2008 (5) TMI 421 - SC - Companies Law

Offence punishable under section 13(1)(c) and 13(1)( d) read with section 13(2) of the Prevention of Corruption Act - Held that - Appeal allowed. There is no allegation that appellant committed any illegality. The allegation against him is to the extent that he accepted the CANCIGO Units though they stood in the name of the Andhra Bank and Andhra Bank Financial Services Limited. These CANCIGO Units were worth Rs. 33 crores and they were accepted with the proper authorization by the higher authorities in the CANFINA. It is highly improbable to believe that appellant S. Mohan on his own decided to accept CANCIGO Units worth Rs. 33 crores without any instructions. CANFINA did not file any complaint alleging any unauthorized transaction carried out by him. Now it has been held by this Court that the entire transaction was legal and the CANFINA was entitled to the proceeds of these CANCIGO Units and not the Custodian under the Act. Therefore, the appellant S. Mohan is not guilty of the offence punishable under section 13(1)(c) and 13(1)( d) read with section 13(2) of the Prevention of Corruption Act.

Summary

Issues Involved:
1. Conviction and sentencing of the appellants under various sections of IPC and the Prevention of Corruption Act.
2. Legality of the transfer of CANCIGO Units.
3. Allegations of criminal conspiracy, breach of trust, and falsification of accounts.
4. Role and actions of the appellants in the transactions.
5. Validity of the prosecution's claims and evidence.

Detailed Analysis:

1. Conviction and Sentencing of the Appellants:
The appellants, Accused Nos. 3 and 4, were convicted by the Special Court for various offences. The third accused was sentenced under section 409 IPC to seven years RI and fined Rs. 1 lakh, under sections 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act to five years RI and fined Rs. 50,000, and under section 411 read with section 120B IPC to two years RI and fined Rs. 50,000. The fourth accused was sentenced under section 409 read with section 120B IPC to seven years RI and fined Rs. 1 lakh, and under section 411 IPC to two years RI and fined Rs. 50,000. The sentences were to run concurrently.

2. Legality of the Transfer of CANCIGO Units:
The prosecution alleged that the CANCIGO Units worth Rs. 33 crores were non-transferable and that the appellants facilitated an illegal transfer. However, the Supreme Court in Canbank Financial Services Ltd. v. Custodian held that the transfer of CANCIGO Units to CANFINA was legal and valid. The units were purchased with the appellant Hiten P. Dalal's money and transferred with implied consent from Andhra Bank and Andhra Bank Financial Services Limited.

3. Allegations of Criminal Conspiracy, Breach of Trust, and Falsification of Accounts:
The prosecution charged the appellants with criminal conspiracy, breach of trust, and falsification of accounts. However, there was no complaint from Andhra Bank or Andhra Bank Financial Services Limited regarding any criminal breach of trust. The Court noted that the CANCIGO Units were purchased by Hiten P. Dalal and transferred without objection from CBMF. The Special Court's findings were reconsidered in light of the Supreme Court's decision, which validated the transactions.

4. Role and Actions of the Appellants in the Transactions:
The third accused, S. Mohan, was alleged to have facilitated the transaction by instructing the acceptance of CANCIGO Units and transferring funds. The fourth accused, Hiten P. Dalal, was accused of transferring the units and benefiting financially. The Court found that these actions were within the scope of their roles and did not constitute criminal breach of trust or conspiracy, as there was no evidence of dishonesty or violation of trust.

5. Validity of the Prosecution's Claims and Evidence:
The prosecution's claims were based on the non-transferability of CANCIGO Units and alleged illegal actions by the appellants. However, the Court found that the rules restricting transfer were not statutory and that the transactions were conducted with implied consent and in the ordinary course of business. The evidence did not support the allegations of criminal conspiracy, breach of trust, or corruption.

Conclusion:
The Supreme Court allowed the appeals, acquitting the appellants of all charges. The Court found no evidence of criminal breach of trust, conspiracy, or corruption, and validated the transfer of CANCIGO Units as legal and within the scope of business practices. The bail bonds of the appellants were canceled.