TaxTMI 
TaxTMI 
2003 (1) TMI 751
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....hored By : M.B. Shah, Arijit Pasayat M.B. Shah, J. 1. The entire prosecution version is around the following five transactions entered into by Maruti Udyog Limited (hereinafter referred to as "MUL"), through United Commercial Bank (hereinafter referred to as 'UCO Bank') wherein Harshad S. Mehta A-5 is payee or recipient of the amount, which are mentioned hereunder:-- Trains No. A-5 Dates From To Days Rate of % Amt Rs. Interest Rs. Amount Repaid (Rs) 01. Lent to MUL 24.01.91 25.02.91 32 12.75 4,99,5.000 5.58,250 5,05,03,250 Remarks- MUL delivered 35 lacs Units of UTI to A5. 02. Borrowed 13.03.91 25.03.91 12 16.75 10,11,50,000 5,56,995 10,17,06,200 Remarks- UCO save BR to MUL for 70 lacs Units, 03. Borrowed 18.03.91 22.03.91 5 21.00 10,83,75,000 3,11,775 10,86,86,775 Remarks- UCO gave BR to MUL for 75 lacs Units. 04. Borrowed 24.04.91 26.04.91 2 26.25 7,62,45,000 1,09,650 7,63,54,650 Remarks- UCO gave BR to MUL for 51 lacs Units. 05. Borrowed ....
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....rtain documents to be used as valuable securities. A-5 Harshad Shantilal Mehta was also charged for the offence punishable under Section 403 of IPC. 4. By judgment and order dated 27th/28th September, 1999, the learned Special Judge acquitted accused No. 2 and convicted accused Nos. 1, 3, 4 and 5 as under :-- 1. "A-1 Pramod Kumar Pritam Lal Manocha. A-3 Vinayak Narayan Deosthali, A-4 Ram Narayan Popli and A-5 Harshad Shantilal Mehta are convicted being the parties to criminal conspiracy alongwith Mr. Mohan D. Khandelwal (PW23) between the period of April -- May, 1989 to May, 1991 in Bombay and Delhi, the object of which was to divert the surplus funds of MUL lying with its account in Canara Bank, Sansad Marg, New Delhi branch to the account of A-5 HSM with ANZ Grindlays Bank, Sansad Marg, New Delhi branch and thereby committing offences of criminal breach of trust fraudulently using forged documents, abuse of public offices, dishonest appropriation of the amount of Rs. 38,97,20,000/- punishable under Section 120-B r/w Sections 409, 467, 468 and 471 of IPC and Section 13(1)(c) read with Section 13(2) of the P.C. Act, 1988. 2. ACCUSED NO. 1 Pramod Kum....
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....1991 (Ex.58) with the dishonest intent of authorizing remittance of MUL's funds of Rs. 4,99,45,000/- to Bank of America, New Delhi by accused No. 5 to MUL, Delhi and further dishonestly authorizing the delivery of valuable securities of 35 lacs of units of UTI belonging to MUL to Mr. Mohan D. Khandelwal, an attorney of A-5; iii) A-3 is convicted under Section 468 IPC for having forged letter dated 23.1.1991 of UCO Bank, Hamam Street Branch, Bombay intending that the same could be used for cheating; iv) A-3 is convicted under Section 471 r/w Section 467 and 468 of IPC for having forged a letter dated 23.1.1991 (Ex.58) of UCO Bank, Hamam Street Branch. Bombay knowing it to be a false and forged document; v) A-3 is convicted under Section 467 of IPC for having forged on or about 13.1.1991 the document to be a valuable security with the banker receipt No. 1121 dated 13.3.1991 (Ex.38) for Rs. 10,11,50,000/- with intent to make MUL believe the UCO Bank, Hamam Street Branch, Bombay was holding 70 lacs units of UTI for the face value of 7 crores and which UCO Bank was to deliver to MUL; vi) A-3 is convicted under Section 468 o....
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....1991 for Rs. 7,62,45,000/- (Ext.41) with the intent to make MUL, believe that it should be used for cheating; xvi) A-3 is convicted under Section 471 r/w Sections 467 and 468 of IPC for having fraudulently and dishonestly used the said BR dated 24.1.1991 (Ex.41) as genuine knowing it to be a false and forged document; 4. ACCUSED NO. 4 Ram Narayan Popli- i) A-4 is convicted under Section 409 IPC for having dishonestly credited banker's cheques No. 645532 dated 25.2.1991 for sum of Rs. 5,05,03,250/- (Ex.28), 646402 dated 18.3.1991 for Rs. 10,83,75,000/- (Ext.32) and 863237 dated 24.4.1991 for Rs. 7,62,45,000/- favouring Grindlays Bank into the account of accused No. 5 HSM with Grindlays Bank, New Delhi instead of crediting the said Cheque into the account of Grindlays Bank, New Delhi; 5. ACCUSED NO. 5 Harshad Shantilal Mehta- i) A-5 convicted under Section 403 of IPC for having dishonestly misappropriated four bankers' cheques to wit:-- (a) Cheque No. 645585 dated 13.3.1991 for Rs. 10,11,50,000/-, (ii) cheque No. 646402 dated 18.3.1991 for Rs. 10,83,75,000/-, (iii) cheque No. 863237 date....
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....vailable for use of A-5. This is on account of the fact that they were authorised to invest the money in the defined securities in a transaction with Public Sector Undertakings only. They, however, knowingly entered into a series of transactions, which had the result of making the funds of MUL available to A-5. 8. It is also the prosecution version that they [A1, A2 and A3] being public servants during the material time, abused their position and thereby conferred a pecuniary advantage upon A-5 and in any event while holding office as a public servant obtained a pecuniary advantage for A-5 against public interest. Thus, they were charged with an offence under Section 13(1)(c) of the PC Act. 9. It is further stated by the prosecution that A-1 alongwith A-3, A-4 and A-5 conspired to obtain funds from MUL under the pretence that the funds were being drawn for purchasing securities from UCO Bank but diverted these funds to the accounts of A-5 for which A-1 and A-2 played the role of misrepresenting to MUL and withdrawing the funds. A-3 forged documents which helped A-1 to secure the release of monies from MUL. A-1 conspired alongwith A-3 and A-4 for making money available to A-5,....
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....individual capacity, it was given to A-5 by creating forged documents. 13. He pointed out that after receiving the cheques issued by Canara Bank on behalf of MUL, in favour of Grindlays Bank, the same were immediately encashed on the same day and thereafter Grindlays Bank, New Delhi again transferred the same to its Bombay branch in favour of A-5. Thereafter, A-5 gave cheques to UCO bank. This itself indicates that as the transactions were not genuine, irregular and illegal procedure was adopted for encashing the cheques. Therefore, this is a case of misappropriation and forgery. Further, if there was genuine sale of units by UCO Bank to MUL, the transactions would have been straight forward between UCO Bank and MUL. It is the prosecution version that brokering by bank is not allowed and, therefore, to contend that commission was paid to UCO Bank is not a just ground for holding that there was no misappropriation or forgery. If there was a genuine transaction then the cheques would not have been issued in favour of Grindlays Bank for so-called expeditious movement of funds. If a person acts in a manner which is sinister or contrary to law then it cannot be said that the transact....
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....s his submission that it is absurd to suggest that A-5 committed any offence or offences, but the prosecution is a piece of political revenge against A-5 for disclosing certain facts to the press against the political leaders. He contends that transactions were loan transactions because in all these transactions the rate of interest and number of days for which the loan was being advanced was settled before the money and the units changed hands. This is consistent only with the transaction being a loan transaction. He also submitted that mainly the prosecution case in the FIR dated 15.4.1993 which was lodged after preliminary enquiry which started from 15.9.1992 as well as in the charge-sheet submitted by the CBI on 15.12.1994 was that MUL gave loan to A-5 at a lower rate of interest and suffered loss. 17. The learned senior counsel submitted that FIR was lodged after investigation for seven months and charge-sheet was submitted after more than one year and eight months, which itself indicates that CBI knew that there was no case to be put up before a Court and the investigation was kept alive for sordid and dishonest motive. He pointed out that--(1) the CBI itself understood th....
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....C)/94/Bom. was lodged and a report was submitted before the Court stating that there was no case against the accused. After investigation, it was discovered that the BRs were indeed backed up by the securities, hence the CBI filed closure report dated 11.11.1994 Ex.A-5-116 before the High Court and the said report was accepted on 17.3.1997. That order was upheld by this Court. However, the CBI proceeded with this prosecution for an oblique motive. 21. In written submissions filed on behalf of A-5, it has been further stated that the charge against A-5 reads as under:-- "That you accused No. 5 in furtherance of the aforesaid conspiracy did dishonestly misappropriate 4 banker's cheque to wit. Cheque No. 645585 dated 13.3.1991, cheque No. 646402 dated 18.3.1991, cheque No. 863237 dated 24.4.1991 and cheque No. 863260, dated 2.5.1991 aggregating to Rs. 38,97,20,000/- drawn by MUL on its bank to wit the Canara Bank, Connaught Place Branch in favour of the ANZ Grindlays Bank and you thereby committed on offence under Section 403 of the IPC." 22. It is contended that the point of determination is -- whether this charge is legally sustainable. In other words whethe....
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....fully supported the existence and propriety of this practice. The kind of pay order like Ex.30 has never been held to be a cheque. To hold it to be a cheque would lead to some absurdity. Section 128 of the Negotiable Instruments Act lays down that when a cheque is crossed, the banker on whom it is drawn shall not pay it otherwise than to banker. It is obvious that if the payee is itself a banker he cannot be expected to present it to another banker for collection. Grindlays Bank cannot open an account with some other bank and cash its Pay orders in that account. Even paying a crossed cheque otherwise than through a bank only renders the bank liable for negligence if somebody suffers a loss. If the banker is certain who the beneficiary of the cheque is, it may well pay out in the certain belief that no loss will occur. It is a manifestly untenable proposition that a criminal breach of trust or misappropriation thereby takes place. Even if it is assumed that the cheque was property of Grindlays bank the bank cannot be said to have committed any offence by passing on its property to anybody it likes. By allowing the proceeds to be credited to the account of its true customer, the Bank....
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.... recollect he having visited Delhi once sometime in April, May, 1989." 31. PW23 makes passing reference to A-2's presence at the alleged meeting so that it could be said that it was a condonable lapse of memory on his part. On appreciation of his evidence, it cannot be said that he had an understandably vague memory regarding A-5's presence; on the contrary, his deposition evidences vivid details about the role and participation of A-2 at the said meeting. Since A-2 could not even be present at the meeting as he was not employed with MUL on that date, it is abundantly clear that PW23 has deposed falsely about the meeting. If A-2 could not have been present at the meeting, PW23's insistence that A-2 was so present, leads to the irresistible inference that his deposition regarding the alleged meeting is totally concocted. 32. It has come on record that PW23 disclosed regarding the alleged meeting, only on 10.8.1994. Indeed, the very suggestion by PW23 that a police officer who interrogated him would not question him about the circumstances of five transactions is absurd and incredible. The said meeting being a crucial aspect of the instant prosecution ought to have ....
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....led banks were being advised against a practice which might put them in difficulty. They were running the risk of being responsible for unauthorized payments. MOTIVATION BEHIND THE INSTANT CASE: 34. There are several salient features of the instant prosecution which clearly show that the entire investigation has been dishonest. 35. It is almost trite to suggest that the SCAM Act was promulgated with a view to recover public monies lost by certain banks and financial institutions in securities where such losses as a result of such transactions. It is equally trite to state the contrary proposition that where there were no losses at all, the institution of the Special Court was wholly unnecessary and the Special Court was not to try such transactions even if they amounted to some technical offences. If the aforesaid two propositions are correct, then, there is simply no justification for the instant prosecution. 36. The Joint Parliamentary Committee (JPC) succinctly set out the dimensions of the scam in its report. The Committee highlighted various irregularities and fraudulent transactions undertaken by the Banks and Financial Institutions etc. in the sic reports submitt....
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....ly sensitive in the extreme and stated that details of these would be revealed if A-5 was given assurance of complete protection from political harassment or prosecution g) Although the CBI replied A-5's letter on 25.2.1993 to the effect that it was beyond their power to grant such protection, they continued to make efforts in March, 1993 to obtain A-5's narration on the said cash withdrawals. It is only after they failed to obtain such a narration that the FIR in the instant case was filed on 15.4.1993. h) The FIR of dated 15.4.1993 did not cite PW23 as an accused, despite the fact that PW16 was cited as an accused in the FIR. IO PW25 says that decision to name PW16 in the FIR was that of the Superintendent of Police V.D. Maheshwari and the investigating agency and that he had to agree with that decision. Further, they decided not to cite PW23 as an accused in the FIR. i) The evidence of VD Maheshwari as a court witness completely corroborates the fact that the FIR was registered not because the investigating agency had applied its mind and such application had revealed to it that the case prima facie disclosed offences which de....
