1 PGK IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE Criminal Revision Application No.221 of 2003 R. Narasimhan ... ... Applicant (Orig.Accused No.4) v/s. The State (C.B.I., A.C.B., Mumbai) ... Respondent (Orig.Complainant) Mr.Yusuf Iqbal with Mr.Neville Majra i/by M/s.Yusuf & Associates for Applicant. Mr.Mangar Goswami with Mr.A.S. Gadkari for Res.No.1-CBI. Mrs.A.A. Mane, APP for State. ----- CORAM : SMT.ROSHAN DALVI, J. Date for reserving the judgment : 15th December 2009 Date for pronouncing the judgment : 19th December 2009 JUDGMENT : 1. This Application has challenged the order of the learned Special Judge, CBI/Additional Sessions Judge, Greater Bombay, dated 13.3.2003, rejecting the Discharge Application of the Applicant herein, who was accused No.4 in Special Case No.61 of 1999 before the learned Judge and also of accused No.3 therein. Accused No.3 has not challenged the said 2 order. 2. The Applicant/accused No.4 herein was charged with having committed offences under Section 120B of the Indian Penal Code read with Sections 5(2) and 5(1) (b) of the Prevention of Corruption Act, 1947 (PC Act) corresponding to Sections 13(2) and 13(1)(d) of the PC Act, 1988. The Applicant served as Vice President at New York Branch, Bank of Baroda. The Applicant was appointed to the said post in September 1987, which he continued to hold until December 1990. The acts committed by the various officers of the Bank as also the third parties with whom they had certain transactions of sanctioning an overdraft facility, credit facility and Letters of Credit (LCs) were stated to be for the period between 1984 and 1988. Hence, in respect of the Applicant, the period between September 1987 and December 1988 would be material. The Applicant returned to India in 1991 and retired on 27th February 1999. The case was registered by the CBI in the year 1992. 3. The charge-sheet contains documents of the relevant period as also several other documents being letters, notes etc. of the accused/Applicant of the period between 1989-90, which has been argued upon 3 on behalf of the accused/Accused. 4. The Applicant was arraigned along with 3 other Bank Officers. They had previously retired. The prosecution applied for sanction to prosecute the Applicant. The competent Authority being the Chairman and Managing Director of the Bank, refused to sanction prosecution against the Applicant. The charge-sheet came to be served upon the Applicant after his retirement on the premise that the sanction to prosecute him would not then be required. 5. Disciplinary proceedings were instituted by way of a departmental inquiry against the Applicant. The Applicant was served with the articles of charge and the statement of allegations in that inquiry on 12.2.1999. The Central Vigilance Commission (CVC) is stated to have conducted that inquiry. The CVC has exonerated the Applicant of the charges levelled against him under its Report dated 22.10.1999. The Applicant claims that the inquiry was conducted on identical charges upon the same documents. 6. The charge against the Applicant showed that accused No.1-K.C. Chokshi, who was the then Executive Vice President at the New York Branch of Bank of Baroda, 4 accused No.2 one Premjit Singh, who was then the Chairman and Managing Director, Central Office, Bank of Baroda in Mumbai and accused No.3-Dr. A.C. Shah, who was then the Executor Director of the Central Office of Bank of Baroda in Mumbai, were charged along with the Applicant. The prosecution case is that the Applicant granted and recommended various credit facilities by increasing credit limits from 1 Million U.S. Dollars to 5 Million U.S. Dollars (USD), granted the overdraft facility as well as allowed opening of LCs to one M/s.Kulmer INC. (Kulmer), a Private Firm based in New York. It is also the prosecution case that based upon the recommendations of the Applicant put up through accused No.3 to accused No.2, these facilities were granted and enhanced. This was despite the said Firm being classified as having doubtful credit limit by the Regulatory Authority, the Federal Deposit Insurance Corporation (FDIC) of the U.S.A. 7. The prosecution case is based upon source information. It is made out despite the fact that the account of Kulmer was not treated as fraudulent by the Bank. 8. The prosecution has, inter alia, relied upon several letters of the Applicant with the Central Office in 5 Mumbai as well as two Telexes dated 10.9.1987 and 12.2.1988 and the Fax dated 2.12.1987, which have been recited and considered in the impugned order. 9. To understand a prima facie case against the Applicant, the documents relied upon by the prosecution and which are a part of the CVC inquiry must be seen. A telex message sent by the Applicant as the Senior Vice President, New York to the DGM (International) in the Main Office at Bombay, does show that the LC of USD 4 Lakhs had not been considered favourably. The Applicant has requested to consider it favourably for the reasons that the Company had shown improvement in its performance, it had made profits and reduced the carry forward losses, it had substantial orders in hand and its liquidity problems were due to direct payment. The Applicant proposed that the LC would help it to meet the orders on hand, as was the case of the Company, and hence recommended reconsideration. 