Madras High Court
M.S.Vijayakumar vs The Chairman And Managing Director on 12 March, 2012
Bench: P.Jyothimani, M. Duraiswamy
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12.03.2012
CORAM
THE HONOURABLE MR.JUSTICE P.JYOTHIMANI
and
THE HONOURABLE MR. JUSTICE M. DURAISWAMY
W.A.No.69 of 2010
and M.P.Nos.1 & 2 of 2010
and
W.P.No.10569 of 2010
and M.P.No.2 of 2010
W.A.No.69 of 2010:
M.S.Vijayakumar ... Appellant
Vs.
1.The Chairman and Managing Director,
Indian Overseas Bank,
Central Office Main Building,
6th Floor, 763, Anna Salai,
Chennai-600 002.
2.General Manager/Disciplinary Authority
Corporate Credit Department,
Indian Overseas Bank,
Central Office Main Building,
5th Floor, 763, Anna Salai,
Chennai-600 002.
3.The Superintendent of Police,
CBI/EOU-III, New Delhi. ... Respondents
(R.C.-44(E)/2007/EOW-II dated 24.12.2007)
Writ Appeal filed under Clause 15 of Letters of Patent against the order dated 06.01.2010 made in W.P.No.22472 of 2009 passed by Her Lordship Ms.Justice K.Suguna on the file of this Hon'ble Court.
For Appellant : Mr.V.T.Gopalan, Senior Counsel
for Mr.S.Ashok Kumar
For Respondents 1 & 2 : Mr.N.G.R.Prasad
For Respondent 3 : Mr.N.Chandrasekaran,
Special Public Prosecutor for CBI
W.P.No.10569 of 2010:
M.L.Gudiyannan ... Petitioner
Vs.
1.The Chairman and Managing Director,
Indian Overseas Bank,
Central Office Main Building,
6th Floor, 763, Anna Salai,
Chennai-600 002.
2.General Manager/Disciplinary Authority
Corporate Credit Department,
Indian Overseas Bank,
Central Office Main Building,
5th Floor, 763, Anna Salai,
Chennai-600 002.
3.The Superintendent of Police,
SPE/CBI/ACB,
Chennai (R.C.No.15(A) 2003)
4.XI Additional Judge for CBI Cases
XI Additional Court for CBI Cases relating to banks,
Chennai. ... Respondents
Writ Petition filed for the issuance of a Writ of Certiorari calling for the records of the Second respondent in sanction order dated 19.03.2005 and to quash the decision taken thereon sanctioning prosecution under Section 19(1)(C) of Prevention of Corruption Act, 1988 against the petitioner.
For Petitioner : Mr.V.T.Gopalan, Senior Counsel
for Mrs.s.Radha Gopalan
For Respondents 1 & 2 : Mr.N.G.R.Prasad
For Respondent 3 : Mr.N.Chandrasekaran,
Special Public Prosecutor for CBI
Respondent 4 : Court
C O M M O N O R D E R
(Order of the Court was made by P.JYOTHIMANI ,J.,) The appeal arises from the order of the learned Single Judge dated 06.01.2010 made in W.P.No.22472 of 2009 filed by the appellant herein, in and by which the learned Judge, while dismissing the writ petition, has held that the order of sanction to prosecute the appellant has been made with independent application of mind supported by reasons and charge sheet has already been filed.
2.The appellant has served the respondent/Bank for a period of 33 years under various positions. While he was working as Chief Manager of Indira Nagar Branch, Chennai, in the year 2005, an explanation was called for in respect of some of the commissions and omissions stated to have been committed by him during 2003-2005. At that time, he was working in New Delhi. The appellant has submitted his explanation. Rejecting the said explanation, charges were framed against him and enquiry was conducted and based on the report of the Enquiry Officer, the Employer/Bank, by an order dated 13.11.2008, has imposed a punishment of reduction in basic pay by one stage in the time scale of pay for a period of one year with further direction that he will not earn increment of pay during the period of such reduction and on the expiry of such period, the reduction will have the effect of postponing his future increment of pay. That order of punishment imposed in the departmental proceeding has become final.
3.It appears that after he was transferred from New Delhi Branch, certain complaint has been lodged with the Central Bureau of Investigation, Economic Offence Wing, New Delhi and the same was registered on 24.12.2007 and in the said complaint, the appellant was cited as one of the accused. After the investigation was completed, the charge sheet was filed against five persons, but the appellant's name was excluded from the charge sheet. The reason was that the Competent Authority namely, the Employer, has declined sanction of prosecution of the appellant. That refusal was made on 30.12.2008. Again for the second time, sanction was sought to prosecute the appellant and that was also declined on 18.05.2009.
4.Thereafter, it is seen that under the impugned order dated 16.09.2009, the same Authority namely, the Employer, has granted sanction for prosecution against the appellant under Section 19(1)(c) of the Prevention of Corruption Act. It was that sanction order given by the Competent Authority, which was challenged by the appellant in the writ petition filed by him in W.P.No.22472 of 2009. The challenge was on various grounds including that the Competent Authority having declined the grant of sanction based on the materials available, cannot now grant sanction on the same materials. In other words, it has been the case of the appellant that the Sanctioning Authority has no power of review, unless new materials come to limelight, which were not brought to the notice of the Sanctioning Authority at the time of granting sanction.
5.Further, the point on which the writ petition was filed was that, when once the first order of declining sanction has been passed by the Authority, there is no question of reopening the case once again, especially in the absence of such power available in law. It is the further case of the appellant that even otherwise in passing of the impugned sanction order, there has been no independent application of mind. According to the appellant, the sanction order has been motivated at the instance of the Central Bureau of Investigation, as directed by the Central Vigilance Commission, and therefore, it has to be treated as not an independent decision, as it has been judicially established that the sanction order has to be granted by the Authority by applying its mind independently and the Authority should not succumb to any pressure from any quarters.
