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TMI Blog2009 (8) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... e us challenging their conviction. We find no reason to interfere with the judgment of conviction arrived at by the learned Special Judge with respect to the said accused. We however disagree with the conclusions arrived at by the learned Special Judge with regard to the guilt of accused No. 8 for the offence of Criminal Conspiracy. The mere fact that he might have been present at the meeting dated 14-3-1992 of the officers of UCO Bank by itself does not in our opinion conclusively prove his involvement in the conspiracy hatched by the other officers of the Bank. Something more was needed to be shown that he was a party thereto. In conclusion we hold accused No. 1 (K. Margabanthu), accused No. 2 (Ramaiya Venkatakrishnan), accused No. 4 (Ashwin Mehta) and accused No. 5 (Sudhir Mehta) guilty of the offence of Criminal Conspiracy. We need not interfere with the conviction of accused Nos. 6, 7 and 9, accused No 8 (S.V. Ramanathan) is acquitted of the charge of Criminal Conspiracy. - CRIMINAL APPEAL NOS. 905, 922, 925, 945 AND 965 OF 2005 - - - Dated:- 7-8-2009 - S.B. SINHA AND CYRIAC JOSEPH, JJ. JUDGMENT S.B. Sinha, J. - Introduction These appeals arise out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g related to and otherwise connected with the activities of the original accused No. 3. Accused Nos. 6, 7 and 9 on whom only a punishment of fine was imposed accepted the judgment and have not preferred any appeal before this Court. Background facts 4. The prosecution case centers around transactions, of discounting and rediscounting of Bills of Exchange and two Pay Orders issued by the State Bank of Patiala and Syndicate Bank, in favour of the UCO Bank. This was said to be at the instance of the private accused. 5. Harshad Mehta was a dealer in the money and securities market. The Reserve Bank of India had found that Harshad Mehta along with his other associates had diverted a huge amount of public fund belonging to Public Sector Banks and Financial Institutions for short-term investment in the securities market, and thus defrauded the banks of a huge amount. 6. An Inquiry Committee was thereafter constituted under the Chairmanship of Shri Janakiraman. The Committee submitted its report; pursuant to and in furtherance whereof the said Act was enacted providing inter alia for the constitution of a Special Court for trial of the criminal offences, as also civil dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by M/s. Mazda Industries Leasing Ltd. (for short, "Mazda") (Accused No. 7), which is a public limited company for the purpose of opening up of a current account in UCO Bank, so that it too could avail the Bill discounting facilities from the Bank. 11. Two or three days thereafter, Sunil Samtani, the Vice President of Mazda and Pankaj Shah, the Vice President of Growmore (Accused No. 9) met Shri Prabhu (PW 44) with Ramanathan (Accused No. 8). They procured two forms for opening current accounts with the Bank. They were introduced by Accused No. 8, who were also invited for attending the Annual General Meeting of Mazda as also a cocktail party which was to be held on 18-3-1992 at Hotel Oberoi. 12. The party was attended by Ramanathan (Accused No. 8), Prabhu (PW 44), Roy Choudhary (PW 45), Pankaj Brijlal Shah (Accused No. 9) and Harshad Mehta. 13. On 24-3-1992, at about 2.30 P.M., Sunil Samtani (Accused No. 7) and Pankaj Shah (Accused No. 9) came to the Nariman Point Branch of the UCO Bank. They had brought with them two banker s cheques; one cheque was from Syndicate Bank dated 24-3-1992 for a sum of Rs. 24,63,01,370 drawn in favour of UCO Bank (Exh. 24); and the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by Sudhir Mehta (Accused No. 5). Two Bills of Exchange were drawn by M/s. J.H. Mehta. The same were signed by Sudhir Mehta (Accused No. 5) as the Constituted Attorney of Mrs. Jyoti Mehta, the proprietor of M/s. J.H. Mehta. On behalf of Mazda, the bill was accepted by Ashwin Mehta (Accused No. 4). The amount of Bills of Exchange were credited to the account of M/s. J.H. Mehta and thereafter they were transferred to the account of Mazda and Growmore. The Bills of Exchange in relation to Growmore was accepted by Ashwin Mehta (Accused No. 4). 