TaxTMI 
TaxTMI 
2009 (8) TMI 695
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....13(2) of the Prevention of Corruption Act, to undergo 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....
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.... was credited to Harshad Mehta's account in UCO Bank, Hamam Street Branch, 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 c....
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....unan, Officer, UCO Bank, Head Office, Kolkata 18.Shri Pradeep A. Karkhanis, Senior Manager, UCO Bank, Hamam Street Branch 19.Shri Sitaram Premaram Paladia, Supdt. 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 char....
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....were passed by the competent authorities. Accused Nos. 6 and 7 challenged the validity of the said orders of sanction before the courts below. 19. All the accused persons had been charged for commission 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 ....
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....e means of communication available and the written submissions filed by him, where he says that this was a routine routing transaction). So far as accused No. 2 is concerned, it is he who authorized the call money 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 c....
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....such a transaction was legally permissible. (4)Only because the accused No. 3 was present at the Bank and wrote a letter for reviving the account of Late Harshad Mehta, the same by itself does not prove that he was a party to the conspiracy. (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 ha....
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....oceedings having not been initiated by the employers and neither the UCO Bank nor the NHB having suffered any loss, the judgment of conviction for criminal breach of trust is wholly unsustainable. (18)The learned Special Court having not assigned any reason and 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....
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....ct, in his written statement in unequivocal terms admitted before the Special Court that the transaction involved was a routing transaction, absolutely transparent and clear transaction in ordinary course of nature, stated that had the scam not been attributed to Harshad Mehta, nobody 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....
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....in (Scale II) 9.Officer in (Scale I) Call Money - The Legal History 30. The statute relating to business in Banking was the Bankers Book Evidence Act, 1891. In 1936 Banking Companies Act, 1936 was enacted which was also known as Indian Companies (Amendment) Act, 1936 wherein Part XA was inserted providing for far reaching effects on the banking legislations. 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 secur....
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....ute book by Act 38 of 1956 which came into force from 6-10-1956. 34. In terms of the said provision each bank is to maintain, what is known as, 'Cash Reserve Ratio' (CRR) every day. It is accepted at the bar that where a bank having an excess amount would like to invest the same so as to enable it to earn interest, those who fall short of 'cash reserve ratio' would be under a 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 defau....
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....he Janakiraman Committee"). The committee submitted its report between May, 1992 and April 1993. On the basis of the said report and to deal with the situation as also to ensure the speedy recovery of the huge amount involved the Parliament enacted the Special Court (Trial of Offences Relating to Transaction in Securities) Act, 1992 ("the Special Courts Act"), establishing the Special Court, from whose 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....
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....risdiction of Special Court.-Notwithstanding anything contained in any other law, any prosecution in respect of any offence referred to in sub-section (2) of section 3 shall be instituted only in the Special Court ...." [Emphasis supplied] 48. The said section begins with a non obstante clause providing that the Special Court shall have jurisdiction to try matters in respect of the offences referred to in section 3(2) of the 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 D....
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....Services Ltd. [2001] 30 SCL 59 (SC). 56. The Jurisdiction of the Special Court may be invoked when an offence committed relate to transactions in securities; the logical corollary whereof would be that all parties connected in diverting the funds of the public sectors and/or financial institutions would also come within the purview thereof. For considering the provisions of the said Act, it has to be borne in mind the object and purport thereof. 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 th....
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....asis supplied] (p. 328) 60. These lines were also quoted with approval in T.N. Kalyana Mandapam Association v. Union of India [2004] 5 SCC 632. (See also Bismag v. Amblins (Chemists) [1970] 3 All ER 1053 (QB) and Re National Federation of Retail Newsagents', Booksellers' & Stationers Agreement (Nos. 3 & 4) [1971] 1 WLR 408.) 61. Regard, therefore, in the matter of establishing and constitution of the Special Court must also be had to the object of creating 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 ....
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.... hereby accord sanction under section 19(1)(c) of Prevention of Corruption Act, 1988 for prosecution of the said Shri C. Ravi Kumar for the said offences and any other offence punishable under other provisions of law in respect of the acts aforesaid and for taking cognizance of the offences by the Court of competent jurisdiction." 67. It is contended by accused No. 6, C Ravi Kumar that he had come to NHB on deputation from the RBI, and therefore the conditions of his service were governed 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 Ind....
