri CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 223 of 336 K. Athimoolan and both of them had permitted the discounting of the bills.
252. It is notable to mention that PW-36 Shri S.V. Sudarshan had deposed that if there is an overdue and there are returned unpaid bills of the parties then export bills cannot be discounted. PW36 has also deposed that Branch Incharge is competent to permit discounting of export bills, if export bills are overdue and then it is to be reported to the sanctioning authority i.e. Circle Office and no office note was prepared at the time of discounting of each bill. PW-36 has also deposed that if a party was having a regular limit then bill can be discounted within the limits and if the limits are not available, then office note should be prepared and if there is any deviation in the terms and conditions, such an exceeding of usance period, alteration in the column of consignee name and address, the office note should be prepared. A careful perusal of the deposition of PW36 is contradictory to the case set up by the prosecution that when overdue bills are pending, the export bills cannot be discounted. In the same breath, PW-36 has also illustrated the circumstances when there were overdue and returned unpaid bills, the bills could be discounted, whereas the specific case of the prosecution is that it cannot be CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 224 of 336 discounted. Relevantly in his examination-in-chief, PW-36 categorically deposed that no office notes in respect of export bills of Harpreet Fashion were prepared. At the cost of the reiteration, this statement of PW-36 was contradicted and demolished in the cross- examination when he was confronted with Ex.PW36/DX-2 to Ex.PW36/DX-11 and the office notes would reveal that it was PW36 who had permitted the discounted of the overdue bills and also permitted the discounting of the altered bills. When a particular decision is taken by the prosecution witness himself being the superior authority, it does not lie into the mouth of the prosecution that superior authority approving such a decision was not responsible, rather presenting officer was responsible for the discounting of the bills, when the decision for the discounting of the bill was not made by him. Rather, it was the superior authority who was empowered to take decision in respect of the discrepent document as well as overdue bills. It is notable to mention that allegations of the prosecution that A-7 and A-9 dealt D-7 to D-17 including the altered overdue bills and other bills, initially no documentary evidence indicating as to how accused A-7 and A-9 had dealt the file M/s Harpreet Fashion in the examination in chief and the above referred notes were put to the witnesses after grant of the permission during the cross-examination CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 225 of 336 when the above referred notes were produced by the Bank pursuant to order passed under the application under section 91 Cr.P.C and in this regard, it is necessary to observe that it is well settled law that case of the prosecution has to stand on its own leg and in respect of present transaction no criminality is found on A-7 and A-9 in dealing with bills from D-8 to D-17.
253. PW-23 Shri N. Balasubramaniam in his cross-examination stated that :
"I have not investigated the account at the branch. I had investigated only at Circle Office and Head Office. I have not pointed out any irregularities on the part of the Branch officials or the branch employees. I had pointed out the irregularities on the part of the officials at Circle Office.
I remember that a meeting was held on 11.08.2006 at Circle office with the borrower and the Branch official where the Branch was directed to continue the discounting of the bills and adhoc limits were permitted. The branch has sought ratification by sending the ratification note to the Circle Office for the discretion used by the Branch and the same were sanctioned by Circle Office.
It is correct that the account was running satisfactorily till April 2007 when the limits were renewed by the orders of Executive Director of the Bank at Head Office and the terms and tenture of the FBE was increased from 90 days to 150 days though the account was showing overdrawings from time to time by delay in realization of export bills.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 226 of 336
The witness is shown page no. 1 of (D-4) which is letter dated 08.12.2006 already Ex.PW19/DX-4 and after seeing the same the witness states that it was informed by the branch that Gunjit Singh referred in the letter has no involvement with the buying houses referred to in Circle Office letter.
The witness is shown page no. 388 of (D-5) which is letter dated 24.11.2006 already Ex.PW24/5 and after seeing the same, the witness states that the branch has confirmed that there was no overdrawings prior to 26.09.2006 there were no overdues.
The witness is shown page no. 114 of (D-5) which is letter dated 23.08.2017 which is now Mark PW24/DX-8 and after seeing the same the witness states that there was no overdues prior to 30.03.2007.
254. It is also relevant to mention that PW-23 has accepted that all the ratification concerning these accounts, discrepancy and overdues were made from the Circle Office. It is pertinent to mention that PW23 had also deposed that he did not point out any irregularity on the part of the branch officials or the branch employees and rather he had pointed out the irregularity on the part of the Circle Office.
255. More importantly, in his deposition dated 03.04.2018, PW23 stated as under :
"It is correct that the bill limits have been sanctioned by the Circle Office. Vol. Had the processing authority at Circle Office brought the overdue aspect end (sic) the account becoming technically NPA in their office note to sanctioning authorities, the limits might CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 227 of 336 not have been sanctioned by the sanctioning authority. It is correct that this account was high risk rating since 2003."
256. PW-36 Shri S.V. Sudarshan in his cross-examination dated 09.08.2018 has stated that :
"It is correct that had there would be any prohibition on inter-group sale and purchase, the bank would not have allowed the borrowers in this case. It is correct that the bank can allow the discounting of the bills despite the earlier bills are over dues if the usance period has not expired. It is correct that in this case of the borrowers the bank has allowed the discounting of the bills despite the earlier bills were pending as it was within the usance period. I am not aware whether there is any policy of the bank which mandates that the bill discounting cannot be allowed unless the buyers bank name is mentioned in the consignee column of the bill of lading or airway bills."
257. PW-36 Shri S.V. Sudarshan was also confronted with his statement under section 161 Cr.P.C. dated 17.01.2013 (Ex.PW36/DX-
1) and he stated that :-
"Yes, there is the policy in the bank, again said instruction of the bank, that the bill discounting would not be allowed by the bank unless the name of the buyers bank is not mentioned in the consignee column as it is mandatory. It is correct that in my statement to the IO, I did not state that there were such instruction. Vol. I had told the CBI that there was policy of the bank. I cannot give the details of the policy as of now. Vol. The same are present/mentioned in foreign exchange manual. I have not handed over the said instruction/policy mentioned in the foreign exchange manual to the CBI nor I was asked by the CBI to do so. It is wrong to suggest that I have not given the copy of such policy/instruction CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 228 of 336 or CBI did not ask for such policy or instructions as it was not mandatory."
258. The prosecution alleged that A-9 C.T. Ramakumar had fraudulently adjusted the overdue account bill in violation of RBI Circular No. APDIR Series No. 28 which restricts receipt of more than Two Lakhs for each transaction. Curiously, during the course of trial, the Circular as referred in the charge sheet was not relied by the prosecution. The photocopy of the aforesaid circular was mentioned in the list of documents vide D-100 and no relevant witness was examined to prove the aforementioned circular. The photocopy of the circular, as relied in the charge sheet, was put to PW-34 i.e. the investigating officer and who upon perusal of the same states that it was of the year 2008. The bill discounted pertains to the year 2007. It is quite surprising as to how the said document could be made the part of the charge sheet when the alleged irregularity relates to the year 2007. Hence, there is no substance in the allegations leveled against A-9 C.T. Ramakumar.
259. Perusal of the deposition of the different witnesses cited by the prosecution either from Branch or Circle Office or Head Office including Investigating Officers, none of the witness had stated that CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 229 of 336 any of the public servant had taken any illegal gratification or had given undue favour to the private accused persons. It would be instructive to take note of the statement of PW-34/IO Sushil Kumar in his cross-examination that he did not find any instance of illegal gratification being demanded, accepted or obtained by the bank officials. In the absence of any material, it cannot be said that there was any dishonest intention on the part of A-6 to A-9 while dealing with the case of A-1/Harpreet Fashion for grant of various credit facilities and on the basis of the evidence culled out during the trial, no offence under section 13(1)(d)(i)&(ii) of the PC Act is made out against A-6 to A-9 and it is established that none of the public servants/ bank officials had acted contrary to the public interest or that their acts are covered under section 13(1)(d)(iii) of PC Act.
260. Parliament Street Branch was an exceptionally large branch and it appears that it used to deal with various import and export bills etc. and different sections manned by different bank officials. Different officials in a banking system perform different sets of duties assigned to them and it is accepted by PW-34 that each department has a Key Responsibility Area and different sets of bank officials have to perform the duties assigned to them. The criminal trial is a voyage CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 230 of 336 to discover the truth and the essential requirement to believe upon a particular fact as a truth or false is dependent on the fact as to what material is brought by the prosecuting agency before the court and in order to nail a person it becomes the bounden duty to clearly specify the duties performed by him. A Senior Manager/or, an Incharge of a bank performs different functions including supervisory function and there are certain officers who manage the main counter where cash etc. are taken and there are some bank officials who used to check the account and there are certain officials who are engaged in bringing the business for the bank. If different sets of bank officials perform different functions, can it be said that for the fault or a wrong doing on the part of one official, another official can be blamed. Before charging any person of a wrong doing, it is mandatory and necessary for such an agency to obtain the relevant document showing the assignment of duties to such bank officials and in the present case, the investigating agency did not bring into record the vital document which delineates the function performed by the bank official and it is reflected from the deposition of PW-34 that he did not obtain any such document knowing fully well that bank official has to perform his duty within the frame work provided to him and PW-34 stated that he believed on the Study Report. Needless to say that an investigating CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 231 of 336 agency has to come to its independent conclusion in respect of fixing any responsibility on public servants. Previous IOs had also stated that they did not analyze the role of bank officials and bank official and no investigation was made from the Circle office as to why the credit facilities were granted and renewed by the Circle Office.
261. In C. Changa Reddy & Ors. Vs. State of AP, (1996) 10 SCC 193, in paragraph no. 22, it was observed by Hon'ble Supreme Court that :
"On careful consideration of the material on the record, we are of the opinion that though the prosecution has established that the appellants have committed not only codal violations but also irregularities by ignoring various circulars and departmental orders issued from time to time in the matter of allotment of work of jungle clearance on nomination basis and have committed departmental lapse yet. non of the circumstances relied upon by the prosecution are of any conclusive nature and all the circumstances put together do not lead to the irresistible conclusion that the said circumstances are compatible only with the hypothesis of the guilt of the appellant and wholly incompatible with their innocence. In Abdulla Mohammed Pagarkar v. State (Union Territory of Goa, Daman and Diu), [1980] 3 SCC 110, under somewhat similar circumstances this Court opined that mere disregard of relevant provisions of the Financial Code as well as ordinary norms of procedural behaviour of government officials and con-tractors, without conclusively establishing, beyond a reasonable doubt, the guilt of the concerned officials and contractors, may give rise to a strong suspicion but that cannot be held to establish the guilt of the accused. The established circumstances in this case also do not establish criminality of the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 232 of 336 appellants beyond the realm of suspicion and, in our opinion, the approach of the trial court and the High Court to the requirements of proof in relation to a criminal charge was not proper. That because of the actions of the appellants in breach of codal provisions, instructions and procedural safeguards, the Stale may have suffered financially, particularly by allot-ment of work on nomination basis without inviting tenders, but those acts of omission and commission by themselves do not establish the commission of criminal offences alleged against them. We may reiterate that once the report, Ext, P 11, is ruled out of consideration as inadmissible, then it is not safe to rely on the mere impressions of the witnesses to hold the appellants guilty of the offences alleged against them. The prosecution has failed to establish that in 1979-80, no work of jungle clearance in the Gandhipalem Project Division was undertaken and that false and fabricated documents were prepared with a view to misappropriate government funds. The prosecution has not even been able to establish that less work of jungle clearance was undertaken but payment was shown to have been made for excessive work and some amount out of the payments made for the work were thus misappropriated by the appellants in connivance with the con-
tractors. The conviction and sentence imposed against the appellants (which had been reduced by the High Court to a token sentence) under the circumstances cannot be sustained and we accordingly accept the appeal and set aside their conviction and sentence. Fine paid by the appellants shall be refunded to them."
262. In view of the above-mentioned discussion and also considering the various judgments of the Apex Court and the Hon'ble Delhi High Court in which it was held that even if the codal and irregularities were established that by itself would not be a ground to establish that criminal case was made out against the accused and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 233 of 336 mere dis-regard to some provisions of the financial code as well as ordinary norms of procedural behaviour of public servant and private persons cannot be made as basis to make out a case under Prevention of Corruption Act.
263. In view of the above-mentioned discussion and from the testimonies of the different witnesses as well as the judgments of superior court, it is clear that apparently no case of criminality is made out under section section 13 of Prevention of Corruption Act.
264. It would be appropriate to consider the provisions of Section 415 and 420 IPC before appreciating the contentions of the parties with regard to commission of offences under Indian Penal Code. Section 415 IPC reads as under :
415. Cheating - Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retrain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
Section 420 IPC reads as under :-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 234 of 336"420. Cheating and dishonestly inducing delivery of property
- Whoever cheats and thereby dishonestly induces, the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extent to seven years, and shall also be liable to fine."
265. The necessary ingredients of offence of cheating under section 420 IPC are, when any person fraudulently or dishonestly induces a person by deceiving him to deliver any property to any person or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or to omit anything which he would not do or omit if he were not so deceived, and which act or commission causes or is likely to cause damage or harm to that person in body, mind, reputation or property is said to cheat.
266. If both Sections 415 IPC and 420 IPC are read together, then in order to attract the applicability of Section 420 IPC, the ingredients of Section 415 IPC are also required to be satisfied. Secondly, the person cheated must be dishonestly induce to deliver a property to any person. Thirdly, when a person destroys or alters either wholly or part of the valuable security or anything signed or sealed and capable of being converted into valuable security is said to have committed the offence of cheating.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 235 of 336267. Sections 463, 464, 467, 468, 469 IPC read as under :-
Section 463 Indian Penal Code [Whoever makes any false document or false electronic record or part of a document or electronic record, with intent to cause damage or injury], to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery.
Section 464 IPC in The Indian Penal Code 464 Making a false document. -- [A person is said to make a false document or false electronic record-- First --Who dishonestly or fraudulently -
(a) makes, signs, seals or executes a document or part of a document;
(b) makes or transmits any electronic record or part of any electronic record;
(c) affixes any [electronic signature] on any electronic record;
(d) makes any mark denoting the execution of a document or the authenticity of the [electronic signature], with the intention of causing it to be believed that such document or part of document, electronic record or [electronic signature] was made, signed, sealed, executed, transmitted or affixed by or by the authority of a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed; or Secondly --Who, without lawful authority, dishonestly or fraudulently, by cancellation or otherwise, alters a document or an electronic record in any material part thereof, after it has been made, executed or affixed with [electronic signature] either by himself or by any other person, whether such person be living or dead at the time of such alteration; or Thirdly --Who dishonestly or fraudulently CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 236 of 336 causes any person to sign, seal, execute or alter a document or an electronic record or to affix hi [electronic signature] on any electronic record knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of deception practised upon him, he does not know the contents of the document or electronic record or the nature of the alteration.] Section 467 IPC
467. Forgery of valuable security, will, etc.--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 thereon, or to receive or deliver any money, movable 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 movable property or valuable security, shall be punished with 1[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.
