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TMI Blog2003 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing five transactions entered into by Maruti Udyog Limited (hereinafter referred to as "MUL"), through United Commercial Bank (hereinafter referred to as UCO Bank ) wherein Harshad S. Mehta A-5 is payee or recipient of the amount, which are mentioned hereunder : Trans.A-5 DatesDaysRate ofAmt. Rs.InterestAmountNo.FromTo%Rs.repaid (Rs.) 1.Lent24-1-199125-2-19913212.754,99,45,0005,58,2505,05,03,250to Mul Remarks MUL delivered 35 lakhs Units of UTI to A5. 2.Borro-13-3-199125-3-19911216.7510,11,50,0005,56,99510,17,06,200wed Remarks UCO gave BR to MUL for 70 lakhs Units. 3.Borro-18-3-199122-3-1991521.0010,83,75,0003,11,77510,86,86,775wed Remarks UCO gave BR to MUL for 75 lakhs Units. 4.Borro-24-4-199126-4-1991226.257,62,45,0001,09,6507,63,54,650wed Remarks UCO gave BR to MUL for 51 lakhs Units. 5.Borro-2-5-19917-5-1991525.0010,39,50,0002,99,09010,42,49,090wed Remarks Number of Units not known but only value stated in chargesheet Undisputedly, ( a ) the receipt and the payment of amount was for a fixed period; ( b ) interest rate was fixed and was received or paid as agreed; ( c ) for the first transaction, before receiving the money, MUL gave UTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arayan Deosthali, A-4 Ram Narayan Popli and A-5 Harshad Shantilal Mehta are convicted being the parties to criminal conspiracy alongwith Mr. Mohan D. Khandelwal (PW23) between the period of April - May, 1989 to May, 1991 in Bombay and Delhi, the object to which was to divert the surplus funds of MUL lying with its account in Canara Bank, Sansad Marg, New Delhi Branch to the account of A-5 HSM with ANZ Grindlays Bank, Sansad Marg, New Delhi Branch and thereby committing offences of criminal breach of trust fraudulently using forged documents, abuse of public offices, dishonest appropriation of the amount of Rs. 38,97,20,000 punishable under Section 120-B r/w Sections 409, 467, 468 and 471 of IPC and Section 13(1)( c ) read with Section 13(2) of the P.C. Act, 1988. 2. Accused No. 1 Pramod Kumar Pritamlal Manocha ( i )A-1 is convicted for furtherance of criminal conspiracy in his capacity as a public servant viz. being Deputy Manager (Finance) of MUL at the relevant time, for causing and or allowing MUL s fund wrongfully to be gained by A-5 HSM, being an offence punishable under Section 13(1)( c ) read with section 13(2) of the PC Act, 1988; ( ii )A-1 is convicted for offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me could be used for cheating; ( iv )A-3 is convicted under section 471 r/w sections 467 and 468 of IPC for having forged a letter dated 23-1-1991 (Ex. 58) of UCO Bank, Hamam Street Branch. Bombay knowing it to be a false and forged document; ( v )A-3 is convicted under Section 467 of IPC for having forged on or about 13-1-1991 the document to be a valuable security with the banker receipt No. 1121 dated 13-3-1991 (Ex.38) for Rs. 10,11,50,000 with intent to make MUL believe the UCO Bank, Hamam Street Branch, Bombay was holding 70 lakhs units of UTI for the face value of 7 crores and which UCO Bank was to deliver to MUL; ( vi )A-3 is convicted under Section 468 of IPC for forging valuable security with Bankers Receipt No. 1121 dated 13-1-1991 (Ex. 38) of UCO Bank for the sum of Rs. 10,11,50,000 in the name of MUL with the intent that the said document should be used for cheating; ( vii )A-3 is convicted under Section 471 r/w sections 467 and 468 of IPC for dishonestly using forged bankers receipt No. 1121 for the sum of Rs. 10,11,50,000 (Ex. 38) as genuine; ( viii )A-3 is convicted under Section 467 of IPC for having forged at Bombay the letter dated 13-1-1991 (Ex. 60) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rindlays Bank into the account of accused No. 5 HSM with Grindlays Bank. New Delhi instead of crediting the said Cheque into the account of Grindlays Bank, New Delhi; 5. Accused No. 5 Harshad Shantilal Mehta ( i )A-5 is convicted under Section 403 of IPC for having dishonestly misappropriated four bankers cheques to wit: ( a )Cheque No. 645585 dated 13-3-1991 for Rs. 10,11,50,000 ( ii ) Cheque No. 646402 dated 8-3-1991 for Rs. 10,83,75,000, ( iii ) Cheque No. 863237 dated 24-4-1991 for Rs. 7,62,45,000 ( iv ) Cheque No. 863260 dated 2-5-1991 for Rs. 10,39,50,000 [Exs. 30, 32, 34 and 36] aggregating to Rs. 38,97,20,000 drawn by MUL on its bankers viz., Canara Bank, Sansad Marg Branch, New Delhi in favour of Grindlays Banks." Against the said judgment and order, A-1 Pramod Kumar Pritam Lal Manocha has filed Criminal Appeal No. 1117 of 1999, A-3 Vinayak Narayan Deosthali has filed Criminal Appeal No. 1141 of 1999, A-4 Ram Narayan Popli has filed Criminal Appeal No. 1097 of 1999 and A-5 Harshad Shantilal Mehta has filed Criminal Appeal No. 1150 of 1999. Against the acquittal order of A-2 Ambuj Sushil Kumar Jain, Central Bureau of Investigation has filed Criminal Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the prosecution that A-1 alongwith A-3, A-4 and A-5 conspired to obtain funds from MUL under the pretence that the funds were being drawn for purchasing securities from UCO Bank but diverted these funds to the accounts of A-5 for which A-1 and A-2 played the role of misrepresenting to MUL and withdrawing the funds. A-3 forged documents which helped A-1 to secure the release of monies from MUL. A-1 conspired alongwith A-3 and A-4 for making money available to A-5, who became the prime beneficiary of the money. The bankers cheques were handed over, on the instructions of A-1 and A-2, to Anuj Kalia an employee of A-5. Submissions Learned senior counsel Mr. Ram Jethmalani appearing for A-5 at the outset submitted that from the aforesaid five transactions, it is apparent that the investment/loan was for a short period. Yield interest is at a higher rate. According to him, the amount is received and paid on due dates. There is no loss to MUL or to the UCO Bank and the Bank has received commission for the said commercial transactions. First transaction is loan taken by the MUL through UCO Bank from A-5 on the basis of 35 lakhs of UTI units given by MUL to A5 through UCO Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that brokering by bank is not allowed and, therefore, to contend that commission was paid to UCO Bank is not a just ground for holding that there was no misappropriation or forgery. If there was a genuine transaction then the cheques would not have been issued in favour of Grindlays Bank for so-called expeditious movement of funds. If a person acts in a manner which is sinister or contrary to law then it cannot be said that the transaction was as per the commercial practice. It is a case of forgery because certain sets of documents are created where there is no real or genuine transaction. It is also contended that A-3 was not having any authority to purchase or sell units on behalf of the Bank. Secondly, he got letters. Exs.58, 60 and 61 typed outside the office and nobody knows wherefrom the said letters were got typed and this would not be in normal course of business. This would be a most relevant factor for judging whether his act was dishonest or not. A-3 wrote a document, which he had no authority to write, with a specific motive to enable the transaction to be completed and money pulled out of MUL and he issued Bank Receipts (hereinafter referred to as BRs ) without havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat MUL gave loan to A-5 at a lower rate of interest and suffered loss. The learned senior counsel submitted that FIR was lodged after investi-gation for seven months and charge-sheet was submitted after more than one year and eight months, which itself indicates that CBI knew that there was no case to be put up before a Court and the investigation was kept alive for sordid and dishonest motive. He pointed out that (1) the CBI itself understood that the FIR was based upon the one single allegation that MUL should have received more interest than it actually received. The charge-sheet nowhere states that at the time of the FIR the nature of these five transactions was misunderstood or that they changed their mind after investigation; (2) paragraph 4 of the charge-sheet expressly confirms that the first transaction was loan transaction inasmuch as it is averred that MUL borrowed the amount at a higher rate of interest at 12.75 per cent per annum for 32 days against physical delivery of 35 lacs Units of the UTI; (3) paragraph 5 of the charge-sheet refers to the transaction of 13-3-1991 which describes it as an investment of 10 crores and odd from MUL for a period of 12 days at the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18-3-1991, Cheque No. 863237 dated 24-4-1991 and Cheque No. 863260, dated 2-5-1991 aggregating to Rs. 38,97,20,000 drawn by MUL on its bank to wit the Canara Bank, Connaught Place Branch in favour of the ANZ Grindlays Bank and you thereby committed an offence under Section 403 of the IPC." It is contended that the point of determination is - whether this charge is legally sustainable. In other words whether borrowing money on four occasions and returning it on the due date with interest is an offence under Section 403 of the IPC? The answer to this point is - a resounding No. The learned senior counsel further submitted that following are the ingredients of the offence charged above:- ( i )that the accused appropriated the cheques to himself; ( ii )that the appropriation was a misappropriation; ( iii )that it was dishonest. He submits that the first ingredient is satisfied A-5 appropriated the cheques or their proceeds to himself. A person misappropriates only when he appropriates property to himself which in fact belongs to somebody else and he does so without that person s consent. Grindlays Bank had not negotiated the loan for itself. Cheques were being issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a manifestly untenable proposition that a criminal breach of trust of misappropriation thereby takes place. Even if it is assumed that the cheque was property of Grindlays Bank the bank cannot be said to have committed any offence by passing on its property to anybody it likes. By allowing the proceeds to be credited to the account of its true customer, the Bank is neither guilty of negligence nor of any criminality. Similarly, no officer of the bank could be held liable for the same and there is no question of any liability for A-5. There is no evidence that Grindlays Bank or the Canara Bank had any objection to this course of dealings. Certainly there was no intention to cause wrongful loss to anybody because no loss has been caused and no unlawful means were used. Learned senior counsel referred to the decision in Dr. Vimla v. Delhi Administration [1963] Supp. 2 SCR 585 and submitted that unlike the above case, every thing in the present case is above-board, there is no deceit, there is no falsehood and suppression of truth. It is contended that an approver s evidence cannot be accepted without corroboration and certainly not when it is in conflict with the unchalleng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record that PW23 disclosed regarding the alleged meeting, only on 10-8-1994. Indeed, the very suggestion by PW23 that a police officer who interrogated him would not question him about the circumstances of five transactions is absurd and incredible. The said meeting being a crucial aspect of the instant prosecution ought to have been referred to in the very first statement of PW23. The fact that it was not so referred to conclusively established that the meeting never took place and reference to it in PW23 s later statement of 10-8-1994 and in his judicial confession recorded under section 164 CrPC was at the instance of the CBI to whose suggestions he readily acceded in view of an agreement to make him an approver. It is further contended by the learned counsel for the appellant that in fact no such meeting ever took place and consequently, the conspiracy charge insofar as it is alleged to have commenced from April/May, 1989 is unsubstantiated by any evidence and in fact falsified by it as ( a )the veracity of PW23 has been destroyed in cross examination. He denied his taped conversation and feigned ignorance of police statement. He suppressed truth from the JPC. ( b )Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secution. The Joint Parliamentary Committee (JPC) succinctly set out the dimensions of the scam in its report. The Committee highlighted various irregularities and fraudulent transactions undertaken by the Banks and Financial Institutions etc. in the six reports submitted by it. Yet, inspite of all the above mentioned features peculiar to the instant case, the charge-sheet in the present case was one of the earliest to be filed against A-5. In view of the palpable lack of nexus between the instant prosecution and legislative intent in enacting the SCAM Act the question can arise as to why the CBI chose to investigate and prosecute the instant case. This question has a clear answer that the CBI chose to pursue the instant case and other cases in which PW23 had acted on behalf of A-5 in New Delhi in transactions with public sector undertaking to intimidate and blackmail PW23 for not supporting A-5 s public declaration from June, 1993 onwards that he had paid the sum of Rs. 1 crore to the then Prime Minister at his residence in Delhi. In simple words, if PW23 - a vital witness in A-5 s allegation against the then PM - supported the allegation of A-5, then he would be prosecuted al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not because the investigating agency had applied its mind and such application had revealed to it that the case prima facie disclosed offences which deserved to be investigated but was to extort PW23 s support in connection with the conditional disclosures that A-5 offered to make. Thus in his cross-examination on behalf of A-5, he does not even remember the following ( i )whether he questioned A-5 before the FIR was registered; ( ii )whether he interrogated any of the other accused in the instant case before the FIR was registered; ( iii )whether he interrogated PW23; ( iv )whether he discussed the matter with the IO; ( v )whether the IO submitted any written report on the outcome of the preliminary enquiry; ( vi )whether at the time of registration of the FIR he had determined the role of PW16; ( vii )why PW23 was not named as an accused in the FIR which came to be registered; ( viii )whether he personally referred to any documents before deciding to register the FIR. All the above circumstances reveal the non-application of mind which the investigating agency displayed in filing the FIR. The only circumstance that Maheshwari recalls is that the decision to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th this case; the total non-application of mind of those superiors in lodging the FIR on 15-4-1993; the untenability of the charges both in law and in fact against all the accused, the manifest incompetence and negligence in investigation on the part of the CBI and the attempt to wilfully suppress material and politically sensitive documents in the case all indicate that the present case far from subserving the objects for which the Special Court was established, is a colossal waste of public time and money, a travesty of justice and an unfortunate reminder of how individuals subvert our criminal justice system by causing institutions like the CBI to file cases which are only vehicles to subserve their own private interests. Lastly, the learned senior counsel for A-5 submitted that not only A-5 and others charged alongwith him be acquitted of all charges, but strictures against the investigating agency for bringing the system of criminal justice administration into disrepute be passed. Before dealing with the contentions raised by the learned counsel for A-5 and CBI and before narrating submissions made by the counsel for rest of the accused, we would first refer to :- A.Alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ANZ Grindlays Bank out of the account of MUL in Canara Bank, Sansad Marg, New Delhi and the cheque was delivered to Shri Anuj Kalia, an employee of Sh. Harshad S. Mehta. Although the said cheque was in the name of ANZ Grindlays Bank, Shri R.N. Popli, officer of ANZ Grindlays Bank, Sansad Marg, New Delhi with oblique motive credited the same into the account of Shri Harshad S. Mehta and then transferred it to his account in Bombay. ( iv )The transactions of 13th March, 18th March, 1991 and 24th April, 1991 are referred to in para 5. The said paragraph itself recites the number of days and the rate of interest. For