6.It was contended by the respondent/Bank that the writ petition is not maintainable on the ground that for sanction of prosecution under the Prevention of Corruption Act there is no need to apply judicial mind and therefore, as and when new materials come to light, the Authority is entitled to change its view and on that basis, it was the case of the respondent/Bank before the learned Single Judge that the writ petition is not maintainable. It is further stated that the Disciplinary Authority has given a finding accepting the report of the Enquiry Officer about the guilt of the appellant and it has prima facie satisfied itself to come to a conclusion that there are sufficient materials available for the purpose of granting sanction and therefore, it is not open to the appellant to say that there were no prima facie materials available.
7.It is also the case of the Bank that simply because on an earlier occasion certain mistakes have been committed by the Authority Competent in declining the grant of sanction, that does not prevent the Authority to take a different decision as long as sufficient materials are available and the action has been taken bona fide giving independent reasons.
8.It is also the case of the respondent/Bank that the decision to grant sanction, even if it is by the same Authority, when compared to earlier two occasions, the same was on independent application of mind.
9.The learned Single Judge found that:
(i)the earlier order declining to grant sanction dated 18.05.2009 was issued on the assumption that the petitioner did not have any mala fide or criminal intention of defrauding the Bank;
(ii)the said decline was by oversight and on the ground that the lapses committed by the appellant were only procedural irregularities, in respect of which the departmental proceedings have been conducted and punishment has been imposed;
(iii)however, in the impugned sanction order, the Authority has now made up its mind and come to a conclusion that there has been a criminal conspiracy entered into between the appellant and G.D.Bansal by sanctioning Packing Credit Limit, because of which the Bank has to sustain loss, and to arrive at such finding, the learned Judge, before whom the records were produced by the Authority, has relied upon a letter of the Chief Manager and Chief Vigilance Officer, Indian Overseas Bank dated 03.09.2009. Admittedly, that letter was neither shown to the appellant nor to the appellant's counsel. The letter dated 03.09.2009 of the respondent/bank has been received subsequently by the appellant under the Right to Information Act, which is extracted hereunder:
"Office Note:
Date:03.09.209 From GM(VK & CVO) To CM(MVN) DA RC 4(E)/2007/EOW-II against Shri G.D.Bansal, R/O 115, Engineer Enclave,Pitampura, New Delhi 34 and Other Indian Overseas Bank.
Mr.V.K.Gupta, Addl. Secretary, Central Vigilance Commission had called for a meeting on 21st August 2009 at 12.00 hours in his chambers to resolve the difference of opinion for sanction of prosecution by CBI against Mr.M.S.Vijayakumar, the, then Chief Manager, IOB, Model Town branch. During the meeting CBI presented their version of the case and the undersigned on behalf of the Bank explained the reasons why DA had not given sanction for prosecution. After hearing both sides, Addl. Secretary, CVC came to the conclusion and advised that the DA reconsider his decision of not giving sanction for prosecution for the following reasons.
1)The Bank has lost substantial money by entering into One Time Settlement with the party.
2)In one of the accounts, there is still an outstanding of Rs.77.46 lakhs which is likely to result in loss to the Bank.
3)The member has chosen to sanction packing credit limits of Rs.95 lakhs each to four borrowers without proper verification of KYC of the borrowers concerned and CBI has been able to establish the link between these four parties and Mr.G.D.Bansal.
4)The member has accepted the valuation of nearly Rs.1.31 crores for a property which was registered with Sub-Registrar for a sum of Rs.2.55 lacs nine months prior to the date of valuation. In this case, Bank was able to actually realise only Rs.19.00 lacs after liquidation of their property."
Hence, we request you to re-examine the matter and advise your decision."
and the letter dated 04.09.2009 of the Central Vigilance Commission is as follows:
"Dated: 04.09.2009 OFFICE MEMORANDUM SUB:RC4(E)/2007/EOW-II/DLI against Shri G.D.Bansal, R/o 115, Enineer Enclave, Pitampura, New Delhi-34 and Others Case of Shri M.S.Vijay Kumar, SMGS-IV, Indian Overseas Bank.
The undersigned is directed to refer to the IOB's letter No.C.208.VIG:GM(V)/305/2009-10 dated 20.05.2009 and subsequent joint meeting held with the SP, CBI and CVO on 21.08.2009 on the subject cited above.
2.The case had been examined and the Commission is of the view that aspects of criminal conspiracy have been brought out by following points-
(i) Shri M.S. Vijay Kumar has accepted the valuation of a property purchased only 7 months back for Rs.2.55 lac, at an exaggerated value of Rs.1.3 crore as collateral security, even after he had himself visited the site.
(ii) Shri M.S.Vijay Kumar accepted projected sale of Rs.18 crore and Rs.20 crores in the next two years, with projected profit of Rs.16.5 lacs, in sharp contrast to the loss of Rs.44,985/- reflected in the balance sheet dated 30.11.2004. This over projection was to create an impression that the company was doing a roaring business and showing a massive upward swing.
(iii) He permitted diversion of huge money on the very next day of the disbursement of funds into the accounts of sisters/associate and dummy companies without any corresponding business deals and this is a clear-cut evidence of criminal intent.
3.Further, all irregularities/omissions committed in this case clearly indicate that there was a design to get the advance sanctioned and allow the money disbursed diverted to other accounts without little control over its end use. The evidence collected during the investigation conducted by the CBI has brought out criminal intent and prosecution of the accused officer is called for. The plea taken by the Bank that irregularities were mere procedural; and that formalities and KYC norms were complied with, cannot be accepted as good defence. The Commission would therefore in agreement with the CBI, advise sanction for prosecution of Shri M.S.Vijay Kumar, Chief Manager.
4.Receipt of the OM may be acknowledged and action taken intimated."