Section 468 IPC
468. Forgery for purpose of cheating.--Whoever commits forgery, intending that the 1[document or electronic record forged] shall be used for the purpose of cheating, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
268. In Dr. Vimla Vs. Delhi Administration, AIR 1963 SC 1572, it was held that:
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 237 of 336The definition of "false document" is a part of the definition of "forgery". Both must be read together. If so read, the ingredients of the offence of forgery relevant to the present enquiry are as follows, (1) fraudulently signing a document or a part of a document with an intention of causing it to be believed that such document or part of a document was signed by another or under his authority; (2) making of such a document with an intention to commit fraud or that fraud may be committed. In the two definitions, both mens rea described in s.464 i.e., "fraudulently" and the intention to commit fraud in s. 463 have the same meaning. This redundancy has perhaps become necessary as the element of fraud is not the ingredient of other intentions mentioned in s. 463. The idea of deceit is a necessary ingredient of fraud, but it does not exhaust it;an additional element is implicit in the expression. The scope of that something more is the subject of many decisions. We shall consider that question at a later stage in the light of the decisions bearing on the subject. The second thing to be noticed is that in s. 464 two adverbs,"dishonestly" and "fraudulently" are used alternatively indicating thereby that one excludes the other. That means they are not tautological and must be given different meanings.
Section 24 of the Penal Code defines"dishonestly" thus :"Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing dishonestly"."Fraudulently" is defined in s. 25 thus:" A person is said to do a thing fraudulently if he does that thing with intent to 591defrand but not otherwise".The word "defraud" includes an element of deceit. Deceit is not an ingredient of the definition of the word "dishonestly" while it is an important ingredient of the definition of the word "fraudulently". The former involves a pecuniary or economic gain or loss while the latter by construction excludes that element. Further the juxtaposition of the two expressions "'dishonestly" and"fraudulently" used CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 238 of 336 in the various sections of the Code indicates their close affinity and therefore the definition of one may give colour to the other. To illustrate, in the definition of "dishonestly", wrongful gain or wrongful loss is the necessary enough. So too, if the expression "fraudulently' were to be held to involve the element of injury to the person or persons deceived, it would be reasonable to assume that the injury should be something other than pecuniary or economic loss. Though almost always an advantage to one causes loss to another and vice versa, it need not necessarily be so. Should we hold that the concept of fraud" would include not only deceit but also some injury to the person deceived, it would be appropriate to hold by analogy drawn from the definition of"dishonestly" that to satisfy the definition of"'fraudulently" it would be enough if there was a non-economic advantage to the deceiver or a non-economic loss to the deceived. Both need not co- exist.
6. Let us now consider some of the leading text book writers and, decisions to ascertain the meaning of the word "fraudulently".
7. The classic definition of the word "fraudulently" is found in Steplien's History of the Criminal law of England, Vol.2, at p. 121 and it reads "I shall not attempt to construct a definition which will meet every case which might be suggested, but there is little danger in saving that whenever the words "fraud" or intent to defraud" or "fraudulently" occur in the definition of a crime two elements at least are essential to the commission of the crime : namely, first, deceit or an intention to deceive or in some cases mere secrecy ; and secondly, either actual injury or possible injury or to a risk of possible 'injury by means of that deceit or secrecy............. This intent is very seldom the only, or the principal, intention entertained by the fraudulent person, whose principal object in nearly every case is his own advantage................. A practically conclusive test of the fraudulent character of a deception for criminal purposes is this : Did the author of the deceit derive CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 239 of 336 any advantage from it which could not have been had if the truth had been known ? If so it is hardly possible that the advantage should not have had an equivalent in loss or risk of loss to someone else, and if so, there was fraud."It would be seen from this passage that "'fraud" is made up of two ingredients, deceit and injury. The learned author also realizes that the principal object of every fraudulent person in nearly every case is to derive some advantage though such advantage has a corresponding loss or risk of loss to another. Though the author has not visualized the extremely rare situation of an advantage secured by one without a corresponding loss to another, this idea is perused in later decisions.
15. To summarize : the expression "'defraud" involves two elements, namely, deceit and injury to the person deceived.
injury is something other than (1) economic loss that is', deprivation of property, whether movable or immovable, or of money, and it will include any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non economic or non-pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied.
269. A perusal of the charge-sheet as well as the charge dated 26.08.2017 in so far as the private persons are concerned i.e. Harpreet Fashion Pvt. Ltd. and its Director and other accused persons the allegations could be categorized for the purposes of analysis in following manner :
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 240 of 336i) Applying for the credit facility for M/s Harpreet Fashion Pvt. Ltd. by filing loan application and other documents with an intention to cheat the Bank by fabricating or forging bills, order copies etc. and altering the airway bills and consignee the goods to Kabul.
ii) Diverting the funds of loan amount/packing credit to the sister concern.
iii) Private accused persons with an intention to cheat, did not make payment qua 10 overdue bills (from D-8 to D-17) and the accused persons diverted the packing credit limits to the sister concern.
iv) It is also alleged that private accused persons had cheated Rs.4.80 Crores in conspiracy with other accused persons by obtaining orders from their relatives and forged and fabricated bills were also submitted and inducement was also made to the bank to grant credit facility in favour of A-1/Harpreet Fashion and diversion of the funds to the family controlled firms of accused and exporting the goods to a restricted country without obtaining permission to export and causing loss to the Canara Bank, Parliament Street Branch.
v) Gunjit Singh Mutneja, Managing Director (Manager), Al Mezhar Trading and authorized signatory of A-1/Harpreet Fashion, it was alleged that he obtained orders from the family controlled firms at Dubai and submitted forged and fabricated airway bill no. 1098D253420-06.CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 241 of 336
vi) Harpreet Kaur obtained orders from the family controlled firms at Dubai and submitted forged and fabricated airway bill no. 1098D253404-06 and Mohanjit Singh Mutneja had applied for the credit facility and submitted overdue bills containing the altered bills.
vii Harmindra Singh, Managing Director, Essa Fashions, it was alleged that he had given the purchase orders with an intention to help co-accused A-1/Harpreet Fashion to export the goods to a restricted country.
270. It is the case of the prosecution that ten bills were discounted by Branch including three bills in which airway bills were fabricated, leading to a situation where the total outstanding bill payable to the bank is Rs.3,59,93,833/- and the same constitute major portion of the cheated amount. It is further case of the prosecution that despite overdue bills, packing credit of about Rs.1.5 crores were utilized by the accused by diverting the fund to the sister concern. The file relating to ten overdues bill are are part of the relied upon document from D-8 to D-17.
271. PW-17 Shri Charan Jiv Arora deposed that when a borrower seeks discounting of the bill then borrower is required to approach the Bank by submitting the documents viz. covering letter alongwith number of documents i.e. original invoice, packing list, original bill of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 242 of 336 lading, exchange control copy of shipping bill and bill of exchange to claim the discounting of the bills and then the forex bill is taken up for consideration by the branch, If the discounting of the forex bill is within the credit limit then forex bill is discounted and the amount is first used to clear out the dues of the packing credit, if any and the balance amount is credited in the account of the borrower. The ten forex bills (overdues) were submitted to bank for the purposes of discounting and it is the case of the prosecution, the forex bills were discounted, however, no payment was received qua the discounted bills and hence the private accused persons had cheated the bank in conspiracy with the bank officials i.e. A-6 to A-9. As already noted that it has come in the evidence of PW-36 when his attention was drawn to Ex.PW36/DX-2 to Ex.PW36/DX-11 that forex bills were discounted by way of different noting which was approved by him. Relevantly, the prosecution has also alleged that three airway bills no. API 86810012786, API 86810012683 and API 8681012952 vide Ex.PW12/2, Ex.PW12/3 & Ex.PW12/4 dated 12.12.2006, 22.11.2006 and 25.11.2006 respectively were altered when the forex bills were submitted for the discounting and airway bills were part of the documentation pertaining to the export item for which the borrower is seeking discounting from the bank.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 243 of 336272. As explained earlier, the forex bills submitted for the discounting are preceded by a covering letter in which the relevant details including the documents are mentioned. The forex bills vide 253072-07 (D-8) dated 27.02.2007 alongwith other documents were furnished in the bank alongwith covering letter vide Ex.PW26/12 under the signature of Harpreet Kaur. The forex bills vide 256028-07 (D-9) dated 27.02.2007 alongwith other documents were furnished in the bank alongwith covering letter under the signature of Harpreet Kaur. The forex bills vide 256028-07 and 253072-07, both dated 27.02.2007 alongwith other documents were furnished in the bank alongwith covering letter under the signature of Harpreet Kaur, however, CFSL report did not express any opinion qua the signature of Ms. Harpreet Kaur. Relevantly, it was not disputed by the defence that aforesaid bills were submitted in the bank for discounting.
273. Overdue bills no. 253420-06 (D-11) dated 19.12.2006; 253404-06 (D-13) dated 05.12.2006; 253024-07 (D-14) dated 18.01.2007; 253023-07 (D-15) dated 18.01.2007 and 253022-07 (D-
17) dated 18.01.2007 alongwith other documents were furnished in the bank alongwith covering letter under the signatures of Harpreet CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 244 of 336 Kaur. The CFSL report vide Ex.PW26/3 (D-85) attributed the signatures to Harpreet Kaur.
274. Overdue bill no. 253352-06 (Exhibit PW26/13 (D-10) dated 09.10.2006 alongwith other documents were furnished in the bank alongwith covering letter under the signatures of Mohanjit Singh Mutneja. The list of documents submitted alongwith overdue bill no. 253404-06 dated 05.12.2006 contains the signature of Mohanjit Singh Mutneja. The CFSL report vide Ex.PW26/3 attributed the signatures to Mohanjit Singh Mutneja.
275. Overdue bill no. 253337-06 (D-12) dated 21.09.2006 alongwith other documents were furnished in the bank alongwith covering letter under the signatures of Gunjit Singh Mutneja. The CFSL report vide Ex.PW26/3 attributed the signatures to Gunjit Singh Mutneja on the questioned documents.
276. The forex bills i.e. ten overdue bills were submitted alongwith covering letters, invoices, packing lists, original bill of lading, exchange control copy of shipping bill alongwith Appendix -I and bill of exchange, purported to contain the signature of accused persons.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 245 of 336The CFSL report vide Ex.PW26/3 has furnished its opinion in respect of the questioned signatures appearing on the different documents. For easy reference and understanding, the corelation between the CFSL report in respect of the signatures on the questioned documents and the signatures appearing on the ten overdue bills, submitted by the private persons, are being shown in a tabular form :-
CFSL REPORTS IN RELATION TO THE ACCUSED PERSONS AND WITNESSES.
Sr. Name of documents Remarks/Opinion No.
1. Covering letter alongwith bill bearing Vide Report Ex. PW26/3 it has no. 235072-07 dated 27.02.2007 not been possible to express containing original letters, original any opinion on these items on invoice, packing list, original bill of the basis of material at hand.
lading, exchange control copy of shipping bill alongwith SDF form in Appendix I and Bill of Exchange of M/s Harpreet Fashion Pvt. Ltd. (Total 14 pages) vide Ex. PW26/12 (Colly) (D-8) having signatures from Q-747 to 760.
2. Covering letter alongwith bill bearing Vide Report Ex. PW26/3 it has no. 256028 dated 27.02.2007 alongwith not been possible to express original letters, original invoice, any opinion on these items on packing list, original bill of lading, the basis of material at hand. exchange control copy of shipping bill alongwith SDF Form in Appendix I of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 246 of 336 M/s Harpreet Fashion Pvt. Ltd (total 14 pages) (not exhibited) and having signatures from Q- 773 to Q-784. (part of D-9)
3. Covering letter alongwith bill bearing Vide Report Ex. PW26/3 the no. 253352-06 dated 09.10.2006 signatures are attributed to the alongwith original letters, original accused Mohanjeet Singh. invoice, packing list, original bill of lading, exchange control copy of shipping bill alongwith SDF Form in Appendix I and Bill of Exhange of M/s Harpreet Fashion Pvt. Ltd. (total fourteen pages) vide Ex. PW26/13 (Colly) (D-10) having signatures marked Q-330 to Q-335.
4. Covering letter alongwith original bill Vide Report Ex. PW26/3 the bearing no. 253420-06 dated signatures are attributed to the 19.12.2006 alongwith original letters, accused Harpreet Kaur. original invoice, packing list, original bill of lading, exchange control copy of shipping bill alongwith SDF Form in Appendix I and Bill of Exhange of M/s Harpreet Fashion Pvt. Ltd. (total fourteen pages) vide Ex. PW26/15 (Colly) (D-11) having signatures marked Q-804 to Q-815.
5. Covering letter alongwith original bill Vide Report Ex. PW26/3 only bearing no.253337-06 dated 21.09.2006 the signatures Mark Q-663, Q- alongwith original letters, original 664, Q-665, Q-667 are invoice, packing list, original bill of attributed to the accused Gunjit lading, exchange control copy of Singh Mutneja.
shipping bill alongwith SDF Form in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 247 of 336 Appendix I and Bill of Exchange of M/s Harpreet Fashion Pvt. Ltd. (14 pages) vide Ex.PW26/16 (Colly) (D-12) having signatures marked Q-663 to Q-
677.
6. Covering letter alongwith original bill Vide Report Ex.PW26/3 the bearing no. 253404-06 dated signatures are attributed to the 05.12.2006 alongwith original bill of accused Harpreet Kaur and exchange, original letters, original only the signatures mark Q- packing list, original bill of lading, 316 to Q-321, Q-323 to Q-327 exchange control copy of shipping bills and Q-329 are attributed to alongwith SDF Form in Appendix I of accused Mohanjit Singh. M/s Harpreet Fashion Pvt. Ltd. Vide Ex. PW26/17 (D-13) having signatures marked Q-816 to Q-818 and signatures from Q-316 to Q-329.
7. Covering letter alongwith bill 253024 Vide Report Ex.PW-26/3 the dated 18.01.07 alongwith original signatures are attributed to the letters, original invoice, packing list, accused Harpreet Kaur. original bill of lading, exchange control copy of shipping bill alongwith SDF Form in Appendix I and Bill of Exchange and invoices of M/s Harpreet Fashion Pvt. Ltd (Total nine pages) vide Ex. PW26/19 (D-14) having signatures Marked Q-795 to Q-803.
8. Covering letter alongwith bill bearing Vide Report Ex.PW-26/3 the no. 253023-07 18.01.07 alongwith signatures are attributed to the original letters, original invoice, accused Harpreet Kaur. packing list, original bill of lading, exchange control copy of shipping bill alongwith SDF Form in Appendix I, CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 248 of 336 and bill of exchange of M/s Harpreet Fashion Pvt. Ltd (No exhibit mark given) having signatures from Marked Q-785 to Q-794. (Part of D-15).
9. Covering letter alongwith bill bearing Vide Report Ex.PW-26/3 it has no. 253073-07 dated 27.02.2007 not been possible to express alongwith original letter, original any opinion on these items on invoice, packing list, original bill of the basis of material at hand. lading, exchange control copy of shipping bill alongwith SDF form in Appendix I and Bill of Exchange of Ms Harpreet Fashion Pvt. Ltd (No exhibit given) having signatures from Marked Q-761 to Q772 (part of D-16).
10. Covering letter alongwith bill bearing Vide Report Ex.PW-26/3 the no. 253022 dated 18.01.2007 alongwith signatures are attributed to the original invoice, packing list, original accused Harpreet Kaur. bill of lading, exchange control copy of shipping bill alongwith SDF form in Appendix I and Bill of Exchange relating to M/s Harpreet Fashion Pvt.
