TaxTMI 
TaxTMI 
2009 (8) TMI 695
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....ergo R.I. for a period of six months and to pay a fine of Rs. 1,00,000 in default S.I. for two months. (c )Accused No. 3, S.V. Ramnathan is sentenced for the offence punishable under section 120B read with section 409 of the Indian Penal Code read with section 13(1)(d)( iii) read with section 13(2) of the Prevention of Corruption Act to undergo R.I. for a period of one month and to pay fine of Rs. 10,000 in default S.I. for 15 days. (d )Accused No. 5, Atul M. Parekh is sentenced for the offence punishable under section 120B of the Indian Penal Code to undergo R.I. for a period of 15 days and to pay fine of Rs. 10,000, in default S.I. for 15 days. (e )Accused No 6, C. Ravikumar is sentenced for the offence punishable under section 120B read with section 409 of the Indian Penal Code read with section 13(1)(d)( iii) read with section 13(2) of the Prevention of Corruption Act to undergo R.I. for a period of three years and to pay fine of Rs. 1,00,000 in default S.I. for three months. (f )Accused No. 7, S. Suresh Babu is sentenced for the offence punishable under section 120B read with section 409 of the Indian Penal Code read with section 13(1)(d)( iii) read with section 13(2) of t....
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....Mumbai. This was allegedly done under the instructions of the Head Office in Calcutta and its Zonal Office at Bombay. The Fund Dealing Officer at D.N. Road, Bombay, Branch had alleged that a letter was received from National Housing Bank enclosing the cheque but it was not traceable either in UCO Bank or in National Housing Bank. On the date of credit, the account of Harshad Mehta in UCO Bank, Hamam Street Branch showed an overdraft of Rs. 39.07 crores. Harshad Mehta allegedly repaid the said amount with interest amounting to Rs. 27 lakhs through Grindlays Banks which had debited Harshad Mehta's account. 9. It is stated that National Housing Bank could not have advanced loans directly to the brokers. The recording of the transactions as call money transactions through other banks was a subterfuge meant only to ensure grant of loans to Harshad Mehta. It was also alleged that all the funds management operations at the National Housing Bank (the lending bank) were centralized with C. Ravi Kumar, Assistant General Manager (accused No. 6). He was not only the dealer but was also one of the signatories to the cheques. The back up functions were conducted by S. Suresh Prabhu, Assistant M....
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.... of Police, C.B.I. 20.Shri P.K. Mankar, Dy. S.P., C.B.I. 12. For proving charges against accused No. l, evidence of P.W. No. 4 Shri B.L. Sachdeva, PW-12, Shri Sunil Kakkar; PW-13, Shri Chinmoykumar Mukherjee and PW-17, Shri K. Mallikarjunan are relevant. Accused No. 1 also examined defence witnesses inter alia contending that on 6-4-1992 he was not present at the Head Office till 3.30 p.m. It was furthermore contended that the transactions in question were held by and between NHB and accused No. 4 and the officers of UCO Bank had nothing to do therewith. The depositions of the said witnesses are also relevant for proving the charges so far as accused No. 2 is concerned. His defence was that the offence of conspiracy has not been proved. It is his case that the purported decision to arrange for call money had not been taken by him alone as per the statement of PW-3, P. Arvindk Shah and PW-17, K. Mallikarjunan, but by the Chairman-cum-Managing Director of UCO Bank. 13. With a view to prove the charges against accused No. 3 the learned Special Court relied upon the evidence of PW-1, Shri Bishwajit Choudhuri, PW-13, Shri Chinmoykumar Mukherjee, PW-16, Neelam P. Kini and PW-18, Prad....
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....mmission of offences punishable under section 120B read with section 409 and section 34 of the Indian Penal Code and section 13(1)(d)( iii) read with section 13(2) of the Prevention of Corruption Act, 1988. Judgment of the Special Court 20. The learned Special Court in its impugned judgment referred to the decision of Ram Narain Poply v. Central Bureau of Investigation [2003] 42 SCL 275 (SC) in extenso so as to note the ingredients for commission of the offence of conspiracy to conclude :- "It is thus well established that the transaction of call money which was shown to be between the National Housing Bank and the UCO Bank was not a real transaction of call money between the National Housing Bank and the UCO Bank. It was really a transaction between the National Housing Bank and Harshad Mehta and the officers of the UCO Bank permitted the name of the UCO Bank to be used to facilitate the transactions between the National Housing Bank and UCO Bank. Therefore, about the nature of the transaction, there is no dispute." 20.1 Referring to the statement of accused No. 1 it was furthermore held:- "From the submissions of accused No. 1 it is clear that even according to him in this t....