20. On 25-3-1992, the account of J.H. Mehta in Grindlays Bank credited the said amount and the amount was promptly transferred to Harshad Mehta s Account. On 26-3-1992, Prabhu (PW 44) asked Ranjit Mukherjee (PW 1) to prepare a note for the Chairman so as to enable him to seek approval from the Board for the transaction pursuant whereto the said note was prepared and it was shown to accused No. 1. On the same date, PW 1 was asked by Prabhu (PW 44) to collect the Balance Sheets from Mazda and Growmore. Whether the Balance Sheets and Annual Reports of the said two Companies were ultimately collected or not is unknown. A proposal for ratifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, which according to him, had to be gone through at the Nariman Point Branch as had been directed by accused No. 1. Charges 25. Several charges were framed against the accused persons by the learned Judge, Special Court on or about 9-10-1995. A Special Leave Petition was preferred thereagainst. Although the order of the Special Court dated 9-10-1995 was not interfered with, this Court recorded a statement made by the Additional Solicitor General of India that charge Nos. 10 to 13 and 16 would not be pressed. We may also place on record that the prosecution at a later stage did not press charge Nos. 2, 4 and 6. The charges which were, thus, framed and pressed against the accused persons, were charge Nos. 1, 3, 5, 7, 8, 9, 14 and 15 as also charge Nos. 12 and 13 (Exhibit - 228). As charge Nos. 14 and 15 related to the deceased accused No. 3-Harshad Mehta, the same stood abated. The charges which survived were charge Nos. 1, 3, 5, 7, 8, 12 and 13. 26. In the words of the learned Special Court, the said charges read as under : "2. By charge No. 1, it is alleged that the accused Nos. 1, 2 and 8 being public servants and being entrusted with public funds entered into a cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furthermore alleged that the said Bills of Exchange were not issued by way of any bona fide commercial transaction and were prepared only to secure financial accommodation for the deceased Harshad Mehta and his group. 31. The prosecution further alleged that as the deceased Harshad Mehta was not in a position to pay the amount due to the Bank on 24-4-1992; only with a view to facilitate the payment of amount to the Bank against the two Bills of Exchange, accused Nos. 1 and 2 decided to purchase shares of Gujarat Ambuja Cement and the amount of purchase price of the shares was paid to M/s. J.H. Mehta. Growmore and Mazda thereafter issued cheques in favour of the Bank in discharge of the liability in relation to the said two Bills of Exchange. The authority on the part of the accused Nos. 1, 2 and 8 to enter into the said transactions without obtaining sanction from the Board of Directors was also questioned. 32. The defence of the accused persons had been a mere denial of the allegations. 33. Before proceeding further, we may notice that Bhaskar Roy Choudhary (PW 45) and S.V. Prabhu (PW 44) were initially made accused in the case. They were arrested and later on relea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domain having not been published cannot have any force of law as is ordinarily understood. ( iii )The said Circular in any event being not binding on the private accused, they could not be said to have been a party to the offence of conspiracy. ( iv )The Circular Letter being confined to rediscounting and a separate procedure having been laid down for discounting of Bills of Exchange permitting the house loan/accommodation loan for some- time as provided for in Exhibit 299; the impugned judgment cannot be sustained. No money, thus, having been transferred in violation of any law, the question of commission of any offence under section 409 did not arise. ( v )The transactions having been entered into bona fide by the officials of the Bank and with the accused in order to earn profit for the bank and in that view of the matter, the prosecution cannot be said to have proved any dishonest intention on their part as envisaged under section 24 of the Indian Penal Code. ( vi )The prosecution has not been able to prove that any wrongful loss or wrongful gain was caused to any person. In view of the admitted case that Harshad Mehta or his group had not made any default in payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve Bank of India s directions being confined to rediscounting and UCO Bank having knowledge thereof entered into the transaction for discounting, the said Circular was not applicable to the case at hand. The decision to enter into the said transaction having been taken in a meeting and not by Accused No. 1 alone, he cannot be said to have any mens rea particularly when the Bank had earned a huge amount by way of interest. ( xv )Purchase of shares of Gujarat Ambuja Cement having been recommended by the Investment Committee which was a separate Department in a meeting held on 27-4-1992; purchase was not in violation of any law. ( xvi )The learned Special Judge committed a serious error in recording the judgment of conviction against each of the appellants herein without considering their individual involvement. 