Bangalore District Court
State By Cbi/Acb vs Sri. M.S.Seetharama Rao on 21 March, 2016
IN THE COURT OF XXI ADDL. CITY CIVIL AND SESSIONS JUDGE
AND PRINCIPAL SPECIAL JUDGE FOR CBI CASES, BENGALURU
(CCH-4).
Spl. C.C. No.476/2002
DATED THIS THE 21ST DAY OF MARCH, 2016
PRESENT : Sri. Bheemanagouda K. Naik,
B.Com., LL.B., (Spl.)
XXI Addl. City Civil and Sessions Judge and
Prl. Special Judge for CBI Cases, Bengaluru.
Complainant: State by CBI/ACB, Bengaluru
(By Special Public Prosecutor)
V/s
Accused: 1. Sri. M.S.Seetharama Rao,
S/o Late M.N. Sreenivas Rao,
Aged 64 years,
the then AGM, SBM,
Bengaluru Branch,
r/o No.1204, 18th Main,
J.P.Nagar, II Phase,
Bengaluru-78.
(Retired from service)
2. Shri. K. Jagannathan,
S/o Late T.S.Krishnamurthy,
Aged 61 years,
the then AGM(Retired),
SBM, Bengaluru Branch,
r/o No.A005, A Block,
Terrace Garden Apartment,
BSK III Stage,
Bengaluru-85.
(Dead, abated vide order dt:06/10/2007)
2 Spl.C.C.No.476/2002 J
3. Shri. M.S. Suryanarayana Rao,
Son of M.V.S.N. Rao,
Aged 53 years,
the then Chief Manager, SBM,
Bengaluru Branch,
r/o No.13, 2nd Cross, SBM Colony,
Mathikere, Bengaluru-54.
4. Shri. T.R.Subbaramu,
Son of Late T. Raja Rao,
Aged 59 years,
the then Manager,
SBM, Bengaluru Branch,
r/o No.39/3, 2nd Main,
Tata Silk Farm,
Basavanagudi,
Bengaluru-4.
5. Shri. M.S.A. Aleem,
Son of Sayed Abbas,
Aged 51 years,
Chairman and Director,
M/s Flora International Ltd.,
r/o No.36, D'Casta Square,
Cook Town, Bengaluru-84.
6. M/s Flora International Ltd., (Company)
Represented by
M.S.A. Aleem, CMD and
Smt. Anuradha, Director,
345/1, Anekal, Bengaluru.
7. Smt. Anuradha,
Wife of Bhuvanendra,
Aged 40 years,
the then Director,
M/s Flora International Ltd.,
r/o No.23, Madhuri, 9th Cross,
I Phase, J.P.Nagar,
Bengaluru-78.
8. K.Parthasarathy,
Son of late K. Krishnamurthy,
Aged 54 years,
3 Spl.C.C.No.476/2002 J
the then Dy.Manager, SBM,
Bengaluru Branch,
C/o R. Jagannatha Rao,
Advocate, Sathyanarayanapet,
Siddique Colony, 6th Cross,
Bellary.
(By Sri. I.S. Pramod Chandra, Adv. for A-1,
Sri. R.N. Nagendra Naik, Adv. For A3,4&8,
Sri. S.G. Bhagawan, Advocate for A-5 & 6,
Sri. Girish.K. Advocate for A7)
JUDGMENT
The Inspector of Police, CBI/ACB, Bengaluru, has filed a charge sheet against the above accused for the offences punishable under Sec. 120B, 420, 468 and 471 of IPC and Sections 13(2) r/w 13(1) (d) of the Prevention of Corruption Act, 1988.
2. It is the case of the prosecution that: -
(a) Accused No.1-Sri. M.S. Seetharama Rao, Accused No.2-
deceased Sri. K. Jagannathan, Accused No.3-Sri. M.S. Suryanarayana Rao, Accused No.4-Sri. T.R. Subbaramu and Accused No.8-Sri.K. Parthasarathy, while functioning as public servants in the capacities as Assistant General Manager, Assistant General Manager, Chief Manager, Manager and Deputy Manager respectively in State Bank of Mysore, Bengaluru Branch, during the period from 1994 to 1996, with a view to derive pecuniary advantage by corrupt or illegal means or otherwise, abusing their official positions, colluded each other and entered into a 4 Spl.C.C.No.476/2002 J criminal conspiracy with Accused No.6 company M/s Flora International Ltd., represented by its Chairman and Director-Accused No.5 Sri. M.S.A. Aleem and Director-Accused No.7 Smt. Anuradha and cheated State Bank of Mysore, Bengaluru Branch, to the tune of Rs.2.20 Crores approximately along with interest from 29-09-1998 and caused corresponding wrongful gain to Accused No.6 company represented by Accused No.7.
(b) In furtherance of the criminal conspiracy, the Accused public servants, dishonestly and fraudulently sanctioned/released various credit facilities such as Cash Credit Hypothecation, pre-shipment advances namely FDBP/FUBP limits, Letter of Credit limits, etc., to Accused No.6 company which are as follows:
i) On 02/06/1995, released Rs.15-Lakhs excess drawings in the said Cash credit account when the Accused No.-5 Company requested for release of Packing Credit of Rs.15-Lakhs against the undrawn balance of USD 70,000 under LC 61194031 of Industrial & Commercial Bank of China, on which the said Accused No.5 Company had already availed packing Credit from Andhra Bank, N R Road Branch and Indian Overseas Bank, Residency Road Branch. Further, they negotiated Export Bill No.030276 for Rs.21,88,900/- drawn under the above mentioned LC submitted 5 Spl.C.C.No.476/2002 J by the said company. Thus, they enabled the said company to avail Post Shipment Finance from State Bank of Mysore, Bengaluru Branch, without liquidating the Packing Credit amount availed by the said company with other banks resulting in double finance, and they failed to give instructions to recover the excess drawings of Rs.15-Lakhs allowed on 02/06/1995. The said bill was returned unpaid.
ii) The Accused officials of SBM, Bengaluru Branch connived with M/s Flora International Ltd., (Accused No.6) and negotiated the following Export Bills drawn under the above mentioned LC61194031.
Date Export Bill No. Amount in US
Dollars
18.01.95 FDBP/N/030033 USD 46,500
30.01.95 FDBP/N/030054 USD 21,000
iii) On 22/02/1995, SBM, Bengaluru Branch has released Rs.25.01-Lakhs as packing Credit and sanctioned the following credit facilities to Accused No.6-Company represented by Accused No.5 and Accused No.7, when the Branch proposal dated:16-02-
1995 for enhancement of limits to Accused No.6-Company was categorically denied by the Controlling Authority:-
a. Packing Credit Limit of Rs.50-Lakhs b. FDBP/FUBP limit of Rs.90-Lakhs.6 Spl.C.C.No.476/2002 J
iv) On 10/05/1995, the Accused officials dishonestly and fraudulently, negotiated two export Bills bearing Nos. 030175 & 176 for USD 2,47,500 and USD 52,000 respectively in spite of the controlling authority turned down to approve Branch's proposal and the International Banking Division of the Branch brought out in their note dated 10.05.1995 that the original export documents of the Bill No.030176 were directly sent to the buyer by the said Accused No.6-
Company violating Exchange Control Regulation.
v) Established the following four Letters of Credit when the said Cash Credit account was overdue and legal notice was served on the said company, its Directors and its Guarantors:-
Date L C Number Amount in Remarks
Rs.
07.01.95 00 7 952 801 1,113,638 Enhanced to
Rs.11,97,985 on
11.02.95
11.01.95 00 7 952 803 2,134,540 Enhanced to
Rs.22,10,524 on
03.02.95
06.04.95 00 7 955 825 1,398,600
12.05.95 00 7 952 837 2,472,600
vi) On 14/06/1995 the Accused bank officials of SBM, Bengaluru issued a Bank Guarantee for Rs.2.60 lakhs favoring M/s Trans Asian Shipping Services Ltd., Chennai when the total liability of the said company was Rs.470.79 Lakhs.
7 Spl.C.C.No.476/2002 J
vii) On 06.04.1996, sanctioned the following credit facilities to the said company without any valid sanction:-
1. C/Cr Hypn of Rs.60 lakhs
2. FDBP/FUBP Limit of Rs.120 lakhs
(c) In furtherance of the said criminal conspiracy, Accused No.6-
Company represented by Accused No.5 and Accused No.7, knowing fully well that the above said credit facilities were permitted by the above said Accused officials by circumventing the laid down procedures, dishonestly and fraudulently availed the same.
(d) In furtherance of the said criminal conspiracy, the Accused public servants permitted the excess drawings unscrupulously in the Cash Credit Hypothecation account bearing No.10631 of Accused No.6 company exceeding their discretionary powers indiscriminately and deliberately without obtaining prior sanction of the Competent Authority.
(e) In furtherance of the said criminal conspiracy, Accused No.6-company knowing fully well that the sanctioned Cash Credit Hypothecation limit in its account No.10631 was Rs.24.5 Lakhs only, dishonestly and fraudulently availed excess drawls on a regular basis permitted by the Accused/public servants by circumventing the laid down procedures.
8 Spl.C.C.No.476/2002 J
(f) In furtherance of the said criminal conspiracy, on 14/09/1995, the SBM, Bengaluru Branch, purchased a forged export bill submitted by Accused No.6-company containing bill of Lading bearing No. MAAI 10219795 valued US$-2,58,000 drawn on M/s DAP Services (Pvt.)Ltd., for Rs.84,99,480/- knowing fully well that the same was not a genuine one when it was presented as genuine by the Accused No.5 and 7 on behalf of Accused No.6 company. In view of the fraudulent acts of the Accused persons the said bill was returned unpaid.
(g) In furtherance of the said criminal conspiracy, the Accused No.6 company represented by Accused No.5 and 7, knowing fully well that the said export bill of M/s Flora International Ltd., containing Bill of Lading bearing No. MAAAI 10219795 valued US$ 2,58,000 drawn on M/s DAP Services (Pvt) Ltd., was not a genuine one, presented the same as genuine one and negotiated the same and dishonestly and fraudulently availed for Rs.84,99,480/-.
(h) In furtherance of the said criminal conspiracy, the Accused/public servants suppressed the fact of enjoying credit facilities by Accused No.6 company from Indian Overseas Branch, Residency Road Branch, Andhra bank, N.R. Road Branch and Karnataka State Industrial and Investment Development Corporation, in the notifications dated:21/03/1995 and 19/04/1996 sent to Export Credit 9 Spl.C.C.No.476/2002 J Guarantee Corporation, Bengaluru, (ECGC) (though they were fully aware of the same and which resulted as one reason in declining of the Bank's claim by Export Credit Guarantee Corporation, Bengaluru.
(i) Because of the above acts of the Accused persons, out standings in the various credit facilities sanctioned to Accused No.6 company represented by Accused No.5 and 7 on various dates were as under:
Sl. Date Balance Balance Balance Balance Total No. in Cash in Foreign in FDBP/ in Bank Balance Credit LCs FUBP Guarante Outstandi (Hyp) (Rs. in (Rs. In e A/c ng (Rs.
(Rs. in Lakhs) Lakhs) (Rs. in in Lakhs)
Lakhs) Lakhs)
01. 07.01.95 25.65 11.15 --- --- 36.8
02. 11.01.95 25.73 32.49 --- --- 58.22
03. 19.01.95 25.82 32.49 --- --- 56.31
04. 30.01.95 36.22 32.49 --- --- 68.71
05. 27.03.95 24.42 34.09 77.96 --- 136.47
06. 06.04.95 25.57 48.07 77.96 --- 141.6
07. 226.9
08. 10.05.95 18.99 48.07 249.41 --- 316.47
09. 12.05.95 18.65 48.07 249.41 --- 316.13
10. 17.05.95 43.21 70.03 327.2 --- 440.44
11. 14.06.95 39.77 50.55 327.2 2.6 420.12
12. 05.07.95 36.46 50.55 404.57 2.6 494.18
13. 01.08.95 39.64 50.55 254.86 2.6 347.65
10 Spl.C.C.No.476/2002 J
14. 14.09.95 50.1 36.71 177.05 2.6 266.46
(j) The collateral security available to the Bank as per the latest valuation report dated:16/01/2002 and 17/01/2002 is aggregating to Rs.78,50,000/-. Thus, the Bank has suffered a financial loss of Rs.2,02,76,308/- along with the interest from 29/09/1998. Therefore, the Accused have committed an offence punishable under Sec. 120B, 420, 468 and 471 of IPC and Sections 13(2) r/w 13(1) (d) of the Prevention of Corruption Act, 1988.
(k) On 04/06/2001 Sri. M.C. George, Inspector of Police, CBI/ACB Bengaluru, registered a case sue-motto in Cr.No.RC.No. 19(A)/2001 on the basis of source of information and lodged the FIR to the court and took up investigation in the matter. During the investigation, CW-34 recorded the statements of the witnesses and seized the records pertaining to this case. He conducted searches in the residence of Accused No.5 on 29/06/2001 and seized the documents. He secured the sanction order in respect of the Accused No.3, Accused No.4 and Accused No.8 from the concerned authority.
Since Accused No.1 and deceased Accused No.2 were already retired from the services, no sanction order was required to prosecute them before the court.
11 Spl.C.C.No.476/2002 J
(l) Thereafter, CW-38 took up further investigation, since the investigation was already completed submitted the final report before the court.
3. After filing the charge sheet, cognizance of offences has been taken, Accused No.1 to 8 appeared before the court and they have been enlarged on bail and necessary police papers have been furnished to them. Thereafter arguments have been heard before framing the charge and prayer for discharge has been rejected by the order dated 2.3.2005. Then the charge has been framed against all Accused and explained the contents of the charge to each of them and they have pleaded not guilty and claimed to be tried. Thereafter Accused No.2 is expired and case against him came to be abated by the order dated 6.10.2007.
4. Then the prosecution examined in all 28 witnesses as PWs.1 to 28 and got exhibited 181 documents as Ex.P.1 to Ex.P.181 and closed its side. Then the statements of Accused No.1, 3 to 8 have been recorded U/s 313 Cr.P.C., after explaining the incriminating circumstances appearing against them in the evidence by the prosecution witnesses and they have denied all the incriminating circumstances appearing against them. The Accused No.1, 3, 4, 6 and 8 have submitted their written statement about their say in the matter. The Accused have entered the defence evidence on their 12 Spl.C.C.No.476/2002 J behalf, examined three witnesses as DW.1 to 3 and got exhibited Ex.D1 to D17 in support of their defence.
5. Then I have heard the detailed arguments advanced by learned Special Public Prosecutor for CBI and learned counsel for the respective Accused. The learned Special Public Prosecutor and learned counsel for Accused No.1, 3, 4, 5, 6 and 8 have submitted their detailed notes of arguments and memo with citations. The learned counsel for Accused No.7 adopted the written arguments of Accused No.5 and 6.
6. The points that would arise for my consideration are:
1) Whether the prosecution proves beyond all reasonable doubt that Accused No. 1, 3, 4 and 8, while functioning as public servants in the State Bank of Mysore, Bengaluru Branch during the period 1994 to 1996 have entered into a criminal conspiracy with Accused No.5 and 7 who were the Chairman/Director of Accused No.6 company M/s.
Flora International limited to cheat the State Bank of Mysore, Bengaluru Branch in respect of credit facilities of Accused No.6 company and thereby committed an offence punishable U/sec. 120(B) of IPC?
2) Whether the prosecution further proves beyond all reasonable doubt that in furtherance of criminal conspiracy, the Accused No. 1, 3 to 8, dishonestly and fraudulently induced State Bank of Mysore for release of Cash Credit Hypothecation, Pre-shipment Advances viz., FDBP/FUBP limits, letter of credit limits, allowed excess drawings in the cash credit hypothecation, purchased, forged export bill etc., and thereby caused loss to the tune of Rs.2,02,76,308/- and 13 Spl.C.C.No.476/2002 J thereby committed an offence punishable U/Sec. 420 of IPC?
3) Whether the prosecution further proves beyond all reasonable doubt that in furtherance of criminal conspiracy, Accused No.5 to 7 have forged the documents for the purpose of cheating and thereby committed an offence punishable u/s 468 IPC?
4) Whether the prosecution further proves beyond all reasonable doubt that in furtherance of criminal conspiracy Accused No.5 to 7 knowing fully well that the export bill containing Bill of Lading bearing No. MAAI 10219795 valued US$2,58,000 drawn on M/s. Dap Services (Pvt.) Ltd., for Rs.84,99,480/- was not a genuine one used the same as genuine one and thereby committed an offence punishable u/s 471 IPC?
5) Whether the prosecution further proves beyond all reasonable doubt that in furtherance of criminal conspiracy Accused No.1, 3, 4 and 8 while functioning as public servants in the capacity of AGM, Chief Manager, Branch Manager, Deputy Manager, State bank of Mysore, abused their official position and sanctioned/released various credit facilities in favour of Accused No.6 company and purchased forged bill of lading and thereby committed an offence of criminal misconduct punishable u/s 13(2) r/w 13(1)(d) of Prevention of Corruption Act, 1988?
6) What Order?
7. My findings on the above points are as follows:
POINT No.1, 2 & 4: In the affirmative, POINT NO.3 & 5: In the negative POINT No.6: As per final order, for the following 14 Spl.C.C.No.476/2002 J REASONS
8. POINT No.1 to 5: - All these points have been taken up together for consideration and discussion to avoid the repetition of facts and evidence.
9. Before going to consider the allegations leveled against the Accused, it is proper to consider the admitted facts. It is an admitted fact that Accused No.1 was serving as AGM, deceased Accused No.2 was serving as AGM, Accused No.3 was serving as Chief Manager, Accused No.4 was serving as Manager and Accused No.8 was serving as Deputy Manager in State Bank of Mysore, C&I Division, Bengaluru Branch. It is further admitted that Accused No.1 and 2 retired from service and during the trial of the case Accused No.2 is expired. It is further admitted that Accused No.3, 4 and 8 were still public servants as on the date of filing of final report.
10. It is further admitted that Accused No.6 company M/s. Flora International Limited is a company of which Accused No.5 Sri. M.S.A. Aleem is the Chairman & Director and Accused No.7 Smt. Anuradha was the Director of the said company and representing the company. It is further admitted about the request of Accused No.6 company to State Bank of Mysore, Bengaluru Branch for sanction of credit facilities, sanction and release of the said funds for the business of Accused No.6 company. On the basis of the above admitted facts now 15 Spl.C.C.No.476/2002 J I will proceed to consider the oral and documentary evidence relied upon by the prosecution in support of its case regarding the following aspects.
VALIDITY OF SANCTION ORDERS: -
11. It is an admitted fact that Accused No.1 who was AGM, retired from the service before filing of the present final report against him and others. When the Accused No.1 retired from the service there was no necessity of obtaining sanction order from his competent authority to prosecute him before the court.
12. It is an admitted fact that Accused No.3 Chief Manager, was still in service and a public servant in respect of whom the prosecution has obtained sanction order from his competent authority as per Ex.P166.
13. In this regard, the prosecution has relied upon oral evidence of PW.23 Sri. Niranjan Bardalai, who was Chief General Manager, State Bank of Mysore, Head Office, Bengaluru and the contents of Ex.P166. As seen from the evidence of PW.23 he has deposed that from 1998 to 2003 he was working as Chief General Manager in State Bank of Mysore, Head Office, Bengaluru. Further, he has deposed that he knows Sri. M.S. Suryanarayana Rao, Accused No.3 of this case and at the relevant point of time he was working as Chief Manager, C&I Division, SBM Main Branch, Bengaluru. Further, 16 Spl.C.C.No.476/2002 J he has deposed that at that time Accused No.3 was working as Scale- IV Officer in SBM, Mysore and the Chief General Manager of the bank was the disciplinary authority and also the competent authority to remove the Accused No.3 from service. He has further deposed that as Chief General Manager he was competent to remove the Accused No.3 from service.
14. Further, he has deposed that he had received the investigation report and supporting documents from CBI along with the request for issue of sanction to prosecute Accused No.3 and he has gone through the investigation report, all other documents that were sent to him by the CBI and felt that there is a case for sanction for prosecution of Accused No.3 and accordingly he has issued the sanction order. Further, he has deposed that Ex.P166 is the sanction order issued by him, contents are correct and bears his signature as per Ex.P166(a) and 166(b).
15. This witness has been cross-examined by the learned counsel for Accused No.3. Looking to the cross-examination made to this witness, it is clear that this witness is having legal knowledge. He is aware of the provisions of the penal code. When he was asked to say about Section 471 of IPC., he has stated that it pertains to forged documents. The evidence is not shaken in any manner in his cross- examination. As he was Chief General Manager, after receiving the 17 Spl.C.C.No.476/2002 J investigation report and all the connected documents, properly verified them, applied his mind and came to the conclusion that there is a prima facie case made out against Accused No.3 for issue of sanction order. Accordingly, he has issued sanction order as per Ex.P166. On perusal of the contents of Ex.P166, it is forthcoming that by considering each allegations forthcoming against Accused No.3, the investigation material and documents, the order has been issued by PW.23. Therefore, there are no reason to disbelieve the evidence of PW.23 and the contents of Ex.P166 issued by him. Therefore, there is no much dispute about the sanction order issued by PW.23 as per Ex.P166. Hence, the prosecution has proved that the sanction order Ex.P166 issued in respect of Accused No.3 by PW.23 as a disciplinary authority and also the competent authority is a valid sanction order in the eye of law.
16. It is an admitted fact that at the relevant point of time Sri. T.R. Subbaramu Accused No.4 was working as Manager, C&I, SBM, Bengaluru Main Branch. It is further admitted that at the relevant point of time Sri. K. Parthasarathy - Accused No.8 was working as Deputy Manager of SBM Main Branch, Bengaluru. As on the date of filing of final report Accused No.4 and 8 were in the service of bank and public servants. Therefore, the prosecution has obtained sanction orders as per Ex.P170 and 171 from the disciplinary authority to 18 Spl.C.C.No.476/2002 J prosecute them before the court of law. In this regard, the prosecution has relied upon the evidence of PW.25 Sri. K.R. Rajagopal who was General Manager, SBM, Head Office, Bengaluru.
17. Looking to the evidence of PW.25, he has deposed that from October 2002 to August 2003 he has worked as General Manager (Operations), State Bank of Mysore, Head Office, Bengaluru. Further, he has deposed that in the year 1996-97 Accused No.4 was working as Manager, C&I, SBM, Bengaluru Main Branch and at that time Accused No.8 was working as Deputy Manager in the said Branch. Further, he has deposed that he was the disciplinary authority for Accused No.4 and 8 as Accused No.4 was Scale-III Officer and Accused No.8 was Scale-II Officer at that time. Further, he has deposed that the General Manager (Operations) was the removal authority for both Scale-II & Scale-III Officers. Further, he has deposed that he was working as General Manager (Operations) and he was removal authority for Accused No.4 and 8.
18. Further, he has deposed that the CBI had sought for sanction to prosecute Accused No.4 and 8 and they had sent their report along with oral and documentary evidence collected, to their Vigilance Department and Vigilance Department had placed the documents before him for taking the decision whether sanction has to be given to prosecute Accused No.4 and 8 or not. Further, he has 19 Spl.C.C.No.476/2002 J deposed that based on the documents furnished to him, he applied his mind and decided that it is a fit case for issuing sanction order against Accused No.4 and 8. Accordingly, he has issued sanction order in respect of Accused No.4 as per Ex.P170 and in respect of Accused No.8 sanction order as per Ex.P171 and his signatures are Ex.P170(a) and 170(b) on Ex.P170 and Ex.P171(a) and 171(b) on Ex.P171.
19. This witness has been cross-examined by the learned counsel for Accused No.4 and 8, nothing has been elicited from his mouth to disbelieve his evidence. It is not disputed that he was working as General Manager (Operations) SBM and he was the disciplinary authority for Accused No.4 and 8 who were the Scale-III & Scale-II Officers respectively.
20. In his cross-examination some questions were asked about the transactions of Accused No.6 company and those questions were not relevant to him. Therefore, considering the evidence of PW.25, his evidence is proving that he being the disciplinary authority for Accused No.4 and 8, after receiving the report from the Investigating Officer, applied his mind and came to the conclusion that there is a prima facie case made out against both the Accused and accordingly issued sanction orders as per Ex.P170 and 171 respectively. Therefore, the sanction orders Ex.P170 and 171 have been issued after applying proper mind and both orders are valid orders in the eye of law. There 20 Spl.C.C.No.476/2002 J is no much dispute about the sanction orders issued by PW.25 as per Ex.P170 and 171. Therefore, the prosecution has established that the sanction orders in respect of Accused No.4 and 8 are valid sanction orders.
BEGINNING OF THE TRANSACTIONS OF ACCUSED NO.6 COMPANY WITH SBM MAIN BRANCH, BENGALURU:
21. It is an admitted fact that, Accused No.6 company is a closely held public limited company of which Accused No.5 is the Chairman and Director and Accused No.7 was the Director of the said company. It is further admitted that on 6.5.1992, Accused No.6 company was sanctioned a cash credit hypothecation limit of Rs.24.50 lakhs to carry on the inland trading activity of silk waste and allied products.
22. It is further admitted that the above credit limit was primarily secured by the hypothecation of stocks and collaterally secured by the equitable mortgage of landed properties in the name of Smt. Pankaja Bai worth more than Rs.60 lacs, personal guarantee of Smt. Pankaja Bai along with the personal guarantee of all the directors of the company. As this limit was sanctioned under Branch discretionary powers, control returns were submitted to the General Manager (Operations), the then controller of the Branch. 21 Spl.C.C.No.476/2002 J
23. It is further admitted that on 29.05.1992, the Branch at the request of the company has substituted the collateral security of Smt. Pankaja Bai after obtaining fresh set of documents and Equitable Mortgage of landed properties worth Rs.19.45 lacs in the name of Smt. B.N. Veena Kumari and landed properties in the name of Smt. Mallamma & her sons worth Rs.45.71 lacs, represented by power of Attorney holder Sri.D. Chandrasekhar, worth Rs.45.71 lacs. The personal guarantees of Smt. B.N. Veena Kumari and D. Chandrasekhar were obtained along with the personal guarantee of all the directors of the company.
24. In this regard, firstly the prosecution has adduced and relied upon the evidence of PW.1 Sri. B. Lakshmipathi, Retired Chief Manager, SBM. He has deposed that he was working as Chief Manager (Commercial & Institutional Banking Division), SBM, Bengaluru Branch during the period from 1997 to May 2000. He succeeded Sri. M.S. Suryanarayana Rao, the then Chief Manager of the said Branch. One Mr. P. Balaramaiah was the AGM, he succeeded Mr. K. Jagannathan (deceased Accused No.2). Mr. Parthasarathy was the Deputy Manager in C&I Division. One Mr. Shivaswamy was DGM of Bengaluru Zone. There will be only one Chief Manager in a division. At that point of time there were two Managers working under Chief Manager, one taking care of advances and another general banking. There were 22 Spl.C.C.No.476/2002 J about 10 Deputy Managers working under the Managers. Of them, two managers were working in C&I advances. Sri. Shashi Kumar & Parthasarathy were the Deputy Managers, C&I Advances at that point of time. Sri. Krishnan Kutti was the Chief Manager, Foreign Exchange Department, Bengaluru Branch. One Mr. Hiriyannaiah was the Deputy Manager in Foreign Exchange Department. Mr. Subbaramu T.R. was the Manager (Advances). Later Mr. Shanthamurthy succeeded Subbaramu. He can identify the handwriting and signatures of Sri. M.S. Seetharama Rao, M.S. Suryanarayana Rao, Subbaramu and Parthasarathy.
25. He has further deposed that there was a circular in the year 1987. Ex.P1 relating to the delegation of financial powers of the officers. Whenever a proposed borrower offers another person as a guarantor, the bank would assess the credit worthiness of that proposed guarantor and prepare a report. If the proposed borrower or the guarantor offers any immovable property as collateral security, the bank collects the title deeds relating to that property together with Encumbrance Certificate, Tax Paid Receipt, Khatha Certificate etc., and refer the matter for legal opinion and obtain the valuation of the proposed property from the valuator. If an individual approaches bank for credit facilities, the procedure is to obtain application accompanied with his 3 years balance sheet reflecting the assets and liabilities, the 23 Spl.C.C.No.476/2002 J type of activity/business for which he wants loan will have to be stated. The bank will ascertain whether the said unit for which the loan is sought is really functioning in its own building or in a rented accommodation and also ascertain about the availability of the man power, raw material, electricity, water etc. If the Chief Manager of the bank is satisfied he would sanction the loan if it is within his limits and seek confirmation from AGM. If the amount of loan sought exceeds the powers of Chief Manager then the proposal will be forwarded to AGM who would sanction the loan if satisfied and if the amount is within his limits and submit the same for confirmation to the DGM. If the loan sought is beyond the sanctioning powers of AGM, the AGM would send proposal to DGM who if satisfied would sanction the limit and refer to the General Manager for confirmation. Before the expiry of the period of 12 months in case of working capital limits, the borrower will be asked to submit a fresh application for renewal of the said limit. The borrower may also seek for enhancement of limit.
26. He knows M/s. Flora International Ltd., of which Accused No.5 was the Chairman and Accused No.7 was the Director of the said company and Accused No.7 offered herself as the guarantor. M/s. Flora International Ltd., was engaged in the activity of processing waste silk and selling the same in the local market and also exporting to the foreign countries. When he reported to duty in the year 1997, 24 Spl.C.C.No.476/2002 J SBM, Bengaluru Branch, M/s. Flora International Ltd., had already availed credit facilities viz., Packing Credit (PC), Cash Credit Hypothecation and Bill Discounting. The said company was given the facility of cash credit hypothecation limit of Rs.25 lakhs. One lady by name Pankaja Bai stood as guarantor and offered an immovable property as a collateral security at the time of processing the application for cash credit hypothecation. Ex.P2 is the letter under which the SBM had sanctioned cash credit hypothecation limit of Rs.24.50 lakhs to M/s. Flora International Ltd. This letter was signed by Mr. Krishnamurthy who was the Manager (C&I). The Directors of Accused No.6 company and the guarantors have subscribed their signatures on the last page of Ex.P2 for having accepted the terms and conditions mentioned in that sanctioned letter. Ex.P3 is the resolution of the company dated 22.4.1992. Ex.P4 is the resolution of the company dated 2.4.1992. Ex.P5 is the on demand promissory note dated 13.5.1992 executed by the Accused No.6 company for a sum of Rs.24.50 lakhs and on the overleaf of Ex.P5, the guarantors have also endorsed the pronote in favour of the bank as per Ex.P5(a). Ex.P6 is the take delivery letter to DPN. Ex.P7 is the letter of undertaking given by the guarantors in favour of the bank under which they have undertaken to continue to remain as guarantors notwithstanding any short fall in the value of the hypothecated stock in favour of the bank. 25 Spl.C.C.No.476/2002 J Ex.P8 is the agreement of guarantor. Ex.P9 is the letter of undertaking. Ex.P10 is the agreement for cash credit and hypothecation of goods. Ex.P11 is the agreement for advances. Ex.P12 is the stock statement. Ex.P13 is the letter written by guarantor confirming for having created an equitable mortgage in favour of the bank on 13.5.1992 in respect of the credit facilities extended to (a) Flora Wall Coverings Ltd., Rs.24.50 lakhs, (b) Flora International Ltd., Rs.24.50 lakhs. On the request made by the company, the guaranteeship of Smt. Pankaja Bai was replaced with the guaranteeship of Smt. Mallamma and Smt. Veena Kumari as per Ex.P14. Ex.P15 is the document pertaining to deposit of documents of title deed by Smt. Pankaja Bai in respect of property, which she offered as a collateral security by creating an equitable mortgage. Ex.P15(a) is the record made for the guarantors by name Mallamma, Basavaraj & Somashekar represented by their GPA holder Chandrashekara for having created an equitable mortgage by depositing the title deeds.
27. Ex.P15(b) is the record made for which guarantor by name Smt. B.N. Veena Kumari for having created an equitable mortgage by depositing the title deeds.
28. Secondly, the prosecution has adduced and relied upon the evidence of PW.4 B.N. Sheshananda Singh, Retired Manager, State 26 Spl.C.C.No.476/2002 J Bank of Mysore. He has deposed that from April 1992 to May 1994 he has worked as Manager, C&I, Advances Division, State Bank of Mysore, Bengaluru. When he reported as Manager in C&I Advance Division one P.N.Bapiraju was working as Asst. General Manager of the State Bank of Mysore, Bengaluru Branch. C&I Division is a section of Bengaluru Branch. The Bengaluru Branch of State Bank of Mysore is situated in Avenue Road, Bengaluru. After transfer of P.N.Bapiraju, C.R.N.Murthy became the AGM of the Bengaluru Branch. At that time V.Krishnamurthy was working as Chief Manager of C&I Division of State Bank of Mysore, Bengaluru. Krishnamurthy worked as Chief Manager as stated above for about one and half months only and after his transfer Mr.V.Kannan Kutti became the Chief Manager of the above said division. While working in C&I Division under him there were 3 Field Officers and they were: T.C.Shantakumar, Shashikumar and Narasimha and they were assisting him. After the transfer of T.C.Shantakumar, Mr.Parthasarathi (Accused No.8) became the Field officer of the said division. He can identify the handwriting and signatures of all the above said officials of the Bank as he has worked with them in the said C&I Division.
29. He has further deposed that Flora International approached C&I Division through their Chief Manager for Advances for sanction of Cash Credit loan. Flora International was a limited 27 Spl.C.C.No.476/2002 J company consisting of 3 directors by names Mr.M.S.A. Aleem (Accused No.5), M.S.M.Pasha and Smt. Anuradha (Accused No.7). The said application of Flora International was processed by T.C.Shanthakumar, Field Officer and it was put up to Chief Manager (Advances) Mr.V.Krishnamurthy and V.Krishnamurthy recommended the advances and it was sanctioned under the discretionary power of then AGM Mr.Bapiraju and he has sanctioned that advance. Mr.Bapiraju died about 15 years back.
30. Further he has deposed that Ex.P.5 is the on demand pronote executed by Flora International and it is filled up by Shanthakumar. He was also working in the C&I Division when the loan documents were executed. He identifies the signatures of Accused No.5 M.S.A. Aleem and Pasha and those signatures are marked as Ex.P.5(b) and P5(c) respectively. All the borrowers have signed the D.P. Note delivery letter marked as Ex.P.6. Ex.P.7 is the guarantors letter and Pankaja Bai has also signed as guarantor.
31. Ex.P.8 is the agreement form No.8 and it is signed by the guarantor Pankaja Bai. Ex.P.9 is the letter of undertaking. Ex.P.10 is form No.9 (agreement for cash credit). Ex.P.11 is form No.12 (hypothecation agreement). Ex.P.12 is stock statement and it is signed by V.Krishnamurthy who was then Chief Manager and his signature is marked as Ex.P.12(b). Ex.P.2 is the loan sanction 28 Spl.C.C.No.476/2002 J communication letter issued to Flora International Ltd., and it is signed by V.Krishnamurthy then Chief Manager and his signature is at Ex.P.2(a). The Board of Directors of Flora International have also signed the same for accepting the terms and conditions mentioned in the same. Ex.P.15 is the document regarding equitable mortgage by deposit of title deeds by the guarantor Pankaja Bai in favour of the Bank. Ex.P.3 and Ex.P.4 are the resolutions for taking the loan by Flora International Ltd., (Accused No.6).
32. The cash credit hypothecation limit sanctioned to Flora International (Accused No.6) was Rs.24,50,000/- as per the terms and conditions.
33. After 15 days of execution of equitable mortgage by deposit of title deeds, the directors of Flora International (Accused No.6) approached the Bank to substitute the collateral security of Pankaja Bai by taking substitution of 2 fresh properties of Mallamma, Basavaraj and Chandrashekar. The Bank accepted the same and released the property of Pankaja Bai and took the properties of Mallamma, Basavaraj and Chandrashekar as collateral security.
