9911796707
TMI Blog1962 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ready committed. In the present case, introduction of Bhagwati Trading Company in the transactions was the first step to carry out deception about the actual payment of money out of the funds of the Insurance Company to the Union Agencies. The second step of suppressing the name of Bhagwati Trading Company in the papers of the Union Agencies, Delhi, made it more difficult to trace the passing of the money of the Insurance Company to the Union Agencies and, therefore, the falsification of the journal vouchers related back to the original diversion of the Insurance Company's moneys to the Union Agencies and was with a view to deceive any such person in future who will be tracing the source of the money received by the Union Agencies. We are therefore of opinion that Gurha has been rightly held to have been in the conspiracy and to have abetted the making of the false journal vouchers.In view of the above, we are of opinion that the appellants have been rightly convicted of the offences charged. X X X X Extracts X X X X X X X X Extracts X X X X ..... the Imperial Bank of India, New Delhi. Exhibit P-785 consists of the Memorandum of Association and the Articles of Association of the Bharat Insurance Company. Articles 116 and 117 deal with the powers of the Directors. Exhibit P-786 is said to be the original Bye-laws passed by the Directors on September 8, 1951. The pages are signed by K. L. Gupta, who was the General Manager of the company during the relevant period, and not by Dalmia, the Chairman, as should have been the case in view of the resolution dated May 8; 1951. The genuineness of this document is not, however, admitted. Exhibits P-15 and P-897 are said to be copies of these Bye-laws which were sent to Shri K. Annadhanam (Chartered Accountant, appointed by the Government of India on September 19, 1955, to investigate into the affairs of the Bharat Insurance Company under section 33(1) of the Insurance Act) and to the Imperial Bank of India, New Delhi, respectively, and the evidence about their genuineness is questioned. Bye-law 12 deals with the powers of the Chairman. Clause (b ) thereof empowers the Chairman to grant loans to persons with or without security, but from August 30, 1954, the power was restricted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mained at Bombay and were kept with the Chartered Bank. Sometimes securities were kept with the Reserve Bank of India and inscribed stock was obtained instead. The presence of the inscribed stock was a guarantee that the securities were in the bank. Chokhani was not empowered by any resolution of the Board of Directors to purchase and sell securities. According to the prosecution, he purchased and sold securities under the instructions of Dalmia. Dalmia and Chokhani state that Dalmia had authorised Chokhani in general to purchase and sell securities and that it was in pursuance of such authorisation that Chokhani on his own purchased and sold securities without any further reference to Dalmia or further instructions from Dalmia. The transactions which have given rise to the present proceedings against the appellants consisted of purchase of securities for this company and sale of the securities which the company held. The transactions were conducted through recognised brokers and ostensibly were normal transactions. The misappropriation of funds of the company arose in this way. Chokhani entered into a transaction of purchase of securities with a broker. The broker entered into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover up this unauthorised transfer of funds, the various steps for the transfer of funds from one company to the other and the falsification of accounts of the Insurance Company and the Union Agencies took place and this conduct of the accused gave rise to the various offences they were charged with and convicted of. The real nature of the sale and purchase transactions of the securities did not come to the notice of the head office of the Insurance Company at Delhi as Chokhani communicated to the head office the contracts of sale and purchase with the brokers' statements of accounts, with a covering letter stating the purchase of securities from the brokers, without mentioning that the securities had not been actually received or that the cheques in payment of the purchase price were issued to Bhagwati Trading Company and not to the brokers. Raghunath Rai, the Secretary-cum-Accountant of the Insurance company, on getting the advice about the purchase of securities used to inquire from Dalmia about the transaction and used to get the reply that Chokhani had purchased them under Dalmia's instructions. Thereafter, the usual procedure in making the entries with respect to the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hokhani that he would arrange funds to meet them. He denies that he was a party to what Chokhani did. Chokhani admits that he carried out the transactions in the form alleged in order to meet the losses of the Union Agencies of which he was an employee. He states that he did so as he expected that the Union Agencies would, in due course, make up the losses and the money would be returned to the Insurance Company. According to him, he was under the impression that what he did amounted to giving of a loan by the Insurance Company to the Union Agencies and that there was nothing wrong in it. He asserts emphatically that if he had known that what he was doing was wrongful, he would have never done it and would have utilised other means to raise the money to meet the losses of the Union Agencies as he had large credit in the business circle at Bombay and as the Union Agencies possessed shares which would be sold to meet the losses. Vishnu Prasad expresses his absolute ignorance about the transactions which were entered into on behalf of Bhagwati Trading Company and states that what he did himself was under the instructions of Chokhani, but in ignorance of the real nature of the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by you R. Dalmia in forward transactions (of speculation) in shares; which transactions were carried on in the name of the Bharat Union Agencies Ltd. under the directions and overall control of R. Dalmia, by you, G.L, Chokhani, at Bombay, and by you, R.P. Gurha, J.S. Mittal and S.N. Dudani at Calcutta ; and for other purposes not connected with the affairs of the said Insurance Company, by further agreeing that current account No. B1763 be opened with the Bank of India, Ltd., Bombay, and current account No. 1646 with the United Bank of India Ltd., Bombay, in the name of M/s. Bhagwati Trading Company, by you Vishnu Pershad accused with the assistance of you, G. L. Chokhani, and Bajranglal Chokhani accused for the illegal purpose of diverting the funds of the said Insurance Company to the said Bharat Union Agencies, Ltd., by further agreeing that false entries showing that the defalcated funds were invested in Government Securities by the said Insurance Company be got made in the books of accounts of the said Insurance Company at Delhi, and by further agreeing to the making of false and fraudulent entries by you R. P. Gurha, J.S. Mittal, G.S. Lakhotia, V.G. Kannan, and others, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agent in your capacity as Chairman of the Board of Directors and the Principal Officer of the Bharat Insurance Company, Ltd., and as such being entrusted with dominion over the funds of the said Bharat Insurance Company, committed criminal breach of trust of the funds of the Bharat Insurance Company Ltd., amounting to Rs. 55,43,220-12-0, by wilfully suffering your co-accused G.L. Chokhani to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing between you and the said Bharat Insurance Company, prescribing the mode in which such trust was to be discharged, by withdrawing the said funds from current account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd., Bombay, by means of cheque Nos. B 564835... issued in favour of M/s. Bhagwati Trading Company, Bombay, and, by dishonestly utilising the said funds for meeting losses suffered by you in forward transactions in shares carried on in the name of the Bharat Union Agencies Ltd., and for other purposes not connected with the affairs of the said Bharat Insurance Company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e they were entered into. We have heard the learned counsel for the parties on facts, even though there are concurrent findings of fact, as Mr. Dingle Foot has referred us to a large number of inaccuracies, most of them not of much importance, in the narration of facts in the judgment of the High Court and has also complained of the omission from discussion of certain matters which were admittedly urged before the High Court and also of misapprehension of certain arguments presented by him. We need not, however, specifically consider points Nos. 12 to 15 as questions urged in that form. In discussing the evidence of Raghunath Rai, we would discuss the relevant contentions of Mr. Dingle Foot, having a bearing on Raghunath Rai's reliability. Our view of the facts will naturally dispose of the last point raised by him. Mr. Dingle Foot's first four contentions relating to the illegalities in procedure may now be dealt with. The two charges under section 409, Indian Penal Code, against Chokhani mentioned that he committed criminal breach of trust in pursuance of the said conspiracy. One of the charges related to the period from August 9,1954, to August 8,1955, and the other related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate the said funds; (ii) to dishonestly use the said funds in violation of the directions of law; (iii) to dishonestly dispose of the said funds in violation of the directions of law; and (iv) to dishonestly use the said funds in violation of the implied contract existing between Dalmia and the Bharat Insurance Company." Section 233 of the Code of Criminal Procedure permits one charge for every distinct offence and directs that every charge shall be tried separately except in the cases mentioned in sections 234, 235, 236 and 239. Section 234 allows the trial, together, of offences up to three in number, when they be of the same kind and be committed within the space of twelve months. The contention, in this case, is that the four offences into which the charge under section 409, Indian Penal Code, against Dalmia can be split up, were distinct offences and therefore could not be tried together. We do not agree with this contention. The charge is with respect to one offence, though the mode of committing it is not stated precisely. If it be complained that the charge framed under section 409, Indian Penal Code, is vague because it does