1 HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR DIVISION BENCH Criminal Revision No.1422/2008 Ajoy Acharya, aged 56 years, s/o Lt. Shri M.C. Acharya, r/o D-II/7, Cornwallis Road, Subramaniam Bharti Marg, New Delhi. versus State Bureau of Investigation Against Economic Offences, Bhopal. ------------------------------------------------------------------------------------------------ For the Petitioner: Shri Amit Prasad, advocate. For the Resp./State: Shri S.K. Rai, Government Advocate. ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ PRESENT: HONOURABLE SHRI JUSTICE RAKESH SAKSENA HONOURABLE SHRI JUSTICE M.A. SIDDIQUI ------------------------------------------------------------------------------------------------ Date of hearing: 08/08/2011 Date of Judgment: 29/08/2011 O R D E R Per: Rakesh Saksena, J Petitioner has filed this revision against the order dated 11.4.2008, passed by Special Judge (Prevention of Corruption Act), Bhopal, in Special Case No.07/2007, rejecting the application filed by him under Section 239 of the Code of Criminal Procedure seeking discharge from the offences punishable under Sections 420, 120B of the Indian Penal Code and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. 2. The State Economic Offence Investigation Bureau, Bhopal, on 24.7.2004 registered a case at Crime No.25/2004 in respect of the offences punishable under Sections 409, 420, 467, 468 and 120B of the Indian Penal Code against the following office bearers of Madhya Pradesh State Industrial Development 2 Corporation (for brevity 'MPSIDC'), a Government Company registered under the Companies Act, 1956:- (i) Rajendra Kumar Singh, the then Chairman (ii) Ajay Acharya, the then Director (iii) J.S. Ramamurthy, the then Director (iv) M.P. Rajan, the then Managing Director (v) Narendra Nahta, the then Chairman (vi) S.R. Mohanty, the then Managing Director and against the beneficiary Chairmen/Directors of 42 other companies. On 6.8.2004, prosecution added Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (for brevity 'Act') also. 3. In short, the accusations against the Chairpersons and the Directors of MPSIDC are that they were involved in a conspiracy to defraud MPSIDC to the tune of crores of rupees and to misappropriate the surplus fund and in pursuance thereof, they passed resolution on 19.4.1995 knowing fully well that it was illegal and unauthorized act and, thereafter, continued to act upon it and in the process, also misappropriated additional sum of Rs.517 crores, secured as debt, by disbursing the entire money of MPSIDC, to various companies as loans in the name of Inter Corporate Deposits (ICDs), even without obtaining reasonably sufficient collateral security for repayment thereof. 4. As per charge sheet, M.P. Adyogik Vikas Nigam (MPAVN), which was renamed as MPSIDC was constituted to promote industrialization in the State of Madhya Pradesh and to provide financial assistance to Industrial Units in the State. The State Cabinet in a meeting held on 28.1.1994 appraised the activities of the Corporation as well as its financial status. A decision was taken to stop MPSIDC from financing the industries any further. For the sake of convenience resolution of the Cabinet Meeting is reproduced as under:- 3 “Audyogik Vikas Nigam bhavishya me vittiya sahayata band kare tatha vrahad avam madhyam udyogon ko protsahan aur pradesh me udyogon ko buniyadi suvidhaon ke vikas ka karya prabalta se karen.” In accordance with the Cabinet decision the Board of Directors of MPSIDC at its 225th meeting held on 31.1.1994 passed a resolution to stop the financial assistance forthwith. The corresponding agenda-note prepared by the Company Secretary Pankaj Dubey is reproduced as under:- “That, after the review of performance, the Cabinet took the decision that in view of the recent liberalization on measures taken by the Government of India in respect of the economy and the Industry, the RBI approval to the All India Financial Institutions/ Banks to sanction projects up to Rs.50 crores, the lowering of interest rate by the Banks, the comfortable CRR and SLR of the Banks and consequent enhanced liquidity, the considerably enhanced degree of professional and commercial orientation requiring financing under the changed economic scenario, there is no justification for MPSIDC to engage in financing and it should be stopped forthwith. The Cabinet also noted that the performance of MPSIDC in respect of its financial operations had been rather unsatisfactory and has resulted in an adverse portfolio situation and evidenced by the asset classification as on 31.03.1993 whereby approx 60% of the loan account were in sub- standard/doubtful/loss category.” Acting upon the Cabinet decision, Department of Commerce and Industry, Government of M.P., also issued a circular No.F-20/1/94/11/B dated 3.3.1994 requiring all the departments/institutions concerned including MPSIDC to discontinue financial assistance to industries and also