Mir Nagvi Askari Vs. C.B.I. [2009] INSC 1414 (7 August 2009)
Judgment
IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 1477 OF 2004 Mir Nagvi Askari ...Appellant Versus C.B.I. ...Respondent WITH CRIMINAL APPEAL NOs. 1525, 1526 OF 2004, 5 AND 121 OF 2005
S.B. SINHA, J :
These five appeals, arising out of a judgment and order dated 19/10/2004 passed by the Special Court constituted under the Special Court (Trial and Offences related to Securities) Act, 1992 (for short "the Act"), were taken up for hearing together and are being disposed of by this common judgment.
BACKGROUND FACTS
1 Andhra Bank is a Scheduled Nationalised Bank. It has a branch at Mumbai known as the Fort Branch. Out of five appellants before us, Accused Nos. 1, 2, 4 and 5 were officers of the said Branch of the Andhra Bank. Accused No. 1 was the Manager of Funds, Accused Nos. 2 and 4 were Junior Management Officers of the Funds Department, and Accused No. 5 was the Assistant Manager, Debit Section. Accused No.3, Hiten Dalal, was at all relevant times and still is a broker and, inter alia, deals in securities.
Accused Nos. 1, 2, 4 and 5, in their capacity as public servants, were working in the Fort Branch of Andhra Bank.
They were charged with abuse of their position and acting dishonestly and fraudulently, as a result whereof undue pecuniary advantage is said to have been procured by Accused No. 3 by way of crediting bankers' cheques without them having been presented or sent for clearance and, thus, cheating Andhra Bank and dishonestly permitting substantial withdrawals from his current account by the Accused No. 3. They are said to have prepared false documents and used them as genuine ones, with the intention to defraud and falsify entries in the books of accounts of the Bank. They are also charged with entering into the criminal conspiracy, as they, having been entrusted 2 with the property of the Andhra Bank, prepared credit and debit vouchers in favour of Accused No. 3 authorizing credit of amounts of various cheques to the account of Accused No. 3 without having actually received any bankers' cheques.
Indisputably, the Reserve Bank of India appointed a Committee known as the Jankiraman Committee whence the alleged security scam came to light. It submitted a report, a portion of which was marked as Exhibit 334 before the learned Special Judge wherein certain irregularities in the functions of Andhra Bank were pointed out, the relevant portion whereof reads as under :
"(6) It was observed on a scrutiny of the current account of H.P. Dalal that the branch has accommodated the broker by affording credit of some of the banker's cheques received from other banks to his account one working day prior to the day on which the instruments were sent for clearing, with a view to avoiding overdrawings in the account on these days. The funds so credited have been utilized by the broker either for purchase of securities or making some other payments. Instances noticed are given in the annexure. It will be seen therefrom that in the case of item No. (i) the branch had afforded the credit even before the actual date of the instrument."
(Emphasis added) 3 It was also pointed out how Accused No.3 had received financial benefit out of the said transactions.
FIRST INFORMATION REPORT Relying on, or on the basis of, the Jankiraman Committee Report, a First Information Report was lodged by PW-25 Sitaram Premaram Paladia on or about 02/06/1993 (Exhibit 333), initially against the accused Nos. 1, 2 and 3.
No further preliminary inquiry was conducted before lodging the said First Information Report. Ten instances of grant of credit to Accused No. 3 were detailed therein, in respect of the cheques received or those yet to be received from four banks, namely Bank of Karad, ANZ Grindlays Bank, Canara Bank and Standard Chartered Bank (hereinafter referred to as "the drawer banks"), without presenting or sending them for clearance.
PW-26 Mr. Waydande while making investigation into the said offence, allegedly found involvement of Accused Nos. 4 and 5 as well, who had prepared debit and credit vouchers, and made entries in the transfer scroll, BCR Registers, Cheque Clearing and Receiving Registers, etc. They were thereafter made accused in the said case.
4 PROSECUTION CASE The prosecution contends that the appellants herein entered into a conspiracy with each other with the object of giving undue pecuniary advantage to Accused No. 3, and for the said purpose, the bank officers had misused their position as public servants, forged documents and used them as genuine ones for the purpose of falsification of accounts.
The prosecution case is that such credits should not have been given until the amount of the cheques was realized. It was furthermore alleged that credit had been given even though the said cheques had not actually been received in the Fort Branch of Andhra Bank. The aforementioned acts on the part of the officers of Andhra Bank constituted criminal breach of trust and forgery, as well as offences under the Prevention of Corruption Act, 1981.
PROCEEDING BEFORE THE SPECIAL COURT As many as ten transactions were in question before the learned judge.
Separate charges were framed in respect of each of the aforementioned ten transactions. Before the learned Special Court, 26 witnesses were examined by the prosecution.
5 PWs 1 to 10 were employees/officers working in the drawer bank along with four officers from the Funds and Investment Department.
PWs 11 to 19 and 22 to 24 were working in the Andhra Bank. PW-11 Hemlala G. Nair and PW-12 Rajinderkumar and one Rane, were working as clerks in the Funds and Investment Department, Andhra Bank. Rane died in 1993 and thus, could not be examined as a witness. PW-13 Sunil Pore and PW-14 Dilip Gursahani were working as typist and Clerk-cum-Cashier respectively in the Clearing Department, Andhra Bank. PW-17 Katta Hari Babu and PW-18 Ramesh G. Ramteke were officers in the Current Account Department, Andhra Bank. PW-19 S. Ganavinayagam was the Manager (Operational) in the Current Account Department and PW-22 J.S. Sastry was working as Chief Officer, at the Head Office of Andhra Bank, Hyderabad.