not specifically state one particular mode i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany in the Bank do not come within the expression "property" in section 405, Indian Penal Code. It is urged that the word " property '' is used in the Indian Penal Code in different senses, according to the context, and that in section 405, it refers to movable property and not to immovable property or to a chose in action. It is then contended that the funds which a customer has in a bank represent choses in action, as the relationship between the customer and the banker is that of a creditor and a debtor, as held in Attorney General for Canada v. Attorney General for Province of Quebec [1947] AC 33 and in Foley v. Hill [1848] 2 HLC 28; 9 ER 1002 Reliance is also placed for the suggested restricted meaning of "property" in section 405, Indian Penal Code, on the cases Reg. v. Girdhar Dkaramdas [1869] 6 Bom. High Ct. Rep. (Crown Cases) 33; Jugdown Sinha v. Queen-Empress [1896] ILR 23 Cal. 372 and Ram Chand Gurvala v. King-Emperor AIR 1926 Lah. 385 and also on the scheme of the Indian Penal Code, with respect to the use of the expressions " property " and " movable property " in its various provisions. The learned Solicitor-General has, on the other hand, urged that the word "p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e qualifying word "movable". We therefore do not see any reason to restrict the word "property" to "movable property" only. We need not express any opinion whether immovable property could be the subject of the offence under section 404, Indian Penal Code. Similarly, we do not see any reason to restrict the word "property" in section 405 to " movable property " as held in Jugdown Sinha v. Queen-Empress [1896] ILR 23 Cal. 372. In that case also the learned Judges gave no reason for their view and just referred to the Bombay case. Further, the learned Judges observed at page 374: "In this case the appellant was at most entrusted with the supervision or management of the factory lands, and the fact that he mismanaged the lands does not in our opinion amount to a criminal offence under section 408." A different view has been expressed with respect to the content of the word "property" in certain sections of the Indian Penal Code, including section 405. In Emperor v. Bishan Prasad [1915] ILR 37 All. 128 the right to sell drugs was held to come within the definition of the word "property'' in section 185, Indian Penal Code, which makes certain conduct at any sale of property an offen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual payment, e.g., by taking the money out of the, drawer or drawing a cheque on the bank. When used in connection with the word 'fund' in its second meaning they connote that, for the purposes of the account in which the fund finds a place, the payment is debited to that fund, an operation which, of course, has no relation to the actual method of payment or the particular cash resources out of which the payment is made. Thus, if a company makes a payment out of its reserve fund-an example of the second meaning of the word ' fund '-the actual payment is made by cheque drawn on the company's banking account, the money in which may have been derived from a number of sources." The expression "funds" in the charge is used in the first sense meaning thereby that Dalmia and Chokhani had dominion over the amount credited to the Bharat Insurance Company in the accounts of the bank, inasmuch as they could draw cheques on that account. We are, therefore, of opinion that the funds referred to in the charge did amount to "property" within the meaning of that term in section 405, Indian Penal Code. It is further contended for Dalmia that he had not been entrusted with dominion over the fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hairman with dominion over its property were revised in 1951. The Board of Directors, at their meeting held on September 8, 1951, resolved : "The bye-laws as per draft signed by the Chairman for identification be and are hereby approved, in substitution and to the exclusion of the existing bye-laws of the company." No such draft as signed by the Chairman has been produced in this case. Instead, K.L. Gupta, P.W. 112, who was the Manager of the Bharat Insurance Company in 1951 and its General Manager from 1952 to August, 1956, has proved the bye-laws. Exhibit P. 786, to be the draft revised bye-laws approved by the Board of Directors at that meeting. He states that he was present at that meeting and had put up these draft bye-laws before the Board of Directors and that the Directors, while passing these bye-laws, issued a directive that they should come into force on January 1, 1952, and that, accordingly, he added in ink in the opening words of the bye-laws that they would be effective from January I, 1952. When cross-examined by Dalmia himself, he stated that he did not attend any other meeting of the Board of Directors and his presence was not noted in the minutes of the meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) at the time of his deposition, stated that the State Bank of India was the successor of the Imperial Bank of India. Notice was issued by the Court to the State Bank of India to produce letter dated September 4, 1954, addressed by Dalmia to the Agent. Imperial Bank of India, and other documents. Mehra deposed that in spite of the best search made by the Bank officials that letter could not be found and that Exhibit P. 897 was the copy of the bye-laws of the Bharat Insurance Company which he was producing in pursuance of the notice issued by the court. It appears from his statement in cross-examination that the words "received, 15th September, 1954," meant that that copy of the bye-laws was received by the Bank on that date. Mehra could not personally speak about it. Only such bye-laws would have been supplied to the Bank as would have been the corrected bye-laws. These bye-laws, Exhibit P. 897, tally with the bye-laws. Exhibit P. 786. Raghunath Rai proves the letter, Exhibit P. 896, to be a copy of the letter sent along with these bye-laws to the Bank and states that both the original and P. 896 were signed by Dalmia. He deposed: "Ex. p. 786 are the bye-laws of the Bharat Insuran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and Resolved that the Bye-laws as per draft signed by the Chairman for identification be and are hereby approved in substitution and to the exclusion of the existing bye-laws of the Company." The letter, Exhibit P. 896, not only supports the statement of Raghunath Rai about the copy of the bye-laws supplied to the Bank to be a certified copy but also the admission of Dalmia that he was empowered to deal in Government Securities, etc., by virtue of article 12, clause (c), of the bye-laws of the company. There, therefore, remains no room for doubt that bye-laws Exhibit P. 897 are the certified copies of the bye-laws of the company passed on September 8, 1951, and in force on September 4, 1954. We are therefore of opinion that either due to oversight the draft bye-laws said to be signed by the Chairman Dalmia were not signed by him or that such signed copy is no more available and that bye-laws Exhibits P. 786 and P. 897 are the correct bye-laws of the company. Article 12 of the company's bye-laws provides that the Chairman shall exercise the powers enumerated in that article in addition to all the powers delegated to the Managing Director. Clause (e) of this article autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mere trustees or agents of the company-- trustees of the company's money and property-- agents in the transactions which they enter into on behalf of the company. In Re Forest of Dean Coal Mining Co. [1878] LR 10 Ch. 450, 453 Sir George Jessel said: "Directors are called trustees. They are no doubt trustees of assets which have come into their hands, or which are under their control…….." We are therefore of opinion that Dalmia and Chokhani were entrusted with the dominion over the funds of the Bharat Insurance Company in the Banks. It has been urged for Chokhani that he could not have committed the offence of criminal breach of trust when he alone had not the dominion over the funds of the Insurance Company, the accounts of which he could not operate alone. Both Raghunath Rai and he could operate on the accounts jointly. In support of this contention, reliance is placed on the case reported as Bindeshwari v. King Emperor [1947] ILR 26 Pat. 703. We do not agree with the contention. Bindeshwari' s case (supra) does not support the contention. In that case, a joint family firm was appointed Government stockist of food grain. The partners of the firm were Bindeshwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Insurance Company by cheating Raghunath Rai inasmuch as he got blank cheques signed by the latter on the representation that they would be used for the legitimate purpose of the company but later tised them for purposes not connected with the company and that, therefore, he could not commit the offence of criminal breach of trust. This may be so, but Chokhani did not get dominion over the funds on account of Raghunath Rai's signing blank cheques. The signing of the blank cheques merely facilitated Chokhani's committing breach of trust. He got control and dominion over the funds under the powers conferred on him by the Board of Directors, by its resolution authorising him and Raghunath Rai to operate on the accounts of the Insurance Company with the Chartered Bank, Bombay. The next contention is that Dalmia and Chokhani were not agents as contemplated by section 409, Indian Penal Code. The contention is that the word " agent " in this section refers to a "professional agent" i.e. , a person who carried on the profession of agency and that as Dalmia and Chokhani did not carry on such profession, they could not be covered by the expression "agent"' in this section. Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrusted with them in that capacity, and without authority to sell, pledge, or negotiate, and not one who upon one solitary occasion acts in a fiduciary character." It was held, in view of the section referring to " banker, merchant, broker, attorney or other agent ", that section 75 was limited to a class, and did not apply to everyone who might happen to be intrusted as prescribed by the section, but only to the class of persons therein mentioned. It was further said: "In our judgment, the 'other agent' mentioned in this section means one whose business or profession it is to receive money, securities, or chattels for safe custody or other special purpose ; and that the term does not include a person who carries on no such business or profession, or the like. The section is aimed at those classes who carry on the occupations or similar occupations to those mentioned in the section, and not at those who carry on no such occupation, but who may happen from time to time to undertake some fiduciary position, whether for money or otherwise." This case therefore is authority to this effect only that the term "agent " in that section does not include a person who just acts as an agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in certain cases that one act of entrustment may constitute a man a factor for another provided he is entrusted in his business as a mercantile agent, nor are they deciding what activity is required to establish that an individual is carrying on the business of an agent." These observations mean that the view that section 75 was limited to the class of persons mentioned therein did not affect the correctness of the view that a certain act of entrustment may constitute a person a factor for another provided he was entrusted in his business as a mercantile agent. It follows that a certain entrustment, provided it be in the course of business as a mercantile agent, would make the person entrusted with a factor, i.e., would make him belong to the class of factors. The criterion to hold a person a factor, therefore, is that his business be that of a mercantile agent and not necessarily that he be a professional mercantile agent. Further, their Lordships left it open as to what kind of activity on the part of a person alleged to be an agent would establish that he was carrying on the business of an agent. This again makes it clear that the emphasis is not on the person's carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Vice-President of the Co-operative Central Bank or the President of the Union controlling the depots or as the President of the Committee. It follows from this that he could not have received the money in the course of his duties as any of these office-bearers. Further, the Manager of the depot had no authority to make the accused an agent for purposes of transmitting the money to the Bank. The reason why the accused was not held to be an agent was not that he was not a professional agent. The reason mainly was that the amount was not entrusted to him in the course of the duties he had to discharge as the office-bearers of the various institutions. Learned counsel also made reference to the case reported as Rangamannar Chetty v. Emperor [1953] MWN 649. It is not of much help. The accused there is said to have denied all knowledge of the jewels which had been given to him by the complainant for pledging and had been pledged and redeemed. It was said that it was not a case under section 409, Indian Penal Code. The reason given was: "There is no allegation that the jewels were entrusted to the accused ' in the way of his business as an agent'. No doubt he is said to have acted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f trust committed by any servant. The agent acts mostly as a representative of the principal and has more powers in dealing with the property of the principal and, consequently, there are greater chances of his misappropriating the property if he be so minded and less chances of his detection. However, the interpretation we have put on the expression "in the way of his business" is also borne out from the dictionary meanings of that expression and the meanings of the words "business" and "way", and we give these below for convenience. "In the way of "--of the nature of, belonging to the class of, in the course of or routine of (Shorter Oxford English Dictionary) --in the matter of, as regards, by way of (Webster's New Inter-national Dictionary, II Edition, Unabridged) "Business "-occupation, work (Shorter Oxford English Dictionary) --mercantile transactions, buying and selling, duty, special imposed or undertaken service, regular occupation (Webster's New International Dictionary, II Edition, Unabridged) --duty, province, habitual occupation, profession, trade (Oxford Concise Dictionary) 'Way '--scope, sphere, range, line of occupation (Oxford Concise Dictionary) Chokhani wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies was worked. The Union Agencies suffered losses in its share-speculation business in the beginning of August, 1954. The share brokers sent statements of accounts dated August 6, 1954, to Chokhani and made demand of Rs. 22,25,687-13-0 in respect of the losses. The total cash assets of the Union Agencies in all its banks and offices at Bombay, Calcutta and Delhi amounted to Rs. 2,67,857-11-7 only. The Union Agencies therefore needed a large sum of money to meet this demand and to meet expected future demands in connection with the losses. At this crucial time, telephonic communications did take place between presumably Dalmia and Chokhani. The calls were made from Telephone No. 45031, which is Dalmia's number at 3, Sikandara Road, New Delhi, to Bombay No- 33726, of Chokhani. Two calls were made on August 7, 1954, three on August 8, two on August 11 and one each on August 13 and August 14, respectively. Of course, there is no evidence about the conversation which took place at these talks. The significance of these calls lies in their taking place during the period when the scheme about the diversion of funds was coming into operation for the first time, but in the absence of evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ani entered into a cross-contract with the same firm of brokers for the sale of similar securities of the same face value on behalf of Bhagwati Trading Company. He informed the brokers that the payment of purchase price would be made by the Insurance Company to Bhagwati Trading Company from whom it would get the securities. Thus the actual brokers practically got out of the transaction except for their claim of brokerage. On August 11, 1954, a similar transaction of purchase on behalf of the Insurance Company from the brokers and sale by Bhagwati Trading Company to those brokers, of 3% 1963-65 securities of the face value of Rs. 5,00,000, was entered into by Chokhani. It may be mentioned, to avoid repetition, that Chokhani always acted in such transactions-which may be referred to as usual purchase transactions-both on behalf of the Insurance Company and on behalf of Bhagwati Trading Company, and that the same arrangement was made with respect to the payment of the purchase price and the delivery of securities. The securities were not delivered to the Insurance Company by Bhagwati Trading Company and yet Chokhani made payment of the purchase price from out of the funds of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Bank of India, in favour of the share brokers at Bombay on account of the losses suffered by the Union Agencies. Chokhani informed the head office at Delhi about these purchase transactions of securities worth Rs. 27,00,000 through letter dated August 16, 1954, and along with that letter sent the contract note and statements of accounts received from the brokers. No mention was made in the letter about the payment being made to Bhagwati Trading Company through cheques or about the arrangement about getting the securities from Bhagwati Trading Company or about the postponement of the delivery of the securities by that company. On receipt of the letter, Raghunath Rai contacted Dalmia and, on being told that the securities were purchased under the latter's instructions, made over the letter to the office where the usual entries were made and records were prepared, as had to be done in pursuance of the office routine. Ultimately, the formal confirmation of the purchases was obtained on August 30, 1954, from the Board of Directors at its meeting for which the office note stating that the securities were purchased under the instructions of the Chairman (Dalmia) was prepared. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e face value of Rs. 17,50,000 held by the Insurance Company were withdrawn from its safe-custody account with the Imperial Bank of India, New Delhi, by letter Exhibit P. 1351 under the signature of Dalmia. Securities worth Rs. 10,00,000 were 2½% 1954 securities and the balance were 2½% 1955 securities. These securities were then sent to Bombay and sold there. On September 9, 1954, Rs. 6,25,000 were transferred from Delhi to the account of the Insurance Company with the Chartered Bank, Bombay, by telegraphic transfer. Thus the balance of the funds of the insurance company with the Chartered Bank rose to an amount out of which the losses of about Rs. 23,00,000 suffered by the Union Agencies could be met. The 1954 securities sold were to mature on November 15, 1954. The 1955 securities would have matured much later. No ostensible reason for their premature sale has been given. On September 6, 1954, Chokhani purchased 3% 1959-61 securities of the face value of Rs. 25,00,000 on behalf of the Insurance Company from M/s. Naraindas & Sons, Brokers. A cross-contract of sale of similar securities by Bhagwati Trading Company to the brokers was also entered into. Steps which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not sufficient to meet the losses, had already been adopted in the previous transactions, presumably, after consultations between Dalmia and Chokhani. This lends weight to the significance of the telephonic communications between Delhi and Bombay in the critical period of August and early September, 1954. To complete the entire picture, we may now mention the steps taken to cover up the non-receipt of securities purchased, at the proper time. By November 19, 1954, securities of the face-value of about Rs. 80,00,000 had been purchased by Chokhani on behalf of the Insurance Company and such securities had not been sent to the head office at Delhi. Raghunath Rai referred the matter to Dalmia and, on his approval, sent a letter on November 19, 1954, to Chokhani, asking him to send the distinctive numbers of those securities. The copy of the letter is Exhibit P. 805. The securities referred to were 3% Loan of 1959-61 of the face value of Rs. 35,00,000, 3% Loan of 1963-65 of the face value of Rs. 27,00,000 and 2¾% Loan of 1960 of the face value of Rs. 18,00,000. It was subsequent to this that stock certificates with respect to 3% 1963-65 securities of the face value of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 955. Both on account of the necessity for obtaining the interest certificate and also on account of the expected check of securities by the auditors appointed for auditing the accounts of the Insurance Company for the year 1954, it became necessary to procure these securities or to sell them off. Chokhani purchased, on December 9, 1954, 2¾% 1960 securities of the face value of Rs. 18,00,000 on behalf of Bhagwati Trading Company. The purchase price was paid out of the funds of the Union Agencies and