R. VENKATAKRISHNAN v. CENTRAL BUREAU OF INVESTIGATION

Citation: [2009] 12 S.C.R. 762

Court: Supreme Court of India

Bench: S.B. SINHA, CYRIAC JOSEPH

Case summary

R. VENKATAKRISHNAN v. CENTRAL BUREAU OF INVESTIGATION.pdf

Judgment text

[2009J 12 S. C. R. 762 R. VENKATAKRISHNAN Ir ' v. CENTRAL BUREAU OF INVESTIGATION (Criminal Appeal No. 76 of 2004) : AUGUST 7, 2009 [S. 8. SINHA AND CYRIAC JOSEPH, JJ. ] SPECIAL COURT (TRIAL OF OFFENCES RELATING --1 • TO TRANSACT/ON IN SECURITIES) ACT, 1992: ss. 2(c), 3(2) and 7 - 'Call money' scam - Jurisdiction of Special Court - A huge sum belonging to a Scheduled Bank diverted as 'call money' by officials of Banks concerned to the .. account of a broker in securities - HELD: "Call money" transactions are banking transactions - The transaction in question was shown as 'call money' transaction and, therefore, 'r ... it could not have been used for any other purpose - The act of illegally diverting the money belonging to National Housing Bank to the account of the broker during the period specified in s.

3(2) so as to enable him to enter into transactions in securities, was an offence triable exclusively by Special Court, which rightly exercised the jurisdiction - Interpretation of statute - Mischief rule - Liberal construction. • ss. 2(c) and 3(2) - Expressions 'securities' and 'offences relating to transactions in securities' - Connotation of NATIONAL HOUSING BANK ACT, 1987: s. 14 - Violation of - HELD: Advancing of loan to an individual under the disguise of 'call money' transaction is an offence under the Act and illegal in terms of s. 43 /PC - Penal Code, 1860 - s. 43. PENAL CODE, 1860: R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 76. 3 INVESTIGATION ss.

120-B, 405 and 409 - Criminal conspiracy, and criminal breach of trust by public servants - Employees of Scheduled Banks, in connivance with a broker and his associate diverting in the guise of "call money" a huge sum belonging to the Bank to the account of the broker - HELD: Even if the Banks may not have suffered ultimate loss, but if money has been allowed to be used il/egal/y/for illegal purpose, s. 405 would get attracted - Temporary embezzlement would also attract s. 405 - The charges having been established, the Bank officials, except A-7, were rightly ' . convicted of offences of criminal conspiracy and criminal breach of trust - The employee of the broker was rightly convicted of offence of criminal conspiracy - A-7 acquitted. ss. 405 and 409 - Criminal breach of trust - Complainant - HELD: Where public money is involved, criminal law can be set in motion by anybody- In the instant case, prosecution was rightly initiated on the basis of the information received by CBI.

ss:23, 24 and 43- 'Wrongful gain' - 'Dishonestly' -'Illegal' - Connotation of. PREVENTION OF CORRUPTION ACT, 1988: • ss. 13(1)(d)(iii) r! w s. 13(2) - Criminal misconduct - 'call money' scam - Officials of Scheduled Banks - In connivance with a broker and his employee diverting in the guise of "call money" huge sum belonging to the Bank to the account of the broker - HELD: Accused were guilty of criminal misconduct u/s 13(1)(d)(iii). ss. 19(1) and 19(3) - Sanction for prosecution of public ' servant - Official of RBI absorbed in National Housing Bank )(- - Proceedings against him to be initiated for various criminal offences - Sanction by officer of NHB - HELD: Authority concerned was competent to pass the order of sanction - Even otherwise, there has been no failure ofjustice because of any alleged error in the orders of sanction.

~ "" SENTENCE/SENTENCING: Awarding of sentence - Factors to be taken into consideration - Explained - "Call money" scam - Special Court, while awarding the sentence to one of the accused, placing reliance on 'Jankiraman Committee' Report - HELD: Special Court acted illegally and without jurisdiction - The said report was not admissible in evidence - There being IJ. tide difference in sentence imposed on the accused concemed "' ' and other accused persons, his sentence reduced to six months - Sentences imposed on other accused, except the one who has been acquitted, not interfered with - Evidence - Committee's Report - Admissibility in evidence. WORDS AND PHRASES: Expressions 'call money', 'dishonestly', 'illegal', 'in relation f ... to', 'offence relating to transactions in securities', 'securities', and 'wrongful gain' - Connotation of.

Appellant-accused-1, the Chairman and Managing Director of UCO Bank, appellant-accused-2, its General Manager, appellant-accused-3, the Divisional Manager of Bombay Branch, UCO Bank, appellant-accused-4, a ' ~ broker in 'securities', appellant-accused-5, an employee of accused-4, appellant-accused-6 and appellantaccused-7, Assistant General Manager and Assistant Manager, respectively, of National Housing Bank, Bombay faced trial before the Special Court. The prosecution case was that on 6. 4. 1992 National Housing Bank lent a sum of Rs. 40 crores 'at call' to UCO Bank. However, the said amount was credited to the account of A-4 in UCO Bank, Hamam Street, Mumbai. This was allegedly done under the instruction of the Head Office in Calcutta and its Zonal Office at Bombay. Later, A-4 died during the trial. A-1 to A-3, A-6 and A-7 were convicted INVESTIGATION j _.. and sentenced u/ss. 120-B, 409 read with s. 34 IPC and s. 13(1)(d) read with s.

13(2) of the Prevention of Corruption Act, 1988; whereas A-5 was convicted and sentenced u/ s 120-B IPC. In the appeals filed by the accused, it was contended for the appellants that the transfer of money being not 'securities' within the meaning of the provisions of Special Court (Trial of Offences Relating to Transaction ' ~ in Securities) Act, 1992, the Special Court had no jurisdiction to try the offences. A-6 and A-7 challenged the sanction orders obtained for their pro. secution. It was contended for A-6 that he had joined NHB on deputation from the Reserve Bank of India and, therefore, the conditions of his service were governed by the RBI Regulations and not those of NHB Act and in his case y -f the Governor of RBI was the only competent sanctioning "- authority. Similarly, the stand of A-7 was that employees of NHB were governed by the RBI Regulations till 1995 and, therefore, the sanction by NHB was not proper.

On merits it was contended that in the case of conspiracy active participation by each _one of the accused was imperative and in its absence they could not be held ~ guilty of commission of any offence; that no departmental • proceedings having been initiated by the employers and ~··· neither the UCO Bank nor NHB having suffered any. Joss, as the money had been repaid by A-4, the judgment of conviction for alleged criminal breach of trust was wholly unsustainable; that accused No. 5, having been acquitted of the charges of criminal breach of trust, could not have - been held to be guilty of being a party to the conspiracy. )· Disposing of the appeals, the Court HELD: 1. 1. The jurisdiction of the Special Court constituted under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 is an exclusive one and is of wide amplitude.

Section 7, ~ ' conferring jurisdiction on the Special Court constituted under the Act, begins with a 'non-obstante' clause and provides that the Special Court shall have jurisdiction to . . ' try matters in respect of offences relating to transactions in securities as referred to in sub-s. {2) of s. 3 of the Act. The definition of 'securities' as provided in s. 2(c) of the Act is an inclusive one and not exhaustive. It takes within its purview not only the matters specified therein but also ~ . all other types of securities as commonly understood. The provision conferring jurisdiction on Special Court, having regard to the peculiar nature of offences sought to be dealt with, should receive a liberal construction. [Para 48, 49 and 52) [808-B-D; 809-D] State of Bombay and others v. The Hospital Mazdoor Sabha and others AIR 1960 SC 610; Regional Director, ~ '( Employees State Insurance Corporation v. High Land Coffee Works of P. X. S.

Saldanha and sons and another, (1991) 3 SCC 617; Commercial Taxation Officer, Udaipur v. Rajasthan Taxchem Ltd. 2007 (2) SCALE 120; Karnataka Power Transmission Corpn. & Anr. v. Ashok Iron Works Pvt. Ltd. (2009) 3 SCC 240; Harshad S. Mehta and others v. State of ~ Maharashtra, (2001) 8 SCC 257; LS. Synthetics Ltd. v. • Fairgrowth Financial Services Ltd. and another, (2004) 11 SCC 456; and Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and others (2001) 3 SCC 71, referred to. 1. 2. "Call money" transactions are indisputably banking transactions. In the instant case, the time period of carrying out 'call money' transactions is not in dispute, for those transactions admittedly took place within the time period referred to in s. 3(2) of the Act. [Para 41 and • 46) [805-G-H; 807-C-D] 1. 3.

Even if 'call money' transactions are held not to be within the scope and ambit of the definition of the term INVESTIGATION 'securities', the jurisdiction of the Special Court may be invoked when an offence committed relates to transactions in securities; the logical corollary whereof would be that all parties connected in diverting the funds of the public sectors and/or financial institutions would also come within the purview thereof. For considering the provisions of the Act, the object and purport thereof has to be borne in mind. The Reserve Bank of India constituted Janakiraman Committee for the purpose of looking into the Securities Scam of the early 90's, and it was on the basis of that report that the said Act was enacted and the Special Court was constituted. [Para 51 and 56) [809-8-C; 810-D-E] 1. 4.

