TaxTMI 
TaxTMI 
2021 (12) TMI 1490
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.... 2. The brief facts germane to the appeal are as follows: The Appellant- N. Raghavender worked as a Branch Manager in Sri Rama Grameena Bank, Nizamabad Branch from May, 1990 to September, 1995. A. Sandhya Rani, Accused No. 2 worked as a Clerk-cum-Cashier in the same Bank from 1991-1996 and she also attended day-to-day transactions in current and savings accounts relating to preparation of credit and debit vouchers. C. Vinay Kumar, Accused No. 3 was the Treasurer of the Nishita Educational Academy (for short, "the Academy") and is the brother-in-law of Appellant (Accused No. 1). Accused No. 3 opened Current Account No. 282 in the afore-said Bank in his capacity as an authorized signatory of the Academy. The account was opened with an initial deposit of Rs. 5,00,000/-. The prosecution case is that the Appellant and Accused No. 2 abused their respective position in the Bank and conspired with Accused No. 3 by allowing withdrawal of amounts up to Rs. 10,00,000/- from the account of the Academy, notwithstanding the fact that the account did not have the requisite funds for such withdrawal. 3. The alleged modus operandi of the Accused persons was that the Appellant, in his....
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....he course of audit of the branch certain transactions of seriously irregular in nature, put through by the Branch Manager with the connivance and co-operation of certain members of staff and customers have come to surface. Some of the transactions are considered to be very serious and were put through by the Branch Manager, bypassing the laid down instructions and norms for conducting such transactions, with an intent to pass on undue monitory benefit to certain customers who are his near relatives including his wife. The transactions of the above nature are large in number. However, one such transaction is detailed hereunder for your considering an investigation. UNAUTHORISED ENCASHMENT OF TERM DEPOSITS No. 0257120 AND 0257121 FOR Rs. 10.00 LACS AND Rs. 400 LACS RESPECTIVELY. The laid down procedure for such transactions warrant that if and when the depositor desires premature withdrawal he should present to the branch, the term deposit in question duly discharged along with written request for premature withdrawal of deposits. Thereupon, the Branch Manager, after duly verifying the genuineness of the signature of the depositor and the deposit receipts may permit....
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....and Section 13(2) read with 13(1)(c) & (d) of the PC Act. Investigation was held; charge-sheet was filed and the learned Special Judge, CBI, framed the following charges against the Appellant and his co-Accused: CHARGE No. 1: That, all of you i.e., A.1 to A.3 during the years 1994-95, while A.1 and A.2 were under employment of M/s. Sri Rama Grameena Bank, Nizamabad, and A3 as Treasurer, Nishita Educational Academy, agreed to do or caused to be done an illegal act to wit to cheat Sri Rama Grameena Bank, Nizamabad in the matter of allowing withdrawals of amounts to the tune of Rs. 10.00 lakhs in current A/c No. 282 of Nishita Educational Academy, Nizamabad without having sufficient funds, in pursuance of the agreement and thereby committed an offence punishable Under Section 120-B Indian Penal Code and within my cognizance. CHARGE No. 2: That all of you i.e., A.1 to A.3 as stated above, cheated by dishonestly and fraudulently inducing the said bank to deliver Rs. 10 lakhs to you and which was the property of the said Bank and that you thereby committed an offence punishable Under Section 420 Indian Penal Code and within my cognizance. CHAR....
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....ked as Ex P6 & Ex P7), purportedly written by B. Satyajit Reddy to the Bank Manager. Vide the aforesaid letters, B. Satyajit Reddy had authorized premature withdrawal of FDRs with a request to the Bank Manager to transfer the amounts into the account of Nishita Educational Academy. PW-1 stated that the standard procedure for prematurely closing an FDR required the FDR holder/depositor to present the receipt of the FDR along with a written request seeking premature payment. He explained that in the present case, the FDRs remained with the depositor and no specific request was received. He further explained that the alleged premature payment was permitted by the Branch Manager by using general debit vouchers instead of term deposit receipts. PW-1 in his cross-examination, while admitting that he never received any complaint from Mr. Reddy regarding the premature closure, disputed the genuineness of Ex P6 & P7. So far as the allegation regarding the unlawful withdrawal of Rs. 10 Lakhs from account No. 282 is concerned, PW-1 deposed, "The account holder is required to utilize the cheques issued to him only. In cases of certain contingencies he may request the Branch in writing to issue....