Bhagwati Trading Company. The securities were, however, got endorsed in the name of the Insurance Company. Chokhani got the securities sometime about December 21, 1954, and, thereafter, got them converted into stock certificates which were then sent to the head office at Delhi. There still remained 3% 1959-61 securities of the face value of Rs. 35,00,000 to be accounted for. They were purchased in September, 1954, as already mentioned, but had not been received up to the end of December. On December 27, 1954, Chokhani purchased 2¾ % 1962 securities of the face value of Rs. 46,00,000 in two lots of Rs. 11,00,000 and Rs. 35,00,000 respectively, on behalf of the Insurance Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the funds were provided to it for meeting its losses. It is also clear that the system adopted of withdrawing the funds of the Insurance Company ostensibly for paying the purchase price of securities after the due date of payment of interest and selling the securities off, if not actually recouped from the funds of the Union Agencies or Bhagwati Trading Company prior to the next date of payment of interest, was not in the interests of the Insurance Company. When, however, the sale price could not be paid out of the funds of the Union Agencies or Bhagwati Trading Company, Chokhani, on behalf of the Insurance Company, entered into a fresh transaction of purchase of securities which were not actually received and thus showed repayment of the earlier funds, though out of the funds withdrawn from the same company (viz., the Insurance Company) ostensibly for paying the purchase price of newly purchased securities. Turning to the evidence on record, the main statement on the basis of which, together with other circumstances, the courts below have found that Dalmia had the necessary criminal intent as what Chokhani did was known to him and was under his instructions, is that of Raghuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se cheques would be properly used by Chokhani. The counterfoils have not been produced and there is no evidence that they showed the real state of affairs, i. e., that the cheques were issued to Bhagwati Trading Company and not to the brokers from whom the securities were purchased. It is not expected that the name of Bhagwati Trading Company would have been written on the counterfoils of the cheques when its existence and the part it took in the transactions were to be kept secret from the head office. When counterfoils were sent for in August, 1955, they were not received from Bombay. Chokhani states that he did not get that letter. Moreover, counterfoils reach the head office after a long time and there is no particular reason why Raghunath Rai should notice the counterfoils then. He does not state in his evidence that he used to look over the counterfoils when the cheque books came to him for further signatures. We do not, therefore, agree that Raghunath Rai was an accomplice. Even if it be considered that Raghunath Rai's evidence required corroboration as to the part played by Dalmia, the circumstances to which we would refer later in this judgment, afforded enough corrobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he securities, is not considered by Dalmia to be a false statement as he himself stated, in answer to question No. 21, that such a statement could possibly be made by Raghunath Rai in view of the Board of Directors considering at the meeting the question whether Chokhani be authorised to purchase and sell securities on behalf of the company in order to make profits, (iii) "Roughly if crores of securities were sent to Bombay from here during the period from April, 1955 to June, 1955." The period was wrong and was really from July to August, 1955. Raghunath Rai admitted the error and said that he had stated to Annadhanam without reference to books, (iv) "Securities are sent to Chokhani at Bombay through a representative of Dalmia." The statement is not quite correct as securities were sent to Bombay by post also. Raghunath Rai stated that on the receipt of the advice from Chokhani about the purchase or sale of securities, he used to go to Dalmia on the day following the receipt of the advice for confirmation of the contract of purchase or sale of securities and that after Dalmia's approval the vouchers about the purchase of those securities and the crediting of the amount of the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that that action was taken on the basis of the office notes. Minutes with respect to other matters do refer to the office notes. This does not, however, mean that office notes were not prepared. Confirmation of the purchase and sale of the shares was a formal matter for the Board. All the office notes, except one, were signed by Raghunath Rai. The one not signed by him is Exhibit P. 793. It is signed by Chordia and is dated August 18, 1954. This also mentions "under instructions of the Chairman certain shares have been purchased." Chordia was a relation of Dalmia and had no reason to write the expression "Under instructions of the Chairman" falsely. Such a note cannot be taken to be a routine note when the power to purchase and sell securities vested in Chordia as Managing Director of the company. Clause (4) of article 13 of the Bye-laws empowered the Managing Director to transfer, buy and sell Government securities. When Chordia, the Managing Director, wrote in this office note that securities were purchased under the instructions of the Chairman, it can be taken to be a true statement of fact. It is true that he has not been examined as a witness to depose directly about his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors. There is no reason to prefer Raghunath Rai's statement to that of Annadhanam. Annadhanam's statement in the letter. Exhibit P. 2, about their being informed that in March, 1954, after the purchase, the securities were kept in Bombay in the custody of Chokhani refer to what they were told in the first week of January, 1955, and not to what Raghunath Rai told him on September 9, 1954. Raghunath Rai stated that on one or two occasions he, instead of going to Dalmia, talked with him on telephone regarding the purchase and sale of securities by Chokhani and that Dalmia told him on telephone that he had instructed for the purchase and sale of securities and that he was confirming the purchases or sales. This does not really favour Dalmia as Raghunath Rai maintains that Dalmia did confirm the purchase or sale reported to him. It is immaterial whether that was done on telephone or on Raghunath Rai actually meeting him. Questions put to the Administrator, Mr. Rao, in cross-examination, implied that Raghunath Rai was a reliable person and efforts to win him over failed. It was suggested to the Administrator that the reasons for the appointment of Sundara Rajan as the Administrator's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Bank if the sale and purchase of them had to be stopped altogether and that Dalmia then said that the securities should be sent for to Delhi in the middle of December, 1955, for inspection by the auditors. Raghunath Rai was re-examined on July 30, and stated that the aforesaid conversation took place on July 14, 1955, and added that he had, in the same context, a further talk with Dalmia in August, 1955. The Public Prosecutor, with the permission of the court, then questioned him about the circumstances in which he had to go a second time to Dalmia and talk about the matter. His reply was that he had the second talk as the securities purchased in May, 1955, and those purchased in July and August, 1955, had not been received at the head office. He asked Dalmia to direct Chokhani to deposit all the securities in the Chartered Bank or to send them to head office. Dalmia then said that the sale and purchase of securities had to be carried on for some time and therefore the question of depositing those securities in the Bank or sending them to the head office did not arise for the time being and that the securities should be sent for to the head office in December, 1955. Raghu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Dalmia with the crime, find corroboration from other evidence. Letter, exhibit P. 1351, dated September 4, 1954, was sent to the Imperial Bank of India, Delhi Branch, under the signature of Dalmia as Chairman. The letter directed the bank to deliver certain securities to the bearer. Dalmia admits his signatures on this document and also on the letter, exhibit P. 1352, acknowledging the receipt of the securities sent for, thus corroborating Raghunath Rai's statement that the securities were withdrawn under his instructions. Letters, exhibit D-3, dated March 16, 1955, and P. 892, dated August 5, 1955, from Raghunath Rai to Chokhani, mentioned that the stock certificates were being sent under the instructions of the Chairman. They corroborate Raghunath Rai's statements in court of the despatch of these stock certificates under Dalmia's instructions. He had no reason to use this expression if he was sending them on his own. It is true that the date on which the Chairman gave the instruction is not proved, but it stands to reason that the stock certificates must have been despatched soon after the receipt of the instruction from the Chairman. It cannot be presumed that in such tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about Bhagwati Trading Company and also to show that Raghunath Rai had reasons to know about it and was therefore in the position of an accomplice, a stand which is also taken by Dalmia. We may now deal first with the case of Chokhani, appellant. Chokhani has admitted his entering into the various transactions of purchase and sale and to have set up Bhagwati Trading Company for convenience to carry out the scheme of diverting the funds of the Insurance Company to the Union Agencies by way of temporary loan. His main plea is that he had no intention to cause loss to the Insurance Company and did not know that the way he arranged funds for the Union Agencies from the Insurance Company was against law. He contends that he had no dishonest intentions and therefore did not commit any of the offences he had been charged with, and convicted of. Learned counsel for Chokhani has urged two points in addition to some of the points of law urged by learned counsel for Dalmia. He urged that the transactions entered into by Chokhani were ordinary genuine commercial transactions and that there was no evidence of Chokhani's acting dishonestly in entering into those transactions. It is further sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Insurance Company's funds to the Union Agencies through Bhagwati Trading Company, in contravention of the manner in which he was to deal with that