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....ey transaction though the amount of Rs. 40 crores was not needed by the UCO Bank on that day. Therefore, his knowledge about the nature of the transaction is well established. So far as accused No. 3 Ramnathan is concerned, his presence at the Hamam Street Branch on 6-4-1992 at 12 - 12.30 with Atul Parekh and his insistence that the transaction with the broker should be started immediately show that he was also aware of the transaction. It is pertinent to note that cross-examination of P.W. 18 by accused No. 3 shows that even an attempt is not made to dispute the above referred statement of P.W. 18. So far as accused No. 5 Atul Parekh is concerned, above ref-erred statement of P.W. 18 clearly establishes his knowledge of the transaction. The statement of P.W. 8 Jeroo Dalal also shows that at his instruction pay order for repayment to the NHB was prepared." 20.3 Referring to the other cases vis-a-vis accused Nos. 6 and 7, it was opined :- "Thus, the evidence on record clearly shows that all the accused persons had knowledge of the transaction and that all of them have some part in the transaction." 20.4 The learned Special Court thereafter considered the question as to whether th....
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....iracy. (5)If the prosecution case that there had been a larger conspiracy because of unlawful favour shown to Harshad Mehta is correct, the other officers of the UCO Bank, concerned officers of Reserve Bank of India and ANZ Grindlays Bank should have also been prosecuted. (6)The orders of sanction for prosecuting accused Nos. 6 and 7 were illegal. (7)The evidences of PWs. 5, 7, 12, 13 and 17 should not have been relied upon by the learned Special Court as they were accomplices to the crime. (8)Accused No. 1 having come to his office at about 3.00 - 3.30 p.m. from Chennai and the entire transaction having been completed by 2 O'clock, he cannot be said to be a party to a decision either to obtain call money from NHB or the cancellation thereof. (9)The documents proved on behalf of the prosecution do not disclose that the accused and in particular accused Nos. 1 and 2 had any intention to commit the alleged offence. (10)Accused No. 2 having signed only two documents and accused No. l having put his initials only on one document, they could not be held to be a party to the alleged conspiracy. (11)Witnesses, PW No. 5 - Hiten D. Mehta; PW No. 12 Sunil Kakkar, PW No. 13 - Chinmoyku....
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....d having not discussed the materials brought on record in details, must be held to have acted illegally and without jurisdiction in passing the impugned judgment. (19)The transfer of money being not 'securities' within the meaning of the provisions of Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1993, the Special Court had no jurisdiction to try the offences thereunder. (20)Accused No. 5 having been acquitted from the charges of criminal breach of trust, could not have been held to be guilty of being a party to the conspiracy as alleged by the prosecution on the basis of the materials brought on record. 22. Mr. Mohan Prasaran, learned Additional Solicitor General appearing on behalf of the Central Bureau of Investigation, on the other hand, urged:- (1)The prosecution case that NHB had diverted its funds in violation of the provisions of the National Housing Bank Act, 1987 must be held to have been proved as the accused persons including Late Harshad Mehta and his associates utilized the officers of UCO Bank as a conduit, having regard to the fact that it stands admitted that a ready forward deal was entered into by and between UCO Bank and NHB B....
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....dy would have raised eye brows thereabout and, thus, admitted that the routing of a sum of Rs. 40 crores belonging to NHB through UCO Bank to the account of Harshad Mehta was carried out for unknown consideration. (8)The entire transaction being illegal would come within the purview of section 120A and section 120B of Indian Penal Code and, thus, no exception can be taken to the judgment of the learned Special Court. Over View National Housing Bank 23. NHB is a Bank constituted under the National Housing Bank Act, 1987 (in short NHB Act). The Act was enacted to establish a bank to be known as the National Housing Bank (NHB) to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions and for matters connected therewith or incidental thereto. It is a financial institution. It is also a Bank within the meaning of the provisions of the Banking (Regulation) Act, 1949. 24. The nature of business of the NHB is contained in Chapter IV of the Act. 25. 'Housing finance institution' has been defined in section 2(d), (as it then stood) to mean - "2. (d) 'housing finance institu....
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....egislations. Subsequently, the Banking Regulation Act, 1949 (1949 Act) was enacted to consolidate and amend the law relating to banking. It repealed and replaced Part XA of the Banking Companies Act, 1936. 31. In the meanwhile, however, Reserve Bank of India Act, 1934 came into force. Section 42 of the 1934 Act provided for "cash reserves" to be kept with the Bank, relevant provisions whereof read as under :- "Section 42-Cash reserves of scheduled banks to be kept with the Bank.-(1) Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than such per cent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing, the monetary stability in the country, notify in the Gazette of India. Explanation.-For the purposes of this section,- (a )'average daily balance' shall mean the average of the balances held at the close of business of each day of a fortnight; ****** (1A) Notwithstanding anything contained in sub-section (1), the Bank may, by notification in the Gaze....
