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TMI Blog2019 (6) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... not also verified by the Branch Officials and have been acted upon fraudulently. As per record, it is clear that the CEO of the Wakf Board having signed the cheques for the purpose of securing Fixed Deposit from Chintamani Branch has also specifically endorsed on the cheque that the instrument is drawn on Vijaya Bank, Chintamani Branch as towards Fixed Deposit to be issued in favour of CEO, KSBW. The transfer of the amount credited to third parties was without the authority of law and therefore there arise no obligation on the part of the CEO to comply as there could not have been any other outcome but to secure the Fixed Deposit in the name of CEO, Wakf Board. The investigating authority has not recorded any finding on the fraud perpetrated by the Bank exceeding its authority and by also transferring huge sums of money without even verifying the veracity of the letter which is not a banking document to transfer funds to third parties. These transactions are effected by the Bank exceeding the direction provided to the Bank. Admittedly there is no specific allegation in the Complaint against the CEO of Wakf Board to array the office of the CEO as one of the defendants in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is the Chief Executive Officer of Karnataka State Board of AUQAF a Statutory Body constituted under the Wakf Act, 1995 [a Central Enactment]. (for short KSBW) b). The Appellant accepted the proposal which was put up on the files by the Accounts Department of the Board and the Chief Accounts Officer to open a Fixed Deposit in the name of CEO, Karnataka State Board of Wakf for an amount of ₹ 2,29,45,465/- [pertains to Khailfathul Rahman Dargah, Gulbarga] and ₹ 1,71,00,000/- [pertaining to Muzrai Funds] at Vijaya Bank, Chintamani Branch for a period of One year. The CEO approved the proposal to keep the funds in FD based on the office note put up before him. The office note put up by Accounts Department was approved by Accounts Superintendent stating that it may be approved. The file was put up before A/s F who also accepted opening of FD at Vijaya Bank, Chintamani Branch. The file was further placed before Chief Accounts Officer who also marked the proposal to CEO. The CEO also accepted at Sl.No.58 of the Note Sheet by affixing his signature. c). The Karnataka State Board of AUQAF [hereinafter referred to as Wakf Board for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of M/s. Ghatge Motors Private Limited. 4. The Respondent Authority filed Original Complaint in OC No.693/17 before the Hon ble Chairperson; Adjudicating Authority dated 23rd February, 2017. 5. The Complaint made the CEO of the Wakf Board as Defendant No.8 in the proceedings. 6. The following were the averments/allegations in the complaint before the Adjudicating Authority: a. That on the basis of the material placed before the Respondent and under the reasonable belief that certain properties are derived out of proceeds of crime the provisional attachment was issued on the properties mentioned therein, b. That on the basis of complaint filed by the CEO of Wakf Board a Criminal Case was registered by Chintamani Town Police against a. Smt. A Susheela, Bank Manager, b) Shri. Marukanappa, Assistant Branch Manager and c) Shri. Siraj Ahmed the First Division Assistant and Cashier of the Wakf Board. The Criminal Case invokes the provisions of sections 120-B read with sections 420, 467, 468 and 471 of IPC which is a Scheduled offence under Prevention of Money Laundering Act, 2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hier to verify the letter purportedly sent by the Board to the Bank. The officials collected the copy of the letter from the Bank on 5.12.2016 and reported that the Board has not issued such request and that the CAO disowned that he signed such letter. IX. The Respondent Authority on investigation took Statement of the Branch Manager of Vijaya Bank, Chintamani Branch who stated that the Branch has not solicited FD from the Wakf Board and that the cheques were eventually received and sent for collection and was credited to the Account of the Branch on 21.12.2016. No FD form was filled by the Board and that the entry, collection and transfer of the funds were done by the then AGM and then Branch Manager. There is no record to show who has received in the bank and no Banker seal for the letter received and the transfer of complete amount of ₹ 4,00,45,465/- was effected to third party M/s. Ajay Sharma Trading Corporation on 21.12.2016 itself. X. The statement was also taken from the CEO of Wakf Board who had narrated the complete facts. XI. The complainant has also, on investigation reveals how other defendants colluded in commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques for an amount of ₹ 2,29,45,465/- and ₹ 1,71,00,000/- in favour of M/s. Vijaya Bank, Chintamani Branch with a specific direction to open a fixed deposit with the Branch of the bank in their names. The said fact is not denied by the counsel for the respondent. The said fact is also supported with material available on record. 12. It is also admitted position that the said amount which was credited to the bank account of the Chintamani Branch was fraudulently transferred by the Branch staff in connivance with the lower level officer of the Appellant organization who had no authority to give any instruction to the Bank. In the compliant, it was accepted that the Board was the loser in this fraud perpetrated. The bank did not take any concurrence with the signatory of the cheque who is the originator of the instrument before effecting such fraudulent transfer which is also grossly opposed to RBI guidelines. 