money. These purchase and sale transactions were just a device for drawing on those funds. We do not believe that Chokhani really intended to purchase the securities though he did purchase some, in certain circumstances, and that the non-delivery of the securities was not a case of just his slightly postponing the delivery of the securities. No reason is given why such a concession should have been made to the sellers of the securities and the period during which such purchased securities remained undelivered is much longer than what can be said to be a reasonable period during which purchased securities for ready delivery should be delivered. The fact, if true, that the Insurance Company suffered no monetary loss on account of the purchase and sale transactions and the passing of its money to the Union Agencies, does not suffice to make the transaction an honest one. The gain which the Union Agencies made out of the money it got from the Insurance Company was wrongful gain. It was not entitled to profit by that money. One is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in no way indicate the cross-contracts between the brokers and Bhagwati Trading Company. It is further said that the payment to Bhagwati Trading Company was as an agent of the brokers. There is no evidence that the brokers appointed Bhagwati Trading Company as their agent for the purpose. The evidence is that on Chokhani's representation that the Insurance Company would pay to Bhagwati Trading Company and get the securities from Bhagwati Trading Company that the brokers neither got the price nor delivered the securities. It is also contended that Chokhani was not a "servant" of the Insurance Company and therefore does not come within section 477A, Indian Penal Code, which makes certain conduct of a clerk, officer or servant an offence. Chokhani was a servant of the Insurance Company as he was its agent and received payment for doing work as an agent. His being a full-time servant of the Union Agencies does not mean that he could not be a servant of any other company, or other employer. We do not agree with the contention that it was a case of several conspiracies, each transaction to meet the losses, as they occurred, giving rise to an independent conspiracy. The conspiracy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forming the Imperial Bank, Delhi, on September 4, 1954, about his powers to deal with securities and actually withdrawing securities that day, which were shortly after sold at Bombay and whose proceeds were utilised for meeting the losses. (5)The gradually increasing retention of securities in the office of the Insurance Company and consequently the gradually reduced deposit of securities in the Banks. (6)The transfer of securities held by the Insurance Company from Delhi to Bombay when funds were low there to meet the losses. (7)The purchase and sale of securities in the relevant period in order to meet the losses were under his instructions. (8)A larger use of converting securities into inscribed stock certificates which was used for concealing the disclosure of the interval between the date of purchase of the securities which were then not received, and the date when those securities were recouped later. (9)Dalmia's annoyance and resentment on September 9, 1955, when the auditors made a surprise inspection of the office of the Insurance Company and wanted to see the securities. (10)His conduct on September 15,1955. (11)His not going to meet Mr. Kaul on September 16, 1955, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed up to September 21, 1954. On September 22, 1954, 2,000 shares were further issued to S. N. Dudani, a nominee of Asia Udyog. The total shares on that date stood at 5,000 of which Dalmia held 1,800, Govan Brothers 1,200, and Dudani 2,000. On October 4, 1954, R. P. Gurha and J. S. Mittal each got 100 shares from Govan Brothers with the result that thereafter the position of share-holding was: Dalmia 1,800 ; Govan Brothers 1,000 ; Dudani 2,000 ; Gurha 100; and Mittal 100, out of the total number of issued shares of 5,000. It is said that Dalmia transferred his 1,800 shares to one L.R. Sharma on October 30, 1954. Sharma's holding 1,800 shares was mentioned in the return. Exhibit P. 3122, filed by the Union Agencies as regards share capital and shares as on December 31, 1955, in the office of the Registrar of Companies in January, 1956, with respect to the year 1955. The return showed that the transfer had taken place on January 31,1955. It would appear that the alleged sale of shares to Sharma in October, 1954, was not mentioned in a similar return which must have been submitted to the Registrar of Companies in January 1955, and that, therefore, its transfer was shown on January 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as at present urged for the State, that Dalmia was the largest shareholder in it. The same idea seemed to have led to the transfer of shares to Sharma by Dalmia. The verbal assertion of the sale having taken place in October, 1954, is not supported by the entry in exhibit P. 3122 and what may be taken to be the entries in a similar return for the year 1954. This can go to support the allegation that Dalmia knew about the shady transactions which were in progress from early August, 1954. The learned Sessions Judge relied on the following circumstances for his conclusion that Dalmia was synonymous with Bharat Union Agencies : "1. The speculation business of Dalmia Cement and Paper Marketing Co. Ltd., the paid up capital of which nearly all belonged to Dalmia was on the liquidation of that company taken over by Bharat Union Agencies and more or less the same persons conducted the business of Bharat Union Agencies who were previously looking after Dalmia Cement & Paper Marketing Company. 2. Bharat Union Agencies was known and taken to be the concern of Dalmia by its then Accountant, Dhawan, and by the brokers with whom it had dealings. 3. Chokhani, who held power of attorney on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased shares of Dalmia Jain Airways of the face value of Rs. 6,00,000 from Anis Haji Ali Mohammad, on behalf of the Union Agencies, in his own name, though the real purchaser was the Union Agencies and that he did so as the seller and his solicitor did not agree to sell the shares in the name of the latter. The explanation does not appear to be satisfactory. The seller had no interest in whose name the sale took place so long as he gets the money for the shares he was selling. Mr. Dingle Foot has urged that these various considerations may indicate strong association of Dalmia with the Union Agencies but are not suflBcient to establish his complete identity with it, as is necessary to establish in view of the charges framed. Dalmia's identity with Union Agencies or having great interest in it is really a matter providing motive for Dalmia's going to the length of entering into a conspiracy to raise funds for meeting the losses of the Union Agencies by diverting the funds of the Insurance Company and which would amount to committing criminal breach of trust. Dalmia admits having given instructions about the business of, the Union Agencies in 1954 when he was not a Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he losses of the Union Agencies were not paid at the proper time. There is no doubt that in the first instance it would be the Union Agencies as a company which would suffer in its credit and its activities. We have found that Dalmia was so intimately connected with this company as could make him a sort of a sole proprietor of the company. He was to lose immensely in case the credit of the Union Agencies suffered, as it was commonly believed to be his concern and he had connections and control over a number of business concerns and had a high stake in the business world. His prestige and credit were bound to suffer severely as a result of the Union Agencies losing credit in the market. There is evidence on record that if the losses are not promptly paid, the defaulter would suffer in credit and may not be able to persuade the brokers to enter into contracts with him. It is suggested for Dalmia that Chokhani had a greater interest in seeing that Union Agencies does not suffer in credit. We do not agree. If the Union Agencies failed on account of its losing credit in the market on its failure to meet the losses, Chokhani may stand to lose his service with the Union Agencies. That wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or details of the losses. Dalmia must be expected not only to know the losses which the Union Agencies suffered, but also their extent. He is also expected to devise or at least know the ways in which those losses would be met. A mere vague knowledge, as stated, about the Union Agencies possessing a number of shares could not have been sufficient satisfaction about the losses being successfully met. It is to be noted that he did not deny that the Delhi Office was short of funds and that it used to supply funds to meet the losses. Further, if Dalmia's statement about Mittal's communication to him be correct, it would appear that when the Bombay Office of the Union Agencies was not in a position to meet the losses, Chokhani would not think of arranging, on his own, funds to meet the losses, but would first approach the Delhi Office of the Union Agencies. The Delhi Office, then, if unable to meet the losses, would necessarily obtain instructions from Dalmia. It can therefore be legitimately concluded that Dalmia alone, or in consultation with Chokhani, devised the scheme of the transactions which led to the diversion of the funds of the Insurance Company to the Union Agencies and car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith securities on September 4, 1954, though he had that power from September, 1951, itself. This was at the early stage of the commencement of the losses of the Union Agencies suffered for a period of over a year and the planned diversion of the funds of the Insurance Company to meet the lossess of the Union Agencies. Raghunath Rai states that on the resignation of Chordia it was deemed necessary that the powers of the Chairman be registered with the Bank so that he be in a position to operate on the securities' safe-custody account of the company with the Bank, and that he sent the copy of the bye-laws, etc., without the instructions of Dalmia, though with his knowledge, as he was told that it was necessary for the purpose of the withdrawal of the securities for which he had given instructions. This was, however, not necessary, as Raghunath Rai had the authority to endorse, transfer, negotiate and/or deal with Government securities, etc., standing in the name of the company. We are of opinion that Dalmia took this step to enable him