10.It is apparent that it is on going through the records which were produced before the learned Judge, after arguments were heard and reserved for orders, the learned Judge has referred to the said letter. The learned Judge has also referred to some of the passages in the impugned order of sanction which relate to the grant of Packing Credit Limit Facility to M/s.Padmakar Iron and Steel Company and has come to a conclusion that the reference of the incident shows the independent application of mind by the Authority for granting prosecution. Therefore, relying upon the judgment of the Supreme Court in State of Karnataka Vs. Ameerjan, (2007) 11 SCC 273, which contemplates independent application of mind as an imperative character for granting sanction, the learned Judge has concluded that the impugned sanction order is a speaking order. The learned Judge has also held that it can never be contended that for granting the sanction, the Authority has no power of review. What is required is an independent application of mind and materials. The learned Judge has also held that there is no delay on the part of the Authority in granting sanction order, since it was only after the Central Vigilance Commission has brought to the notice of the Sanctioning Authority new materials, which expose the alleged conspiracy between the appellant and G.D.Bansal, the sanction order had to be issued, which cannot be held to be invalid. According to the learned Judge, fresh materials were placed and they gave a new slant and therefore, simply because there is some delay, it cannot be held that the Sanctioning Authority cannot review its earlier order. With that reasoning, the learned Judge has dismissed the writ petition, because of which the writ petitioner has filed the appeal.
11.The main grounds on which the appeal has been filed are that:
(i)There is no power of review to the Sanctioning Authority, especially, when the same Sanctioning Authority, on earlier two occasions namely, on 30.12.2008 and 18.05.2009 on the basis of the same materials, has come to a conclusion that there was no ground for granting sanction and in the impugned order nothing new has been stated in respect of the materials, which are relied upon.
(ii)The impugned sanction order has been passed at the instance of the Central Bureau Investigation and Central Vigilance Commission, who have furnished their views to the Sanctioning Authority and due to that extraneous considerations, the Bank being the Sanctioning Authority had to change its earlier stand and therefore, it cannot be said to be an independent view based on fresh materials.
(iii)Even in the impugned order, the Sanctioning Authority has not chosen to state anything about the previous orders declining sanction of prosecution dated 30.12.2008 and 18.05.2009 and that shows the non application of mind on the part of the Sanctioning Authority.
(iv)There is nothing about the new materials stated to have been brought to the notice of the Sanctioning Authority, which were not available earlier on 30.12.2008 and 18.05.2009.
(v)The reliance placed by the learned Judge on the letter dated 03.09.2009 and the decision arrived at by the learned Judge based on such letter, which is inter-departmental in nature and has not been revealed to the appellant, is a denial of the principles of natural justice to the appellant and the same is unfair.
12.Likewise, the petitioner in Writ Petition No.10569 of 2010 was working as a Clerk cum Typist having joined in the year 1975 in the Indian Overseas Bank and was subsequently promoted as Senior Manager in the year 1996 and was posted in New Delhi and was transferred to Chennai in that capacity on 01.11.2007. It was in respect of some commissions and omissions, while he was working in Chennai, there was certain disciplinary proceeding initiated against him, in which, after conducting enquiry and based on the report of the Enquiry Officer, punishment of reduction in basic pay in two stages in the time scale of pay for a period of one year to the effect that the reduction will not have the effect of postponing his future increment of pay was imposed. That order of punishment imposed in the departmental proceeding has become final.
13.In this case also, like that of the Appellant, wherein the fact was explained about the complaint that was registered, making the petitioner as one of the accused and the Central Bureau of Investigation forwarded a letter on 28.07.2004 to the Authority Competent to grant sanction to prosecute the petitioner for alleged offences under Section 120-B read with Sections 420, 467, 468, 471 of the I.P.C. and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The General Manager, Central Office, who is the Competent Authority, has rejected the proposal of the Central Bureau of Investigation on 31.08.2004. It appears that there has been some letter on 04.11.2009 from the Central Vigilance Commission requesting the General Manager to grant sanction, stating the necessity of granting sanction for prosecution because of the gravity of the alleged offences, which was once again rejected by the Chairman cum Managing Director on 23.12.2004 reiterating the earlier stand taken by the General Manager on 31.08.2004. It appears that subsequently, based on certain advice of the Central Vigilance Committee dated 21.02.2005, the same authority has granted the sanction order on 19.03.2005, which is challenged in the writ petition by the petitioner on the same grounds which are stated above in respect of the appellant.
14.The case of the petitioner is that the draft sanction order furnished by the Central Bureau of Investigation to the Bank based on which the impugned order came to be passed by the Sanctioning Authority on 19.03.2005, shows that it is out of pressure from the Central Vigilance Commission, the sanction came to be granted and therefore, the sanction cannot be said to be independent and based on any fresh materials available.
15.In the counter affidavit filed by the respondents, the facts have been reiterated and in addition to that, it has also been stated that the sanction order of the year 2005 has been challenged in the year 2010 and therefore, the writ petition is liable to be dismissed on the ground of laches.
16.Mr.V.T.Gopalan, the learned senior counsel appearing for the appellant as well as the petitioner, contended that even though the sanction order may not be a decision, it is sacrosanct in nature, since it is based on such order of sanction which has been prima facie arrived at by the Sanctioning Authority, the prosecution has commenced and therefore, the order of sanction must be not only independent, but also based on the materials. He would also rely on the judgment of the Hon'ble Supreme Court in R.S.Nayak V. A.R.Antulay, (1984) 2 SCC 183 to substantiate his contention that the sanction order should not be out of pressure from any source and the same should be by independent application of mind. While referring to the Prevention of Corruption Act, 1947, especially Section 6(1), which is in pari materia with Section 19(1) of the Prevention of Corruption Act, 1988, he would also rely upon the judgment in Mansukhlal Vithaldas Chauhan V. State of Gujarat, (1997) 7 SCC 622, apart from Gopikant Choudhary V. State of Bihar and others, (2000) 9 SCC 53, to submit that in the absence of any fresh materials, there is no question of reviewing an earlier sanction by the Sanctioning Authority, he would also rely upon the judgment in State of Punjab and another V. Mohammed Iqbal Bhatti, (2009) 17 SCC 92.
