Karnataka High Court

Smt Baby Vasantha Kumar vs The Superintendent Of Police on 29 October, 2022

Bench: Sreenivas Harish Kumar

                                1


IN THE HIGH COURT OF KARNATAKA AT BENGALURU

      DATED THIS THE 29TH DAY OF OCTOBER 2022

                          BEFORE

 THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR

       CRIMINAL APPEAL No.225 OF 2011 C/W
       CRIMINAL APPEAL No.155 OF 2011 C/W
         CRIMINAL APPEAL No.226 OF 2011

IN CRL.A.NO.225/2011

BETWEEN

Shri T.Narayanappa,
S/o T.Thimmaiah,
Aged about 56 years,
Formerly Branch Manager,
Raghavendra Nagar Branch,
State Bank of Mysuru, Tumkur,
R/at Venkatadri Nilaya, 6th Cross,
Vijayanagar, Near Sree Ranga Road,
Tumkur.
                                         ...Appellant
(By Sri P.N.Hegde, Advocate)

AND

State by Inspector of Police,
CBI, represented by
Standing Counsel for CBI
in the Hon'ble High Court,
Bengaluru
                                       ...Respondent
(By Sri P.Prasanna Kumar, Advocate)
                              2


      This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellant/accused for
the offence punishable under section 120B, 320 IPC and
under section 409, 13(1)(d) read with 13(2) of Prevention
of Corruption Act 1988.

IN CRL.A.NO.155/2011


BETWEEN

1.   Smt. Baby Vasantha Kumar,
     W/o. S.A.Vasantha Kumar,
     Aged about 64 years,
     Proprietrix, M/s. Balaji Aromatics,
     Tumkur.

2.   V.Raghavendra,
     S/o. S.A.Vasanthakumar,
     Aged about 24 years,
     Proprietor,
     M/s. Karnataka Copper Mills,
     Tumkur.

3.   V.Manikanta,
     S/o. S.A.Vasanthakumar,
     Aged about 18 years,
     Proprietor, M/s.Balaji Products,
     Tumkur.

4.   Sri V.Kandaswamy,
     S/o. S.A.Vasanthakumar,
     Aged about 41 years,
     Halusiddeswaranilaya,
     Maruthinagar,
     Arsikere.
                              3


5.    Sri S.A.Vasantha Kumar,
      S/o. Ambalavana Chettiar

      [Appeal abated against appellant
      No.5 vide order dated 25.8.2022]
                                             ...Appellants
(By Sri R.Nagendra Naik, Advocate)

AND

The Superintendent of Police,
Central Bureau of Investigation,
Ganganagar, Bengaluru.
                                            ...Respondent
(By Sri P.Prasanna Kumar, Advocate)

      This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellants/accused for
the offence punishable under section 120B, 320 IPC and
etc.,

IN CRL.A.NO.226/2011


BETWEEN

Shri T.Venkataswamy
S/o T.Thimmaiah,
Aged about 50 years,
Presently R/at Venkatadri Nilaya,
6th Cross, Vijayanagar,
Near Sree Ranga Road,
Tumkur.
                                              ...Appellant
(By Sri P.N.Hegde, Advocate)
                              4


AND

State
By Inspector of Police,
CBI, represented by
Standing Counsel for CBI
in the Hon'ble High Court,
Bengaluru
                                            ...Respondent
(By Sri P.Prasanna Kumar, Advocate)


      This Criminal Appeal is filed under Section 374(2)
Cr.P.C. praying to set aside the order dated 01.02.2011
passed by the XXXII Additional City Civil and Sessions
Judge and Special Judge for CBI cases, Bengaluru in
Spl.C.C.No.116/2007 convicting the appellant/accused for
the offence punishable under sections 120B, 320 IPC and
etc.