to withdraw the securities from the Bank when urgently required and another person authorised to withdraw be not available or be not prepared to with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecouped and did not exist with the company. Such an inference is sufficient to impute Dalmia with the knowledge of the working of the scheme. Securities were sent to Bombay from Delhi seven times during the relevant period and they were of the face value of Rs. 2,14,82,500. Securities of the face value of Rs. 17,50,000 were withdrawn from the Imperial Bank, Delhi, on September 4, 1954-vide exhibit P. 1351. They were sold at Bombay on September 9, 1954. Thereafter, 3% 1957 securities of the face value of Rs. 37,75,000 were sent on January 6, 1955. Raghunath Rai deposes that he withdrew these from the Imperial Bank, Delhi, under the directions of Dalmia, and that he handed them over to Dalmia. These securities did reach Bombay. There is no clear evidence as to how they went from Delhi to Bombay. They were sold on January 11, 1955. Eleven stock certificates of the face value of Rs. 57,72,000 were sent to Bombay on March 16, 1955, vide letter, exhibit D. 3. Thereafter, stock certificates were sent thrice in July, 1955. Stock certificate in respect of 3% Bombay Loan of 1955, of the face value of Rs. 29,75,000 was sent to Bombay on July 15, 1955-vide exhibit P. 923. On the next day, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of an agent. Chokhani was also empowered by a resolution dated October 1, 1953 to deposit and withdraw Government securities held in safe custody account by the company. The aforesaid powers conferred on Chokhani are different from the powers of sale or purchase of securities. Dalmia has stated that he authorised Chokhani to purchase securities in about October, 1953, when he was to leave for abroad and that thereafter Chokhani had been purchasing and selling securities in the exercise of that authority without consulting him. It is urged for him that Raghunath Rai's statement that he used to obtain confirmation of the purchase and sale of the securities from him cannot be true, as there was no necessity for such confirmation. Chokhani does not appear to have exercised any such authority during the period Dalmia was abroad or till August, 1954, and, therefore, Dalmia's statement does not appear to be correct. Chokhani and Raghunath Rai were authorised to operate upon the Bank account at Bombay on October 1, 1953. Dalmia states, in paragraph 17 of the written statement dated March 30,1959, that this was done ns Chokhani had been given the authority for the sale and purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit in the Chartered Bank at Bombay. There was thus no need for sending these securities from Delhi. Chokhani could have withdrawn the necessary securities from the Bank at Bombay. This indicates that on learning that there were no liquid funds for meeting the losses at Bombay, Dalmia himself decided to send these securities to Bombay for sale and for thus providing for the liquid funds there for meeting the cost of the intended fictitious purchase of securities to meet \ the losses of the Union Agencies. It is not suggested that these securities were sent to Bombay at the request of Chokhani. Securities withdrawn in January, 1955, and stock certificates sent in March and August, 1955, coincided with the period when the Union Agencies suffered losses and the funds of the Insurance Company at Bombay were low and were insufficient to meet the losses of the Union Agencies. 3% 1957 securities of the face value of Rs. 46,00,000 (Rs. 37,75,000 sent from Delhi and Rs. 8,25,000 withdrawn from the Chartered Bank at Bombay) were sold on January 11, 1955, and the proceeds were utilised in purchasing 2¾ % 1962 securities of the face value of Rs. 46,00,000 in two lots, one of Rs. 35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is answer was that that was so, but that it also depended on the character of the company making the investments in securities. It may be said that the trend of the share market will only guide the purchase or sale transactions of securities of a company speculating in shares, like the Union Agencies, but will not affect the purchase and sale by a company whose business is not speculation of shares like the Insurance Company. Raghunath Rai states that when on September g } 1955, the auditors wanted the production of the securities, said to be at Bombay, in the next two days, he informed Dalmia about it and Dalmia said that he would arrange for their production after two days. Dalmia, however, took no steps to contact Chokhani at Bombay, but rang up Khanna instead and asked him to certify the accounts as they had to be laid before the Company by September 30, and told him that everything was in order, that he would give all satisfaction later, soon after Chokhani was available and that he did not ask for an extension of time for the filing of the accounts as that would affect the prestige of the company. On September 10, 1955, when Raghunath Rai handed over the letter. Exhibit P. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siderable amount of the securities were missing and that they were to make good the loss. It is clear that these persons decided not to disclose to Mr. Kaul that the securities were not in stock because they were not actually purchased and the amount shown to be spent on them was lent to the Union Agencies, It was not a case of the securities missing but a case of the Insurance Company not getting those securities at all. It is a reasonable inference from this conduct of Dalnria that he did not go himself to Mr. Kaul as he was guilty and would have found it inconvenient to explain to him how the shortfall had taken place. We may now discuss the evidence relating to Dalmia's making a confession to Annadhanam. Annadhanam was a Chartered Accountant and partner of the Firm of Chartered Accountants M/s. Kbanna and Annadhanam, New Delhi, and he was appointed by the Central Government, in exercise of its powers under section 33(1) of the Insurance Act, 1938, on September 19, 1955, to investigate into the affairs of the Bharat Insurance Company and to report to the Government on such investigation. He started this work on September 20. Annadhanam, having learnt from Raghunath Rai about th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce at 6-30 p. m., though the appointment was for- 5-30 p.m. His companion stayed outside the office room. Annadhanam asked Dalmia the explanation with regard to the missing securities. Dalmia wanted two hours' time to give the explanation. This was refused. He then asked for half-an-hour's time at least. This was allowed. Dalmia went out of the office, but returned within ten minutes and said that he would make the statement and it be recorded. Annadhanam, in the exercise of his powers under section 33(3) of the Insurance Act, administered oath to Dalmia and recorded the statement. Exhibit P. 10. It was read over to Dalmia. Dalmia admitted it to be correct and signed it. Shortly after, Dalmia stated that he wanted to add one more sentence to his statement. He was again administered oath and his further statement, Exhibit P. 11, was recorded. This was also read over and Dalmia signed it, admitting its accuracy. Annadhanam states that no threat or inducement or promise was offered to Dalmia before he made these statements. A third statement is also attributed to Dalmia and it is that when Dalmia was going away and was nearing the staircase, Annadhanam asked him whether the speculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de with regard to the missing securities. He further stated that his statement about Dalmia's making statements, Exhibits P. 10 and P. 11, voluntarily was on account of the facts that Dalmia himself volunteered to make those statements and that he himself had offered no inducements or promises. In cross-examination by Mr. T. C. Mathur he denied that he told Dalmia that as Chairman of the Insurance Company he should own responsibility for the missing securities and that that would make him a greater Dalmia because he was prepared to pay for the shortfall and further denied that it was on account of the suggested statement that Dalmia had asked for two hours' time before making his statement. In cross-examination by Dalmia personally, Annadhanam explained the discrepancy in the amount of the securities admitted to be misappropriated. Exhibit P. 10 mentions the securities to be of the order of Rs. 2,20,00,000. In his report, Exhibit P. 12, he stated the admission to be with respect to securities of the face value of Rs. 2,22,22,000. The explanation is that in the interim report he worked out the face value of the missing securities to be Rs. 2,22,22,000, and he mentioned this figure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the securities. He also denied the suggestion that Dalmia had told him and Annadhanam on September 20, at their office, that he had no knowledge of the missing securities, that it appeared that the securities bad either been sold or pledged and that the money had been paid to the Union Agencies, which Dalmia did not like, and that in the interest of the policy-holders and the Insurance Company DaJmia Was prepared to pay the amount of the shortfall of securities, and also that when Dalmia spoke about the securities being sold or pledged, Khanna and Annadhanam remarked that the securities had been misappropriated. He denied that he told Dalmia that if he took personal responsibility in the matter, it would be only then that no action would be taken and stated that he and Annadhanam were nobody to give any assurance to Dalmia. Dalmia stated in this statement under section 342, Criminal Procedure Code, on November 7, 1958, that his companion, Raghunath Das Dalmia, stayed out because he was not allowed to stay with him inside the office. He denied that he first spoke about his charitable disposition and piety when asked by Annadhanam to explain about the missing securities and stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publicity it would cause a great loss to the policy-holders. Shri Khanna accordingly stated that if I agreed to his suggestion the matter would be settled satisfactorily and without any publicity. It was in those circumstances that I asked for two hours' time to consult my brother and son-in-law." He further stated that when Annadhanam told him that he could have half-an-hour's time and that more time could not be given as the report had to be given to the Government immediately, he objected to the shortness of time as he could not during that interval go to meet his brother and son-in-law and return to the office after consulting them and further told Annadhanam and Khanna