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....was rejected. 39. Thereafter, on second attempt, after his arrest on 10.8.1994, his confessional statement was recorded by another Magistrate and not by the Special Judge who rejected the application for pardon in PFC case. n) Ld. CMM assigned the case for recording of confession to PW20 Dr. Ramkrishna Yadav, M.M., New Delhi who ultimately recorded the judicial confession (Ex.139) of PW23 on 21.10.1994. 40. Ultimately, the application for grant of pardon was accepted by the same Magistrate. 41. Very soon, after the said pardon was granted, the charge sheet was filed on 6.12.1994 i.e. within a period of six weeks from the pardon being granted. o) The absence of any loss to MUL in the instant case, the absence of proof whether A-5 made any gain in the instant case; the fact that the transactions took place at a time in which three of them were beyond the time period for which the Special Court exercises jurisdiction; the fact that all five transactions were prior to the RBI circular of 26.7.1991; the allegation of A-5 against the then PM; the abdication by the IO of the powers and discretion vested in him by the CrPC to his superiors in the CBI ....
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....ombay with V.N. Deosthali an officer of UCO Bank, Hamam Street Branch, Bombay, R.N. Popli of ANZ Grindlays Bank, Delhi and Sh. Harshad S. Mehta a broker, his employee Anuj Kalia and certain other unknown persons with the object to misappropriate the said surplus funds of MUL and to provide pecuniary advantage to Sh. Harshad S. Mehta out of the funds to be invested by MUL by abusing their official position as public servants. (iii) In pursuance to the said criminal conspiracy, Shri V.N. Deovasthali wrote a letter on 24.1.91 to MUL to effect physical delivery of 35 lacs units of UTI to Sh. Mohan Kandelwal, the attorney of Sh. Harshad S. Mehta and an amount of Rs. 4,99,45,000/- was credited to the account of MUL, in Bank of America at Delhi out of the account of Sh. Harshad S. Mehta. This amount was borrowed by MUL at higher interest rate of 12.75% per annum for 32 days against physical delivery of 35 lac units of UTI. The physical delivery of 35 lac units was taken by Sh. Anuj Kalia on the basis of receipt given by Sh. Mohan Kandelwal on the letter head of Sh. Harshad S. Mehta. After expiry of 32 days the principal amount together with interest totalling to Rs. 5,05,03....
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....age to the co-conspirators and corresponding loss to the MUL. 48. In the charge-sheet submitted on 15.12.1994, similar allegations are reiterated. Learned senior counsel Mr. Jethmalani pointed out that --(1) Paragraph 4 of the charge-sheet expressly confirms that the first transaction was loan transaction inasmuch as it is averred that MUL borrowed the amount at a higher rate of interest i.e. at 12.75% per annum for 32 days against physical delivery of 35 lacs Units of the UTI; (2) paragraph 5 of the charge-sheet referring to the transaction of 13th March, 1991 describes it as an investment of 10 crores and odd from MUL for a period of 12 days at the interest rate of 16.75% per annum. (3) paragraphs 6, 7 and 8 contain similar description of the remaining transactions. (4) Para 3 of the FIR is the basis for conspiracy during the period from January 1991 to May 1991. 49. From the contents of the FIR it appears that A-1 and A-2 were investing surplus funds of MUL with various agencies. These investments were made in each case with the specific approval of Sub-committee for Investment consisting of Mr. RC Bhargava, the then Chairman and Managing Director (CMD), MUL and S. Natraja....
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.... reasons such as the securities are lying at another center. In terms of the B.R., the seller bank undertakes to hold the security on trust for the purchaser for the short period till delivery and it is generally considered valid for 90 days or till delivery is effected whichever is earlier. In the inter bank market, a large number of transactions in securities were being concluded by means of BR deliveries (instead of physical delivery of securities sold); however, there was no uniformity in the format of the BR and there were also not set guidelines for its usage. B.R. does not find a place in the Banking Regulation Act, 1949. It was only on the 6th May, 1991 that IBA issued a circular prescribing a format and laying down certain broad guidelines and recommending its adoption by member banks and other financial institutions like IDBI/IFCI/ICCI/NABARD etc. The RBI for the first time inter alia issued instructions to banks in this regard in their Circular of 26.7.1991 (Appendix-IX). A similar receipt issued by a non-banking financial company is termed "Security Receipt" (SR) and such receipts also came to be freely used in security transactions. 4.32 The Committee is....
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....facility of collection and credit of the bankers cheques by SBI as per his instructions. The Bombay Main Branch of SBI acting as the agent of SBI Caps had debited SBI Caps account and unauthorisedly credited funds to the account of HSM instead of making payments to named banks/institutions. Cheques drawn on UCO Bank had been credited to the current account of the same broker. 12.29 The Committee noticed in this connection that HSM had requested the Bombay Main Branch twice by his letter dated 19.8.91 and 10.01.92 for acceptance of bankers cheques from banks/organisations brought by him or his representative and issuance of bankers cheques there against. In fact, the broker wanted that the facility of "single point clearance" whereby the activities of issuance and acceptance of bankers cheques in their account may be conducted through the Securities Division of the SBI Main Branch Bombay instead of the Personal Banking Division in the same branch where he had the account. This facility had enabled HSM to put through the transactions through the Securities Division itself and also to get bankers cheques in favour of SBI credited to his account and issue of cheques agai....
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....ith the same party and for identical or similar amounts were construed as tacit arrangements which was in contravention of the instructions prohibiting but back arrangements with non-bank clients. DIVERSION OF FUNDS TO BROKERS- 14.114 While most of the PSUs/Organisations denied before the Committee about utilising the services of brokers, the Committee found that in some cases inquiries/investigations by CBI/internal auditors clearly established nexus between brokers, officers of PSUs/ banks resulting in syphoning of funds of PSUs to brokers. It is reported that 22 PSUs had placed funds to the extent of over Rs. 12,000 crores through Harshad S. Mehta which were syphoned of to him and his groups of Companies. Some instances are given below:- (i) ..... (ii) In the case of Maruti Udyog Limited, it was found, that funds of MUL meant for purchase of units from UCO bank were credited into the individual accounts of HSM. There is a financial involvement of Rs. 33.63 crores. (iii) ..... (iv) ..... 17.48 On 16th June, 1993 Shri Harshad Mehta held a press conference in which he issued a copy of an af....
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....tely, a practice is developed in criminal/civil cases not to admit any document and thereby to prolong the litigation with impunity. For the purposes of deciding these appeals, it is necessary to only refer to relevant part of evidence which learned counsel for the parties have relied upon. 56. For this purpose, we would divide the evidence and submissions as under:-- [On behalf of]- (a) MUL; (b) UCO Bank; (c) ANZ Grindlays Bank; (d) other relevant witnesses, such as, PW16 Anuj Kalia, PW23 Mohan D. Khandelwal (Approver) and PW25 I.O. etc. (a) WITNESSES FROM MUL [PW1, PW3 AND PW4] 57. PW1 Brijendra Singh Bhargava stated that he was Legal Advisor of MUL and at the relevant time Company Secretary and also internal legal advisor for the Company. It is his say that during May, 1989 to May, 1991 Mr. R.C. Bhargava was the Managing Director and Shri S. Natrajan was the Director (Finance). During the said period, MUL has several bankers, such as, Canara Bank, Bank of America and Bank of Tokyo. At that time, A-1 Pritam Lal Manocha was Deputy Manager, Corporate Finance and one of his duties was deployment of funds of MUL. He....
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.... of India had also audited the account of MUL for the period in question and they had made their comments as "nil", which means they made no comments in respect of said five transactions. 63. He admitted that MUL, has not lodged any complaint/FIR with the CBI nor made any complaint to anyone about the said transactions and according to him no loss was caused to the MUL in the said five transactions. 64. He admitted that after CBI enquiry, the management of MUL did not take any action against A1 and A2 as it felt that A-1 and A-2 were not guilty. The performance of A-1 was appreciated and he was subsequently promoted to the next level. He was also granted one additional increment. For that purpose, the relevant letters written by Mr. R.C. Bhargava, Chairman-cum-Managing Director of MUL are produced on record. He has also admitted that A-2 Ambuj Sushilkumar Jain was also promoted by the management on considering his performance and merits. 65. He further admitted that Joint Parliamentary Committee (JPC) was constituted by the Parliament for the purpose of inquiring into various securities transactions and MUL was required by the JPC to clarify certain queries in respect of i....
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....Br necessarily indicates that the bank issuing it would be holding the security covered under the said BR. The BR would also acknowledge the receipt of monies from MUL for the purchase of security. He further agreed that in respect of three transactions dated 13th March, 1991, 18th March, 1991 and 24th April, 1991, the payments made from MUL were for buying securities and securities were received and the subsequent delivery of the securities involved receipts of payment by MUL. For these transactions, MUL had also received the payments with agreed yield. In the last transaction of May, 1991, MUL made payment for the purchase of securities. In the said transaction, MUL had received money with agreed yield. In respect of disinvestment transaction dated 24.1.1991 MUL delivered the securities against the payment and on reversal received the securities and made the payment. 67. He further admitted that MUL had not suffered any monetary loss in any of the five transactions. In the five transactions there was optimum yield and utilization from the point of investment by MUL. MUL used to have large amount of surplus funds for investment. Every day there used to be such investment transa....
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....n the event of transaction of investment being through the Broker. It is his further say that PW2 Mr. Meda Sai Swaroop, who was the concerned Manager of the Canara Bank after preparing bankers' cheque as per their instructions would hand over the same to him and he in turn used to hand over the cheque to the representative of the said bank or brokers' representative. It is his say that because of pressure of work, they were not going to the respective banks and instead handing over the bankers cheque to the representative of the bank or to the broker under the instructions of either A-1 or A-2. In cross-examination, he admits that during the relevant period foreign banks used to effect transfer of monies from one city to another much faster than the national banks and they were able to do so during the banking hours of the same day. He came across transactions where SBI Capital Market Services had done transactions both of receiving monies and paying it to them on the date of maturity which payments were made or reused through Bank of America. He further states that the brokers who used to contact them on behalf of their bank clients and financial institutions during the re....
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....f the security department of the said branch. The security department used to attend the security transactions on behalf of the head office as also on behalf of the clients which also included brokers. The branch was not concluding was not permissible to use the said accounts for any individual. While working in Hamam Street Branch, sometimes he came across few brokers including Harshad S. Mehta whom he met once in his office along with Mr. S.V. Ramnathan, the then Divisional Manager of the bank. He never came across transactions known as buy back or ready forward. He came across transactions known as switch transactions, wherein security is received from one bank and delivered to the other bank. During the relevant time, a doubt was entertained in respect of switch transactions, the Zonal Manager and Divisional Manager took the decision to stop the said practice. After one week, the Divisional Manager phoned Hamam Street branch and asked them to resume such transactions. Accused No. 3 was not authorized to conclude transactions in security on his own on behalf of the bank. On seeing the letter dated 23rd January, 1991 addressed to MUL, containing signature of A-3, it is his say th....
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....ank all the debit and credit vouchers of that branch were not being received by him every day. He was familiar with what is meant by 'day book' which was kept and maintained by the bank. All the debit and credit vouchers would be reflected in the said 'day book' on particular day including in subsidiary book. Such 'day books' used to come to him every day. He knew that securities transactions on behalf of brokers were taking place but he had no detailed particulars thereof. By going through the debit and credit vouchers it was not possible to get such details or particulars of such transactions. Credit voucher in a security transaction would contain the particular such as a nomenclature of security, face value, rate etc. The name of the counter party may not necessarily be reflected in such vouchers. He might have seen some credit vouchers but he did not remember. He did not remember whether the names of the counter party were mentioned in those vouchers which he might have seen. It is his further say that there used to be 30 to 40 switch over transactions every day. The strength of the staff available in the said department was adequate enough to handle the....
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....uld not be issued on behalf of the client in absence of security or back up security. In case of security transaction on behalf of the client, they credit the sale proceed receipt into the account of client. They were preserving and keeping the original letters so received from the client and instructions received from the head office by telex or fax messages. In respect of security transactions executed for and on behalf of head office. Hamam street branch used to debit and/or credit direct head office account (shortly known as "DHO account'). It is his further say that the officer working in Hamam Street branch could not enter into any purchase transaction in security on behalf of head office without instructions from head office. Similarly, on behalf of the client, the officer working in Hamam Street branch could not enter into a purchase transaction in security without instruction of a client. He admitted that Hamam Street branch of UCO Bank was not maintaining security account, either security wise or otherwise, of the clients. However, the record in respect of security transactions put through head office was maintained in the Hamam Street Branch in a Security Register. O....
