STATE OF MADHYA PRADESH v. RAMESHWAR & ORS

Citation: [2009] 5 S.C.R. 510

Court: Supreme Court of India

Bench: ALTAMAS KABIR, CYRIAC JOSEPH

Case summary

STATE OF MADHYA PRADESH v. RAMESHWAR & ORS.pdf

Judgment text

[2009] 5 S. C. R. 510 STATE OF MADHYA PRADESH v. ~ RAMESHWAR & ORS. (Criminal Appeal No. 647 of 2009) 1 APRIL 6, 2009 [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ. ] PENAL CODE, 1860/PREVENTION OF CORRUPTION ACT, 1988: S. 409, 418, 420, 1208/S. 13(1)(d) r/w s. 13(2) Cooperative Bank - Alleged illegality in sanctioning loans - Trial Court directing filing of charge sheet - Set aside by High Court on the ground that respondents could not be ' treated as public servants and hence could not be punishable either under the provisions of the prevention of Corruption Act, 1988 or under S. 409 /PC - On appeal, Held: High Court erroneously quashed the charges - Its orders set aside and charges framed by the Trial Court restored - Trial Court to proceed with the trial. WORDS & PHRASES: 'Public Servant' - Meaning ofin the context of Prevention of Corruption Act. The Respondents were Directors of the Indore Premier Co-operative Bank Ltd. and were also Members of the Loan Committee.

There was a complaint filed in the Lok Adalat that they had sanctioned loans to some persons without verifying their eligibility. Charge sheet was filed against the Respondents under Sections 409, 420 and 120-B IPC together with Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. Trial Court ordered framing of charges. On appeal, High Court set aside the order of the Trial Court. The High Court held that the respondents could not be treated as public servants and they could not be punished either under the provisions of the Prevention of Corruption Act or under Section 409 IPC. Disposing of the appeal, the Court HELD: 1. The High Court did not, while con~idering the definition of the expression "public servant", take into account the fact that the decision in Laljit Rajshi Shah was no longer applicable in view of the amended provisions of Section 2(c) of the Prevention of Corruption Act, 1988, defining the said expression.

Prima facie, it appears that the Respondent Nos. 1 and 3, in their capacity as the Chairman and Executive Officer of the Bank, come within the definition of "public servant" under Section 2(c)(ix) of the 1988 Act. [Para 37] (525-A-B] State of Maharashtra vs. Laljit Rajshi Shah and others (2000) 2 sec 699, held inapplicable. 2. There is no bar under the M. P. Co-operative Societies Act, 1960, to take resort to the provisions of the general criminal law, particularly when charges under the Prevention of Corruption Act, 1988, are involved. (Para 38] [525-F] I Stree Atyachar Virodhi Parishad vs. Dilip Nathumal Chordia & Anr. (1989) 1 SCC 715; Om Wati (Smt) & Anr. vs. State, through Delhi Admn. & Ors. (2001) 4 SCC 333; Munna Devi vs. State of Rajasthan & Anr. (2001) 9 SCC 631; Govt. ofAndhra Pradesh & Ors. Vs. P. Venku Reddy (2002) 7 SCC 631; State of Maharashtra & Anr. vs. Prabhaka"ao & Anr. (2002) 7 SCC 636; Indian Oil Corpn. vs. NEPC India Ltd. & Ors.

(2006) 6 SCC 736 and Nikhil Merchant vs. Central Bureau of Investigation & Anr. 2008 (11) SCALE 379, referred to. 3. The High Court had in revision erroneously quashed the charges framed against the respondents. Consequently, the orders dated 17th March, 2007, passed by the High Court in Crl. Revision No. 1303 of 2006 and Crl. Revision No. 36 of 2007, impugned in these two appeals are set aside and the charges framed by the Trial • Court against the respondents are restored. [Para 40] [526-A-B] 4. The Trial Court shall proceed with the trial. It is clarified that the views expressed in this judgment are prima facie in nature for the disposal of these appeals only and should not influence the trial in any way.