34. He worked in the C&I Division upto May 1994 only and afterwards he was transferred to Bombay. As per Ex.D.1, the account number of the Flora International (Accused No.6) is 10631 (cash credit account) and it was opened on 6.5.1992 as per Ex.D.1. All the 29 Spl.C.C.No.476/2002 J transactions of Flora International are reflected in the account extract Ex.D.1.
35. Thirdly, the prosecution has adduced and relied upon the evidence of PW.5 Sri. T.C. Shanthakumar, Retired Chief Manager, SBM. He has deposed that from March 1991 to May 1993 he has worked as Asst. Manager as well as Deputy Manager in C&I Division of State Bank of Mysore, Bengaluru Branch. P.V Bapiraju and CRN Murthy were working as Asst. General Managers during the above said period in Bengaluru Branch of State Bank of Mysore one after the other. In other words CRN Murthy succeeded as Asst. General Manager after P.V Bapiraju. V.Krishnamurthy and afterwards K.Kannan kutti were working as the Chief Managers of C&I Division of State Bank of Mysore, Bengaluru Branch during the above said period. During the above said period, G.S.Ramachandra and B.N.Sheshananda Singh were working as Managers of C&I Division, State Bank of Mysore, Bengaluru Branch. He can identify the signatures and also the handwritings of all the above said officials who were working at that time along with him.
36. Flora International was given cash credit facility against hypothecation charge over silk waste from C&I Division of Bengaluru Branch. In his presence the loan documents were executed and the loan documents are in his own handwriting.
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37. Ex.P.129 is the loan application given by Flora International Ltd., along with balance sheet and the loan application is signed by Chairman.
38. He was deputed for doing pre sanction inspection and hence he has given the pre sanction inspection report under his signature as per Ex.P.130. The Chief Manager has made the note in Ex.P.130 directing him to put up the proposal for sanction by the appropriate authority.
39. Ex.P.131 is the proposal put up by him, which was signed and recommended by Chief Manager of C&I Division to the Asst. General Manager of the Bengaluru Branch. Along with the proposal, working capital assessment data was also prepared by him on the basis of the loan application and also the data given.
40. Ex.P.105 is the note for sanction submitted to the General Manager (Operations) for confirmation/noting. The General Manager (Operations) has confirmed the sanction.
41. Ex.P.14 is the letter addressed to the Manager, C&I Division, Bengaluru Branch requesting for replacement of collateral security. Earlier Pankajabai had given collateral security as guarantor by way of mortgage (immovable property). That security was sought to be replaced by the collateral security of the immovable property of Chandrashekar and others as also by one Veena Kumari and her 31 Spl.C.C.No.476/2002 J property. On Ex.P.14 Chief Manager of C&I Division has written as discussed with AGM and he has advised him to go ahead with replacement of security. Accordingly fresh documents were obtained from Chandrashekar and others and also from Veena Kumari and their properties were mortgaged to the Bank as security for loan.
42. Ex.P.15 is the daily list, wherein it is mentioned about the property offered by Pankajabai as collateral security, which is in his own handwriting.
43. Ex.P.15(a) shows the details of the documents deposited by Chandrashekar and others as collateral security for the loan by way of deposit of title deeds. As a witness along with 2 others his signature is found in Ex.P.15(a) and his signature is at Ex.P.15(a-1). In Ex.P.15(a) the immovable property mortgaged by deposit of title deeds is mentioned (particulars of the property).
44. Ex.P.15(b) shows the details of the documents deposited by Veena Kumari as collateral security for the loan by way of deposit of title deeds. As a witness along with 2 others his signature is found in Ex.P.15(b) and his signature is at Ex.P.15(b-1). In Ex.P.15(b) the immovable property mortgaged by deposit of title deeds is mentioned (particulars of the property).
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45. Ex.P.2 is the sanction communication letter. The borrowers and guarantors have accepted the terms and conditions of the loan and in token of the same they have signed on Ex.P.2.
46. Ex.P.3 is the resolution copy of Flora International Ltd., wherein the Flora International Ltd., has been authorized to borrow loan from State Bank of Mysore, Bengaluru Branch.
47. Ex.P.5 to Ex.P.12 are the loan documents executed by Flora International Ltd. Ex.P.13 is the mortgage confirmation letter dt.14/5/1992. Ex.P.13(a) is the postal cover through which Ex.P.13 was received by the Bank (registered post).
48. The evidence deposed by PW.5 before the court about the loan transaction, execution of documents by the borrower, guarantor and mortgage created and replacement of mortgage on the request of the borrower company Accused No.6 company is not disputed by any of the accused. Further, PW.5 has deposed that the documents are in his own handwriting and bears his signature as an officer of the bank for execution in his presence. Therefore, the unchallenged evidence of PW.5 is proving the loan transaction, due execution of the documents and creation of equitable mortgage and replacement of collateral security on the request of Accused No.6 company.
49. Therefore, the evidence of PW.1, 4 and 5 is proving the procedure for sanction of cash credit hypothecation, sanction of cash 33 Spl.C.C.No.476/2002 J credit hypothecation to Accused No.6 company and mortgage of property as a collateral security. Now, coming to the documents Ex.P.2 is the sanction letter dated 7.5.1992 to Accused No.6, communicating the sanction of cash credit hypothecation of Rs.24,50,000/-, margin money 25% on the stocks receivable and period of facility was 12 months, interest and security. On this Ex.P.2, Accused No.5, 7 and another Director have signed accepting the terms and conditions. Smt. Pankaja Bai has also signed accepting the terms and conditions as a mortgager and guarantor for the said facility. Ex.P.3 is the extract of the resolution passed at the extraordinary general meeting of Accused No.6 company held on 22.4.1992 and there is no dispute about this resolution passed in the meting of Accused No.6 company which reads as follows: -
"RESOLVED that the Consent of the Members is be and hereby given authorising the Company to borrow money from State Bank of Mysore, Bangalore Branch, Bangalore, by way of open Cash Credit Facility upto a limit not exceeding Rs.50,00,000/- (Rupees Fifty Lakhs Only) in excess of the paid up share Capital and Reserves of the Company, pursuant to Section 293, of the Companies Act 1956. Further, Resolved that the Chairman Mr. M.S.A. Aleem, and the Director Smt. Anuradha are be and hereby authorized to execute the documents to avail the Loan and also to offer any security required by the Bankers to Secure the Loan."
This document is signed by the Accused No.5 as the Chairman of the Accused No.6 company.
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50. Further, Ex.P.4 is the extract of the resolution passed at the board meeting dated 2.4.1992 signed by the Accused No.5 which reads as follows: -
"RESOLVED that the common seal of the Company be affixed on any Instrument/Document to be executed on behalf of the Company in the presence of Sri. M.S.A. Aleem, Chairman, and countersigned by Smt. Anuradha, Director."
51. Ex.P.5 is the On Demand Promissory Note executed on 13.5.1992 for Rs.24,50,000/- by Accused No.5 and 7 on behalf of Accused No.6 company. The execution of this Ex.P.5 has been proved from the evidence of PW.5. Even he has identified the signatures of Accused No.5, 7 and Smt. Pankaja Bai who was the guarantor and mortgagor of property at the time of availing the cash credit hypothecation from SBM, Bengaluru. Ex.P.6 is the D.P. Note delivery letter. Ex.P.7 is the letter from guarantors. Ex.P.8 is the agreement for advances. Ex.P.9 is the letter of undertaking. Ex.P.10 is the agreement for cash credit and hypothecation of goods executed by Accused No.5, 7 and another Director. Ex.P.11 is the agreement for advances. Ex.P.12 is the stock statement of the company. Ex.P.13 is the letter written by Smt. Pankajabai confirming equitable mortgage. Ex.P.13(a) is the RPAD cover. Ex.P.14 is the letter of Accused No.6 company for replacement of collateral security. Ex.P.15 is the daily list 35 Spl.C.C.No.476/2002 J and the relevant entries for equitable mortgage and replacement of equitable mortgage are at Ex.P.15(a) and (b).
52. Therefore, the prosecution has clearly established the sanction of cash credit hypothecation of Rs.24.50 lakhs in favour of Accused No.6 company on 6.5.1992, execution of documents and equitable mortgage and replacement of property for equitable mortgage.
DELEGATION OF FINANCIAL POWERS, REVISION 1987:
53. In his evidence PW.1 has deposed about delegation of financial powers to the various category of officers under Ex.P.1. There is no dispute about the delegation of powers as per Ex.P.1 in 1987. Ex.P.1(a) is the relevant powers which are exercisable separately for each category subject to the over raiding stipulation that the total liability of the borrower does not exceed as mentioned therein.
ISSUE OF LEGAL NOTICE: -
54. It is deposed by PW.1 that when the Accused No.6 company remained in due of cash credit hypothecation, the bank requested the panel advocate for issue of legal notice calling upon the Accused No.6 company to pay the dues. Further, he has deposed that the bank requested PW.3 Sri.P.B. Raju, Advocate for issue of legal notice as per Ex.P.17 dated 19.6.1994. Further, he has deposed that PW.3 issued 36 Spl.C.C.No.476/2002 J legal notice to Accused No.6, its directors and guarantors for payment of the dues in the cash credit account No. 10631. He has further deposed that pursuant to the legal notice Accused No.6 company has given reply as per Ex.P.18 on 30.6.1994. There is no dispute about the evidence deposed by PW.1 before the court.
55. Further, the prosecution has adduced and relied upon the evidence of PW.3 Sri. P.B. Raju, Advocate. He has deposed that since 26 years he is the panel advocate of State Bank of Mysore. On the instructions of the Branch head, he will issue legal notices to the borrowers. Ex.P.17 is the copy of the legal notice issued by him to Accused No.6 company and others. As per Ex.P.17, he called upon the borrower and the guarantors to pay the dues payable to State Bank of Mysore, C&I Division, Bengaluru Branch, Bengaluru. Further, he has deposed that as per Ex.P.17, the dues mentioned was Rs.26,23,828/- along with interest from 1.4.1994 at the agreed rate. The evidence deposed by PW.3 is not disputed by Accused No.1, 3 to 6 and 8. The learned counsel for Accused No.7 cross-examined the witness but nothing has been elicited from his mouth to disprove his evidence.
56. As seen from the evidence of PW.1 and 3 and the contents of Ex.P.16, 17 and 18, it is clear that on 10.6.1994, the bank requested the panel advocate PW.3 to issue legal notice to Accused No.6 company and others. In this letter, it was mentioned that the 37 Spl.C.C.No.476/2002 J dues payable by Accused No.6 company and its guarantors was Rs.26,23,828/- exclusive of interest from 1.4.1994. Based on Ex.P.16, the legal notice was issued by PW.3 to Accused No.6 company and others.
57. In this legal notice, in para No.2 and 3, it is mentioned as follows: -
"2. Client informs me that, you the above named, despite our clients persistent follow up and several rounds of personal contacts, you have failed and neglected to repay the outstandings in the account. A sum of Rs.26,23,828/- together with interest thereon from 1.4.94 is due and outstanding in the account as maintained by my clients in its normal course of business.
3. Client call upon you the above named which I hereby do to pay to my clients the said sum of Rs.26,23,828/- together with interest thereon from 1.4.94 at the contracted rate within 15 days from the date of this notice failing which I have definite instructions to proceed against all of you above named jointly and severally in your various capacities as directors and guarantors etc., as also proceed against the securities available without any further notice to you in this regard. Clients hope that you will not force them to such an extreme step, which action if taken shall be at your risk as to cost and consequences."
58. By issuing the above legal notice Ex.P.17, the SBM had called upon the concerned to pay the dues and cautioned them to initiate legal action in the event of failure to do the needful.
59. In Ex.P.18, Accused No.6 company has clearly admitted that :-
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"Our Clients opened their accounts with your client bank with a sanctioned limit of Rs.24.50 lakhs under cash credit hypothecation facility in the year 1992."
Therefore, the prosecution has clearly established the issue of legal notice by PW.3 as per Ex.P.17 and reply tendered by Accused No.6 company as per Ex.P.18 during June 1994.
PROPOSAL FOR PACKING CREDIT LIMIT AND FDBP/FUBP:
60. It is an admitted fact that on 16.2.1995, Accused No.1 M.S. Seetharama Rao, AGM submitted proposal to General Manager (Operations) recommending sanction of packing credit limit (PCL) of Rs.50 lakhs and FDBP/FUBP for Rs.90 lakhs in respect of M/s. Flora International Ltd., (Accused No.6) as per Ex.P.19.
61. In this regard, firstly PW.1 has deposed about the said proposal as per Ex.P.19 and endorsement made by GM (O) on the said proposal. Further, he has deposed that Accused No.1 has signed on the proposal and Accused No.3 had put his initial on each page and it was prepared by Manager, Accused No.4 Subbaramu. Further, he has deposed that the reason for sending the proposal has been highlighted in the said proposal Ex.P.19. Further, he has deposed that GM (O), Secretariat made endorsement to the effect that "let us not take up this" and send back to AGM, Bengaluru.
62. Secondly, the prosecution has relied upon the evidence of PW.6 Sri. T.K. Srinivasa, retired DGM, who served as DGM (Credit) 39 Spl.C.C.No.476/2002 J SBM, Head Office, Bengaluru at the relevant time and dealt with the matter and put up his note on the proposal Ex.P.19 sent from the Branch to the Head Office for sanction. He has deposed that from March 1995 to 20/5/1995 he has worked as Deputy General Manager (Credit), State Bank of Mysore, Head Office, Bengaluru. At that time, Sri R.I.Raghavan was working as General Manager (Operations), State Bank of Mysore, Head office, Bengaluru. After the transfer of Sri. R.I.Raghavan Mr.U.Bhaskar Rao succeeded him.
63. Further, he has deposed that at that time Accused No.1 was working as Asst. General Manager, Bengaluru Branch of State Bank of Mysore. He can identify the handwriting and signature of Accused No.1. If the loan applied was more than Rs.1 crore such proposals from the Branches will be referred to the Credit Department of the Head Office, of which he was the Deputy General Manager at that time. The Credit Department of the Head Office will process the papers and after going through such papers if he was satisfied, he was putting up the papers to sanctioning authority like the General Manager or Chief General Manager or Managing Director or to the Board of the Bank for approval and sanction. The loan proposal of Flora International Ltd., (Accused No.6) was referred to him by the General Manager (Operations) which was received from Bengaluru 40 Spl.C.C.No.476/2002 J Branch. He went through the note put up by the Branch and he passed his comments and recommendations on the proposal.
64. On Ex.P.19, he has made his comments in writing as per Ex.P.19(b) and he has put his initial also in that respect. He has commented that, "this may be considered in view of Branch recommendations.....". He had also made a comment that between 1992 to 1994, he was in Sunderam Finance Services Ltd., Chennai and at that time, the Flora International Ltd., had approached SFSL for lead managing their public issue as was the practice, he asked their Bengaluru office of Sunderam Finance Services Ltd., to check up about the promoters of Flora International Ltd., and he was told by Sunderam Finance Services Ltd., Bengaluru that, the reputation of the company was not well spoken off and hence they may avoid that proposal. The gist of the same was also commented in Ex.P.19(b) and he advised that the Branch may check in the market about the reputation of the company before giving the loan and he had also commented that, it is reported by the Branch that the company under the management of Mr.Aleem are now doing well and before increase of their exposure, Branch may get some market information on Mr. Aleem.
65. Further, he has identified the signature of Accused No.1 on Ex.P.19 as per Ex.P.19(c) and deposed that Accused No.1 had 41 Spl.C.C.No.476/2002 J recommended for sanction of packing credit limit of Rs.50 lakhs and FDBP/FUBP limit of Rs.90 lakhs as per Ex.P.19. He has further deposed that Ex.P.20 is a note put up by the Asst. General Manager, Bengaluru Branch namely Accused No.1 stating that, the Branch had released a sum of Rs.25,01,000/- to enable the company Flora International Ltd., to procure materials for export and vide the said note, they had requested the sanctioning authority namely General Manager (Operations) to approve their action in releasing the above said amount and that note was also seen by him. The General Manager confirmed the action of the Branch in releasing the above said money and he also commented that, let us not increase our commitment to the company and he also stated that, it was his information that, there were some problems with PNB (Punjab National Bank) and to make discrete enquires and he also made a comment let him know when the bills will be negotiated and they should be strictly in terms of the LC (letter of credit).
66. Further, he has deposed that Ex.P.21 is the note put up by Accused No.1 dt.6/5/1995 stating that, they had submitted the proposal on 16/2/1995, recommending sanction of loans to Flora International Ltd., and further stated that, since the Branch has not received the approval of the loan facilities, the copy of the proposal is enclosed and for recommending sanction. He has put his initial on 42 Spl.C.C.No.476/2002 J Ex.P.21 and he has stated that, his comments have been put on the facing page of the proposal. On Ex.P.19 itself he has made the comments as stated earlier and the same comment was made by him in the copy of the proposal that was annexed to Ex.P.21. His writing and initial in Ex.P.21 is at Ex.P.21(b). He identifies the signature of Accused No.1 as per Ex.P.21(c).
67. Further, he has deposed that Ex.D.1 is the Ledger Extract of the Flora International Ltd., account maintained at Bengaluru Branch. According to Ex.D.1, the account balances of the company on various dates from 29.5.1992 to 1998 is shown and he finds that on several dates for example on 31/1/1995, 22/2/1995, 17/3/1995 etc., he find that, the balances in the account have exceeded than the sanction limit of Rs.24.5 lakhs.
68. He has further deposed that Ex.P.95 is the note re- submitted to the General Manager (Operations) by Accused No.1 wherein Accused No.1 stated that, the account had become NPA due to some misunderstanding at the Branch level on account of non purchase of local bankers cheque and it is further stated that, the account is now satisfactorily operated and as per their experience has also been satisfactory as records the observations of DGM (Credit) and they state that, they will make efforts to collect the information from the persons named by the DGM. Finally the note also states that, in 43 Spl.C.C.No.476/2002 J view of the satisfactory features, which are now prevailing and the desirability of bringing back an account/good customer with foreign exchange turnover potential and other related aspects they recommend for sanction of the limits. On this he had also commented that his information on the company was 2 years old and that may be got checked since Bengaluru Branch on the transaction has been satisfactory, the recommendation may be approved. Ex.P.95(f) is his observations stated above along with his initial and Ex.P95(j) is the signature of Accused No.1.
69. He has further deposed that he was handling this account in the Head Office for only 2 months and even before he reported as Deputy General Manager, this proposal was already put up to General Manager for sanction. Ex.P.19 was the first paper, which he saw after he became the Deputy General Manager. Apart from his personal experience with Sunderam Finance Services Ltd., as stated above, based on the Branch recommendations, he passed on his comments and recommendations regarding the advance in favour of Flora International Ltd. He has also stated that in Ex.P.19 after his note the General Manager has written as "let us not take up this" and that portion along with the signature of General Manager is at Ex.P.19(a).
70. In the cross-examination made by learned counsel for Accused No.3, 4 and 8 he has admitted that during his tenure as a 44 Spl.C.C.No.476/2002 J Deputy General Manager (Credit) in State Bank of Mysore, Head Office, no credit facility was sanctioned to Flora International Ltd., There is no denial of his evidence by any of the Accused. Nothing has been elicited in his cross-examination to disprove his evidence deposed before the court. The evidence of PW.6 is supported from the documents and he has spoken about the contents, notings and signatures. Therefore, his evidence is the best evidence available before the court to prove that the proposal Ex.P.19 was turned down by the Head Office for sanction of credit facility proposed by Accused No.1.
71. On perusal of Ex.P.19, though there was recommendation for sanction of Packing Credit facility and FDBP/FUBP facility to Accused No.6 company by Accused No.1, the same was rejected by GM (O) on 6.3.1995. It is pertinent to note the contents of para-10 of Ex.P.19 which reads as follows: -
"The Flora International Limited has been enjoying credit facility and Flora Silks Limited, a well maintained current account. The conduct of the accounts have been by and large satisfactory except for a brief period when the account had become a Non-operative account due to some misunderstanding with the Bank about non-purchase of a banker's cheque drawn by one of our local Branches. We have however prevailed upon the Promoter and Directors of the Company to switch back the entire transactions to us. We have visited the unit at Anekal and are satisfied with the performance and progress of the Company. The Company has made an export sales of Rs.58.68 lacs for the last two months and all the export bills since then are negotiated through us. All the bills have been paid 45 Spl.C.C.No.476/2002 J promptly. The connection is considered valuable in view of substantial chunk of non-fund based limits as well as forex. turnover. In view of the sizeable export order and the large export potential, we are wooing the other accounts also to our fold."
72. It is pertinent to note the endorsement of DGM (Credit) on Ex.P.19 which reads as follows: -
"When I was in SFSL, Madras, Flora International issue was floated. I had enquired in the market and I was told that the promoter Mr. Aleem, had some problems earlier in the repayment of loans, which was also reflected in the relative prospectus. Hence I have advised the Branch to enquire with some people in the market viz., Abdul Samad of Karisma Silks and Mr. Muniyappa, ex-director of Central Silk Board, who know about the background of Mr.Aleem. It is however stated in the note that the company under the management of Mr. Aleem are doing well now. Before we increase our exposure further, Branch may get some market information on Mr. Aleem."
73. On the note of DGM (Credit), GM(O) made the following endorsement as per Ex.P.19(a) which reads as follows: -
"Let us not take up this".
74. Inspite of dues, issue of legal notice and reply of Accused No.6 company as per Ex.P.17 and 18, the Accused No.1 sent a proposal to the GM (O) on 16.2.1995 stating that the conduct of the accounts of Accused No.6 company have been by and large satisfactory. Inspite of such remarks, the GM (O) did not agree and turn down the proposal for packing credit and FDBP and FUBP in favour of Accused No.6.
46 Spl.C.C.No.476/2002 J
75. It is further deposed by PW.1 that on 22.2.1995, AGM, Bengaluru Branch put up a note to DGM (Credit) & GM(O) stating that in order to meet immediate needs of the company a sum of Rs.25,01,000/- has been released and sought for approval of their action and also requested for according their sanction as per Ex.P.20. Further, he has deposed that on 22.2.1995 PCL of Rs.50 lakhs and FDBP/FUBP of Rs.90 lakhs was sanctioned to M/s. Flora International Ltd., after obtaining necessary documents. Further, he has deposed that Ex.P.21 is another note submitted by AGM, Bengaluru Branch to GM (O) and DGM (Credit) requesting them to consider the proposal already recommended and accord approval and along with this letter, the copies of the proposal also enclosed and Ex.P.21 is the said letter and the DGM Secretariat has made an endorsement on the said note to call for the balance sheet of the company for the year ending 31.3.1995. There is no dispute about the evidence of PW.1 and the contents of Ex.P.20 and P21.
76. In Ex.P.20, it is mentioned at para No.2 as follows: -
"2) To meet the immediate needs of the Company for export of silk waste under L.C.No.LCH29500103 dated 28.01.1995 of Bank of Communication CHENGDU, China for U.S.$ 900,000, we have this day released a sum of Rs.25,01,000/- (Rupees twenty five lacs one thousand only) to enable the exporter to procure the materials/ goods for export. While we request you to kindly approve our action in having released the said sum, we also request you to sanction the limits early."47 Spl.C.C.No.476/2002 J
77. On receiving Ex.P.20, the controlling authority has made his endorsement as per Ex.P.20(a) which read as follows: -
"Confirmed, let us not increase our commitment to this company. I understand that there were some problems with PNB. Pl. make discrete enquiries."
78. The above endorsement makes it clear that the request of Branch was confirmed to the extent of Rs.25,01,000/- in favour of Accused No.6 company and there was no sanction for the entire limit claimed in the note Ex.P.20.
79. Further, Ex.P.21 is the note from Accused No.1 to GM(O) and DGM (Credit) on 6.5.1995 which reads as follows: -
"We have submitted a proposal No. BBR/C&I dated 16-02- 95, recommending sanction of the captioned limits. The proposal was recommended by Deputy General Manager (Credit) for sanction. Since, we have not received your kind approval, we are submitting a copy of the proposal held in our files for you kind perusal and recommend for sanction."
80. In his cross-examination, PW.1 has deposed that, as per Ex.P.21, AGM has written a note to GM(O) seeking approval of the earlier proposal submitted for packing credit limit of Rs.50 lakhs and FDBP limit of Rs.90 lakhs. New GM(O) has written on Ex.P.21 'the Branch to make further trade enquiries and submit fresh recommendations along with the financial statements as on 31/3/1995 for our consideration' and initialed the same and it is at Ex.P.21(a). 48 Spl.C.C.No.476/2002 J By the above said shara it can be said that, the proposal Ex.P.19 has not been rejected and it was pending consideration.
81. Considering the contents of Ex.P.21 and endorsement made by GM(O) as per Ex.P.21(a), it is clear that the proposal Ex.P.19 was not sanctioned and further information was sought and directed to submit fresh recommendation along with financial figures as on 31.3.1995 for taking further action in the matter. This note shows that there was no sanction of packing credit facility and FDBP/FUBP limit of Rs.50 lakhs and Rs.90 lakhs respectively in favour of Accused No.6 company by the GM(O) who was the competent authority for sanction of the said facilities. Even after the proposal dated 16.2.1995 as per Ex.P.19 till Ex.P.21 dated 6.5.1995, there was no sanction of the facilities proposed in favour of Accused No.6.
82. Further, in his evidence, PW.1 has deposed that on 22.2.1995, a PCL of Rs.50 lakhs and FDBP/FUBP of Rs.90 lakhs was sanctioned to M/s. Flora International Ltd., after obtaining necessary documents. The evidence of PW.1 proves that without sanction from GM(O) as per the proposal Ex.P.19, the said facilities have been sanctioned in favour of Accused No.6.
HONOUR AND PASSING OF CHEQUES ISSUED BY ACCUSED NO.6 COMPANY IN RESPECT OF CASH CREDIT ACCOUNT NO.10631:
83. In his evidence, PW.1 has deposed that, whenever the borrower wants to withdraw money from his Cash Credit Loan Account 49 Spl.C.C.No.476/2002 J by issuing cheques, if the value of the cheque is within the sanctioned limit the Deputy Manager himself would pass the cheque. If it exceeds sanctioned limit, the Deputy Manager after making an entry relating to that cheque in the separate register called "Cheque Referred Register"
would refer such cheque to his higher officer. Further, he has deposed that, Ex.P.22 to P24 are the 3 cheque referred registers and Ex.P.22 is pertaining to the period from 17.01.1995 to 27.04.1995, Ex.P.23 is for the period from 27.04.1995 to 08.08.1995 and Ex.P.24 is for the period from 08.08.1995 to 08.12.1995.
84. Considering the above evidence of PW.1, he has deposed about the procedure for passing of cheques and referring the cheques to higher authority for passing, if it was beyond the power of passing officer and relevant registers as per Ex.P.22 to P24. There is no dispute about the procedure, powers for passing of cheques and referring of cheques by writing in Ex.P.22 to P24 to the higher authority for approval.
85. Further, PW.1 has deposed that the cash credit was opened in the name of M/s. Flora International Ltd., (Accused No.6) on 6.5.1992 with the credit balance of Rs.1,008/- and the interest was being charged on quarterly rests and interest was charged till 30.9.1998.50 Spl.C.C.No.476/2002 J
86. He has further deposed that the irregularities in the cash credit hypothecation account were as under: -
Sn. Dt. Balance in the Irregularity
account (in Rs.) (in Rs.)
1. 9.7.92 24,92,987 42,987
2. 29.9.92 26,37,741 1,87,741
3. 5.3.93 27,85,890 3,35,891
4. 12.3.93 27,86,092 3,36,092
5. 31.3.93 29,35,924 4,85,924
6. 20.5.93 29,42,648 4,92,648
7. 12.7.93 30,98,046 6,48,046
8. 25.1.94 34,61,088 10,11,088
9. 1.3.94 34,64,550 10,14,550
10. 2.3.94 24,53,462 3,462
11. 21.3.94 26,17,244 1,67,244
12. 30.4.94 26,23,828 1,73,828
13. 7.7.94 27,62,724 3,12,724
14. 9.7.94 27,63,474 3,13,474
15. 28.9.94 27,11,488 4,61,488
87. He has also stated that in between the dates from 9.7.1992 to 1.3.1994 there was no credit transaction and as such no credit entry is seen in the said account.51 Spl.C.C.No.476/2002 J
88. Ex.D1 is the entire statement of account pertaining to the account of Accused No.6 company with SBM. On perusal of the entries for the relevant dates and the evidence of PW.1, there is no dispute about the over drawings allowed in the account of Accused No.6 company on the various dates as mentioned in the above table.
89. Further, PW.1 has deposed regarding cheques of different dates drawn on SBM, Bengaluru Branch in respect of cash credit account No. 10631 issued by M/s. Flora International Ltd., favouring different parties which are as follows: -
Sn. Prn. Ch. No. Date Amount Favouring whom Ex. No.
Doc. (Rs.) of the
No. cheque
1. D.8 313708 27.4.95 2,33,400/- Maharashtra P.25
Apex
Corporation
Ltd., (MACL)
2. D.9 344862 6.5.95 3 Lakhs Yourselves P.26
3. D.10 344869 6.5.95 12409=40 Nippon Products P.27
4. D.11 344850 15.5.95 136975/- Lal Trading P.28
Corporation
5. D.12 344896 22.5.95 50000/- Self P.29
6. D.13 313709 27.5.95 233400/- MACL P.30
7. D.14 311201 2.6.95 700350/- Yourself P.31
8. D.15 313704 19.1.95 150000/- Self P.32
9. D.16 313705 21.1.95 10000/- Self P.33
10. D.17 313765 31.1.95 40 Lakhs Yourself P.34
11. D.18 313756 30.1.95 10000/- Rangappa P.35
12. D.19 313737 4.2.95 10800/- MACL P.36
13. D.20 313772 13.2.95 25000/- Orient Hardware P.37
Stores
14. D.21 313775 18.2.95 50000/- Self P.38
15. D.22 313777 23.2.95 14550/- The New India P.39
Assurance
Company Ltd.,
52 Spl.C.C.No.476/2002 J
16. D.23 313738 27.2.95 233400/- MACL P.40
17. D.24 313773 28.2.95 40425/- Murthy Glass P.41
and Plywood
18. D.25 313780 27.2.95 11466/- Hema Stationary P.42
Suppliers
19. D.26 313779 27.2.95 50000/- Srinath Glass P.43
and Plywoods
20. D.27 313783 27.2.95 10000/- Rangappa P.44
21. D.28 313785 27.2.95 5000/- Manjappa P.45
22. D.29 313789 28.2.95 6500/- Iyengar P.46
23. D.30 313791 28.2.95 18000/- Scollar P.47
Advertising
Constants
24. D.31 313782 27.2.95 11,155/- Namdev P.48
25. D.32 313781 27.2.95 20,000/- Manchaiah P.49
26. D.33 313794 6.3.95 2,80,000/- Andhra Bank P.50
Account Flora
International
27. D.34 313786 27.2.95 9,487=50 Jayaprakash P.51
28. D.35 313795 7.3.95 1550,825/- Yourself Pay P.52
orders
29. D.36 313796 7.3.95 1,00,000/- Self P.53
30. D.37 313799 15.3.95 30805/- ARRCEE P.54
Enterprises
31. D.38 344814 27.3.95 23336/- Poonam P.55
32. D.39 344813 27.3.95 34906/- Murthy Glass & P.56
Plywoods Pvt.
Ltd.,
33. D.40 311223 7.7.95 70000/- Zain Enterprises P.57
34. D.41 311224 7.7.95 155000/- Flora Silks Ltd., P.58
35. D.42 311210 30.6.95 12595/- Sri Durga P.59
Travels
36. D.43 311234 1.8.95 202200/- Flora Silks Ltd., P.60
37. D.44 311238 2.8.95 2 Lakhs Self P.61
38. D.45 311241 3.8.95 10 Lakhs Evershine P.62
Traders
39. D.46 311243 3.8.95 1 Lakhs Jameel P.63
Enterprises
40. D.47 311240 3.8.95 15 Lakhs Mm Silk P.64
Enterprises
41. D.48 311242 3.8.95 4 Lakhs S Ajeej Khan P.65
42. D.49 311244 3.8.95 4 Lakhs Self P.66
43. D.50 311245 3.8.95 1734763/- Yourself Pay P.67
53 Spl.C.C.No.476/2002 J
orders
44. D.51 311248 3.8.95 155878/- Yourself Pay P.68
orders
45. D.52 313798 9.3.95 26592=78 Windsor Manner P.69
Shelton &
Towers
46. D.53 313797 9.3.95 23300/- Tekmark P.70
47. D.54 313792 4.3.95 250000/- Self P.71
48. D.55 313787 27.2.95 5400/- Naghabhoosan P.72
49. D.56 313788 27.2.95 6432/- Tirumala Service P.73
Station
50. D.57 311276 15.9.95 20 Lakhs Zain Enterprises P.74
51. D.58 311253 14.8.95 2 Lakhs Self P.75
52. D.59 311252 12.8.95 1 Lakhs ITC Hotels Ltd., P.76
53. D.60 313711 27.8.95 233400/- MACL P.77
54. D.61 311258 28.8.95 21700/- JB Enterprises P.78
55. D.62 311230 1.9.95 11771/- PRAFUL Lakshmi P.79
Huf.
56. D.63 311259 1.9.95 1 Lakhs Travel Systems P.80
Pvt. Ltd.,
57. D.64 311260 4.9.95 2 Lakhs Travel Systems P.81
Pvt. Ltd.,
90. At this stage, it is relevant to consider the evidence of PW.16 Sri. Samuel Immanuel who worked as Commercial Manager in Flora International Ltd., from 1994 to 1997. He has deposed that during his period of service in Flora International Ltd., the office of the said company was situated in Wilson Garden, Bengaluru. Flora International Ltd., was dealing with export of silk waste and manufacturing spun silk yarn.
91. He has further deposed that he knew M.S.A. Aleem who is Accused No.5 in this case and he was the Managing Director of the said Flora International Ltd., when he was working in the said 54 Spl.C.C.No.476/2002 J company. He knew Smt. Anuradha (Accused No.7) and she was the Director of the company.
92. He knew Sri Sri Ganesh Shipping Company/Clearing and Handling Agency as Flora International Ltd., used to export silk waste to foreign countries with the assistance of Sri Sri Ganesh Shipping Company.
93. At that time, Flora International Ltd., had financial transactions with State Bank of Mysore, Main Branch, Bengaluru. For financial transactions Accused No.5, Accused No.7, Finance Manager Prathap and one Dwaraki of Account Section were going to the said Branch.
94. He has further deposed that Ex.P.25 to Ex.P.81 are all the cheques issued by Flora International Ltd., to various parties. In Ex.P.25 he identified the signature of Accused No.5 and it is at Ex.P.25(a). In Ex.P.27 he identified the signature of Accused No.7 and it is at Ex.P.27(a). He has stated that, in the other cheques stated above there is the signature of either Accused No.5 or Accused No.7. The evidence deposed by PW.16 with regard to the position held by Accused No.5 and 7 in the Accused No.6 company and cheques issued by Accused No.6 company as per Ex.P.25 to Ex.P.81 in favour of various parties and signing of those cheques by Accused No.5 and 7, is not disputed in any manner. Therefore, the evidence of PW.16 is 55 Spl.C.C.No.476/2002 J supporting the case of the prosecution, acceptable and proving the issue of Ex.P.25 to P81 by the Accused No.6 company and signed by Accused No.5 and 7 for making payment.
95. Now, coming to the evidence of PW.1, he has deposed regarding Ex.P.25 to P81. He has deposed that Ex.P.25 cheque bearing No.313708 for Rs.2,33,400/- was referred by Accused No.8 and also Accused No.3 to Accused No.1 for approval and accordingly it was approved by Accused No.1 subject to regularization and the relevant entry is found in the register Ex.P.23 at Ex.P.23(a). As on that day, there was debit balance of Rs.24,33,718/- as against the limit of Rs.24.50 lakhs and the limit expired. There is no dispute about this Ex.P.25, payment made and endorsement Ex.P.23(a). It is pertinent to note that firstly it was written that we may return and the same was struck off and written as we may pay. Further, it was submitted to Accused No.1 that the Director has made a special request for payment and has orally promised to adjust out of export bill to be negotiated in another 8 or 10 days. Therefore, payment made as per Ex.P.25 has been proved in this case by the prosecution beyond the powers, though the limit had already expired.
