* THE HONOURABLE SRI JUSTICE B.N. RAO NALLA + CRIMINAL APPEAL No.12 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. (1979) 1 SCC 535 2. (1990) 3 SCC 325 3. (2009) 6 SCC 77 4. (2009) 8 SCC 617 5. 2009(6) SCC 364 6. 2008 CrlLJ 2805 7. 1993 CRIMES 1-856 C/15 THE HON’BLE SRI JUSTICE B.N.RAO NALLA CRIMINAL APPEAL No.12 OF 2004 JUDGMENT: A-1 in C.C. No.8 of 1999 dated 22-12-2003 on the file of the Court of the Special Judge for C.B.I. Cases, Hyderabad, was found guilty of the offence 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 and sentenced to suffer rigorous imprisonment for two years and to pay a fine of Rs.5,000/-, in default of payment of fine to undergo simple Imprisonment for six months. Aggrieved by the said conviction and sentence passed by the trial Court, A-1 preferred this appeal questioning the legality or otherwise of the said conviction and sentence, inter alia, contending that the trial Court had failed to appreciate the evidence of prosecution witnesses and other material on record in proper perspective. 2. The appellant – A-1 is also accused (A-1) in C.C. No.12 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.12 of 1999 and 13 of 1999, appellant – A-1 preferred Criminal Appeal Nos.11 of 1999 and 466 of 199 respectively. 3. The case of the prosecution as unfolded from the charge sheet, in brief, is as under: (a) That the appellant (K. Murali) – A-1 being Manager of the State Bank of Mysore, Mahindra Hills Branch, Secunderabad (hereinafter referred to as “Bank”), alleged to have conspired with A-2 (Gopal Agarwal) and A-3 (Pushpa Agarwal), who are Managing Director and Director of M/s. ISE Steels Private Limited respectively, to cause wrongful gain to them and thereby to cause wrongful loss to the Bank, by way of accommodating A-2 and A-3 during the course of banking business in violation of the banking procedure, by debiting their local clearing account and falsely showing them as having been paid, by detaining 39 cheques issued by them in inward clearing unauthorizedly, though they had no sufficient balance in their accounts. (b) The appellant – A-1 had also accommodated A-2 and A-3 in the case of outward clearing cheques i.e. the credits placed in the accounts of the parties (A-2 and A-3) pertaining to third party cheques lodged for realization in outward clearing had been allowed to be withdrawn on the same day. Thus, the local clearing accounts were misused in order to pass on the value of the returned cheques to the parties, A-2 and A-3, for which they are not entitled to. That the said modus operandi had been resorted to by the appellant – A-1 on several occasions. (c) That basing on Ex.P-174 - complaint preferred by the Vigilance Officer of the State Bank of Mysore, LW.65 - T.N. Rao, Deputy Superintendent of Police, CBI, Hyderabad, had registered a case against the appellant – A-1 and A-2 to A-4 for the offences under Sections 120-B read with Section 420 IPC, Section 13(1)(d) read with Section 13(2) of PC Act and issued FIR on 31-01-1997 under the cover of said Ex.P-174, wherein two methods i.e. outward clearing and inward clearing methods were stated to be adopted by A-1 in releasing funds in favour of the other accused in furtherance of the criminal conspiracy entered into by and between them in order to cause wrongful pecuniary gain to them and corresponding wrongful pecuniary loss to the Bank. 4. That after completion of the investigation into the case, LW.65 - T.N. Rao, Deputy Superintendent of Police, CBI, Hyderabad had laid charge sheet into the Court on 17-02-1999 against the appellant – A-1 and A-2 and A-3 by deleting the name of another accused viz., Sri Nathmal Agarwal, father of A- 2 - Gopal Agarwal, as he was no more (died) by the time of laying charge sheet. The trial Court had framed three charges against A-1 to A-3, which are as under:- “ Charge U/S.120-B r/w 420 IPC That A1 to A3 of you while working as Branch Manager, State Bank of Mysore, Mahendra Hills Branch, Secunderabad, Managing Director (A2) of M/s. ISE Steels Ltd., and Director (A3) of M/s. ISE Steels Ltd., M.G. Road, Secunderabad respectively, have entered into a criminal conspiracy during the years 1995 and 1996 to cheat State Bank of Mysore, Mahendra Hills Branch, Secunderabad, by presenting and issuing cheques of various amounts totaling to Rs.4,42,92,715/-, in the Inward clearing 39 cheques and in the Outward clearing 44 cheques and thereby committed an offence punishable U/S 120- B r/w 420 IPC and within my cognizance. Charge U/S.420 I.P.C. That A2 and A3 of you had submitted 39 Inward clearing cheques and 44 Outward clearing cheques for a total sum of Rs.4,42,92,715/- during the years 1995 and 1996 to the State Bank of Mysore, Mahendra Hills Branch, Secunderabad in the account of M/s. ISE Steels Ltd., which were discounted by the said bank, and which were later dishonoured, resulting loss of Rs.4,42,92,715/- and causing wrongful loss to the bank and thereby committed an offence punishable U/S.420 IPC and within my cognizance. Charge U/S.13(2) r/w 13(1)(d) of P.C. Act, 1988 That A1 of you being public servant working as Branch Manager, State Bank of Mysore, Mahendra Hills Branch, Secunderabad, abused your official position and committed criminal misconduct by obtaining a pecuniary advantage to a tune of Rs.4,42,92,715/- to A2 and A3 by discounting the said cheques and thereby committed an offence punishable U/Sec.13(2) r/w 13(1)(d) of P.C. Act, 1988 and within my cognizance.” 