9911796707
TMI Blog2021 (12) TMI 1490X X X X Extracts X X X X X X X X Extracts X X X X ..... given Under Section of 477-A, contains two elements, deceit and injury. So far as the second element is concerned, it has already been noted that no financial injury was caused to the Bank. It is also alleged that the afore-said amount of Rs. 10 lakh was collected by the Appellant. The prosecution witnesses have deposed that the operating procedure at the Bank entailed that the signature of the person who received the cheque would be recorded on the back side of the cheque. Two incriminating circumstances have come on record in so far as this allegation is concerned. First, as deposed by PW-2, and corroborated by PW-10, the signature on the back of the cheque did not tally with that of Accused No. 3. Second, the signature of the wife of the Appellant- N. Lalitha, appears on the back of Ex. P25. Undoubtedly, this raises a suspicion. But as can also be seen from the record, there are contradictions on this point as well. PW-4 has acknowledged that the payment for the three cheques was received by the Appellant and he subsequently handed over the same to Accused No. 3, who at the relevant time, was waiting in the office room of the Appellant. Further, neither of the courts below have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 409 Indian Penal Code. So far as the charge Under Section 420 Indian Penal Code is concerned, once again, the best and the only person who could throw light on whether or not he had voluntarily agreed to transfer his FDR amount in the account of the Academy or there was an element of inducement, cheating or a false promise, was B. Satyajit Reddy himself who has chosen not to enter the witness box. In the absence of even an ordinary complaint by B. Satyajit Reddy regarding misuse of his FDRs, it will be too far-fetched to hold that the Appellant had any mens rea to deceive or to misappropriate or destroy valuable property of B. Satyajit Reddy. Thus, to conclude, no financial loss was caused to the Bank - no pecuniary loss was caused to B. Satyajit Reddy or to any other customer of the Bank - the material does not disclose any conspiracy between the Accused persons. In the absence of any reliable evidence that could unfold a prior meeting of minds, the High Court erred in holding that Appellant and other Accused orchestrated the transactions in question to extend an undue benefit to Accused No. 3 - the Appellant committed gross misconduct by misusing his position as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rother-in-law of Appellant (Accused No. 1). Accused No. 3 opened Current Account No. 282 in the afore-said Bank in his capacity as an authorized signatory of the Academy. The account was opened with an initial deposit of Rs. 5,00,000/-. The prosecution case is that the Appellant and Accused No. 2 abused their respective position in the Bank and conspired with Accused No. 3 by allowing withdrawal of amounts up to Rs. 10,00,000/- from the account of the Academy, notwithstanding the fact that the account did not have the requisite funds for such withdrawal. 3. The alleged modus operandi of the Accused persons was that the Appellant, in his capacity as a Branch Manager, issued loose-leaf cheques on 23.04.1994 and thereafter, for a sum of Rs. 2,50,000/-, and despite withdrawal of the said amount, the debit was deliberately not entered into the ledger book. After that, another such transaction took place on 30.06.1994 for a sum of Rs. 4,00,000/-, and once again, the debit was not entered into the ledger sheet of the Bank. This was followed by the Appellant issuing another cheque on 30.07.1994, of a closed account for withdrawal of Rs. 3,50,000/-. The endorsement on the third cheque issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, one such transaction is detailed hereunder for your considering an investigation. UNAUTHORISED ENCASHMENT OF TERM DEPOSITS No. 0257120 AND 0257121 FOR Rs. 10.00 LACS AND Rs. 400 LACS RESPECTIVELY. The laid down procedure for such transactions warrant that if and when the depositor desires premature withdrawal he should present to the branch, the term deposit in question duly discharged along with written request for premature withdrawal of deposits. Thereupon, the Branch Manager, after duly verifying the genuineness of the signature of the depositor and the deposit receipts may permit premature payment. In respect of fixed deposits where interest is paid periodically will be worked out and adjusted from the interest payable on such deposits and net amount of interest payable and the principle will be released to the depositor. As per the Income Tax Rules any such amount exceeding Rs. 20,000/- is to be paid either by crediting to the depositor's account with the branch or paid by way of Banker's Cheque in the name of depositor crossed account payee . xxx xxx xxx Unauthorised payment of deposit came to light on 12.9.1995 when the depositor called on the branch for drawing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout having sufficient funds, in pursuance of the agreement and thereby committed an offence punishable Under Section 120-B Indian Penal Code and within my cognizance. CHARGE No. 2: That all of you i.e., A.1 to A.3 as stated above, cheated by dishonestly and fraudulently inducing the said bank to deliver Rs. 10 lakhs to you and which was the property of the said Bank and that you thereby committed an offence