Madras High Court
K.Krishnaswamy vs State By on 11 August, 2023
Crl.A.Nos.259, 278, 280, 290 & 310 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 11.08.2023
CORAM
THE HON'BLE MR. JUSTICE DR.G.JAYACHANDRAN
Crl.A.Nos.259,278,280,290 & 310 of 2013
Crl.A.No.259 of 2013
K.Krishnaswamy ...Appellant/A1
Vs.
State by
The Inspector of Police,
SPE/CBI/ACB,
Chennai ... Respondent
PRAYER: Criminal Appeal filed under Section 374(2) of Criminal
Procedure Code., to set aside the judgment dated 26.03.2013 made in
C.C.No.38 of 2003 by XI Additional Special Judge, CBI Cases relating
to Banks and Financial Institutions, Chennai against the appellant and
acquit the appellant from the above case.
For Appellant : Mr.R.Rajaratnam
for Mr.C.Sundaresan
For Respondent : Mr.K.Srinivasan
Special Public Prosecutor for CBI
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Crl.A.No.278 of 2013
1. K.Babu @ Janarthanan
2. P.Viji Rani
3. Kalamani ...Appellants/A2, A3 & A7
Vs.
State Represented by
The Inspector of Police,
SPE/CBI/ACB,Chennai. ... Respondent
PRAYER: Criminal Appeal filed under Section 374(2) of Criminal
Procedure Code., against the conviction and sentence passed by the XI
Additional Special Judge, CBI Cases by his judgment dated 26.03.2013
made in C.C.No.38 of 2003.
For Appellants : Mr.K.Shankar
For Respondent : Mr.K.Srinivasan
Special Public Prosecutor for CBI
Crl.A.No.280 of 2013
Prabakar ...Appellants/A5
Vs.
State Represented by
The Inspector of Police,
SPE/CBI/ACB,Chennai. ... Respondent
PRAYER: Criminal Appeal filed under Section 374(2) of Criminal
Procedure Code., against the conviction and sentence passed by the XI
Additional Special Judge, CBI Cases (CBI Cases relating to Banks and
Financial Institutions) Chennai by his judgment dated 26.03.2013 made
in C.C.No.38 of 2003.
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Crl.A.Nos.259, 278, 280, 290 & 310 of 2013
For Appellant : Mr.K.Shankar
For Respondent : Mr.K.Srinivasan
Special Public Prosecutor for CBI
Crl.A.No.290 of 2013
S.Ramesh ...Appellant/A8
Vs.
State Represented by
The Inspector of Police,
SPE/CBI/ACB,
Chennai. ... Respondent
PRAYER:
Criminal Appeal filed under Section 374(2) of Criminal
Procedure Code., set aside the judgment dated 26.03.2013 made in
C.C.No.38 of 2003 passed by the XI Additional Special Judge, CBI
Cases (CBI Cases relating to Banks and Financial Institutions) Chennai
against the appellant.
For Appellant : Mr.Swami Subramanian
For Respondent : Mr.K.Srinivasan
Special Public Prosecutor for CBI
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Crl.A.Nos.259, 278, 280, 290 & 310 of 2013
Crl.A.No.310 of 2013
T.Arul Phakyaraj ...Appellants/A4
Vs.
State Represented by
The Inspector of Police,
SPE/CBI/ACB,
Chennai. ... Respondent
PRAYER:
Criminal Appeal filed under Section 374(2) of Criminal
Procedure Code., against the conviction and sentence passed by the XI
Additional Special Judge, CBI Cases (CBI Cases relating to Banks and
Financial Institutions) Chennai by his judgment dated 26.03.2013 made
in C.C.No.38 of 2003.
For Appellant : Mr.K.Shankar
For Respondent : Mr.K.Srinivasan
Special Public Prosecutor for CBI
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Crl.A.Nos.259, 278, 280, 290 & 310 of 2013
COMMON JUDGMENT
These Criminal Appeals have been filed against the conviction
and sentence passed by the XI Additional Special Judge, CBI Cases
(CBI Cases relating to Banks and Financial Institutions) Chennai, by
judgment dated 26.03.2013 passed in C.C.No.38 of 2003.