PW-23 G.D. Bhalla was working as Chief Manager in Fort Branch, Andhra Bank, Mumbai. PW-24 C. Raja Rao was working as General Manager (Personnel) at the Head Office, Andhra Bank, Hyderabad. PW - 20 Anand Sinha and PW-21 M. Mahajan were officers working in the Reserve Bank of India.
In respect of transaction no. 1, the Special Court noted that the account of A3 was credited on 18/05/1991, whereas the cheque is dated 20/05/1991. As Accused No.1 and 2 authorized the credit vouchers to the Current Accounts Department, allowing it to credit an amount of Rs.2 crores indicated therein to the account of Accused 3, without having in their possession the cheque for the said amount, A1 and A2 were guilty of criminal breach of trust as also for creating false documents.
In respect of transactions no. 2 and 3, the Special Court held that though the cheque dated 05/07/1991 was received on 06/07/1991, the credit therefor had been given on 05/07/1991; the cheque amount was realized only on 06/07/1991. As A1 and A2 prepared debit and credit vouchers and ensured credit to the account of A3, even without having in their possession the corresponding cheque and, thus, they were guilty of criminal breach of trust and also falsifying documents.
In respect of transaction No. 4, the Special Court held that though the cheque dated 17/09/1991 was received on 18/09/1991, the credit was given one day prior thereto, i.e., on 17/09/1991 and the cheque amount was realized only on 18/09/1991. Hence, on the day on which the credit was 7 given, the cheque was not in possession of the A1 and A2, and, thus, by issuing credit voucher on 17/09/1991, A1 and A2 committed criminal breach of trust and falsification of documents.
In respect of transactions no. 5 and 6, it was held by the Special Court that the cheque dated 06/11/1991 was supposed to have received on 06/11/1991, but credit thereof was availed by him on 06/11/1991 although the cheque was realized on 08/11/1991; 07/11/1991 being a holiday. Hence, on the day on which the credit was given, the cheque was not in the hands of the A2 and A4; and by issuing the credit voucher on 06/11/91, they have committed the offence of criminal breach of trust as also falsification of documents.
It was also held in respect of transaction no. 7, that the cheque dated 13/11/1991 was received on that date and the credit was given on 13/11/1991, although the cheque amount was realized only on 14/11/1991.
The cheque was not sent for clearing on 13/11/1991 and therefore, by issuing credit voucher on that day, A1, A2 and A4 had committed criminal breach of trust and were also guilty of preparing false documents.
So far as transaction No.8 is concerned, the Special Court held that the cheque dated 04/12/1991 was received on 05/12/1991 and the credit was 8 given on 04/12/1991, despite the amount was realized only on 05/12/1991.
Evidence on record has clearly proved that the cheque in question was not received in the Funds Department on 04/12/1991, although A1 and A5 authorised crediting the cheque amount into A3's account on that day and therefore A1 and A5 were guilty of criminal breach of trust as also making of false documents in respect of the said transaction.
In respect of transaction no. 9, it was held by the Special Court that the cheque dated 16/12/1991 was received on 16/12/1991, the credit is given and availed on 16/12/1991 and the cheque was actually realized only on 17/12/1991. The cheque was not sent for clearing on 16/12/1991 and therefore, by issuing credit voucher on that day, A1 and A2 were guilty of criminal breach of trust and of making of false documents in furtherance thereof.
In respect of transaction no. 10, the Special Court held that the cheque dated 07/04/1992 was received on 08/04/1992, and the credit was given on 07/04/1992 even though the cheque was realized only on 08/04/1992. As on the day on which the credit was given, the cheque was not in the hands of A2, by issuing the credit voucher on 07/04/1992, A2 was guilty of criminal 9 breach of trust and also guilty of making false documents in furtherance of this transaction.
It was also recorded by the Special Court that the pecuniary advantage had illegally been given to A3, and thereby A2 and A4 have committed an offence under Section 13 (2) read with 13 (1) (c) and 13 (1) (d) of the Prevention of Corruption Act. It was also held that since the credit was illegally given to A3, they have committed criminal breach of trust, and that by issuing a credit voucher without the cheque having been realized, A2 and A4 have prepared false documents and thereby committed forgery. It was also held that A2 and A4 entered into criminal conspiracy with A3 and other accused persons for the purpose of giving illegal credit to A3 and thus securing a pecuniary advantage for him.
ADMITTED FACTS:
Before adverting to the rival contentions raised before us by the parties, we may, at the outset, notice the following:
(i) All the cheques involved are banker's cheques.
(ii) Payments under the banker's cheques are guaranteed.
1 0 (iii) Cheques received by the Bank are dealt with by the Funds Department, Current Account Department, Clearing Department and Day Book Department.
(iv) The Current Account, Clearing and Day Book Departments operate under the Operation Department of the Fort Branch, Andhra Bank (v) In addition thereto, there is a service centre of the Bank which is situated in separate premises. It is responsible for sending the banker's cheques to the Reserve Bank of India for clearance.
