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1962 (4) TMI 28
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....was convicted under section 477A, Indian Penal Code. To appreciate the case against the appellants, we may first state generally the facts leading to the case. Bharat Insurance Company was incorporated in 1896. In 1936, Dalmia purchased certain shares of the company and became a Director and Chairman of the company. He resigned from these offices in 1942 and was succeeded by his brother J. Dalmia. The head office of the Bharat Insurance Company was shifted from Lahore to 10, Daryaganj, Delhi, in 1947. Dalmia was co-opted a Director on March 10, 1949, and was again elected Chairman of the company on March 19, 1949, when his brother J. Dalmia resigned. R.L. Chordia, a relation of Dalmia and Principal Officer of the Insurance Company, was appointed Managing Director on February 27, 1950. Dalmia was appointed Principal Officer of the company with effect from August 20, 1954. He remained the Chairman and Principal Officer of the Company till September 22, 1955. The period of criminal conspiracy charged against the appellants is from August, 1954, to September, 1955. Dalmia was therefore, during the relevant period, both Chairman and Principal Officer of the Insurance Company. During ....
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....th the result that Current Account No. 1120 was opened. On the same day Chokhani was appointed Agent of the company at Bombay. He was its agent during the relevant period. From 1951 to 1953, Chokhani alone operated on that account. On October 1, 1953, the Board of Directors directed that the current account of the company with the Chartered Bank, Bombay, be operated jointly by Chokhani and Raghunath Rai, P.W. 4. Raghunath Rai joined the company in 1912 as a Clerk, became Chief Accountant in 1940 and Secretary-cum-Chief Accountant of the company from August 17, 1954. The modus operandi of the joint operation of the bank account by Chokhani and Raghunath Rai amounted, in practice, to Chokhani's operating that account alone. Chokhani used to get a number of blank cheques signed by Raghunath Rai, who worked at Delhi. Chokhani signed those cheques when actually issued. In order to have signed cheques in possession whenever needed, two cheque books were used. When the signed cheques were nearing depletion in one cheque book, Chokhani would send the other cheque book to Raghunath Rai for signing again a number of cheques. Thus Raghunath Rai did not actually know when and to whom and for....
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.... sale transactions consisted in the sale of the securities held or supposed to be held by the company to a broker and the price obtained from the sale was utilised in purchasing formally further securities which were not received. The purchase transaction followed the same pattern, viz., Chokhani purchased for the company from a broker, the broker purchased the same securities from Bhagwati Trading Company and the delivery of the securities was agreed to be given by Bhagwati Trading Company to Chokhani. Bhagwati Trading Company did not deliver the securities but received the price from the insurance company. In a few cases, securities so purchased and not received were received later when fresh genuine purchase of similar securities took place from the funds of the Bharat Union Agencies or Bhagwati Trading Company. These securities were got endorsed in favour of the Insurance Company. The funds of the company, ostensibly spent on the purchase of securities, ultimately reached another company, the Bharat Union Agencies. Bharat Union Agencies (hereinafter referred to as the Union Agencies) was a company which dealt in speculation in shares and, according to the prosecution, was pra....
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.... him ask for the counterfoils of the cheques and for the production of securities and for a satisfactory explanation of the securities not with the company at Delhi. The matter, however, came to a head not on account of the auditors' report, but on account of Shri Kaul, Deputy Secretary, Ministry of Finance, Government of India, hearing at Bombay in September, 1955, a rumour about the unsatisfactory position of the securities of the Insurance Company. He contacted Dalmia and learnt on September 16, 1955, from Dalmia's relatives that there was a shortfall in securities. He pursued the matter departmentally and eventually, the Government of India appointed Shri Annadhanam, under section 33(1) of the Insurance Act, to investigate into the affairs of the company. This was done on September 19, 1955. Dalmia is said to have made a confessional statement to Annadhanam on September 20. Attempt was made to reimburse the Insurance Company with respect to the short-fall in securities. The matter was, however, made over to the police and the appellants and a few other persons, acquitted by the Sessions Judge, were proceeded against as a result of the investigation. Dalmia's defence, in brief....
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....ous appellants. The charge under section 120B read with section 409, Indian Penal Code, was against the appellants and five other persons and read : "I, Din Dayal Sharma, Magistrate I Class, Delhi, do hereby charge you, R. Dalmia (Ram Krishan Dalmia) s/o etc. 2. G. L. Chokhani s/o etc. 3. Bajranglal Chokhani s/o etc. 4. Vishnu Pershad Bajranglal s/o etc. 5. R. P. Gurha (Raghbir Pershad Gurha) s/o etc. 6. J. S. Mittal (Jyoti Swamp Mittal) s/o etc. 7. S.N. Dudani (Shri Niwas Dudani) s/o etc. 8. G. S. Lakhotia (Gauri Shankar Lakhotia) s/o etc. 9. V. G. Kannan (Vellore Govindaraj Kannan) s/o etc. accused as under:- That you, R. Dalmia, G. L. Chokhani, Bajrang Lal Chokhani, Vishnu Pershad Bajranglal, R. P. Gurha, J. S. Mittal, S. N. Dudani, G. S. Lakhotia and V. G. Kannan, during the period between August, 1954, and September, 1955, at Delhi, Bombay and other places in India, were parties to a criminal conspiracy to do and cause to be done illegal acts, viz., criminal breach of trust of the funds of the Bharat Insurance Company Ltd., by agreeing amongst yourselves and with others that criminal breach of trust be committed by you, R. Dalmia and G.L. Chokhani, in respect of....
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....conspiracy between the 9th day of August, 1954, and the 8th day of August, 1955, at Delhi, Being the Agent, in your capacity as Chairman of the Board of Directors and the Principal Officer of the Bharat Insurance Company Ltd., and as such being entrusted with dominion over the funds of the said Bharat Insurance Company, committed criminal breach of trust of the funds of the Bharat Insurance Company Ltd., amounting to Rs. 2,37,483-9-0, by wilfully suffering your co-accused, G.L. Chokhani, to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing between you and the said Bharat Insurance Company, prescribing the mode in which such trust was to be discharged, by withdrawing the said funds from current account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd., Bombay, by means of cheque Nos. B 540329 etc., issued in favour of M/s. Bhagwati Trading Company, Bombay, and cheque No. B 540360 in favour of F. C. Poddar, and by dishonestly utilising the said funds for meeting losses suffered by you in forward transactions in sha....
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....in the Chartered Bank, Bombay, which were alleged to have been misappropriated were not "property" within the meaning of sections 405 and 409, Indian Penal Code. (6)If they were, Dalmia did not have dominion over them. (7)Dalmia was not an "agent" within the meaning of section 409, Indian Penal Code, as only that person could be such agent who professionally carried on the business of agency. (8)If Dalmia's conviction for an offence under section 409, Indian Penal Code, fails, the conviction for conspiracy must also fail as conspiracy must be proved as laid. (9)The confessional statement, exhibit P-10, made by Dalmia on September 20, 1955, was hot admissible in evidence. (10)If the confessional statement was not inadmissible in evidence in view of section 24 of the Indian Evidence Act, it was inadmissible in view of the provisions of clause (3) of article 20 of the Constitution, (11)The prosecution has failed to establish that Dalmia was synonymous with Bharat Union Agencies Ltd. (12)Both the Sessions Judge and the High Court failed to consider the question of onus of proof, i.e., failed to consider whether the evidence on record really proved or established the conclusion a....
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....g the decision in Purushottam Das Daltnia's case (supra) , hold that the Delhi court had jurisdiction to try Chokhani of the offence under section 409, Indian Penal Code, as the offence was alleged to have been committed in pursuance of the criminal conspiracy with which he and the other co-accused were charged. In view of this opinion, the second and third contentions do not arise for consideration. The fourth contention is developed by Mr. Dingle Foot thus. The relevant portion of the charge under section 409, Indian Penal Code, against Dalmia reads: "Firstly, that you Dalmia, in pursuance of the said conspiracy between ... being the Agent, in your capacity as Chairman of the Board of Directors and as Principal Officer of the Bharat Insurance Company Ltd., and as such being entrusted with dominion over the funds of the said Bharat Insurance Company, committed criminal breach of trust of the funds ... by wilfully suffering your co-accused G.L. Chokhani to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing between you and the said Bharat Insurance Company prescribing t....