2. These batch of appeals are filed by the accused persons who
were convicted by the trial Court in C.C.No.38 of 2003, a case
investigated by the Inspector of Police Mr.K.S.V.D.Srinivas, attached to
CBI/ACB/Chennai. F.I.R came to be registered on 05.03.2002 and the
final report was filed on 19.06.2003. Eight persons were shown as
accused and sent for trial. One accused was not sent for trial and shown
as absconding. According to the final report, A1 is a public servant
working as Manager, Canara Bank, Washermanpet, Chennai between
1998 and 2001. A2-K.Babu is a private individual who was used to be a
contractor for arranging loan and also the proprietor of M/s.J.G.Traders,
fictitious company. A3-P.Viji Rani is a Proprietor of M/s.K.K.Sweets,
Chennai. A4-Arul Packiaraj is the Proprietor of M/s.Femina Resins &
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Chemical Industries. A5-T.N.Prabakar is the Power of Attorney Holder
of M/s.Pentagon Exports, which is a proprietorship concern, consisting
of his wife Anitha Prabakar. A6-N.Natraj, who is the husband of
Shyamala, partner of Pentagon Exports, Chennai (died pending trial).
A7- Kalaimani is the Proprietor of M/s.Surya Offset Printers, Chennai.
A8-S.Ramesh is the Proprietor of M/s.Sweeti Special, Chennai.
3. The sum and substance of the final report is that A2 to A8 by
floating firms in different names, had availed loan from Canara bank,
Washermanpet, by producing false document and the loan availed by
them was not utilized for the purpose for which it was sanctioned by A1-
the Branch Manager of Canara Bank, Washermanpet.
4. It is the specific case of the prosecution that A1-the Branch
Manager of Canara Bank, Washermanpet, knowing well that these Firms
are either fictitious firms or name-sake firms, dishonestly accepted the
loan applications from the loanees/accused and sanctioned the same
without proper scrutiny of the documents filed by the respective loanees.
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Particularly, final report has indicated that in case of loan to JG traders,
the CST and TNGST numbers furnished by the loanees, do not belong to
the loanees. The loan sanctioned for purchase of machinery was handed
over to A2 instead of supplier. Likewise, for the loan sanctioned to
K.K.Sweets, Chennai, the Proprietor P.Viji Rani/A3, the machinery
already with the loanees was shown as purchased out of loan amount and
the invoice of JG Traders was utilised for sanctioning the loan.
5. The specific contention of the prosecution is that J.G.Traders
is a fictitious company/Firm floated by A2 to accommodate the other
accused to withdraw the loan amount by producing fake invoices.
Regarding the loan sanction for M/s.Pentagon Exports, it is the specific
case of the prosecution that this Firm was started in the name of the
respective spouses by A5 and A6 (died). A1 extended OCC limit for
Rs.5 lakhs for purchase of machinery and overdraft facility for Rs.2
lakhs, whereas, the machineries already purchased had been shown as
machineries purchased out of loan amount and invoices raised by
J.G.Traders, being fictitious firm floated by A2, was paid the cost of
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machinery. As far as M/s.Surya Offset Printers is concerned, it has
availed the loan for purchase of machinery and for over draft facility.
Similar MOP been adopted and for the old machinery already purchased,
the loan amount been shown as the source and invoice of JG Traders is
produced. Regarding M/s.Sweeti Special, Proprietorship concern by A8,
it is stated in the final report that after availing the over draft facility, the
same was mis-utilized for purchase of machinery. Alleging that knowing
fully well loans were sanctioned based on the documents given in
support of loan applications which are forged/fabricated. The loan money
has not been utilized for the purpose for which loan was sanctioned. The
Bank Manager conspired with the other accused to cheat the Bank and
thereby caused the pecuniary loss to the Bank.
6. The Trial Court, after taking into consideration the materials
collected during the investigation, has framed the following charges and
after appreciating the evidence placed, found the accused guilty and
sentenced them as below:
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Accused Offence Sentence
A1 Under Section 120-B r/w 420, 467 r/w Rigorous Imprisonment for three
471, 468 r/w 471 IPC and Section years and to pay fine of
13(2) r/w13(1)(d) of PC Act Rs.2,000/- in default to undergo
simple imprisonment for one
year.
A2 to A5 Under Section 120-B r/w 420, 467 r/w Rigorous Imprisonment for one
& A8 471, 468 r/w 471 IPC and Section year each and to pay fine of
13(2) r/w13(1)(d) of PC Act Rs.1,000/- each in default to
undergo simple imprisonment
for three months.