[Para 40] [526-8-C] Case Law Reference: ~ (2000) 2 sec 699 distinguished Para 5 (1989) 1 sec 715 referred to Para 14 (2001) 4 sec 333 referred to Para 15 (2001) 9 sec 631 referred to Para 16 (2002) 1 sec 631 referred to Para 19 (2002) 1 sec 636 referred to Para 19 (2006) 6 sec 736 referred to Para 24 2008 (11) SCALE 379 referred to Para 25 CRIMINAL APPELLATE JURISDICTION: Criminal Appeal ~- No. 647 of 2009. From the Judgment & Order dated 17. 03. 2007 of the High Court of Madhya Pradesh Bench at Indore in Criminal Revision No. 1303 of 2006. Ravindra Srivastava, C. D. Singh, Sunny Chaudhary, Aditya Singh, K. Krishna Kumar, Chavvi Batra, Upasana Nath, Vairagya and Kunul Verma for the Appellant. Vivek Tankha, Sushil Kumar Jain, Gurleen Chhabra, Anubha Singh and Pratibha Jain for the Respondent. .. , The Judgment of the Court was delivered by AlTAMAS KABIR, J. 1. Leave granted in both the special leave petitions which are taken up for hearing and final disposal together. 2.

The respondents were Directors of the Indore Premier Co-operative Bank Limited and were also members of the Loan Committee for sanctioning loans. One Harish Patil and Kanhaiyalal Yadav lodged a complaint with the Special . / Establishment of the Lokayukt, Madhya Pradesh at Indore, alleging that the respondents had sanctioned loans amounting to Rs. 56,50,000/- in favour of 35 persons without verifying their .... eligibility to receive such loans or the end-use of such loans and had intentionally acted in an illegal manner to enable the said borrowers to avail of the loans. On receiving the complaint, the Special Establishment Lokayukt, Indore, registered Crime No. 133/99 and after investigation filed a charge-sheet against the respondents under Sections 409, 420 and 120-B of the Indian Penal Code CIPC' for short) together with Sections 13(1)(d) read with Section 13(2) of the Prevention of Corruption -I Act, 1988 (hereinafter referred to as the 'P. C. Act').

The Trial Court on due consideration of the charge-sheet, found a prima facie case against the respondents and by its order dated 4. 11. 2006 directed framing of charges as suggested in the "\ charge-sheet. 3. Being aggrieved by the said order dated 4. 11. 2006, directing framing of charges, the respondents moved in revision before the Indore Bench of the Madhya Pradesh High Court for setting aside the aforesaid order passed by the Special Judge, [2009) 5 S. C. R. Indore, in Special Case No. 1 of 2006 and for their discharge from the above-mentioned charges. 4.

Considering the case made out by the respective parties, the High Court came to the conclusion that admittedly i ~ the respondents were members of the Loan Committee and as such members they are only required to consider the loan cases which are put up to them by the concerned Bank Manager for the grant of loan and it was for the Branch Managers to verify the facts regarding entitlement for grant of loan before submitting the same to the Loan Committee. Furthermore, it is only after the Executive Officer had also verified the applications for loan that the loan cases were put up before the Loan Committee for its sanction. In view of the aforesaid procedure, the High Court held that it could not be said that the Members of the Loan Committee (the respondents \herein) had acted illegally and had wrongly sanctioned loans to the concerned borrowers.

The High Court also took into consideration the fact that out of the total amount of loan which had been sanctioned by the Loan Committee amounting to Rs. 56,50,000/- a total sum of Rs. 64,69,000/- had already been deposited by the concerned depositors in the Bank and hence it could not be contended that by sanctioning the loans to the concerned borrowers the Bank had suffered any monetary loss since the full amount of loan, together with interest, had already been deposited by the borrowers in the Bank. 5. On the question of status of the respondents as "public servants" for the purpose of prosecution under the provisions of the Prevention of Corruption Act, 1988, the High Court r relying on the judgment of this Court in State of Maharashtra vs.

Laljit Rajshi Shah and others ((2000) 2 SCC 699) held that the respondents could not be treated as public servants and could not, therefore, be punishable either under the provisions of the Prevention of Corruption Act, 1988, or under Section 409 IPC. 6. On such finding, the High Court by its order dated 17th - .. March, 2007, allowed the Revision Petition and set aside the order of the Trial Court dated 4. 11. 2006 framing charges against the respondents and discharged them from the said charges under Sections 409, 418, 420 and 120-B IPC and Section 13(1)(d) read with Section 13(2) of the P. C. Act. ~ • 7. The present appeals have been filed by the State of Madhya Pradesh against the said order of the High Court. 8. Appearing for the appellant State of Madhya Pradesh, Mr.

