Karnataka High Court
Mrs N Padmini vs Superintendent Of Police on 2 May, 2025
Author: H.P.Sandesh
Bench: H.P.Sandesh
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF MAY, 2025
BEFORE
THE HON'BLE MR. JUSTICE H.P. SANDESH
CRIMINAL APPEAL NO.362/2012
BETWEEN:
1. MRS. N. PADMINI
W/O SRI. N.C.S.MAYYA
AGED ABOUT 62 YEARS
45/13, III MAIN ROAD
MOUSNT JOY ESTENTION
HANUMANTHANAGAR
BENGALURU-560 019. ... APPELLANT
(BY SRI. S.S.SRINIVASA RAO, ADVOCATE)
AND:
1. SUPERINTENDENT OF POLICE
CENTRAL BUREAU OF INVESTIGATION
BELLARY ROAD, BENGALURU. ... RESPONDENT
(BY MS. RAMULA K., ADVOCATE FOR
SRI. P. RASANNA KUMAR, ADVOCATE)
THIS CRIMINAL APPEAL IS FILED UNDER SECTION 374(2)
OF CR.P.C PRAYING TO SET ASIDE THE JUDGMENT OF
CONVICTION AND SENTENCE DATED 19.03.2012 PASSED BY
THE XLVI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND
SPECIAL JUDGE FOR CBI CASES AT BENGALURU CITY IN
SPL.C.C.232/2004 - CONVICTING THE APPELLANT/ACCUSED
NO.1 FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 120B,
420 OF IPC AND UNDER SECTION 13(2) R/W SECTION 13(1)(d)
OF THE PREVENTION OF CORRUPTION ACT.
2
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 28.03.2025 THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE H.P.SANDESH
CAV JUDGMENT
Heard learned counsel for the appellant and learned
counsel for the respondent.
2. This appeal is filed by appellant-accused No.1 under
Section 374(2) of the Code of Criminal Procedure challenging the
judgment of conviction and sentence passed against her to
undergo simple imprisonment for a period of one year for the
offence under Section 120B IPC, simple imprisonment for a
period of one year with fine of Rs.5,000/- for the offence under
Section 420 IPC and simple imprisonment for a period of two
years with fine of Rs.10,000/- for the offence under Section
13(2) read with Section 13(1)(d) of Prevention of Corruption Act.
3. The factual matrix of the case of the prosecution
before the Trial Court is that the accused No.1 was working as
Chief Manager, Canara Bank, Chamarajapet Branch, Bangalore
during the period from 05.08.2002 to 14.06.2003 and had
entered into criminal conspiracy with accused Nos.2 to 4 to cheat
Canara Bank and in pursuance of the said criminal conspiracy,
the accused Nos.2 and 3, the proprietors of M/s. Empap
Electronics and M/s. Empee Electronics respectively, both of
which are situated in Bangalore had dishonestly and fraudulently
opened a joint SB account in Canara Bank. The accused No.1,
who was the Chief Manager of the Bank had introduced this joint
savings Bank account herself and accused Nos.2 and 3 have
dishonestly and fraudulently opened two current accounts in the
name of M/s. Empap Electronics and M/s. Empee Electronics
respectively.
4. It is the case of the prosecution that Sri Babulal V.
Patel, who was not acquainted with accused Nos.2 and 3 was
asked to introduce these two accounts, by accused No.1. After
opening of the said savings account and current accounts,
accused Nos.2 and 3 dishonestly and fraudulently and in
connivance with accused Nos.1 and 4, got discounted the
Cheques through accused No.1 and the said fraudulent amount
was credited to the accounts of accused Nos.2 and 3. As per the
powers delegated to accused No.1, the Chief Manager, she could
permit discounting of approved Cheques upto Rs.20 lakhs in
respect of a party and this limit should include the transactions
against the Cheques already sent or to be sent in clearing. It is
also the case of the prosecution that in the joint savings Bank
account of accused Nos.2 and 3, discounting of local Cheques
were permitted from 12.03.2003 onwards i.e., within ten days of
the opening of the account in the branch. Thereafter, the
Cheques were permitted to be discounted on a regular basis, and
the discounting was continued until 26.04.2003. In total 78
Cheques amounting to Rs.562 lakhs were discounted in the
above three accounts from 03.03.2003 to 26.04.2003 within a
period of 45 days. The same was noticed and deputed P.W.5 to
examine the same and P.W.5 has submitted a report in terms of
Ex.P389 and on receiving the report Ex.P389, defrauding of the
bank amount to the extent of Rs.114.20 in Cheque discounting
and Rs.21 lakhs towards housing loan which came to light,
complaint was lodged and case was registered in
R.C.No.18(A)/2003 by the CBI/ACB, Bangalore and the
Investigating Officer obtained search warrant to search the
residential premises of the accused Nos.2 and 3. Accordingly,
after recording the statement of the witnesses and after
collecting the documents, they have filed the charge-sheet.
