Madras High Court
K. Chellappan And J.R. Chandran vs State By, Represented By Police, ... on 23 July, 2002
Author: A.K. Rajan
Bench: A.K. Rajan
JUDGMENT A.K. Rajan, J.
1. These appeals are against the conviction of the appellants.
2. The Sub-Inspector of Police, SPE: C.B.I: GOW, Madras received complaint on 31.7.1986 that between 1983 April and July 1985, K.Sankaranarayanan-A.1, Manager, Indian Bank, Hasthinapuram Branch, Madras, who had the power of sanctioning various loans, entered into a criminal conspiracy along with K.Chellappa-A.2 and Chandran-A.3 and in pursuance of the criminal conspiracy, committed various acts of commission and omission under the guise of sanctioning loans to some ten individuals referred to in the complaint. The loan amounts were not paid to the loanees; A.2 and A.3 acted as middlemen and withdrawn the amounts from the bank. They also stood as guarantors in some of the loan transaction. A.1 caused undue pecuniary advantage for himself and A.2 and A.3 and all the three accused cheated the Indian Bank, Hasthinapuram Branch, Madras. The above said acts of the accused constitutes offences under Section 120-B, read with Sections 409, 467, 465, 471 I.P.C. and Section 5(2) read with Section 5(1)(c) and (d) of the Prevention of Corruption Act.
3. The Chief Metropolitan Magistrate, Egmore, Madras by order dated 7.8.1986, granted permission to C.M.Dhanapal, the Sub-Inspector of Police, SPE: C.B.I: G.O.W., to investigate the above case.
4. The Sub-Inspector, Dhanapal investigated the case and filed the charge-sheet against the accused-1 to 3. The trial Court framed 19 charges under Sections 120-B, read with Sections 409, 467, 465, 471 I.P.C. and Section 5(2) read with Section 5(1)(c) and (d) of the Prevention of Corruption Act. To prove the charges, prosecution examined P.Ws.1 to 29 and marked Exs.P.1 to P.110; no Material Objects were marked. The Special Judge under the Prevention of Corruption Act who tried the case found the accused-1 to 3 guilty under charges 120-B, read with Sections 409, 465, 467, 471 and Section 5(1)(d) of the Prevention of Corruption Act.
(i) A.1 was convicted under Section 409 I.P.C. and imposed a sentence of six months R.I and a fine of Rs.100; he was also convicted under Section 465 read with Section 471 I.P.C. and imposed a sentence of three months' R.I. and a fine of Rs.100/-; and further he was convicted under Section 5(1)(d) read with Section 5(2) of the Prevention of Corruption Act;
(ii) A.2 was convicted under Section 409 read with 109 I.P.C. and sentenced him to undergo three months R.I., and also imposed a fine of Rs.200/-; he was also convicted under Section 471 read with 467 I.P.C. and imposed a sentence of three months R.I. and a fine of Rs.200/-;
(iii) A.3 was convicted under Section 409 read with Section 109 I.P.C. and imposed a sentence of one year R.I. and a fine of Rs.200/-; he was also convicted under Section 465 imposed a sentence of three months R.I. and imposed a fine of Rs.100/-, he was convicted under Section 467 (5 counts) I.P.C. and imposed a fine of Rs.100/- for each count; he was also convicted under Section 467 read with 471 (5 counts) and imposed a sentence of one year R.I. and imposed a fine of Rs.100/- for each count; and further convicted under Section 467 read with Section 471 (5 counts) and imposed a sentence of one year R.I. and a fine of Rs.200/- for each count. Sentences were directed to run concurrently.
5. With respect to other charges, they were acquitted. Aggrieved by the conviction, A.1 filed C.A.No.82 of 1990; A.2 and A.3 filed C.A.No.70 of 1990. Since both the appeals arise out of a common judgment, they were heard together and common judgment is passed.