Ravindra Srivastava, learned Senior Counsel submitted that the High Court had erred both as to the role played by the respondents and also on the question of the status of the said respondents as "public servants" for the purpose of prosecution under the provision of the P. C. Act. Mr. Srivastava also submitted that the High Court had travelled beyond its jurisdiction under Sections 397 read with Section 401 Criminal Procedure Code in re-assessing the factual position in order to arrive at the conclusion that the provisions, under which they had been charged, were not supported by the materials in the charge-sheet. 9. Referring to the inquiry report dated 21st January, 1999, submitted by the District Vigilance Committee, Indore, on the complaint of Shri Kanhaiyalal Yadav, Mr. Srivastava submitted that it had come to light during the inquiry that the quotation of Indore Motor and Agro Machinery, having its registered office at 535 Scheme No.

54, Indore, loans were advanced by the Banks to the persons named in the report for purchase of different kinds of vehicles. However, the said firm was not available at the address indicated. It also transpired that the :"\. firm was managed by one Shri Himanshu Joshi, son of Shri .. , Hem Joshi, Public Contact Officer working in the Indore Premier Co-operative Bank and the Current Account of the firm was with • the Kila Maidan Branch, Indore and the various Demand Drafts were deposited in the said account and the cash was subsequently withdrawn. It was also reported that the loans were sanctioned with the connivance of the Bank administration for the purchase of vehicles, but were not used for the said purpose and the Demand Drafts were encashed with the intention of cheating the Bank. Mr.

Srivastava submitted that the tenor of the Inquiry Report was that Shri Hem Joshi had, in his capacity as the Public Contact Officer of the Bank, in connivance with the other respondents, set up a fictitious firm in the name of his son Shri Himanshu Joshi for the purpose of encashing the Bank Drafts which were all deposited in the account of the purported firm in the Kila Maidan Branch, Indore. 10. Mr. Srivastava pointed out that from the statements made by the Managers of the different Branches of the Bank a prima facie case was made out that not only were the rules relating to sanctioning of loans not followed, but the grant of such loans revealed lack of awareness and application on the part of the respondents.

He also submitted that the officers of the National Bank for Agricultural and Rural Development (hereinafter referred as ·NABARD') conducted an inspection of the Indore Premier Co-operative Bank in June, 1998 and in their Report they also raised objections with regard to the loans which formed the subject matter of the present appeals. 11. Mr. Srivastava submitted that the finding of the District Vigilance Committee was that while the Branch Managers of the different Branches of the Bank had not complied with the directions given with regard to the policy of sanctioning loans, the Chairman, and the Chief Executive Officer of the Bank, who are the Respondent Nos. 1 and 3 herein, failed to take any action despite the Inspection Report of NABARD, which gave rise to the conclusion that they had also played a decisive role in defrauding the Bank. Mr.

Srivastava submitted that since the 'said Inquiry Report indicted all the respondents, along with several others, it had recommended that a case be registered under Section 420 read with Section 120-B IPC against all the /persons named. A further recommendation was made to register a case against the officers of the Bank, including the respondents herein, under Section 406, 409, 419 and 420 read STATE OF MADHYA PRADE. SH v. RAMESHWAR & ORS. 517 ' with Section 120-8 IPC. Departmental action was also recommended against the Members of the Loan Committee of which the Respondent No. 1, Rameshwar, was the President, while the other respondents, who were all Directors of the Bank, were members. ~ . 12. Mr.

Srivastava urged that the High Court had erred in completely absolving the respondents of any responsibility in connection with the sanctioning of the loans and placing the entire burden of the fraud perpetrated on the Branch Managers and the Executive Officer for inadequate or improper verification of the entitlement of the borrowers for grant of such loans. Learned counsel also urged that the High Court had erred in observing that the members of the Loan Committee had a limited role to play for the purpose of sanctioning loans, --( since the ground work had already been prepared upto the level ~ of the Branch Managers who had recommended the grant of such loans. 13. Mr. Srivastava submitted that in going into factual aspects of the matter, the High Court had travelled beyond its revisional powers in coming to findings of fact, which were yet to be established on evidence. 14. To support his submission, Mr.