(vi) It was not proved that the bank officers received any pecuniary advantages for themselves but by their action pecuniary advantages were received by Accused No. 3.
(vii) Whereas there are no guidelines for operation of the Funds Department, guidelines have been issued by the Andhra Bank for other connected departments, viz., Current Account Department, Clearing Department and Day Book Department.
(viii) It is also not in dispute that a machine known as Advance Ledger Posting Machine (ALPM) was installed in the Current Account 1 1 Department which was possible to be operated manually. We will highlight the operational details of the said machine at an appropriate stage.
SUBMISSIONS OF LEARNED SENIOR COUNSEL.
Mr. Naphade, Mr. C. Mukund and Mr. Das, learned counsel appearing on behalf of the accused nos. 1, 2, 4 and 5 urged :
(i) Since the First Information Report was lodged only on the basis of the report of the Jankiraman Committee without any further preliminary enquiry, the entire proceeding is vitiated in law.
(ii) Jankiraman Committee having only pointed out irregularities committed both by the Current as well as the Clearing Department, appellants cannot be said to have been involved in commission of any offence, as alleged or at all.
(iii) There is no evidence to show that the appellants had any dominion over the property of the bank at any point of time, and/ or they were ultimately responsible for the disposal thereof in violation of any direction of law.
1 2 (iv) Since the purported guidelines [Exhibit 322] have no force of law, no offence of criminal breach of trust can be said to have been committed in terms of Section 405, read with Section 43 of the Indian Penal Code.
(v) Further, the guidelines purportedly issued by the Bank, in any event, have no nexus with the functioning of the Funds Department being applicable in respect of securities transactions; the impugned judgment of the Special Court is wholly unsustainable.
(vi) Appellants, having scrupulously followed the prevailing bank practices and furthermore having complied with all the procedures laid down therefor, cannot be said to have committed any offence.
(vii) The job of the Funds Department was only to prepare credit and debit vouchers on receipt of the Banker's Cheque and to forward the same to the Current Accounts Department and it was the officers of the Current Accounts Departrment have both a duty, as well as the authority to scrutinize, verify and process these vouchers resulting in ultimate clearance thereof and in that view of the matter, no offence can be said to have been committed by the appellants alone.
1 3 (viii) Even assuming that the appellants are party to any conspiracy but the same by itself cannot yield any result, viz., ultimate benefit to the Accused No. 3, as the clearance of the cheques was in the hands of some other officers and as such the impugned judgment is liable to be set aside.
(ix) Since the banking practice in regard to grant of instant credit to the holder of a negotiable instrument is an accepted one, meant for the benefit of the customers, there can be no rationale that such benefits though required to be given to the customers, would be withheld unless the actual fund is received from the drawer bank.
Although there existed guidelines only for the Current Account and other Departments, there existed no guidelines as regards the grant of instant credit which had come to be established based on the internal practice followed by the banks. Accordingly, no case for the commission of an offence of criminal breach of trust had been made out.
(x) It being not the case of the prosecution that the procedures in respect of the said transactions were totally disregarded and only because the scam broke out, faults were sought to be found without 1 4 rectifying the said procedure and in that view of the matter, the functionings of the appellants could not have been questioned.
(xi) The veracity or the existence of the documents being not disputed, the judgment of the Special Court as regards actual date of receipt of the cheques were wholly unjustified, particularly in view of the statements made by the witnesses examined on behalf of the drawer banks who had categorically stated that no cheque was ante-dated.
(xii) The Andhra Bank not being involved in the security transactions wherein only the drawer banks were involved, the Special Court had no jurisdiction to try the alleged offence.
(xiii) Even if the findings of the Special Court that some documents did not contain all the details is held to be correct, all the officers concerned, from receiving the cheque to clearance thereof (including the clearance of the Funds Department) should be held to be liable therefor and not the appellants alone.
(xiv) In view of the pressure of work on all the employees being admitted, and as all entries in the registers were required to be 1 5 done on the same day which having substantially been complied with, inadvertent errors on the part of employees cannot be considered to be acts of illegality.
(xv) Since the current account credit vouchers were released by the accused persons in discharge of their official duties, the allegation that they had prepared any false document and, thus, committed acts of forgery, must fail.
(xvi) The banker's cheques having been admittedly 100% guaranteed and the bank having not suffered any monetory loss and having also not filed any complaint, the impugned judgment cannot be sustained.
(xvii) Appellants having followed the established and longstanding banking practices, deviation therefrom would only amount to misconduct, as no mens rea can be attributed to them.
(xviii)The transactions in question being exceptional in nature, which according to PW-17, Katta Hari Babu, would mean "it involves large credits and large debits"; some priority was required to be given thereto 1 6 (xix) When cheques are posted (which means the amount is credited into the account), the customer becomes entitled to utilize the same, which is not subject to the clearance of the banker's cheque wherewith the accused had no role to play; and hence the impugned judgment is wholly unsustainable.
(xx) In view of the fact that Sh. Ramesh G. Ramteke, PW-18, both had the authority to verify the transaction, as well as discovered discrepancies in the date of the cheque and/or the credit and the debit voucher for which he went back to the Funds Department, but no action was taken therefor would clearly go to show that he satisfied himself that only a wrong date has been mentioned, which was otherwise usual.