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....e touching the discharge of such trust, or wilfully suffers any other person so to do, commits ' criminal breach of trust'." Section 406 provides for punishment for criminal breach of trust. Section 407 provides for punishment for criminal breach of trust committed by a carrier, wharfinger or warehouse-keeper, with respect to property entrusted to them as such and makes their offence more severe than the offence under section 406. Similarly, section 408 makes the criminal breach of trust committed by a clerk or servant entrusted in any manner, in such capacity, with property or with any dominion over property, more severely punishable than the offence of criminal breach of trust under section 406. Offences under sections 407 and 408 are similarly punishable. The last section in the series is section 409 which provides for a still heavier punishment when criminal breach of trust is committed by persons mentioned in that section. The section reads: "Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach....
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.... covered by that section. It is in this sense that it may be said that the word "property" in a particular section covers only that type of property with respect to which the offence contemplated in that section can be committed. Section 22, Indian Penal Code, defines "movable property". The definition is not exhaustive. According to the section the words "movable property" are intended to include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything which is attached to the earth. The definition is of the expression "movable property" and not of "property" and can apply to all corporeal property except property excluded from the definition. It is thus clear that the word "property" is used in the Code in a much wider sense than the expression "movable property". It is not therefore necessary to consider in detail what type of property will be included in the various sections of the Indian Penal Code. In Reg v. Girdhar Dharamdas [1869] 6 Bom. High Ct. Rep. (Crown Cases) 33 it was held that reading sections 403 and 404, Indian Penal Code, together, section 404 applied only to movable property. No reasons are given....
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....him [1936] ILR 60 Bom. 706 it was held that the word "property" in section 421 is wide enough to include a chose in action. In Daud Khan v. Emperor AIR 1925 All. 673 it was said at page 674 : "Like section 378, section 403 refers to moveable property. Section 404 and some of the other sections following it refer to property without any such qualifying description; and in each case the context must determine whether the property there referred to is intended to be property moveable or immovable." The case law, therefore, is more in favour of the wider meaning being given to the word "property" in sections where the word is not qualified by any other expression like "movable ". In Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh [1955] 2 SCR 402 this court said at page 417 : "That a debt is property is, we think, clear. It is a chose in action and is heritable and assignable and it is treated as property in India under the Transfer of Property Act which calls it an ' actionable claim'." In Allchin v. Coulthard [1942] 2 KB 228 the meaning of the expression "fund" has been discussed at page 234 ; it is said : "Much of the obscurity which surrounds this matter is due to a f....
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.... may have dominion over property but may not exercise any power which he could exercise with respect to it. Non-exercise of the power will not make the dominion entrusted to him nugatory. Article 116 of the Articles of Association of the Bharat Insurance Company provides that the business of the company shall be managed by the Directors, who may exercise all such powers of the company as are not, under any particular law or regulation, not to be exercised by them. Article 117 declares certain powers of the Directors. Clause(7) of this Article authorises them to draw, make, give, accept, endorse, transfer, discount and negotiate such bills of exchange, promissory notes and other similar obligations as may be desirable for carrying on the business of the company. Clause (10) authorizes them to let, mortgage, sell, or otherwise dispose of any property of the company either absolutely or conditionally. Clause (12) authorises them to invest such parts of the funds of the company as shall not be required to satisfy or provide for immediate demands, upon such securities or investments as they may think advisable. It also provides that the funds of the company shall not be applied in maki....
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....val of the Committee be produced. The bye-laws of the company can be proved from other evidence. K.L. Gupta was present at the meeting when the bye-laws were passed. It seems that it was not his duty to attend meetings of the Board of Directors. He probably attended that meeting because he had prepared the draft of the revised bye-laws. His presence was necessary or at least desirable for explaining the necessary changes in the pre-existing bye-laws. He must have got his own copy of the revised bye-laws put up before the meeting and it is expected that he would make necessary corrections in his copy in accordance with the form of the bye-laws as finally approved at the meeting. The absence of the copy signed by the Chairman, if ever one existed, does not therefore make the other evidence about the bye-laws of the company inadmissible. The fact that Gupta signed each page of Exhibit P. 786 supports his statement. There was no reason to sign every page of the copy if it was merely a draft office-copy that was with him. He must have signed each page on account of the importance attached to that copy and that could only be if that copy was to be the basis of the future bye-laws of the ....
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....es I identify..............The aforesaid Bank (Imperial Bank) put a stamp over Ex. p. 896 with regard to the receipt of its original. The certified copy of the bye-laws of the Bharat Insurance Company which was sent for registration to the Imperial Bank along with the original letter of which Ex. p. 896 is a carbon copy is Ex. p. 897 (heretofore marked C). The copy of the bye-laws has been certified to be true by me under my signatures." Dalmia states in answer to question No. 15 (put to him under section 342, Criminal Procedure Code) that the signatures on Exhibit P. 896 appear to be his. Letter Exhibit P. 896 may be usefully quoted here : "SEC The Agent,4-9-54 Imperial Bank of India, New Delhi. Dear Sir, Re :-Safe Custody of Govt. Securities. We are sending herewith true copies of Resolution No. 4 dated 10th March, 1949, Resolution No. 3 dated 19th March, 1949, and Resolution No. 8 dated 8th September, 1951, along with a certified copy of the Bye-laws of the Company for registration at your end. By virtue of Article 12 clause (e) of the Bye-laws of the Company I am empowered to deal in Government Securities etc. The specimen signatures Card of the undersigned is also sen....
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....rse, purchase, sell, discount or accept cheques, drafts, hundies, bills of exchange and other negotiable instruments in the name and on behalf of the company and to exercise all such powers from time to time incidental to the post of the General Manager of the Company and not otherwise excepted. By the same resolution, the words "Managing Director" in Article 12 of the Bye-laws stating the powers of the Chairman, were substituted by the words "General Manager". There-alter, the Chairman could exercise the powers of the General Manager conferred under the bye-laws or other resolutions of the Board. It is clear, therefore, from these provisions of the articles and bye-laws of the company and the resolutions of the Board of Directors, that the Chairman and the General Manager had the power to draw on the funds of the company. Chokhani had authority to operate on the account of the Bharat Insurance Company at Bombay under the resolution of the Board of Directors dated January 31, 1951. Both Dalmia and Chokhani, therefore, had dominion over the funds of the Insurance Company. In Peoples Bank of Northern India Ltd. v. Harkishen Lal AIR 1936 Lah. 408 it was stated at page 409: "Lala ....
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....her a person who, jointly with another has dominion over certain property, can commit criminal breach of trust with respect to that property or not. On the other hand, a Full Bench of the Calcutta High Court took a different view in Nrigendro hall Chatterjee v. Okhoy Coomar Shaw 21 WR (Criminal Rulings) 59, 61. The court said: "We think the words of section 405 of the Penal Code are large enough to include the case of a partner, if it be proved that he was in fact entrusted with the partnership property, or with a dominion over it, and has dishonestly misappropriated it, or converted it to his own use." Similar view was expressed in Emperor v. Jagannath Raghunathdas [1931] 33 BLR 15 8. Beaumont CJ. said at page 1521: "But, in my opinion, the words of the section (section 405) are quite wide enough to cover the case of a partner. Where one partner is given authority by the other partners to collect moneys or property of the firm I think that he is entrusted with dominion over that property, and if he dishonestly misappropriates it, then I think he comes within the section." Barlee J. agreed with this opinion. The effect of Raghunath Rai's delivering the blank cheques signed by....
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....iolation of good faith and contrary to the object or purpose for which such chattel, &c, was intrusted to him, sell, negotiate, pledge, &c, or in any manner convert to his own use or benefit, or the use or benefit of any person other than the person by whom he shall have been so intrusted,..............shall be guilty of a misdemeanor." The accused in that case was employed by a firm of Railway contractors for commission, to use his influence to obtain for them a contract for the construction of a railway and docks in France. In the course of his employment, he was entrusted with a cheque for GBP500 for the purpose of opening a credit in their name in one of the two specified banks in Paris. He was alleged to have misappropriated the cheque to his own use fraudulently. He was also alleged to have fraudulently dealt with another bill for GBP250 and other securities which had been entrusted to him for a special purpose. He was committed for trial for the offence under section 75. He, on arrest under an extradition warrant, was committed to prison with a view to his extradition in respect of an offence committed in France. It was contended on his behalf: "To justify the committal un....