6. Learned counsel appearing for the accused submitted that the complaint has been registered by, P.W.29 who is also the Investigating Officer. Therefore, the entire investigation is vitiated. In support of his submission, he relied upon a decision in Megha Singh v. State of Haryana (1997 Supreme Court Cases (Cri) 267), wherein the Supreme Court has held, " We have also noted another disturbing feature in this case. P.W.3, Siri Chand, Head Constable arrested the accused and on search being conducted by him a pistol and the cartridges were recovered from the accused. It was on his complaint a formal first information report was lodged and the case was initiated. He being complainant should not have proceeded with the investigation of the case. But it appears to us that he was not only the complainant in the case but he carried on with the investigation and examined witnesses under Section 161 Cr.P.C. Such practice, to say the least, should not be resorted to so that there may not be any occasion to suspect fair and impartial investigation. "
7. The Special Public Prosecutor referred to a judgment of the Supreme Court in Nanak Chand v. State of H.P. (1974 Cri.L.J.660), wherein it was held, "...that where an objection that the investigation had been made by an officer below the rank of Deputy Superintendent of Police in contravention of the provisions of the Prevention of Corruption Act has not been raised before the trial Court and the High Court, it cannot be allowed to be raised for the first time in this Court in an appeal by Special Leave. "
Therefore, the Special Public Prosecutor submitted that since this objection was not raised before the lower Court, such an objection cannot be raised at this stage.
8. The Supreme Court held in the above case that an objection which was not raised before the High Court, could not be raised even before the Supreme Court. Since the objection is raised in the appellate Court, this objection requires consideration. Further, this decision of the Supreme Court refers to obtaining an authorization from the Judicial Magistrate. This decision is not applicable to the point raised by the accused.
9. The point that is raised by the accused is that the complainant cannot investigate the case himself; such a procedure vitiates the entire trial. The First Information Report was registered by P.W.29. a reading of the F.I.R. makes it clear that the information he received was "source information". R.W.29 was not the complainant. After registering the complaint, he has obtained permission, under Section 5-A of the Prevention of Corruption Act from the Chief Metropolitan Magistrate, Madras,to the effect, " Under the circumstances stated in the above application, permission is granted to Thiru C.M. Dhanapal, Sub-Inspector of Police, C.B.I., G.O.W., Madras to investigate the above said case. "
Therefore, assuming that there was an irregularity in investigation, that has been cured. Therefore, there is no irregularity or illegality in P.W.29 investigating the case.
10. The learned counsel for the appellant next submitted that the order of authorization granted by the Chief Metropolitan Magistrate is only to investigate the "case" as registered; the case as registered pertains to the grant of loan to ten named persons in the F.I.R. The complaint is, the ten individuals found in F.I.R. are non-existent persons whereas A.2 and A.3 are the 7th and 10th persons' in that complaint. Therefore, the complaint that all those persons are non-existent persons are proved to be false. Further, none of the charges framed by the Court relates to grant of loan. Further, P.W.29 in his evidence has admitted that he went to the house of all the account holders; Therefore, it is proved that all the persons named in the F.I.R. were real persons. Therefore, the complaint that those persons are non-existent persons is not true and it is also proved to be false. Therefore, the trial Court ought to have acquitted of the accused all the charges.
11. The Chief Metropolitan Magistrate has given permission to investigate the "case". When such permission has been granted, if during investigation, the Officer finds new materials, he can prosecute on the basis of such new materials.