(xxi) Appellants not being the authorized officers of the bank, could not be said to have any dominion over the property of the bank and thus no offence can be said to have been committed.
(xxii) PW-19, S. Ganavinayagam having testified that accused No.3, Hiten Dalal used to receive preferential treatment and for whom only the guidelines Ex.322 had been issued, any action taken pursuant thereto or in furtherance thereof must be held to be legal 1 7 and within the framework of law particularly when in relation to bankers' cheques, as was admitted by PW-20,. Anand Sinha, an officer of the Reserve Bank of India that no guidelines had been issued therefor.
(xxiii)From the deposition of prosecution witnesses, particularly those who are high ranking officers including PW-23, Sh. G. Bhalla, Chief Manger of Andhra Bank, it would be evident that the appellants had followed the usual banking practice. It has also been admitted that any transaction carried out was subject to scrutiny, as the Funds Department used to send a daily report to PW-23.
(xxiv) Accused No.5 having been shown to be involved in respect of only two transactions, namely transaction Nos. 8 and 9, and as in respect transaction of No.9, he had not been found guilty, for the self-same reasons he should have been found to be not involved in respect of transaction No.8 as well.
(xxv) There being no independent material on record to show conspiracy between A-1, A-2, A4 and A-5 on the one hand and A-3 on the other the appellants could not have been convicted for commission 1 8 of an offence under Sections 120-A and 120-B of the Indian Penal Code 1860.
(xxvi) As conspiracy is a separate and distinct offence under the Indian Penal Code, and the original agreement between the accused is a sine qua non there for, mere knowledge of conspiracy by itself cannot be said to be sufficient in arriving at a finding of guilt in respect thereof.
Mr. U.U. Lalit, learned senior counsel appearing on behalf of accused No.3 would contend:
(i) As no material of either any meeting or any conversation having been brought on record, the question of holding him guilty of commission of an offence of conspiracy does not arise.
(ii) The bankers' cheques having been issued by the banks for utilization of the amounts thereof by accused No.3 and he being beneficiary thereof, there was no question of his being benefited by entering into any conspiracy with anyone.
(iii) Charges alleged made by the prosecution being confined to non realization of the bankers cheques from the Reserve Bank of India at 1 9 the end of the day, although credit thereof had been given in the account of accused No.3, the irregularity in respect thereof was to be dealt with by different branches of the banks wherewith accused No.3 was not concerned and, thus, he cannot be said to have committed any offence.
(iv) Even assuming that irregularity had been committed in the matter of realization of the amount under the bankers' cheques from the Reserve Bank of India, the same by itself would not lead to an inference of commission of an illegal act and consequently, an offence of conspiracy.
Mr. A. Mariarputham, learned counsel appearing on behalf of the Central Bureau of Investigation, on the other hand, submitted :
(i) Although there is no direct evidence of conspiracy, in view of the materials brought on record by the prosecution, accused Nos. 1, 2, 4 and 5, who authorized crediting of the amounts of the bankers' cheques for the benefit of accused No.3 must be held to have misused their position so as to cause wrongful loss to the bank and wrongful gain to accused No.3, and, thus, have clearly committed the offence of 2 0 criminal breach of trust within the meaning of Section 405 of the Indian Penal Code 1860.
(ii) Circular dated 5th December, 1990 issued by the Andhra Bank (Ext. 322) specifically providing that the transaction may be carried out in the case of Hiten Dalal (accused No.3) and the commission to be charged therefor having been prescribed and, thus, no exception having been made granting him the facility of over draft, charging of interest on any advance or over draft etc., the officers of the banks having not taken the requisite precautions by them in regard to receipt of any cheque and, thus, have violated the directions as the account of accused No.3 was credited much before the Bank received credit in respect of the said cheques in the account maintained with the Reserve Bank of India.
(iii) The cheques/transactions would fall into three categories, namely - (1) post dated cheques and credit given therefor earlier ; (2) cheques although not in physical possession of Andhra Bank, but credit was still given to the account of accused No.3; and (3) cheques presented for clearance the next day, but account of accused No.3 was credited the previous day, all of which were wholly illegal.
2 1 (iv) From a bare perusal of the findings of the learned Special Court it would appear that in regard to transactions 1, 2, 3, 4, 7, 8 and 10 the cheques were not in physical possession of Andhra Bank at the time when the account of accused No.3 was credited, although in respect of transaction No.1 the cheque might have been with the Andhra Bank and, thus, the charge against the appellant must be held to have been established.
(vi) In so far as the first transaction is concerned, account of accused No.3 was credited on 18th May, 1991 but the cheque was dated 20th May, 1991 which clearly shows the intention on the part of the appellants to confer an illegal benefit to accused No.3, to which he was not otherwise entitled to.
(vii) In respect of transaction No.10, although the account of accused No.3 was credited on 7th April, 1992 for an amount of Rs. 4 crores, the materials on record clearly show that although the cheque was dated 7th April, 1992, it was issued/forwarded only on 8th April, 1992 which is clearly demonstrative of the fact that the accused had dealt with the said cheque without there any forwarding letter having been issued by the transferee bank stating that accused No.3 was the beneficiary 2 2 thereof, the criminal misconduct on the part of the accused must be informed.