13. It is also a matter of fact that it was the CEO of the Wakf Board coming to know of the fraud perpetrated, direct his officers to file a complaint which was filed on 2nd January, 2017. The bank was able to recover back an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cheque citing the purpose for which a cheque is issued in favour of the Bank. The CEO being an authorized signatory for cheques, no instructions issued by any other person can be considered by the Bank in undertaking a transaction to transfer the funds illegally to third parties. This practice is disallowed by the RBI. The Bank has committed a fraud on the Board and the CEO. The CEO has exercised caution by clearly endorsing the cheque for the stated purpose and the instrument could not have been used for no purpose other than opening an FD. These allegations are an afterthought by the Respondent without any evidence led or an allegation made in the Complaint. No amount of precaution could have averted the fraud committed by the Bank. 18. The fact being the CEO of the Board having issued a Cheque drawn on Vijaya Bank, Chintamani Branch by endorsing the Cheque as issued towards opening of FD , it would be immaterial as to who takes the cheques as the banking procedure requires that the cheque should be deposited only with Chintamani Branch of Vijaya Bank and that the Bank should issue an FD in favour of the Board. There cannot be any other u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Branch based on a letter stated to have been signed by the Chief Accounts Officer when the Cheque issued by the CEO has an endorsement that the amount is credited to the Branch for opening of Fixed Deposit in his name. The instruction purported to have been given by the Chief Accounts Officer in a letter is not by the authority who has signed the cheque. The instruction which is stated to have been issued to the Bank was not also verified by the Branch Officials and have been acted upon fraudulently. 24. The bank has not also recorded the receipt of the letter seeking transfer of the funds in its inward register. The bank has fraudulently transferred the money credited to its account to third parties which is also in gross violation of the directions issued by the Reserve Bank of India. Counsel for the appellants submits that if any employee is mixed with the main accused, the appellants are not responsible. Counsel for the respondent has admitted that there is no evidence against the appellant in order to show that the appellants have link or nexus with the main accused nor there is any evidence that the money was not owned by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question of therefore arraying the CEO of the Wakf Board without leading any evidence of his knowledge is therefore unsustainable in law. The requirement of mens rea is embedded in the statutory provision. The burden lies on the Respondent authority to do the proper investigation in order to establish that there is an evidence on such knowledge to the appellants otherwise such an inference without any evidence amounts to harsh and unjust. 27. The investigating authority has not recorded any finding on the fraud perpetrated by the Bank exceeding its authority and by also transferring huge sums of money without even verifying the veracity of the letter which is not a banking document to transfer funds to third parties. These transactions are effected by the Bank exceeding the direction provided to the Bank. 28. The CEO of the Board even otherwise had no other responsibility to perform as he had secured the transaction by clearly instructing the bank and its branch that the amount credited to their account was towards opening of Fixed Deposit. There was also no requirement to take any other precautions or steps as there was a clear direction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being committed by the Appellant and therefore there cannot be any proceedings initiated on the Appellant as defendant in the proceedings without providing any specific charge. The averment at para 34 of the Complaint shows that a forged letter was given to the Karnataka State Board of WAKFs seeking deposits, which was found out on due investigation to be forged. The CEO has only accepted to the proposal which has come through the Accounts Section and also seconded by the Chief Accounts Officer to deposit the money in an FD. It is averred in the complaint that even though Board has clearly indicated its intention for fixed deposit through the covering letter dated 2.12.2016 and through an entry to that effect on the back of the cheque, the fraud is still committed by the employees of the Bank. 33. The CEO who was representing the Board prima facie has no knowledge to the crime committed by the Bank in connivance with certain individuals. The question of therefore arraying the CEO as defendant in the proceedings was argued to be is unsustainable in law. 34. Admittedly the Chief Executive Officer, Karnataka State WAKF, Bangalore ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction in hand Cheque having been signed by CEO of the Karnataka State Board of Wakf, the instruction cannot be given by the Chief Accounts Officer to credit the amount to some other person and the Bank has with the connivance of the Accounts Officer broken all norms and directions issued by the CEO of the Board to transfer the funds fraudulently. There is also no finding on this ground that the Board has no role and the amount credited to the Bank has been wrongly dispersed by the Bank to which they have not shown any authority or instruction from the Board. Arraying the CEO of the Board as a defendant in the proceedings is therefore without jurisdiction and unsustainable in law. 38. The Bank vide its communication in Ref:ROB(S):RM/INS/2016 dated 29th December, 2016 has communicated to HDFC Bank, Ernakumal stating that there was wrong credit to one of the account held in the name of M/s. Varkeys Realtics Pvt. Ltd from Vijaya Bank, Chintamani Branch. It shows that the transaction was undertaken by the Bank without taking proper instructions from Karnataka State Board of Wakf, Bangalore. 39. The provisions of section 2(u) defines the expression p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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