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.... statutory obligation to borrow the same so as to maintain the 'cash reserve ratio' on such interest, as may be mutually agreed upon. 35. The Banks which are governed under the aforementioned Act being in the business of banking, besides other purposes, may grant loans not only to individuals or private persons or body corporates but also to another bank. 36. Control of Banking Companies is vested in the Reserve Bank of India as would appear from section 35 of the 1949 Act. Section 35A empowers the Reserve Bank of India to issue direction, which the banks are bound to carry out; on their failure to do so the penal clause contained in section 46 would be attracted, sub-section (4) whereof reads as under :- "Section 46 - Penalties .-(4) If any other provision of this Act is contravened or if any default is made in- (i )complying with any requirement of this Act or of any order, rule or direction made or condition imposed thereunder, or (ii )carrying out the terms of, or the obligations under, a scheme sanctioned under sub-section (7) of section 45, by any person, such person shall be punishable with fine which may extend to fifty thousand rupees or twice the amount involved in ....
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.... judgment this appeal arises. 42. The learned counsel for the appellants contend before us that the special court so constituted did not have the jurisdiction to try this matter. They argue that section 7 read with sub-section (2) of section (3), of the Special Court Act, limiting the jurisdiction of the Special Court only to 'offences relating to transaction in securities' would not attract the transactions which have been attributed to the appellants in the present case. It is argued that the definition of the term 'Securities', as provided for in section 2(c) of the Act does not bring within its ambit 'call money transactions' for which they are being tried. It must be noted that the order passed by the learned Special judge is silent on the issue of jurisdiction even though the issue is said to have been raised at the trial. 43. The Special Courts under the Act were established 'for the trial of offences relating to transaction in securities and for matters connected therewith or incidental thereto'. 44. Section 3 of the Act deals with the appointment of, and the functions of custodians under the Act. Section 3(2) empowers the Custodians to notify the name of any person who ....
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.... Act. 49. The definition of 'securities' in the Act is an inclusive one. It is not exhaustive. It takes within its purview not only the matters specified therein but also all other types of securities as commonly understood. 50. In the State of Bombay v. Hospital Mazoor Sabha AIR 1960 SC 610 this Court while interpreting the definition of "industry" as contained in section 2(j) of the Industrial Disputes Act, 1947 noted as under :- "It is obvious that the words used is an inclusive definition denote extension and cannot be treated as restricted in any sense. Where we are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation" [Internal citations omitted] See also Regional Director, Employees State Insurance Corpn. v. High Land Coffee Works of PFX Saldanha & Sons [1991] 3 SCC 617 and CTO v. Rajasthan Taxchem Ltd. [2007] 2 SCALE 120. Karnataka Power Transmission Corpn. v. Ashok Iron Works (P.) Ltd. [2009] 3 SCC 240. 51. However, even if we hold call money transactions not to be within the scope and ambit of the definition of the term 'securities', it must still be remembered that the jurisdiction of the S....
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....We have noticed here to before that the Reserve Bank of India constituted Janakiraman Committee for the purpose of looking in to the Securities Scam of the early 90's. A report pursuant thereto was submitted. It was on the basis of that report that the said Act was enacted and the Special Court was constituted. These background facts, in our opinion, would be relevant for determining the issue. 57. For the purpose of determining the question as to whether the Special Court had the jurisdiction to try the offences in question or not, in our opinion, the principle of purposive construction must be resorted to. The rule which is also known as the 'mischief rule' enables consideration of four matters in construing an Act : (i) What was the law before the making of the Act, (ii) What was the mischief or defect for which the law did not provide, (iii) What is the remedy that the Act has provided, and (iv) What is the reason of the remedy. The rule then directs the courts to adopt that construction which suppresses the mischief and advances the remedy. [See Bengal Immunity Co. Ltd. v. State of Bihar AIR 1955 SC 661, Zile Singh v. State of Haryana AIR 2000 SC 5100]. Simply stated 'the cou....
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....g the Special Courts. 62. In Minoo Mehta v. Shavak D. Mehta [1998] 16 SCL 188 (SC), this Court held : "... As the Preamble of the Act shows, the Act is to provide for the establishment of a Special Court for the trial of offences relating to transactions in securities and for matters connected therewith or incidental thereto. Therefore, every offence pertaining to any transaction in securities which is covered by the sweep of the Act, that is, if such transaction has taken place between 1-4-1991 and on or before 6-6-1992 would be subjected to the provisions of the Act regarding trial of such an offence. . . ." (p. 198) 63. If the purport and object of the Act was to bring home an offence of the nature discussed here tobefore, in our opinion, the Special Court would have jurisdiction to try that offence. The money belonging to National Housing Bank had been diverted to Harshad Mehta's account who was a broker dealing in securities so as to enable him to enter into transactions in securities during the period 1-4-1991 and on or before 6-6-1992, which was an offence triable exclusively by the Special Court. The Special Court, therefore, rightly exercised the jurisdiction vested in ....
