TaxTMI 
TaxTMI 
2003 (1) TMI 560
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....mercial Bank (hereinafter referred to as 'UCO Bank') wherein Harshad S. Mehta A-5 is payee or recipient of the amount, which are mentioned hereunder :- Trans.A-5 DatesDaysRate ofAmt. Rs.InterestAmountNo.FromTo%Rs.repaid (Rs.) 1.Lent24-1-199125-2-19913212.754,99,45,0005,58,2505,05,03,250to Mul Remarks-MUL delivered 35 lakhs Units of UTI to A5. 2.Borro-13-3-199125-3-19911216.7510,11,50,0005,56,99510,17,06,200wed Remarks-UCO gave BR to MUL for 70 lakhs Units. 3.Borro-18-3-199122-3-1991521.0010,83,75,0003,11,77510,86,86,775wed Remarks-UCO gave BR to MUL for 75 lakhs Units. 4.Borro-24-4-199126-4-1991226.257,62,45,0001,09,6507,63,54,650wed Remarks-UCO gave BR to MUL for 51 lakhs Units. 5.Borro-2-5-19917-5-1991525.0010,39,50,0002,99,09010,42,49,090wed Remarks-Number of Units not known but only value stated in chargesheet Undisputedly, (a) the receipt and the payment of amount was for a fixed period; (b) interest rate was fixed and was received or paid as agreed; (c) for the first transaction, before receiving the money, MUL gave UTI units as a security; for 2nd, 3rd and 4th transactions UCO bank issued Banks Receipts (BRs); (d) the transactions are squared-up on fixed date i.e....
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....etween the period of April - May, 1989 to May, 1991 in Bombay and Delhi, the object to which was to divert the surplus funds of MUL lying with its account in Canara Bank, Sansad Marg, New Delhi Branch to the account of A-5 HSM with ANZ Grindlays Bank, Sansad Marg, New Delhi Branch and thereby committing offences of criminal breach of trust fraudulently using forged documents, abuse of public offices, dishonest appropriation of the amount of Rs. 38,97,20,000 punishable under Section 120-B r/w Sections 409, 467, 468 and 471 of IPC and Section 13(1)(c) read with Section 13(2) of the P.C. Act, 1988. 2. Accused No. 1 Pramod Kumar Pritamlal Manocha- (i )A-1 is convicted for furtherance of criminal conspiracy in his capacity as a public servant viz. being Deputy Manager (Finance) of MUL at the relevant time, for causing and or allowing MUL's fund wrongfully to be gained by A-5 HSM, being an offence punishable under Section 13(1)(c) read with section 13(2) of the PC Act, 1988; (ii)A-1 is convicted for offence punishable under Section 409 of IPC for committing criminal breach of trust in respect of property of Maruti Udyog Limited, Delhi, then Government company of 35 lakhs Units of UTI,....
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....be a false and forged document; (v)A-3 is convicted under Section 467 of IPC for having forged on or about 13-1-1991 the document to be a valuable security with the banker receipt No. 1121 dated 13-3-1991 (Ex.38) for Rs. 10,11,50,000 with intent to make MUL believe the UCO Bank, Hamam Street Branch, Bombay was holding 70 lakhs units of UTI for the face value of 7 crores and which UCO Bank was to deliver to MUL; (vi)A-3 is convicted under Section 468 of IPC for forging valuable security with Bankers Receipt No. 1121 dated 13-1-1991 (Ex. 38) of UCO Bank for the sum of Rs. 10,11,50,000 in the name of MUL with the intent that the said document should be used for cheating; (vii)A-3 is convicted under Section 471 r/w sections 467 and 468 of IPC for dishonestly using forged bankers receipt No. 1121 for the sum of Rs. 10,11,50,000 (Ex. 38) as genuine; (viii)A-3 is convicted under Section 467 of IPC for having forged at Bombay the letter dated 13-1-1991 (Ex. 60) on the letter head of UCO Bank, Hamam Street Branch, Bombay with the intent to dishonestly authorize remittance of funds of MUL amounting to Rs. 10,11,50,000 to Grindlays Bank knowing that the said remittance was meant to cause ....
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....r having dishonestly misappropriated four bankers' cheques to wit:- (a )Cheque No. 645585 dated 13-3-1991 for Rs. 10,11,50,000 (ii) Cheque No. 646402 dated 8-3-1991 for Rs. 10,83,75,000, (iii) Cheque No. 863237 dated 24-4-1991 for Rs. 7,62,45,000 (iv) Cheque No. 863260 dated 2-5-1991 for Rs. 10,39,50,000 [Exs. 30, 32, 34 and 36] aggregating to Rs. 38,97,20,000 drawn by MUL on its bankers viz., Canara Bank, Sansad Marg Branch, New Delhi in favour of Grindlays Banks." Against the said judgment and order, A-1 Pramod Kumar Pritam Lal Manocha has filed Criminal Appeal No. 1117 of 1999, A-3 Vinayak Narayan Deosthali has filed Criminal Appeal No. 1141 of 1999, A-4 Ram Narayan Popli has filed Criminal Appeal No. 1097 of 1999 and A-5 Harshad Shantilal Mehta has filed Criminal Appeal No. 1150 of 1999. Against the acquittal order of A-2 Ambuj Sushil Kumar Jain, Central Bureau of Investigation has filed Criminal Appeal No. 521 of 2000. It is to be stated that pending hearing and disposal of these appeals A-5 expired on 31-12-2001, Normally, appeal would have abated against him. However, his wife filed Criminal Misc. Petition No. 574 of 2002 on 16-1-2002 for continuing the said appeal. By or....
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....ting to MUL and withdrawing the funds. A-3 forged documents which helped A-1 to secure the release of monies from MUL. A-1 conspired alongwith A-3 and A-4 for making money available to A-5, who became the prime beneficiary of the money. The bankers' cheques were handed over, on the instructions of A-1 and A-2, to Anuj Kalia an employee of A-5. Submissions- Learned senior counsel Mr. Ram Jethmalani appearing for A-5 at the outset submitted that from the aforesaid five transactions, it is apparent that the investment/loan was for a short period. Yield- interest is at a higher rate. According to him, the amount is received and paid on due dates. There is no loss to MUL or to the UCO Bank and the Bank has received commission for the said commercial transactions. First transaction is loan taken by the MUL through UCO Bank from A-5 on the basis of 35 lakhs of UTI units given by MUL to A5 through UCO Bank. It is his submission that in view of these facts it is apparent that prosecution is motivated and the conviction of the accused requires to be set aside. For the prosecution, it is the contention of the learned Solicitor General Mr. Harish N. Salve that the aforesaid transactions wer....
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....r so-called expeditious movement of funds. If a person acts in a manner which is sinister or contrary to law then it cannot be said that the transaction was as per the commercial practice. It is a case of forgery because certain sets of documents are created where there is no real or genuine transaction. It is also contended that A-3 was not having any authority to purchase or sell units on behalf of the Bank. Secondly, he got letters. Exs.58, 60 and 61 typed outside the office and nobody knows wherefrom the said letters were got typed and this would not be in normal course of business. This would be a most relevant factor for judging whether his act was dishonest or not. A-3 wrote a document, which he had no authority to write, with a specific motive to enable the transaction to be completed and money pulled out of MUL and he issued Bank Receipts (hereinafter referred to as 'BRs') without having security, namely, having UTI units. The learned counsel admits that there is no direct evidence on record to establish that BRs were issued without possessing the units but inference can be drawn that the same were issued without holding units as A-3 has not maintained any record for this ....
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....se to be put up before a Court and the investigation was kept alive for sordid and dishonest motive. He pointed out that-(1) the CBI itself understood that the FIR was based upon the one single allegation that MUL should have received more interest than it actually received. The charge-sheet nowhere states that at the time of the FIR the nature of these five transactions was misunderstood or that they changed their mind after investigation; (2) paragraph 4 of the charge-sheet expressly confirms that the first transaction was loan transaction inasmuch as it is averred that MUL borrowed the amount at a higher rate of interest at 12.75 per cent per annum for 32 days against physical delivery of 35 lacs Units of the UTI; (3) paragraph 5 of the charge-sheet refers to the transaction of 13-3-1991 which describes it as an investment of 10 crores and odd from MUL for a period of 12 days at the interest rate of 16.75 per cent per annum. This is nothing but a loan to Harshad S. Mehta: (4) paragraphs 6.7 and 8 contain similar descriptions of the remaining transactions. He further submitted that cheques were drawn in favour of Grindlays Bank for expeditious transmission of amounts to A-5, the....
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....ontended that the point of determination is - whether this charge is legally sustainable. In other words whether borrowing money on four occasions and returning it on the due date with interest is an offence under Section 403 of the IPC? The answer to this point is - a resounding No. The learned senior counsel further submitted that following are the ingredients of the offence charged above:- (i)that the accused appropriated the cheques to himself; (ii)that the appropriation was a misappropriation; (iii)that it was dishonest. He submits that the first ingredient is satisfied-A-5 appropriated the cheques or their proceeds to himself. A person misappropriates only when he appropriates property to himself which in fact belongs to somebody else and he does so without that person's consent. Grindlays Bank had not negotiated the loan for itself. Cheques were being issued for the purpose of lending money by MUL to A-5. The cheques and their proceeds were meant for the accused and it was the accused who was receiving it by a pay order in the name of Grindlays Bank. It is not the prosecution case that the amount was in fact meant for Grindlays Bank but it is the prosecution case that t....
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....d to the account of its true customer, the Bank is neither guilty of negligence nor of any criminality. Similarly, no officer of the bank could be held liable for the same and there is no question of any liability for A-5. There is no evidence that Grindlays Bank or the Canara Bank had any objection to this course of dealings. Certainly there was no intention to cause wrongful loss to anybody because no loss has been caused and no unlawful means were used. Learned senior counsel referred to the decision in Dr. Vimla v. Delhi Administration [1963] Supp. 2 SCR 585 and submitted that unlike the above case, every thing in the present case is above-board, there is no deceit, there is no falsehood and suppression of truth. It is contended that an approver's evidence cannot be accepted without corroboration and certainly not when it is in conflict with the unchallenged testimony of another prosecution witness. There was no justification for the Court to come to the conclusion that it is accused No. 5 who is responsible for these pay orders being credited directly in his account. Of course, it is without prejudice to the arguments that the amount is not directly put into his account. It....
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....have been referred to in the very first statement of PW23. The fact that it was not so referred to conclusively established that the meeting never took place and reference to it in PW23's later statement of 10-8-1994 and in his judicial confession recorded under section 164 CrPC was at the instance of the CBI to whose suggestions he readily acceded in view of an agreement to make him an approver. It is further contended by the learned counsel for the appellant that in fact no such meeting ever took place and consequently, the conspiracy charge insofar as it is alleged to have commenced from April/May, 1989 is unsubstantiated by any evidence and in fact falsified by it as- (a)the veracity of PW23 has been destroyed in cross examination. He denied his taped conversation and feigned ignorance of police statement. He suppressed truth from the JPC. (b)Para 160 at page 294 of the impugned judgment, contains a legal error. The learned Judge treats as corroborative evidence what in law and common sense is not corroborative evidence at all. Learned Judge has held that evidence of Khandelwal is corroborated from what followed thereafter in the form of various transactions between MUL and A....
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....stant case, the charge-sheet in the present case was one of the earliest to be filed against A-5. In view of the palpable lack of nexus between the instant prosecution and legislative intent in enacting the SCAM Act the question can arise as to why the CBI chose to investigate and prosecute the instant case. This question has a clear answer that the CBI chose to pursue the instant case and other cases in which PW23 had acted on behalf of A-5 in New Delhi in transactions with public sector undertaking to intimidate and blackmail PW23 for not supporting A-5's public declaration from June, 1993 onwards that he had paid the sum of Rs. 1 crore to the then Prime Minister at his residence in Delhi. In simple words, if PW23 - a vital witness in A-5's allegation against the then PM - supported the allegation of A-5, then he would be prosecuted along with accused No. 5 in the instant case and other cases. If he co-operated and did not support A-5, he would be granted a pardon in the said cases. The forum in which the co-operation of PW23 was sought for was in proceedings before the JPC which inter alia was to inquire into A-5's allegation against Shri Narsimha Rao, the then Prime Minister. F....
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....er he questioned A-5 before the FIR was registered; (ii)whether he interrogated any of the other accused in the instant case before the FIR was registered; (iii)whether he interrogated PW23; (iv)whether he discussed the matter with the IO; (v)whether the IO submitted any written report on the outcome of the preliminary enquiry; (vi)whether at the time of registration of the FIR he had determined the role of PW16; (vii)why PW23 was not named as an accused in the FIR which came to be registered; (viii)whether he personally referred to any documents before deciding to register the FIR. All the above circumstances reveal the non-application of mind which the investigating agency displayed in filing the FIR. The only circumstance that Maheshwari recalls is that the decision to lodge the FIR was a unanimous one. (j)The investigation concluded on 4-11-1993 when the IO PW25 recom-mended the prosecution of all the accused including PW23. Although the investigation had ostensibly concluded, no charge- sheet was filed. Obviously, the CBI was awaiting the outcome of the event. (k)The JPC prepared its report in December 1993. In January 1994, the said report was made public. The repor....