5. The accused persons were secured and they have
not pleaded guilty. Hence, the prosecution examined in all 25
witnesses as P.Ws.1 to 25 and got marked the documents as
Exs.P1 to P497(a). During the course of cross-examination, the
defence has also got marked the documents of Exs.D1 to D8.
The accused was subjected to 313 statement and accused
denied the prosecution case and not chosen to lead any defence
evidence.
6. The Trial Court having considered both oral and
documentary evidence placed on record, convicted the accused
persons for the above offences. The accused Nos.2 and 3 though
have been convicted, they passed away, hence, case against
them is abated. Now, the appeal under consideration is in
respect of appellant No.1, who has filed the present criminal
appeal before this Court.
7. The main contention of learned counsel for the
appellant in his argument is that the Trial Court committed an
error in appreciating both oral and documentary evidence placed
on record and the appellant was Branch Chief Manager and
overall in-charge of the Branch which is classified by the Bank as
an Exceptionally large Branch having among other, a Senior
Manager, 2 Managers, 6 Officers and in all more than 25
employees. The Branch in charge had no role to play in routine
Banking activities to be proceeded with. Learned counsel would
vehemently contend that the Trial Court failed to appreciate the
fact that Banking is a commercial business and criminal intent in
the name of natural justice cannot be attributed to commercial
decisions taken by honest managers invoking criminal offences
against them. The very fact that appellant had caused loss has
not been established inasmuch as the entire amount had been
fully secured even prior to the FIR being lodged. It is contended
that the Court failed to take note of the fact that equitable
mortgage of the assets of the accused Nos.2 and 3 had been
obtained. The appellant along with P.W.1 had held a number of
meetings for recovery for the money due and no loss whatsoever
has been caused to the Bank, as the amount was fully secured
even before investigation by P.W.5 and on the date of filing of
FIR. It is strange that Court has failed to take cognizance of the
fact that the entire liability with up to date interest has been
recovered by the Bank and therefore, the Bank has not incurred
any financial loss whatsoever. The accounting methodology of
the Branch requiring daily report to be sent to Circle Office were
not produced and the said observation is not erroneous and the
quarterly reports for ratification are sent which are not produced
is also an erroneous observation and charges were not proved.
8. It is also the contention that the Trial Court failed to
appreciate that Ex.P51 clearly revealed that no pending Cheques
were outstanding as the same reveals nil balance. Learned
counsel would vehemently contend that the Trial Court failed to
take note of the fact that prosecution required sanction under
Section 19 of the Prevention of Corruption Act and there was
inherent lack of jurisdiction, compliance and basic lack of
authority with respect to grant of sanction in proceeding against
the appellant and that it does not attract Prevention of
Corruption Act. It is also contended that document Ex.D1 is very
clear that ratification was sought and also transaction was
brought to the notice of higher authority and amount in respect
of dishonoured Cheques are also deposited and collateral
security was given. Learned counsel would vehemently contend
that even evidence of P.W.2 supports the case of accused No.1
and P.W.1 categorically admits that out of 13 Cheques, 4
Cheques are discounted by H.N.Palegar, but the same is included
against the appellant. Learned counsel would vehemently
contend that even P.W.24 supports the case of accused No.1 and
evidence of P.W.25-Investigating Officer is clear in respect of
security is concerned. Learned counsel also brought to notice of
this Court that Prevention of Corruption Act cannot be invoked
when there is no loss to the bank and bank has not suffered any
monitory loss and the Trial Court failed to consider Ex.P51 and
there was no criminal misconduct and P.W.3 also speak about
addressing letter for ratification in terms of Ex.D1. When such
being the case, ought not to have convicted the appellant.
9. Learned counsel for the appellant in support of his
argument, relied upon the judgment in DILEEPBHAI
NANUBHAI SANGHANI VS. STATE OF GUJARAT AND
ANOTHER reported in 2025 SCC ONLINE SC 441 and brought
to notice of this Court discussion made in paragraph No.6,
wherein judgment of NEERAJ DUTTA's case was discussed to
urge that in the absence of direct oral or documentary evidence,
the Court could draw inference from the evidence available,
including circumstantial, to bring home the guilt of the accused.
The policy deviation is a clear pointer to the avaricious intent of
the accused; to illegally profit, at the expense of the State which
demonstrably suffered huge losses and no such circumstance is
warranted in the case on hand. Learned counsel also brought to
notice of this Court paragraph No.22, wherein discussion was
made that only charge is with respect to misuse of authority
which does not come under the provisions of the Prevention of
Corruption Act and none of the ingredients regarding demand or
obtaining or acceptance of bribe or any illegal gratification has
come out. The accusation was only that the policy of the State
required a tender process to be adopted but the Minister had
sanctioned the grant of fishing rights on an upset price, which is
alleged to be misuse of authority especially since the Policy can
be deviated from, only on orders of the Chief Minister or the
Cabinet as per the policy document and the Rules of Business
framed. The investigation report, as we observed, speaks only of
an allegation of misuse of authority, without any allegation of
demand and acceptance of bribe as against the appellant. The
presumption under Section 20 of the Act does not arise. Learned
counsel referring this discussion would vehemently contend that
question of invoking Prevention of Corruption Act does not arise.