punishable Under Section 420 Indian Penal Code and within my cognizance. CHARGE No. 3: That all of you as stated above (Charge No. 1) and being in such capacity entrusted with certain property committed criminal breach of trust in respect of that property, and thereby you committed an offence punishable Under Section 409 Indian Penal Code and within my cognizance. CHARGE No. 4: That all of you during the same course of transaction as stated in Charge No. 1 being in such capacity wilfully and with intent to defraud, fabricated certain papers, writings and accounts of Srirama Grameena Bank, Nizamabad and Nishitha Educational Academy, and you thereby committed an offence punishable Under Section 477-A Indian Penal Code and within my cognizance. CHARGE No. 5: That A.1 and A.2 of y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss-examination, while admitting that he never received any complaint from Mr. Reddy regarding the premature closure, disputed the genuineness of Ex P6 P7. So far as the allegation regarding the unlawful withdrawal of Rs. 10 Lakhs from account No. 282 is concerned, PW-1 deposed, The account holder is required to utilize the cheques issued to him only. In cases of certain contingencies he may request the Branch in writing to issue a loose cheque leaf for operating the account. Such a request in writing is to be approved by the Branch Manager when he may issue a loose leaf making appropriate endorsement on the cheque form itself and on application . PW-1 additionally clarified that, There is no prohibition for re-using cheque books of loan A/cs if they are sufficient in number to be used as loose leaves provided they are recorded as such in the cheque book issue register. Lastly, PW-1 acknowledged that during the period the Appellant was the Branch Manager, the business of the Bank had grown and the Bank was recategorized from Scale-I to Scale-II. 8. The deposition of Badam Swamy (PW-2), Auditor, is crucial to the Prosecution's case. He deposed that under instructions of PW-1, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 282 when Ex P25 was presented, there were insufficient funds when the other two cheques were passed. Thus, according to PW-2, the Appellant had allowed withdrawal of Rs. 10,00,000/- from account No. 282, even though there were insufficient funds in the said account. It was also pointed out that the Appellant had also permitted overdrawing of another Rs. 4 lakhs from account No. 282. PW-2 alleged that in order to cover up these withdrawals and to adjust the amounts, the Appellant withdrew the amount of Rs. 14 Lakhs pertaining to the FDRs of B. Satyajit Reddy. 10. During his cross-examination, PW-2 deposed that he had never personally enquired from B. Satyajit Reddy about the premature closure of his FDRs, instead, he claimed that PW-1 had spoken to Mr. Reddy. PW-2 further admitted that despite knowing that the signature on the three cheques did not match with that of Accused No. 3, he never enquired about the transactions from Accused No. 3 directly. PW-2 shed light on the fact that beyond the account ledger sheet (Ex P23), the Bank also maintained three other ledgers, i.e., the Officer's Cash Scroll, Transit Voucher Register and the Cashier Payment Register. PW-2 deposed that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 as on 30.06.1994 and I have authenticated the said balance on the same day. It is true that there was sufficient amount to meet the cheque of Rs. 4 lakhs on 30.06.1994. The balance amount available in the said A/c No. 282 on 28.07.1994 was Rs. 12,12,830/-. It is true that an entry with pencil was made between the lines debiting a sum of Rs. 3.50 Lakhs to A/c No. 282. The said entry is now marked as Ex D3 (sic). He lastly stated, There is a possibility of missing certain entries in posting the same in the ledger entry due to rush of work. But they will be rectified at the time of balancing the amount. See Ex P8, it is balancing register. It was maintained by A2. 14. J. Madhusudhan (PW-7), Second Officer of the Nizamabad Branch, deposed that B. Satyajit Reddy had approached him in the first week of September 1995 with a request to credit the interest accrued in the two FDRs into his S.B. A/c 5520. He stated that when he inspected the FDR register, he found that the two FDRs had been prematurely closed. He then brought this to the notice of Mr. G. Nagesh Reddy, the then Manager. He testified that the Appellant had signed the entries relating to those closures as is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge of B. Satyajit Reddy. He further stated that it was on the request of B. Satyajit Reddy that Rs. 4 Lakhs were transferred to the account of the Academy, i.e., account No. 282. When asked about the withdrawal of Rs. 10,00,000/- from account No. 282 in the year 1994, he disputed the version put forth by the prosecution, and stated, As there was balance, I passed the cheque and paid the amount to A3. Lastly, the Appellant claimed that he had been falsely implicated due to the rivalries between the two Bank Unions. 