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.... the Special Court was established, is a colossal waste of public time and money, a travesty of justice and an unfortunate reminder of how individuals subvert our criminal justice system by causing institutions like the CBI to file cases which are only vehicles to subserve their own private interests. Lastly, the learned senior counsel for A-5 submitted that not only A-5 and others charged alongwith him be acquitted of all charges, but strictures against the investigating agency for bringing the system of criminal justice administration into disrepute be passed. Before dealing with the contentions raised by the learned counsel for A-5 and CBI and before narrating submissions made by the counsel for rest of the accused, we would first refer to :- A.Allegations in the FIR and charge-sheet B.Relevant Part of the Report of the Joint Parliamentary Committee (JPC). A. Allegations in the FIR and charge-sheet The FIR was recorded on 15-4-1993 by the CBI after Preliminary inquiry which started on 15-9-1992, wherein it is inter alia stated as under :- (i)During Jan, 1991 to May, 1991 Shri Pramod Kumar was functioning as Dy. Manager (Finance) and Shri Ambuj Jain was functioning as Sr. ....
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....actions of 13th March, 18th March, 1991 and 24th April, 1991 are referred to in para 5. The said paragraph itself recites the number of days and the rate of interest. For these investments, Banker's cheques were obtained by S/Shri Pramod Kumar and Ambuj Jain from the account of MUL in Canara Bank, Sansad Marg, New Delhi in the name of ANZ Grindlays Bank and the same were collected by Shri Anuj Kalia who deposited the same into the account of Shri Harshad S. Mehta in ANZ Grindlays Bank, Sansad Marg, New Delhi. As these Banker's cheques were in the name of ANZ Grindlays Bank, they should have been credited into the account of the bank but Shri R.N. Popli in connivance with his co-conspirators, credited the same into the account of Shri Harshad S. Mehta unauthorisedly. On reversal of these investments the amounts were credited in the account of MUL from the account of Shri Harshad S. Mehta. For the above investments, Shri V.N. Deosthali issued bogus bank receipts unauthorised in pursuance of the said conspiracy. With regard to the 5th transaction dated 2-5-1991, similar averments are made in paragraph 7. (v)The enquiry into the said PE disclosed that MUL, Delhi during the said per....
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..... The CBI itself understood that MUL should have received more interest than it actually received. The charge-sheet nowhere states that at the time of lodging of the FIR the nature of these five transactions was misunderstood. Further, in the FIR as well as in the charge-sheet it is stated that conspiracy between the accused for the alleged transaction took place during the period from January 1991 to May 1991. B. Relevant part of the report of Joint Parliamentary Committee (JPC) JPC noticed the findings of Janakiraman Committee's Report submitted in May 1992 that unscrupulous brokers in collusion with certain bank officials had manipulated securities transactions of banks and financial institutions for their own purpose in a variety of ways and in clear violation of the established rules, guidelines and prudent business practices. Parliamentary Committee also noticed (i) number of irregularities including extensive use of BRs for ready forward transactions, (ii) issuance of number of BRs on the basis one outstanding BR and issue of BRs having no backing of securities, (iii) facilitating the brokers to take temporary position in Government securities without involvement of their....
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.... to meet their obligations. As per informal understanding and in the name of market practice, the payee-bank used to credit the proceeds to the accounts of the broker constituents who brought the cheque to it for collection. These practices were in gross violation of the instruction that the accounts of banks with RBI should be utilised only for genuine inter bank transactions and not for transfer of funds to their clients. The total amount diverted to the brokers accounts and the ultimate disposal of funds has not been determined. Some instances are however given below. 12.15 In respect of investment transactions between PFC and UCO Bank during the period July, 1990 to May, 1991, 16 bankers cheques totalling Rs. 394.23 crores were unauthorisedly issued in favour of ANZ Grindlays which were irregularly credited to the account of HSM. Routing of transactions 12.24 Many brokers e.g., HSM, HPD, ADN, Excel & Co., NKA etc. used some of the banks as 'routing' banks which carried large volume of securities transactions for them. Thus, Andhra Bank, UCO Bank, BOK Bank of Madura and ABFSL carried transactions of the value of over Rs. 77,000 crores for brokers and others during April, 1991....
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....ptance of Banker's Cheques be conducted by the Securities Division. This will facilitate us to meet the deadlines of inter-bank clearing timings.' 14.21 The Committee note that the PSUs were the single largest source of surplus investible funds around Rs. 36,000 crores between April 1990 and December 1992 only. In the investment of these funds guidelines and instructions were routinely flouted and no norms were observed. Neither DPE nor the Ministries concerned took any steps to ensure the compliance of their guidelines. Even the Ministry of Petroleum and Natural Gas which had made a review of investment of surplus funds by the PSUs under its administrative control in May 1990 closed its eyes knowing fully well that PSUs were investing with the foreign banks despite the guidelines of DPE, that PSUs could have normal banking transactions only with nationalised banks. Placement of funds for short periods- 14.98 The PSUs have placed funds with banks and finance companies for very short periods, sometimes for only a few days and even for one day implying supply of funds for speculative purposes to earn higher return. These banks/finance companies issued BRs for the amount received. ....
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....ensibly to assist the latter in transferring funds quickly to meet their obligations. As per informal understanding and in the name of market practice, the payee bank used to credit the proceeds to the accounts of the broker constituents who brought the cheque to it for collection. (b)Routing of transactions facility was given to many brokers including A-5. (c)Single Point Clearance claimed by A-5 and given by SBI. (d)PSUs were investing the funds against the guidelines and instructions. (e)PSUs were investing funds for short periods for few days and even for one day implying supply of funds for speculative purposes to earn higher return. (f)In the investment of these funds guidelines and instructions were routinely flouted and no norms were observed. Neither DPE nor the Ministrices concerned took any steps to ensure the compliance of their guidelines. Relevant part of evidence In the present case, the evidence runs into more than 40 volumes. However, at the time of hearing of this matter, on behalf of A-5, five transactions in question are admitted. Hence, it is not necessary to refer to or consider the evidence pertaining to the transactions in question. If the prosecution....
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.... all were sitting adjoining to each other. Only the Director (Finance) was having closed cabin in the said hall, which has transparent glasses. It is his further say that the fact that MUL was having surplus funds was well known in the finance market and the large amount used to remain idle in the bank. Company felt that there was need of optimum utilization of surplus funds to get best possible returns. It is his say that four transactions of investment were approved by the sub-committee consisting of Mr. R.C. Bhargava and Mr. S. Natarajan and there was also discussion with him in respect of dis-investment of units of UTI on 24th January, 1991. It is his say that the investment and dis-investment transactions were placed before Board of Directors for information and Board had not raised any objection. In cross-examination, when he was asked whether he was aware that the representatives of the brokers representing the counter parties used to contact officials of the Corporate Finance Department, he stated, "according to him, the Director of Finance might be knowing about the same." He also admitted that there was a system of internal audit and a statutory audit and aforesaid tra....
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.... Cell used to evaluate quotations received from the banks in terms of yields. After such evaluation. Director (Finance) used to be apprised and then a decision would be taken depending upon the best yield possible. Thereafter, an agenda used to be put up to the Director (Finance) for a final decision and that A-1 used to convey such offers to Director (Finance) orally. A-1 also used to put-up a written note about the proposals of investments before the Director (Finance). It is his say that such deals were directly discussed with the counter party and such investment deals were not put through any individual by MUL on principal to principal basis. He stated that in respect of five transactions being the subject-matter of this case, he was not having any personal information. However, when he took over as a Director (Finance), the same policy about the placement of funds continued. It is also his say that BR held by MUL is discharged when the duration of investment gets over. He admitted that looking at the BR of UCO Bank (Ex. 41 dated 24-4-1991) for identification, no suspicion would arise on the face of it. With regard to all five transactions, he stated the same thing. In further....
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....s has proved the agenda notes and resolutions passed by the Sub-Committee of MUL. Prosecution has also examined PW4 Rajan Ramgopal, Executive, who at the relevant time was posted as Accountant and working in Corporate Finance Cell under A-1 and A-2. In examination-in-chief, the witness has stated that MUL through its Finance Cell used to deploy its surplus funds in Inter Corporate Deposit with Public Sector Undertakings and also invest in securities through Banks and also through brokers quoting on behalf of the banks. For this purpose, the office was receiving telephone calls directly from the banks as also from brokers acting on behalf of the banks. Similarly, MUL also used to make calls for the enquiries to the banks as also the brokers. It is his say that in case of incoming calls, the calling party would disclose its identity and would inquire about A-1 or A-2. In case both being busy then he used to take down the particulars furnished by the calling party and then pass on to A-1 or A-2. The calling party would ask whether MUL, has any surplus funds for deployment in securities. They used to pass on the said message to A-1 or A-2 and inform what the other party had offered. ....
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....attend the security transactions on behalf of the head office as also on behalf of the clients which also included brokers. The branch was not concluding deals in the security transactions, in case where such transactions were on behalf of their bank and the same used to be concluded by the Head Office. The transactions in securities included both sale of such securities by UCO Bank as also purchase. It was only the Head Office which was concluding deals of sale of the securities, inviting the proposals etc. As per instructions of the head office, Hamam Street Branch used to receive the sale proceeds and deliver the securities to the purchasing bank. The branch used to receive instructions in respect of such concluded deals from the head office over telephone. During the relevant period there were no hard and fast rules and any officer including the witness used to receive such telephonic instructions from the head office in respect of security transactions. The securities sold by their bank were not delivered in a physical form and their branch used to issue mostly SGL Forms. In case of some of the financial institutions, the delivery used to be in a physical form of security. Dur....
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....al Manager and Zonal Manager the names of 18 such brokers for whom UCO Bank was doing switch over transactions. Because of increase in deposits, Hamam Street Branch of UCO Bank was upgraded from medium to large branch. He has further stated that the bank was charging the commission for routing such switch over transactions but did not agree that it was so doing for lending its name as suggested. According to him, routing transaction means-UCO bank used to receive bank receipts from one bank and against it the bank used to issue BRs to other bank. It is also his say that in some cases their bank received bankers cheques from one bank and UCO bank issued its bankers' cheques to another bank. Whenever switch over transactions used to take place under the instructions of the brokers, the brokers' instructions to receive or deliver securities were sent to the counter party along with the cost memos and BRs. The BRs and cost memos used to be of UCO bank. The brokers instructions used to be on the letter head of the broker. The purpose of sending brokers instructions along with various documents to the counter party was to put it on a proper notice. It is his further say that although he....
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.... In case of sale transactions on behalf of their clients, they used to get written instructions from their clients, having necessarily their accounts with the bank. Such written instructions would be addressed to the Branch Manager. The instructions being for the sale of the security, they were ascertaining from their clients about the availability of the security with the bank or the time of delivering of security to the bank. On receipt of the security, they were preparing a cost memo as per instructions of their client as contained in his instructions letter. The officers working in the security department were authorised to sign the cost memos and such authorised officer used to sign the same. Their bank was receiving payment in accordance with the cost memo from the counter party and on receipt of such payment they were delivering the security in question to the counter party. Without security in the hands of the bank, they were not preparing the cost memo and sending it to the counter party. He admitted that UCO Bank, Hamam Street Branch can issue a BR while dealing on behalf of its client in the security transactions provided there is a back up security of the client. He fur....
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.... order Ex. A-3(2), he stated that the said letter is the letter of instruction received from A-5 Harshad S. Mehta addressed to UCO Bank without the name of its branch. By reading the said letter, it is noticed that the same contains instructions to UCO Bank. PW21 Mr. Makarand Vasant Shidhaya joined UCO Bank on 8-5-1972. He has stated that he was named as one of the accused in five Security related scam cases along with the other accused which are on the file of Special Court. On 1-10-1982 he was promoted as an officer. During January, 1991 to May, 1991, he worked as an officer in Hamam Street Branch in security department. During the said period, V.N. Deosthali, A-3 also worked in the said branch as an officer. He himself and A-3 were empowered and authorized to sign BRs, bankers cheques and all other related vouchers for and on behalf of their bank. The head office used to conclude its deals in Securities, and Hamam Street Branch used to execute the security deals of their head office as per advice received from zonal office, MBD Department and Division Office. No officer or an employee working in Hamam Street Branch was authorized to conclude any security deal on behalf of their....
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....ontaining signature on its reverse, it is his say that the signature on the reverse of BR signifies reversal of the BR meaning thereby that the counter party had received the security and obligation of UCO Bank, who had issued the said BR stood discharged. DW-A3(2) Mr. Sekharipuram Vasudevan Ramnathan, Chief Officer, UCO Bank stated that he joined services of UCO Bank at Calcutta in the year 1969 as Probationary Officer. In June, 1990 he was brought to Bombay Office as Divisional Manager in its Nariman Point Office and he worked at the said office till October, 1992. Thereafter, he was transferred to Bhuvaneshwar, Orissa. Since February, 1993 he has been under suspension. On seeing the letter dated 8-1-1991 written by Divisional Manager to Senior Manager, Hamam Street Branch, he stated that the letter bears his signature as being writer of the said letter and he identified the same. He also identified the initials of Karkhanis on the same and stated that he was working as Senior Manager in the said UCO Bank's Branch at Hamam Street. On seeing letter dated 17-3-1992 written by D.M. to Zonal Manager, Zonal Office, General Admn. Department, Bombay, he stated that he was the author of....
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....ale of the securities was done by the bank as an agent of its customer for a commission. The routing facility was offered to many brokers including A-5 in the year 1991 and such brokers availed of the said facility. Such routing facility was already in practice even before he joined as Divisional Manager in June 1990. Some banks were offering such facilities. He was an accused in two special cases before the Special Court and the said cases did not relate to the security transactions concerning routing facility. He further stated that a bank can issue its BR against physical security and SGLs held by it in addition to the BRs which it may hold. He was aware about a meeting between the officers of RBI and the officials of all the banks about reconciliation of outstanding banks receipts. To his knowledge, there were no outstanding BRs against UCO Bank. One Mr. R. Venkatakrishnan, the then GM. Treasury and Investment Management Department attended the said meeting on behalf of UCO Bank. Letter dated 8-1-1991 (Ex. 231) written by the Divisional Manager, UCO Bank, Divisional Office, Bombay to the Senior Manager, Hamam Street Branch for switch transactions reads thus- "Re. : Switch Tra....
