* THE HONOURABLE SRI JUSTICE B.N. RAO NALLA + CRIMINAL APPEAL No.11 OF 2004 % Date: 12-10-2011 # K. Murali .. Appellant v. $ State of Andhra Pradesh, rep. by its Special Public Prosecutor for CBI Cases .. Respondent ! Counsel for the appellant : Sri C. Kodandaram, Senior Counsel, for Sri C. Gunaranjan, Advocate ^ Counsel for the respondent : Sri P. Kesava Rao Special Standing Counsel for CBI < GIST: > HEAD NOTE: ? CASES REFERRED: 1. (2009) 6 SCC 77 2. (2009) 8 SCC 617 3. (2002) 5 SCC 86 4. (2005) 12 SCC 631 5. 2009(6) SCC 364 C/15 THE HON'BLE SRI JUSTICE B.N. RAO NALLA CRIMINAL APPEAL No.11 OF 2004 JUDGMENT: This Criminal Appeal is filed by the appellant – A-1 assailing th judgment in C.C. No.12 of 1999 dated 22-12-2003 passed by the learne Special Judge for C.B.I. Cases, Hyderabad, whereby and whereund appellant – A-1 was found guilty of the offence punishable under Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (for short ‘PC Act’) and accordingly he was convicted for the sa offence and sentenced to suffer rigorous imprisonment for a period of one ( year and to pay a fine of Rs.2,000/-, in default of payment of fine to suff simple imprisonment for a period of three (3) months. However, the appellant – A-1 was not found guilty for the offence und Section 120-B read with Section 420 IPC and therefore acquitted him for th said offence. 2. The appellant – A-1 is also accused (A-1) in C.C. No.8 of 199 and C.C. No.13 of 1999 before the trial Court for similar offences alleged have committed by him and in those matters also he was convicted an sentenced by the trail Court vide separate judgments for the offence und Section 13(1)(d) read with 13(2) of PC Act, while acquitting him for th charge under Section 120-B read with 420 IPC, and directing to run th sentence against him in all the three matters concurrently. Assailing th conviction and sentence in C.C. No.8 of 1999 and 13 of 1999, appellant – 1 preferred Criminal Appeal Nos.12 of 1999 and 466 of 1999 respective and the same are disposed of separately. 3. The case of the prosecution as unfolded from the charge sheet, in brief, is that the appellant - A-1 was Branch Manager of State Bank of Mysore, Mahindra Hills Branch, Secunderabad (hereinafter referred to as “Bank”). A-2 is proprietor of M/s. Saikrupa Enterprises, Secunderabad and he was having a current account bearing No.CA/OD/202 in the said Bank. A-2 approached the appellant - A-1 for purchase of two cheques bearing Nos.147599 and 147560 dated 19-9-1995 for Rs.75,000/- each, amounting to Rs.1,50,000/-, issued by Smt. Annamaneni Padmavathi, who is wife of A-2, in favour of M/s. Saikrupa Enterprises, the proprietor of which is A-2, drawn on State Bank of India, Ganapavaram Branch, knowing fully well that there is no outstanding balance in the account of the party, and the appellant – A-1 discounted the said cheques and credited proceeds of the same into the account bearing No.CA/OD/202 of A-2 with the Bank on 28-09-1995. That the appellant - A-1 purchased these two cheques transgressing his discretionary powers and sent them for collection to State Bank of India, Ganapavaram Branch for realization, after giving credit to the account of A-2. The cheques were returned unpaid by State Bank of India, Ganapavaram Branch vide cheque return memo dated 10-10-1995 “for want of sufficient funds”. After receipt of the cheque return memo, appellant - A-1 kept those cheques in his custody from 10-10-1995 to 01-12-1995 without responding to the account and deliberately omitted to debit the amount to the account bearing No.CA/OD/202 of A-2 and did not take any action against A-2, and thereby misled the Bank. On 05-12-1995, the cheque purchase account was credited and debit was wrongly posted to another account bearing No.CC1-44 of M/s. Shanmukha Marketing Agency, basing on a debit voucher prepared by Sri Sathaiah and passed by Smt. N. Santhosh, Accountant of the Branch. Appellant - A-1 instructed the accountant to debit this voucher to cash credit account bearing No.CC1-44 which is a blatant irregularity and thereby misled the Bank by debiting another account instead of party’s account. The fact of debiting the amount of Rs.1,50,578/- is not even known to M/s. Shanmukha Marketing Agency. Further, at the time of issuance of cheques, the party was not having sufficient balance in her account at State Bank of India, Ganapavaram Branch. On 16-12-1995, M/s. Shanmukha Marketing Agency, deposited a cheque for Rs.86,010/- in the clearing for credit to its account, but the amount covered by that cheque was credited to a different account. Thus, the total amount due to