96. Further, he has deposed that Ex.P.26 cheque bearing No.344862 for Rs.3 Lakhs was referred by Parthasarathy (Accused No.8) the Deputy Manager and also Suryanarayana Rao (Accused 56 Spl.C.C.No.476/2002 J No.3) the Chief Manager (Advances) to AGM for approval and accordingly it was approved by AGM Seetharama Rao (Accused No.1) with a remark "please follow up", the relevant entry is found in the register Ex.P.23 at Ex.P.23(b).
97. Further, he has deposed that Ex.P.27 and Ex.P.28 cheques bearing No.344869 for Rs.12409=40 & 344850 for Rs.1,36,975/- are concerned Accused No.8 Parthasarathy has made a remark in the register Ex.P.23 as "we may return". Later that has been struck off. AGM Seetharama Rao (Accused No.1) has remarked as "pay & report"
for the reasons stated therein, the said entry in the register Ex.P.23 with the remarks is at Ex.P.23(c).
98. Further, he has deposed that Ex.P.29 cheque bearing No.344896 for Rs.50,000/- is concerned, on the recommendation made by Chief Manager Suryanarayana Rao Accused No.3, the AGM Seetharama Rao Accused No.1 has advised to pay as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(d).
99. Further, he has deposed that Ex.P.30 cheque bearing No.313709 for Rs.2,33,400/- is concerned, on the recommendation made by Chief Manager Suryanarayana Rao Accused No.3, the AGM Seetharama Rao Accused No.1 has advised to pay as could be seen from the entry found in the register Ex.P.23, the said entry in the 57 Spl.C.C.No.476/2002 J register Ex.P.23 is at Ex.P.23(e). As could be seen from the remarks made in Ex.P.23(e) the balance amount was Rs.22,48,085=58 with the limit of Rs.24.50 Lakhs.
100. Further, he has deposed that Ex.P.31 cheque bearing No.311201 for Rs.7,00,350/- is concerned, on the recommendation made by the Deputy Manager Parthasarathy (Accused No.8), the AGM Seetharama Rao (Accused No.1) has advised to pay & report as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(f). As could be seen from the remarks made in Ex.P.23(f) the balance amount was Rs.24,89,620/- with the limit of Rs.24.50 Lakhs.
101. Further, he has deposed that Ex.P.32 cheque bearing No.313704 for Rs.1,50,000/- is concerned, on the recommendation made by the Deputy Manager Parthasarathy (Accused No.8), approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(a). As could be seen from the remarks made in Ex.P.22(a) the balance amount was Rs.25.94 Lakhs with the limit of Rs.24.50 Lakhs.
102. Further, he has deposed that Ex.P.33 cheque bearing No.313705 for Rs.10,000/- is concerned, on the recommendation made by the Deputy Manager Parthasarathy (Accused No.8), approved 58 Spl.C.C.No.476/2002 J and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(b). As could be seen from the remarks made in Ex.P.22(b) the balance amount was Rs.25.15 Lakhs, limit expired.
103. Further, he has deposed that Ex.P.34 cheque bearing No.313765 for Rs.40 Lakhs is concerned, on the recommendation made by the Deputy Manager Parthasarathy (Accused No.8), approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(c). As could be seen from the remarks made in Ex.P.22(c), limit expired.
104. Further, he has deposed that Ex.P.35 cheque bearing No.313756 for Rs.10,000/- is concerned, on the recommendation made by the Deputy Manager Parthasarathy (Accused No.8), approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(d). As could be seen from the remarks made in Ex.P.22(d), limit expired.
105. Further, he has deposed that Ex.P.36 cheque bearing No.313737 for Rs.10,800/- is concerned, the Deputy Manager Parthasarathy (Accused No.8) has remarked as "to return" the cheque 59 Spl.C.C.No.476/2002 J but approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(e). As could be seen from the remarks made in Ex.P.22(e), the balance was Rs.24.48 Lakhs.
106. Further, he has deposed that Ex.P.37 cheque bearing No.313772 for Rs.25,000/- is concerned, the Deputy Manager Parthasarathy (Accused No.8) has recommended payment, approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(f). As could be seen from the remarks made in Ex.P.22(f), the balance was Rs.25,21,490/-.
107. Further, he has deposed that Ex.P.38 cheque bearing No.313775 for Rs.50,000/- is concerned, it was approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(g). As could be seen from the remarks made in Ex.P.22(g), the balance was Rs.25,57,140/-.
108. Further, he has deposed that Ex.P.39 cheque bearing No.313777 for Rs.14,550/- is concerned, Mr.Parthasarathy (Accused No.8) who initially remarked "we may return the cheque"
subsequently recommended for payment. It was approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry 60 Spl.C.C.No.476/2002 J found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(h). As could be seen from the remarks made in Ex.P.22(h), the balance was Rs.26,15,168/-.
109. Further, he has deposed that Ex.P.40 and Ex.P.41 cheques bearing No.313738 for Rs.2,33,400/- & 313773 for Rs.40,425/- are concerned, Mr.Parthasarathy (Accused No.8) who remarked "we may return the cheque". It was approved and passed by Suryanarayana Rao (Accused No.3) stating that the proposal is pending with GM (O) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(j). As could be seen from the remarks made in Ex.P.22(j), the balance was Rs.26,52,346/-.
110. Further, he has deposed that Ex.P.42 and Ex.P.43 cheques bearing Nos.313780 for Rs.11,466/- & 313779 for Rs.50,000/- are concerned, Mr.Parthasarathy (Accused No.8) had recommended for the return of the cheque. It was approved and passed by Suryanarayana Rao (Accused No.3) stating that the proposal is pending with GM(O) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(k). As could be seen from the remarks made in Ex.P.22(k), the balance was Rs.29,26,171/-.
111. Further, he has deposed that Ex.P.44 to Ex.P.49 cheques bearing Nos.313783, 313785, 313789, 313791, 313782 and 313781 61 Spl.C.C.No.476/2002 J for Rs.10,000/-, Rs.5000/- Rs.6,500/-, Rs.18,000/-, Rs.11,155/- and Rs.20,000/- respectively are concerned, Mr.Parthasarathy (Accused No.8) had recommended for the payment. It was approved and passed by Suryanarayana Rao (Accused No.3) stating that the proposal is pending with GM(O) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(l). As could be seen from the remarks made in Ex.P.22(l), the balance was Rs.29.87 Lakhs.
112. Further, he has deposed that Ex.P.50 cheque bearing No.313794 for Rs.2,80,000/-is concerned, it was approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(m). As could be seen from the remarks made in Ex.P.22(m), the balance was Rs.30,71,905/-. In Ex.P.22(m) it was recommended that Rs.24.50 lakhs limit is expired. Even then, the Accused No.3 approved for payment of the cheque amount.
113. Further, he has deposed that Ex.P.53 cheque bearing No.313796 for Rs.1,00,000/-is concerned, it was recommended by Accused No.8 Parthasarathy and approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is 62 Spl.C.C.No.476/2002 J at Ex.P.22(n). As could be seen from the remarks made in Ex.P.22(n), the balance was Rs.33,51,905/-.
114. Further, he has deposed that Ex.P.54 cheque bearing No.313799 for Rs.30,805/- is concerned, it was remarked to be returned by Accused No.8 Parthasarathy and approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(o). As could be seen from the remarks made in Ex.P.22(o), the balance was Rs.49,42,323/-. In this also, it was specifically mentioned that the limit was expired.
115. Further, he has deposed that Ex.P.55 cheque bearing No.344814 for Rs.23,336/- is concerned, it was approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(p). As could be seen from the remarks made in Ex.P.22(p), the balance was Rs.26,27,331/-.
116. Further, he has deposed that Ex.P.56 cheque bearing No.344813 for Rs.34,906/- is concerned, it was recommended by Parthasarathy (Accused No.8) and approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is 63 Spl.C.C.No.476/2002 J at Ex.P.22(q). As could be seen from the remarks made in Ex.P.22(q), the balance was Rs.25,57,602/-.
117. Further, he has deposed that, Ex.P.57 and Ex.P.58 the cheques bearing Nos.311223 and 311224 for Rs.70,000/- and Rs.1,55,000/- respectively are concerned, they were recommended by Accused No.4 Subbaramu and approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(g). As could be seen from the remarks made in Ex.P.23(g), the balance was Rs.36,46,156/-.
118. Further, he has deposed that Ex.P.59 cheque bearing No.311210 for Rs.12,595/- is concerned, it was recommended by Parthasarathy (Accused No.8) and approved and passed by Suryanarayana Rao (Accused No.3) as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(h). As could be seen from the remarks made in Ex.P.23(h) the balance was Rs.38,71,156/-.
119. Further, he has deposed that Ex.P.60 cheque bearing No.311234 for Rs.2,02,200/- is concerned, Suryanarayana Rao (Accused No.3) has written pay and report as could be seen from the entry found in the register Ex.P.23, the said entry in the register 64 Spl.C.C.No.476/2002 J Ex.P.23 is at Ex.P.23(i). As could be seen from the remarks made in Ex.P.23(i) the balance was Rs.40,74,223/-.
120. Further, he has deposed that Ex.P.61 cheque bearing No.311238 for Rs.2,00,000/- is concerned, Suryanarayana Rao (Accused No.3) has written pay and report as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(j). As could be seen from the remarks made in Ex.P.23(j) the balance was Rs.39,64,151/-.
121. Further, he has deposed that Ex.P.62 cheque bearing No.311241 for Rs.10,00,000/- is concerned, Suryanarayana Rao (Accused No.3) has written pay as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(k). As could be seen from the remarks made in Ex.P.23(k) the balance was Rs.41,63,009/-.
122. Further, he has deposed that Ex.P.63 cheque bearing No.311243 for Rs.1,00,000/- is concerned, Suryanarayana Rao (Accused No.3) has written pay along with some other cheques, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(L). As could be seen from the remarks made in Ex.P.23(L) the balance was Rs.41,63,009/-.
123. Further, he has deposed that Ex.P.64 cheque bearing No.311240 for Rs.15,00,000/- is concerned, Suryanarayana Rao 65 Spl.C.C.No.476/2002 J (Accused No.3) has written pay along with some other cheques, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(m). As could be seen from the remarks made in Ex.P.23(m) the balance was Rs.41,63,009/-.
124. Further, he has deposed that Ex.P.65 cheque bearing No.311242 for Rs.4,00,000/- is concerned, Suryanarayana Rao (Accused No.3) has written pay along with some other cheques, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(n). As could be seen from the remarks made in Ex.P.23(n) the balance was Rs.41,63,009/-.
125. Further, he has deposed that Ex.P.66 cheque bearing No.311244 for Rs.4,00,000/- is concerned, Suryanarayana Rao (Accused No.3) has written pay along with some other cheques, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(o). As could be seen from the remarks made in Ex.P.23(o) the balance was Rs.41,63,009/-.
126. Further, he has deposed that Ex.P.67 cheque bearing No.311245 for Rs.17,34,763/- is concerned, Suryanarayana Rao (Accused No.3) has written pay along with some other cheques, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(p). As could be seen from the remarks made in Ex.P.23(p) the balance was Rs.75,63,090/-. 66 Spl.C.C.No.476/2002 J
127. Further, he has deposed that Ex.P.68 cheque bearing No.311248 for Rs.1,55,878/- is concerned, Suryanarayana Rao (Accused No.3) has written pay, as could be seen from the entry found in the register Ex.P.23, the said entry in the register Ex.P.23 is at Ex.P.23(q). As could be seen from the remarks made in Ex.P.23(q) the balance was Rs.38,31,804/-.
128. Further, he has deposed that Ex.P.69 cheque bearing No.313798 for Rs.26,292.78 is concerned, Subbaramu (Accused No.4) has written pay, as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(s). As could be seen from the remarks made in Ex.P.22(s) the balance was Rs.48,92,730/-.
129. Further, he has deposed that Ex.P.70 cheque bearing No.313797 for Rs.23,300/- is concerned, Subbaramu (Accused No.4) has written pay along with the cheque (Ex.P.69), as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(s-1). As could be seen from the remarks made in Ex.P.22(s-1) the balance was Rs.48,92,730/-.
130. Further, he has deposed that Ex.P.71 cheque bearing No.313792 for Rs.2,50,000/- is concerned, Subbaramu (Accused No.4) has written pay along with other cheques, as could be seen from the entry found in the register Ex.P.22, the said entry in the register 67 Spl.C.C.No.476/2002 J Ex.P.22 is at Ex.P.22(t). As could be seen from the remarks made in Ex.P.22(t) the balance was Rs.30,62,417/-.
131. Further, he has deposed that Ex.P.72 cheque bearing No.313787 for Rs.5,400/- is concerned, Subbaramu (Accused No.4) has written pay along with other cheques, as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(t-1). As could be seen from the remarks made in Ex.P.22(t-1) the balance was Rs.30,62,417/-.
132. Further, he has deposed that Ex.P.73 cheque bearing No.313788 for Rs.6,432/- is concerned, Subbaramu (Accused No.4) has written pay along with other cheques, as could be seen from the entry found in the register Ex.P.22, the said entry in the register Ex.P.22 is at Ex.P.22(t-2). As could be seen from the remarks made in Ex.P.22(t-2) the balance was Rs.30,62,417/-.
133. Further, he has deposed that Ex.P.74 cheque bearing No.313276 for Rs.20,00,000/- is concerned, Accused No.3 and 4 have written as pay, as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(a). As could be seen from the remarks made in Ex.P.24(a) the balance was Rs.30,09,894/-.
134. Further, he has deposed that Ex.P.75 cheque bearing No.311253 for Rs.2,00,000/- is concerned, Accused No.3 has 68 Spl.C.C.No.476/2002 J recommended and approved by AGM (Accused No.1), as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(b). As could be seen from the remarks made in Ex.P.24(b) the balance was Rs.39,98,757/-.
135. Further, he has deposed that Ex.P.76 cheque bearing No.311252 for Rs.1,00,000/- is concerned, Accused No.3 has recommended and approved by AGM (Accused No.1), as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(c). As could be seen from the remarks made in Ex.P.24(c) the balance was Rs.42,99,057/-.
136. Further, he has deposed that Ex.P.77 cheque bearing No.313711 for Rs.2,33,400/- is concerned, Accused No.3 has recommended and approved by AGM (Accused No.1), as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(d). As could be seen from the remarks made in Ex.P.24(d) the balance was Rs.43,99,000/-.
137. Further, he has deposed that Ex.P.78 cheque bearing No.311258 for Rs.21,700/- is concerned, Accused No.3 has recommended and approved by AGM (Accused No.1), as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(e). As could be seen from the remarks made in Ex.P.24(e) the balance was Rs.46,06,477/-. 69 Spl.C.C.No.476/2002 J
138. Further, he has deposed that Ex.P.79 cheque bearing No.311230 for Rs.11,771/- is concerned, Accused No.3 has recommended and approved by AGM (Accused No.1), as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(e-1). As could be seen from the remarks made in Ex.P.24(e-1) the balance was Rs.46,06,477/-.
139. Further, he has deposed that Ex.P.80 cheque bearing No.311259 for Rs.1,00,000/- is concerned, Accused No.4 has written as pay, as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(f). As could be seen from the remarks made in Ex.P.24(f) the balance was Rs.46,24,948/-.
140. Further, he has deposed that Ex.P.81 cheque bearing No.311260 for Rs.1,00,000/- is concerned, Accused No.3 has recommended and Accused No.1 has approved, as could be seen from the entry found in the register Ex.P.24, the said entry in the register Ex.P.24 is at Ex.P.24(g). As could be seen from the remarks made in Ex.P.24(g) the balance was Rs.47,24,948/-.
141. There is no dispute about the evidence deposed by PW.1 with regard to recommendation and passing of cheques Ex.P.25 to P81 by the respective Accused and the entries made in the registers Ex.P.22 to 24. Therefore, the evidence of the prosecution is proving 70 Spl.C.C.No.476/2002 J that the Accused No.8 being Deputy Manager recommended for passing of cheques and the same have been approved by Accused No.1, 3 and 4 respectively. Hence, the payments made in respect of Ex.P.25 to P81 as mentioned in the above table has been proved sufficiently by placing oral and documentary evidence by the prosecution. Therefore, considering the evidence of the prosecution, and the contents of Ex.D1 statement of account pertaining to the cash credit hypothecation account of Accused No.6, the following over drawals in the said account from 17.12.1994 to 29.9.1995 are forthcoming.
Date Balance (Rs.) Irregularity (Rs.)
17.12.94 24,73,574 23,574
19.12.94 24,76,074 26,074
22.12.94 24,52,506 2,506
30.12.94 24,56,305 6,305
07.01.95 25,64,806 1,14,806
09.01.95 25,67,806 1,17,398
11.01.95 25,73,246 1,23,246
15.01.95 25,896 1,23,896
20.01.95 25,84,434 1,34,434
21.01.95 25,84,454 1,34,454
71 Spl.C.C.No.476/2002 J
07.02.95 24,58,853/98 8,853/98
10.02.95 24,99,465/68 49,465/68
11.02.95 25,21,490/68 71,490/68
14.02.95 25,46,490/68 96,490/68
15.02.95 25,56,490/68 1,06,490/68
17.02.95 25,57,140/68 1,07,140/68
18.02.95 26,14,162/68 1,64,162/68
22.02.95 26,15,162/68 1,65,162/68
25.02.95 26,52,346/68 2,02,346/68
01.03.95 29,87,637/68 5,37,637/68
02.03.95 30,62,417/68 6,12,417/68
06.03.95 33,51,905/18 9,01,905/18
07.03.95 49,42,730/18 24,92,730/18
10.03.95 48,92,730/18 24,42,730/18
11.03.95 49,42,322/96 24,92,322/96
17.03.95 53,09,959/96 28,59,959/96
22.03.95 53,10,509/96 28,60,509/96
31.03.95 26,23,645/96 1,73,654/96
04.04.95 26,27,331/96 1,77,331/96
05.04.95 25,57,099/96 1,07,099/96
06.04.95 25,57,099/96 1,07,099/96
72 Spl.C.C.No.476/2002 J
07.04.95 25,57,602/96 1,07,602/96
10.04.95 25,42,508/96 92,508/96
17.04.95 25,43,158/96 93,158/96
29.04.95 26,67,118/96 2,17,118/96
06.05.95 27,00,294/11 2,50,294/11
08.05.95 27,00,444/11 2,50,444/11
16.05.95 25,98,025/51 1,48,025/51
25.05.95 25,46,460/58 96,460/58
27.05.95 25,47,110/58 97,110/58
31.05.95 24,89,625/58 39,625/58
02.06.95 39,89,975/58 15,39,975/58
05.06.95 39,87,352/58 15,37,352/58
14.06.95 39,77,452/58 15,27,452/58
27.06.95 39,87,741/58 15,37,741/58
28.06.95 42,21,141/58 17,71,141/58
30.06.95 42,23,861/58 17,73,861/58
05.07.95 36,46,156/58 11,96,156/58
07.07.95 38,71,156/58 14,21,156/58
08.07.95 39,83,851/58 15,33,851/58
11.07.95 40,06,623/58 15,56,623/58
13.07.95 39,65,857/58 14,15,857/58
73 Spl.C.C.No.476/2002 J
17.07.95 39,66,507/58 14,16,507/58
24.07.95 39,79,595/58 14,29,595/58
25.07.95 41,26,685/58 16,76,685/58
31.07.95 40,74,223/58 16,24,223/58
01.08.95 39,64,151/26 15,14,151/26
02.08.95 41,64,151/26 17,14,151/26
03.08.95 38,31,804/26 13,81,804/26
04.08.95 39,87,704/26 15,37,704/26
05.08.95 39,88,104/26 15,38,104/26
08.08.95 39,98,757/26 15,48,757/26
14.08.95 41,98,757/26 17,48,757/26
21.08.95 42,99,057/26 18,49,057/26
26.08.95 43,99,057/26 19,49,057/26
30.08.95 46,06,477/26 21,56,477/26
02.09.95 46,24,948/26 21,84,948/26
05.09.95 49,24,948/26 24,74,948/56
06.09.95 49,32,463/26 24,82,463/26
12.09.95 50,14,687/26 25,64,687/26
14.09.95 50,09,894/52 25,59,894/52
15.09.95 50,09,934/52 59,59,934/52
18.09.95 50,26,784/52 25,76,784/52
74 Spl.C.C.No.476/2002 J
22.09.95 50,36,475/52 25,86,475/52
25.09.95 50,36,707/52 25,86,707/52
28.09.95 52,71,457/52 28,21,457/52
29.09.95 52,77,707/52 28,27,707/52
RELEASE OF PACKING CREDIT, NEGOTIATION OF BILLS,
ESTABLISHMENT OF LETTER OF CREDIT AND ISSUE OF BANK GUARANTEE IN FAVOUR OF ACCUSED NO.6:
142. It is urged that on 2.6.1995 Accused No.1, 3, 4 and 8 released Rs.15,00,000/- excess drawings in the cash credit account when Accused No.5 and 6 requested for release of packing credit of Rs.15,00,000/- against the undrawn balance of USD 70,000 under L.C. 61194031 of Industrial Commercial Bank, China on which already packing credit was availed from Andhra Bank, N.R. Road Branch and Indian Overseas Bank, Residency Road Branch and further negotiated export bill No. 030276 for Rs.21,88,900/- drawn under the above L.C. resulting in double finance and the bill was returned unpaid. Accused No.1 dishonestly and fraudulently negotiated with Accused No.6 company two export bills drawn under LC61194031 causing loss of Rs.15,00,000/-.
143. It is further urged that on 10.5.1995 Accused No.4 and 8 dishonestly and fraudulently negotiated two export bills bearing Nos. 75 Spl.C.C.No.476/2002 J 030175 & 176 for USD 2,47,500/- and 52,000/- respectively in spite of the controlling authority turning down the proposal and the IBD note dated 10.05.1995 that the export documents of bill No. 030176 were sent directly to the buyer by Accused No.6 company in violation of Exchange Control Regulation.
144. It is further urged that Accused No.1 dishonestly and fraudulently established four L.Cs, i.e., No. 007952801 for Rs.11,14,638/- (later enhanced to Rs.11,97,985/-), LC No.007952803 for Rs.21,34,540/- (later enhanced to Rs.22,10,524), LC No.007955825 for Rs.13,98,600/- and LC No.007952837 for Rs.24,72,600/- in favour of Accused No.6 company when cash credit account was overdue and legal notice had been issued.
145. It is further urged that on 14.6.1995 Accused No.3 dishonestly and fraudulently issued Bank Guarantee for Rs.2,60,000/- favouring Trans Asian Shipping Services Ltd., Chennai when the total liability of the company was Rs.470.79 lakhs.
146. It is further urged that Accused No.3 dishonestly and fraudulently purchased a forged export bill containing bill of lading bearing No. MAAI10219795 valued at USD 2,58,000/- drawn on DAP Services for Rs.84,99,480/- knowing fully well that it was not genuine and the bill was returned unpaid.
76 Spl.C.C.No.476/2002 J
147. It is further urged that Accused No.5 and 7 knowing fully well that the export bill containing bill of lading bearing No. MAAI 10219795 valued at USD 2,58,000/- drawn on DAP Services for Rs.84,99,480/- was not a genuine one presented the same as genuine and Accused No.3 purchased/negotiated it for Rs.84,99,480/-.
148. In this regard, PW.1 has deposed that he reported for duty in June 1997 in State Bank of Mysore, Bengaluru Branch, C&I (Commercial and Institutional Banking Division), as Chief Manager and he worked in the said Branch as Chief Manager upto June 2000. During the above said period he was handling all the advance accounts, assisted by Manager (Advances) and Deputy Managers (Advances). When he reported for duty in the said Branch, the advance account of M/s Flora International Ltd., was outstanding and after he took charge he has handled that advance also. He can identify the correspondence that was made by his predecessor with M/s Flora International Ltd., as he has seen them after he took charge of the said Branch.
149. He has further deposed that Ex.P.82 is the document shows that processing and documentation charges recovered on 14/5/1992. The said document is initialed by Deputy Manager. On perusal of Ex.P.82, it is mentioned about processing and 77 Spl.C.C.No.476/2002 J documentation charges recovered on 14.5.1992 from Accused No.6 company by debiting to its account and there is no dispute.
150. Further he has deposed about Ex.P.83, which is the slip wherein AGM has approved to release Rs.50 lakhs cash credit hypothecation limit and report to Head office about irregularity. It contains the initial of AGM Sri. M.S.Seetharama Rao Accused No.1 which is at Ex.P.83(a). On the back of Ex.P.83, it is written that, the cash credit hypothecation sanctioned limit is not found as it is torn. In the remaining portion, it is written that adhoc packing credit limit allowed Rs.15 lakhs, additional drawings allowed Rs.10 lakhs and total it is written as Rs.50.150 lakhs. On perusal of Ex.P.83, it is a slip partly torn and containing the notings and signature of Accused No.1.
151. Further, he has deposed that Ex.P.84 is the extract of resolutions passed at the board meeting of Accused No.6 company dated 2.4.1992 wherein the resignation tendered by Sri. Ravi Roberto Narain for his Directorship was accepted and Sri. M.S.M. Pasha was appointed as Director of the company and there is no dispute about the said resolution and appointment of new Director.
152. Further, he has deposed that Ex.P.85 is the letter from Indian Overseas Bank, Residency Road Branch, Bengaluru addressed to Chief Manager, State Bank of Mysore, C&I, Bengaluru Branch wherein it is stated that, the said Indian Overseas Bank has been 78 Spl.C.C.No.476/2002 J banking credit and advances to M/s Flora International Ltd., and the outstanding is large. The said letter is marked to Sri Parthasarathy, Deputy Manager (Accused No.8) by Accused No.3 as he was the Chief Manager of the said Branch at that time and the initial of Accused No.3 is at Ex.P.85(a).
153. Further he has deposed that, Ex.P.86 is another letter from Indian Overseas Bank dt.30/11/1995 addressed to Chief Manager, C&I, State Bank of Mysore, Bengaluru Branch mentioning the details of outstandings with them from M/s Flora International Ltd., and Flora Silks Ltd., The said letter is marked to Parthasarathy (Accused No.8) by Accused No.3 by making endorsement on the above said letter and the initial of Accused No.3 is at Ex.P.86(a).
154. Regarding this Ex.P.85, the prosecution has adduced and relied upon the evidence of PW.20 Sri. B.S.R. Rao who worked as Senior Manager in Indian Overseas Bank, Residency Road Branch, Bengaluru from January 1995 to November 1995. He has deposed that he knew about Flora International Ltd., and he knew that Flora International Ltd., had availed credit facilities from Indian Overseas Bank, Residency Road Branch, Bengaluru and he can identify the documents pertaining to the correspondences between Indian Overseas Bank, Residency Road Branch, Bengaluru and Flora 79 Spl.C.C.No.476/2002 J International Ltd., He has also written some letters to State Bank of Mysore, Main Branch, Bengaluru in respect of Flora International Ltd.,
155. He has further deposed that Ex.P.85 is the letter written by him as Senior Manager of Indian Overseas Bank, Residency Road Branch, Bengaluru and to State Bank of Mysore, Main Branch, Bengaluru in reply to the letter of State Bank of Mysore, Main Branch, Bengaluru. The State Bank of Mysore, Main Branch had sought for certain opinion regarding Flora International Ltd., and they have given their opinion. In Ex.P.85 he has mentioned that, Flora International Ltd., was in due of amount to Indian Overseas Bank, Residency Road Branch, Bengaluru and the amount is also mentioned in the said letter and his signature is at Ex.P.85(b).
156. Further, he has deposed that Ex.P.86 is the letter written by his successor Mr. Balakrishna to State Bank of Mysore, Main Branch, Bengaluru and signature of Mr. Balakrishna is at Ex.P.86(b).
157. As seen from the evidence of PW.1, he has deposed about the correspondence received from Indian Overseas Bank as per Ex.P.85 and 86. PW.20 who is the author of Ex.P.85 has deposed about the transactions of Accused No.6 company with their bank and the dues payable by the said company and intimation of dues to the SBM, Bengaluru. Further, he has also deposed about the correspondences made by his successor Mr. Balakrishna as per 80 Spl.C.C.No.476/2002 J Ex.P.86. Therefore, the evidence of PW.1 and 20 are proving the contents of Ex.P.85 and 86.
158. As seen from the defence of all accused, there is no dispute about Ex.P.85 and the contents of the same. As per Ex.P.85 dated 16.3.1995, the Indian Overseas Bank informed the State Bank of Mysore about the credit facilities availed by Accused No.6 company from that bank and the dues payable by them. It is pertinent to note the contents of this letter which reads as follows: -
"In this regard we wish to state that the subjects have large outstandings under Packing Credit and this is put on recovery basis. Hence, we request you to look into this aspect and consider extending the credit limits to the captioned borrower preferably after obtaining a No Due Certificate from our end.
Further we wish to add that an import bill drawn on their associates viz., M/s. Flora Silks Limited for US$65,000/- sent to you for realization still remains unpaid."
159. Further, there is no dispute about letter Ex.P.86 from Indian Overseas Bank. It is pertinent to note the contents of this letter which reads as follows: -
"We understand that you are considering sanction of certain credit facilities to the above group as a revival package. In this connection we have to advise that the above group of companies have the following outstanding overdue liabilities with us:
FLORA INTERNATIONAL LIMITED Overdue Packing Credit - Rs.2205886/- + interest from 1.1.95 Temporary Overdraft - Rs.107847.30 + interest from 1.11.95 81 Spl.C.C.No.476/2002 J FLORA SILKS LIMITED Temporary Overdraft - Rs.4576.11 + interest from 1.11.95 Letter of Guarantee L.G. No.3/94 - Rs.1746293/-
L.G. No.5/94 - Rs.500000/-
For the above Letters of Guarantee we hold as margin 25% in the form of Fixed Deposits.
In the event of sanctioning credit facilities to the above group would you kindly advise us of the same so that it would help us in recovering our dues. Also would you kindly insist on obtention of a No Due Certificate from us before releasing any credit facilities to the group."
160. Further, PW.1 has deposed that Ex.P.87 is the copy of the letter addressed to ECGC by the Manager (Advances, C&I Division), Bengaluru dt.22/3/1995. Under the said letter the proposal to cover the advance of M/s Flora International Ltd., has been sent. Ex.P.87 bears the initial of Accused No.4 as Manager who has sent the said letter and his initial is at Ex.P.87(a). The copy of the proposal sent to ECGC is annexed to Ex.P.87 as per Ex.P.88. The initials of Accused No.4 as Manager (Advance) is at Ex.P.88(a). In column No.3 of Ex.P.88, the name and address of other Bankers has to be mentioned but in that column Accused No.4 has written as 'not applicable' which is false as the said Flora International Ltd., had already taken the loan from Indian Overseas Bank, Residential Road Branch, Bengaluru as per the letters of the said Bank as per Ex.P.85 and Ex.P.86. 82 Spl.C.C.No.476/2002 J
161. Further, he has deposed that the State Bank of Mysore, C&I Division, Bengaluru Branch enhanced the credit facility to Flora International Ltd., from Rs.80 lakhs to Rs.120 lakhs as post shipment credit and the same has been intimated to ECGC along with the Branch letter dt.26/4/1996. The copy of the Branch letter is at Ex.P.89 and it is initialed by Accused No.4 and the initial of Accused No.4 is at Ex.P.89(a). The copy of the proposal, which has been sent to ECGC as stated above, is at Ex.P.90 and the initial of Accused No.4 is at Ex.P.90(a).
162. Regarding Ex.P.87 and 88, PW.7 Joyce Jose who was working as Executive Officer and Asst. Manager in Export Credit Guarantee Corporation of India Ltd., Bengaluru has deposed his evidence. There is no dispute about the contents of Ex.P.87 to 90 sent by SBM to the ECGC, Bengaluru Branch. In Ex.P.88 and 90, it is not mentioned anything about the credit facilities availed by Accused No.6 company from other banks and in the said column it was mentioned as 'not applicable' though SBM was well aware about the credit facilities availed by Accused No.6 company from Indian Overseas Bank, Bengaluru.
163. Further, PW.1 has deposed that Ex.P.91 is copy of the letter addressed to KSSDC by Manager (Advances), C&I, State Bank of Mysore, Bengaluru Branch dt.10/5/1995 wherein it is mentioned that, 83 Spl.C.C.No.476/2002 J Flora International Ltd., has been sanctioned cash credit limit of Rs.24.50 lakhs and Flora Silks Pvt. Ltd., is maintaining only a current account and spun Silks India Ltd., and Flora Wall Coverings Ltd., has no credit facilities. The copy of the said letter is initialed by Accused No.4 as per Ex.P.91(a). In Ex.P.91 it is mentioned that the transaction of Flora International Ltd., is "satisfactory'.
164. Regarding this Ex.P.91 and 91(b), PW.17 Nagar Anand Nayak has also spoken. As seen from the evidence of PW.1 and PW.17, there is no dispute about the said correspondences. In this Ex.P.91, the Accused No.4 mentioned about the credit facilities of Accused No.6 company and the transaction in their account are 'satisfactory'. Further, as per Ex.P.91(b) KSIIDC., sought for information from the SBM, Bengaluru and the same was intimated as per Ex.P.91.
165. Further, PW.1 has deposed that Ex.P.92 is the office copy of the letter addressed to Flora International Ltd., by AGM, Bengaluru Branch dt.6/5/1996 wherein it is stated that, State Bank of Mysore, Bengaluru Branch has no objection for Flora International Ltd., obtaining financial assistance with other Bankers. The said letter bears the initials of Accused No.1 as per Ex.P.92(a). There is no dispute about the contents of Ex.P.92 which reads as follows: -
"With reference to your letter No. FIL:SBM:002 dated 04- 05-1996, we have no objections in your seeking need 84 Spl.C.C.No.476/2002 J based financial assistance with other bankers in view of our liability to consider your request."
166. Further, PW.1 has deposed that Ex.P.93 is the original note submitted by Accused No.4 to AGM dt.29/1/1996 furnishing the details of the outstanding in respect of M/s Flora International Ltd., The signature of Accused No.4 is at Ex.P.93(a). In Ex.P.93 in the 2nd sheet bottom AGM M.S.Seetharam Rao (Accused No.1) has written as "yes please report to DGM (Bengaluru zone) under copy to DGM (Credit), Head office" and below the same he has put his initials also. The endorsement and his initial are together at Ex.P.93(b). In Ex.P.93, Accused No.4 had sought for authorization to pay cheques and debit slips amounting to Rs.50 lakhs. By the endorsement, it means that the Accused No.1 has permitted for passing of the cheques of Rs.50 lakhs and report to DGM (Bengaluru zone) and DGM (Credit). There is no dispute about Ex.P.93, contents and the endorsement of Accused No.1.
167. Further PW.1 has deposed that Ex.P.94 is the letter from Enforcement Directorate, Government of India, Bengaluru dt.24/2/1999 addressed to the State Bank of Mysore, Chief Manager, Bengaluru Branch to submit the details of position of the accounts of M/s Flora International Ltd., and other details sought in the same. There is no dispute about receipt of Ex.P.94 and the contents of the 85 Spl.C.C.No.476/2002 J same. It is pertinent to note the contents of Ex.P.94 at para No.2 which reads as follows: -
"During the course of investigation, it was observed that the export proceeds relating to the GR No.AH 100002, AH 100018 and AL 59713112 were pending realization for more than six months by M/s. Flora International Ltd., But you have forwarded Xerox copies of GR form Nos. 100002 and 100018. You are therefore requested to forward the copy of the GR form No. AL 59713112."