17.The learned Senior Counsel further submits that even though the appellant as well as the petitioner have taken a stand that the Sanctioning Authority has no power to review, such power of review is possible when there are new materials. Therefore, there cannot be any review of earlier decision based on the same materials, which were the basis for earlier rejection. To substantiate the same, he would rely upon the latest judgment of the Hon'ble Supreme Court in State of Himachal Pradesh V. Nishant Sareen, AIR 2011 SC 404.
18.On the other hand, it is the contention of Mr.N.G.R.Prasad, learned counsel for respondents 1 and 2 that the sanction order is not a decision, but it is only a statutory requirement. Against the sanction order, no writ petition can be filed. To substantiate that a sanction order is only an administrative act and therefore, it does not require any opportunity to a person against whom the sanction order was to be given or there is no question of principles of natural justice to be followed, he would rely on decision in Superintendent of Police (C.B.I) V. Deepak Chowdhary and others, (1995) 6 SCC 225.
19.Again, to insist on his point that the sanction is only procedural in nature and it does not go to the root of jurisdiction, he would rely upon the decision Paul Varghese V. State of Kerala and another, (2007) 14 SCC 783. He also contends that the sanction as stated under Section 197 of the Criminal Procedure Code is totally different from the sanction that is required under Section 19(1)(c) of the Prevention of Corruption Act. According to Mr.N.G.R.Prasad, sanction under Section 19(1) is only preliminary in nature, whereas under Section 197 of the Criminal Procedure Code it is substantial. Therefore, by granting sanction to prosecute the appellant as well as petitioner, their right to defend themselves in the criminal case is not taken away.
20.Mr.N.Chandrasekaran, learned counsel for the 3rd respondent/CBI, while reiterating the above said contentions of Mr.N.G.R.Prasad, would submit that the appellant as well as the petitioner have approached the Court in the preliminary stage and the criminal case is yet to commence. It is not as if the appellant as well as the petitioner cannot defend themselves. If there is no prima facie case which has been taken cognisance of by the Competent Criminal Court, it is always open to the accused to file petition for discharge.
21.We have heard both the learned Senior Counsel for the appellant as well as the petitioner and the learned counsel for the respondents and have given our anxious thought to the issue involved in these cases.
22.It is also relevant to note at this point in time that in respect of the writ petition, the petitioner has filed a petition for discharge, which came to be dismissed.
23.Insofar as the factual aspect in the writ appeal as well as in the writ petition is concerned, it is not in dispute that the Authority, which has granted sanction, is the same on earlier two occasions, when the order declining sanction of prosecution was passed. On a reference to the impugned order of sanction, it is seen that in respect of the appellant, while he was working in New Delhi, he has abused his official position by fraudulently sanctioning Packing Credit Limit of Rs.95 lakhs to M/s.Padmakar Iron and Steel Company on the basis of fabricated balance sheets. It is also stated that in furtherance of the same, there has been a conspiracy in allowing M/s.Padmakar Iron and Steel Company, a Proprietary concern floated by Shri Om Prakash Malik, to open the Current Account No.3948 and thereafter it is alleged that the appellant has visited the premises of M/s.Padmakar Iron and Steel Company on 10.02.2005 and he has filed a report, in which he states that the value of the collateral security is Rs.1.31 crores as per the valuer of the Indian Overseas Bank, S.S.K.Bhagat. Further, the stock statements submitted by M/s.Padmakar Iron and Steel Company from time to time, signed by Shri Om Prakash Malik showing a godown address in Narela, New Delhi, has been accepted by the appellant, while such godown does not exist in the said premises. Therefore, by sanctioning such loan facilities to the said party, loss has been caused to the Bank and therefore, the appellant has committed offences under Section 120-B read with Sections 420, 467, 468, 471 of the I.P.C., apart from Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 and it is on that basis, the sanction order came to be passed.
24.Likewise, in respect of the writ petition in W.P.No.10569 of 2010, the impugned sanction order states that the petitioner while working as Senior Manager, IOB, T.Nagar Branch from 2001-2002 has entered into agreement with Shri.T.S.R.Vasudevan, Proprietor of M/s.Lalitha Oils, S/Shri.C.Manohar Naidu, R.Muthaiyan, P.Thanigaivelan, Sundaram Balraj, Smt.P.Hema, T.Palanivel and T.Vetrivel and A.Ramesh during the months of August 2001 to October 2002 towards certain illegal acts to cheat the Indian Overseas Bank by fabricating the documents and using the same as genuine and committed criminal misconduct and in pursuance of the criminal conspiracy, various acts have been committed causing loss to the extent of Rs.1,22,89,785/- to the Indian Overseas Bank. It is also alleged that in respect of the credit worthiness of the persons, the Advance Officer anticipated that the project would not become fruitful due to the reasons namely, "1.The CC limit of Rs.70 lacs was always in excess of limit from 09.07.2002 onwards.
2.Regarding LC limit, the LC commitment was not honoured on the due dates on various earlier occasions.
3.With regard to the bills limit, the bills were found mostly drawn on two parties i.e. M/s.Hari Oil and M/s.Vetri Oils, Villupuram. Many of the UBD bills were not paid on the due dates and an over due amount of Rs.32.26 lacs was adjusted only during the last week of September 2002. The said account was also classified as Quick Mortality Account (QMA) by the inspection team of IOB, Central Office, Chennai on 22.02.2002."