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....erned by the RBI regulations and not those of NHB Act. According to him, the Governor of RBI was the only competent sanctioning authority. 68. Indisputably accused No. 6 was initially appointed by the Reserve Bank of India and was sent to NHB on deputation in the year 1988. He was, however, permanently absorbed there in 1992 and the Order of sanction in respect of him was passed on 26th February, 1993. It is a fundamental principle of service jurisprudence that an employee, subject to statutory interdict, cannot have two masters. If from the date of his absorption the relationship of employer and employee came into being between him and NHB, it is fallacious to suggest that the Reserve Bank of India continued to be his employer. It is not in dispute that if accused No. 6 is treated to be the an officer of the Bank, the Chairman-cum-Managing Director, being its highest authority would be competent to pass the order of sanction. 69. Next it was urged before us on behalf of accused No. 7, S. Suresh Babu that since the terms and conditions of service of the employees of NHB till as late as 1995 used to be governed by the Service Regulations framed by Reserve Bank of India, Shri R.V. ....
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....19(3) of the Act; especially since there has been no failure of justice in the present case by the said error in the orders. The contentions of the accused, as to the validity of the Sanctioning orders, in view of the said sub-section must be rejected. Reliance on the Janakiraman Committee 73. Before we move on to deal with the substantive criminal charges under the Indian Penal Code and the Prevention of Corruption Act invoked against the appellants herein, we must first deal with a grievance which has been raised by the learned counsel for the appellants and, in our opinion, rightly that in the impugned judgment the Special Court had acted illegally and without jurisdiction in relying upon the report of the "Janakiraman Committee" while imposing the sentence on respondent No. 6; the relevant portion whereof is as under :- "So far as accused No. 6 is concerned, it is clear from what has been observed [by the] Janakiraman Committee that there was virtually no supervision on accused No. 6 and he was managing the affairs or mismanaging the affairs of the NHB according to his own acts, wish and ultimately at the wish and fancy of the brokers. He was giving loans to the brokers whic....
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....ime officials of the National Housing Bank, at the behest of Late Harshad S. Mehta and Atul M. Parekh (A 5) entered into a criminal conspiracy with the object of diverting funds from the National Housing Bank to Late Harshad Mehta's Account in UCO Bank. The funds were diverted to enable Harshad Mehta to invest the same in the Securities Market. It is alleged that in furtherance of the said conspiracy K. Margabandhu (A 1), R. Venkatkrishnan (A 2), C. Ravikumar and S. Suresh Babu (A 7) created certain fake documents to facilitate the transfer of funds. It is further alleged that S.V. Ramanathan (A 3) along with Atul M. Parekh (A5) then persuaded the officials of UCO Bank to allow the said transaction to proceed without any hindrance. 79. Criminal conspiracy in terms of section 120B of the Code is an independent offence. It is punishable separately. Prosecution, therefore, must prove the same by applying the legal principles which are applicable for the purpose of proving a criminal misconduct on the part of an accused. 80. A criminal conspiracy must be put to action and so long a crime is merely generated in the mind of the criminal, it does not become punishable. Thoughts, even cr....
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....t is not required that a single agreement should be entered into by all the conspirators at one time. Each conspirator plays his separate part in one integrated and united effort to achieve the common purpose. Each one is aware that he has a part to play in a general conspiracy though he may not know all its secrets or the means by which the common purpose is to be accomplished'. 87. Dr. Hari Singh Gour in his Commentary on Penal Law of India, (Vol.2, 11th Edn. p. 1138) elaborates : "In order to constitute a single general conspiracy there must be a common design .... The evil scheme may be promoted by a few, some may drop out and some may join at a later stage, but the conspiracy continues until it is broken up. The conspiracy may develop in successive stages. There may be general plan to accomplish the common design by such means as may from time to time be found expedient." 88. In some cases, intent of unlawful use being made of the goods or services in question may be inferred from the knowledge itself. This Court in State of Maharashtra v. Som Nath Thapa [1996] 4 SCC 659 opined that it is not necessary for the prosecution to establish that a particular unlawful use was inte....