For the purpose of determining the question as to whether the Special Court had jurisdiction to try the offences in question or not, the principle of purposive construction must be resorted to. The rule which is also known as the 'mischief rule', simply stated, lays down that the courts should identify the mischief which existed before passing of the statute and then if more than one construction is possible, favour that which will eliminate the mischief so identified. The phrase 'offence relating to transactions in securities' as used in s. 3 (2) is clearly .. subject to more than one meaning. For the purpose, the meaning of the words 'in relation to' would be relevant. Regard, therefore, in the matter of establishing and constitution of the Special Court must also be had to the object of creating the Special Court. [Para 57,58 and 60] [810-F-H; 811-C; 812-C-D] Bengal Immunity Co. v. State ofBihar, AIR 1955 SC 661; Zile Singh v. State of Haryana AIR 2000 SC 5100; Mis.

~ Doypack Systems (Pvt. ) Ltd. v. Union of India & Ors. , (1988) 2 SCC 299; T. N. Kalyane Mandapam Association v. Union of India, (2004) 5 SCC 632 and Minoo Mehta v. Shavak D. Mehta, AIR 1998 SC 831, referred to. Bismag v. Amblins (Chemists), (1970] 3 All ER 1053 .... ~ (QB) ; Re National Federatino of Retail Newsagetns', Booksellers' and Stationers Agreement (Nos. 3 & 4) (1971] 1 WLR 408; and Anderton v. Ryan, (1985) 2 All ER 355, referred to. 1. 5. In the instant case, the money belonging to National Housing Bank was diverted to the account of A- 4, who was a broker dealing in securities, so as to enable him to enter into transactions in securities during the -1 ' period 1st April, 1991 and 6th June, 1992, which was an offence triable exclusively by the Special Court. The Special Court, therefore, rightly exercised the jurisdiction vested in it. [Para 62] (812-G-H; 813-A] 2. 1.

All the appellants, except A-5, at the relevant point of time being employees of UCO Bank National Housing ~ " Bank, were public servants and, as such, were also charged with commission of offences under the - Prevention of Corruption Act, 1988. The competent authorities accorded sanction for their prosecution as required u/s. 19 of the 1988 Act. Though A-6 was initially appointed by the Reserve Bank of India and was sent to ~ NHB on deputation in the year 1988, he was permanently • absorbed there in 1992 and the order of sanction in respect of him was passed on 26th February, 1993. From the date of his absorption the relationship of employer and employee came into being between him and NHB, and, therefore, the Chairman-cum-Managing Director, being its highest authority would be competent to pass .! the order of sanction: [Para 63,64 and 67] [813-B-F; 814- E-G] ~ 2. 2.

As regards A-7, even if till the framing of Regulations by NHB, it adopted the Service Regulations governing the employees of the RBI, the same would not mean that the appointing authority would also be an • fii INVESTIGATION officer of the RBI and not the appropriate authority of v 1 NHB. The Chairman-cum-Managing Director of NHB being the highest executive authority, would be, subject to any delegation of powers conferred in terms of the · Regulations or through Resolutions adopted by the Board of Directors, the appointing authority and, therefore, will have the requisite jurisdiction to accord sanction for prosecution of the employees. [Para 68 and 69) (814-H; 815-A-D] . )- 2. 3. Even otherwise, what has been challenged by both the accused is in fact the competence of the sanctioning authority to issue sanction orders against them. As per s.

19(3) of the 1988 Act, 'a finding' or ' sentence' shall not be reversed by a court of appeal on the ground of any error, omission or irregularity in the sanction order unless a failure of justice has been ,,,-1 occasioned thereby. There has been no failure of justice in the instant case by the alleged error in the orders. [Para 71] (816-B-D] 3. 1. Criminal conspiracy in terms of s. 120B IPC is an independent offence. It is punishable separately. The ingredients of the offence of criminal conspiracy are: (i) ~ an ,agreement between two or more persons; (ii) the ~ • agreement must relate to doing or causing to be done ' either (a) an illegal act; or (b) an act which is not illegal in itself but is done by illegal means. Condition precedent for holding accused persons guilty of a charge of criminal conspiracy must, therefore, be considered on the anvil of the fact which must be established by the prosecution, viz.

, meeting point of two or more persons for doing or causing to be done an illegal act or an act by illegal means. The courts, however, while drawing an inference from the materials brought on record to arrive at a finding as to whether the charges of the criminal conspiracy have been proved or not, must always bear in mind that ... _, a conspiracy is hatched in secrecy and it is, thus, difficult, " if not impossible, to obtain direct evidence to establish the same. [Para 78 and 80-82] [818-F; 819-A-F] 3. 2. The manner and circumstances in which the offences have been committed and the level of involvement of the accused persons therein are relevant factors. For the said purpose, it is necessary to prove that the propounders had expressly agreed to or caused to "-1 • be done the illegal act but it may also be proved otherwise by adduction of circumstantial evidence and/ or by necessary implication. Conduct of the parties would also be relevant.

[Para 83 and 88) [819-G; 823-8) Mohammad Usman Mohammad Hussain Maniyar & Ors. v. State of Maharashtra (1981) 2 SCC 443; Kehar Singh and Ors. v. State (Delhi Administration), 1988 (3) SCC 609 f . at 731; State of Maharashtra v. Som Nath Thapa (1996) 4 SCC 659; K. R. Purushothaman ·v. State of Kera/a (2005) 12 SCC 631; State (NCT) of Delhi v. Navjot Sandhu @ Afsan Guru (2005) 11 SCC 600; Esher Singh v. State of A. P. (2004) 11 SCC 585; Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra (2008) 6 SCALE 469; Nirmal Singh Kah/on v. State of Punjab and Others, 2008 (14) SCALE 639, referred ' • to. Penal Law of India by Dr. Hari Singh Gour, (Vol. 2, 11th Edn. p. 1138 - referred to. 3. 3. In the instant case UCO Bank in order to maintain cash reserve ratio, as was statutorily required, used to participate in 'call money' transactions in the money market, decision in respect whereof used to be taken at its Head Office at Kolkata.

For the said purpose, however, the Head Office used to be in touch with the D. N. Road . Main Branch in Bombay. A-2, the General Manager, at the INVESTIGATION Head Office in Kolkata, was authorized for the said ~ purpose. Again a decision taken by the General Manager would be subject to any direction which may be issued by A-1, the Managing Director of the Bank. The fact that the decision had been taken by the A-2 to obtain "call money" to the tune of Rs. 40 crores is not in dispute. [Para 89, 90 and 94] [823-C-E; 824-H; 825-A] 3. 4.

The prosecution in view of the documentary and oral evidence must be held to have proved the following ' }facts: (i) That the decisions regarding the lending or borrowing of "call money" were usually taken at the Head Office in Kolkata based upon the information received from the DN Road Branch in Bombay, (ii) These decisions in Kolkatta were primarily taken by A-2 who at the relevant time was the General Manager of UCO Bank, Kolkatta, (iii) The decision as to the 'call money' ~ _, borrowing on the 6th April, 1992 was also taken by A-2. On that day he had communicated his decision of borrowing of "call money" to PW-17, who at the relevant time was an official there. PW-17 had noted the information regarding the borrowings in a chit of paper including 'call money' amounting to Rs. 40 crore .

f borrowed from NHB at 26% interest,(iv) PW-17 then )I handed over the said chit with the 'call money' information to PW-12 who had the responsibility of noting the details in the 'call money' register. He accordingly noted the details of the "call money" transactions of the day, including the one from NHB worth Rs. 40 Crore. [Para 104] [828-C-H; 829-A] 3. 5. Keeping in view the statement made by P. W. 14 which was not shaken in the cross-examination, there is 't no reason to disbelieve that part of the material brought on record that 'call money' from NHB was, in fact, sought to be cancelled. In any event, the prosecution cannot be said to have failed to prove its case. On 6. 4. 1992 itself the amount was credited to the account of A-4. It may be that ): ....

National Housing Bank is entitled to enter into the security transactions but neither deceased A-4 nor A-5 made any attempt to show that any transaction had been entered into by and between deceased A-4 and National Housing Bank. [Para 110 and 124] [831-E-F; 836-F-G] 3. 6. The accused in their statements u/s. 313 of the Cr. P. C. accepted that the transaction in question was a routine transaction. Such a transaction indisputably was .... , misconduct. For convicting the person uls. 13(1)(d)(iii), there must be evidence on record that accused 'obtained' for any other person any valuable thing or pecuniary advantage without any public advantage. [Para 184 and 185) [855-B-D] CK Damodaran Nair v. Government of India, AIR 1997 SC 551; Dalpat Singh v. State of Rajasthan, AIR 1969 SC 17; B. Ramachandran and S. S. Abdul Hameed vs. State rep. ~ , by The Inspector of Police, Special Police Establishment, Central Bureau of Investigation, Anti-Corruption Branch, (Crl. A. No.