In spite of the said reasons given, the writ petitioner and one P.Sethuseshan, Assistant General Manager have overruled the above said opinion without any reasons and recommended enhancement of LC limit from Rs.25 lacs to Rs.40 lacs and CC limit from Rs.70 lacs to Rs.75 lacs on permanent basis and based on the said criminal conspiracy, the transactions have taken place and the account was classified as QMR (Quick Mortality Report) and the same was revised thrice and certain deficiencies were subsequently noted in respect of the mortgage which was created as security for the repayment, and that on 31.10.2001, the writ petitioner went along with the Proprietor of M/s.Lalitha Oils and T.Ramaswamy, Approved Panel Lawyer to inspect the agricultural land at Gummidipoondi for valuation and the valuation report has been submitted by him by increasing the value, resulting in the grant of facilities to the said account holder. It is also alleged under the sanction order that by granting the said loan facilities, RBI instructions have been breached and therefore, the sanction order shows that the writ petitioner is alleged to have committed offences punishable under Section 120-B read with Sections 420, 419, 467, 468, 471 of the I.P.C., apart from Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. As stated above, in respect of the writ petitioner, earlier, the General Manager, on the said materials has declined to grant sanction and subsequently, on the CBI approaching the Chairman cum Managing Director, the said stand was reiterated and it was thereafter, the General Manager has granted the impugned sanction order based on the same reasons.
25.Insofar as it relates to the contention raised by the learned Senior Counsel for the appellant as well as the petitioner that the Sanctioning Authority cannot change its opinion and, in fact, there is no power of review available, now the law is well settled that the power of review to the Sanctioning Authority is available, provided that new materials have come to the lime light. While dealing with Section 197 of the Criminal Procedure Code contemplating sanction to prosecute, the Hon'ble Apex Court in the State of Himachal Pradesh V. Nishant Sareen, AIR 2011 Supreme Court 404 has held that the power of the Government in granting sanction is a statutory power and when once it is exercised, it cannot be exercised again in the absence of express power of review. But in cases where new materials have been brought to the notice of the Authority namely, the Government, for granting sanction that can be a ground for reconsidering the earlier decision of refusal to grant sanction. The Supreme Court while reiterating that unless the power of review is granted under a statute, based on the earlier materials by which the sanction was refused there cannot be a reopening for the purpose of granting fresh sanction, has held that based on fresh materials certainly there are powers to review the earlier stand, as it is seen in the following paragraph:
"12.It is true that the Government in the matter of grant or refusal to grant sanction exercises statutory power and that would not mean that power once exercised cannot be exercised again or at a subsequent stage in the absence of express power of review in no circumstance whatsoever. The power of review, however, is not unbridled or unrestricted. It seems to us sound principle to follow that once the statutory power under Section 19 of the 1988 Act or Section 197 of the Code has been exercised by the Government or the competent authority, as the case may be, it is not permissible for the sanctioning authority to review or reconsider the matter on the same materials again. It is so because unrestricted power of review may not bring finality to such exercise and on change of the Government or change of the person authorised to exercise power of sanction, the matter concerning sanction may be reopened by such authority for the reasons best known to it and a different order may be passed. The opinion on the same materials, thus, may keep on changing and there may not be any end to such statutory exercise. In our opinion, a change of opinion per se on the same materials cannot be a ground for reviewing or reconsidering the earlier order refusing to grant sanction. However, in a case where fresh materials have been collected by the investigating agency subsequent to the earlier order and placed before the sanctioning authority and on that basis, the matter is reconsidered by the sanctioning authority and in light of the fresh materials an opinion is formed that sanction to prosecute the public servant may be granted, there may not be any impediment to adopt such course."
26.Therefore, legally it is settled that the power of review is possible only when there is an express provision enabling the Authority to review the earlier stand. It is equally settled that in respect of the grant of sanction to prosecute, when once on certain materials the Sanctioning Authority decides not to grant sanction, certainly on the same materials, the Sanctioning Authority cannot change its opinion.
27.It cannot be said that the sanction order is not an order, as stated by the Hon'ble Apex Court. As reiterated by the Hon'ble Apex Court, the sanctioning order is a statutory order. A statutory order has got a legal force and that is the basis for starting the prosecution against the delinquent officer and therefore, it cannot be lightly taken up. It was held as early as in the year 1984 in R.S.Nayak V. A.R.Antulay, (1984) 2 SCC 183 that granting sanction to prosecute is a sacrosanct act. In that case, the Hon'ble Supreme Court has dealt with Section 6(1) of the Prevention of Corruption Act, 1947, which is in pari materia with Section 19(1) of the Prevention of Corruption Act, 1988. The Hon'ble Supreme Court in categorical terms held that granting sanction is not expected to be misused or abused by the Sanctioning Authority and it cannot be for the purpose of frivolous prosecution. While holding that the grant of sanction is a sacrosanct act, the Hon'ble Supreme Court has held as follows:
"The expression office in the three sub-clauses of Section 6(1) would clearly denote that office which the public servant misused or abused for corrupt motives for which he is to be prosecuted and in respect of which a sanction to prosecute him is necessary by the competent authority entitled to remove him from that office which he has abused. This interrelation between the office and its abuse if severed would render Section 6 devoid of any meaning. And this interrelation clearly provides a clue to the understanding of the provision in Section 6 providing for sanction by a competent authority who would be able to judge the action of the public servant before removing the bar, by granting sanction, to the taking of the cognizance of offences by the court against the public servant. Therefore, it unquestionably follows that the sanction to prosecute can be given by an authority competent to remove the public servant from the office which he has misused or abused because that authority alone would be able to know whether there has been a misuse or abuse of the office by the public servant and not some rank outsider. By a catena of decisions, it has been held that the authority entitled to grant sanction must apply its mind to the facts of the case, evidence collected and other incidental facts before according sanction. A grant of sanction is not an idle formality but a solemn and sacrosanct act which removes the umbrella of protection of Government servants against frivolous prosecutions and the aforesaid requirements must therefore, be strictly complied with before any prosecution could be launched against public servants. (See Mohd. Iqbal Ahmad v. State of A.P., (1979) 4 SCC 172) The Legislature advisedly conferred power on the authority competent to remove the public servant from the office to grant sanction for the obvious reason that that authority alone would be able, when facts and evidence are placed before him to judge whether a serious offence is committed or the prosecution is either frivolous or speculative. That authority alone would be competent to judge whether on the facts alleged, there has been an abuse or misuse of office held by the public servant. That authority would be in a position to know what was the power conferred on the office which the public servant holds, how that power could be abused for corrupt motive and whether prima facie it has been so done. That competent authority alone would know the nature and functions discharged by the public servant holding the office and whether the same has been abused or misused. It is the vertical hierarchy between the authority competent to remove the public servant from that office and the nature of the office held by the public servant against whom sanction is sought which would indicate a hierarchy and which would therefore, permit inference of knowledge about the functions and duties of the office and its misuse or abuse by the public servant. That is why the Legislature clearly provided that that authority alone would be competent to grant sanction which is entitled to remove the public servant against whom sanction is sought from the office."