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....s per the said section, 'a finding' or a 'sentence' shall not be reversed by a court of appeal on the ground of any error, omission or irregularity in the sanctioning order unless a failure of justice has been occasioned thereby. In our considered opinion even if we assume for the sake of argument that the Chairman-cum-managing director of NHB, Shri R.V. Gupta was not the competent authority to pass the orders of sanction against the officials of NHB, the prosecution could still rely on the said section 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 ....
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.... of the accused. For the said purpose the report was wholly inadmissible in evidence. Criminal conspiracy 78. It would now be appropriate to deal with the offence of criminal conspiracy of which all the appellants herein have been charged with and convicted of. It is alleged by the prosecution that K. Margabandhu (A 1), R. Venkatkrishnan (A-2) and S.V. Ramanathan (A 3), who all were at the relevant time officials of UCO Bank, along with C. Ravikumar (A 6) and S. Suresh Babu (A 7), both of whom were at the relevant time 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 ....
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....e (Delhi Administration) [1988] (3) SCC 609 at 731 brings out the legal position succinctly : "The gist of the offence of conspiracy then lies, not in doing the act, or effecting the purpose for which the conspiracy is formed, nor in attempting to do them, nor in inciting others to do them, but in the forming of the scheme or agreement between the parties. Agreement is essential. Mere knowledge, or even discussion, of the plan is not, per se enough." 86. It was further noted in that case that to establish an offence of criminal conspiracy 'it 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 so....
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....must take care to see that the acts or conduct of the parties must be conscious and clear enough to infer their concurrence as to the common design and its execution. 90. In Ram Narain Poply (supra), this Court noted : "...Law making conspiracy a crime is designed to curb immoderate power to do mischief which is gained by a combination of the means. The encouragement and support which co-conspirators give to one another rendering enterprises possible which, if left to individual effort, would have been impossible and furnish the ground for visiting conspirators 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 o....
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....s other officers might have been taking decisions in this behalf, but there is no reason to disbelieve P.W. 12 that ordinarily Accused No. 2 used to take a decision. 96. For the purpose of exercise of power furthermore it may not be necessary that he would be given instructions only by Accused No. 2 and no other. If he had been given instructions in this behalf from time to time by the Assistant General Manager or Assistant Manager, the same would not necessarily mean that Accused No. 2 was not exercising his power. 97. P.W. 13 in his evidence categorically stated that Mr. Mallikarjunan (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 2:3....
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.... amounts and interest against them as 21 crores. Can Mutual 23 per cent, 30 crores Saurashtra at 26 per cent and 50 crores SB Hyderabad at 26 per cent and these three were totalled after drawing a line below it and the total of 101 crore was written. Thereafter I wrote NHB and against that 40 crore and 26 per cent and again after drawing line the total of 141 crores is made. Exactly I do not remember what happened but I can say that [K. Venkatkrishnan (A2)] must have told me three names of the banks and there figures and after totalling, he must have told the fourth name and the figure which is added 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....
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....ext date, i.e., 7-4-1992 rate of interest 23 per cent [...]. This entry is in my handwriting. [...] The other three entries on that day are of State Bank of Saurashtra, State Bank of Hyderabad and National Housing Bank. These three entries are also in my handwriting [...]" 108. The question as to whether the aforementioned amount of Rs. 40 crores, which was to be taken on loan from National Housing Bank was really needed or not is, however, a matter of some controversy. We may, at this juncture, take note thereof. 109. The prosecution in view of the aforementioned documentary and oral evidence must be held to have proved 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 a....
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....e explanation as to why we could not disclose as to what had taken place in the said meeting in his statement recorded by the Central Bureau of Investigation. The fact that such a meeting had taken place was also the subject-matter of deposition by P.W. 13, stating : "7. On that day in the afternoon I and Mallikarjun were called by General Manager Venkatkrishnan. Mr. Venkatakrishnan told us that we had to go to the chamber of Managing Director Margabandhu and report to him about all the treasury transactions. Then we, means, I, Mallikarjun [PW 17] and Venkatkrishnan [A 2] went to Mr. Margabanthu's office [A 1] and Venkatkrishnan informed him 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 M....
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....en produced. Nothing much turns on the said purported admission. It appears from the records that at a later stage the General Manager (I&M) was asked to make an investigation. A report was filed by P.W. 17. Only because in the said report again the factum of the meeting did not find place, the same by itself should not be taken to be a ground to ignore the depositions of all these witnesses. 120. Apart from the supposed contradictions and inconsistencies, it is also pointed by the learned counsel for the appellants that no such meeting had taken place in the chamber of Accused No. 1 on 6-4-1992. Our attention has been drawn to the evidence of D.W 1- Ajit Sadhukhan, 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 w....