10. Learned counsel for the respondent-CBI would
vehemently contend that complaint was given in terms of Ex.P1
and that too, after making an enquiry. The accused No.1 herself
introduced in opening the bank account and opened two current
accounts and one savings bank account. Learned counsel also
would vehemently contend that appellant had only limit of Rs.20
lakhs, but continuously discounted the Cheques and exceeded
the limit. Ex.P51 also discloses regarding dues and P.W.1 given
complaint to CBI and collateral security is only upto Rs.75 lakhs.
But here is a case of discounting of Cheques for more than
Rs.120 lakhs. Learned counsel would vehemently contend that
P.W.5 investigated the matter and came forward to settle the
matter after noticing the fraud by the appellant along with
accused Nos.2 to 4. Learned counsel would contend that though
letter was sent for ratification after noticing fraud, no ratification
was made. P.W.2 speaks regarding approved Cheques and P.W.3
also speaks about Exs.P2 to P14 i.e., in total 13 Cheques were
dishonoured. P.Ws.2 and 5 have also spoken about their
responsibility. Learned counsel would vehemently contend that
appellant not disputes discounting of Cheques and Rs.526 lakhs
was disbursed within a span of 45 days. Learned counsel would
vehemently contend that while invoking Section 120B IPC, the
Court has to take note of circumstantial evidence and P.W.6
categorically deposed that account was opened at the instance of
accused No.1 in the name of accused Nos.2 and 3. Learned
counsel would vehemently contend that Ex.P389-report is very
clear regarding discounting of Cheques and collateral security
was given after discounting of Cheques. It is contended that the
citation given by the appellant is not applicable to the case on
hand and here is a case where the appellant favoured accused
Nos.2 and 3 and the appellant is the main accused, who indulged
in such act, in order to favour accused Nos.2 and 3, exceeded
the limit without there bring any ratification.
11. Learned counsel for the respondent in support of her
argument, relied upon the judgment in the Apex Court in MIR
NAGVI ASKARI VS. CENTRAL BUREAU OF INVESTIGATION
reported in (2009) 15 SCC 643 and relied upon paragraph
Nos.59 to 66, wherein observation is made that moreover, it
must be noted in this respect that Banking norms and
established practices and "Criminal conspiracy, it must be noted
in this regard, is an independent offence. The courts, however,
while drawing an inference from the materials brought on record
to arrive at a finding as to whether the charges of the criminal
conspiracy have been proved or not, must always bear in mind
that a conspiracy is hatched in secrecy and it is difficult, if not
impossible, to obtain direct evidence to establish the same. The
manner and circumstances in which the offences have been
committed and the accused persons took part are relevant.
12. The counsel also relied upon the judgment of the
Apex Court in SUDHIR SHANTHILAL MEHTA VS. CENTRAL
BUREAU OF INVESTIGATION reported in (2009) 8 SCC 1 and
relied upon paragraph No.8, wherein Apex Court held that having
regard to the fact that the Reserve Bank of India exercises
control over the Banking Companies, we are of the opinion that
the said Circular letter was binding on the Banking Companies.
The officials of UCO Bank were, therefore, bound by the said
circular letter.
13. The counsel also relied upon the judgment of the
Apex Court in R. VENKATAKRISHNAN Vs. CENTRAL BUREAU
OF INVESTIGATION reported in (2009) 11 SCC 737 and
relied upon paragraph Nos.82, 83 and 167, wherein the Apex
Court held that applying the principles of law to the facts of the
present case, we may take note of certain broad features.
Indisputably, maintaining of cash reserve ratio is a statutory
requirement. All the Scheduled Banks are bound to carry on the
statutory instructions issued by the Reserve Bank of India in this
behalf. It is for the maintenance of this cash reserve ratio that
UCO Bank used to participate in call money transactions in the
money market, decision in respect whereof used to be taken at
its Head Office at Kolkata. In paragraph No.167, it is observed
that each one of them played a specific role in diversion of funds
from NHB to the account of Harsad Mehta, all ostensibly under a
call money transaction. They thereby in our opinion facilitated
Harshad Mehta to obtain pecuniary advantage within the
meaning of the section. The acts were anything but intended to
be in public interest. On the contrary the public loss and
suffering occasioned thereby was immeasurable. Though it is
true, as has been argued before us that all the funds diverted
have subsequently been returned to NHB and no actual loss has
been occasioned there by either to the UCO Bank or the NHB.
But it must not be forgotten that white collar crimes of such a
nature affect the whole society even though they may not have
any immediate victims.
14. The counsel also replied upon the judgment of the
Apex Court in VINAYAKA NARAYAN DEOSTHALI VS.
CENTRAL BUREAU OF INVESTIGATION reported in (2015) 4
SCC 353, wherein Apex Court held that criminal breach of trust
by banker/public servant, appellant was employer of securities
department of UCO Bank, by abusing his official position and
violating banking laws felicitated trading with respect of
securities account of UCO Bank to the benefit of the accused
Harshad Mehta under a criminal conspiracy and hence convicted
for offences criminal conspiracy, breach of trust along with for
offence obtaining pecuniary advantage under PC Act.