168. Further, he has deposed that Ex.P.95 is the note submitted by the AGM Bengaluru Branch to the General Manager (O), State Bank of Mysore, Head office, Bengaluru along with note furnishing the details of the loan account of M/s Flora International Ltd., and intimating that the account has become Non Performing Asset. The General Manager (O) has sent back the letter and the note stated above to the AGM with certain remarks found in the same. In Ex.P.95 it was recommended Rs.15 lakhs additional limit when the account was overdrawn to the extent of Rs.15,40,000/- over and above the sanctioned limit of Rs.24.50 lakhs stating that the account is satisfactory. The collateral security that was taken are 2 properties worth 19,45,000/- and another Rs.45.71 lakhs. The note annexed to Ex.P.95 has been returned by General Manager (O), Secretariat on the ground that, it should have been routed through a proper channel that is through DGM, Bengaluru zone. In the note Ex.P.95 stock position has been mentioned as Rs.36,66,000/- but balance outstanding in the 86 Spl.C.C.No.476/2002 J account was Rs.39.90 lakhs and the balance was not covered by the stock. To the above said note Parthasarathy, Subbaramu and Suryanarayana Rao have put the initials at Ex.P.95(a), (b) and (c) respectively and signed by AGM Seetharama Rao as per Ex.P.95(d).
169. Regarding Ex.P.95, PW.6 has spoken his evidence stating that it is the note re-submitted to the General Manager (Operations) by Accused No.1 wherein Accused No.1 states that, the account had become NPA due to some misunderstanding at the Branch level on account of non purchase of local bankers cheque and it is further stated that, the account is now satisfactorily operated and as per their experience has also been satisfactory as regards the observations of DGM (Credit) and they state that, they will make efforts to collect the information from the persons named by the DGM. Finally, the note also states that, in view of the satisfactory features, which are now prevailing and the desirability of bringing back an account/good customer with foreign exchange turnover potential and other related aspects they recommend for sanction of the limits. On this, he had also commented that his information on the company was 2 years old while this may be got checked since Bengaluru Branch on the transaction has been satisfactory, the recommendation may be approved. Ex.P.95(f) is his observations stated above along with his initial and signature of Accused No.1 is at Ex.P95(j). Therefore, there 87 Spl.C.C.No.476/2002 J is no dispute about the evidence deposed by PW.1 and 6 regarding Ex.P.95 and the notings made therein by the concerned.
170. Further, PW.1 has deposed that Ex.P.96 is the note submitted by the International Banking Division, Bengaluru Branch to the Chief Manager, C&I Division, Bengaluru Branch along with enclosures (foreign exchange bill and other documents). In the said note, the IBD Chief Manager has sought permission of the Chief Manager C&I to purchase the bill for 70,000/- US dollars amounting to Rs.21,88,900/- under letter of credit favouring M/s Schuan Ghousyi Silk Spinning Co. Ltd., on ground that, M/s Flora International Ltd., has sent consignment to M/s Schuan Ghousyi Silk Spinning Co. Ltd., worth 70,000/- US dollars. The letter of credit will be issued by the Buyer's Banker to the Seller (M/s Flora International Ltd.,).
171. In Ex.P.96, the C&I division has noted that, there is no sanctioned limit to purchase the above said bill and Letter of credit given by the foreign banker has expired and already one bill negotiated has not been paid by the foreign banker amounting to Rs.12,11,738/-. Inspite of the above said note, the Chief Manager Accused No.3 Suryanarayana Rao has written 'negotiate and report' but the said note is not signed by Accused No.3. On the basis of the above said note the bill mentioned in Ex.P.96 has been purchased and the amount of Rs.21,88,900/- has been credited to the account of M/s 88 Spl.C.C.No.476/2002 J Flora International Ltd., At that time excluding the above said amount the outstanding amount due by M/s Flora International Ltd., was Rs.2,32,97,175/-. The said bill was not honoured by the foreign banker on the ground that letter of credit has been expired and the party has not authenticated the foreign banker to pay the above said bill. Ex.P.96 also contains the Telex Message of the Foreign Bank stating that they are returning the bill as the party has not accepted to pay the bill. The Telex Message is at Ex.P.96(b). Ex.P.96 also contains bill of lading. If any consignment is loaded to the ship for transportation to the foreign country, the shipping agent or authority will issue a bill of lading, which means that he has received the consignment mentioned in the same for transportation in the ship. The bill of lading is at Ex.P.96(c). Usually 3 copies of bill of lading will be issued and 2 copies are in the file. According to Ex.P.96(c) it is said to have been issued by M/s Sri Ganesh Shipping Agency, Bengaluru on behalf of Sea Land Agency India Pvt. Ltd., Kochin. After the bill was returned as stated above they came to know that the said bill of lading is a fake one. He had gone to Sri. Sri Ganesh Shipping Agency, Bengaluru situated in the Cunningham Road, Bengaluru and enquired about Ex.P.96(c) and came to know that it has not been issued by M/s Sri Ganesh Shipping Agency, Bengaluru. The beneficiary of Rs.21,88,900/- (70,000 US dollars) was M/s Flora International Ltd., 89 Spl.C.C.No.476/2002 J
172. In this regard, the prosecution has also placed reliance on the evidence of PW.13 Sri. Lalithkumar who worked as Clearance Staff and Manager from 1982 to 2003 in Sri. Sri Ganesh Shipping Agency. He has deposed that Sri. Sri Ganesh Shipping Agency is custom clearing agent. If anybody or firm wants to export any commodity from India to any other country, he has to approach the custom clearing agent and he should give export invoice, packing list, purchase order or Letter of credit and blank GR (Guaranteed Receipt issued by the Reserve Bank of India). In export invoice the name of the shipper, consignee name of the other country, description of the cargo, value of the cargo, etc., Will be mentioned. In packing list how the commodity is packed and its weight will be given. Purchase order is the order given by the buyer of the other country mentioning the cargo, quantity and value of the commodity to be exported to him. They prepare shipping bill on the basis of the invoice and packing list given by the party and after typing Xerox copy of the shipping bill will be taken in the blank GR form stated above. GR form consists of original and duplicate. They submit GR form, shipping bill, invoice, packing list, purchase order to customs authority for getting shipping bill number. After shipping bill number is given the documents will go to Superintendent of Customs for assessment purpose. Invoice and purchase order is in foreign currency. Shipping bills will be prepared in 90 Spl.C.C.No.476/2002 J Indian rupees. The Superintendent of Customs will assess whether shipping bill correspondence to the value of the export and he will tally both of them. If everything is correct then it will be send to Asst. Commissioner of Customs for his signature. After the signature of Asst. Commissioner, open order will be given for inspection of the cargo. Customs Inspector will come to the place where the cargo is kept. The Customs Inspector will open the cargo and inspect the same and afterwards permission will be given to stuff the cargo into containers. Containers are provided by the shipping line along with one time lock. After the stuffing again Inspector will come and he will put the one time lock to the container doors and he will gives the report. Afterwards Superintendent will give let export permission.
173. Then he has deposed that after clearance of customs, they give duplicate GR signed by the Superintendent of Customs and invoice and packing list copy to the party. They will prepare the bill of lading in which they mention the name of the shipper, the name of the consignee, name of the vessel, description of the cargo, their shipping bill number and GR number mentioned in the bill of lading and it will be given to the shipping line. The container will go to port and it will be taken in the ship to the foreign country.
174. Further, he has deposed that under the seizure memo Ex.P.138 produced the export register maintained in their office 91 Spl.C.C.No.476/2002 J Ex.P.139 and there are entries as per Ex.P.139(a) to 139(d) in respect of export made by Flora International Ltd., to the various countries. The evidence deposed by PW.1 and PW.13 with regard to the procedure is not disputed in any manner.
175. Further, he has deposed that Ex.P.97 is the note submitted by IBD dated 14.9.1995 and the bill annexed to the above said note is at Ex.P.97(a). Ex.P.97(a) is the original of the bill available in the file Ex.P.96 and there is no dispute. This document speaks about the purchase of the said bill when there was no submission of GR Form which was the proof of shipment, absence of credit opinion on the buyers and the total outstanding on the export bill was Rs.1,87,29,655/- and the import bill outstanding was Rs.1,02,30,175/- . It also speaks about the meeting of Accused No.5 with AGM on the day of the negotiation and the purchase of the said bill as per the recommendation of Accused No.3 and the approval of deceased Accused No.2 and it also speaks the non-payment of the said bill by the exporter.
176. Further, PW.1 has deposed that Foreign Export Bill Purchase register consisting of 6 sheets is at Ex.P.98 and for every purchase one page is maintained and the relevant entries pertaining to purchase of the bills mentioned in Ex.P.98 are at Ex.P.98(a) to 98(e). As per Ex.P.98(b) another bill for Rs.84,99,480 (2,58,500 US dollars) 92 Spl.C.C.No.476/2002 J has been purchased on 14/9/1995 and the bill has been returned unpaid on 24/6/1997 and the beneficiary is M/s Flora International Ltd., and the bill was drawn on M/s DAP Services (P) Ltd., Singapore. Hence the above said amount has been debited along with interest amounting to Rs.91,11,836/- to the account of M/s Flora International Ltd., In Ex.P.98(b) the bill of lading number is mentioned as MAAI- 10219795 and the Bank had written the letter to Hanjin Shipping as to whether it had issued the said bill of lading and for which the said shipping Hanjin Shipping has written the reply to the Bank dt.15/1/1998 as per Ex.P.99 to the effect that, it has not issued the said bill of lading. The bill of lading bearing No. MAAI-10219795 mentioned in Ex.P.98(b) in 2 sets are together marked as Ex.P.100 and Ex.P.100(a). The above said Hanjin Shipping has written the letter to the Bank dt.19/2/1998 as per Ex.P.101 enclosing the xerox copy of the bill of lading issued by them. Another letter written by the above said shipping to the State Bank of Mysore dt.26/5/1998 is at Ex.P.102.
177. In this regard, it is pertinent to note the evidence of PW.14 Sri. A.A. Mathews, who served as Branch Manager in M/s. J.M. Baxi & Company. He has deposed that M/s. J.M. Baxi & Company is a shipping company and they were doing shipping business on behalf of the shipping lines like Hanjins and other shipping lines like K-line, etc. 93 Spl.C.C.No.476/2002 J As agent of the shipping line Hanjins they were authorized to sign the bill of lading. One Laxman Kumar was working as his Asst. in M/s J.M.Baxi & Company.
178. As agents of shipping line, they were procuring export cargo for shipment through shipping line. Bill of lading is a receipt of cargo in the custody of shipping line and afterwards they export it to the concerned destination. The bill of lading will be issued to the Exporter. The Exporter has to book the shipping line with them for exporting. They allot the container to the exporter and the exporter will bring the cargo to the customs custody and after customs formalities, they put the container in the customs premises and after passing of the documents in the customs with the supervision of the customs, the cargo will be loaded to the container supplied by them in the presence of the customs officer. Then that container will be sent to port for export in the ship.
179. Further, he has deposed that Ex.P.100 and Ex.P.100(a) are the bill of lading issued by Hanjin Shipping company in favour of Flora International Ltd., His signatures are found in both Ex.P.100 and Ex.P.100(a) are at Ex.P.100(b), 100(a-1). As the agent of Hanjin Shipping Company, he has signed Ex.P.100 and Ex.P.100(a). M/s J.M.Baxi & Company were the agents for Confreight Shipping agency also.
94 Spl.C.C.No.476/2002 J
180. The corrections made in both Ex.P.100 and Ex.P.100(a) were not made by him [the corrections made after putting whitener in some portions of both Ex.P.100 and Ex.P.100(a)] and when he issued Ex.P.100 and Ex.P.100(a) there were no corrections in them as found now in them. The small round seal to the effect that correction approved put by the side of the corrections made in Ex.P.100 and Ex.P.100(a) are not made by him or by anybody in their office. The corrections found in Ex.P.100 and Ex.P.100(a) are not genuine corrections. He has further stated that they were not at all issuing the bill of lading with so many corrections as found in Ex.P.100 and Ex.P.100(a).
181. The evidence deposed by PW.14 is not disputed by Accused No.1, 3, 4 and 8 in any manner. The learned counsel for Accused No.5 to 7 have cross-examined this witness on commission. In his cross-examination, PW.24 has admitted that one Lakshman Kumar was the employee of J.M. Baxi & Company and the seals and initials are made by Lakshman Kumar. PW.14 is trying to make hot and cold at the same time in his evidence. In his examination in chief he has specifically deposed that neither himself nor any other staff in his office have made the corrections on Ex.P.100 and 100(a). In the cross-examination, he says that the seal and initial are made by his staff Lakshman Kumar. The evidence of PW.14, deposed in his 95 Spl.C.C.No.476/2002 J examination-in-chief has to be accepted ignoring the admission made in his cross-examination because he has made such admission to help the accused.
182. Regarding Ex.P.100 & 100(a), the prosecution has relied upon the evidence of PW.24 Sri. S.C. Lohia, who was Deputy GEQD at Hyderabad. He has deposed that the documents of this case were received in his office on 8/5/2002 from S.P., CBI, Bengaluru vide letter number DP/4869/RC/BGA/2001/A0019 dated 6/5/2002. Along with the requisition letter, certain documents were also received for examination. The disputed portion of the typed writing have been enclosed with the red pencil and marked as Q.1 to Q.8 and X-1 in Ex.P.100, Q.9 to Q.17 and X-2 are found in Ex.P.100(a).
183. Then he has deposed that he has carefully and thoroughly examined Ex.P.100 and Ex.P.100(a) and he is of the opinion that, in the red enclosed portions stamped and marked as Q.1 to Q.17 there are marks of obliteration below the existing type impressions. The original type impressions are visible under transmitted light. The 23 transmitted photographs in respect of Q.1 to Q.17 are at Ex.P.167. The type impressions in the red enclosed portions of Ex.P.100 and Ex.P.100(a) marked as X-1 and X-2 show the following oddities (peculiarities). The location of the word "LIMITED" is unusual. In the red enclosed portions marked X-1 and X-2, the terminal letter of 96 Spl.C.C.No.476/2002 J capital "S" of the word "CONSULTANTS" is partly typed on the revenue stamp. The above observations indicates that, the impressions in the red enclosed portions marked X-1 and X-2 have been typed after affixing the revenue stamps.
184. He has further stated that it is not been possible to express a definite opinion on the existing type impressions in the red enclosed portions marked Q-1 to Q-17 [Ex.P.100 and Ex.P.100(a)] regarding the age and the identity in comparison with the original type impressions. The opinion given by him signed by himself and Sri R.B. Bhosle, Assistant GEQD who had also examined the documents of this case independently is at Ex.P.168 and his signature is at Ex.P.168(a) and the signature of R.B. Bhosle is at Ex.P.168(b) and the reasons given by him for his opinion is at Ex.P.169 and his signature is at Ex.P.169(a).
185. Except the learned counsel for Accused No.5 to 7, none of the accused have disputed the evidence and the opinion given by PW.24. Looking to the cross-examination, there is no reason to disbelieve the evidence of PW.24, his opinion as per Ex.P.168 and reasons as per Ex.P.169. As seen from the evidence of PW.24, there is no doubt that Ex.P.100 and 100(a) have been sufficiently tampered after the same have been said to be issued from the shipping company.
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186. Ex.P.99 is the letter of Hanjin Shipping to SBM, Bengaluru Branch dated 15.1.1998. There is no dispute about this letter from the Shipping Company to the SBM. It is pertinent to note the contents of this letter which reads as follows: -
"We refer to your letter IBD/MISC dtd. 15.12.1997 enclosing B/L No. MAAI 10219795 of shipper Flora International Ltd., At the outset we have to inform you that the enclosed copy of original B/L is not issued by our office as all the contents on this B/L are totally different from that of our B/L No. MAAI 10235106 issued by us."
The contents of this letter proves that Ex.P.100 and 100(a) are not issued from the concerned Shipping Company in respect of consignment of Flora International Ltd.,
187. Further, Ex.P.101 is another letter of Hanjin Shipping dated 19.2.1998 issued in favour of the Chief Manager, SBM, Bengaluru Branch, wherein the copy of the bill was furnished which reads as follows: -
"As requested in your above letter, we enclose herewith a photocopy of the original B/L No. MAAI 10235106 dated 10 Nov 1995, issued by us to M/s Flora International Ltd, Bengaluru, for your information."
188. Along with this letter, the copy of the bill of lading pertaining to original B/L No. MAAI 10235106 dated 10 Nov 1995 was enclosed. There is no dispute about this letter, contents and the copy of the bill enclosed along with this letter. On perusal of Ex.P.101 and 98 Spl.C.C.No.476/2002 J the copy of the bill of lading enclosed to it, it is clear that Ex.P.100 and 100(a) are manipulated documents from the Accused No.6 company.
189. Ex.P.102 is another letter of Hanjin Shipping Company dated 26.5.1998 in favour of SBM, Bengaluru Main Branch, International Banking Division which reads as follows: -
"We refer to your letter dated. 17.04.98 received by us on 14/05/98, kindly note we have already sent several notices to you and shipper regarding above shipment. Furthermore, please note we have advised you vide our letter dtd. 16/12/96 that subject consignment has been disposed of due to no response received from you as well as shipper in this matter. We are holding shipper responsible for all the cost and consequences arising thereof."
190. Further, PW.1 has deposed about Ex.P.103, which contains statement of irregularities in the accounts of Accused No.6 company submitted to the controlling authority for various months in respect of over drawals allowed in favour of Accused No.6 company by the Branch. There is no dispute about the statements, the contents of the statements submitted to the controlling authority. There is no endorsement on the statements to show that the irregularities reported have been ratified/approved by the controlling authority on any occasion.
191. Further, PW.1 has deposed about Ex.P.104 which is a note submitted by AGM, Bengaluru Branch to GM (O) dated 3.1.1994, wherein the permission was sought to issue legal notice to Accused 99 Spl.C.C.No.476/2002 J No.6 company for calling up the advance. There is no dispute about the notes submitted to the General Manager (Operations) reporting the position of the account of the Accused No.6. The remarks and recommendations made in the note are as follows: -
"The company has sparingly routed their transactions through their account initially and subsequently after lapse of 2 to 3 months, the account has become virtually dorment. The company has not submitted monthly stock statement/monthly select operational data from April 1993 onwards. Inspite of our close follow up/personal contact/ several reminders to the company, they have not adhered to the requirements of the bank. The company has also not paid accumulated interest for 6 quarters. The directors of the company have been giving only assurances for regularization/rectification of the account and adopting only time-gaining tactics.
In view of the unsatisfactory features prevailing in the account and since the account is in dormant state for over one year, we may be permitted to issue legal notice to the company, calling up the advance. We note to report developments in due course."
192. Further, it is also pertinent to note the endorsement made by GM(O) as per Ex.P.104(c) which reads thus: -
"This sanction made in 1992 going bad in one year requires a deeper study."
193. The above note submitted on 3.1.1994 itself proves that since one year the account of Accused No.6 company became darment and features was unsatisfactory which was reported to the controlling authority and sought permission for issue of legal notice for recovery of the dues in the account of Accused No.6. Further, the endorsement 100 Spl.C.C.No.476/2002 J of GM(O) makes it clear that the account became bad within one year and to study deeper to know the position of the Accused No.6 company.
194. Inspite of this note and remarks of GM(O), the Branch has permitted drawings in favour of Accused No.6 company in respect of the credit facilities and reported to the controlling authority, which were not ratified/approved in any manner.
195. Further, PW.1 has deposed about Ex.P.105 submitted on 6.6.1992 and there is no dispute about this note and report for sanction of cash credit limit of Rs.24.50 lakhs in favour of Accused No.6 company. Ex.P.106 is the sanction communication of sanction of cash credit facility of Rs.24.50 lakhs by SBM, Bengaluru in favour of Accused No.6 company dated 3.6.1992 and there is no dispute about this. Ex.P.107 is the Guarantee Issue Register Extract dated 17.6.1995. It is admitted that the State Bank of Mysore has issued Bank Guarantee in favour of Trans Asian Shipping Services Pvt. Ltd., for a sum of Rs.2,60,000/- on the request of Accused No.6 company and there is no dispute about this Bank Guarantee. Ex.P.108 is the Demand Liability Register Extract in respect of letter of credit pertaining to Accused No.6 company on various dates. There is no dispute about the letter of credit negotiated by SBM, Bengaluru in respect of the LC mentioned in the register.
101 Spl.C.C.No.476/2002 J
196. Ex.P.109 is the Inward Bills under LC received and retired particulars register in respect of Letter of Credit pertaining to Accused No.6 company and the relevant transactions are Ex.P.109(a) to 109(d) and there is no dispute about those bills and payments.
197. Ex.P.110 is the Copy of the Letter dated 25.3.1996 issued by SBM, Bengaluru in favour of Accused No.6 company intimating that CC Limit is Rs.24.50 lakhs and the balance outstanding was Rs.59,13,772.42 exclusive of interest from 1.1.1996 and overdue export bills outstandings balance was Rs.1,15,00,236/- and interest and to arrange for payment of the dues outstanding at the earliest and there is no dispute about this letter issued by SBM to the Accused No.6 company.
198. Ex.P.111 is the letter of DGM (Credit) to AGM, SBM, C&I Division dated 7.3.1996. Regarding this document, PW.1 has spoken and there is no dispute about this correspondence which reads as follows: -
"Reg: FLORA INTERNATIONAL LIMITED We refer to your credit proposal seeking enhancement in the credit facilities to the captioned company.
We note that the stigma caused by the BIFR observations in respect of M/s. Spun Silk India Ltd., is still pending clearance. Also the difficulties we have already experienced in the company's dealings with us do not encourage us to take up the proposal. We therefore regret our inability to consider credit facilities to the company at present. Please advise the party suitably.102 Spl.C.C.No.476/2002 J
You may tactfully get our outstandings under different heads recovered at the earliest and confirm compliance."
199. Ex.P.112 is the file pertaining to Bank Guarantee No. 95/5 dated 17.6.1995 for Rs.2,60,000/- on behalf of Accused No.6 company.
200. In this regard, PW.1 has deposed that, Ex.P.112 is the file in respect of Bank guarantee issued by State Bank of Mysore, Bengaluru Branch, C&I Division on behalf of accused No.6 M/s Flora International Ltd., favouring Trans Asia Shipping Services Pvt. Ltd., for Rs.2,60,000/-. The letter of guarantee will be issued on stamp paper and copy of the same signed by Manager (Advances) and Deputy Manager (Advances) consisting of 3 sheets is marked as Ex.P.112(a). The original of the same has been sent to Trans Asia Shipping Services Pvt. Ltd., In that respect the Bank has obtained counter guarantee from M/s Flora International Ltd., and it is at Ex.P.112(b). In respect of the above said guarantee the note had been submitted to Asst. General Manager on 17/6/1995 signed by Deputy Manager Parthasarathy and the Manager Subbaramu and the said note is at Ex.P.112(c). In the file there is no document to show that AGM has sanctioned the said guarantee. In Ex.P.112 there is the note submitted to the Chief Manager by the Manager C&I Division and Chief Manager has written "sanction as recommended please put up to AGM 103 Spl.C.C.No.476/2002 J for noting" signed by Chief Manager Suryanarayana Rao and AGM has written as seen and has written something and the said note consisting of 2 sheets is marked as Ex.P.112(d). In Ex.P.112(d) the liability of the M/s Flora International Ltd., is mentioned as Rs.437.09 lakhs (in total). The signature of Chief Manager Suryanarayana Rao is at Ex.P.112(d-1) and the initial of AGM Seetharama Rao is at Ex.P.112(d-
2). The signature of Subbaramu, Manager is at Ex.P.112(d-3). The guarantee Trans Asian Shipping Services Pvt. Ltd., has written the letter to State Bank of Mysore, Bengaluru Branch dt.17/6/1996 demanding payment of the guarantee No.95/5 for Rs.2,60,000/- and that letter is at Ex.P.112(e). The said letter was received by Chief Manager, Suryanarayana Rao and marked to Parthasarathy, Deputy Manager. The note submitted by Manager C&I, Subbaramu to Chief Manager C&I and AGM Bengaluru Branch dt.20/6/1996 wherein it is mentioned that sanctioned limit is Rs.75 lakhs (cash credit hypothecation) and the balance outstanding was Rs.62.86 lakhs and FDBP/FUBP outstanding balance is Rs.115 lakhs and it is also mentioned that the guarantee of Rs.2,60,000/- favouring Trans Asian Shipping Services Pvt. Ltd., has expired on 16/6/1996 and the claim made is on 17/6/1996 and the claim is inadmissible. The said note is marked as Ex.P.112(f). According to the copy of the letter written to M/s Trans Asian Shipping Services Pvt. Ltd., dt.18/6/1996 the Bank 104 Spl.C.C.No.476/2002 J has expressed its inability to pay the guarantee amount as the claim is made after the due date. The copy of that letter is at Ex.P.112(g).
201. There is no dispute about the correspondence and the notings made in Ex.P.112 by the respective officers.
202. Ex.P.113 and Ex.P.114 are the valuation reports dated 16.1.2002 and 17.1.2002 issued by approved valuator for the property and there is no dispute about these valuations.
203. Regarding Ex.P.113 and Ex.P.114, PW.1 has deposed that Smt. B.N.Veenakumari is the guarantor to the limits sanctioned to M/s Flora International Ltd., and she has given her property as security for the loans sanctioned to M/s Flora International Ltd., The valuation report issued by Ashok D. Kulakarni, Panel Valuer valuing the property as Rs.27.80 lakhs. According to Ex.P.113, the property given as security is house property situated at Rajajinagar, 5th Block, Bengaluru (house No.869, 17th G-Main, 5th block). Sri. D.Chandrashekar is the another guarantor to the limits sanctioned to M/s Flora International Ltd., and he has given his property as security for the loans sanctioned to M/s Flora International Ltd., The valuation report issued by Ashok D.Kulakarni Panel valuer valuing the property as Rs.50.70 lakhs. According to Ex.P.114, the property given as security is house bearing No.48, Siddanagalli, Cubbonpet, Bengaluru-9. The value of the property of both the above said guarantors comes to Rs.78,50,000/-. 105 Spl.C.C.No.476/2002 J Thus the collateral security given does not cover the limit sanctioned to the M/s Flora International Pvt. Ltd., M/s Flora International Pvt. Ltd., has not given any collateral security.
204. Ex.P.115 is the letter of Export Credit Guarantee Corporation of India Ltd., dated 30.3.2000 to SBM, Bengaluru and there is no dispute about this letter. In this regard, PW.1 has deposed that in Ex.P.115 it is stated that the claim of the bank has been disallowed for the reasons stated in that letter. Regarding this document, the prosecution has relied upon the evidence of PW.7 Sri. Joyce Jose who has deposed that from 1993 to 1997 he was working as Executive Officer and Assistant Manager in Export Credit Guaranty Corporation of Indian Ltd., Bengaluru. The said Corporation comes within the purview of Ministry of Commerce, Government of India. At that time he was looking after the work of Export Insurance to Banks. ECGC is concerned with Credit insurance for covering overseas buyers risks and borrowers risks to the Banks. In case the overseas buyer fail to make the payment certain percentage of payment will be made by ECGC to the exporter and for Banks when the borrower fails to repay either pre shipment advance or post shipment advance ECGC gives guaranty to the Banks. The borrower stated by him is the exporter who has taken advance from the Bank for doing his export business. ECGC covers the risk of overseas buyer as well as the risk of the 106 Spl.C.C.No.476/2002 J exporter/borrower by taking premium amount. Further, he has deposed that Ex.P.87 and Ex.P.88 were sent by the State Bank of Mysore to ECGC, Bengaluru for covering the risk on Flora International Ltd., for pre shipment and post shipment advance. (pre shipment limit of Rs.50 lakhs and post shipment limit of Rs.90 lakhs). Ex.P.115 is the rejection letter issued to State Bank of Mysore after processing the claim, which was filed on account of Flora International Ltd., under WTPSG. The reasons for rejection is mentioned in the above said letter itself and his signature is at Ex.P.115(a). Due to the lapses found by them while processing the claim of State Bank of Mysore, it was rejected. The bill Number referred in Ex.P.115 is No. 030328 dt. 14/9/1995 for USD 2,58,500/- drawn on M/s DAP Services Pvt. Limited, Singapore. No other Bank has filed any claim with ECGC on account of this exporter namely Flora International Ltd., This witness has been cross-examined by learned counsel for Accused No.3, 4 and 8 and there is no cross-examination of other learned counsels for other accused and nothing has been elicited from his mouth to disbelieve his evidence. Therefore, the evidence of PW.7 is acceptable and proving the procedure for making the claim from ECGC in respect of pre shipment and post shipment.
205. It is pertinent to note the contents of para-1 of Ex.P.115 which reads as follows: -
107 Spl.C.C.No.476/2002 J
"(01) The appraisal note dated 16/02/95 put up to your GM (Operations) was for a one time limit of PC 50 lacs plus FDBP/FUBP - Rs.90 lacs for enabling the exporter to make shipment under L/C for USD 9,00,000/- valid upto 15/06/95. The approval for this one time limit is not furnished to us. Bank reported a PC limit of Rs.50 lacs and PS Limit of Rs.90 lacs on 21/03/95 wherein the Health Code of the exporter was classified as 1 (One). This was the first time bank was sanctioning export finance to this exporter, hence should have obtained Corporation's approval since the discretionary limit to your bank is only Rs.30 lacs."
It is also pertinent to note the last para of Ex.P.115, which reads as follows: -
"The competency of the authority who said to have sanctioned the negotiation of this overdue bill for Rs.84.79 lacs is unreasonable when there were already overdue export bills of Rs.102.30 lacs thereby the total liability was enhanced to Rs.187.30 lacs as on that day. Whereas, on 16/02/95, bank sought their GM's approval for a one time sanction of PS Limit of Rs.90.00 lacs."
206. The contents of Ex.P.115 proves that how without approval of ECGC, the amount was released in favour of Accused No.6 company and exceeding the limit of the bank.
207. Ex.P.116 is the another letter from ECGC of India addressed to State Bank of Mysore, Bengaluru Branch consisting of 2 sheets dt.8/6/1999. Regarding this document PW.1 has deposed and there is no dispute about this correspondence. In Ex.P.116 it is stated that, for the reasons mentioned in the said letter, the claim of the 108 Spl.C.C.No.476/2002 J Bank has been declined. Therefore, the contents of Ex.P.116 are relevant in the matter which reads as follows: -
"The case has been re-examined by us on the basis of clarification given by the bank. However, we regret to inform you that, we are un-able to consider your claim due to the following reasons: -
1) No information was available on the buyer at the time of discount of the bill.
2) No approval from the competent authority for sanctioning of one time limit.
3) As the promoter was involved in different banks. Bank has not taken any certificate from the other banks.
4) Goods was sent on DP basis, no timely action taken by the exporter and the bank to prevent the loss."
208. Ex.P.117 is the letter from ECGC of India addressed to State Bank of Mysore, Bengaluru Branch dt.22/12/1997. In this regard, PW.1 has deposed about this correspondence and there is no dispute about the same. As per Ex.P.117, ECGC has sought clarification from the SBM, Bengaluru Branch regarding the whole turnover post shipment guarantee in respect of M/s Flora International Ltd., The relevant clarification sought are at para No.2 to 5 which reads as follows: -
2) Copy of Credit appraisal note for sanctioning PC & PS limits and also for enhancement of PS limit to Rs.120 lakhs.
3) Copies of sanction letters for granting facilities on 21.03.95 and 19.04.96.
4) We find from the documents made available to us that the exporter was earlier dealing with Indian Overseas Bank also. As such kindly let us know whether you have 109 Spl.C.C.No.476/2002 J obtained No Objection Certificate from IOB before extending facilities to this exporter.
5) We also find that bank has granted the advance against discrepant LC documents. Please let us know the reason for extending PS facilities against bills drawn under expired LC. Please also inform us whether the bank has any such previous experience wherein the post shipment advances were granted against discrepant documents and the payments realized on due dates. If so, please furnish us the details. Please let us know whether the bank granted any PCs for the bills for which claim was preferred under WTPSG."
209. Ex.P.118 is the letter dt.19/10/1995 from Accused No.6 company addressed to the Chief Manager, Bengaluru Branch. In this regard, PW.1 has deposed about this document stating that the Chief Manager Sri M.S.Suryanarayanarao has marked the said letter to the Manager (Advances)/K.Parthasarathy. In the said letter M/s Flora International Ltd., has stated that, it will not have any financial arrangement with any other Bank and the present liability of Indian Overseas Bank will be cleared and No Due Certificate will be submitted to the Bank, etc. The initial of Chief Manager is at Ex.P.118(a) and the initials of Parthasarathy is at Ex.P.118(b). There is no dispute about the evidence deposed by PW.1 and the contents of Ex.P.118.
210. In para No.1 of the letter Ex.P.118, it is mentioned that:
"The company will not have any financial arrangement with any other Bank. The present outstanding liability with Indian Overseas Bank will be cleared shortly and a no due certificate will be obtained and furnished to your Bank. The 110 Spl.C.C.No.476/2002 J account with IOB and Andhra Bank will be closed."
211. Ex.P.119 is the letter from Karnataka State Industrial Investment & Development Corporation Ltd., (KSIIDC) addressed to the Chief Manager C&I Division, Bengaluru Branch dt.4/11/1995. Regarding this document, PW. 1 has deposed that in Ex.P.119 there is mention about application given by M/s Flora International Ltd., to KSIIDC for term loan of Rs.185 lakhs and they have stated that they have considered the limit favourably as State Bank of Mysore, Bengaluru Branch has stated that, accounts of the M/s Flora International Ltd., are satisfactory. There is no dispute about the letter Ex.P.119 and its contents.
212. Ex.P.120 is the copy of the letter sent by the Chief Manager, Bengaluru Branch to M/s Confreight Shipping Agency India Pvt. Ltd., dt.15/12/1997. Regarding this, PW.1 has deposed that in the said letter the Bank has sought for clarification about the cargo sent by bill of lading No.MAAI10219795 dt.13/9/1995 from Madras to Hong Kong. There is no dispute about the correspondence as per Ex.P.120 made by SBM to the concerned Shipping Agency.
213. Ex.P.121 is the statements of irregularities in the accounts of Accused No.6 company for the months of October and November 1997 submitted on 20.12.1997. In this regard, PW.1 has deposed that after he took over charge as Chief Manager C&I, he has reported the 111 Spl.C.C.No.476/2002 J irregularities in respect of the loan accounts of M/s Flora International Ltd., at monthly intervals to DGM, Bengaluru Zone through Asst. General Manager. Apart from the same he has sent other irregularity reports also to his higher authorities from time to time. Further, he has deposed that the Chief Manager Sri. Suryanarayana Rao, Asst. General Manager Sri Seetharama Rao exceeded their discretionary powers mentioned in circular No.87/87 and their exceeding acts have not been approved by higher ups and hence they have committed irregularities. The above said circular No.87/87 is at Ex.P.1. The evidence of PW.1 proves that after he assuming charge as Chief Manager, C&I submitted irregularities statement as per Ex.P.121 for the month of October and November 1997. The irregularities are not approved and ratified by the higher authorities.
214. It is pertinent to note the contents of Ex.P.121. In Ex.P.121 for the month of October and November, it is mentioned that cash credit hypothecation limit has been recommended for enhancement by the DGM on 13.10.1995 for Rs.75 lakhs. In the months of October and November 1997, it is mentioned that the limit was recommended and there is no order to show that the limit was approved by the controlling authority i.e., General Manager (Operations). It is also mentioned that the limit sanctioned was 112 Spl.C.C.No.476/2002 J Rs.24.50 lakhs even in the report Ex.P.121. Where is the question of accepting the contention of all accused that the limit dated 6.5.1992 was renewed and enhanced from time to time as contended by them.