10. After the appointment of the Applicant as Senior Vice President of Bank of Baroda, New York, in September 1987, the telex issued by the New York Branch upon the DGM (International) at the Head Office in Mumbai dated 12.12.1988, does show that sanction limit enjoyed by Kulmer was USD 2.4 6 Millions since 16th December 1987. Ad-hoc limits have been allowed by the Chairman and Managing Director. Their overdraft has been overdrawn due to payment of bills under the LCs. They had approached the Bank to sanction the credit limit of USD 3.5 Million immediately. The Bank was required to open further LCs. The Fax further states that they could not achieve their sales target because of certain embargo placed by the US Government and quota restrictions in India. They were hopeful to achieve the sales target during that current year. Hence, the Fax shows that, the ad-hoc limits of USD 3.5 Million may be sanctioned for 3 months. 11. The aforesaid Telex and the Fax thus show the advocacy on the part of the Applicant on behalf of Kulmer. 12. However, there are several other letters which show a restraint on further recommendations, calling upon Kulmer to strengthen its account and make payment and thereafter refusing to allow or recommend any further facilities. 13. The charge-sheet contains a last of correspondence relied upon by the CBI. The Advocate on behalf of the Applicant has produced copies of the documents 7 considered by the CVC in the departmental inquiry which are much the same. 14. The letter dated 20th June 1988 addressed by the Applicant to Kulmer shows that its operations are below targets despite the increase in the credit limit from USD 2.5 Million to USD 3.5 Million. The cheque was returned. The matter was referred to higher Authorities. It calls upon Kulmer to sort out the matter by proper planning before further increase in credit limit to USD 5 Million could be considered. In the letter dated 24.6.1988, the Applicant has informed the DGM (International) at Mumbai that Kulmer has requested the increase to USD 5 Million without proper justification either to continue the ad-hoc credit or to increase it. It is not able to reduce the credit. The said letter sets out the limit granted and calls upon Bombay Office to confirm the action of continuing the ad-hoc excess credit limit. That letter does not recommend further increase in the credit limit asked for by Kulmer. 15. On 26.7.1988, a note has been sent by the Deputy General Manager (International) to the then Chairman and the Managing Director, who is accused Premjit Singh in the aforesaid case based upon the letter of 8 the Applicant advising that he was unable to give his recommendations and had proposed to decline the request of Kulmer to open ad-hoc LC. 16. Thereafter the Applicant wrote to Kulmer on 4th October 1988 putting on record that ad-hoc LCs were opened purely to accommodate its requirements and calling upon it to reduce its limit to USD 2.4 Million with a sub-limit for overdraft of USD 1 Million. In a letter dated 14th October 1988 of the Applicant to the DGM (International) Mumbai, he put on record the strained relationship between the Bank and the Company as also the Bank s Attorneys and called for suggestions and comments. Thereafter on 13th December 1988, the Applicant wrote to the Company that the Bank would not be able to exceed the limits in view of the classification by the regulatory Authority of its account as doubtful. He called upon Kulmer to quicken collection, meet the commitments and take necessary measures to avoid requiring the Bank to initiate steps against it. 17. He has thereafter not recommended any further additional credit limits for any other facilities to be granted to Kulmer. 18. It is, therefore, seen that though ad-hoc limits 9 were increased initially upon recommendations of the Applicant for Kulmer and Kulmer was allowed to open ad-hoc LC, when it was seen that Kulmer was not achieving its target and reducing its limits and yet calling for further increase in the limit and further ad-hoc LCs, the Applicant had exercised restraint and had recommended that such limits be declined. Consequent upon such letters, the DGM (International) had recommended confirmation of the Applicant s actions and declined the Company s request for opening the ad-hoc LCs to the Chairman and Managing Director and other accused in this case. 19. The aforesaid are the relevant documents of the period 1984 to 1988 showing the acts of the Applicant, for which he is charged. 20. The Applicant has continued to write further letters to Kulmer, calling for explanation and reprimanding it in the year 1989 onwards, which is not the period considered in the charge. However, the CVC has considered the documents of that period also. The Applicant unaware of the charge that would be framed against him later, is shown to have written certain letters to which my attention has been drawn by the learned Counsel on behalf of the Applicant. 