Therefore, the contention of Mr.N.G.R.Prasad and Mr.N.Chandrasekar, learned counsel for the respondents that sanctioning order is not a decision, has no meaning.
28.While dealing with the same Section 6(1) of the Prevention of Corruption Act, 1947 in Mansukhlal Vithaldas Chauhan V. State of Gujarat, (1997) 7 SCC 622, the Hon'ble Supreme Court, while referring to the hierarchy of the judgments on granting of sanction, has held that grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to the government servants against frivolous prosecutions. The Hon'ble Supreme Court in that case has held that the grant of sanction is based on the application of mind and the materials and evidence collected during investigation and it was also further held that the High Court by exercising its power under Article 226 of the Constitution of India is entitled to take a decision if the Sanctioning Authority has not made its decision on the materials. Of course, it is not the sufficiency of materials which has to be considered by the High Court, but the availability of the materials that have been considered to the satisfaction of the Sanctioning Authority. It is not the decision making process, which can be the subject matter under Article 226 of the Constitution of India. The categoric pronouncement of the judgment by the Hon'ble Apex Court is reflected in the following paragraphs:
"14. From a perusal of Section 6, it would appear that the Central or the State Government or any other authority (depending upon the category of the public servant) has the right to consider the facts of each case and to decide whether that public servant is to be prosecuted or not. Since the section clearly prohibits the courts from taking cognizance of the offences specified therein, it envisages that the Central or the State Government or the other authority has not only the right to consider the question of grant of sanction, it has also the discretion to grant or not to grant sanction.
15. In Gokulchand Dwarkadas Morarka v. King, AIR 1948 PC 82 it was pointed out that:
... The sanction to prosecute is an important matter; it constitutes a condition precedent to the institution of the prosecution and the Government have an absolute discretion to grant or withhold their sanction. They are not, as the High Court seem to have thought, concerned merely to see that the evidence discloses a prima facie case against the person sought to be prosecuted. They can refuse sanction on any ground which commends itself to them, for example, that on political or economic grounds they regard a prosecution as inexpedient. Looked at as a matter of substance it is plain that the Government cannot adequately discharge the obligation of deciding whether to give or withhold a sanction without a knowledge of the facts of the case. (emphasis supplied)
16. In Basdeo Agarwalla v. Emperor, AIR 1945 FC 16, it was pointed out that sanction under the Act is not intended to be, nor is an automatic formality and it is essential that the provisions in regard to sanction should be observed with complete strictness. This Court in State through Anti-Corruption Bureau, Govt. of Maharashtra v. Krishanchand Khushalchand Jagtiani, (1996) 4 SCC 472 while considering the provisions of Section 6 of the Act held that one of the guiding principles for sanctioning authority would be the public interest and, therefore, the protection available under Section 6 cannot be said to be absolute.
17. Sanction lifts the bar for prosecution. The grant of sanction is not an idle formality or an acrimonious exercise but a solemn and sacrosanct act which affords protection to government servants against frivolous prosecutions. (See Mohd. Iqbal Ahmed v. State of A.P., (1979) 4 SCC 172) Sanction is a weapon to ensure discouragement of frivolous and vexatious prosecution and is a safeguard for the innocent but not a shield for the guilty.
18. The validity of the sanction would, therefore, depend upon the material placed before the sanctioning authority and the fact that all the relevant facts, material and evidence have been considered by the sanctioning authority. Consideration implies application of mind. The order of sanction must ex facie disclose that the sanctioning authority had considered the evidence and other material placed before it. This fact can also be established by extrinsic evidence by placing the relevant files before the Court to show that all relevant facts were considered by the sanctioning authority. (See also Jaswant Singh v. State of Punjab, AIR 1958 SC 124 and State of Bihar v. P.P. Sharma, 1992 Supp(1) SCC 222)
19. Since the validity of sanction depends on the applicability of mind by the sanctioning authority to the facts of the case as also the material and evidence collected during investigation, it necessarily follows that the sanctioning authority has to apply its own independent mind for the generation of genuine satisfaction whether prosecution has to be sanctioned or not. The mind of the sanctioning authority should not be under pressure from any quarter nor should any external force be acting upon it to take a decision one way or the other. Since the discretion to grant or not to grant sanction vests absolutely in the sanctioning authority, its discretion should be shown to have not been affected by any extraneous consideration. If it is shown that the sanctioning authority was unable to apply its independent mind for any reason whatsoever or was under an obligation or compulsion or constraint to grant the sanction, the order will be bad for the reason that the discretion of the authority not to sanction was taken away and it was compelled to act mechanically to sanction the prosecution.
20. The narration of facts, set out in the beginning of the judgment, would show that while the matter of grant of sanction was under the consideration of the State Government, Harshadrai had filed a petition on behalf of his firm in the Gujarat High Court under Article 226 of the Constitution for a writ in the nature of mandamus directing the State Government to grant sanction. In this petition, the Secretary of the Department who, originally was not impleaded, was, subsequently, arrayed as Respondent 7 and a direction was issued to him to grant sanction and the Secretary, acting in pursuance of the order of the High Court, granted the sanction.
21. The question is whether the High Court could issue a mandamus of this nature and whether the order of sanction, in these circumstances, is valid.