36. Mr. Mariarputham learned counsel appearing on behalf of the C.B.I., on the other hand, urged : ( i )Conspiracy amongst the accused had clearly been established by the evidence of S.V. Prabhu (PW 44), Bhaskar Roy Choudhary (PW 45) and R.L. Joshi (PW 7). ( ii )The manner in which the transactions had been carried through and in particular accused No. 1 s mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Branch of UCO Bank for bill discounting facility up to the limit of Rs. 50 crores. However the same had not been granted as it had been found that Mazda did not satisfy the eligibility criterion, as would appear from the evidence of PW 2, Mazda would have been entitled to a maximum credit limit only of Rs. 2.76 crores; but even then transactions worth Rs. 50 crores were undertaken with J.H. Mehta, Growmore and Mazda. ( g )Guidelines laid down in the Manual of UCO Bank (Exhibit 239) and directions of the Reserve Bank of India dated 5-9-1988, which have statutory force, stipulated that the credit limit be fixed only after verifying the creditworthiness of the customer wherefor it was necessary to compile the credit reports and accordingly the credit limit should have been sanctioned only thereafter. In terms of the said directions, if the Bills of Exchange exceeded Rs. 25,000, credit report on the drawee on whom the Bill was drawn was required to be obtained. Security was also required to be taken and it was the duty of the Manager to satisfy himself that the Bills of Exchange were a result of genuine trade transactions. But in the instant case, the said procedures were given a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in securities after 1-4-1991 and on or before 6-6-1992, to notify the name of such person in the Official Gazette. Section 4 provides for cancellation of contracts entered into fraudulently. Section 5 provides for the establishment of the Special Court. Section 6 empowers the Special Court to take cognizance of or try such cases which are instituted before it or transferred to it. Jurisdiction of the Special Court is provided for in section 7 of the 1992 Act. It starts with a non obstante clause providing that any prosecution in respect of any offence referred to in sub-section (2) of section 3 shall be instituted only in the Special Court and any prosecution in respect of such offence pending in any Court shall stand transferred to the Special Court. Section 9 provides for the procedure and powers of the Special Court. 41. Let us, at the outset, deal with contention of learned counsel for the appellant that having regard to the definition of securities as contained in section 2( c ) of the 1992 Act which does not involve bill discounting and rediscounting , the Special Court had no jurisdiction to try the accused for the offences alleged against them. 42. The definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 7 that the prosecution for any offence shall be instituted only in Special Court deserve a liberal and wider construction." 48. We may also notice another decision of this Court in L.S. Synthetics Ltd. v. Fairgrowth Financial Services Ltd. [2004] 54 SCL 660 (SC) wherein it was held as under: "18. The jurisdiction of the Special Court is of wide amplitude. Subject to a decision in appeal therefrom, its decision is final." 49. Jurisdiction of the Special Court is required to be determined with regard to the provisions of section 6 of the Code of Criminal Procedure, 1973. The Act is a special Act. It contains a non obstante clause. It shall, thus, prevail over any other Act. [ See - Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. [2001] 30 SCL 59 (SC)]. 50. An offence is committed with a view to circumvent the law. An apparent state of affairs need not be the real state of affairs. A simple transaction of discounting and rediscounting on its face may appear to be genuine and lawful but there may be underlying purposes behind it. It has not been disputed that Harshad Mehta was dealing in the money market and securities market and that Growmore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany generally. The Reserve Bank of India in terms of section 21 of the 1949 Act is empowered to control advances by banking companies and issue necessary directions in this behalf. 58. The Reserve Bank of India, therefore, has the requisite power to issue direction to Banks in relation to discounting and rediscounting of bills of exchange and those directions issued by the Reserve Bank of India have statutory force and, thus, can be termed as law in force. { See also Corpn. Bank v. D.S. Gowda [1994] 81 Comp. Cas. 842 (SC) and Central Bank of India v. Ravindra [2001] 107 Comp. Cas. 416 (SC)}. 59. All public sector banks are bound thereby. 