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....fficer working in Hamam Street branch were not dealers and their job was only to execute the security transactions of the head office as per their instructions. One Harshad S. Mehta (A-5) had his current account with their branch and he was knowing him. He came across a person by name Mr. Pankaj Shah working with Harshad S. Mehta, who sometimes used to come to Hamam street branch in connection with brokers security transactions. It is further say that no record in a form of security ledger or security register broker wise was kept and maintained in respect of security transactions of their broker clients. Initially, there used to be such record but because of increase in the transactions in security on behalf of their broker clients in large numbers, the practice of maintaining of such record was discontinued. There was no guidelines formulated or received in this regard in their branch. On seeing Ex.106, xerox copy of the delivery order dated 25.2.1991 on the letter head of A-5 Harshad S. Mehta, it is his say that the same is delivery order of Harshad S. Mehta addressed to UCO Bank containing instructions to deliver 35 lakhs units of UTI to MUL. The question put to the witness was....
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....letter and the same bears his signatures. 77. He has further stated that he is one of the accused in Special Case No. 1 of 1993 on the file of the Special Court. In connection with the said case Mr. Bhaskar Raichoudhary the then Zonal Manager in the rank of DGM was arrested in Special Case No. 1 of 1993 who later on was turned to be an approver. There is no departmental proceeding or inquiry instituted against him either by UCO Bank or Central Vigilance Commission in that matter. A question was put to him--What was pre-condition to use BRs in the security transactions and how transactions in securities by means of BRs used to be put through at the relevant time. 78. His answer to the above query was that--the bank would issue its BR only against back up of another Br i.e. the BR issued by other banks in favour of UCO Bank stating therein that the said issuing Bank held the securities in question with it. BRs could be issued on bank's own behalf as also on behalf of its customers. When UCO Bank is selling its security on its own, it would issue its BR favouring the counter party bank. In case of purchase by UCO Bank the process would be vice a versa i.e. other counter part....
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....s thus-- "Re" Switch Transactions. We refer to your letter No.BR:002:91 dated 1.1.1991 on the subject matter. After stoppage of the switch transactions by us, all the Brokers called on us as well as Zonal Manager and Zonal Manager had also discussion in this regard with Mr. Venkatakrishnan. General Manager, subsequently, based on the discussions Deputy General Manager and the undersigned had with all the brokers and based on the understanding that Branch will never run into a difficulty and day on account of switch transactions and because the brokers have already entered into contracts with various banks to route the transactions through UCO bank on various dates up to end of March, 1991, it was decided to resume the switch transactions on the following terms: 1) The resumption is temporary and that bank after having detailed discussion further with individual brokers and after discussion with various bankers who are dealing in switch transactions and who are not dealing in switch transactions may discontinue routing this transaction through UCO Bank depending upon our findings. 2) The brokers will give us ....
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.... as named therein i.e. Grindlays Bank. On the right hand top corner of the said pay order, 'not transferable' was also printed. This would show that it was only the payee of the said pay order which was entitled to receive the credit of the said pay order. In the cross-examination, he has stated that he was sure that payee banker i.e. Grindlays Bank had received the credit under the said pay order and that Canara Bank was not concerned as to what Grindlays bank did with the proceeds of the said pay order. (c) WITNESSES FROM ANZ GRINDLAYS BANK [PW9, PW11, PW12 and PW15 AND also PW22 Ex. RBI Officer] 83. PW9 Ravi Saluja, was an employee of ANZ Grindlays Bank. During the period 1990 till May, 1991 he was posted at Karol Bagh branch of the said bank as an officer. It is his say that ANZ Grindlays bank has a department known as clearing department and he is acquainted with the procedure of clearing department. He was stated about the procedure how the clearing aspect is processed. According to him, the account holder of the bank is required to deposit the cheque meant for clearance by filling in slip known as pay-in-slip or deposit slip mentioning particulars such as the d....
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....mentioned above and handed over the same to the bearer of the said letter, Mr. Anuj Kalia, who has received and acknowledged the receipt of the said pay order by signing the same at the right hand bottom corner of the said letter. A debit voucher in respect of issuance of the said pay order was prepared with one original and one carbon copy. The original was sent to Mr. Harshad S. Mehta and carbon copy thereof was retained in their office. 85. PW12 Ashok Kumar Anant Ram Monga, Asstt. Manager, Grindlays Bank stated that during the year 1991 he was posted in Sansad Marg branch. He identified A-4 R.N. Popli as the person who also worked in the said branch along with him as officer in charge, clearing department. He was overall in-charge of the said branch along with the Manager and in that capacity, he used to have supervision over the working of the concerned clearing department. He was shown bankers cheque Ex.28 favouring Grindlays bank, having rubber stamp in the left hand top corner reading as "Payee Account only" and on the right hand side top corner reading as "Not transferable". The witness stated that since the Canara Bank is the drawer of the said cheque and the Grindlays ....
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.... was a practice of crediting the proceeds of the bankers' cheques into the account of third party other than its payee. However, it was extended to only certain high networth customers like British Airways, Classic Financial Nizhewan Travels and Harshad Mehta Group, which list is not exhaustive and he came across the instances in case of the said parties where there bank had allowed such credits. He further agreed that RBI had never taken any action against the Grindlays bank in respect of five pay orders shown to him earlier. He was aware that RBI possessed the power to take action against any errant bank. The Grindlays bank had not received any complaint from MUL for crediting the amounts of said five pay orders to the account of third party. When the instrument like pay order is drawn favouring Grindlays bank then the same has necessarily to be deposited in Grindlays bank account with RBI. He was asked about the category of customers regarded as High Networth customers. He replied--such classification is generally given by the concerned manager of the bank having regard to the deposits maintained by the customer or other business potentials. Any officer working in the branch....
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....not deposited in the department where he was working. The same were deposited in the treasury department in the same branch. It was the treasury department to which they used to send the said cheques for clearance. He could not recollect who was or who were the concerned officers of the treasury department who would be giving such instructions as there were many such officers. The instructions were conveyed to him orally and he considered the same to be in proper order. 87. PW22 V. Rangarajan is an ex-employee of RBI. He joined R.B.I. in 1961 as a Junior office and retired in 1997. It is his say that in December, 1990 he was elevated to the position of Additional Chief Officer and was posted in Department of Banking Operations and Developments (DBOD). It is his say that the commercial banks have their account with RBI. Individual persons are not eligible and entitled to open their account in any form with the R.B.I. The bankers cheque/pay order issued by one bank favouring other bank are negotiated as under:-- "The payee bank would deposit the cheque for clearance in clearing house and RBI would settle the payment thereof by giving credit into the account of payee....
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....that there are clear instructions for disposal of proceeds thereof from the drawer of the instrument". 90. The Circular dated 09.91992 Ex.148 issued by the Reserve Bank of India reads thus:-- "September 9, 1992. Bhadra 18, 1914 (Saka) The Chairman/Chief Executives of Scheduled Commercial Banks (excluding RRBs) Dear Sir, Payment of cheques/pay orders It has come to our notice that banks have undertaken large value transactions with third parties on a significant scale by means of cheques drawn on their accounts maintained with Deposit Accounts Department of Reserve Bank of India (RBI) in the names of other banks maintaining accounts with the RBI. As banks are aware, the facility of maintaining accounts with RBI has been granted mainly to enable banks to fulfil their statutory obligations, settlement of transactions with RBI/Government, settlement of inter-bank transactions or adverse clearing balances. It is reiterated that the accounts maintained with RBI should be utilised only for these purposes and not for facilitating credit to accounts of third parties. 2. It has also be....
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....the money by A-5 through UCO Bank. However, we would refer to the evidence of PW23, PW25, PW16, CW1 and DW5(8) pertaining to A-5 and other accused. 92. PW23 Mohan Das Khandelwal, a Share broker, who is approver in this case stated that after doing B.Sc., MBA, he worked with Delhi Cloth & General Mills Co. Ltd. and State Bank of India upto the year 1986. Thereafter, in 1990 he got membership of Delhi Stock Exchange. It is his say that through a common acquaintance, he came across one Ashwin Mehta in the year 1988 and then with Harshad S. Mehta (A-5). Ashwin Mehta is the younger brother of A-5. It is his further say that Ashwin Mehta was looking for a qualified person who could assist him in research activities in the share market and he called him to come to Bombay to meet Harshad Mehta and accordingly he went to Bombay somewhere in December, 1988 (when for the first time he met A-5). The purpose was to enable him to have a set up in Delhi. He met A-5 at his residence and office. In the meeting, they decided to associate with each other for the purpose of carrying out research in share market and companies in Delhi. At that time, he was also aware that A-5 was active in money mar....
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....ncerns including the account in the name of Ashwin S. Mehta. He was one of the authorized signatories, being a Power of Attorney holder, to operate the said accounts except one of the accounts which was opened in Citibank. He received the authority for the operation of some accounts which were in the name of Harshad S. Mehta. Usually Mr. Anuj Kalia used to attend to the bank's work. 95. During his visit to Delhi in April/May, 1989, A-5 made reference to MUl and told that MUL had surplus investable funds as a PSU and they were very active in money market. On his request, he fixed an appointment of A-5 with accused No. 1, who was the concerned functionary in the investment of funds. He was not knowing the exact date and time but it was during A-5's visit to Delhi in April/May, 1989. A-1 and A-2 were present in the meeting which took place in the office of MUL. It is his further say that he saw and heard Harshad Mehta introducing himself in the said meeting as a Member of Bombay Stock Exchange who was very active in money market and that he wanted to deal with MUL. He also informed that he had lost of contracts with the banks in Bombay and he could offer to MUL excellent de....
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....nara Bank favouring Grindlays Bank into the account of Harshad S. Mehta in his account in Bombay were given by him but he did so as per instructions which he received from Harshad Mehta. He gave instructions in his official capacity being in charge of Delhi office and also as per instructions of Harshad S. Mehta. 104. He had no knowledge as to whether the Canara Bank. Parliament Street Branch issued any instructions to the ANZ Grindlays Bank to credit the proceeds of the said pay order Ex. 36 and the said proceeds of which were credited into the account of Harshad S. Mehta with Grindlays Bank. As per his knowledge, the amount involved in four transactions referred to by him earlier, which were credited into the account of Harshad S. Mehta were reveersed at later stages. 105. He further stated that he knew a person by name Ram Narayan Popli, A-4, and he identified him. In the year 1991, A-4 was working with ANZ Grindlays Bank, Parliament Street Branch, New Delhi. He had occasion to meet him during the year 1990-91 in the Parliament Street Branch of Grindlays Bank. The purpose of meeting was in connection with the operation of the accounts of Harshad S. Mehta with the banks. He....
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....d A-2 about excellent deals in the money market. A-1 showed interest in the deployment of funds of MUL in the money market in the said excellent deals as stated by A-5. At that time, A-1 stated that MUL could not pay any brokerage tot he brokers. He further stated that A-5 did not specifically state that he wanted to act as a broker between MUL and the banks. It is correct that A-5 stated in the said meeting that he would get his brokerage from the covered banks. A-1 stated that he did not want to mention the name of Harshad Mehta as broker in the books of MUL. A-2 was absolutely quiet during the said meeting. A1 said that he would be open to any good suggestions and offers or proposals in the money market. 111. Witness was shown Pay Order Ex. 34 dated 24.4.1991 and was questioned--on what basis ANZ Grindlays Bank credited the proceeds of the said pay order in the account of Harshad S. Mehta with them? 112. The witness replied--ANZ Grindlays bank usually used to credit the amount on the bais of covering letter of Harshad Mehta issued by Delhi Office. In some case, ANZ Grindlays bank has also credited the process of pay orders on the bais of pay-in-slips by which pay orders we....
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....by reading the statement, he can say that he had not mentioned specifically the said fact in his statement before the CBI. He was further referred to his statement rrecorded on 15.6.1993 wherein he stated that "earlier on arrival to office on 4.11.1991 (FN) Shri Harshad S. Mehta had told him that he had to attend a meeting with PM on that day". The witness denied having made such statement before the CBI. 120. PW25 Mr. B.C. Bhatnagar, SP CBI stated that he was transferre to BS&FC Branch of CBI at the end of February 1994 as Dy. S.P. At that time he was working in Delhi. Case No. RC. 2 (A) 93-ACU.VII was entrusted to him soon after the registration of FIR of this case in 1993 itself. The FIR of this case was registered by Shri V.D. Maheshwari, who was the SP, CBI and Incharge of ACU (VII) Unit. Mr. Maheshwari had entrusted this case to him for investigation. During the investigation conducted by him Shri Maheshwari being his superior remained in touch with htis case as a supervisory authority of investigation till November, 1993. Inspector O.P. Arora. Inspector Dhaga and Inspector Routela assisted him in the investigation. Pursuant to the orders from the headquarter of CBI, the p....