22. Mandamus which is a discretionary remedy under Article 226 of the Constitution is requested to be issued, inter alia, to compel performance of public duties which may be administrative, ministerial or statutory in nature. Statutory duty may be either directory or mandatory. Statutory duties, if they are intended to be mandatory in character, are indicated by the use of the words shall or must. But this is not conclusive as shall and must have, sometimes, been interpreted as may. What is determinative of the nature of duty, whether it is obligatory, mandatory or directory, is the scheme of the statute in which the duty has been set out. Even if the duty is not set out clearly and specifically in the statute, it may be implied as correlative to a right.
23. In the performance of this duty, if the authority in whom the discretion is vested under the statute, does not act independently and passes an order under the instructions and orders of another authority, the Court would intervene in the matter, quash the order and issue a mandamus to that authority to exercise its own discretion."
29.The reliance placed by Mr.N.G.R.Prasad on the judgment of the Hon'ble Supreme Court in Superintendent of Police (C.B.I) V. Deepak Chowdhary and others, (1995) 6 SCC 225 is not applicable to the facts of the present case. There the contention was as to whether before granting sanction under Section 6 of the Prevention of Corruption Act, 1947, the delinquent must be given an opportunity and it was in those circumstances held that granting of sanction is only an administrative act and therefore, the question of giving opportunity of hearing does not arise. The Hon'ble Supreme Court has held as follows:
"5.We find force in the contention. The grant of sanction is only an administrative function, though it is true that the accused may be saddled with the liability to be prosecuted in a court of law. What is material at that time is that the necessary facts collected during investigation constituting the offence have to be placed before the sanctioning authority and it has to consider the material. Prima facie, the authority is required to reach the satisfaction that the relevant facts would constitute the offence and then either grant or refuse to grant sanction. The grant of sanction, therefore, being administrative act the need to provide an opportunity of hearing to the accused before according sanction does not arise. The High Court, therefore, was clearly in error in holding that the order of sanction is vitiated by violation of the principles of natural justice."
It is not the case of the appellant as well as the petitioner in this case that no opportunity was given before the impugned sanction order came to be passed and therefore, the said judgment is not applicable to the facts of the case.
30.Further reliance is placed by the learned counsel for the respondents on the judgment of the Hon'ble Supreme Court Paul Varghese V. State of Kerala and another in (2007) 14 SCC 783, which again relates to the sanction under Section 197 of the Code of Criminal Procedure. It was held that the sanction under Section 19(1) of the Prevention of Corruption Act, 1988 does not go into the root of jurisdiction, while it is altogether different under Section 197 of the Code of the Criminal Procedure. The Hon'ble Supreme Court has differentiated the two statutes holding that they are absolutely different. Ultimately, the Hon'ble Supreme Court has held as follows:
"10.It may be noted that Section 197 of the Code and Section 19 of the Act operate in conceptually different fields. In cases covered under the Act, in respect of public servants the sanction is of automatic nature and thus factual aspects are of little or no consequence. Conversely, in a case relatable to Section 197 of the Code, the substratum and basic features of the case have to be considered to find out whether the alleged act has any nexus to the discharge of duties. Position is not so in case of Section 19 of the Act."
In fact, in the said judgment by referring to the earlier decision in Parkash Singh Badal and another Vs. State of Punjab and others, (2007) 1 SCC 1, the Hon'ble Supreme Court has held that mere irregularity or error or omission in granting the sanction does not vitiate the sanction order, unless it is shown that such irregularity or error has resulted in substantial failure of justice. It is relevant to extract paragraph-8, which is as follows:
"8.The effect of sub-sections (3) and (4) of Section 19 of the Act is of considerable significance as noted in Parkash Singh Badal V. State of Punjab, (2007) 1 Supreme Court Cases 1. In sub-section (3) the stress is on "failure of justice" and that too "in the opinion of the court". In sub-section (4), the stress is on raising the plea at the appropriate time. Significantly, the "failure of justice" is relatable to error, omission or irregularity in the sanction. Therefore, mere error, omission or irregularity in sanction is (sic not) considered fatal unless it has resulted in failure of justice or (sic failure of justice) has been occasioned thereby. Section 19(1) is a matter of procedure and does not go to the root of jurisdiction. Sub-section (3)(c) of Section 19 reduces the rigour of prohibition. In Section 6(2) of the Prevention of Corruption Act, 1947 (hereinafter referred to as "old Act") corresponding to Section 19(2) of the Act, question relates to doubt about authority to grant sanction and not whether sanction is necessary."
31.But that is not the issue before this Court. The issue before this Court is that the Authority on the same materials having taken earlier decision twice in not granting sanction, has chosen to grant sanction based on the same materials and it is not the question of mere irregularity or omission to show that it is not substantive in nature.
32.It was in Gopikant Choudhary V. State of Bihar and others, (2000) 9 SCC 53, the Hon'ble Supreme Court has reiterated that independent application of mind is sine qua non for granting sanction to prosecute. In that case, originally, the matter was placed before the Minister of Law to revise the grant of sanction and after retirement of the delinquent, the Chief Minister has granted sanction and it was in those circumstances, the Hon'ble Supreme Court having found that the investigating agency has not collected any fresh materials and therefore, the Chief Minister has no authority to change the earlier decision of the Minister of Law, has held as follows:
"5. In the case in hand, the matter was initially placed before the Minister of Law who refused to accord sanction after applying his mind to the entire materials and an order to that effect was passed. Subsequent to the same, the appellant retired in the year 1994 and it is only in 1997, the Chief Minister appears to have passed the impugned order. The appellant assailed the legality of the aforesaid order in the High Court, but the High Court having not interfered, he has approached this Court. It is contended on behalf of the appellant that no fresh materials were collected subsequent to the earlier order refusing to sanction prosecution and the appropriate authority having applied its mind and having passed the said order, the subsequent order was wholly uncalled for and unjustified. In the counter-affidavit filed by the State, it has been indicated that before passing the earlier order, the matter had not been referred to the Chief Minister who was the competent authority and, therefore, when the matter was referred to the Chief Minister, the Chief Minister having passed the order there is no infirmity with the order of sanction in question. He also produced the relevant file before us to indicate as to how the file has been processed after the earlier order refusing to sanction prosecution.