12. P.Ws.1 and 2 depose about the procedure that is to be followed while granting loans to self-employed persons. According to them, they must start S.B. Account, formerly introduced by another account-holder of the Bank. The Manager may either by himself or through his subordinates verify the contents of the application for loan; after getting the relevant documents signed by the loanee as well as the guarantors, he can grant the loan. P.W.1, who succeeded A.1 as Manager of Indian Bank, Hasthinapuram Branch has stated in his evidence that this branch was started in 1985; One Manager, two officers, four clerks and two sub-staff were working there. The Manager had power to grant loan upto Rs.3,000/- to small business, self-employment and for retail business; the regional office set a limit to every Branch Manager; they cannot exceed that limit fixed for every year. The person who is in need of the loan must approach the Bank Manager and the Bank Manager must enquire the details regarding the person and the type of loan that he needs. The Manager must be self informed as to the person who wishes to get the loans and the Manager has to satisfy himself as to the needs of the person for the grant of loan. He must inspect the place where the applicant wishes to start the business and only after deciding that the loan application has to be filled up and given to the Manager; For such loans, the guarantors are also needed; the person must have a savings account in his name. The Manager must make an endorsement in the loan application for sanction of the loan. On the date when the loan is sanctioned, the guarantor must come to the bank in person. After getting agreement, promissory note and hypothecation agreement for mortgaging the business are to be obtained in writing. The person who gets the loan must sign in the promissory note and the hypothecation agreement. Thereafter, these documents are sent to the concerned clerk and after the banks accounts are debited, loan amount will be credited in the savings account of the loanee. Withdrawal slips are given at the same counter; Using the withdrawal slips, the amount can be received by the loanees. A representative of the loanee can also get the amount from the bank.
13. From the evidence on record, it is seen that,
(i) M.Kandasamy was introduced by J.R. Chandran-A.3 and loan was granted under A/c No.1432 for the purpose of doing business in food products; The guarantor was one Ramu. The loan amount was received by M.Kandasamy. In that, Rs.449.83 has been paid through Ex.P.11.
(ii) Ganesh, Account Holder, S.B. A/c No.3156 was introduced by J.Mohan; the purpose of granting loan was for the business in mat weaving. The guarantor was one Rose Mary and the amount was received through K.Chellappa and the amount of Rs.305.20 was repaid by Ex.P.22.
(iii) Alim was introduced by J.Mohan for the business of rope making business; His A/c No. was 3157; guarantor was P.Karmegam; the amount Rs.481.90 was received through K.Chellappa.
(iv) Nathan was introduced by V.Kandasami; His A/c No. was 2476; He sought loan for the purpose of manufacturing table salt. Guarantor was R.Gopal; amount of Rs.320/- was received by Masilamani through Ex.P.45.
(v) J.Kuppan, A/c No.3179 was introduced by Kaliaperumal; he sought loan for starting a bunk shop. Guarantor was one Sundararajan; amount of Rs.520.10 was received by Masilamani, under Ex.P.56.
(vi) M.Mohan, A/c No.1577 was not introduced by anybody. He sought loan for the purpose of having a tea stall and manufacturing biscuits. The amount was received by Mohan. Rs.1,000/- was received by Mohan.
(vii) R.Radha, A/c No.1578 was not introduced by anybody. He sought loan for the purpose of starting a biscuit stall and general store. No amount was repaid by him.
(viii) K.Chellappa, A/c No.387 was introduced by J.R.Chandran. He sought loan for having automobile shop. No amount was repaid by him.
(ix) Masilamani, A/c No. was1732. He sought loan for the starting confectionary and no one introduced him. No amount was repaid.
14. P.W.1 in his evidence has stated that he along with Thayumanavar, Palaniappa and the first accused went to the addresses of these loanees; He came to know that all these seven persons were not in the addresses that were furnished in the loan applications. Not even a suggestion was put to him that those seven persons were residing in the very same address. P.W.2 was another officer of the bank when the first accused was the manager; He was well acquainted with the signatures of the officers and clerks; He identifies the signatures of A.1, A.2 and A.3. He has further stated that the accused-2 and 3 are brothers and they used to come to the Indian Bank at Hasthinapuram during the year 1984-85; When they come, they will meet only the first accused and used to talk with A.1 in his room, dining room and in his private room; There is also a locker in the name of Chellapa, A.2. He has further stated that Savings Bank Account in the name of Masilamani who was working under A.2 and A.3 was opened by the first accused. A.3 had a current account in the name of Vinodh Traders under the Employment Scheme and he has been given loan. In the cross-examination, he has stated that A.2 and A.3 were having fixed deposits in that bank.
15. The evidence of P.Ws.17, 19, 20, 23 and 24 proves that the loans were granted to above mentioned persons and amounts were disbursed, based on the sanction made by A.1.
