TaxTMI 
TaxTMI 
1962 (4) TMI 28
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....th section no, Indian Penal Code. Gurha 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 Principa....
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....e an application for the opening of the account at Bombay with 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. T....
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....eques was paid out of the company's funds without any gain to it. The 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 whi....
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.... out the audit and was not satisfied with respect to certain matters and that made 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, ....
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.... of law raised by Mr. Dingle Foot, we may now state the charges which were framed against the various 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 ....
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.... "I, Din Dayal Sharma, Magistrate I Class, Delhi... charge you, R. Dalmia accused as under:- Firstly, that you, R. Dalmia, in pursuance of the said 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, a....
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....ection 409, Indian Penal Code, against Dalmia offended against the provisions of section 233 of the Code ; therefore the whole trial was bad. (5)The funds of the Bharat Insurance Company 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 Lt....
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....the conclusion that no case for reconsideration was made out and accordingly expressed our view during the hearing of these appeals. We need not, therefore, discuss the first contention of Mr. Dingle Foot and, following 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 di....
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.... own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made 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: ....
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....articular section of the Indian Penal Code can be committed in respect of any particular kind of property will depend not on the interpretation of the word "property" but on the fact whether that particular kind of property can be subject to the acts 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....
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....fer of the amount from the account of the Bank to his own account, the accused removed it from the control of the bank and placed it at his own disposal. The conviction of the accused for criminal breach of trust was confirmed. In Manchersha Ardeshir v. Ismail Ibrahim [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 prop....
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....Chairman and Principal Officer of the Bharat Insurance Company, he had the power, on behalf of the company, to operate on those accounts. If no further steps are taken on the execution of the plan, that does not mean that the power which the company had entrusted to him is nullified. One 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 conditionall....
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....ignatures were not obtained. There is no evidence that the bye-laws approved by the Board of Directors were actually signed by the Chairman, Dalmia. Dalmia has stated so. It is not necessary for the proof of the bye-laws of the company that the original copy of the bye-laws bearing any mark of approval 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. 78....
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....e resolutions................ I produce the carbon copy of the letter dated 4-9-54, which was sent as a covering letter with the bye-laws of the Bharat Insurance Company to the Imperial Bank of India, New Delhi. It is Ex. p. 896. The carbon copy bears the signatures of R. Dalmia accused, which signatures 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, ....
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....entioned the powers of the Manager. The Board of Directors, by resolution No. 4 dated October 6, 1952, resolved that these powers be exercised by K. L. Gupta as General Manager and the necessary corrections be made. By resolution No. 4 dated August 30, 1954, of the Board of Directors, the General Manager was empowered to make, draw, sign or endorse, 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 ....
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...., of the offence under section 403, Indian Penal Code. This is clear from the observation at page 715 : "In my opinion, the Government rice was entrusted to the firm of which the petitioner and his younger brother were the proprietors. Technically speaking, there was no entrustment to the petitioner personally." This case clearly did not deal directly with the question whether 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 enou....
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....ntly with any other person, as a banker, merchant, broker, attorney, or other agent, with any chattel or valuable security, or any power of attorney for the sale or transfer of any share or interest in any public stock or fund......or in any stock or fund of any body corporate, & c., for safe custody or for any special purpose, without any authority to sell, negotiate, transfer, or pledge, shall, in violation 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 a....
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....such business, etc., his receiving money, securities or chattels for safe custody or other special purpose. That is to say, he is already an agent for the purpose of doing such acts and is subsequently entrusted with property with direction to deal with it in a certain manner. It is not held that a person to be an agent within that section must carry on the profession of an agent or must have an agency. The accused, 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 limit....
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.... i.e., who carries on the business of an agent. Further, the accused in the Privy Council case was not held to be an agent. In so holding, their Lordships said at page 419: "In the present case the appellant clearly was not doing so, and was in no sense entitled to receive the money entrusted to him in any capacity, nor indeed, had Mr. Ranatunga authority to make him agent to hand it over to the bank." To appreciate these 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 P....
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.... with respect to any property be entrusted with that property or with dominion over that property in the way of his business as an agent. The expression "in the way of his business" means that the property is entrusted to him "in the ordinary course of his duty or habitual occupation or profession or trade". He should get the entrustment or dominion in his capacity as agent. In other words, the requirements of this section would be satisfied 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 pe....
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....ly act by agents, and usually the persons by whom it acts and by whom the business of the company is carried on or superintended are termed directors............." Again, at page 515 is noted : "Directors are, in the eye of the law, agents of the company for which they act, and the general principles of the law of principal and agent regulate in most respects the relationship of the company and its directors." It was held in Gulab Singh v. Punjab Zamindara 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 o....