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....owing the presence of particular officer at particular time. He agreed that he neither saw nor took into possession any such record dated 25.2.1991, 13.3.1991, 18.3.1991, 24.4.1991 and 2.5.1991 with regard to the presence of A-4 in the concerned bank on these dates. 125. He further stated that it is wrong to say that due to the five transactions in question no pecuniary loss has been caused to MUl. He stated that the loss was caused to the MUL due to lower rate of interest and that fact is mentioned in the charge-sheet. In further cross-examination, the witness stated that during the course of investigation MUL never complained of any pecuniary loss to it. MUL also did not disclose if it had filed any case of recovery against ANZ Grindlays Bank, Sansad Marg Branch, New Delhi, for any loss. During the course of investigation, he had not visited any other bank except that Grindalsy bank to ascertain the procedure of inter banking clearance. He had examined the transactions of high value inter banking clearance prior to February 1991. These transactions pertained to the high network customers of the bank. He had also checked the high value transactions of inter banking clearance pe....
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.... other PSUs borrowed on 23.1.1991. He had not recorded the statements of any person from those PSUs. But he collected the data showing the borrowing rate of interest. He had collected such data from GAIL. Indian OIL and ONGC etc. but it has not been made part of the charge-sheet, the reason being oversight. He stated that it was wrong to suggest that the said data was deliberately suppressed because it would not indicate any loss to MUL. At that time, he did not consider it necessary to record the statement of the concerned officials of the PSUs. 131. He could not remember if he had recorded the statement of any officials of MUL on the point of loss. He does not recollect of MUL had other borrowings on that day and if so at what rate. He agreed that MUL had not lodged any FIR with regard to any of the five transactions in question. 132. He had recorded the statement of R.C. Bhargava nd Natrajan during investigation to ascertain if any other higher authority of MUl was also involved in the case. On that basis his conclusion was that A-1 and A-2 were liable for their acts as mentioned in the charge- sheet. So far as Mr. Bhargav and Mr. Natrajan were concerned, they were found n....
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....decision to drop him from the list of accused was his and that of investigating agency. After recording statement of M. Khandelwal under Section 164 Cr.P.C. it was decided to drop him from thelist of accused. Till that time, he was an accused. It was the decision of Mr. Maheshwari and the Investigating Agency not to cite M. Khandelwal as an accused at the time of FIR. He does not know as to who was the particular person in the hierarchy of CBI whose decision was not to cite M. Khandelwal as an accused in the FIR. As an IO, he was at the bottom of the hierarchy i.e. SP and then his DIG, Joint Director, Additional Director, Special Director and the Director. He had in fact not made any conclusion as to whom should be made the accused. He had only given his findings of the preliminary enquiry. During the course of preliminary enquiry, he had learnt that Anuj Kalia was the person who took the cheques of these five transactions to and fro, the bank and delivered them in Delhi. He had mentioned the role of Anuj Kalia in the report submitted to his SP. During the course of enquiry, he had also learnt the role of Mohan Khandelwal and that at all time Anuj Kalia was acting on his instructio....
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.... in Stock Market and to make investments in stock market and similar services of broker. 138. The witness further stated that during his visits to Grindlays bank in connection with the work of their company, he came across an officer by name R.N. Popli, (A-4) working with the said branch of Grindlays Bank, and that A-4 was attached to Remittances Department. Sometimes, he also worked in other department. 139. The witness also stated that in connection with the office work, he had occasion to visit the office of MUL situated at Kasturba Gandhi Marg, New Delhi on few occasiosn. On seeing the letter Ex. 58 issued by the UCO Bank on 23.1.1991 addressed to MUL., New Delhi, he stated that he had an occasion to handle the said letter. The said letter was given to him by Mohan Khandelwal. At that time, he was also given one more letter by Mr. Khandelwal (witness was shown Ex.A-5(1) being receipt dated 24.1.1991 on the letter head of Harshad S. Mehta). Along with the said letter shown to him, Mr. Khandelwal gave him this document also. He was instructed by Mr. Khandelwal to go along with both these documents to the office of MUL and collect the envelope containing units of UTI from th....
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....han Khandelwal. The said letter was written for depositing the bankers' cheque of Canara Bank mentioned therein into the account of A-5 as such letters used to be written for depositing bankers cheques into the said account. 144. On seeing Ex.102 -- detached part of pay-in-slip of Grindlays bank dated 13.3.1991 -- the witness stated that the same was in his handwriting and he prepared the same for depositing bankers' cheque of Canara Bank, Parliament Street Branch, as per its number and amount mentioned therein into the account of A-5. 145. On seeing Ex.76, the witness stated that he wrote the said letter under instruction of Mohan Khandelwal. He handed over the letter Ex. 76 along with pay-in-slip Ex.102 and Ex.30 to A-4 in Grindlays Bank. He handed over the instruction letter and pay order to A-4 because A-4 was handling the said work and he was also instructed by Mr. Khandelwal to do so. 146. On seeing Ex.32, 78 and 103 being Canara Bank's pay order dated 18.3.1991 favouring Grindlays Bank, Pay-in-slip dated 18.3.1991 and instruction letter dated 18.3.1991, the witness stated that the said documents co-related to each other and he handed over the same to A-4....
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....s case. He stated that he discussed the evidence collected by Mr. Bhatnagar who was the I.O. of the case as also with senior officials; examination or interrogation of witnesses and to assess the documents collected as also the statements of witnesses and to discuss with I.O. as well as senior officers. Besides supervision of the investigation of the case, the then DIG Mr. Amod Kanth ordered to examine one Mr. Mohan Khandelwal with the assistance of IO about the MUL's security transactions as well as cash withdrawals during 1991-92 from the accounts of A-5. Accordingly, he recorded the statement of Mr. Khandelwal on 15.6.1993 in presence of IO at Delhi. He stated that FIR was registered on 15th April, 1993. It is his say that to ascertain whether any departmental irregularity was committed or any criminal offences were committed, the CBI instituted the preliminary enquiry. He admitted that there is no statutory provision which permits or allows the investigating agency like CBI to institute and conduct preliminary enquiry as has been done in this case prior to the registration of crime. He did not know why the said statement dated 15.6.1993 of Mr. Khandelwal was not furnished a....
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.... in the note book produced by Shri Kesari. (xi) Then all three of them returned to office from where he remained in the office and Shri Harshad S. Mehta along with Sunil Mittal proceeded to Hotel; (xii) Similar heavy cash withdrawal was also done on 4.5.1992 when Rs. 20 lacs were withdrawn from the same bank." 151. The witness was questioned--whether the said evidence of Mr. Khandelwal denying the recording of his said statement was true? The witness replied 'No'. He had recorded the said statements. He said that Mr. Khandelwal in his said statement recorded by him on 15.6.1993 had made the statement as above at Sl. Nos.(i) to (xii). 152. On the basis of the aforesaid statement, question was asked to the witness that -- whether he realised that the said statement disclosed the material requiring or warranting separate and independent enquiry in certain aspects which were not covered or directly related to the evidence of the case which he has registered as per the FIR? To this question, he replied that he did realise so and thereafter DIG Mr. Amod Kanth conducted some enquiry with Mr. Sitaram Kesari who revealed that he did not recollect ....
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....Hamam Street Branch, Bombay issued its BR in respect of 70 lacs units of UTI on 13.3.1991 in respect of the second transaction favouring MUL. 159. He was in Bombay when A-5 was arrested. He was also arrested by CBI in RC Case No. 8(A)/92. He was aware that A-5 was kept in the CBI custody for well over 90 days. He was not knowing whether A-5 was under CBI custodial interrogation. ALLEGED CONSPIRACY 160. In this case, conspiracy is the basis for convicting the accused. Special Court has mainly relied upon the evidence of PW23 for holding that prosecution has established conspiracy on the basis of so-called meeting between A-1, A-2, A-5 and PW23 Mohan Khandelwal in the month of April/May, 1989. For conspiracy, it is the prosecution version that A1 to A5 entered into a criminal conspiracy to siphon-off the funds of MUL in favour of A-5 and afore-quoted five transactions took place, even though there was a special bar of granting loan by MUL to individuals. 161. Mr. Mahesh Jethmalani who appeared as amicus curiae for A-3, submitted that the conspiracy charge is not tenable for the following reasons:- a) It is absurd to suggest that the conspiracy took place in....
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....ing". 163. It is submitted that from the aforesaid note inference is obvious -- the registering of preliminary enquiry in this case and other cases was an attempt to threaten PW23 for not disclosing to the public what he had informed to Shri Sharma, DIG Special Investigation Wing privately. The registering of the cases had the desired effect -- PW23 did not reveal his knowledge to anybody because the agency to whom he had revealed it from June, 1992 onwards, had chosen not to use the information but to investigate cases in which he could be roped in. Obviously, the filing of cases against PW23 intimidated him sufficiently not to divulge the information he was aware of. He submitted that this is crystal clear from the evidence of CW1 Mr. V.D. Maheshwari wherein he has stated that Mr. Khandelwal in his statement dated 15.6.1993 disclosed that after withdrawing large amount from the bank. A-5 along with Sunil Mittal went at the residence of Mr. Sitaram Kesari, Congress Party Treasurer and handed over the said amount to him. To suppress this, Mr. Khandelwal was made approver. 164. The learned counsel for all the accused contended that prosecution story of conspiracy between A1 to....
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....uring the period -- January, 1991 to May, 1991 -- the prosecution has not led any evidence and it appears that it has given up the said version. 168. On the contrary, prosecution led evidence to the effect that there was conspiracy either in April or May, 1989 between A1, A2 and A5 and for that purpose it relied upon the evidence of approver PW23 Mohan D. Khandelwal, who was associated with A-5 for the purpose of carrying out research in share market and companies in Delhi somewhere in the month of February or March, 1989. During his visit to Delhi in April/May, 1989, A-5 made reference to MUL and told that MUL has surplus investable funds as a PSU and they were very active in money market. It is the say of PW23 that A-5 desired that he should fix an appointment with A-1 who was the concerned functionary in the investment of the funds by MUL. Therefore, a meeting was fixed in the month of April/May, 1999 which took place in the office of MUL in Delhi. In the said meeting, A-5, A-1 and A-2 were present. In the meeting, A-5 stated that he wanted to deal with MUL and that he was having lot of contracts with the banks in Bombay and could offer to MUL excellent deals in the money mar....
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..... Further, PW23 has developed a story after his arrest on 10.8.1994 that A-2 was present in the meeting. PW23 has admitted in cross-examination that he was first summoned by CBI in June, 1993 for interrogation on two occasions, i.e. on 1.6.1993 and 15.6.1993. In further cross-examination, he admitted that neither he could recollect the exact date and time of the meeting which took place in the premises of MUL nor remember the month of the meeting. The witness has also stated that if in the statement recorded by the CBI, he has not mentioned about the presence of A-2 in the said meeting, then it may be, he has not stated about the same. The public prosecutor admitted that it was an omission in the statement recorded by the CBI with regard to the presence of A-1. From the aforesaid admission in the cross-examination, it is apparent that A-2 was not present during the meeting and that the prosecution story with regard to the alleged meeting appears to be doubtful. In any case, approver PW23 does not assign any role to A2 in the said meeting. 173. It is also to be noted that the alleged meeting took place in an open hall where other employees of MUL were sitting in close proximity o....
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.... of approver's evidence appears to be unreliable and baseless, 176. Next question would be (even though not argued) -- Can we draw an inference from the transactions in question that there was any such conspiracy from January, 1991 to May, 1991 between accused? 177. There is no circumstances on record for establishing any conspiracy between A-1 and A-3 who was Assistant Manager of UCO Bank. There is nothing on record to show that A-1 or A-2 had any talk with A-3 or A-4 with regard to the alleged conspiracy and that they were party to it. 178. However, let us consider that five transactions mentioned above took place and as MUL could not lend money to A-5 directly, the transactions took place under the name of and through UCO Bank and in four transactions UCO Bank in turn gave the said amount to A-5. It is pointed out that as there was conspiracy, A1 and/or A-2 gave Account Payee cheques issued by Canara Bank on behalf of MUL payable to Grindlays Bank to Anuj Kalia representative of A-5. Grindlays Bank deposited the said amount in the account of A-5 at Delhi and thereafter transferred the same to the account of A-5 at Bombay. Subsequently on the same day, it was transfe....
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....SUs, it cannot be inferred that there was any conspiracy between the banks and PSUs or that there was conspiracy between A-1, A-2, A-3, A-4 and A-5. 181. Further, in the present case, there is no evidence on record that BRs were issued by the UCO Bank without being backed by the security namely UTI Units. 182. In this set of circumstances, it would be difficult to hold that prosecution has proved the charge of criminal conspiracy under Section 120-B of IPC against the accused. 183. I would also state that it is not properly understood by the prosecuting agency that by introducing or adding a new story in a criminal prosecution, in most of the cases, it adversely affects or destroys the prosecution case. Not only it creates doubts with regard to that part of the prosecution version but on occasions casts doubt about the motive. Result is -- under our criminal jurisprudence, benefit of doubt may go to the accused. 184. Once we arrive at the conclusion that the prosecution has failed to prove the criminal conspiracy, the conviction of the accused under Section 120-B of IPC requires to be set aside. JURISDICTION OF THE SPECIAL COURT UNDER THE SCAM ACT. 185. At the out....