60. Pursuant to or in furtherance of the said power, the Reserve Bank of India issued a Circular dated 5-9-1988 titled Bills Rediscounting Scheme - Introduction of usance promissory notes - procedure therefor , clauses 2( iii ) and 2( v ) whereof read as under : "2( iii ) The usance promissory note should be backed by unencumbered usance Bills of Exchange of at least equal value not fallen due for payment, drawn or endorsed in its favour, arising out of bona fide commercial or trade transactions on which the required s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks. Our attention was drawn to sections 21 and 35A of the said Act and it was contended that the directions which are issued by the Reserve Bank of India under these two provisions are clearly mandatory. On the other hand, section 36(1)( a ) and (1)( b ) gives power to the Reserve Bank of India to give advice or lend assistance and any action taken thereunder cannot be regarded as mandatory. It was submitted that the language of the circulars dated 14-4-1987 and 1-12-1987, which prohibit the banks from entering into buying back arrangements, clearly shows that the said circulars were only in the nature of advice and must be regarded as having been issued under section 36(1) ( a ) and (1)( b ) of the Act." 64. Having regard to the provisions of section 36(1)( a ) and ( b ) of the Banking Regulation Act, it was held that they were only in the nature of an advice and not binding on the third parties. 65. The distinction between exercise of jurisdiction under the enabling provisions contained in section 36(1) and the ones under sections 21 and 35A of the Banking Regulation Act and the provisions contained in section 45L of the Reserve Bank of India Act, 1934 is absolutely clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority in the exercise of delegated legislative power. 7. The question relating to a post-constitution order or notification in the context whether it amounts to law was considered by the Supreme Court in Jayantilal Amratlal v. F. N. Rana, AIR 1964 SC 648 = 1964-5 SCR 294. ...The Court further observed as follows: "This is not to say that every order issued by an executive authority has the force of law. If the order is purely administrative, or is not issued in exercise of any statutory authority it may not have the force of law. But where a general order is issued even by an executive authority which confers power exercisable under a statute, and which thereby in substance modifies or adds to the statute, such conferment of powers must be regarded as having the force of law." ... 70. It therefore, stands established from the above that UCO Bank could only have discounted the bills of exchange out of bona fide commercial transactions as had been provided under the RBI circulars which were statutorily binding on UCO Bank. 71. So far as the submission of the learned counsel that they had no knowledge of the circulars issued by RBI is concerned, we would affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust. 74. The criminal breach of trust would, inter alia, mean using or disposing of the property by a person who is entrusted with or has otherwise dominion thereover. Such an act must not only be done dishonestly but also in violation of any direction of law or any contract express or implied relating to carrying out the trust. It is one thing to say that any Circular Letter issued by the Reserve Bank of India being not within the public domain would not be law but it would be another thing to say that it did not contain any direction of law so as to attract the liability in terms of section 405 of the Indian Penal Code. Lawful directions were issued by the Reserve Bank of India. The Circular Letter was meant for all Scheduled Banks. The authorities and/or officers running the affairs of the Scheduled Banks therefore were aware thereof. If it is binding on the Banks, it would be binding on the officers. Any act of omission or commission on the part of any authority of the Bank would amount to acting in violation of any direction of law. A direction of law need not be a law made by the Parliament or a Legislature; it may be made by an authority having the power therefor; the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complex one. 81. It was insisted that the transaction of such magnitude be carried out from the Nariman Point Branch of the Bank which was not the main branch and was not otherwise well equipped to deal with such transactions. The private accused did not have any account in the said branch. The employees of the said branch did not have enough experience to carry out transaction of such high values. Despite objection made by Prabhu (PW-44), the same was insisted upon. 82. It had not been disclosed that a similar offer made by Mazda to carry the transactions at the Hamam Street Branch of the Bank had yielded no results. An assessment of creditworthiness of Mazda was made and it was found that their creditworthiness was only to the extent of Rs. 2.76 crores and not beyond the same. This appears to be the prime reason why the transactions were shifted from Hamam Street Branch to Nariman Point Branch. 