17. We may, at the outset, clarify that the learned Special Judge in paragraph 50 of his judgment dated 28.03.2020 has unequivocally acquitted all the Accused of offences Under Section 120B Indian Penal Code and Under Section 13(2) read with Section 13(1)(c) of the PC Act. Accused No. 2 and Accused No. 3 were further acquitted of all the other charges as well. The Appellant, however, was held guilty of offences punishable Under Sections 420, 409 and 477A Indian Penal Code as also Under Section 13(2) read with Section 13(1)(d) of the PC Act. It is useful to reproduce paragraph 50 of the judgment of the Special Judge which reads as follows: 50. The same thing can als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant had, without any authorization or consent, encashed the two FDRs. Thus, the Trial Court found the Appellant guilty, and consequently convicted and sentenced him to five years imprisonment along with various fines. 20. The Appellant challenged his conviction and sentence before the High Court of Judicature, Andhra Pradesh at Hyderabad. Much like the Trial Court, the High Court did not accord any weight to the allegations or the defence raised by the Appellant pertaining to the withdrawal of Rs. 10 lakhs from account No. 282. Upon appraising itself of the evidence on record, the learned Single Judge noted that no financial loss was caused to the Bank. The High Court, however, held that a loss had been incurred by B. Satyajit Reddy, because without his consent and knowledge, his deposits in the two FDRs were transferred to another account. Whilst observing that B. Satyajit Reddy was the best person to testify about the pre-mature withdrawal of the FDRs, the Court opined that in the light of the overall circumstances of the case, the non-examination of B. Satyajit Reddy could not lead to an adverse inference against the prosecution's case. Thus, the High Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, has in this regard been completely overlooked. 23. Shri Sidharth Luthra then pointed out paragraph 23 of the High Court judgment, wherein, it was acknowledged that no loss to the Bank was caused as a result of the alleged misdemeanours of the Appellant. He relied upon the statements of Chairman (PW-1) and Branch Manager (PW-8) of the Bank, who have admitted that no loss was caused to the Bank and no complaint from B. Satyajit Reddy was ever received against the Appellant. Learned Senior Counsel also pressed the decisions of this Court in Hari Sao and Anr. v. State of Bihar (1969) 3 SCC 107 and Mohd. Ibrahim and Ors. v. State of Bihar and Anr. (2009) 8 SCC 751, in aid to urge that in such circumstances, no offence can be said to have been made out against the Appellant. 24. Adverting to another incriminating circumstance, namely, the deposit of interest accrued on the two disputed FDRs in the account of B. Satyajit Reddy even after closure of the FDRs from the personal account of the Appellant and his wife, learned Senior Counsel argued that this allegation was raised for the first time in the deposition of PW-2, and no charge was framed against the Appellant generally or speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ex P25 to P27, handed over to Accused No. 3 but also that the signature of the Appellant was not found on the three cheques. It was advanced that the findings of the High Court were also self-contradictory in as much as the Court held that the Appellant's acts were meant for the benefit of Accused No. 3, and yet the acquittal of Accused No. 3 was sustained. 27. With regard to the use of loose cheques and the alleged omission to record relevant entries in the ledger of current account No. 282, it is claimed that the same cannot be a ground to convict the Appellant for offences Under Sections 420, 409 and 477A Indian Penal Code or under the provisions of PC Act. Learned Senior Counsel maintained that, at worst, it was a case of gross administrative misconduct for which the Appellant has already been dismissed from service and denied his pensionary benefits. This allegation, according to him, should be mirrored in the light of the fact that the Bank has not suffered any losses. Reliance was also placed on the statements of PW-1 and PW-2 to contend that (i) Officers Cash Scroll; (ii) Transit Voucher Register; (iii) Cashier Payment Register have not been produced by the prosecution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awal of funds without existence of securities could not be justified except for illegal benefit to a private individual, namely, brother-in-law of the Appellant (Accused No. 3). Such illegalities cannot be defended on the pretext of practice or internal procedure being followed by the Bank. 33. Learned ASG argued that the Appellant was the custodian of the Branch and had to take the entire responsibility for the duties he had failed to discharge. According to him, the onus stood shifted on the Appellant to show that he had complied with all transactions genuinely and all the requirements or conditions were adhered to (see: N.V. Subbarao v. State (2013) 2 SCC 162). He explained that there is no error of facts or in law when the Court relies on factual presumptions to convict or exonerate the Accused like the Appellant. 34. In all fairness, we may point out that learned ASG also relied upon two more decisions of this Court in Vinayak Narayan Deosthali v. Central Bureau of Investigation (2015) 2 SCC 553 and Neera Yadav v. Central Bureau of Investigation (2017) 8 SCC 757. Analysis: 35. Having heard learned Counsel for the parties at considerable length, we find that two questions fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by B. Satyajit Reddy. But the charges against the Appellant, as can be seen in Paragraph No. 5 above, were that the three Accused, by their fraudulent and illegal actions, caused a loss to the Bank. Even further, as pointed out by the learned Senior Counsel for the Appellant, the High Court held that the actions of the Appellant were not to his benefit, but to the advantage of his brother-in-law, i.e., Accused No. 3. The Brother-in-law of the Appellant was, however, acquitted by the Trial Court and no appeal was preferred by the State against his acquittal. Keeping these contradictions in mind, we are of the opinion that the boundaries of judicial temperance would not be disturbed if the present matter is looked at more closely. 