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.... in order to transfer Rs. 11,570/-, debit vouchers bearing S.B. Account No. 5555 were raised. The said S.B. Account No. 5555 stood in the name of the Appellant and his wife. 9. With respect to the second set of transactions, PW-2 deposed that in the year 1994, an amount of Rs. 10,00,000/- was 'fraudulently' withdrawn from account No. 282 by passing three cheques (Ex P25, Ex P26 & Ex P27) which were signed by Accused No. 3. However, neither did the signature on the three cheques tally with that of Accused No. 3 nor were these transactions reflected in the concerned ledger sheet (Ex P23). PW-2 alleged that the ledger sheet- Ex P23 was intentionally ill-maintained to suppress these transactions. PW-2 further alleged that while there was balance in account No. 282 when Ex P25 was presented, there were insufficient funds when the other two cheques were passed. Thus, according to PW-2, the Appellant had allowed withdrawal of Rs. 10,00,000/- from account No. 282, even though there were insufficient funds in the said account. It was also pointed out that the Appellant had also permitted overdrawing of another Rs. 4 lakhs from account No. 282. PW-2 alleged that in order to cover ....
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....will be obtained on the reverse of cheque in token of receipt of the said amount. The signature on the reverse of Ex P-26 is not that of A1. It is also true that the signature of A1 is also not there on the reverse of Ex. P27". 13. The evidence of Mallikarjun Sanne, PW-5, is of no consequence as he was not personally aware of any of the facts relating to the case. Next comes the deposition of B. Ganagaram (PW-6), who worked as an Accountant at the Nizamabad Branch. He testified that loose cheque leaves could be issued by the Bank, provided that the record of the same was maintained. He went on to depose that, "It is true that there was sufficient amount in a/c No. 282 to meet the cheque amount of Rs. 2.50 Lakhs. There was a balance of Rs. 4,78,480/- was the balance in the A/c of 282 as on 30.06.1994 and I have authenticated the said balance on the same day. It is true that there was sufficient amount to meet the cheque of Rs. 4 lakhs on 30.06.1994. The balance amount available in the said A/c No. 282 on 28.07.1994 was Rs. 12,12,830/-. It is true that an entry with pencil was made between the lines debiting a sum of Rs. 3.50 Lakhs to A/c No. 282. The said entry is now marked as E....
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....ant and Accused No. 2. We may also note that PW-11 stated that the specimen signature of the Appellant was not taken before any Judicial Authority though it was obtained before independent witnesses. 16. The Appellant, in his statement recorded Under Section 313 Code of Criminal Procedure, denied the prosecution case. When confronted with the allegations levelled by PW-1 regarding the unauthorized premature closure of the two FDRs, the Appellant stated that he had done so, "With the request in writing, of depositor only premature payment was permitted. As depositor requested that he had misplaced FDRs and could not trace them out. As he is V.I.P. customer, I obliged." The Appellant (Accused No. 1) categorically denied the allegation that premature withdrawal had been done without the consent or knowledge of B. Satyajit Reddy. He further stated that it was on the request of B. Satyajit Reddy that Rs. 4 Lakhs were transferred to the account of the Academy, i.e., account No. 282. When asked about the withdrawal of Rs. 10,00,000/- from account No. 282 in the year 1994, he disputed the version put forth by the prosecution, and stated, "As there was balance, I passed the cheque and pa....
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....ed with the explanation of the Appellant. The two letters (Ex P6 and Ex P7) given by the Appellant to PW-1 were disbelieved and instead, the Court laid emphasis on the fact that despite premature closure of the two FDRs, the Appellant continued to deposit the monthly interest in the account of B. Satyajit Reddy. The Court also noted that the subsequent interest payments were not made by the Bank, but the amount was instead transferred from account No. 5555, which stood in the name of the Appellant and his wife. Since no explanation was given in regard to these interest payments made to B. Satyajit Reddy, the Court drew an adverse inference, and propounded that the interests were credited to create the illusion that the FDRs were still alive. The Court, therefore, summarily concluded that these circumstances clearly revealed that the Appellant had, without any authorization or consent, encashed the two FDRs. Thus, the Trial Court found the Appellant guilty, and consequently convicted and sentenced him to five years imprisonment along with various fines. 20. The Appellant challenged his conviction and sentence before the High Court of Judicature, Andhra Pradesh at Hyderabad. Much ....