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....used, in that case, was therefore not held to be an agent. It may also be noticed that he was so employed for a specific purpose which was to use his influence to obtain for his employers a contract for the construction of a railway and docks in France. This assignment did not amount to making him an agent of the employers for receiving money, etc. In Mahumarakalage Edward Andrew Cooray's case (supra) the Privy Council was dealing with the appeal of a person who had been convicted under section 392 of the Penal Code of Ceylon. Sections 388 to 391 of the Ceylon Penal Code correspond to sections 405 to 408 of the Indian Penal Code. Section 392 corresponds to section 409, Indian Penal Code. It was contended before the Privy Council that the offence under section 392 was limited to the case of one who carried on an agency business and did not comprehend a person who was casually entrusted with money either on one individual occasion or a number of occasions, provided that the evidence did not establish that he carried on an agency business. Their Lordships were of opinion that the reasoning in Reg. v. Portugal [1856] 16 QBD 487 for the view that section 75 of the Larceny Act was limit....
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....hese reasons, we may mention here the facts of that case. The accused was the President of the Salpiti Korale Union. The union supplied goods to its member societies through three depots. The accused was also President of the Committee which controlled one of these depots. He was also Vice-President of the Co-operative Central Bank which advanced moneys to business societies to enable them to buy their stocks. The societies repaid the advances weekly through cheques and/or money orders except when the advance be of small sums. The Central Bank, in its turn, paid in the money orders. cheques and cash to its account with the Bank of Ceylon. The accused appointed one Ranatunga to be the manager of the depot which was managed by the Committee of which he was the President. The payments to the Central Bank used to be made through him. The accused instructed this Manager to follow a course other than the prescribed routine. It was that he was to collect the amounts from the stores in cash and hand them over to him for transmission to the Bank. The accused thus got the cash from the Manager and sent his own cheques in substitution for the amounts to the Central Bank. He also arranged as t....
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....sfied if the person be an agent of another and that other person entrusts him with property or with any dominion over that property in the course of his duties as an agent. A person may be an agent of another for some purpose and if he is entrusted with property not in connection with that purpose but another purpose, that entrustment will not be entrustment for the purposes of section 409, Indian Penal Code, if any breach of trust is committed by that person. This interpretation in no way goes against what has been held in Reg. v. Portugal' [1885] 16 QBD 487 or in Mahumarakalage Edward Andrew Cooray's case [1953] AC 407 and finds support from the fact that the section also deals with entrustment of property or with any dominion over property to a person in his capacity of a public servant. A different expression "in the way of his business" is used in place of the expression "in his capacity", to make it clear that entrustment of property in the capacity of agent will not, by itself, be sufficient to make the criminal breach of trust by the agent a graver offence than any of the offences mentioned in sections 406 to 408, Indian Penal Code. The criminal breach of trust by an agent ....
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....ara Bank AIR 1942 Lah. 47 and in Jaswant Singh v. V.V. Puri AIR 1951 Punj. 99 that a director is an agent of the company. Both Dalmia and Chokhani being agents of the company the control, if any, they had over the securities and the funds of the company, would be in their capacity as agents of the company and would be in the course of Dalmia's duty as the Chairman and Director or in the course of Chokhani's duty as a duly appointed agent of the company. If they committed any criminal breach of trust with respect to the securities and funds of the company, they would be committing an offence under section 409, Indian Penal Code. In view of our opinion with respect to Dalmia and Chokhani being agents within the meaning of section 409, Indian Penal Code, and being entrusted with dominion over the funds of the Bharat Insurance Company in the banks which comes within the meaning of the word "property" in section 409, these appellants would commit the offence of criminal breach of trust under section 409 in case they have dealt with this "property" in any manner mentioned in section 405, Indian Penal Code. We may now proceed to discuss the detailed nature of the transactions said to h....
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.... company was described in the form for opening account as "merchants, piece-goods dealers". There is no dispute now that Bhagwati Trading Company did not carry on any business either as merchants and commission agents or as merchants and piece-goods dealers. Vishnu Prasad states that he acted just as Chokhani told him and did not know the nature of the transactions which were carried on in the name of this company. It is however clear from the accounts and dealings of this company that its main purpose was simply to act in such a way as to let the funds of the Insurance Company pass on to the Union Agencies, to avoid easy detection of such transfer of funds. Chokhani states that he did this business as the Union Agencies needed money at that time. He thought that the Union Agencies would make profit after some time and thereafter pay it back to Bhagwati Trading Company for purchasing securities and therefore he postponed the dates of delivery of the securities to the Insurance Company. He added that in case of necessity he could raise money by selling or mortgaging the shares of the Union Agencies in the exercise of his power of attorney on its behalf. We may now revert to the a....
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....4, Vishnu Prasad drew cheques for Rs. 9,00,000 in the account of Bhagwati Trading Company in the United Bank of India. The amount was collected by his father, Bajranglal. He drew another cheque for Rs. 9,60,000 in the account of the Bhagwati Trading Company with the Bank of India, Bombay, and collected the amount personally. The total amount withdrawn by these two cheques, viz.,Rs. 18,60,000, was passed on to the Union Agencies through Chokhani that day. Therefore Chokhani deposited Rs. 7,00,000 in the account of the Union Agencies with the Bank of India, Rs. 7,00,000 in the account of the Union Agencies with the United Bank of India and Rs. 4,40,000 in the account of the Union Agencies with the Punjab National Bank Ltd. The Punjab National Bank Ltd., Bombay, as already mentioned, had received deposits of Rs. 2,00,000 and Rs. 3,00,000 on August 7 and August 9, 1954, respectively, in the account of the Union Agencies from Delhi. Between August 9 and August 19, 1954, Chokhani made payment to the brokers on account of the losses suffered by the Union Agencies. He issued cheques for Rs. 9,37.473-5-9 between August 9 and August 13, 1954, on the account with the Punjab National Bank. On....
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....ssed on the amount to the Union Agencies through Chokhani. On August 23, 1954, he withdrew Rs. 90,000 from Bhagwati Trading Company's account with the United Bank of India and Rs. 5,10,000 from its account with the Bank of India and passed on these amounts also to the Union Agencies through Chokhani. Chokhani then issued cheques totalling Rs. 5,88,380-13-0 from August 23 to August 26,1954, on the account of the Union Agencies with the Chartered Bank, Bombay, in favour of the brokers on account of the losses suffered by that company. Thus, out of the total amount of Rs. 25,33,193-6-6 withdrawn by Chokhani from the account of the Bharat Insurance Company and paid over to Bhagwati Trading Company, Rs. 25,10,000 went to the Union Agencies, which mostly utilised the amount in payment of the losses suffered by it. The Union Agencies suffered further losses amounting to about Rs. 23,00,000. Demands for payment by the brokers were received on September 3, 1954, and subsequent days. The Bharat Insurance Company had no sufficient liquid funds in the Banks at Bombay. There was therefore necessity to deposit funds in the Bank before they could be drawn ostensibly to pay the price of securiti....
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....ptember 10, 1954. There were two communications on September 4, one on September 5, three on September 6 and one on September 10, 1954. The Union Agencies suffered further losses amounting to about Rs. 10,00,000 in the month of September. Again, the accounts of the Union Agencies or of the Insurance Company, at Bombay, did not have sufficient balance to meet the losses and, consequently, sale of certain securities held by the Insurance Company and purchase of other securities again took place. This time, 3% 1957 securities of the face value of Rs. 10,00,000 held by the Insurance Company in its safe-custody deposit with the Chartered Bank, Bombay, were sold on September 21, 1954, and Rs. 9,84,854-5-6, the net proceeds, were deposited in the Bank. On the same day, Chokhani purchased 3% 1959-61 securities of the face value of Rs. 10,00,000 on behalf of the Insurance Company following the procedure adopted in the earlier usual purchase transactions. No telephonic communication appears to have taken place between Delhi and Bombay, on receipt of the demand from the brokers on September 17, 1954, for the payment of the losses, presumably because necessary steps to be taken both in conne....