A7 Under Section 120-B r/w 420, 467 r/w Rigorous Imprisonment for three
471, 468 r/w 471 IPC and Section years and to pay fine of
13(2) r/w13(1)(d) of PC Act Rs.5,000/- in default to undergo
simple imprisonment for one
year.
A1 Under Section 420 IPC Rigorous Imprisonment for three
years and to pay fine of
Rs.2,000/- in default to undergo
simple imprisonment for one
year.
A2 to A5 Under Section 420 IPC Rigorous Imprisonment for one
& A8 year each and to pay fine of
Rs.1,000/- each and in default to
undergo simple imprisonment
for three months.
A7 Under Section 420 IPC Rigorous Imprisonment for three
years and to pay fine of
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Accused Offence Sentence
Rs.5,000/- in default to undergo
simple imprisonment for one
year.
A1 Under Section 467 r/w 471 IPC Rigorous Imprisonment for three
years and to pay fine of
Rs.2,000/- in default to undergo
simple imprisonment for one
year.
A2 to A5 Under Section 467 r/w 471 IPC Rigorous Imprisonment for one
& A8 year each and to pay fine of
Rs.1,000/- each and in default to
undergo simple imprisonment
for three months.
A7 Under Section 467 r/w 471 IPC Rigorous Imprisonment for three
years and to pay fine of
Rs.5,000/- in default to undergo
simple imprisonment for one
year.
A1 Under Section 468 r/w 471 IPC Rigorous Imprisonment for three
years and to pay fine of
Rs.2,000/- in default to undergo
simple imprisonment for one
year.
A2 to A5 Under Section 468 r/w 471 IPC Rigorous Imprisonment for one
& A8 year each and to pay fine of
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Accused Offence Sentence
Rs.1,000/- in default to undergo
simple imprisonment for three
months.
A7 Under Section468 r/w 471 IPC Rigorous Imprisonment for three
years and to pay fine of
Rs.5,000/- in default to undergo
simple imprisonment for one
year.
A1 Under Section 13(2) r/w 13(1)(d) of Rigorous Imprisonment for three
PC Act years and to pay fine of
Rs.5,000/- in default to undergo
simple imprisonment for one
year.
7. Being aggrieved, the present batch of appeals are filed by
the respective accused.
8. Mr.R.Rajaratnam, learned counsel appearing for A1.
Mr.K.Shankar, learned counsel appearing for A2, A3, A4, A5 & A7 and
Mr.Swami Subramnian, learned counsel appearing for A8, submitted that
the investigation conducted by P.W.28 without placing all the materials
collected during the investigation is singularly enough to set aside the
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conviction. The trial court had not taken into consideration the evidence
of P.W.6 who infact had prepared the loan applications, processed the
loan applications and placed all the documents for consideration by A1.
The investigation report and the legal scrutiny report given by the Panel
Laywer, which has been taken into account by A1 before sanctioning the
loan, clearly shows that the loan was disbursed only after satisfaction of
the documents produced by the borrowers and except for few lapse
regarding the nature of identical invoice from JG Traders, there were no
other suspicious materials to decline the loan request.
9. Furthermore, it is submitted that the allegation of the
prosecution that the machineries found in the premises of the loanees as
per Ex.P7, though alleged to have been old machinery and not produced
out of loan amount, there is no evidence to substantiate the said
allegation. It is also contended that the loans were sanctioned based on
collateral security and even before registration of F.I.R, substantial
amount has been paid by the borrowers and few borrowers have cleared
their loan, pending trial. When there is no element of deception at the
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inception, the trial court ought not to have convicted them for the offence
of cheating. In the absence of evidence that there was meeting of mind to
do the illegal act by the accused, charge of conspiracy cannot sustain. It
is further contended that when there is no culpable mental state on the
part of the accused, the charges are imaginary and evidence let in by the
prosecution does not prove or establish the ingredients required for
cheating and conspiracy.
10. The learned Special Public Prosecutor Mr.K.Srinivasan,
Senior Advocate appearing for CBI, submitted that repayment of loan
either after registering the F.I.R or pending trial, can only have
mitigating effect on sentence. But the fact that the loan was sanctioned
by A1 for A3 to A8, based on bogus invoices of JG Traders floated by
A2, is proved beyond any doubt. JG Traders, which has no commercial
activity, issued their invoices which are marked as Exs.P68 and 72 and
receipts Ex.P76 to 85. The very fact that, for all these loanees, A2 had
issued invoices or receipts in the name of JG Traders and the same has
been accepted by A1, discloses and proves the web between these
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accused persons. It is an admitted fact that A8 secured over draft facility.