215. Regarding Ex.P.122 to 128, the prosecution has relied upon the evidence of PW.2. Looking to his evidence, he has spoken in detail and stated that he was working as Chief Manager, State Bank of Mysore, C&I Division, Bengaluru Branch from May 1992 to August 1994. Mr. Suryanarayana Rao was his successor as he was transferred to Foreign Department in the same bank. Mr. Papiraju was the Assistant General Manager of Bengaluru Branch of State Bank of Mysore when he reported for duty in May 1992 in the above said Branch. Mr. C. R. Narasimha Murthy succeeded Mr. Papiraju as AGM of Bengaluru Branch. B. N. Sheshanand Singh was working as Manager in C&I Division of Bengaluru Branch under him at that time.
216. Further, he has deposed that he is conversant with the loan taken by Flora International Ltd., from State Bank of Mysore, C&I Division, Bengaluru Branch. Except the signature of Mr. Papiraju he can identify the signatures of other officers. As Chief Manager of C&I division he knows about the dealings of the above said Flora International with above said Branch.
217. Further, he has deposed that before he reported as Chief Manager of the above said Branch, Flora International Ltd., had 113 Spl.C.C.No.476/2002 J already taken the loan from the said Branch. He saw there were no transactions in the Account and the transactions were very few and the borrower was not paying quarterly interest. He also observed that the outstanding balance had exceeded the drawing power.
218. Then he has deposed that Ex.P.122 is the office copy of the letter dated 07-09-1992 written by C&I Division to the borrower regarding conducting the loan account as per bank norms and to regularize the account. In the said letter it is mentioned that there is over drawing to an extent of Rs.42,987/- as on 30-06-1992. Sri. Sheshanand Singh has put his initials in Ex.P.122 as per Ex.P.122(a).
219. Ex.P.123 is the office copy of the letter dated 07-10-1992 sent by C&I division to Flora International stating that the account is over drawn by Rs.1,87,741/- as on 30-09-1992 and the said letter contains the initials of Mr. Sheshanand Singh and the initial of Mr. Sheshanand Singh is at Ex.P.123(a).
220. Ex.P.124 is the office copy of the letter dated 13-11-1992 sent by C&I Division to Flora International stating that the account is over drawn by Rs.1,87,741/- as on 30-09-1992 and the said letter contains the initials of Mr. Sheshanand Singh and the initial of Mr. Sheshanand Singh is at Ex.P.124(a).
221. Ex.P.125 is the copy of letter sent by C&I Division dated 15-07-1993 addressed to the above said borrower to the effect that 114 Spl.C.C.No.476/2002 J the interest continuously for five quarters from June 1992 to June 1993 has not been paid and the account is over drawn to the extent of Rs.6,48,046/- and his initial is at Ex.P.125(a).
222. Ex.P.126 is the office copy of the letter dated 07-01-1993 sent by C&I Division to the above said borrower asking the borrower to remit the sum of Rs.3,35,528/- to bring the account within the sanctioned limit and the initial of Mr. Sheshanand Singh is at Ex.P.126(a).
223. Ex.P.127 is the office copy of the letter dated 30-03-1993 sent by C&I Division to the above said borrower stating that the account is over drawn to an extent of Rs.3,36,092/-. The said letter has been sent to borrower through RPAD.
224. Ex.P.128 is the office copy of the letter dated 30-09-1993 sent by C&I Division to the above said borrower asking the borrower to take several measures mentioned in the same to regularize the account on or before 20-10-1993 and his initial is at Ex.P.128(a) and the copy of the said letter is also sent to the guarantors.
225. As seen from the entire evidence deposed by PW.2 before the court, the service rendered by him as a Chief Manager, State Bank of Mysore, C&I Division, period and acquaintance with the loan transaction of Accused No.6 company is not disputed in any manner. 115 Spl.C.C.No.476/2002 J Further, the correspondence made by the bank as per Ex.P.122 to 128 is also not disputed in any manner.
226. Admittedly, the cash credit hypothecation of Rs.24.50 lakhs was sanctioned in favour of Accused No.6 company on 6.5.1992 and at that time, Accused No.3, 4, 8 were not working in that section. It is the case of the prosecution that during their tenure of service, when the account became defunct, exceeded their powers to release the funds in favour of Accused No.6 company on various items without there being any sanction from the controlling authority and their acts have not been ratified. Therefore, simply because they were not working at the time of sanction of cash credit limit on 6.5.1992, it cannot be said that they have not done any irregularities in the release of funds in favour of Accused No.6 company during their tenure. When PW.2 assumed charge as a Chief Manager, he noticed that for a considerable period, the account of Accused No.6 company was not operated and steps were taken to demand for the dues from the defaulter Accused No.6 company. Some of the correspondences are made by PW.2 personally and bears his signature and some of them are made by PW4 Sri. Sheshananda Singh. Therefore, the evidence of PW.2 is supporting the case of the prosecution and proving the contents of Ex.P.122 to 128.
116 Spl.C.C.No.476/2002 J
227. Regarding Ex.P.122 to 128, PW.4 Sri. B.N. Sheshananda Singh has also spoken about the contents and the signatures made by him on some of the correspondence. Therefore, in his evidence also, it is not denied in any manner, the contents of Ex.P.122 to 128 and the demand for payment of the dues from Accused No.6 company from time to time.
228. Ex.P.129 is the loan application along with balance sheet of Accused No.6 company submitted on 16.4.1992. Regarding this document, PW.5 Sri. T.C. Shantha Kumar, Retired Chief Manager has stated that from March 1991 to May 1993 he had worked as Asst. Manager as well as Deputy Manager in C&I Division of State Bank of Mysore, Bengaluru Branch. P.V Bapiraju and CRN Murthy were working as Asst. General Managers during the above said period in Bengaluru Branch of State Bank of Mysore one after the other. In other words CRN Murthy succeeded as Asst. General Manager after P.V Bapiraju. V.Krishnamurthy and afterwards K.Kannan kutti were working as the Chief Managers of C&I Division of State Bank of Mysore, Bengaluru Branch during the above said period. During the above said period, G.S.Ramachandra and B.N.Sheshananda Singh were working as Managers of C&I Division, State Bank of Mysore, Bengaluru Branch. He can identify the signatures and also the 117 Spl.C.C.No.476/2002 J handwritings of the above said officials who were working at that time along with him.
229. Further, he has deposed that Flora International was given cash credit facility against hypothecation charge over silk waste from C&I Division of Bengaluru Branch. In his presence the loan documents were executed and the loan documents are in his handwriting. The application for loan given by Flora International Ltd., along with balance sheet and the loan application is signed by the Chairman. The loan application and the balance sheet is at Ex.P.129. Absolutely there is no dispute about the evidence deposed by PW.5 regarding his period of service and acquaintance with the loan transaction of Accused No.6 company. Further, his evidence that Accused No.6 company submitted application for loan along with balance sheet is also not disputed in any manner. It is pertinent to note that Ex.P.129 has been signed by the Accused No.5 as a Chairman of Accused No.6 company requesting for sanction of working capital of Rs.25 lakhs.
230. Ex.P.130 is the pre-sanction inspection report of PW.5. In this regard, PW.5 has deposed that he was deputed for doing pre sanction inspection and hence he has submitted the pre sanction inspection report as per Ex.P.130 and his signature is at Ex.P130(a). The Chief Manager has made the note in Ex.P.130 directing him to put up the proposal for sanction by the appropriate authority. The pre- 118 Spl.C.C.No.476/2002 J sanction inspection conducted by PW.5 and the contents of his report is not disputed by any of the accused.
231. Ex.P.131 is the proposal along with working capital assessment data. Regarding this, PW.5 has deposed that the proposal Ex.P.131 put up by him was signed and recommended by Chief Manager of C&I Division to the Asst. General Manager of the Bengaluru Branch. Along with the proposal, working capital assessment data was also prepared by him on the basis of the loan application and also the data given. There is no dispute about the note of Chief Manager directing him to put up the proposal for sanction by the appropriate authority and the proposal put up by him as per Ex.P.131.
232. Further, PW.5 has deposed that the sanction was submitted to the General Manager (Operations) for confirmation/ noting. The General Manager (Operations) has confirmed the sanction as per Ex.P.105. There is no dispute about the sanction of cash credit hypothecation limit of Rs.24.50 lakhs as per Ex.P105.
233. Ex.P.133 is the GR Form No.100018 dated 20.10.1995. Regarding Ex.P.133, the prosecution has relied upon the evidence of PW.9 Smt. A.P. Geetha who served as Cashier in State Bank of Mysore, IBD (International Banking Division), Bengaluru Branch. She has deposed that the said Branch deals with international transactions like exports, imports, NRI accounts and travel exchange counter. One 119 Spl.C.C.No.476/2002 J Hiriyannaiah was working as Chief Manager of the said Branch in the year 1995 and at that time K.T.Manjunath was working as Manager of the said Branch and V.Shashidhar was working as Asst. Manager. At that time, Smt. Lakshmi, herself and Sri Bommanahalli were working as Cashiers/Clerks in Export Division. In the year 1995 Sri Suryanarayana Rao (Accused No.3) was working as Chief Manager of C&I Division of Bengaluru Branch. Sri. Subbaramu (Accused No.4) was working as Manager, C&I in the year 1995 and at that time Parthasarathy (Accused No.8) was working as Deputy Manager in C&I Division. She can identify the handwritings and signatures of the above said officers as she is conversant with the same.
234. Further, she has deposed that she knew about Flora International Ltd., which had dealings with IBD and C&I as there was some exports by Flora International Ltd. The Flora International Ltd., was maintaining its account with C&I Division and was exporting silk to other countries. She has prepared vouchers and some of the notes were prepared by her regarding negotiation of export bills and sometimes Asst. Manager Sri. Shashidhar used to write the notes himself and sometimes he used to dictate her the notes which she used to write as per his dictation.
235. Further, she has deposed that Ex.P.133 is the GR form bearing No.100018 dt.20/10/1995 of Flora International Ltd., for US 120 Spl.C.C.No.476/2002 J dollars 2,58,500/-. Custom code number mentioned in the same is 4195008275. Ex.P.133 should have been given to IBD Branch along with Ex.P.100, but along with Ex.P.100 she had received GR form bearing No.100019 and hence she mentioned that GR Form Number in Ex.P.98(b) but at a later date Ex.P.133 was filed to their Branch but she does not know on what date it was filed.
236. Further, regarding Ex.P.133, PW.12 has also stated that, it is the original GR form bearing No.AH100018 connected to bill No.030328. The said GR form has been certified by the Customs Department and it pertains to Flora International Ltd. The goods have been sent by way of shipment. This GR form Ex.P.133 should have been given at the time of presenting the bill mentioned in Ex.P.98 but it was not given at that time. That bill has been purchased by the Bank on 14th September, 1995 but as per Ex.P.133, the shipment has been made on 20/10/1995 which is subsequent to the purchase of the bill and this GR form has been given long after the purchase of the bill. Usually, the GR form number should be mentioned on the bill of lading and GR will contain the details as per invoice.
237. The evidence deposed by PW.9 and 12 are proving that Ex.P.133 was not submitted along with Ex.P.100 as per the procedure and the same was submitted later on to the concerned Branch. The evidence of PW.9 and 12 further proves that there is violation of 121 Spl.C.C.No.476/2002 J procedure for submitting Ex.P.133 along with Ex.P.100. The evidence of the prosecution is proving that GR Form No. should be mentioned on the bill of lading. In this case, after the purchase of bill, the GR form has been given after long time. Therefore, there is illegality in purchase of bill.
238. Ex.P.134 is the note dated 10.5.1995 for US Dollars 2,47,500/- and US dollars 52,000/-. Regarding this note, PW.9 has deposed that Ex.P.134 is note which is in her handwriting dt.10/5/1995 for US dollars 2,47,500/- and US dollars 52,000/- . The said note was put up from IBD to C&I Division regarding purchase of 2 export bills. The remarks were "No sanction limit and Date of payment is 8/7/1995 in respect of outstanding bill 30136 is 8/7/1995 and there is another remark that "the original document in respect of the second bill referred is sent to the consignee directly instead of routing trough the Bank which is not as per exchange control rules". The said portion is at Ex.P.134(a) which is in her handwriting. Below the above said note, Mr.Parthasarathi, Deputy Manager C&I has written as "We may negotiate the bill as per terms of LC under reserve....... to the extent of 65.16 lakhs" and below the same Mr.Parthasarathy has put his signature at Ex.P.134(b). The signature of Subbaramu, Manager, C&I Division and Seetharama Rao, AGM, Bengaluru Branch are found in Ex.P.134. AGM has permitted to negotiate and in that respect, he has 122 Spl.C.C.No.476/2002 J made some note also as per Ex.P.134(c). The evidence deposed by PW.9 with regard to Ex.P.134 is not disputed in any manner. Therefore, her evidence is proving the note put up by her for negotiating two bills and the notings made by Accused No.1, 4 and 8. Therefore, the contents of Ex.P.134 are proved by the prosecution in the present case.
239. Ex.P135 is the Invoice with packing list pertaining to Accused No.6 company. Regarding this document, PW.12 has deposed that the invoice concerning the bill mentioned in Ex.P.97 is Ex.P135 and the invoice was accompanied by packing list. There is no dispute about the invoice and the packing list relied upon and deposed by PW.12.
240. Ex.P.136 is the submission and Ex.P.137 is the copy of the bill No.030241 which is in the handwriting of PW.12. PW.12 has deposed about these documents and there is no dispute. She has further deposed that Accused No.3 has recommended for purchase of the said bill at Ex.P.137.
241. Ex.P.139 is the export register pertaining to Sri Sri Ganesh Shipping Agency. Regarding this document, PW.13 has deposed that he knows Flora International Ltd., and they were doing custom clearance of the said company. Then he has deposed that in Ex.P.139, it is mentioned about the exports made by Flora International Ltd., as 123 Spl.C.C.No.476/2002 J per Ex.P.139(a) to Ex.P.139(d). Further, he has deposed that the consignment mentioned in Ex.P.139(a) has gone to the consignee and the GR Number of the same is AH100039 dated 9.5.1995 and the said consignment has gone to Shangai. In Ex.P.139(b) the GR No., is 10038 dated 29.6.1995 and Ex.P.139(c) the GR No., is 100002 and consignment has also gone to Shangai and Ex.P.139(d) the GR No., is 100018 and consignment has gone to Hong Kong. The evidence of PW.13 is proving the contents of Ex.P.139 and the relevant entries Ex.P.139(a) to 139(d).
242. Ex.P.140 is the covering letter of Sri Sri Ganesh Shipping Agency dated 6.5.1998 to SBM, Main Branch, Bengaluru, IBD and PW.13 has deposed about this document. Ex.P.141 are the copies of the documents. Ex.P.142 is the duplicate GR bearing No. 100002 and PW.13 has deposed about the same and there is no dispute.
243. Ex.P.144 to 147 are the copies of bill of lading and PW.14 has deposed about them and there is no dispute about his evidence and the copies of the bills in favour of Accused No.6 company. Further, PW.14 has deposed that their company were doing shipping business for Hanjin Shipping Company, Confreight Shipping Agency etc.
244. Ex.P.148 is the copy of the shipping bill dated 6.9.1995. Ex.P.149 is the copy of the forwarding note. Ex.P.150 is the copy of 124 Spl.C.C.No.476/2002 J Inland Waybill and Ex.P.151 is the copy of statement of container booked and moved. Regarding these documents PW.15 has deposed in detail and there is no dispute about those documents and the contents of the same.
245. Ex.P.152 is the copy of the Indemnity Bond, Ex.P.153 is the letter dated 4.7.1995, Ex.P.154 is the letter of Indemnity Bond, Ex.P.155 is the original negotiation of purchase of bill expressed in foreign currencies or Indian rupees, Ex.P.156 is the Invoice dated 29.6.1995. Regarding these documents, PW.16 has deposed and there is no dispute about the evidence deposed by him in respect of those documents.
246. Ex.P.161 is the note submitted to the DGM, Bengaluru Zone by Bengaluru Branch C&I division dated 14.11.1994 to postpone the legal action against the Flora International Ltd. Regarding this note, PW.19 has stated and also stated that Accused No.8, 4 and 3 have put their initials on the said note as per Ex.P.161(a) to (c) and Accused No.1 has also put his initial as a Branch Head as per Ex.P.161(d) and there is no dispute about this note from the Branch to the DGM, Bengaluru Zone.
247. Ex.P.162 is the post shipment finance by negotiating export bill. Regarding this document, PW.19 has deposed that on Ex.P.96(d), there are endorsement by IOB, Residency Road Branch 125 Spl.C.C.No.476/2002 J under lien to IOB, Residency Road Branch as per Ex.P.96(d-1). In Ex.P.96(j), there is endorsement of Andhra Bank, N.R. Road Branch, Bengaluru as under lien to Packing credit and it is marked as Ex.P.96(d-2). Inspite of the same, the Bank has sanctioned post shipment finance by negotiating export bill numbers 030033 for US dollars 46,500/- and 030054 for US dollars 21,000/- as per Ex.P.162. Ex.P.162(a) to Ex.P.162(d) are the signatures/initials of A.8, A.4, A.3 and A.1 and they have also signed on the 2nd sheet of Ex.P.162. The said finance has been sanctioned by A.1 as Branch Head. There is no dispute about the purchase of bill as per Ex.P.162.
248. Ex.P.163 to 165 are the letters for producing the documents from the SBM, for purpose of investigation and there is no dispute. Ex.P.172 is the letter of Container Corporation of India Ltd., for producing the documents for the purpose of investigation.
249. Ex.P.173 is the xerox notarized copy of portion of investigation report of PW.19. Regarding the investigation, PW.19 has deposed that from December 1998 to July 2002 he had worked as Manager, Vigilance Department at Head Office, State Bank of Mysore, Bengaluru. He knows Accused No.1, 3, 8 and deceased Accused No.2 and also Accused No.4 as they were Bank officials. In the year 2000, Accused No.1, 3, 4, 8 and deceased Accused No.2 were working at their Bengaluru Branch. Accused No.3 was working as Chief Manager, 126 Spl.C.C.No.476/2002 J Accused No.4 was working as Manager and Accused No.8 was working as Deputy Manager of C&I Division of Bengaluru Branch. At the time of investigation, he came to know that, Accused No.1 was working as Asst. General Manager (AGM) of Bengaluru Branch and afterwards Accused No.2 (deceased) was working as AGM.
250. Further, he has deposed that as per the directions of Sri Bhaskar Rao, Chief Vigilance Officer of State Bank of Mysore, he has conducted the investigation into the irregularities in the account of M/s Flora International Ltd., and submitted his report in July 2000. During his investigation, he noticed the following irregularities in the loan account of Flora International Ltd.,
(a) In the year 1995 the Bank had taken the decision to proceed against Flora International Ltd., legally for recovery of the dues on account of unsatisfactory features in the conduct of the account.
(b) Afterwards there is a letter from the Bengaluru Branch to the DGM, Bengaluru Zone to defer the same in view of the promises given by Flora International Ltd. The said Flora International Ltd., was sanctioned cash credit limit of Rs.24.50 lakhs.
(c) During his inspection, he noticed 3 import letters of credit were established by their Bengaluru Branch. As per sanctioned terms, the Bank should recover margin money from the company. Instead of 127 Spl.C.C.No.476/2002 J recovery of margin money from the company, excess drawings were allowed in the cash credit account of Flora International Ltd., towards margin money and Bank charges. The above said import letters of credit means is a guarantee given by the banker assuring the supplier about payment provided, the documents are tendered to the Bank in accordance with the terms and conditions of the letters of credit. When the Bank receives the import bills under letter of credit, the bills have to be paid on the 10th day from the receipt of the import documents as per Reserve Bank of India directives. If the importer does not pay those bills, the same has to be paid by the Bank called crystallization in banking terms.
(d) All the import bills received under the above said 3 LCs opened by the Bank were crystallized. Then the Bank has to recover the same from Flora International Ltd. Instead of recovering the amounts from the company, the amounts have been debited to the cash credit account of Flora International Ltd. Hence the cash credit limit in the above said account exceeded the sanctioned limit of Rs.24.50 lakhs number of times.
(e) Regarding export transactions, there will be letter of credits from the foreign Banks favouring Flora International Ltd., regarding the exports by Flora International Ltd. When Flora International Ltd., receives the letter of credit from the foreign Bank, on 128 Spl.C.C.No.476/2002 J the basis of the same, Flora International Ltd., can avail pre-shipment finance and post shipment finance from the Bank. In respect of one Letter of credit received from China, Flora International Ltd., availed pre-shipment finance from Andhra Bank, N.R.Road Branch, Bengaluru and also from IOB, Residency Road Branch, Bengaluru. When pre-
shipment finance has been availed on the basis of the letter of credit (export), the post shipment finance in respect of that letter of credit should be availed from the same Bank which gave the pre-
shipment finance. Flora International Ltd., after availing pre-shipment finance from Andhra Bank, N.R. Road Branch, Bengaluru and also from IOB, Residency Road Branch, Bengaluru had approached State Bank of Mysore, Bengaluru Branch for post- shipment finance on the same letter of credit and the said Branch without insisting for "No objection"/"No Due" from the above said 2 Banks, sanctioned the post shipment finance to Flora International Ltd. He found discrepancies in the above said export bill which was negotiated by State Bank of Mysore, Bengaluru Branch in respect of post-shipment finance. In respect of that letter of credit, IBD (International Banking Division) officials of State Bank of Mysore, Bengaluru Branch had brought to the notice of C&I Division and AGM about the discrepancies in the same but inspite of the same, the bills on the basis of the above said letter of credit 129 Spl.C.C.No.476/2002 J were negotiated and payment were made. The foreign Bank which had issued the letter of credit returned the bills unpaid due to discrepancies and hence the Bank was not able to recover the post-
shipment finance sanctioned by State Bank of Mysore, Bengaluru Branch to Flora International Ltd.
(f) In the export bills, bill of lading issued by the shipping company which is a document of title to the goods exported contained number of alterations by putting whitener. That was one of the discrepancy.
251. Further, he has deposed that inspite of unsatisfactory features in the account of Flora International Ltd., loan proposal recommending higher limits were sent which was declined. Inspite of it, higher limits were sanctioned to Flora International Ltd. The above are the irregularities which he found generally in the above said account of Flora International Ltd.
252. Further, he has deposed that Ex.P.173 is the copy of his investigation report. While marking this, the learned defence counsel raised serious objections stating that it is the Xerox copy and it is only a portion of the report. During the evidence of PW.19, the same was marked subject to production of original report or the certified copy issued in accordance with law. Thereafter, the prosecution has not made efforts to secure the original or the certified copy of the report from the concerned though it was available in the bank records. When 130 Spl.C.C.No.476/2002 J the copy of the report Ex.P.173 was marked subject to objection, it was the duty of the prosecution to look into the order passed by the court, but the same has been not taken into consideration for the reasons best known to the prosecution. The original report or the certified copy is not produced before the court.
253. There is no dispute that PW.19 on the directions of Chief Vigilance Officer conducted internal investigation regarding the irregularities in the accounts of Accused No.6 company with SBM, Main Branch, Bengaluru. PW.19 after verifying all the records submitted his report. Before the court, he has deposed about the irregularities noticed by him in the accounts of Accused No.6 company. His evidence is supported from the documentary evidence produced before the court. Based on the documentary evidence produced before the court, he has submitted his report. When the documentary evidence concerning to the irregularities is produced before the court, the evidence of PW.19 is supported from the contents of the original documents. Simply because the original or the certified copy of internal investigation report is not produced, the evidence deposed by the PW.19 before the court cannot be disbelieved. Even in the absence of original report or the certified copy, the evidence deposed by PW.19 about the irregularities noticed by him are acceptable. Though, PW.19 has been cross-examined on various aspects but 131 Spl.C.C.No.476/2002 J regarding the irregularities noticed by him in the accounts of Accused No.6 company, his evidence is not shaken in any manner. Therefore, the evidence deposed by PW.19 which is supported from the documentary evidence is acceptable, supporting the case of the prosecution and proving the irregularities in the accounts of Accused No.6 company deposed by him.
254. Ex.P.174 is the FIR lodged by CBI along with notification. Ex.P.175 is the seizure memo. Ex.P.176 is the register of Confreight Shipping Agency. Ex.P.177 is the letter of Superintendent of Customs for producing the bill No. 004495. Ex.P.178 is the FDBP Register. Ex.P.179 and 180 are the search lists. Ex.P.181 is the file.
255. Regarding the investigation PW.27 Sri. M.C. George who was Inspector of Police, CBI, ACB, Bengaluru from 1999 to 2003 has deposed in detail. He has deposed that on 4.6.2001 he registered a case, submitted FIR as per Ex.P.174. Further, he has deposed that during the investigation he recorded the statements of witnesses and secured the documents. Further, he has deposed about the searches conducted by him and seizure of the documents for the purpose of investigation. The evidence of PW.27 is proving the investigation done by him in this case.
256. Regarding the filing of final report, PW.28 K. Jayakumaran Nair, who was working as Inspector of Police, CBI, ACB, Bengaluru has 132 Spl.C.C.No.476/2002 J deposed and his evidence is proving the final report submitted by him against the accused before the court.
DEFENCE EVIDENCE.
257. The defence has relied upon oral and documentary evidence. Looking to the oral evidence of DW1, he has deposed about the procedure for presentation of cheque and passing of cheque if there is sufficient fund in the account of the drawer of the cheque. Further, he has deposed that if there is no sufficient fund, they refer the said cheque to the Branch head and also refer the cheque to the Branch head if the sanction limit is exceeded. Then he has deposed that while referring the cheque, they will enter the same in the Cheque Referred and Return Register. In his cross-examination he has admitted that there are Circulars and Guidelines for processing and sanction of loan to the borrowers. Further, he has admitted that there should be approval from lower level to higher level for sanctioning of the loan. He has also admitted that the bank officials should not violate the bank guidelines for sanctioning the loan. The evidence of DW1 is only with regard to procedure and not disproving the case of the prosecution with regard to the over drawals allowed in the account of Accused No.6 company from time to time beyond the permissible limit and without sanction.
133 Spl.C.C.No.476/2002 J
258. Looking to the evidence of DW2 Sri. K.L. Shantha Murthy, Retired Chief Manager, SBM, who has deposed that he was working as Manager (Advances), C&I Division from August 1997 to April/May 2000 and during his tenure he had given serial numbers to the page numbers to the accounts relating to Flora International Ltd. Further, he has deposed that when he reported for duty in the said Branch, the account of Accused No.6 company was NPA, he obtained the permission from the concerned authority i.e., AGM of the Branch and he filed a suit before DRT for recovery of the amount. The evidence of DW2 is only proving the filing of suit before the DRT for recovery of the dues when the account of Accused No.6 company became NPA. The evidence of DW2 is not with regard to the transactions of Accused No.6 company made prior to the account become NPA and filing of suit. He has not deposed that he was working in the Branch when the transactions have taken place. Therefore, his evidence is of no use to the accused in any manner except the civil remedy availed by the bank for recovery of dues before the DRT.
259. Looking to the evidence of DW3 Shashi Kumar P.R. who was working as Field Officer in State Bank of Mysore, Main Branch, Bengaluru from 1992 to 1996. He has deposed that the SBM had given credit facilities of Rs.24.50 lakhs to Flora International Ltd., on 7.5.1992, at that time Accused No.3, 4 and 8 were not working in that 134 Spl.C.C.No.476/2002 J Branch. Then he has deposed that D. Chandrashekar and B.N. Veena Kumari had given their properties as security for the said loan which are mentioned in Ex.P15(a) and (b). The SBM had filed a claim petition before DRT, Bengaluru for recovery of the dues and enforced the properties for recovery of the dues. Then he has deposed that Flora International Ltd., had two letter of credits, one letter of credit for US$6,65,000 and the another letter of credit for US$9,00,000 as per Ex.P.95 and 96 and if the loan is granted on the letter of credits, the repayment of loan is guarantee. The SBM had purchased 8 export bills amounting to Rs.5,11,45,215/- and all the 8 foreign export bills were realized. Initially, SBM had granted cash credit limit of Rs.24.50 lakhs to Flora International Ltd., thereafter it had granted packing credit limit of Rs.50 lakhs for a period of 4 months and non-letter of credit limit of Rs.90 lakhs for a period of one year. Then he has deposed that Ex.D12 to 14 are the irregular statements which are approved by General Manager (Operations) on 1.6.1995. Ex.D15 is the letter of Andhra Bank, stating that there is no dues from Flora International Ltd. Ex.D16 is the circular letter and Ex.D17 is the letter of ECGC. In his cross-examination he has admitted that the sanction of credit facilities and other facilities should be within the delegated powers of the officer as per the circular and in the event of excess drawals, the same should be ratified by the higher authorities. 135 Spl.C.C.No.476/2002 J Further, he has admitted that he does not know whether the Bank Manager had sanctioned the loan to the Flora International Ltd., without obtaining the No Due Certificates of the said company from other banks.
260. As seen from the entire evidence of DW-3, he has deposed about the limit sanctioned to Accused No.6 company, letter of credit and purchase of foreign export bills. He has also deposed about the procedure, powers and ratification of the over drawals by the controlling authority. He has not deposed that there was no irregularity in the accounts of Accused No.6 company during the tenure of Accused No.1, 3, 4 and 8. Then he has deposed about the property mortgaged and action taken by the bank for recovery of the dues. Further, his evidence that the amount of all the bills were realized he is contrary to the documentary evidence placed before the court by the prosecution. Further, his evidence that the irregularity statements have been approved by the controlling authority is also contrary to the documentary evidence of the prosecution. Further, his evidence that the credit facilities were as per the sanction of the higher authority is also contrary to the documentary evidence of the prosecution. It appears that without knowing the actual position of the accounts of accused No.6 company he has come before the court to depose in favour of the accused persons. Further, his evidence is 136 Spl.C.C.No.476/2002 J contrary to the contents of the documentary evidence produced before the court by the accused persons. His evidence is in no way helpful to the accused to disprove the irregularities in the accounts of Accused No.6 company.
261. Coming to the documentary evidence, Ex.D1 is the copy of the statement of account in respect of account No. 10631 pertaining to the transactions of Accused No.6 company with SBM and there is no dispute about the transactions and the entries mentioned therein. Ex.D2 is the letter of Accused No.6 company dated 1.4.1996 to SBM, Bengaluru requesting for time for the reasons stated therein and the said letter is signed by Accused No.7 and there is no dispute about this letter. This letter proves the request made by Accused No.6 company seeking time to pay the dues in respect of the export bills. Ex.D3 is another letter of Accused No.6 company dated 19.4.1996 to SBM requesting for time to pay the dues in respect of export bill of US$2,58,500, drawn on M/s. DAP Services Pvt. Ltd., Singapore and there is no dispute. Ex.D4 is another letter of Accused No.6 company dated 5.6.1996 to SBM, requesting for time for payment of the above mentioned bill amount and there is no dispute. Ex.D5 is the copy of letter of Accused No.6 company dated 3.5.1996 requesting for permission to extend the period for realization of export proceeds for US$2,58,500 and there is no dispute. Ex.D7 is another letter of 137 Spl.C.C.No.476/2002 J Accused No.6 company dated 19.2.1996 to SBM requesting for extension of time and there is no dispute. Ex.D8 is letter of Accused No.6 company dated 14.8.1996 to SBI requesting for time for the above bill amount. Ex.D9 is the letter of Accused No.6 company dated 6.1.1997 to SBM requesting for time and release of the documents and there is no dispute. Ex.D10 is the letter of Accused No.6 company dated 25.4.1997 to SBM requesting for extension of time for realizing the bill amount mentioned above. Ex.D11 is the list of documents. Ex.D12 to D14 are the irregular statements from January 1995 to March 1995 submitted by Branch to the Head Office.
262. As seen from the notings made on Ex.D12 to 14 General Manager (Operations) has endorsed "Noted". It means that he has only seen the statements and there is no endorsement that he has approved the irregularities reported to him. The word approved appearing in the seal has been struck off. Therefore, the irregular statements noted by GM(O) cannot be considered as approved or ratified by him.
263. Ex.D15 is the letter of Andhra Bank dated 22.3.1995 to SBM, C&I Division, Bengaluru. The contents of this letter are not proved by examining the officer who has issued the same. Mere production and marking of document does not dispense with the proof of the contents. Therefore, Ex.D15 is not proved in accordance with 138 Spl.C.C.No.476/2002 J law. Therefore, this document is not helpful to the defence of accused in any manner. Ex.D16 is the circular letter No.279 dated 5.10.1994 of SBM, Head Office and there is no dispute about the instructions contained therein. Ex.D17 is the copy of the letter dated 30.6.1998 from ECGC to SBM regarding settlement of the claim under WTPSG pertaining to Accused No.6 company. There is no evidence to prove the settlement as mentioned in Ex.D17 by examining the concerned.
264. It is pertinent to note that in the letters Ex.D3 to D10 relied upon by the defence, the accused No.6 company has requested for extension of time to pay the amount of bills which were due but DW-3 has deposed that the bills amount were realized. There is no consistency in the oral and documentary evidence relied upon by the defence. Therefore, the oral evidence of DW-3 which is contrary to the documentary evidence of defence cannot be said as helpful to the defence to disprove the case of the prosecution.
265. The learned Special Public Prosecutor vehemently argued that there is sufficient oral and documentary evidence placed before the court to prove the allegations made against Accused No.1, 3 to 8 and the said evidence is acceptable evidence and proving the case of the prosecution. He further argued that the defence put forth by the accused in all probability is far from truth and the same cannot be accepted to disbelieve the case of the prosecution. 139 Spl.C.C.No.476/2002 J
266. The learned counsel for Accused No.1 argued that Accused No.1 served as AGM in the Branch for a limited period from 1.10.1994 to 30.6.1995. During his tenure, he has permitted excess drawings within his delegated powers as prescribed under the scheme of delegation of powers Ex.P.1 and only on 6 occasions as per Ex.P.25 to 31, the cheques have been permitted by him and there is no any irregularity or illegality on his part during his tenure and the transactions allowed by him are legal transactions which does not attract any criminal action against him. It is further argued that all the decisions were taken with bank's commercial interest as per the normal course of banking business, the dues pertaining to his tenure have been paid, bills have been realized, bank has incurred no loss on account of any of the actions or decisions of Accused No.1 and the present dues to the bank are those created after his relieving on his transfer from the Branch and management had not questioned his actions at any time and no departmental enquiry was conducted and there is no any monetary gain to him and he has no knowledge about the sanction of cash credit hypothecation and FDBP/FUBP on 6.4.1996 since he was already transferred.
267. The learned counsel for Accused No.3, 4 and 8 argued that the evidence of the prosecution is lacking to prove the charges leveled against them. They have done the legal transactions, reported the 140 Spl.C.C.No.476/2002 J matter to the higher authority which have been ratified from time to time and ratified action cannot be considered as an offence in the eye of law.
268. It is further argued that:
a) The bank has no grievance about the loans granted as the bank has not lodged any complaint and the case is filed suo-moto by CBI.
b) The Accused No.6 company was dealing with the Bank even before the Accused No.3, 4 and 8 took charge.
c) The Accused No.6 company has discounted similar bills prior to the present transactions and all those bills are honoured.
d) Even in the disputed export bill, the export is completed; the dispute is about post shipment.
e) The Accused No.3, 4 and 8 have never worked in IBD.
f) The correctness of the export bills have to be checked by the officials of IBD.
g) The dispute is about the export documents and as per the admission of witness this has not even reached Accused No.3.
h) Accused No.4 and 8 have not even recommended any action on any proposals. They have only followed post sanction procedures.
i) The facilities granted are all accepted banking transactions.
j) The loans are sanctioned are ratified by the higher authorities in the form of Control returns.
k) Having approved the control return now it is not open to say the action is bad.
l) The facilities like over draft, bill purchase, bank guarantee granted by these Accused officials are also granted by the officers who were present in the Branch prior to and after the reliving of the Accused.
If what they have done is not an offence? How the Accused can be held as an offender for the same act. 141 Spl.C.C.No.476/2002 J
269. The learned counsel for Accused No.5 to 7 argued that the charges under PC Act are not attracted to Accused No.5 to 7 as they are not public servants and Accused No.6 company is a juristic person being a company incorporated under the Companies Act. It is further argued that in order to attract penal provisions for the offences charged, the prosecution must prove beyond all reasonable doubt by direct evidence or unimpeachable circumstantial evidence that the accused had entertained mens rea at the inception itself to commit the offences and that in pursuance thereof committed criminal conspiracy, cheating, forgery and used the forged document as genuine document for the purpose of cheating.