5. The prosecution, in support of its case, had got examined PWs.1 to 37 and got marked Exs.P-1 to P-174 on its behalf. However, no witnesses were examined and no documents were marked on behalf of the defence. 6. The trial Court, taking the evidence of the prosecution witnesses and other material on record into consideration, found all the accused not guilty of the offences under Sections 120-B and 420 IPC and accordingly acquitted them for the said offences. 7. However, the trial Court had found the appellant – A-1 guilty of the offence under Section 13(1)(d) read with Section 13(2) of PC Act and accordingly convicted the appellant – A-1 for the said offence and sentenced him as referred supra. Assailing the same, appellant – A-1 preferred this appeal. CASE OF THE APPELLANT – A-1: 8. That, though, A-2 and A-3 are stated to be the beneficiaries as per the charge sheet laid down by the CBI and as per the charges framed by the trial Court, however, in fact, if at all any benefit was alleged to have been extended to any person it was to M/s. ISE Steels Private Ltd., M.G. Road, Secunderabad, of which A-2 and A-3 were Managing Director and Director respectively. However, the said company is not included in the array of the accused. 9. That even if the appellant – A-1 is alleged to have extended the facility of crediting cheques against clearance to A-2 and A-3 during the course of banking business, it cannot be said that it resulted in corresponding pecuniary wrongful loss to the Bank. In fact, no such facility was extended in favour of A-2 and A-3. If it is strictly construed, it may amount to extending such facility in favour of the company, of which A-2 and A-3 are parts being its Managing Director and Director respectively. That extending such a facility does not necessarily mean that a pecuniary advantage is extended to others. The whole thing is to be seen in the light of a banker and a customer relationship, and that too, with the eyes of a prudent businessman. When it is so seen, extending such a facility may not, in the business sense, cause corresponding pecuniary disadvantage or loss to the person, natural or legal. The alleged amount of wrongful loss caused to the Bank as stated in the charge sheet as well as the charges framed by the trial Court is incorrect and in fact it was not a loss at all. What is shown in the charge sheet is that the details of the amounts alleged to be involved in the accounts through the alleged two methods is incorrect. The figure that is sought to be projected as a loss is actually not a loss and in fact it is gain to the Bank since the said figure is a cumulative one by adding number of occasions and/or times the facility was extended. Therefore, it is a cumulative figure and it cannot be said that the facilities extended in favour of A-2 and A-3 caused pecuniary loss to the Bank to a tune of Rs.4,42,85,519/-, whereas the said figure is shown different in the charge sheet framed against the appellant – A-1 in the trial Court as Rs.4,42,92,715. Further, that none of the prosecution witnesses has spoken to the real and exact amount of the alleged wrongful loss having been caused to the Bank and in the business thereof, therefore it cannot be said that the appellant – A-1 had caused wrongful loss of any amount to the Bank. 10. That the appellant – A-1 always, as a Branch Manager, acted in good faith and to secure the best interest of the Bank. His honesty and hard-work were not in question. PW.1 stated in his cross-examination that during the course of investigation, he came to know that appellant - A-1 was posted in the Bank (Mahindra Hills Branch) to improve the business of the said branch. That, further, during the course of investigation, he could not come across any material to show that the appellant – A-1 had any pecuniary benefit for himself in the transactions. However, PW.1 has also stated in his evidence that the appellant – A-1 had accommodated the Bank customers against the procedure of the Bank and the same resulted in loss to the Bank. PW.1 has also admitted that he did not notice any evidence to prove conspiracy between the appellant - A-1 and A-2 & A-3. It is also in the evidence of PW.1 that while the appellant – A-1 was the Branch Manager, there was some improvement in the Bank’s efficiency and at the same time some instances resulted in cases like this. 11. That the loan application of M/s. ISE Steels Private Limited was also pending consideration before the Regional Office of the Bank at Bangalore and that certain document of immovable property was placed by the said company as a collateral security, but the loan was not sanctioned, therefore taking the said factual position into consideration, the action of the appellant – A-1 in extending the facility of discounting cheques to M/s. ISE Steels Private Limited cannot be said to have been done in mala fide. Moreover, there is a practice of charging interest in cases of the facility of overdraft and the same was extended in favour of the said company i.e. M/s. ISE Steels Private Limited and the same also goes to show that the action of the appellant – A-1 in extending the facility of discounting cheque to the said company cannot be said to be mala fide. 12. That none of the remaining witnesses has stated anything against the appellant – A-1 and they only spoke about the transactions wherein the cheques issued to M/s. ISE Steels Private Limited and vice versa were being cleared by the Bank. It is only PW.32, who has stated that the said company was having a credit facility from the Bank of India. Therefore, the appellant – A-1 tried to attract the said company to be its