Using invoice of A1 had utilised the fund for purchasing machineries and
the diversion of loan amount is clearly admitted. A1 ought not to have
permitted such diversion which is contrary to the Banking rules.
11. Heard the learned counsel appearing for the appellants and
the learned Special Public Prosecutor appearing for the respondent and
perused the materials available on record.
12. Learned counsel appearing for the appellants have
presented a chart indicating the material documents which were collected
during the investigation but not marked as exhibits, but only selective
documents were marked and the Investigating Officer has not come out
with any explanation for not marking those documents which are relevant
to show that the loans were obtained in the normal course of Banking
transaction.
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13. It was contended that if at all there is any default in
payment, it should be construed only as a breach of contractual
obligation and not breach of trust or dishonest intention to cheat the
bank. The chart indicates that the legal scrutiny report of all the five
loans though available, was marked only in respect of two loanees
namely, M/s.K.K.Sweets and M/s.Pentagon Exports. The
product/purchase report which was scrutinized for sanction of loan in all
the five cases though available, was not marked before the Court. The
appraisal memorandum which is necessary to indicate that pre-sanction
inspection had been conducted but was not produced for the four loanees
except M/s.K.K.Sweets. It is pertinent to note that this appraisal
memorandum is a main document to test as to whether A1 had applied
his mind and had done his duty as Manager before sanctioning the loan.
While P.W.7 the main witness whom the prosecution relied upon admits
that the appraisal memorandum in all the five cases is available.
However there is no explanation from the Investigating Officer as to why
they were not marked as exhibits.
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14. It is also the case of the defence that the money sanctioned
was not disbursed directly to the loanees, but they were given to the
suppliers by way of Pay Order or Demand Draft. Though it is contended
by the prosecution and also accepted by the trial court, the majority of the
loan amount had been paid to JG Traders based on the invoice or receipt
given by A2. This fact is purely based on the Enquiry report of P.W.7
which is marked as Ex.P6. From the evidence of investigating Officer-
P.W.28, it is obviously clear that he had not made any independent
inspection of the documents that were all materials in the premises of the
borrowers to clarify as to whether J.G Traders supplied the materials as
per the invoices. To prove that those invoices are fake, there should have
been some corroborative evidence, to the statement of P.W.7. Except the
fact that TNGST and GST numbers furnished by J.G. Traders are not
genuine, the other facts regarding the non-sale of materials are not
proved. May be J.G Traders would have been floated by A2 and had no
proper TNGST or CST Registration, but the said fact per se it will not
lead to the inference that the said J.G Traders never involved in
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manufacturing materials. In fact, the evidence of P.W.7 who has
inspected also had not said that there is no establishment in the name of
J.G Traders.
15. Yet another document heavily relied upon by the
prosecution is the statement of A5 to P.W.7 which is marked as Ex.P6 in
which A5 has stated that for availing the loan, he took the assistance of
A2 who arranged the loan for consideration and he has also paid some
percentage to A1. This letter of A5 addressed to P.W.7 is dated
29.12.2001. It is prior to registering the F.I.R. It is an extra-judicial
confession, in the course of investigation conducted by Bank Official.
This statement ought to be tested in the manner known to law, since the
maker of the statement is one of the accused and the persons whom the
statement addressed, are examined as witnesses who admitted in their
cross examination that Ex.P7 statement dated 29.12.2001 was retracted
by A5, vide letter dated 07.01.2002 and he has mentioned about this
retraction in his report Ex.P6. Furthermore, in Ex.P7, this Court finds
that the letter was not simply addressed to P.W.7, but there is a witness
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by name Balasubramanian, who is one of the Bank staff who has affixed
the seal and signature, but he was not examined by the prosecution.
Therefore, the prior statement retracted subsequently has to be totally
ignored for the reason that the prior statement proved through substantive
and corroborating evidence.
