2009 (8) TMI 694 - SC - Companies Law

Supreme Court Upholds Special Court's Jurisdiction in Landmark Bank Fraud Case

Mir Nagvi Askari Versus CBI.

The Supreme Court affirmed the jurisdiction of the Special Court under the Special Court Act. A criminal conspiracy was established between Accused Nos. ... Jurisdiction of Special Court - Whether having regard to the peculiar facts and circumstances of the case the Special Courts so constituted had jurisdiction to try this matter? Whether the charges of the criminal conspiracy have been proved or not? Whether the said cheque had really been received by the Funds department on 7-7-1991? Whether the transfer has been made, or the misappropriation or breach of trust has been committed, within or without India? Held that:- There is no doubt that the offences relating to criminal breach of trust stands established against the accused. They were the officers in the Funds Department of Andhra Bank. As the same has been done dishonestly to cause wrongful gain to A3 and in the process wrongful loss has been caused to the Bank. The instruments based on which the funds of Andhra Bank were transferred to the account of A3 were not physically available with Andhra Bank at the time the accused persons authorized the transfer of the funds of Andhra Bank to the account of A3. Thus it must be noted in this respect that Banking norms and established practices and procedures would contain directions of law prescribing the mode in which the trust is to be discharged. The expression direction of law in the context of sections 405 and 409 would include not only legislations pure and simple but also directions, instruments and circulars issued by an authority entitled therefor. Thus the prosecution has sufficiently been able to prove the involvement of A1, A2 and A4 as regards the offence of criminal breach of trust. However in the present case the principal offender, i.e., A1, A2 and A4 have been held guilty of a ‘criminal breach of trust’ therefore the conviction of A3 would be even more clearly established from the facts and circumstances of the present case. Thus affirm the sentence imposed by the learned Special Judge with regard to the offence under the Prevention of Corruption Act. Issues Involved:1. Jurisdiction of the Special Court.2. Procedures followed by various departments.3. Criminal conspiracy.4. Prevention of Corruption Act.5. Making of false documents.6. Criminal breach of trust.7. Receiving stolen property.8. Sentencing and conclusion.Detailed Analysis:Jurisdiction of the Special Court:The Supreme Court affirmed the jurisdiction of the Special Court constituted under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992. The Court noted that the jurisdiction of the Special Court is wide and that the Act must be given full effect. The Court found that the trial of the offences by the Special Court was within its jurisdiction.Procedures Followed by Various Departments:The judgment detailed the working modalities of the Funds Department, Current Account Department, Clearing Department, and Day Book Department of the Fort Branch of Andhra Bank. The Funds Department was exclusive to the Fort Branch and dealt with call money and securities transactions. The Court examined the procedures followed for handling banker's cheques, including the preparation of credit and debit vouchers, and the roles of different departments in processing these cheques.Criminal Conspiracy:The Court held that a criminal conspiracy was established between Accused Nos. 1, 2, 3, and 4. The conspiracy involved the preparation of credit and debit vouchers to credit amounts to Accused No. 3's account without the physical possession of the cheques. The Court noted that a conspiracy is hatched in secrecy, and direct evidence is difficult to obtain. The circumstantial evidence and the manner in which the transactions were conducted demonstrated the existence of a conspiracy.Prevention of Corruption Act:The Court found Accused Nos. 1, 2, and 4 guilty of offences under Section 13(1)(c) and Section 13(1)(d) of the Prevention of Corruption Act, 1988. The accused, being public servants, had dominion over the funds of the bank and misappropriated the funds to benefit Accused No. 3. The Court acquitted Accused No. 5 of all charges under the Prevention of Corruption Act due to the lack of conclusive evidence of his involvement.Making of False Documents:The Court held that the accused could not be convicted for making false documents under Sections 467, 471, and 477A of the Indian Penal Code. The Court noted that the documents in question were not made with the intention of causing them to be believed as made by someone else. There was no alteration of the documents after they were made, nor were they signed by someone who did not know the contents.Criminal Breach of Trust:The Court found Accused Nos. 1, 2, and 4 guilty of criminal breach of trust under Section 409 of the Indian Penal Code. The accused, being entrusted with the funds of the bank, dishonestly misappropriated the funds to benefit Accused No. 3. The Court noted that the banking norms and established practices were binding on the officers, and their actions violated these norms, causing wrongful gain to Accused No. 3 and loss to the bank.Receiving Stolen Property:The Court found Accused No. 3 guilty of dishonestly receiving stolen property under Section 411 of the Indian Penal Code. The funds transferred to Accused No. 3's account were considered stolen property as they were obtained through criminal breach of trust. Accused No. 3 had knowledge that the property was stolen, as he was part of the conspiracy.Sentencing and Conclusion:The Court acquitted Accused No. 5 of all charges and quashed the sentences related to the offences under Sections 467, 471, and 477A of the Indian Penal Code for all accused. Accused No. 3 was sentenced to six months of rigorous imprisonment and a fine of Rs. 50,000 for offences under Sections 120B and 411 read with Section 120B. Accused Nos. 1, 2, and 4 were sentenced to one month of rigorous imprisonment and a fine of Rs. 1,000 for offences under the Prevention of Corruption Act. They were also sentenced to six months of rigorous imprisonment and a fine of Rs. 5,000 for offences under Section 409 read with Section 120B of the Indian Penal Code. All substantive sentences were directed to run concurrently, with the benefit of set-off for the period already undergone.