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....he FDRs and requested him to transfer the said amount to the account of Nishita Educational Academy. He further contended that no effort was made to investigate as to whether or not the Appellant had the authorisation for pre-mature withdrawal of the FDRs. Learned Senior Counsel drew our attention to the evidence of the handwriting expert (PW-10), to highlight that signature on the letters dated 22.02.1995 and 24.02.1995, matched with the signature of the B. Satyajit Reddy. Thus, by relying upon the principles enunciated in Prabhat and Ors. v. State of Maharashtra (2013) 10 SCC 391, p. 11 and Mahak Chand and Ors. v. State of U.P., it was contended that the non-examination of B. Satyajit Reddy was fatal to the case of the Prosecution. It was passionately urged that the statement of the Appellant made Under Section 313 Code of Criminal Procedure, has in this regard been completely overlooked. 23. Shri Sidharth Luthra then pointed out paragraph 23 of the High Court judgment, wherein, it was acknowledged that no loss to the Bank was caused as a result of the alleged misdemeanours of the Appellant. He relied upon the statements of Chairman (PW-1) and Branch Manager (PW-8) of the Bank....
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....nsactions (cheques marked as ExP-26 and ExP-27). Rather, PW-6 in his cross-examination has candidly admitted that there were sufficient funds available in the afore-stated account on the dates when the amounts were withdrawn. Learned Senior Counsel argued that the aforesaid inconsistency has been duly noticed in the impugned judgment yet the High Court proceeded on a wrong premise that the onus was on Accused No. 3 to prove the availability of funds in the account. 26. It was further claimed that there is total absence of mens rea as no benefit was drawn by the Appellant even if the cash was handed over to Accused No. 3, who has since been acquitted. The statement of B. Chandrasekhar (PW-4) is said to have been misconstrued by the Trial Court and the High Court, as he had clearly admitted that not only was the amount pertaining to the three cheques- Ex P25 to P27, handed over to Accused No. 3 but also that the signature of the Appellant was not found on the three cheques. It was advanced that the findings of the High Court were also self-contradictory in as much as the Court held that the Appellant's acts were meant for the benefit of Accused No. 3, and yet the acquittal of ....
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.... appearing for the prosecution--CBI, on the other hand, rigorously defended the judgments of the Trial Court and High Court. He reminded us of the well-known limitations in exercise of powers Under Article 136 in a concurrent finding of facts. Learned ASG urged that there is no question of law involved in this appeal and all that has been determined, are essentially mixed questions of law and facts for which the Courts below have appraised and re-appraised the entire evidence. 32. Learned ASG reiterated that to establish mens rea or criminality Under Sections 420, 409 and 477A Indian Penal Code, it was not necessary to prove that the Appellant had derived benefit or caused any loss to the Bank. The fact remains that the action of the Appellant involved unauthorized conversion of public funds of an individual. He pointed out that the issuance of bank receipts for withdrawal of funds without existence of securities could not be justified except for illegal benefit to a private individual, namely, brother-in-law of the Appellant (Accused No. 3). Such illegalities cannot be defended on the pretext of practice or internal procedure being followed by the Bank. 33. Learned ASG argue....
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....477-A Indian Penal Code, nor have they made any effort to refer to the specific evidence which may satisfy such ingredients. There is no gainsaying that the role of the Trial Court and the High Court is not just to decipher and bring to light the relevant evidence, but also to apply the relevant laws to the factual matrix before it. It further appears that the Courts below have inter-changed and mixed up the allegations against the Appellant. While the charges were framed primarily with respect to the issuance of the three loose cheques and the alleged unlawful withdrawal of Rs. 10 Lakhs from account No. 282, the Courts below have proceeded to convict the Appellant on the ground that he prematurely and fraudulently enchased the two FDRs, which stood in the name of B. Satyajit Reddy. Further, the High Court, while acknowledging that no loss was caused to the Bank, held that a loss had been incurred by B. Satyajit Reddy. But the charges against the Appellant, as can be seen in Paragraph No. 5 above, were that the three Accused, by their fraudulent and illegal actions, caused a loss to the Bank. Even further, as pointed out by the learned Senior Counsel for the Appellant, the High Cou....