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....self out as the sole proprietor and mentioned the business of the company in the form for opening account as "merchants and commission agents". He made a deposit of Rs. 1,100 said to have been supplied to him by Chokhani. On August 11, 1954, Vishnu Prasad made another deposit of Rs. 1100, again said to have been supplied by Chokhani, as the first deposit in the account he opened with the United Bank of India, Bombay, in the name of Bhagwati Trading Company. The business of the 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 a....
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....ilised the cheques which had already been signed by Raghunath Rai, in pursuance of the arrangement to facilitate transactions on behalf of the Insurance Company. On August 12,1954, the statement of account with respect to the purchase of securities worth Rs. 5,00,000 was received. The cost worked out to Rs. 4,69,134-15-9. Chokhani made the payment by issuing a cheque for the amount in favour of Bhagwati Trading Company. AH these cheques were drawn on the Chartered Bank, Bombay. On August 12, 1954, 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 Agencie....
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....ani had advanced earlier for opening accounts for Bhagwati Trading Company with the Bank of India and the United Bank of India. Thereafter, whatever money was in the account of Bhagwati Trading Company with these Banks was the money obtained through the dealings entered into on behalf of Bhagwati Trading Company, the funds for most of which came from the Bharat Insurance Company. On August 18, 1954, Vishnu Prasad drew a sum of Rs. 50,000 from Bhagwati Trading Company's account with the Bank of India and passed 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....
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....Bombay. Vishnu Prasad passed on Rs. 24,00,000 to the Union Agencies through Chokhani. This amount was utilised in meeting the losses suffered by the Union Agencies to the extent of Rs. 22,81,738-2-0. A sum of Rs. 75,000 was paid to Bennett Coleman Co. Ltd., of which Dalmia was a director and a sum of Rs. 15,000 was deposited in the Punjab National Bank. It is again significant to note that telephonic communication took place between Dalmia's residence at New Delhi and Chokhani's at Bombay, between September 4 and September 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 Septe....
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....enter into a paper transaction of their sale prior to December 1 as, otherwise, the non-obtaining of the income-tax deduction certificate from the Reserve Bank would have clearly indicated that the Insurance Company did not hold these securities. Chokhani, therefore, entered into a genuine contract of purchase of 3% 1963-65 securities of the face value of Rs. 27,00,000 on behalf of Bhagwati Trading Company with Devakara Nanjee, Brokers, Bombay, on November 3, 1954. He instructed the brokers to endorse the securities in favour of the 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 the....
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.... of the Insurance Company and also entered into a cross-contract on behalf of the Union Agencies for the purchase of these securities from the same brokers. As these securities did not exist with the Insurance Company, these transactions were also paper transactions. We need not give details of the passing of money from one concern to the other in connection with these transactions. For purposes of audit the 3% 1959-61 securities of the face value of Rs. 35,00,000 had been sold. New securities, viz., 2¾% 1962 securities of the face 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 Bo....
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....o error in accepting the statements made by him which favoured the prosecution case without critically examining them, that they ignored his statements in favour of the accused for the reason that he was under obligation to Dalmia and ignored his statements inconsistent with his previous statement as he was not confronted with them in cross-examination. An accomplice is a person who participates in the commission of the actual crime charged against an accused. He is to be a participes criminis. There are two cases, however, in which a person has 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 accomplic....
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....gument of Mr. Dingle Foot is that such variation, if taken into consideration, considerably weakens the evidence of Raghunath Rai. He has urged that no cross-examination of Raghunath Rai was directed to the inconsistencies on any particular point in view of the general attack on his veracity through cross-examination with respect to certain matters. He has contended that in view of section 155 of the Indian Evidence Act, any previous statement of a witness inconsistent with his statement in court, if otherwise proved, could be used to impeach his credit and 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 inc....
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....ns from Dalmia and therefore do not, as suggested for the appellants, in any way, contradict Raghunath Rai. It is urged by Mr. Dingle Foot that it was somewhat unusual to put of the entries with respect to advices received by a day, that the entries must have been made on the day the advices were received and that in this manner the entries made by these clerks contradict Raghunath Rai. A witness cannot be contradicted by first supposing that a certain thing must have taken place in a manner not deposed to by any witness and then to find that that was not consistent 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.....
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....ns. The statements made by Raghunath Rai which are said to go in favour of the accused may now be dealt with. Raghunath Rai was cross-examined with respect to certain letters he had sent to Chokhani. He stated, in his deposition on July 29, 1958, that Dalmia accepted his suggestion for writing to Chokhani to send him the distinctive numbers of the securities which had been purchased, but not received at the bead office, and that when he reported non-compliance of Chokhani in communicating the distinctive numbers and suggested to Dalmia to ring up Chokhani to send the securities 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 Chokhan....