these investments, Banker s cheques were obtained by S/Shri Pramod Kumar and Ambuj Jain from the account of MUL in Canara Bank, Sansad Marg, New Delhi in the name of ANZ Grindlays Bank and the same were collected by Shri Anuj Kalia who deposited the same into the account of Shri Harshad S. Mehta in ANZ Grindlays Bank, Sansad Marg, New Delhi. As these Banker s cheques were in the name of ANZ Grindlays Bank, they should have been credited into the account of the bank but Shri R.N. Popli in connivance with his co-conspirators, credited the same into the account of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. With regard to the remaining transactions it is alleged that MUL gave funds to A-5 at a lower rate of interest and thereby pecuniary advantage accrued to the borrowers and MUL suffered corresponding loss. Same is the position in the charge-sheet. Further, there cannot be any dispute that the FIR and the charge-sheet is the basis in a warrant triable case. Charges were also framed on the basis of FIR as well as other material produced by the investigating agency. The CBI itself understood that MUL should have received more interest than it actually received. The charge-sheet nowhere states that at the time of lodging of the FIR the nature of these five transactions was misunderstood. Further, in the FIR as well as in the charge-sheet it is stated that conspiracy between the accused for the alleged transaction took place during the period from January 1991 to May 1991. B. Relevant part of the report of Joint Parliamentary Committee (JPC) JPC noticed the findings of Janakiraman Committee s Report submitted in May 1992 that unscrupulous brokers in collusion with certain bank officials had manipulated securities transactions of banks and financial institutions for their own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he BR system, for example, by way of reduction in the period of its validity and imposing of severe penalties for its misuse. Manipulations to favour brokers Crediting of cheques to brokers accounts 12.14 The scrutiny of securities transactions in a number of banks revealed that some banks were even handing over Account payee cheques drawn in favour of other banks to the brokers who got them credited to their account ostensibly to assist the latter in transferring funds quickly to meet their obligations. As per informal understanding and in the name of market practice, the payee-bank used to credit the proceeds to the accounts of the broker constituents who brought the cheque to it for collection. These practices were in gross violation of the instruction that the accounts of banks with RBI should be utilised only for genuine inter bank transactions and not for transfer of funds to their clients. The total amount diverted to the brokers accounts and the ultimate disposal of funds has not been determined. Some instances are however given below. 12.15 In respect of investment transactions between PFC and UCO Bank during the period July, 1990 to May, 1991, 16 bankers cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om HSM. In this letter, HSM while requesting for the facility of obtaining bankers cheques against presentation of bankers cheques in bank s favour argued that there would be no outlay of any funds by the bank. On the contrary, a good amount of sum will be left in current account for the bank to enjoy the float. 12.30 In his letter dated 10-1-1992 , the broker repeated his request and stated : to facilitate a single point clearance, we have to request you to let the activities of issuance and acceptance of Banker s Cheques be conducted by the Securities Division. This will facilitate us to meet the deadlines of inter-bank clearing timings. 14.21 The Committee note that the PSUs were the single largest source of surplus investible funds around Rs. 36,000 crores between April 1990 and December 1992 only. In the investment of these funds guidelines and instructions were routinely flouted and no norms were observed. Neither DPE nor the Ministries concerned took any steps to ensure the compliance of their guidelines. Even the Ministry of Petroleum and Natural Gas which had made a review of investment of surplus funds by the PSUs under its administrative control in May 1990 close ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5 HSM was summoned by the Committee again on 30-6-1993. During evidence when his attention was drawn to the inherent contradictions between what he had deposed before the Committee earlier and that given in the press conference he stated that he had been discrete about the information given by him to the Committee." From the aforesaid part of the report, it is apparent that ( a )Some banks were even handing over account payee cheques drawn in favour of other banks to the brokers who got them credited to their account ostensibly to assist the latter in transferring funds quickly to meet their obligations. As per informal understanding and in the name of market practice, the payee bank used to credit the proceeds to the accounts of the broker constituents who brought the cheque to it for collection. ( b )Routing of transactions facility was given to many brokers including A-5. ( c )Single Point Clearance claimed by A-5 and given by SBI. ( d )PSUs were investing the funds against the guidelines and instructions. ( e )PSUs were investing funds for short periods for few days and even for one day implying supply of funds for speculative purposes to earn higher return. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, but there was a practice reporting the same to the Board of Directors in its meeting. The Corporate Finance Department used to put up proposal for fund deployment before sub-committee. The sub-committee would then take decision one way or the other. He has produced relevant documents and the resolutions passed by the Board as well as the sub-committee. It is his say that he was broadly aware of the activities of Funds Investment Committee for the placement of funds. His office was also a section of Corporate Finance, which was located in a big open hall and they all were sitting adjoining to each other. Only the Director (Finance) was having closed cabin in the said hall, which has transparent glasses. It is his further say that the fact that MUL was having surplus funds was well known in the finance market and the large amount used to remain idle in the bank. Company felt that there was need of optimum utilization of surplus funds to get best possible returns. It is his say that four transactions of investment were approved by the sub-committee consisting of Mr. R.C. Bhargava and Mr. S. Natarajan and there was also discussion with him in respect of dis-investment of units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt witness from MUL - PW3 Mr. Agharam Ramakrishnan Halasyam was the General Manager (Finance) since 1985 till the end of 1989; in 1991 he was promoted as Chief General Manager (Finance) and thereafter was promoted as Director (Finance) from 1st June, 1991. According to him, in 1991 MUL used to have surplus funds, which were invested in UTI and PSU bonds. It also disinvested the same when funds were required. This was done by the Corporate Finance Cell. For this purpose, Corporate Finance Cell used to get quotations from different banks for different kinds of securities and Finance Cell used to evaluate quotations received from the banks in terms of yields. After such evaluation. Director (Finance) used to be apprised and then a decision would be taken depending upon the best yield possible. Thereafter, an agenda used to be put up to the Director (Finance) for a final decision and that A-1 used to convey such offers to Director (Finance) orally. A-1 also used to put-up a written note about the proposals of investments before the Director (Finance). It is his say that such deals were directly discussed with the counter party and such investment deals were not put through any individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., for couple of days (for two or three weeks) there might not be written proposal and he had heard this while discussing with A-1 and A-2. He also admits that with regard to the JPC, he was concerned with the queries received by the MUL and their response. One Mr. Surender Singh was then the concerned Secretary. He was a Director of MUL representing Government of India. He himself and the Managing Director had occasion to discuss with him about the queries received as also the response that MUL was to make. Response which MUL gave was with the approval of Mr. Singh. This witness has proved the agenda notes and resolutions passed by the Sub-Committee of MUL. Prosecution has also examined PW4 Rajan Ramgopal, Executive, who at the relevant time was posted as Accountant and working in Corporate Finance Cell under A-1 and A-2. In examination-in-chief, the witness has stated that MUL through its Finance Cell used to deploy its surplus funds in Inter Corporate Deposit with Public Sector Undertakings and also invest in securities through Banks and also through brokers quoting on behalf of the banks. For this purpose, the office was receiving telephone calls directly from the banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and PW2 from Canara Bank ] PW 7 Mr. Pradip Anant Karkhanis is a dismissed employee of UCO Bank. He is one of the accused in a security scam related case being case No. 5 of 1996 pending on the file of Sessions Court, Greater Bombay. He had worked in the Hamam Street Branch during the period July 1976 to September 1980 and September 1990 to April 1992. During his second posting, he worked as Sr. Manager and was overall in-charge of the said branch. It is his say that he was not familiar in detail with the working of the security department of the said branch. The security department used to attend the security transactions on behalf of the head office as also on behalf of the clients which also included brokers. The branch was not concluding deals in the security transactions, in case where such transactions were on behalf of their bank and the same used to be concluded by the Head Office. The transactions in securities included both sale of such securities by UCO Bank as also purchase. It was only the Head Office which was concluding deals of sale of the securities, inviting the proposals etc. As per instructions of the head office, Hamam Street Branch used to receive the sale pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot know whether such transactions were ever undertaken by their head office. The Hamam Street Branch used to conduct its transactions on the instructions of the head office and under the instructions of its clients on their behalf. UCO Bank used to undertake such transactions on behalf of its clients on charging its commission and that the bank had made substantial profit by undertaking such transactions. In 1990, he noticed that the bank has conducted such transactions for about 9 brokers. In January, 1990, Mr. Barve who was also one of the Managers in Hamam Street Branch informed the Divisional Manager and Zonal Manager the names of 18 such brokers for whom UCO Bank was doing switch over transactions. Because of increase in deposits, Hamam Street Branch of UCO Bank was upgraded from medium to large branch. He has further stated that the bank was charging the commission for routing such switch over transactions but did not agree that it was so doing for lending its name as suggested. According to him, routing transaction means UCO bank used to receive bank receipts from one bank and against it the bank used to issue BRs to other bank. It is also his say that in some cases their ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi, who was Assistant Chief Officer in Merchant Banking Division, situated at YWCA Building, Madam Cama Road, Bombay, stated that in the year 1992, he was transferred as Manager in Security Section of Hamam Street Branch of UCO Bank and thereafter he was promoted as Sr. Manager in the year 1993. To a question What was the nature of the business conducted by the security cell ? he replied as far as Hamam Street Branch was concerned, the said branch used to conduct the security transactions on behalf of their head office as well as on behalf of clients. Mr. Harshad S. Mehta was one such client. In case of sale transactions on behalf of their clients, they used to get written instructions from their clients, having necessarily their accounts with the bank. Such written instructions would be addressed to the Branch Manager. The instructions being for the sale of the security, they were ascertaining from their clients about the availability of the security with the bank or the time of delivering of security to the bank. On receipt of the security, they were preparing a cost memo as per instructions of their client as contained in his instructions letter. The officers working in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is an inscription at the left hand top corner reading as "Payees Account only" and that being so, the said instrument has to be deposited in the account of Payee named in the said instrument i.e., UCO Bank. Such instrument like the pay order shown to him cannot be deposited in the account of any third party. Payer bank has to give covering letter instructing them to deposit the said pay order into the third party account, if so required. Such instruction letter containing instructions of the payer bank are preserved along with other related records such as vouchers in their office. On seeing the delivery order Ex. A-3(2), he stated that the said letter is the letter of instruction received from A-5 Harshad S. Mehta addressed to UCO Bank without the name of its branch. By reading the said letter, it is noticed that the same contains instructions to UCO Bank. PW21 Mr. Makarand Vasant Shidhaya joined UCO Bank on 8-5-1972. He has stated that he was named as one of the accused in five Security related scam cases along with the other accused which are on the file of Special Court. On 1-10-1982 he was promoted as an officer. During January, 1991 to May, 1991, he worked as an office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger and he identified his handwriting as also signature thereon being familiar therewith. The same also bears initials of Mr. H.L. Naik, the cashier of the branch. He further identified the signature of A-3 Deosthali on a debit voucher dated 13-3-1991 of UCO Bank, Hamam Street Branch, being the commission from various securities. He was further shown BRs of UCO Bank and he stated that the same were issued by the UCO Bank, Hamam Street Branch and have been signed by him in the caption of accountant and he signed the said BRs after he found the contents thereof to be true. With regard to the BR dated 29-4-1991 containing signature on its reverse, it is his say that the signature on the reverse of BR signifies reversal of the BR meaning thereby that the counter party had received the security and obligation of UCO Bank, who had issued the said BR stood discharged. DW-A3(2) Mr. Sekharipuram Vasudevan Ramnathan, Chief Officer, UCO Bank stated that he joined services of UCO Bank at Calcutta in the year 1969 as Probationary Officer. In June, 1990 he was brought to Bombay Office as Divisional Manager in its Nariman Point Office and he worked at the said office till October, 1992. Thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the pipelines to be routed through UCO Bank and hence this letter was written. Since there were no definite guidelines, they had certain apprehensions i.e., when pay orders for purchase and sale did not come in time, they might not be able to send them in time and the clearing may go against them. Therefore, routing facility of the brokers/customers was stopped by the UCO Bank. He further stated that no officer of UCO Bank working in Hamam Street Branch was authorised to lend or borrow monies on behalf of UCO Bank. He explained the routing facility as routing transactions is the transaction in which purchase and sale of the securities was done by the bank as an agent of its customer for a commission. The routing facility was offered to many brokers including A-5 in the year 1991 and such brokers availed of the said facility. Such routing facility was already in practice even before he joined as Divisional Manager in June 1990. Some banks were offering such facilities. He was an accused in two special cases before the Special Court and the said cases did not relate to the security transactions concerning routing facility. He further stated that a bank can issue its BR against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring particularly