to concentrate on development of basic infrastructure amenities to the large as well as medium scale industries in the State. However, pursuant to a conspiracy hatched for defrauding the MPSIDC, the Board of Directors, in utter contravention of the policy decision taken by the Cabinet, consequent resolution and the circular dated 3.3.1994, passed a resolution at its 229th meeting held on 19.4.1995, authorizing M.P. Rajan, the 4 then Managing Director, to invest surplus funds of MPSIDC in Inter Corporate Deposits (ICDs), Fixed Deposits (Fds) or in any other form, and also to decide the period of investment and rate of interest from time to time. This resolution was also violative of (a) the Memorandum and Article of Association of MPSIDC and (b) the provisions of sub-section (1)(e) and sub-section(4) of Section 292 of the Companies Act, 1956, which imposed restrictions and conditions on the exercise by the Board of Directors of powers to advance loans. Moreover, in the 32nd Annual General Meeting of the MPSIDC held on 21.8.1998, the limit of financial assistance to the companies was enhanced from Rs.3.00 crores to Rs.15.00 crores, without obtaining any approval from the State Government, as contemplated under sub-clause (ii) of Article 110 of the Memorandum of Association. At the 240th meeting of the Board of Directors held on 30.11.1998, M.P. Rajan, the then Managing Director, was able to get the borrowing capacity of MPSIDC increased from 175 crores to 500 crores on the ground that a total amount of Rs.173.72 crores had already been borrowed whereas by the end of the financial year, investment (presumably by way of ICDs) was expected to reach their limit of Rs.500 crores. By way of this resolution, the Managing Director was authorized to secure loans as well as to invest the amount thus obtained. This resolution was passed without prior approval of the State Government as required under Clauses 57, 58 and 60 of the Memorandum of Association, despite the fact that the Cabinet had already disapproved the activity of financing/funding by MPSIDC. Under aforesaid resolution dated 30.11.1998, a total amount of Rs.511.57 crores was collected by M.P. Rajan and other Directors of MPSIDC as per the following details:- 5 S.No. Particulars of lending Institution Amount (Rs.) 1. Indian Industrial Development Bank 150.00 crores 2. Mumbai District Co-operative Bank 110.00 crores 3. Bonds of MPSIDC (14.4%) 81.61 crores 4. Bombay Mercantile Co-operative Bank Ltd. 75.00 crores 5. Apex Urban Bank of Maharashtra and Goa. 55.00 crores 6. Syndicate Bank (Overdrafts) 12.00 crores 7. Subordinate Units of the Corporation and other Corporations of M.P. 27.96 crores Total 511.57 crores During the period from 1995 to 2002, all the accused named above, under the garb of the resolution dated 19.04.1995, distributed, even without taking adequate security for repayment, crores of rupees by way of ICDs to as many as 42 companies and thus, caused wrongful gain to the Directors of these Companies and corresponding wrongful loss to the MPSIDC. M.P. Rajan was relieved of the charge from the post of Managing Director on 20.1.2000. However, at its 243rd meeting held on 25.5.2000 under the Chairmanship of Narendra Nahta, a decision was taken to continue with the financing by way of ICDs ignoring the adverse comments recorded in the Financial Status Report. The Comptroller and Auditor General of India, in his report pertaining to the financial year ending 31st of March, 2000, also noted that while investing the surplus amount in the ICDs, the Board of Directors neither formulated policies/procedures/guidelines nor followed the directions issued by the Reserve Bank of India in this regard. It was also pointed out that conferment of power on the Managing Director to make loans without fixing the maximum limit of deposits was contrary to the provisions of Companies Act. Reserve Bank of India, while observing that under Section 45-I(a) of the Reserve Bank of India Act, 1934, registration of MPSIDC as a non-banking 6 financial institution (NBFI) was a pre-condition for the purpose, also raised objection to the investment of surplus money in the ICDs. In the wake of the objection, the Board of Directors, at its 251st meeting, resolved to apply for the registration and, accordingly, on 6.11.2002, the then Dy. General Manager of MPSIDC forwarded the corresponding proposal to the RBI. In turn, the RBI issued a notice to show cause not only against proposed rejection of the registration application but also against prosecution for the offence punishable under Section 58B(4A) of the RBI Act of 1934 for functioning as a NBFI right from 19.4.1995 without ensuring that as on 31.12.2002, the Net Owned Fund (NOF) ought to have been Rs.200 lacs whereas the balance sheet reflected that as on 31.3.2002, NOF was minus Rs.9415.29 lacs. Ultimately, the RBI, not being satisfied with the explanation tendered on behalf of MPSIDC in its reply dated 30.7.2003, proceeded to reject the registration application vide its order dated 18.3.2004. 