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....rs and abettors with consign punishment...." (P. 287) (See also Esher Singh v. State of A.P. [2004] 11 SCC 585 : 91. Recently, in Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra [2008] 6 SCALE 469, a Division Bench of this Court held : "23. Thus, it is manifest that the meeting of minds of two or more persons for doing an illegal act or an act by illegal means is sine qua non of the criminal conspiracy but it may not be possible to prove the agreement between them by direct proof. Nevertheless, existence of the conspiracy and its objective can be inferred from the surrounding circumstances and the conduct of the accused. But the incriminating circumstances must form a chain of events from which a conclusion about the guilt of the accused could be drawn. It is well settled that an offence of conspiracy is a substantive offence and renders the mere agreement to commit an offence punishable even if an offence does not take place pursuant to the illegal agreement." 92. A conspiracy may further be a general one and a separate one. A smaller conspiracy may be a part of a larger conspiracy. It may develop in successive stages. [Nirmal Singh Kahlon v. State of Punjab [2008] 14 SC....
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....karjunan (P.W. 17) would take instructions from all the fourteen centres on the basis whereof the General Manager Mr. Venkatkrishnan [A2] used to take a decision. P.W. 17 in his deposition categorically stated : "2. The deals of lending or borrowing money market were done at Calcutta Head Office by Mr. Venkatkrishnan. This is in respect of call money borrowing and lending... 3. Mr. Venkatkrishnan used to decide from whom call money to be borrowed and to whom it is to be lent." The necessary information could be supplied by the Bombay main branch. Bombay main branch informs us between 10:30 to 2:30 pm. Once a decision is taken for borrowing or lending call money to some institute at particular rate, the entries are entered in Head Office in call money register of Calcutta office. The decision is communicated to the branch where the transaction is to be executed." 98. Indisputably again, however, a decision taken by the General Manager would be subject to any direction which may be issued by Margabandhu (Accused No. 1), Managing Director of the Bank. Keeping that aspect of the matter in mind, we may also take notice of the call money transaction which took place on 6-4-1992 around....
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.... and the amount is retotalled but I say that I noted down all the four names and figures at the same time." 102. It is true that in his cross-examination, this witness stated that the same was in his handwriting. Existence of the said Chit is thus not in dispute. It matters little whether it is in the handwriting of P.W. 17 or Accused No. 2. The fact that the decision had been taken by the Accused No. 2 to obtain call money to the tune of Rs. 40 crores is, thus, not in dispute. P.W. 17 also notes that he had noted the details in the chit after receiving information from Accused No. 2 in this behalf. The said Chit containing the details of the call money transactions was thereafter handed over to P.W.12 - Sunil Kakkar. It has been brought on record that this witness used to maintain the call money register, and was, therefore, required to note the same in the said register. 103. The learned counsel appearing on behalf of the appellant, however, would submit that the entries in respect of the said transactions had been made post facto. For the aforementioned purpose our attention has been drawn to the deposition of P.W. 12 - Sunil Kakkar who stated, "the entries of the transaction....
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....roved the following facts : (i)That the decisions regarding the lending or borrowing of call money were usually taken at the Head Office in Kolkata based upon the information received from the DN Road Branch in Bombay. (ii)These decisions in Kolkata were primarily taken by K. Venkatkrishnan (A 2) who at the relevant time was the General Manager of UCO Bank Kolkata. (iii)The decision as to the call money borrowing on 6-4-1992 was also taken by K. Venkatkrishnan. On that day he had communicated his decision of borrowing of call money to K. Mallikarjun, who at the relevant time was an official there. K. Mallikarjun had noted the information regarding the borrowing in a chit of paper. He had noted down information regarding call money borrowing amounting to a total of Rs. 141 crore from four different banks. One of these banks was the NHB from which call money amounting to Rs. 40 crore had been borrowed for a period of one day at 26 per cent interest. (iv)K. Mallikarjun had then handed over this chit with the call money information to Sunil Kakkar who had the responsibility of noting the details in the call money register. He, accordingly, noted the details of the Call Money transa....
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....m the day's transactions. While referring to NHB's call money transaction of 40 crore Mr. Margabanthu said that it was not UCO bank's call money transaction. It was money arranged by Harshad Mehta from NHB. He also said that the money was required by Harshad Mehta at our Bank at Hamam Street Branch for undertaking certain securities operations by him. [...] He also told that Mr. Venkatkrishnan General Manager that this amount of Rs. 40 crore should be immediately sent to Hamam Street branch so that Security transactions could be completed by Mr. Harshad Mehta." 114. P.W. 13, allegedly on this basis, had called up Vijayan (P.W. 14) who was the Manager, Accounts Department, D.N. Road Branch of the Bank to inform him of the development, stating : "[...] After the meeting was over we, i.e., I and Mr. Mallikarjun came down to our department and as per instructions of Mr. Venkatkrishnan, General Manager I conveyed this message to Mr. Vijayan DN Road Branch, Mumbai." 115. Such a telephone call to P.W. 14 is further corroborated by P.W. 17, stating : "8. Mr. CK Mukherjee phoned to Mr. Vijayan at Bombay and informed him about this decision. [...] 11. Mr. Venkatkrishnan told me that he ....