on Saturdays does not go against us on account of switch transactions. In fact, it will be better to avoid switch transactions on Saturday. (6)Only straight forward transaction either on SGL or BR should be routed through Bank and the brokers will have to give an undertaking to this effect. In the meantime, the undersigned is contracting the brokers separately and is having discussions with them. Two such brokers have already had discussions with the undersigned. Shortly the matter will be discussed with a couple of other brokers also. You are advised to contact other banks through whom such transactions are routed and have detailed discussions with them regarding their experience, the commission they charge, the modus operandi and their opinion why other banks are not entering the field. You are also advised to contact other banks who are not having such transactions and have discussion with them with a view to find out why in spite of profitability in this area they are not entertaining this and give at your report at an early date." PW2 Meda Sai Swaroop, who was the Manager in the Parliament Street Branch of Canara Bank at New Delhi, stated that after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank can use the format of pay order also. If such bankers cheques are made payees account only then the same are not transferable. On seeing Ex. 28, he stated that it is inter bank cheque in favour of Grindlays Bank issued by Canara Bank bearing stamp Payee A/c only and not transferable . There is a rubber stamp of Grindlays Bank on its reverse indicating that the said banker s cheque is cleared. It is his say that Grindlays Bank would dispose of the proceeds of the said cheque as per the covering letter. It is his further say that without instructions of Canara Bank, Grindlays Bank could not credit the amount of the pay orders Ex. 28 and Ex. 30 to any third party s account. He identified A-4 R.N. Popli, an employee of Grindlays Bank, but stated that he was not aware about his posting during the relevant period i.e., from the year 1990 to 31-5-1991. PW11 Suraj Amarnath Tandon, Assistant Manager of ANZ Grindlays Bank, stated that from March, 1990 to March, 1992 he worked as Second Officer. Front Office in Sansad Marg Branch. It is his say that on the receipt of the instruction letter of the customer, their bank used to put its rubber stamp in token of receipt of such letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were required, the first authorization related to giving credit to the third party which is generally given by Branch Manager marketing department who are known as Relationships Manager or Account Manager and lastly the Funds Manager. Only after the first authorization has been received the officer-in-charge would proceed to indicate his second authorization by authorising transactions for posting on computer system i.e., the pay-in-slip is authorised to be used as authorised voucher for posting on computer system. During the period when the transactions covered by Ex. 28, took place there was a market practice followed by various banks to present bankers cheques through a Special Clearance settlement which is known as inter bank settlement. The objective of drawing the bankers cheque was to provide speediest or fastest clearance of such instruments which was not possible through other clearing settlements available to the customers, namely, MICR. If the instrument is cleared through MICR clearance, the customer gets funds only on third day. The other settlement introduced by RBI in the year 1985 in response to the needs of the business community as a mode of faster settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds of the said five pay orders into the Grindlays Bank account that the proceeds thereof in turn were credited into the account of A-5. PW15 Mr. Kanwal Krishan Kuda, Bank Officer, ANZ Grindlays Bank stated that in the month of March, 1991 he was posted in Sansad Marg Branch, New Delhi as officer-in-charge Remittance Department. He identified A-4 R.N. Popli as the person working in the same branch in different department of the bank. It is his further say that he is also one of the accused in a case which has been instituted by the CBI in the Court of Special Judge at Delhi being CBI Case No. RC-2A/92 ACU-(I) which is still pending. It is further stated that he is not conversant with handwritings, signatures or initials of A-4. The activities which they carried out in the Remittance Department were Remittance of funds from one branch to another branch or another bank, cheque collection, cheque purchases, standing orders etc. During the course of his work, he came across Payees Account Cheque, Pay-in-Slip, debit vouchers and credit vouchers. With regard to the credit voucher dated 26-4-1991 into the account of Harshad S. Mehta, it is his say that the same was approved by him and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the said question : "If any bank credits the account of a constituent who is not the payee named in the cheque without proper mandate of the drawer, it does so at its own risk and will be responsible for the unauthorised payment". Q.(Witness is referred to portion of his deposition in para 18 on page 495 in question and answer form (witness is questioned). Whether the practice of crediting the proceeds of Bankers cheques to unnamed beneficiaries was not violative of any specific banking law or any RBI Circular or guideline on the subject ? A.The same would not violate any Banking law as I understand. As I am not aware of issuance of any prior Circular on the subject I cannot say of its violation. Q.The Circular Ex. 148 was issued with the approval of the then Governor of RBI who was Mr. Venkataramana at the relevant time. (Witness is again referred to portion of Circular Ex. 148 in the second para reading as : "If an bank credit.............for the unauthorised payment". Q.Does the use of the word "Unauthorised" referred to the fact that the issuing bank may not have authorised the payee bank to credit the amount into the account of third party ? A.Yes. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be returned to the sender. RBI reiterates the position that crediting of proceeds of such cheques to parties otherwise than in pursuance of clearly delineated instructions of issuer of such cheques is unauthorised and should not be done under any circumstances. Banks cannot and also should not invoke market practice in justification of doing that, which is not supported by law or recognised banking practice. These instructions should be carefully noted. Banks which indulge in any deviation from these instructions would invite severe penal action. Kindly acknowledge receipt of this letter. Yours faithfully, Sd/- (V. Rangarajan) Addl. Chief Officer" ( d ) Other relevant witnesses including evidence against A-5 : [PW23, PW25, PW16, CW1 and DW5(8) Learned senior counsel appearing on behalf of A-5 stated that the evidence led by the prosecution for establishing the five transactions is not required to be dealt with as he admits on behalf of A-5 that in four transactions the amount was taken by A-5 and in first transaction he gave loan to MUL but as loan was given, he has not committed any illegality in taking loan from MUL through UCO Bank. In this view of the matter, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations were undertaken in the name of Harshad S. Mehta which was his proprietary concern, he being a member of Bombay Stock Exchange. After it was decided to set up office in Delhi as stated earlier. A-5 made another trip to Delhi somewhere in April or May, 1989. In this trip, A-5 spoke about the activities in money market. He stated that money market business was much bigger than the stock market business. He also told him that there were many P.S.U. Companies in Delhi; these PSUs had large investable surplus funds with them and that such large funds of PSUs in Delhi could be invested in banks at Bombay. A-5 wanted him to keep liaison with certain PSUs. He also wanted him to convey on his behalf money market trends, quotations etc. to such PSUs. He was supposed to convey the same to the functionaries of the PSUs who were concerned in the investment of the funds. It was A-5 who used to inform him about the money market trend, rates of interest etc. which he wanted him to convey to the functionaries of the PSUs. A-5 was mostly in Bombay and he used to convey him the same over telephone. It is his say that a number of accounts with various banks were opened in Delhi in the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money would be UCO Bank, Hamam Street Branch, Bombay and that offer in that respect would come from the said bank who would be showing it as an offeror. It is further say of the witness that he came across a person named V.N. Deosthali (A-3). He was an officer working in UCO Bank in its Hamam Street Branch at Bombay. He learnt about the same from A-5. At subsequent stage, he had occasion to meet Deosthali (A-3). He heard the name of Deosthali in the year 1990, it may be even early in the year 1989 in connection with some other transactions with some other PSUs. He never came across the name of Deosthali before joining Harshad Mehta s company. In the year 1989 or 1990, he heard the name of Deosthali from Harshad Mehta. He identified A-3 sitting in the Court. In January 1991 he received the letter Ex. 58 of UCO Bank, Hamam Street Branch, Bombay, dated 23rd January, 1991. As per the said letter, he was to collect 35 lakhs units of UTI from MUL. He contacted A-1 for the purpose of complying with the instructions as contained in the said letter. Anuj Kalia was deputed by him to collect the said security. Instructions for transferring the proceeds of the pay orders of Canara Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le which would include employees were sitting. He further stated that their meeting was with A-1 and A-2 who were sitting in the said hall. He was not known to the other employees of MUL who were sitting in the said hall. He and A-5 were sitting across the table and in front of them A-1 and A-2 were also sitting there and the said meeting was among four of them. He was arrested by the CBI in this case. It was in the month of August 1994 but he does not recollect the exact date. As far as he remembered, it was on 10th of August 1994. He presumes that CBI officer recorded his statement on 10th of August, 1994, which was read over to him and he found the same having been correctly recorded. Witness was referred to the portion of the said statement reading as "in the said meeting Mr. Harshad S. Mehta, accused No. 1 and accused No. 2 were present". The witness stated that his statement before the Court is correct. If in his statement recorded by CBI, he has not mentioned about the presence of accused No. 2 in the said meeting then it may be that he had not stated about the same. He agreed that Harshad S. Mehta elaborated to A-1 and A-2 about excellent deals in the money market. A- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of occasions and questioned him and he gave them answers to such questions. He could not recollect whether CBI officials recorded his statement/s or not. He again stated that on 10-8-1994 he was arrested. He was summoned by CBI on two occasions in June, 1993 for interrogation in this case. He was first called on 1-6-1993 and then again on 15-6-1993. Mr. B.C. Bhatnagar called him on both the occasions. On 1-6-1993, he was called in the CBI office which was then located in Loknayak Bhavan, Delhi. He had received written summons at that time. The summons mentioned about the MUL s case. He could not recollect the exact time when the process of recording of his interrogation commenced and ended but it was during the office hours between 10 a.m. to 5 p.m. The process of interrogation continued on when the officer Mr. Bhatnagar questioned him and he gave answers to his questions. He could not recollect whether Mr. Bhatnagar at that time went on recording his statements. On being shown para 32 of his deposition recorded by Mr. Bhatnagar under section 161 Cr. PC he stated that by reading the statement, he can say that he had not mentioned specifically the said fact in his statement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Except the statement of Mohan Khandelwal, he was not aware when A-5 visited Delhi during the month of April-May, 1989. He secured the statement of Mohan Khandelwal with regard to the presence of A-1 and A-2 and about the fact of the meeting in April-May, 1989. On seeing the case diary he stated that he had recorded one statement of Mohan Khandelwal on 1-6-1993. Prior to 15-6-1993, he had not recorded any statement of Anuj Kalia. Between 15-4-1993 to 15-6-1993 he had not interrogated Anuj Kalia. In cross-examination, the witness stated that he does not remember if during the course of investigation, he had checked up the various records of Grindlays Bank, Sansad Marg Branch where A-4 was working and particularly between February 1991 to May 1991. He also does not remember if he had made any application/request for production of documents to the said bank during the said period and that he had conducted any search and seizure from the said bank with regard to the documents like attendance register, duty roster or any other similar document showing the presence of particular officer at particular time. He agreed that he neither saw nor took into possession any such record date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CBI and to become an approver. He was not aware of Mohan Khandelwal being involved in five or six other cases of scams at the relevant time. He also stated that it was one of the significant factors in the investigation that loss had been caused to MUL. During the course of preliminary enquiry he had collected information which indicated pecuniary loss to MUL. Out of the five transactions in question, the first one was a borrowing by MUL whereas the remaining four were lending by MUL. The loss was caused to MUL because MUL paid higher rate of interest in comparison to the rate of interest paid by other PSUs on borrowings. He does not remember as to what rate of interest was paid by MUL but it is mentioned in the charge-sheet. He had seen the charge-sheet. It does not carry any mention of other PSUs. There is also no list showing the rate of borrowing by other PSUs. He admitted that the rate of interest in the market fluctuates from day to day and hour to hour. He investigated on the aspect as to on what rate of interest other PSUs borrowed on 23-1-1991. He had not recorded the statements of any person from those PSUs. But he collected the data showing the borrowing rate of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itness further clarified that the placement of funds was with UCO Bank which offered the sale of units available with them and the contents of the resolutions in Ex. 23 and Ex. 24 should be read with the Agenda Note and the letter of offer by UCO Bank. According to him, after the placement of funds with UCO Bank, the Bank would not be acting illegally if it places those very funds with a third party. He admitted that in Ex. 24 MUL had adopted a resolution on the same day placing the funds with M/s. Can Bank Financial Services for investment in bonds/units/Government securities. He denied that he and the Investigating Agency have protected Mr. Bhargav and Mr. Natrajan. He could not remember if he had recommended the prosecution of Mr. Bhargav and Mr. Natrajan or that the Investigating Agency rejected that recommendation for extraneous reasons. The decision to name Anuj Kalia in the FIR was of Mr. Maheshwari and the Investigating Agency and he had agreed. The decision to drop him from the list of accused was his and that of investigating agency. After recording statement of M. Khandelwal under section 164 Cr.P.C. it was decided to drop him from the list of accused. Till that time, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence in which he levelled the allegations of having paid Rs. One crore to Narsimha Rao, the then Prime Minister and in which Mohan Khandelwal was a vital witness. He did not know if the said statement dated 15-6-1993 had been brought to the notice of Mr. Narsimha Rao and his advisors. PW16 Anuj Kalia stated that he was working as management Trainee with M/s. Growmore Research and Assets Management Ltd. at New Delhi. While working in the said company and in connection with the work of that company, he came across a person by name Harshad S. Mehta. It is stated that the said company namely M/s. Growmore Research and Assets Management Ltd. was a family concern of A-5. During 1990 and 1991, A-5 