M/s. Shanmukha Marketing Agency, was aggregating to Rs.2,41,588/-. The appellant - A-1 in conspiracy with A-2 did not report as to return of the cheques to the Controlling Authority, and instead on 15-12-1995, vide a transfer credit voucher for Rs.2,41,588/- instructed the accountant to prepare a voucher for the same and he himself passed the same for payment and thus adjusted the earlier debit raised to M/s. Shanmukha Marketing Agency by ultimately raising a debit to branch local clearing account. This act was done by him in order to screen his earlier criminal act. Further, the appellant - A-1 by abusing his official position as Branch Manager of the Bank in connivance with A-2 and in order to accommodate him, cheated the Bank by falsifying the accounts of the Bank and extended pecuniary advantage to a tune of Rs.1,50,000/- to A-2 and thereby caused corresponding loss to the Bank by misusing the funds of the Bank. However, except an amount of Rs.15,000/- towards interest, the remaining balance has been recovered by the Bank. Thus, appellant - A-1 and A-2 committed the offences under Sections 420 and 120-B IPC and Section 13(1)(d) read with Section 13(2) of PC Act. 4. The trial Court after taking charge sheet on file, registered a cas as C.C. No.12 of 1999, and charges under Section 120-B read with 420 IP and Section 13(1)(d) read with Section 13(2) of PC Act were framed again appellant - A-1, and charges under Section 120-B and 420 IPC frame against A-2. 5. On appellant - A-1 and A-2 pleading not guilty for the sa charges, they were put on trial, and in order to prove its case, th prosecution in support of its case had examined PWs.1 to 8 and got marke Exs.P-1 to P-23. However, no witnesses were examined and no documen were marked on behalf of the defence. 6. That after taking into consideration, the evidence of th prosecution witnesses and other material on record, the trial Court has foun that the prosecution had failed to prove its case for the offence under Sectio 120-B read with Section 420 IPC against the appellant - A-1 and A-2 an acquitted them for the said offence. However, the trial court has found th appellant - A-1 guilty of the offence under Section 13(1)(d) read with Sectio 13(2) of PC Act and accordingly convicted and sentenced him, as state herein above. 7. Aggrieved by the impugned judgment of conviction and sentenc for the offence under Section 13(1)(d) read with Section 13(2) of PC A appellant – A-1 has preferred this appeal questioning the legality otherwise thereof, inter alia, on the ground that the trial court has erred appreciating the evidence of prosecution witnesses and other material o record and thereby came to an erroneous conclusion in finding the appella - A-1 guilty of the aforesaid offence. 8. It is the case of the appellant – A-1 that though the trial Court ha framed, basing on the charge sheet, three charges against the appellant - A-1 and A-2, however, after conclusion of the trial, it has given a finding th the prosecution failed to establish the charges under Section 120-B rea with 420 IPC against the appellant - A-1 and A-2, and, as such, the appellant - A-1 and A-2 were acquitted for the said offence. Howeve the trial Court has found the appellant - A-1 guilty of the offence und Section 13(1)(d) read with Section 13(2) of PC Act and accordingly he wa convicted and sentenced for the same. Referring to the third charge a framed against the appellant - A-1, it is contended that he is alleged to hav abused his official position and committed criminal misconduct by extendin pecuniary advantage to A-2 to a tune of Rs.1,50,000/- by discounting tw cheques for Rs.75,000/- each, but to establish the third charge, th ingredients as contained in Section 13(1)(d)(iii) of PC Act have to be prove and are complied with. However, in this case, it cannot be said that the sa ingredients are complied with and are proved since in the provisions of su clause (iii) of Section 13(1)(d) of PC Act, the words “without any pub interest” are used soon after the words “pecuniary advantage”. The word “public interest” is not defined in the Act. Therefore, it is difficult understand the meaning of a public servant obtaining “any pecunia advantage” without any public interest. Hence, it is contended that the appellant – A-1 cannot be said to hav committed the offence under Section 13(1)(d) read with Section 13(2) of P Act. It is contended that the appellant – A-1 at the relevant time had acte for furthering the interest of the Bank bona fide. His intention was not cause any wrongful loss to the Bank. That on the contrary, his intention wa to cause pecuniary