Ltd (No exhibit given) having signatures from Market Q-738 to Q-
746. (D-17).
277. The private accused persons have not disputed the CFSL report vide Ex.PW26/3 and it can be safely said that covering letters containing different signatures of the above-mentioned accused CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 249 of 336 persons pertain to Mohanjit Singh Mutneja, Gunjit Singh Mutneja and Harpreet Kaur on different documents as attributed to them in CFSL report belongs to them except at Sr. No. 1, 2 and 9 on the above table, in which no opinion was expressed by the CFSL.
278. The aforesaid forex bills were presented for discounting and the same were discounted and out of its proceed, the packing credit were cleared and whatever be the balance amount was credited into the current account of A-1/Harpreet Fashion. The copy of original discounting register vide Ex.PW21/4 alongwith certificate under section 65B of the Indian Evidence Act vide Ex.PW21/3 gives a complete detail in respect of the discounting of the aforesaid bills. A perusal of deposition of PW-21 would indicate that there was not much challenge with regard to the various entries made in the bill discounting register in respect of the aforesaid ten overdue bills. A perusal of cross-examinations of PW-21 and PW-20 would reveal that not much challenge was raised in respect of the ten overdue bills aggregating Rs.3,59,93,833/-.
279. It is contended on behalf of the prosecution that the overdue bills were wrongly discounted by the Branch officials in conspiracy CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 250 of 336 with private accused persons and the accused persons have committed substantive offences under Penal Code. The Ld. Defence counsels for the private accused persons had contended in unison voice that mere fact that bank had discounted the bills or that they had furnished the bills for discounting and for which the payment was not realized, it would not mean that they have committed an offence of cheating and it was also vehemently argued that mere fact that altered airway bills were found with forex bill would not mean that there was any intention to cheat the Bank or that private persons had committed the offence of cheating or there was any conspiracy between private accused person or with public servant.
280. At the cost of reiteration, the prosecution had alleged that three overdue bills No. 253352-06 (Exhibit PW26/13 (D-10), 253404-06 (Exhibit PW26/17 (D-13) and 253420-06 (Exhibit PW26/15 (D-11) submitted for discounting also contain altered airway bills in which the name of Dubai based Bank was inserted as 'Consignee', whereas goods were exported to Afghanistan, a restricted cover country. In order to meet out the allegations, it is contended that mere fact that three airway bills were altered would not make much difference as the altered bill nos. API 86810012786, API 86810012683 and API CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 251 of 336 8681012952 vide Ex.PW12/4 (D-19), Ex.PW12/3 (D-13) and Ex.PW12/2 (D-11) would indicate that when bills were submitted to the bank for discounting, all the documents Forex Bills clearly indicate that goods were exported to Afghanistan and the name of buyer is mentioned as Dubai. It is also contended that mere discrepancy in airway bill would not make much difference in the instant case as goods as per usual practice were being exported to Afghanistan. It is also contended that while submitting the application for credit facility, it was always mentioned that goods were to be exported to Afghanistan and buyer at Dubai. It was also alluded by the Ld. Counsel for private accused persons that it is a choice of buyer as to where he wants the delivery of his goods and since in the present case, the buyer was at Dubai and he wanted the goods to be delivered at Afghanistan and for that reason, the goods were delivered to Afghanistan. It is also pointed out that Custom documents indicate that goods were exported to Afghanistan and on the basis of these submissions, it is contended that no offence of cheating was committed by accused persons. It is also contended that when goods are exported to a foreign destination, the airway bills are also used to be sent and the preparation of airway bill is not in the hand of the private accused persons.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 252 of 336281. It is amply clear that ten bills were presented for discounting to the Bank and after necessary adjustment, the packing credit was adjusted and the remaining balance was transferred in the account.
282. Charge dated 26.08.2017 framed against Harpreet Kaur Mutneja, Mohanjit Singh Mutneja and Gunjit Singh Mutneja to the effect that they have altered/forged three airway bills bearing no. API- 86810012786 dated 25.11.2006 vide Ex.PW12/4 (D-19), API- 86810012683 dated 22.11.2006 vide Ex.PW12/3 (Part of D-13) and API-86810012952 dated 12.12.2006 vide Ex.PW12/2 (Part of D-11) respectively. In order to appreciate the allegations the evidence brought on record is required to be appreciated.
283. Prosecution has examined PW-8 Shri Sunil Dutt who identified signatures appearing on Ex.PW8/2 to Ex.PW8/8 of different Custom Officers. The documents only indicate that goods were exported to Afghanistan. PW8 explained the procedure as to how the goods are cleared for export and number of documents that are required. He also stated that if there is any correction in airway bill, the same is to be authenticated by Custom Department and as per him, no request for change of shipper bill/airline bill was made by him and no corrections CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 253 of 336 were also made by him on the bills. It is also relevant to note that the original altered bill was never produced by this witness or that any altered bill was shown to him during the investigation/trial. Moreover, no contemporaneous record was produced/referred by PW- 8 in respect of the altered bill and therefore, his testimony is hardly of any avail. The testimony of PW-10 Shri Rajender Singh is also similar to the testimony of PW-8.
284. PW-11 Shri Binod Kumar Singh deposed on the similar line as that of PW-8 and PW-10. Apart from identifying the signatures of different custom officers and their employees on different documents, PW-11 stated that he had handed over the self attested copy of the shipping bills alongwith invoice, packing list and copy of airway bills except shipping bill no. 4360069 and shipping bill no. 4320069 dated 19.01.2013 to the IO of the case and he also stated that if there is any cutting in the airway bill/airlines and Airport Authority do not accept the goods for export and he has also deposed that in case of alteration, the same is required to be authenticated by the Authority. Relevantly in his examination-in-chief, PW-11 stated that after receipt of the airway bills from the Forwarder i.e. Airworld Cargo Services, the relevant documents are filled up and the documents are submitted to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 254 of 336 the Custom, upon which the shipping bills are issued. He has also stated that there are four copies of airway bills and the original copy remains with the Airlines and out of the four copies, one copy is given to the Exporter. He has also stated that alteration was not made at his end. He also stated that documents vide Ex.PW10/1, Ex.PW11/1 alongwith annexures vide Ex.PW10/2 and Ex.PW11/2 were sent to the Custom Authorities.
285. PW-12 Shri Chander Sharma, another Custom House Agent brought on record the shipping bills Ex.PW8/2 to Ex.PW8/8 vide which A-1/Harpreet Fashion had exported the goods and clearance of the export bill was made by his agency as Custom House Agent. He was shown airway bill vide Ex.PW12/2, Ex.PW12/3, Ex.PW12/4 and Ex.PW12/5 and stated that cutting on the airway bills was not made by any employee of his agency. He also deposed that if there are any cutting/alterations on the airway bill then airline usually authenticate it.
286. Perusal of deposition of all the above-mentioned witnesses would indicate that none of them had produced the original copy of the airway bill and no register/document was brought into record CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 255 of 336 showing any such maintenance of the airway bill by these CHAs. The common flow of the deposition of these witnesses are that airway bill in original is used to be dealt either by Airline or the Customs. Notably, no official from the Custom or any record of the Custom was brought by them and rather, the Custom House Agent had identified the signatures of various Custom Officers and even no attempts were made to obtain the copy of the airway bill either in original or photocopy from the relevant Government Departments and from the Airline Company. It is quite logical that natural witnesses who could have deposed about the condition of airway bill would be the person(s) who dealt the airway bill or the person who has custody of airway bill i.e. Custom or airline but these witnesses were not examined by the prosecution.
287. Pertinently, PW-34 in his cross-examination dated 28.09.2018 stated that the detail on the airway bills are filled by Airworld Cargo Company on the basis of the documents provided by the exporter himself and thereafter, Airworld Cargo Company provides the copy of the airway bill to the exporter. PW34 also stated that if there are any defects or error on the airway bill, then it is to be rectified by the Customs. PW-34 also stated that he has not examined any witness CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 256 of 336 from the Custom Department on this aspect and he went by the statement made by CHAs on this aspect and no verification was made from the Custom Authority. PW-34 had also denied the suggestion that details filled in the airway bill were rectified by Airworld Cargo Company and not by the Custom Authority and due to which he did not make any enquiry from the Custom Authority. PW-34 also stated that the details in the shipping bills are to be matched with the details in the airway bill and however, it is not mentioned in the charge sheet that he tallied the shipping bills with the alleged altered bills. P W-34 has also stated that details of the airway bill are filled by Airworld Cargo Company on the basis of the documents provided by the exporter and the same is not filled by the exporter . He has also further stated that upon receipt of the copy of the airway bills after the export, if the exporter find that details were wrongly filled and the Cargo Company did not rectify such defect then it is to be rectified by the Custom. PW34 Shri Sushil Kumar stated that :
"I have not examined any officials from the Custom Department on this aspect. Whatever has been stated by the CHA/Air Cargo Company on this aspect, I taken it to be correct and I did not independently cross-check the same from the Custom Authority. It is wrong to suggest that the details filled wrongly in the Airway Bills are rectified by the Air-Cargo Company and not by the Custom Authorities. It is further wrong to suggest that it was for this reason CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 257 of 336 that I have not made any inquiry or examine any officials from the Custom Department.
It is correct that the details filled in the shipping bills have to be the same as filled in the airway bills. The shipping bills were already there in the documents provided by the Bank and I got it tallied from the alleged altered airway bills. It is correct that I have not mentioned in the charge sheet that I have tallied the shipping bills with the alleged altered airway bills. It is wrong to suggest that I have not tallied the shipping bills with the alleged altered airway bills and that is why, I have not mentioned it in the charge sheet and I am improving the case now.
I have not confronted the officials of the shipping agency with the alleged altered airway bills to get the details matched as it was done by previous IO's. I have not done any investigation nor I have confronted the witnesses from the Air Cargo whose statements have been filed on record with the charge sheet with the alleged altered airway bills to confirm that whether the seal and signatures on the alleged alteraton portion belongs to them. (Vol. This must have been done by the previous IO). It is correct that I have not taken the sample signatures or collected the sample seal for sending it to CFSL for purposes of confirmation as to whether it belongs to the Air Cargo Company or not. It is correct that the entire details filled in the airway bills including the alleged alterations is filled by the typewriter. I have neither seized the typewriter from the Air Cargo Company nor sent it to CFSL for their opinion as to whether it has been done by the same typewriter or by a different typewriter."
288. It is debouched from the testimony of PW-34 that details in airway bills are usually filled by the Forwarder/Cargo Agent. There is no evidence available on record which indicates that exporter used to interact with Custom House Agent and it is Forwarder who used to interact with the Custom House Agents when goods are sent for CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 258 of 336 export to foreign countries and notably, the Forwarder/Cargo Agent was not examined by the prosecution during trial. It is not the case of prosecution that forwarding agent did not have any interaction with the investigating officer/PW34 or due to the lapse of time he was not available. It appears that during investigation, the investigating agency did come into contact with the proprietor of Airworld Cargo Company and it also seized one airway bill vide seizure memo Ex.PW31/4 (D-38) from Hemant Chowdhray. Under normal circumstances, Cargo Agent Shri Hemant Choudhary would be the best person to indicate whether any alteration was made in the altered bill or not and the investigating agency would have called for the record in respect of the delivery of the cargo by Cargo Agent and contemporaneous record in respect of the so-called altered bill. However, no such exercise was conducted during the investigation and no reason was assigned on this crucial aspect, specially in a situation when prosecution asserts that airway bills were altered by the private accused person. She Hemant Choudhary was not examined by the prosecution.
289. Moreover that three altered airway bills vide API 86810012786 (Ex.PW12/2), API 86810012683 (Ex.PW12/3) and API 8681012952 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 259 of 336 (Ex.PW12/4) dated 12.12.2006, 22.11.2006 and 25.11.2006 respectively, which were annexed alongwith three forex bills 253352- 06, 253404-06 and 253420-06 were not sent to CFSL for analysis and rather the covering letter pertaining to the bills which were submitted for discounting was sent to CFSL for analysis and on the basis of the covering letter in which different documents including airway bill was submitted. The said covering letter contains the signature of Harpreet Kaur and Mohanjit Singh Mutneja.
290. PW-34 Shri Sushil Kumar in his examination-in-chief dated 09.08.2018 stated that he received CFSL opinion which had confirmed the signature of accused Mohanjit Singh Mutneja on the altered airway bill no. API-86810012786 attached with ID No. 1098D-253352-06 discounted on 09.10.2006 and signature of Harpreet Kaur Mutneja on the altered airway bills bearing no. API- 86810012683 attached with bill ID No. 1098D-253404-06 discounted on 18.12.2006 and altered airway bill no. API-86810012952 attached with bill ID No. 1098D-253420-06 discounted on 21.12.2006, whereas in his cross-examination when PW-34 was confronted with Ex.PW26/4 and Ex.PW34/4, stated that he did not send the altered bills to CFSL for analysis for opinion. The relevant suggestion was CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 260 of 336 also given by the defence to PW-34 that three altered bills were not sent to CFSL for analysis and he incorrectly stated that the signatures of Mohanjit Singh Mutneja and Harpreet Kaur Mutneja on the altered bills were found on altered bills. When three altered bills were not sent to CFSL for analysis then there was no basis to state that CFSL has confirmed that the signatures appearing on three altered bills were of private accused persons and thus no offence under section 467 or 468 IPC is made out against the accused person and in order to make out an offence under section under section 468 IPC, the person who has committed the forgery is required to be identified however prosecution failed to prove the charge under section 468 IPC against any of the charged accused persons. It would be profitable to refer and rely upon Chatt Ram Vs. State of Haryana(1980)1 SCC 460 in the context of the present case ;
14. There were two crucial questions which had to be considered before the appellant Chatt Ram could be convicted of the offences with which he was charged. With regard to the charge under Section 467, Penal Code, 1860, it was to be determined whether Chatt Ram had participated in any manner in the act of forging the ticket (Ex. P-
3). Similarly regarding the offence under Section 471, Penal Code, 1860, it was necessary to consider whether the prosecution had established by adducing cogent and convincing evidence that Chatt Ram, appellant knew or had reason to believe the ticket (Ex. P-3) to be a forged document when he presented it before the Treasury Officer and later before the Director to claim special prize on the basis thereof. Proof of this factual ingredient was essential for CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 261 of 336 conviction of the appellant for an offence under Section 471, of the Penal Code.
25. if it is assumed for the sake of argument that the number of ticket had been forged, that by itself would not show that accused forged it or participated in its forgery. Nor would the mere fact that accused presented this ticket before the officers concerned and claimed the Special Prize on its basis, necessarily stamp him with the knowledge or belief of its forged character.
26. Ex. P-3 was a forged document. Further, even on the assumption that the ticket Ex. P-3 was a forged document, the evidence on the record did not indubitably lead to the conclusion that the appellant Chatt Ram was concerned in forging it or had the requisite guilty knowledge of its forged character when he presented it and claimed prize on its basis before the officers concerned. It is immaterial if at any subsequent point of time he came to know of its forged character.
291. In light of the of above discussion, the next question for determination is with regard to the applicability of section 471 IPC and section 420 IPC on the private persons.