16. From these evidence, it is proved that A.1 sanctioned the loan for all these seven persons. The case of the prosecution is that they are the seven persons are not real persons and these loans were not real loans. According to the addresses furnished in the account opening form and other documents, Kandasamy was residing in No.191, G.S.T. Road, Chromepet, Madras-600044; he was said to be carrying on business in manufacturing pickles and appalams for ten years. But, P.W.26, V.Kandasamy has stated in the evidence that he was working under the accused-2 and 3 for some time. They were having a company by name, "Vinodh Traders" at No.191, G.S.T. Road. They were carrying on business in hardware and also carrying on business in running tourist taxis. There is no evidence that V.Kandasamy was carrying on business in that; It was A.3 who introduced Kandasamy to the bank. If really any person by name Kandasamy was carrying on business in the shop of A.3, then A.3 should have produced him before the Court. Since A.3 did not produce Kandasamy, he introduced as a person carrying on business in the same premises, the lower Court has come to the conclusion that the prosecution has proved that no such person by name Kandasamy was carrying on business at No.191, G.S.T. Road, Chromepet, Madras-44.
17. The address given while opening the account in the name of Ganesh, is 27, Station Road, Chromepet, Madras. But P.W.10, owner of the premises had stated in his evidence that his house contains three parts and it has been rented to Sivaraman, Rajagopal and in one part his son-in-law, R.Sundaresan was residing and no such person by name R.Ganesh was ever residing in that house. P.W.10, retired as Under Secretary to Government. There is no reason to reject his evidence. Further, P.W.10 was not cross-examined at all. P.W.12, Postman attached to Chromepet Post Office has stated that at No.27, Station Road, Chromepet, nobody by name R. Ganesh was residing in that house. From the evidence of P.Ws.10 and 12, the trial Court has come to the conclusion that no person by name, R.Ganesh was residing at No.27, Station road, Chromepet, and the loan has been given by A.1 to a person. Loan was granted by A.1 to Alim who was said to be residing at No.11, Bhuvaneswari Nagar, Madras-54. P.W.3, owner of the house at No.11, Bhuvaneswari Nagar has stated that it was his own house; he constructed the house in 1975 and it was never rented to any person and it was under owner's occupation right through. P.W.13, the postman attached to that area has stated that P.W.3 is residing in that house and no person by name Alim was ever residing. Therefore, on the basis of these two witnesses, the lower Court has come to the conclusion, that no person by name Alim was residing in that address. Therefore, the address given in the loan applications are false.
19. Loan was given to Nathan who was said to be residing at No.15, N.S.K. Nagar, Madras-64. P.W.14, Postman of that area who is working from 1981 has deposed that at the address at No.15, N.S.K. Nagar, there was no house at all. In that street, only numbers upto 14 are found. This witness was also not cross-examined. Therefore, the lower Court has come to the conclusion that no person by name Nathan was ever residing in that place.
20. Loan was given to J.Kuppan who was said to be residing at No.9, Agananuru Street, Madras-64. P.W.14, Postman attached to that area has stated that at No.9, Agananuru Street, no person by name J.Kuppan was ever residing. This witness was not examined. P.W.8, owner of the house at No.9, Agananuru Street, has stated that he constructed the house in the year 1984. While constructing the house, he was residing adjacent to the house at No.9. Kuppan was never his tenant. Only Kandasamy and Rajaram were living in that house. This witness was not cross-examined. Lower Court has come to the conclusion that no person was residing by name Kuppan in the given address.
21. Loan was given to one Mohan said to be residing at No.40, Rajendra Prasad Street, Madras-64. P.W.14 has stated that there was no such person by name Mohan residing at No.40E, Rajendra Prasad Street, Madras-64. That house belongs to one Elumalai. P.W.21 has stated that No.40E, Rajendra Prasad Street, Madras-64 is a shop and he is a tenant of that shop. He purchased the shop from one Subramania Iyer. He was residing in a hut behind the shop. No one by name Mohan was ever residing. There is nothing to disbelieve this evidence. Therefore, from this evidence, the trial Court has come to the conclusion that the address given in the loan account of Mohan was not real.