83. The officers of the main branch of the Bank at Bombay were not taken into confidence at all. One of the officers who was asked to attend the meeting was Ramanathan, Divisional Manager (Accused No. 8). Why he was involved had not been explained? He might not have participat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the time when the Resolution was passed but the fact remains that both took place on the same date. Only a few days later, Sunil Samtani (accused No. 7), the Vice President of Mazda and Pankaj Shah (accused No. 9), the Vice President of Growmore came to the Bank and met Prabhu (PW-44). They did not come alone; they were accompanied by Ramanathan (accused No. 8). Admittedly, they obtained two forms for opening Current Accounts. At the same time, the Officers were invited for attending a cocktail party on 18-3-1992, i.e. on the same day. 88. We would presume that before accused No. 7 and accused No. 9 came to the Bank, a resolution was also passed by Mazda. Although no documentary evidence in this behalf is available on record but it was spoken of by PW 4 Prakash V. Bhat. The learned Special Judge, also has referred thereabout in his judgment. We may, for this purpose also, take into consideration that a dinner was held at Hotel Oberoi on the same day. It was attended by Ramanathan (accused No. 8), Prabhu (PW-44), Roy Choudhary (PW-45). Accused No. 7, accused No. 9 and Harshad Mehta (accused No. 3) were also present. It is crucial that on 24-3-1992, at about 2.30 P.M., Samt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts for the two cheques received from Syndicate Bank and State Bank of Patiala; and ( iii ) two usance promissory notes. 93. Indisputably, as on the said date, M/s. J.H. Mehta did not have any account at the Nariman Point Branch. Accounts of Mazda being Account No. 1705 (Exhibit 86), Growmore being Account No. 1706 (Exhibit 89) and M/s. J.H. Mehta being Account No. 1708 (Exhibit 93) were opened later. The transactions took place in a post haste manner. 94. Accounts of Growmore and Mazda were credited and pay orders were issued. Thereafter, M/s. J.H. Mehta s Account was credited and the amount was transferred to the accounts of Growmore and Mazda. When certain irregularities in regard to the Bill discounting were pointed out, PW-44 and PW-1 admitted that confusion was prevailing in the matter. The Bills were rediscounted by State Bank of Patiala before they had been discounted by UCO Bank. PW-19 I.B. Gupta, who is an employee of State Bank of Patiala categorically stated that Sunil Samtani (accused No. 7) had contacted the Bank in the morning about the bill rediscounting. Similarly, S.K. Jindal (PW-21), an officer of the State Bank of Patiala testified that Prakash Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breach of a departmental order, he may be held to be guilty as he was legally bound to act in terms thereof. 98. It does not matter whether the violation was in relation to the Circular issued by the Reserve Bank of India or whether it was in violation of the guidelines issued by the Bank itself. 99. The question as to whether the directions are statutory in character and binding in law may not depend upon the nature of the powers to be exercised by the Reserve Bank of India. Discounting and rediscounting of Bills of Exchange is an integral part of banking transactions. Purchase and sale of securities is also a part of the banking transactions as would appear from section 6(1)( a ) of the Banking Regulations Act. 100. Harshad Mehta was having a very good customers credit rating which was even spoken of by PW 7. The Bills of Exchange being usance Bills of Exchange in terms of section 32 of the Negotiable Instruments Act on their maturity, only the acceptors, namely, Growmore and Mazda, were responsible for clearance thereof and not M/s. J.H. Mehta. 101. Further we must take note of the fact that the bills had been drawn by M/s. J.H. Mehta and were accepted by M/s. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were satisfied. None of them were customers of the said Branch; the Authorities, namely, PW-44, PW-45 as also PW-1 did know them. Although the past dealings of the accused with the Bank took place at Hamam Street Branch, its records were not called for. So far as J.H. Mehta, Mazda and Growmore are concerned, they were new customers. It was therefore beyond anybody s comprehension as to how an account was opened on the same day as the Bills of Exchange was presented for discounting. It is also beyond any doubt or dispute that the power to sanction advance so far as the Chairman is concerned is limited to Rs. 5 crores. (Prior sanction of the Board of Director was necessary if the Bill discounting exceeds Rs. 5 crores. PW-44 in his evidence stated : "The limit up to which Shri Margabanthu was authorized to sanction was Rs. 5 crores. If business was to be in excess of Rs. 5 crores, the authority to sanction was with the Board of Directors." 103. To the same effect is the evidence of Varanadi Subrahmanyam (PW-43), who testified : "According to me a transaction of discounting or rediscounting of Bills of Exchange in a sum of Rs. 50 crores could not be undertaken without prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the appellants was that further security was not necessary as two cheques had been issued by two Scheduled Banks. The cheques were issued for the purpose of earning interest by way of rediscounting. It may be true that whereas the Syndicate Bank and State Bank of Patiala were to get 17.5 per cent of interest, the UCO Bank was to receive interest from Harshad Mehta at the rate of 21 per cent per month. This itself shows the speculative nature of the transaction. Syndicate Bank and State Bank of Patiala or even the banker of Harshad Mehta and his group ANZ Grindlays Bank were of the opinion that they proceeded with so much amount even for a short period. We fail to see any reasons as to why the usual good credit was not taken recourse to. The underlying object of such transaction is that the same should be a genuine/ bona fide commercial transaction. It was for the said purpose procedural requirements were required to be complied with. 109. Even if the words directions of law are to be given literal meaning, it would include a direction issued by the authorities in exercise of their statutory power as also the power of supervision. We have opined heret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to send the balance sheets to the Head Office. He had asked me to go to their offices. On 27th or 28th March, 1992, I visited the office of Mazda. Over there I met Mr. Samtani. I requested him to give me the Balance Sheets and the Annual Reports for the last three years. Mr. Samtani told me that he would send the same. I also asked him about the Balance Sheets of Growmore. Mr. Samtani stated that he would collect these and send them to the bank. As Mr. Samtani did not give the Balance Sheets and the Annual Reports, I again contacted Mr. Samtani. Mr. Samtani gave me two Annual Reports for the years 1988 to 1990 and for the year 1991." 113. Thus, all attempts to procure the balance sheet, etc. were undertaken at a later date. As the date of repayment was coming closer, UCO Bank sent letters to Mazda and Growmore for arranging funds to retire the Bills of Exchange on due date. Evidently, they were unable to fulfil their promise. For the said purpose, Harshad Mehta had already spoken to Accused No. 1 and he agreed that the Bills would be rolled over for one more month. PW-44 was informed thereabout by Pankaj Shah (accused No. 9). Naturally, as the entire blame would be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iental Bank of Commerce to the tune of Rs. 50 crores for three days. The evidence of PW-44 in this regard is relevant, which is as under : "In view of the promissory notes executed by the Bank in favour of Syndicate Bank and Bank of Patiala, on due date our Bank made payments to the two Banks in whose favour promissory notes were signed. The Bank made these payments from its own funds. The Mazda Industries and Leasing Ltd. and Growmore Finance Ltd. did not retire the bills of exchange on due date i.e., 24th April, 1992." To the same effect is the evidence of PW-1 : "These Promissory Notes were due for payment on 24th April, 1992. In the morning I had discussed this with Mr. Prabhu. He asked me to make payments in respect of these Promissory Notes. We had therefore made payments to the Syndicate Bank and to the State Bank of Patiala respectively." 116. We are, therefore, of the opinion that the charge of criminal breach of trust stands established against accused Nos. 1 and 2. The role played by accused No. 2 in the entire chain of events is significant. The decision to discount the two bills of exchange at Nariman Point Branch had been taken by accused No. 1 only af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non of the criminal conspiracy but it may not be possible to prove the agreement between them by direct proof. Nevertheless, existence of the conspiracy and its objective can be inferred from the surrounding circumstances and the conduct of the accused. But the incriminating circumstances must form a chain of events from which a conclusion about the guilt of the accused could be drawn. It is well-settled that an offence of conspiracy is a substantive offence and renders the mere agreement to commit an offence punishable even if an offence does not take place pursuant to the illegal agreement." 