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....ination of Raghunath Rai that he was in a position in which he could be influenced by the Administrator. Raghunath Rai was using the office car. Its use was stopped by the Administrator in January, 1956. He was not paid any conveyance allowance. In April, 1958, he made a representation to the Administrator for the payment of that allowance to him. The Administrator passed the necessary order in May, 1958, with retrospective effect from January, 1956. The amount of conveyance allowance was Rs. 75 per mensem. Raghunath Rai could not give any satisfactory explanation as to why he remained 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 t....
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....ent the next day, he himself suggested to Dalmia in August, 1955, that Chokhani be asked to deposit all the securities in the Bank or to send them to the head office. He denied the suggestion that he made this change in his statement under pressure of the Police. The cross-examination was really directed to show that he had been approached by the police between the close of his examination on July 29, and his further examination on July 30, 1958. Raghunath Rai admitted in court that after giving evidence he went to the room allotted in the court building to the Special Police Establishment and 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 favo....
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....ment that he did not mention the name of Bhagwati Trading Company in his letters to the head office as he did not want Dalmia to know about the dealings with Bhagwati Trading Company, implies that in the ordinary course of business the information conveyed in those letters would be communicated to Dalmia and thus tends to support Raghunath Rai's statement that he used to visit Dalmia on receipt of the statement of account and inform him about the purchase or sale of the securities. Chokhani had been inconsistent about Raghunath Rai's later knowledge of the existence of Bhagwati Trading Company. In answer to 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 ....
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....to meet the losses of the Union Agencies Chokhani was in a position to sell the shares held by it or could have raised the money on its credit. He did not sell the shares as they were valuable and as their sale would have affected the credit of the Union Agencies. Chokhanihad been instructed in September, 1954, that the yield from the investment of the Insurance Company was not good and that the funds of the Insurance Company be invested in securities. Such instructions are said to have been given when he was authorised by Dalmia to purchase and sell securities on behalf of the Insurance Company. It is suggested that these instructions 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....
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....s of property to which the person using it is legally entitled. It is urged that Chokhani's keeping Bhagwati Trading Company secret from Delhi was not the result of a guilty conscience, but could be due to his nervousness or fear. We do not agree with this suggestion. He had nothing to fear when he was acting honestly and, according to him, when he was doing nothing wrong. It is further submitted that what Chokhani did amounted simply to the mixing of the funds of the Insurance Company and the Union Agencies. We do not think that this would be the correct interpretation of what Chokhani did. It was not a case of mixing of funds 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....
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.... would no more arise. Similar steps to meet the losses were taken whenever the occasion arose. The identity of purpose and method is to be found in all the transactions and they must be held to have taken place in pursuance of the original conspiracy. We next come to the case of Vishnu Prasad, appellant. He was the sole proprietor of Bhagwati Trading Company. His main defence is that he was ignorant of the various transactions entered into by Chokhani on behalf of Bhagwati Trading Company and that it was Chokhani who kept the books of accounts and entered into those transactions. The courts below have found that he knew of the transactions and 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 con....
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..... 11, and the statement made to Annadhanam that he carried on his speculative business in shares in the name of the Union Agencies. One of the main factors urged in support of the contention that Dalmia was in the conspiracy is that the entire scheme of conspiracy was entered into for the sole benefit of Dalmia. It is not reasonably probable that such a conspiracy would come into existence without the knowledge or consent of Dalmia. The conspiracy charge framed against Dalmia mentioned the object of the conspiracy as "meeting losses, suffered by you, R. Dalmia, in forward transactions, of speculation in shares, which transactions were carried on in the name of the Bharat Union 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....
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.... on his resignation, by O.P. Dhawan, who was an Accountant in the Delhi Office of the Union Agencies. He was also an employee of another company named Asia Udyog Ltd. Another Director of Govan Brothers Ltd. was D.A. Patil, Income-tax Adviser in the concerns of Dalmia. The share scrips in the Marketing Company standing in the name of Govan Brothers Ltd. and three blank share transfer forms signed by S.N. Dudani as Secretary of Govan Brothers Ltd., in the column entitled "seller ", were recovered from Dalmia's house on search on November 25, 1955. Dudani was the personal accountant of Dalmia and Manager of the Delhi Office of Bharat Union Agencies. The inference drawn by the Courts below from 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 ....