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....uted and have detailed discussions with them regarding their experience, the commission they charge, the modus operandi and their opinion why other banks are not entering the field. You are also advised to contact other banks who are not having such transactions and have discussion with them with a view to find out why in spite of profitability in this area they are not entertaining this and give at your report at an early date." PW2 Meda Sai Swaroop, who was the Manager in the Parliament Street Branch of Canara Bank at New Delhi, stated that after preparing the bankers cheque, the same would be handed over as per instructions contained in the instructions letter or to the bearer of that letter. He has identified the signatures of Anuj Kalia, to whom the bankers' cheque was handed over. It is his say that in all the cheques in question there were cross lines on the left hand top corner of the said pay order which indicate that the amount of the said pay order was to be credited into the account of payee only as named therein i.e. Grindlays Bank. On the right hand top corner of the said pay order, 'not transferable' was also printed. This would show that it was only the payee of th....
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..... 30 to any third party's account. He identified A-4 R.N. Popli, an employee of Grindlays Bank, but stated that he was not aware about his posting during the relevant period i.e., from the year 1990 to 31-5-1991. PW11 Suraj Amarnath Tandon, Assistant Manager of ANZ Grindlays Bank, stated that from March, 1990 to March, 1992 he worked as Second Officer. Front Office in Sansad Marg Branch. It is his say that on the receipt of the instruction letter of the customer, their bank used to put its rubber stamp in token of receipt of such letter indicating date and time of its receipt. On seeing the letter, Ex. 73, dated 26-4-1991 of Harshad S. Mehta addressed to the Manager Grindlays Bank, he has stated that by that letter Harshad S. Mehta (their account holder) instructed them to issue a bankers cheque for a sum of Rs. 7,63,54,650 favouring Canara Bank for the benefit of MUL. As per the said letter, they issued bankers' cheque on the date itself for the amount as mentioned above and handed over the same to the bearer of the said letter, Mr. Anuj Kalia, who has received and acknowledged the receipt of the said pay order by signing the same at the right hand bottom corner of the said lette....
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.... bankers cheques through a Special Clearance settlement which is known as inter bank settlement. The objective of drawing the bankers cheque was to provide speediest or fastest clearance of such instruments which was not possible through other clearing settlements available to the customers, namely, MICR. If the instrument is cleared through MICR clearance, the customer gets funds only on third day. The other settlement introduced by RBI in the year 1985 in response to the needs of the business community as a mode of faster settlement of cheques, also took minimum two days to provide clearance of cheques. He was shown entry Ex. 71(4) dated 13-3-1991 into the accounts of Harshad S. Mehta. He stated that the then officer-in-charge of clearing department had authorized the said entry to be made in the statement of account. He could not recall the name of the said officer who was in charge of clearing department. He agreed that in 1991-92 there was a practice of crediting the proceeds of the bankers' cheques into the account of third party other than its payee. However, it was extended to only certain high networth customers like British Airways, Classic Financial Nizhewan Travels and ....
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....ated that he is not conversant with handwritings, signatures or initials of A-4. The activities which they carried out in the Remittance Department were Remittance of funds from one branch to another branch or another bank, cheque collection, cheque purchases, standing orders etc. During the course of his work, he came across Payees Account Cheque, Pay-in-Slip, debit vouchers and credit vouchers. With regard to the credit voucher dated 26-4-1991 into the account of Harshad S. Mehta, it is his say that the same was approved by him and it bears his initials. The entry appearing therein is correct and the same was prepared on the basis of credit advice received from the RBI. It is his further say that Grindlays Bank did not receive any instructions from RBI for crediting the amount of the two vouchers shown to him earlier into the account of Harshad S. Mehta. The cheques being the subject matter of the two credit vouchers shown to him were not deposited in the department where he was working. The same were deposited in the treasury department in the same branch. It was the treasury department to which they used to send the said cheques for clearance. He could not recollect who was or ....
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.... on the subject I cannot say of its violation. Q.The Circular Ex. 148 was issued with the approval of the then Governor of RBI who was Mr. Venkataramana at the relevant time. (Witness is again referred to portion of Circular Ex. 148 in the second para reading as : "If an bank credit.............for the unauthorised payment". Q.Does the use of the word "Unauthorised" referred to the fact that the issuing bank may not have authorised the payee bank to credit the amount into the account of third party ? A.Yes. The said aspect has been further clarified in the said Circular (Witness refers to the following portion of the said Circular) reading as : "In the case of 'account payee' cheques wherein a bank is a payee, the payee bank should always ensure that there are clear instructions for disposal of proceeds thereof from the drawer of the instrument." The Circular dated 9-9-1992 Ex. 148 issued by the Reserve Bank of India reads thus :- "September 9, 1992 Bhadra 18, 1914 (Saka) The Chairman/Chief Executives of Scheduled Commercial Banks (excluding RRBs) Dear Sir, Payment of cheques/pay orders It has come to our notice that banks have undertaken large value transactions with ....
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....ses including evidence against A-5 : [PW23, PW25, PW16, CW1 and DW5(8) Learned senior counsel appearing on behalf of A-5 stated that the evidence led by the prosecution for establishing the five transactions is not required to be dealt with as he admits on behalf of A-5 that in four transactions the amount was taken by A-5 and in first transaction he gave loan to MUL but as loan was given, he has not committed any illegality in taking loan from MUL through UCO Bank. In this view of the matter, it is not necessary to discuss the evidence with regard to the receipt of the money by A-5 through UCO Bank. However, we would refer to the evidence of PW23, PW25, PW16, CW1 and DW5(8) pertaining to A-5 and other accused. PW23 Mohan Das Khandelwal, a Share broker, who is approver in this case stated that after doing B.Sc., MBA, he worked with Delhi Cloth & General Mills Co. Ltd. and State Bank of India upto the year 1986. Thereafter, in 1990 he got membership of Delhi Stock Exchange. It is his say that through a common acquaintance, he came across one Ashwin Mehta in the year 1988 and then with Harshad S. Mehta (A-5). Ashwin Mehta is the younger brother of A-5. It is his further say that As....
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....is behalf money market trends, quotations etc. to such PSUs. He was supposed to convey the same to the functionaries of the PSUs who were concerned in the investment of the funds. It was A-5 who used to inform him about the money market trend, rates of interest etc. which he wanted him to convey to the functionaries of the PSUs. A-5 was mostly in Bombay and he used to convey him the same over telephone. It is his say that a number of accounts with various banks were opened in Delhi in the name of Harsad Mehta, in the name of his company and other concerns including the account in the name of Ashwin S. Mehta. He was one of the authorized signatories, being a Power of Attorney holder, to operate the said accounts except one of the accounts which was opened in Citibank. He received the authority for the operation of some accounts which were in the name of Harshad S. Mehta. Usually Mr. Anuj Kalia used to attend to the bank's work. During his visit to Delhi in April/May, 1989, A-5 made reference to MUL and told that MUL had surplus investable funds as a PSU and they were very active in money market. On his request, he fixed an appointment of A-5 with accused No. 1, who was the concern....
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....i from Harshad Mehta. He identified A-3 sitting in the Court. In January 1991 he received the letter Ex. 58 of UCO Bank, Hamam Street Branch, Bombay, dated 23rd January, 1991. As per the said letter, he was to collect 35 lakhs units of UTI from MUL. He contacted A-1 for the purpose of complying with the instructions as contained in the said letter. Anuj Kalia was deputed by him to collect the said security. Instructions for transferring the proceeds of the pay orders of Canara Bank favouring Grindlays Bank into the account of Harshad S. Mehta in his account in Bombay were given by him but he did so as per instructions which he received from Harshad Mehta. He gave instructions in his official capacity being in charge of Delhi office and also as per instructions of Harshad S. Mehta. He had no knowledge as to whether the Canara Bank, Parliament Street Branch issued any instructions to the ANZ Grindlays Bank to credit the proceeds of the said pay order Ex. 36 and the said proceeds of which were credited into the account of Harshad S. Mehta with Grindlays Bank. As per his knowledge, the amount involved in four transactions referred to by him earlier, which were credited into the acco....
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....rred to the portion of the said statement reading as-"in the said meeting Mr. Harshad S. Mehta, accused No. 1 and accused No. 2 were present".-The witness stated that his statement before the Court is correct. If in his statement recorded by CBI, he has not mentioned about the presence of accused No. 2 in the said meeting then it may be that he had not stated about the same. He agreed that Harshad S. Mehta elaborated to A-1 and A-2 about excellent deals in the money market. A-1 showed interest in the deployment of funds of MUL in the money market in the said excellent deals as stated by A-5. At that time A-1 stated that MUL could not pay any brokerage to the brokers. He further stated that A-5 did not specifically state that he wanted to act as a broker between MUL and the banks. It is correct that A-5 stated in the said meeting that he would get his brokerage from the concerned banks. A-1 stated that he did not want to mention the name of Harshad Mehta as broker in the books of MUL. A-2 was absolutely quiet during the said meeting. A-1 said that he would be open to any good suggestions and offers or proposals in the money market. Witness was shown Pay Order Ex. 34 dated 24-4-199....
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.... office hours between 10 a.m. to 5 p.m. The process of interrogation continued on when the officer Mr. Bhatnagar questioned him and he gave answers to his questions. He could not recollect whether Mr. Bhatnagar at that time went on recording his statements. On being shown para 32 of his deposition recorded by Mr. Bhatnagar under section 161 Cr. PC he stated that by reading the statement, he can say that he had not mentioned specifically the said fact in his statement before the CBI. He was further referred to his statement recorded on 15-6-1993 wherein he stated that "earlier on arrival to office on 4-11-1991 (FN) Shri Harshad S. Mehta had told him that he had to attend a meeting with PM on that day". The witness denied having made such statement before the CBI. PW25 Mr. B.C. Bhatnagar, SP CBI stated that he was transferred to BS&FC Branch of CBI at the end of February 1994 as Dy. S.P. At that time, he was working in Delhi. Case No. RC.2(A)93-ACU.VII was entrusted to him soon after the registration of FIR of this case in 1993 itself. The FIR of this case was registered by Shri V.D. Maheshwari, who was the SP, CBI and Incharge of ACU(VII) Unit. Mr. Maheshwari had entrusted this cas....
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.... February 1991 to May 1991. He also does not remember if he had made any application/request for production of documents to the said bank during the said period and that he had conducted any search and seizure from the said bank with regard to the documents like attendance register, duty roster or any other similar document showing the presence of particular officer at particular time. He agreed that he neither saw nor took into possession any such record dated 25-2-1991, 13-3-1991, 18-3-1991, 24-4-1991 and 2-5-1991 with regard to the presence of A-4 in the concerned bank on these dates. He further stated that it is wrong to say that due to the five transactions in question no pecuniary loss has been caused to MUL. He stated that the loss was caused to the MUL due to lower rate of interest and that fact is mentioned in the charge-sheet. In further cross-examination, the witness stated that during the course of investigation MUL never complained of any pecuniary loss to it. MUL also did not disclose if it had filed any case of recovery against ANZ Grindlays Bank, Sansad Marg Branch, New Delhi, for any loss. During the course of investigation, he had not visited any other bank excep....
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....e had seen the charge-sheet. It does not carry any mention of other PSUs. There is also no list showing the rate of borrowing by other PSUs. He admitted that the rate of interest in the market fluctuates from day to day and hour to hour. He investigated on the aspect as to on what rate of interest other PSUs borrowed on 23-1-1991. He had not recorded the statements of any person from those PSUs. But he collected the data showing the borrowing rate of interest. He had collected such data from GAIL. Indian Oil and ONGC etc. but it has not been made part of the charge-sheet, the reason being oversight. He stated that it was wrong to suggest that the said data was deliberately suppressed because it would not indicate any loss to MUL. At that time, he did not consider it necessary to record the statement of the concerned officials of the PSUs. He could not remember if he had recorded the statement of any officials of MUL on the point of loss. He does not recollect if MUL had other borrowings on that day and if so at what rate. He agreed that MUL had not lodged any FIR with regard to any of the five transactions in question. He had recorded the statement of R.C. Bhargava and Natarajan ....
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....nd Mr. Natrajan or that the Investigating Agency rejected that recommendation for extraneous reasons. The decision to name Anuj Kalia in the FIR was of Mr. Maheshwari and the Investigating Agency and he had agreed. The decision to drop him from the list of accused was his and that of investigating agency. After recording statement of M. Khandelwal under section 164 Cr.P.C. it was decided to drop him from the list of accused. Till that time, he was an accused. It was the decision of Mr. Maheshwari and the Investigating Agency not to cite M. Khandelwal as an accused at the time of FIR. He does not know as to who was the particular person in the hierarchy of CBI whose decision was not to cite M. Khandelwal as an accused in the FIR. As an IO, he was at the bottom of the hierarchy i.e., SP and then his DIG, Joint Director, Additional Director, Special Director and the Director. He had in fact not made any conclusion as to whom should be made the accused. He had only given his findings of the preliminary enquiry. During the course of preliminary enquiry, he had learned that Anuj Kalia was the person who took the cheques of these five transactions to and fro, the bank and delivered then ....