15. The counsel also relied upon the judgment of the
Apex Court in VINAYAK NARAYAN DEOSTHALI VS. CENTRAL
BUREAU OF INVESTIGATION reported in (2015) 2 SCC 553
and relied upon paragraph No.15 , wherein Apex Court held that
it is not necessary to prove that the accused had derived any
benefit or caused any loss to the Bank.
16. The counsel also relied upon the judgment of the
Apex Court in NEER YADAV VS. CENTRAL BUREAU OF
INVESTIGATION reported in (2017) 8 SCC 757, wherein the
Apex Court held that accused was entrusted with management,
abused her position by committing gross irregularities in
allotment and conversion of lands. The court held that obtaining
valuable thing to herself and her daughters caused grave loss to
the authority and confirmed the conviction. The counsel also
relied upon paragraph Nos.16 and 17, wherein the Apex Court
held that under Section 13(1)(d)(i) obtaining any valuable thing
or pecuniary advantage by corrupt or illegal means by a public
servant in itself would amount to criminal misconduct. On the
same reasoning "obtaining a valuable thing or pecuniary
advantage" by abusing his official position as a public servant,
either for himself or for any other person would amount to
criminal misconduct.
17. The counsel also relied upon the judgment of the
Apex Court in CENTRAL BUREAU OF INVESTIGATION VS.
HARI SINGH RANKA AND OTHERS reported in (2019) 16
SCC 687 and relied upon paragraph No.19, wherein Apex Court
held that civil settlement of the controversy would not suffice to
wipe off the criminal liability. The case reflects fiscal impurity
and, in a way, financial fraud. The modus operandi as narrated
in the charge sheet cannot be put in the compartment of an
individual or personal wrong. It is a social wrong and it has
immense societal impact. This court has further observed that
accepted principle of handling of finance that whenever there are
manipulation and cleverly conceived contrivance to avail of this
kind of benefits it cannot be regarded as a case having
overwhelmingly and predominantly of civil character. The gravity
of the offence creates a dent in the economic spine of the nation.
The quashing of the case was set aside as social interest would
be in peril.
18. The counsel also relied upon the judgment of the
Apex Court in SURESH CHANDRA JANA VS. STATE OF WEST
BENGAL AND OTHERS reported in (2017) 16 SCC 466 and
relied upon paragraph Nos.15 and 16, wherein Apex Court held
that in our opinion, it is almost impossible to come across a
single case where the investigation was completely flawless or
absolutely foolproof. The function of the criminal court is to find
out the truth and it is not the correct approach to simply pick up
the minor lapses of the investigation and acquit the accused,
particularly when the ring of truth is undisturbed. It may be
mentioned that it is not every doubt but only a reasonable doubt
of which benefit can be given to the accused. The accused is
entitled to get benefit of only reasonable doubt, i.e. the doubt
which rational thinking man would reasonably, honestly and
conscientiously entertain and not the doubt of a vacillating mind
that has no moral courage and prefers to take shelter itself in a
vain and idle skepticism.
19. In reply to the argument of learned counsel for the
respondent-CBI, learned counsel for the appellant would
vehemently contend that Ex.P51 is very clear that amount was
shown as zero balance and Cheques are dishonoured only the
ground of insufficient balance and Cheques are dishonoured on
28.04.2003, 29.04.2003 and 30.04.2003 and letter was written
on 02.05.2003 immediately when the Cheques were
dishonoured. Learned counsel would vehemently contend that
there was a target in banking business and hence, Cheques are
dishonoured.
20. In reply to the reply argument of learned counsel for
the appellant, learned counsel for the respondent would contend
that target cannot be for violation of banking rules. Hence, it
does not require any interference of this Court.
21. Having heard learned counsel for the appellant and
learned counsel for the respondent, the points that would arise
for consideration of this Court are:
(1) Whether the Trial Court committed an error in
convicting the accused for the offence under
Sections 120B and 420 IPC and for the offence
under Section 13(2) read with Section 13(1)(d)
of the Prevention of Corruption Act and it
requires interference of this Court by
exercising appellate jurisdiction?
(2) What order?