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....he Insurance Company, even though the securities were being sold to Bhagwati Trading Company. These securities so endorsed were received on November 24,1954, and were converted into inscribed stook (Stock Certificate Exhibit P. 920) from the Reserve Bank of India on December 7, 1954. The stock certificate does not mention the date on which the securities were purchased and therefore its existence could prevent the detection of the fact that these securities were not purchased in August, 1954, when, according to the books of the Insurance Company, they were shown to have been purchased. The Insurance Company did not ostensibly pay for the purchase of these shares but partially paid for it through another share-purchase transaction. In order to enable Bhagwati Trading Company to pay the purchase price, Chokhani paid Rs. 16,00,000 to it from the account of the Bharat Union Agencies with the Banks at Bombay, and Rs. 10,08,515-15-0 from the account of the Insurance Company with the Chartered Bank by a fictitious purchase of 2½% 1961 securities of the face value of Rs. 11,00,000 on behalf of the Insurance Company. These 2½% 1961 securities of the face value of Rs. 11,00,00....
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....ace value of Rs. 46,00,000, had been ostensibly purchased. The auditors could demand inspection of these newly purchased securities. Chokhani therefore entered into another purchase transaction. This time a genuine transaction for the purchase of 2¾% 1962 securities of the face value of Rs. 46,00,000 was entered into on January 11, 1955. The purchase price was paid by the sale of 3% 1957 securities of the face value of Rs. 46,00,000 which the Insurance Company possessed. For this purpose, Chokhani withdrew these securities of the face value of Rs. 8,25,000 from the Chartered Bank, Bombay, and Rs. 37,75,000 worth of securities were sent to Bombay from Delhi. These securities were then converted into inscribed stock. The Insurance Company was now supposed to have purchased 2¾% 1962 securities of the face value of Rs. 92,00,000 having purchased Rs. 46,00,000 worth of securities in December, 1954, and Rs. 46,00,000 worth of securities in January, 1955. It possessed securities worth Rs. 46,00,000 only and inscribed stock certificate with respect to that could serve the purpose of verifying the existence of the other set of Rs. 46,00,000 worth of securities. These transac....
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....as been held to be an accomplice even if he is not a participes criminis. Receivers of stolen property are taken to be accomplices of the thieves from whom they receive goods, on a trial for theft. Accomplices in previous similar offences committed by the accused on trial are deemed to be accomplices in the offence for which the accused is on trial, when evidence of the accused having committed crimes of identical type on other occasions be admissible to prove the system and intent of the accused in committing the offence charged : Davies v. Director of Public Prosecutions [1954] AC 378. The contention that Raghunath Rai was an accomplice is mainly based on the facts that (i) Raghunath Rai did not produce the counterfoils of the cheques for the inspection of the auditors, though asked for by them, in spite of the fact that the counterfoils must have come to Delhi during the period of audit; (ii) the alleged scheme of the conspirators could not have been carried out without his help in signing blank cheques which were issued by Chokhani subsequently. The mere signing of the blank cheques is hardly an index of complicity when the bank account had to be operated both by Chokhani and ....
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....that therefore the courts below were not right in ignoring the inconsistencies in the statement of Raghunath Rai merely on the ground that they were not put to him in cross-examination. On the other hand, the learned Solicitor-General contends that section 155 of the Indian Evidence Act is controlled by section 145 and that previous inconsistent statements not put to the witness could not be used for impeaching his credit. We do not consider it necessary to decide this point as we are of opinion that the inconsistent statements referred to are not of any significance in impeaching the credit of Raghunath Rai. The specific inconsistent statements are : (i) "I never of my own accord send securities to Bombay nor am I authorised to do so." In court Raghunath Rai said that certain securities were sent by him to Bombay on his own accord because those securities were redeemable at Bombay and the maturity date was approaching, (ii) Before the Administrator, Raghunath Rai had stated: "I cannot interfere in the matter as, under Board Resolution, Chokhani is authorised to deal with the securities. Chokhani always works under instructions from the Chairman." In court, however, he stated that....
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....ent with the statement made by that witness. Further, we are of opinion that there could be no object in making consequential entries on receipt of the advice about the purchase of securities if the purchase transaction itself is not approved of and is consequently cancelled. The consequent entries were to be with respect to the investments of the Insurance Company and not with respect to infructuous transactions entered into by its agents. It has also been urged that if Dalmia's confirmation was necessary, it was extraordinary that no written record of his confirming the purchase of securities was kept in the office. We see no point in this objection. If confirmation was necessary, the fact that various entries were made consequent on the receipt of advice is sufficient evidence of the transaction being confirmed by Dalmia, as, in the absence of confirmation, the transaction could not have been taken to be complete. Further, office notes stating that securities had been purchased or sold "under instructions of the Chairman" used to be prepared for the meeting of the Board of Directors when the matter of confirming sale and purchase of securities went before it. The fact that offi....
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....urities to the head office, Dalmia agreed. This took place in November and December, 1954. Dalmia's approval of the suggestion does not go in his favour. He could not have refused the suggestion. Raghunath Rai also stated that in September or October, 1954, there was a talk between him, K.L. Gupta and Dalmia about the low yield of interest on the investments of the Insurance Company and it was suggested that the money be invested in securities, shares and debentures. Dalmia then said that he had no faith in private shares and debentures but had faith in Government securities and added that he would ask Chokhani to invest the funds of the Insurance Company in the purchase and sale of Government securities. He, however, denied that Dalmia had said that investment of funds would be in the discretion of Chokhani, and added that Chokhani was not authorised to purchase or sell securities on behalf of the Insurance Company unless he was authorised by the Chairman. The statement does not support Dalmia's authorising Chokhani to purchase and sell securities in his discretion. Another statement of Raghunath Rai favourable to Dalmia is said to be that according to him he told the auditors o....
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....ed silent with regard to his claim for conveyance allowance for a period of over two years, but denied that he was given the allowance with retrospective effect in order to win him over to the prosecution. Raghunath Rai applied for extension of service in the end of 1956, or in the beginning of 1957, and, in accordance with the resolution passed on August 17, 1954, by the Board of Directors, his service was extended up to 1961. The Administrator forwarded the application to the higher authorities. This matter had not been decided by July 29, 1958. The amount of his gratuity and provident fund in the custody of the Insurance Company amounted to Rs. 35,000. We do not think that the Administrator had any reason to influence Raghunath Rai's statement and acted improperly in sanctioning car allowance to him retrospectively and would have so acted with respect to Raghunath Rai's gratuity if Raghunath Rai had not made statements supporting the prosecution case. Raghunath Rai stated on July 29, 1958, that in July, 1955, when he informed Dalmia that the bulk of the securities were at Bombay and the rest were at Delhi, Dalmia asked him to write to Chokhani to deposit all the securities i....
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....that the Investigating Officer and the Secretary to the Administrator of the Insurance Company were there. He went there in order to take certain papers which he had kept there. He, however, had not brought any papers on July 30, as, according to him, his main cross-examination had been over. He, however, denied that he had been dictated notes by the police in order to answer questions in cross-examination or that he remained with the police till 9 p.m. or that the Secretary to the Administrator held out a threat about the forfeiture of his gratuity in case he did not make a statement favourable to the prosecution. We see no reason for the police to bring pressure on Raghunath Rai to introduce falsely the conversation in August. Between July 14, 1955, and middle of August, 1955, the head office learnt of the purchase of securities of the face value of Rs. 74,00,000 and again, on or about August 26, of the purchase of securities of the face value of Rs. 40,00,000. A further conversation in August is therefore most likely as deposed to. The main fact remains that Dalmia said that the securities be sent for in December, 1955, which implies his knowledge of the transactions in questio....
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....question No. 66, on November 13, 1958, he stated: "I did not contradict the statement made in Exhibit P. 813 that cheque No. B564809 dated 17-11-54 had been issued in favour of Narain Das and Sons although that cheque had in fact been issued in favour of Bhagwati Trading Company and not in favour of Narain Das and Sons, because those at the Head Office did not know anything about Bhagwati Trading Company." In answer to question No. 149, on November 14, 1958, he stated: "I did not mention the name of Bhagwati Trading Company in my letters addressed to the Head Office of the Bharat Insurance Company as the party with whom there were cross-contracts because Raghunath Rai would not have known as to what was Bhagwati Trading Company. I also did not mention the name of Bhagwati Trading Company in my letters to the Head Office of the Bharat Insurance Company because I did not want Shri Dalmia to know that I was having dealings with Bhagwati Trading Company. I also want to add that Raghunath Rai must have known that the cross-contracts were with Bhagwati Trading Company because the name of Bhagwati Trading Company was mentioned as the payee on the counterfoils of the cheques issued in f....