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....e that the Special Court would have exclusive jurisdiction to take cognizance of or to try such cases as are instituted before it or transferred to it as provided. 187. Further, it is to be clearly understood that the Act not create any new offence nor brings about any change in the procedure or raises any presumption to an offence punishable under the IPC or P.C. Act, which is to be tried under the Act. Therefore, the offences pertaining to misappropriation, criminal breach of trust or fraud and forgery are required to be established by the prosecution on the touchstone of ingredients laid down under the relevant provisions of Indian Penal Code and by following the Evidence Act. Hence, for conviction under Section 403 and/or Section 405 IPC the prosecution is required to establish the ingredients of said sections beyond reasonable doubt. 188. Therefore, as the prosecution has failed to establish the conspiracy, the jurisdiction of the Special Court would be limited only for the transactions which took place after 1st April, 1991. In the present case, only two transactions, i.e., dated 24.4.1991 and 2.5.1991 would be covered. CASE AGAINST A-1 AND A-2 189. In this case, ....
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....rought to the notice of A-1 by PW-4 to which A-1's reply was that it was the problem of UCO Bank. (i) The contention that A-1 was instructed by UCO bank to issue the pay order in favour of Grindlays Bank is unacceptable for the simple reason that in the fourth and the fifth transaction pay order continued to be issued to Grindlays Bank without any direction from UCO bank. (j) In any event, there was no authorisation to purchase any securities from any brokers. There was no mention of the monies being given on loan to any broker. It bears emphasis that surplus funds were many times invested in securities in buy back transaction, in that the arrangement would be to purchase a security and then resell it within a stipulated time after the identified period at a price which would include the cost of purchase plus the stipulated interest. This transaction was considered as placement of funds with PSUs. The witness have clearly stated that the only authorisation for placement of surplus funds was PSUs and not private person. CHARGES AGAINST A-2 a) He was present in the meeting held in April/May, 1989. b) He signed letter ....
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....2 as under:-- "A2 saw this BR at the time of discharge as authorised signatory after MUL had got the money back and the sanction had got reversed. When PW4 who was the custodian of all records of every transaction and was maintaining BRs, put up the said BR for discharge before A2 for signing after MUL had got the money back, he signed the same in a routine manner." 198. Under the circumstances, it is submitted that no criminality can be imputed against A2 for signing this BR as an authorised signatory after the reversal of the transaction. Hence, it is submitted that this circumstances also cannot be held against A2. 199. Learned senior counsel further submitted that as there is no evidence against A-2, the Special Court had rightly acquitted him and in the appeal also learned Solicitor General appearing on behalf of CBI has not pointed out any material evidence to hold that the judgment and order passed by the Special Court calls for any interference in acquittal appeal. 200. He referred to Ex.26 and submitted that the said document is signed by him but as deposed by PW4 the said document was authored by PW4 and approved by A-1 and, therefore, it cannot be....
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....funds by MUL, which read thus:- "Resolution dated 4.5.1989 (Ex.9) BOARD AGENDA ITEM NO. 17 -- INVESTMENT OF SURPLUS FUNDS BY MUL 1.0 In terms of the existing guidelines from the Board, MUL has been loading its surplus funds to Central Public Sector Undertakings consistent with the terms and conditions of the approval accorded by the Central Government under Section 370 of Companies Act, 1956. 2.0 A Sub-Committee comprising the Managing Director and Director (Finance) has been delegated the authority by the Board to facilitate taking faster decision in this regard. The details of investment made are placed in the Board meeting for information. 3.0 Of late, the number of PSUs, who have surplus funds wanting to loan funds to PSUs has increased. Some PSUs, who were earlier requiring temporary accommodation are now in a position to give funds. As a result of this, there is an increasing competition between PSUs affecting the yield on such loaning of funds. 4.0 In an effort to maximise yield on surplus funds, it is proposed to invest funds in the units of UTI, Central Govt. securities....
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....is reproduced hereunder:-- (1) Ex.22 dated 01.2.1991 "MARUTI UDYOG LIMITED (CORPORATE FINANCE) No. MUL/FIN./CF/91. 1st February, 91. Sub:- Funds Management 1.0 In November and December Maruti has placed lot of money in Government Securities/Units and PSU Bonds through Banks. These investments have been made for a period of 3 months to 6 months on assured yield ranging from 16.25% to 22% per annum. 2.0 During the last week of December and in January, the receipt of payments were relatively less. Maruti was required to borrow funds or withdraw money from PSU's. One of the options available for borrowing was to sell our investments to other banks with a understanding to buy back these investments after a gap of 30 days or so. This amounts to borrowing of funds at low rates, as Maruti will continue to get advantage of the high assured yield. The bank with whom we have earlier invested the funds and the bank from whom we borrow the funds need not necessarily be the same bank. In our documentation we have to show the borrowing as sales or our investments. Therefore, it is proposed to sh....
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.... of 12 days at an expected yield of 16.75% p.a." The resolution was put to vote and carried unanimously. (3) Ex.24 dated 18.3.1991 AGENDA NOTE FOR THE MEETING OF COMMITTEE OF DIRECTORS FOR INVESTMENT OF FUNDS TO BE HELD ON 18.03.1991. 1.0 We have received a proposal for investment of Rs. 14.45 crores in Units/Government Securities/PSU Bonds through Can Bank Financial Services for a period of 43 days. The expected yield is 25% per annum. 2.0. We have received a proposal for investment of Rs. 10.84 crores in Units through UCO Bank for a period of 5 days. The expected yield will be 21% p.a. Submitted for approval of the committee of Directors for the above placement." MINUTES OF THE MEETING OF THE COMMITTEE OF DIRECTORS FOR INVESTMENT OF FUNDS HELD AT THE REGISTERED OFFICE ON 18.3.1991. PRESENT Shri R.C. Bhargava - Chairman & Managing Director Shri S. Natarajan - Director (Finance) Item No. 1Confirmation of the minutes of the last Meeting held on 15.3.91. The minutes of the last meeting held on 15.3.91 were ....
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....placement of Rs. 7.50 crores with Grindlays bank for 2 days at an expected yield of 26.25% p.a. Subsequently UCO Bank agreed to accept this funds at the same rate and there was a certain reluctance on the part of Grindlays Bank to accept the fund beginning 24.4.91. Accordingly, the placement has been done with UCO Bank. Submitted for ex-post facto approval please. Sd/- (Pramod Kumar) Dy. Manager (Finance) Sd/- D(F) Sd/- CMD (5) Ex.42 dated 02.05.1991. AGENDA NOTE FOR THE MEETING OF COMMITTEE OF DIRECTORS FOR INVESTMENT OF FUNDS TO BE HELD ON 30.04.1991. 1.0. We have received a request from UCO Bank for placement of Rs. 10.00 crores in units. The placement will be for a period of 5 days with effect from 02.5.91. The expected yield will be 21% per annum. 2.0. We have received a request from Bank of America for placement of Rs. 15.00 crores in Units. The placement will be for a period of 7 days with effect from 2.5.91. The expected yield will be 22% per annum. 3.0. We have checked up with M/s ILES who are agreeable to renew the inter corpor....
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....e purchased for a limited period through UCO Bank and for the last transaction the amount was placed with UCO Bank. The afore-quoted resolutions also reveal that when the funds were placed, say as, with Bank of America, with M/s Infrastructure Leasing and Financial Services Limited, with Grindlays Bank and others, it has used the word "with". However, when the purpose is otherwise, it has used the word "through", say as, through Can Bank Financial Services, through Bank of America etc. 208. Further, in the resolutions, the period of investment which is only for few days (i.e. 12, 5, 2 and 5) is mentioned. It also mentions expected yield at 16.75%, 23%, 21%, 26.25% and 25% which would indicate that as a matter of fact nature of such transaction was nothing but loan. Purpose of having UTI units was to secure repayment of loan, that is to say, in case of failure to repay on due date, the units would stand forfeited. It is also clear from para 2 of the resolution Ex.22 dated 1st February, 1991 that during the last week of December and in the month of January, 1991, the receipt of payments by MUL was relatively less and it was required to borrow funds or withdraw money from PSUs. How....
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....d Managing Director of MUL and Director (Finance) of MUL. Whether they were aware of the fact that investment of the MUL funds was with A-5 through UCO Bank could have been deposed only by them and not by Investigating Officer. 212. Apart from these salient lapses, from the evidence of PW1 Bhargava, who was Legal Advisor to the company, it emerges that- a) The five transactions were not only sanctioned by the sub-committee consisting of Managing Director and Director (Finance) but were also approved by the Board; b) Brokers representing the counter parties used to contact officials of the Corporate Finance department and the Director (Finance) might be knowing about the same, that means Mr. S. Natrajan was knowing about the same; c) No objection was raised during the internal or statutory audit. Comptroller and Auditor General of India had also audited the account. d) MUL has not lodged any FIR nor made any grievance with regard to the said transactions; e) After CBI enquiry, A-1 and A-2 were promoted for their better performance; and f) To the JPC necessary replies were given by the Board ....
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....investment by MUL. (d) He also admitted that with regard to the queries raised by the JPC, he and the Managing Director had discussed the same and he had given response of MUL to JPC after getting approval from Mr. Singh. 215. In that para-wise reply to JPC, it is inter alia sated as under:-- "1(b). The Government has not issued any guidelines in regard to the investment of surplus funds. ..... In an effort to maximise the yield on surplus funds, the Board of Directors in its meeting held on 4.5.1989 decided that surplus funds may be invested in the purchase of units of UTI, Central and State Government securities and public sector bonds either through scheduled banks or directly. Pursuant to this decision, MUL has been investing surplus funds through scheduled banks/wholly owned subsidiaries of nationalised banks. The Sub-Committee of the Board earlier nominated for PSU placements was authorised by the Board for investments in these securities. Among others the meeting held on 4.5.89 was attended by Secretary, Finance and Secretary Industry. All the investments were made with the prior approval of the Sub-Committee and placed before the Board for i....
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....ted by UCO Bank came to the notice of MUL in October, 1992 when CBI stated the enquiry. There is absolutely no connivance between any Maruti official and Mr. V.N. Deosthali of UCO Bank or Mr. Harshad Mehta. These investments were made to optimise returns for the company and were made through a public sector bank. Maruti had no reason to suspect that the public sector bank was not doing things in the straight forward manner. In the first transaction Maruti sold units worth Rs. 5 crores to UCO Bank, Bombay and received the money on 24th January, 1991. Maruti, thereafter bought back the units after 32 days and the total cost of funds for this period amount to 12.75% per annum. Other four transactions were for investment of Rs. 10.12 crores, Rs. 10.84 crores, Rs. 7.62 crore and Rs. 10.39 crores for period of 12 days, 5 days, 2 days and 5 days with the expected yield of 16.75%, 21%, 26.25% and 21% p.a. respectively. In the circumstances there is no need for the company to take any action. 10(a) The letters from UCO Bank, Bombay were addressed to Maruti Udyog Limited and were received in the Finance Department. Maruti Udyog Limited followed the written instructions of UCO ....
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....tions by the MUL before the JPC would certainly mean that A1 or A2 have not done anything dishonestly with the intention of causing wrongful gain to A5 or wrongful loss to MUL or that Chairman and Managing Director Mr. Bhargava or the Director (Finance) were not knowing about such transactions through UCO Bank. 218. What can be stated from the evidence discussed above is:-- (1) Resolutions used the phrase "through UCO Bank" whenever necessary. It also used the words 'with UCO Bank' or 'with Bank' which ever is the Bank as per the nature of the transaction. (2) Admittedly documents maintained by MUL do not reveal true state of affairs. Apart from oral evidence, this is reflected in the Resolution Ex. 22. (3) It is totally misconceived to hold that A-1 or A-2 were having any dominion over MUL funds/property. Funds were to be invested as per the decision of the Sub-Committee consisting of Chairman-cum-Managing Director and the Director (Finance). They were having dominion over such property. A-1 or A-2 were only required to carry out the directions issued by the Sub-Committee. (4) Resolutions passed by the ....
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.... of Rs. 7,62,45,000/- issued by Canara Bank favouring Grindlays Bank into account of A-5. 222. In support of charges, prosecution has relied upon the evidence of 4 witnesses of Grindlays Bank, i.e. PW9 Ravi Saluja, PW11 Suraj Tandon, PW12 Ashok Monga and K.K. Kuda PW15 and PW22 Mr. V. Rangarajan, an employee of Reserve Bank of India. 223. It is contended on behalf of prosecution that from the evidence of witnesses of ANZ, Grindlays Bank, the following stands proved- a) That A-4 was the officer in charge of the clearing department. (PW12) b) The entries in respect of these transactions would have to be authorised by the officer in charge of the clearing department--in view of the amount involved--and, therefore, it would be authorised only by A-4 (PW12). 224. Mr. Dwivedi, learned senior counsel appearing on behalf of A-4 submitted there is no evidence against accused for the offence for which he is convicted. It is his contention that with regard to the handing over of cheque of Grindlays Bank, there is no evidence except that of Anuj Kalia PW16 that he accepted the said cheque and forwarded it for encashment. But that would not mean that he wa....