5. On the basis of above facts, the cognizance against the petitioner as well as other accused persons had been taken upon charge sheet being filed by the Economic Offence Investigation Bureau, Bhopal. A supplementary charge sheet was also presented by the Bureau on 31.3.2010 against the Directors and Promoters of other companies, who obtained benefits as a result of acts and conducts of the office bearers of MPSIDC. 6. According to prosecution, by the conduct of the Directors of the MPSIDC M/s Archana Airways Ltd. obtained illegal financial benefit of Rs.5.50 crores. Since the petitioner by corrupt and illegal means alongwith other accused persons helped the aforesaid company to obtain pecuniary advantage and made the Government to suffer heavy pecuniary loss, he was liable to be prosecuted for the offences under Sections 420, 120B of the Indian Penal Code and Section 13(1)(d) read with Section 13(2) of the Act. The petitioner, at the 7 time of commission of the offence, was Director of MPSIDC and also Commissioner of Industries of M.P. Government, but, at the time of filing of charge sheet, he was not occupying the said office and instead was posted as Financial Adviser (Acquisition) to the Ministry of Defence, Government of India, at Delhi, therefore, a charge sheet was filed without obtaining sanction under Section 19 of the Act and also sanction under Section 197 of the Cr.P.C. 7. Petitioner filed an application under Section 239 of the Code of Criminal Procedure for being discharged on the ground of absence of sanction to prosecute him by the concerned Government and also on the ground that from the accusation leveled against him, no commission of offence was disclosed against him, however, in view of the proposition laid down by the Apex Court in the case of Prakash Singh Badal and another vs. State of Punjab and others-(2007) 1 SCC 1 and in the facts and circumstances of the case the same was dismissed by the impugned order, aggrieved whereby, the petitioner has filed this revision. 8. Shri Amit Prasad, learned counsel for the petitioner, submitted that the petitioner is a Government servant belonging to Indian Administrative Service, still continuing in Government service and was Additional Secretary in the Department of Defence Production, Government of India. Since petitioner was an officer of the Indian Administrative Service, the President of India was the appointing as well as dismissing authority. Even if he was encadred to State of M.P., or proceeded on deputation to any organization, or the Central Government, he was not removable from his service save with the sanction of Central Government. He submitted that in view of the provisions of Article 320 (3)(c) of the Constitution of India, on all the disciplinary matters affecting a person serving under the Government of India or the Government of a State in the civil capacity, the Union Public Service Commission or the State Public 8 Service Commission as the case maybe, should be consulted. All India Services were included in the Union List of VIIth Schedule of the Constitution. Therefore, the competent authority for according sanction for the prosecution of the petitioner was the Central Government. It did not make any difference that he was employed in connection with the affairs of the State or on deputation in Central Government. The petitioner was only a nominee Director on the Board of MPSIDC by virtue of his posting as Industries Commissioner. He was not getting any remuneration or salary or fees from the MPSIDC. He continued to be in Indian Administrative Service. It was part of his official duty to attend the Board meeting, once a notice was received from the MPSIDC. Learned counsel submitted that the ratio of the Apex Court decision rendered in case of Prakash Singh Badal' (supra) was not applicable to the petitioner. 9. Apart from the question of sanction, learned counsel for the petitioner submitted that the decision taken at the Cabinet Review Meeting and the meeting of the Board dated 31.1.1994, which adopted the decision of Cabinet meeting clearly showed that the 'financial assistance', as discussed in the said meetings, pertained only to project finance. While business of Project Finance was stopped, the expenditure continued to create a compelling situation for MPSIDC to generate profits on its own without there being any line of business. In these prevailing circumstances, the Agenda was circulated in the 229th Board Meeting of MPSIDC to be held on 19.4.1995. In the said meeting , the important phrases viz. “availability of surplus funds”; “to be given to reputed companies”; “for a period of 3-6 months”; “could be called back at the time of need”; “interest rates higher than 8.5% and 15.5%” were explained in detail. The agenda also provided that it was within the powers of the Board to give Inter Corporate Deposits. The Board Resolution was