used to visit the said office at Delhi once in a few months or so. During the said period, A-5 was stationed in Mumbai. It is further say of this witness that he got himself appraised of the nature of the business of the said company which was to conduct the research in Stock Market and to make investments in stock market and similar services of broker. The witness further stated that during his visits to Grindlays Bank in connection with the work of their company, he came across an officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it is the letter on the strength of which he collected the pay order Ex. 28. The same bears his signature at two places marked as Ex. 27(1) and 27(2) in the said letter. Handwritten portion thereon reading as "Mr. Sai Swaroop please deliver the cheque to Mr. Anuj Kalia" is the handwriting of A-2 and he identified the same being familiar therewith. He identified the signature thereon marked as Ex. 26(2) as that of A-2 Ambuj Jain. Further, on seeing Ex.101 covering letter dated 25-2-1991 on letter head of Harshad S. Mehta addressed to the Manager, Grindlays Bank, New Delhi the witness stated that the hand written part of the said letter was written by him in his own handwriting and he identified the same. The same has been signed by Mr. Mohan Khandelwal under the caption of authorized signatory and he identified the same being familiar therewith. He wrote the said letter under the instructions of Mr. Mohan Khandelwal. The said letter was written for depositing the bankers cheque of Canara Bank mentioned therein into the account of A-5 as such letters used to be written for depositing bankers cheques into the said account. On seeing Ex.102 detached part of pay-in-slip of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He denied the suggestion that in the CBI Office he was told to implicate A-4 in this case and that he would not be implicated in this case. To the question that during February and May, 1991 A-4 was not working in Remittance Department in Grindlays Bank in its branch at Sansad Marg, - he replied that he was not knowing about his department but he knew where he used to sit in the said branch. CW1 Mr. Vishnu Deo Maheshwari, SP CBI stated that during the years 1991, 1992 and 1993 he was supervising investigation of cases relating to anti corruption offences. In the year 1992-93 Mr. Amod Kanth, the then DIG was his superior. Mr. B.C. Bhatnagar, the then Dy. S.P. was amongst the subordinate officers working under him during the said period. He was asked to explain about his precise role in the process of supervision investigation of the MUL s case. He stated that he discussed the evidence collected by Mr. Bhatnagar who was the I.O. of the case as also with senior officials, examination or interrogation of witnesses and to assess the documents collected as also the statements of witnesses and to discuss with I.O. as well as senior officers. Besides supervision of the investigation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Harshad S. Mehta came to office in the car of Shri Sunil Mittal and the suitcase containing cash lying in NE 118 car was shifted to the car of Shri Sunil Mittal. ( vi )He, Sunil Mittal and Harshad S. Mehta went to residence of Shri Sitaram Kesari, party Treasurer. ( vii )There he remained along with them in the front room. ( viii )Later Shri Harshad S. Mehta and Sunil Mittal went inside the connected room and the suitcase containing the cash was picked up by somebody from the Bungalow (Residence of Shri Sitaram Kesari) and taken inside that room. ( ix )While returning from that room Shri Kesari asked Harshad S. Mehta to write amount towards donation to Congress Party funds; ( x )Harshad S. Mehta initialled in the note book produced by ShriKesari; ( xi )Then all three of them returned to office from where he remained in the office and Shri Harshad S. Mehta along with Sunil Mittal proceeded to Hotel; ( xii )Similar heavy cash withdrawal was also done on 4-5-1992 when Rs. 20 lakhs were withdrawn from the same bank." The witness was questioned whether the said evidence of Mr. Khandelwal denying the recording of his said statement was true? The witness replied No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities in a form of BRs held by UCO Bank in the account of A-5, he would pass on the same to the dealers of A-5. Without holding the securities by way of BRs, UCO Bank would not issue BRs for and on behalf of A-5. Apart from BRs the securities in the physical form of A-5 would also lie with UCO Bank. Hamam Street Branch, Bombay. Whatever securities received either by BRs, SGLs or physical for and on behalf of A-5, the same used to remain with UCO Bank, Hamam Street Branch, Bombay. There used to be generally surplus balance of securities in the account of A-5 with UCO Bank, Hamam Street Branch, Bombay. He agreed to the suggestion that UCO Bank, Hamam Street Branch, Bombay issued its BR in respect of 70 lakhs units of UTI on 13-3-1991 in respect of the second transaction favouring MUL. He was in Bombay when A-5 was arrested. He was also arrested by CBI in RC Case No. 8(A)/92. He was aware that A-5 was kept in the CBI custody for well over 90 days. He was not knowing whether A-5 was under CBI custodial interrogation. Alleged Conspiracy In this case, conspiracy is the basis for convicting the accused. Special Court has mainly relied upon the evidence of PW 23 for holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of an approver. It is submitted that in the instant case there is no corroboration of the so-called conspiracy through any independent evidence; in fact the evidence of approver himself does not disclose any conspiracy as alleged in the charge. Learned senior counsel Mr. Jethmalani also referred to a note recorded by 13 Members of JPC, wherein it is stated as under: ". . . The CBI s treatment of Shri Mohan Khandelwal, first as a "source" and thereafter as an accused is mystifying, to stay the least. No satisfactory explanation about this was ever forthcoming." It is submitted that from the aforesaid note inference is obvious the registering of preliminary enquiry in this case and other cases was an attempt to threaten PW 23 for not disclosing to the public what he had informed to Shri Sharma, DIG Special Investigation Wing privately. The registering of the cases had the desired effect - PW 23 did not reveal his knowledge to anybody because the agency to whom he had revealed it from June 1992 onwards, had chosen not to use the information but to investigate cases in which he could be roped in. Obviously, the filing of cases against PW23 intimidated him sufficiently not to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi and Bombay with V.N. Deosthali (A-3), then Asstt. Manager UCO Bank, Hamam Street Branch, Bombay, R.N. Popli (A-4) of ANZ Grindlays Bank, New Delhi, Harshad S. Mehta (A-5) a broker and Mohan Khandelwal an attorney of Harshad S. Mehta, with the object to misappropriate the surplus funds of MUL and to provide pecuniary advantage to Harshad S. Mehta (A-5) by abusing their official position as public servants." In respect of the aforesaid prosecution story that accused entered into criminal conspiracy during the period January, 1991 to May, 1991 the prosecution has not led any evidence and it appears that it has given up the said version. On the contrary, prosecution led evidence to the effect that there was conspiracy either in April or May, 1989 between A-1, A-2 and A-5 and for that purpose it relied upon the evidence of approver PW23 Mohan D. Khandelwal, who was associated with A-5 for the purpose of carrying out research in share market and companies in Delhi somewhere in the month of February or March, 1989. During his visit to Delhi in April/May, 1989, A-5 made reference to MUL and told that MUL had surplus investable funds as a PSU and they were very active in money mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that by an office order dated 4-4-1989 Ex. A-1 and Ex. A-2 (5), A-2 was appointed and thereafter he joined the MUL, on 19-4-1989 as Junior Officer on probation. He was sent for refresher course from Ist May. In this set of circumstances, it would be difficult to believe that a raw junior officer who was on probation would take part in alleged meeting and be a party to conspiracy of dealing in MUL funds illegally or irregularly. Further, PW23 has developed a story after his arrest on 10-8-1994 that A-2 was present in the meeting. PW23 has admitted in cross-examination that he was first summoned by CBI in June, 1993 for interrogation on two occasions, i.e. on 1-6-1993 and 15-6-1993. In further cross-examination, he admitted that neither he could recollect the exact date and time of the meeting which took place in the premises of MUL nor remember the month of the meeting. The witness has also stated that if in the statement recorded by the CBI, he has not mentioned about the presence of A-2 in the said meeting, then it may be, he has not stated about the same. The public prosecutor admitted that it was an omission in the statement recorded by the CBI with regard to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prosecution version that A-1 and A-2 entered into a criminal conspiracy with other accused between January 1991 to May 1991 as stated in the FIR (which was recorded after preliminary inquiry) and in the charge-sheet (virtually filed after more than two years of the preliminary inquiry), no attempt is made to prove the same. Subsequently developed prosecution version that conspiracy was hatched in April/May, 1989 on the basis of approver s evidence appears to be unreliable and baseless. Next question would be (even though not argued) Can we draw an inference from the transactions in question that there was any such conspiracy from January, 1991 to May, 1991 between accused. There is no circumstance on record for establishing any conspiracy between A-1 and A-3 who was Assistant Manager of UCO Bank. There is nothing on record to show that A-1 or A-2 had any talk with A-3 or A-4 with regard to the alleged conspiracy and that they were party to it. However, let us consider that five transactions mentioned above took place and as MUL could not lend money to A-5 directly, the transactions took place under the name of and through UCO Bank and in four transactions UCO Bank in tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who brought the cheque to it for collection. The JPC also observed that routing of transactions of many brokers including A-5 had been carried out by banks. The banks were lending their names to the transactions of these brokers and exposed themselves to great risk by irregularly issuing their own BRs. Therefore, if this commercial practice was rightly or wrongly developed in various banks or the PSUs, it cannot be inferred that there was any conspiracy between the banks and PSUs or that there was conspiracy between A-1, A-2, A-3, A-4 and A-5. Further, in the present case, there is no evidence on record that BRs were issued by the UCO Bank without being backed by the security namely UTI Units. In this set of circumstances, it would be difficult to hold that prosecution has proved the charge of criminal conspiracy under section 120B of IPC against the accused. I would also state that it is not properly understood by the prosecuting agency that by introducing or adding a new story in a criminal prosecution, in most of the cases, it adversely affects or destroys the prosecution case. Not only it creates doubts with regard to that part of the prosecution version but on occasions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction of the Special Court is limited for offences relating to transactions in securities after the 1st April 1991 and on or before 6-6-1992 and the Court is required to follow the procedure prescribed by the Code of Criminal Procedure for the trial of warrants cases before a Magistrate. Sections 6 and 7 inter alia provide that the Special Court would have exclusive jurisdiction to take cognizance of or to try such cases as are instituted before it or transferred to it as provided. Further, it is to be clearly understood that the Act does not create any new offence nor brings about any change in the procedure or raises any presumption pertaining to an offence punishable under the IPC or P.C. Act, which is to be tried under the Act. Therefore, the offences pertaining to misappropriation, criminal breach of trust or fraud and forgery are required to be established by the prosecution on the touchstone of ingredients laid down under the relevant provisions of Indian Penal Code and by following the Evidence Act. Hence, for conviction under section 403 and/or section 405 IPC the prosecution is required to establish the ingredients of said sections beyond reasonable doubt. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the transaction, which was authorised, was a transaction in securities directly with UCO Bank. ( h )The fact that the pay order was being given to Grindlays Bank in a transaction with UCO Bank was brought to the notice of A-1 by PW-4 to which A-1 s reply was that it was the problem of UCO Bank. ( i )The contention that A-1 was instructed by UCO Bank to issue the pay order in favour of Grindlays Bank is unacceptable for the simple reason that in the fourth and the fifth transaction pay order continued to be issue to Grindlays Bank without any direction from UCO Bank. ( j )In any event there was no authorisation to purchase any securities from any brokers. There was no mention of the monies being given on loan to any broker. It bears emphasis that surplus funds were many times invested in securities in buy back transaction, in that the arrangement would be to purchase a security and then resell it within a stipulated time after the identified period at a price which would include the cost of purchase plus the stipulated interest. This transaction was considered as placement of funds with PSUs. The witnesses have clearly stated that the only authorisation for placement of sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted document Ex. 41 during arguments before this Court, the same is being replied to by A-2 as under : "A-2 saw this BR at the time of discharge as authorised signatory after MUL had got the money back and the transaction had got reversed. When PW-4 who was the custodian of all records of every transaction and was maintaining BRs, put up the said BR for discharge before A2 for signing after MUL had got the money back, he signed the same in a routine manner." Under the circumstances, it is submitted that no criminality can be imputed against A-2 for signing this BR as an authorised signatory after the reversal of the transaction. Hence, it is submitted that this circumstances also cannot be held against A-2. Learned senior counsel further submitted that as there is no evidence against A-2, the Special Court had rightly acquitted him and in the appeal also learned Solicitor General appearing on behalf of CBI has not pointed out any material evidence to hold that the judgment and order passed by the Special Court calls for any interference in acquittal appeal. He referred to Ex. 26 and submitted that the said document is signed by him but as deposed by PW-4 the said document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us : "Resolution dated 4-5-1989 (Ex. 9) Board Agenda Item No. 17 - Investment of Surplus Funds by MUL 1.In terms of the existing guidelines from the Board, MUL has been loaning its surplus funds to Central Public Sector Undertakings consistent with the terms and conditions of the approval accorded by the Central Government under section 370 of Companies Act, 1956. 2.A sub-committee comprising the Managing Director and Director (Finance) has been delegated the authority by the Board to facilitate taking faster decision in this regard. The details of investment made are placed in the Board meeting for information. 3.Of late, the number of PSUs, who have surplus funds wanting to loan funds to PSUs has increased. Some PSUs who were earlier requiring temporary accommodation are now in a position to give funds. As a result of this, there is an increasing competition between PSUs affecting the yield on such loaning of funds. 4.In an effort to maximise yield on surplus funds, it is proposed to invest funds in the units of UTI. Central Govt. Securities, public sector bonds either through scheduled banks or directly. These investments, at times, are expected to fetch a highe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. In November and December Maruti has placed lot of money in Government Securities/Units and PSU Bonds through Banks. These investments have been made for a period of 3 months to 6 months on assured yield ranging from 16.25% to 22% per annum. 