      These Criminal Appeals having been heard &
reserved     on   28.09.2022,     coming  on  for
pronouncement this day, the Court pronounced
the following:


                    JUDGMENT

In Special C.C.No.116/2007, on the file of XXXII

Additional City Civil and Sessions Judge and Special

Judge for CBI Cases, Bengaluru ('trial court' for short),

seven accused persons faced trial for the offences

punishable under sections 120B, 420 of Indian Penal

Code (IPC) and stood convicted. Accused No.1, in

addition to the above offences, faced trial and stood

convicted for the offences under section 409 IPC and

section 13(1)(d) read with 13(2) of Prevention of

Corruption Act ('PC Act' for short). Hence these three

appeals. Accused Nos. 2, 3, 4, 5 and 6 filed Criminal

Appeal 155/2011. Because of death of accused No.6,

appeal as regards him was abated. Criminal Appeal

225/2011 is filed by accused No.1 and Criminal Appeal

226/2011 is filed by accused No.7.

2. The gist of the prosecution is :

While accused No.1 was working as branch

manager of Raghavendra Nagar Branch of State Bank

of Mysore at Tumkur, in between the dates 11.7.2004

and 29.10.2004, he conspired with accused 2 to 5 and

extended credit facilities to them beyond his

discretionary power. He discounted cheques and

purchased fraudulent bills of accused 2 to 5 exposing

the bank to pecuniary loss of ` 57,00,000/-. In

violation of Banking Rules and Norms, accused No.1

sanctioned cash credit limit of ` 10,00,000/- even

though the borrower had only applied for cash credit

limit of ` 5,00,000/-. There were also allegations that

accused No.1 sanctioned two loans under SSI scheme

for a sum of ` 20,00,000/- to M/s Karnataka Copper

Mills of accused No.3 and loan of ` 5,00,000/- to

accused No.3 towards cost of machinery, but he

misutilized the money in conspiracy with accused 1

and 2, and diverted the money to M/s Lakshmi

Perfumery Works of accused No.4. In the charge

sheet details of transactions are mentioned.

3. The prosecution examined twenty one

witnesses, and produced the documents marked

Exs.P1 to P176. The accused got marked the

documents as per Exs. D1 to D24.

4. The trial court has recorded findings that the

prosecution has proved the transactions such as cash

credit facility of ` 10,00,000/-, two loans under SSI

scheme for ` 20,00,000/- in favour of accused No.3

who was the Proprietor of Karnataka Copper Mills,

loan of ` 1,00,000/- in favour of accused No.4,

V.Manikanta and cash credit of ` 10,00,000/- in favour

of accused No.2. All these transactions indicate that

accused No.1 circumvented bank procedures and

exceeded his discretionary power. In order to arrive

at these conclusions, the trial court, instead of

examining whether the prosecution was able to prove

the charges, proceeded to examine the defence

version and came to conclusion because defence

theory had failed, the case of prosecution would be

accepted.

5. Assailing the findings of the trial court, Sri

Nagendra Naik, learned counsel for appellants in

Criminal Appeal 155/2011 raised the contentions that

no witness examined by the prosecution would speak

to the effect that accused No.1 had intention to cheat

the bank and in furtherance of the same there was

conspiracy between him and other accused. The bank

did not lodge complaint, the CBI proceeded to launch

prosecution based on source report. The allegation

against accused No.1 was that he did not submit

control report to his next higher authority and he

exceeded his discretionary limit while sanctioning

loans. Therefore the prime witnesses have spoken

about procedural irregularities. Referring to Exs.P4

and P5 he submitted that the loans sanctioned lay

within the discretionary limit of accused No.1. No

witness would refer to any particular circular which

was said to have been violated. Even if there was

violation, it would not lead to criminal prosecution and

at best departmental enquiry could have been

initiated, which was also not done. Therefore the

judgment of conviction should be set aside.

6. Sri P.N.Hegde, learned counsel for the

appellants in Criminal Appeal 225/2011 and Criminal

Appeal 226/2011 argued that the charge sheet does

not indicate any offence being committed. The

prosecution witnesses have not at all deposed against

accused No.1, who was the branch manager.