to write whatever they considered proper as he had trust in them. His reply to question No. 476 is significant and reads: "The statement was read over to me. I then pointed out that what I had stated had not been incorporated in Exhibit P. 10. I made no mention that the statement Exhibit P. 10 was correct or not. Shri Annadhanam then reduced to writing, whatever was stated by me. That writing is Exhibit P. 11 and is in the very words used by me." He does not directly answer question No. 479: "It is in evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat I should confess that I had taken the securities, that they would help me. They added that Shri Annadhanam has been appointed as Investigator by the Government and, therefore, their words carry weight with the Government, that it was my responsibility, being the Chairman and Principal Officer of the Bharat Insurance to pay the money. At that time I was restless to pay the money. I was influenced by their talk and anybody in my place would have trusted their words. I was impressed by their saying to me that no wise Government or officers would take such action which would harm the policy-holders through publicity. Therefore, I took that whatever Shri Khanna and Annadhanam were saying was for my good." He stated that he asked Annadhanam and Khanna for two hours' time to consult his brother and son-in-law and that one of them said that they could not give more than half-an-hour. This is inconsistent with what he stated under section 342. He further stated : "I told them to write in whatever way they thought best and whatever they wrote I simply signed. After signing when I read it, I pointed out to them that they had not written that I wanted to pay every pie of the policy-holde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 482 was put to him with reference to this statement of Raghunath Rai he simply stated that he had briefly told Raghunath Rai with regard to what had transpired between him and Khanna and Annadhanam and that he had told Raghunath Rai that he need not worry. The various statements of Dalmia suggesting that inducement was held out to him by Khanna have not been believed by the courts below, and we see no good reason to differ from their view. There was no reason for Annadhanam to record an incriminating statement like P. 10 and get it signed by Dalmia. The High Court does not also hold that the confession was the result of some threat extended by Annadhanam. It did no,t consider it safe to rely upon it as it considered the confession to be not voluntary in a certain sense. It said: "In that sense, therefore, it was not a voluntary statement because although no words of threat or inducement were uttered by Mr. Annadhanam or anyone else, the circumstances had shaped them selves in such a manner that there was an implied offer of amnesty, being granted to him if he did not persist in his negative behaviour. He therefore made a statement that he had misappropriated the securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire scheme of conspiracy which had made it possible for him to misappropriate such a large amount of the assets of the Insurance Company. The High Court held that even if the confession was made for that purpose, it would not be a voluntary confession. We consider this ground to hold the confession involuntary unsound. Mr. Dingle Foot has contended that the statement, Exhibit P.10, is not correct, that Annadhanam and Mr. Kaul colluded and wanted to get a confession from Dalmia and that is why Annadhanam extracted the confession and that various circumstances would show that the confession was not voluntary in the sense that it was induced or obtained by threat. He has also urged that Annadhanam was "a person in authority" for the purpose of section 24 of the Indian Evidence Act. These circumstances, according to him, are that Daimia's companion was not allowed to stay in the office, that only half-an-hour was allowed for Dalmia to make consultations, that there had been a discussion before the recording of Exhibit P. 10, that no record on the discussion was maintained, that Annadhanam, as Investigator, was a public servant, that section 176, Indian Penal Code, was applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained that they were unnecessarily harassing the officers of the Bharat Insurance Company and had no right to inspect the securities. Dalmia was not satisfied with their assertion of their right to make a surprise insptction. There was nothing in this conduct of Dalmia which should have annoyed Annadhanam or Khanna. They did what they considered to be their duty and successfully met the opposition of Raghunath Rai. If there could be any grievance on account of their inspection, it would be to Dalmia who, as a result, would not be easily induced by them to make the confession. Mr. Kaul, as Deputy Secretary, Ministry of Finance, did take part in the bringing of the matter to a head not on account of any personal animus against Dalmia--such animus is not even alleged--but, on account of his official duties, when he heard a rumour in Bombay that Dalmia had incurred heavy losses amounting to over two crores of rupees through his speculative activities and had been drawing upon the funds of the Insurance Company of which he was the Chairman to cover his losses. He asked Dalmia on September 14, 1955.to see him on the 15th in connection with the securities of the Insurance Company. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. 10, cannot justify the conclusion that Aanadhanam and Mr. Kaul were in collusion. Annadhanam does not admit that he had ordered Dalmia's companion to stay out of the office. Even if he did, as stated by Dalmia, that would not mean that Annadhanam did it on purpose, the purpose being that he would act unfairly towards Dalmia and that there be not any witness of such an attempt. Similarly, the non-maintenance of the record of what conversation took place between Dalmia and the Investigator does not point out to any sinister purpose on the part of Annadhanam. It was Annadhanam's discretion to examine a person in connection with the affairs of the Insurance Company. He put a simple question to Dalmia and that required him to explain about the missing securities. So long as Dalmia- did not make a statement in that connection, it was not necessary to make any record of the talk which might take place between the two. In fact, Annadhanam had stated that the word "discussion" used by him in his supplementary interim report, Exhibit P. 13, really be read as "recording of the statement of Shri Dalmia and the talk he had with him when he came to Annadhanam's office and which he had with h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither description for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both." For the application of this section, it is necessary that Annadhanam, as Investigator, be a public servant. Annadhanam cannot be said to be a public servant. He was not an employee of the Government. He was a Chartered Accountant and had been directed by the order of the Central Government to investigate into the affairs of the Insurance Company and to report to the Government on the investigation made by him. Of course, he was to get some remuneration for the work he was entrusted with. "Public servant" is defined in section 21 of the Indian Penal Code. Mr. Dingle Foot has argued that Annadhanam was a public servant in view of the ninth clause of section 21. According to this clause, every officer in the service or pay of the Government or remunerated by fees or commission for the purpose of any public duty would be a public servant. A person who is directed to investigate into the affairs of an Insurance Company under section 33(1) of the Insurance Act, does not ipso facto become an officer. There is no office which he holds. He is not employed in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneous process as to render the making of this statement involuntary and therefore extorted. We believe the statement of Annadhanam that Dalmia had told him near the staircase that he had lost the money in his personal speculation business which was carried on chiefly through one of his private companies, viz., the Union Agencies. The later part of his confession, Exhibit P. 10, is an admission of Dalmia's losing the money in speculation. His further statement was only an amplification of it as to the name under which speculation was carried on. The statement finds support from the facts established by other evidence that the speculation business carried on by the Union Agencies was really the business of Dalmia himself, though, ostensibly, it was the business of the company of which there were a few shareholders other than Dalmia. Mr. Dingle Foot has urged that adverse inference be drawn against the prosecution case on account of the prosecution not producing certain documents and certain witnesses. We have considered the objection and are of opinion that there is no case for raising such an inference against the prosecution. The prosecution did not lead evidence about the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors. The minutes of the proceedings of the Board's meetings served this purpose. It is admitted by Dalmia that there was no resolution of the Board of Directors conferring authority on Chokhani to purchase and sell securities. Certain matters have been referred to at pages 206-210 of Dalmia's statement of case, which, according to Dalmia, could have been proved by the Directors. All these matters are such which were not necessary for the unfolding of the prosecution case and could be proved by the accused examining them if considered necessary. We, therefore, see no force in this contention. It is urged for Dalmia that he could not have been a party to a scheme which would cause loss to the Insurance Company, because he was mainly responsible for the prosperity of the company. The Union Agencies had assets. The Government was displeased with Dalmia. The company readily agreed to the appointment of M/s. Khanna and Annadhanam as auditors. There was the risk of detection of the fraud to be committed and so Dalmia would have acted differently with respect to such affairs of the Union Agencies as have been used as evidence of Dalmia being synonymous with it. We are of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ha personally. Now, the cash statement from Bombay showed correctly entries of the amounts received from Bhagwati Trading Company. Such amounts were noted to the credit of Bhagwati Trading Company. When the Union Agencies made payment to Bhagwati Trading Company, an entry to that effect was noted in the cash statement to the debit of Bhagwati Trading Company. On receipt of these cash statements