22. Another person by name R.Radha said to be residing at No.72, Hasthinapuram Road, Madras-44.P.W.15, the Postman of that area has stated that there was no building at all at No.72 and no person by name, Radha was ever residing in that area. He has also stated that in that area Door Nos.1 to 13 alone were in existence. From this evidence, the trial Court has come to the conclusion that the address given in the loan account of Radha was not real.
23. The lower Court from Exs.P.3, 14,25, 36, 48, 59 and 71, has come to the conclusion that the addresses given by all these persons who obtained loans are false. There is no reason to reject the conclusion of the trial Court. No materials were brought to the notice of this Court to alter those findings or to reject this conclusion.
24. The trial Court has further found that the guarantor Ramu was not residing in the address given. Similarly, the guarantor for Ganesan by name Rose Mary was also found to be false. The guarantor Karmegam for the loan account of Alim has stated he never knew Alim and he signed only as a guarantor to his friend's wife, Dhanammal. Therefore, the guarantee letter given by Karmegam was used for the grant of loan to Alim. Gopal was the guarantor of Nathan who is said to be working as Tourist Guide in Tamil Nadu Tourism Development Corporation and it is stated that his monthly salary was Rs.1,040/-. It is also said to have been issued by the Accounts Officer, Tourism Development Corporation. P.W.7 is the Chief Accounts Officer of Tamil Nadu Tourism Development Corporation. He has stated that there is no such post as Accounts Officer and there is no post as Tourist Guide. Ex.P.40 is the certificate said to have issued by their office; but no such person by name R.Gopalan was working in the Tamil Nadu Tourism Development Corporation. Therefore, false documents in the name of Gopalan have been issued for granting loan to Nathan. (P.W.28, the hand-writing expert has stated that Ex.P.40 is the letter written in the letter-head of Tamil Nadu Tourism Development Corporation. Ex.P.107 is the report). Murugan has signed as guarantor for the loan account of Mohan. Mohan was said to be an Assistant in Connemara Hotel. Salary certificate is said to have been issued by the Senior Accounts officer. Ex.P.63 is his salary certificate. But the witness Kumar, P.W.6 working as Accountant in Connemara Hotel has stated that there was no post as Senior Accounts Officer in the hotel and Ex.P.63 is the letter-head. He stated that no person as Mohan was ever served in Connemara Hotel. This evidence was not cross-examined at all. Reading the evidence of P.W.6 with P.W.11 Postman, the lower Court has come to the conclusion that Murugan who is the guarantor was a fictitious person and the documents filed through him are false documents.
25. Selvam was a guarantor for Radha. Selvam was examined as P.W.16. He has stated in his evidence that he stood as a guarantor for his wife Chandra for getting a lona of Rs.3,000/-. He never signed as guarantor for Radha. He denied the suggestion that the signature found in Ex.P.74 is not his signature. The lower Court after comparing the signature in Ex.P.74 and the signature of this witness before this Court has found that it is not the signature of P.W.16. Therefore, the signature found in Ex.P.74 is a forged one.
26. Therefore, from the evidence available on record relating to these seven loan accounts, it is clear that the persons to whom loans were alleged to have been given and the guarantors are not real. This finding of the lower Court does not suffer from any illegality. No argument has been advanced to hold that these findings are unacceptable. Therefore, these findings of the trial Court are valid and cannot be set aside. From the evidence available on record, the lower Court has come to the conclusion that A.2 and A.3 along with A.1, have created documents for the purpose of granting loans in the name of seven persons and they have withdrawn the amount from the bank. The bank employees also have proved that the amounts were received in these loan accounts by the persons referred to already. There is no reason for them to speak against these fictitious persons. This conclusion of the trial Court cannot be said to be incorrect. There are minute details relating to the issue of challans, getting the money, submitting the documents etc., to prove that the amounts were received by those persons. The hand-writing expert P.W.28 has compared the signatures of the accused-2 and 3 with Exs.P.22, 25, 26, 36, 37, 38, 41, 48, 49, 50, 59, 60, 61, 71, 72, 73 and given a report Ex.P.107. From this, the lower Court has come to the conclusion that Exs.P.14, 25, 36 and 48 and the other related documents, Exs.P.4, P.5, P.15, P.16, P.26, P.27, P.37, P.38, P.49, P.50 and P.60 are signed by third accused. Therefore, it is proved that the third accused had received the loan amount given to Ganesh and Alim; Further, admittedly, A.3 received the loan given to Kandasamy, Mohan and Radha. Therefore, the trial Court has come to the conclusion that A.2 and A.3 are guilty of creating false documents for the purpose of obtaining loan from the bank.