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....nstructions were given in 1953, and not in 1954, when Dalmia was going abroad. In view of this authority, Chokhani decided on a course of action by which he could invest the insurance money in securities and also help the Union Agencies. It is submitted that it was not necessary to mention Bhagwati Trading Company to the head office as the Insurance Company was going to suffer no loss and was simply concerned in knowing of the sale and purchase transactions. Chokhani's payment of the purchase price in anticipation of the delivery of the securities, was bona fide. We have already expressed the opinion that the transactions in connection with the investment of the funds of the Insurance Company were not bona fide purchase and sale transactions. They were transactions with a purpose. They were motivated in the interests of the Union Agencies and not in the interests of the Insurance Company. The mere fact that on account of the non-delivery of securities within a reasonable time of the payment of the purchase money made the brokers or Bhagwati Trading Company or both of them liable to an action, does not change the nature of the transactions. That liability can co-exist with the cri....
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....but was a case of making over the funds of the Insurance Company to the Union Agencies. The fact that the Administrator did not cancel any contract entered into on behalf of the Insurance Company under the powers given to him by section 52(2) of the Insurance Act, does not mean that every such contract was in the interest of the Insurance Company. The Administrator has stated that he did not know the legal position as to whether those contracts stood or not. Of the points of law urged for Chokhani, we have already dealt with those relating to the jurisdiction of the Delhi Court to try the various offences, to the content of the words "property", "dominion" and "agency" in section 409, Indian Penal Code. The only other points raised are that the offence under section 477A could not be said to be committed in pursuance of the conspiracy and that it was not a case of one conspiracy but of several conspiracies. The charge under section 477A, Indian Penal Code, is based on the letters written by Chokhani from Bombay to Delhi intimating his entering into the contracts of purchase of securities and indicating that cheques had been issued in payment to the brokers. It is true that these....
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.... the nature of the conspiracy. We agree with this opinion. There is sufficient material on record to establish his knowledge and part in the conspiracy. *** We therefore hold that Vishnu Prasad has been rightly found to be in the conspiracy. We may now deal with the case of Dalmia, appellant. The fact that the funds of the Bharat Insurance Company were diverted to Union Agencies by the transactions proved by the prosecution, is not challenged by Dalmia. His main contention is that he did not know what Chokhani had been doing in connection with the raising of funds for meeting the losses of the Union Agencies. There is, however, ample evidence to indicate that Dalmia knew of the scheme of the transactions and was a party to the scheme inasmuch as the transactions were carried through under his instructions and approval. The facts which have a bearing on this matter are: (1)Dalmia had the clearest motive to devise means for meeting the losses of the Union Agencies. (2)Dalmia actually looked after the share business of the Union Agencies at Calcutta and Delhi. He had knowledge of the losses of the Union Agencies. (3)The frequency of telephonic calls between him and Chokhani dur....
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.... Agencies Limited. .." and the charge under section 409, Indian Penal Code, referred to the dishonest utilisation of the funds of the Insurance Company. This matter has been considered from several aspects. The first is that Dalmia is said to have owned the entire shares issued by the Union Agencies, or at least to have owned a substantial part of them and was in a position to control the other shareholders. To appreciate this aspect, it is necessary to give an account of the shareholding in this company. The Union Agencies was incorporated at Bombay on April 1, 1948, as a private limited company, with its registered office at Bombay. It also had an office at 10, Daryaganj, Delhi, where the head office of the Bharat Insurance Company was. Its authorised capital was Rs. 5,00,000. The total number of shares issued in 1949 was 2,000. Out of these Dalmia held 1,200 shares, Dalmia Cement & Paper Marketing Company Ltd. (hereinafter called the Marketing Company) 600 shares, Shriyans Prasad Jain, brother of S. P. Jain, 100 shares and Jagat Prasad Jain, the balance of 100 shares. The same position of shareholding continued in 1950. In 1951, Dalmia continued to hold 1,200 shares, but the ot....
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....rom these circumstances is that Govan Brothers Ltd, was the concern of Dalmia, and this is reasonable. No satisfactory explanation is given why the shares standing in the name of Govan Brothers Ltd. and the blank transfer forms should be found in Dalmia's residence. Dudani was the personal accountant of Dalmia and Manager of the Delhi Office of the Union Agencies, and was also Secretary of Asia Udyog Ltd. Asia Udyog appears to be a sister concern of the Union Agencies. It was previously known as Dalmia Jain Aviation Ltd. It installed a telephone at one of Dalmia's residences in January, 1953. Its offices were in the same room in which the offices of the Union Agencies were. Dhawan, who succeeded Dalmia as Director of Govan Brothers Ltd., was an employee of Asia Udyog. Gurha was the Accountant of Asia Udyog, in addition to being Director of the Union Agencies. He had powers over the staff of both the companies. J.S. Mittal was Director of Union Agencies and held 100 shares in the Union Agencies as nominee of Govan Brothers Ltd., from October 4. 1954, and 1,000 shares as nominee of Crosswords Ltd., from some time about January 31, 1955. L.N. Pathak, R.B. Jain and G. L. Dalmia were a....
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....mia wanted money it was lent to her out of the funds of Bharat Union Agencies and in the books of that company no interest was charged from her." It has been strenuously urged by Mr. Dingle Foot that what certain persons considered to be the nature of the Union Agencies or what Chokhani told them could not be evidence against Dalmia with respect to the question whether he could be said to be identical with the Union Agencies. We need not consider this legal objection as it is not very necessary to rely on these considerations for the purpose of the finding on this point. It may be said, however, that prima facie there seems to be no legal bar to the admissibility of statements that Chokhani told certain persons that Union Agencies was the business of Dalmia. He had authority to represent Dalmia and Union Agencies on the basis of the power of attorney held by him from both. His statement would thus appear to be the statement of their "agent" in the course of the business. We have considered the reasons given for the other findings by the learned Sessions Judge and accepted by the High Court and are of opinion that the findings are correct and that they can lead to no other conclusi....
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....e charge under section 409, Indian Penal Code, described the manner to consist of withdrawing the funds from the banks by cheques in favour of Bhagwati Trading Company and by the utilisation of those funds for meeting losses suffered by Dalmia in forward transactions in shares carried on in the name of Bharat Union Agencies, and for other purposes not connected with the affairs of the Insurance Company. Even in this description of the manner, the emphasis ought to be placed on the expression " for meeting losses suffered by Dalmia in forward transactions in shares carried on in the name of the Bharat Union Agencies and for other purposes not connected with the affairs of the said Bharat Insurance Company" and not on the alleged losses suffered by Dalmia personally. We are therefore of opinion that firstly the evidence is adequate to establish that Dalmia and the Union Agencies can be said to be interchangeable and secondly that even if that is not possible to say, Dalmia had sufficient motive, on account of his intimate relations with the Union Agencies, for committing breach of trust, and thirdly that the second finding does not in any way adversely affect the establishment of the....
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....ect to the evidence that Delhi Office of the Union Agencies used to supply funds for meeting the losses suffered by it in the speculation business at Calcutta and Delhi: "It is correct that as the result of shares speculation business at Calcutta and Delhi Bharat Union Agencies suffered losses in the final analysis. I was once told by R.P. Mittal on telephone from Calcutta that G.L. Chokhani had informed him that the Bombay Office would arrange for funds for the losses suffered by the Calcutta Office of the Bharat Union Agencies. It was within my knowledge that if the Bombay Office of the Bharat Union Agencies was not in a position to supply full funds for meeting the losses at Calcutta, the Delhi Office of the company would supply those funds." And, in answer to question No. 211 which referred to the evidence about the Delhi Office of the Union Agencies being short of liquid funds from August, 1954, onwards and in 1955, to meet the losses,he said: "It was within my knowledge that Bharat Union Agencies was holding very large number of shares. But I did not know the name of the companies of which the shares were held by the Bharat Union Agencies and the quantum of those shares. "....
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....Dalmia's telephone and that of Chokhani at Bombay. That was the period when Dalmia was confronted with the position of arranging sufficient funds at Bombay for the purpose of diverting them to the Union Agencies. Very heavy losses were suffered in July and August, 1955. Securities of the face value of Rs. 79,00,000 and Rs. 60,00,000 were purchased in July and August, 1955, respectively. A very large number of telephone calls took place during that period between Dalmia at Delhi and Chokhani at Bombay. It is true that during certain periods of losses, the record of telephonic communications does not indicate that any telephonic communication took place. We have already stated, in considering the transactions, that the pattern of action to be taken had been fully determined by the course adopted in the first few transactions. Chokhani acted according to that pattern. The only thing that he had to do in connection with further contingencies of demands for losses, was to send for securities from Delhi when the funds at Bombay were low. Such requests for the transfer of securities could be made in good time or by telephonic communication or even by letters addressed to Dalmia personally....