122. Yet again in Nirmal Singh Kahlon v. State of Punjab (2008) 14 SCALE 639, this Court following Ram Lal Narang v. State of Delhi (Administration) (1979) 2 SCC 322 held that a conspiracy may be a general one and a separate one meaning thereby a larger conspiracy and a smaller which may develop in successive stages. For the aforementioned purpose, the conduct of the parties also assumes some relevance. { See also Chaman Lal v. State of Punjab JT 2009 (4) SC 662}. 123. In K.R. Purushothaman v. State of Kerala AIR 2006 SC 35, this Court held : "11. Section 120A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinue till the termination of agreement." { See also P.K. Narayanan v. State of Kerala 1995 (1) SCC 142} : 124. Offence had been committed purely for the benefit of Harshad Mehta. He was the prime beneficiary. He appears to have made elaborate plans to obtain liquid cash for a short period with a view to enable him to make investments in the security market so that he could obtain quick returns. He involved a few Nationalized Banks in the process. Prosecution seeks to establish the offence of conspiracy from the evidence of Shri S.V. Prabhu (P.W.- 44), Shri Bhaskar Roy Choudhary (P.W.-45) and Shri R.L. Joshi (P.W.-7). If the story unfolded by the prosecution through several witnesses is taken to its logical conclusion, the following would emerge : 125. The transactions in relation to which the two bills of exchange were drawn are dated 20-3-1992. Growmore and Mazda opened the account with Nariman Point Branch of the UCO Bank on the same date on which the bills of exchange were presented to the Bank on 24-3-1992, but a resolution for the purpose of opening the account with the UCO Bank was passed by Growmore on 14-3-1992 and by Mazda on 18-3-1992. The conduct of Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the account Mazda and Growmore in the said Branch, two bills were presented. It is, however, of some significance to notice that the original credit note relating to the alleged sale transactions of shares had not been presented, only a photocopy thereof had been presented. A sum of Rs. 50 crores is made available on the same day; no verification or assessment as per procedure is carried out; no security was taken. Yet again, before the bills of exchange were discounted, rediscounting had already been done by two other branches. The usance promissory notes, however, were issued by UCO Bank later. Rediscounting is permissible only when the transaction of discounting is taken first. P.W.-40 said so in no uncertain terms in the following manner : "There can be no Bills Re-discounting unless there is a first Bill Discounting. This Circular is only laying down the revised procedure for rediscounting. According to me, in that sense this is covering Bills Discounting but it is correct that it does not directly deal with Bills Discounting." 127. For the purpose of covering default in retiring the bills of exchange, shares were purchased from J.H. Mehta by UCO Bank and a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.H. Mehta. It is he who had signed the forms for opening the account with the Nariman Point Branch of UCO Bank. He had signed the letter dated 23-3-1992 requesting the Bank to discount the two Bills of Exchange. The relationship between the parties both personal and professional clearly establishes criminal conspiracy on the part of accused No. 5. We therefore affirm the decision of the Special Judge finding accused No. 5 guilty of the offence of Criminal Conspiracy. 133. As we have already mentioned accused Nos. 6, 7 and 9 have not preferred appeals before us challenging their conviction. We find no reason to interfere with the judgment of conviction arrived at by the learned Special Judge with respect to the said accused. 134. We however disagree with the conclusions arrived at by the learned Special Judge with regard to the guilt of accused No. 8 for the offence of Criminal Conspiracy. The mere fact that he might have been present at the meeting dated 14-3-1992 of the officers of UCO Bank by itself does not in our opinion conclusively prove his involvement in the conspiracy hatched by the other officers of the Bank. Something more was needed to be shown that he was a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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