553 of 2000 decided on 23. 03. 2007), by Madras H. C. relied on. 6. 2. A-1 to A-3 (UCO Bank officials) and A-6 (NHB official) were at the relevant time public servants. Each ( one of them played a specific role in diversion of funds from NHB to the account of A-4, all ostensibly under a .. 'call money' transaction. They thereby facilitated A-4 to obtain pecuniary advantage within the meaning of s. 13 of the 1988 Act. Their acts were anything but intended to be in public interest. On the contrary, the public loss and suffering occasioned thereby was immeasurable. Though • it is true that all the funds diverted have subsequently • been returned to NHB and no actual loss has been occasioned thereby either to the UCO Bank or the NHB, but it must not be forgotten that white collar crimes of such a nature affect the ,whole society even though they may not have any immediate victims.

A-1 to A-3 and A-6 are, accordingly, guilty of criminal misconduct uls 13 (1) (d) (iii) of the Prevention of Corruption Act. 1988. However, there is no sufficient evidence to bring in the involvement of A-7, within the fold of the said transaction. [Para 189 and 190) [856-E-H; 857-A-B] 7. 1. A sentence of punishment poses a complex INVESTIGATION problem which requires a balancing act between the competing views based on the reformative, the deterrent as well as the retributive theories of punishment. Accordingly, a just and proper sentence should neither be too harsh nor too lenient. In judging the adequacy of a sentence, the nature of the offence, the circumstances of its commission, the age and character of the offender, injury to individual or the society, effect of punishment on offender, are some amongst many other factors which should be ordinarily taken into consideration by the courts.

It may also be placed on record that as the CBI has not preferred any appeal against the quantuin of sentence, this Court cannot impose a higher sentence. Therefore, the sentences imposed by the Special Court on A-1 to A-3 and A-5 are not interfered with. [Para 191- 196) [857-C-E; 858-8-E] 7. 2. The Special Court acted illegally and without jurisdiction in relying upon the report of the "Janakiraman Committee" while imposing the sentence on A-6. Though, the court may refer to the constitution of the Committee for the purpose of tracing the history for enactment of the Act, but the contents of the said report would not be admitted in evidence in a criminal case without proof thereof. The Committee was not a court. It did not render any decision. It was merely a fact finding body. It was constituted for a limited purpose. The report in terms of the provisions of the Evidence Act, 1872 is not a judgment.

The report may facilitate investigation but cannot form basis of conviction and sentencing the accused. Contents of the report, therefore, without formal proof, could not have been taken in evidence. Accordingly, the Janakiraman Committee Report was not admissible in evidence. [Para 72-73] [816-F~G; 817-A-C] M. V. Rajwade v. Dr. S. M. Hassan, AIR 1954 Nag 71; Re. Maharaja Madhava Singh LR (1905) 31 IA 239, referred to. J\ Branjnandan Sinha v. Jyoti Narain (1955) S. C. R. 955; Ram Krishna Dalmia v. Justice S. R. Tendolkar, 1959 SCR 279; Puhupram v. State of Madhya Pradesh, (1968) MPLJ 629; Sham Kant v. State of Maharashtra 1992 Suppl. (2) sec 521, relied on 7. 3.

Though, A-6 played a very instrumental role in the entire scheme of things and the transactions could not have been possibly carried on without his help, but so ~ (1981) 2 sec 443 referred to para 83 1988 (3) sec 609 referred to para 84 (1996) 4 sec 659 referred to para 86 (2005) 12 sec 631 referred to para 86 (2005) 11 sec 600 referred to para 87 (2004) 11 sec 585 referred to para 87 • (2008) 6 SCALE 469 referred to para 87 2008 (14) SCALE 639 referred to para 88 (2008) 2 sec 561 relied on para 158 AIR 1960 SC 889 relied on para 159 2008 (2) SCALE 303 relied on para 164 (1974) 4 sec 230 relied on para 165 AIR 1953 SC 478 relied on para 166 I ' 2002) 1 sec 241 relied on para 174 1996 Cr. L. J. 2253 relied on para 179 AIR 1997 SC 551 relied on para 184 AIR 1969 SC 17 relied on para 187 CRIMINAL APPELLATE JURISDICTION : Criminal Appeal • • No. 76 of 2004. From. the Judgment & Order dated 04. 12.

2003 of the Special court (Trial of Offences Relating to Transactions in Securities) at Bombay in Special Case No. 2 of 1993. WITH • Crl. A. Nos. 101, 147, 164, 90 and 92 of 2004. Mohan Parasaran, ASG, V. A. Mehta, Bhimrao Naik, Bishwajit Bhattacharyya, P. S. Narasimha, Amit Sharma, Anupam Lal Das, E. C. Agrawala, Mahesh Agarwal, Rishi Agrawala, Nilkanta Nayar, Rajeev B. Masoodkar, S. S. Khanduja, Aarohi Bhalla, Amit Yadav, Pramit Saxena, Sujata Kurdukar, Debashis Mukherjee, Ajay Singh, Ravindra Kumar, Kamini Jaiswal, D. L. Chidananda, Gaurav Dhingra, T. A. Khan, B. K. Prasad (for P. Parmeswaran) for the appearing parties. The Judgment of the Court was delivered by INVESTIGATION S. S. SINHA, J. " INTRODUCTION 1. These six appeals are directed against a judgment and order dated 4th December, 2003 passed by the Special Court in Case No. 2of1993 whereby and whereunder the appellants herein were convicted and sentenced in the following terms :- "(a) Accused No. 1, K.

Margabanthu is sentenced for the offence punishable under Section 120-B read ' )' with Section 409 of the Indian Penal Code read with Section 13(1)[d](iii) read with Section 13(2) of the Prevention of Corruption Act to undergo R. I. for a period of six months and to pay fine of Rs. 1,00,000/ - in default S. I. for two months. . " j (b) Accused No. 2, R. Venkatkrishnan is sentenced for ~ y the offence punishable under Section 120-B read with Section 409 of the Indian Penal Code read with Section 13(1 )[d](iii) read with Section 13(2) of the Prevention of Corruption Act, to undergo R. I. for a period of six months and to pay a fine of Rs. 1,00,000/- in default S. I. for two months. >- . - (c) Accused No. 3, S. V. Ramnathan is sentenced for the offence punishable under Section 120-B read ... with Section 409 of the Indian Penal Code read with Section 13(1)[d](iii) read with Section 13(2) of the Prevention of Corruption Act to undergo R. I. for a period of one month and to pay fine of Rs.

10,000/ - in default S. I. for 15 days. (d) Accused No. 5, Atul M. Parekh is sentenced for the offence punishable under Section 1208 of the Indian Penal Code to undergo R. I. for a period of 15 days and to pay fine of Rs. 10,000/-, in default S. I. for 15 days. (e) Accused No. 6, C. Ravikumar is sentenced for the offence punishable under Section 120-B read with section 409 of the Indian Penal Code read with Section 13(1)[d](iii) read with Section 13(2) of the Prevention of Corruption Act to undergo RI. for a period of three years and to pay fine of Rs. 1,00,000/- in default S. I. for three months. (f) Accused No. 7, S. Suresh Babu is sentenced for the offence punishable under Section 120-B read with section 409 of the Indian Penal Code read with Section 13(1)[d](iii) read with Section 13(2) of the Prevention of Corruption Act to undergo RI. for a period of one year and to pay fine of Rs. 50,000/in default S. I. for three months. " BACKGROUND FACTS ... ~ • 2. While accused No. 1, K.

Margabandhu, at the relevant time, was the Chairman and Managing Director of United Commercial Bank (UCO Bank), (a public sector b°ank), accused No. 2, Ramaiya Venkatkrishnan was the General Manager and accused No. 3, S. V. Ramnathan was the Divisional Manager thereof of the Bombay Branch. -i accused No. 4, Harshad Shantilal Mehta (Harshad Mehta) • is said to be the kingpin of the whole operation. He is no more. accused No. 5, Atul Manubhai Parekh was working as Asst. Vice President in M/s. Growmore Research and Assets Management Ltd. Bombay and representing Harshad Mehta in the matter of undertaking security transactions. accused No. 6 Coodli Ravi Kumar was Assistant General Manager of National Housing Bank (NHB), Bombay and was -+ in charge of its Funds Department. accused No. 7, Seethapathy Suresh Babu was the Assistant Manager of National Housing Bank. He used to report to Accused No. 6, Shri Coodli Ravi R. VENKATAKRISHNAN v.