39. Within these broader contours, the litmus test is whether a case Under Sections 409, 420 and 477A Indian Penal Code, and Under Section 13(2) read with Section 13(1)(d) of the PC Act is made out against the Appellant? 40. Before we advert to the relevant evidence on record, we deem it appropriate to brace ourselves with the relevant statutory ingredients necessary to bring home the guilt of an Accused when charged Under Sections 409, 420 and 477A I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental ingredients of 'criminal breach of trust' within the meaning of Section 405 Indian Penal Code proved, and if such criminal breach is caused by a public servant or a banker, merchant or agent, the said offence of criminal breach of trust is punishable Under Section 409 Indian Penal Code, for which it is essential to prove that: (i) The Accused must be a public servant or a banker, merchant or agent; (ii) He/She must have been entrusted, in such capacity, with property; and (iii) He/She must have committed breach of trust in respect of such property. 45. Accordingly, unless it is proved that the Accused, a public servant or a banker etc. was 'entrusted' with the property which he is duty bound to account for and that such a person has committed criminal breach of trust, Section 409 Indian Penal Code may not be attracted. 'Entrustment of property' is a wide and generic expression. While the initial onus lies on the prosecution to show that the property in question was 'entrusted' to the Accused, it is not necessary to prove further, the actual mode of entrustment of the property or misappropriation thereof. Where the 'entrustment' is admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Penal Code: 49. The last provision of Indian Penal Code with which we are concerned in this appeal, is Section 477A, which defines and punishes the offence of 'falsification of accounts'. According to the provision, whoever, being a clerk, officer or servant, or employed or acting in that capacity, wilfully and with intent to defraud, destroys, alters, mutilates or falsifies any book, electronic record, paper, writing, valuable security or account which belongs to or is in possession of his employer, or has been received by him for or on behalf of his employer, or wilfully and with intent to defraud, or if he abets to do so, shall be liable to be punished with imprisonment which may extend to seven years. This Section through its marginal note indicates the legislative intention that it only applies where there is falsification of accounts, namely, book keeping or written accounts. 50. In an accusation Under Section 477A Indian Penal Code, the prosecution must, therefore, prove--(a) that the Accused destroyed, altered, mutilated or falsified the books, electronic records, papers, writing, valuable security or account in question; (b) the Accused did so in his capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank. Second, the Appellant permitted the use of three loose cheques. Third, the cheques were passed by the Appellant even though there were insufficient funds in account No. 282. Fourth that the relevant entries regarding this transaction were intentionally not recorded in the ledger book- Ex P23, and fifth, that the amount pertaining to these cheques was collected by the Appellant. This according to the Prosecution, and as held by the High Court, was done to extend an undue benefit to the brother-in-law of the Appellant, i.e., Accused No. 3. 55. It may first be noted that the Trial Court has unequivocally held that neither was there a conspiracy between the three Accused persons, nor did the withdrawal result in any direct or indirect advantage to Accused No. 3. In fact, the learned Special Judge went to the extent of holding that Accused No. 3 merely acted in the normal course of his duties as a Treasurer/authorized signatory of the Academy. Since the prosecution has not assailed the acquittal of Accused No. 3, the findings in respect to his innocence have attained finality. In any case, the prosecution has adduced no other evidence that would indicate a prior meeting of minds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Penal Code, the primary contention of the Prosecution is that despite passing the three cheques (Ex P25 to Ex P27), the Appellant did not make the relevant entries into the Current Account Ledger (Ex P23) of account No. 282. This was allegedly done to conceal the withdrawals as there were insufficient funds in the account of the Academy. We may note that the expression 'intent to defraud' as given Under Section of 477-A, contains two elements, deceit and injury. So far as the second element is concerned, it has already been noted that no financial injury was caused to the Bank. 59. With respect to the question of 'deceit', the depositions of PW-2 and PW-6 unveil that though the relevant entries were missing in the Current Account