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....pt of instruction from Head Office. [...] The entry of call money transaction is taken in the call money register [...] Mr. Rupani made entry in call money register from the note book. 10. The register shown to me is call money register in which entries are taken from note book. Only three call money transactions of 6-4-1992 are mentioned in this register where as fourth transaction of NHB is not mentioned and there is no entry in this register. [...] 11. [...] In respect of other three banks they issued call money receipts to the said banks and collected the cheques. It was between 2:00 to 3:00 pm. In case of NHB Receipt was not prepared and sent as transaction was cancelled. 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....
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....tated that the amount of Rs. 40 crore was meant for Hamam Street Branch and that he himself had not been informed that the amount was meant for Mr. Harshad Mehta. Mr. Pradeep Kharkhanis stated that Mr. Vijayan specifically informed him that the said amount was meant to be credited to the account of Mr. Harshad Mehta. If Mr. Vijayan himself did not know that the Rs. 40 crore were meant to be deposited in the account of Mr. Harshad Mehta at Hamam Street Branch how could he have informed Mr. Kharkhanis that it was for Mr. Harshad Mehta ? 132. The matter, however, must be considered from another angle. A bankers' cheque for a sum of Rs. 40 crores was received by the Hamam Street Branch of the UCO Bank. The records 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 ....
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....had informed him that Mr. SV Ramanathan (A3) had been authorized him to deal with security transactions of Mr. Harshad Mehta at the Hamam Street Branch, Bombay. 139. It has also been emphasized by the prosecution that Mr. SV Ramanathan was present at the Hamam Street Branch on the day the said transaction took place. The testimony of Pradeep Kharkhanis (PW 18) is relevant which reads as under : "On that day at about 12:00 to 12:30 Noon, Mr. SV Ramanathan, the Divisional Manager had come to our office. Mr. SV Ramanathan came to our office at about 12:00 to 12:30 noon and told me that he will take care of any difficulty about the transaction as required by Parekh. These were brokers transactions. Mr. SV Ramanathan was presenting 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 sig....
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....deep Anant Karkhanis (PW 18) [Hamam Street branch] notes in his testimony, stated : "Shri Atul Parekh accused in this case had also come in our branch on that day. Shri Atul Parekh had come to me for starting transaction in brokers account. I raised certain queries in this respect and I told Shri Atul Parekh that I was seeking replied (sic) to the queries. . . . These were brokers transactions. Before I received telephone from Vijayan. Shri Atul Parekh told me that he was expecting a cheque of Rs. 40 crores from National Housing bank." 148. Whatever doubt had been left regarding the involvement of Shri Atul Parekh (A5) has been cleared by the above stated testimony. He knew that he was to receive Rs. 40 crores from NHB and that is why he had on the said 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. 40,27,5....
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....is not enough. Just because Sunil Pandurang Gondale (PW 7) had been sent by Shri Suresh Babu (A7) is not enough for his involvement in the criminal conspiracy which was hatched on behalf of the other accused. Something more substantial would be needed to bring him within its fold. In fact in his cross examination he admits : "It is not true to say that on 16-4-1992 Suresh Babu [A 7] told me to go to Hamam Street Branch. It is not true to say that when I was sent to UCO bank accused C Ravi Kumar [A 6] was not present." 154. The burden of proof is always heavy on the prosecution. The prosecution must stand on its own legs basing its findings on the evidence that has been let in by it. The prosecution has however failed in this task at least with respect to A7, Shri Suresh Babu 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 ....
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....son guilty of such contravention or default shall be punishable with fine. 161. It reads as under : "49. Penalties. . . .(4) If any other provision of this Act is contravened or if any default is made in complying with any other requirement of this Act, or of any order, regulation or direction made or given or condition imposed thereunder, any person guilty of such contravention or default shall be punishable with fine which may extend to two thousand rupees and where a contravention or default is a continuing one, with further fine which may extend to one hundred rupees for every day, after the first, during which the contravention or default continues." 162. The NHB cannot, therefore, advance loans to anybody except housing finance institutions, scheduled banks and statutory slum clearance body, 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 co....
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....ly to one who is in any manner entrusted with property or dominion over property. The section does not require that the trust should be in furtherance of any lawful object. It merely provides, inter alia, that if such a person dishon- estly misappropriates or converts to his own use the property entrusted to him; he commits criminal breach of trust. This section requires : (1)Entrusting any person with property or with dominion over property. (2)That person entrusted (a) dishonestly misappropriates or converts to his own use that property; or (b) dishonestly uses or disposes of that property or wilfully suffers any other person so to do in violation - (i)of any direction of law prescribing the mode in which such trust is to be discharged, or (ii)of any legal contract made touching the discharge of such trust. 169. 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 deali....