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....han, who at the relevant time was the driver of the Accused No. 1 to contend that Accused No. 1 came to his chamber only at about 3.30 p.m. although the transaction was over at 3.00 p.m., stating : "On 6th April when in the morning I went to the flat of Margabanthu, Mrs. Margabanthu informed me that Mr. Margabanthu is coming to Calcutta by flight from Madras and that I have to take the vehicle to airport for Mr. Margabanthu. Shri Margabanthu came to Calcutta Airport by flight at about 12.30 p.m. He was having luggage with him. The suitcase was having a registered tag. I took him to his residence. Mr. Margabanthu told me that he will leave for the office after his lunch. We started the office at about 3.15 pm and reached the office at 3.30 pm. We tell the airport with Mr. Margabanthu at about 1 O'clock and reached the residence at 2 O' clock." 121. The prosecution case must be judged on a broad based fact. The Indian Airlines Flight reached Kolkata Airport at about 12.30 p.m. on that date. Evidences brought on record show that it takes about 45 minutes to reach the Head Officer from the Airport. According to the prosecution witness to which we have already adverted to, the meeting....
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.... Before 2:00 pm it was cancelled. [...]" 125. However, despite being informed that the call money from NHB had been cancelled, when the DN Road Branch, UCO Bank received a cheque for Rs. 40 crores from NHB, Mr. Vijayan (PW 14) [DN Road Branch] called Mr. Ravikumar (A 6) [NHB] to seek clarification in this respect. Mr Vijayan in his testimony notes : "7. [...] By 3.00 pm we received a cheque of Rs. 40 crores from NHB. Thereafter I telephoned Mr. Ravi Kumar at NHB and asked why he had sent the cheque when transaction is cancelled, he told me on phone in reply that this cheque of Rs. 40 crore pertains to Hamam street Branch. [...] 126. He further went on to state : "12. [...] I called up Mr. Ravi Kumar because he should have sent the cheque to Hamam street branch instead he sent the cheque to DN Road Branch. [...]" 127. Mr. Vijayan (PW 14) also clarified that he had also received information from Mr. Mukherjee (PW 13) that the cheque was to be transferred to the Hamam street branch of UCO Bank. 128. However, since there was little time left to transfer the cheque to the Hamam street Mr. Vijayan directly deposited the cheque with RBI. He also informed this information to Mr. Kark....
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....cords of the UCO Bank reflect that the same amount was to be repaid on 7-4-1992. The said sum was to carry interest at the rate of 26 per cent per annum. 133. Had the transaction related to call money, it should have been deposited in the D.N. Road Branch and not in the Hamam Street Branch? The Hamam Street Branch does not deal with call money. On 6-4-1992 itself the amount was credited to the account of Harshad Mehta. Although a lot of arguments had been advanced to contend that National Housing Bank is entitled to enter into the security transactions but neither the deceased Harshad Mehta nor the accused No. 5 made any attempt to show that any transaction had been entered into by and between the deceased Harshad Mehta and National Housing Bank. 134. The accused in their statement under section 313 of the Code of Criminal Procedure accepted that the transaction in question was a routine transaction. Such a transaction indisputably was utilized for the personal gain of Harshad Mehta. If such transaction was a routine transaction, it goes to show the long standing agreement between the said bank and Harshad Mehta. Why on one pretext or the other UCO Bank would allow itself to be u....
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....resenting the Bank when Mr. Atul Parekh was there." [Emphasis added] 140. Mr. Kharkhanis, in his testimony, further clarified the role of Mr. SV Ramanathan in insisting the starting up of security transactions through the account of Mr. Harshad Mehta, regarding which Mr. Ramanathan had even addressed the following letter : "This letter was in connection with the restarting of brokers transaction of Mr. Harshad Mehta and two other brokers. I identify the signature of the Divisional Manager Mr. SV Ramanathan. I have made the endorsement to the effect that Mr. SV Ramanathan, DM visited the Branch on 6-4-1992 from 12:30 to 3:15 pm and insisted on starting switch transactions which he said were as per the chairman's instructions." 141. It is evident therefore that SV Ramanathan (A3) also played an important role in ensuring that the call money from NHB which was meant from UCO bank got transferred to Harshad Mehta's Account. 142. It is pertinent to note that the money which was supposed to be borrowed by UCO Bank as a call money was ultimately repaid by Harshad Mehta through his account in ANZ Grindlays Bank directly. 143. Mr. Jeroo Dalal (PW 8) who at the time was an official at A....