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....sing. It was Rs. 1,88,47,500 from September, 1953, to March 31, 1954. Thereafter, it rapidly increased every quarter, with the result that on March 31, 1955, the securities worth Rs. 3,76,50,804 out of the total worth Rs. 3,86,97,204 were in the offices. The overall position of the securities must have been known to Dalmia. The saving of Bank charges is no good explanation for keeping the securities of such a large amount, which formed a large percentage of the company's holdings, in the offices and not in deposit with a recognized bank. The explanation seems to be that most of the securities were not really in existence. Raghunath Rai states that he spoke to Dalmia a number of times, presumably, in July and August, 1955, about the non-receipt of the securities of the value of Rs. 81,25,000, Rs. 75,00,000 and Rs. 69,00,000 which were purchased in the months of April-May, July and August, 1955, respectively, and Dalmia used to tell him that as the purchase and sale of securities had to be effected at Bombay, Chokhani could send them to the head office only after it had been decided about which securities would be finally retained by the Insurance Company. This statement implies tha....
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....wn a couple of months earlier. We do not consider the sending of the securities a month and a half or two months earlier than the date of maturity to be unjustified in the course of business. It is to be noticed that what was sent were the stock certificates and it might have been necessary to get the securities covered by those certificates for the purpose of redemption and that might have taken time. No pointed question was put to Raghunath Rai as to why he sent the securities two months ahead of the date of maturity. Dalmia denies that he gave any instructions for the sending of the securities. There seems to us to be no good reason why the expression ''under the instructions of the Chairman" would be noted in letters, exhibits D. 3 and P. 892, unless that represented the true statement of fact. We have already discussed and expressed the opinion, in considering the evidence of Raghunath Rai, that Raghunath Rai was told by Dalmia, when informed of the purchase or sale of securities, that that had been done under instructions and that he had confirmed them. We may further state that there is no resolution of the Board of Directors empowering Chokhani to deal with the securities....
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....ived no reply to his letter dated November 19, 1954, asking for distinctive numbers of securities not received at headquarters, Dalmia said that he would arrange for the despatch bf those securities from Bombay to the head office. No action was apparently taken in that connection. Raghunath Rai further states that on March 23, 1955, when he spoke to Dalmia about the non-receipt of certain securities Dalmia told him that he had already instructed Chokhani for the conversion of those securities into stock certificates and that-it was in view of this statement of Dalmia that he had written letter, exhibit P. 916, to Chokhani stating therein: "You were requested for conversion of the above said G. P. Notes into Stock Certificate. The said certificate has not been received by us as yet. It may be sent now immediately as it is required for the inspection of the company's auditor. " This indicates that Dalmia was in the know of the position of securities and, on his own, gave instructions to Chokhani to convert certain securities into inscribed stock. Dalmia admits Raghunath Rai's speaking to him about the non-receipt of the securities and his telling him that he would ask Chokhani to ....
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.... mentioned that purchasing and selling securities was not really the business of the Insurance Company. The Insurance Company had to invest its money and, under the statutory requirements, had to invest a certain portion at least in Government securities. The value of Government securities does not fluctuate much. Dalmia states, in answer to question No. 25 (under section 342, Criminal Procedure Code): "Government securities are gilt edged securities and there is very small fluctuation in these". The question of purchasing and selling of securities with a view to profit could not, therefore, be the ordinary business of the Insurance Company. It has to purchase securities when the statutory requirements make it necessary, or when it has got funds which could be invested. The Insurance Company had Government of India 3% Loan of 1957 in deposit with the Chartered Bank, Bombay, the face value of the securities being Rs. 53,25,000, from April 6, 1951, onward. The fact that these securities remained intact for a period of over three years, bears out our view that the purchasing and selling of securities was not the normal business of the Insurance Company. Securities are purchased for i....
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....s statements made by Dalmia in these circumstances and his conduct go to show that he had a guilty mind and when he made the statement to Raghunath Rai that the securities would be produced within two days, he trusted that he would be persuasive enough for the auditors to pass the accounts without further insistence on the production of those securities. Dalmia's not going to Mr. Haul's office on September 16, and sending his relations to inform the latter of the shortfall in securities can have no other explanation than that he was guilty and therefore did not desire to have any direct talk about the matter with Mr. Kaul. There was no need to avoid meeting him and miss the opportunity of explaining fully what Chokhani had done without his own knowledge. Dalmia has admitted that he sent his relations to Mr. Kaul and has also admitted that what they stated to Mr. Kaul was under his instructions. He states in answer to question No. 450, that after the telephonic talk with Chokhani on the evening of September 15, he consulted his brother, Jai Dayal Dalmia, and his son-in-law, S.P. Jain, about the position and about the action to be taken and that it was decided between them before t....
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....ate, but it was suggested in cross-examination of Annadhanam and in his written statement that he made that statement as a result of inducement and promise held out by either Annadhanam or Khanna (the other partner of M/s. Khanna and Annadhanam, Chartered Accountants, New Delhi) or both. Dalmia's contention that Exhibit P. 10 was inadmissible in evidence, it being not voluntary, was repelled by the learned Sessions Judge, but was, in a way, accepted by the High Court which did not consider it safe to rely on it. The learned Solicitor-General urged that the confession, Exhibit P. 10, was voluntary and was wrongly not taken into consideration by the High Court. Mr. Dingle Foot contended that the High Court took the proper view and the confession was not voluntary. He further urged that the confession was hit by the provisions of clause (3) of article 20 of the Constitution. The only witnesses with respect to the recording of the statement. Exhibit P. 10, are Annadhanam and Khanna. The third person who knew about it and has stated about it is Dalmia himself. He has given his version both in his statement recorded under section 342, Criminal Procedure Code, and in his written statem....
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....espect to the further action to be taken. He denied that he had any telephonic talk with Mr. Kaul, the Deputy Secretary, Ministry of Finance, prior to the recording of the statements, Exhibits P. 10 and P. 11. His explanation for keeping Khanna with him during the examination of Dalmia was that Khanna had done the detailed auditing of the accounts of the company in pursuance of the Firm Khanna and Annadhanam being appointed auditors for 1954 by the Insurance Company. He denied that Dalmia told him that he had no personal knowledge of the securities and that the only information he had from Chokhani was that the latter had given money on loan to the Union Agencies. He stated that the statements, Exhibits P. 10 and 11, were recorded in the very words of Dalmia. The statements were not actually read over to Dalmia but Dalmia himself read them over. Annadhanam denied that he told Dalmia that he would not be prosecuted if he made the statements, Exhibits P. 10 and P. 11 and deposited the money alleged to have been embezzled and further stated that Khanna did not tell this to Dalmia. He denied that Exhibit P. 10 was never made by Dalmia and was false and reiterated that that statement w....
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....statements, Exhibits P. 10 and P. 11, were the natural culmination of what he learnt in the office of Mr. Kaul on September 16, 1955. He also denied that he told Dalmia that whoever was at fault, the ultimate responsibility would fall on the Chairman and other Directors as well as the officers of the Insurance Company by way of misfeasance, and that Dalmia should sign the statement which would be prepared by himself and Annadhanam so that the other Directors and the officers of the Insurance Company be not harassed and that if this suggestion was accepted by Dalmia, he would save every one and become a greater Dalmia. He denied the suggestion that when Dalmia talked of his charitable disposition in his office on September 20, 1955, it should have been in answer to his (Khanna's) provocative remarks wherein he had made insinuations regarding Dalmia's integrity and stated that he was merely a silent spectator of what actually had happened in the office that day. He further stated that no question arose of Annadhanam's attacking the integrity of Dalmia on September 20, 1955. He denied that Mr. Kaul had told him or Annadhanam on September 19, when the order appointing Annadhanam, Inves....