subsequently 9 confirmed in 230th Board Meeting, which was attended by Shri K.Shanker Narain, Member on the Board and also the Principal Secretary, Commerce and Industries. The Company Secretary Shri Pankaj Dubey, was responsible for ensuring the legal compliance of Board Minutes, yet no proceeding was initiated against him by the prosecution. The prosecution adopted 'pick and chose' policy in discriminatory manner. Prosecution committed error in inter- relating the transactions of “Project Finance” , “Term Loan”, “Inter Corporate Deposits (ICDs)”. Counsel further submitted that there was no allegation in the charge sheet that there was any kind of secrete meeting between petitioner and the beneficiaries of ICDs or other co-accused persons. It was not said by the prosecution that out of the proceeds of ICDs, some kick-back was given to the petitioner, or that petitioner desired to extend favour to any particular person. Sitting on the board of MPSIDC was a part of extension of his duty as Industries Commissioner by virtue of his official duty. As such, the petitioner was also entitled for the protection in accordance with Section 197 Cr.P.C.. Even if there was bonafide mistake or error in decision making, petitioner was not liable to be prosecuted on the charge of corruption in the absence of any dishonest or malafide intention on his part. 10. Shri S.K. Rai, learned Government Advocate, on the other hand, submitted that it was a situation where at the relevant time the petitioner was holding the office of a public servant as Industries Commissioner and also the Director of the Board of MPSIDC. The allegation against him pertained to his office of Director of the Board only and not as Industries Commissioner. For the purpose of this case, the petitioner ceased to be in the office of MPSIDC or even the Industries Commissioner as soon as he relinquished the said office. At the time when charge sheet was filed, he was on deputation with the Union Government as Additional Secretary to the Department of Defence Production. 10 In this situation, in view of the law laid down by the Apex Court in Prakash Singh Badal (supra), no sanction was required for taking cognizance against him, since the office, which, as a public servant, the petitioner abused, was different than his present assignment of deputation. The offence under Section 13(1)(d) read with Section 13(2) of the Act is the time-related offence. Placing reliance on the decision of Prakash Singh Badal (supra), learned Government Advocate submitted that the question relating to sanction under Section 197 Cr.P.C. Was not necessarily to be considered as soon as the complaint was lodged. This question might have arisen at any stage of the proceeding, and question whether the sanction was necessary or not might have to be determined from stage-to-stage. Apart from it, the offence of cheating under Section 420 IPC or for that matter offences relatable to Sections 467, 468, 471 and 120-B IPC, by their very nature not be regarded as having been committed by any public servant while acting or purporting to act in discharge of official duty. In such case, the official status was an opportunity for commission of the offence. Learned Government Advocate further submitted that despite the decision of the Cabinet Review Meeting dated 28.1.1994 and Board Meeting dated 31.1.1994 where the decision relating to discontinuance of Project Finance was taken, deliberately, the petitioner, who was present in the Board Meeting dated 19.4.1995 alongwith other Directors, passed resolution and engaged in the activities of financing on the pretext and the name of Inter Corporate Deposits due to which MPSIDC suffered heavy losses. The Board Resolution dated 19.4.1995 empowering the Managing Director to give Inter Corporate Deposits was in violation of the provisions of Section 292(1)(e) read with Section 292(4) of the Companies Act and also in violation of the Memorandum and Articles of Association. 11. Perusal of the charge sheet indicates that on 28.1.1994, in the meeting 11 of Cabinet, petitioner Ajoy Acharya was present. In the meetings of the Board held on 31.1.1994, 27.7.1994 and 19.4.1995 also petitioner was present as a Director. It is apparent that he knew fully well that Cabinet categorically issued directions for discontinuance of the Financial Assistance, yet, as a Director, he, by abusing his post in connivance of others, co-operated in passing the resolution about making Inter Corporate Deposits. To prove conspiracy, there cannot always be a direct evidence. Existence of a conspiracy can be inferred mostly by the circumstances. In fact, because of the difficulties in having direct evidence of criminal conspiracy, once reasonable ground is shown for believing that two or more persons have conspired to commit an offence then, anything done by anyone of them in reference to their common intention after the same is entertained becomes, according to Section 10 of the Evidence Act, relevant for proving both conspiracy and the offences committed pursuant thereto (Noor Mohammad Mohd. Yusuf Momin v. The State of Maharashtra-AIR 1971 SC 885). 