Point No.(1)
22. Having heard learned counsel for the appellant,
learned counsel for the respondent and also the grounds urged
which have been urged by both the counsel and also principles
laid down in the judgments referred by learned counsel for both
the parties, this Court has to analyze the material on record,
since this appeal is filed by accused No.1 and specific charge is
also against accused No.1 that Smt. N. Padmini, who was
functioning as Chief Manager, Chamarajapet Branch during the
period from 05.08.2002 to 14.06.2003 and being the Chief
Manager of the Bank, she had indulged in conspiracy with
accused Nos.2 and 3 and accused No.4 with an intention to
cheat Canara Bank and in pursuance of the said criminal
conspiracy, dishonestly and fraudulently, accused Nos.2 and 3
have opened a joint savings Bank account and current account
and those accounts are opened on the introduction of Sri Babulal
V. Patel, who was not known to them on 11.04.2003 and after
opening the said savings Bank account and current account, in
connivance with accused No.1, accused No.4 got discounted the
Cheques and said fraudulent amount was credited to the
accounts of accused Nos.2 and 3 and accused No.1 permitted
discounting of local Cheques in the joint savings Bank account of
accused Nos.2 and 3 from 12.03.2003 onwards i.e., within 10
days from the date of opening of the account in the branch and
accused No.1 permitted discounting of Cheques in that account
on a regular basis and amounts were credited to those accounts
and the accused No.1 exceeded her powers and out of 18
Cheques, 3 Cheques were returned unpaid for want of funds and
remaining 13 Cheques were discounted beyond her discretionary
powers and those Cheques have remained unpaid, due to which
Canara Bank had suffered wrongful loss of Rs.120.4 lakhs with
corresponding wrongful gain to accused Nos.2, 3 and 4. Hence,
the accused No.1 committed offence under Section 120B read
with Section 420 IPC. The Trial Court also convicted the accused
No.1 for the said offence and regarding other offences i.e., for
the offence under Sections 467, 468 and 471 IPC, the Trial Court
acquitted the accused and convicted the accused for the offence
under Section 13(2) read with Section 13(1)(d) of the Prevention
of Corruption Act and ordered to undergo simple imprisonment
for a period of two years with fine of Rs.10,000/-, for offence
under Section 120B IPC ordered to undergo simple imprisonment
for a period of one year and for the offence under Section 420
IPC, ordered to undergo simple imprisonment for one year with
fine of Rs.5,000/-.
23. The prosecution mainly relies upon the evidence of
P.W.5. Based on his report, case was registered and he
conducted preliminary investigation and gave the report. He was
examined as P.W.5 and in his evidence, he says that he was
working as a Senior Manager (Advances) in Circle Office,
Bangalore. He was asked by their AGM to investigate into the
irregularities in Cheque discounting in the branch at
Chamarajanagar, Bangalore. On 04.06.2003, he went to the said
Branch to investigate the matter and collected the challans of
savings bank and two current accounts. It is stated that on the
challans, there was authorization by accused No.1 to discount
the Cheques and accused No.1 had authority to discount the
Cheques upto Rs.20 lakhs party-wise in current account. If there
is any outstanding amount, Cheque discounting facility cannot be
given beyond prescribed limit. But, during his inspection, he
noticed that accused No.1 had exceeded her limits in extending
Cheque discounting facility to both current accounts for M/s.
Empap Electronics and M/s. Empee Electronics. In savings bank
account, Cheque discounting is allowed only upto Rs.25,000/- for
self-Cheque and accused No.1 exceeded her limits in extending
Cheque discounting facility to savings bank account of accused
Nos.2 and 3. Accused No.1 had sanctioned more housing loan
than her delegated powers to accused Nos.2 and 3. After going
through all the documents and noticing irregularities, he
prepared the report and submitted to GM in terms of Ex.P389
and identifies his signature in the report as Ex.P389(a).
24. This witness was subjected to cross-examination. In
the cross-examination, he admitted that a letter dated
02.05.2003 written by accused No.1 to the Circle Office was not
brought to his notice and he is acquainted with signature of
accused No.1, but he cannot identify the signature of accused
No.1 in her letter dated 02.05.2003. It is elicited that he was not
aware of accused Nos.2 and 3 availing housing loan of Rs.21.50
lakhs before commencing his investigation. It was not brought to
his notice that accused Nos.2 and 3 had opened two savings
bank accounts in the Branch and he was also not aware that
accused Nos.2 and 3 had submitted a credit proposal for
discounting of Cheques. It was not brought to his notice that
accused Nos.2 and 3 had furnished three properties worth Rs.75
lakh as collateral security for Cheque discounting facility. He also
admits the Cheque discounted register. The uncleared Cheques
will not figure in such a register, they will appear in the register
after realization, which is normally 24 hours. Such a register will
be some assistance at the time of discounting of the Cheque
provided verification is made regarding uncleared Cheques. He
also admits that he has not made this register as part of his
report Ex.P389. After clearance amount is given to credit in
register, which will reduce the liability. If this register shows zero
liability, it would help the officer to discount the Cheque. The
entire discounting of Cheques in the branch is shown in Ex.P51.
In every branch, a register of equitable mortgages is maintained
and admits that he has gone through such a register in this
branch and legal opinion has to be taken before any such
equitable mortgage. In this case also, equitable mortgage had
been taken, but he has not referred to that document. But, he
says there was no sanction for discounting of Cheque, but there
was security by way of equitable mortgages. He also admits that
whenever a Branch Manager exceeds his or her powers in
discounting of Cheques, the same has to be informed to the
Circle Office and ratification has to be taken. The report
regarding exercise of emergency power under CDB for the
quarter ending September 2002, December 2002 and March
2003 are not brought to his notice and says that he has not
verified in the Circle Office about the reports sent for ratification
during 01.04.2003 to 12.06.2003. If the report is received and
ratification is made, then the Officer in the Circle Office could be
the better person to speak about it, copies of reports could be
available in the branch office and he has not referred to such
copies.