2. During the last week of December and in January, the receipt of payments were relatively less. Maruti was required to borrow funds or withdraw money from PSUs. One of the options available for borrowing was to sell our investments to other banks with a understanding to buy back these investments after a gap of 30 days or so. This amounts to borrowing of funds at low rates, as Maruti will continue to get advantage of the high assured yield. The bank with whom we have earlier invested the funds and the bank from whom we borrow the funds need not necessarily be the same bank. In our documentation we have to show the borrowing as sales of our investments. Therefore, it is proposed to show such borrowing as reduction in our investments. This has been discussed with Company Secretary also who is agreeable for such treatment. 3. Maruti has done different borrowing/disinvestment as mentioned in the annexure. Some of these have been done to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.84 crores in Units through UCO Bank for a period of 5 days. The expected yield will be 21% p.a. Submitted for approval of the committee of Directors for the above placement. Minutes of the meeting of the committee of directors for investment of funds held at the registered office on 18-3-1991. Present Shri R.C. Bhargava-Chairman Managing Director Shri S. Natrajan-Director (Finance) Item No. 1Confirmation of the minutes of the last meeting held on 15-3-1991. The minutes of the last meeting held on 15-3-1991 were confirmed. Item No. 2The Committee passed the following resolutions : RESOLVED that Maruti may place funds with M/s. Can Bank Financial Services for investment in Bonds/Units/Govt. Securities aggregating to Rs. 14.45 crores for a period of 43 days at an expected yield of 25% p.a. RESOLVED FURTHER that Maruti may place funds through UCO Bank for investment in Units aggregating to Rs. 10.84 crores for a period of 5 days at an expected yield of 21% p.a. The resolution was put to vote and carried unanimously. Sd.Sd. R.C. BhargavaS. Natrajan Chairman Managing DirectorDirector (Finance) (4) Ex. 40 dated 24-4-1991 Agenda note for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placement will be for a period of 5 days with effect from 2-5-1991. The expected yield will be 21% per annum. 2. We have received a request from Bank of America for placement of Rs. 15.00 crores in units. The placement will be for a period of 7 days with effect from 2-5-1991. The expected yield will be 22% per annum. 3. We have checked up with M/s. ILFS who are agreeable to renew the inter corporate deposit of Rs. 5.50 crores @ 22% per annum for a period of 5 days with effect from 2-5-1991. Submitted for kind approval of the committee of Directors for the above placements. Minutes of the meeting of the committee of directors for placement of funds held on 30-4-1991 at the registered office. Present Shri R.C. Bhargava-Chairman Managing Director Shri S. Natrajan-Director (Finance) Item No. 1Confirmation of the minute of the last meeting held on 26-4-1991. The minutes of the last meeting held on 26-4-1991 were confirmed. Item No. 2The Committee passed the following resolutions : RESOLVED that Maruti may place funds with UCO Bank for investment in Units aggregating to Rs. 10 crores for a period of five days w.e.f. 2-5-1991 at an expected yield of 21% p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on due date, the units would stand forfeited. It is also clear from para 2 of the resolution Ex. 22 dated 1st February, 1991 that during the last week of December and in the month of January, 1991, the receipt of payments by MUL was relatively less and it was required to borrow funds or withdraw money from PSUs. However, in the documentation, the borrowings were required to be shown as sales of investments. The relevant part of resolution reads as under : ". . . In our documentation we have to show the borrowing as sales of our investments. Therefore, it is proposed to show such borrowing as reduction in our investments. This has been discussed with Company Secretary also who is agreeable for such treatment." This would indicate that whatever may be the documentation of purchase or sale of UTI units, the same would not reflect the true and real nature of transaction. Admittedly, in the case of borrowing, MUL was preparing documents so as to reveal that the transactions were sale of investments, may be in the UTI Units or other such securities. Further, PW-4 Mr. Rajan Ramgopal specifically admits that the name of the broker did not figure or reflect on the record of MUL in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not lodged any FIR nor made any grievance with regard to the said transactions; ( e )After CBI enquiry, A-1 and A-2 were promoted for their better performance; ( f )To the JPC necessary replies were given by the Board and Mr. R.C. Bhargava was summoned by the JPC; and ( g )Mr. Bhargava, Chairman- cum -Managing Director and Mr. Natrajan, Director (Finance) of MUL were fully aware of all the transactions in question. PW4 also admits that ( a )MUL used to invest in securities through brokers quoting on behalf of the banks on the basis of telephone calls; ( b )The name of broker did not figure or reflect on the record of MUL in the event of transaction of investment being through the brokers; ( c )Medasai Swaroop, the concerned Manager of the Canara Bank after preparing the cheques would hand over the same to him and he would in turn hand over the cheque to the representative of the bank or the brokers; ( d )Because of the pressure of work he was not going to respective bank but the cheques were handed over to the representative of the bank or to the broker under the instruction of either A-1 or A-2; ( e )During the relevant period foreign banks used to effect tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or approval of the sub-committee and placed before the Board for information. 2.( b ) To the best of our knowledge, RBI has not issued any guidelines which are applicable to companies incorporated under the Companies Act for investment of surplus funds. MUL has complied with all the rules and regulations prescribed under the Companies Act, 1956 for investments of funds. Therefore, the question of any violation does not arise. 2.( c ) One or more Government Directors have always been attending the Board Meetings of MUL. There has not been any dissent on any such investments. 4.( e ) After it was reported that some banks have committed irregularities in securities transaction, MUL stopped investing funds in securities w.e.f. 30-5-1992 and instead has been placing surplus funds only as inter corporate loans. 4.( g ) The investments of these funds were authorised by the Committee of Directors consisting of Managing Director and Director (Finance) within the parameters approved by the Board in its meeting held on 4-5-1989. 5.1 . . . . . As per the joint venture agreement dated 2nd October, 1982 amongst Government of India, Suzuki Motor Corporation and Maruti Udyog Limited, Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions of UCO Bank, Bombay regarding the remittance of funds through ANZ Grindlays Bank. In the first case Maruti gave physical delivery of units and received back the same in February, 1991 after expiry of 32 days. In respect of other 4 investments which were only for very short periods no physical delivery of units was taken. Maruti received Bank Receipts from UCO Bank, Bombay for all transactions of investment except for the last investment of Rs. 10.39 crores for 5 days in May, 1991. These funds were received back alongwith the expected yield. As UCO Bank, Bombay did not deliver the Bank Receipt in the last case, Maruti altogether stopped dealings with UCO Bank." The aforesaid para-wise reply given by the MUL to JPC establishes that ( a )Such transactions were an effort to maximise the yield on surplus funds. Maruti Udyog is a joint venture company and is to manage as a commercial enterprise with a view to provide its shareholders reasonable return on their equity investments in Maruti. ( b )The investment of these funds were authorised by the Committee of Directors consisting of Managing Director and Director (Finance). ( c )The transactions were reported to the Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a commercial transaction for getting optimum yield. All the witnesses on behalf of MUL stated that MUL has not suffered any loss in the said transactions. (6)Pending CBI inquiry, MUL considered that A-1 or A-2 have not committed any wrong and they were promoted. (7)Issuing of cheques by Canara Bank in favour of Grindlays Bank was as suggested by the UCO Bank (A-3). (8)Further this was a commercial practice adopted by many banks for transmitting the funds at the earliest. This practice rightly or wrongly was developed with the PSUs and financial institutions. (9)PW-4 Rajan Ramgopal admits that MUL used to invest in certain securities through brokers and the name of the broker did not figure or reflect on the record of MUL. (10)In such a case, it would be difficult to hold that A-1 or A-2 acted dishonestly in issuing cheques in favour of Grindlays Bank for transmitting the funds of MUL to UCO Bank, Bombay. (11)No objection was raised during internal or statutory audit despite the fact that Comptroller and Auditor General had also audited the accounts. For the reasons stated above, neither A-1 nor A-2 can be convicted for the alleged offences. No doubt A-2 is alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanwal Krishan Kuda. He further submitted that even witness from Canara Bank PW-2 Meda Sai Swaroop has also deposed that cheques were credited in the account of Grindlays Bank. He also referred to evidence of PW-14 Mr. Prem Shanker Joshi. He relied upon evidence of DW5(8) Atul Manubhai Parekh. Finally, he has drawn our attention to the evidence of PW-25 Mr. B.C. Bhatnagar, the Investigating Officer, who deposed that there were number of officers involved, and referred to the part of PW-25 s deposition, wherein he stated that he does not remember if he had made any application/request for production of documents to the said bank during the said period. He did not remember if he had conducted any search and seizure from the said Bank with regard to the documents like attendance register, duty roster or any other similar document showing the presence of particular officer at particular time. For considering the contentions raised by the learned counsel for the parties, I would refer to what emerges from the evidence of the relevant witnesses : PW9 Ravi Saluja states that the cheques so received by the ANZ Grindlays Bank for clearance were sent to the clearing department for fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the said officer who was incharge of clearing department. He agreed that in 1991-92 there was a practice of crediting the proceeds of the bankers cheques into the account of third party other than its payee. However, it was extended to only certain high networth customers like British Airways, Classic Financial Nizhewan Travels and Harshad Mehta Group which list is not exhaustive and he came across the instances in case of the said parties where their bank had allowed such credits. The Grindlays Bank had not received any complaint from MUL for crediting the amounts of said five pay orders to the account of third party. He was asked about the category of customers regarded as high networth customers. He replied such classification is generally given by the concerned manager of the bank having regard to the deposits maintained by the customer or other business potentials. The services to be extended to the customers like high networth customers would be decided by the branch manager. In the cross-examination, it is his say that all the five pay orders which were shown to him being Ex. 28, 30, 32, 34 and 36 were sent for inter Bank Clearance by the Grindlays bank. The amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u elaborate ? A.Such classification is generally given by the concerned manager of the bank having regard to the deposits maintained by the customer or other business potentials. Q.Such practice being in deviation of the usual practice, was the permission of the RBI obtained as far as your bank is concerned? A.No. Q.You have stated that RBI issued detailed guidelines somewhere in September - October, 1992 expressly prohibiting such practice of negotiation, does that not mean that RBI never approved of such practice? A.Yes, (witness volunteers) RBI never objected to it and probably it might not be aware of such practice. All the five pay orders which were shown to me being Exs. 28, 30, 32, 34 and 36 were sent for inter Bank Clearance by the Grindlays Bank. It is correct that the amounts of the said pay orders were debited into the account of issuing bank and credited into the account of Grindlays Bank. The account of the issuing bank and payee bank are with the RBI. It is correct that it is only after credit of the proceeds of the said five pay orders into the Grindlays Bank account that the proceeds thereof in turn were credited into the account of accused No. 5." PW- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the deposits maintained by the customers or other business potentials. While convicting the accused, the trial court has not been able to segregate the fact that even assuming that what was done by Grindlays Bank was irregular that does not necessarily mean that it was done by the appellant. None of the witnesses of the bank have been able to clearly point out as to where the appellant was posted during the relevant period nor his initials are identified and nothing has been brought on record that he credited the said cheques in the account of A-5 or he was concerned with the credit of the said amount in favour of A-5. In the absence of any such evidence, the charge under section 120B and substantive offences under section 409 are not proved. It is apparent from the testimony of I.O. that no effort was made to collect any material which would have shown where the appellant was posted during the relevant period nor any record like the duty register was seized by the I.O. He admits that in matters of debit and credit, various officers at different levels were involved. The prosecution has failed to produce any evidence oral or documentary which would go to show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. It is contended on behalf of the prosecution that from the evidence of the witnesses following stands proved : ( a )That the documents were not prepared in the normal course of business but outside the office. (PW-6) ( b )That the UCO Bank s branch was not authorised to conclude deals (PW-7). If there had to be a genuine transaction of sale of securities between the UCO Bank and MUL then that deal would have to be concluded between the Head Office of the bank and MUL. ( c )The Bank (as a corporate entity, and a Govt. Company) could not lend its name to a private broker to enable him to obtain funds from any other Public Sector Undertaking, the identity of the private broker being kept secret. This would constitute a clear deceit upon a Public Sector Company - since it was done not for any commercial purpose but to deceive the Public Sector Undertaking into placing its funds with that Bank. The question of the deal being on behalf of the broker legitimately and commercially did not arise. ( d )It is submitted that the evidence of the officers of the UCO Bank that the Bank would act for the brokers, is being misconstrued. The banker can, on behalf of the broker, undoubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no such prohibition and it only provided that such BRs must be backed by units/securities. He referred to the letter dated 13-3-1991 written by A-3 to MUL [Ex. 60] and Ex. 23, which is an agenda note for the meeting of the Directors for investment of funds to be held on 13-3-1991 and the resolution of the same date passed by the Chairman and the Managing Director as well as Director (Finance) of MUL. He submitted that in the letter dated 13-3-1991 written by A-3 it is nowhere stated that MUL was purchasing units from UCO Bank. With regard to crediting of funds in A-5 s account, it is submitted on behalf of A-3 that the evidence on record discloses that it was not A-3 who allowed MUL funds to be wrongfully gained by A-5. MUL s funds were credited into the account of A-5 allegedly by A-4. The funds were already credited to A-5 s account by Grindlays Bank, New Delhi from where the same were transferred under the instructions of PW-23 to A-5 s