benefit to the Bank, as he has only followed the Bankin practice that is in vogue. Discounting cheques by a banker is a commo practice. It goes to help the banker. It is further contended that though th appellant - A-1 has alleged to have exceeded his financial powers discounting two cheques in question, it is only an irregularity which he ha intentionally done keeping the best interest of the Banking institution mind. That his intention was not to cause pecuniary advantage to A-2, but extend it to the Bank itself with a good intention of retaining its custom since it is the primary duty of every banker to maintain good relations with customers and also to retain them as customers forever. 9. Referring to the evidence of PW.1, who is the Assistant Manag of the State Bank of Mysore, Mahendra Hills Branch, PW.3, who is a cashi of the Bank, PW.5, who is a clerk of the Bank, and PW.7, who is Ch Manager of the Bank of Mysore and also Vigilance Officer between 1991-9 it is stated that A-2 was a regular customer of their Bank and that he ha investments in the form of F.D.Rs. to a tune of Rs.5,00,000/-, therefore th appellant - A-1 has acted in good faith with an intention to retain a goo customer (A-2) by extending cheque discounting facility to him which in h opinion was in furtherance of the interest of the Bank. Moreover, referring the evidence of PW.5, the clerk, who is working with the Bank since 198 and has testified that A-2 was a regular and good customer of their Bank an that he had paid the entire amount, it is contended that no wrongful loss caused to the Bank. 10. The evidence of PW.7 - the Chief Manager of the State Bank Mysore, who also acted as Vigilance Officer and investigated this case, is that during the course of investigation, he came across certa irregularities in respect of the cheque purchase account, which is subje matter of this case, and that “a cheque purchase” is unsecured clea advance extended to the parties of high standard depending on the custo of the Bank. Under this system, when outstation cheques are presented the request of the party, such cheques will be purchased by the branch an value of the cheques is immediately placed to the credit of the party account, and on realization of the said cheques, it would be sent f collection to the paying branches and the cheque purchase entries will b reversed to the debit of the drawee branch. In case, the cheques a returned unpaid, the amount is to be recovered from the party immediatel In view of the said evidence of PW.7, it is contended that since A-2 ha already paid the entire amount, even if the appellant - A-1 is said to hav committed any irregularity, it is in accordance with the Bank’s practice a spoken to by PW.7. Moreover, it is contended that the appellant - A-1 did n extend any wrongful pecuniary benefit to A-2, and A-2 did not receive a such benefit and that A-2 being a reputed and regular customer of the Ban paid the entire amount. Moreover, it is seen from the evidence of PW.1 th due to the transaction, the Bank stood benefitted by receiving interest Rs.975/-, commission amount of Rs.450/- and postage of Rs.45/-, and th same has been recorded in the long books concerned. Hence, it contended that no wrongful loss to the Bank was caused and on th contrary, the Bank gained goodwill and good customer besides gainin pecuniary benefits by way of interest, commission and postage e Therefore, it is contended that the appellant - A-1 has acted in good faith an also in the best interest of the banking institution, which cannot be termed, any manner, as criminal misconduct by abusing his official position. 11. Referring to the decisions in P. JAYAKUMAR v. STATE O A.P.[1], STATE OF MADHYA PRADESH v. SHEETLA SAHAI AN OTHERS[2], SUBASH PARBAT SONVANE v. STATE OF GUJARATH[ and K.R. PURUSHOTHAMAN v. STATE OF KERALA[4], it is contende that the prosecution has failed to prove the ingredients of the offences w which the appellant - A-1 was charged. That appellant - A-1 did not hav any dishonest intention to cause wrongful gain to A-2 and wrongful loss terms of Section 13(1)(d)(iii) of PC Act. Moreover, it was not the specific case of the prosecution to th effect. It was the bounden duty of the prosecution to prove its case b proving the ingredients of Section 13(1)(d) of PC Act which it has failed to d so. That the prosecution has also failed to make out a case that th appellant - A-1 had committed criminal misconduct by extending a pecuniary advantage to A-2 by corrupt or illegal means as a public serva in terms of Section 13(1)(d)(iii) of PC Act. It is also contended that once th appellant - A-1 along with A-2 was acquitted for the offence under Sectio 120-B read with Section 420 IPC, he ought to have been acquitted for th offence under Section 13(1)(d) read with Section 13(2) of PC Act since was stated to be a sequel to the charge under Section 120-B read with 42 IPC, and the trial Court has come to an erroneous conclusion by n appreciating the evidence of the prosecution witnesses and other mater on record in proper perspective and erroneously held that the appellant - A was guilty of the offence under Section 13(1)(d) read with Section 13(2) PC Act, and, as such, the same is liable to be set aside. 