Srivastava firstly referred to a decision of this Court in Stree Atyachar Virodhi Parishad vs. Dilip Nathuma/ Chordia & Anr. ((1989) 1 SCC 715], wherein, while considering the question relating to discharge of or framing of charges against an accused, it was held that when the Trial Court, finding a prima facie case prefers to frame charges against the accused, the High Court should not interfere by probing into the sufficiency of grounds for conviction of the accused and ordering his discharge. 15. Mr. Srivastava then referred to another decision of this • Court in Om Wati (Smt) & Anr. vs. State, through Delhi Admn. & Ors. ((2001) 4 sec 333], wherein also, while considering the provisions of Sections 227, 228 and 401 of the Criminal Procedure Code, 1973, this Court, inter alia, observed that the High Court should not ordinarily interfere with the Trial Court's order for framing of charge unless there is glaring injustice. 16.

Reference was lastly made to the decision of this Court in Munna Devi vs. State of Rajasthan & Anr. [(2001) 9 SCC 631], wherein it was held that the revisional powers of the High . " Court could not be exercised in a routine and casual manner for quashing the charges framed against an accused, except where there was a legal bar or where no offence is made out against an accused in the F. 1. R. 17. Mr. Srivastava submitted that apart from the above, the finding of the High Court that the respondents were not public servants was erroneous, as they had been elected as Office Bearers of the Co-operative Bank. He submitted that the High ... Court had wrongly relied upon the decision of this Court in State .. of Maharashtra vs. Laljit Rajshi Shah & Ors. (supra), in which the definition of "public servant" as contained in section 2 of the Prevention of Corruption Act, 1947 was under consideration.

In the said Act, "public servant" has been defined in Section 2 to mean "public servanf' as defined in Section 21 of the Indian Penal Code. Mr. Srivastava urged that the definition of "public servant" in the Prevention of Corruption Act, 1988 has been given a much wider connotation and the limited interpretation of the said expression in Laljit Rajshi Shah & Ors. 's case (supra) would not, therefore, be applicable to the facts of this case. 18. Mr. Srivastava submitted that on account of being an Office Bearer of a registered Co-operative Society engaged in banking, the respondents came within the definition of "public servant" under Section 2(c)(ix) of the 1988 Act. He also submitted that the High Court had failed to take note of Section 87 of the M. P. Co-operative Societies Act, 1960, which provides that the Registrar and other officers, as well as employees of a Co-operative Bank or a Co-operative Society, .

would be deemed to be "public servants" within the meaning ' I STATE OF MADHYA PRADESH v. RAM! =SHWAR & ORS. 519 of Section 21 of the Indian Penal Code. --'! '> 19. In this regard, Mr. Srivastava referred to the decision of this Court in Govt. of Andhra Pradesh & Ors. Vs. P. Venku Reddy [(2002) 7 sec 631], where reference was made to the decision in Laljit Rajshi Shah & Ors. 's case (supra) and it was observed that the same was distinguishable as it was based on an interpretation of the definition of "public servant", as defined in the 1947 Act, which restricted such definition to cover only such "public servants" as were included in Section 21 of the Indian Penal Code. Reference was also made to another decision of this Court in State of Maharashtra & Anr. vs. Prabhakarrao & Anr.

[(2002) 7 SCC 636], in which the wider definition of the expression "public servant" under Section 2 (c) of the Prevention of Corruption Act, 1988 was held to be applicable and not the narrow definition under Section 21 of -.. ; the Indian Penal Code. 20. Mr. Srivastava submitted that as far as the State of j Madhya Pradesh was concerned, the same submissions would -;tr also be relevant in SLP(Crl. )No. 6929/07. 21. Replying to the submissions made on behalf of the appellant, Mr. Vivek Tankha, learned Senior Counsel, firstly, took us to the Charge framed against the respondents under Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 and Sections 409, 418, 420 and 120-B of the Indian ( • Penal Code. Mr. Tankha pointed out that the Charge was ' ' framed against the Respondent No.

1 in his capacity as Chairman/Manager of the Indore Premier Co-operative Bank and as a Member of the Loan Sanctioning Committee during the period from 4th March, 1997 to 4th May, 1998, when he was a public servant. The charge against the Respondent No. 1 was that in connivance with the other accused persons and on the basis of forged documents relating to "Indore Motor and Agro . , Machinery", he had, without verification of the loan applications filed for the purpose of purchasing of vehicles by the other coaccused, without ensuring that the margin money was deposited as per the rules and without obtaining security, sanctioned the loans in contravention of the Bank Rules and issued the cheque/drafts of such loans to the applicants directly who withdrew the amount without purchasing the vehicles, resulting in misappropriation of Rs. 56,50,000/-. Accordingly, the Respondent No.