Prosecution case appears to be that the kickback

given to accused No.1 was routed through accused

No.7, but to this effect the charge sheet is silent. The

main allegation against accused No.1 is that he did

not submit Control Return but PW6 has admitted in

the cross-examination that accused No.1 submitted

the Control Return on 30.10.2004. Late submission of

Control Return would not warrant prosecution. The

evidence of PW9 shows that loans sanctioned by

accused No.1 was within his financial power. There is

no evidence to show that bank suffered loss of

` 57,00,000/-. Therefore he argued for setting aside

the conviction.

7. Sri P.Prasanna Kumar, learned standing

counsel for CBI, appearing for respondent in all the

appeals argued that the borrowers submitted their

applications for loan of ` 5,00,000/-, but accused No.1

sanctioned ` 10,00,000/-, exceeding the cash credit

limit of the borrowers. Accused No.1 violated the

banking norms and procedure for showing favour to

accused Nos. 2 to 7. His argument was that for the

offence of conspiracy, direct evidence cannot be

obtained and inferences must be drawn from other

proved facts and circumstances. The prosecution

witnesses have given evidence that all the accused

cheated the bank, and accused No.1 in particular

misappropriated the funds under his dominion.

8. Before examining the impugned judgment in

the backdrop of the points of arguments, the essential

ingredients of sections 120B, 409, 420 IPC and section

13(2) read with section 13 (1)(d) of PC Act may be

noted here.

8.1. Section 120B of IPC deals with punishment

for conspiracy. Section 120A IPC is the defining

provision, its ingredients are

(i) agreement between two or more persons

(ii) agreement must be with regard to doing or

causing to be done

(a) an illegal act

(b) an act which is not illegal in itself but is done by illegal act

8.2. Section 409 deals with criminal breach of

trust by a public servant or by banker, merchant or

agent. This offence requires proof of committing

criminal breach of trust by a public servant or a

banker or merchant being entrusted with or having

dominion over a property.

8.3. To constitute an offence under section 420

IPC, the ingredients to be proved are the person

cheated and deceived must have been induced to

deliver any property to any person, or to make alter

or destroy the whole or any part of valuable security

or anything which is signed or sealed, and which is

capable of being converted into valuable security. It is

needless to say that the ingredients of section 415 IPC

are innate in section 420 IPC.

8.4. Section 13(1)(d) deals with obtaining of

valuable thing or pecuniary advantage by a public

servant for any other person by corrupt or illegal

means or by abusing his position as a public servant

or without any public interest.

9. It may be noted now itself that the offence

under section 13 (2) read with section 13(1)(d) could

not have been invoked, because if there is allegation

of criminal breach of trust punishable under section

409 IPC, the appropriate corresponding offence under

PC Act is section 13(2) read with section 13 (1)(c).

10. Sri P.Prasanna Kumar has placed reliance on

some authorities. In the case of R.Venkatkrishnan

vs CBI [(2009) 11 SCC 737], the Hon'ble Supreme

Court dwelling, on the scope of conspiracy, has held :

"72. Criminal conspiracy in terms of Section 120B of the Code is an independent offence. It is punishable separately.

Prosecution, therefore, must prove the same by applying the legal principles which are applicable for the purpose of proving a criminal misconduct on the part of an accused. A criminal conspiracy must be put to action and so long a crime is merely

generated in the mind of the criminal, it does not become punishable. Thoughts, even criminal in character, often involuntary, are not crimes but when they take concrete shape of an agreement to do or cause to be done an illegal act or an act which is not illegal but by illegal means then even if nothing further is done, the agreement would give rise to a criminal conspiracy.

73. The ingredients of the offence of criminal conspiracy are:

(i) an agreement between two or more persons;

(ii) the agreement must relate to doing or causing to be done either

(a) an illegal act;

(b) an act which is not illegal in itself but is done by illegal means.

Condition precedent, therefore, for holding accused persons guilty of a charge of criminal conspiracy must, therefore, be considered on the anvil of a fact which

must be established by the prosecution, viz., meeting point of two or more persons for doing or causing to be done an illegal act or an act by illegal means."