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.... day come to the Hamam Street Branch of the Bank. 149. It must however be noted that the entire transaction could not have been carried out, had the officials of the NHB been not involved. 150. We must here deal with the involvement of C. Ravi Kumar (A6) and Suresh Babu (A7). NA Shivraman (PW 6) [NHB] in his testimony in this regard stated thus : "I am shown Voucher D 11 .... It mentions deal No. 395 amount Rs. 40,27,52,442. It mentions Rs. 40 crores call money and interest... The rate of interest for 1 day is 26 per cent and for 9 days it is 25 per cent and the date of maturity is 16-4-1992, the date of deal is 6-4-1992. Accused C Ravi Kumar was authorized to decide the date of maturity or of extending the date of maturity. . . . The particulars of call money were being first mentioned in his diary by C Ravi Kumar and thereafter the entries were taken in call money register.... 11. I am shown the concerned page containing entry of 6-4-1992.... The entry mentions the deal No. 395 and the name of the institution as UCO Bank with rate as 26 per cent and due date as 7-4-1992. ... The period extension to 9 days from 1 day is written in the diary by C Ravi Kumar. Interest of 25 per ....
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....bu who was an officer working with NHB. 155. Now that it has been established that the accused had the knowledge of the call money transaction which took place between the National Housing Bank and Harshad Mehta on 6-4-2008, next we would have to consider the question as to whether the said transaction was illegal or not. To establish a charge of conspiracy, indulgence in either an illegal act or a legal act by illegal means is necessary. 156. The definition of 'illegal' is provided for in section 43 of the Indian Penal Code. "43. 'Illegal', 'legally bound to do'.-The word 'illegal' is applicable to everything which is an offence or which is prohibited by law, or which furnishes ground for a civil action; and a person is said to be 'legally bound to do' whatever it is illegal in him to omit." 157. The word 'illegal' in the section has been given a very wide meaning. It consists of three ingredients : (1) everything which is an offence; (2) everything which is prohibited by law; and (3) everything which furnishes ground for civil action. 158. It is contended on behalf of the respondent that the routing of call money from the National Housing Bank to the Account of the deceased ....
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....y, and in case it advances any loan to any individual the same would amount to an offence under the provisions of the 1987 Act. 163. It has been contended by the learned counsel for the appellants that it was for the Reserve Bank of India to take some action and the very fact that it did not take any action against UCO Bank and NHB are pointers to show that no offence had been committed. The said contention is untenable. It was the Reserve Bank of India, which having regard to the magnitude of the scam constituted Janakiraman Committee to look into the real nature of the transactions and to find out if any fraud or irregularity had been committed. Only pursuant to or in furtherance of the report a first information report was lodged by the Central Bureau of Investigation. It was only with a view to achieve a speedy trial and pass consequential orders in regard to the properties acquired by illegal means, the Special Court was constituted in terms of the provisions of the said Act. Reserve Bank of India in the circumstances could not have done anything more. 164. Therefore, advancement of loan to Harshad Mehta by NHB under the disguise of a call money transaction was illegal. The ....
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....In Onkar Nath Mishra v. State (NCT of Delhi) [2008] 2 SCC 561 this court noted that in the commission of the offence of criminal breach of trust, two distinct parts are involved. The first consists of the creation of an obligation in relation to the property over which dominion or control is acquired by the accused. The second is a misappropriation or dealing with the property dishonestly and contrary to the terms of the obligation created. 170. In Jaikrishnadas Manohardas Desai v. State of Bombay AIR 1960 SC 889, this Court observed : "...To establish a charge of criminal breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure, in breach of an obligation, to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to an inference of dishonest, misappropriation or conversion. Conviction of a person for the offence ....
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....the Penal Code. 176. In Superintendent & Remembrancer of Legal Affairs, West Bengal v. S.K Roy [1974] 4 SCC 230, this Court held : "12. To constitute an offence under section 409, IPC it is not required that misappropriation must necessarily take place after the creation of a legally correct entrustment or dominion over property. The entrustment may arise in any manner whatsoever. That manner may or may not involve fraudulent conduct of the accused. Section 409, IPC, covers dishonest misappropriation in both types of cases; that is to say, those where the receipt of property is itself fraudulent or improper and those where the public servant misappropriates what may have been quite properly and innocently received. All that is required is what may be described as 'entrustment' or acquisition of dominion over property in the capacity of a public servant who, as a result of it, becomes charged with a duty to act in a particular way, or, at least honestly." (p. 235) 177. In Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore AIR 1953 SC 478, this Court held : "... to constitute an offence of criminal breach of trust, it is essential that the prosecution must prove f....