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....es that Grindlays bank would dispose-of the proceeds of the said cheque as per the covering letter. He identified A-4 R.N. Popli, an employee of Grindlays bank, but stated that he was not aware about his posting during the relevant period i.e., in the year 1990 to 31.5.1991. 229. PW12 Ashok Kumar Anant Ram Monga states that he was overall in-charge of the ANZ Grindlays Bank branch along with the Manager and in that capacity he used to have supervision over the working of the concerned clearing department. He states that in these types of transactions there are two authorizations required, the first authorization relates to giving credit to the third party which is generally given by Branch Manager, Marketing Department who is known as Relationship Manager or Account Manager and the Funds Manager. The objective of drawing the bankers cheques was to provide speediest or fastest clearance of such instruments which was not possible through other clearing settlements available to the customers, namely, MICR. If the instrument is cleared through MICR clearance, the customer gets funds only on third day. The other settlement which is high valued settlement which was introduced by RBI i....
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....r/October, 1992 as many banks were indulging in such practices. It is his say that RBI has never taken any action against the Grindlays bank in respect of Five pay orders shown to him earlier. He also stated that Grindlays bank had not received any complaint from MUL for crediting the amounts of said five pay orders to the account of third party. It is his say that Grindlays Bank has not received any complaint or claim in respect of said five pay orders from Canara Bank, UCO Bank or Harshad S. Mehta. The said parties have also not initiated any action in any court of law in respect of megotiation of said five pay orders at any time. 231. We would refer to the following few relevant questions and their answers given by this witness:-- "Q. Having received the funds under the Pay order payee bank would credit its proceeds into the account of the party depositing the said payee order? A. When the instruments like pay order is drawn favouring Grindlays bank then the same has necessarily to be deposited into pits i.e., Grindlays Bank Account with RBI. Q. Would it be correct to say that if any bankers cheque is made payees account and non tr....
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.... "The payee bank would deposit the cheque for clearance in clearing house and RBI would settle the payment thereof by giving credit into the account of payee with RBI." 235. In view of the aforesaid evidence, it can be stated without any doubt that all the five pay orders namely Exs.28, 30, 32, 34 and 36 were sent for inter bank clearance by the Grindlays Bank. The amount was credited in the account of Grindlays Bank. Hence, it is established that the amount of "account payee" and "non-transferable" pay orders were only credited in the account of Grindlays Bank. In this set of circumstances, it is not necessary to discuss the relevant provisions of Negotiable Instruments Act that 'account payee' 'non-transferable' cheques cannot be credited in anybody else's account. As such, the entire prosecution against A-4 was totally on an erroneous assumption that A-4 got the amount of 'account payee' cheque bearing stamp 'non-transferable' credited straightaway in the account of A-5. 236. If the amount is credited in the account of Grindlays Bank, question is--how is A-4 liable? There is nothing on record to establish who directed that the sai....
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.... a) He abused his position as public servant by allowing use of MUL's funds to be wrongly obtained by A-5 and, therefore, he is guilty of the offence under Section 13(1)(c) r/w 13(2) of PC Act. b) He fabricated a set of letters written on the letter head of UCO Bank representing fraudulently that UCO Bank was entering into a transaction with MUL. He also created a set of BRs (signed by him purporting to be an accountant although he was an Assistant Manager). c) His fraudulent misrepresentations of showing a transaction of purchase/sale of securities between UCO Bank and MUL were to enable A-1, A-2 and A-5 to misappropriate the funds of MUL. Therefore, apart from the charge of conspiracy against A-3, he is also charged with the offence under Sections 467, 468 and 471 of IPC. d) He forged the BRs purporting to be the representation that a set of securities was being held by UCO Bank on behalf of MUL and the same had been sold by UCO Bank to MUL and thereby committed an offence under Section 467 IPC. e) He forged the letters and he dishonestly made and/or signed the documents with the intention of causing it....
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....om a PSU - since it would constitute a deceit upon the other PSUs. e) A-3 wrote letters which constituted a clear representation to MUL that it was entering into a transaction with UCO Bank - it is apparent from the plain language of the letter. It is clear that A-3 would not be authorised to write such letters unless he had been permitted to do so by the Head Office. On this apparent tenor, the letter would commit the UCO Bank personally to a transaction of sale/purchase of securities and A-3 was not authorised to do so. The letters written by A-3, therefore, were purporting to be with an authority which he did not possess and purporting to commit the bank to an agreement thereby clearly being forgery. PW14 and PW21 also (employees of UCO Bank) have pointed out that only Head Office used to give instructions for deals on behalf of the Bank. f) That the documents created by A-3 were intended to misrepresent the position of the UCO Bank is also clear from the fact that the identification, which should have been put on the document that it was a transaction for and on behalf of a client, was not so placed on the document - this is the evidence of PW14. T....
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....r of intention to cause loss to anybody. In the absence of any evidence of dishonest intent the charge under the PC Act must fail. 246. It is submitted on behalf of A-3 that charges of forgery have been framed on the assumption that Exs. 58 and 60 are forged. The accused is convicted in ignorance of the fact that banks were entitled in law to act as agents for their customers and in UCO Bank this facility was offered to several brokers including A-5 as it was a lucrative source of income to the Bank. For this, reference is also made to the evidence of PW7 Karkhanis, PW14 Prem Shanker Joshi and PW21 M.V. Shidhaya (both employees of UCO bank). 247. It is further contended that PW7 Karkhanis stated that the alleged letters could not be written by A-3. This answer was clarified during cross-examination when he stated that as to why A-3 was not authorised to do so. He says that A-3 was not supposed to write such letters on behalf of UCO Bank as the Hamam Street Branch could only transact business on behalf of brokers and could not transact business concerned with UCO bank's own investment. The fact of the matter however is that when A-3 addressed the letters, he was not dealin....
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....ated 18th March, 1991 and Ex.41 dated 24th April, 1991, A-3 has been erroneously charged for forging the BRs on the assumption that UCO Bank did not hold the units for which the BRs were issued. It is submitted that the charges proceeds on an incorrect assumption that the BRs were issued on behalf of UCO Bank. B.Rs. were issued on behalf of A-5 and the same were backed up by more than adequate units belonging to A-5. The charge of forgery is accordingly misconceived and untenable. 254. He submitted that after RBI circular dated 26.7.1991, it was irregular for banks to issue BRs on behalf of their broker clients. Prior to that date, however, it was the practice of UCO Bank and other banks to issue BRs on behalf of their broker clients. It is submitted that the question which arises in the instant case is--whether the BRs issued by A-3 were backed up with units belonging to A-5? Although nine charges have been framed on this aspect, the CBI has undertaken no investigation whatsoever to discover whether the BRs were backed up by securities belonging to A-5. Had the CBI undertaken this simple exercise, this trial might never have seen the light of the day and the accused would not h....
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....d not be undertaken. A list of such transactions is appended. (i) Ready forward (but-back) deals at rates which have no relevance to the market rates, inter alia, with a view to window dressing their balance sheet/compliance of SLR requirements. (ii) Double ready forward deals with a view to covering their oversold position in a specific security. (iii) Sale transactions by issue of Bank Receipts (BRs)/SGL forms without actually holding the securities/without having sufficient balance in their SGL accounts. (iv) Issuing BRs/SGL forms on behalf on their broker clients without safeguarding banks' interest. 2. You may be aware that with a view to helping the banks to overcome various deficiencies in the long term securities market and to enable them to manage their short-term securities market and to enable them to manage their short-term cash deficit/surpluses more efficiently, we have permitted banks to enter into buy-back deals in Government securities among themselves (and not with their non-bank clients). It was our expectation that such deals with be undertaken by the selling bank, only if it holds su....
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....hether through the mechanism of/SGL Account or Bank receipt should be reflected on the same day in its investment Account and accordingly for SLR purpose, wherever applicable. (iii) Transactions between your bank and another bank should not be put through the brokers' accounts. The brokerage on the deal payable to the broker, if any (if the deal is put through with the help of a broker) should be clearly indicated on the notes/memorandum put up to the top management seeking approval for putting through the transaction and operate amount of brokerage paid, broke-wise, should be maintained. (iv) For issue of BRs, the banks should adopt the format prescribed by the IBA and should strictly follow the guidelines prescribed by them in this regard. Subject to above, the banks should issue BRs covering their own sale transactions only and should not issue BRs on behalf of their constituents including brokers. (v) The banks should be circumspect while acting as agents of their broker clients for carrying out transactions in securities on behalf of brokers. (vi) Any instance of return of SGL form, from the Public Debt Office of ....
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....curities on behalf of brokers. d) These guidelines would indicate that till the date of issue of guidelines banks were issuing BRs on behalf of their broker clients. It was their investment policy. Further, the restriction which was suggested for framing the policy was that banks should be circumspect while acting as agents of their brokers client for carrying out transactions in securities on behalf of brokers. This would also indicate that there was no prohibition that bank should not act on behalf of their broker clients for carrying out transactions in securities. In any set of circumstances, the aforesaid circular would reveal that till 26.7.1991 many banks were adopting the practice of issuing BRs on behalf of their broker clients and the transactions were undertaken in securities on behalf of their brokers. Hence, the RBI clearly recognizes that some banks were indulging in such transactions. What was object by the said circular was that banks were issuing BRs without verifying whether their broker clients were holding the security covered by the relative BRs and thereafter the policy was suggested to all that BRs should be issued covering their own sale trans....
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....ere not treated as transactions of UCO Bank. g) The evidence on record clearly establishes that for the 5th transaction A-3 cannot be held responsible, because at the relevant time he was transferred from Hamam Street Branch. This has been specifically sated by PW7 Karkhanis in his deposition. He has stated that in the month of April, 1991, accused No. 3 was transferred from Hamam Street Branch to Hingha Branch near Nagpur. In the month of May, 1991, he was again called back to Hamam Street Branch but between 2nd May, 1991 to 7th May, 1991, A-3 was not in Hamam Street Branch. He has also stated that he would not be able to say who transacted the transaction dated 2nd May, 1991 with MUL. This also indicates faulty investigation. Hence, for the fifth transaction, between 2nd May to 7th May, it has been brought on record by the prosecution that A-3 was not working at the UCO Bank, Hamam Street Branch. At the relevant time, he was transferred to Hingha Branch, Near Nagpur. Further, the resolution dated 30.4.1991 passed by the MUL clearly reveals that the funds were placed with UCO Bank for investment in units for a period of five days w.e.f. 2nd May, 1991 at an expected ....
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.... the security, they were ascertaining from their clients about the availability of the security with the bank or when he will deliver to the bank. On receipt of the security, they were preparing a cost memo as per instructions of their client as contained in his instructions letter. Without security in the hands of the bank, they were not preparing the cost memo and sending it to the counter party. He admitted that Hamam Street branch of UCO Bank was not maintaining security account, either security wise or otherwise, of the clients. BRs Exs. 38, 39 and 41(1) were issued in respect of Security Transaction put through on behalf of the Head Office or the client. The delivery order Ex.A-3(2) contains instructions to UCO Bank, which was received by A-5 Harshad S. Mehta without the name of its branch. (iii) PW21 Mr. Shidhaya has stated that one Harshad S. Mehta had his current account with their branch. He came across a person by name Mr. Pankaj Shah working with Harshad S. Mehta, who sometimes used to come to Hamam street branch in connection with brokers security transactions. No record in a form of security ledger or security register broker-wise was kept and maintaine....
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..... The routing facility was offered to many brokers including A-5 in the year 1991 and such brokers availed of the said facility. Such routing facility was already in practice even before he joined as Divisional Manager in June, 1990. Some of the banks were offering such facilities. i) ON THE POINT OF FORGERY- 262. Resolutions passed by the MUL reveal that MUL was placing funds through UCO Bank in units. This phraseology used in the resolution does not reveal true colour of the transactions that MUL was not purchasing and selling the Units from UCO Bank nor UCO Bank was selling or purchasing the units from MUL. It only meant that the transactions were through UCO Bank. Seller or purchaser was a third person. In this set of circumstances, to say that A-3 prepared forged documents that UCO Bank was selling or purchasing the units is totally misconceived and is against the documentary record maintained by MUL. 263. Letters Exts. 58, 59, 60 and 61 written by A-3 also do not reveal that UCO Bank was purchasing or selling units. The said letters are as under:-- "Ex.58 January 23, 1991. MARUTI UDYOG LTD. 11th FLOOR &nb....
