45. Material evidence also discloses that the purpose for
which loan is sanctioned or facility is extended is not
achieved by accused Nos.2 and 3 and there is diversion of
funds. Cheque discounting facility was also not properly
done by accused No.1 inasmuch as he did not send the bill
drawn on Andhra Bank in respect of M/s Sadguru
Enterprises remains unpaid to major extent insofar as
Canara Bank, Basavanagudi Branch is concerned even
after sale of goods. There is a clear deficiency in
discharging the responsibility by accused No.1 in this
regard.
46. Further, the amounts sanctioned by the Branch for
the purpose of Trading has not been utilized for said
purpose by accused Nos.2 and 3; but the payments were
made to individuals. No doubt, among P.Ws.7 to 13,
P.W.8 and P.W.13 have turned partly hostile.
47. The fact remains that to the extent they supported
the case of the prosecution a clear case of siphoning of the
funds from the loan accounts of accused Nos.2 and 3 to
different individuals is established by prosecution.
48. Needless to emphasize that it was the duty of
accused No.1 to ensure that the funds have been utilized
by accused Nos.2 and 3 for their business/trading
purposes and not for paying individual debts, that too
through the accounts of accused Nos.2 and 3.
49. After the money is transferred to the accounts of
accused Nos.2 and 3, and after they draw the money, if
the individual persons like P.Ws.7 to 13 are paid out their
dues, then accused No.1 could not have been held
responsible. There again the utilization certificate of the
loan amount need to be issued by accused Nos.2 and 3
and periodical inspections are to be conducted by accused
No.1 and his sub staff not only with regard to stock
statement which has been given as security but also with
other conditions of sanction.
50. Why would accused No.1 show extra interest to the
loan account of accused Nos.2 and 3 is a question that
needs to be looked into especially in the light of the
charges leveled against all the three accused including
offence under Section 120B of the Indian Penal Code.
51. It is settled principles of law and requires no
emphasis that expecting the positive evidence to be placed
to establish the ingredients to attract the offence under
Section 120B of the Indian Penal Code is impermissible,
inasmuch as such positive evidence is seldom available in
a given case. It is equally settled principles of law that
office under Section 120B of the Indian Penal Code can be
established by inferential deduction from the facts and
circumstances placed on record.
52. Since accused No.1 is no more and his appeal came
to be abated, it is all the more necessary for this Court to
find out whether such inferential deduction is permissible
in the present case.
53. In that regard, admittedly, materials on record would
establish that accused No.1 being the whole and sole of
Canara Bank, Basavanagudi Branch, has shown extra
interest at every stage, to accused Nos.2 and 3.
54. Firstly, Rs.7,00,000/- limit was enhanced to
Rs.8,00,000/- and as on the date of enhancing limit
outstanding was more than Rs.8,00,000/-. Later, further
accumulation took place in the loan account of accused
Nos.2 and 3 and instead of demanding the clearance of
loan amount from accused Nos.2 and 3, accused No.1
again enhanced the limit to Rs.10,00,000/-.
55. Secondly, even as on the date of enhancing the limit
to Rs.10,00,000/-, outstanding amount from accused
Nos.2 and 3 was to the tune of Rs.13,00,000/- and odd.
Thus, by misusing the official position, in the guise of
discretionary powers accused No.1 went on processing the
request made by accused Nos.2 and 3 by practically
throwing all norms to wind.
56. In the absence of any secret understanding between
accused No.1 to 3 why would accused No.1 show such an
interest in the accounts of accused Nos.2 and 3 and not
intimating the same to the higher authorities of Canara
Bank and said conduct of accused No.1 got revealed only
when inspection was conducted by P.W.14 along with
Ramachandra Rao and Anantapadmanabha is a significant
factor while inferring the existence of conspiracy among
accused persons.
57. No explanation whatsoever is forthcoming on record
either by accused No.1 or by other accused persons in this
regard.
58. Suggestions put to the material witnesses of the
prosecution that it was well within the powers of accused
No.1 having been denied by the prosecution witnesses, it
was incumbent on the part of accused No.1 to spell out
that all his deeds were well within the norms of the bank
at least when incriminatory circumstances were put to him
while recording the accused statement.