25. Having taken note of this admission, it is very clear
that, even if the Branch Manager exceeds his or her limit, the
same could be ratified by sending a information to the Circle
Office. It is also very clear that entire discounting of Cheques in
the branch is shown in Ex.P51. Learned counsel for the
appellant also brought to notice of this Court Ex.P51 which
disclose no dues. Hence, it is clear that in terms of Ex.P51, no
dues were found and the accused with a bonafide intention
proceeded to discount the Cheques. The evidence of P.W.5 is
very clear that uncleared Cheque will not figure in such a
register in the Cheque discounted register and such a register
will be of some assistance at the time of discounting of Cheque,
provided verification is made regarding uncleared Cheques and
P.W.5 also categorically admits that he has not made this
register as part of his report and his report contains the
information that more number of Cheques are discounted.
26. The witness P.W.1 in his evidence says that accused
exceeded discounting of Cheques worth of Rs.114.20 lakhs and
house loan of Rs.21 lakhs. In the cross-examination, P.W.1 also
admits that he does not remember that on 20.05.2003, accused
No.2 has written a letter that he has discounted Cheques worth
Rs.1,14,20,000/- and it is his responsibility to clear the same
and he had offered security worth more than Rs.2.50 Crores and
he is not aware of the letter dated 10.06.2023 forwarded by
accused No.1 to DGM, Canara Bank. He says that when his
statement was being recorded, CBI people have not shown him
the register of equitable mortgages, but only he says that based
on the report given by P.W.5, he has given his complaint. After
receiving the report from P.W.5, he has not made further
enquiries before filing the complaint Ex.P1. He admits that in the
report Ex.P389, there is a mention of collateral security
furnished by the party. In the complaint Ex.P1 given by him,
there is no reference of collateral security furnished by the party
but in the complaint Ex.P1 payment of Rs.1,80,000/- on
12.07.2003, Rs.6,50,000/- on 28.06.2003 and Rs.10 lakhs cash
on 28.06.2003 are not mentioned and also admits that he is not
aware whether original file is taken away by CBI or not and he
cannot say whether report was given to CBI police along with
Ex.P1 or not and also admits that it is true that Branch Manager
is entitled to exercise emergency powers upto certain limits. The
evidence of P.W.1 is also very clear that he cannot say whether
CBI has given any report Ex.P389 along with complaint Ex.P1
and also it is very clear that while lodging the complaint, the
report Ex.P389 was not enclosed and there is a clear mention
that in Ex.P389, there is a mention of collateral security
furnished by the party and in the complaint Ex.P1, there is no
reference of collateral security furnished by the party.
27. The other material witness relied upon by the bank is
P.W.2, who also speaks about discounting of Cheques. In the
cross-examination, he admits that all discounted Cheques will be
taken in a printout at the end of the day and such a
computerized statement was not brought to his notice by CBI.
He is also not aware that the party had availed housing loan
prior to submitting bill discounting. At the time of discounting of
Cheque, Bank Manager is expected to see how many Cheques
are discounted and how many outstanding and he has to see
what is the outstanding liability and what was the position as to
previous day evening. The witness clarifies that if Cheques are to
be discounted on 16.03.2004, he has to look into the position as
on 15.03.2004 and also admits that such a statement was not
shown by CBI and CBI had not come to ask him regarding
powers of Scale-4 Officer and showed him Cheques and pay-in-
slip. Having considered the evidence of P.W.2 also, it is very
clear that computerized statement is not brought to his notice by
CBI and also witness clarifies that Cheques are to be discounted,
he has to look into the position as on 15.03.2004, but such a
statement was not shown to him by CBI.