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....s of Dalmia were paid by Bharat Union Agencies and those payments were debited to the Salaries Account of the company. The personal employees of Dalmia were thus treated as the employees of Bharat Union Agencies. 5. The business done in the name of Dalmia with Jagdish Jagmohan Kapadia was treated as the business of Bharat Union Agencies. 6.The funds of Bharat Union Agencies were used to discharge an obligation personally undertaken by Dalmia. The price of the shares purchased in the process in the name of Dalmia was paid out of the funds of Bharat Union Agencies and the purchase of those shares was treated in the books of Bharat Union Agencies as part of its investment. 7. When sister-in-law of Dalmia 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 ....
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....en that he had lost the moneys in speculation which he did through his private companies and that most of those transactions were through the Union Agencies. Further, the charge said that he committed criminal breach of trust of the funds of the Insurance Company by wilfully suffering Chokhani to dishonestly misappropriate them and dishonestly use them or dispose of them in violation of the directions of law and the implied contract existing between Dalmia and the Insurance Company prescribing the mode in which such trust was to be discharged. It was in describing the manner of the alleged dishonest misappropriation or the use or disposal of the said funds in violation of the legal and contractual directions that the 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 ....
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....d been serving faithfully for a long time. Chokhani, as agent of Dalmia, had certainly credit in the market. There is evidence of his good reputation, but much of it must have been the result of his association with Dalmia and his concerns. He really enjoyed reflected glory. He had no personal interest in the matter as Dalmia had. We therefore do not consider this suggestion to be sound and are of opinion that Dalmia was the only person who had to devise means to meet the losses of the Union Agencies. Further, Dalmia admits that he used to give instructions with regard to the speculation-in-shares business of the Union Agencies at Calcutta and Delhi during 1954 and 1955, and stated, in answer to question No. 210 with respect 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 ....
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....Agencies by means other than the diversion of the Insurance Company's funds. We need not discuss whether the shares held by the Union Agencies at the time could be sold to raise the funds or whether on the mere credit of Dalmia funds could be raised in no time. These courses were not adopted. The selling of the shares which the Union Agencies possessed, might itself affect its credit, and that no business concern desires, especially a concern dealing in share-speculation business. . Dalmia had been in telephonic communication with Chokhani. It is significant, even though there is no evidence about the content of the conversation, that there had been frequent calls, during the period of the losses in August and September, 1954, between 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 ....
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.... securities at Bombay with the Chartered Bank, on June 30, 1953, was Rs. 53,25,000 out of a total worth Rs. 2,69,57,200. The amount of securities in the Bank continued to be the same till March 31, 1954, even though the total amount of securities rose to Rs. 3,04,88,600. Thereafter, there had been a depletion of securities with the Chartered Bank at Bombay with the result that on December 31, 1954, it had no securities in deposit. The amount of securities in the Imperial Bank of India, New Delhi, also fell subsequent to June 30, 1954. It .came down to Rs. 2,60,000 on March 31, 1955, from Rs. 59,11,100 on June 30, 1954. Securities worth Rs. 52,00,000 were in the two offices on June 30, 1953. The amount of such securities kept on steadily increasing. 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 la....
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....ya Pradesh of the face value of Rs. 60,500 were sent to Bombay'-vide exhibits D. 1 and D. 2 respectively. Lastly, stock certificates of 2¾ % Loan of 1962 of the face value of Rs. 56,00,000 were sent to Bombay on August 5, 1955. Letters, exhibits D. 3 and P. 892, state that the stock certificates mentioned therein were being sent "under instructions of the Chairman". Raghunath Rai has deposed that the other stock certificates sent with letters, exhibits D. 1, D. 2 and P. 923, were sent by him as the securities with respect to which those certificates were granted were maturing in September and were redeemable at Bombay. It has been urged that they could have been redeemed at Delhi and that they need not have been sent by Raghunath Rai on his own 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 pu....
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....he reason alleged, there seems to be no good reason why the Board itself did not resolve that Chokhani be empowered to sell and purchase securities. The explanation for the introduction of the joint-signature scheme does not stand to reason. Even if it be not correct that Raghunath Rai had to obtain confirmation, it stands to reason that he should report such transactions on the part of Chokhani to the Chairman, if not necessarily for his approval, at least for his information, as Chokhani had no authority to purchase and sell securities. These transactions have to be confirmed by the Board of Directors and, therefore, confirmation of the Chairman who was the only person authorised to purchase and sell securities was natural. Raghunath Rai states that when he received 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 t....
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....ted in the accounts of the Insurance Company. Inscribed stock for these securities worth Rs. 46,00,000 was duly obtained. Dalmia himself handed over inscribed stock certificate to Raghunath Rai some time in the end of January, 1955. This purchase, though genuine, was not a purchase in the ordinary course of business, but was for the purpose of procuring the inscribed stock certificate to satisfy the auditors, as already discussed earlier, that similar securities purchased in December, 1954, existed. The auditors were then to audit accounts of 1954 and not of 1955. In this connection reference may be made to Dalmia's attitude to the auditors' surprise inspection on September 9, 1954, on the ground that they could not ask for inspection of securities purchased in 1955. It may also be 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 Cod....