59. Sri S.P.Kulkarni, learned Senior Advocate , no doubt
contended that based on the judgments referred to supra
that in the absence of bank placing necessary circular the
accused cannot be found guilty.
60. However, facts and circumstances in the said case
are different than the facts and circumstances in the case
on hand. In the present case, sanctioning authority has
clearly opined that the acts of accused No.1 was not mere
irregularity but it is illegality.
61. To record such a finding, overwhelming evidence is
available on record in the form of inspection report and
other material documents referred to supra collected and
placed on record by the Investigation Officer. Practically
every transaction of accused Nos.2 and 3, there is violation
and it should be therefore inferred that those violations are
pursuant to the criminal conspiracy entered into among
the accused Nos.1 to 3. Therefore, the findings recorded
by the learned Special Judge that there is element of
wrongful loss caused to the bank and wrongful gain caused
to accused Nos.1 to 3 is based on logical reasons.
62. No doubt, a suggestion is put to the Investigation
Officer that he has estimated the loss to the bank to the
tune of Rs.46,85,000/-. But the civil suits filed between
the bank and accused Nos.2 and 3 would sufficiently
establish the actual liability of the accused Nos.2 and 3.
63. Sri S.P.Kulkarni, however contended that O.S.
No.495/2008 filed by the appellant have been decreed in
their favour. Sri P.Prasanna Kumar, advocate for
respondent while addressing his reply arguments
contended that said judgment in favour of the appellants
has been reversed by the Hon'ble Apex Court.
64. Reversal of the judgment is not disputed. Therefore,
prosecution is successful in establishing the element of
wrongful loss to the bank and wrongful gain to the accused
Nos.1 to 3.
65. When Section 120B of the IPC is alleged, what
exactly was the share that accused No.1 derived by him by
showing the extra favour to accused Nos.2 and 3 is again
needs to be inferred and it cannot be proved with
mathematical precision inasmuch as nobody would receive
the illegal gratification with acknowledgment.
66. Therefore, it was for the accused Nos.1 to 3 to
establish that all transactions of accused Nos.2 and 3 with
Canara Bank, Basavanagudi Branch was well within the
four corners of the banking operations and thereby, there
was no scope for any criminal conspiracy at all.
67. With regard to the principles that would govern the
proof of criminal conspiracy, this Court would gainfully
places reliance on the principles of law enunciated in the
judgment of the Hon'ble Apex Court in the case of
Mohd.Khalid vs. State of West Bengal reported in
(2002)7 SCC 334. Relevant portion of the said judgment
is culled out hereunder for ready reference:
25. In Kehar Singh v. State (Delhi Admn.) [(1988) 3
SCC 609 : 1988 SCC (Cri) 711 : AIR 1988 SC 1883]
(AIR at p. 1954) this Court observed : (SCC pp. 732-
33, para 275)
"275. Generally, a conspiracy is hatched in
secrecy and it may be difficult to adduce direct
evidence of the same. The prosecution will often
rely on evidence of acts of various parties to infer
that they were done in reference to their
common intention. The prosecution will also
more often rely upon circumstantial evidence.
The conspiracy can be undoubtedly proved by
such evidence direct or circumstantial. But the
court must enquire whether the two persons are
independently pursuing the same end or they
have come together to the pursuit of the unlawful
object. The former does not render them
conspirators, but the latter does. It is, however,
essential that the offence of conspiracy required
some kind of physical manifestation of
agreement. The express agreement, however,
need not be proved. Nor actual meeting of the
two persons is necessary. Nor is it necessary to
prove the actual words of communication. The
evidence as to transmission of thoughts sharing
the unlawful design may be sufficient."
Conspiracy can be proved by circumstances and
other materials. (See State of
Bihar v. Paramhans Yadav [1986 Pat LJR 688
(HC)] .)
To establish a charge of conspiracy
knowledge about indulgence in either an illegal
act or a legal act by illegal means is necessary.