28. No doubt, prosecution mainly relied upon the
evidence of P.W.6, he comes and deposes before the Court that
he only introduced accused Nos.2 and 3 for opening of account
at the instance of Bank Manager, since Bank Manager has asked
him to introduce them and Exs.P18 and 20, two accounts
opening forms are marked through this witness. But, in the
cross-examination, he admits that he is having account in
Canara Bank, Chamarajpet Branch, Bangalore since several
years and he is having current account and he also categorically
admits that it was not brought to his notice that accused Nos.2
and 3 had already opened their savings bank account prior to
this account. Hence, it is clear that accused Nos.2 and 3 were
having savings bank account prior to opening of this current
account. He also categorically admits that, it was not brought to
his notice that both of them had availed housing loan and it was
also not brought to his notice that only a current account holder
can introduce the party for opening his current account. Hence,
it is clear that accused Nos.2 and 3 already had their accounts
and the same was not brought to notice of P.W.6. No doubt,
though P.W.5 has introduced accused Nos.2 and 3 and the
admission given by P.W.6 is also very clear that accused Nos.2
and 3 were already having their accounts. Hence, the very case
of the prosecution that with a dishonest intention account was
opened cannot be accepted. It is confronted to the witness that a
letter was sent in terms of Ex.D1, wherein also, a request was
made to ratify the discounting of Cheque and no dispute that
letter was sent in terms of Ex.D1. But only contention of learned
counsel for the respondent is that though letter was sent, the
same was not ratified. But, the fact is that P.Ws.1, 2 and 5
categorically admit in their evidence that there was a equitable
mortgage and the same was not enclosed along with complaint
Ex.P1 and there is a clear admission on the part of P.W.5 that
there was a mention of equitable mortgage to the extent of
Rs.75 lakhs and the same is noted in the report Ex.P389. When
such admission is given and security is given to the extent of
Rs.75 lakhs by giving the property and in respect of remaining
amount is concerned i.e., Rs.114 lakhs, already letter was sent
for ratification in terms of Ex.D1 i.e., on 02.05.2003. No doubt,
no such ratification was made, but the fact that accused No.1
sent letter for ratification is not in dispute and also P.Ws.1, 2 and
5 have categorically admitted that, if a Manager exceeds his or
her powers, the same can be ratified by the concerned and
accordingly, accused No.1 made all her efforts to get the same
ratified by sending the letter Ex.D1 which was confronted and
marked.
29. Apart from that, document Ex.P1 does not disclose
any dues in the statement. Learned counsel for the appellant
also mainly relies upon the same and Ex.P51 is the certified copy
of register of clean demand bills maintained in Canara Bank,
Chamarajpet Branch, Bangalore maintained for the period from
03.03.2003 to 26.04.2003 and the same does not disclose any
dues. When the document disclose no dues and with bonafide
belief, the accused proceeded in discounting of Cheques and in
order to prove the factum of conspiracy, there must be
circumstantial evidence before the Court that there was
conspiracy between accused Nos.1, 2, 3 and so also accused
No.4 and this was done in a business transaction. When the
prosecution witness, particularly P.W.5 categorically admits that
he was not aware that accused Nos.2 and 3 had submitted a
credit proposal for discounting of Cheques, he categorically
admits that it was not brought to his notice that accused Nos.2
and 3 had furnished three properties worth Rs.75 lakhs as
collateral security for Cheque discounting facility and he was also
not aware of accused Nos.2 and 3 availing housing loan of
Rs.21.50 lakhs before commencing his investigation and all
these factors were not brought to the notice of P.W.5 before
conducting investigation. The admission of P.W.5 is very clear
that uncleared Cheques will not figure in such a register and
such register will be of some assistance at the time of
discounting of Cheque, provided verification is made regarding
uncleared Cheques and also he has not made the said register as
part of report in Ex.P389. When such material is available on
record and these are the answers elicited from the mouth of
witnesses, particularly, who conducted the preliminary
investigation, it was not brought to his notice regarding collateral
security.
30. No doubt, it was the case of the respondent that
limit was only upto Rs.20 lakhs, but in the case on hand, it has
emerged during the course of evidence and also admission that
Rs.75 lakhs was furnished as collateral security for Cheque
discounting facility by accused Nos.2 and 3. Apart from that
bank had not suffered any loss and all the amounts were also
recovered. He also admits that report regarding exercising of
emergency power under CDB for the quarter ending, September
2002, December 2002 and March 2003 are not brought to his
notice and he has also not verified in Circle Office about the
report sent for ratification during 01.04.2003 to 12.06.2003 i.e.,
the period taken for registration of the case against the accused
and the entire discounting of the Cheques in the branch is shown
in Ex.P51. He also categorically admits that in every branch, a
register of equitable mortgage is maintained and also
categorically admits that in this case also, equitable mortgage
had been taken, but he has not referred to the document.
31. Having taken note of evidence available on record
and these are the admissions elicited from the mouth of P.Ws.1,
2, 5 and 6, dishonest intention of the accused cannot be
gathered considering these material on record. The prosecution
also mainly relies upon the evidence of P.W.25, who was working
as PI, ACB, CBI, Bangalore. He conducted the investigation in
the matter and number of documents are also marked through
this witness. He also categorically admits that he does not
remember whether P.Ws.5 and 1 have brought to his notice
about collateral security about Rs.1 Crore taken from the
borrowers and both of them have not brought to his notice about
the equitable mortgage created in favour of Canara Bank prior to
filing of FIR and also he does not remember about the practice of
sending daily information to the Circle Office regarding
discounting of Cheque. He also says that he does not remember
if they have brought to his notice about the practice and the
methodology of the ratification of the acts of Branch Office by
the Circle Office and he also not asked P.Ws.1 to 5 about Ex.P51
and also he has not asked P.W.2 about working in the said
branch before recording his statement. He also admits that he
has not sent Mr. Palegar and Mr. Manjunath B. Shet for trial. It is
evident from the records that 4 Cheques are discounted by
Mr. Palegar and the same has emerged during the course of
evidence. He also admits that on one or two occasions,
Mr. Palegar has discounted Cheques but, Mr. Manjunath B. Shet
has not discounted the Cheques. But, the said Mr. Palegar has
not been made as accused in the case on hand and also he
categorically admits that he does not remember whether it was
brought to his notice that accused Nos.2 and 3 had filed an
application for bill discounting facility and produced the
documents of title which were under scrutiny and during the
course of his investigation and before filing of charge-sheet, it
was not brought to his notice that both accused Nos.2 and 3 had
furnished security for their liability.