12. Merely because Company Secretary, whose role was to ensure the legal compliance of the Board Minutes, was present in all the meetings, but was not prosecuted, did not exonerate the petitioner of his conduct of allowing the agenda to be passed in 229th Meeting. It is not necessary that all the conspirators must know each and every detail of the conspiracy as long as they are co-participators in the main object of the conspiracy. There may be so many devices and techniques adopted to achieve the common goal of the conspiracy and there may be division of performances in the chain of actions with one object to achieve the real end of which every collaborator be interested...............even if some steps are resorted to by one or two of the conspirators without the knowledge of the others it will not affect the culpability of those others when they are associated with the object of the 12 conspiracy (Yash Pal Mittal v. State of Punjab, AIR 1977 SC 2433). 13. As a director, petitioner also appears to have acted in contravention of the provisions of Section 292(1)(e) and sub-section (4) of the Companies Act, 1956. The relevant provision of Section 292 is quoted hereunder:- “292. Certain powers to be exercised by Board only at meeting.-(1) The Board of directors of a company shall exercise the following powers on behalf of the company, and it shall do so only by means of resolutions passed at meetings of the Board:- (a) ................ (b) ................ (c) ................ (d) ................ (e) the power to make lonas: [Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, [***] the manager or any other principal officer of the company or in the case of a branch office of the company, a principal officer of the branch office, the powers specified in clauses (c), (d) and (e) to the extent specified in sub-sections (2), (3) and (4) respectively, on such conditions as the Board may prescribe: (2) Every resolution delegating the power referred to in clause (c) of sub-section (1) shall specify the total amount [outstanding at any one time] up to which moneys may be borrowed by the delegate. (3) Every resolution delegating the power referred to in clause (d) of sub-section (1) shall specify the total amount up to which the funds may be invested, and the nature of the investments which may be made, by the delegate. (4) Every resolution delegating the power referred to in clause (e) of sub-section (1) shall specify the total amount up to which loans may be made by the delegate, the purposes for which the loans may be made, and the maximum amount of loans which may be made for each such purpose in individual cases.” It is apparent by the above provisions that powers of the Board of Directors of Company have been restricted in the matter of advancing loan by putting limitation on it. In the instant case, no specific or definite guidelines were formulated. Apart from it, since the Financial Assistance by the MPSIDC was expressly discontinued by the Cabinet decision, no investment, advancement of loan or deposits ought to have been made by the Directors of the Board of 13 MPSIDC, except with the prior permission of the State Government. While appraising the financial transactions of the MPSIDC on 31st March 2000 Comptroller and Auditor General (CAG) observed that while taking decision of making Inter Corporate Deposits in the month of April 1995 the Board neither ascertained its policies, procedure and relevant guidelines, nor followed the directions issued by the Reserve Bank of India and delegated all the powers for taking all the relevant decisions in making deposits. Until the maximum limit of deposit was not ascertained, the delegation of powers in this regard was against the proviso of the Companies Act. 14. It was also brought to notice that the Industrial Development Corporations of all States were recognized as “Non-Banking Financial Institutions (NBFI)” after the 1997 amendment in the Reserve Bank of India Act, 1934 (Chapter III-B). As such, MPSIDC ought to have been registered as 'Non-Banking Financial Institution (NBFI)' with the Reserve Bank of India under the provisions of Section 45-I-A. On occasion, the objections in this regard were raised by the Auditors of the MPSIDC. In the year 2003, Reserve Bank of India, Bhopal, also issued a show cause notice to MPSIDC for working as NBFI without getting registered under the provisions of Reserve Bank of India Act, 1934. 15. It has come on record that by making Inter Corporate Deposits number of companies including MPSIDC suffered heavy losses. The argument advanced by the learned counsel for the petitioner that Economic Offences Bureau chose to prosecute Directors/Chairman of only those companies, who made default and left out those who returned the money, does not incur any