in 1955, it is alleged, Gurha used to get the genuine cash statement substituted by another fictitious cash statement in which no mention was made of Bhagwati Trading Company. Entries to the credit of Bhagwati Trading Company used to be shown to be entries showing the receipt of those moneys from the Delhi Office of the Union Agencies, through Chokhani. The debit entry in the name of Bhagwati Trading Company used to be shown as a debit to the Delhi Office of the Union Agencies. This substituted cash statement was then made over to one Lakhotia, who worked in the Delhi Office of the Union Agencies on behalf of the Bombay Office of the company. He was also prosecuted, but was acquitted. Lakhotia issued credit advices on behalf of the Bombay Office of the Union Agencies to the Delhi Office of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the case of vouchers relating to the credit or debit advice from that Office. All such vouchers in Asia Udyog Ltd. were signed by Gurha even during the period when he was ill and was not attending the office of the Union Agencies. The result of all such entries in the vouchers was that on paper it appeared in the case of credit advices that the Delhi Office of the Union Agencies advanced money to the Bombay Office which paid the money to Asia Udyog Ltd., which, in its turn, paid the money to the Delhi Office of the Union Agencies, and in the case of debit advices, the Bombay Office debited the amount to Delhi Office of the Union Agencies and that debited it to Asia Udyog Ltd., which, in its turn, debited it to the Bombay Office. All these entries were against facts and they must have been done with a motive and apparently it was to keep off the records any mention of Bhagwati Trading Company. No explanation has been given as to why this course of making entries was adopted. The genuine cash statements are on record. The alleged fictitious statements are not on the record. It is not admitted by Gurha that any fictitious cash statement was prepared. It is not necessary for ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se entries concocted. The entries did show the receipt of the amounts from Bhagwati Trading Company, but the prosecution case was that the amount was received in cash and not through transfers which transactions had to be adjusted. The learned Sessions Judge, did not, however, believe the statement of Sri Kishen Lal who investigated the case that he had noticed these alterations earlier than his statement in court which was some time in 1958, for the reason that Dhawan was not questioned by the prosecution in this regard and no reference was made by Sri Kishen Lal in the case diary about his questioning Dhawan about the alterations. The learned Sessions Judge appears to have overlooked the statement of Sri Kishen Lal to the effect: "I made a note in the case diary about myself having put the overwriting to Lakhotia and about having asked his explanation about that." The court could have verified the fact from the case diary. It is too much to suppose that Sri Kishen Lal would make a wrong statement whose inaccuracy could be very easily detected. However, the learned Sessions Judge himself has given good reasons for not accepting the suggestion that the over-writing of the letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice relating to that amount to him. In answer to questions Nos. 217 and 218, in connection with his advising Dhawan about the debiting of this amount to Asia Udyog Ltd., he stated that he gave that advice after tracing the relevant entry in the journal statement of the Bombay Office. This answer is not consistent with his earlier answer to question No. 45 as entry with respect to the same amount could not have existed simultaneously both in the cash statement and the journal statement of the Bombay Office. If his later answer is correct, his referring to the journal would have been just a ruse as already stated. If his earlier answer is correct, that would indicate that either Gurha had supplied the office with the fictitious cash statement of the Bombay Office as alleged by the prosecution or that seeing in the journal cash statement that the entry related to Bhagwati Trading Company, deliberately told Dhawan, in accordance with the scheme, to debit that amount to Asia Udyog Ltd. In either view of the matter, this conduct of Gurha in advising Dhawan to debit the amount to Asia Udyog Ltd., is sufficient to indicate his complicity in the whole scheme, as otherwise, he had no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Union Agencies to pay its losses, from Bhagwati Trading Company. This letter is of significance and we quote it in full: "Girdharilal Chokhani Times of India Building, Hornby Road, Bombay-I. CONFIDENTIAL 17th September, 55. Bharat Union Agencies Ltd., Delhi. Attn. Mr. R. P. Gurha Dear Sir, I have to inform you that the various amounts arranged by me as temporary loans to Bharat Union Agencies Ltd., Bombay Office, from time to time in the name of Bhagwati Trading Company, actually represented the monies relating to the undernoted securities belonging to Bharat Insurance Company Limited. Face Value 2½% 1961 Rs. 55.00,000 3% 1963-64 Rs. 79,00,000 3% 1966-68 Rs. 60,00,000 Rs. 1,94,00,000 I have now to request you to please arrange at your earliest to pay about Rs. 1,80,00,000 in cash or purchase the aforesaid securities (or their equivalent) and deliver the same to Bharat Insurance Company Ltd., 10, Daryaganj, Delhi, on my behalf, debiting the amount to the credit standing in the books of the Company's Bombay Office in the name of M/s. Bhagwati Trading Company. Any debit or credit balance left thereafter in the said account would be settled later on. I am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Mr. Kohli has, however, urged that the contract for the purchase of these securities had taken place on September 16, 1955, and that therefore Chokhani did not include those securities in this letter. Reference is made to the statement of Jayantilal, P.W. 6, a partner of the Firm, Devkaran Nanjee, Brokers in Shares and Securities. He states that Bhagwati Trading Company wanted to purchase for immediate delivery 3% 1966-68 securities of the face value of Rs. 21,25,000 and that a contract about it was entered into. Securities of this amount were not available in the market. Securities worth Rs. 1,75,000 were available and were delivered to Chokhani that day. They had to purchase securities of the face value of Rs. 20,00,000 from the Reserve Bank of India in order to effect delivery and had to sell some other securities of that value. The result was that the required securities were received by them on September 22, 1955. Even this statement does not account for not including securities of the value of Rs. 4,50,000 in this letter, Exhibit P. 956. It was further urged in the alternative that Chokhani had very extensive powers in all the alleged concerns of Dalmia and so could get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t questioned about the allegation that the cash statement had been suppressed and substituted by another fictitious one. No such question could have been put to him when there was no evidence about it. An accused is questioned under section 342, Criminal Procedure Code, to explain any circumstances appearing in the evidence against him. It is not necessary to ask him to explain any inference that a court may be asked to draw and be prepared to draw from the evidence on record. Another point stressed for Gurha is that the cash statements would not have mentioned Bhagwati Trading Company when the prosecution case is that Chokhani took deliberate steps to keep the Delhi Office of the Insurance Company in the dark about it. The fact is that the cash statement sent from Bombay did mention Bhagwati Trading Company. They were sent to Gurha personally. In the circumstances the reasonable conclusion can be that they mentioned Bhagwati Trading Company as that represented the true state of affairs and Chokhani had to inform the Delhi Office of the Bharat Union Agencies about the source of the money he was receiving for the Union Agencies to meet its losses. Chokhani did not disclose the true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kohli that Chokhani might have showed the same amount both in the cash statement and in the journal statement. No such case, however, seems to have been raised in the courts below and has been made in the appellant's statement of case. It has been contended that an offence under section 477A, Indian Penal Code, has not been established against the accused as it is not proved that he falsified any book, papers, etc., in the possession of his employer with intent to defraud and that the intention to defraud should be to defraud someone in future and should not relate to an attempt to cover up what had already happened. It is submitted that an intent to defraud connotes an intention to deceive and make the person deceived suffer some loss, that the entries made in the journal vouchers did not make anyone suffer and, therefore, the entries could not be said to have been made with intent to defraud. The expression "intent to defraud " is not defined in the Penal Code but section 25 defines "fraudulently" thus: "A person is said to do a thing ' fraudulently' if he does that thing with intent to defraud but not otherwise." The vouchers were falsified with one intention only and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the breach of trust. There is no question of immediate or remote connection with the commission of breach of trust which is sought to be covered up by the falsification, so long as the falsification is to cover that up. In the present case, introduction of Bhagwati Trading Company in the transactions was the first step to carry out deception about the actual payment of money out of the funds of the Insurance Company to the Union Agencies. The second step of suppressing the name of Bhagwati Trading Company in the papers of the Union Agencies, Delhi, made it more difficult to trace the passing of the money of the Insurance Company to the Union Agencies and, therefore, the falsification of the journal vouchers related back to the original diversion of the Insurance Company's moneys to the Union Agencies and was with a view to deceive any such person in future who will be tracing the source of the money received by the Union Agencies. A grievance is made of the fact that certain witnesses were not examined by the prosecution. Of the persons working for the Union Agencies, five were accused at the trial, Kannan, Lakhotia, Gurha, Mittal and Dudani. Only Gurha among them was convict ..... X X X X Extracts X X X X X X X X Extracts X X X X
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