12. The prosecution has taken this Court through the charge she against the appellants – A-1 and A-2 for the offences under Sections 120- 420 IPC and 13(1)(d) read with 13(2) of PC Act, which is to the effect th appellant - A-1 being Branch Manager of the Bank during July 1994 an October 1996, in furtherance of conspiracy with A-2, proprietor of M/s. S Krupa Enterprises has cheated the Bank by committing an act of crimin misconduct, by discounting two cheques of Rs.75,000/- each and thereb caused pecuniary gain (wrongful gain) to A-2 and wrongful loss to the Ba to the tune of the amount covered under the said two cheques in questio i.e., Rs.1,50,000/-. 13. That A-2 was having current account bearing No.CA/OD/200 with the Bank; that wife of A-2 had issued the said two cheques f Rs.75,000/- each in favour of M/s. Sai Krupa Enterprises drawn on Sta Bank of India, Ganapavaram Branch at the behest of A-2 and the appellan A-1 purchased the said two cheques amounting to Rs.1,50,000/- knowin that there was no outstanding balance in the account of the wife of A-2; that after discounting, the proceeds of the cheques were deposited into th current account of A-2. 14. That both the cheques dated 19-09-1995 bearing Nos.14756 and 147599 respectively were issued in favour of M/s. Sai Krupa Enterprise drawn on State Bank of India, Ganapavaram branch; that appellant - A has purchased the said two cheques transgressing his discretionary powe of purchase as per HOC 87 of 1987 and sent them for collection to the State Bank of India, Ganapavaram Branch, after giving credit to the accou of A-2, proprietor of M/s. Sai Krupa Enterprises; that as per the said circul HOC 87 of 1987, the appellant - A-1 as Branch Manager of the Bank empowered to purchase third party cheques up to Rs.50,000/- only. 15. That when the said cheques were presented for payme returned un-paid by the State Bank of India, Ganapavaram Branch vid cheque return memo dated 10-10-1995, since there were no sufficient fund in the SB account (P-21/5038) of wife of A-2; that after receiving the chequ return memo along with two cheques, appellant - A-1 kept those cheques his custody from 10-10-1995 to 01-12-1995 i.e., for two months, witho informing A-2 and deliberately omitted to debit the amount to the account A-2 (CA/OD/202) and did not initiate any action against A-2 and thereb misled the Bank. 16. That on 05-12-1995, the cheque purchased account wa credited and debit was wrongly posted to a third party account bearin No.CC1-44 belonging to one M/s. Shanmukha Marketing Agency at th instance of the appellant - A-1, thereby misled the Bank by debitin Rs.1,50,578/- to a third party’s account (CC 1-44) belonging to M/ Shanmukha Marketing Agency instead of debiting the account bearin No.CA/OD/202 of A-2, M/s. Sai Krupa Enterprises, and that the said fact wa not even informed to M/s. Shanmukha Marketing Agency. 17. That when M/s. Shanmukha Marketing Agency deposited cheque for Rs.86,010/- into its account bearing No.CC1-44 on 06-12-1995 on scrutiny, it was realized, on 15-12-1995, that the said cheque of M/s. Shanmukha Marketing Agency for Rs.86,010/- deposited on 06-1 1995 was wrongly credited to a different account, and it had also come light that Exs.P-1 and P-2 cheques in question purchased by the appellan A-1 were wrongly debited to account bearing No.CC1-44 of M/ Shanmukha Marketing Agency and the said mistakes were rectified b giving credit of Rs.2,41,588/- to the account bearing No.CC1-44 of M/ Shanmukha Marketing Agency under Ex.P7 – transfer credit voucher date 15-12-1995. That the said rectification was done at the instance of th appellant - A-1 in order to screen his earlier criminal misconduct i.e., wrong debiting the proceeds of Exs.P-1 and P-2 cheques in question that we purchased by the appellant - A-1 into the account bearing No.CC1-44 of M/ Shanmukha Marketing Agency in furtherance of conspiracy between himse and A-2 and thereby the appellant - A-1 resorted to commit the act criminal misconduct by falsifying the accounts of the Bank by abusing h official position as Branch Manager of the Bank and it has resulted wrongful gain to A-2 and wrongful loss to the Bank. It is contended that th action on the part of the appellant - A-1 amounts to criminal misconduct falsifying the Bank accounts to carry pecuniary advantage to A-2 and th same does not involve any public interest except involving private intere and therefore, the provisions of Section 13(1)(d) read with Section 13(2) PC Act are clearly attracted and the appellant - A-1 is liable thereunder. 