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.... Yours faithfully, For UCO Bank, Sd/- (Manager)" 264. From letters Exhibits 60 and 61, it is apparent that A3 has not stated that UCO Bank was selling units. It only mentions that for the purchase of units mentioned in those letters, the amount to be remitted through ANZ Grindlays Bank, New Delhi. Evidence on record establishes beyond any doubt that A3 was authorized to deal on behalf of the broker clients and if the broker client had instructed that amount be sent through Grindlays Bank, writing of such letter would not mean that he has committed any fraud. 265. For the allegation of forgery, it is to be stated that in the instant case, A-3 has been charged with forging the BRs Ex. 38 dated 13th March, 1991, Ex. 39 dated 18th March, 1991 and Ex. 41 dated 24th April, 1991, on the ground that UCO Bank did not hold the units for which the BRs were issued. 266. All the transactions are based upon the documents, which stand proved by the evidence of various witnesses of MUL, who signed the documents. The transactions were through UCO Bank. Further, there is nothing on record to show that UCO Bank either purchased or sold th....
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....authority. The insurance policy was transferred in the name of Nalini after the proposal form was signed by Dr. Vimla. Subsequently, when the car met with the accident, Dr. Vimla filed two claim forms as Nalini. She also signed the receipts acknowledging the compensation money as Nalini. Dr. Vimla and her husband were prosecuted under Sections 120-B, 419, 467 and 468 of Indian Penal Code. The High Court convicted Dr. Vimla under Sections 467 and 468 of IPC. IN that set of circumstances, this Court held thus:-- "...Certainly, Dr. Vimla was guilty of deceit, for though her name was Vimla, she signed in all the relevant papers as Nalini and made the insurance company believe that her name was Nalini, but the said deceit did not either secure to her advantage or cause any non-economic loss or injury to the insurance company. The charge does not disclose any such advantage or injury, nor is there any evidence to prove the same. The fact that Dr. Vimla said that the owner of the car who sold it to her suggested that the taking of the sale of the car in the name of Nalini would be useful for income-tax purposes is not of any relevance in the present case, for one reason, th....
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....s: "A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise". The word "defraud" includes an element of deceit. Deceit is not an ingredient of the definition of the word "dishonestly" while it is an important ingredient of the definition of the word "fraudulently". The former involves a pecuniary or economic gain or loss while the latter by construction excludes that element. Further, the juxtaposition of the two expressions "dishonestly" and "fraudulently" used in the various sections of the Code indicates their close affinity and therefore the definition of one may give colour to the other. to illustrate, in the definition of "dishonestly", wrongful gain or wrongful loss is necessary enough. So too, if the expression "fraudulently" were to be held to involve the element of injury to the person or persons deceived, it would be reasonable to assume that the injury should be something other than pecuniary or economic loss. Though almost always an advantage to one causes loss to another and vice versa, it need not necessarily be so. Should we hold that the concept of fraud" would include not only deceit ....
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....re, A-5 was entitled to get it back; before issuance of the guidelines by the RBI, RBI had itself noted that many banks were issuing BRs on behalf of their brokers, there was no prohibition to the banks with regard to the issuance of the BRs on the behalf of their clients. Only thing which was required to be verified was whether there was sufficient security. The witnesses on behalf of bank have admitted that UCO Bank and other banks were giving routing facility to their clients and that routing transaction was a transaction in which purchase and sale of securities was done by the bank as an agent of its customer for a commission; resolutions by the MUL also reveal that the investment for the first four transactions was 'through UCO bank' and for the 5th transaction, the investment was "with UCO Bank"; It was UCO Bank's investment policy to have such transactions. Hence, it cannot be stated that A-5 was having any dishonest intention; there is no allegation that A-3 gained by such transactions and there is no loss to the bank or to the MUL. No inference of 'dishonesty' or intention to defraud could reasonably be drawn. In this set of circumstances, it would be d....
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....ration--collecting donation of unaccounted money, even if it is practice or usage, it would be an offence. This is sought to be brought out on record in the cross-examination of I.O. Bhatnagar that PW23 Khandelwal has given a statement before him that A-5 gave a VIP suitcase containing cash to Sitaram Kesari. 274. Further, we are required to decide the case on the touchstone of ingredients of the offence punishable under IPC and there cannot be any doubt that those who are found guilty should be punished but the conviction must be on the basis of established criminal jurisprudence and not on moral or equitable ground or impression created or gathered by the prosecuting agency. It is also true that in the present case, dealing in public funds was to a large extent but that would not itself be a sufficiently ground for drawing any inference in favour of the prosecution particularly when there is no evidence on record that MUL or UCO Bank suffered any loss or any of accused Nos. 1 to 4 gained anything. On the contrary, there is evidence on record that UCO Bank got commission from the said transactions. 275. This Court in State (Delhi Admn.) v. Laxman Kumar. 1986CriLJ155 observed....
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....monies became available for use. 279. From the evidence on record, it is proved that- 1. Undisputedly there is no statutory prohibition that MUL or UCO Bank cannot grant loan to the individual. 2. In the present case, admittedly, there is no loss to the MUL or to the UCO bank. 3. It is not the prosecution version that accused Nos. 1, 2, 3 or 4 got any advantage or gain because of the five transactions. In any case, there is no evidence. 4. In first transaction, MUL took loan by handling over 35 lacs units of UTI. In other transactions, MUL gave the amount on the basis of bank receipts. Bank receipts were backed by the units. RBI directions which are issued in July 1991, nowhere prescribe that a transaction by the Bank on behalf of the broker clients if it is backed by the adequate securities is irregular or prohibited. 5. On behalf of MUL it has been stated before the JPC that the transactions were regular and there was no irregularity. No officer of the MUL has stated before the Court tat transactions were irregular. Witnesses examined on behalf of MUL are PW1 Bhargava who was a Legal Advisor, MUL and Co....
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....these transactions were regular and routine transactions. 11. It is contended that in reality if it were loan transactions then there was no question of giving a facade of sale transactions and it establishes fraud. This submission cannot be accepted because of the resolutions of the MUL fixing days for repayment and the rate of interest meaning thereby if the amount is not returned on a particular date, the units would stand forfeited and for that limited purpose it is a sale transaction and if the amount is repaid with interest, units would be returned. Further, in case of sale or purchase of units, there would not be any question of payment of interest. Question of payment of interest would arise in cases of loan transaction. 12. As discussed above, resolutions passed by the MUL maker clear distinction of investing the amount "with the bank" or "through the bank". May be that there was facit understanding as the loan cannot be given to A-5 by MUL, it should be routed through a bank. For this transaction, UTI units were handed over to the bank, therefore, there is no question of any fraud or mis-appropriation. In any case, for this purpose, A-5 is no....
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....intention of causing wrongful gain to one or wrongful loss to another person. 283. Allegation in this case are that firstly, accused appropriated cheques issued by Canara Bank in favour of Grindlays Bank to himself. Secondly, that appropriation was misappropriation and, thirdly, it was dishonest. 284. Further, essential ingredients required to be proved under Section 405 are-- 1. Accused must be entrusted with some property or with any dominion over property. 2. He dishonestly misappropriates or dishonestly converts to his own use that property, or 3. Dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged or of any legal contract, or 4. Willfully suffers any other person to do so. 285. In this case, an essential ingredient which is required to be established would be 'dishonest misappropriation or use'. For this, it is contended that A-5 took loan from MUL through UCO Bank. If it is established that he took loan from MUL through UCO Bank, then there is no question of misappropriation because property belonged to him as....
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....aid cheques were handed over to the representative of A-5? 292. Prosecution contends that as it was subterfuge, this irregular method was adopted. Defence contends that it was known to MUL that amount was meant for A-5 and, therefore, this procedure was adopted for earliest release of funds in favour of A-5. By this method. UCO Bank Bombay Branch got the money on the same day. It is pointed out that Grindlays Bank was not at all concerned with money except for transmitting the same to its beneficiary. 293. At this stage, we would refer to the decision in Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore, Cochin AIR1953SC478 . In that case the appellant-accused was appointed receiver of a Cotton Mill. He demanded and received payment over and above the market price in respect of cotton bales allotted to a shopkeeper. He was charged for criminal breach of trust and misappropriating the extra money received by him without bringing it into the Mill's account. The Court dealt with the question--whether the extra money was given by the shopkeeper to the accused for and on behalf of the Mill or was given to him personally as a motive or reward for showing some f....
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....g endorsement 'non transferable' can not be paid to A-5. For this purpose, he referred to various provisions of Negotiable Instruments Act, 1881 (Chapter VI Sections 78). 296. Learned senior counsel Mr. Jethmalani made it abundantly clear that he confines his submissions to the effect that A-5 had only loan transactions with MUL and the amount taken on loan was paid with interest and commission was paid to UCO Bank. The transactions are already squared up, hence there is no question of any offence being committed by A-5. He further makes it clear that considering the course of dealing it is apparent that there is consensus agreement that monies from MUL were received for customer namely A-5, from the customers lender for handing over the same to the customer. Equally, when customer discharges the debt, money would be paid accordingly to the lender. He, therefore, submits that this was a tacit agreement between the parties. 297. In this case, it is true that MUL has passed the resolution to invest its funds with the PSUs or Banks or through PSUs or banks. The words 'through' would certainly mean that it is not with the banks. In any case, because of the resolut....
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....f Grindlays Bank, there is nothing on record that monies were meant for Grindlays Bank. As pointed out by the learned counsel for A-5, the beneficial interest for the said amount remained in A-5. It is nobody's case that the UCO Bank itself has sold or purchased the units and was entitled to have the cheque amount that is to say that ownership or beneficial interest in the property was not with UCO Bank. 301. With regard to first transaction, it is to be stated that it is nobody's case that UCO bank sold and thereafter re-purchased the units to MUL and therefore it was entitled to get it back from MUL. As soon as the amount was re-paid by MUL, original owner of the UTI units was entitled to get it back and that was done by A-5. 302. Further, document Ex.58 (Vol.26 page 7056) and Ex. A-5(1) (Vol.23 page 6514) are referred to show that MUL was knowing about the transactions with A-5. Ex.58 is the letter dated 22nd January, 1991 written by UCO Bank to MUL requesting to hand over the delivery of units to Mr. Khandelwal; and Ex.A.5 (1) is the receipt dated 24.1.1991 issued by Mr. Khandelwal (an employee of A-5) on the letter-pad of A-5. Both these documents would also indi....
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.... the accused unless there is sufficient evidence to connect the accused with the crime. Joint Parliamentary Committee found that many brokers used some of the banks as "routing" banks which carried large volume of securities transactions for them. The Bombay main Branch of SBI acting as the agent of SBI Caps had debited SBI Caps account and unauthorisedly credited funds to the account of HSM instead of making payments to named banks/institutions. The Committee noted that the PSUs were the single largest source of surplus investible funds around Rs. 36000 crores between April 1990 and December 1992. In the investment of these funds guidelines and instructions were routinely flouted and no norms were observed. Neither DPE nor the Ministries concerned took any steps to ensure the compliance of their guidelines. Even the Ministry of Petroleum and Natural Gas which had made a review of investment of surplus funds by the PSUs under its administrative control in May 1990 closed its eyes knowing fully well that PSUs were investing with the foreign banks despite the guidelines of DPE that PSUs could have normal banking transactions only with nationalised banks.....
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.... 42 passed by the MUL for investment of funds as reproduced above also reflect the same thing, namely "through bank" or "with the bank." (f) Resolution Ex.22 dated 1.2.1991 reveals how the documents were prepared to suit its purpose by the MUL. The relevant part of resolution reads thus-- "...In our documents we have to show the borrowing as sales of our investments. Therefore, it is proposed to show such borrowing as reduction in our investments. This has been discussed with Company Secretary also who is agreeable for such treatment." PW4 Mr. Rajan Ramgopal has admitted that the name of the broker did not figure or reflect on the record of MUL in the event of transaction of investment being through broker. (g) In any case, A1 and A2 who are sought to be prosecuted are not responsible for the said policy. The policy is framed by the Board and as per the said policy, Sub-Committee headed by the Chairman and the Managing Director of MUL and Financial Director has passed appropriate resolutions. It appears that they were in know of entire investments, but for the reasons best known to the prosecution, they are not prosecuted ....
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....ussed above, there is no evidence against A-2 and A-4 to connect them with the crime. (s) A-4 is prosecuted without collecting any evidence against him that he was responsible for crediting the amount in the account of A-5. The prosecution has erroneously proceeded as if the amount of pay orders issued in favour of Grindlays Bank was directly deposited in the account of A-5. (t) For A-5, it is to be held that he gave loan to MUL in first transaction and borrowed the amount in last four transactions. These transactions were carried out through UCO Bank. Therefore, assuming that those transactions were against the guidelines issued by the RBI, it would not mean that A-5 has mis-appropriated the amount. He repaid the amount on fixed dates with stipulated interest. Question of payment of interest would arise in cases of loan transaction and normally bank would not borrow the amount at such a high rate of interest. The Bank has issued BRs and there is no evidence that BRs were not backed by the units. On the contrary, defence has led evidence to suggest that units were given as security. (u) for A-3 also, Investigating Officer has not bothere....