270. It is further argued that, the prosecution has to prove that the transactions are illegal and not irregular because only illegal transactions would attract criminal prosecution. He further argued that in view of the evidence of the prosecution witnesses and the admissions made by them in their cross-examination, the evidence is not proving that the transactions are illegal transactions and attract penal provision. There is no preliminary enquiry regarding the allegations and no complaint has been filed from the bank to initiate action. The CBI has taken up the investigation on the source of information which is not proper. The prosecution has failed to prove the ingredients of the offences alleged against Accused No.5 to 7. 142 Spl.C.C.No.476/2002 J Therefore, case against Accused No.5 to 7 is not proved and they are liable to be acquitted.
271. As seen from the evidence of the prosecution, the account of Accused No.6 company in respect of cash credit hypothecation was over due and legal notice was issued. The Accused No.6 company has given reply to the legal notice. When the amount was over due, it means that the account became NPA and steps were taken to recover the amount firstly by issuing legal notice calling upon the Accused No.6 company, its Directors and guarantors to pay the dues at the earliest. To the legal notice, the Accused No.6 company tendered reply as per Ex.P.18 on 30.6.1994. It is pertinent to note the reply in writing admitting the sanction of cash credit limit of Rs.24.50 lakhs in their account, denying the documents executed by them, liability to pay the amount and genuineness of the statement of account. Looking to the reply tendered by the Accused No.6 company in Ex.P.18, the only remedy available to the bank was to initiate legal action for recovery of the dues without waiting further and no question of allowing the further drawals from the said company arose in the facts and circumstances of the present case. In spite of the denial of liability by the Accused No.6 company to pay the dues, the bank has not taken any legal action immediately for recovery of the dues, but on the other hand remained silent without enforcing claim before the 143 Spl.C.C.No.476/2002 J competent court of law. When the action was taken for recovery of the dues by issuing legal notice from the bank on 19.6.1994, the question of considering further grant of credit facilities in favour of Accused No.6 company without their request application and valid sanction does not arise. When the legal notice was issued, the only option left to the bank was to initiate legal action for recovery of the dues before the competent court of law. After the issue of legal notice to Accused No.6 company, there was no occasion to the bank to extend the credit facility and other facilities to Accused No.6 company.
272. Admittedly, the cash credit hypothecation facility was sanctioned to Accused No.6 company on 6.5.1992. It is pertinent to note that after availing the limit prescribed for Accused No.6 company, there were no credit transactions from the said company from 9.7.1992 to 1.3.1994. The company had not made any credit transactions in their account for a considerable period of 9 months, inspite of such inaction on the part of Accused No.6 company to do the transactions, the further drawings have been allowed from time to time from the bank which turned to be NPA for huge amount resulting in initiating legal action at a later stage after considerable delay.
273. The evidence of the prosecution proves that the GM(O) has instructed the Branch not to increase bank commitment to Accused No.6 company on 7.3.1995 as per Ex.P20(a). Further, on 6.3.1995, 144 Spl.C.C.No.476/2002 J the GM(O) has rejected the earlier proposal of the Branch dated 16.2.1995 recommending higher limits to the company as per Ex.P.19(a).
274. The evidence of PW.20 and the contents of Ex.P.85 and 86 relied upon by the prosecution clearly proves that Accused No.6 company had availed credit facilities from Indian Overseas Bank, Residency Road Branch, Bengaluru during 1994-95 and large outstanding were in due and put on recovery basis. In Ex.P.85, it is specifically requested to consider the dues payable by Accused No.6 company in favour of Indian Overseas Bank and then think of extending the credit limits to the said company preferably after obtaining a No Due Certificate from their end. In Ex.P.86, it is mentioned that 'in the event of sanctioning credit facilities to the above group would you kindly advise us of the same so that it would help us in recovering our dues. Also would you kindly insist on obtention of a No Due Certificate from us before releasing any credit facilities to the group'. It is also mentioned about the over due packing credit and temporary over draft pertaining to Accused No.6 company. Inspite of the borrowings made by Accused No.6 company from Indian Overseas Bank, amount became due, and action was taken for recovery ignoring the said fact, the State Bank of Mysore came forward to extend the over drawals and other facilities to 145 Spl.C.C.No.476/2002 J Accused No.6 company without obtaining No Due Certificate from Indian Overseas Bank. The information given by the Indian Overseas Bank proves how the transactions of Accused No.6 company with the said Bank and the company's financial status. This clearly proves that inspite of receiving the adverse credit opinion about the conduct of account of Accused No.6 company from IOB, Residency Road Branch as per Ex.P.85 and 86, the facilities were extended to Accused No.6 company without taking into consideration the said aspect.
275. The evidence of the prosecution proves that the cash credit hypothecation limit of Rs.24.50 lakhs was sanctioned in favour of Accused No.6 company by the SBM on 6.5.1992 for a period of 12 months only. Thereafter, there is no request from the company for renewal of the said credit facility or for fresh sanction of cash credit hypothecation or any other facility in their favour from the SBM. It has come in the evidence of PW.1 that the cash credit hypothecation limit came to be expired and the same was noted in the registers Ex.P.22 to 24 while permitting the withdrawals and inspite of expiry of the limit, the cheques have been honoured and withdrawals have been permitted by the concerned. In this regard, it is pertinent to note the contents of Ex.D1 statement of account, wherein it is specifically noted that the said limit was valid up to 5.5.1993 and it is also mentioned that account became NPA and it is also mentioned that limit was 146 Spl.C.C.No.476/2002 J expired. The evidence of the prosecution proves that inspite of the limit valid till 5.5.1993, turned to NPA and expired ignoring the said aspect/notings, the withdrawals have been permitted and other facilities such as packing credit, negotiation of bills and bank guarantee are allowed in favour of Accused No.6 company from time to time.
276. The evidence of the prosecution proves that the irregular statements submitted from the Branch to the head office have not been ratified or approved by the GM(O). The GM(O) has turned down the proposal of Branch Ex.P.20 on 7.3.1995 and earlier proposal dated 16.2.1995 recommending higher limits to Accused No.6 company as per Ex.P.19, where is the question of considering the transactions as legal transactions. If the limit was valid and in the event of allowing the excess withdrawals then within the stipulated time, the Branch can send the irregular statements to the head office for approval. In the present case, when the limit was expired, no approval for Branch proposal from the head office for any limit, where is the question of sending the irregular statements and approval of the same by the GM(O) as per the delegation of powers Ex.P.1. Therefore, the deemed approval claimed by the accused in respect of irregular statements as per Vigilance Management in public sector banks under the head 147 Spl.C.C.No.476/2002 J "Reporting & Confirmation" does not apply to the transactions of the present case.
277. If the transactions are legal and legitimate transactions, in that situation if the officers/officials of the bank exceed their delegated power such action can be ratified or approved by the higher authority. In the present case, the withdrawals which were permitted were not the legal withdrawals, under such circumstances, the accused cannot take the defence or shelter of deemed approval of their irregular statements reported to the GM(O) of Head Office from time to time. It is forthcoming from the endorsements made on the irregular statement that on some occasion GM(O) has observed the statements but not endorsed for approval of those actions. Simply, noticing the irregular statements cannot be termed as deemed approval to consider that the transactions have been ratified/ approved by the controlling authority.
278. It is an admitted fact that on 22.2.1995, SBM, Bengaluru Branch has released a sum of Rs.25.01 lakhs as packing credit and sanctioned the same in favour of Accused No.6 company. The evidence of the prosecution proves that the Branch proposal dated 16.2.1995 for enhancement of limits in favour of Accused No.6 company was categorically denied by the controlling authority for enhancement of packing credit limit of Rs.50 lakhs and FDBP/FUBP 148 Spl.C.C.No.476/2002 J limit of Rs.90 lakhs. Inspite the denial for enhancement of the said limit, the Branch has allowed the Accused No.6 company to avail the packing credit limit of Rs.25,01,000/- from the bank. The evidence proves that subsequently on the note dated 7.3.1995 Ex.P.20 as a special case under special circumstances, the GM(O) has approved the said release of Rs.25,01,000/- made, by his note Ex.P.20(a) by mentioning that "confirmed. Let us not increase our commitment to this company. I understand that there were some problems with PNB. Pl. make discrete enquiries." The prosecution has proved that GM(O) under special circumstances sanctioned one time packing credit limit of Rs.25,01,000/- in favour of Accused No.6 company as per Ex.P.20. There is no sanction of packing credit limit of Rs.50 lakhs and FDBP/FUBP limit of Rs.90 lakhs in favour of Accused No.6 company at no point of time from the competent authority. Inspite of sanction of one time packing credit limit of Rs.25,01,000/-, the Branch has extended the said facility on other occasions to Accused No.6 company which is illegal.
279. There is no dispute that on 2.6.1995, the bank released Rs.15,00,000/- excess drawings in the cash credit account of Accused No.6 company as packing credit on the request of the said company against the undrawn balance of US$70,000/- under LC 61194031 of Industrial & Commercial Bank of China. The said fact has been proved 149 Spl.C.C.No.476/2002 J by the prosecution based on the oral and documentary evidence. It is forthcoming from Ex.D1 that on 2.6.1995, the packing credit of Rs.15 lakhs was released through the cash credit hypothecation account of Accused No.6 company and the same has been recovered on 5.6.1995, when the credit transaction was made by the said company. It is the contention of accused that the said release has been approved by the GM(O) as per Ex.P.95(k) and there is no illegality in the said transaction. The evidence shows that the said amount has been recovered as early as possible through the next credit transaction made by Accused No.6 company. As seen from the documentary evidence, the GM(O) has only put his initial and there is no specific endorsement forthcoming that the said transaction has been approved by him. Therefore, the contention of the accused that DW.3 has admitted that release of the said amount was approved by the GM(O) by his signature Ex.P.95(k) cannot be accepted. Already, the account of Accused No.6 company in respect of cash credit hypothecation came to be expired and there was no approval of the over drawings by the controlling authority. Under such circumstances, the packing credit of Rs.15 lakhs released in favour of Accused No.6 company though the same was recovered immediately within 3-4 days can be very well said as an illegal transaction. In the absence of ratification and approval of the said credit facility, it cannot be said that the same was a legal 150 Spl.C.C.No.476/2002 J transaction and defence of accused is acceptable one. Though the proposal of the Branch came to be turned down for increase of limit by the note of GM(O) Ex.P.20(a), the bank has taken risk to sanction and release packing credit of Rs.15 lakhs on 2.6.1995.
280. Further, the evidence of the prosecution proves that under LC No.61194031, the Accused No.6 company had already availed pre- shipment finance from Andhra Bank, NR Branch and Indian Overseas Bank, Residency Road Branch. It is further proved that when pre- shipment finance had been availed on the basis of letter of credit (export) the post shipment finance in respect of that letter of credit should have been availed from the same bank which gave the pre- shipment finance. It is also proved that the Accused No.6 company after availing pre-shipment finance from other banks had approached State Bank of Mysore, Bengaluru for post shipment finance without liquidating the packing credit amount availed from other banks on the same letter of credit and the SBM, without insisting for No Objection /No Due Certificate from the above said two banks sanctioned the post shipment finance to Accused No.6 company which is against the procedure of negotiating the bills. Therefore, the said transaction is also an illegal transaction done by the SBM for negotiating bill for post shipment.
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281. It is an admitted fact that SBM negotiated two export bills drawn under LC No. 61194031 bearing Bill Nos. (1) FDBP/N/030033 dated 18.1.1995 for USD 46,500 and (2) FDBP/N/030054 dated 30.1.1995 for USD 21,000. This fact is also proved from the evidence of the prosecution placed before the court.
282. It is also admitted that on 10.5.1995, the SBM negotiated two export Bills bearing Nos.030175 & 176 for USD 2,47,500 and USD 52,000 respectively. The evidence of the prosecution proves that in spite of controlling authority turned down the approval of Branch proposal and the International Banking Division of the Branch brought out in their note dated 10.5.1995 that the original export documents of the bill No.030176 were directly sent to the buyer by the Accused No.6 company violating the Exchange Controlled Regulations.
283. Further, the prosecution has proved that in respect of that letter of credit IBD (International Banking Division) officials of State Bank of Mysore, Bengaluru Branch had brought to the notice of C&I Division and AGM about the discrepancies in the same but inspite of the same, the bills on the above said letter of credit were negotiated and payments were made and the foreign bank which had issued the letter of credit returned the bills unpaid due to discrepancies and hence SBM was not able to recover the post shipment finance sanctioned by SBM to Accused No.6 company.
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284. Further, it is admitted that SBM Established the following four Letters of Credit presented by Accused No.6 company when the Cash Credit account of the said company was already overdue and legal notice was served on the said company, its Directors and its Guarantors. The particulars of those letters of credit are as under:-
Date L C Number Amount in Remarks
Rs.
07.01.95 00 7 952 801 1,113,638 Enhanced to
Rs.11,97,985 on
11.02.95
11.01.95 00 7 952 803 2,134,540 Enhanced to
Rs.22,10,524 on
03.02.95
06.04.95 00 7 955 825 1,398,600
12.05.95 00 7 952 837 2,472,600
285. The evidence of the prosecution is proving the
establishment of the above four letters of credit by SBM, Bengaluru.
286. It is further admitted that on 14.6.1995 SBM, Bengaluru issued a Bank Guarantee for Rs.2.60 lakhs favouring M/s. Trans Asian Shipping Services Ltd., Chennai. The prosecution has proved that the said Bank Guarantee was issued when the total liability of Accused No.6 company became over due. The evidence of the prosecution proves that the Bank Guarantee was issued for a period of 12 months valid up to 16.6.1996. The guarantee was invoked on 17.6.1996 and 153 Spl.C.C.No.476/2002 J the payment was not realised as the claim was preferred on 17.6.1996 after the expiry of the period of guarantee.
287. The prosecution has further proved that as per sanctioned terms, the bank should recover margin money from the Accused No.6, instead of recovery of margin money from the Accused No.6 company excess drawings were allowed in the cash credit account, towards margin money and bank charges.
288. Further, the prosecution has proved that on 6.4.1996 SBM sanctioned the cash credit hypothecation of Rs.60 lakhs and FUBP limit of Rs.120 lakhs to Accused No.6 company without any valid sanction. Further, the Branch proposal came to be turned down and communication was made to the Branch as per Ex.P.111 on 7.3.1996 by the DGM (Credit) Head Office and Branch made communication to Accused No.6 company on 25.3.1996 as per Ex.P110. It is also mentioned in Ex.P.110 what were the dues in the account of Accused No.6 company in respect of cash credit limit and over due export bills.
289. Further, the prosecution has proved that the export bill Ex.P.100 and 100(a) submitted by Accused No.6 company containing bill of lading bearing No. MAAI 10219795 valued US$2,58,000 drawn on M/s. DAP Services (Pvt.) Ltd., for Rs.84,99,480/- was a forged document of Accused No.6 company and inspite of knowing that the said bill was not genuine presented the same for negotiation to SBM 154 Spl.C.C.No.476/2002 J and though there were number of corrections made in the bill and such bill was not permissible for negotiation, the bank negotiated the said bill and released the amount of Rs.84,99,840/- in favour of Accused No.6 company and Accused No.6 company availed the said amount from the bank under the forged bill of lading.
290. Based on the above established facts by the prosecution, now I will proceed to consider the individual acts attributed and proved against each accused in the above matters.
IN RESPECT OF ACCUSED NO.1: -
291. It is clearly admitted by the Accused No.1 that during his tenure in SBM, Main Branch, Bengaluru from 1.10.1994 to 30.6.1995 he had allowed excess drawings to Accused No.6 company as per Ex.P.25 to 31. It is the contention of Accused No.1 that he had allowed excess drawings to Accused No.6 company well within his power and submitted returns to the GM(O) who has noted the same. As seen from the evidence, the cash credit hypothecation limit had expired, account became NPA and legal notice was issued and the proposal of the Branch came to be rejected by the GM(O). Under such circumstances, the Accused No.1 being the head of the Branch allowed continuation of the cash credit hypothecation account from 29.4.1995 till 2.6.1995 and allowed the excess drawings to the said company 155 Spl.C.C.No.476/2002 J beyond his limit and the control return submitted to the GM(O) were not approved by the concerned authority. The evidence proves that it is Accused No.1 after the expiry of the limit after considerable time without taking recourse for recovery of the dues, has allowed illegal transactions which cannot be considered as legal transactions and within his power provided to him under the delegation of powers Ex.P.1.
292. Further, he has approved the establishment of letters of credit bearing No. 007952801 for Rs.11,14,638 dated 7.1.1995, 007952803 for Rs.21,34,540 dated 11.1.1995, 007955825 for Rs.13,98,600/- dated 6.4.1995 and 007952837 for Rs.24,72,600/- dated 12.5.1995 though the Accused No.6 company had availed packing credit with Andhra Bank and Indian Overseas Bank and IOB Residency Bank informed about large outstanding and insisted to obtain No Due Certificate from them before considering any credit facilities to Accused No.6 company and in spite of cash credit account of Accused No.6 company was not satisfactory and legal notice was issued and the total liability of Accused No.6 company was beyond the discretionary powers vested with the Branch and when GM(O) has instructed the Branch not to increase the bank's commitment to Accused No.6 company on the proposal and control returns. 156 Spl.C.C.No.476/2002 J
293. Further, he has released packing credit of Rs.15 lakhs on 2.6.1995 under LC No.61194031 of Industrial Bank of China in spite of Accused No.6 company had already availed pre-shipment packing credit with Andhra Bank and IOB Residency Branch under the said LC, when the conduct of cash credit account of Accused No.6 company was over due and inspite of IOB Residency Road Branch adverse credit opinion about the packing credit facilities availed by Accused No.6 company with it and turning down the Branch proposal for increase of bank's exposure to Accused No.6 company by GM(O) and rejecting the proposal of the Branch recommending higher limits to Accused No.6 company.
294. Further, he has approved the purchase of the Export Bills dated 13.12.1994 Bill No. FDBP/N/030310 for USD 1,20,000, 18.1.1995 FDBP/N/030033 for USD 46,500 and 30.1.1995 Bill No. FDBP/N/030054 for USD 21,000 under LC No.61194031 though the Accused No.6 company had already availed packing credit facilities from other banks and the account of Accused No.6 company was not satisfactory and the Accused No.1 has suppressed these information in the control returns submitted to the controller.
295. Further, Accused No.1 on 24.3.1995 exceeding his discretionary powers has permitted the continuation of cash credit limit 157 Spl.C.C.No.476/2002 J of Rs.24.50 lakhs even though the balance in the cash credit account was Rs.53.55 lakhs and failed to report the same to the controller.
296. Further, Accused No.1 inspite of clear instructions from the GM(O) and DGM(Credit), without making any market enquiries and disregarding the controller's instructions has allowed substantial credit limits to Accused No.6 company exceeding discretionary powers of Rs.100 lakhs for a corporate borrower on 5 occasions, on 27.3.1995, 18.4.1995, 10.5.1995, 12.5.1995 and 17.5.1995. IN RESPECT OF ACCUSED NO.3:
297. It is admitted that Accused No.3 served as Chief Manager in SBM, Main Branch, Bengaluru during the relevant period. It is proved that he has permitted excess drawings, exceeding his discretionary powers in the cash credit hypothecation account as per Ex.P.32 to Ex.P.68 in favour of Accused No.6 company when the account of Accused No.6 company became over due, legal notice was issued and GM(O) instructed not to increase bank commitment and GM(O) rejected the earlier proposal of Branch dated 16.2.1995 for recommending higher limits to the Accused No.6 company and when the adverse credit opinion about Accused No.6 company was received from IOB Residency Road Branch. It is further proved that the discretion of Chief Manager in respect of cash credit hypothecation was 158 Spl.C.C.No.476/2002 J Rs.7.50 lakhs as per Ex.P.1 and Accused No.3 permitted excess drawings up to Rs.53.11 lakhs as on 11.10.1995.
298. Further, he has recommended for establishment of letters of credit bearing No. 007952801 for Rs.11,14,638 dated 7.1.1995, 007952803 for Rs.21,34,540 dated 11.1.1995, 007955825 for Rs.13,98,600/- dated 6.4.1995 and 007952837 for Rs.24,72,600/-
dated 12.5.1995 though the Accused No.6 company had availed packing credit with Andhra Bank, N.R. Road Branch and Indian Overseas Bank, Residency Bank Branch informed about large outstanding and insisted to obtain No Due Certificate from them before considering any credit facilities to Accused No.6 company and in spite of cash credit account of Accused No.6 company was not satisfactory and legal notice was issued and the total liability of Accused No.6 company was beyond the discretionary powers vested with the Branch and when GM(O) has instructed the Branch not to increase the bank's commitment to Accused No.6 company on the proposal and control returns.
299. Further, it is proved that on 6.4.1996, he has sanctioned the following credit facilities to the Accused No.6 company, without any valid sanction and exceeding his discretionary powers of Rs.7.50 lacs for C/Cr (Hypn) and Rs.50 lacs for Documentary Bills under LC (as per HOC 87 of 1987).
159 Spl.C.C.No.476/2002 J
(i) Cash Credit Hypothecation of Rs.60 lacs.
(ii) FDBP/FUBP limit Rs.120 lacs.
300. Further, he has recommended for release of packing credit of Rs.15 lakhs on 2.6.1995 under LC No.61194031 of Industrial Bank of China in spite of Accused No.6 company had already availed pre- shipment packing credit with Andhra Bank and Indian Overseas Bank under the said LC, when the conduct of cash credit account of Accused No.6 company was over due and inspite of IOB, Residency Road Branch adverse credit opinion about the packing credit facilities availed by Accused No.6 company with it and turning down the Branch proposal for increase of bank's exposure to Accused No.6 company by GM(O) and rejecting the proposal of the Branch recommending higher limits to Accused No.6.
301. It is further proved that the Accused No.3 when the bill for USD 70,000 submitted for negotiation on 02.06.1995, he suppressed the information of having sanctioned packing credit of Rs.15 lacs by allowing excess drawings in the cash credit account and failed to recover the same out of the proceeds of the negotiation of the bill.
302. It is further proved that on 1.8.1995 Accused No.1 has purchased the discrepant export bill for USD 70,000 under LC No. 61194031 of Industrial & Commercial Bank of China, Siachun Branch when the conduct of the cash credit account of Accused No.6 company 160 Spl.C.C.No.476/2002 J was not satisfactory, legal notice was issued to the company on 19.6.1994 and Accused No.6 company had already availed pre- shipment packing credit from other banks and without obtaining No Due Certificate before purchasing the said bill and the letter of credit was expired and no sanctioned limit to Accused No.6 company and ignoring the instructions of GM(O) and the outstanding in the advance against over due export bills account of Accused No.6 company was Rs.12,11,738/- and he has exceeded his discretion when the total liability of the Accused No.6 company as on 1.8.1995 was Rs.377.79 lakhs and failed to report this purchase of bill beyond his discretion to the controller and failed to obtain the confirmation and the bill was returned unpaid.
303. It is further proved that on 14.9.1995 Accused No.3 recommended for purchase of demand export bill for USD 2,58,500 under Accused No.6 company order, on the note submitted by the Chief Manager, IBD reporting the discrepancy and remarks which are as follows: -
Discrepancies
1. G.R. Form not submitted.
2. credit opinion on the buyer not available with us.
Remarks:
1. In addition to export bills outstanding of Rs.1,02,30,175 import bills under LC crystalised amounting to Rs.37,03,848 is also outstanding. The 161 Spl.C.C.No.476/2002 J company had agreed to repay the outstanding of crystalised import bill by 10.08.95. Please advise us whether we may purchase the above bill in the absence of GR form which has to be submitted as proof of shipment at the time of submitting documents for purchase.
2. Please let us know whether we can recover the outstanding under crystalised import bill from out of the current proceeds.
And inspite of the above discrepancies, he has recommended the purchase of the above bill over looking the conduct of the account, issue of legal notice and turning down the proposal by GM(O).
304. It is further proved that on 14.6.1995, he has issued a Bank guarantee for Rs.2.60 lacs favouring Trans Asian Shipping Services Ltd., Chennai when the total liability of the borrower was Rs.470.79 lacs. Thus he has exceeded the discretion of Rs.50 lacs vested with him under total liability for corporate borrower as per HOC 87 of 1987, Ex.P1.
305. It is further proved that Accused No.3 inspite of clear instructions from GM(O) and DGM (Credit), without making any market enquiries and disregarding the controller's instructions, he has allowed substantial credit limits to the company. Further, he has also submitted proposals on 16.2.95 & 31.8.95 recommending additional/ higher limits to the Accused No.6 company and reminded for early sanction of the recommended limits. The proposals were ultimately rejected by the sanctioning authorities, but he has already released 162 Spl.C.C.No.476/2002 J the recommended limits to the company which are not recovered from the concerned company. The adverse features like non satisfactory credit report from IOB, Non renewal of the Cash Credit account, non satisfactory conduct of Cash Credit account was not appraised to the controller in Credit Proposals.
306. Further, it is proved that Accused No.3 on 6.5.96, caused issuance of No Objection Certificate Ex.P.92 from AGM to Accused No.6 company even though there were liabilities overdue to the bank from the said company. The liabilities of the Accused No.6 company to the Branch as on 6.5.1996 were as under:
a) Cash Credit Hypothecation Rs.62.62 lacs as against the limit of Rs.24.50 lacs.
b) Advance against Overdue export bills a/c Rs. 114.12 lacs.
In the No Objection letter issued to the Accused No.6 company, neither the outstanding liabilities of the Accused No.6 company were mentioned nor the Accused No.6 company was advised to repay the dues before seeking financial assistance from other banks. Thus he has failed to take steps for recovery when the Accused No.6 company wanted to seek financial assistance from other banks. IN RESPECT OF ACCUSED NO.4:
307. It is admitted that Accused No.4 served as Manager in SBM, Main Branch, Bengaluru during the relevant period. It is proved 163 Spl.C.C.No.476/2002 J that he has permitted excess drawings, exceeding his discretionary powers in the cash credit hypothecation account as per Ex.P.69 to Ex.P.73 in favour of Accused No.6 company when the account of Accused No.6 company became over due, legal notice was issued and GM(O) instructed not to increase bank commitment and GM(O) rejected the earlier proposal of Branch dated 16.2.1995 for recommending higher limits to the Accused No.6 company and when the adverse credit opinion about Accused No.6 company was received from IOB Residency Road Branch. It is further proved that the discretion of Manager in respect of cash credit hypothecation was Rs.1.00 lakh as per Ex.P.1 and Accused No.4 permitted excess drawings up to Rs.50,09,894.52 on 15.9.1995.
308. It is further proved as per Ex.P.91 that on 10.5.1995, he has advised KSIIDC Bengaluru that the transactions of the Accused No.6 company are satisfactory, although the adverse features were noticed in the conduct of the account of Accused No.6 company that (1) Legal notice was issued to the company.
(2) Account was overdue and irregular, Based on which KSIIDC has subsequently sanctioned Term loan of Rs.185 lacs and Corporate loan of Rs.75 lacs to the Accused No.6 company.
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309. It is further proved that Accused No.4 in the notifications dated 21.3.95 and 19.4.96 Ex.P.88 and Ex.P.90 sent to ECGC Ltd., Bengaluru advising about packing credit/post shipment limits sanctioned/enhanced, in column 3 under Name(s), addresses of other banks of exporter, he has mentioned as NOT APPLICABLE although the official was aware that the Accused No.6 company was enjoying credit facilities with IOB, Residency Road Branch, Andhra Bank and KSIIDC.
310. Further, it is proved that Accused No.4 has recommended for establishment of letters of credit bearing No. 007952801 for Rs.11,14,638 dated 7.1.1995, 007952803 for Rs.21,34,540 dated 11.1.1995, 007955825 for Rs.13,98,600/- dated 6.4.1995 and 007952837 for Rs.24,72,600/- dated 12.5.1995 though the Accused No.6 company had availed packing credit with Andhra Bank, N.R. Road Branch and Indian Overseas Bank, Residency Bank Branch informed about large outstanding and insisted to obtain No Due Certificate from them before considering any credit facilities to Accused No.6 company and in spite of cash credit account of Accused No.6 company was not satisfactory and legal notice was issued and the total liability of Accused No.6 company was beyond the discretionary powers vested with the Branch and when GM(O) has instructed the Branch not to 165 Spl.C.C.No.476/2002 J increase the bank's commitment to Accused No.6 company on the proposal and control returns.
311. It is further proved that Accused No.4 inspite of clear instructions from GM(O) and DGM (Credit), without making any market enquiries and disregarding the controller's instructions, he has allowed substantial credit limits to the Accused No.6 company. Further, he has also submitted proposal on 31.8.95 recommending cash credit hypothecation limit of Rs.180 lakhs and post shipment limit of Rs.85 lakhs and remained the DGM (Credit) for early sanction of limits as on 8.11.1995 and 10.1.1996, the proposal was ultimately rejected by the credit department. But he has already released the recommended limits to the Accused No.6 company which are not recovered from the concerned company. The adverse features like non-satisfactory credit report from IOB, Non-renewal of the Cash Credit account, non-satisfactory conduct of Cash Credit account was not appraised to the controller in the proposal.
312. It is further proved that on 22.2.1995, Accused No.4 without any valid sanction and exceeding his discretionary powers, he has released the following credit limits to the Accused No.6 company. i. Packing Credit limit of Rs.50 lacs.
ii. FDBP/FUBP limit of Rs.90 lacs.
166 Spl.C.C.No.476/2002 JThe discretionary power to sanction Packing Credit limit was Rs.1.00 lac (Cash Credit Hypothecation) and Bill limit under LC was Rs.10 lacs HOC 87 of 1987 as per Ex.P.1.
IN RESPECT OF ACCUSED NO.8:
313. It is admitted that Accused No.8 was working as Deputy Manager in SBM, Bengaluru Main Branch during the relevant period. It is proved that inspite of the conduct of the credit account was not satisfactory and legal notice was issued to the Accused No.6 company on 19.6.1994, the company had already availed packing credit from other banks, the documents were discrepant, GM(O) turned down the Branch proposal for increase of bank's exposure and refused to extend the higher limits to Accused No.6, the Accused No.8 has recommended for negotiation of the following export bills. (1) Bill No.030033 dated 19.1.1995 for USD 46,500, (2) Bill No.030054 dated 30.1.1995 for USD 21,000, (3) Bill No. 030175 dated 10.5.1995 for USD 2,47,500, and (4) Bill No.030176 dated 10.5.1995 for USD 52,000.
314. Further, it is proved that Accused No.8 has recommended for establishment of letters of credit bearing No. 007952801 for Rs.11,14,638 dated 7.1.1995, 007952803 for Rs.21,34,540 dated 11.1.1995, 007955825 for Rs.13,98,600/- dated 6.4.1995 and 007952837 for Rs.24,72,600/- dated 12.5.1995 though the Accused No.6 company had availed packing credit with Andhra Bank, N.R. Road 167 Spl.C.C.No.476/2002 J Branch and Indian Overseas Bank, Residency Road Branch which informed about large outstanding and insisted to obtain No Due Certificate from them before considering any credit facilities to Accused No.6 company and in spite of cash credit account of Accused No.6 company was not satisfactory and legal notice was issued and the total liability of Accused No.6 company was beyond the discretionary powers vested with the Branch and when GM(O) has instructed the Branch not to increase the bank's commitment to Accused No.6 company on the proposal and control returns.
315. It is further proved that Accused No.8 has recommended for release of packing credit of Rs.15 lakhs on 2.6.1995 under LC No.61194031 of Industrial Bank of China in spite of Accused No.6 company had already availed pre-shipment packing credit with Andhra Bank and IOB, Residency Road Branch under the said LC, when the conduct of cash credit account of Accused No.6 company was over due and inspite of IOB, Residency Road Branch adverse credit opinion about the packing credit facilities availed by Accused No.6 company with it and turning down the Branch proposal for increase of bank's exposure to Accused No.6 company by GM(O) and rejecting the proposal of the Branch recommending higher limits to Accused No.6. IN RESPECT OF ACCUSED NO.5 TO 7:
316. The evidence of the prosecution clearly proves that at the relevant time of transactions, Accused No.5 Sri. M.S.A. Aleem was the 168 Spl.C.C.No.476/2002 J Chairman and Director and Accused No.7 Smt. Anuradha was the Director of Accused No.6 company M/s. Flora International Ltd. It is further proved that Accused No.6 company is a public limited company registered under the Indian Companies Act.
317. It is further proved that pursuant to Ex.P.3 and P4 Accused No.5 submitted request application Ex.P.129 dated 16.4.1992 as Chairman of Accused No.6 company to The Manager, C&I Division, State Bank of Mysore, Main Branch, Bengaluru requesting for sanction of working capital of Rs.25 lakhs to Accused No.6 company for its business.
318. It is admitted that pursuant to the request application Ex.P.129, the SBM has sanctioned cash credit hypothecation limit of Rs.24.50 lakhs to Accused No.6 company on 6.5.1992 for a period of 12 months on the personal guarantee of Directors, guarantee of third party and mortgage of property as a collateral security and the same was communicated to Accused No.6 company as per Ex.P.2 on 7.5.1992. It is further admitted that the Accused No.5 and 7, guarantors, mortgagee of property executed the necessary loan documents in favour of the bank. It is also admitted that subsequently there was replacement of collateral security on the request made by the Accused No.6. It is also admitted that the limit sanctioned to 169 Spl.C.C.No.476/2002 J Accused No.6 company was availed by it through Accused No.5 and 7 from time to time.
319. The prosecution has proved that even after expiry of the period of cash credit hypothecation, the Accused No.5 and 7 have drawn the amount on several occasions by drawing the cheques from time to time exceeding the limit. The prosecution has also proved that the Accused No.5 and 7 on behalf of Accused No.6 company have availed packing credit from SBM and previously on the same letter of credit from Andhra Bank and Indian Overseas Bank.
320. The prosecution has also proved that the Accused No.5 and 7 have negotiated the bills from time to time without there being any valid sanction from the controlling authority. It is further proved that they have obtained No Objection Certificate from SBM knowing fully well that they were in large outstanding in their account to the said bank.
321. The prosecution has also proved that the Accused No.5 and 7 negotiated Ex.P.100 and 100(a) from SBM and availed the amount of Rs.84,99,480/- knowing fully well that the said bill was forged and not genuine one.
322. On the basis of the above established acts of each accused, now, I will consider whether their acts amounts to an offence 170 Spl.C.C.No.476/2002 J alleged against them. In this regard firstly, I will consider the offence of criminal conspiracy.
ALLEGATION OF CRIMINAL CONSPIRACY:
323. It is alleged by the prosecution that Accused No.1, 3 to 8 entered into a criminal conspiracy among themselves during 1994 to 1996 to cheat the State Bank of Mysore, Main Branch, Bengaluru. The accused have seriously disputed the allegations of criminal conspiracy against them.
324. The Accused No.1, 3 to 8 have clearly admitted all the transactions concerning to this case made in the accounts of Accused No.6 company with State Bank of Mysore, Main Branch, Bengaluru. It is their only contention that the transactions are business transactions done in the ordinary course of banking business and they are all legal transactions and approved and sanctioned by the controlling authority and there is no illegality committed by them.
325. To know the offence of criminal conspiracy it is proper to consider the definition of the same as defined under Sec. 120-A of IPC., which reads as follows: -
"120-A, Definition of criminal conspiracy - When two or more persons agree to do, or cause to be done: -
(1) an illegal act, or
(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 171 Spl.C.C.No.476/2002 J 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."