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....operty; (ii) That person has dishonestly mis-appropriated or converted that property to his own use; (iii) Or that person dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation of any direction of law or a legal contract. 43. It ought to be noted that the crucial word used in Section 405 Indian Penal Code is 'dishonestly' and therefore, it pre-supposes the existence of mens rea. In other words, mere retention of property entrusted to a person without any misappropriation cannot fall within the ambit of criminal breach of trust. Unless there is some actual use by the Accused in violation of law or contract, coupled with dishonest intention, there is no criminal breach of trust. The second significant expression is 'mis-appropriates' which means improperly setting apart for ones use and to the exclusion of the owner. 44. No sooner are the two fundamental ingredients of 'criminal breach of trust' within the meaning of Section 405 Indian Penal Code proved, and if such criminal breach is caused by a public servant or a banker, merchant or agent, the said offence of criminal breach of tr....
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....omise or representation was made. 48. It is equally well-settled that the phrase 'dishonestly' emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, the offence becomes punishable Under Section 420 Indian Penal Code. Contrarily, the mere breach of contract cannot give rise to criminal prosecution Under Section 420 unless fraudulent or dishonest intention is shown right at the beginning of the transaction. It is equally important that for the purpose of holding a person guilty Under Section 420, the evidence adduced must establish beyond reasonable doubt, mens rea on his part. Unless the complaint showed that the Accused had dishonest or fraudulent intention 'at the time the complainant parted with the monies', it would not amount to an offence Under Section 420 Indian Penal Code and it may only amount to breach of contract. Ingredients necessary to prove a charge Under Section 477-A Indian Penal Code: 49. The last provision of Indian Penal Code with which we are concerned in this appeal, is Section 477A, which defines and punishes the offence of 'falsification of accou....
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.... to account No. 282. It has been further held that even though the two FDRs were for a combined amount of Rs. 14 Lakhs, only Rs. 4 lakhs were shown to be credited into the Account of the Academy. The rest of the amount was adjusted towards the concealed withdrawals that took place in the year 1994. 53. Even though the two sets of allegations are continuous parts of one single transaction, for the sake of brevity and clarity, we propose that the two allegations may first be examined independently. (A) Fraudulent and unlawful withdrawal of Rs. 10 Lakhs from Account No. 282 in the year 1994. 54. We may outrightly note that so far as this allegation is concerned, there is no dispute as to the factum of 'entrustment'. The Appellant being the Branch Manager was in-charge and responsible for the deposits made by the Bank customers. The prosecution in regard to this set of transaction, has put forth a five-pronged claim. First, the Appellant along with co-Accused conspired to cause wrongful loss to the Bank. Second, the Appellant permitted the use of three loose cheques. Third, the cheques were passed by the Appellant even though there were insufficient funds in account No....
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....ssed on 30.07.1994 for an amount of Rs. 3.5 Lakhs. While PW-2 deposed that there were sufficient funds at the time of passing of Ex P25, he claimed insufficiency of funds when Ex P26 and Ex P27 were passed. On the other hand, the Appellant in his statement Under Section 313 Code of Criminal Procedure contradicted the stand of PW-2 and has testified about there being sufficient funds in account No. 282 throughout. The stand of the Appellant also finds corroboration in the testimony of PW-6, Accountant of the Branch. We have perused the Current Account Ledger for account No. 282 (Ex P23) and it appears that there were sufficient funds in account No. 282 for passing all the three cheques in question. Thus, the contention that the three cheques were passed despite insufficient funds in account No. 282, cannot be sustained. This being the case, we have no difficulty holding that so far as this part of the transaction is concerned, the Bank did not suffer any loss. 58. In order to substantiate the charge Under Section 477-A Indian Penal Code, the primary contention of the Prosecution is that despite passing the three cheques (Ex P25 to Ex P27), the Appellant did not make the relevant ....