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....iminal Appeal Nos. 1117 of 1999, 1141 of 1999 and 1150 of 1999 filed by A1 Pramod Kumar Prital Lal Manocha, A-3 Vinayak Narayan Deosthali and deceased A-5 Harshad Shantilal Mehta respectively are partly allowed. The order of conviction awarded by the Special Court in respect of A1, A3 and A5 is confirmed. However, sentence of A1 and A3 is reduced to the period already undergone. Arijit Pasayat, J. 309. Notwithstanding my great respect for learned Brother Shah's wisdom and erudition. I am unable to agree that some of the appellants i.e. A-1, A-3 and A-5 deserve to be acquitted. My reasons with which Brother Agrawal also agrees, are as follows: 310. The present appeals relate to Special Case No. 6/1994 which was one of the 32 cases filed by the Central Bureau of Investigation (in short the 'CBI') under the provisions of Special Court (Trial of offences relating to Transactions in Securities) Act, 1992 (in short the 'Special Court Act'). 311. Before constitution of the Court under the Special Court Act several enquiries were made in relating to securities scam which allegedly broke out in May 1992 in various types of transactions relating to government ....
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....A-3 (Deosthali) and A-4 (Popli). 316. Accused Nos. 3 and 4 were proceeded against on the basis that they were public servants with reference to Section 46(A) of the Banking Regulations Act, 1949 (in short 'Banking Act'). The five accused-appellants were charged under Sections 409, 420, 467, 471 of the Indian Penal Code, 1860 (in short 'the IPC') and section 13(1)(c) read with Section 13(2) of the Prevention of Corruption Act, 1988 (in short 'the PC Act'). 317. Reference was made to various documents to show how the transactions were conducted and how documents were fabricated to facilitate use of the huge sums of money by A-5, Harshad. All the accused persons pleaded innocence. 318. The stand of accused No. 1, Pramod and accused No. 2, Ambuj Jain was that they did not know the involvement of A-5, Additionally. A-1 took a stand that A-5, Harshad is broker of UCO Bank. So far as A-3 was concerned though he did not deny authorship of several letters which were placed on record by the prosecution to show alleged commission of forgery, stated that the transactions were put through under mere routing facilities and in any event so far as the last two tran....
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....#39; 321. Each of the five transactions needs to be examined separately. 322. Transaction No. 1: This transaction dated 24.1.1991 involves 35 lacs units of UTI as security and it is ostensibly shown to have been purchased by MUL from UCO Bank, Hamam Street Branch, Bombay for a consideration of Rs. 4,99,45,000/-. There was a reversal as agreed on 25.2.1991. Accused No. 3. Deosthali addressed a letter dated 23.1.1991 on the letter head of UCO Bank of the concerned Branch to MUL stating that arrangement for payment of consideration of the aforesaid sum would be made through Bank of America, New Delhi with a further request to MUL to hand over the physical delivery of the security to Mohan Khandelwal (PW 23). Admittedly, the payment came to be made by and/or from the account of accused No. 5, Harshad. Bombay's office of A-5 by its letter to Bank of America, Bombay requested remittance of the amount by means of ITRO to its Delhi Branch for crediting into the account of MUL, Delhi. Accordingly, Bank of America, (Bombay and Delhi branches) arranged the payment thereof to MUL. On receipt of (SIC) the securities were delivered to Anuj Kalia (PW 16), an employee of A-5 Harshad at i....
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.... very suspicious circumstances surround this transaction, particularly, the role of A-3. The letter (Exbt. 58) was not typed in the office of the UCO Branch. The (SIC) (PW 6) has categorically stated that he has not typed (SIC) fact A-3 had admitted that it was typed outside and he has responsible for the typing done outside. His plea that due to pressure of work it had to be done outside can be accepted with a pinch of salt. It was for PW-6 to say that there was pressure of work and, therefore, the letter was required to be typed outside. There was no other instance, except the cases involving A-5 and the other transactions to which reference shall be made subsequently, that the letter was typed outside. So far as reversal is concerned, the role of A-3 is very significant. The letter (Exbt. 59) was written by A-3. He accepted that he was the author and signatory of the letter. Exbt. No. 101 is a letter dated 25.2.1991 issued by the Delhi Office of A-5 to the Grindlays Bank, by which it was instructed to credit the proceeds of the pay order (Exbt. 28) to the account of A-5. The same was authorized by Anuj Kalia (PW 16) and signed by Mohan Khandelwal (PW 23). The current account num....
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....n the form of Agenda Note before the Investment Committee showing as if the transaction was between MUL and UCO Bank, Bombay and on this basis approval was obtained. On the same day, as authorized signatory of MUL, A-1 instructed Canara Bank, Delhi to issue a pay order favouring Grindlays Bank by debiting the amount to the account of MUL and accordingly Canara Bank issued its pay order for the amount directly to MUL. A-5's Delhi Office instructed its bankers Grindlays Bank, Delhi for issuance of a banker's cheque for the said amount favouring Grindlays for the benefit of MUL by depositing the amount into the account of A-5. This is what was done. 328. Exbt. 60 is the letter dated 13.3.1991 which was signed by A-3 Deosthali. BY the said letter it was indicated to MUL that it (MUL) had purchased 70 lakhs of units. There was a request to remit funds through Grindlays Bank. The Agenda Note and the approval clearly show that MUL was to place funds through UCO Bank. 329. A reading of the Agenda Note and the Resolution clearly shows that the transaction was intended to be between MUL and UCO Bank. Much was made of the words "through UCO Bank" to contend that there was no pro....
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....count of MUL. Fourth transaction 334. So far as fourth transaction is concerned, initially the proposal was for investment of units valued at rupees 7.50 crores through Grindlays Bank for a period of two days, but second note/proposal was put up by A-1 which is very significant. There was approval for placement of Rs. 7.50 crores with Grindlays Bank of 2 days at an expected yield of 26.25% p.a. Subsequently, UCO Bank agreed to accept this fund at the same rate. There was some reluctance on the part of Grindlays Bank to accept the fund beginning 24.4.1991. Accordingly the placement has been done with UCO Bank. 335. Reading of the second note/proposal makes it clear the MUL was dealing with UCO Bank and there was no question of (SIC) with MUL on principal-to-principal basis. In the minutes of Sub-Committee for the investment, the committee had earlier approved the proposals as contained in the Agency Note. Exbt. 40(3) where the investment in the (SIC) question was to be made with Grindlays Bank. But later on the same was changed and it was resolved to be made with UCO Bank, Hamam Street Branch, Bombay as proposed by A-1-Pramod. Significantly, there was no written proposal ei....
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.... signed by A-1 (Exbt. 29). 5. Transaction No. 3 - Agenda note for the meeting prepared by A-1. (Exbt. 24). 6. In the bank receipt of UCO Bank, notings are made by A-1 (Exbt. 39). 7. Reversal of the entry, carbon copy of bank debit voucher, accounts slips signed by A-1 (Exbt. 48). 8. Transaction No. 5 - Minutes signed by A-1 (Exbts. 42 [1] to [3]). 9. Instruction letter dated 2.5.1991 of MUL addressed to the Manager, Canara Bank to issue pay order in favour of Hong Kong and Shanghai Banking Corporation and in favour of Grindlays Banks signed by A-1 (Exbt. 35). 10. For the 5th transaction, there was no BR and it has not been explained by A-1 as to how the transaction could take place without BR. 339. A-1 concealed the receipt signed by PW-23 on the letterhead of A-5 cancelling the receipt of 35 lakhs of units from MUL. It is, therefore, hard to believe that A-1 did not know that the ultimate beneficiary was A-5. A-1 deliver pay order for the second transaction to PW-16. It has to be noted that for the first time in this Court A-5 has taken the stand that the relevant transactions were in the ....
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....2.2.1991 addressed by the UCO bank, Rajabahadur Building, Bombay to MUL requested MUL to remit funds through ANZ Grindlays Bank. (Exbt. 59[1]). Transaction No. 2-BR dated 13.3.1991 is in the handwriting of A-3 and is signed by him. Carbon copy of credit voucher of UCO bank (Exbt. 150) is in the handwriting of A-3 and also bears his signature. It indicates that the amount was intended for A-5 being the amount of security, namely, units sold to MUL. Similarly, Exbt. 151(1) shows that A-3 signed on the debit voucher in the name of Harshad Mehta for Rs. 6,000/-. 343. In Exbt. 152(1), the signature of A-3 on the debit voucher of UCO bank in the name of A-5 is there. 344. Exbt. 153(1) is the signature of A-3 on debit voucher of UCO bank in the name of Harshad Mehta. 345. Transaction No. 3 - letter dated 18.3.1991 of UCO bank is signed by A-3 (Exbt. 61). BR dated 19.3.1991 is signed by A-3 (Exbt. 39). Exbt. 157(1) is the signature of A-3 on the debit voucher of UCO Bank in the name of A-5. Exbt. 158(1), page 6893, is the signature of A-3 in the name of A-5. Similar is the case of Exbts. 159(1), 160(1), 161(1) and 162(1) where there are signature of A-3 on the debit vouchers of UC....
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....to be noted. Grindlays and UCO bank never received money in their own right. They only collected the cheque for A-5, although the cheque in each case was non-negotiable payee cheque in favour of Grindlays Bank without any instructions from Canara Bank or MUL. UCO bank did not sell or agree to sell, as A-3 had no authority either to sell or commit UCO Bank to any sale of security on behalf of the bank, even if it is accepted that the bank had purchased the security, it had become the property of bank, and the securities dealt with as an agent is not to be reflected in the books of the Bank yet such recording is appropriate. In the instant case, the sale or repurchase has not been passed through the Bank's books. The stand that bank had received a commission is inconsistent with the stand that there was a sale and repurchase involved in the transaction. In such a transaction, the difference in price is the profit and not a commission. For the 5th transaction neither there was a letter from the UCO bank nor a BR, which amply demonstrate that no security was delivered. Though it is possible as an argument that in respect of transactions 2, 3 and 4 certain securities were placed wit....
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....y or that the funds were credited to the accounts of A-5 or funds were received from A-5. 354. It is most significant to note that there was no letter from the Board on the 5th transaction and even for the same transaction no BRs were received. 355. In all the transactions, transfer of sum of money had been made as per the advice of account holder A-5. Exbt. 82 is a letter dated 2.5.1991 addressed to the Manager. Grindlays Bank, New Delhi for remitting the sum of money to his account at M.G. Road, Bombay. 356. The Agenda Note prepared by accused No. 1 did not make any mention of accused No. 5. Harshad but referred to UCO Bank. In fact, A-1 has accepted that the transactions were between MUL and UCO Bank and not with any individual. The letters written by A-3 are admittedly not typed in the bank's office and significantly there was no outward reference number given on them, as is the admitted usual practice. 357. For the 4th transaction there was only the BR, and no letter and for the 5th transaction there was neither letter nor BR. It is not disputed that there can be no oral transaction by banks. It must be reflected in the books of account. 358. Further, a bank....
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....r A-2. 364. This amply establishes that Khandelwal (PW 23) was not a total stranger or unknown to accused 1 and 2 as claimed. His association with accused 5. Harshad also is clearly borne out. It is unbelievable that to a stranger i.e. (PW 23) Khandelwal, valuable securities of crores of rupees and pay orders were delivered by MUL for which receipts were issued on the letter head of A-5 Harshad. The evidence also shows that letters and the BRs issued by the UCO Bank. Hamam Street Branch. Bombay in the transactions addressed to MUL were firsts received in the office of A-5 and were then passed on to MUL. 365. In respect of the conspiracy in April/May, 1989 it is of interest to note that in the meeting i.e. 4th May, 1989 the Board of Directors of MUL resolved and decided to deploy the surplus funds into the money market. The evidence of PW 2 also throws some light on this aspect. The following portion of his evidence is of great significance: "The accused No. 1 at that time stated that MUL could not deal or involve the brokers. Mr. Harshad S. Mehta stated that the deals would be between MUL and banks structured and suggested by him i.e. Harshad S. Mehta. Mr. Meht....
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....ipal, interest or dividends thereon, or to received or deliver any money, movable property, or valuable security, or any document purporting to be an acquittance or receipt acknowledging the payment of money, or an acquittance or receipt for the delivery of any movable property or valuable security, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Section 468: Forgery for purpose of cheating- Whoever commits forgery, intending that the document or electronic record forged shall be used for the purpose of cheating, shall be punished with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Section 471: Using as genuine a forged document or electronic record- Whoever fraudulently or dishonestly uses as genuine any document or electronic record which he knows or has reason to believe to be a forged document or electronic record, shall be punished in the same manner as if he had forged such document or electronic record. 369. It would be appropriate to ....