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....th the securities or evidence if they were with other persons, by Tuesday, September 13, Dalmia had stated that Chokhani's mother had died and that he would himself arrange for the inspection of securities direct with the auditors. Chokhani's mother died on September 4,1955. Dalmia had no reason to tell Rahgunath Rai on September 9, that the securities would be produced for inspection in the next two days, unless he believed that he could get them in that time on contacting Chokhani, or did not wish to tell him the real position. Dalmia states that he contacted Chokhani for the first time on September 15, the last day of the mourning and then learnt from Chokhani that the securities were not in existence, the money withdrawn for their purchase having been lent to the Union Agencies. The various 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 off....
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....im, called Dalmia to his office that evening in order to make a statement. Dalmia made the statements, Exhibits P. 10 and P. 11. P. 10 reads: "I have misappropriated securities of the order of Rs. 2,20,00,000 of the Bharat Insurance Company Ltd. I have lost this money in speculation." Exhibit P. 11 reads: "Further stated on solemn affirmation. At any cost, I want to pay full amount by requesting my relatives or myself in the interest of the policy-holders." Dalmia admits having made the statement, Exhibit P. 11, but made some inconsistent statements about his making the statement Exhibit P. 10. It is said that he never made that statement, but in certain circumstances he asked the Investigator to write what he considered proper and that he signed what Annadhanam recorded. He did not directly state, 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 volunt....
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....in his private account. Dalmia replied that he had lost that money in his personal speculation business which was carried on chiefly through one of his private companies, viz., the Union Agencies. This statement was not recorded in writing. Annadhanam did not consider it necessary, but this was mentioned by Annadhanam in his supplementary interim report, Exhibit P. 13, which he submitted to the Deputy Secretary, Ministry of Finance, on September 21, 1955. Annadhanam also mentioned about the statement recorded in Exhibit P. 10 in his interim report, Exhibit P. 12, dated September 21, 1955, to the Deputy Secretary, Ministry of Finance. In cross-examination Annadhanam stated that he did not send for Dalmia to the office of the Bharat Insurance Company where he had examined Raghunath Rai, as he had not made up his mind with respect 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....
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.... Nothing sinister can be inferred from this variation. Khanna practically supports the statement of Annadhanam, not only with respect to Exhibits P-10 and P-11, but also with respect to the third statement said to have been made near the staircase. His statements in cross-examination that it was possible that Annadhanam might have asked the companion of Dalmia to stay outside the office as the proceedings were of a confidential nature does not in any way belie Annadhanam's statement as this statement itself is not definite. In answer to the question whether it struck him rather improper that Dalmia made the statement, Exhibit P. 10, in view of his previous statement to Khanna that satisfaction would be afforded to the auditors on the points raised by them after Chokhani was available, he replied that his own feeling was that the 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 Dalm....
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....ety and charitable disposition when he had been specifically called to explain with regard to the missing securities. His version of what took place may now be quoted (answer to question No. 471) in his own words : "What actually happened was that I told Shri Annadhanam that I had learnt from G. L. Chokhani that the amount of the missing securities had been lent temporarily on behalf of the Bharat Insurance Company by Shri G.L. Chokhani to Bharat Union Agencies and that the amount had been lost in speculation. Shri Annadhanam then asked me about the missing securities. I then told him that I did not know as to whether the securities had been sold or mortgaged. My replies were being noted by Shri Annadhanam on a piece of paper. Shri Annadhanam then asked me as to when the securities had been sold or mortgaged-I replied that I did not know 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 inte....
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....u, you admitted it to be correct and signed it. Do you want to say anything with regard to that?" and simply stated, "I did sign that statement". He denied the third statement alleged to have been made near the staircase. Dalmia also stated that he had mentioned some facts about the statements. Exhibits P. 10 and P. 11, in his written statement. Paragraphs 53 to 59 of the written statement dated October 24, 1958, refer to the circumstances about the making of the statements, Exhibits P. 10 and P. 11. In paragraph 53 Dalmia states that the recording of his statement in Annadhanam's office took place as it was only there that Annadhanam and Khanna could get the necessary privacy. The insinuation is that they did not want any independent person to know of what transpired between them. Paragraph 54 refers to a very minor discrepancy. Paragraph 55 really 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 t....