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....s or so. During the said period, A-5 was stationed in Mumbai. It is further say of this witness that he got himself appraised of the nature of the business of the said company which was to conduct the research in Stock Market and to make investments in stock market and similar services of broker. The witness further stated that during his visits to Grindlays Bank in connection with the work of their company, he came across an officer by name R.N. Popli, (A-4) working with the said branch of Grindlays Bank, and that A-4 was attached to Remittances Department. Sometimes, he also worked in other department. The witness also stated that in connection with the office work, he had occasion to visit the office of MUL situated at Kasturba Gandhi Marg, New Delhi on few occasions. On seeing the letter Ex. 58 issued by the UCO Bank on 23-1-1991 addressed to MUL, New Delhi, he stated that he had an occasion to handle the said letter. The said letter was given to him by Mohan Khandelwal. At that time, he was also given one more letter by Mr. Khandelwal (witness was shown Ex. A-5(1) being receipt dated 24-1-1991 on the letter head of Harshad S. Mehta). Along with the said letter shown to him, ....
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....lwal under the caption of authorized signatory and he identified the same being familiar therewith. He wrote the said letter under the instructions of Mr. Mohan Khandelwal. The said letter was written for depositing the bankers' cheque of Canara Bank mentioned therein into the account of A-5 as such letters used to be written for depositing bankers cheques into the said account. On seeing Ex.102-detached part of pay-in-slip of Grindlays Bank dated 13-3-1991-the witness stated that the same was in his handwriting and he prepared the same for depositing bankers' cheque of Canara Bank, Parliament Street Branch, as per its number and amount mentioned therein into the account of A-5. On seeing Ex. 76, the witness stated that he wrote the said letter under instruction of Mohan Khandelwal. He handed over the letter Ex.76 along with pay-in-slip Ex. 102 and Ex. 30 to A-4 in Grindlays Bank. He handed over the instruction letter and pay order to A-4 because A-4 was handling the said work and he was also instructed by Mr. Khandelwal to do so. On seeing Ex. 32, 78 and 103 being Canara Bank's pay order dated 18-3-1991 favouring Grindlays Bank, Pay-in-slip dated 18-3-1991 and instruction lette....
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.... about his precise role in the process of supervision investigation of the MUL's case. He stated that he discussed the evidence collected by Mr. Bhatnagar who was the I.O. of the case as also with senior officials, examination or interrogation of witnesses and to assess the documents collected as also the statements of witnesses and to discuss with I.O. as well as senior officers. Besides supervision of the investigation of the case, the then DIG Mr. Amod Kanth ordered to examine one Mr. Mohan Khandelwal with the assistance of IO about the MUL's security transactions as well as cash withdrawals during 1991-92 from the accounts of A-5. Accordingly, he recorded the statement of Mr. Khandelwal on 15-6-1993 in presence of IO at Delhi. He stated that FIR was registered on 15th April, 1993. It is his say that to ascertain whether any departmental irregularity was committed or any criminal offences were committed, the CBI instituted the preliminary enquiry. He admitted that there is no statutory provision which permits or allows the investigating agency like CBI to institute and conduct preliminary enquiry as has been done in this case prior to the registration of crime. He did not know w....
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....turned to office from where he remained in the office and Shri Harshad S. Mehta along with Sunil Mittal proceeded to Hotel; (xii)Similar heavy cash withdrawal was also done on 4-5-1992 when Rs. 20 lakhs were withdrawn from the same bank." The witness was questioned-whether the said evidence of Mr. Khandelwal denying the recording of his said statement was true? The witness replied 'No.'. He had recorded the said statements. He said that Mr. Khandelwal in his said statement recorded by him on 15-6-1993 had made the statement as above at Sl. Nos. (i) to (xii). On the basis of the aforesaid statement, question was asked to the witness that-whether he realised that the said statement disclosed the material requiring or warranting separate and independent enquiry in certain aspects which were not covered or directly related to the evidence of the case which he has registered as per the FIR? To this question, he replied that he did realise so and thereafter DIG Mr. Amod Kanth conducted some enquiry with Mr. Sitaram Kesari who revealed that he did not recollect about the donation to the party. DW5(8) Atul Manubhai Parekh stated that he is dealing with pharmaceuticals and chemicals sin....
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....A-5 was arrested. He was also arrested by CBI in RC Case No. 8(A)/92. He was aware that A-5 was kept in the CBI custody for well over 90 days. He was not knowing whether A-5 was under CBI custodial interrogation. Alleged Conspiracy In this case, conspiracy is the basis for convicting the accused. Special Court has mainly relied upon the evidence of PW 23 for holding that prosecution has established conspiracy on the basis of so-called meeting between A-1, A-2, A-5 and PW 23 Mohan Khandelwal in the month of April/May, 1989. For conspiracy, it is the prosecution version that A1 to A5 entered into a criminal conspiracy to siphon-off the funds of MUL in favour of A-5 and afore-quoted five transactions took place, even though there was a specific bar of granting loan by MUL to individuals. Mr. Mahesh Jethmalani who appeared as amicus curiae for A-3, submitted that the conspiracy charge is not tenable for the following reasons : (a)It is absurd to suggest that conspiracy took place in 1989 and the first overt act in pursuance of that conspiracy took place in March 1991. The link between the conspiracy of 1989 and the first overt act of March, 1991 is further broken by the fact that 1....
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....ely. The registering of the cases had the desired effect - PW 23 did not reveal his knowledge to anybody because the agency to whom he had revealed it from June 1992 onwards, had chosen not to use the information but to investigate cases in which he could be roped in. Obviously, the filing of cases against PW23 intimidated him sufficiently not to divulge the information he was aware of. He submitted that this is crystal clear from the evidence of CW1 Mr. V.D. Maheshwari wherein he has stated that Mr. Khandelwal in his statement dated 15-6-1993 disclosed that after withdrawing large amount from the bank. A-5 along with Sunil Mittal went at the residence of Mr. Sitaram Kesari, Congress Party Treasurer and handed over the said amount to him. To suppress this, Mr. Khandelwal was made approver. The learned counsel for all the accused contended that prosecution story of conspiracy between A-1 to A-5 is absurd, subsequently developed and cooked up. It is contended that one of the purposes for developing the story of conspiracy hatched in the year 1989 might be for seeing that the offences are tried by the Special Court. It is contended that under section 3(2), the offence which took plac....
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....n D. Khandelwal, who was associated with A-5 for the purpose of carrying out research in share market and companies in Delhi somewhere in the month of February or March, 1989. During his visit to Delhi in April/May, 1989, A-5 made reference to MUL and told that MUL had surplus investable funds as a PSU and they were very active in money market. It is the say of PW23 that A-5 desired that he should fix an appointment with A-1 who was the concerned functionary in the investment of the funds by MUL. Therefore, a meeting was fixed in the month of April/May 1999 which took place in the office of MUL in Delhi. In the said meeting, A-5, A-1 and A-2 were present. In the meeting, A-5 stated that he wanted to deal with MUL and that he was having lot of contracts with the banks in Bombay and could offer to MUL excellent deals in the money market. Relevant talk which transpired in the said meeting is as under :- "Ans. 34. The accused No. 1 at that time stated that the MUL, could not deal or involve the brokers. Mr. Harshad S. Mehta stated that the deals would be between MUL and banks, structured and suggested by him i.e. Mr. Harshasd S. Mehta. Mr. Mehta would not appear in the books of accoun....
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.... the month of the meeting. The witness has also stated that if in the statement recorded by the CBI, he has not mentioned about the presence of A-2 in the said meeting, then it may be, he has not stated about the same. The public prosecutor admitted that it was an omission in the statement recorded by the CBI with regard to the presence of A-2. From the aforesaid admission in the cross-examination, it is apparent that A-2 was not present during the meeting and that the prosecution story with regard to the alleged meeting appears to be doubtful. In any case, approver PW-23 does not assign any role to A-2 in the said meeting. It is also to be noted that the alleged meeting took place in an open hall where other employees of MUL were sitting in close proximity of A-1 and A-2 and one of the employees was PW-4 Rajan Ramgopal who joined the Corporate Finance Cell of MUL sometime in the year 1986 as deposed by him. He stated that he used to work directly under A-1 and that he himself, A-1, A-2 and Jagdish Kumar used to sit in a common hall; A-1 had his table with chairs meant for visitors and by the side of it and in front of him, there was a common table where A-2 used to sit; he (PW4) ....
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....ny talk with A-3 or A-4 with regard to the alleged conspiracy and that they were party to it. However, let us consider that five transactions mentioned above took place and as MUL could not lend money to A-5 directly, the transactions took place under the name of and through UCO Bank and in four transactions UCO Bank in turn gave the said amount to A-5. It is pointed out that as there was conspiracy, A1 and/or A-2 gave Account Payee cheques issued by Canara Bank on behalf of MUL payable to Grindlays Bank to Anuj Kalia representative of A-5, Grindlays Bank deposited the said amount in the account of A-5 at Delhi and thereafter transferred the same to the account of A-5 at Bombay. Subsequently on the same day, it was transferred to UCO Bank and UCO Bank gave cheque to A-5. From the nature of aforesaid transactions, whether conspiracy can be inferred ? It is true that apparently transactions are not simple. It casts serious doubt with regard to functioning of Banks and MUL. But as against this, the evidence which is brought on record by the prosecution establishes that these were routing/switch transactions. PW-14 Assistant Chief Officer. UCO Bank has stated that in case of security....
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.... would also state that it is not properly understood by the prosecuting agency that by introducing or adding a new story in a criminal prosecution, in most of the cases, it adversely affects or destroys the prosecution case. Not only it creates doubts with regard to that part of the prosecution version but on occasions casts doubt about the motive. Result is - under our criminal jurisprudence, benefit of doubt may go to the accused. Once we arrive at the conclusion that the prosecution has failed to prove the criminal conspiracy, the conviction of the accused under section 120B of IPC requires to be set aside. Jurisdiction of the Special Court under the SCAM Act At the outset, it is to be stated that accused were tried under the SCAM Act which was preceded by an Ordinance promulgated on 6th June, 1992. In the year 1992, it was noticed that there was a scam in the stock exchange as there was sudden rise or fall of prices in the stock market and large number of persons who were trading in stock exchange were losing their money. Some of them were experienced gamblers at the stock exchange and most of them were laymen. As per the Statement of Objects and Reasons of the Act, large sc....
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....osecution on the touchstone of ingredients laid down under the relevant provisions of Indian Penal Code and by following the Evidence Act. Hence, for conviction under section 403 and/or section 405 IPC the prosecution is required to establish the ingredients of said sections beyond reasonable doubt. Therefore, as the prosecution has failed to establish the conspiracy, the jurisdiction of the Special Court would be limited only for the transactions which took place after 1st April, 1991. In the present case, only two transactions, i.e., dated 24-4-1991 and 2-5-1991 would be covered. Case against A-1 and A-2 In this case, as the prosecution has failed to establish criminal conspiracy, we are required to consider the prosecution case against each accused for the acts committed by them and to find out whether they have committed any offences. The case of the prosecution against A-1 and A-2 is as follows:- (a)A-1 and A-2 misappropriated the property in violation of the law as well as their duty (express and implied) by making it available for use of A-5. This is on account of the fact that they were authorised to invest the money in defined securities in a transaction with Public S....
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....e after the identified period at a price which would include the cost of purchase plus the stipulated interest. This transaction was considered as placement of funds with PSUs. The witnesses have clearly stated that the only authorisation for placement of surplus funds was PSUs and not private person. Charges Against A-2 (a)He was present in the meeting held in April/May 1989. (b)He signed letter dated 25-2-1991 for issuing a pay order in the name of ANZ Grindlays Bank and also wrote in his own handwriting to Canara Bank that the pay order might be handed over to one Mr. Anuj Kalia (PW-16) (Ex. 26-first transaction). (c)He signed letter dated 18-3-1991 for issuing pay order in the name of ANZ Grindlays Bank (Ex. 31 - third transaction). (d)He signed letter dated 24-4-1991 for issuing pay order in the name of ANZ Grindlays Bank (Ex. 33 - 4th transaction). (e)He discharged a bank receipt after the money was received by MUL on 26-4-1991 (Ex. 41 - 4th transaction). The learned senior counsel Mr. Jain appearing on behalf of A-2 submitted thus :- For Charge (a) - The prosecution has miserably failed to establish conspiracy sought to be proved by examining PW-23 Mr. Khandelwal. Th....
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....hat the judgment and order passed by the Special Court calls for any interference in acquittal appeal. He referred to Ex. 26 and submitted that the said document is signed by him but as deposed by PW-4 the said document was authored by PW-4 and approved by A-1 and, therefore, it cannot be held that he did anything wrong in mentioning in the said letter that cheque may be handed over to Anuj Kalia. It is his submission that even handing over of cheque to a person who had brought 35 lakhs of units for being delivered to MUL cannot be termed in any way as dereliction of duty. Learned senior counsel Mr. Sundaram on behalf of A-1 has given detailed written submissions and has inter alia submitted that the prosecution has failed to establish that- (a)A-1 mis-represented to the sub-committee of the MUL regarding transfer of funds of UCO Bank on UCO Bank's instructions through Grindlays Bank; (b)A-1 mis-represented to the sub-committee by not putting to their knowledge the resolution of the Board dated 4th May, 1989; (c)The charge of conspiracy is fabricated one; (d)There was no mens rea for the alleged criminal breach of trust on the part of A-1; (e)In any case, it would be totally....
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....nds in the units of UTI. Central Govt. Securities, public sector bonds either through scheduled banks or directly. These investments, at times, are expected to fetch a higher rate of return than what is available on loaning of funds to PSUs without involving any risk as to the return of the principal and/or yield. 5.It is, therefore, proposed that the Board may permit the sub-committee formed by it for the purpose to invest surplus funds of the company from time to time in the purchase of units of UTI, Central Government and State Govt. Securities, public sector bonds either through scheduled banks or directly. 6.In March, 1989, MUL invested surplus funds in PSU Bonds, Units of UTI and Central Govt. Securities as contained in the Annexure. The Board may kindly accord ex post facto approval for such investments made to utilise the opportunity of high yield during such periods. 7.The Board may kindly approve proposals in paras 5 and 6 above." Much has been contended that the Board resolution dated 4-5-1989 (Ex. 9) passed by the Board of Directors of MUL prohibits granting of loan in favour of individuals and, therefore, transactions by A-5 with MUL are illegal and against the pol....
