Broad jurisdiction over securities-scam offences upheld where bank funds were diverted through a call money transaction.

The Special Court Act was construed broadly to confer exclusive jurisdiction over offences connected with the securities scam, and diversion of bank funds through a purported call money transaction intended to facilitate securities dealings fell within that scope. Circumstantial evidence, including coordinated conduct and immediate diversion of funds, was treated as sufficient to infer criminal conspiracy without direct proof of agreement. Knowingly diverting public funds for a private broker was held to establish criminal breach of trust and criminal misconduct. The sanction orders for prosecuting NHB officials were upheld, and any sanction irregularity did not vitiate the conviction absent failure of justice.

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Issues: (i) Whether the Special Court had jurisdiction to try offences arising out of the diversion of call money routed through banks in the securities scam; (ii) Whether the evidence established criminal conspiracy, criminal breach of trust, and criminal misconduct by the bank officials and the broker's associate; (iii) Whether the sanction orders for prosecuting the NHB officials were valid.

Issue (i): Whether the Special Court had jurisdiction to try offences arising out of the diversion of call money routed through banks in the securities scam.

Analysis: The jurisdictional provisions of the Special Court Act were construed liberally and purposively, having regard to the object of creating a special forum for offences connected with the securities scam. The expression "offence relating to transaction in securities" was held to be broad enough to cover the diversion of bank funds through a purported call money transaction that was intended to facilitate securities dealings. The inclusive definition of securities and the non obstante clause in the Act supported exclusive jurisdiction.

Conclusion: The Special Court had jurisdiction to try the matter.

Issue (ii): Whether the evidence established criminal conspiracy, criminal breach of trust, and criminal misconduct by the bank officials and the broker's associate.

Analysis: Criminal conspiracy was inferred from the chain of events, the coordinated conduct of the accused, the internal banking records, and the immediate diversion of the NHB funds to Harshad Mehta's account. The Court held that direct proof of agreement was unnecessary where the circumstances showed a meeting of minds and conscious participation. The NHB transaction was held to be illegal because NHB could not advance funds to an individual broker, and the money entrusted for a lawful banking purpose was knowingly diverted, establishing criminal breach of trust. The public servants thereby obtained pecuniary advantage for another without public interest, attracting criminal misconduct under the Prevention of Corruption Act.

Conclusion: The convictions for criminal conspiracy, criminal breach of trust, and criminal misconduct were upheld against the officials found to have participated, while the NHB official who was not proved to have sufficient involvement was acquitted.

Issue (iii): Whether the sanction orders for prosecuting the NHB officials were valid.

Analysis: The Chairman-cum-Managing Director of NHB was treated as the competent authority after absorption of one accused into NHB service, and the other sanction order was also held to be by the appropriate authority. In any event, the Court held that section 19(3) barred reversal on the ground of any error or irregularity in sanction absent failure of justice, which was not shown.

Conclusion: The sanction orders were held valid and no failure of justice was established.

Final Conclusion: The appeals succeeded only to the limited extent of relieving the accused against whom the prosecution failed to prove sufficient involvement, while the remaining convictions were affirmed and the sentence of one accused was modified.

Ratio Decidendi: An offence can be proved by circumstantial evidence showing a concerted and conscious course of conduct, and where public funds are knowingly diverted in violation of the governing statute for the benefit of a private person, the conduct constitutes criminal conspiracy, criminal breach of trust, and criminal misconduct; a sanction irregularity does not vitiate the conviction absent failure of justice.

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