CENTRAL BUREAU OF -----> ;( Kumar in regard to his function and worked under his instructions. 3. The basic allegation against the appellants and Late Harshad Mehta was that some transactions were carried out in connivance with the officials of the Financial Institutions, Banks illegally as a result whereof Late Harshad Mehta was allowed to obtain a sum of Rs. 40 crores which was actually 'Call Money' given as a loan by the National Housing Bank to the . )' UCO Bank. 4. Similar illegal transactions relating to government securities and other non governmental securities came to the notice of the Central Government. A Committee commonly known as 'Janakiraman Committee' was thereafter constituted, Shri R. Janakiraman, the then Deputy Governor of Reserve Bank of India was appointed as its Chairman. The Committee . • y submitted its report between May, 1992 and April. 1993.

On the basis of the report of the said Committee, Special Courts were constituted in terms of The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1993. 5. Allegations against the appellants and late Harshad . _ ___... , Mehta were as under:- ,. , On 6th April, 1992 National Housing Bank lent a sum of Rs. 40 crores 'at call' to UCO Bank. However the said amount was credited to Harshad Mehta's account in UCO Bank, Hamam Street Branch, Mumbai. This was allegedly done under the instructions of the Head Office in Calcutta and its Zonal ~ Office at Bombay. The Fund Dealing Officer at D. N. Road, Bombay, Branch had alleged that a letter was received from National Housing Bank enclosing the cheque but it was not ~ traceable either in UCO Bank or in National Housing Bank. On the date of credit, the account of Harshad Mehta in UCO Bank, Hamam Street Branch showed an overdraft of Rs. 39. 07 crores.

Harshad Mehta allegedly repaid the said amount with interest amounting to Rs. 27 lakhs through Grindlays Banks which had / ;; debited Harshad Mehta's account. 6. It is stated that National Housing Bank could not have advanced loans directly to the brokers. The recording of the transactions as call money transactions through other banks was a subterfuge meant only to ensure grant of loans to Harshad Mehta. It was also alleged that all the funds manager:nent operations at the National Housjng Bank (the lending bank) were centralized with C. Ravikumar, Assistant General Manager (accused No. 6). He was not only the dealer but was also one of the signatories to the cheques. The back up functions were conducted by S. Suresh Prabhu, Assistant Manager, who used to report to C. Ravikumar and acted under his instructions.

These two officers, between themselves, were responsible for all functions including (i) making the deal; (ii) recording the same ; (iii) preparing the vouchers; (iv) preparing the cheques; (v) signing the cheques (as one of the two signatories); preparing and signing BRs; (vii) custody of BRs received from counter-parties; (viii) issuing and receiving SGL transfer forms and lodging the same with the RBI; and (ix) maintaining the account with the RBI and reconciling the same. 7. The incident having come to light, an investigation was conducted whereafter Charge Sheets were filed against the accused persons. Charges were framed by the Special Court on or about 31st October, ·2001 which were as many as fourteen in number. We need not advert thereto. PROCEEDINGS BEFORE THE TRIAL COURT 8. With a view to prove the charges against the accused persons the prosecutions examined twenty witnesses, viz :- 1.

Shri Bishwajit Chaudhuri, Chairman and Managing Director, United Commercial Bank of India. Sanctioning Authority 2. Shri P. Arvindak Shah .. General Manager, Reserve Bank of India, Production Witness 3. Ravi Vira Gupta Chairman, National Housing Bank, Sanctioning Authority 4. Shri B. L. Sachdeva, Under Secretary in the Ministry of Finance in Banking • 'f Division 5. Shri Hiten D. Mehta, Employee of late Shri Harshad S. Mehta 6. Shri N. A. Shivraman, Assistant, Funds Department, y' j. National Housing Bank 7. Shri Sunil Pandurang Gondhale, Peon, National Housing Bank 8. Jeroo Dalal, Management Trainee, ANZ Grindlays Bank ~ ,. , 9. Shri Satish D: Hosangadi, Chief General Manager, National Housing Bank. 10. Mrs. Jyoti R. Patankar, Officer, Reserve Bank of India Production Witness 11. Sujata Milind Nimbalkar, ANZ Grindlays Bank Production Witness 12. Shri Sunil Kakkar, + Assistant Chief Officer, UCO Bank, Head Office, Kolkata. ! 13.

Shri Chinmoykumar Mukherjee, Assistant Chief Officer, UCO Bank, Kolkata 14. Shri K. Vijayan, Manager, Accounts Department, D. N. Road Branch, UCO Bank 15. Shri Manohar C. Rupani Assistant Manager, D. N. Road Branch, UCO Bank 16. Neelam P. Kini Clerk, Hamam Street Branch, UCO Bank. .. lt on that day the NHB was to route Rs. 40 crores to Harshad Mehta through the UCO Bank and that Ramnathan and Atul Parekh knew about it. It has come on record that the ~ transactions with the brokers were stopped in the year 1991 from the Hamam Street Branch. The accused No. 3 Ramnathan wrote a letter dated 17. 3. 1992 on instruction from accused No. 1 K. Margabanthu for starting of the transactions again. P. W. 18 Karkhanis has stated that on 6. 4. 1992 accused No. 3 Ramnathan came to the Hamam ~- Street Branch and insisted on starting the transactions immediately. He also states that accused No. 3 said that he is saying so on instructions from accused No. 1. This shows that accused No.

3 knew that on that day N. H. B. was to route Rs. 40 crores to Harshad Mehta through the .. _ UCO Bank and he had gone to the UCO Bank Hamam Street Branch to see that the transaction goes through and that he did so on instruction from the accused No. 1, K. Margabanthu. The Supreme Court has clearly laid it down in the case of Somnath Thapa referred to above that for establishing conspiracy knowledge about indulgence in illegal act is necessary. So far as accused No. 1 is concerned, from the statements that he made in the meeting on 6. 4. 1992 it is clear that he knew about the ... 1 transaction. (The dispute about the time of the meeting raised by accused No. 1 is really not relevant considering the means of communication available and the written submissions filed by him, where he says that this was a routine routing transaction). So far as accused No. 2 is concerned, it is he who authorized the call money transaction though the amount of Rs. 40 crores was not ..

, needed by the UCO bank on that day. Therefore, his knowledge about the nature of the transaction is well established. So far as accused No. 3 Ramnathan is concerned, his presence at the Hamam Street Branch on 6. 4. 1992 at 12-12. 30 with Atul Parekh and his insistence that the transaction with the broker should be started immediately show that he was also aware of the ... ,, transaction. It is pertinent to note that cross-examination of P. W. 18 by accused No. 3 shows that even an attempt is not made to dispute the above referred statement of "; P. W. 18. So far as accused No. 5 Atul Parekh is concerned, above referred statement of P. W. 18 clearly establishes his knowledge of the transaction. The statement of P. W. 8 Jeroo Dalal also shows that at his instruction pay order for repayment to the NHB was prepared. " 1, 18. Referring to the other cases vis-a-vis accused Nos.

6 and 7, it was opined :- "Thus, the evidence on record clearly shows that all the accused persons had knowledge of the transaction and )I that all of them have some part in the transaction. " 19. The learned Special Court thereafter considered the question as to whether the 'transfer' was illegal within the meaning of Section 43 of the Indian Penal Code in the light of the provisions of Section 14 of the NHB Act, holding :- "It is thus clear that the National Housing Bank in terms of Section 14 of the Act can only make loans and advances to housing finance institutions and scheduled banks or slum clearance authority constituted under the Central or "' -· State Legislation. Sub-se.

ction (4) of Section 49 of the National Housing Bank Act lays down that if any other provision of this Act is contravened or if any default is ;; made in complying with any other requirement of this Act, or of any order, regulation or direction made or given or condition imposed thereunder, any person found guilty of ... such contravention or default shall be punishable with fine. " 20. So far as the purported offence in regard to criminal breach of trust is concerned, the learned Judge held that the same stood proved against the officers of the Bank. However, so far as accused No. 5 is concerned, the same was held to have not been proved, although it was held that he was guilty ~ of commission of offence of conspiracy. ·:. : 21. So far as the offences under the Prevention of Corruption Act, 1988 is concerned, a finding has also been arrived at that the charges under the said provisions have been proved. 22. The learned Special Court also negated the contention of accused Nos.

6 and 7 that the order of sanction passed +- against them are not valid. SUBMISSIONS 23. The principal contentions raised on behalf of the .. appellants are :- ~ (1) That the prosecution case even if taken to be correct in its entirety does not disclose any offence of conspiracy. (2) So far as accused No. 1 and 2 are conc~rned they were stationed at Kolkata. Only because they had held a meeting in the Chamber of accused No. 1 in presence of PWs 12 and 13, the same by itself does not prove that they were party to a larger 'f conspiracy, namely use of call money for causing unlawful gain to Late Harshad Mehta. (3) The charges of conspiracy vis-a-vis criminal breach of trust cannot be said to have been proved as even ~ in terms of Section 14 of the National Housing Bank Act, such a transaction was legally permissible. "' (4) Only because the accused No.