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.... allegation of criminal breach of trust is against accused Nos. 6 and 7 as they had for allowed the diversion of a huge sum meant to be used for specific purpose, namely - 'call money' to be lent to another Nationalized Bank. We have already hereinbefore dealt with the question as to the legality of the transactions having regard to the provisions of the NHB Act. If the transaction was illegal, as result whereof, a private person, who was not expected to reap the fruit of 'call money' was allowed to retain the same for a period to make an unlawful gain therefrom, offence of criminal breach of trust must be held to have been committed. 182. It is for the same reason, the submission that as no body ultimately suffered any loss, an offence under section 409 of the Indian Penal Code was not made out, cannot be accepted. A Bank or Financial Institution may not suffer ultimate loss but if the money has been allowed to be used by another person illegally for illegal purposes, the ingredients of section 405 of the Indian Penal Code would get attracted. A case involving temporary embezzlement also attracts the ingredients of section 405 of the Indian Penal Code. 183. Furthermore, in terms....
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....the Judgment of the Orissa High Court in Kartikeshwar Nayak v. State 1996 Cr.L.J. 2253]. 191. In the present case accused No. 6 parted with money of NHB which was entrusted to him so that Harshad Mehta could get it although not entitled therefor in Law. The conduct of accused No. 6 was therefore dishonest. He is guilty of the offence of criminal breach of trust. With regard to accused No. 7, Suresh Babu we have already mentioned that there is not enough evidence to show his involvement in the said transactions. 192. So far as the involvement of accused Nos. 1 to 3 is concerned, we are of the opinion that they also played an important role in diverting the supposed call money from NHB which was meant for UCO Bank to the account of Harshad Mehta. As soon as the cheque for Rs. 40 crore was received by UCO Bank the amount stood entrusted to the officials of UCO Bank. However accused Nos. 1 to 3 in violation of law and in the absence of any contract permitted the amount to be transferred to the account of accused No. 4 Harshad Mehta who was not entitled to it. Therefore, the offence of criminal breach of trust stands proved against them also. 193. We must also make reference to the f....
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....rvant read as under. "13. Criminal misconduct by a public servant.-(1) A public servant is said to commit the offence of criminal misconduct,- ...(d)if he,- [ ...(iii)while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public advantage; or (2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than one year but which shall may extend to seven years and shall also be liable to fine." 195. Section 13 in general lays down that if a public servant, by corrupt or illegal means or otherwise abusing his position as a public servant obtained for himself or for any other person any valuable thing or pecuniary advantage he would be guilty 'criminal misconduct'. Clause (2) thereof speaks of the punishment for such misconduct. [See C.K. Damodaran Nair v. Government of India AIR 1997 SC 551]. 196. The ingredients of sub-clause (iii) of section 13(1)(d) contemplate that a public servant who while holding office obtains for any person any valuable thing or pecuniary advantage without any public interest would be guilty of criminal misconduct. Sub-secti....
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....s from NHB to the account of Harshad Mehta, all ostensibly under a call money transaction. They thereby in our opinion facilitated Harshad Mehta to obtain pecuniary advantage within the meaning of the section. The acts were anything but intended to be in public interest. On the contrary the public loss and suffering occasioned thereby was immeasurable. Though it is true, as has been argued before us that all the funds diverted have subsequently been returned to NHB and no actual loss has been occasioned thereby either to the UCO Bank or the NHB. But it must not be forgotten that white collar crimes of such a nature affect the whole society even though they may not have any immediate victims. We, accordingly, hold accused Nos. A1 to A3 and A6 guilty of criminal misconduct under section 13(1)(d)( iii) of the Prevention of Corruption Act. Sentencing 202. A sentence of punishment in our opinion poses a complex problem which requires a balancing act between the competing views based on the reformative, the deterrent as well as the retributive theories of punishment. Accordingly a just and proper sentence should neither be too harsh nor too lenient. In judging the adequacy of a sentenc....
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....ecated against the reference by the Special Court on the Jankiraman Committee Report while awarding the sentence. Though we too are of the opinion that A6 played a very instrumental role in the entire scheme of things, but feel that the Special Court might have been influenced by the observations of the Report while awarding the sentence. In our opinion the transaction could not have been possibly carried on without the help of A6. But so long as there is doubt that the court was not wholly correct in awarding the sentence we would not be in a position to uphold it. This is also visible from the wide difference in the sentence of imprisonment which has been given to him as compared to other accused who also played an equally instrumental role in the illegal transactions. We accordingly reduce his sentence of his imprisonment to six months but uphold the amount of fine which has been imposed upon him. 208. Since we have acquitted A7, S. Suresh Babu of all charges no question as regards the sentence to be imposed on him arises. 209. Conclusion 1.A1, K. Margabanthu is sentenced for the offence punishable under section 120B and section 409 of the IPC as also section 13(1)(d)( iii) r....