10 21. The letter dated 27.1.1989 calls upon Kulmer to explain certain anomalies and clarify its position. The letter dated 8.2.1989 shows that there was a shortfall in its deposits into the account with the Bank and the collection efforts have considerably slowed down. It calls for certain Bank statements. The letter dated 28.2.1989 of the Applicant to the DGM (International) at Mumbai, sets out the position of Kulmer. It calls for advice upon the decision to release additional overdraft facility. A note to the then Chairman and Managing Director through the Executive Director (both of whom are accused) sent by the Assistant General Manager at Mumbai dated 3.3.1989, shows an endorsement that the Applicant, as the Senior Vice President, has not recommended the facilities and overdraft mentioned therein. The note specifically sets out thus:- Senior Vice President, New York is unable to offer recommendations as the Company has not been able to explain the reasons for poor recovery. &.. 22. Despite this, Premjit Singh, the co-accused of the Applicant, sanctioned further facilities on 15.5.1989 on the ground that there were reasonable 11 requests considered on merits by him. Under those circumstances, the Applicant contends that he was obliged and bound to grant further facilities specifically not recommended by him. 23. On 16.8.1989, the Applicant wrote to the General Manager, International, Mumbai, that Kulmer had not heeded his request and he was not in a position to monitor the account in an effective manner. In a similar letter dated 18.8.1989, he has informed the General Manager, International, that Kulmer had not fulfilled its commitments and the balance overdraft account was well above the stipulated limit. In a further letter dated 11.9.1989, he has informed the General Manager, International (referring to the Telex of Mumbai, requesting for his recommendations on the request of Kulmer for additional ad-hoc loan of USD 3 Lakhs) that the account was classified as doubtful by the regulatory Authorities, despite which the Chairman (the co-accused/ Premjit Singh) by his letter dated 5th May 1989, had opted to give additional finance to the Company. He, therefore, requested suitable decision on the request of the Company for additional loan in the overall interest of the Bank. In the year 1990, similar letters have been addressed by the Applicant to Kulmer, calling upon it to improve its financial position with the 12 Bank and regretting that he was not in a position to open further LCs, requested by the Company in the letter dated 12th April 1990. 24. The aforesaid documents would show that though the Applicant did recommend additional credit limits initially, he stopped after he saw that the account of Kulmer did not improve as called upon. The contention on his behalf is that though, as the Senior Vice President, he had to take a certain amount of risk and allow a certain amount of discretion of recommending credit limit, he has not exceeded his authority. When he realized that Kulmer did not improve its position, he called for the opinion from the Bombay Office. He did not recommend further limits. He recommended that it not be increased. Despite his recommendations he was overruled by the then Chairman and Managing Director, the co-accused/ Premjit Singh. These aspects have been considered by the CVC. He has been fully exonerated. 25. The loan of Kulmer has been written off in 1991. The case has been filed in 1992. Investigation continued until 1997. Sanction to prosecute was applied for and refused on 15.1.1998. A departmental inquiry was instituted on 12.2.1999. The Applicant 13 was exonerated after extensive evidence was considered on 22.10.1999. The Bank passed its order of exoneration of the charges against the Applicant on 31.5.2000 based upon the CVC s order dated 22.10.1999. Thereafter the charge-sheet came to be filed, levying the aforesaid charges, inter alia, upon the Applicant. 26. The prosecution of a public officer for corruption charges is required to be made under the PC Act, 1988 by the CBI. CBI is a watch-dog for that purpose; it cannot be a bloodhound to persecute a public officer in the place of prosecuting him. Therefore, the salutary provision for sanction to be obtained by the competent Authority is required. 27. The competent Authority has refused sanction in a detailed letter spanning 10 pages, setting out the reasons for refusal. It sets out the establishment of the New York Branch of the Bank in February 1978, the licence for lending activities obtained by it in 1982. The account with Kulmer was opened in September 1983 well before the Applicant was posted at the Branch. The default for recoveries by Kulmer despite increased sales has been set out. It shows that Kulmer did not reduce outstandings despite its increased sales and profitability in the period 1987 14 to 1989. It also sets out that investigation commenced in 1992 for the period 1983 to 1989-90, which were completed only in 1997, which de- motivated the Applicant and hampered his career, though his contribution and performance has always been to the utmost satisfaction of his superiors. It also sets out that from 1983 till 1987 Kulmer s account was functioning normally. Hence when occasions for higher credit facilities arose the Bank Authorities deemed it fit to accede to its request. At that time, the true status of the account was reported by the Branch Authorities to the Central Office and hence the case for criminal conspiracy to cheat the Bank of its commitments was not at all made out any where or at any stage. 