292. The contentions of the Ld. Counsels for accused persons are that in order to attract the applicability of Section 420 IPC in cases where there are regular transactions between the borrower and the bank and by picking up the few transactions to allege that borrower/party has cheated or defauded and it is urged that intention to deceive should CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 262 of 336 exist since inception. There is no quarrel to the proposition as submitted by the Ld. Counsels for the accused persons that intention to deceive should exist since inception, however, the term 'inception' is required to be applied by taking into account the peculiar facts and circumstances associated with the case. Merely a borrower company was dealing with the Bank for many years and in one of the years, it commits illegality/fraud then it does not lie in the mouth of such a borrower that because of good track, it cannot be fastened with the guilt as it is only in one of the year during the course of the dealing some defaults were made. What is required to be assessed in such cases, whether in respect of a particular transaction, any fraud or cheating was committed by the accused. The focus of the attention could be the entire duration in which a borrower is interacting with the Bank or in respect of the few transactions in which the deviant behaviour is observed. A good dress or address of a person is no guarantee that such person shall not commit any wrongful act in subsequent transactions. The term 'intention to deceive since inception" is a flexible term and cannot be put in a straight jacket formula and is required to be applied on case to case basis, there is no cavil to the proposition that in considering the intention to cheat the attending circumstances as well as other patterns are also to be CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 263 of 336 considered when the prosecution alleges that there were criminalities. The file relating to ten overdue bills (D-8 to D-17) and more specifically the cover letter/invoice and other documents would unveil that goods were always exported to Afghanistan and the names of the buyers are also mentioned. PW-36 and other witnesses from the bank have deposed that even if there are cutting/alterations, the bills are discounted. Different documents as available in D-8 to D-17 i.e. Invoices annexed with the covering letter mentions the destination at Afghanistan. Even in the packing list, the name of consignee is mentioned as Al-Mezhar Corner Trading, Dubai/Essa Fashions/Greenbelt etc. The invoice also contains the similar declaration to the effect that goods to be delivered to Afghanistan. A copy of computerized generated document from CUSTOM Department having title 'Shipping Bill for Export' gives the name of final destination as Afghanistan. A perusal of the documents submitted for the discounting to the bank would reflect that in all these documents, the name of final destination is given as Afghanistan. The cumulative reading of the documents submitted alongwith the altered bills clearly indicate that goods were exported to Afghanistan and merely on the basis of the altered bills, it cannot be said that there was any intention to cheat. It is also submitted by the Ld. Counsel for the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 264 of 336 private accused persons that goods were always exported to Afghanistan. In the application for the credit facility it was stated that Goods are to be exported to Afghanistan.
293. Admittedly, in the present case, the goods were exported to Afghanistan having buyer at Dubai and from the long course of the dealing between the borrower and the bank, there is a uniform pattern that goods are being exported to Afghanistan. It is not the case of the prosecution that goods were not exported to Afghanistan or any of the document submitted in respect of the goods purported to be exported were forged and fabricated and there is no report from the Custom that goods had not been exported. PW-8, PW-10, PW-11 and PW-12 have deposed that goods were exported through Custom and material available on record further indicates that importer bank had not made payment as buyer did not accept the bills raised by the borrower and even the banker of buyer had not raised any objection qua the fact as to why goods were delivered at Afghanistan. PW-36, star prosecution witness, had also provided the justification for discounting the bill containing the alterations, if any.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 265 of 336294. The bills which are usually submitted for discounting by the borrower would be sent by the borrower bank to the Banker of Importer Company located in a foreign country and if the bills are accepted then borrower bank receives the payment and if the bills are not accepted, then airway bill and other original documents are returned back to borrower. In the instant case, the original airway bills (part of three forex bills) were never received back from the foreign country and there is a complete lack of clarity on the part of the prosecution about the original airway bills which were sent to the foreign banker. Prosecution has also not explained when the bills are sent for collection whether all original documents are received back from the importer bank and no investigation was made by the Investigating officer in this regard and there is a complete silence by the prosecution on this crucial aspect. The prosecution despite all opportunities did not make proper effort to locate/obtain the original airway bill on the basis of which it has build up its case.
295. The only way forward for the prosecution to establish that private accused persons had committed the offence of cheating in relation to the export if it is established that goods were not exported to the foreign country or the documents by which the export of the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 266 of 336 goods shown are forged and fabricated. Secondly, by showing the active connivance of the buyer with the seller that borrower had exported the goods to a buyer and both buyer and seller had entered into a tacit agreement by which the buyer would not make the payment to the seller and the seller despite knowing the intention of the buyer had exported the goods.
296. In reference to the present case, the case of the prosecution is that goods were exported in the foreign country to the firm which were controlled by the relatives of the borrower. The goods were basically meant for Al Mezhar, Greenbelt Readymade and M/s Essa Fashion who were stated to be the buyers. The prosecution has failed to establish by way of cogent, admissible and relevant evidence about the constitution of these firms, whether buyer firm was a partnership or a limited company. The prosecution has even not alleged any wrong doing on the part of the buyer company and it had simply alleged that relatives of the director of the company are controlling the buyer firms, located in the foreign country. The investigating agency also did not make any attempt to conduct investigation either at Dubai or in Afghanistan.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 267 of 336297. It is necessary to observe that prosecution had alleged that A-3 and A-5 are the relatives of director of A-1/Harpreet Fashion and A-3 and A-5 were controlling the buyer company/firm at Dubai. In order to establish this allegation, the prosecution is required to establish by way of cogent evidence as to how and in what capacity A-3 and A-5 are associated with buyer firms/concern at Dubai. A relative of any private accused person could be employed in any firm and mere fact that he or she was working in the said buyer firm and if the said buyer firm did not make any payment to such a firm then such a relative cannot be hauled up to face the criminal trial. The prosecution is mandatorily obliged by collecting the relevant piece of admissible evidence by showing the involvement of such relative by positive evidence and must also answer about other persons who were controlling the said firm/company. It must also disclose about the constitution and nature of such concern whether it was proprietorship/partnership concern or a private limited company. Needless to say, in order to determine the criminal liability of an individual, the criminal liability in case of a proprietorship concern is markedly different from the liability of the director of the company. In order to establish that a Mg. Director of a company is liable for the act of its concern, the prosecution is obliged to prove that he or she is CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 268 of 336 directly involved in day to day affairs of the company, whereas in the case of the proprietorship concern, the proprietor is an individual and he can be fastened with the guilt. The prosecution in the present case, in order to stitch up the case against A-3 and A-5, had alleged that A-3 is the Director of Al Mezhar Corner Trading Company and Green Belt Ready-made and A-5 is having control of M/s Md. Essa Fashion Company, Dubai.
298. Apart from the common charge under section 120B IPC, accused Gunjit Singh was also charged u/sections 420/467/468/471 of Indian Penal Code with an allegation that he fraudulently obtained/gave the purchase order from his family controlled firm at Dubai for supply of ready-made garments and it was alleged that he was the Director of Al Mezhar Corner Trading Company and Green Belt Ready-made.
299. A-5/Harmendra Singh was charge sheeted and a charge under section 120B IPC was framed against him. Substantive charge under section 420 IPC was also framed against him by alleging that he had given the purchase order from his family controlled firm being the Director of M/s Essa Fashion.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 269 of 336300. In order to show that both Gunjit Singh Mutneja (A-3) and Harmendra Singh (A-5) are the Directors/Manager in the buyer firms at Dubai, the prosecution has examined and relied upon the testimony of PW-5 Shri Mrinal Singh and the documents brought into the record during the trial. A perusal of the deposition of PW-5 would unveil that essentially prosecution relies upon Ex.PW5/1 & Ex.PW5/2 to assert that A-5/Harmendra Singh is the Director of Mohd. Essa Fashion Company LLC. Ex.PW5/1 and Ex.PW5/2 are the unsigned electronically generated reports which were furnished vide covering letters Ex.PW5/4 and Ex.PW5/5 to Canara Bank, bearing the signature of Shri Sandesh Vichare. In respect of accused Gunjit Singh Mutneja, prosecution relies upon Ex.PW5/3 to assert that Gunjit Singh Mutneja is the Director of Al Mezhar Trading Company. Ex.PW5/3 is the unsigned electronically generated report which was furnished vide covering letter Ex.PW5/6 to Canara Bank, bearing the signature of Shri Sandesh Vichare.
301. Without going into the question of the admissibility of Ex.PW5/1, Ex.PW-5/2 and Ex.PW5/3, the electronically unsigned report state that "This report is forwarded to the Subscriber in strict confidence for the use by the Subscriber as one factor to consider in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 270 of 336 connection with credit and other business decisions. This report contains information compiled from information which Dun & Bradstreet does not control and which has not been verified unless otherwise indicated in this report. Dun & Bradstreet therefore cannot accept responsibility for the accuracy, completeness or timeliness of the report. Dun & Bradstreet disclaims all liability for any loss or damage arising out of or in anyway related to the contents of this report. This material is confidential and proprietary to Dun & Bradstreet and/or third parties and may not be reproduced, published or disclosed to others without the express authorization of Dun & Bradstreet or the General Counsel of Dun & Bradstreet." Interestingly, no one knows who was the author of the document.
302. Notably, no document was shown during the course of arguments or even during the trial that Gunjit Singh Mutneja was the Director/Manager of Green Belt Ready-made Company or had worked in any capacity in Greenbelt Readymade company. The prosecution has failed to elaborate or justify on what material and basis, it was the case of prosecution that Gunjit Singh Mutneja was the Director of Green Belt Ready-made Company.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 271 of 336303. A perusal of Ex.PW-5/1 to Ex.PW-5/3 would indicate that these were the electronically generated documents without having signature of any person and even no certificate under section 65-B of the Indian Evidence Act was attached with these reports. The question for consideration is whether Ex.PW5/1 to Ex.PW5/3 can be admitted and read in evidence.
304. The prosecution has relied upon electronic record by way of email etc. Section 65B(4) of the Indian Evidence Act specially stresses on the requirement for giving a certificate 'in respect of the electronic record in a proceedings' where it is desired to give statement in evidence.
305. In Anvar P.V. Vs. P.K. Baheer, AIR (2015) SC 180, it is observed that :
"15. Under Section 65-B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied:
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 272 of 336
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65-B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, compact disc (CD), video compact disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
17. Only if the electronic record is duly produced in terms of Section 65-B of the Evidence Act, would the question arise as to the genuineness thereof and in that situation, resort can be made to Section 45-A--opinion of Examiner of Electronic Evidence.
18. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65-B of the Evidence Act are not complied with, as the law now stands in India. xxx xxx xxx."
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 273 of 336306. The aforesaid observation followed and reiterated in Arjun Pandit Rao Vs. Kailash Kushanrao Gorantyal & Ors., (2020) 7 SCC 1 and in paragraph no. 31 and 32, it was observed as under :-
31. The non-obstante clause in sub-section (1) makes it clear that when it comes to information contained in an electronic record, admissibility and proof thereof must follow the drill of Section 65B, which is a special provision in this behalf - Section 62 to 65 being irrelevant for this purpose. However, Section 65B(1) clearly differentiates between the "original" document - which would be the original "electronic record" contained in the "computer" in which the original information is first stored - and the computer output containing such information, which then may be treated as evidence of the contents of the "original" document. All this necessarily shows that Section 65B differentiates between the original information contained in the "computer" itself and copies made therefrom - the former being primary evidence, and the latter being secondary evidence.
32. Quite obviously, the requisite certificate in sub-section (4) is unnecessary if the original document itself is produced. This can be done by the owner of a laptop computer, a computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. In cases where "the computer", as defined, happens to be a part of a "computer system" or "computer network" (as defined in the Information Technology Act, 2000) and it becomes impossible to physically bring such network or system to the Court, then the only means of proving information contained in such electronic record can be in accordance with Section 65B(1), together with the requisite certificate under Section 65B(4). This being the case, it is necessary to clarify what is contained in the last sentence in paragraph 24 of Anvar P.V. (supra) which reads as "...if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act...". This may more appropriately be read without the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 274 of 336 words "under Section 62 of the Evidence Act,...". With this minor clarification, the law stated in paragraph 24 of Anvar P.V. (supra) does not need to be revisited.
307. In view of the above-mentioned discussion, Ex.PW5/1 to Ex.PW5/3 cannot be admitted in evidence and what to talk about its proof. Without prejudice to the aforesaid findings, the deposition of PW-5 Shri Mrinal Singh raises further piquant question as regard the proving of the covering letters by which Ex.PW5/1 to Ex.PW5/3 were brought into record. PW-5 deposed that he cannot confirm or deny whether any inquiries were made about the firms from the competent firm at Chamber of Commerce, Dubai. He further stated that he cannot admit or deny the fact whether Gunjit Singh Mutneja and Harmendra Singh were not the controlling authorities of the aforesaid firms. Moreover, PW-5 had identified the signature of Shri Sandesh Vichare as he was one of Customer Support Executive. There is no evidence to the effect that PW5 had ever seen Shri Sandesh Vichare writing and signing before him at any point of time and the identification is solely based on the fact that documents had come to him through official channel. It would be profitable to refer and rely B. Raghuvir Acharya Vs. CBI, (2013) 7 SCR 132 (Supreme Court), it CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 275 of 336 was observed by Hon'ble Apex Court after relying upon the judgment of Mobarik Ali Ahmed Vs. State of Bombay, (1958) SCR 328 ;
39. "....It may be proof of the handwriting of the contents, or of the signature, by one of the modes provided in ss.45 and 47 of the Indian Evidence Act. It may also be proved by internal evidence afforded by the contents of the document. This last mode of proof by the contents may be of considerable value where the disputed document purports to be a link in a chain of correspondence, some links in which are proved to the satisfaction of the Court. In such a situation the person who is the recipient of the document, be it either a letter or a telegram, would be in a reasonably good position both with reference to his prior knowledge of the writing or the signature of the alleged sender, limited though it may be, as also his knowledge of the subject, matter of the chain of correspondence, to speak to its authorship. In an appropriate case the court may also be in a position to judge whether the document constitutes a genuine link in the chain of correspondence and thus to determine its authorship." (Mobarik Ali Ahmed).
40. The question for our consideration is whether there is any credibility in the evidence of PW.5. Admittedly, PW.5 was not posted in CANCIGO. He came from CANGILT for the purpose of auditing in April, 1992 i.e after the payment of brokerage (paid on 10th March, 1992).Therefore, the question arises whether PW.5 was familiar with the handwriting of accused No.1 in the course of his business as he was neither from CANCIGO nor was working under accused No.1. PW.5 had neither stated that he had seen accused No.1 writing the endorsement nor he himself was the recipient of any correspondence made by accused No.1. Therefore, it is clear that PW.5 had no prior knowledge of the handwriting of accused No.1 or the signatures of the author, and he was not a part of the chain of correspondence to speak of its authors. It can be safely stated that PW.5 does not come within the ambit of Section 47 of the Indian Evidence Act to provide evidence regarding the handwriting of accused No.1.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 276 of 336308. Perusal of the record reveals that no document was produced/obtained from ROC or any other appropriate authority at Dubai by the investigating agency/prosecution or any inquiry was made to the effect that Gunjit Singh Mutneja and Harmendra Singh were the Directors of the aforementioned buyer companies and it is not clear on what basis it was investigated by the CBI that Gunjit Singh Mutneja and Harmendra Singh were the Directors of the above- mentioned firms and conclusion is further fortified from the deposition of PW-34 in which he stated that he did not visit Dubai and no investigation was made by him. PW-34 Inspector Sushil Kumar/IO further stated that no investigation was made by him qua the fact that any money was transferred in the bank account of Harmendra Singh (A-5) and even no documents were brought during the trial that any purchase order was given or signed by Harmendra Singh (A-5) on behalf of the buyer firm. Interestingly, PW-34 Inspector Sushil Kumar/IO also disclosed that no investigation in respect of the financial status of the accused Harmendra Singh was made by him and conclusions in respect of the Dubai based firms were based on D&B report. PW-34 admitted that he had not made any inquiry from the aforementioned importer company to confirm that who is the controlling person and holds what stake of shares in the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 277 of 336 said importer company. PW-34 stated that he had not made any inquiry from the Dubai Chamber of Commerce, ROC of Dubai or any other Government Agency who maintains the record of licence to work or about the Directorship and Shareholding of the companies incorporated in Dubai to confirm the actual controlling person and their shareholding in the aforementioned importer company. PW-34 also admitted that he had not cross checked the details given by D&B and ECGC from any other independent source.