11. In Mir Nagvi Askari vs CBI [(2009) 15

SCC 643], the Hon'ble Supreme Court has reiterated

the scope of section 120B IPC in paras 60 and 61, and

of section 409 IPC in paras 167 and 168. Sri

Prasanna Kumar's argument was that even violation of

banking norms, and established practices and

procedure would amount to violation of direction of

law. In paras 175 and 176, the following are the

observations :

"175. Moreover, it must be noted in this respect that Banking norms and established practices and procedures would contain directions of law prescribing the mode in which the trust is to be discharged. The expression "direction of law" in the context of sections 405 and 409

would include not only legislations pure and simple but also directions, instruments and circulars issued by an authority entitled therefor. The trust in this regard would therefore have to be discharged in terms of such directions. Acting in violation thereof causing wrongful gain to A3 and loss to the Bank would bring the action within Section 409 IPC.

176. Established banking norms are binding on an officer of the Bank in the matter of discharge of the trust i.e. in dealing with the money entrusted to him.

He is required to follow the same and that would be an implied term of his contract of service as an officer of the bank. The accused before us here acted in breach of the same. We are therefore of the opinion that the prosecution has sufficiently been able to prove the involvement of A1, A2 and A4 as regards the offence of criminal breach of trust."

12. Sudhir Shantilal Mehta vs CBI [(2009) 8

SCC 1] also discusses the scope of the expression

"Direction of Law". In para 100, the Supreme Court

has held as below :

"100. Even if the words "directions of law" are to be given literal meaning, it would include a direction issued by the authorities in exercise of their statutory power as also the power of supervision. We have opined heretobefore that it has been accepted at the Bar that both the RBI circulars as also the Manual of UCO Bank were binding on the authorities."

13. Sri Nagendra Naik sought to distinguish the

above judgment on facts, but it becomes clear that Sri

P.Prasanna Kumar relied on Mir Nagvi Askari and

Sudhir Shantilal Mehta to emphasize the point that

since accused No.1 violated the banking norms and

circulars issued from time to time, all the transactions

concerning accused 2 to 4 amounted to offences.

14. Keeping the above principles in mind, the

evidence on record must be analysed to find out

whether any offence is proved or not. It is not

necessary to refer to oral testimonies of all the

witnesses, examination is confined to evidence

tendered by PW1, PW2, PW5, PW6, PW7, PW9, PW15,

PW20 and PW21.

15. PW1-K.Rengan was the Chief Manager of

Advances Section, Region No.V, State Bank of Mysuru,

Tumkur. At that time accused No.1 was working as

Branch Manager at Raghavendra Nagar branch of

SBM, Tumkur. PW1 has stated that having verified

the performance report of accused No.2, he noticed

that accused No.1 had sanctioned various loans, but

had failed to submit 'Control Return' in connection

with advances. He gave telephonic instructions to

accused No.1 to submit Control Return, but when

accused No.1 did not submit the Control Return, he

issued reminders to him as per Ex.P1 to P3. He has

also stated that accused No.1 had purchased cheques,

Ex.P4 and P5 exceeding his financial power and in

regard to this transaction also, accused No.1 failed to

submit Control Return.

16. While cross-examining PW1, he was

suggested that 'Control Return' had in fact been

submitted by accused No.1, and of course he denied

this suggestion. But he admitted another suggestion

that accused No.1 had the power to sanction loan up

to ` 10,00,000/- for small scale industries. Then

PW1 is sought to be discredited by questioning him

that he was in the habit of giving complaint against

bank officers, and he admitted a suggestion that he

had given a report against his predecessor. Cross-

examination to this effect does not matter much, but

his another admission has some relevancy. He

admitted the suggestion that if the manager was

found to have exceeded the discretionary limit in

some cases, the same would be rectified. And he was

again suggested that accused No.1 submitted Control

Return on 30.10.2004, he stated that he wanted to

verify the records.

17. PW2-Putteri was working as Special

Assistant in the Raghavendra Nagar Branch at the

time when accused No.1 was the branch manager.

His evidence in examination-in-chief gives entire

picture of transactions of loan sanction, and cheque

and bill discounting permitted by accused No.1. His

cross-examination shows that under Ex.P26, request

was made for loan of ` 5,00,000/- towards working

capital. He has admitted a suggestion that Karnataka

Copper Mills made an application to KSSID as per

Ex.D1 seeking allotment of an industrial shed.