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....ow with regard to the time when the securities had been sold or mortgaged. Shri Annadhanam then asked me as to what were the places where there were offices of Bharat Union Agencies. I then told him that the offices were at Bombay and Delhi. I then remarked that whatever had happened, I wanted to pay the amount of the missing securities as the interest of the policy-holders of the Bharat Insurance Company were close to my heart. During the course of that talk sometimes Shri Annadhanam questioned and sometimes the questions were asked by Shri Khanna. Shri Khanna then stated that I should forget the events of September 9, 1955. Shri Khanna further stated, we too are men of hearts. And not bereft of all feelings. We too have children. I am very much impressed by your offer of such a huge amount'. Shri Khanna also remarked that Shri Annadhanam had been appointed under section 33 of the Insurance Act to investigate into the affairs of the Bharat Insurance Company and as such the words of Shri Khanna ard Shri Annadbanam would carry weight with the Government. Shri Khanna also stated other things but I do not remember them. I, however, distinctly remember that Shri Khanna stated to me tha....
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....eally gives the version of what took place in Annadhanam's office. We refer only to such portions of this version as do not find a place either in the suggestions made to Annadhanam and Khanna in their cross-examination or in the statement of Dalmia under section 342 or which be inconsistent with either of them. Dalmia stated that he told Annadhanam that the money that had been received by Bharat Union Agencies as loan belonged to Bharat Insurance Company and it appeared that the Union Agencies had lost that money in speculation. He further made statements which tend to impute an inducement on the part of Khanna to him. These statements may be quoted in Dalmia's own words: "On this Shri Khanna said that I was a gentleman, that I was prepared to pay such a heavy amount which has never been paid so far by anybody, that I should accept his advice and that I should act according to his suggestion and not involve myself in this dispute, the Government was not such a fool that they would not arrive at a quiet settlement with a man who thought that his first duty was to protect the policy-holders and thus by spoiling the credit of the Bharat Insurance Co. would harm its policy-holders. ....
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....nadhanam had put all sorts of questions to Raghunath Rai but let me off after recording my statement in just one or two lines. Their design had succeeded and therefore they did not care to record any further question." This again implies his making the statement P. 10. Of courses, after he had made the statement, P. 10, there was no necessity of asking anything further. His statement explained the missing of the securities. Reference may now be made to what Raghunath Rai, who was the Secretary of the Bharat Insurance Company, states in reference to the statement made by Dalmia to Annadhanam. Raghunath Rai states, that when he went to Dalmia at about 7 p.m. on September 20, 1955, and told him about the recording of his own statement by Annadhanam and the preparation of the statement about Exhibit P. 8 and about his talk regarding the securities at Bombay, Dalmia said : "I have been myself in the office of the Investigator. He has recorded my statement wherein I have admitted the shortfall of the securities". This also points to Dalmia's making the statement, Exhibit P. 10. Raghunath Rai did not admit, but simply said that Dalmia did tell him something when he was questioned as to....
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....dhanam had the authority of law to question and thought that the only manner of postponing the evil consequence of his act was by making the statement which would soften the attitude of the authorities towards him. We are of opinion that none of these circumstances would make the confession invalid. Dalmia's knowledge that Annadhanam could record his statement under law and his desire to soften the attitude of the authorities by making the statement do not establish that he was coerced or compelled to make the statement. A person 1 of the position, gift and intelligence of Dalmia could not be so coerced, A person making a confession may be guided by any considerations which, according to him, would benefit him. Dalmia must have made the statement after weighing the consequences which he thought would be beneficial to him. His making the confession with a view to benefit himself would not make the confession not voluntary. A confession will not be voluntary only when it is made under some threat or inducement or promise, from a person in authority. Nothing of the kind happened in this case and the considerations mentioned in the High Court's judgment do not justify holding the conf....
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....n of the money equivalent of the securities. We are of opinion that any vagueness in the expression could have been deliberate. The expression used was not such that Dalmia, even if he had a poor knowledge of English, could not have used. The statement was undoubtedly very brief. It cannot be expected that every word was used in that statement in the strict legal sense. The expression "I misappropriated the securities" can only mean that he misappropriated the amount which had been either spent on the purchase of the securities which were not in existence, or realised by the sale of securities, and which was shown to be utilised in the fictitious purchase of securities. The main fact is that Dalmia did admit his personal part in the loss of the amount due to the shortfall in the securities. There is nothing on record to justify any conclusion that Annadhanam and Mr. Kaul had colluded and wanted to get a confession from Dalmia. It is suggested that Annadhanam was annoyed with Dalmia on account of the latter's resentment at the conduct of Anna dhanam and Khanna in conducting a surprise inspection of the accounts and securities on September 9, 1955. Raghunath Rai protested saying th....
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....mia remained unaffected whether the loss was rupees two crores or a few lakhs, more or less. On the basis of the aforesaid suggestion of Mr. Kaul and his using the expression "courses against Shri Dalmia" it is urged that criminal action was contemplated against Dalmia and that there most have been some understanding between Mr. Kaul and Annadhanam about securing some sort of confession from Dalmia for the purpose of the case which was contemplated. We consider this suggestion far-fetched and not worthy of acceptance. As a part of his duty, Mr. Kaul had to consider the various courses of action open to the Government in connection with the alleged drawing upon the funds of the Insurance Company to cover his losses in the speculative activities. Mr. Kaul did not know what had actually transpired with respect to the securi ties. He had heard something in Bombay and then he was told about the shortfall in the securities of the Bharat Insurance Company and, naturally, he could contemplate that the alleged conduct could amount to a criminal offence. In fact, according to Mr. Kaul, a suggestion had been made to him by S.P. Jain that on the making up of the short fall in securities no fur....
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.... that this fact that Dalmia was allowed half-an-hour to consult his relations can point to compelling Dalmia to make the statement. We do not see that examination of Dalmia on oath be considered to be an inquisition. Sub-section (3) of section of the Insurance Act empowers the Investigator to examine on oath any manager, managing director or other officer of the insurer in relation to his business. Section 176 of the Indian Penal Code has no application to the examination of Dalmia under section 33 of the Insurance Act. Section 176 reads: "Whoever, being legally bound to give any notice or to furnish information on any subject to any public servant, as such, intentionally omits to give such notice or to furnish such information in the manner and at the time required by law, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the notice or information required to be given respects the commission of an offence, or is required for the purpose of preventing the commission of an offence, or in order to the apprehension of an offender, with simple imprisonment for a term which m....
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....anam, and from certain statements of Dalmia himself in his written statement and in answers to questions put to him under section 342, Criminal Procedure Code. We therefore hold that the statement, Exhibit P. 10, is a voluntary statement and is admissible in evidence. We also hold that it is not inadmissible in view of clause (3) of article 20 of the Constitution. It was not made by Dalmia at a time when he was accused of an offence, as is necessary for the application of that clause, in view of the decision of this court in State of Bombay v. Kathi Kalu Oghad AIR 1961 SC 1808 where the contention that the statement need not be made by the accused person at a time when he fulfilled that character was not accepted. Dalmia was not in duress at the time he made that statement and therefore was not compelled to make it. It was said in the aforesaid case at page 1816 : "'Compulsion', in the context, must mean what in law is called 'duress'....................The compulsion in this sense is a physical objective act and not the state of mind of the person making the statement, except where the mind has been so conditioned by some extraneous process as to render the making of the statem....
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....n is said not to have produced is the Dak Receipt Register. The Register could have at best shown on which dates the various advices received from Bombay about the transactions were received. On that point there had been sufficient evidence led by the prosecution. The production of the Register was therefore not necessary. The accused could have summoned it if he had particular reason to rely on its entries to prove his case. Lastly, complaint is made of the non-production of certain documents in connection with the despatch of certain securities from Delhi to Bombay. Again, there is oral evidence with respect to such despatch of securities and it was not essential for the prosecution to produce the documents in that connection. Of the witnesses who were not produced, complaint is made about the prosecution not examining Mr. Barve, Joint-Secretary, Ministry of Finance, who was present at the interview which Dalmia had with Mr. Kaul on September 15, 1954, and of the non-production of the Directors of the Insurance Company, It was quite unnecessary to examine Mr. Barve when Mr. Kaul has been examined. It was also not necessary to examine the Directors of the company who are not all....