Ledger, they do find a mention in the other ledger sheets maintained by the Bank, namely, the Officer's Cash Scroll and the Cashier Payment Register. PW-6 has further deposed that the entry relating to Ex P25, has been mentioned in the Current Account Ledger. The ledger- Ex P23 does reveal that there is some truth in the deposition of PW-6. It can be seen that there is an entry made with a pencil for an amount of Rs. 2.5 lakhs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the two FDRs continued to be deposited into savings account No. 5520 of B. Satyajit Reddy. The interest amount, however, was transferred from account No. 5555, which stood in the name of the Appellant and his wife. It is alleged that the subsequent interest payments were made to 'deceive' the FDR holder into believing that the FDRs were still alive. 62. As already clarified by us, to prove the charge Under Section 409 Indian Penal Code, the prosecution need not prove the exact manner of misappropriation. Once the 'entrustment' is admitted or proved, as has been done in the present case, the onus lies on the Accused to prove that the entrusted property was dealt by him in an acceptable manner. Thus, misappropriation with this dishonest intention is one of the most important ingredients of proof of 'criminal breach of trust'. The offence Under Section 409 Indian Penal Code can be committed in varied manners, and as we are concerned with its applicability in the case of a bank officer, it is fruitful to point out that the banker is one who receives money to be drawn out again when the owner has occasion for it. Since the present case involves a conventional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the air and enlighten us would have been B. Satyajit Reddy himself, but neither was he associated during the course of inquiry/audit or the investigation nor was he examined as a prosecution witness in the trial. 65. The investigating agency did not care to record the statement of B. Satyajit Reddy either Under Section 161 Code of Criminal Procedure or as a court witness. There is not even a whisper that B. Satyajit Reddy was won over by the Appellant from the very inception and/or his examination at any stage would have been an exercise in futility. Further, there is also no written or oral complaint made by B. Satyajit Reddy against the Appellant or other officials of the Bank accusing them of misusing his FDRs or causing any financial loss to him. On the contrary, the Appellant has produced on record two letters dated 22.02.1995 and 24.02.1995 (Ex P6 and Ex P7) purportedly written by B. Satyajit Reddy for premature encashment of his FDRs and to deposit the amount in the account of the Academy. These two letters (which the Appellant is Accused to have obtained antedated) suggest that copies thereof were physically received/handed over to the Chairman and other officials of the Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who could throw light on whether or not he had voluntarily agreed to transfer his FDR amount in the account of the Academy or there was an element of inducement, cheating or a false promise, was B. Satyajit Reddy himself who has chosen not to enter the witness box. In the absence of even an ordinary complaint by B. Satyajit Reddy regarding misuse of his FDRs, it will be too far-fetched to hold that the Appellant had any mens rea to deceive or to misappropriate or destroy valuable property of B. Satyajit Reddy. 68. We may at this stage, briefly note that learned Senior Counsel for the Appellant had raised another contention, namely, that the charges Under Section 409 and Section 420 Indian Penal Code cannot go together. He eloquently argued that the essential ingredients of the two offences are conflicting in nature. Section 409 (or 405) Indian Penal Code deals with offences where the Accused has been 'entrusted' with the property and Section 420 Indian Penal Code deals with offences where the Accused has 'dishonestly induced' the victim/complainant to depart with the property in question. It was, therefore, argued that an Accused cannot be charged under both the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithheld by the prosecution, the benefit of doubt must be extended to the Appellant, for no conviction can be sustained on the basis of conjectures and surmises. Non-production of the records of the Bank also adversely comments on the fairness and independence of the investigation conducted in the instant case. 71. To sum-up the above-stated discussion, the following incontrovertible factors have emerged in the present appeal: First, no financial loss was caused to the Bank. Second, the record before us does not indicate that any pecuniary loss was caused to B. Satyajit Reddy or to any other customer of the Bank. Third, the material before us does not disclose any conspiracy between the Accused persons. In the absence of any reliable evidence that could unfold a prior meeting of minds, the High Court erred in holding that Appellant and other Accused orchestrated the transactions in question to extend an undue benefit to Accused No. 3. Fourth, the Appellant committed gross misconduct by misusing his position as the Branch Manager. Notwithstanding the final outcome, the Appellant's abuse of powers clearly put the Bank at the risk of financial loss. Fifth, despite dereliction of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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