(viii) So far as transaction Nos. 2, 3, 4, 7 and 8 are concerned, it is borne out from the record that the cheques had not been received by the Andhra Bank and in any event the same having not been sent for clearance on the dates they were purported to have been received, wherefor the bank did not receive any credit from the Reserve Bank of India, the findings in the impugned judgment in this behalf are unassailable.
(ix) So far as transaction No.7 is concerned, it is established that a credit of Rs.1.5 crores had been given although the actual figure mentioned in the cheque was Rs.2,37,29,750/- which is beyond anybody's comprehension as a partial credit is not given in any banking transactions.
(x) The learned Special Judge having dealt with each of the transactions separately showing in details as to how, and on what basis his conclusions were arrived at in regard to the fact that the cheques involved in seven transactions were not with Andhra Bank when the 2 3 account of accused No.3 was credited; the impugned judgment should not be interfered with.
(xi) It is clear from the findings of the learned Special Judge that but for the credit given on the relevant dates, the account of accused No.3 would have been overdrawn i.e. money in the account No.3 would not have been sufficient to honour cheques issued by him and presented for payment on these days, and thus, the appellants have rightly been found guilty for commission of the said offence.
(xii) Even for a banking branch to grant immediate credit to the account of accused No.3; as at least in respect of 5 cheques, the conditions required therefor, namely the physical availability of bankers' cheques with the Andhra Bank, having been found to be missing at the point of time when the credit was given to the account of accused No.3, the appellants must be held to have committed the offence under Section 409 read with Section 120-B of the Indian Penal Code.
(xiii) When an account holder is permitted to draw money in excess of the amount in his account, it would be an over-draft or an advance or loan from the bank to the account holder, wherefor interest would become chargeable and as no interest has been charged, the same would 2 4 amount to giving undue benefit to the account holder, and loss to the bank, particularly when in the circular letter (Ext. 322) there was no exception made in favour of accused No.3.
(xiv) As Accused No.3 had no overdraft facility or overdraft limit sanctioned to him, he could not have indirectly obtained the facility at the behest of accused Nos. 1, 2, 4 and 5.
(xv) In a situation of this nature, the Court is required to take a holistic view of the mater and for the said purpose the materials brought on record to prove the ingredients may have to be considered from different angles, namely - (a) if a cheque had been received the entire procedure for grant of credit had been rushed through beyond the normal banking hours so that credit may be given to the account of accused No.3; (b) the cheques are of one date and the forwarding letters of the next date, the credit and debit vouchers in the name of accused No.3 could not have been prepared in absence of the forwarding letters; (c) the requirements of accused No.3 must be held to be known to the officers of the bank, as against the cheque amount of Rs.2,37,29,750/- credit for a sum of Rs. 1.5 crores could not have been granted, which clearly goes to show that even if cheques were 2 5 received later the amounts were credited to the account of accused No.3 so as to enable him to meet his other obligations and in the process, money belonging to the bank was being used by Accused No.3 facilitated by officers of the bank using their authority.
(xvi) Appellants have not offered any explanation as to why details had not been entered in such a large number of documents, although the register must show as to who is the beneficiary of the cheques and the amount therefor, hence the impugned judgment should not be interfered with.
(xvii) Banking norms, for the purpose of attracting ingredients of Section 405 of the Indian Penal Code, are binding on its officers and for giving any undue facility given to accused No.3, the appellants could be found guilty.
JURSIDICTION OF THE SPECIAL COURT It is well known that during the period for April 1992 to June 1992, certain large scale irregularities and malpractices were detected in certain security transactions which were alleged to have been carried on by some prominent brokers in collusion with employees of various public sector 2 6 banks and financial institutions. To deal with the situation and to ensure the speedy recovery of the huge amount involved, the Parliament enacted the Special Court (Trial of offences relating to transaction in Securities) Act, 1992, "the Act" establishing the Special Courts from whose judgment this appeal comes before us.
The question which now arises for our consideration is whether having regard to the peculiar facts and circumstances of the case the Special Courts so constituted had jurisdiction to try this matter.
Indisputably Section 7, read with sub section 2 of Section 3 of the Special Courts Act, limits the jurisdiction of Special Courts only to offences relating to transactions in securities after the 1st day of April, 1991 and before 6 June 1992.
Further Section 8 provides that the special courts shall have jurisdiction to try any person concerned for the offence referred to in sub section 2 of Section 3 either as a principal, conspirator or abettor and accused persons can be jointly tried at one time, in accordance with CrPC.
Since we have already dealt with the issue as to the ambit of jurisdiction of the Special courts in R Venkatkrishnan v. Central Bureau of 2 7 Investigation (Criminal Appeal No. 76 of 2004 decided today), it is not necessary to deal with this aspect of the matter once again.
Indisputably the jurisdiction of the Special Court is wide in nature.
The provisions of the Act need to be interpreted keeping in mind its object and purport. The Act being a special Act must be given its full effect.
It would bear repetition to state that A3 was one of the clients of Andhra Bank dealing with the purchase and sale of securities through the Funds Department and that he had a Current Account bearing No. 4819 mainly for the said purpose.
While dealing with the securities transactions on behalf of A3, there used to be sale as well as purchase of securities. In case of transaction of sale of securities, Accused No. 3 used to receive his payments through Bankers Cheque which were deposited with the Funds Department, and the amount of the Cheque in relation to sale in securities. It is the undisputed position that the Funds Department of the Andhra Bank was the only branch exclusively dealing with securities.