309. In view of the above discussion, the prosecution has miserably failed to establish or bring into record by way of admissible and relevant documentary evidence that Gunjit Singh (A-3) and Harmendra Singh (A-5) were associated with the buyer companies viz Al Mezhar Corner Trading Company & Green Belt Ready-made Company and Mohd. Essa Fashion at Dubai or they had placed any order with A-1/Harpreet Fashion or played any significant role in the export of the goods to Afghanistan with buyer being located at Dubai. Hence, no offence is made out against Gunjit Singh (A-3) and Harmendra Singh (A-5).
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 278 of 336310. Even prosecution did not not make the companies Al Mezhar Corner Trading Company & Green Belt Ready-made Company and Mohd. Essa Fashion either as an accused or a witness and even the identity of the person who was having the controlling stake in the abovesaid firm were not brought into record by the prosecution.
311. Sanction memorandum vide Ex.PW-37/7 provides that an insurance cover is required to be taken in respect of the goods proposed to be exported to a foreign country. Export Credit Guarantee Corporation provides risk cover to exporter and financial institution providing finance to the borrower. The guarantee cover which is provided to an exporter is known as Export Credit Insurance for Bank. The two kind of covers are proposed for the exporter. One is WTPCG i.e. Whole Turn Over Packing Credit which covers the risk for packing credit and is usually based on the maximum outstanding packing credit given by the bank in a month and the premium is paid on the average daily products of the amount. "INPSG" stands for Individual Post Shipment Guarantee Cover and it covers the risk involved after export of the goods and the same is based on the maximum outstanding advance given by the bank during the month and the premium is based on the highest outstanding amount in a CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 279 of 336 given month. PW-15 Shri Suresh Paunikar, examined by the prosecution, had explained the process and terminology "INPSG" and "WTPCG". PW-15 in his deposition explained that ECGC covers the risk of export in a third country and he further deposed that for some restricted country, cover is not provided by the ECGC except on the approval of the competent authority. He further deposed that premium would gets higher if the goods are exported to a restricted country and buyer is the sister concern or related to the close relation of the buyer. PW-15 identified the signature appearing on the letter dated 06.08.2017 vide Ex.PW15/1 as that of his Executive Officer by which a letter was addressed to the bank in which advise was given not to grant further advance or negotiation of bill and bank was also asked to pay premium up to the month of submission of the report of the default i.e. July 2007.
312. PW-17 Shri Charan Jiv Arora was not the witness to the fact but a witness explaining the process involved in obtaining ECGC. PW-17 has neither worked and dealt Parliament Street Branch nor he dealt the accounts of A-1/Harpreet Fashion. He basically stated that when a cover for packing credit is taken i.e. WPTCG, a borrower has to submit a PC application alongwith the purchase order and other CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 280 of 336 details. The packing credit limit which is granted to a party would be notified to ECGC and packing credit amount would be released to the extent of the application minus the applicable margin and he further stated that normal margin is normally 25% of the value of the purchase and the ECGC will notify the cover and confirm the same in writing to the Bank.
313. By referring to clause 5 of Ex.PW-15/1, it is contended by the Ld. Counsel that only premium in respect of the month of July 2007 was left to be paid and if goods were exported prior to July 2007 then it would ordinarily be covered by the ECGC and losses could be recovered by the bank in view of the insurance cover.
314. One of the conditions at the time of grant of the sanction was that INPSG and buyerwise cover is required to be taken by the borrower. It was alleged by the prosecution that goods were shipped to Afghanistan, which was a restricted country, and for which the permission is required to be taken, however, permission was not taken by the branch and the same is used to be given by the competent authority on case to case basis. It is further the case of the prosecution that firm exporting the goods to a foreign firm controlled by relative CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 281 of 336 of the exporter, shall be liable for an additional premium. The case of the prosecution in respect of ECGC lacks clarity as to what the prosecution intends to establish, hence without prejudice to other findings, the vacillating case of the prosecution being examined on all aspect as understood from the charge sheet and the facts which had emerged during the trial or even disclosed during the oral argument for the sake of completeness of fact.
315. PW-15 Shri Suresh Paunikar from ECGC did not bring into record any document in respect of the exact cover taken by the bank and even prosecution has also not specified or brought into record any document in respect of the premium paid to ECGC so much so that the entire documentation in respect of the cover taken for A-1/Harpreet Fashion was not explained. PW-15 also did not tell the specific policy which is required to be taken in a given case and prosecution has also not established the exact cover that is to be taken by the borrower from ECGC by placing on record the relevant policy/norms for taking the cover and even none of the prosecution witness had relied or referred to any specific policy. Prosecution has merely relied upon Ex.PW-15/1 through PW-15. A careful perusal of testimony of PW-15 would indicate that even the contents of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 282 of 336 Ex.PW15/1 were not proved by the prosecution and the only fact which has come on record that last paid premium was of the month of June 2007.
316. A perusal of the deposition of PW-15 would indicate that PW- 15 did not tell the specific policy which was not taken by the borrower as per the sanction memorandum although Ex.PW15/1 indicates that premiums were being paid to ECGC, however, as stated earlier the relevant record were neither investigated nor any clarity was given by the prosecution witnesses. It was asserted that buyerwise insurance policy was not taken. It is also a matter of record that premium etc. were being deducted from the account of A-1/Harpreet Fashion and the bank used to take the insurance cover from ECGC. In order to explain the payment made towards the cover of the premium to ECGC is required to be established through necessary documentation. The testimony of PW-15 has not brought the relevant clarity in respect of the insurance cover as no document except Ex.PW15/1 was placed into record and nothing has come in the testimony of PW-15 that there was any concealment of fact in respect of the sister concern and no other document was brought by the prosecution in respect of the buyer. Merely exhibiting certain documents or letter by PW-15 does CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 283 of 336 not mean that document has been proved in accordance with law. No document i.e. any policy or circular from ECGC or any other authority was produced by the prosecution during the course of the trial and that a borrower is required to pay the higher premium if the sister concerns are related to the borrower company and it is difficult to understand as to how the same was furthering the offence of cheating. PW-15 deposed in his cross-examination as under :
"I have no pesonal knowledge about the contents of the said letter Ex.PW15/1. I am not aware if my department was receiving ECGC premium from Canara Bank in respect of firm M/s G.M. Exim and M/s Ginna Trade till 2007. It is correct that before issuing the ECGC insurance covers, the ECGC department verifies whether the foreign buyers are sister concerns or not."
317. The perusal of the allegation as leveled in the charge sheet and testimony of the PW-34 is to the effect "as per ECGC norms export made to Afghanistan is required prior approval from ECGC and case to case basis. In the present case, the same were not obtained from ECGC. The ECGC covers all the obligation of the bank in case payment from the foreign buyer not forthcoming to bank. In this case, export(er) M/s Harpreet Fashion Pvt. Ltd. had also hidden the fact that importer company were their sister concern company. If they disclosed that they were exporting the goods to their sister concern in CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 284 of 336 the foreign country, in that case ECGC will charge higher risk premium." PW-34 has also stated that he did not make any inquiry from the Custom Authority whether Afghanistan is a restricted country and exports were not permissible and he also did not admit or deny the fact that if exports were not allowed to Afghanistan then Custom would not have permitted the export of goods to Afghanistan. A perusal of the statement of account vide Ex.PW20/30 would indicate that premiums were being deducted, however, the prosecution has failed to bring the exact material exchanged between ECGC and the Bank and has also not explained the deductions of the various premium which are mentioned in the statement of account and which indicates that IPSG premium and WTPCG were being debited by the Bank from the account. Prosecution has brought into record showing showing exchange of letter between the Bank and ECGC in respect of ECGC Cover.
318. A perusal of the statement of account vide Ex.PW20/30 would reflect that premium towards insurance policy was being deducted till 14.08.2007 by bank towards ECGC premium, whereas the account was declared as NPA on 30.09.2007. The prosecution has miserably CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 285 of 336 failed to explain, on what account and for what purpose the premium was being deducted.
DIVERSION OF FUND
319. Diversion of fund in usual parlance would mean that utilization of funds for the purposes other than it was granted. Packing Credits are granted for the specific periods and the proceeds of the same is credited to the current account of the borrower and the borrower is permitted to utilize the same.
320. The case of the prosecution is that funds were diverted to five sister concerns of A-1/Harpreet Fashion on different occasions in which private accused persons were having controlling stake. Reference was also made to 47 different cheques by which it was alleged that funds were also diverted to the sister concern. However, only 29 cheques were brought into the record by the prosecution during the trial vide Ex.PW20/1 to Ex.PW20/29 (D-46 to D-74) from 27.04.2005 to 26.03.2007 and it was also averred in the charge sheet that remaining cheques were not traceable as communicated by the Bank through letters dated 20.06.2014 and 26.06.2014. None of the three Investigating officers i.e. PW-30, 31 & 34 even spoke about the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 286 of 336 letters dated 20.06.2014 and 26.06.2014 as referred in the charge sheet in their deposition.
321. 29 cheques vide Ex.PW20/1 to Ex.PW20/29 were relied by the prosecution, however, 13 cheques pertain to the tenure of A-6 Raman Kumar Agarwal and remaining 16 cheques pertain to the tenure of Shri S.V. Sudarshan/PW-36 and broadly, the prosecution asserts that from 47 cheques, the funds were diverted to the sister concern and were wrongfully passed by the Branch official. It is the specific contention of the Ld. counsel for accused persons and more specifically on behalf of the public servant A-6 that being Branch Manager of a Bank would not mean that accused has control over each and every thing as other officers are looking into the specific areas and passing of the cheque was not in the hand of A-6 as some other official used to deal with the same and not a single instance was brought into record by the prosecution to indicate that A-6 had ever used his discretion to pass a cheque and in the absence of any specific responsibility on the part of A-6 to look into the cheques, he cannot be fastened with any wrong doing and it was also contended that there was no specific condition that cheque issued in the name of the sister concern is not permitted for clearing or there was any specific bar to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 287 of 336 inter group transaction and audited statement of account for the period of 2005 to 2006 vide Ex.PW-19/DX-2, Ex.PW37/10 and Ex.PW22/DX-4 (D-4) {Ex.PW37/10, Ex.PW19/DX-2 and Ex.PW22/DX-4 are one and same document and is a relied upon document of the prosecution} in which the names of five sister concerns were shown as sundry creditors and the co-related transaction was also certified by the chartered accountant and the audited balance sheet is a relied upon document of the prosecution in which the transactions between A-1/Harpreet Fashion and sister concerns are shown. Moreover, the prosecution had never chosen to challenge the balance sheet and even relied upon it !
322. The different cheques vide Ex.PW20/1 to Ex.PW20/29 issued by A-1/Harpreet Fashion would indicate that the same were issued during the period from 04.03.2005 to 26.03.2007. During this period, the packing credits were granted to the borrower and even the foreign bills were discounted. The bank had also received payments from the borrower as well as from buyer as reflected in the statement of account vide Ex.PW20/30 that export had taken place. Available available evidence on record indicates that no proper analysis of the statement of the account of A-1/Harpreet Fashion was made with the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 288 of 336 account of the sister concern in whose accounts these cheques were encashed. The prosecution has also not examined or analyzed the bank accounts, statement of accounts, balance sheet and the relevant income tax return of the sister concern to establish whether any activity was carried out pursuant to the payment made by A-1/Harpreet Fashion. Prosecution has also failed to collect the relevant data/record pertaining to the production or the work which was being carried out by the sister concern. Even, no vouchers were seized during the investigation or any of the employee or any person from the sister concern was called to explain the dealing of A-1/Harpreet Fashion with sister concern and even no prosecution witness from the Bank had even whispered that there was any diversion of funds from A-1/Harpreet Fashion to sister concern. During the course of investigation, no auditor or any other witnesses either from Branch or the Circle Office was examined to justify that there was any diversion of fund and even in the absence of the examination of an auditor, the investigating officer has also not collected any material qua the fact that there was any diversion of funds qua 47 cheques. The requisite material to sustain the charge on the ground of diversion was not elaborated through any of the witness or explained through the documents by the witnesses during the trial.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 289 of 336In their brief and short examination-in-chief, the investigating officer and the previous investigating officers, have also not explained about the nature and the manner of diversion of funds by A-1/Harpreet Fashion to sister concerns. During the course of the trial, PW-34 stated that there is no prohibition from the Bank on the Intra Group Sale Purchase of raw material and ready-made goods for the purpose of exports and he further stated that all Intra Group Transactions as mentioned in the charge sheet was for the purpose of purchasing the ready-made goods/material. PW-34/Investigating Officer has admitted in the cross-examination that "It is correct that the transaction between related party are not barred but it has to be disclosed under Section 40A (2) b of IT Act as has been done in the Balance Sheet dated 31.03.2006 on page 27 of D-4 already Ex.PW19/DX-2....." PW-37 Shri Mahesh Kumar stated that the balance sheet dated 31.03.2006 vide Ex.PW19/DX-2 (D-4, page 14 to
48) clearly reveals that details in respect of the inter-se transaction between the accused and other sister concern are not barred. PW-31, previous IO, has also admitted that he did not come across any rule or regulation by which intra group sale and purchase of material were prohibited.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 290 of 336323. Mere issuance of cheques by an accused to its sister concern would not make much difference unless the prosecution explains the diversion of funds by cogent evidence and the charge of diversion of funds could only be sustained, if the end use of such amount is not utilized by the sister concern or is appropriated in some other manner. The prosecution has not disputed the audited statement of account of A-1/Harpreet Fashion for the relevant years, unless the prosecution questions or cast doubt on the audited balance sheet or collect the requisite material in order to sustain its charge of diversion of funds, the mere allegations would not sustain.