Another suggestion admitted by him is that loan of

` 10,00,000/- was sought under Ex.P16 and Ex.P24

and that ` 10,00,000/- was sanctioned to Balaji

Aromatics. His prominent admission is that Control

Return was submitted on 30.10.2004.

18. PW5 has stated that accused No.1 passed

several cheques. PW6 has deposed about passing of

cheques by accused No.1. PW7 has given evidence

that the CBI Officer enquired him at SBM, Dharwad

regarding return of the cheques, Ex.P4, P5, P40, P42

and P44 which were sent for collection to Indian

Overseas Bank, Sapthapuva Branch, Dharwad from

SBM, Raghavendra Nagar Branch, Tumkur.

19. PW9, S.R.Srivastha has stated that he

worked as Manager, Advances Section, SBM Regional

Office, Tumkur in between June 2003 and December

2004. In the year 2004, he visited Raghavendra

Nagar Branch on the instruction of Assistant General

Manager. He came to know increases in the level of

advances, and accused No.1 had not taken security

for loan of ` 10,00,000/- each advanced to Karnataka

Copper Mills, Balaji Aromatics and Balaji Products. He

has stated that loan sanctioned by accused No.1 was

within the discretionary power of accused No.1 but

security documents were not properly filled and

accused No.1 had not reported the sanction of loans

to the Regional Office.

20. In the cross-examination it was elicited from

him that Karnataka Copper Mills had given loan

application as per Ex.D3, that Baby Vasanta Kumar

(accused No. 2) stood as guarantor for the loan and

that equitable mortgage had been obtained for the

loans. In this regard, he stated further that creation

of equitable mortgage was subsequent to his

inspection. Another answer elicited from him was that

the AGM had given good performance report

concerning accused No.1, and security was not

necessary for loans up to ` 1 crore under credit

guarantee scheme for small and medium enterprises.

21. Another important witness is PW15

V.Ramesh who worked as a Manager at SBM Regional

Office, Tumkur in between the period 2004 and 2005.

His evidence is that the AGM, Regional Office, SBM,

Tumkur directed him to visit Raghavendra Nagar

Branch and verify the accounts of Balaji Aromatics,

Karnataka Copper Mills, Balaji Products and other

accounts. He noticed that pre-sanction and post-

sanction inspection had not been conducted and the

manager had exceeded that discretionary power, that

he had not submitted Control Returns and that stocks

had not been insured. He has also stated that one bill

of Balaji Products was returned from Goa and

therefore he again visited Raghavendra Nagar Branch

for inspection. He stated that he visited ABT services

at Goa along with the manager of Goa Branch and

took possession of the cans available in the godown.

At that time he noticed that five cans were not

properly sealed and in that regard, he gave a report

as per Ex.P159. In the cross examination he denied

the suggestion that accused No.1 had discretionary

limit up to ` 10,00,000/- and Control Return had

been filed by accused no.1. But he admitted that loan

up to ` 7,00,000/- had been repaid. Another answer

elicited from him was that procedural irregularities

were common in the back ground of pressure of work.

22. PW20, K.V.Ananth Raj Shetty worked as

Deputy Manager, SBM, Raghavendra Nagar Branch,

Tumkur. His evidence is that the CBI Officer asked

him to furnish the copy of the statement of accounts

in connection with current account of Karnataka

Copper Mills and accordingly the branch manager

issued the statement of accounts as per Ex.P86. The

said statement showed that a DD was purchased for

`5,00,500/- on 07.08.2004. Seeing another

statement of account as per Ex.P88 in connection with

cash credit account of Karnataka Copper Mills, he

stated that two DDs purchased for ` 7,00,700/- and

` 3,00,300/- were encashed. He also stated that

Ex.P89 was the statement of account in connection

with cash credit account of Balaji Aromatics and a DD

which was purchased for ` 8,00,800/- was encashed

at SBM, Dharawad Branch. Like that another DD

purchased for ` 5,00,500/- relating to cash credit

account of Balaji Products had been purchased and it

was encashed at SBM, Dharwad Branch.