32. Having taken note of evidence of P.W.25 also, it is
very clear that a half hearted investigation was made by P.W.25.
Having taken note of oral evidence of these witnesses, it is very
clear that the Manager can exceed his limit, but he or she has to
seek for ratification and accordingly, the accused has sent a
letter in terms of Ex.D1 for ratification. The Trial Court failed to
take note of all these aspects, while considering the material on
record, while answering point Nos.1 and 2 with regard to
conspiracy and in respect of conspiracy is concerned, no material
on record, except discounting of Cheques and the same is also
permissible and it requires ratification as deposed by the
witnesses, who have been examined before the Trial Court.
33. I have already pointed out with regard to opening of
the account with the help of P.W.6 and before opening the said
account, already accused Nos.2 and 3 were having account with
the very same bank. Hence, accused Nos.2 and 3 are not
strangers and they were not introduced as a fresh account
holders and these are the aspects ought to have been taken note
by the Trial Court while appreciating the evidence and instead
proceeded in an erroneous approach and observed in paragraph
No.55 that accused discounted Cheques worth Rs.20 lakhs to a
party and she has exceeded her limit in respect of joint account
and the fact that there was a security is not in dispute and the
same is admitted to the extent of Rs.75 lakhs and there was
equitable mortgage. Though learned counsel for the respondent
contend that said equitable mortgage was given subsequent to
noticing of discounting of Cheque, but admission of witness,
particularly P.W.5 is very clear in the report Ex.P389 regarding
mentioning of security. The Trial Court in paragraph No.58 has
observed that it is true that discounting of Cheque is a normal
banking activity in so many banks, however, Bank Manager has
to follow the rules and regulations of the bank. In the instance
case, it is specifically stated that accused No.1 had not exceeded
her limit once or twice, but many times, but the fact is that when
the limit was exceeded, ratification was sought in terms of Ex.D1
and the same has not been discussed by the Trial Court in detail.
Though the Trial Court mentioned in paragraph No.59 that Ex.D1
is the letter written by accused No.1 seeking ratification of her
acts, may be she has intimated about Circle Office about the
irregularities in discounting of Cheques, but there is no evidence
forthcoming to show that Circle Office had ratified all the
irregularities committed by accused No.1. The fact that letter
was sent is not in dispute and also Ex.D1 goes to show that
accused has not suppressed irregularities in discounting of
Cheques. But, the Trial Court has taken the same in other away
and when the letter was sent for ratification, the Trial Court
ought to have taken note of the same and when a provision is
made for ratification, if the limit is exceeded and when the
accused No.1 has exceeded her limit, the same ought to have
been considered by the Trial Court in proper perspective and
instead, the Trial Court proceeded in an erroneous approach and
comes to the conclusion that there is a conspiracy and with
dishonest intention, the same has been done and the ingredients
of conspiracy and dishonest intention that with an intention to
cheat the bank, the accused acted upon in such a manner is not
forthcoming, having considered over all evidence on record,
particularly evidence of P.Ws.1, 2, 5 and 25, who conducted
investigation and answer elicited from the mouth of P.W.25 is
very clear that he does not remember about the material which
have been placed before him during the course of investigation
and benefit of doubt goes in favour of accused and when such
being the case, the Trial Court ought to have extended the
benefit of doubt in favour of the accused and the same is not
done and committed an error and not appreciated the material
on record in proper perspective.
34. The Trial Court has also invoked Prevention of
Corruption Act and in order to invoke the said Act also, there
must be misconduct by the accused No.1 with an intention to
cheat the bank. In the case on hand, to invoke the said Act also,
no sanction was taken and material placed on record before the
Court does not disclose ingredients of the offence of the said Act
and the Trial Court committed an error in invoking penal
provision under the Prevention of Corruption Act and the same is
also erroneous. Accordingly, I answer point No.(1) as
'affirmative' that the Trial Court committed an error in convicting
the accused and this Court can exercise the appellate
jurisdiction.
Point No.(2)
35. In view of the discussion made above, I pass the
following:
ORDER
(i) The criminal appeal is allowed.
(ii) The impugned judgment of conviction passed
against accused No.1 for the offence under
Section 120B and 420 IPC and for the offence
under Section 13(2) read with Section 13(1)(d)
of the Prevention of Corruption Act, is hereby
set aside. Consequently, the appellant/accused
No.1 is acquitted.
(iii) The bail bond executed by the
appellant/accused No.1 stands cancelled.
(iv) If the appellant/accused No.1 has deposited
any fine amount, the same is ordered to be
refunded in favour of the appellant/accused
No.1 on proper identification.
Sd/-
(H.P. SANDESH)
JUDGE
ST