324. Statement of account vide Ex.PW20/30 would indicate that regular transactions were taken place between A-1/Harpreet Fashion and other sister concern. The prosecution has also not explained in proper manner when it made the allegations of diversion of funds as to whether the diversion was made in respect of some specific transaction or no export had occurred or no manufacturing activity had taken place in these sister concern or they did not supply any material to A-1/Harpreet Fashion Pvt. Ltd. Except for mentioning certain transactions in the charge sheet, the relevant entries explaining the nature of diversion were not brought into the record by any of the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 291 of 336 prosecution witness and even the prosecution has also not bothered to examine any of the witnesses in respect of the diversion of the funds during the course of trial or investigation. The prosecution has also relied upon the provisional balance sheet of A-1/Harpreet Fashion in the list of documents and in the cross-examination of PW-24, the provisional balance sheet was put to the witness and the witness had admitted the balance sheet vide Ex.PW-24/DX-2. A perusal of the balance sheet would indicate that in the balance sheet, the name of the sister concern i.e. Chozee Knitwear Industries and Rajni World were mentioned as Sundry Debtors/Suppliers and the details of raw material and finished goods were mentioned. The provisional balance sheet was neither challenged nor disputed by the prosecution at any stage and it was a relied upon document and the same was admitted by the prosecution witness. Even during the course of the investigation, the investigating agency had not conducted any investigation in respect of the final balance sheet or by examining the relevant record from ROC or the Income Tax which could have shown the clear picture. It is not very clear from the deposition of all the investigating officers that whether they had examined the chartered accountant of the borrower company or had even asked any employee of A-1/Harpreet Fashion to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 292 of 336 furnish or provide the audited balance sheet. The investigation is totally silent on this aspect.
325. It was also alleged by the prosecution that some of the items which were mentioned in the export bills were other than ready-made garments and for which credit facilities were not specified. A perusal of the memorandum of association as well as the sanction limit would reveal that there was no specific embargo that apart from ready-made goods, other goods cannot be exported. Even, none of the official witnesses from the bank either from the Circle Office or Head Office had raised any objection qua this effect and the attention of the witness/PW-34 was also drawn to the various clauses of the memorandum of association and article in which PW-34 in his cross- examination dated 28.09.2018, at page 5, has admitted that the sanction of various limits to the account of A-1/Harpreet Fashion, the accounts were not limited to manufacture and export of ready-made garments, but also for trading of other goods including items and cosmetics. The Sanction Memorandum vide Ex.PW37/7 also does not disclose that there was any specific embargo in exporting goods other than garments. The Memorandum of Article of Assciation as annexed with part of Ex.PW21/9 (Colly) provides that A-1/Harpreet Fashion CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 293 of 336 was engaged in diverse nature of business not limited to the garments etc.
326. It is also alleged by the prosecution that despite the pending over due bills, packing credit was granted to A-1/Harpreet Fashion. In this regard, some of the prosecution witnesses as well as PW-36 has deposed that bill discounting is permitted if the usance period has not expired. The main substratum of the allegation of the prosecution to suggest conspiracy as well as the offence of cheating was to indicate that despite overdue bills, the packing credit was granted. This allegation could be proved by the prosecution, if it could have relied upon a particular circular/guideline that when overdue bills are pending then packing credit cannot be granted. One of the allegation of the prosecution was to the effect that bill cannot be discounted if the name of the buyer bank is not mentioned in the consignee column of bill of lading or airway bills. PW-36 expressed his ignorance in this regard and also pleaded ignorance that he had stated about any such policy. Notably, no such policy was placed on record or any of the prosecution witness has deposed about existence of such a policy.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 294 of 336327. PW-17 Shri Charanjiv Arora had explained that if a party requires a packing credit then it is required to fill the PC application form duly filled up alongwith the purchase order received from the foreign buyer. The prosecution has failed to explain or brought into record by which an application for packing credit is moved on behalf of A-1/Harpreet Fashion or the person i.e. Director who had moved an application for grant of the packing credit. Although prosecution has asserted that packing credit was granted but it has not placed on record the application for packing credit and the grant of limit through packing credit is reflected only through the statement of account vide Ex.PW20/30 and PC register vide Ex.PW21/5. The availability of the application for packing credit is required in the present case as through the application for packing credit, the court could determine the role of the person who had moved such an application and more specifically the director who had moved such an application for grant of the packing credit. It is a well settled law that if a company commits a penal offence then vicarious liability cannot be put on the director and he can be made criminally liable only if there is a cogent evidence to show that penal offence was committed by him. In order to construe that whether there was any intention to deceive on the part of directors of A-1/Harpreet Fashion, the requisite documents are to CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 295 of 336 be brought into record and it is only through these documents it could be ascertained that whether there was any intention to cheat. The prosecution had alleged in paragraph no. 19 of the charge sheet that packing credit of Rs.17.50 lacs, Rs.22.90 lacs dated 28.02.2007 was granted, however, it admits that packing credit qua the same was outstanding only to the extent of Rs.1000/- each, meaning thereby that both the packing credits were cleared out. The prosecution has also alleged that packing credit of Rs.41.50 lacs dated 06.03.2007, packing credit of Rs.43 lacs, packing credit of Rs.17 lacs, packing credit of Rs.26.50 lacs dated 20.03.2007 and Rs.31.50 lacs dated 21.03.2007 was granted, but a major part of the same was diverted to the sister concern. Interestingly, the relevant entries in respect of the outstanding packing credit was generally referred by relying upon the statement of account of A-1/Harpreet Fashion and the supporting document that whether A-1/Harpreet Fashion had received any such order was not placed on record by the prosecution. It is also to be noted that it was not the case of the prosecution that packing credit as mentioned in para 19 of the charge sheet were granted without any basis or justification or sans any document and the IO has also not indicated that whether any efforts were made to obtain the relevant record pertaining to the grant of packing credit and only explanation CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 296 of 336 furnished was that the application for packing credit is not available with the bank. The prosecution has maintained studied silence on the same. It is a well settled law that if a particular fact is to be proved by the prosecution then the prosecution is obliged to explain the material fact or the circumstances surrounding the same, specially in a situation when it alleges that accused persons had committed the offence of cheating. The application for packing credit and the supporting documents whether A-1 was having any confirmed order would have gone long way in establishing their innocence or criminality. There is another method by which the prosecution could have easily come to the conclusion that whether A-1 was having any approved order from any buyer by contacting with such buyer during the course of investigation either by enquiring from the accused persons or by making an inquiry from the Bank and the other method could be to check the relevant record from the sister concern or by examining the relevant employees of the sister concern and if it feels that accused persons were maintaining their right to silence but it seems that prosecution had faltered on the same. The court is also not convinced about the feeble explanation given by the investigating officer that he asked for the documents from the Bank, but Bank did not provide. The investigating officer has all the powers under the Code of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 297 of 336 Criminal Procedure to take such steps in accordance with law to obtain the relevant record, but no such exercise was undertaken by the investigating agency. A perusal of the release of packing credit which is stated to remain unpaid would reflect that when packing credit of Rs.17.50 lacs and Rs.22.90 lacs were released on 28.02.2007 against which substantial amount was received by the banker as mentioned in paragraph no. 19 of the charge sheet. It is further reflected that when packing credit of Rs.41.50 lacs was released and it shows the outstanding payment as Rs.32.2 lacs, meaning thereby that outstanding amount against the same was cleared. It is only three packing credits of Rs.17.50 lacs, Rs.26.50 lacs and Rs.31.50 lacs remain unpaid. The mere non-payment of the packing credit would not mean that accused had any intention to cheat in reference to the present case as paragraph no. 19 of the charge sheet would itself reflect that till 06.03.2007, the payments were being made by the borrower. Non realisation of few dues qua packing credit would not be cheating unless it is established that there was an intention to cheat when the limits were released in favour of borrower.
328. PW-36 Shri S.V. Sudarshan under whose tenure ten forex bills became overdue and packing credit also remained unrealized, in his CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 298 of 336 cross-examination dated 09.08.2018 had stated that he made recommendation for adhoc proposal for Rs.200 lacs on 22.12.2006 and if there was any fraud then he would not have made recommendation for the adhoc proposal of Rs.200 lacs to A-1/Harpreet Fashion. Interestingly, after referring to Ex.PW36/1, he stated that there were no overdues when he sent the proposal to the Circle Office and he further categorically stated that even if there are overdue bills by keeping the need of a borrower, the proposal for adhoc limit was made. It is also amply reflected from the material available on record that Circle office as well as Head office after perusing the entire material on record, after assessing the financial condition of the borrower, it released limits in favour of A-1/Harpreet Fashion. When a prudent or imprudent proposal is made by an official in a hierarchy to a superior officer in hierarchy without concealing the material fact and by bringing into light the business condition of the borrower and if such a superior authority grants the limit and if a borrower defaults on the same and if the prosecution has not charged/prosecuted such a superior authority of any wrong doing then neither branch official nor a borrower could be hauled up for any wrongful act.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 299 of 336329. Neither PW-30, PW-31 nor PW-34/Investigating Officer has elaborated the resume of statement of account both Hapreet Fashion and sister concern in which it is alleged that funds were diverted. Packing credit is disbursed against the confirmed orders from the customer i.e. foreign buyer Harpreet Fashion could utilize funds credited into the account pursuant to proceeds of credit in this account against the packing credit and bills disbursement of A-1/Harpreet Fashion. It is also necessary to mention that prosecution has alleged that there was a fraud of Rs.4.80 crores and if the case of the prosecution is taken in reference to the total limit of Rs. Two crores for packing credit and Rs.2.80 crores for FDB/FBE, then the amount would be Rs.4.80 crores. The prosecution has alleged that FDB/FBE of Rs.3.59 crores was unpaid and packing credit of Rs.1.62 crores had remained unpaid, the total of which would come out to be Rs.5.21 crores.
330. No rules or procedure were indicated or brought by the prosecution that cash withdrawal from the account is not permitted. It is submitted on behalf of the accused persons that in furtherance of the various business activities, the payment etc. are to be made to the vendors/fabricators and no material was brought by the prosecution CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 300 of 336 that no business activities were being carried by the sister concern. Therefore, without any verification whether there was any requirement for cash in hand for the purposes of business, besides there was no limit having been prescribed for the cash withdrawal.
331. PW-37 had brought into record vide Ex.PW37/9 the renewal application of the borrower alongwith provisional balance sheet and projected balance sheet as on 31.03.2007. The prosecution has not questioned the audited balance sheet as well as the projected balance sheet. Interestingly, in his cross-examination, PW-37 had stated that adequate security was provided by the borrower in respect of the PC limit and financial bill discounting facility. He had also deposed that when he left the bank in July 2006, there were no overdues.
332. Vide Ex.PW24/9, PW-24 forwarded the copy of the stock report vide Ex.PW36/2, prepared by Anil Chadha. A perusal of the same would indicate that in the description of stock declared by the borrower was Rs.2,85,90,140/-. However, during the course of audit, certain items were not found and accordingly, amount of Rs.9.44 lacs was deducted by the auditor, meaning thereby that there was a stock of Rs.2.76 lacs and further observation was made that the moment of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 301 of 336 the stock was found to be satisfactory. In the final certificate which was given by the chartered accountant, it was found that proper account book had been kept by the company from the examination of the books. It was also observed that no material discrepancies were noticed on the physical verification of the stocks as compared to the record. The auditor had also certified that the collateral security provided to the bank is adequate to cover the outstanding.
333. It was alleged in the charge sheet that Rs.96.45 lacs was received as export proceeds, however, the same was diverted to the sister concern, although bills were overdue and discounted bills were being adjusted. In order to establish this allegation, the prosecution is duty bound to prove the relevant bills which were overdue and its usance period. If a borrower takes a packing credit, he usually gets the time to make the payment or same is cleared out of the proceeds of export bill and if the due date of the payment is within the window period then such a borrower cannot be saddled with any criminal wrong doing and in order to establish the criminality, the prosecution is duty bound to bring on record the relevant overdue bills with sufficient clarity and more appropriately in the form of the deposition of the witnesses, but the prosecution has miserably failed to elaborate CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 302 of 336 upon such charge. Moreover, if a borrower has got the bill discounted and there is a usance period and if such a borrower receives money from any buyer by way of realization of forex bills and withdraws the money for the legitimate purpose then it cannot be said that he has diverted the fund or committed the offence of cheating. In order to establish the allegation of cheating, the particulars of the cheating has to be worded and disclosed in proper manner. Number of prosecution witnesses had deposed to the effect that if a bill is within the usance period, although technically, it would be a overdue bill even then bill can be discounted and, therefore, the allegation of the prosecution that amount of Rs.96.45 lacs received as an export proceeds was diverted would make an offence of cheating fails. Interestingly, during the course of the trial, the prosecution has not established that the funds which were transferred to the sister concern were basically used for the diversion or that no manufacturing activity was taking place in the sister concern and even the relevant record of the sister concern was not considered and investigated during the course of the trial. Relevantly, the prosecution has relied upon the audited balance sheet of A-1/Harpreet Fashion for the year 2005-06 and provisional balance sheet for the year 2006-07 in the list of documents without questioning it.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 303 of 336334. In Hridaya Ranjan Prasad Verma Vs. State of Bihar, (2000) 4 SCC 168, Hon'ble Apex Court had interpreted Sections 415 and 420 of IPC to hold that fraudulent or dishonest intention is a precondition to constitute the offence of cheating by observing that "14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. 15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 304 of 336 the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
335. In Dalip Kaur Vs. Jagnar Singh, (2009) 14 SCC 696, the Hon'ble Apex Court observed that "a dispute arising out of a breach of contract would not amount to an offence of cheating under sections 415 and 420. The relevant extract is as follows:
"9. The ingredients of Section 420 of the Penal Code are:
"(i) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to deliver any property; or
(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit."
10. The High Court, therefore, should have posed a question as to whether any act of inducement on the part of the appellant has been raised by the second respondent and whether the appellant had an intention to cheat him from the very inception. If the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non-refunding the amount of advance the same would not constitute an offence of cheating. Similar is the legal position in respect of an offence of criminal breach of trust CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 305 of 336 having regard to its definition contained in Section 405 of the Penal Code. (Ajay Mitra Vs. State of M.P. [(2003) 3 SCC 11 : 2003 SCC (Cri) 703])".
336. One of the charge against A-6 is to the effect that Mohanjit Singh Mutneja was not the authorized signatory of the company and he continued to sign the papers as authorized signatory and bank officials had failed to notice the same. The only thing that was required to be established by the prosecution that Mohanjit Singh Mutneja was not the authorised signatory of A-1/Harpreet Fashion by referring to the memorandum of association/article of association in which the name of Mohanjit Singh Mutneja is not mentioned or by bringing the relevant record from Registrar of Companies. During the course of the trial, PW-37 Shri B. Mahesh Kumar was shown Ex.PW21/29 and after referring to page 4, PW-37 stated that Harpreet Kaur Mutneja was authorised to operate the account and at page no. 5 and 6, both Mohanjit Singh Mutneja and Badal Juneja were authorized constituted attorney of the company and were authorized to operate the banking account as per resolution dated 01.09.2004. PW-34 Shri Sushil Kumar/Investigating Officer who has filed the charge-sheet has specifically stated that "It is correct that Harpreet Kaur, Mohanjit Singh Mutneja and Badal Juneja were the authorized signatory for the Harpreet Fashions Pvt. Ltd." (Reference to page 7 of cross-
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 306 of 336examination dated 27.09.2018 of PW-34). The above answers given by PW34 and PW37 demolishes the case of the prosecution that authorised signatories have not filed the balance sheet or the audited statement of account as averred in letters/balance sheet/stock statement etc. were signed by some other person who was the director or the authorized signatory. It is relevant to mention that CFSL report vide Ex.PW-26/3 clearly points out towards the signature of Mohanjit Singh Mutneja and other directors of the company on the documents. It was neither pointed out by any of the Investigating Officer, PW-31, PW-32 and PW-34 as to which document was not signed by the director or the authorized signatory during the course of the trial and it is also not clear whether any such document which does not bear the signature of the authorized signatory or the director was sent to FSL for examination. No record was produced from the ROC to the effect that Mohanjit Singh Mutneja was not the director of the company, specially in a situation when he opened the bank account. It is also relevant to mention that Mohanjit Singh Mutneja has not denied his association with A-1/Harpreet Fashion. Admittedly, accused Mohanjit Singh Mutneja, Harpreet Kaur and Badal Juneja had furnished their personal guarantee and it is not understandable as to what loss was caused to the bank or what was the element of fruad or deception. It is CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 307 of 336 relevant to mention that PW-35 who was examined by the prosecution was confronted with his previous statement as recorded under section 161 Cr.P.C. vide Ex.PW35/PX-1 wherein PW-35 has stated that some of the document does not bear his signatures. However, during his cross-examination by Ld. PP for the CBI, he admitted the signatures appearing on the documents available on record. The prosecution has also not specifically pointed out any document in which the signatures of the authorized person/director did not match during the course of the trial.