3 was present at the Bank and wrote a letter for reviving the account of Late Harshad Mehta, the same by itself does not prove that he was a party to the conspiracy. (5) If the prosecution case that there had been a larger .. conspiracy because of unlawful favour shown to Harshad Mehta is correct, the other officers of the UCO Bank, concerned officers of Reserve Bank of r India and ANZ Grindlays Bank should have also been prosecuted. (6) The orders of sanction for prosecuting accused Nos. 6 and 7 were illegal. (7) The evidences of PWs. 5, 7, 12, 13 and 17 should not have been relied upon by the learned Special Court as they were accomplices to the crime. (8) Accused No. 1 having come to his office at about " 43. The learned counsel for the appellants contend before us that the special court so constituted did not have the jurisdiction to try this matter.

They argue that Section 7 read with Sub Section 2 of Section 3, of the Special Court Act, limiting the jurisdiction of the Special Court only to 'offences relating to transaction in securities' would not attract the A transactions which have been attributed to the appellants in the ~ present case. It is argued that the definition of the term 'Securities', as provided for in Section 2 (c) of the Act does not bring within its ambit 'call money transactions' for which they are being tried. It must be noted that the order passed by the learned Special judge is silent on the issue of jurisdiction even though the issue is said to have been raised at the trial. 44. The Special Courts under the Act were established 'for ( the trial of offences relating to transaction in securities and for matters connected therewith or incidental thereto. ' 45. Section 3 of the Act deals with the appointment of, and the functions of custodians under the Act.

Section 3 (2) empowers the Custodians to notify the name of any person who i are involved 'in any offence relating to transaction in securities'. The relevant part thereof reads as under: "3. Appointment and functions of custodians. - ... (2) The Custodian may, on being satisfied on information received that any person has been involved in any offence relating to transaction in securities after the 1st day ofApril, 1991 and on and before the 6th June, 1992 notify the name of such person in the official gazette. " [Emphasis supplied] f· • 46. Section 3, it must be noted, deals only with offences t relating to transaction in securities within the period of time specified in the Act. The time period of carrying out the call money transactions is not in dispute before us, for those transactions admittedly took place within the time period referred to in the section. What is disputed however is whether -.. _ -.

( the said transactions do not relate to transactions in securities, / as is required by the section. The definition of the term 'securities' as provided for in section 2 (c) of the Act, reads as under: "... (c) "securities" includes - (i) shares, scrips, stocks, bonds, debentures, debenture ~ ........ stock, units of the Unit Trust of India or any other mutual fund or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii) Government securities; and (iii) rights or interests in securities;"[Emphasis added] 47. Section 4 of the Act gives the Custodians the requisite - t power to cancel certain contracts entered into fraudulently and/ or to defeat the provisions therein. Section 5 of the Act provides for the establishment of a special Court with a sitting judge of a High Court for speedy trial of such offences. Section 6 empowers the Special Court to take cognizance or try such cases as are instituted before it. 48.

Section 7, which is of relevance in determining the present issues before us, defines the jurisdiction of the Special Courts in criminal matters. It reads as under: "7. Jurisdiction of Special Court. - Notwithstanding anything contained in any other law, any prosecution in respect of any offence referred to in sub section (2) of section 3 shall be instituted only in the Special Court .... " [Emphasis 'i • supplied] The said section begins with a non obstante clause providing that the Special Court shall have jurisdiction to try matters in respect of the offences referred to in Section 3 (2) of the Act. )t 49. The definition of 'securities' in the Act is an inclusive one. It is not exhaustive. It takes within its purview not only the matters specified therein but also all other types of securities as commonly understood. 50. In the State of Bombay and others v. The Hospital Mazoor Sabha and others, [AIR 1960 SC 610] this Court while ;.

,,_ interpreting the definition of "industry" as contained in Section 20) of the Industrial Disputes Act, 1947 noted as under:- "It is obvious that the words used is an inclusive definition denote extension and cannot be treated as restricted in any sense. Where we are dealing with an inclusive definition it would be inappropriate to put a restrictive interpretation upon terms of wider denotation" [Internal citations omitted] j - {See also Regional Director, Employees State Insurance Corporation v. High Land Coffee Works of P. X. S. Saldanha and sons and another, [(1991) 3 sec 617) and Commercial INVESTIGATION [S. 8. SINHA, J. ] Taxation Officer, Udaipur v. Rajasthan Taxchem Ltd.. [2007 i (2) SCALE 120]. Kamataka Power Transmission Corpn. & Anr. v. Ashok Iron Works Pvt. Ltd. [(2009) 3 SCC 240]} 51.

However, even if we hold call money transactions not to be within the scope and ambit of the definition of the term 8 'securities', it must still be remembered that the jurisdiction of the Special Court extends even to offences relating to transaction in securities. Therefore, the jurisdiction of the Special Court could be invoked even in cases where the 'f " transaction is somehow related to securities. It would extend also to the utilization of any amount relating to transactions in securities and for matters connected therewith or incidental thereto. 52. The jurisdiction of the Special Court is an exclusive one. It exercises original jurisdiction to try offences relating to the ~ )_ irregularity in, the sanction required under subsection (1 ), unless in the opinion of that court, failure of justice has in fact been occasioned thereby; ... Explanation. - For the purpose 'of this section. - • (a) error includes competency of the authority to grant sanction;...

" [Emphasis supplied] 71. What has been challenged here before us by both the accused is in fact the competence of the sanctioning authority to issue sanction orders against them. As per the said section, 'a finding' or a 'sentence' shall not be reversed by a court of appeal on the ground of any error, omission or irregularity in . t • the sanctioning order unless a failure of justice has been occasioned thereby. In our considered opinion even if we assume for the sake of argument that the Chairman cum managing director of NHB, Shri RV Gupta was not the competent authority to pass the orders of sanction against the officials of NHB, the prosecution could still rely on the said s. 19 (3) of the Act; especially since there has been no failure of ~ justice in the present case by the said error in the orders. The contentions of the accused, as to the validity of the Sanctioning orders, in view of the said sub section must be rejected. RELIANCE ON THE JANKIRAMAN COMMITEE 72.

Before we move on to deal with the substantive ,.. criminal charges under the Indian Penal Code and th~ Prevention of Corruption Act invoked against the appellants herein, we must first deal with a grievance which has been raised by the learned counsel for the appellants and, in our opinion, rightly that in the impugned judgment the Special Court had acted illegally and without jurisdiction in relying upon the report of the "Janakiraman Committee" while imposing the sentence on respondent No. 6; the relevant portion whereof is as under:- ' . "So far as accused No. 6 is concerned, it is clear from what has been observed [by the] Jankiraman Committee that there was virtually no supervision on accused No. 6 and he was managing the affairs or mismanaging the affairs of the N. H. B. according to his own acts, wish and ultimately at -t the wish and fancy of the brokers. He was giving loans to the brokers which the law prohibited him from doing. " 73.

We have noticed hereinbefore the premise on which the said Committee was constituted. We have also noted its objects and reasons. There is no dispute that the Committee was appointed and it submitted its report. It is one thing to say that the court records to the constitution of the Committee for the purpose of tracing the history for enactment of the Act. But t it is another thing to say that the contents of the said report " would be admitted in evidence in a criminal case without proof thereof. The Committee was not a court. It did not render any decision. It was merely a fact finding body. It was constituted for a limited purpose. Contents of the report, therefore, without formal proof, could not have been taken in evidence. ~ 76. Accordingly, the Janakiraman committee report was not admissible in evidence. The report in terms of the provisions of the Evidence Act, 1872 is not a judgment. The report may facilitate investigation but cannot form basis of . -f 78.

Criminal conspiracy in terms of Section 120B of the Code is an independent offence. It is punishable separately. Prosecution, therefore, must prove the same by applying the legal principles which are applicable for the purpose of proving crimin:il misconduct on the part of an accused. 79. A criminal conspiracy must be put to action and so long crime is merely generated in the mind of the criminal, it does not become punishable. Thoughts, even criminal in character, • • often involuntary, are not crimes but when they take concrete shape of an agreement to do or cause to be done an illegal act or an act which is not illegal but by illegal means then even if nothing further is done, the agreement would give rise to a INVESTIGATION [S. S. SINHA, J. ] criminal conspiracy. 1 80. The ingredients of the offence of criminal conspiracy are: (i) an agreement between two or more persons; (ii) the agreement must relate to doing or causing to be done either (a) an illegal act; ~ .

+ (b) an act which is not illegal in itself but is done by illegal means. 81. Condition precedent, therefore, for holding accused persons guilty of a charge of criminal conspiracy must, therefore, be considered on the anvil of a fact which must be established by the prosecution, viz. , meeting point of two or I more persons for doing or causing to be done an illegal act or an act by illegal means. 82. The courts, however, while drawing an inference from the materials brought on record to arrive at a finding as to whether the charges of the criminal conspiracy have been proved or not, must always bear in mind that a conspiracy is ~ hatched in secrecy ~nd it is, thus, difficult, if not impossible, to obtain direct evidence to establish the same. 83. The manner and circumstances in which the offences have been com. mitted and the level of involvement of the accused persons therein are relevant factors.