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....eeable for such treatment. 3. Maruti has done different borrowing/disinvestment as mentioned in the annexure. Some of these have been done to place funds with other PSU's. Even though the rate of interest charges to the PSU's is lower than our cut-off rate yet these will result in additional interest advantage ranging from 1 to 2.5% p.a. for Maruti. 4. Maruti will have an interest advantage of approximately Rs. 27.00 lakhs against such disinvestment made for meeting our funds requirement and for placement of funds with other PSU's. 5.We have placed the following funds in different dates : Date ofParty'sAmountInterestPeriodArrangementNameRs. in CroresRate p.a. 23-1-91NFL15.0013%30 days 30-1-91MFL10.0014%30 days 30-1-91ILFS5.5016.25%Till 2-5-91 Submitted for kind approval for placement of funds and borrowing mentioned the enclosed statement. Sd. (S. Natrajan) Sd. Director (Finance)" (Pramod Kumar) Sd. (R.C. Bhargava) Deputy Manager (Finance CMD (2) Ex. 23 dated 13-3-1991 Agenda note for the meeting of committee of directors for investment of funds to be held on 13-3-1991. We have received a proposal for investment of Rs. 10.00 crores in Units through UCO Bank for a ....
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....dated 24-4-1991 Agenda note for the meeting of committee of directors for investment of funds to be held on 24-4-1991. 1. We have received a proposal for investment of Rs. 7.50 crores in Units through Grindlays Bank for a period of 2 days. The expected yield is 26.25% per annum. 2. We have received a proposal for investment of Rs. 30.00 crores in Units/PSU Bonds/Government Securities through Bank of America for a period of 29 days with effect from 2-5-1991. The expected yield will be 23% p.a. Submitted for approval of the committee of Directors for the above placement. Minutes of the meeting of the committee of directors held on 24-4-1991 for placement of funds at the registered office. Present Shri R.C. Bhargava-Chairman & Managing Director Shri S. Natrajan-Director (Finance) Item No. 1Confirmation of the minute of the meeting of the Committee of Directors held on 22-4-1991. The minutes of the last meeting held on 22-4-1991 were confirmed. Item No. 2The Committee passed the following resolutions :- ' RESOLVED that Maruti may place funds with M/s. Grindlays Bank for investment in Units aggregating to Rs. 7.50 crores for a period of two days at an expected yield of 26.25....
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....f America for investment in Units/PSU Bonds/Govt. Securities aggregating to Rs. 15 crores for investment in Units for a period of seven days w.e.f. 2-5-1991 at an expected yield of 22% p.a. RESOLVED FURTHER that Maruti may placed funds with M/s. Infrastructure Leasing and Financial Services Limited by renewal of the inter corporate deposit of Rs. 5.50 crores @ 22% p.a. for a period of five days w.e.f. 2-5-1991.' The resolutions were put to vote and carried unanimously. Sd.Sd. R.C. BhargavaS. Natrajan Chairman & Managing DirectorDirector (Finance) The aforesaid resolutions reveal that proposals for investment of funds in units through UCO Bank for a specified period with an expected yield were received and it was resolved that MUL may place funds in units "through UCO Bank" as per the proposal. As against this, in Ex. 42 dated 2-5-1991 which is last resolution, it has been specifically mentioned that MUL may place funds 'with UCO Bank' in units for a period of five days as per the request from UCO Bank. The change of wording in the last resolution clearly indicates that funds were placed with UCO Bank for investment in units for a period of five days with expected yield of 21%....
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....admitted that MUL was investing its funds in securities through banks and also through brokers quoting on behalf of the banks. Further, there is nothing on record to indicate that Mr. R.C. Bhargava, Chairman-cum-Managing Director and Mr. S. Natrajan, Director (Finance), MUL who have passed the resolutions for investment of funds, did not know that the funds were meant for A-5. They were throughout monitoring the transactions in question but are not examined by prosecution for reasons best known to it. This course adopted by a premier investigating agency in such a serious case, if there was real fraud or misappropriation, appears to be unusual. PW-25 Investigating Officer Mr. Bhatnagar has admitted in his evidence that he recorded the statements of Mr. R.C. Bhargava and Mr. Natrajan during the investigation to ascertain if any other higher authority of MUL was involved in the case and found that they were not involved "directly". It is his say that the proposals put up by A-1 and A-2 were approved by Mr. Bhargava and Mr. Natrajan but they were not aware that the investment in fact has been made with A-5 through UCO Bank. They had bona fidely accepted the proposals put up by A-1 an....
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....hours of the same day; (f)The brokers who used to contact on behalf of the bank's clients and financial institutions during the relevant period included Mr. Ashwin Mehta; (g)The writing contained on all the vouchers and its language was his and he used expression as either "through UCO Bank" or "through ANZ Grindlays Bank". PW3 Halasyam, Chief General Manager (Finance), who was promoted as the Director (Finance) from 1st June, 1991 has also stated that : (a)A-1 used to put a written note about the proposals for investments before the Director (Finance). With regard to the five transactions in question, in cross-examination, he admits that he did not have any personal information. (b)He admitted that looking at the BRs of UCO Bank, on the face of it, no suspicion would arise and that issuance of BRs necessarily indicates that bank issuing it would be holding the security covered under the said BR. The BR also would acknowledge the receipt of monies from MUL for the purchase of security. (c)He agreed that MUL had not suffered any monetary loss in any of the five transactions and got optimum yield and utilization from the point of investment by MUL. (d)He also admitted that wit....
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....i used both nationalised and foreign banks to optimise the yield. 5.2 These transactions were reported to the Board and none of the Directors had objected to this as they were not considered to be irregular. 7. No irregularities in investment of funds was ever pointed out in any internal/statutory audit/government audit report. For the first time, in Government auditor's review of accounts dated 28th August, 1992, it was observed that investments through foreign banks were not in conformity with BPE guidelines. 9.(a) In all such transactions of purchase of units, funds were transferred to UCO Bank, Bombay by way of banker's cheques in favour of ANZ Grindlays Bank strictly in accordance with the written instructions regarding remittance of funds by UCO Bank, Bombay. The funds were not credited by Maruti to the individual account of Mr. Harshad Mehta, Maruti had no means to know or any knowledge how UCO Bank, Bombay used the funds paid by Maruti for purchase of units. The fact that the funds were credited by UCO Bank came to the notice of MUL in October, 1992 when CBI started the enquiry. There is absolutely no connivance between any Maruti official and Mr. V.N. Deosthali of UCO B....
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....t, 1992, it was observed that investments through foreign bank were not in conformity with BPE guidelines. (e)In all such transactions of purchase of units funds, funds were transferred to UCO Bank, Bombay by way of bankers' cheques in favour of ANZ Grindlays Bank strictly in accordance with written instructions regarding remittance of funds by UCO Bank, Bombay. (f)There is absolutely no connivance between any Maruti official and Mr. V.N. Deosthali of UCO Bank or Harshad S. Mehta. (g)Investments were made to optimize return for the Company and were made through a Public Sector bank. (h)Funds were received back along with expected yield. (i)In the circumstances, there is no need for the Company to take any action against the officers. From the aforesaid evidence it is totally misconceived to contend that A-1 or A-2 were having any dominion over the MUL funds. The aforesaid assertions by the MUL before the JPC would certainly mean that A-1 or A-2 have not done anything dishonestly with the intention of causing wrongful gain to A-5 or wrongful loss to MUL or that Chairman and Managing Director Mr. Bhargava or the Director (Finance) were not knowing about such transactions throug....
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....s Bank, New Delhi. A-4 is convicted under section 120-B r/w section 409/467/468/471 of IPC and sections 13(2) of the PC Act. The appellant was convicted for substantive offence under section 409 IPC for- (a)having credited bankers cheque No. 645532 dated 25-2-1991 for a sum of Rs. 5,05,03,250 issued by Canara Bank favouring Grindlays Bank into account of A-5 (the amount was paid by A-5 through UCO Bank to MUL); (b)having credited bankers cheque No. 646402 dated 18-3-1991 for a sum of Rs. 10,83,75,000 issued by Canara Bank favouring Grindlays Bank into account of A-5; and (c)having credited bankers cheque No. 863237 dated 24-4-1991 for a sum of Rs. 7,62,45,000 issued by Canara Bank favouring Grindlays Bank into account of A-5. In support of charges, prosecution has relied upon the evidence of 4 witnesses of Grindlays Bank, i.e., PW-9 Ravi Saluja, PW-11 Suraj Tandon, PW-12 Ashok Monga and K.K. Kuda PW-15 and PW-22 Mr. V. Rangarajan, an employee of Reserve Bank of India. It is contended on behalf of prosecution that from the evidence of witnesses of ANZ Grindlays Bank, the following stands proved- (a)That A-4 was the officer-in-charge of the clearing department (PW-12) (b)The ....
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....d the cheques received for clearance to the clearing house of RBI. There is also a category of cheque known as bankers' cheque, that is to say, a particular bank issues its cheques in favour of another bank. In such a case, the issuing bank can use the format of pay order also. On seeing Ex. 28, he stated that it is inter bank cheque in favour of Grindlays Bank issued by Canara bank bearing 'Payee A/c only' and stamped 'not transferable'. There is a rubber stamp of Grindlays Bank on its reverse indicating that the said bankers cheque is cleared. He states that Grindlays Bank would dispose of the proceeds of the said cheque as per the covering letter. He identified A-4 R.N. Popli, an employee of Grindlays Bank, but stated that he was not aware about his posting during the relevant period i.e. in the year 1990 to 31-5-1991. PW12 Ashok Kumar Anant Ram Monga states that he was overall in-charge of the ANZ Grindlays Bank branch along with the Manager and in that capacity he used to have supervision over the working of the concerned clearing department. He states that in these types of transactions there are two authorizations required, the first authorization relates to giving credit t....
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....aid five pay orders into the Grindlays Bank account that the proceeds thereof in turn were credited into the account of A-5. He further stated that during the relevant period i.e. , in the year 1990-91, to his knowledge, some other banks in this country were also following such practice. There was no prohibitory order, direction, or guidelines from the RBI prohibiting the banks to follow such practice during the relevant period i.e. 1990-91. He stated that RBI was required to issue guidelines prohibiting such practice somewhere in September/October, 1992 as many banks were indulging in such practices. It is his say that RBI has never taken any action against the Grindlays Bank in respect of five pay orders shown to him earlier. He also stated that Grindlays Bank had not received any complaint from MUL for crediting the amounts of said five pay orders to the account of third party. It is his say that Grindlays Bank has not received any complaint or claim in respect of said five pay orders from Canara Bank, UCO Bank or Harshad S. Mehta. The said parties have also not initiated any action in any court of law in respect of negotiation of said five pay orders at any time. We would ref....
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....t advice received from the RBI. He could not recollect who was or who were the concerned officers of the treasury department, who would be giving such instructions as there were many such officers. PW-22 V. Rangarajan states that the bankers cheque/pay order issued by one bank favouring other bank are negotiated as under :- "The payee bank would deposit the cheque for clearance in clearing house and RBI would settle the payment thereof by giving credit into the account of payee with RBI." In view of the aforesaid evidence, it can be stated without any doubt that all the five pay orders namely Exs. 28, 30, 32, 34 and 36 were sent for inter bank clearance by the Grindlays Bank. The amount was credited in the account of Grindlays Bank. Hence, it is established that the amount of "account payee" and "non-transferable" pay orders were only credited in the account of Grindlays Bank. In this set of circumstances, it is not necessary to discuss the relevant provisions of Negotiable Instruments Act that 'account payee' 'non-transferable' cheques cannot be credited in anybody else's account. As such, the entire prosecution against A-4 was totally on an erroneous assumption that A-4 got th....
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....In view of the aforesaid state of evidence, the conviction of A-4 for any offence including for the substantive offences under section 409 IPC cannot be sustained. Case Against A-3 The case of prosecution against A-3 is that :- (a)He abused his position as public servant by allowing use of MUL's funds to be wrongly obtained by A-5 and, therefore he is guilty of the offence under section 13(1)(c) read with 13(2) of PC Act. (b)He fabricated a set of letters written on the letter head of UCO Bank representing fraudulently that UCO Bank was entering into a transaction with MUL. He also created a set of BRs (signed by him purporting to be an accountant although he was an Assistant Manager). (c)His fraudulent misrepresentations of showing a transaction of purchase/sale of securities between UCO Bank and MUL were to enable A-1, A-2 and A-5 to misappropriate the funds of MUL. Therefore, apart from the charge of conspiracy against A-3, he is also charged with the offence under sections 467, 468 and 471 of IPC. (d)He forged the BRs purporting to be the representation that a set of securities was being held by UCO Bank on behalf of MUL and the same had been sold by UCO Bank to MUL and t....
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....terest of the UCO Bank to lend its name to a broker to obtain funds from a PSU - since it would constitute a deceit upon the other PSUs. (e)A-3 wrote letters which constituted a clear representation to MUL, that it was entering into a transaction with UCO Bank - it is apparent from the plain language of the letter. It is clear that A-3 would not be authorised to write such letters unless he had been permitted to do so by the Head Office. On this apparent tenor, the letter would commit the UCO Bank personally to a transaction of sale/purchase of securities and A-3 was not authorised to do so. The letters written by A-3, therefore, were purporting to be with an authority which he did not possess and purporting to commit the bank to an agreement thereby clearly being forgery. PW-14 and PW-21 also (employees of UCO Bank) have pointed out that only Head Office used to give instructions for deals on behalf of the Bank. (f)That the documents created by A-3 were intended to misrepresent the position of the UCO Bank is also clear from the fact that the identification, which should have been put on the document that it was a transaction for and on behalf of a client, was not so placed on t....