16. This Court, at the beginning of the judgment itself,
observed that the learned counsels alleged that the investigation done in
perfunctory manner. This attack on investigation is well fortified by the
fact elicited during the cross examination of P.W.28-Investigating
Officer. Very crucial portion of the cross examination of P.W.28 which
doubts the case of the prosecution to the Court, is extracted below:
If suggested that my investigation is
based on Ex.P6 means. I deny. I collected Ex.P6 on
16.08.2002. On 06.03.2002 I have sent a letter to
the Branch Manager,Tondaiyarpet to furnish
relevant document for investigation purpose. I
received the documents from Vijayakumar. Senior
Manager on different dates. I do not remember
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whether I have given receipt memo for receiving the
documents. I am not aware that before A1 joined
the washermanpet branch, the branch was a loss
making branch. I am not aware that A1 was posted
to Washermanpet branch, he was instructed to make
the branch as profitable branch and target was fixed
on him. I am not aware that after A1 joined, the
branch, he made the branch as profit making
branch. I am not aware, how loans, A1 sanctioned
in Washermanpet branch during his tenure. As per
Ex.P6, I know how many accounts were taken into
consideration for inspection. 22 accounts were
taken into consideration for inspection in Ex.P6. I
have stated 5 cases in the F.I.R. The 5 cases forms
part of the 22 cases in Ex.P6. I am not aware out of
the 5 cases in which F.I.R was registered in 4 cases
the total amount was settled. In F.I.R, it is stated
that loans were given in the year 2000-2001. In the
year 2002 the F.I.R was registered. I do not know
that since the amounts were not repaid, the account
become NPA the case was registered. In the F.I.R,
the source is shown as SPE/CBI/ACB. I do not
remember in what form the information was given.
In F.I.R one Rathnakar is shown as Accused No.3.
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But the said Rathnakar is not shown as an accused
in the final report nor as witness. I have not stated
anything about Rathnakar in the charge sheet.
17. I do not remember whether I collected
loan files and credit files. The documents required
for processing the loan it is called as loan file. The
bank required certain documents for sanctioning the
credit is called credit file. I have collected check
list for scrutiny and approval of LSR by branches
pertaining to 2 units, namely M/s.Femina Resins &
Chemical Industries and M/s.Sweeti Special. One is
dated 20.12.2000 and other is dated 23.02.2002.
For others I have not collected the LSR. I am not
aware who was the Panel Advocate for Canara
Bank. Tondaiyarpet branch. I have not collected
the Equitable Mortgage Transaction EMT Register
from Tondiarpet branch. In page No.4 of Ex.P6, it
is stated that Hari visited Surya Offset Printers on
26.12.2001 and found the machinery was available
there. At page 19, it is stated that sewing machines
pertaining to Pentagon Exports were available in its
premises. In this case P.W.6 Ramcharan was the
loan officer and he has processed the loan
application of all the five cases and has put up the
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office note with his recommendations to the
Manager. I am not aware that pre-sanction and
post-sanction inspection report are available in the
credit file. For J.G.Traders the loan amount was
given in the form of demand drafts and pay orders. I
am not aware that the loan documents such as
invoices, proforma and other documents are to be
taken on the face value.
17. Though the prosecution case that documents emanating
from same source for sanctioning loans points the needle of suspension
towards the appellants who had availed the loan relying upon those
documents, there suspicion is not sufficient to convict. The allegations
not been established and proved beyond doubt in the manner known to
law. Further, on account of the fact that, the loan amount paid by four of
the borrowers before registration of F.I.R and the fifth loanee had paid
the amount pending trial, the element of criminality has also been diluted
though whatever materials are available against them. The above extract
of evidence will show that the prosecution had failed to establish the
charges against the accused beyond reasonable doubt.
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18. Hence, the appeals are allowed. Conviction and Sentence
passed by the learned XI Additional Special Judge, CBI Cases by
judgment dated 26.03.2013 passed in C.C.No.38 of 2003 is set aside.
Fine amount paid by the appellants, if any is ordered to be refunded. The
bail bond, if any is executed by the accused, shall stand cancelled.
11.08.2023
mfa
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To
1. The XI Additional Special Judge,
CBI Cases (CBI Cases relating to Banks and Financial Institutions)
Chennai.
2. The Inspector of Police,
SPE/CBI/ACB,
Chennai.
3. The Public Prosecutor,
High Court,
Chennai.
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DR.G.JAYACHANDRAN,J.,
mfa
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11.08.2023
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