2 8 Furthermore it must be noted in this respect, that Exhibit 322 Notification of the Andhra Bank dated 5.12.1990 authorized the Fort Branch of Andhra Bank to deal with A3 in regard to securities transactions.
Besides, as we have already noted, there is ample evidence of the officers and the staff members working in the Bank of Karad, Standard Chartered Bank, Canara Bank and ANZ Grindleys Bank that they had issued these Bankers Cheque in regard to security transactions, especially in respect of Mr AD Narottam, who was dealing in securities.
Officers who are accused in the present case A1, A2, A4 and A5 are officers in the Funds Department of the Andhra Bank at its Fort Branch. As stated earlier, the said branch was the only one dealing with security transactions on behalf of the entire Andhra Bank.
The submission of the learned counsel for the appellants that the trial of offences by the Special Court is without jurisdiction and without the authority of law would, thus, have to be rejected and, in our opinion, the court rightly exercised jurisdiction in the present matter. We affirm the findings of the court in this regard.
PROCEDURES FOLLOWED BY THE VARIOUS DEPARTMENTS 2 9 In order to appreciate the issues involved in the present case it is necessary to set out in brief the working modalities of the various departments of the Fort Branch of Andhra Bank, Mumbai which were connected with transactions relating to bankers cheques. There are four such departments to which we must pay special attention; namely Funds and Investment Department (hereinafter "Funds Department"), Current Account Department, the Clearing Department and lastly Day Book Department. It is also to be noted that the Funds Department was an independent department whereas the other departments namely Current Accounts Department, the Clearing Department and the Day Book Department were under the Operations Department of Fort Branch of Andhra Bank, Mumbai.
The Funds Department which was functioning at the Fort Branch was exclusive to the said branch, and did not exist in any other branch of Andhra Bank throughout India. This department was dealing in call money and securities transactions on behalf of the bank as a whole. The functioning of the department was directly under the supervision of the head office of the bank, situated at Hyderabad.
3 0 For a proper analysis of the factual matrix of the case it would be essential to take a close look at the procedure followed in the various departments of the Bank.
FUNDS DEPARTMENT Bankers cheques used to first arrive at the Funds Department of the Bank. These cheques which were received from the drawer bank were accompanied with a forwarding letter indicating the nature of the beneficiary and the amount of the Cheque. On receipt of the Cheque, an entry used to be made in the Bankers Cheque Receivable Register [BCR Register]. The register contain all necessary particulars with regard to the Cheque, the name of the drawer bank, the number, the date and amount thereof as also to whom the amount of the Cheque was to be credited.
Thereafter, entries used to be made in the transfer scroll, which contained credit as well as debit vouchers. The details of the credit voucher are entered in the transfer scroll on the credit side, and the details of the debit voucher are entered on the debit side. The entries in the transfer scroll used to be made on the same day on which the Cheque was received.
3 1 On the credit side, the particulars of the person in favour of whom the Cheque was received was entered, along with the amount of the cheque. On the debit side, debit voucher entries were made by debiting the BCR account with the amount of the cheque. Thereafter, the credit voucher used to be sent to the Current Account Department for posting, i.e., giving credit equal to the amount of the cheque directly to the account of the beneficiary. The debit voucher was however retained in the Funds Department.
All these vouchers were required to be signed, which in effect authorizes the credit to be given to the beneficiary of the cheque.
As per the procedure followed by the department, a consolidated credit voucher and a consolidated debit voucher used to be prepared on the basis of the entries made in the BCR Register by about 2.30 to 2.45 pm.
Accordingly the voucher contained the total of all the cheques received until then.
The consolidated credit voucher was prepared, along with a slip bearing the amounts of all the cheques. The total of the vouchers and the total of all the cheques given on the slip should tally with the total of the BCR Register.
3 2 Thereafter, the consolidated credit voucher so prepared along with the slip and all the cheques used to be sent to the Clearing Department of the Bank, whereas the consolidated debit voucher was sent directly to the Day Book Department.
CURRENT ACCOUNT DEPARTMENT The Current Account Department as has already been noted came under the Operations Department of Andhra Bank. The officers working in the Current Account Department would check the credit vouchers received from the Funds Department and then make posting on the computer which operated as per the Advanced Ledger Posting Machine [ALPM] programme.
The amount shown in the credit voucher would, through the posting, be credited to the account of the client indicated on the credit voucher. At the end of the day two lists used to be generated through the ALPM system from the computer. The first list concerned Exceptional Transactions of the day which were transactions involving amounts of more than one lakh. The second list, namely the transaction listing, was for all the transactions handled by the Current Account Department on that day.
CLEARING DEPARTMENT 3 3 As has already been noted, the Clearing Department used to receive the consolidated credit vouchers along with the slip bearing the amounts of the various cheques, along with the cheques themselves from the Funds Department. These cheques, thereafter, were bifurcated bank-wise and accordingly a bank-wise slip, for the purpose of preparing the bank schedule, was made. Mr Sarkar [PW 15] used to verify the entries made in the bank schedule along with the cheques before sending them to the service centre for clearance.