For the said purpose, it is necessary to prove that the propounders had expressly agreed to or caused to be done the illegal act but it , may also be proved otherwise by adduction of circumstantial . - ).. evidence and/ or by necessary implication. [See Mohammad Usman Mohammad Hussain Maniyar & Ors. v. State of Maharashtra (1981) 2 SCC 443] 84. The following passage from Russell on Crimes (12th Edn. Vol 1) referred to by Jagannatha Shetty, Jin Kehar Singh and Ors. v. State (Delhi Administration}, [1988 (3) SCC 609 at 731] brings out the legal position succinctly: "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 -t ~ se enough" It was further noted in that case that to establish an offence of criminal conspiracy '[i]t is not required that a single agreement should be entered into by all the conspirators at one time. Each conspirator plays his separate part in one integrated and united effort to achieve the common purpose. Each one is \ aware that he has a part to play in a general conspiracy though he may not know all its secrets or the means by which the common purpose is to be accomplished. ' 85. Dr. Hari Singh Gour in his Commentary on Penal Law of India, (Vol. 2, 11th Edn. p. 1138) elaborates: } "In order to constitute a single general conspiracy there must be a common design..... The evil scheme may be promoted by a few, some may drop out and some may join at a later stage, but the conspiracy continues until it is broken up. The conspiracy may develop in successive stages.

There may be general plan to accomplish the common design by such means as may from time to time be found expedient. " 86. In some cases, intent of unlawful use being made of • • the goods or services in question may be inferred from the knowledge itself. This Court in State of Maharashtra v. Som Nath Thapa [(1996) 4 sec 659] opined that it is not necessary 1 for the prosecution to establish that a particular unlawful use was intended, so long as the goods or services in question could not be put to any lawful use, stating: "... 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 -3- 4 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 use.

Finally, when the ultimate offence consists of a chain of actions, it would not be necessary for the prosecution to establish, to bring home the charge of conspiracy, that each of the conspirators had the knowledge of what the collaborator ~ would do, so long as it is known that the collaborator would put the goods or service to an unlawful use. " [See a. lso K. R. Purushothaman v. State of Kera/a (2005) 12 sec 6311 87. We may also notice a decision of this Court being ~ State (NCT) of Delhi v. Navjot Sandhu @ Afsan Guru [(2005) 11 SCC 600], commonly known as the Parliament Attack case, wherein upon taking note of various earlier decisions of this Court, it was opined that as conspiracy is mostly proved by circumstantial evidence, usually both the existence of conspiracy and its objects have to be inferred from the circumstances and the conduct of the accused, stating : "101.

One more principle which deserves notice is that the cumulative effect of the proved circumstances should be " ~. taken into account in determining the guilt of the accused rather than adopting an isolated approach to each of the circumstances. Of course, each one of the circumstances should be proved beyond reasonable doubt. Lastly, in regard to the appreciation of evidence relating to the conspiracy, the Court must take care to see that the acts or conduct of the parties must be conscious and clear enough to infer their concurrence as to the common design and its execution. 8 In Ram Narayan Popli (supra), this Court noted: "... 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. .. " {See also Esher Singh v. State of A. P. [(2004) 11 SCC 585]}: Recently, in Yogesh @ Sachin Jagdish Joshi v. State of Maharashtra [(2008) 6 SCALE 469], a Division Bench of this Court held: "23. Thus, it is manifest that the meeting of minds of two or more persons for doing an illegal act or an act by illegal means is sine qua 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. n 88. A conspiracy may further be a general one and a separate one. A smaller conspiracy may be a part of a larger conspiracy. It may develop in successive stages. [Nirmal Singh Kah/on v. State of Punjab and Others, 2008 (14) SCALE 639] New techniques may be invented and new means may be devised for advan·cement of common plan. For the said purpose, conduct of the parties would also be relevant. 89. Applying the principles of law to the facts of the present case, we may take note of certain broad features. Indisputably, maintaining of cash reserve ratio is a statutory requirement. All the Scheduled Banks are bound to carry on the statutory instructions issued by the Reserve Bank of India in this behalf.

It is for the maintenance of this cash reserve ratio that UCO Bank used to participate in call money transactions in the money market, decision in respect whereof used to be taken at its Head Office at Kolkata. For the said purpose, however, the Head Office used to be in touch with the D. N. Road Main Branch in Bombay. 90. It is neither . ·n doubt nor in dispute that Mr. K. Venkatkrishnan (Accused No. 2) at the Head Office in Kolkata was authorized for the said purpose. P. W. 12 - Sunil Kakkar in his statement before the learned Special Judge, stated as under: "6.... The General manager Mr. Venkatakkrishnan [A 2] used to decide upon the requirement of borrowing of call . money on a particular date. He also used to decide about lending of call money to other banks. Instructions in this respect were given by the treasury and investment department head office, Kolkatta by the General Manager to the DN Road branch in Bombay. ....

Mr • r Venkatakrishnan, Genara/ manager used to take decisions after knowing the requirement, the rate of interest etc. The call money transactions are authorized by him and are recorded in a register known as call money register. " 91. Such a power had been conferred upon various officers to deal with call money transactions. Indisputably, accused No. 2 was one of them. Although, those various other officers might have been taking decisions in this behalf, but there is no reason to disbelieve P. W. 12 that ordinarily Accused No. 2 used to take a decision. 92. For the purpose of exercise of power furthermore it may ~ .. ,. not be necessary that he would be given instructions only by Accused No. 2 and no other. If he had been given instructions in this behalf from time to time by the Assistant General Manager or Assistant Manager, the same would not necessarily mean that Accused No. 2 was not exercising his power. 93. P. W. 13 in his evidence categorically stated that Mr.

Mallikarjunan (P. W. 17) would take instructions from all the fourteen centres on the basis whereof the General manager Mr Venkatkrishnan [A2] used to take a decision. P. W. 17 in his deposition categorically stated: "2. The deals of lending or borrowing money market were done at Calcutta Head Office by Mr. Venkatakrishnan. This is in respect of call money borrowing and lending... t 3. Mr Venkatkrishnan used to decide from whom call money to be borrowed and to whom it is to be lent. The necessary information could be supplied by the Bombay main branch. Bombay main branch informs us between 10:30 to 2:30 pm. Once a decision is taken for borrowing or lending call money to some institute at particular rate, the entries are entered in Head Office in call money register of Calcutta office. The decision is communicated to the ~ . branch where the transaction is to be executed. " 94.

Indisputably again, however, a decision taken by the General Manager would be subject to any direction which may be issued by Margabanthu (Accused No. 1}, Managing Director 1 of the Bank. Keeping that aspect of the matter in mind, we may also take notice of the call money transaction which took place on 6. 4. 1992 around which the prosecution case revolves. 95. Indisputably, call money was required on the 6th of April, 1993 although there may be some dispute with regard to the quantum thereof. P. W. 17 in his deposition produced a 'Chit' which was marked as Exhibit 56 to show that call money was to be procured from Can Mutual, State Bank of Saurashtra, and ... ~ State Bank of Hyderabad amounting to Rs. 21 crores, Rs. 30 crores and Rs. 50 crores besides of National Housing Bank for a sum of Rs. 40 crores. 96. It is profitable to notice the relevant portion of his testimony, which reads as under: j "6. On 6. 4. 1992, I was informed by Mr. Venkatakrishnan that Rs.

40 crore are borrowed as call money from NHB. ... It was sometime in the afternoon and must be at 2. 00 pm. Mr Venkatkrishnan informed me and I noted it down on a chit in my own handwriting. I noted on that chit the names offour institutions and the total borrowing from four institution Rs. 144 crore. [. .. } I gave this chit to Mr Sunil 1 Kakkar for making necessary entries in the call money register. He made the entries and sent [the call money register] through me to General Manager, Venkatkrishnan. I am shown the call money register(... ] for identification [... ]. I identify the handwriting of Sunii Kakkar. The enteries in Call Money Authorization register would be made .. subsequently by Sunil Kakkar and register would be signed by Venkatkrishnan. I am shown the register (... ] These are in the handwriting of Mr Kakkar and signed by " ~ Venkatkrishnan. [... ]" 97. With respect to the said chit in which Mr.

Mallikarjun had noted down the details regarding the call money transaction after receiving information from A2 [Mr Venkatkrishnan], he further stated: I- "On this sheet, I wrote the names, Can Mutual, SB Saurashtra, and SBH, with the amounts and interest against them as 21 crores. Can Mutual 23%, 30 crores Saurashtra at 26% and 50 crores SB Hyderabad at 26% and these three were totaled after drawing a line below it and the total of 101 crore was written. Thereafter I wrote NHB and against that 40 crore and 26% and again after drawing line the total of 141 crores is made. Exactly I do ~ not remember what happened but I can say that [K Venkatakrishnan (A2)] must have told me three names of the banks and there figures and after totaling, he must have told the fourth name and the figure which is added and the amount is retotaled but I say that I noted down all the four names and figures at the same time. " o 98.