In some cases, intent of unlawful use being made
of the goods or services in question may be
inferred from the knowledge itself. This apart,
the prosecution has not to establish that
a particular unlawful use was intended, so long
as the goods or service in question could not be
put to any lawful use. Finally, when the ultimate
offence consists of a chain of actions, it would
not be necessary for the prosecution to establish,
to bring home the charge of conspiracy, that
each of the conspirators had the knowledge of
what the collaborator would do, so long as it is
known that the collaborator would put the goods
or service to an unlawful use. (See State of
Maharashtra v. Som Nath Thapa [(1996) 4 SCC
659 : 1996 SCC (Cri) 820 : JT (1996) 4 SC 615]
, SCC p. 668, para 24.)
68. Applying the principles of law enunciated in the
aforesaid judgment to the case on hand, material evidence
places on record in enhancing limits for Over Draft
unilaterally without ratification from the higher authorities
nor reporting the same under F-637 by accused No.1, and
accused Nos.2 and 3 having mis-utilized said Over Draft by
allowing the individual persons to draw the money when
said money was supposed to be utilized for
trading/business purpose would be sufficient enough to
prove the element of existence of criminal conspiracy
among accused Nos.1 to 3.
69. Insofar as principles of law enunciated in the
decisions which have been relied on by the appellants are
concerned, in the case of Vesa Holdings, Their Lordships
of the Hon'ble Apex Court were of the opinion that mere
breach of contract would not per se amount to cheating.
In the case of hand, there is no contract at all for breach
and material on record would suggest that there was
deviation from the existing norms of the bank in lending
the amount to accused Nos.2 and 3 and therefore, said
decision is of no avail for the appellant to seek for an order
of acquittal.
70. In the case of Sujit Biswas, the Hon'ble Apex Court
held that prosecution has to travel a long distance between
something that 'may be proved' and something that 'will
be proved' and 'actual proof'. It is also enunciated in the
said decision that suspicion how so strong, would not take
seat of proof. In the case on hand, material evidence
placed on record is sufficient enough to hold that it is not
mere suspicion in the case of prosecution but actual proof
is made available.
71. Again, in the case of Ismail Khan Shah, what are
the ingredients required to be establish for attracting the
offence under Section 420 IPC has been enunciated by the
Hon'ble Apex Court. In the case on hand, in view of the
foregoing discussion where the proceeds has been utilized
by accused Nos.2 and 3 not only in the over draft account
but also in the bill discounting account and admittedly,
those amounts were not paid and therefore, there is a
wrongful loss to the bank and corresponding wrongful gain
to the appellants and accused No.1. Therefore, said
decision is of no avail.
72. In the case of Rajeevan Aswathy, the Hon'ble Apex
court considered the question of mere inference would not
be sufficient from the material evidence on record and the
prosecution has to place necessary material evidence on
record to complete the offence under Section 120B and
420 IPC. In the case on hand, overwhelming evidence is
placed on record to establish the ingredients to attract the
offence under Section 120B and 420 IPC. Therefore, facts
of the present case are different from the facts involved in
the case of Rajeevan Aswathy and as such, same is not
applicable.
73. Again in the case of A.Ramanuja the Court did
consider the principles of law in the case of Rajeevan
Aswathy and therefore, same ratio will be applicable to
A.Ramanuja and same is not of any assistance to accept
the case of the appellants.
74. In the case of Sherimon Hon'ble Apex Court was
dealing with a fact that mere outstanding in the account
would not ipso facto result in criminal offence. In the case
on hand, in view of the foregoing discussion, it is not the
mere outstanding that was complained of against accused
persons, but existence of conspiracy and furtherance of
such conspiracy, illegal acts committed by the appellants
has been discussed at length by this Court and therefore,
principles Sherimon is not of any assistance in accepting
the contentions urged on behalf of the appellants.
75. In the case of N.R.Bhat, learned single Judge of this
Court took into consideration about the role played by
bank officers and adverse inference under Section 114(g)
of the Indian Evidence Act was pressed into service. Facts
of the present case are altogether different and therefore,
said decision is not applicable to the case on hand.
76. In the case Kattemane Ganesha again this Court
took into consideration what is the purpose of cross-
examination and answers elicited in the cross-examination
cannot be ignored while adjudging the case of the parties
in toto. In the case on hand, answers elicited in the cross-
examination is not only discussed by the learned Trial
Judge in the impugned judgment but this Court also re-
appreciated the same and therefore, Kattemane Ganesha
is of no avail in accepting the contentions of the
appellants.