A clearing rubber stamp along with the date would be put on each Cheque as well as the consolidated credit voucher. The date of the stamp would be the date on which the Cheque was received in the Clearing Department and sent to the service centre for realization. It was the job of the service centre to send the cheques to the RBI where the amount of the cheque would be credited in the account of Andhra Bank with RBI.
The cheques would then go back to the drawer bank and the bank schedule would be sent back to the service centre. In case a cheque was dishonored, it used to come back to the Clearing Department through the service centre. If no Cheque was received back by the Clearing Department 3 4 from the service centre by 4.00 pm, then it meant that all the cheques had been cleared.
Subsequently, the consolidated credit voucher would be sent from the clearing department to the Day Book Department.
DAY BOOK DEPARTMENT Day Book Department used to ultimately receive both the consolidated credit voucher as well as the consolidated debit voucher.
Though it used to receive the credit voucher from the Clearing Department, the debit voucher used to be directly received by it from the Funds Departments. Since both the vouchers were prepared from the BCR Register they would both tally with each other. Accordingly it was in this department that all the transactions of the day of Fort Branch of Andhra Bank used to be consolidated. Mr Mukesh [PW 16] used to handle the consolidation.
It was his duty to consolidate the data in the Day Book Register. It must be noted that a day book register is like a balance sheet showing the assets and liabilities of the bank on that day. Accordingly a Bankers Cheque which remained to be realized at the end of the day would be shown as an debit excess under the head of `Bankers Cheque receivables' 3 5 A similar balance sheet through the General Ledger Balance [GLB] used to be generated through the ALPM system. This GLB gave a snapshot of the assets and liabilities on a particular day.
GUDELINES FOR BANKERS CHEQUES Let us now consider the relevant guidelines which relate to the dealing of the Bankers Cheques.
Mr. Sastry, the Assistant General Manager and the Chief Officer in the Central Accounts Department at the head office of Andhra Bank at Hyderabad, stated in his testimony that the head office had issued guidelines for the operation of securities transactions of constituents at Fort Branch , Bombay dated 5.12.1990 [Exb. 322].
In his testimony, he further clarified that the intention behind issuing the guidelines was to ensure that the purchase price for the transaction would be made only after ensuring that the sale proceeds of the transaction are credited in the RBI to Andhra Bank.
As per him, the Funds Department would receive the bankers cheques on account of sale transactions of the clients and enter the particulars of 3 6 these instruments and send them to the Service centre for being forwarded to the RBI for crediting the amount to Andhra Bank's account.
Guideline 12 of Exhibit 322 [Operations of Security Transactions for Constituents at Fort Branch, Bombay] specifically provides:
"Please ensure that all the cheques received towards sale transactions will be presented in Special Clearing for interbank cheques and ensure that the credit is afforded to our Bank with RBI on the same day."
It had also been vehemently submitted before the Special Court that the said guidelines were not in respect of the Funds Department. It was furthermore contended that guideline itself does not indicate that they were pertaining to the Funds Department. The learned special judge rightly rejected the said arguments.
These guidelines were issued by the Head Office. They were issued for the purpose of operation of security transaction at Fort, Bombay Branch of Andhra Bank. The guidelines moreover specify that permission had been granted to Hiten P Dalal (A3) for the purpose of securities transactions.
Therefore, these directions were obviously binding on the persons who were working in the Funds Department. These guidelines were 3 7 exclusively meant for the Funds Department for handling securities transactions, and there was no other department or branch of Andhra Bank anywhere in India which was handling such securities transactions. As such, they were binding on the accused persons.
THE PRESENT CASE In the aforementioned backdrop of events, let us now analyse the transactions involved herein. Ten transactions relating to drawer's cheques are in question, the details whereof are as under:
Tran. Date of Amt. Date of Actual Credited to realisation date of NO. Credit a/c of A3 of cheque cheque 1 18.05.91 2 crore 20.05.91 20.05.91 2 05.07.91 29 lacs 06.07.91 05.07.91 3 05.07.91 71 lacs 06.07.91 05.07.91 4 17.09.91 61,84,925.59 18.09.91 17.09.91 5 06.11.91 86,62,500 08.11.91 06.11.91 6 06.11.91 75 lacs 08.11.91 06.11.91 7 13.11.91 1,50,00,000 14.11.91 13.11.91 8 04.12.91 7 crores 05.12.91 04.12.91 9 16.12.91 8,80,95,890 17.12.91 16.12.91 10 07.04.92 4 crore 08.04.92 07.04.92 Accused No.1 is involved in all the transactions ; Accused No.2 is said to be involved in eight transactions, i.e., transaction Nos. 1 to 6, 9 and 10; while Accused No.4 is allegedly involved in four transactions, 3 8 transaction Nos.4 to 7. Accused Nos. 2 and 4 are jointly involved in transaction Nos. 4 to 7.
Accused No.5 has not authorised any payment. He is said to be involved in transaction Nos.8 and 9 only. However, Accused No.5 has been given benefit of doubt in respect of the 8th transaction. We are, therefore, concerned herein with his involvements in the 8th transaction.
We have discussed the functioning of different departments at some length only to highlight the submissions of learned counsel appearing on behalf of the appellants that the prosecution has not been able to prove the charge of conspiracy as without involvement of other departments, it was not possible for accused No.3 to obtain any pecuniary gain out of the said transactions at all, if any.