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.... also be seen from the record, there are contradictions on this point as well. PW-4 has acknowledged that the payment for the three cheques was received by the Appellant and he subsequently handed over the same to Accused No. 3, who at the relevant time, was waiting in the office room of the Appellant. Further, neither of the courts below have recorded a finding that the Appellant gained any pecuniary benefit nor is there any other adverse circumstance which may lead us to reach such a conclusion. Therefore, in view of such slippery evidence, we are not inclined to accord much weight to this allegation. (B) Unauthorised premature encashment of the two FDRs belonging to B. Satyajit Reddy 61. We may now consider the second set of allegations pertaining to the alleged premature withdrawal of two FDRs and the subsequent unauthorised transfer of Rs. 14 Lakhs to account No. 282. It may be noted that the allegation of premature withdrawal is also accompanied by the averment that despite the premature withdrawal, the interests relating to the two FDRs continued to be deposited into savings account No. 5520 of B. Satyajit Reddy. The interest amount, however, was transferred from accou....
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....the handwriting expert (PW-10) has given some credence to the Appellant's version as according to his opinion, both the letters bear the signature(s) of B. Satyajit Reddy. 64. On the other hand, the Prosecution disputed the genuineness of these two letters and has Accused the Appellant of securing these letters antedated. The subsequent conduct of the Appellant i.e., the deposit of interest from his own account to that of B. Satyajit Reddy has been strongly highlighted to emphasize that the Appellant had made the withdrawal without the knowledge or consent of the FDR holder and in contravention of the law. The latter fact weighed heavily on the minds of the Courts below as both have proceeded to convict the Appellant on the assumption that he did not receive any authorization for the premature encashment and transfer. There is thus a serious dispute on the factum of whether or not B. Satyajit Reddy had sought the premature withdrawal and the subsequent transfer of the proceeds of FDRs to the account of Academy. The best person to clear the air and enlighten us would have been B. Satyajit Reddy himself, but neither was he associated during the course of inquiry/audit or the i....
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....ablish the charge of criminal breach of trust against the Appellant beyond a reasonable doubt. We are inclined to agree with the learned Senior Counsel for the Appellant that the non-examination of B. Satyajit Reddy has been materially fatal to the case of the prosecution. Furthermore, it appears that B. Satyajit Reddy was deliberately not examined as he would have deposed against the prosecution. Undoubtedly, some of the proven facts, like deposit of interest amount from the account of the Appellant to that of B. Satyajit Reddy, do create a strong suspicion against the Appellant, but as held by this Court time and again, suspicion cannot take the place of proof, howsoever, strong it may be. We are, therefore, of the firm belief that in the absence of cogent and unimpeachable evidence to prove that the Appellant has misappropriated the funds of the Bank and/or of B. Satyajit Reddy, it would not be safe to convict him under the provisions of Section 409 Indian Penal Code. 67. So far as the charge Under Section 420 Indian Penal Code is concerned, once again, the best and the only person who could throw light on whether or not he had voluntarily agreed to transfer his FDR amount in....
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.... of criminal trial. Such findings though may not be sufficient to fasten criminal liability on the Appellant, his dismissal from service of the Bank is fully legitimised and the punishment so awarded, is proportionate to the proven misconduct. We say so, also for the reason that neither can the Appellant be allowed to take undue advantage of the benefit of doubt being extended to him, nor is a recourse to a departmental enquiry desirable at this belated stage. On the other hand, upholding the order of dismissal dated 06.01.2006 will serve the cause of public interest and send a befitting message amongst the Appellant's peers. 70. We are also constrained to observe that in this case the CBI has either adopted a casual and callous approach or there was some hidden pressure to derail a fair investigation. The resultant effect is that though there is a strong suspicion of criminal breach of trust, cheating and/or fabrication of the Bank records against the Appellant, but such suspicion falls short of a conclusive proof to hold him guilty of the criminal charges. The best evidence having been withheld by the prosecution, the benefit of doubt must be extended to the Appellant, for....