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.... signed." The statement referred to is a short one, and it is not possible to believe that he signed it without reading it. Paragraph 56 makes no reference to the events of that evening, but paragraph 57 refers to the improbability of his writing things which brought trouble to him when just before it, he had been talking irrelevantly. The question in cross-examination did suggest that he was forced to make irrelevant talk due to certain provocation. That does not fit in with the explanation in paragraph 57 that his talk about a temple was invented to support the statement Annadhanam had made to the police about Dalmia's talking irrelevantly. His statement " How could I have acted in such a way without any positive assurances ?" implies that he did make the statements though on getting assurances. In paragraph 58 he states: "On 20th September Shri Khanna and Annadhanam 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, ....
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.... to make good the loss through his relatives." What are those circumstances which implied an offer of amnesty being granted to him if he did not persist in his negative behaviour, presumably in not giving out full information about the missing securities? Such circumstances as can be gathered from the judgment of the High Court seem to be these: (i) Dalmia, a person ;of consider able courage in commercial affairs was not expected to make a voluntary Confession. (2) He had evaded meeting the issue full-face whenever he could do so and did not appear before Mr. Kaul on September 16,1955, to communicate to him the position about the securities. (3) He not only appeared before Annadhariam an hour late, but further asked for two hours time before answering a simple question about the missing securities. (4) He made the statement when he felt cornered on account of the knowledge that Annadhanam 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....
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....d not made the statement and that the statement on oath really amounted to an inquisition. It was further contended that if the confession was not inadmissible under section 24 of the Evidence Act, it was inadmissible in view of clause (3) of article 20 of the Constitution. Mr. Dingle Foot has further contended that the statement, Exhibit P. 10, is not correct inasmuch as it records: "I have misappropriated securities of the order of rupees two crores, twenty lakhs of the Bharat Insurance Company Ltd.", that it could not be the language of Dalmia and that these facts supported Daimia's contention that he Simply signed What Annadhanam had written. The Public Prosecutor had also questioned the correctness of this statement inasmuch as the actual misappropriation was done by Chokhani and Dalmia had merely suffered it and as the accurate statement would have been that there was misappropriation 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 canno....
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....ia met him on the 15th in the presence of Mr. Barve, Joint Secretary, he asked whether he had brought with him an account of the securities of the Bharat Insurance Company. Dalmia expressed his inability to do so for want of sufficient time and promised to bring the account on September 16. On the 16th, Dalmia did not go to Mr. Haul's office; instead, his relations, S. P. Jain and others, met Mr. Kaul and made certain statements. Mr. Kaul submitted a note. Exhibit D. 67, to the Finance Minister on September 18, 1955, and in his note suggested that of all the courses of action open to the Government, the one to be taken should be to proceed in the matter in the legal manner and launch a prosecution as the acceptance of S.P. Jain's offer would amount to compounding with a criminal offender. Mr. Kaul stated that he did not consider it necessary to make any enquiry because the merits of the case against Dalmia 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....
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....while going to the staircase." This explanation seems to fit in with the context in which the word "discussion" is used in Exhibit P. 13. The interval of time allowed to Dalmia for consulting his relations might have been considered to be insufficient for considering a confession voluntary in case that was the time allowed to a confessing accused produced before a Magistrate for recording a confession. But that wasnot the position in the present case. Annadhanam was not going to record the confession of Dalmia. He was just to examine him in connection with the affairs of the Insurance Company and had simply to tell him that he had called him to explain about the missing securities. There was, therefore, no question of Annadhanam allowing any time to Dalmia for pondering over the pros and cons of his making a statement about whose nature and effect he would have had no idea. We do not, therefore, consider 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....
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....loyed in service and, therefore, this definition would not apply to Annadhanam. The making of a statement to the Investigator under section 33(3) of the Insurance Act does not amount to furnishing information on any subject to any public servant as contemplated by section 176, Indian Penal Code, an omission to furnish which would be an offence under that section. This section refers to information to be given in statements required to be furnished under some provision of law. We are therefore of opinion that section 176, Indian Penal Code, did in no way compel Dalmia to make the statement, Exhibit P. 10 We believe the statements of Annadhanam and Khanna about Parana's making the statement, Exhibit P. 10, without his being induced or threatened by them. Their statements find implied support from the statement of Raghunath Rai with respect to what Dalmia told him in connection with the making of the statement to Annadhanam, 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 ev....