1 was purported to have committed the offence punishable under the above-mentioned provisions of the Prevention of Corruption Act, 1988 and the Indian Penal code. Similar charges were framed against the other respondents. 22. Mr. Tankha submitted that from the Inquiry Report of the District Vigilance Committee it would be quite apparent that it was the Branch Managers of the different Branches of the Bank who had failed to comply with the procedure relating to grant and sanction of loans and that all the lapses which were attempted to be foisted on the respondents by Mr. Srivastava during the course of his submissions, were required to be fulfilled at the Branches before proposals were put up for sanctioning of the loans. Mr. Tankha submitted that the Loan Sanctioning Committee had to deal with innumerable loan ·applications and it was not possible for the said Committee to scrutinize each application to ensure whether all the conditions : for grant of loan had been satisfied. Mr.

Tankha, in fact, urged ' that in the Inquiry Report, the only allegation made against the respondents herein was that they had not taken any action despite the Inspection Report of NABARD and it was only a presumption that as a result thereof a conclusion must be drawn that the Chairman of the Bank and the Chief Executive Officer had also played a main role in the fraud committed upon the Bank. 23. Mr. Tankha submitted that apart from the above, the only other allegation against the respondents in the Inquiry Report was that the members of the Loan Committee had failed to perform their duties efficiently. He submitted that the allegations pointed out by Mr. Srivastava had really been - ( directed at the Branch Managers of the various Branches and Committee, they had acted inefficiently, it has also been suggested that the Chairman and the Executive Officer of the Bank had connived with the other accused in defrauding the Bank.

In the Inquiry Report it was stated that the respondents had in conspiracy with Shri Hem Joshi, the Public Contact Officer of the Bank, whose son, Himanshu Joshi, maintained a current account of a fictitious firm - Indore Motor and Agro ,, Machinery in the Kila Maidan Branch of the Bank at Indore encashed the various Demand Drafts issued on account of the loans, by using the said account without purchase of any vehicle for which the loans had been sanctiuned. STATE OF MADHYAPRADESH v. RAMESHWAR & ORS. 525 ) 37. The High Court also did not, while considering the definition of the expression "public servant", take into account the fact that the decision in Laljit Rajshi Shah & Ors. 's case (supra) was no longer applicable in view of the amended provisions of Section 2(c) of the Prevention of Corruption Act, 1988, defining the said expression. Prima facie, it appears to > us that the Respondent Nos.

1 and 3, in their capacity as the Chairman and Executive Officer of the Bank, come within the definition of "public servant" under Section 2(c)(ix) of the 1988 Act, which reads as follows:- "public servant" means - any person who is the President, Secretary or other office-bearer of a registered cooperative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid from the Central Government or a State Government or from ' .. J any corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government Company as defined in Section 617 of the Companies Act, 1956 (1 of 1956). " 38. Mr. Tankha's submissions, which were echoed by Mr. Jain, that the M. P.

Co-operative Societies Act, 1960 was a complete Code in itself and the remedy of the prosecuting / agency lay not under the criminal process but within the ambit of Sections 74 to 76 thereof, cannot also be accepted, in view ' ' of the fact that there is no bar under the M. P. Co-operative "' Societies Act, 1960, to take resort to the provisions of the general criminal law, particularly when charges under the Prevention of Corruption Act, 1988, are involved. 39. The judgments referred to by Mr. Tankha regarding the tendency to convert civil disputes into criminal cases to ~ pressurize the accused, are unimpeachable, but the same will not apply to the facts of this case where a conspiracy to cheat the Bank is alleged. 40. We are, therefore, inclined to accept Mr. Srivastava's submissions that the High Court had in revision erroneously quashed the charges framed against the respondents. Consequently, the orders dated 17th March, 2007, passed by the High Court in Crl. Revision No.

1303 of 2006 and Crl. Revision No. 36 of 2007, impugned in these two appeals are set aside and the charges framed by the Trial Court against the respondents are restored. The appeals are, accordingly, disposed of with a direction to the Trial Court to proceed with the trial. We make it clear that the views expressed in this judgment are prima facie in nature for the disposal of these appeals only and should not influence the trial in any way. G. N. Appeal disposed of . ;