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....public and private calamity. High morality is expected of these persons. They are to discharge their duties honestly. 174. The following are the essential ingredients of the offence under this section : (1)The accused must be a public servant; (2)He must have been entrusted, in such capacity with the property ; (3)He must have committed breach of trust in respect of such property. 175. In Raghunath Anant Govilkar v. State of Maharashtra [2008] 2 SCALE 303 the court noted that section 406 which provides the punishment for criminal breach of trust simplicitor and 409 of IPC are cognate offences in which the common component is criminal breach of trust. When an offence punishable under section 406 is committed by a public servant (or holding any one other of the positions listed in the section) the offence would escalate to section 409 of 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.....
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....ce of criminal breach of trust is wholly unsustainable cannot be accepted for more than one reason. 180. It is not the law that complaint petition under all circumstances must be made by the Banks and Financial Institutions whose money had been the subject-matter of offence. It is also not the law that suffering of loss is a sine qua non for recording a judgment of conviction. It is now trite that criminal law can be set in motion by anybody. The prosecution was initiated on the basis of the information received by the Central Bureau of Investigation. It would be entitled to do so not only in regard to its statutory powers contained in the Delhi Special Police Act but it was also entitled to take cognizance in terms of the report submitted by 'Janakiraman Committee'. The money involved in the transfer is public money belonging to Public Sector Banks. 181. The first 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....
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....." 187. Thus, an act done with the intention to cause 'wrongful gain' can be said to be dishonest. 188. The term 'wrongful gain' is defined in section 23 of the IPC as follows: "'Wrongful gain' - 'Wrongful gain' is gain by unlawful means of property to which the person gaining is not legally entitled." 189. The most essential ingredient of proof of criminal breach of trust, therefore, is misappropriation with a dishonest intention. Breach of trust simplicitor is not an offence as is it not associated with intention which is dishonest. 190. The term dishonestly defined in section 24 IPC means doing anything with the intention of causing wrongful gain to one person or wrongful loss to another. So the offence is completed when misappropriation of the property has been made dishonestly. Accordingly, even a temporary misappropriation falls within the ambit of the said offence. [See 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 there....
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....ught to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eve on personal profit regardless of the consequence to the Community...." (p. 431) Prevention of Corruption Act 194. Apart from the charges under the IPC, accused Nos. 1 to 3 [UCO Bank officials] and accused Nos. 6 and 7 [NHB officials] have also been charged of committing the offence under section 13(1)(d)( iii) read with section 13(2) of the Prevention of Corruption Act. It must be placed on record that in this regard that the Prevention of Corruption Act, 1988 replaced the Prevention of Corruption Act, 1947. The new Act was enacted 'to consolidate and amend the law relating to the prevention of corruption and for matters connected therewith.' Relevant portions of section 13 which provide for criminal misconduct by a public servant 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 adv....
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....y means of corrupt or illegal means, obtains for himself or for any other person any valuable thing or pecuniary advantage; or by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest." 200. In the light of the provisions already enumerated by us we per the law laid down we therefore hold that the accused Nos. A1 to A3 [officials of UCO Bank] & A6 [officials of NHB] are guilty of criminal misconduct under the Prevention of Corruption Act. For the reasons already mentioned by us we do not find sufficient evidence to bring in the involvement of A7, Suresh Babu within the fold of the said transaction. 201. All the accused were at the relevant time public servants. Each one of them played a specific role in diversion of funds 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....
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....mposed on him. 205. As regards A3, SV Ramanathan the court considering his lower rank in the hierarchy of the bank imposed on him only a sentence of one month RI and ordered to pay a fine of Rs. 10,000 and in default SI for 15 days. Though we are of the opinion that he deserved to be dealt more harshly by the trial court but after five years having passed since the pronouncement of the judgment we do not propose to effect any change the said sentence. 206. As to A 5, Atul M Parekh the court took note of the fact that he was working under the orders of A4, the deceased Harshad Mehta, being his employee, and handed him a sentence of merely 15 days and ordered him to pay a fine of Rs. 10,000 and in default SI for 15 days. We need not interfere with the said sentence. 207. As to A6, C. Ravi Kumar the court gave him a sentence of three years and ordered him to pay a fine of Rs. 1,00,000 in default SI for 3 months. We have hereinbefore already deprecated 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 th....