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....ns holding shares in Asia Udyog Ltd., and in Govan Brothers Ltd. Such evidence would have, at best, indicated how many shares Dalmia held in these companies. That was not necessary for the prosecution case. The extent of shares Dalmia held in these companies had no direct bearing on the matter under inquiry in the case. The prosecution led evidence about the telephonic calls up to August 31, 1955, and did not lead evidence about the calls between September 1 and September 20, 1955. It is urged that presumption be raised that Dalmia and Chokhani had no telephonic communication in this period. Admittedly, Dalmia had telephonic communication with Chokhani on September 15. The prosecution has not impugned any transaction entered into by Chokhani during this period. It is not therefore essential for the prosecution to have led evidence of telephonic calls between Dalmia and Chokhani during this period. Another document which the prosecution 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 b....
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....e of opinion that these considerations are not such which would off set the inferences arrived at from the proved facts. It cannot be a matter of mere coincidence that frequent telephonic conversations took place between Dalmia and Chokhani when the Union Agencies suffered losses, that the usual purchase transactions by which the funds of the Insurance Company were diverted to the Union Agencies took place then, that such purchases should recur several times during the relevant period, that such securities which could not be recouped had to be shown as sold and when the Union Agencies or Bhagwati Trading Company could not pay for the sale price which had to be credited to the account of the Insurance Company, a further usual purchase transaction took place. We are therefore satisfied from the various facts considered above that the transactions which led to the diversion of funds of the Insurance Company to the Union Agencies were carried through under 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 res....
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....o the Delhi Office of the Union Agencies, in reference to the entry in the cash statement which, in the original statement, was in respect of the amount received from Bhagwati Trading Company, intimating that that amount had been credited by the Bombay Office to the account of the Delhi Office. A debit advice on behalf of the Bombay Office to the Delhi Office was issued intimating that the amount had been debited to the account of the Delhi Office when, in fact, the original entry debited that amount to the account of Bhagwati Trading Company. Lakhotia also made entries in the ledger of the Bombay Office which was maintained in the Delhi Office of the company. In its column entitled "folios" reference to the folio of the cash statement was given by writing the letter "C" and the number of the folio of the cash statement from which the entry was posted. On receipt of such advices from Lakhotia on behalf of the Bombay Office, Dhawan, P. W. 19, Accountant of the 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 th....
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....pared. It is not necessary for our purposes to hold whether a fictitious cash statement in lieu of the genuine cash statement received from Bombay was prepared under the directions of Gurha or not. The fact remains that the entries in the various advices prepared by Lakhotia on the basis of the cash statements received, did not represent the true entries in the genuine cash statements and that journal vouchers prepared by Dhawan also showed wrong entries and did not represent facts correctly. Of the journal vouchers with respect to which the three charges under section 477A, Indian Penal Code, had been framed, two are the vouchers prepared by Dhawan crediting the amounts mentioned therein to Asia Udyog Ltd., and debiting them to the Bombay Office of the Union Agencies. They are Exhibits P. 2055 and P. 2060. Each of them is addressed to Asia Udyog Ltd., and states that the amount mentioned therein was the amount received by the former, i.e., the Bombay Office from Chokhani 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 Un....
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....tion that the over-writing of the letter "C" by the letter "J" and the changing of the journal papers were made by the police. The part that Gurha played in getting these false entries prepared is deposed to by Dhawan, P.W. 19, who used, occasionally, to approach Gurha for instructions. Further, Gurha, as the accountant of Asia Udyog Ltd., must have known that Asia Udyog Ltd., had neither advanced any amounts to the Bombay Office of the Union Agencies nor received any amounts from the Bombay Office of the Union Agencies. He, however, signed all the vouchers prepared in the office of Asia Udyog Ltd., in connection with these transactions. He did so even during his illness (May, 1955, to July, 1955, which, according to the statement of Gurha, in answer to question No. 134 was from March 15 to August 12, 1955, during which period he did not attend the office of the Union Agencies). He signed them deliberately to state false facts. Dhawan particularly stated that on receipt of the 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 p....
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....the whole scheme, as otherwise, he had no reason to behave in that manner. Gurha, among the accused, must have been chosen for the purpose of the conspiracy because he had connection both with the Union Agencies and with Asia Udyog Ltd. He had been in the employ of a Dalmia concern from long before. He was the Accountant of the Dalmia Cement and Paper Marketing Company from 1948 till its liquidation in 1953. Gurha, as Director of the Union Agencies, knew that it had suffered losses as a result of share-speculation business in 1954-55 and that the Delhi Office was short of liquid funds to meet those losses. He must have known how the funds to meet the losses were being secured from the funds of the Insurance Company through Bhagwati Trading Company. He must have also known that this was wrong. It is only with such knowledge that he could have been a party to the making of false advices and vouchers. There could be no other reason. It could not have been possible for the prosecution to 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....