28. The letter sets out the various facilities granted to Kulmer beginning 9.3.1983 well before the Applicant was posted in May 1987 and worked under K.C. Choksi, the co-accused, who was the Executive Vice President. He became Senior Vice President in September 1987 when K.C. Choksi was repatriated to India. The credit limit was then USD 1.4 Million. It was raised to USD 2.08 Million due to overdrafts in its bills portfolio. It also sets out that the recommendation made by the Applicant initially was for regularisation of the ad-hoc credit given. The 15 request for reconsideration was submitted by the Applicant since Kulmer showed the increased profitability and substantial orders. It sets out that the Applicant, as the Senior Vice President, reported the entire picture to the Head Office. The ad-hoc proposal was not recommended by the New York Office. The reconsideration was called for by the Applicant because the outstanding had already reached saturation level and without further LC and further ad-hoc facilities, the operations in the account would have come to a stand-still. Consequently, the additional ad-hoc limit was increased for commercial considerations for keeping the operations in the account alive at that time. The proposal for still further limit of USD 3.5 Million was submitted to the Central Office for consideration. This was in turn submitted by the Deputy General Manager (International) to the Executive Director. Hence it is concluded in the letter that no fault, deficiency or omission of duty can be imputed upon the Applicant. 29. Further the letter has considered the Fax dated 2.12.1987 of the Applicant, which recommended increase because the sales position of the Company had improved. The additional ad-hoc facility was considered and sanctioned by the Chairman and 16 Managing Director (the co-accused). It shows that the limit was recommended to be increased to USD 3.5 Million, which effectually amounted to regularization of the limits enjoyed by the Company. This was discussed and approved by the Chairman and Managing Director and confirmation for excess grant of credit was conveyed to New York Branch under letter dated 24.2.1988. Similarly, the opening of the LC of USD 35,000 has been justified. It is also set out that after the account was termed doubtful by the FDIC, no further limit was recommended. The letter, therefore, refuses to sanction prosecution to the Director, Central Vigilance Commission. 30. No such sanction has been obtained by the CBI either. 31. From a reading of these documents, it can be seen that there is no prima facie case of conspiracy or any act of corruption shown against the Applicant. Mere recommendations do not tantamount to conspiracy or corruption. They have to be independently considered and appreciated. Where a particular employee has stopped short has to be seen. The officer, who acts upon the directions of his superiors, despite his own opinion being made known, cannot be prosecuted for an act done upon the 17 directions of his superiors. Consequently, from the documents relied upon by the prosecution, more specially the aforesaid Telexes, Fax and the letters, the charge is not made out against the Applicant. 32. It has been argued on behalf of the Applicant that in the case of P.S. Rajya vs. State of Bihar, (1996) 9 Supreme Court Cases 1, it has been held by the Hon ble Supreme Court that once the departmental inquiry has exonerated the Applicant, the criminal prosecution would not lie since the standard of proof is much higher than the criminal prosecution. Nevertheless, I have gone through the material to satisfy myself upon whether the charge can be prima facie made out against the Applicant, based upon the factual evidence relied upon by the CBI. I have found that it cannot be, since the two documents cannot be read in isolation when the charge-sheet contains a bulk of documentary evidence. I am satisfied that the Applicant is required to be discharged upon the material produced by the CBI on merits and upon the fact that sanction to prosecute was earlier refused and the Applicant has been charge-sheeted only after his retirement to evade the statutory provision regarding the obtaining of sanction to prosecute the Applicant. The learned 18 Special Judge/Sessions Judge has not considered any documentary evidence to see any prima facie case against the Applicant herein. In a charge such as this, the main case would be made out by the documentary evidence which consists in correspondence over a large period of time forming a chain of correspondence which has to be looked into as a whole. 33. I am gratified to have received exemplary assistance from the Counsel on behalf of the Applicant who has in the most lucid manner set out before me the entire documentary evidence to unfold the Applicant s act as the Senior Vice President of the Bank at its New York Branch over a period of years from the compilations of the CBI as well as the CVC. 34. Consequently, the order of the learned Special Judge/Sessions Judge, Greater Bombay, is seen to be suffering from a material irregularity. Hence the order of the learned Judge dated 13.3.2003 is set aside. The Criminal Revision Application is allowed accordingly. The Applicant is discharged from Special Case No.61 of 1999. (SMT.ROSHAN DALVI, J.)