It is true that in his cross-examination, this witness ~ stated that the same was in his handwriting. Existence of the ,.. said Chit is thus not in dispute. It matters little whether it is in the handwriting of P. W. 17 or Accused No. 2. The fact that the decision had been taken by the Accused No. 2 to obtain call money to the tune of Rs. 40 crores is, thus, not in dispute. P. W. 17 also notes that he had noted the details in the chit after .. receiving information from Accused No. 2 in this behalf. The / said Chit containing the details of the call money transactions , was thereafter handed over to P. W. 12 - Sunil Kakkar. It ha~ been brought on record that this witness used to maintain the call money register, and was, therefore, required to note the same in the said register. ,, 99. The learned counsel appearing on behalf of the appellant, however, would submit that the entries in respect of _. . the said transactions had been made post facto.

For the aforementioned purpose our attention has been drawn to the deposition of P. W. 12 - Sunil Kakkar who stated, "the entries of the transactions would be made post facto. It was the responsibility of superior officer to verify the entries in the register. By superior officers, I mean General Manager, Assistant General Manager. " 100. It was principally, therefore, the responsibility of those two officers to make verification. The entry in relation to the said transaction inter alia finds place in Exhibit 45 for daily funds records to the CMD dated 6. 4. 1992. This witness has proved the entries in the said registers. ,. t- 101. Yet again, a comment has been made with reference to his statement that a number of pages of the register were written at one time and i. e. , post facto and Accused No. 2 signed the same after the entries had been made post facto. The signature of the Accused No. 2 in those registers, therefore, stands proved. ~ 102.

The significance of this aspect of the matter would ... be dealt with a little later. Before, however, we do so, we may notice the evidence of P. W. 12 - Sunil Kakkar in this behalf which is to the following effect: "8. [... ]There is reference in the daily Report of call money borrowing on 6. 4. 1992 amounting to Rs. 141 crore [... ]the i last borrowing is from National Housing Bank Rs. 40 crore at 26 % interest due date 7. 4. 1992 i. e. for one day. These figures are collected from a slip of papergiven to me by Assistant general manager Mr. Mallikarjun. The signature of the Assistant General Manager on this document signifies that he has noted the daily funds position as mentioned in the sheet" He, upon making entries with regard to the said transaction ~- "' in the register, in his deposition, stated: "11. [... ] I am shown the entry of 6. 4. 1992. the entry reads as borrowing transaction on 6. 4. 1992 call money of canbank mutual fund 21 crores payable next date i. e. 7. 4.

1992 rate of interest 23% [... ]This entry is in my handwriting. [... ] The other three entries on that day are of State Bank of saurashtra, state bank of Hyderabad and National Housing Bank. These three entries are also in my handwriting[... ]" 103. The question as to whether the aforementioned amount of Rs. 40 crores, which was to be taken on loan from National Housing Bank was really needed or not is, however, matter of some controversy. We may, at this juncture, take 1 or note thereof. 104. The prosecution in view of the aforementioned documentary and oral evidence must be held to have proved the following facts: (i) That the decisions regarding the lending or borrowing ... of call money were usually taken at the Head Office in Kolkata based upon the information received from the DN ... Road Branch in Bombay. (ii) These decisions in Kolkatta were primarily taken by K. Venkatakriahnan (A 2) who at the relevant time was the General Manager of UCO Bank Kolkatta.

r / (iii) The decision as to the call money borrowing on the 6th April, 1992 was also taken by K Venkatakrishnan. On that day he had communicated his decision of borrowing of call money to K Mallikarjun, who at the relevant time was an official there. K Mallikarjun had noted the information regarding the borrowing in a chit of paper. He had noted down information regarding call money borrowing amounting to a total of Rs. 141 crore from four different .. . banks. One of these banks was the NHB from which call money amounting to Rs. 40 crore had been borrowed for a period of one day at 26% interest. (iv) K Mallikarjun had then handed over this chit with the call money information to Sunil Kakkar who had the responsibility of noting the details in the call money register. He accordingly noted the details of the Call Money transactions of the day, including the one from NHB worth Rs. 40 Crore. 105. But that is not the end of the story.

Subsequently, however, a meeting has been alleged to have taken place in the chamber of Accused No. 1. According to P. W. 17, it was at this meeting that Accused No. 1 had informed him and others present at the meeting that the call money which had been borrowed from the National Housing Bank had in fact been arranged by Harshad Mehta for the purpose of carrying out his security transactions. He further informed them that the money was required by Harshad Mehta at UCO Banks, Hamam Street Branch in Bombay. As per the deposition of the said witness, Venkatakrishnan (Accused No. 2) and C. K. Mukherjee (P. W. 13) were also present in the said meeting. He stated: "7. On 6. 4. 1992 there was meeting at about 2. 00 p. m. in a chamber of Mr. Margabanthu where Mr R. Venkatakrishna, myself and CK Mukherjee were present. Mr Margabanthu who is accused in this case told us that this amount from NHB of Rs. 40 Crore meant for Harshad S Mehta account.

" In his cross-examination to which our attention has been drawn by the learned counsel appearing on behalf of the appellant, he is said to have accepted that he did not remember to have heard from Accused No. 2 that it was not a call money and that the said amount was raised from the Bank by Harshad Mehta. He further accepted : • 1. "I did not tell the CBI about this as I was not asked any question about the same by the CBI,[... ) I was not knowing for what purpose the inquiry was made. I did not tell CBI of my own regarding the meeting in the Chamber of Mr Margabanthu, as I was only answering the questions. " • 106. We have noticed hereinbefore that he, ther~fore, has given some explanation as to why we could not disclose as to what had taken place in the said meeting in his statement recorded by the Central Bureau of Investigation. The fact that such a meeting had taken place was also the subject matter of deposition by P. W. 13, stating: "7.

On that day in the afternoon I and Mallikarjunan were called by General Manager Venkatakrishnan. Mr. ~ . :.... . Venkatakrishnan told us that we had to go to the chamber of Managing Director Margabanthu and report to him about all the treasury transactions. Then we, means, I , Mallikarjunan [PW 17) and Venkatakrishnan [A 2] went to Mr Margabanthu's office [A 1] and Venkatkrishnan informed him the day's transactions. While referring to NHB's call money transaction of 40 crore Mr. . ,. Margabanthu said that it was not UCO bank's call money ... transaction. It was money arranged by Harshad Mehta from NHB. He also said that the money was required by Harshad Mehta at our Bank at Hamam Street Branch for undertaking certain securities operations by him. [... ] He also told that Mr. Venkatkrishnan General Manager that this amount of Rs. 40 Crore should be immediately sent to Hamam Street branch so that Security transactions could be completed by Mr. Harshad Mehta" 107. P. W.

13, allegedly on this basis, had called up Vijayan (P. W. 14) who was the Manager, Accounts Department, D. N. Road Branch of the Bank to inform him of the development, stating: "[... ] After the meeting was over we, i. e. I and Mr . 4 • Mal/ikarjun came down to our department and as per instructions of Mr Venkatkrishnan, General Manager I conveyed this message to Mr Vijanan ON Road Branch, Mumbai" 108. Such a telephone call to P. W. 14 is further f. corroborated by P. W. 17, stating: "8. Mr CK Mukherjee phoned to Mr. Vijayan at Bombay and informed him about this decision. [. .. } 11. Mr Venkatakrishnan told me that he telephoned and informed Mr. Vijayan, Bombay. My statement that Mr Mukherjee telephoned Mr Vijayan is on the basis what Mr. Venkatkrishnan told me. Mr Venkatkrishnan told me most ~ tprobably after the meeting but I do not recollect the exact time. " 109. Our attention, however, has been drawn to the evidence of P. W. 14 by Mr.

Narasimha, learned counsel appearing on behalf of the accused No. 2 that the instructions for cancellation was received at 1:00 p. m. or so. Although, . "( according to P. W. 17, the meeting had taken place at about 2:00 p. m. 110. It must, however, be borne in mind that in a case of this nature where the witnesses were being examined more than ten years later i. e. in the 2003, some amount of discrepancy with regard to time would not be of much significance. We i would deal with this aspect of the matter at some details at an ... appropriate stage. Keeping in view the statement made by P. W. , 14 which was not shaken in the cross examination, there is no reason for us to disbelieve that part of the material brought on record that call money from NHB was, in fact, sought to be cancelled. In any event, as would appear from the discussions to be made hereinafter, the prosecution cannot be said to have failed to prove its case.