27. From the evidence of P.W.2, P.W.17, P.W.19, it is proved that the accused-2 and 3 used to visit the bank very often and whenever they visited the bank, they will go the personal room of A.1 the Manager or to his dining room and they will not speak to anybody else. It is also proved that all the three accused used to converse in the dining room as well as strong room. P.W.9, K.Kaliaperumal gave money to the accused-2 and 3 for the purpose of sending them abroad for work. In that regard, he used to visit the shop of A.2 and A.3. During such visit of P.W.9 for getting back the money, he had seen A.2 taking A.1 in his motor bike; he has also stated that A.1, A.2 and A.3 used to consume liquor in the shop of A.2 and A.3. Specimen signature card were found in plenty in the shop of the accused-2 and 3. Exs.P.91 to 95 proved that A.3 had received money from K.Kaliaperumal on the promise to get a job in foreign countries and K.Kaliaperumal was trying to get bank loan. Ex.P.105 proves that A.3 used to send employees to foreign countries. These evidence prove that there was a close relationship among A.1, A.2 and A.3. From the evidence of P.W.9, P.W.22, P.W.26, it is proved that the bank forms were found in Vinodh Traders belonging to A.2 and A.3.
28. Taking all these totality of the evidence, the lower Court has found that the accused-1 to 3 had withdrawn the amount from the bank, in pursuance of the criminal conspiracy.
29. Further, A.1 has not discharged his duty as Branch Manager before granting loan; He has not taken any steps to ascertain whether the statements made by the loanees in the applications are true. Therefore, the lower Court has found that the charges framed against the accused have been proved beyond reasonable doubt. There is absolutely no reason to alter this finding. Hence, the conviction of A.1 to A.3 by the trial Court is confirmed.
30. Regarding sentence, this is a white collar offence; A.1, the Manager of the bank who has been conferred with the power to grant loans to the poor and needy small business people, who were in dire need of finance for the purpose of improving their business, had misused it by unscrupulous methods. A laudable purpose for which this scheme was introduced by the Central Government was misused by such persons which resulted in scrapping of such schemes. It is not strange that the general public who approach the banks for small loans for genuine purpose and with the real intention of repaying the loans were/are not given the loans, whereas crores and crores of rupees were given as loans to persons who had no intention of repaying. The practice of "writing off" the loans by resolution of Board of Directors prevailing in the banks appear to be one of the most important reasons for non-payment of the loans by the "big borrowers"; This practice which is known to all the Branch Managers of banks appear to have tempted the Branch Managers to indulge in such misadventures. Necessary amendments to such of "those laws which causes impediments in recovering the loans are not impossible.
31. It is not uncommon in the banks where the amounts due are very high, it is written off (even where it may not be impossible to recover), due to various reasons, including the difficulties that may have to be crossed.
32. The Criminal Law Amendment Ordinance, 1944 would go a long way to recover the money from the defaulters. This law seems to have escaped the attention of the authorities all these years.
33. In the present case, the total amount of loss incurred by the bank is Rs.26,000/. The offence took place some 20 years back; A.1 has been dismissed from service. In view of these facts, this Court is of the view that the sentence of imprisonment be reduced to imprisonment till rising of the Court with additional fine of Rs.10,000/- on each of the accused-1 to 3. When the fine amount is recovered, Rs.26,000/- is to be paid to the Indian Bank, Hasthinapuram Branch.
34. In the result, with the above modification in the sentence, the appeal is dismissed.