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....he Company's Bombay Office in the name of M/s. Bhagwati Trading Company. Any debit or credit balance left thereafter in the said account would be settled later on. I am getting this letter also signed by Vishnuprasad on behalf of Bhagwati Trading Company although he had neither any knowledge of these transactions nor had any connection with these affairs. Yours faithfully. For Bhagwati Trading Company Sd./ G. L. Chokhani Sd. Illegible Vishnuprasad Bajranglal Proprietor." We are of opinion that this is a letter written for the purpose of the case and was, as urged for the State, ante-dated. There is inherent evidence in this letter to support this view. The letter makes a reference to Vishnu Prasad's having no knowledge of the transactions and having no connection with the affairs. Mention of these facts was quite out of place in a letter which Chokhani was addressing to Gurha in the course of business for his immediately arranging for the payment of Rs. 1,80,00,000 in cash or securities to Bharat Insurance Company. Further, the opening expression in the letter does not necessarily mean that Gurha was being informed for....
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....count for not including securities of the value of Rs. 4,50,000 in this letter, Exhibit P. 956. It was further urged in the alternative that Chokhani had very extensive powers in all the alleged concerns of Dalmia and so could get anything done due to his influence without divulging secrets. That was not the position taken by Gurha in his statement. He did not say that he deliberately got false decuments prepared due to directions from Chokhani and which he could not disregard. Even if it be so, that means that Gurha got false documents made deliberately. Another submission for Gurha is that the case held proved for convicting him is different from the case as sought to be made out in the police charge-sheet submitted to the court under section 173 of the Code of Criminal Procedure. The charge-sheet is hardly a complete or accurate thesis of the prosecution case. Clause (a) of sub-section (1) of section 173, Criminal Procedure Code, requires the officer in charge of the police station to forward to the Magistrate empowered to take cognizance of the offence on a police report, the report in the prescribed form setting forth the names of the parties, the nature of the informati....
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....s that represented the true state of affairs and Chokhani had to inform the Delhi Office of the Bharat Union Agencies about the source of the money he was receiving for the Union Agencies to meet its losses. Chokhani did not disclose the true source, but disclosed a source fictitiously created to conceal the real source. There was no harm in disclosing Bhagwati Trading Company to the office of the Union Agencies at Delhi. With the same frankness it could not have been disclosed to the Insurance Company Office at Delhi both because that would have required the complicity of the entire staff of the Insurance Company in the conspiracy and because otherwise, it would at once disclose to the Insurance Company and those who had to check its working that its funds were being misused. Disclosure of Bhagwati Trading Company to the Union Agencies was necessary and there was no harm in any way in informing Gurha confidentially about it. After Gurha had got possession of the cash statements it was for him how to direct the necessary entries to be made in the advices prepared by Lakhotia on behalf of the Bombay Office at Delhi and on the basis of which journal vouchers were to be prepared by Dh....
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....s not defined in the Penal Code but section 25 defines "fraudulently" thus: "A person is said to do a thing ' fraudulently' if he does that thing with intent to defraud but not otherwise." The vouchers were falsified with one intention only and that was to let it go unnoticed that the Union Agencies had got funds from the Insurance Company. If they had shown the money received and paid to Bhagwati Trading Company, it was possible to trace the money back to the Insurance Company through Bhagwati Trading Company which received the money from the Insurance Company through crossed cheques as well. Whoever would have tried to find out the source of the money would have been deceived by the entries. The Union Agencies made wrongful gain from the diversion of the Insurance Company's funds to it through Bhagwati Trading Company and the insurance Company suffered loss of funds. The false entries were made to cover up the diversion of funds and were thus to conceal and, therefore, to further the dishonest act already committed. We agree with respect with the following observation in Emperor v. Ragho Ram [1933] ILR 55 All. 783 at page 788 : "If the intention with which a false doc....
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....the Union Agencies. A grievance is made of the fact that certain witnesses were not examined by the prosecution. Of the persons working for the Union Agencies, five were accused at the trial, Kannan, Lakhotia, Gurha, Mittal and Dudani. Only Gurha among them was convicted. The others were acquitted. The remaining persons were Krishnan, Panchawagh and the clerks, O.D. Mathur and Attarshi. Of the persons connected with Asia Udyog, one R.S. Jain of the Accounts Branch was not examined. Panchawagh who was an accountant of the Union Agencies and had custody of the cash statements and journal was given up by the prosecution on the ground that he was won over. We do not consider that it was necessary to examine him for the unfolding of the prosecution case against Gurha. Similarly, it was not necessary to examine the others for that purpose. A mere consideration that they ntight have given a further description of how things happened in those offices would not justify the conclusion that the omission to examine them was an oblique motive and could go to benefit the accused. A grievance was made that the High Court did not deal with the question whether the police tampered with the ca....