We may, however, notice that at one stage, according to this witness, such a telephone call had been •• • made at about 2:00 or 2:30 p. m.. 111. Our attention has also been drawn that P. W. 13 before the C. 8. 1. stated: "Mr. Kakkar also told me that the telex message received at Head Office from D. N. Road, Bombay branch showing position of call money borrowed lend on that day does not contain the borrowing item of Rs. 40 crores from National Housing Bank. " 112. Telex message has not been produced. Nothing much turns on the said purported admission. It appears from the records that at a later stage the General Manager (l&M) was asked to make an investigation. A report was filed by P. W. 17. Only because in the said report again the factum of the meeting -1 .. did not find place, the same by itself should not be taken to be ground to ignore the depositions of all these witnesses. 113.

Apart from the supposed contradictions and inconsistencies, it is also pointed by the learned counsel for the appellants that no such meeting had taken place in the chamber of Accused No. 1 on 6. 4. 1982. Our attention has been drawn to the evidence of D. W 1-Ajit Sadhukhan, who at the relevant 'f time was the driver of the Accused No. 1 to contend that Accused No. 1 came to his chamber only at about 3. 30 p. m. although the transaction was over at 3. 00 p. m. , stating: "On 6th April when in the morning I went to the flat of Margbanthu, Mrs. Margbanthu informed me that Mr. ; Margbanthu is coming to Calcutta by flight from Madras and that I have to take the vehicle to airport for Mr. Margbanthu. Shri Margbanthu came to Calcutta Airport by flight at about 12. 30 p. m. He was having luggage with him. The suitcase was having a registered tag. I took him to his residence. Mr. Margbanthu told me that he will leave for the office after his lunch. We started the office at about 3.

15 pm and reached the office at 3. 30 pm. We tell the airport with Mr. Margbanthu at about 1 O'clock and ~ ' reached the residence at 2 0 clock. " 114. The prosecution case must be judged on a broad based fact. The Indian Airlines Flight reached Kolkata Airport at about 12. 30 p. m. on that date. Evidences brought on record show that it takes about 45 minutes to reach the Head Officer from the Airport. According to the prosecution witness to which we have already adverted to, the meeting took place round about 2'0 clock. Even if Accused No. 1 had gone to his house for taking lunch, the possibility of his coming to his office round about 2'0 clock cannot be ruled out. The Ctiairman cum Managing Director of a Bank presumably would like to attend to his duties during banking hours and particularly when vital decisions as regards the borrowing of call money was required ~ to be taken. That amount of concern from a highly responsible officer should be expected. 115.

We must, however, nqtice that the evidence of P. W. 14, who at the relevant point of time was working at the .... Bombay Branch of UCO Bank, categorically stated : •, "7. The head office had instructed that call money ">( transaction of Rs. 40 crore was cancelled. This instruction was received at about 1:00 pm or so. From Head office Mr Mukherjee talked to me about this cancellation of call money transaction from NHB. Mr Mukherjee first told me that there are four call money transaction from NHB and subsequently informed that Rs. 40 crore transaction from NHB has been cancelled. " i Mr. Vijayan (PW 14) in his testimony further goes on to clarify about the cancellation of the call money. 116.

Though the entry for the call money transaction occurs in the Note Book which was being maintained, but the final Call money register which was being maintained only had three call money transactions, since by the time the entries in the register had to be noted down the fourth transaction had already been ~ j. cancelled: "9. I am shown note Book [... ] These four entries in my· handwriting are of all call money. [... ] and last entry is of NHB Rs. 40 crore rate of interest@ 26 % and this entry has subsequently cancelled on receipt of instruction from head office. [... ] The entry of call money transaction is taken in the call money register[... ] Mr Rupani made entry in call money register from the note book. 10. The register shown to me is call money register in which enteries are taken from note book. Only three call money transactions of 6. 4. 1992 are mentioned in this register where as fourth transaction of NHB is not mentioned and there is no entry in this register. [...

) ~ - 11. [... ]In respect of other three banks they issued call money receipts to the said banks and collected the cheques. It was between 2:00 to 3:00 pm. In case of NHB Receipt was not prepared and sent as transaction was cancelled. Before 2:00 pm it was cancelled. [... ]" ,. 0 ,,. 117. However, despite being informed that the call money from NHB had been cancelled, when the ON Road Branch, UCO Bar. ik received a cheque for Rs. 40 crores from NHB, Mr. Vijayan (PW 14) [ON Road Branch) called Mr. Ravikumar (A 6) [NHB) to seek clarification in this respect. Mr Vijayan in his testimony notes: t "7. [... ]By 3. 00 pm we received a cheque of Rs. 40 crores from NHB. Thereafter I telephoned Mr. Ravi Kumar at NHB and asked why he had sent the cheque when transaction is cancelled, he told me on phone in reply that this cheque of Rs. 40 crore pertains to Hamam street Branch. [... ] He further went on to state: "12. [... ] I called up Mr Ravi Kumar because he should _. .

have sent the cheque to Hamam street branch instead he sent the cheque to ON Road Branch. [... ]" 118. Mr Vijayan (PW 14) also clarified that he had also received information from Mr. Mukherjee (PW 13) that the cheque was to be transferred to the Hamam street branch of UCO Bank. 119. However, since there was little time left to transfer the cheque to the Hamam street Mr Vijayan directly deposited the cheque with RBI. He also informed this information to Mr Karkhanis (PW 18) from the Hamam street branch: "7. [... ]Since there was no time left and since the Hamam street Branch cannot deposit the cheque. I informed . the ~ Hamam street branch that we have received the cheque and I am depositing it with RBI. Mr Karkhanis was the Hamam street Branch Manager and I talked with him in connection with the transaction. I told him that we received cheque of Rs. 40 crore from NHB on behalf of Hamam street branch and we have deposited it with RBI. " .. 120. Mr.

Karkhanis (PW 18) [Senior Manager, Hamam Street Branch] stated in his testimony as regards the said phone call which was received by him from Mr Vijayan (PW 14): "2. On 06. 04. 1992 the current account of Harshad Mehta was credited by 40 crores. The cheque was deposited in DN Road Branch but I have not seen that cheque. Sr. Manager of ON Road Branch, Mr Vijayan informed me on phone that he had received a RBI cheque of 40 crores and he was depositing it directly with RBI because of time constraint. He gave instructions to credit it to the account of Harshad Mehta. The instruction were received from Mr. Vijayan at about 3. 00. " - 121. However, Mr Vijayan, (PW 14) [DN Road Branch] in his testimony disclosed that he had only received information 1 '/... from NHB that the cheque was to be transferred to the Hamam Street Branch in the following terms : "It did not happen that I contacted Ravi Kumar on telephone and he told me that amount of Rs.

40 crores is meant for Harshad Mehta, he only told me that it is meant for • Hamam Street Branch" 122. There is a discrepancy between the two testimonies of Mr Vijayan [ON Road] and Mr Karkhanis [Hamam Street], as Mr Vijayan in his testimony stated that the amount of Rs. 40 Crore was meant for Hamam Street Branch and that he himself had not been informed that the amount was meant for Mr. Harshad Mehta. Mr Pradeep Kharkhanis stated that Mr. Vijayan specifically informed him that the said amount was meant to -I .. be credited to the account of Mr Harshad Mehta. If Mr Vijayan himself did not know that the 40 crore were meant to be deposited in the account of Mr. Harshad Mehta at Hamam Street Branch how could he have informed Mr Kharkhanis that it was for Mr Harshad Mehta.? 123. The matter, however, must be considered from another angle. A bankers' cheque for a sum of Rs. 40 crores was received by the Hamam Street Branch of the UCO Bank.

The records of the UCO Bank reflect that the same amount was to be repaid on 7. 4. 1992. The said sum was to carry interest at the rate of 26% per annum. 124. Had the transaction related to call money, it should have been deposited in the D. N. Road Branch and not in the Hamam Street Branch. The Hamam Street Branch does not deal with call money. On 6. 4. 1992 itself the amount was credited to the account of Harshad Mehta. Although a lot of arguments had been advanced to contend that National Housing Bank is entitled to enter into the security transactions but neither the deceased Harshad Mehta nor the accused No. 5 made any attempt to show that any transaction had been entered into by and between the deceased Harshad Mehta and -'< • National Housing Bank. 125. The accused in their statement under Section 313 of the Code of Criminal Procedure accepted that the transaction in question was a routine transaction.

Such ;:i transaction indisputably was utilized for the personal gain of Harshad Mehta. If such transaction was a routine transaction, it goes to show the long standing agreement between the said bank and Harshad Mehta. Why on one pretext or the other UCO Bank would allow itself to be used as a conduit thereto is the question. 126. P. W 5 - Hiten D. Mehta who used to work with Harshad Mehta admitted that he knew Ravikumar (Accused No. 6) since 1990 and the remittance facilities were available. ·~ A sort of arrangement by and between the said Bank and ·Harshad Mehta, thus, stood established. 127. This is one of the links in the chain to show how the arrangement developed so as to bring the ma! ter within the purview of conspiracy amongst the accused. 128. In between 11:00 a. m. and 3:00 p. m. things took .... place in quick succession. The transaction in question was ' shown to be a call money transaction.

While assuming it to be so for the time being, if it was a call money transaction it could not have been used for any