We must also notice that the functioning of the different departments has not been seriously disputed.
The functioning of the Funds Department has been proved by PW 2, Sampada S. Amre, and the other departments' functionings by PW 11, Hemlata Nair. The same would also be apparent from the entries made in the BCR register, marked as Ext.111. So far as the functioning of the 3 9 Clearing Department is concerned, the same has been proved by PW 13, Sunil Pore. Therein, cheques are segregated bank-wise and amount wise.
There appears to be some controversy as to at what time cheques are sent out for clearance. According to the appellants, the Funds Department is bound to receive cheques up to 3.00 p.m. However, according to the prosecution a consolidated statement of the cheques received upto 2.30 p.m., after preparing bank schedule by the Clearing Department are sent at about 2.45 p.m. to the service centre and the R.B.I. Appellants contend that any cheque received after the prescribed hours i.e. 2.30 - 2.45 p.m., is sent with a single voucher to another department.
It is accepted by PW 13, Sunil Pore that any cheque received up to 3.00 p.m. is also entertained wherefor a separate voucher is prepared, and the same is sent to the Current Account Department. This voucher may not be sent on that date, but must be sent on the day after.
It is also contended that in regard to the processing of the cheque for giving credit or making entries, the Funds Department evidently had no access. It is also admitted that the Funds Department personnel have no access to the ALPM machine. It also appears from the evidence of PW-7, K. Hari Babu, that the crucial function of operating the machine is of the 4 0 Current Account Department. Before signing the document relating to the posting of the cheque, an officer of the Current Department only would verify the entries made in the computer on the basis of which a print out would be taken out which is considered to be a document authorization in respect thereof.
The said witness further states that the credit granted are of two types, namely cleared credits and uncleared credits. This would be known from the vouchers received from the Funds Department.
Before us, the aforementioned procedural aspect is not at all in dispute. What is in dispute is what is meant by authorisation.
Our attention has also been drawn to certain flaws in the system pertaining to the working of the various departments but we are not much concerned with them herein According to the prosecution, as instructions are received by the Current Account Department from the Funds Department by way of credit vouchers, signing of the same by the officer would itself amount to authorization whereas according to the accused, posting of the vouchers for clearance would amount to authorization.
4 1 The learned Special Judge in his judgment has dealt with each transaction in great details. He has considered both the aspects of the matter in respect of each of the transactions. The learned Judge, however, found that apart from three transactions, being transaction Nos. 5, 6 and 9, physical possession of the cheques might have been established, but in respect of other transactions either vouchers had been prepared before receipt of the cheques, or post dated cheques issued by the drawer banks have been entertained, in violation of the guidelines issued by the Bank.
Credit had been given on the basis of post dated cheques. Two cheques were not in the physical possession of the Andhra Bank. Although the cheques were presented for clearance on the next date, the account of Accused No.3 was credited on a previous day.
Although we have been taken through the depositions of all important witnesses, as regards the functioning of the Bank, which includes not only the internal functioning of its different departments but also the banking practice developed over the years for grant of instant credit to its customers including Accused No.3, it may not be necessary to delve thereto in details.
In our considered opinion, we may proceed on the assumption that the transactions in question are exceptional transactions and a banking practice 4 2 had developed for grant of advance credit to some of the customers of the Bank, including Accused No.3.
It is not in dispute that the guidelines issued by Andhra Bank (Ext. 322) do not relate to Bankers Cheques. It is also not in dispute that the payment under the Bankers Cheques is guaranteed. It is furthermore admitted that the Funds Department used to receive cheques along with a forwarding letter mentioning in whose account the same it is to be credited and upon verification thereof, it would be sent to the Clearing Department.
The cheques used to be received by the officer of the Funds Department and on the instructions of these officers that the credit vouchers were to be prepared. After preparation, the vouchers were to be handed over to the officers who, by signing them, used to authorise the transaction.
As per PW 23, Mr. G.H Bhalla, the cheques used to be sent to the Clearing Department, which in turn was responsible for sending them to the service centre.
Similarly, according to PW 12, Mr. Rajinderkumar, the debit vouchers were retained in the Funds Department and credit vouchers were sent to the Operational Department. It was on the basis of credit vouchers that entries were made in the Current Account of the Customer.
4 3 Mr. Katta Hari Babu's (PW 17) responsibility was to verify the signature of the officer on the credit vouchers after they were received by him whereafter he used to give it to his operator with an instruction for posting.
During daily proceedings, the Bank Schedules were made ready by 2.30 p.m everyday. Separate vouchers were made for cheques that were received after the consolidated voucher had been prepared.
The banker's cheques, since they related to daily transactions would never be post dated. No credit was to be given on the basis of post dated Cheque. Bankers Cheques used to be accompanied by a Covering letter, which was in the form of a letter of Authorization of the issuing bank containing details of the beneficiary of the said cheques.
PW 23, Mr. G.H. Bhalla, further elaborates that giving immediate credit meant preparing the credit voucher on the receipt of the banker's cheque and sending the said voucher to the Current Account department for posting credit to the customer's account. However, customers who had deposited banker's cheques could not demand the credit as a right on the same day before the realization. Since Officers of the Funds Department had the ultimate responsibility to give credit, they used to exercise considerable 4