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....body or of intention to cause loss to anybody. In the absence of any evidence of dishonest intent, the charge under the PC Act must fail. It is submitted on behalf of A-3 that charges of forgery have been framed on the assumption that Exs. 58 and 60 are forged. The accused is convicted in ignorance of the fact that banks were entitled in law to act as agents for their customers and in UCO Bank this facility was offered to several brokers including A-5 as it was a lucrative source of income to the Bank. For this, reference is also made to the evidence of PW-7 Karkhanis, PW-14 Prem Shanker Joshi and PW-21 M.V. Shidhaya (both employees of UCO bank). It is further contended that PW-7 Karkhanis stated that the alleged letters could not be written by A-3. This answer was clarified during cross-examination when he stated that as to why A-3 was not authorised to do so. He says that A-3 was not supposed to write such letters on behalf of UCO Bank as the Hamam Street Branch could only transact business on behalf of brokers and could not transact business concerned with UCO Bank's own investment. The fact of the matter however is that when A-3 addressed the letters, he was not dealing with ....
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...., 1991, A-3 has been erroneously charged for forging the BRs on the assumption that UCO Bank did not hold the units for which the BRs were issued. It is submitted that the charges proceed on an incorrect assumption that the BRs were issued on behalf of UCO Bank. BRs were issued on behalf of A-5 and the same were backed up more than adequate units belonging to A-5. The charge of forgery is accordingly misconceived and untenable. He submitted that after RBI circular dated 26-7-1991. It was irregular for banks to issue BRs on behalf of their broker clients. Prior to that date, however, it was the practice of UCO Bank and other banks to issue BRs on behalf of their broker clients. It is submitted that the question which arises in the instant case is - whether the BRs issued by A-3 were backed up with units belonging to A-5? Although nine charges have been framed on this aspect, the CBI has undertaken no investigation whatsoever to discover whether the BRs were backed up by securities belonging to A-5. Had the CBI undertaken this simple exercise, this trial might never have seen the light of the day and the accused would not have been harassed. It is further pointed out that in an almo....
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....et/compliance of SLR requirements. (ii)Double ready forward deals with a view to covering their oversold position in a specific security. (iii)Sale transactions by issue of Bank Receipts (BRs)/SGL Forms without actually holding the securities/without having sufficient balance in their SGL accounts. (iv)Issuing BRs/SGL Forms on behalf on their broker clients without safeguarding banks' interest. 2. You may be aware that with a view to helping the banks to overcome various deficiencies in the long term securities market and to enable them to manage their short-term securities market and to enable them to manage their short-term cash deficit/surpluses more efficiently, we have permitted banks to enter into buy-back deals in Government securities among themselves (and not with their non-bank clients). It was our expectation that such deals will be undertaken by the selling bank, only if it holds sufficient securities (either in the physical form or in SGL account), at market related rates and such deals will be properly reflected in their books of account. However, we observe that certain banks have been resorting to this type of transactions, without actually holding sufficient se....
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....is put through with the help of a broker) should be clearly indicated on the notes/memorandum put up to the top management seeking approval for putting through the transaction and operate amount of brokerage paid, brokerwise, should be maintained. (iv)For issue of BRs, the banks should adopt the format prescribed by the IBA and should strictly follow the guidelines prescribed by them in this regard. Subject to above, the banks should issue BRs covering their own sale transactions only and should not issue BRs on behalf of their constituents including brokers. (v)The banks should be circumspect while acting as agents of their broker clients for carrying out transaction in securities on behalf of brokers. (vi)Any instance of return of SGL Form, from the Public Debt Office of the Reserve Bank for want of sufficient balance in the account should be immediately brought to our notice with the details of the transactions. 5. We shall also be glad if a copy of the policy framework for undertaking transactions in securities approved by your bank's Board, is forwarded to us. 6. Please acknowledge receipt. Yours sincerely, Sd. (A. Ghosh)" As stated by PW-7 that SGL Form (Subsidiary G....
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....for carrying out transactions in securities. In any set of circumstances, the aforesaid circular would reveal that till 26-7-1991 many banks were adopting the practice of issuing BRs on behalf of their broker clients and the transactions were undertaken in securities on behalf of their brokers. Hence, the RBI clearly recognizes that some banks were indulging in such transactions. What was objected by the said circular was that banks were issuing BRs without verifying whether their broker clients were holding the security covered by the relative BRs and thereafter the policy was suggested to all that BRs should be issued covering their own sale transactions and they should not issue BRs on behalf of their constituents including brokers. In this case, the aforesaid five transactions have taken place prior to 26-7-1991, therefore, assuming that UCO Bank has evolved such policy of not issuing BRs on behalf of its brokers as directed by the RBI, then also it would not mean that by issuing BRs prior to 26-7-1991, he has committed any irregularity. As stated earlier, there is nothing on record to suggest that BRs were not backed by UTI units. On the contrary, defence has led evidence that....
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.... Street Branch. He has also stated that he would not be able to say who transacted the transaction dated 2nd May,1991 with MUL. This also indicates faulty investigation. Hence, for the fifth transaction, between 2nd May to 7th May, it has been brought on record by the prosecution that A-3 was not working at the UCO Bank, Hamam Street Branch. At the relevant time, he was transferred to Hingha Branch, Near Nagpur. Further, the resolution dated 30-4-1991 passed by the MUL clearly reveals that the funds were placed with UCO Bank for investment in units for a period of five days w.e.f. 2nd May, 1991 at an expected yield of 21% p.a. The prosecution has failed to prove that A-3 paid the said amount to A-5. (h)The evidence of witnesses from the Bank reveals that such transactions were the commercial practice of the Bank- (i)PW-7 Karkhanis has stated that UCO Bank. Hamam Street Branch was doing business on behalf of brokers including A-5 Harshad S. Mehta. He admitted that Switch transactions were the transactions conducted by the UCO Bank for buying and selling the securities on behalf of its clients including brokers. The negotiations in respect of such transactions were conducted by th....
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....d Office or the client. The delivery order Ex. A-3(2) contains instructions to UCO Bank, which was received by A-5 Harshad S. Mehta without the name of its branch. (iii)PW-21 Mr. Shidhaya has stated that one Harshad S. Mehta had his current account with their branch. He came across a person by name Mr. Pankaj Shah working with Harshad S. Mehta, who sometimes used to come to Hamam Street Branch in connection with brokers security transactions. No record in a form of security ledger or security register broker-wise was kept and maintained in respect of security transactions of their broker clients. Initially, there used to be such record but because of increase in the transactions in security on behalf of their broker clients in large numbers, the practice of maintaining such record was discontinued. BRs were issued by the UCO Bank, Hamam Street Branch and were signed by him in the caption of accountant after he found that the contents thereto were true. With regard to BR dated 29-4-1991 containing signatures on its reverse, it is his say that signatures on reverse of BR signifies reversal of the BR meaning thereby that counter party had received the security and obligation of UCO B....
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....a third person. In this set of circumstances, to say that A-3 prepared forged documents that UCO Bank was selling or purchasing the units is totally misconceived and is against the documentary record maintain by MUL. Letters Exts. 58, 59, 60 and 61 written by A-3 also do not reveal that UCO Bank was purchasing or selling units. The said letters are as under:- " Ex. 58 January 23, 1991 Maruti Udyog Ltd. 11th Floor Jeevan Prakash 25, Kasturba Gandhi Marg New Delhi - 110 001 Dear Sirs, This has reference to your sale of 35 lakh Units for value dated 24th January 1991 @ 14,27. We are arranging to remit the funds amount to Rs. 4,99,45,000 through Bank of America, New Delhi. You are requested to hand over the physical delivery of the Units to Mr. Mohan Khandelwal, a specimen of whose signature is attested hereinbelow. Thanking you, Yours faithfully, For UCO Bank Sd/- (Manager) Signature of Mr. Mohan Khandelwal:Sd/- Attested For UCO Bank, Sd/- (Manager) Ex. 59 February 22, 1991 Maruti Udyog Ltd. 11th Floor Jeevan Prakash 25, Kasturba Gandhi Marg New Delhi - 110 001 Dear Sirs, This has reference to your purchase of 35 lakh Units for value dated 25th February, 199....
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.... deal on behalf of their clients, then it would be difficult to hold that issuance of the said BRs by A-3 was in any way forgery punishable under the Indian Panel Code. Issue of BRs on behalf of broker clients was part of commercial transactions. Routing facility was given by the bank as proved prior to RBI Circular dated 26-7-1991. Even RBI Circular does not prohibit issuance of BRs if properly backed by the security. The evidence on record nowhere establishes that the Bank was not holding adequate securities before issuance of BRs. With regard to the alleged forged typing of letters outside the office of UCO Bank, there is evidence of PW-6, which shows that in 1991 there was only one typewriter in Hamam Street Branch of UCO Bank which was being used since 1983 and heavy work in the office and that 30 to 40 transactions of such work were daily carried out. In the circumstances, from the fact that document was typed out side the bank, 'dishonesty' cannot be attributed to the accused. For this purpose, we would straightway refer to the decision rendered by this Court in Dr. Vimla's case (supra) wherein this Court held thus :- "To summarize : the expression 'defraud' involves two e....
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....action was that of Dr. Vimla and it was only put through in the name of her made minor daughter for reasons best known to herself. On the evidence as disclosed, neither was she benefited nor the insurance company incurred loss in any sense of the term." (p. 599) For arriving at the said conclusion, the Court further referred to sections 463 and 464 of IPC and held as under:- "The definition of 'false document' is a part of the definition of 'forgery'. Both must be read together. If so read, the ingredients of the offence of forgery relevant to the present enquiry are as follows: (1) fraudulently signing a document or a part of a document with an intention of causing it to be believed that such document or part of a document was signed by another or under his authority; (2) making of such a document with an intention to commit fraud or that fraud may be committed. In the two definitions, both mens rea described in section 464, i.e., 'fraudulently' and the intention of commit fraud in section 463 have the same meaning. This redundancy has perhaps become necessary as the element of fraud is not the ingredient of other intentions mentioned in section 463. The idea of deceit is a nece....
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....stly, fraudulently or to defraud. (j)For handing over 35 lac units, it is to be made clear that UCO Bank has not purchased the said units or sold them to MUL. As the said units were sold by the broker clients to A-5 through UCO Bank, the units were required to be returned to A-5 and that would be clear from Exhibit 58. This function is considered by the Banks as routing function as explained by the witnesses of the bank which we have referred to earlier. (k)The commission for the transactions on behalf of A-5 was credited in the bank account by debiting the same in the account of A-5. If really A-3 was acting on his own behalf and not on behalf of bank, the commission amount would not have been reflected in the bank's account. Finally, one of the important circumstance required to be taken into consideration is : crediting of brokerage charges/commission for the said transactions by the UCO Bank. If A-3 was having any guilty mind or dishonest intention, which is essential for convicting him for the offence punishable under section 409 or other sections of IPC, he would not have seen that the brokerage charges/commission is credited in the account of the UCO Bank. (l)No objection....
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....account payee cheques drawn in favour of other banks to the brokers who got them credited to their account ostensibly to assist the broker in transferring funds quickly to meet their obligations. Many brokers including Harshad S. Mehta (A-5) were getting routing facilities. Thus, banks provided special privilege to select few brokers by lending their names to the transactions of these brokers totally disproportionate to the income derived and exposed themselves to great risk by irregularly issuing their BRs. The Committee also noted that A-5 was also unauthorisedly given the facility of collection and credit of the banker's cheque by SBI as per his instructions. The Bombay Main Branch of SBI acting as the agent of SBI CAPS had debited SEBI CAPS account and unauthorisedly credited funds to the account of A-5 instead of making payments to named banks. The cheques drawn on UCO Bank had been credited to the account of the same broker. For this purpose, the brokers wanted the facility of single point clearance whereby the activities of issuance and acceptance of bankers' cheques in their accounts may be conducted through the security division of the SBI's main branch, Bombay. The Commit....
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....e parties, accusations are brought against the accused, the prosecutor is given an opportunity of supporting the charge and the accused is equally given an opportunity of meeting the accusations by establishing his innocence. It is the outcome of cool deliberations and the screening of the material by the informed mind of the Judge that leads to determination of the lis. If the cushion is lost and the court room is allowed to vibrate with the heat generated outside it, the adjudicatory process suffers and the search for truth is stifled." (p. 505) [Emphasis supplied] Keeping the aforesaid principle in mind, I would deal with the prosecution case against A-5. Five transactions took place between the MUL and A-5 between the end of January, 1991 and beginning of May, 1991, A-5 says that he lent money to MUL and MUL returned the loan on due date together with agreed interest. This loan was a secured loan inasmuch as MUL transferred and delivered 35 lakhs units of the UTI. The case of the prosecution is that there is an irresistible inference that A-5 was involved throughout in the case because:- (a)the pay orders of Canara Bank were collected by his agent Mr. Anuj Kalia; (b)the pa....