18. Relying on the decision reported in RUMI DHAR (SMT.) STATE OF WEST BENGAL AND ANOTHER[5], it is contended th payment of the entire amount covered under the two discounted cheques b A-2 does not, in any way, absolve the appellant - A-1 from criminal liability for his crimin misconduct. Lastly, it is contended that the appellant - A-1 had discounte the said two cheques and credited the proceeds thereof to the account of A-2 and that when the said two cheques were sent for collection, they we dishonoured. That after receiving the said cheques with the dishonoure memo, appellant - A-1 kept those cheques under his custody for about tw months without debiting the amount thereof to the party’s account. That o the other hand, the proceeds of the said cheques were debited to th account of M/s. Shanmukha Marketing Agency and this has been done b the appellant - A-1 in furtherance of criminal conspiracy between himse and A-2. That though discounting cheques is a normal banking transactio appellant - A-1 misused the same in the guise of exercising his discretion. That his discretionary power in doing so is limited to Rs.50,000/- only an not beyond; that after a gap of two months and when the matter came to lig during the course of a scrutiny on 15-12-1995, appellant - A-1 got it rectifie by preparing a separate voucher therefor under Ex.P-7. Therefore, it is contended that action of the appellant – A-1 ultimate amounts to criminal misconduct under Section 13 of PC Act for which h was rightly charge sheeted. It is further contended that the trial court, aft appreciating the evidence and other material on record and also by takin an overall view, rightly convicted the appellant - A-1 for the said offenc under Section 13(1)(d) read with Section 13(2) of PC Act, and, as such, th impugned judgment of conviction and sentence as passed by the trial Cou does not warrant any interference by this Court, and as such, the appe may be dismissed. 19. This Court gave its earnest consideration to the submissio made by Sri C. Kodandaram, learned senior counsel appearing for th appellant – A-1, and Sri C. Kesava Rao, learned Special Standing Couns for CBI, perused the impugned judgment and other material on record. 20. Considering the rival contentions, the points that arise f consideration are: 1. Whether discounting of Exs.P-1 and P-2 cheques by the appellant – A-1 is in violation of the regulations issued by the Reserve Bank of India from time to time and also in violation of the banking circulars and procedures? 2. Whether the action of the appellant - A-1 in discounting Exs.P-1 and P-2 cheques amounts to criminal misconduct? 3. Whether the action of the appellant –A-1 in discounting the cheques amounts to causing wrongful gain to A- 2 and thereby causing corresponding wrongful loss to the Bank? 4. Whether the payment of the amount covered under Exs.P-1 and P-2 cheques by A-2 would absolve the appellant-A-1 from criminal liability? 5. Whether such action of the appellant - A-1 amounts to illegality or irregularity? 6. Whether the trial Court has committed any error, infirmity or illegality in finding the appellant – A-1 guilty of the offence under Section 13(1)(d) read with Section 13(2) of PC Act ? POINT Nos.1 to 6: 21. The main contention of the prosecution is that the appellant – A-1 by abusing his official position and in collusion with A-2 accommodate him to obtain pecuniary advantage to a tune of Rs.1,50,000/- by violating th banking normal practice and its regulations and thereby committed th offences of criminal conspiracy, cheating and criminal misconduc However, the trial Court observing that there is no evidence of any kind f the alleged conspiracy and cheating, acquitted the appellant – A-1 as we as A-2 for the offence under Section 120-B read with 420 IPC, but convicte the appellant – A-1 for the offence under Section 13(1)(d) read with 13(2) of PC Act observing that the very act of passing cheques witho sufficient funds and without taking sufficient security would definitely amou to dishonest intention and thus