337. PW-32 Shri Chetan Sanjan Dutta has observed that in the letter of sanction, the cut back of 3% was put on the bills and the bank was supposed to deduct the same, however, the same was not done by the branch officials and A-6 Raman Kumar Aggarwal was blamed for this. However, it has come on evidence that cut back of 3% was made by PW-36 and not by A-6 Raman Kumar Aggarwal. It is also relevant to mention that PW-32 had also stated that he did not check with the bank and in his cross-examination dated 23.05.2018, he was shown the mortgage document as per which the equitable mortgage transaction of the property was taken and a compliance report of the same is Ex.PW32/DX-2. It is pertinent to mention that PW-32 in his CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 308 of 336 report vide Ex.PW-7/1 has stated that there is no information whether equitable mortage was taken or not. It is also relevant to mention that when attention of PW-32 was invited to the reply given by the Branch about the negative observation made by him, PW-32 stated that he was not aware whether any query etc was made by him or not. PW-32 in his further cross-examination stated that he was not aware of the fact that the limit to the parties were renewed by the orders of Executive Director, Head Office with the same security. The cut back was released during the tenure of PW-36 and even he wrote a letter dated 23.01.2007 to Circle Office for reversal of cut back amount of Rs.32.30 lacs.
338. The vaccilating stand of the prosecution in respect of the involvement of the directors of A-1/Harpreet Fashion is reflected from the fact that it has made Harpreet Kaur as an accused in the present case by stating that she was only the sleeping director and the wrong doing was conducted by Mohanjit Singh Mutneja and at the same time, the prosecution has alleged that he was not the authorized signatory.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 309 of 336339. The submission of the Ld. PP for the CBI is to the effect that accused persons had not paid the dues of the company and also failed to give proper explanation in respect of the overdue charges payable to the bank. Contention of the Ld. Counsel for A-1, A-2 and A-4 are to the effect that admittedly, the export had taken place and till March 2007, the company had paid its dues qua the packing credit and there was no intention to cheat which is reflected from the fact that security in the form of immovable property as well as the sufficient number of stock would indicate that the liability of the bank would have been cleared.
340. Mere non-repayment of loan would not be a ground of criminal action unless it is established that there was no intention to make payment to the borrower.
341. The ten overdue bills which were relied by the prosecution would indicate that goods were exported to the foreign country and when the factum of the export of the goods through overdue bills is admitted and if the payment is not made by the buyer then it cannot be said that the borrower had defrauded the bank and rather, it is buyer who had indulged in wrong doing. The investigation was not CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 310 of 336 conducted by the investigating agency to examine any connivance of buyer with the borrower and in the absence of such a connection, the charge under section 420 IPC does not hold water.
342. In Sunil Mittal Vs. Union of India, Crl. Appeal No. 34/2015, it was observed in paragraph no. 39 as under :-
"39. When the company is the offendor, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada (supra), the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of "alter ego", was applied only in one direction namely where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or anyother person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. This very principle is elaborated in various other judgments. We have already taken note of Maharashtra State Electricity Distribution Co. Ltd. (supra) and S.K. Alagh (supra).
343. The statement of law is that merely a person is the director of the company would not be a ground to hold him criminally liable unless and untill the positive evidence is led to the effect that the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 311 of 336 person has committed the offences under the Penal Code and in the Indian Penal Code, there is no concept of vicarious liability. The material available on record indicates that Parliament Street Branch had advanced loan to A-1/Harpreet Fashion through its director, however, in order to make A-1/Harpreet Fashion or its director criminally liable, the prosecution has to prove the same by way of acceptable relevant admissible evidence.
Conspiracy.
344. Nine persons i.e. 5 private persons and 4 public servants were woven together in the present case with the aid of Section 120B IPC on the ground that pursuant to the criminal conspiracy, substantive offences under Indian Penal Code and Prevention of Corruption Act were committed by the accused persons in which private accused persons had obtained the credit limit by misrepresentation and submitted forged documents etc. and they diverted the funds to their sister concern and failed to make payment to the bank. The substantive offence against them were elaborately discussed in the preceding paragraphs.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 312 of 336345. The question for consideration is whether there was a conspiracy by which different substantive offences were committed and the role of the accused persons in the substantive offences against them. It would be appropriate to consider the substantive provision of the conspiracy and the law relating to the Criminal Conspiracy as developed by the Apex Court and its application in variety of the cases.
346. Section 120A of the Indian Penal Code defines Criminal Conspiracy as follows:
When two or more persons agree to do, or cause to be done, (1) an illegal act, (2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy:
Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.
Explanation ; It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental to that object.
Section 120B, which prescribes in sub-section (1) the punishment for criminal conspiracy provides: Whoever is a party to a criminal conspiracy to commit an offence punishable with death, [imprisonment for life] or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in the Code for the punishment CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 313 of 336 of such a conspiracy, be punished in the same manner as if he had abetted such offence.
347. Hon'ble Supreme Court of India, in State v. Nalini, (1999) 5 SCC 253, after considering plethora of judgment summarised broad principles which governs the law of conspiracy in Paragraph 583 :
(1) Under Section 120-A IPC offence of criminal conspiracy is committed when two or more persons agree to do or cause to be done an illegal act or legal act by illegal means. When it is a legal act by illegal means overt act is necessary. Offence of criminal conspiracy is an exception to the general law where intent alone does not constitute crime. It is intention to commit crime and joining hands with persons having the same intention.
Not only the intention but there has to be agreement to carry out the object of the intention, which is an offence. The question for consideration in a case is did all the accused have the intention and did they agree that the crime be committed. It would not be enough for the offence of conspiracy when some of the accused merely entertained a wish, howsoever horrendous it may be, that offence be committed.
(2) Acts subsequent to the achieving of the object of conspiracy may tend to prove that a particular accused was party to the conspiracy. Once the object of conspiracy has been achieved, subsequent act, which may be unlawful, would not make the accused a part of the conspiracy like giving shelter to an absconder.
(3) Conspiracy is hatched in private or in secrecy. It is rarely possible to establish a conspiracy by direct evidence. Usually, both the existence of the conspiracy and its objects have to be inferred from the circumstances and the conduct of the accused.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 314 of 336(4) Conspirators may for example, be enrolled in a chain--A enrolling B, B enrolling C, and so on; and all will be members of a single conspiracy if they so intend and agree, even though each member knows only the person who enrolled him and the person whom he enrolls. There may be a kind of umbrella-spoke enrollment, where a single person at the centre does the enrolling and all the other members are unknown to each other, though they know that there are to be other members. These are theories and in practice it may be difficult to tell which conspiracy in a particular case falls into which category. It may however, even overlap. But then there has to be present mutual interest. Persons may be members of a single conspiracy even though each is ignorant of the identity of many others who may have diverse roles to play. It is not a part of the crime of conspiracy that all the conspirators need to agree to play the same or an active role. (5) When two or more persons agree to commit a crime of conspiracy, then regardless of making or considering any plans for its commission, and despite the fact that no step is taken by any such person to carry out their common purpose, a crime is committed by each and everyone who joins in the agreement. There have thus to be two conspirators and there may be more than that. To prove the charge of conspiracy it is not necessary that intended crime was committed or not. If committed it may further help prosecution to prove the charge of conspiracy. (6) It is not necessary that all conspirators should agree to the common purpose at the same time. They may join with other conspirators at any time before the consummation of the intended objective, and all are equally responsible. What part each conspirator is to play may not be known to everyone or the fact as to when a conspirator joined the conspiracy and when he left.
(7) A charge of conspiracy may prejudice the accused because it forces them into a joint trial and the court may consider the entire mass of evidence against every accused. Prosecution has to produce evidence not only to show that each of the accused CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 315 of 336 has knowledge of the object of conspiracy but also of the agreement. In the charge of conspiracy the court has to guard itself against the danger of unfairness to the accused. Introduction of evidence against some may result in the conviction of all, which is to be avoided. By means of evidence in conspiracy, which is otherwise inadmissible in the trial of any other substantive offence prosecution tries to implicate the accused not only in the conspiracy itself but also in the substantive crime of the alleged conspirators. There is always difficulty in tracing the precise contribution of each member of the conspiracy but then there has to be cogent and convincing evidence against each one of the accused charged with the offence of conspiracy. As observed by Judge Learned Hand, this distinction is important today when many prosecutors seek to sweep within the dragnet of conspiracy all those who have been associated in any degree whatever with the main offenders‟ [United States v. Falcone, 109 F 2d 579 (2d Cir 1940)] (8) As stated above it is the unlawful agreement and not its accomplishment, which is the gist or essence of the crime of conspiracy. Offence of criminal conspiracy is complete even though there is no agreement as to the means by which the purpose is to be accomplished. It is the unlawful agreement which is the gravamen of the crime of conspiracy. The unlawful agreement which amounts to a conspiracy need not be formal or express, but may be inherent in and inferred from the circumstances, especially declarations, acts and conduct of the conspirators. The agreement need not be entered into by all the parties to it at the same time, but may be reached by successive actions evidencing their joining of the conspiracy. (9) It has been said that a criminal conspiracy is a partnership in crime, and that there is in each conspiracy a joint or mutual agency for the prosecution of a common plan. Thus, if two or more persons enter into a conspiracy, any act done by any of them pursuant to the agreement is, in contemplation of law, the act of each of them and they are jointly responsible therefor. This CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 316 of 336 means that everything said, written or done by any of the conspirators in execution or furtherance of the common purpose is deemed to have been said, done or written by each of them. And this joint responsibility extends not only to what is done by any of the conspirators pursuant to the original agreement but also to collateral acts incidental to and growing out of the original purpose. A conspirator is not responsible, however, for acts done by a co-conspirator after termination of the conspiracy. The joinder of a conspiracy by a new member does not create a new conspiracy nor does it change the status of the other conspirators, and the mere fact that conspirators individually or in groups perform different tasks to a common end does not split up a conspiracy into several different conspiracies.
348. In Kehar Singh v. State (Delhi Admn.), 1988 AIR 1883, 1988 SCR Supl. (2) 24, the following observation was made by in respect of the ingredients of the offence of Conspiracy :
12. Conspiracy is not only a substantive crime. It also serves as a basis for holding one person liable for the crimes of others in cases where application of the usual doctrines of complicity would not render that person liable. Thus, one who enters into a conspiratorial relationship is liable for every reasonably foreseeable crime committed by every other member of the conspiracy in furtherance of its objectives, whether or not he knew of the crimes or aided in their commission. The rationale is that criminal acts done in furtherance of a conspiracy may be sufficiently dependent upon the encouragement and support of the group as a whole to warrant treating each member as a causal agent to each act. Under this view, which of the conspirators committed the substantive offence would be less significant in determining the defendants liability than the fact that the crime was performed as a part of a larger division CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 317 of 336 of labor to which the accused had also contributed his efforts.
[Firozuddin Basheeruddin].
349. In Ajay Aggarwal v. Union of India this Court considering the ingredients of the offence of conspiracy said: (SCC pp. 616-17, para
8) "Section 120-A of IPC defines 'conspiracy' to mean that when two or more persons agree to do, or cause to be done an illegal act, or an act which is not illegal by illegal means, such an agreement is designated as 'criminal conspiracy'. No agreement except an agreement to commit an offence shall amount to a criminal conspiracy, unless some act besides the agreement is done by one or more parties to such agreement in furtherance thereof. Section 120-B of IPC prescribes punishment for criminal conspiracy. It is not necessary that each conspirator must know all the details of the scheme nor be a participant at every stage. It is necessary that they should agree for design or object of the conspiracy. Conspiracy is conceived as having three elements:
agreement (2) between two or more persons by whom the agreement is effected; and (3) a criminal object, which may be either the ultimate aim of the agreement, or may constitute the means, or one of the means by which that aim is to be accomplished. It is immaterial whether this is found in the ultimate objects."
350. In Ajay Aggarwal v. Union of India, 1993 AIR 1637, 1993 SCR (3) 543 it was further observed as under:
"Conspiracy to commit a crime itself is punishable as a substantive offence and every individual offence committed CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 318 of 336 pursuant to the conspiracy is separate and distinct offence to which individual offenders are liable to punishment, independent of the conspiracy. Yet, in our considered view, the agreement does not come to an end with its making, but would endure till it is accomplished or abandoned or proved abortive. Being a continuing offence, if any acts or omissions which constitute an offence are done in India or outside its territory the conspirators continuing to be parties to the conspiracy and since part of the acts were done in India, they would obviate the need to obtain sanction of the Central Government. All of them need not be present in India nor continue to remain in India.
Finally, the Court said as under: (SCC pp. 625-26, paras 24-25).