6. We find from the file that was produced that there has been no application of mind when the subsequent order was passed in the year 1997. It further appears that between the order refusing to sanction and the order that was passed in 1997, the investigating agency had not collected any fresh materials requiring a fresh look at the earlier order. It is also apparent that the alleged excess amount said to have been paid on account of non-performance of the duty by the appellant is to the tune of Rs 2750 and, therefore, under the Rules of Business, the file pertaining to sanction would have been finally dealt with by the Law Minister and, in fact, he had done so. In this view of the matter, neither was there any necessity for the authorities concerned to place the file before the Chief Minister nor had the Chief Minister any occasion to reconsider the matter and pass fresh order sanctioning prosecution particularly when taking into account the loss sustained to the exchequer to the tune of Rs 2750. That apart, the person concerned has already retired in the year 1994 and it is unthinkable that for a loss of Rs 2750 the State would pursue the proceedings against such person. In this view of the matter, we set aside the impugned order of sanction dated 10-12-1997 passed by the Chief Minister for prosecuting the appellant."
While the law is thus well settled, on the facts of the present case, we have no hesitation to hold that the impugned sanction has been given by the authority on the same material, which was available before the Authority on the earlier two occasions when the refusal was made.
33.We have also perused the file handed over by the learned counsel for respondents 1 and 2. On a reference to the letter relied upon by the learned Judge dated 03.09.2009, extracted above, it is seen that the Central Vigilance Commission has called for a meeting in the Chamber of the Central Vigilance Commission to resolve the difference of opinion for sanctioning of prosecution by the CBI against the appellant. The letter shows that during the said joint meeting of the Bank, CBI and CVC, the Additional Secretary, CVC has advised the Bank, being the Sanctioning Authority, to the effect that the bank has lost substantial amount by One Time Settlement and the Packing Credit Limit has been given by the appellant without proper verification of the borrower's status and that the appellant blindly accepted the valuation of nearly Rs.1.31 Crores, while the property was registered with the Sub-Registrar for a sum of Rs.2.55 lacs, nine months prior to the date of valuation. The following points which have been insisted by the CVC to the Bank as seen in the letter dated 03.09.2009 are once again extracted hereunder with the risk of repetition:
"1.The Bank has lost substantial money by entering into One Time Settlement with the party.
2.In one of the accounts, there is still an outstanding of Rs.77.46 lakhs which is likely to result in loss to the Bank.
3.The member has chosen to sanction packing credit limits of Rs.95 lakhs each to four borrowers without proper verification of KYC of the borrowers concerned and CBI has been able to establish the link between these four parties and Mr.G.D.Bansal.
4.The member has accepted the valuation of nearly Rs.1.31 crores for a property which was registered with Sub-Registrar for a sum of Rs.2.55 lacs nine months prior to the date of valuation. In this case, Bank was able to actually realise only Rs.19.00 lacs after liquidation of their property."
34.It is seen that it is because of the joint sitting of the CBI, CVC along with the Indian Overseas Bank (Sanctioning Authority), the Sanctioning Authority has changed its view. It is not the case of the bank that these materials which are insisted by either the CBI or CVC were not available on earlier two occasions when the order declining sanction of prosecution was passed. Therefore, it is manifestly clear that the change in mind on the part of the Sanctioning Authority has occurred only at the instance and instigation of the CBI and CVC. In the light of the well settled legal principle that the Sanctioning Authority has to independently decide before granting sanction on the materials available, we have no hesitation to hold on the facts and circumstances of the present case that the change of mind on the part of the Sanctioning Authority is certainly not independent. Moreover, it is astonishing to note that in the impugned sanction orders passed by the competent authority there is not even a reference about the earlier order declining to grant sanction and there is absolutely nothing to show that the impugned order has been passed based on any new materials, which were brought to the notice of the authority competent.
35.It is unfortunate that in spite of the alleged grave nature of the offences stated to have been committed by the appellant as well as the petitioner, the employer, being the Sanctioning Authority, having taken a lenient view earlier of declining to grant sanction has changed its opinion due to the pressure from the extraneous sources, which is certainly not expected of the Sanctioning Authority in the light of the well settled principles of law. Unfortunately, the learned Judge has not taken note of the said relevant fact, which in our view vitiates the impugned sanction order. It cannot be said that the impugned sanction order has been passed based on the new materials. Even though the learned Judge has referred to the judgment in Ramanad Chaudhary V. State of Bihar and others in (2002) 1 SCC 153 wherein the Hon'ble Supreme Court has reiterated that the Sanctioning Authority has no jurisdiction to review the order and grant sanction on the same materials, she has chosen to come to a conclusion that there are new materials available. On fact, we do not see any new materials which were either placed by the CBI or CVC before the Sanctioning Authority for the purpose of enabling the Sanctioning Authority to come to a different conclusion.
36.In respect of the alleged conduct during the year 2001-2002, the impugned sanction order came to be passed in the year 2005 and there has been a substantial delay of three years and in such circumstance, we do not want to fasten the responsibility on the petitioner for belatedly approaching this Court by filing the writ petition in the year 2010.
37.For all these reasons, the order of the learned single Judge stands set aside. Consequently, the orders of the Sanctioning Authority, which are impugned in the writ petitions, are quashed and resultantly, the writ petition as well as the writ appeal stand allowed. No costs. Consequently, the connected miscellaneous petitions are closed.
va To:
1.The Superintendent of Police, SPE/CBI/ACB, Chennai (R.C.No.15(A) 2003)
2.The XI Additional Judge for CBI Cases XI Additional Court for CBI Cases relating to banks, Chennai