23. His cross examination shows that

performance report of accused No.1 was excellent and

admissions that Control Report had been filed in

October 2004 and the bank had collected commission

on purchase of cheques and bills. He also stated in

the cross-examination that he passed cheques in

connection with transactions of Balaji Aromatics, Balaji

Products and Karnataka Copper Mills and for all the

transactions, equitable mortgage was created.

24. PW21 was the investigating officer whose

evidence shows details of evidence collected by her on

different dates.

25. Now if the entire oral evidence of the

prominent witnesses is assessed, it does not become

clear as to what was the illegality committed in

sanctioning of loan and purchase of cheques and bills.

No witness has implicated accused No.1, and their

evidence does not help in any way to draw inference

as to existence of conspiracy among all the accused.

It appears that Control Return was not submitted on

time and it was the reason for reminders being issued

to accused No.1. But PW2 and PW20 have admitted

that Control Return was submitted on 30.10.2004. It

has come in evidence that equitable mortgage was

also obtained and that the bank collected commission

when cheques and bills were purchased. This being

the evidence, it does not become clear as to how the

accused came to be prosecuted. There might be some

procedural infractions, which could be set right or

rectified as stated by PW1 in his cross examination.

PW15 has given an admission that procedural

irregularities were common because of pressure work.

26. In regard to allegation that accused No.1

had exceeded his discretionary limit, there is no

consistent evidence. If one witness says that accused

No.1 had exceeded the limit, another says that he had

not exceeded. PW9 has very specifically stated in

examination-in-chief itself that accused No.1 had not

exceeded discretionary limit. Moreover the

prosecution should have produced a circular or

notification which specified the discretionary power of

branch manager. Above all as the evidence shows

AGM had given good performance report concerning

accused No.1. The evidence of the investigating

officer is of no use at all. In a case of this type, the

evidence of investigating officer must disclose as to on

what basis he could form an opinion that offences had

been committed. The prosecution case is that the

bank suffered loss of ` 57,00,000/- but no witness has

stated that the bank suffered loss. Even the

investigating officer does not state about it. Rather it

is elicited from the investigating officer that accused

No.1 had discretionary power up to ` 10,00,000/- and

could purchase cheques up to ` 2,00,000/- and bills

up to ` 5,00,000/-. As regards involvement of

accused No.7, no witness has spoken against him, but

PW21, the investigating officer has stated that the

receiving or acceptance of cheques by accused No.1

showed conspiracy between him and other accused.

This answer has no basis. To this kind of evidence, a

judgment of the Supreme Court in the case of S.V.L

Murthy vs State represented by CBI, Hyderabad

[(2009) 6 SCC 77], cited by Sri Nagendra Naik may

be appositely referred here. In para 55, it is held ,

"55. The upshot of our discussions is:-

(a) The prosecution did not lay down any foundational facts to arrive at a finding of dishonest intention on the part of the appellants, nor any such finding has been arrived at by the trial court or the High Court.

(b) The circumstances which were considered sufficient to bring home the charges against the appellants were: the cheques of accused 1, 2 and 3 were discounted after purchasing cheques;

cheques were deposited after a gap of 1 to 4 days; only later the amounts were deposited in the account which circumstances, in our opinion, are not sufficient to hold the appellants guilty for commission of offence under Section 420 of the IPC as all the actions on the part of the bank officers were in consonance with the long standing banking practice.

(c) Accused 4 had taken care of having adequate security to ensure that the bank does not suffer any loss, the gain if any was caused to the Bank.

(d) The appellants acted on instructions by the higher authority.

(e) The prosecution evidence does not establish any conspiracy on their part vis- a-vis Accused 1, 2 and 3."

27. Therefore the conclusion to be drawn is the

prosecution has failed to establish the offences

punishable under sections 120B, 420, 409 of IPC and

IPC and section 13 (1) (2) read with 13(1)(d) of PC

Act. The judgment of the trial court cannot be

sustained at all. Hence the following :

ORDER

All the appeals are allowed, the judgment of the

trial court in Spl.C.C.No.116/2007 on the file of XXXII