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....taking loan for a very short period which is repaid on agreed date with agreed interest. The loan was taken by pledging UTI Units. At the most, in the FIR it is stated that the amount was given to A-5 at a lower rate of interest and that in the first transaction, he charged more interest. This contention is also without any substance because in first transaction A-5 only charged 12.75% interest for the amount. As against that in all subsequent four transactions, rate of interest given to the MUL was 16.75%, 21%, 26.75% and 25% respectively. 8.Presuming what is stated in FIR is true that lower rate of interest was charged, then also once it is loan transaction to A-5 there is no question of misappropriation of the amount by A-5. 9.The next question is - whether the Bank receipts were backed by units or not? For that purpose, prosecution has not led any evidence. However, prosecution witnesses admit that record was not maintained because of heavy work: (a)For that purpose, it would be difficult to hold that A-5 is responsible or liable. (b)Even for A-3 there is no evidence to the effect that A-3 was required to maintain such accounts. (c)Witness [DW5(8) Atul Manubhai Parekh] exa....
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....shed with imprisonment of either description for a term which may extend to two years, or with fine, or with both. 405. Criminal breach of trust.-Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his 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'." Sections 403 and 405 require dishonest misappropriation. The word "dishonestly" is defined under section 24 IPC as under :- "Dishonestly.-Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing 'dishonestly'." What is punishable under section 403 is dishonest misappropriation or conversion to his own use any movable property. Further as per the Explanation, dishonest misappropriation for time being or for a short time is also misappropriation within the meaning of th....
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....transaction 'through' bank would be an offence? Prima facie, there is no such law prohibiting such transaction nor it can be held to be an offence under any law. In such a transaction, there is no question of dishonest misappropriation. The Investigating Officer PW-25 Mr. Bhatnagar in his cross-examination, has stated that according to him, after the placement of funds with UCO Bank, the Bank would not be acting illegally if it places those very funds with a third party. However, the prosecution case is made out on the ground that as MUL was not giving any loan directly to individual (A-5), he manipulated and created subterfuge as if UCO Bank was purchasing the UTI Units. For this purpose, on behalf of MUL, cheques were issued by Canara Bank in favour of ANZ Grindlays Bank. Those cheques were deposited at Delhi Branch and the amount was transferred in the name of A-5 at Grindlays Bank's Bombay Branch. Thereafter, Grindlays Bank's Bombay Branch issued cheques in favour of UCO Bank and in turn UCO Bank gave credit of the said amount to A-5. Further, it is contended that if the transactions were with UCO Bank, question is-why the cheques were prepared in the name of ANZ Grindlays ....
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....s of lending money to A-5 or purchasing UTI Units from UCO Bank was mere pretence by giving a cover of ostensible sale of units to MUL. If really, there was a loan transaction between MUL and A-5, MUL would have issued pay order in favour of A-5, but in the present case, the pay orders-bankers' cheques were issued by the Canara Bank in favour of Grindlays Bank and the cheques were having endorsement of - crossed cheques, account payee, non-transferable. After receipt of the said cheques, surprisingly, officer of Grindlays Bank credited it in the account of A-5. Thereafter, A-5 again transferred it in his account in Grindlays Bank at Bombay. He again issued the cheque through Grindlays Bank in favour of UCO Bank and UCO Bank transferred the said amount in favour of A-5. He submits that if it was a real and genuine transaction of money lending by MUL in favour of A-5, parties would not have credited such subterfuge or pretence as if MUL was purchasing units from UCO Bank Bombay Office. It is his further contention that in any case A-3 Deosthali had no authority to sell units to MUL. He pointed out relevant section of the Negotiable Instruments Act for contending that the amount of c....
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..... In criminal prosecution, in such a situation, if any reasonable doubt arises, benefit would be in favour of accused. Further, adverse inference could have been drawn against A-5 if the amount was received by him without pledging any units with the bank. As discussed above, it is the contention on behalf of A-5 that UTI units were handed over to the bank and on that basis BRs were issued by A-3. For this purpose, witness is also examined. However, prosecution has failed to establish that BRs were issued without being backed by the units. For the transfer of the amount from Canara Bank to UCO Bank at Bombay Branch via Grindlays Bank, it has come on record that such irregular unjustifiable practice had developed with certain banks. It has also come on record that even SBI had given such facility to A-5 (as per JPC Report). In such a state of prosecution evidence, it cannot be held beyond reasonable doubt that A-5 committed any offence punishable under section 403 or abetted offence punishable under section 405 of IPC or has abetted any commission of offence punishable under section 468 read with section 464 IPC. For the cheque issued by the Canara Bank in favour of Grindlays Bank....
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....eat.Conviction or acquittal in a system wedded to rule of law should be in accordance with law only. As observed in the case of Laxman Kumar (supra) if the cushion is lost and the Court room is allowed to vibrate with the heat generated outside it, the adjudicatory process suffers and the search for truth is stifled. It is for the Parliament to enact laws to meet white-coloured illegalities or irregularities affecting the society. What emerges from the discussion of the entire evidence which, to some extent, is reproduced in the earlier paragraphs is : (a)The SCAM Act does not create any new offence nor changes the procedure as prescribed in the Code of Criminal Procedure nor raises any presumption pertaining to an offence punishable under the Indian Penal Code or Prevention of Corruption Act. The offences of mis-appropriation, criminal breach of trust or fraud and forgery are required to be established by the prosecution on the basis of existing criminal jurisprudence, which requires that prosecution has to establish its case beyond reasonable doubt. Serious allegations would not be a ground for convicting the accused unless there is sufficient evidence to connect the accused wi....
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....nks and Public Sector Undertakings of short term investments of their extra funds. May be that the practice adopted by the banks or PSUs was unjustified or irregular. (d)Jurisdiction of the Court under the SCAM Act is limited for the transactions in Securities after the First Day of April, 1991 and on or before 6th June, 1992. As the prosecution has failed to prove the conspiracy, the accused cannot be convicted by the Court for the transactions dated 24-1-1991, 13-3-1991 and 18-3-1991. Remaining 4th and 5th transactions are on 24-4-1991 and 2-5-1991 for two days and five days respectively. Before the 5th transaction, A-3 was transferred from the Haman Street Branch. (e)In the investment policy or lending policy as per the guidelines framed by the MUL in 1989 (Ex.9) use of phrase 'through Scheduled Banks' or 'directly' appears to be intentional. 'Through Scheduled Bank' would indicate that the amount is not invested 'with the Bank'. Resolutions Exs. 22, 23, 24, 40 and 42 passed by the MUL for investment of funds as reproduced above also reflect the same thing, namely "through bank" or "with the bank". (f)Resolution Ex. 22 dated 1-2-1991 reveals how the documents were prepared t....
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.... has stated that looking at the BRs of UCO Bank, no suspicion would arise and that issuance of the BRs necessarily indicates that bank issuing it would be holding the security covered under the BR. (p)Mr. Ramanathan, Divisional Manager of UCO Bank at Bombay Office at the relevant time has produced on record letter dated 8-1-1991 Ex. 231 written by him stating resumption of switch transaction after discussing the subject with various authorities including Zonal Manager, General Manager and Dy. Manager of UCO Bank. (q)On the evidence as it is, at the highest it was a failure on the part of A-1, A-2 and A-3 to perform their duties or observe rules of procedure in appropriate manner and may at the most be an administrative lapse. (r)As discussed above, there is no evidence against A-2 and A-4 to connect them with the crime. (s)A-4 is prosecuted without collecting any evidence against him that he was responsible for crediting the amount in the account of A-5. the prosecution has erroneously proceeded as if the amount of pay orders issued in favour of Grindlays Bank was directly deposited in the account of A-5. (t)For A-5, it is to be held that he gave loan to MUL in first transacti....
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....o. 1150 filed by Harshad S. Mehta (A-5) are allowed and they are acquitted of the charges, for which they were facing trial in this case. Criminal Appeal No. 521 of 2000 filed by Central Bureau of Investigation against acquittal of A-2 stands dismissed. Arijit Pasayat, J. - Notwithstanding my great respect for learned Brother Shah's wisdom and erudition. I am unable to agree that some of the appellants i.e. A-1, A-3 and A-5 deserve to be acquitted. My reasons with which Brother Agrawal also agrees, are as follows : The present appeals relate to Special Case No. 6/1994 which was one of the 32 cases filed by the Central Bureau of Investigation (in short the 'CBI') under the provisions of Special Court (Trial of offences relating to Transactions in Securities) Act, 1992 (in short the 'Special Court Act'). Before constitution of the Court under the Special Court Act several enquiries were made in relation to securities scam which allegedly broke out in May 1992 in various types of transactions relating to government securities. The basic allegation was that these transactions were made in active connivance with the officials of banks, financial institutions and shareholders. One com....
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....e charged under sections 409, 420, 467, 471 of the Indian Penal Code, 1860 (in short 'the IPC') and section 13(1)(c) read with section 13(2) of the Prevention of Corruption Act, 1988 (in short 'the PC Act'). Reference was made to various documents to show how the transitions were conducted and how documents were fabricated to facilitate use of the huge sums of money by A-5, Harshad. All the accused persons pleaded innocence. The stand of accused No. 1, Pramod and accused No. 2, Ambuj Jain was that they did not know the involvement of A-5. Additionally, A-1 took a stand that A-5, Harshad is broker of UCO Bank. So far as A-3 was concerned though he did not deny authorship of several letters which were placed on record by the prosecution to show alleged commission of forgery, stated that the transactions were put through under mere routing facilities and in any event so far as the last two transactions were concerned, he was not working in the concerned branch. He took a stand that though the letters produced by the prosecution to show that forgery had been committed, as they were typed outside the office. The same was done due to pressure of work. Accused 4 took the stand that he w....
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.... agreed on 25-2-1991. Accused No. 3, Deosthali addressed a letter dated 23-1-1991 on the letter head of UCO Bank of the concerned Branch to MUL stating that arrange- ment for payment of consideration of the aforesaid sum would be made through Bank of America, New Delhi with a further request to MUL to hand over the physical delivery of the security to Mohan Khandelwal (PW-23). Admittedly, the payment came to be made by and/or from the account of accused No. 5, Harshad. Bombay's office of A-5 by its letter to Bank of America, Bombay requested remittance of the amount by means of ITRO to its Delhi Branch for crediting into the account of MUL, Delhi. Accordingly, Bank of America (Bombay and Delhi branch arranged the payment thereof to MUL. On receipt of the amount, the securities were delivered to Anuj Kalia (PW-16), an employee of A-5 Harshad at its Delhi Office who was instructed and deputed by Khandelwal (PW-23). The proposal submitted by A-1 indicated as if the transaction was between MUL and UCO Bank, Hamam Street, Bombay. Nothing was mentioned about the role of A-5 who was operating from behind the screen. At the reversal stage, accused No. 3, Deosthali addressed a letter dated ....
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....pressure of work it had to be done outside can be accepted with a pinch of salt. It was for PW-6 to say that there was pressure of work and, therefore, the letter was required to be typed outside. There was no other instance, except the cases involving A-5 and the other transactions to which reference shall be made subsequently, that the letter was typed outside. So far as reversal is concerned, the role of A-3 is very significant. The letter (Exbt. 59) was written by A-3. He accepted that he was the author and signatory of the letter. Exbt. No. 101 is a letter dated 25-2-1991 issued by the Delhi Office of A-5 to the Grindlays Bank, by which it was instructed to credit the proceeds of the pay order (Exbt. 28) to the account of A-5. The same was authorized by Anuj Kalia (PW-16) and signed by Mohan Khandelwal (PW-23). The current account number of A-5 was also mentioned in the letter. From the statement of account of UCO Bank, Hamam Street Branch, Bombay (Exbt. 149) it is clear that there was no debit entry showing that the UCO Bank, Bombay have charged any commission for the transaction of 35 lakhs of units of UTI and there is also nothing to show that UCO Bank had charged any comm....
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....nk issued its pay order for the amount directly to MUL, A-5's Delhi office instructed its bankers Grindlays Bank, Delhi for issuance of a banker's cheque for the said amount favouring Grindlays Bank for the benefit of MUL by depositing the amount into the account of A-5. This is what was done. Exbt. 60 is the letter dated 13-3-1991 which was signed by A-3 Deosthali. By the said letter it was indicated to MUL that it (MUL) had purchased 70 lakhs of units. There was a request to remit funds through Grindlays Bank. The Agenda Note and the approval clearly show that MUL was to place funds through UCO Bank. A reading of the Agenda Note and the Resolution clearly shows that the transaction was intended to be between MUL and UCO Bank. Much was made of the words "through UCO Bank" to contend that there was no prohibition on involvement of A-5. This has to be considered in the background of the stand of A-5. His stand was that the transaction was between him and MUL on principal-to-principal basis. But the material on evidence clearly shows that the intention was that MUL was to be the purchaser and the UCO Bank the seller. Exbt. 38 is the BR issued by the UCO Bank. The same was authored....
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....UCO Bank agreed to accept this fund at the same rate. There was some reluctance on the part of Grindlays Bank to accept the fund beginning 24-4-1991. Accordingly the placement has been done with UCO Bank. A reading of the second note/proposal makes it clear that MUL was dealing with UCO Bank and there was no question of A-5 dealing with MUL an principal-to-principal basis. In the minutes of Sub-Committee for the investment. The committee had earlier approved the proposals as contained in the Agenda Note. Exbt. 40(3) where the investment in the security in question was to be made with Grindlays Bank. But later on, the same was changed and it was resolved to be made with UCO Bank, Hamam Street Branch, Bombay as proposed by A-1, Pramod. Significantly, there was no written proposal either from UCO Bank or Grindlays Bank which has been received and placed before the Committee of MUL. It had given its approval to the proposal for investment with UCO Bank. As noted earlier in respect of the other transaction. There was no direct involvement of UCO Bank and it was A-5 creating a facade to give a picture to MUL as if the transaction was between it and UCO Bank. Transaction No. 5 - So far ....