326. In this regard, the learned counsel for Accused No.5 to 7 relied upon the principles of decision reported in 2012 AIR SCW 5139 in the case of Central Bureau of Investigation, Hyderabad Vs. K. Narayana Rao, the Hon'ble Supreme Court of India held as follows:
Indian Penal Code (45 of 1860) - S 120A -
Conspiracy - Agreement to do illegal act - Is essence of criminal conspiracy - Direct evidence of conspiracy is rarely available - It has to be proved on basis of circumstances prior and after occurrence - Circumstances proved however must clearly show that they were committed in pursuance of agreement between persons conspiring.
327. Regarding criminal conspiracy, proof and requirement of the evidence it has been held in the decision reported in 2003 SUPREME COURT CASES - 2748, in the case of Ram Narain Poply Vs. Central Bureau of Investigation, the Hon'ble Supreme Court of India held as follows:
Indian Penal Code (45 of 1860) - S. 120B - Criminal conspiracy - Ingredient of offence - Is an agreement between conspirators to do an illegal act - No overt act need be done in furtherance of conspiracy - Conspiracies are not hatched in open but are secretly planned - Direct evidence rarely available to prove conspiracy - Circumstantial evidence can be relied on - Conspiracy is 172 Spl.C.C.No.476/2002 J continuing offence and subsists till it is executed or frustrated by choice of necessity.
328. Further, in the decision reported in (1996) 4 SCC page 659, in the case of State of Maharashtra and Others. Vs. Som Nath Thapa and Others the Hon'ble Supreme Court of India held as follows:
A. Penal Code, 1860 - S. 120-A - Criminal conspiracy - Essential ingredients of - Knowledge and intention - Knowledge of commission of illegal act or legal act by illegal means necessary - intent may be inferred from knowledge itself when in fact no legitimate use of the goods or service in question exists - Person participating in transportation of materials like RDX must be imputed the intent of its use for illegal purpose - Prosecution not required to establish that the accused knew that the said materials would be used for the purpose of bomb blasts in the country - When offence consists of a chain of actions, it is not necessary that each of the conspirators must know what the other conspirators would do - Bombay Bomb Blast case - TADA Act, 1987, Ss. 3(3) and 2(1)(a)(iii) To establish a charge of conspiracy knowledge about indulgence in either an illegal act or a legal act by illegal means is necessary. In some cases, intent of unlawful use being made of the goods or services in question may be inferred from the knowledge itself. This apart, the prosecution has not to establish that a particular unlawful use was intended, so long as the goods or service in question could not be put to any lawful use. Finally, when the ultimate offence consists of a chain or actions, it would not be necessary for the prosecution to establish, to bring home the charge of conspiracy, that each of the conspirators had the knowledge of what the collaborator would do, so long as it is known that the collaborator would put the goods or service to an unlawful use.173 Spl.C.C.No.476/2002 J
329. Further, in the decision reported in (2004) 12 SCC page 336, in the case of Damodar Vs. State of Rajasthan, the Hon'ble Supreme Court of India held as follows::
F. Penal Code, 1860 - S. 120-B - Criminal conspiracy - Essential Ingredients - Nature of proof required - Held, conspiracy can be proved even by circumstantial evidence - hence lack of direct evidence in respect of a conspiracy has no consequence - overt Act is inessential when the conspiracy is to commit any punishable offence - The most important ingredient of criminal conspiracy is that there must be an agreement between two or more persons to do an illegal act - Express agreement need not be proved - Evidence as to the transmission of thoughts sharing the unlawful act is sufficient - conspiracy continues to subsist till it is executed or rescinded or frustrated by choice or necessity.
330. Further, in the decision reported in 1970(1) SCC 152 in the case of Lennart Schussler and another vs. The Director of Enforcement and another the Hon'ble Supreme Court of India held as follows: -
Penal Code, 1860 (No. 45 of 1860) - Section 120-B - Criminal Conspiracy - Ingredients - Foreign Exchange Regulation Act, 1947 (No.7 of 1947) - Sections 4, 5, 9, 21 and 23 - Rule 132-A of Defence of India Rules, 1962 - Violation of - Whether an offence under the Penal Code lies.
Held, (per Sikri, Ray and Jaganmohan Reddy, JJ,) that the first of the offence defined in Section 120-A, Penal Code which is itself punishable as a substantive offence is the very agreement between two or more persons to do or cause to be done an illegal act or a legal act by illegal means subject however to the proviso that where the agreement is not an agreement to commit an offence the agreement does not amount to a conspiracy unless it is followed up by an overt act done by one or more persons in pursuance of such an 174 Spl.C.C.No.476/2002 J agreement. There must be a meeting of minds in the doing of the illegal act or the doing of a legal act by illegal means. If in the furtherance of the conspiracy certain persons are induced to do an unlawful act without the knowledge of the conspiracy of the plot they cannot be held to be conspirators, though they may be guilty of an offence pertaining to the specific unlawful Act. The offence of conspiracy is complete when two or more conspirators have agreed to do or cause to be done an act which is itself an offence, in which case no overt act need be established. It is also clear that an agreement to do an illegal act which amounts to a conspiracy will continue as long as the members of the conspiracy remain in agreement and as long as they are acting in accord and in furtherance of the object for which they entered into the agreement. What has to be seen is whether the agreement between A-1 and A-2 is a conspiracy to do or continue to do something which is illegal and if it is, it is immaterial whether the agreement to do any of the acts in furtherance of the commission of the offence do not strictly amount to an offence. The entire agreement must be viewed as a whole and it has to be ascertained as to what is fact the conspirators intended to do or the object they wanted to achieve.
331. Further, in the decision reported in (2001) 7 SCC 596 in the case of Firozuddin Basheeruddin and others vs. State of Kerala the Hon'ble Supreme Court of India held as follows: -
Penal Code, 1860 - Ss. 120-A and 120-B - Criminal conspiracy - Nature - What constitutes - Ingredients are actus reus and mens rea - As regards the mental state, two elements are necessary viz., intent to agree and intent to promote the unlawful objective of the conspiracy - Scope of conspiracy i.e. who are the parties and what are their objectives - How to determine - Conspiracy is not only a substantive crime but on the basis of it a conspirator can also be held liable for the crime committed by co-conspirators in furtherance of the objectives of the conspiracy - Conspiracy can be established on the basis of circumstantial evidence - As regards admissibility of evidence strict standards are not necessary inasmuch as any declaration made by a conspirator 175 Spl.C.C.No.476/2002 J in furtherance of and during pendency of a conspiracy though hearsay, is admissible against each co-conspirator
332. Lastly, in the decision reported in (2009) 15 SCC 643 in the case of Mir Nagvi Askari vs. CBI the Hon'ble Supreme Court of India held as follows:-
A. Penal Code, 1860 - Ss. 120-A - Criminal conspiracy - Concept - Evidence for proving - Illegal advance credits by bank officials - Held, criminal conspiracy involves meeting of minds of two or more persons for doing or causing to be done an illegal act or an act which may not be illegal but by illegal means - The offence takes place with the meeting of minds even if nothing further is done - It is an offence independent of other offences and is punishable separately - Criminal conspiracy is generally hatched in secrecy - Direct evidence is therefore difficult to obtain or access - The offence can be proved by adducing circumstantial evidence and/or by necessary implication.
333. The above definition of criminal conspiracy shows that conspiracy consists of an agreement between two or more persons for doing an illegal act or to do a legal act by illegal means. To establish a charge of conspiracy, mens rea, knowledge about the indulgence to do either illegal act or a legal act by illegal means is a necessary. In the present case, there is no direct evidence to establish the alleged criminal conspiracy of Accused No.1, 3 to 8. The prosecution has mainly relied upon circumstantial evidence to support the allegation. Even a presumption can be drawn from the facts of the case. In order to establish criminal conspiracy of Accused No.1, 3 to 8, the 176 Spl.C.C.No.476/2002 J prosecution has to prove that they were having mens rea, knowledge about indulgence in doing an illegal act or a legal act by illegal means.
334. As seen from the evidence of the prosecution, the validity of the limit of cash credit hypothecation limit sanctioned in favour of Accused No.6 company on 6.5.1992 came to be expired on 5.5.1993. In the records, it is specifically mentioned that the limit came to be expired and there is no valid sanction of the same after the expiry of the same on 5.5.1993. The bank proposal for sanction of higher limit of cash credit hypothecation limit in favour of Accused No.6 company came to be turned down by the GM(O) on 7.3.1995 endorsing that Branch not to increase bank commitment to the company. Further, the proposal of the Branch dated 16.2.1995 recommending to sanction one time packing credit facility of Rs.50 lakhs and FDBP/FUBP facility of Rs.90 lakhs to Accused No.6 company came to be rejected by GM(O) on 6.3.1995. Thereafter Accused No.1 being the AGM started allowing the excess withdrawals on various occasions. Then Accused No.3 has allowed withdrawals on many occasions in favour of Accused No.6. So also, Accused No.4 has allowed the withdrawals from time to time. Further, Accused No.1, 3, 4 and 8 have involved in release of packing credit, negotiating the export bills inspite of the company borrowed the pre-shipment credit facility on the letter of credit from 177 Spl.C.C.No.476/2002 J the other banks and there was adverse credit opinion about the conduct of the company from IOB, Residency Road Branch.
335. It is also forthcoming that the excess withdrawals and other facilities extended to Accused No.6 company have not been reported to the higher authority and the same have been suppressed. Further, the irregular statements sent by the Branch have not been approved by the controlling authority. It is not the one time transaction done by the bank to extend financial assistance to the company but there are several transactions involving huge amount under various credit facility for considerable length of time. As seen from the evidence from 17.12.1994 till 29.9.1995, the excess withdrawals have been permitted by the bank. On 2.6.1995, a packing credit of Rs.15 lakhs was released and excess drawings in cash credit account was permitted. Further, there was negotiation of export bill No.030276 for Rs.21,88,900/- though the Accused No.6 company availed pre-shipment packing credit facility on the same and without liquidating the packing credit amount availed from other bank, the SBM sanctioned post shipment finance on the said bill. Further, on 18.1.1995 and 30.1.1995 negotiated two bills. On 22.2.1995, a sum of Rs.25,01,000/- was released as packing credit in favour of Accused No.6 company though the proposal dated 16.2.1995 came to be rejected. On 10.5.1995, negotiated two bills bearing No. 030175 and 178 Spl.C.C.No.476/2002 J 030176 inspite of controlling authority turned down the Branch proposal and adverse opinion expressed by the International Banking Division. Further, on 7.1.1995, 11.1.1995, 6.4.1995 and 12.5.1995 established four letters of credit though the account of Accused No.6 company became overdue and legal notice was issued to the said company. On 14.6.1995, a bank guarantee of Rs.2.60 lakhs was given in favour of M/s. Trans Asian Shipping Services Ltd., Chennai when the total liability of the Accused No.6 company was Rs.470.79 lakhs. On 6.4.1996 sanctioned cash credit hypothecation limit of Rs.60 lakhs and FDBP and FUBP limit of Rs.120 lakhs in favour of Accused No.6 company without any valid sanction from the competent authority. Further, on 14.9.1995, the bank has purchased forged export bill for Rs.84,99,480/-. Further, though the value of the property offered as collateral security was aggregating to Rs.78,50,000/- huge amount has been released beyond the value of the property given as security. As seen from the commencement of the transaction for permitting excess withdrawals by Accused No.6 company till the date of last transaction for issue of Bank Guarantee, nearly one year six months period the transactions have been done in the account of Accused No.6 company.
336. As seen from the evidence, the financial condition of Accused No.6 company was not satisfactory when it approached the 179 Spl.C.C.No.476/2002 J State Bank of Mysore for sanction of working capital of Rs.25 lakhs anyhow, the cash credit hypothecation of Rs.24.50 lakhs came to be sanctioned on 6.5.1992. The Accused No.6 company availed the said benefit, did not do any transactions in its account for a period of 9 months. After availing the credit facility, the Accused No.6 company has failed to pay even the interest on the credit facility and the same came to be debited to its account from time to time.
337. Looking to the unsatisfactory features of the Accused No.6 company in operating its account, the legal notice was issued as per Ex.P.17 on 19.6.1994 and reply was issued on 30.6.1994 as per Ex.P.18. After receiving the reply notice denying the liability by the said company, the only remedy available to the bank was to institute civil proceedings for recovery of the outstanding dues. Instead of doing so, after the account became unsatisfactory, denial of liability, the Accused No.1, 3, 4 and 8 have allowed considerable over withdrawals through cheques, released packing credit, negotiated bills and issued bank guarantee for huge sum in favour of Accused No.6. The transactions done, over limits allowed were not reported to the controlling authority within the stipulated time to get their approval. The irregular statements submitted for some months were not approved by the controller to make those transactions as approved transactions and legal transactions in the eye of law. 180 Spl.C.C.No.476/2002 J
338. When there is no direct evidence forthcoming before the court to prove the criminal conspiracy of the accused persons, the said aspect can be proved from the circumstantial evidence. Even based on the oral and documentary evidence court can draw the inference about the agreement in between the accused to do an illegal acts for extending credit facilities illegally and beyond their delegated powers. Looking to the transactions for a considerable period for huge sum under various heads, the evidence relied upon by the prosecution proves that there was prior meeting of minds between all the accused persons, having knowledge and knowing fully well that the transactions are beyond their delegated powers, without valid sanction from the controlling authority have extended the facility and allowed over drawals, and that is clearly proving their intention and indulgence.
339. Admittedly, SBM is a nationalized bank and the transactions have to be in accordance with law, procedure prescribed and as per the delegation of powers. In the present case, ignoring the procedure prescribed, beyond the delegated powers and against the law the transactions have been allowed in the account of accused No.6. It is the duty of the bank to recover the amount of packing credit and bills negotiated and instead of recovering the said amount, the said amount has been illegally debited to cash credit hypothecation 181 Spl.C.C.No.476/2002 J account of Accused No.6 company resulted in huge over due and non- recovery of the said amount.
340. The accused No.1, 3, 4 and 8 being the officers of the bank in their various capacities knowing full well about the bad conduct of account of Accused No.6 company extended credit facility, packing credit, negotiation of bills and bank guarantee by suppressing the position of the account of accused No.6. The notings recorded in the records and the initial put by accused No.1, 3, 4 and 8 clearly proves that inspite of knowing the bad conduct of the account of Accused No.6 company instead of stopping the operation of the account by returning the cheques, honoured the cheques and allowed the withdrawals resulting in huge over dues.
341. The learned counsel for accused argued that the transactions are giving remedy for civil action and not for criminal case and already the bank had approached the DRT and order has been passed in favour of the bank. The argument of the learned counsel for accused cannot be acceptable because simply the remedy of civil action is availed by the bank for recovery of huge outstanding from the accused No.5 to 7, it cannot be said that the illegal acts done and the fraudulent transactions allowed will take away the action under criminal law. Therefore, there is no substance in the argument of the learned counsel for accused looking to the illegal and dishonest 182 Spl.C.C.No.476/2002 J transactions done for huge amount resulting in huge loss to the bank, which is not yet recovered inspite of the order passed by the DRT. Therefore, the accused persons cannot escape from criminal liability for the respective illegal transactions done and allowed by them in respect of the account of accused No.6.
342. As seen from the evidence placed before the court, it is forthcoming that the financial position of Accused No.6 company was not in good terms. The Accused No.6 company availed the credit facility from other banks by obtaining No Due Certificate from the State Bank of Mysore though there was outstanding payable in favour of SBM. The Accused No.6 company by suppressing the fact of credit facility availed from other banks, availed credit facilities from State Bank of Mysore on the collateral security having the lesser value than the amount withdrawn.
343. It is also forthcoming from the evidence that based on the forged bill of lading approached the SBM and negotiated the said bill for Rs.84,99,480/- on 14.9.1995 and the bill of that amount was not realized from the bank which issued the letter of credit. Bill of lading is a negotiable instrument under Negotiable Instruments Act. Such a bill of lading should be without correction or alteration. In the event of permissible correction it should be by the authorized person. In the case on hand, Ex.P.100 and 100(a) are altered at several places by 183 Spl.C.C.No.476/2002 J putting whitner. The handwriting expert PW.24 has opined that below the whitener, there are impressions of some other words and after putting the stamps, the typing has been done. On seeing the alterations made on Ex.P.100 and 100(a) by putting whitner at various places, even an ordinary prudent man will not believe that they are genuine document that can be accepted for negotiating the same by the nationalized bank for huge amount of Rs.84,99,480/-. The bank officers who have dealt with those documents have totally lost sight and accepted the forged documents which are negotiable instruments and acted on them and released huge amount on the said documents. That transaction itself is sufficient to prove that the accused who have done the said transaction have clearly colluded with Accused No.6 company and its representatives who are accused No.5 and 7, purchased the said bill of lading, subsequently the amount of that bill was not realized from the foreign bank.
344. Therefore, considering the evidence of the prosecution placed before the court, the transactions forthcoming in the present case, there is sufficient circumstantial evidence to establish the criminal conspiracy between Accused No.1, 3, 4 to 8 to do the illegal acts pertaining to the account of Accused No.6 company. Even an inference can be drawn from the said evidence how illegally the acts have been done by the accused for release of credit facilities to 184 Spl.C.C.No.476/2002 J Accused No.6 company on various occasions. Therefore, the ingredients of Sec.120-A IPC are well established in the present case. Hence, the offence u/s 120-B of IPC is established against accused No.1, 3 to 8.
ALLEGATION OF CHEATING & DISHONESTLY INDUCING DELIVERY OF PROPERTY:
345. It is the allegation of the prosecution that accused No.1, 3 to 8 in furthereance of their criminal conspiracy dishonestly and fraudulently induced State Bank of Mysore, Main Branch, Bengaluru for release of packing credit of Rs.15,00,000/- on 2.6.1995, negotiated the foreign export bills drawn under LC No. 61194031, released packing credit of Rs.25.01 lakhs on 22.2.1995, negotiated two export bills bearing No.030175 and 030176 on 10.5.1995, established four letters of credit on four different dates when the cash credit account was over due and legal notice was issued and issued bank guarantee for Rs.2,60,000/- on 14.6.1995 and permitted the excess drawings unscrupulously in the cash credit hypothecation account bearing No.10631 from 17.12.1994 to 29.9.1995 and purchased forged bill of lading on 14.9.1995 pertaining to the accounts of Accused No.6 company and caused wrongful loss of Rs.2,02,76,308/- to the State Bank of Mysore and corresponding wrongful gain to Accused No.6 company for the said amount.
185 Spl.C.C.No.476/2002 J
346. To decide this allegation of the prosecution made against the accused, u/s 420 of IPC, it is proper to know the definition of cheating defined u/s 415 of IPC, which reads as follows: -
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 retain any property, or intentionally induce the person so deceived to do or omit to do anything which he would not do or omit if he was not so deceived, and which act of omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".
Explanation: - A dishonest concealment of facts is a deception within the meaning of this section.
347. The essential ingredients for the offence u/s 420 of IPC are:
(i) Accused cheated the State Bank of Mysore.
(ii) Accused did so dishonestly.
(iii) Thereby induced the State Bank of Mysore;
(a) to deliver some property to accused or to some other person;
(b) to make, alter or destroy the whole or any part of the valuable security or anything which was signed, sealed, and which was capable of being converted into valuable security.
348. It is proved by the prosecution that release packing credit facility of Rs.15,00,000/- to Accused No.6 company on 2.6.1995 was double finance though there was availment of pre-shipment credit facility from other banks and the same was illegal transaction. Further, the prosecution has proved that negotiation of two export bills drawn 186 Spl.C.C.No.476/2002 J under LC No.61194031 on 18.1.1995 and 30.1.1995 are not legal transactions. Then the prosecution has proved that the release of packing credit of Rs.25,01,000/- on 22.2.1995 was without valid sanction and after rejection of the proposal of the Branch dated 16.2.1995 for enhancement of limit to accused No.6. The prosecution has further proved that on 10.5.1995, the two bills were negotiated by the bank which was illegal. Further, the prosecution proved that establishment of four letters of credit was done when the cash credit account was overdue and legal notice was issued to Accused No.6 company. Further, the prosecution has proved that on 14.6.1995 bank guarantee of Rs.2.60 lakhs was issued when the total liability of Accused No.6 company was Rs.470.79 lakhs. Further, the prosecution has proved that on 6.4.1996 there was release of cash credit hypothecation of Rs.60 lakhs and FDBP/FUBP limit of Rs.120 lakhs to Accused No.6 company without any valid sanction from the controlling authority. Further, the prosecution has proved the various excess drawings unscrupulously allowed in the cash credit hypothecation account of Accused No.6 company on various dates. Further, the prosecution has proved the negotiation of forged bill on 14.9.1995 for a sum of Rs.84,99,480/- and the amount of that bill was not realized.
349. The learned counsel for all accused vehemently argued that the prosecution has to prove beyond all reasonable doubt that the 187 Spl.C.C.No.476/2002 J accused were having intention to deceive at the inception of the transactions and in the present case, the evidence is not proving the intention of accused to deceive at the inception of each and every transaction, therefore, the ingredients of offence of cheating are not established in the present case. The learned counsel for accused No.5 and 6 argued that the prosecution has to prove that transactions alleged are illegal and not irregular because only illegal transactions would attract criminal prosecution.
350. In this regard, the learned counsel for accused No.3, 4 and 8 firstly relied upon a decision reported in (2009) 6 SCC 77 in the case of S.V.L. Murthy Vs. State Rep. by CBI, Hyderabad, wherein the Hon'ble Supreme Court held as follows: -
In present case, held, allowing of cheque discounting facility by bank officials to customers of Bank, without any criminal intent being proved, did not amount to commission of offence, particulars as facility allowed was not contrary to RBI Guidelines - It could not therefore also be said that there was meeting of minds in a conspiracy to commit an offence, nor could the act of corruption be inferred from transactions between Bank and its customers.
Further, in para-34, 38 and 41 held as follows: -
34. From the aforementioned statements, it is evident that all the transactions were being carried on in a transparent manner having regard to the prevalent practice. In fact, as noticed hereinbefore, Shri Vijay Kumar not only started granting the said facility to the principal Accused, some amount of laxity on his part was also found.188 Spl.C.C.No.476/2002 J
38. Having noticed the evidence adduced on behalf of the prosecution, we are of the opinion that no evidence was brought on record to show that Accused 4 or for that matter Accused 5 entered into any conspiracy with others.
Accused 4, in fact, had stopped grant of the said facility and only at the instance of PW 20, the said facility was restored. It is true that the said witness had denied a suggestion made by Accused 4 but the fact that the oral instructions used to be given to the officers concerned have not only been accepted by PW 19 but also by PW 20.
41. ......... For the purpose of constituting an offence of cheating, the complainant is required to show that the Accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the Accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code can be said to have been made out.
351. Secondly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in 2000 SCC (Cri) 786 in the case of Hridaya Ranjan Prasad Verma vs., wherein the Hon'ble Supreme Court held as follows: -
B. Penal Code, 1860 - S-415 - Cheating -
Ingredients of - Distinguished from mere breach of contract - Definition contemplates two separate classes of acts viz., deception by fraudulent or dishonest inducement and deception by intentional, but not fraudulent or dishonest, inducement - In the second case intentional deception must be shown to exist right from the beginning of the transaction.
Further, in para-13 held as follows: -
13. Cheating is defined in Section 415 of the Code as: "415. Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that 189 Spl.C.C.No.476/2002 J any person shall retain 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'.
Explanation: - A dishonest concealment of facts is a deception within the meaning of this section." The section requires: -
(1) deception of any person;
(2) (a) fraudulently or dishonestly inducing that person
(i) to deliver any property to any person, or
(ii) to consent that any person shall retain any property; or
(b) intentionally inducing that person 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.
352. Thirdly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in AIR 1973 SC 326 in the case of State of Kerala vs. A. Pareed Pillai and another, wherein the Hon'ble Supreme Court held as follows: -
Penal Code (1860), Section 420 - Cheating - Dishonest intention at time of making promise is necessary.
To hold a person guilty of the offence of cheating. It has to be shown that his intention was dishonest at the time of making he promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfill the promise.
353. Fourthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in AIR 1974 SC 1560 in the case of 190 Spl.C.C.No.476/2002 J Anil Kumar Bose vs. State of Bihar, wherein the Hon'ble Supreme Court held as follows: -
Index Note: - (A) Penal Code (1860), S. 420 - Cheating - Essentials - Mens rea - Dishonest intention - Proof.
Brief Note: - (A) For the purposes of holding the Accused guilty under Section 420, the evidence adduced must establish beyond reasonable doubt, mens rea on their part.
354. Fifthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in AIR 2001 SC 2960 in the case of S.N. Palanitkar and others vs. State of Bihar and another, wherein the Hon'ble Supreme Court held as follows: -
(C) Penal Code (45 of 1860), S. 420 - Cheating -
Intention to deceive should be in existence at time when inducement was made - Mere failure to keep up promise subsequently - Cannot be presumed as leading to cheating.
355. Sixthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in 2011 Cri.L.J. 1192 in the case of Banwar Lal Lodha vs. State of Punjab, wherein the Hon'ble Supreme Court held as follows: -
Penal Code (45 of 1860), S. 420 - Cheating - Proof
- Petitioner in his capacity as Bank Manager allegedly wrongfully exceeded limit of discounted bill facility causing wrongful loss to Bank - Petitioner no where denied that he exceeded limit of bill discounting facility but it was done as a matter of routine and practice was in vague - It cannot be termed as illegal as it is sought to be resorted to achieve projected targets of business by Bank - Monthly progress report were sent to Regional officer and they had knowledge of Bank limit having been exceeded - It cannot 191 Spl.C.C.No.476/2002 J be said that petitioner had only dishonest intention or he abused his position causing wrongful loss of bank - Petitioner entitled to be acquitted.
356. Seventhly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in 2011 Cri.L.J. 891 in the case of Smt.Meena Rathore vs. CBI, ACB, Bhopal, wherein the Hon'ble Supreme Court held as follows: -
(A) Penal Code (45 of 1860), S. 420 - Cheating and dishonestly inducing delivery of property - Construction of collect building on land which was mortgaged with bank -
Recognition granted on submission of affidavit by applicant-society by All India Council for Technical Education that said land and building was not mortgaged - Complaint filed by CBI for offence under S. 420 etc., for Penal Code - Liable to be quashed.
357. Eighthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in (2006) 5 SCC 96 in the case of Maharashtra State Mining Corporation vs. Sunil, wherein the Hon'ble Supreme Court held as follows: -
The ratification related back to the date of the dismissal order and validated the same.
358. Ninthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in 2007(4) ALD 707 in the case of B. Ramachandra Rao (Died) by LRs vs. Syndicate Bank and another on 5 June, 2007, wherein the Hon'ble Supreme Court held as follows: -
The petitioner could not have been singled out for punishment and responsibility ought to have been fixed on 192 Spl.C.C.No.476/2002 J the concerned officers in the zonal office who had accorded sanction despite loans having been released in deviation of the norms stipulated in the head office letter dated 2.6.1987. Both on the ground that the respondents had not applied their mind to the question whether or not the petitioner was singled out for punishment and since the Enquiry Officer has failed to take into consideration the admissible and material evidence in Ex.S.27(2), more particularly the contents of the note addressed by the Zonal Office to the Head Office, the impugned orders of punishment are liable to be quashed.
359. Tenthly, the learned counsel for Accused No.3, 4 and 8 relied upon a decision reported in (2007)7 SCC 206 in the case of Bongaigaon Refinery & Petrochemicals Ltd., and others vs. Girish Chandra Sarma, wherein the Hon'ble Supreme Court held as follows: -
as one person alone made scapegoat for collective decision in which others also collectively participated.
360. The learned counsel for accused No.5 and 6 relied upon the principles of the following decisions: -
(i) (2008) 5 SCC 662 - S.K. Alagh =v= State of Uttar Pradesh and others.
(ii) (2008) 5 SCC 668 - Maksud Saiyed=vs=State of Gujarath and others.
361. In the present case, looking to the evidence after the expiry of limit, issue of legal notice, receiving the reply, the transactions have been allowed and amount has been released without valid sanction, beyond the delegated powers and without approval of those transactions by the controlling authority from time to time. The 193 Spl.C.C.No.476/2002 J evidence also proves that the forged bill of lading has been negotiated and huge amount has been paid which resulted in not recovering the said amount from the concerned. Looking to the manner in which accused No.1, 3, 4 and 8 have acted in their respective tenure in respect of the account of Accused No.6 company and the other transactions pertaining to their account, the transactions cannot be termed as irregular transactions but they are illegal transactions. If the irregular transactions have been done and if they are ratified/ approved by the controlling authority, the question of criminality would not arise in respect of those transactions. In the present case, knowing fully well the bad conduct of the account of accused No.6, their over due and issue of legal notice without recourse to recovery of the dues, the transactions have been allowed suppressing the facts of finance availed from other banks and exceeding the powers. When the limit came to be expired after 12 months on 5.5.1993, the question of allowing the further withdrawals without sanction and renewal of the said account does not arise. In the present case, inspite of expiry of the limit, the subsequent transactions have been allowed in the account of Accused No.6 company for a considerable period of one year 9 months and instead of recovering the amount of bills, they have been debited to the account of accused No.6. There is no doubt that the transactions are illegal transactions done by accused No.1, 3, 4 194 Spl.C.C.No.476/2002 J and 8 during their respective tenure to show undue favour to the Accused No.6 company.
362. It is forthcoming from the evidence inspite of specific notings in Ex.P.22 to 24 that the limit is expired, the transactions have been allowed by the concerned ignoring the expiry of limit and overdues in the account.
363. The Accused No.6 company through accused No.5 and 7 knowing fully well that their cash credit hypothecation limit was sanctioned for a period of 12 months only, same came to be expired, without applying for renewal have issued number of cheques on various occasions for withdrawal and for payment to others and has made illegal transactions in its account with SBM, Bengaluru Branch. They have also availed the packing credit, negotiation of bills and obtained bank gurantee inspite of their overdues illegally. Further, the Accused No.6 company represented by accused No.5 and 7 has presented the forged bill of lading as per Ex.P.100 and 100(a) to the bank and got released a sum of Rs.84,99,480/- on 14.9.1995. This fact itself shows the malafide intention on the part of Accused No.6 company and accused No.5 and 7 to induce the SBM, for delivery of the same. Further, by suppressing the availment of credit facility from other banks have availed the credit facility from SBM which amounts to deception on their part. Further, they have gone to the extent of 195 Spl.C.C.No.476/2002 J obtaining No objection certificate as per Ex.P.92 though there was huge outstanding in their account with SBM to avail the credit facility from KSIIDC for huge amount.
364. Therefore, the evidence of the prosecution, the nature of transactions, manner in which they have been done and allowed clearly prove the dishonest intention on the part of accused No.1, 3 to 8 at the inception of each and every transactions pertaining to the account of accused No.6. The prosecution has also proved that by their dishonest intention accused No.1, 3 to 8 have induced the State Bank of Mysore to deliver huge amount from time to time to Accused No.6 company represented by accused No.5 and 7 for which the SBM suffered huge losses and accused No.5 to 7 gained wrongfuly which amounts to cheating and the ingredients of the offence u/s 420 of IPC are well established. Therefore, the defence of accused and the argument of the learned counsel for accused that the transactions are legal transactions which will not attract criminal liability and the principles of the decisions relied upon by them are not attracted to the facts and charges of the present case, therefore, the same cannot be accepted.
ALLEGATION OF FORGERY FOR THE PURPOSE OF CHEATING:
365. It is the allegation of the prosecution that in furtherance of the criminal conspiracy, on 14.9.95, the SBM, Bengaluru Branch 196 Spl.C.C.No.476/2002 J purchased a forged export bill submitted by M/s. Flora International Ltd., containing Bill of Lading bearing No. MAAI 10219795 valued US$2,58,000 drawn on M/s. Dap Services (Pvt.) Ltd., for Rs.84,99,480/- knowing fully well that the same was not a genuine one when it was presented as genuine by the said Accused No.6 company represented by accused No.5 and 7. In view of the fraudulent acts of the accused persons the said bill was returned unpaid, therefore the accused have committed forgery for the purpose of cheating.
366. In this regard, it is proper to know the definition of forgery and essential ingredients to constitute an offence: -
463. Forgery: - [Whoever makes any false documents 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.
The essential ingredients are: -
(i) the making of a false document or part of it and;
(ii) such making should be with such intention as is specified in the Section viz. (a) to cause damage or injury to (i) the public, or (ii) any person; or (b) to support any claim or title; or (c) to cause any person to part with property; or (d) to cause any person to enter into an express or implied contract;
or (e) to commit fraud or that fraud may be committed.
To constitute an offence u/s 468 of IPC, the material ingredients are: - 197 Spl.C.C.No.476/2002 J
(i) Document in question is forged.
(ii) Accused forged it.
(iii) In forging he intended that it shall be used for cheating.
367. In the present case, the prosecution has proved that Ex.P.100 and 100(a) are forged bill of lading. There is no evidence forthcoming to prove that it is accused No.5 to 7 have forged the said document. Admittedly, Accused No.6 company is a public limited company and a juristic person which cannot forge the document. The evidence is not forthcoming to prove that it is accused No.5 and 7 have forged the same. In order to attract the ingredients of offence u/s 468 of IPC, the prosecution has to prove that it is the accused No.5 and 7 have forged the said document, but the same is not proved in the present case. Therefore, the prosecution has not established the ingredients of offence u/s 468 of IPC against accused No.5 to 7. ALLEGATION OF USING AS GENUINE A FORGED DOCUMENT:
368. It is alleged by the prosecution that in furtherance of the criminal conspiracy, Accused No.6 company represented by accused No.5 and 7, knowing fully well that the said export bill of M/s. Flora International Ltd., containing Bill of Lading bearing No. MAAI 10219795 valued US$2,58,000 drawn on M/s. Dap Services (Pvt.) Ltd., was not a genuine one, presented the same as genuine one and negotiated the same and dishonestly and fraudulently availed for Rs.84,99,480/-.
198 Spl.C.C.No.476/2002 J
369. Before going to consider the evidence of the prosecution regarding this allegation, it is proper to know the offence defined u/s 471 of IPC which reads as follows: -
471. Using as genuine a forged document or electronic record: - Whoever fraudulently or dishonestly uses as genuine any [document or electronic record] which he knows or has reason to believe to be a forged [document or electronic record], shall be punished in the same manner as if he had forged such [document or electronic record].
370. In the present case, as discussed above, the prosecution has proved that bill of lading bearing No. MAAI 10219795 valued US$2,58,000 drawn on M/s. Dap Services (Pvt.) Ltd., Ex.P.100 and 100(a) is a forged and fabricated document. Looking to Ex.P.100 and 100(a) on the face of it any ordinary prudent man can apparently say that the said document is a tampered and the forged document, to gain wrongfuly. The evidence of the prosecution proves that though Accused No.6 company is a public limited company, its representatives accused No.5 and 7 being Chairman and Director and Director of the said company have presented the said forged document, as a genuine document, when the bill of lading is a negotiable instrument for negotiating on 14.9.1995 to State Bank of Mysore, Main Branch, Bengaluru. The bank officers without taking into consideration, the tampering of the said document with number of alterations made by using the whitener, without ascertaining the genuineness of the said 199 Spl.C.C.No.476/2002 J document negotiated the forged bill by closing their eyes and released a sum of Rs.84,99,480/- in favour of Accused No.6 company on 14.9.1995. Such document has been blindly accepted, negotiated and payment has been made by the officers of the bank in respect of the public funds by which act Accused No.6 company was succeeded to gain wrongfully. This is one of the biggest transaction pertaining to Accused No.6 company wherein the SBM suffered huge loss without recovery of the amount of the said bill from the concerned. Therefore, the ingredients of the offence u/s 471 IPC are well establish in the present case against accused No.5 to 7.
ALLEGATION FOR CRIMINAL MISCONDUCT:
371. It is alleged by the prosecution that accused No.1, 3, 4 and 8 while discharging their duties as public servants, by corrupt or illegal means, by abusing their position as public servants obtained for themselves or for any other person, valuable thing or pecuniary advantage and thereby committed an offence of criminal misconduct punishable under Section 13(1)(d) r/w 13(2) of PC Act.