24. Thus, an agreement between two or more persons to do an illegal act or legal acts by illegal means is criminal conspiracy. If the agreement is not an agreement to commit an offence, it does not amount to conspiracy unless it is followed up by an overt act done by one or more persons in furtherance of the agreement. The offence is complete as soon as there is meeting of minds and unity of purpose between the conspirators to do that illegal act or legal act by illegal means. Conspiracy itself is a substantive offence and is distinct from the offence to commit which the conspiracy is entered into. It is undoubted that the general conspiracy is distinct from number of separate offences committed while executing the offence of conspiracy. Each act constitutes separate offence punishable, independent of the conspiracy. The law had developed several or different models or techniques to broach the scope of conspiracy One such model is that of a chain, where each party performs even without knowledge of the other a role that aids succeeding parties in accomplishing the criminal objectives of the conspiracy. An illustration of a single conspiracy, its parts bound together as links in a chain, is the process of procuring and distributing narcotics or an illegal foreign drug for sale in different parts of the globe. In CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 319 of 336 such a case, smugglers, middlemen and retailers are privies to a single conspiracy to smuggle and distribute narcotics. The smugglers knew that the middlemen must sell to retailers; and the retailers knew that the middlemen must buy of importers of someone or another. Thus, the conspirators at one end of the chain knew that the unlawful business would not. And could not. Stop with their buyers; and those at the other end knew that it had not begun with their settlers. The accused embarked upon a venture in all parts of which each was a participant and an abettor in the sense that, the success of the part with which he was immediately concerned, was dependent upon the success of the whole. It should also be considered as a spoke in the hub. There is a rim to bind all the spokes together in a single conspiracy. It is not material that a rim is found only when there is proof that each spoke was aware of one another's existence but that all promoted in furtherance of some single illegal objective. The traditional concept of single agreement can also accommodate the situation where a well-defined group conspires to commit multiple crimes; so long as all these crimes are the objects of the same agreement or continuous conspiratorial relationship, and the conspiracy continues to subsist though it was entered in the first instance. Take for instance that three persons hatched a conspiracy in country A to kill D in country B with explosive substance. As far as conspiracy is concerned, it is complete in country A. One of them pursuant thereto carried the explosive substance and hands it over to third one in the country B who implants at a place where D frequents and got exploded with remote control. D may be killed or escape or may be diffused. The conspiracy continues till it is executed in country B or frustrated. Therefore, it is a continuing act and all are liable for conspiracy in country B though first two are liable to murder with aid of Section 120-B and the last one is liable under Section 302 or Section 307 IPC, as the case may be. Conspiracy may be considered to be a march under a banner and a person may join or drop out in the march without CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 320 of 336 the necessity of the change in the text on the banner. In the comity of International Law, in these days, committing offences on international scale is a common feature. The offence of conspiracy would be a useful weapon and there would exist no conflict in municipal laws and the doctrine of autrefois convict or acquit would extend to such offences. The comity of nations are duty-bound to apprehend the conspirators as soon as they set their feet on the country's territorial limits and nip the offence in the bud.
25. A conspiracy thus, is a continuing offence and continues to subsist and committed wherever one of the conspirators does an act or series of acts. So long as its performance continues, it is a continuing offence till it is executed or rescinded or frustrated by choice or necessity. A crime is complete as soon as the agreement is made, but it is not a thing of the moment. It does not end with the making of the agreement. It will continue so long as there are two or more parties to it intending to carry into effect the design. Its continuance is a threat to the society against which it was aimed at and would be dealt with as soon as that jurisdiction can properly claim the power to do so. The conspiracy designed or agreed abroad will have the same effect as in India, when part of the acts, pursuant to the agreement are agreed to be finalized or done, attempted or even frustrated and vice versa."
351. In order to make a person culpable for the offence under the charge of conspiracy under section 120B IPC, the prosecution is duty bound to establish that there was an agreement between the parties for doing an unlawful act Charge under section 120B IPC is also in the nature of the substantive offence and in order to establish a charge CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 321 of 336 under section 120B IPC, the requirement to establish the said charge is neither watered down nor any specific method is provided to prove it. Like any other substantive charges under Indian Penal Code, the charge of conspiracy is to be established by way of cogent evidence. Since conspiracies are usually hatched in secrecy and, therefore, in order to establish the charge of conspiracy, the indirect circumstances are taken into consideration subject to the consideration that circumstances are conclusive in nature and points out to one hypothesis that there was an agreement to commit an illegal act. Needless to say, to prove the charge of conspiracy in most of the cases, different sets of circumstances are taken into consideration. Parliament Street branch different sets of bank employees including A-6 to A-9. No direct or circumstantial evidence would reveal that none of the public servants/bank officials had any vested interest in forwarding the application for credit facility to the Circle Office. A detailed analysis has already been made in the earlier part of the judgment that proposal for forwarding of the credit facility was not the lone decision of A-6 and other accused persons it rather proposal was vetted by number of officials. It is also observed that different persons who had worked in different hierarchy had performed their duties. The allegation of the prosecution that there was a conspiracy CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 322 of 336 from 2003 to 2007 is belied in the present case from the mere fact that A-1/Harpreet Fashion came into existence only in March 2004. It has also come in evidence that various facilities such as packing credit/bill discounting and other facilities were granted pursuant to the sanction which was granted by the sanctioning authority. No specific criminal wrong doing by any public servant/bank officials at Parliament Street Branch. No evidence was brought by the prosecution that any of the public servant was in direct touch with the private accused except for the business dealing and nothing was shown that any of the public servant had acted at the behest of the private accused persons. A close perusal of the working of the bank would reveal that public servants from Parliament Street branch who had been arrayed as an accused had provided the relevant information to both Circle Office and Head Office. Except for some irregularities, nothing was found against them. No material has emerged during the trial various officials acts performed by them in pursuance of illegal agreement. No material has also come on record that private accused persons were in conspiracy with the public officials or the private persons were in conspiracy with each other. It is also necessary to observe that one of the allegation of the prosecution is that buyer firm located at Dubai was controlled by the relative of the private accused persons, more specifically A-2 and CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 323 of 336 A-4. The prosecution has failed to establish that the buyer firms at Dubai were under the control of A-1/Harpreet Fashion or its director. No material has come on record to indicate that there was any meeting of mind in doing an illegal act or an act which might be legal but was performed in an illegal manner and consequently no offence under section 120 B IPC is made out against any accused persons.
352. The detailed discussion in respect of the evidence brought on record vis-a-vis the role of accused persons has already been considered. The findings are being summarised as under :
i. A-1 had taken credit facility from Parliament Street Branch by moving an application for the grant of credit facility. The proposal was only forwarded by the number of officials including A-6, A-8 and other officials to the Circle Office. The Branch does not have power to reject any such application and accordingly, it forwarded the proposal to the Circle Office. No wrong doing or any criminal act is found in the forwarding/recommending the proposal by the Parliament Street Branch to the Circle Office.
ii. Circle Office considered the proposal forwarded by the Branch and number of officials from the Circle Office evaluated the proposal CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 324 of 336 by noting number of positive and negative features. The negative features were considered by the superior authorities at Circle Office and they sanctioned the limit with conditions. It is also noted that Circle Office is the sanctioning authority for both Parliament Street Branch and Chandni Chowk Branch and due to which it was aware about the financial condition of the sister concern of A-1/Harpreet Fashion. The negative features were never communicated to the Parliament Street Branch.
iii. The limits were released in favour of A-1/Harpreet Fashion and it is further observed that there is a substantial compliance prior to the release of the limit and necessary documentation is available on record. No criminal wrong doing is noted on the part of the Branch Manager.
iv. It is further observed that prosecution/investigating agency has tried to raise multiple issues either deliberately or ignorantly by not collecting the relevant material/evidence. It is also noted that prosecution has alleged that Rs.196.04 lacs was released, despite pending overdue bills, however, during trial, the original forex bills were not specified either in the deposition of the witnesses and no CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 325 of 336 document was brought into record as to which official has passed it and named some of the accused such as A-7 and A-9. It was admitted by the prosecution that the payment qua the packing credits has been realised.
v. The prosecution had alleged that ten overdue bills which constitutes the major part of the cheated amount were passed, however, the record would reveal that ten overdue bills do not pertain to the tenure of A-6 and rather, he was charge sheeted and tried in the present case. The case of the prosecution stood further exposed from the fact that ten overdue bills pertain to the tenure of the star prosecution witness PW-36. PW-36 deposed that the forex bills cannot be cleared if there is a pending overdue bills and he also narrated the instances where the overdue bills could be cleared. During the course of the trial, it was found that the major allegation of the prosecution against A-7 to A-9 that they had fraudulently discounted the bills when PW-36 was confronted with various notes vide Ex.PW36/DX-2 to DX-11 in which the Junior Officers have brought all the facts to the knowledge of the superior officer and PW- 36 being the superior officer had passed all the overdue bills on the basis of which the prosecution has based its case and surprisingly CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 326 of 336 during the course of the investigation, the investigating agency despite all available power had failed to investigate and brought into record the notes which absolves A-7 to A-9 from any criminal wrong doing.
vi. The prosecution has alleged that three overdue bill out of the ten overdue bills contain three altered airway bills. Surprisingly, the altered airway bill was not sent to CFSL for analysis and even the relevant witness in respect of the custody of the airway bill i.e. Customs and the Airlines were not examined during the course of the trial. The best witnesses were withheld from the court.
vii. The prosecution had alleged that A-3 and A-5 were the directors in buyers company or they were associated with buyers company and they placed an order with A-1/Harpreet Fashion. No documentary evidence was produced during the trial indicating that A- 3 and A-5 had given any such order. The casual manner of the investigation and the conduct of the prosecution is reflected from the fact that an unsigned and unknown e-mail containing the name of A-3 and A-5 were brought into record without any certificate under section 65B of Indian Evidence Act and the document which was presented by the prosecution to allege culpability on A-3 and A-5, the document CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 327 of 336 itself had substantially disowned its content. No independent verification or investigation was conducted to know about the constitution of the buyer company at Dubai and even no record were obtained from any public authority at Dubai or Afghanistan.
viii. The perusal of the record reveals that despite poor financial condition of A-1/Harpreet Fashion, it was the Circle office and Head Office which used to grant the limits to A-1/Harpreet Fashion and in fact the renewal proposal for the credit facility was proposed by the Circle office and yet in order to build up its case, the prosecution has presented the case in such a manner that it was the Branch who made the proposal to the Circle Office.
ix. The investigating agency has not properly appreciated the role of the Circle office and Head Office and it went after the Parliament Street Branch.
x. The prosecution has also alleged that the packing credits were granted to A-1/Harpreet Fashion despite the pendency of overdue bills. It is reflected from the record that the application for the packing credit is altogether missing and was not filed alongwith the CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 328 of 336 charge sheet and no proper investigation was made as to how it was not traceable and whether non-availability was deliberate or inadvertent.
xi. The prosecution has also failed to make proper analysis of the statement of accounts of all the sister concerns of A-1/Harpreet Fashion and the activities which are being carried out by A-1/Harpreet Fashion including the manufacturing activities being undertaken by it. The prosecution has picked up few cheques and on the basis of which it has alleged that diversion of funds were made. The cheques were spread over a long period of time and admittedly, there are financial dealings between A-1 and sister concerns which is permitted as per the Income Tax Act, however, the prosecution has failed to co-relate the aspect of diversion of funds, specially in a situation when number of forex bills and packing credit stands realized.
xii. The prosecution has merely relied upon the Study Report Ex.PW19/A without making any independent investigation in respect of the roles of bank officials.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 329 of 336xiii. The prosecution has also relied upon a circular by alleging that cash transaction was not permitted. The circular is of the year 2008, whereas the irregularities pertain to the year 2007. The prosecution has also not brought to the knowledge about the court by specifying in clear manner about the value of the security given by the borrower.
xiv. The prosecution has failed to bring home the charges against public servants i.e. A-6 to A-9 and it is also failed to establish that there was any conspiracy between the public servants and the private accused persons or interse between the private accused persons. The prosecution has failed to prove that A-1/Harpreet Fashion, A-2 Mohanjit Singh Mutneja and A-4 Harpreet Kaur Mutneja in conspiracy with A-3 and A-5 have committed any offence of cheating.
353. In Sharad Birdichand Vs. State of Maharashtra, AIR 1984 SC 1622, it was observed that the circumstances from which the conclusion of guilt is to be drawn should be fully established. The circumstances concerned 'must or should' and not 'may be' established. The court while laying emphasis on the above legal principle relied on a judgment of the Supreme Court in Shiva Sahabrao Bobade & Anr. Vs. State of Maharashtra, (1973) 2 SCC 793 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 330 of 336 where it was observed that "Certainly, it is a primary principle that the accused must be and not merely may be guilty before a court can convict and the mental distance between 'may be' and 'must be' is long and divides vague conjectures from sure conclusions.
354. In view of the above-mentioned discussion, the prosecution has failed to prove the charges against the accused persons and accordingly, (i) A-1/Harpreet Fashion is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 420 IPC; (ii) A-2 Mohanjit Singh Mutneja is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 420/467/468/471 IPC; (iii) A- 3 Gunjit Singh Mutneja is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 420/467/468/471 IPC; (iv) A-4 Harpreet Kaur is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 331 of 336 Corruption Act 1988 and under section 420/467/468/471 IPC; (v) A-5 Harmendra Singh is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 420 IPC; (vi) A- 6 Raman Kumar Aggarwal is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 13(1)(d) r/w section 13(2) of the Prevention of Corruption Act 1988;
(vii) A-7 Darwan Singh Mehta is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 13(1)(d) r/w section 13(2) of the Prevention of Corruption Act 1988;
(viii) A-8 T.G. Purushothaman is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 13(1)(d) r/w section 13(2) of the Prevention of Corruption Act 1988 and (ix) A-9 C.T. Ramakumar is acquitted of committing an offence under section 120-B r/w Sections 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988 and under section 13(1)(d) r/w section 13(2) of the Prevention of Corruption Act 1988.
CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 332 of 336355. FINAL CONCLUSION Sr. Name of the accused Offences charged Offences No. proved/Acquitted
1. Harpreet Fashions 120-B r/w Sections Not Proved.
(A-1) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Section 420 IPC. Not Proved. 2. Mohanjit Singh 120-B r/w Sections Not Proved. Mutneja 420/467/468/471 IPC and (A-2) Section 13(2) of the Prevention of Corruption Act 1988. Sections 420/467/468/471 Not Proved. IPC. 3 Gunjit Singh Mutneja 420/467/468/471 IPC and Not Proved. (A-3) Section 13(2) of the Prevention of Corruption Act 1988. Sections 420/467/468/471 Not Proved. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 333 of 336 IPC 4. Harpreet Kaur 120-B r/w Sections Not Proved. (A-4) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Sections 420/467/468/471 Not Proved. IPC 5. Harmendra Singh 120-B r/w Sections Not Proved. (A-5) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Section 420 IPC Not Proved. 6. Raman Kumar 120-B r/w Sections Not Proved. Aggarwal 420/467/468/471 IPC and (A-6) Section 13(2) of the Prevention of Corruption Act 1988. Section 13(1)(d) r/w section Not Proved. 13(2) of the Prevention of Corruption Act 1988. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 334 of 336 7. Darwan Singh Mehta 120-B r/w Sections Not Proved. (A-7) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Section 13(1)(d) r/w section 13(2) of the Prevention of Not Proved. Corruption Act 1988. 8. T.G. Purushotaman 120-B r/w Sections Not Proved. (A-8) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Section 13(1)(d) r/w section 13(2) of the Prevention of Not Proved Corruption Act 1988 9. C.T. Ramakumar 120-B r/w Sections Not Proved. (A-9) 420/467/468/471 IPC and Section 13(2) of the Prevention of Corruption Act 1988. Section 13(1)(d) r/w section 13(2) of the Prevention of Not Proved. Corruption Act 1988. CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 335 of 336
356. The bail bonds and sureties stand discharged. The accused persons are directed to furnish personal bond in the sum of Rs.50,000/- with one surety of the like amount under section 437-A Cr.P.C. Case property, if any, be destroyed as per rules. File be consigned to record room.
Digitally signed (Dicated and announced in the open court HASAN by HASAN ANZAR today i.e. on 03.06.2024) ANZAR Date: 2024.06.03 18:29:16 +0530 (HASAN ANZAR) SPECIAL JUDGE (PC ACT) CBI-03, ROUSE AVENUE DISTRICT COURTS, NEW DELHI/03.06.2024 CBI Vs. Harpreet Fashion & Ors. CC No. 80/2019 RC No. 12(E)/2011 Page 336 of 336