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.... of Grindlays Banks signed by A-1 (Exbt. 35). 10.For the 5th transaction, there was no BR and it has not been explained by A-1 as to how the transaction could take place without BR. A-1 concealed the receipt signed by PW-23 on the letterhead of A-5 cancelling the receipt of 35 lakhs of units from MUL. It is, therefore, hard to believe that A-1 did not know that the ultimate beneficiary was A-5. A-1 delivered pay order for the second transaction to PW-16. It has to be noted that for the first time in this Court A-5 has taken the stand that the relevant transactions were in the nature of loan between A-5 and MUL. A-1 used to place the proposal before the Board and obtained approvals for the investments in question. A decision was taken by MUL for investing its funds with PSU's as deposed by PW-1. That clearly indicated that investments could only be in PSU's bonds. As per PW-3, MUL did not engage the services of brokers for its transactions and A-1 used to give instructions on the basis of which letters addressed to banks were prepared by MUL clearly suggesting that the transactions were intended to be between MUL and UCO bank. Therefore, what was intended was that the transactions....
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....f A-5 is there. Exbt. 153(1) is the signature of A-3 on debit voucher of UCO bank in the name of Harshad Mehta. Transaction No. 3 - letter dated 18-3-1991 of UCO bank is signed by A-3 (Exbt.61). BR dated 18-3-1991 is signed by A-3 (Exbt.39). Exbt.157(1) is the signature of A-3 on the debit voucher of UCO Bank in the name of A-5, Exbt. 158(1), page 6893, is the signature of A-3 in the name of A-5. Similar is the case of Exbts. 159(1), 160(1), 161(1), and 162(1) where there are signature of A-3 on the debit vouchers of UCO Bank in the name of A-5. Transaction No. 4 - BR 106 dated 24-4-1991 covering security of 51 lakhs of units signed by A-3. Credit voucher Exbt. 163(1) is in the name of A-5 signed by A-3. Similarly in the case of Exbts. 164(1), 165(1), 166(1), 167(1) and 168(1). It is an accepted case that documents purporting to be prepared in the normal course were prepared outside the office. Evidence of PW-6 is significant in this regard. One significant factor as deposed by PW-7 is that none of UCO's Bank Managers was authorized to deal with securities. If there was any genuine transaction for sale of security, the deal could have been concluded by the Head Office of the Ban....
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....he Bank's books. The stand that bank had received a commission is inconsistent with the stand that there was a sale and repurchase involved in the transaction. In such a transaction, the difference in price is the profit and not a commission. For the 5th transaction neither there was a letter from the UCO bank nor a BR which amply demonstrate that no security was delivered. Though it is possible as an argument that in respect of transactions 2, 3 and 4 certain securities were placed with A-3 by A-5, that really is of no assistance to A-5. If any security is received, the Bank ought to have made some payment and if the Bank has not paid to retain the security, it would have been required to deliver the securities based on the BR and/or its letters. In other words, UCO Bank's fund were payable to MUL, without having any legal right to retain any security which A-3 may have kept in his possession. Another question which needs to be considered is whether UCO Bank received any consideration for the sale of MUL. The Banker's cheque issued by Canara Bank on MUL's account was received by Grindlay's Bank and credited to the account of A-5, and remitted to the Bombay Branch of Grindlay's Ba....
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....not typed in the bank's office and significantly there was no outward reference number given on them, as is the admitted usual practice. For the 4th transaction there was only the BR, and no letter and for the 5th transaction there was neither letter nor BR. It is not disputed that there can be no oral transaction by banks. It must be reflected in the books of account. Further, a bank cannot act as a broker under the Banking Act. It is not one of the permitted acts. There is also not a question paying of any commission on purchase/sale of transactions. The transactions are, therefore, not transparent. The counter party i.e. MUL does not appear to have noticed about the role of the brokers. The decisions in question did not refer to A-5, Harshad but to UCO Bank, but the beneficiary is A-5. The pay-in slips were filled up by PW-16 which indicate that the payment was made to A-5, Harshad and in fact there was no authorization from MUL in this regard. The cheques were account payee cheques. In Exhibit 38 dated 13-3-1991. A-3 has signed as "Accountant". The document uses the expression "cost". Though the receipt was from A-5, it was indicated as if it was from MUL. All the relevant ....
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....so throws some light on this aspect. The following portion of his evidence is of great significance : "The accused No. 1 at that time stated that MUL could not deal or involve the brokers. Mr. Harshad S. Mehta stated that the deals would be between MUL and banks structured and suggested by him i.e. Harshad S. Mehta. Mr. Mehta would not appear in the books of account of MUL and that is what he stated." Though, attempt was made to emphasize accused No. 1's role in informing A-5 that MUL could not deal or involve broker, the statement attributed to A-5 Harshad has also to be considered. An attempt was made to as if there was no broker involved. Accounts were to be presented in such a manner that the role of A-5 would remain hidden. It is interesting, as noted above, that so far as the last transaction is concerned, there is no letter or the BR. Though accused No. 5 was the master mind in reality, it reflects the involvement of several persons to present legitimacy while in reality that was not so. Letters authored by A-3 made a clear representation to MUL as if it was transacting with UCO Bank. It would be relevant to take note of the various offences alleged to have been committe....
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....shall be punished in the same manner as if he had forged such document or electronic record." It would be appropriate to deal with the question of conspiracy. Section 120B of IPC is the provision which provides for punishment for criminal conspiracy. Definition of 'criminal conspiracy' given in section 120A reads as follows: "Definition of criminal conspiracy.-When two or more persons agree to do, or cause to be done,- (1)an illegal act, or (2)an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy : Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof." The elements of a criminal conspiracy have been stated to be: (a ) an object to be accomplished, (b) a plan or scheme embodying means to accomplish that object, (c) an agreement or understanding between two or more of the accused persons whereby, they become definitely committed to co-operates for the accomplishment of the object by the means embodied in the agreement, or by any effectual means, (d) in the jurisdiction where....
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.... the circumstances proved before, during and after the occurrence have to be considered to decide about the complicity of the accused. In Halsbury's Laws of England (vide 4th Ed. Vol. 11, page 44, page 58), the English Law as to conspiracy has been stated thus : "Conspiracy consists in the agreement of two or more persons to do an unlawful act, or to do a lawful act by unlawful means. It is an indictable offence at common law, the punishment for which is imprisonment or fine or both in the discretion of the Court. The essence of the offence of conspiracy is the fact of combination by agreement. The agreement may be express or implied, or in part express and in part implied. The conspiracy arises and the offence is committed as soon as the agreement is made; and the offence continues to be committed so long as the combination persists, that is until the conspiratorial agreement is terminated by completion of its performance or by abandonment or frustration or however, it may be. The actus rues in a conspiracy is the agreement to execute the illegal conduct, not the execution of it. It is not enough that two or more persons pursued the same unlawful object at the same time or in t....
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....fence. There must be a meeting of minds resulting in ultimate decisions taken by the conspirators regarding the commission of an offence and where the factum of conspiracy is sought to be inferred from circumstances, the prosecution has to show that the circumstances give rise to a conclusive or irresistible inference of an agreement between two or more persons to commit an offence. As in all other criminal offences the prosecution has to discharge its onus of proving the case against the accused beyond reasonable doubt. The circumstances in a case, when taken together on their face value, should indicate the meeting of the minds between the conspirators for the intended object of committing an illegal act or an act which is not illegal, by illegal means. A few bits here and a few bits there on which the prosecution relies cannot be held to be adequate for connecting the accused with the commission of the crime of criminal conspiracy. It has to be shown that all means adopted and illegal acts done were in furtherance of the object of conspiracy hatched. The circumstances relied for the purposes of drawing an inference should be prior in time than the actual commission of the offenc....
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....arly established conspiracies there are no means of proving any such thing and neither law nor common sense requires that it should be proved. If you find that these two persons pursued by their acts the same object, often by the same means, one performing one part of an act, so as to complete it with a view of the attainment of the object which they were pursing, you will be at liberty to draw the conclusion that they have been engaged in a conspiracy to affect that object. The question you have to ask yourselves is, had they this common design, and did they pursue it by these common means the design being unlawful." As noted above, the essential ingredient of the offence of criminal conspiracy is the agreement to commit an offence. In a case where the agreement is for accomplishment of an act which by itself constitutes an offence, then in that event no overt act is necessary to be proved by the prosecution because in such a situation, criminal conspiracy is established by proving such an agreement. Where the conspiracy alleged is with regard to commission of a serious crime of the nature as contemplated in section 120B read with the proviso to sub-section (2) of section 120A, t....
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....f unlawful use being made of the goods or services in question may be inferred from the knowledge itself. This apart, the prosecution has not to establish that a particular unlawful use was intended, so long as the goods or service in question could not be put to any lawful use. Finally, when the ultimate offence consists of a chain of actions, it would not be necessary for the prosecution to establish, to bring home the charge of conspiracy, that each of the conspirators had the knowledge of what the collaborator would do so, so long as it is known that the collaborator would put the goods or service to an unlawful use" - State of Maharashtra v. Som Nath Thapa JT 1996 (4) SC 615. It was noticed that sections 120A and 120B IPC have brought the law of conspiracy in India in line with English law by making an overt act inessential when the conspiracy is to commit any punishable offence. The most important ingredient of the offence being the agreement between two or more persons to do an illegal act. In a case where criminal conspiracy is alleged, the court must inquire whether the two persons are independently pursuing the same end or they have come together to pursue the unlawful o....
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....o be done has not been done. So too, it is an ingredient of the offence that all the parties should agree to do a single illegal act. It may comprise the commission of a number of acts. Under section 43 of the Indian Penal Code, an act would be illegal if it is an offence or if it is prohibited by law." In Yash Pal Mittal v. State of Punjab [1977] 4 SCC 540 the rule was laid as follows : "9. . . . The very agreement, concert or league is the ingredient of the offence. It is not necessary that all the conspirators must know each and every detail of the conspiracy as long as they are co-participators in the main object of the conspiracy. There may be so many devices and techniques adopted to achieve the common goal of the conspiracy and there may be division of performances in the chain of actions with one object to achieve the real end of which every collaborator must be aware and in which each one of them must be interested. There must be unity of object or purpose but there may be plurality of means sometimes even unknown to one another, amongst the conspirators. In achieving the goal several offences may be committed by some of the conspirators even unknown to the others. The o....
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....was that dealing would be directly with the bank and not through any broker or intermediary. Much has been made out of use of the word 'through' in the resolution. If the clear understanding of A-1 was that the deal should not be dealt with or involved any broker then the question of A-5 acting as broker does not arise. Use of the expression "through" is indicative of the fact that emphasis was on securities being not purchased in the open market, but "through" named PSU. These PSU were admittedly not brokers. They were either banks or financial institutions. Evidence clearly shows that A-5 wanted that he will not directly come to the picture, and would not appear in the books of account of MUL; but would stand to gain by way of commission and as a brokerage from the bank. The statement of A-1 that he would look into any good proposals if A-5 does not come to the picture shows that the actual state of affairs was intended to be hidden from the MUL authorities and a totally distorted picture was sought to be given. These are factors which does not go in favour of the accused as contended, and on the contrary clearly proves conspiracy. Much has also been submitted that repayment has....
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....and of law or any contract touching the discharge of trust. In Jaswantrai Manilal Akhaney v. State of Bombay AIR 1956 SC 575, it was held that if the Managing Director of the Bank entrusted with securities owned by the pledger disposes of their securities against the stipulated terms of the contract entered into by the parties with an intent to cause wrongful loss to the pledger and wrongful gain to the Bank there can be no question but that the Managing Director has necessarily mens rea required by section 405. The term 'entrustment' is not necessarily a term of law. It may have different implications in different context. In its most general signification all it imports is the handing over possession for some purpose which may not imply the conferring of any proprietary right at all. When a person misappropriates to his own use the property that does not belong to him, the misappropriation is dishonest even though there was an intention to restore it at some future point of time. As noted by this Court in Jaikrishnadas Manohardas Desai v. State of Bombay AIR 1960 SC 889, to establish the charge of criminal breach of trust, the prosecution is not obliged to prove the precise m....
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.... the first essential is that the accused should have made a false document. The false document must be made with an intent to cause damage or injury to the public or to any class of public or to any community. The expression 'intent to defraud' implies conduct coupled with intention to deceive or thereby to cause injury. In other words, defraud involved two conceptions namely, the deceit and injury to the person deceived, that is infringement of some legal right possessed by him but not necessarily deprivation of property. The term 'forgery' as used in the statute is used in its ordinary and popular acceptation. The definition of the offence of forgery declares the offence to be completed when a false document or false part of a document is made with specified intention. The questions are (i ) is the document false (ii) is it made by the accused and (iii) is it made with an intent to defraud. If at all the questions are answered in the affirmative, the accused is guilty. In order to constitute an offence of forgery the documents must be made dishonestly or fraudulently. But dishonest or fraudulent are not tautological. Fraudulent does not imply the deprivation of property or an....
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....manner for personal use with no right to do it. Funds of the public bodies were utilized as if they were private funds. There was no legitimacy in the transactions. Huge funds running into hundreds of crores of MUL, a Government company, were diverted and all the concerned accused persons A-1, A-3 and A-5 played dubious roles in these illegitimate transactions. Their acts had serious repercussions on the economic system of the country, and the magnitude of financial impact involved in the present appeal is only tip of the iceberg. There were several connected cases and interestingly some of the prosecution witnesses in the present case are stated to be accused in those cases. That itself explains the thread of self-perseverance running through their testimony. Therefore, the need to pierce the facadial smoke screen to unravel the truth to lift the veil so that the apparent, which is not real can be avoided. The proverbial red herrings are to be ignored, to find out the guilt of the accused. The cause of the community deserves better treatment at the hands of the Court in the discharge of its judicial functions. The Community or the State is not a persona non grata whose cause may....