372. It is an admitted fact that accused No.1,3, 4 and 8 have worked in State Bank of Mysore, Main Branch, Bengaluru in the capacity of AGM, Chief Manager, Manager and Deputy Manager during the relevant period and they were the public servants.200 Spl.C.C.No.476/2002 J
373. Before considering the evidence of the prosecution, it is proper to consider the principles of the decision relied upon by the learned counsel for accused No.3, 4 and 8 reported in AIR 1979 SC 826 in the case of S.P. Bhatnagar and another vs. State of Maharashtra, wherein the Hon'ble Supreme Court held as follows: -
The abuse of position in order to come within the mischief of S. 5 (1)(d) must necessarily be dishonest so that it may be proved that the Accused caused deliberate loss to the department. It is for the prosecution to prove affirmatively that the Accused by corrupt or illegal means or by abusing his position obtained any pecuniary advantage for some other person.
374. In order to attract the offence u/s 13(1)(d) r/w 13(2) of Prevention of Corruption Act, 1988, the prosecution has to prove affirmatively that the Accused by corrupt or illegal means or by abusing his position has obtained for himself or any other person a valuable thing or pecuniary advantage. In the light of the requirement of the law, if the evidence of the prosecution in the present case is assessed, none of the witnesses have deposed that the accused No.1, 3, 4 and 8 have obtained any valuable thing or pecuniary advantage to themselves or for any other person. Therefore, the ingredients of the offence of criminal misconduct as provided under Sec. 13(1)(d) are not established in the present case.
375. In the present case, the learned counsel for accused No.5 to 7 has challenged the legality of the case registered by the CBI on 201 Spl.C.C.No.476/2002 J the source of information and investigation done in the matter.
Further, the learned counsel has raised that when the case was registered on the source of information, the CBI has to conduct preliminary enquiry into the matter to ascertain the truth or otherwise of the matter.
376. In this regard, the learned relied upon a decision reported in AIR 1971 SC 520 in the case of P. Sirajuddin vs. State of Madras. So far as the contention of learned counsel that CBI cannot register and investigate the offences pertaining to financial losses to bank cannot be accepted. The CBI can register and investigate such offences pertaining to financial losses to bank where the public fund is involved. Further, so far as preliminary enquiry, it is in respect of public servants where the cases are registered for disproportionate of assets. That rule cannot be applied in the present case for the case registered by the CBI on the source of information and investigation carried out by it pertaining to criminal conspiracy, cheating and other offences.
377. In the present case, considering the above discussion, I am of the view that the prosecution has established beyond all reasonable doubt that accused No.1, 3 to 8 have committed an offence of criminal conspiracy, cheating and dishonestly inducing delivery of funds which are punishable u/s 120B and 420 of IPC. 202 Spl.C.C.No.476/2002 J
378. Further, the prosecution has proved beyond all reasonable doubt that accused No.5 to 7 have committed an offence of using forged documents as genuine documents, which is punishable u/s 471 of IPC.
379. Therefore, the accused No.1, 3 to 8 are found guilty for the offences punishable u/s 120B and Sec. 420 of IPC and accused No.5 to 7 are found guilty for the offence punishable u/s 471 of IPC. Hence, I answer Point No.1, 2 and 4 in the affirmative and Point No.3 and 5 in the negative.
380. Point No.6: In view of my findings to the above points, I proceed to pass the following:
ORDER Acting under Section 235(2) of Cr.P.C., Accused No.1, 3 to 8 are hereby convicted for the offence punishable u/s 120-B and 420 of IPC.
Further, acting under Section 235(2) of Cr.P.C., accused No.5 to 7 are convicted for the offence punishable u/s 471 of IPC.
Acting under Section 235(1) of Cr.P.C., accused No.1, 3, 4 and 8 are acquitted for the offences punishable u/s 13(1)(d) r/w 13(2) of Prevention of Corruption Act, 1988.
Acting under Section 235(1) Cr.P.C., accused No.5 to 7 are acquitted for the offence punishable u/s 468 of IPC.203 Spl.C.C.No.476/2002 J
To hear regarding the sentence for the offences punishable u/s 120-B, 420, 471 of IPC from the respective accused.
(Dictated to the Judgment Writer, transcribed by him, revised by me personally and incorporated additional paragraphs directly on computer, corrected and then pronounced by me in the Open Court on this the 21st day of March, 2016) (BHEEMANAGOUDA K. NAIK) XXI Addl. City Civil and Sessions Judge And Prl. Special Judge for CBI Cases, Bengaluru City.
ORDER REGARDING SENTENCE Heard the learned Special Public Prosecutor Sri. Shivananda Perla for CBI, learned counsel for accused No.1, 3 to 8 and accused No.1, 3 to 5, 7 and 8 regarding the sentence.
The learned Public Prosecutor submitted that maximum sentence may be imposed against the accused No.1, 3 to 5, 7 and 8 and maximum fine may be imposed for accused No.6 company.
All the learned counsels for respective accused urged for taking lenient view stating that already 13 years time is over in the trial of the case. Accused No.1, 3, 4, 5 and 8 are old age people and suffering from severe health problems and to take lenient view in the matter.
The learned counsel for accused No.5 submitted memo with medical reports to show the health condition of accused No.5.204 Spl.C.C.No.476/2002 J
Accused No.1 submitted that he is aged 78 years, undergone heart surgery on two occasions, lost his wife last month and the children are residing in abroad and nobody in the family and prays for taking lenient view.
Accused No.3 submitted that he is aged 67 years, suffering from hypertension and diabetic and his daughter is in abroad and there are none in the family to look after his wife and prays for lenient view.
Accused No.4 submitted that he is aged 74 years, suffering from nurological problem, arthrisis and prays for taking lenient view.
Accused No.5 submitted that he is 64 years old, suffered brain haemrrage, heart attacks on two occasions, suffering from hypertension, diabetic, heavy weight and his mother is aged 88 years bedridden and nobody to lookafter her and his son is in abroad and his company is not working and he is not having any income and prays for taking lenient view.
On behalf of Accused No.6 company, accused No.5 submitted that company has become defunct since 15 years, winding up proceedings not taken place as per law and no business of the said company and not having any income to the said company.
Accused No.7 submitted that she is a woman aged about 54 years, left the Directorship in the company during 1996, deserted by her husband and her children are studying and she is not having any 205 Spl.C.C.No.476/2002 J independent source of income to lead her life and to maintain her children.
Accused No.8 submitted that he is aged 67 years, undergone surgery of right eye and vision is only 10% and he has to maintain his wife and prays for taking lenient view.
As seen from the evidence, the transactions are pertaining to prior to 1996 and case was filed in 2002 and decided in the year 2016.
Considerable time has already spent in the trial of the case. Except accused No.7, accused No.1, 3, 4, 5 and 8 are senior citizens and suffering from one or the other serious ailments. Accused No.7 is a women, said to be left the Directorship in 1996 itself and deserted by her husband.
Therefore, considering the old age, health problems of accused No.1, 3, 4, 5 and 8 and accused No.7 being the women, considering her condition it is proper to take lenient view while imposing sentence against them. The accused No.6 is a company said to be defunct since 15 years, it is a juristic person and sentence of imprisonment cannot be passed against the company and only the sentence of fine can be imposed by taking the present condition of the same.
Hence, I proceed to pass the following ORDER For an offence punishable u/s 120B of IPC, Accused No.1 M.S. Seetharama Rao, Accused No.3 M.S. Suryanarayana Rao, Accused 206 Spl.C.C.No.476/2002 J No.4 T.R. Subbaramu, Accused No.5 M.S.A. Aleem, Accused No.7 Smt. Anuradha and Accused No.8 K. Parthasarathy are sentenced to undergo Rigorous Imprisonment for a period of 3 (three) years each and shall also pay a fine of Rs.1,00,000/- (Rs. One Lakh only) each and in default of payment of fine to undergo Simple Imprisonment for a period of 9 (Nine) months each.
Further, for an offence punishable u/s 420 of IPC, Accused No.1 M.S. Seetharama Rao, Accused No.3 M.S. Suryanarayana Rao, Accused No.4 T.R. Subbaramu, Accused No.5 M.S.A. Aleem, Accused No.7 Smt. Anuradha and Accused No.8 K. Parthasarathy are sentenced to undergo Rigorous Imprisonment for a period of 3 (three) years each and shall also pay a fine of Rs.1,00,000/- (Rs. One Lakh only) each and in default of payment of fine to undergo Simple Imprisonment for a period of 9 (Nine) months each.
Further, for an offence punishable u/s 471 of IPC, Accused No.5 M.S.A. Aleem, and Accused No.7 Smt. Anuradha are sentenced to undergo Rigorous Imprisonment for a period of 1 (one) year and shall also pay a fine of Rs.1,00,000/- (Rs. One lakh only) each and in default of payment of fine to undergo simple imprisonment for a period of three months.
207 Spl.C.C.No.476/2002 J
Further, for an offence punishable u/s 120-B of IPC, accused No.6 M/s. Flora International Ltd., represented by accused No.5 and 7 is sentenced to pay a fine of Rs.5,00,000/- (Rs. Five lakhs only).
Further, for an offence punishable u/s 420 of IPC, accused No.6 M/s. Flora International Ltd., represented by accused No.5 and 7 is sentenced to pay a fine of Rs.5,00,000/- (Rs. Five lakhs only).
Further, for an offence punishable u/s 471 of IPC, accused No.6 M/s. Flora International Ltd., represented by accused No.5 and 7 is sentenced to pay a fine of Rs.2,00,000/- (Rs. Two lakhs only).
All substantive sentences imposed to accused No.1, 3, 4, 5, 7 and 8 shall run concurrently and the sentence of fine of respective accused shall run consecutively.
Acting u/s 428 Cr.P.C., the days spent by accused No.1, 3, 4, 5, 7 and 8 in judicial custody during investigation and trial of this case if any is given set off towards the imprisonment ordered.
Free copy of judgment is supplied to all the accused in the open court.
(Dictated to the Judgment Writer directly on computer, corrected and then pronounced by me in the Open Court on this the 21st day of March 2016) (BHEEMANAGOUDA K. NAIK) XXI Addl.City Civil and Sessions Judge And Prl. Special Judge for CBI Cases, Bengaluru City.
208 Spl.C.C.No.476/2002 JANNEXURE LIST OF WITNESSES EXAMINED FOR THE PROSECUTION:
PW-1: B. Lakshmipathy.
PW-2: Kannan Kutty.
PW-3: P.B. Raju.
PW-4: B.N. Seshanand Singh.
PW-5: T.C.S. Kumar.
PW-6: T.K. Srinivasan.
PW-7: Smt. Joyce Jose PW-8: V.R. Kalandaikal PW-9: A.P. Geetha PW-10: A.P. Hiriyannaiah PW-11: K.T. Manjunath PW-12: R. Lakshmi.
PW-13: Lalith Kumar.
PW-14: A.A. Mathews PW-15: N. Surendran PW-16: Samuel Emankal PW-17: N.A. Nayak.
PW-18: K.B. Nagaraju PW-19: M.V. Raghunath Rao.
PW-20: B.S.R. Rao PW-21: K.S. Prakash PW-22: Shantharam Sharma PW-23: Niranjan Basdalai PW-24: S.C. Lohia PW-25: K. Rajagopal PW-26: M.B. Suresh Kumar PW-27: M.C. George PW-28: K. Jayakumaran Nair LIST OF WITNESS EXAMINED FOR DEFENCE:
DW-1: S. Anbalagan DW-2: K.L. Shanthamurthy DW-3: Shashi Kumar LIST OF DOCUMENTS EXHIBITED FOR THE PROSECUTION: Ex.P.1: Delegation of powers - Revision - 1987. Ex.P1(a): Relevant entry in P. No.26 Ex.P.2: Sanction letter of Hypothecation limit of 24.50 lakhs dt. 7.5.92.209 Spl.C.C.No.476/2002 J
Ex.P2(a): Signature of Manager C&I. Ex.P.3: Resolution of company dated:22/4/1992. Ex.P.4: Resolution of company dated 2.4.1992.
Ex.P.5: Demand Promissory Note.
Ex.P.5(a): Endorsement of Guarantee
Ex.P.5(b): Signature of Director.
Ex.P.5(c): Signature of Director.
Ex.P.6: Delivery Letter to DPN.
Ex.P.7: Letter obtained from guarantor.
Ex.P.8: Agreement of guarantee in Form No.7 executed by
guarantor.
Ex.P.9: Letter of undertaking by company dt. 13.5.1992.
Ex.P.10: Agreement for cash credit & hypothecation of goods
dt.13.05.1992.
Ex.P.11: Agreement for Advances dt. 13.5.1992.
Ex.P.12: Stock Statement of company dated: 13/05/1992.
Ex.P.12(a): Endorsement made by Manager.
Ex.P.12(b): Signature of Manager.
Ex.P.13: Letter written by guarantor Pankaja Bai confirming
equitable mortgage dt. 14.5.1992.
Ex.P13(a): Registered cover (postal).
Ex.P.14: Xerox copy of letter dt. 28.5.1992 written by Flora
Industries Limited.
Ex.P.15: Page No.296 to 297 of the daily list (large sheets)
Ex.P.15(A): P.No.298 & 299 of the Daily List (large sheets) Ex.P.15(A1): Signature of PW.5 Ex.P.15(b): Page No.300 & 301 of the daily list (large sheets) Ex.P.15(b1): Signature of PW.5 Ex.P.16: Copy of letter dt. 10.6.1994 written by Chief Manager to Advocate to issue legal notice to borrower company.
Ex.P.17: Legal Notice dated: 19/06/1994.
Ex.P.18: Legal Notice dated 30.6.1994.
Ex.P.19: Proposal by AGM, Bengaluru to GM (operations)
dt. 16.2.1995.
Ex.P.19(a): Relevant portion
Ex.P.19(b): Portion identified by
Ex.P.19(c): Signature of A1
Ex.P.20: Proposal for sanction sent by AGM to DGM (Credit).
Ex.P.20(a): Relevant portion
Ex.P.21: Note submitted by AGM, Bengaluru to DGM (O) & (Credit)
to consider the proposal already recommended. Ex.P.21(a): Shara with signature of GM.
Ex.P.21(b): Signature of witnesses of PW6. Ex.P22: Cheque referred register for period from 17.1.1995 to 210 Spl.C.C.No.476/2002 J 27.4.1995.
Ex.P22(a) to (S) to (T): Relevant entry Ex.P23: Cheque referred register for period from 27.4.1995 to 8.8.1995 Ex.P23(a) to (Q): Relevant entries Ex.P24: Cheque referred Register for the period from 8.8.1995 to 8.2.1995 Ex.P24(a) to (G): Relevant entries Ex.P25: Cheque dt. 27.4.1995 No. 313708 Ex.P25(a): Signature of Director or Flora Industries Ltd., Ex.P26: Cheque dt. 6.5.1995 No. 344862 Ex.P27: Cheque dt. 8.5.1995 No. 344869 Ex.P27(a): Signature of Director Ex.P28: Cheque dt. 15.5.1995 No. 344850 Ex.P29: Cheque dt. 22.5.1995 No.344896 Ex.P30: Cheque dt. 27.5.1995 No.313709 Ex.P31: Cheque dt. 2.6.1995 No.311201 Ex.P32: Cheque dt. 19.1.1995 No.313704 Ex.P33: Cheque dt. 21.1.1995 No. 313705 Ex.P34: Cheque dt. 31.1.1995 No. 313765 Ex.P35: Cheque dt. 30.1.1995 No. 313756 Ex.P36: Cheque dt. 4.2.1995 No. 313737 Ex.P37: Cheque dt. 13.2.1995 No. 313772 Ex.P38: Cheque dt. 18.2.1995 No. 313775 Ex.P39: Cheque dt. 23.3.1995 No. 313777 Ex.P40: Cheque dt. 27.2.1995 No. 313738 Ex.P41: Cheque dt. 28.2.1995 No. 313773 Ex.P42: Cheque dt. 27.2.1995 No. 313780 Ex.P43: Cheque dt. 27.2.1995 No. 313783 Ex.P44: Cheque dt. 27.2.1995 No. 313785 Ex.P45: Cheque dt. 27.2.1995 No. 313785 Ex.P46: Cheque dt. 28.2.1995 No. 313789 Ex.P47: Cheque dt. 28.2.1995 No. 313791 Ex.P48: Cheque dt. 27.2.1995 No. 313782 Ex.P49: Cheque dt. 27.2.1995 No. 313781 Ex.P50: Cheque dt. 6.3.1995 No. 313794 Ex.P51: Cheque dt. 27.2.1995 No. 313786 Ex.P52: Cheque dt. 7.3.1995 No. 313795 Ex.P53: Cheque dt. 7.3.1995 No. 313796 Ex.P54: Cheque dt. 15.3.1995 No. 313799 Ex.P55: Cheque dt. 27.3.1995 No. 344814 Ex.P56: Cheque dt. 27.3.1995 No. 344813 Ex.P57: Cheque dt. 7.7.1995 No. 311223 Ex.P58: Cheque dt. 7.7.1995 No. 311224 211 Spl.C.C.No.476/2002 J Ex.P59: Cheque dt. 30.6.1995 No. 311210 Ex.P60: Cheque dt. 1.8.1995 No. 311234 Ex.P61: Cheque dt. 2.8.1995 No. 311238 Ex.P62: Cheque dt. 3.8.1995 No. 311241 Ex.P63: Cheque dt. 3.8.1995 No. 311243 Ex.P64: Cheque dt. 3.8.1995 No. 311240 Ex.P65: Cheque dt. 3.8.1995 No. 311242 Ex.P66: Cheque dt. 3.8.1995 No. 311244 Ex.P67: Cheque dt. 3.8.1995 No. 311245 Ex.P68: Cheque dt. 3.8.1995 No. 311248 Ex.P69: Cheque dt. 9.3.1995 No. 313798 Ex.P70: Cheque dt. 9.3.1995 No. 313797 Ex.P71: Cheque dt. 4.3.1995 No. 313792 Ex.P72: Cheque dt. 27.2.1995 No. 313787 Ex.P73: Cheque dt. 27.2.1995 No. 313788 Ex.P74: Cheque dt. 15.9.1995 No. 311276 Ex.P75: Cheque dt. 14.8.1995 No. 311253 Ex.P76: Cheque dt. 12.8.1995 No. 311252 Ex.P77: Cheque dt. 27.8.1995 No. 313711 Ex.P78: Cheque dt. 28.8.1995 No. 311258 Ex.P79: Cheque dt. 1.9.1995 No. 311230 Ex.P80: Cheque dt. 1.9.1995 No. 311259 Ex.P81: Cheque dt. 4.9.1995 No. 311260 Ex.P82: Document to show processing and documentation charges dt. 14.5.1992 Ex.P83: Slip written by A.G.M. Ex.P83(a): Signature of A.G.M. Ex.P84: Resolution of the company dt. 2.4.1992 Ex.P85: Letter dt. 16.3.1995 written by Indian Overseas Bank to SBM (C&I) Ex.P85(a): Signature of A8 Ex.P85(b): Relevant entry Ex.P86: Letter from Indian Overseas Bank dt. 30.11.1995 Ex.P86(a): Initial of A3 Ex.P86(b): Signature of Senior Manager, Indian Overseas Bank Ex.P87: Copy of the letter addressed to ECGC by Manager (C&I) Ex.P87(a): Signature of Manager (A4) Ex.P88: Copy of proposal sent to ECGC Ex.P88(a): Initials of A4 Ex.P89: Copy of the Branch letter dt. 26.4.1996 Ex.P89(a): Signature of A4 Ex.P90: Copy of proposal sent to ECGC Ex.P90(a): Initial of A4 Ex.P91: Copy of the letter dt. 10.5.1995 212 Spl.C.C.No.476/2002 J Ex.P91(a): Initials of A4 Ex.P91(b): Letter dt. 9.5.1995 Ex.P91(b1): Signature of Manager (Appraisal) Ex.P92: Copy of letter dt. 6.5.1996 Ex.P92(a): Signature of A1 Ex.P93: Original note submitted by A4 to AGM dt. 29.1.1996 Ex.P93(a): Signature of A4 Ex.P93(b): Relevant portion of writings and initials Ex.P94: Letter from Enforcement Directorate of Govt. of India dt. 24.2.1999 Ex.P95: Letter along with the note (3 sheets) Ex.P95(a)(b)(c): Note by Parthasarathy, Subramani and Suryanarayana respectively Ex.P95(d): Signature of AGM Ex.P95(e): Chit annexed to P95 Ex.P95(f): Shara with signature of (DGM Credit) Ex.P95(g): Written portion Ex.P95(h): Writings by GM(O) Ex.P95(i): Initial & date in red ink Ex.P95(j): Signature of A1 Ex.P95(k): Signature of GM(O) Ex.P96: Note submitted by I.B.D. to Chief Manager C&I division (23 sheets) Ex.P96(a): Note by A3 Ex.P96(b): The Telex Message Ex.P96(c): Bill of lading Ex.P96(d): Portion (written) Ex.P96(d1) to (d3): Relevant entry Ex.P96(e): Letter dt. 1.8.1995 Ex.P96(f): Initial with date Ex.P96(g): Relevant entry of portion Ex.P96(h): AGM for noting writings Ex.P96(i): Signature of official Ex.P96(j): Letter dt. 7.4.1994 Ex.P97: Note submitted by I.B.D. dt. 14.9.1995 Ex.P97(a): Bill annexed to Note Ex.P97(b): Initial of official Ex.P97(c): Initial of A2 Ex.P98: Foreign export bill purchase register Ex.P98(a): P.No.212 Ex.P98(b) (b1): P.No.263 bill of lading Ex.P98(c): P. No.112 Ex.P98(d): P. No.117 Ex.P98(e): P. No.112 213 Spl.C.C.No.476/2002 J Ex.P99: Rep. by letter by Hanjin Shipping dt. 15.1.1998 Ex.P100: Bill of lading Ex.P100(a): Bill of lading Ex.P100(a1): Signature of Hanjin Shipping Official Ex.P100(a2): Signature of Director of Flora Ex.P100(b): Signature of Hanjin Shipping Official Ex.P100(c): Signature of Director of Flora Ex.P101: Hanjin Shipping Letter dt. 19.2.1998 written to bank Ex.P102: Letter written by Hanjin Shipping to State Bank of Mysore dt. 26.5.1998 Ex.P103: 6 sets of office copies of statement of irregularities Ex.P103(a) to (g): Relevant pages Ex.P104: Note submitted by AGM dt. 3.1.1994 sought to issue legal notice Ex.P104(a): Signature of the C.R. Narasimhamurthy Ex.P104(b): Initial of GM(O) Ex.P104(c): Observation in red ink by GM(O) Ex.P105: Note submitted by signature Branch to GM(O) dt. 6.6.1992 (8 sheets) Ex.P106: Copy of the sanctioned letter dt. 3.6.1992 Ex.P106(a): Initial of A4 Ex.P107: True copy of Bank Guarantee Issue Register Ex.P108: P. No. 131 of Demand Liability Register maintained by IBD Ex.P108(a) to (f): Relevant entry Ex.P109: P. No. 13, 14, 25, 26, 136, 137, P. No.138, 139, Initial bill under LC (Letter of Credit) Ex.P109(a) to (d): Relevant pages Ex.P110: Office copy of letter dt. 25.3.1996 of SBM Ex.P111: Note from credit department addressed to AGM Ex.P112: File in respect of Bank Guarantee issued by SBM Ex.P112(a): Copy of letter of guarantee issued on stamp paper Ex.P112(b): Counter guarantee on stamp paper Ex.P112(c): Note submitted to AGM dt. 17.6.1995 Ex.P112(d): Bank Guarantee (Hand written) 2 sheets Ex.P112(d1): Signature of A3 Ex.P112(d2): Signature of A1 Ex.P112(d3): Signature of A4 Ex.P112(e): Letter dt.17.6.1996 Ex.P112(f): Note submitted by Manager C&I Ex.P112(g): Letter dt. 18.6.1991 Ex.P113: Valuation Report dt. 17.1.2002 Ex.P114: Valuation Report dt. 16.1.2002 Ex.P115: Letter from ECGC of India dt. 30.3.2000 Ex.P115(a): Signature of PW.7 214 Spl.C.C.No.476/2002 J Ex.P116: Letter from ECGC of India dt. 8.6.1999 Ex.P117: Letter by ECGC of India dt. 22.2.1997 Ex.P118: Letter from Flora Industrial Pvt. Ltd., to Chief Manager dt.
19.10.1995 Ex.P118(a): Initial of Chief Manager Ex.P118(b): Initial of A8 Ex.P119: Letter from KSIIDC to Chief Manager dt. 4.11.1995 Ex.P119(a): Signature of J.A. Yallakki (DGM) Ex.P120: Letter dt. 15.12.1997.
Ex.P121: Report for months of October & November (6 sheets) Ex.P122: Office copy of letter dt. 7.9.1992 Ex.P122(a): Signature of one Sheshanand Singh Ex.P123: Office copy of letter dt. 7.10.1992 Ex.P123(a): Signature of one Sheshananda Singh Ex.P124: Copy of letter dt. 30.9.1992 Ex.P124(a): Signature of Sheshanand Singh Ex.P125: Copy of letter dt. 15.7.1993 sent to C&I division Ex.P125(a): Signature of PW.2 Ex.P126: Office copy of letter dt. 7.1.1993 Ex.P126(a): Signature of one Sheshananda Singh Ex.P127: Office copy of letter dt. 30.3.1993 Ex.P127(a): Signature of PW.2 Ex.P128: Office copy of letter dt. 30.9.1993 Ex.P128(a): Signature of PW.2 Ex.P129: Loan application along with balance sheet of Flora Industries Ltd., Ex.P129(a): Signature of Chairman of Flora Industries Ex.P129(b & c): Signature of Director of Flora Industries Ex.P130: Pre-sanction Inspection Report given by PW.5 Ex.P130(a): Signature of PW.5 Ex.P131: Proposal along with the working capital assessment data Ex.P132: Receipt Memo dt. 22.5.2002 Ex.P133: G.R. Form No.100018 dt. 20.10.1995 of Flora Industries Ex.P134: Note dt. 10.5.1995 written by PW.9 Ex.P134(a): Written portion Ex.P134(b): Written portion & Signature of A8 Ex.P134(c): Note along with signature of AGM Ex.P135: Invoice with packing list Ex.P136: Submission by IBD Ex.P137: Copy of the bill No. 030241 Ex.P138: Receipt Memo dt. 12.6.2002 Ex.P138(a): Signature of PW.13 Ex.P139: Export Register Ex.P139(a) to (d): Relevant entries 215 Spl.C.C.No.476/2002 J Ex.P140: Covering letter dt. 6.5.1998 Ex.P140(a): Signature of PW.13 Ex.P141: Xerox copies of the 3 documents together marked Ex.P142: Duplicate G.R. Form No.100002 Ex.P143: Receipt Memo dt. 15.6.2002 Ex.P143(a): Signature of V. Laxman Kumar Ex.P144: Copy of one bill of lading issued by J.M. Baxi & Company Ex.P145: Copy of bill of lading Ex.P146: Copy of bill of lading Ex.P147: Copy of bill of lading Ex.P147(a): Signature of PW.14 Ex.P148: Copy of shipping bill dt. 6.9.1995 Ex.P148(a): Written portion in Ex.P148 Ex.P148(b): Signature of official of CC of India Ltd., Ex.P149: Copy of Forwarding Note Ex.P149(a): Signature of official of CC OF India Ltd., Ex.P150: Certified copy of Inland Way Bill Ex.P150(a): Signature of official of CC of India Ltd., Ex.P151: Certified copy of statement of container booked and moved Ex.P151(a): Relevant entry Ex.P151(b): Signature of official of CC of India Ex.P152: Xerox copy of Indemnity Bond Ex.P153: Letter dt. 4.7.1995 Ex.P153(a): Signature of A5 Ex.P154: Letter of Indemnity bond addressed to SBM Ex.P154(a) & (b): Signatures of A5 Ex.P155: Original negotiation of purchase of bill expressed in foreign currency Ex.P155(a) & (b): Signatures of A5 Ex.P156: Invoice dt. 29.6.1995 signed by A5 Ex.P156(a): Signature of A5 Ex.P157: Letter dt. 18.9.2009 Ex.P157(a): Signature of PW.19 Ex.P157(b): Signature of Investigating Officer Ex.P158: Letter dt. 29.11.2001 Ex.P158(a): Signature of PW.19 Ex.P158(b): Signature of Investigating Officer Ex.P159: Letter dt. 28.3.2002 Ex.P159(a): Signature of PW.19 Ex.P159(b): Signature of Investigating Officer Ex.P160: Receipt Memo dt. 3.6.2002 Ex.P160(a): Signature of PW.19 Ex.P160(b): Signature of Investigating Officer Ex.P161: Note submitted to DGM by C&I Division 216 Spl.C.C.No.476/2002 J Ex.P161(a): Signature of A8 Ex.P161(b): Initial of A4 Ex.P161(c): Initial of A3 Ex.P161(d): Initial of A1 Ex.P162: Post shipment Finance by negotiating export bill Ex.P162(a): Signature of A8 Ex.P162(b): Initial of A4 Ex.P162(c): Initial of A3 Ex.P162(d): Initial of A1 Ex.P163: Covering letter dt. 17.6.2002 Ex.P163(a): Signature of PW.21 Ex.P164: Covering letter dt. 11.4.2002 Ex.P164(a): Signature of PW.22 Ex.P165: Covering letter dt. 3.1.2002 Ex.P165(a): Signature of PW.22 Ex.P166: Sanction order Ex.P166(a)(b): Signature of PW.23 Ex.P167: 23 transmitted photographs (Q1 to Q7) Ex.P168: Opinion given by GEQD Ex.P168(a): Signature of PW.24 Ex.P168(b): signature of R.B. Bhosle Ex.P169: Reasons for opinion dt. 31.5.2002 Ex.P169(a): Signature of PW.24 Ex.P170: Sanction order of A4 Ex.P170(a) (b): Signature of PW.25 Ex.P171: Sanction order of A8 Ex.P171(a)(b): signature of PW.25 Ex.P172: Covering letter dt. 14.6.2002 Ex.P172(a): Signature of PW.26 Ex.P173: Notarized copy of investigation conducted by PW.19 Ex.P173(a): Notarized copy of note submitted by AGM Ex.P174: Original F.I.R. dt. 4.6.2o001 along with notification Ex.P174(a): Signature of PW.27 Ex.P175: Seizure Memo dt. 7.6.2002 Ex.P175(a): Signature of PW.27 Ex.P176: Register of Con freight Shipping Agency India Pvt., Ltd., Ex.P177: Letter dt. 14.6.2002 Ex.P178: Register period 1.2.1995 to 13.10.1995 Ex.P179: Search List dt. 29.6.2001 Ex.P179(a): Signature of PW.27 Ex.P180: Search List dt. 29.6.2001 Ex.P180(a): Signature of PW.27 Ex.P181: One file 217 Spl.C.C.No.476/2002 J LIST OF DOCUMENTS MARKED FOR THE DEFENCE:
Ex.D1: Copy of statement of account of SBM, Bengaluru Division of A/c. No.10631 from 6.5.1992 to 31.10.1998 Ex.D1(a) to (e): Relevant entries Ex.D2 to D6: Letters issued by Flora to bank Ex.D7 to D10: Letters wrote by PW.16 to bank Ex.D7(a) to D10(a): Signature of PW.16 Ex.D11: Bunch of documents produced u/s 91 Cr.P.C., with covering letter dt. 22.1.2014.
Ex.D12: Monthly irregularities settings dt.28.4.1995 (for month of January 1995) Ex.D13: Monthly irregularities settings dt.28.4.1995 (for month of February 1995) Ex.D14: Monthly irregularities settings dt.28.4.1995 (for month of March 1995) Ex.D15: Letter by Andhra Bank Ex.D16: Circular letter No. 279 dt. 5.10.1994 Ex.D17: Letter dt. 30.6.1998 of E.C.G.C. LIST OF MATERAIL OBJECTS MARKED FOR PROSECUTION: -
-NIL -
(Bheemanagouda K. Naik) XXI Addl.City Civil and Sessions Judge And Prl. Special Judge for CBI Cases, Bengaluru City.218 Spl.C.C.No.476/2002 J
Judgment pronounced in open court, vide separate detailed order.
ORDER Acting under Section 235(2) of Cr.P.C., Accused No.1, 3 to 8 are hereby convicted for the offence punishable u/s 120-B and 420 of IPC.
Further, acting under Section 235(2) of Cr.P.C., accused No.5 to 7 are convicted for the offence punishable u/s 471 of IPC.
Acting under Section 235(1) of Cr.P.C., accused No.1, 3, 4 and 8 are acquitted for the offences punishable u/s 13(1)(d) r/w 13(2) of Prevention of Corruption Act, 1988.
Acting under Section 235(1) Cr.P.C., accused No.5 to 7 are acquitted for the offence punishable u/s 468 of IPC.
To hear regarding the sentence for the offences punishable u/s 120-B, 420, 471 of IPC from the respective accused.
(Bheemanagouda K. Naik) XXI Addl.City Civil and Sessions Judge, and Prl. Special Judge for CBI Cases, Bengaluru.219 Spl.C.C.No.476/2002 J
Order pronounced in open court, vide separate detailed order.
ORDER For an offence punishable u/s 120B of IPC, Accused No.1 M.S. Seetharama Rao, Accused No.3 M.S. Suryanarayana Rao, Accused No.4 T.R. Subbaramu, Accused No.5 M.S.A. Aleem, Accused No.7 Smt. Anuradha and Accused No.8 K. Parthasarathy are sentenced to undergo Rigorous Imprisonment for a period of 3 (three) years each and shall also pay a fine of Rs.1,00,000/- (Rs. One Lakh only) each and in default of payment of fine to undergo Simple Imprisonment for a period of 9 (Nine) months each.
Further, for an offence punishable u/s 420 of IPC, Accused No.1 M.S. Seetharama Rao, Accused No.3 M.S. Suryanarayana Rao, Accused No.4 T.R. Subbaramu, Accused No.5 M.S.A. Aleem, Accused No.7 Smt. Anuradha and Accused No.8 K. Parthasarathy are sentenced to undergo Rigorous Imprisonment for a period of 3 (three) years each and shall also pay a fine of Rs.1,00,000/- (Rs. One Lakh only) each and in default of payment of fine to undergo Simple Imprisonment for a period of 9 (Nine) months each.
Further, for an offence punishable u/s 471 of IPC, Accused No.5 M.S.A. Aleem, and Accused No.7 Smt. Anuradha are sentenced to undergo Rigorous Imprisonment for a period of 1 (one) year and shall also pay a fine of Rs.1,00,000/- (Rs. One lakh only) each and in default of payment of fine to undergo simple imprisonment for a period of three months.
Further, for an offence punishable u/s 120-B of IPC, accused No.6 M/s. Flora International Ltd., represented by accused 220 Spl.C.C.No.476/2002 J No.5 and 7 is sentenced to pay a fine of Rs.5,00,000/- (Rs. Five lakhs only).
Further, for an offence punishable u/s 420 of IPC, accused No.6 M/s. Flora International Ltd., represented by accused No.5 and 7 is sentenced to pay a fine of Rs.5,00,000/- (Rs. Five lakhs only).
Further, for an offence punishable u/s 471 of IPC, accused No.6 M/s. Flora International Ltd., represented by accused No.5 and 7 is sentenced to pay a fine of Rs.2,00,000/- (Rs. Two lakhs only).
All substantive sentences imposed to accused No.1, 3, 4, 5, 7 and 8 shall run concurrently and the sentence of fine of respective accused shall run consecutively.
Acting u/s 428 Cr.P.C., the days spent by accused No.1, 3, 4, 5, 7 and 8 in judicial custody during investigation and trial of this case if any is given set off towards the imprisonment ordered.
Free copy of judgment is supplied to all the accused in the open court.
(Bheemanagouda K. Naik) XXI Addl.City Civil and Sessions Judge, and Prl. Special Judge for CBI Cases, Bengaluru.