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....nder the instructions and approval of Dalmia. It is clear that he had a dis-honest intention to cause at least temporary loss of its funds to the Insurance Company and gain to the Union Agencies. This could be achieved only as a result of the conspiracy between him and Chokhani. Vishnu Prasad was taken in the conspiracy to facilitate diversion of funds and Gurha to facilitate the making up of false accounts, etc., in the offices of the Union Agencies and Asia Udyog Ltd., as would be discussed hereafter. We may now turn to the charges against Gurha, appellant. He was charged under section 120-B read with section 409, Indian Penal Code, and also on three counts under section 477A for making or abetting the making of false entries in three journal vouchers Nos. 98, 106 and 107 dated January 12, 1955, of the Union Agencies. It is necessary to give a brief account of how these vouchers happened to be made. Gurha was a director of the Union Agencies and looked after the work of its office at Delhi. He was also the Accountant of Asia Udyog Ltd. At Delhi there was a ledger with respect to the account of the transactions by the Bombay Office of the Union Agencies. Under the directions of....
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.... Delhi Office of the Union Agencies, used to prepare the journal voucher. In the case of the credit advices, the amount was debited to the Bcmbay Office of the Union Agencies and credited to Asia Udyog Ltd. In the case of the debit advice, the amount was debited to Asia Udyog Ltd., and credited to the Bombay Office of the Union Agencies. According to the statement of Dhawan, he did so under the instructions of Gurha. Gurha used to sign these vouchers and when he fell ill, they were signed by another Director, J.S. Mittal. Corresponding entries used to be made in the account of the Bombay Office and the Asia Udyog Ltd., in the ledger of the Delhi Office of the Union Agencies. After Dhawan had prepared these vouchers, he also used to issue advices to Asia Udyog Ltd., intimating that the amount mentioned therein had been credited or debited to its account. Thus the name of Bhagwati Trading Company did not appear in the various advices, vouchers and the ledgers prepared at Delhi- In the office of Asia Udyog Ltd., on receipt of the credit advice, a journal voucher crediting the amount to the Bombay Office and debiting it to the Delhi Office of the Union Agencies was prepared. A journa....
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....ani on account of the latter, i.e., Asia Udyog Ltd., on January 7 and January 10, 1955, respectively and adjusted. One Exhibit P. 2042 debits the amount to Asia Udyog Ltd., and credits it to the Bombay Office of Union Agencies and states the amount mentioned therein to have been paid by the latter, i.e., Bombay Office to Chokhani on account of the former, i.e., Asia Udyog Ltd. and adjusted. Other facts which throw light on the deliberate preparation of these false vouchers are that there had been tampering of the ledger of the Bombay Office in the Delhi Office of the Union Agencies and also in the journal statement of that office. The letter "C" in the folio column of the ledger had been altered to "J" indicating, that that entry referred to an entry in the journal statement received from Bombay. Sheets of the journal statement on which corresponding entries are noted have also been changed. These two documents remained in the possession of the Union Agencies till November 12, 1955, though the advices and vouchers in the Delhi Office were seized by the Police on September 22, 1955, and, therefore, interested persons could make alterations in them. It has been suggested for Gurha t....
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....he advice. Exhibit P, 2041, on the basis of which journal entry No. 98 was prepared by him, he went to Gurha to consult as it was not clear from that advice to whom the amount mentioned in it had been paid. Gurha, on looking up the journal statement received from the Bombay Office told him to debit that amount to Asia Udyog Ltd. Dhawan prepared journal voucher P. 2042, accordingly, and Gurha initialled it. It may be mentioned that this debit advice was addressed to M/s. Delhi Office and therefore could be taken to refer either to the Delhi Office of the Union Agencies or the Delhi Office of Asia Udyog Ltd., both these offices being in the same building and being looked after by Gurha. Gurha admits in his statement under section 342, Criminal Procedure Code, that Dhawan referred this matter to him and that he asked him to debit the amount to Asia Udyog Ltd. The journal statement of the Bombay Office at the relevant time could have no reference to this item which was really entered in the cash statement and Gurha's conduct in looking up the journal was a mere ruse to show to Dhawan that he was giving instructions on the basis of the entries and not on his own. Gurha stated, in answe....
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....lead direct evidence about Gurha's knowledge with respect to the full working of the scheme to provide for the losses of the Union Agencies from the funds of the Insurance Company. It is further not necessary that each member of a conspiracy must know all the details of the conspiracy. Mr. Kohli, for Gurha, has urged that Gurha could have had nothing to do with the diversion of the funds of the Insurance Company to the Union Agencies, even though he was a Director of the latter asphe never issued instructions regarding the activities of the Union Agencies, had no knowledge of the passing of money from the funds of the Insurance Company to the Union Agencies as he had nothing to do with the movement of the securities held by the Insurance Company or the receipt of cash or the other transactions, his role having begun, according to the prosecution, after the offence under section 409, Indian Penal Code, had been actually committed, i.e., after Chokhani had issued cheques on the bank accounts of the Insurance Company with the Chartered Bank in favour of Bhagwati Trading Company, and, therefore, could know nothing regarding the diversion of funds and the desirability of falsifying the....
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....ance Company. Further, the opening expression in the letter does not necessarily mean that Gurha was being informed for the first time that the temporary loans arranged by him for the Union Agencies Ltd., in the name of Bhagwati Trading Company actually represented the moneys belonging to the Bharat Insurance Company. If it meant so, that must have been done so by design, just as the concluding portion of the letter was as already mentioned, put in by design to protect Vishnu Prasad's interest. The letter is dated September 17, 1955, and thus purports to have been written a few days before the formal complaint was made to the police. Even if it was written on September 17, it was written at a time when the matter of securities had come to the notice of the authorities and Dalmia was being pressed to satisfactorily explain the position of the securities. Chokhani could have written a letter of this kind in that setting. Another fact relied upon by the learned Sessions Judge in considering this letter to be ante-dated is that it does not refer to one kind of securities which were not in the possession of the Insurance Company even though they had been ostensibly purchased. It does ....
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....report, the report in the prescribed form setting forth the names of the parties, the nature of the information, and the names of the persons who appear to be acquainted with the circumstances of the case. Nothing further need be said on this point. Further, it is submitted that the prosecution case has changed from stage to stage. This can only mean that facts came on the record which were not known before and, therefore, the complexion of the allegations against Gurha's conduct varied. Even if this is so, he can have no grievance against it unless he had been unable to meet it in defence. No such inability has been expressed. It is, however, stated that the prosecution based its ultimate case against him on the allegation that the cash statement received from Bombay was suppressed and another false cash statement was prepared at Delhi under the directions of Gurha. We have already dealt with this matter. There was no such allegation on the basis of the statement of any prosecution witness. This was really a suggestion to explain how despite certain entries in the cash statements received from Bombay different entries were made in the advices issued by Lakhotia which advices ough....
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....half of the Bombay Office at Delhi and on the basis of which journal vouchers were to be prepared by Dhawan and entries were to be made in the accounts of the Union Agencies at Delhi. We, therefore, do not consider that this contention in any way favours the appellant. The fact that the account of the Asia Udyog Ltd., in the ledger, Exhibit P. 2226, is not alleged to be fictitious and records in the column "folio " the letter "J" is of no help as the entries in that ledger must have been made on the basis of the journal vouchers issued by Dhawan. In fact once it is alleged that the advices issued by Lakhotia were fictitious any entry which can be traced to it must also be fictitious. It is argued that the alleged scheme of making the circuitous entries could not have worked in keeping the source of money concealed as the Income-tax Authorities could have detected by following the entries in the Bank records with respect to the source of payment of money (by cheques issued by Bhagwati Trading Company) to the Union Agencies at Bombay. They could have thus known only about Bhagwati Trading Company and, as already stated, it was not necessary to keep Bhagwati Trading Company secret f....
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....ho Ram [1933] ILR 55 All. 783 at page 788 : "If the intention with which a false document is made is to conceal a fraudulent or dishonest act which had been previously committed, we fail to appreciate how that intention could be other than an intention to commit fraud. The concealment of an already committed fraud is a fraud." And, again, at page 789: "Where, therefore, there is an intention to obtain an advantage by deceit there is fraud and if a document is fabricated with such intent, it is forgery. A man who deliberately makes a false document in order to conceal a fraud already committed by him is undoubtedly acting with intent to commit fraud, as by making the false document he intends the party concerned to believe that no fraud had been committed. It requires no argument to demonstrate that steps taken and devices adopted with a view to prevent persons already defrauded from ascertaining that fraud had been perpetrated on them, and thus to enable the person who practised the fraud to retain the illicit gain which he secured by the fraud, amount to the commission of a fraud. An act that is calculated to conceal fraud already committed and to make the party defrauded belie....