account in Grindlays Bank, Bombay. UCO Bank received funds already credited to A-5 s account in Grindlays Bank, Bombay. Moreover, when UCO Bank received those funds from Grindlays Bank, Bombay, the same were received under credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecution, A-5 acted as broker of MUL in 13 other transactions. Similarly, he pointed out the resolution Ex. 24 along with the agenda and submitted that investment of Rs. 10.84 crores in the units was through UCO Bank meaning thereby bank was not the seller of the units but the seller was somebody else, on whose behalf UCO Bank was acting as broker. Further, the investment was only for five days and expected yield was 21% per annum which normally no bank would pay. He further referred to Ex. 40 which is a resolution as well as agenda of the meeting which was held on 24-4-1991 to point out that MUL was investing funds with Grindlays Bank as well as Bank of America for getting higher yield. He referred to evidence of PW-21 (Vol. 6 page 1038 paragraphs 4 and 5) and pointed out that bank was agent and broker on behalf of its clients and for that it was getting commission and that commission was credited in the bank s account by debiting the same in the account of its clients. For this purpose, he referred to Vol. 25 page 6895 and relevant vouchers. Lastly, he submitted that A-3 is not at all connected with the 5th transaction which took place without BRs because at the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged document. It was next submitted that the argument of CBI that the letters were typed outside the office of UCO Bank does not mean that these are forged documents. The evidence of PW-6 shows that in 1991 there was only one typewriter in Hamam Street Branch of UCO Bank which was being used since 1983 and there was heavy work in the office and that 30 to 40 transactions of such work were daily carried out. In the circumstances, from the fact that document was typed outside the bank, dishonesty cannot be attributed to the accused. It is submitted that once the conspiracy charge fails, the first three transactions are outside the jurisdiction of the Special Court. A-3 is not concerned with the fifth transaction. Hence, in any case the conviction recorded for charges pertaining to the first three and 5th transactions must be set aside on this ground alone. For appreciating the contentions, we would refer to the Circular dated 26-7-1991, issued by the Reserve Bank of India, which reads thus : "DEPUTY GOVERNOR D.O.DBOD No. FSC.46/CReserve Bank of India 469-91/92Central Office SecretBombay 26th July, 1991. Dear Sir, Investment portfolio of banks Transactions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to our above expectation, banks have been issuing BRs freely (without regard to whether they will be in a position to deliver the securities thereagainst within a reasonable time) and against an initial outstanding BR, a series of transaction are put through by further issue of BRs and in the final analysis only the BRs are exchanged and no security is delivered. Some of the banks have also been issuing BRs only behalf of their broker clients, without verifying whether their broker clients hold the securities covered by the relative BRs. 4. It will be absolutely essential for your bank to frame and implement a suitable investment policy to frame and implement a suitable investment policy to ensure that operations in securities are conducted in accordance with sound and acceptable business practices. While evolving the policy you are requested to keep in view the following guidelines : ( i )Under no circumstances, the bank should hold a oversold position in any security, that is to say that no sale transactions should be put through without actually holding the security in its investment account. ( ii )All the transactions put through by bank either on outright basis or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph (4). Prosecution has not produced on record policy evolved by the UCO Bank after this circular. ( c )The Circular also specifically reveals that certain banks were engaged in type of transactions in securities which they should not be undertaking and list of such transactions inter alia includes the sale transactions by issue of BRs without actually holding the securities and secondly issuing of BRs on behalf of their broker clients without safeguarding bank s interest. Thereafter, the RBI directed to frame and implement a suitable investment policy to ensure that operations in securities are conducted in accordance with sound and acceptable business practices. RBI also requested that while evolving the policy the guidelines mentioned in paragraph 4 of the Circular should be kept in mind and the bank should issue BRs covering their own sale transactions only and should not issue BRs on behalf of their constitutents including brokers. The banks should be circumspect while acting as agents of their broker clients for carrying out transactions in securities on behalf of brokers. ( d )These guidelines would indicate that till the date of issue of guidelines banks were issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the reply given by MUL, to JPC. For the 5th transaction, as the BRs were not received by MUL, transaction was over within five days, but there is no evidence that UCO Bank was not holding the units for the said transaction. From the evidence on record it cannot be held that A-3 had issued BRs without being backed by sufficient number of securities i.e. UTI Units. No witness from the bank has stated that A-3 was required to maintain the account for such transactions. On the contrary, it has come on record that practice of maintaining register was dispensed with because of increase of such work with the bank. Witnesses from MUL have specifically stated that looking at the BR it would be difficult to say that BRs were issued without securities. PW-3 Halasyam admitted that looking at the BR of UCO Bank (Ex.4 dated 24-4-1991), no suspicion would arise on the face of it. PW-7 Karkhanis has specifically stated that UCO Bank used to act as a routing bank and that such transactions were done through the broker s account and were not treated as transactions of UCO Bank. ( g )The evidence on record clearly establishes that for the 5th transaction A-3 cannot be held responsible, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counter party along with the cost memo and BRs. The BRs and cost memos used to be of UCO bank. The brokers instructions used to be on the letterhead of the broker. The purpose of sending brokers instructions along with various documents to the counter party was to put it on a proper notice. It is his further say that per day there used to be 30 to 40 switch transactions. During the internal audit and statutory audit of the relevant period there were no adverse comments over switch transaction. ( ii )PW-14 Prem Shanker Joshi has stated that as far as Hamam Street Branch of their bank was concerned, the said branch used to conduct the security transactions on behalf of their head office as well as on behalf of clients. Mr. Harshad S. Mehta was one of such clients. In case of sale transactions on behalf of their clients, they used to get written instructions from their clients, having necessarily their accounts with the bank. The instructions being for the sale of the security, they were ascertaining from their clients about the availability of the security with the bank or when he will deliver to the bank. On receipt of the security, they were preparing a cost memo as per inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were continued. In case of delay, bank would charge interest at the market rate. Bank was also having discretion to increase commission. Letter dated 8-1-1991 Ex.231 also informs the concerned officer at Hamam Street Branch as under: "...You are advised to contact other banks through whom such transactions are routed and have detailed discussions with them regarding their experience, the commission they charge, the modus operandi and their opinion why other banks are not entering the field. You are also advised to contact other banks who are not having such transactions and have discussion with them with a view to find out why inspite of profitability in this area they are not entertaining this and give your report at an early date." For routing facility, he explained that routing transaction is the transaction in which purchase and sale of the securities was done by the bank as an agent of its customer for a commission. The routing facility was offered to many brokers including A-5 in the year 1991 and such brokers availed of the said facility. Such routing facility was already in practice even before he joined as Divisional Manager in June, 1990. Some of the banks were off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Marg New Delhi - 110 001 Dear Sirs, This has reference to your purchase of 75 lakh Units for value dated today @ 14,4500. Please arrange to remit the funds amounting to Rs. 10,83,75,000 through ANZ Grindlays Bank, Sansad Marg, New Delhi. Thanking you, Yours faithfully, For UCO Bank Sd/- (Manager)" From letters Exhibits 60 and 61, it is apparent that A-3 has not stated that UCO Bank was selling units. It only mentions that for the purchase of units mentioned in those letters, the amount to be remitted through ANZ Grindlays Bank, New Delhi. Evidence on record establishes beyond any doubt that A-3 was authorized to deal on behalf of the broker clients and if the broker client had instructed that amount be sent through Grindlays Bank, writing of such letter would not mean that he has committed any fraud. For the allegations of forgery, it is to be stated that in the instant case, A-3 has been charged with forging the BRs Ex. 38 dated 13th March, 1991, Ex. 39 dated 18th March, 1991 and Ex. 41 dated 24th April, 1991, on the ground that UCO Bank did not hold the units for which the BRs were issued. All the transactions are based upon the documents, which stand pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hter Nalini, aged about six months. The price of the car was paid by her. The transfer of the car was notified in the name of Nalini to the motor registration authority. The insurance policy was transferred in the name of Nalini after the proposal form was signed by Dr. Vimla. Subsequently, when the car met with the accident, Dr. Vimla filed two claim forms as Nalini. She also signed the receipts acknowledging the compensation money as Nalini. Dr. Vimla and her husband were prosecuted under sections 120-B, 419, 467 and 468 of Indian Penal Code. The High Court convicted Dr. Vimla under sections 467 and 468 of IPC. In that set of circumstances, this Court held thus: "...Certainly, Dr. Vimla was guilty of deceit, for though her name was Vimla, she signed in all the relevant papers as Nalini and made the insurance company believe that her name was Nalini, but the said deceit did not either secure to her advantage or cause any non-economic loss or injury to the insurance company. The charge does not disclose any such advantage or injury, nor is there any evidence to prove the same. The fact that Dr. Vimla said that the owner of the car who sold it to her suggested that the taking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or wrongful loss to another person, is said to do that thing dishonestly . Fraudulently is defined in section 25 thus : A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise. The word defraud includes an element of deceit. Deceit is not an ingredient of the definition of the word dishonestly while it is an important ingredient of the definition of the word fraudulently . The former involves a pecuniary or economic gain or loss while the latter by construction excludes that element. Further, the juxtaposition of the two expressions dishonestly and fraudulently used in the various sections of the Code indicates their close affinity and therefore the definition of one may give colour to the other. To illustrate, in the definition of dishonestly , wrongful gain or wrongful loss is necessary ingredient. Both need not exist, one would be enough. So too, if the expression fraudulently were to be held to involve the element of injury to the person or persons deceived, it would be reasonable to assume that the injury should be something other than pecuniary or economic loss. Though almost always an advantage to one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were belonging to A-5 which MUL had given as security for the loan amount received by it and, therefore, A-5 was entitled to get it back; before issuance of the guidelines by the RBI, RBI had itself noted that many banks were issuing BRs on behalf of their brokers; there was no prohibition to the banks with regard to the issuance of the BRs, on behalf of their clients. Only thing which was required to be verified was whether there was sufficient security. The witnesses on behalf of bank have admitted that UCO Bank and other banks were giving routing facility of their clients and that routing transaction was a transaction in which purchase and sale of securities was done by the bank as an agent of its customer for a commission; resolutions by the MUL also reveal that the investment for the first four transactions was through UCO Bank and for the 5th transaction, the investment was "with UCO Bank". It was UCO Bank s investment policy to have such transactions. Hence, it cannot be stated that A-5 was having any dishonest intention; there is no allegation that A-3 gained by such transactions and there is no loss to the bank or to the MUL. No inference of dishonesty or intention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an offence in accordance with law. Take for illustration collecting donation of unaccounted money, even if it is practice or usage, it would be an offence. This is sought to be brought out on record in the cross-examination of I.O. Bhatnagar that PW-23 Khandelwal has given a statement before him that A-5 gave a VIP suitcase containing cash to Sitaram Kesari. Further, we are required to decide the case on the touchstone of ingredients of the offence punishable under IPC and there cannot be any doubt that those who are found guilty should be punished but the conviction must be on the basis of established criminal jurisprudence and not on moral or equitable ground or impression created or gathered by the prosecuting agency. It is also true that in the present case, dealing in public funds was to a large extent but that would not itself be a sufficient ground for drawing any inference in favour of the prosecution particularly when there is no evidence on record that MUL or UCO Bank suffered any loss or any of accused Nos. 1 to 4 gained anything. On the contrary, there is evidence on record that UCO Bank got commission from the said transactions. This Court in State (Delhi A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom monies became available for use. From the evidence on record, it is proved that 1.Undisputedly there is no statutory prohibition that MUL or UCO Bank cannot grant loan to the individual. 2.In the present case, admittedly, there is no loss to the MUL or to the UCO Bank. 3.It is not the prosecution version that accused No. 1, 2, 3 or 4 got any advantage or gain because of the five transactions. In any case, there is no evidence. 4.In first transaction, MUL took loan by handing over 35 lakhs units of UTI. In other transactions, MUL gave the amount on the basis of bank receipts. Bank receipts were backed by the units. RBI directions which are issued in July 1991, nowhere prescribe that a transaction by the Bank on behalf of the broker clients if it is backed by the adequate securities is irregular or prohibited. 5.On behalf of MUL it has been stated before the JPC that the transactions were regular and there was no irregularity. No Officer of the MUL has stated before the Court that transactions were irregular. Witnesses examined on behalf of MUL are PW-1 Bhargava who was a Legal Advisor, MUL and Company Secretary, PW-3 Agharam Halasyam who was the General Manager (Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale transactions and it establishes fraud. This submission cannot be accepted because of the resolutions of the MUL fixing days for repayment and the rate of interest meaning thereby if the amount is not returned on a particular date, the units would stand forfeited and for that limited purpose it is a sale transaction and if the amount is repaid withinterest, units would be returned. Further, in case of sale or purchase of units, there would not be any question of payment of interest. Question of payment of interest would arise in cases of loan transaction. 