77. In the case of R.Shivakumar there was an
admission in the cross-examination of the witness on
behalf of the prosecution that guidelines were not followed.
In the case on hand, no such material is available.
78. The principles of law enunciated in the case of Lalita
Kumari cannot be disputed. But how same is applicable
to the case on hand is not forthcoming and therefore,
Lalita Kumari is of no avail in accepting the case of the
appellants.
79. In the additional list of citations, the principles of
law enunciated in the case of Raja Ram is sought to be
pressed into service. The offence alleged in the said case
is under Section 302 r/w 149 IPC and therefore, same is of
no avail to the case on hand.
80. In the cases of Dandu Lakshmi Reddy,
Mohammed Ilias, Anil Rai, Bijoy Singh, Pawan
Kumar, Suresh Chowdhary, K.C.Narasegowda,
Deepak Rajak and Kaushal Verma, principles of law
enunciated is that if a particular accused has not even
appealed against the impugned judgment, would he also
get the benefit of modification of the conviction and
sentence by appealing accused. In the case on hand,
same is sought to be pressed into service taking note of
death of appellant. It is pertinent to note that no case is
adjudicated on merits insofar as accused No.1 is concerned
before appellate forum and therefore, principles of law
enunciated in those decisions are not of any avail to the
appellants in seeking for modification.
81. In other words, mere death of appellant and offence
alleged against accused No.1 having been not further
adjudicated on account of his appeal being abated, will not
improve the case of the appellants in independently
appraising the material and therefore, this Court is of the
considered opinion that none of the decisions that have
been cited on behalf of the appellants would be of any
avail in upsetting the finding of guilt of appellants for the
offence punishable under Sections 120B and 420 of IPC.
82. In view of the foregoing discussion even after re-
appreciation of the material evidence on record this Court
is of the considered opinion that prosecution is successful
in establishing necessary ingredients to attract the offence
punishable under Sections 420 and 120B of the Indian
Penal Code for which present appellants have been
convicted.
83. Accordingly, point Nos.1 and 2 are answered in the
affirmative and negative, respectively.
84. REGARDING POINT No.3: Appellants have been
convicted for the aforesaid offences and have been ordered
to undergo imprisonment as stated supra. Taking note of
the fact that in respect of civil liability, the bank has
already filed necessary civil proceedings and it is being
recovered and accused No.1 having died and appeal
against him came to be dismissed as abated, further
taking note of the fact that appellant No.2 is aged about
74 years and appellant No.1 is aged 50 years and they are
first time offenders and there is no minimum imprisonment
period prescribed for the offence punishable under
Sections 120B and 420 of the Indian Penal Code, the
simple imprisonment ordered by the learned Trial Judge for
the offences punishable under Sections 120B and 420 of
the Indian Penal Code, if set-aside by enhancing fine
amount in a sum of Rs.4,50,000/- (plus Rs.25,000/- each
for offence under Sections 120B and 420 IPC), in all
Rs.5,00,000/-) would meet the ends of justice.
Accordingly, point No.3 is answered partly in the
affirmative.
85. REGARDING POINT No.4: In view of the finding of
this Court on point Nos.1 to 3, the following:
ORDER
(i) Criminal Appeal is allowed in part.
(ii) While maintaining the conviction of the
appellants for the offences punishable
under Sections 120B and 420 of the Indian
Penal Code, sentence ordered by the
learned Special Judge is modified as under:
(a) Simple imprisonment of 3 years and 2
years ordered for the offences
punishable under Sections 120B and
420 of IPC respectively is hereby set-
aside by enhancing the fine amount in
a sum of Rs.4,50,000/- (plus
Rs.25,000/- each for the offences
punishable under Sections 120B and
420 IPC, in all Rs.5,00,000/-) payable
by each of the appellants.
(b) Enhanced fine amount is to be paid
on or before 15th March 2025 failing
which appellants shall undergo simple
imprisonment as ordered by the
learned Special Judge in the
impugned judgment.
(iii) Office is directed to return the Trial Court
Records with copy of this Order forthwith,
for issuing modified conviction warrant.
Sd/-
(V. SRISHANANDA)
JUDGE
kcm