12.As discussed above, resolutions passed by the MUL make clear distinction of investing the amount "with the bank" or "through the bank". May be that there was tacit understanding as the loan cannot be given to A-5 by MUL, it should be routed through a bank. For this transaction, UTI units were handed over to the bank, therefore, there is no question of any fraud or mis-appropriation. In any case, for this purpose, A-5 is not liable. The resolutions were passed by the MUL that the amount be given to UCO Bank for purchase/sale of units. Whenever the transactions were directed with the bank, the resolutions mentioned "wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, essential ingredients required to be proved under section 405 are 1.Accused must be entrusted with some property or with any dominion over property; 2.He dishonestly misappropriates or dishonestly converts to his own use that property; or 3.Dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged or of any legal contract; or 4.Wilfully suffers any other person to do so. In this case, an essential ingredient which is required to be established would be dishonest misappropriation or use . For this, it is contended that A-5 took loan from MUL through UCO Bank. If it is established that he took loan from MUL through UCO Bank, then there is no question of misappropriation because property belonged to him as he was the owner of the said amount. For this purpose, let us consider the prosecution case in the light of the following illustrations (A)Presume that A-5 received the amount by investment/loan from UCO Bank by depositing UTI Units; or (B)Presume that A-5 took loan from MUL directly by pledging UTIunits. In both the aforesaid cases, it cannot be held that the said transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At this stage, we would refer to the decision in Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore AIR 1953 SC 478. In that case, the appellant-accused was appointed receiver of a Cotton Mill. He demanded and received payment over and above the market price in respect of cotton bales allotted to a shopkeeper. He was charged for criminal breach of trust and misappropriating the extra money received by him without bringing it into the Mill s account. The Court dealt with the question whether the extra money was given by the shopkeeper to the accused for and on behalf of the Mill or was given to him personally as a motive or reward for showing some favour. In that context. Court considered the definition of criminal breach of trust and held (in para 21) as under: "It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit . In the case before us, it is not disputed that if the sum of Rs. 23,100 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-5. He further makes it clear that considering the course of dealing it is apparent that there is consensus agreement that monies from MUL were received for customer namely A-5, from the customers lender for handing over the same to the customer. Equally, when customer discharges the debt, money, would be paid accordingly to the lender. He, therefore, submits that this was a tacit agreement between the parties. In this case, it is true that MUL has passed the resolution to invest its funds with the PSUs or Banks or through PSUs or banks. The word through would certainly mean that it is not with the banks. In any case, because of the resolutions passed by the MUL, it cannot be held that there was any prohibition for the MUL to invest its funds through the banks by giving loan to an individual. If bank intervenes as the broker taking its responsibility on behalf of its client then it cannot be said that the transactions are illegal or fraudulent. For this purpose, in earlier paragraphs, resolutions passed by the MUL are referred. Resolution dated 4-5-1989 (Ex. 9) specifically provides that to fetch higher rate of interest than what is available on loaning of funds to PSUs, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore it was entitled to get it back from MUL. As soon as the amount was re-paid by MUL, original owners of the UTI units was entitled to get it back and that was done by A-5. Further, document Ex. 58 (Vol. 26 page 7056) and Ex. A-5 (1) (Vol. 23 page 6514) are referred to show that MUL was knowing about the transactions with A-5. Ex. 58 is the letter dated 22nd January, 1991 written by UCO Bank to MUL requesting to handover the delivery of units to Mr. Khandelwal; and Ex. A.5 (1) is the receipt dated 24-1-1991 issued by Mr. Khandelwal (an employee of A-5) on the letter paid of A-5. Both these documents would also indicate that MUL was fully aware about the transaction with A-5. Finally, an important contention raised by the learned counsel for the appellants that for the transaction Nos.1 to 3 i.e., transactions dated 24-1-1991, 13-3-1991 and 18-3-1991, the Special Court would have no jurisdiction as the prosecution has failed to prove the conspiracy. Admittedly, the said transactions had taken place prior to cut-off date prescribed under section 3(2) of the SCAM Act, which is 1st April, 1991. In my view, the said submission requires to be accepted. However, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember, 1992. In the investment of these funds guidelines and instructions were routinely flouted and no norms were observed. Neither DPE nor the Ministries concerned took any steps to ensure the compliance of their guidelines. Even the Ministry of Petroleum and Natural Gas which had made a review of investment of surplus funds by the PSUs under its administrative control in May 1990 closed its eyes knowing fully well that PSUs were investing with the foreign banks despite the guidelines of DPE that PSUs could have normal banking transactions only with nationalised banks. The PSUs have placed funds with banks and finance companies for very short periods, sometimes for only a few days and even for one day implying supply of funds for speculative purposes to earn higher return. These banks/finance companies issued BRs for the amount received. The PSUs after the maturity of investments returned the BRs and got their monies along with the yield which was agreed to at the time of placement of funds. Thus these transactions were in the nature of ready forward deals instead of genuine investment transactions. ( b )The prosecution version of conspiracy as stated in the FIR and the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh broker. ( g )In any case, A-1 and A-2 who are sought to be prosecuted are not responsible for the said policy. The policy is framed by the Board and as per the said policy, Sub-Committee headed by the Chairman and the Managing Director of MUL and Financial Director has passed appropriate resolutions. It appears that they were in know of entire investments, but for the reasons best known to the prosecution,they are not prosecuted or examined as witnesses even though they were interrogated by the Investigating Officer. ( h )A-1 and A-2 were promoted for their efficiency and good work. The same stand was taken by the MUL before the JPC despite knowing that there was so-called investigation by the CBI. ( i )MUL has not suffered any loss. On the contrary, it has received substantial interest for short term investment for a few days. ( j )UCO Bank has also earned commission which is reflected in its account. ( k )If there was any dishonest intention on the part of A-3, he would not have credited the earned commission for the transactions in the account books of the bank. ( l )No loss to the UCO Bank. ( m )Neither the MUL nor UCO Bank has lodged any FIR for so-called mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of interest. The Bank has issued BRs and there is no evidence that BRs were not backed by the units. On the contrary, defence has led evidence to suggest that units were given as security. ( u )For A-3 also, Investigating Officer has not bothered to verify properly because admittedly A-3 was transferred from Hamam Street Branch at Bombay to Hingha Branch, Near Nagpur at the relevant time when 5th transaction was carried out between 2-5-1991 to 7-5-1991. ( v )As mentioned above, section 415 has two parts. While in the first part, the person must "dishonestly" or "fraudulently" induce the complainant to deliver any property; in the second part, the person should intentionally induce the complainant to do or omit to do a thing. That is to say, in the first part, inducement must be dishonest or fraudulent. In the second part, the inducement should be intentional. In the present case, it is very important to determine who is the controlling agent behind the act of the Company (MUL). If the Board of the MUL or the Management of the Bank were fully aware of such transactions, subordinates who carry out the transactions could not be held guilty as for the offences for which the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Government first promulgated an Ordinance which was replaced by the Special Court Act on 8th August, 1992. When the matter was brought to the notice of both Houses of Parliament, a Joint Parliamentary Committee (in short the JPC ) was appointed to enquire into the irregularities. Prosecution version was that there were five transactions conducted between January 1991 to May 1991 involving Rs. 43,96,65,000 purportedly as ready forward deals. The securities involved were units of Unit Trust of India (in short UTI ). Two stages were involved in the transactions: the first sale and purchase and the second reversal thereof. The bankers involved were United Commercial Bank, Hamam Street Branch, Bombay, Canara Bank, Sansad Marg, New Delhi, Bank of America, Bombay Branch and New Delhi Branch, ANZ Grindlays Bank, Sansad Marg, New Delhi and ANZ Grindlays Bank, Bombay Branch. The Government company involved was Maruti Udyog Ltd. (in short MUL ). The reports of the Janakiraman s Committee and the JPC were placed before the Trial Court and were exhibited as 237(1) and 237(2). The basic allegation was that as a result of criminal conspiracy surplus funds of MUL had been deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acility by the UCO Bank. They were illegally permissible and there was no prohibition for the same. There was adequate balance of securities money with UCO Bank at the relevant dates and UCO Bank issued its BRs relating to the impugned transactions favouring MUL. Finally, it was submitted that all the transaction were reversed and financial obligations were discharged and met, and no amount was due or outstanding under the transactions in question. Whatever had been done by and/or from the Bombay office with regard to the impugned transactions was done under the instructions of PW-23. Khandelwal. The transactions in the securities between him and MUL were conducted on principal to principal basis and the same were put through UCO Bank under routing facility extended to him by it and MUL in particular was very much aware of the said fact, namely that the transactions in question were directly between MUL and him and that the same were on principal to principal basis. It was also pointed out that before the JPC there was no objection raised by the MUL as nothing was considered irregular. The Trial court had found that though representations were made that the units were there as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lays Bank, Delhi by handing over the same to A-4, Popli the concerned officer of the Grindlays Bank. Letter was issued by the Delhi Office of A-5 instructing Grindlays Bank for remittance of the amount by it to its Bombay Branch which was done on the same day. Then the amount was paid by pay order to UCO Bank, Hamam Street Branch, Bombay and the amount was credited to the account of A-5. Bare perusal of the method adopted shows that the same was disinvestment borrowing transaction between MUL and UCO Bank though it was reflected to be a transaction as if MUL had borrowed money from UCO Bank against the security as a ready forward deal. The consideration was actually provided by Harshad through the Bank of America. In fact, the interest that was paid by MUL did not go to UCO Bank but went ultimately into the account of A-5, Harshad. Exbt. 58 is the letter dated 23-1-1991 addressed by UCO Bank, Hamam Street Branch, Bombay to MUL and it was signed at two places by A-3, Deosthali. There was no dispute that A-3 had signed and addressed the letter. Exbt. 54 is the letter dated 24-1-1991 addressed by the Bombay office of A-5 to the Manager of Bank of America, Bombay by which instructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough Bank of America under the instructions of UCO Bank, Bombay. Similarly, at the stage of reversal, the amount paid by MUL directly came to be credited in the account of A-5 first in the Grindlays Bank, Delhi, then Grindlays Bank, Bombay and finally in the UCO Bank, Bombay. In all these three stages, the amount went directly to the account of A-5. There was no involvement of any UCO Bank in financial aspects of the transactions. If the Bank as claimed by A-5, at all acted for him as routing bank in the transaction. On the contrary, there is no involvement of UCO Bank either on 24-1-1991 and 25-2-1991 either in passing or receiving funds in it own account. At the first instance, money was paid by A-5 through Bank of America to MUL. There is nothing to show that such payment was made under the instructions of UCO Bank. Hamam Street Branch, Bombay. Transaction No. 2 - Coming to the second transaction, it involved 70 lakhs units of UTI. Here MUL was the purchaser and UCO Bank, Hamam Street Branch, Bombay was the seller. The date of the transaction is 13-3-1991. Here again, the modus operandi for this transaction is almost identical to those involved in transactions 3, 4 and 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security, namely, 70 lakhs units when ready in exchange for the said BR. There is also endorsement made in the said BR reading as "discharged" with a rubber stamp of MUL which is proved to be made by accused No. 1 Pramod as prove by PW-3 Mr. Agharam Ramkrishnan Halasyam, the officer of MUL. This endorsement shows UCO bank having discharged its obligations to MUL under the said BR. Credit advise dated 13-3-1991 (Exbt. 150) issued by UCO Bank is in the handwriting of A-3. Although, in the narration of credit voucher it was mentioned that 70 lakhs of units related to MUL. There is no written record in that regard. Exbt. 128 which is the advise of Grindlays Bank, does not justify the narration as appearing in the credit voucher. The material on record clearly justifies a conclusion that the amount involved came from the account of A-5 and was paid to MUL. There was no involvement whatsoever of UCO Bank though the stand of MUL is that the transaction was between it and UCO Bank. As is the case with the first transaction. A-5 s stand is that the transaction between him and MUL was on principal-to-principal basis which routed through UCO Bank. But, as noted above in the reversal stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with money which went into the account of A-5 in the same manner as in the case of transactions 2 to 4. Here again, A-1 placed a Agenda Note (Exbt. 42(3)) which reads as follows : "We have received a request from UCO Bank for placement of Rs. 10.00 crores in units. The placement will be for a period of 5 days with effect from 2-5-1991. The expected yield will be 21% per annum". The Sub-Committee s approval was in the following terms : "Resolved that Maruti may place funds with UCO Bank for investment of units aggregating to Rs. 10 crores for a period of 5 days w.e.f. 2-5-1991 at an exected yield of 21% per annum". Another important aspect is that the monies/funds were in fact credited eventually in the account of A-5 Harshad with UCO Bank, Hamam Street Branch, Bombay. The debit and credit vouchers of the bank amply prove this. Role of Accused No. 1 in the transactions are as follows : 1.Carbon copy of bank voucher on the letterhead of MUL approved and singed by A-1 (Exbt. 44). 2.Reverse entry on 25-2-1991, carbon copy of bank voucher of MUL approved and signed by A-1 (Exbt. 45). 3.Transaction No. 2 bank receipt dated 13-3-1991 of UCO Bank, Hamam Street Branch. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in its transaction the pay orders were to be issued to Grindlays Bank, the same could not have been without any direction from UCO Bank. The contention of A-1 is also not acceptable because in respect of fourth and fifth transactions, pay orders continued to be issued to Grindlays Bank even though admittedly there was no instruction from UCO Bank. In the fifth transaction, he released funds of MUL even in the absence of an authority letter or a security in form of Bank Receipt from UCO Bank. Payments made at the stage of reversal by MUL were directly made to A-5. There was no authorization to purchase any securities from any brokers. There was no mention about the intention that monies will be given on loan to any broker. Each transaction as reflected was considered to be a placement of funds with PSUs and there was no scope of any placement of surplus funds with private person. It is unbelievable that A-1 did not know about the involvement of A-5 when the receipt in respect of 35 lakhs of units was kept in the records of MUL. Next comes the case of A-3. In almost all the transactions the role of A-3 is very significant. Investment of the first transaction (Exbt. 58) indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A-3 s signatures indicating various designations were fraudulent because it represented something which in reality was not there. A-3 has signed in various documents, describing his designation differently. In letter dated 23-1-1991 he has signed as Manager. He has attested signature of Khandelwal (PW 23) "for UCO Bank", Similar is the position in letters dated 22-2-1991 (Ext. 59), 13-3-1991 (Ext. 60), 18-3-1991 (Ext. 61) where he has signed as "Manager" for UCO Bank. In Exbt. 38 dated 13-3-1991, he signed as "Accountant". He issued the three letters in question to MUL and four BRs describing himself as "Manager" on the letters and "Accountant" on the BRs; though in reality he was the Assistant Manager. These are clearly conducts of deceit and dishonest intention. On the basis of the letters and BRs. MUL parted with its funds which went to the account of A-5. The letters and BRs. were handed over to A-5. The BRs. which are in the format (either cyclostyled or Xeroxed re-produced para 179 of the Trial Court s judgment) show that there is a requirement for signatures at two authorised signatories i.e. Manager and Accountant. In the case of concerned BRs., A-3 has signed Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money and he had derived benefit of it. Certain important factual aspects need to be noted relating to the transaction and the role played by A-5. Pay Orders of Canara Bank were collected by Anuj Kalia (PW-16). These were deposited as though he was the payee. It is clear from the descriptions in the pay-in slips, letters written by his agent/employees to Grindlays Bank giving clear instructions to remit the proceedings of Pay Orders to his account. Receipts given by A-5 in respect of the first transaction of 35 lakhs of units were in the records of MUL. It is clear from the resolutions and the minutes of discussion that MUL had not approved the role or involvement of A-5 and it was not known to the Board that the transactions were in reality with A-5. The subterfuge adopted was to conceal actual state of affairs and to present a totally distorted picture. The stand of A-5 that MUL s counter party was UCO Bank who was acting for undisclosed principal is hard to believe. The evidence of PW-23 is to the effect so far as the first transaction is concerned including question of brokerage, he did not inform MUL that the funds were received from the account of A-5. PW-23 did not ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n essence, UCO Bank has not received any money from MUL. There was no direction given by Grindlays Bank. Parliament Street. All the vouchers that have been produced show that same are put through Grindlays Bank. The vouchers of MUL clearly show as if the transaction was between MUL and UCO Bank. Much stress has been laid by the appellants on the role of Khandelwal (PW 23). The evidence on record clearly shows that Khandelwal was not only known to MUL but represented accused No. 5, Harshad and in particular to accused No. 1. Pramod. Exbt. 58 is the letter of the UCO Bank, Hamam Street Branch, Bombay dated 23-1-1991 addressed to the MUL, Herein, MUL had been instructed to deliver 35 lakhs of units to Khandelwal whose specimen signature was attested by accused No. 3 Deosthali. Delivery of the said securities was effected to Khandelwal (PW-23) by MUL and the receipt was passed by PW-23. Interestingly, the acknowledgement is on the printed stationery i.e. letter head of A-5, Harshad. In respect of each of the transactions 2 to 5 the pay orders issued by MUL through its bankers, Canara Bank towards the consideration of the security was handed over to PW-16 under instructions of A-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. 420. Cheating and dishonestly inducing delivery of property. Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. 467. Forgery of valuable security, Will etc. Whoever forges a document which purports to be a valuable security or a will, or an authority to adopt a son, or which purports to give authority to any person to make or transfer any valuable security, or to receive the principal, interest or dividends thereon, or to receive or deliver any money, movable property, or valuable security, or any document pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the object of the combination need not be accomplished, in order to constitute an indictable offence. Law making conspiracy a crime, is designed to curb immoderate power to do mischief which is gained by a combination of the means. The encouragement and support which co-conspirators give to one another rendering enterprises possible which, if left to individual effort, would have been impossible, furnish the ground for visiting conspirators and abettors with condign punishment. The conspiracy is held to be continued and renewed as to all its members wherever and whenever any member of the conspiracy acts in furtherance of the common design. ( See ; American Jurisprudence Vol. II See 23. p. 559). For an offence punishable under section 120-B, prosecution need not necessarily prove that the perpetrators expressly agree to do or cause to be done illegal act; the agreement may be proved by necessary implication. Offence of criminal conspiracy has its foundation in an agreement to commit an offence. A conspiracy consists not merely in the intention of two or more, but in the agreement of two or more to do an unlawful act by unlawful means. So long as such a design rests in intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any other offence, it can be established by direct or circumstantial evidence. ( See Bhagwan Swarup Lal Bishan Lal v. State of Maharashtra AIR 1965 SC 682 at p. 686. It was held that the expression "in reference to their common intention" in section 10 is very comprehensive and it appears to have been designedly used to give it a wider scope than the words "in furtherance of" in the English Law; with the result, anything said, done or written by a co-conspirator, after the conspiracy was formed, will be evidence against the other before he entered the field of conspiracy or after he left it. Anything said, done or written is a relevant fact only. ". . . as against each of the persons believed to be so conspiring as well as for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it ... In short, the section can be analysed as follows : ( 1 ) There shall be a prima facie evidence affording a reasonable ground for a court to believe that two or more persons are members of a conspiracy; ( 2 ) if the said condition is fuflilled, anything said, done or written by any one of them in reference to their commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by either direct or circumstantial evidence. It is not always possible to give affirmative evidence about the date of the formation of the criminal conspiracy, about the persons who took part in the formation of the conspiracy, about the object, which the objectors set before themselves as the object of conspiracy, and about the manner in which the object of conspiracy is to be carried out, all this is necessarily a matter of inference. The provisions of sections 120A and 120B, IPC have brought the law of conspiracy in India in line with the English Law by making the overt act unessential when the conspiracy is to commit any punishable offence. The English Law on this matter is well settled. Russell on Crime (12 Ed. Vol. I. p. 202) may be usefully noted "The gist of the offence of conspiracy then lies, not in doing the act, or effecting the purpose for which the conspiracy is formed, nor in attempting to do them, nor in inciting others to do them, but in the forming of the scheme or agreement between the parties, agreement is essential. Mere knowledge, or even discussion, of the plan is not, per se enough." Glanville Williams in the "Criminal Law" (Second Ed. p. 382) st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions, in such a situation, do not require that each and every person who is a party to the conspiracy must do some overt act towards the fulfilments of the object of conspiracy, the essential ingredient being an agreement between the conspirators to commit the crime and if these requirements and ingredients are established, the act would fall within the trapping of the provisions contained in section 120B [ See : Suresh Chandra Bahri v. State of Bihar AIR 1994 SC 2420. The conspiracies are not hatched in open, by their nature, they are secretly planned, they can be proved even by circumstantial evidence, the lack of direct evidence relating to conspiracy has no consequence, [ See : E.K. Chandrasenan v. State of Kerala AIR 1995 SC 1066. In Kehar Singh v. State (Delhi Administration) AIR 1988 SC 1883 this Court observed : "272. Generally, a conspiracy is hatched in secrecy and it may be difficult to adduce direct evidence of the same. The prosecution will often rely on evidence of acts of various parties to infer that they were done in reference to their common intention. The prosecution will also more often rely upon circumstantial evidence. The conspiracy can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce as to the transmission of thoughts sharing the unlawful act is not sufficient. A conspiracy is a continuing offence which continues to subsist till it is executed or rescinded or frustrated by choice of necessity. During its subsistence whenever any one of the conspirators does an act or series of acts, he would be held guilty under section 120B of the Indian Penal Code. I may usefully refer to Ajay Agarwal v. Union of India JT 1993 (3) SC 203. It was held : "3. . . . It is not necessary that each conspirator must know all the details of the scheme nor be a participant at every stage. It is necessary that they should agree for design or object of the conspiracy. Conspiracy is conceived as having three elements; (1) agreement; (2) between two or more persons by whom the agreement is effected; and (3) a criminal object, which may be either the ultimate aim of the agreement, or may constitute the means, or one of the means by which that aim is to be accomplished. It is immaterial whether this is found in the ultimate objects. The common law definition of criminal conspiracy was stated first by Lord Denman in Jones case that an indictment for conspiracy must charge a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting by some of the conspirators.... (p. 543) In Mohammad Usman Mohammad Hussain Maniyar v. State of Maharashtra [1981] 2 SCC 443, it was held that for an offence under section 120B IPC, the prosecution need not necessarily prove that the perpetrators expressly agreed to do or cause to be done the illegal act, the agreement may be proved by necessary implication." After referring to some judgments of the United States Supreme Court and of this Court in Yash Pal Mittal s case ( supra ) and Ajay Aggarwal s case ( supra ) the court in Som Nath Thapa s case ( supra ) summarized the position of law and the requirements to establish the charge of conspiracy, as under : "24. The aforesaid decisions, weighty as they are, lead us to conclude that to establish a charge of conspiracy knowledge about indulgence in either an illegal act or a legal act by illegal means is necessary. In some cases, intent of unlawful use being made of the goods or services in question may be inferred from the knowledge itself. This apart, the prosecution has not to establish that a particular unlawful use was intended, so long as the goods or service in question could not be put to any lawful us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the future transactions the money can be dishonestly misappropriated. This is a part of the scheme and the factum of repayment cannot be considered in isolation. The repayment as has been rightly contended by the Solicitor General can be a factor to be considered while awarding sentence, but cannot be a ground for proving innocence of the accused. Section 409 deals with criminal breach of trust by public servant or by banker, merchant or agent. Section 405 defines criminal breach of trust. The offence like the offence of criminal misappropriation is characterized by an actual fraudulent appropriation of property. There is not originally wrongful taking or moving as in the case of theft but the offence consists in wrongful appropriation of property, consequent upon a possession which is lawful. The offence is distinguishable from criminal misappropriation because subject of it is not the property which by some casual act or otherwise, but without criminal means, comes into the offender s possession; but the property which is entrusted to the offender by the owner or by others lawful authority and which the offender holds subject to some duty or obligation to apply it accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted if proved may in the light of other circumstances, justifiably lead to an inference of dishonest misappropriation or conversion. Section 420 deals with cheating and dishonestly inducing delivery of property. The offence of cheating is made of two ingredients. Deception of any person and fraudulently or dishonestly inducing that person to deliver any property to any person or to consent that any person shall retain any property. To put it differently, the ingredients of the offence are that the person deceived delivers to some one a valuable security or property, that the person so deceived was induced to do so, that such person acted on such inducement in consequence of his having been deceived by the accused and that the accused acted fraudulently or dishonestly when so inducing the person. To constitute the offence of cheating, it is not necessary that the deception should be by express words, but it may be by conduct or implied in the nature of the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry forgery postulates a false document either in whole or in part, however, small. The intent to commit forgery involves an intent to cause injury. A person makes a false document who dishonestly or fraudulently signs with an intent or cause to believe that the document was signed by a person whom he knows it was not signed. A false description makes a document of forgery when it is found that the accused by giving such false description intended to make out or wanted it to believe that it was not he that was executing the document but another person. The accused persons have tried to take shelter behind what they have described as "market practices". Such practices even if existing, cannot take the place of statutory and regulatory functions. There is no public interest involved in such practices and they cannot be a substitute for compliance with the regularity or statutory prescriptions. An attempt was made to show that there was subsequent disapproval of the market practices: at the point of time when the transactions took place there was no embargo. It is their stand that the practices were a part of accepted norms. We do not find anything plausible in these explanations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye, unmindful of the damage done to the National Economy and National Interest, as was aptly stated in State of Gujarat v. Mohanlal Jitamalji Porwal AIR 1987 SC 1321. Unfortunately in the last few years, the country has seen an alarming rise in white-collar crimes which has affected the fibre of the country s economic structure. These cases are nothing but private gain at the cost of public, and lead to economic disaster. The convictions of accused 1, 3 and 5 are in order and are maintained. A question about the sentence was raised. Normally, in cases involving offences which corrode the economic stability are to be dealt with sternly. It is, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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