customer. Whereas, PW.33 has testified that his inspection revealed that the appellant – A-1 had violated the instructions issued by the Bank. PW.35 has stated that the CBI had sent its report to the Bank, however, there was no specific reference in the said report that the appellant – A-1 had any pecuniary advantage for himself. Lastly, it is in the evidence of PW.37, the investigating officer, that his investigation revealed that 39 inward and 44 outward cheques were honoured by the appellant – A-1. However, he has admitted in his cross-examination that he did not notice any evidence to prove any conspiracy between the appellant - A-1 and A-2 and A-3. However, he volunteered that the way he had accommodated the parties gave him an inference for such conspiracy. He has also stated in the beginning of his cross-examination that his investigation revealed that all the cheques were genuine and they were not forged and all the cheques deposited in the account of M/s. ISE Steels Private Limited were from business houses and corporations connected with either manufacturing or marketing steel. Therefore, even as per the evidence of PW.37, the investigating officer, there were 39 inward clearing transactions and 44 outward clearing transactions. However, the action of the appellant – A-1 in all the transactions was irregular but not illegal as no criminal element like mens rea was involved. It has come to light from the evidence of many of the witnesses that the appellant – A-1 was posted as Branch Manager of the Bank to improve its business and, in fact, there was improvement after his assuming charge as such. That, in all such transactions, Bank stood benefitted by interest and commission etc. All the transactions were banking business transactions between the banker and the customer, and, as such, it cannot be said that the appellant – A-1 had indulged in criminal misconduct with a view to extend pecuniary benefits to any of A-2 or A-3 and also with a view to cause pecuniary corresponding loss to the Bank. That, in fact, all the transactions did not result in any pecuniary benefit to any of A-2 or A-3 and none of the witnesses has spoken to it that they only happened to be the Managing Director and Director respectively of M/s. ISE Steels Private Limited; that it cannot be said that even the said company has enjoyed such a pecuniary benefit since it is not the case of the prosecution to that effect. 13. That initially appellant – A-1 along with A-2 and A-3 charged for the offence under Section 120-B read with 420 IPC as they are alleged to have conspired by and between them to cause pecuniary benefit to A-2 and A-3 by the appellant – A-1 by causing corresponding pecuniary wrongful loss to the Bank. However, as the prosecution had failed to prove the offence of conspiracy against them, the trial Court had acquitted the appellant – A-1 along with A-2 and A-3 for the said charge. Therefore, the charge against the appellant – A-1 for the offence under Section 13(1)(d) read with 13(2) of PC Act, which is corollary to the first charge of conspiracy under Section 120-B read with 420 IPC should have no legs to stand. 14. It is to be found in the evidence of PW.1 that the Bank recovered about Rs.1.23 crores from M/s. ISE Steels Private Limited Company and the balance amount is yet to be recovered, for which a civil suit was already filed. 15. That the appellant – A-1 had acted bona fide in his capacity as Branch Manager of the Bank. That he acted in the context of improving the business of the Bank, and, as such, no motive can be attributed to him. But, his actions may be construed as an irregularity but not illegal since the contract between the banker and the customer was under mutual obligation; the banker has to extend certain facilities including overdraft or credit facility, which the customer has obligation to repay. It has a legal sanctity. It is legally enforceable. That, the customer is liable in law to fulfill his part of contract in a given case since he has gained some pecuniary advantage as extended by his banker; that, in the case on hand, appellant – A-1 had acted in good faith and bona fide in improving the business of the Bank and he did not gain any monetary benefit. Therefore, the provisions of Section 13(1)(d) are not attracted. Moreover, since the appellant – A-1 along with A-2 and A-3 was already acquitted for the charge under Section 120-B read with 420 IPC, of which, the present case is stated to be a corollary as has already been stated hereinabove repeatedly, it cannot be said that he is liable for the charge under Section 13(1)(d) read with 13(2) of PC Act. 16. In support of his case, learned counsel for the appellant – A-1 relied on the decisions of the Hon’ble Supreme Court in S.P. BHATNAGAR v. STATE OF MAHARASHTRA[1], STATE (DELHI ADMINISTRATION) v. N.S. GIANI AND OTHERS[2], S.V.L. MURTHY v. STATE, REP. BY CBI, HYDERABAD[3], and STATE OF MADHYA PRADESH v. SHEETLA SAHAI AND OTHERS[4] CASE OF THE PROSECUTION: 17. On the other hand, it is the case of the prosecution that the appellant – A-1 had acted hand in glove with A-2 and A-3 and exceeded his official powers and financial limits in extending the overdraft facility i.e. clearing 39 inward cheques and 44 outward cheques, total amounting to Rs.4,42,92,715/-, without there being sufficient balance in the account and also against the instructions and advise of its controlling authority, to A-2 and A-3 and thereby facilitated wrongful gain to them and causing corresponding wrongful loss to the Bank. 18. The evidence of PW.1 - Vigilance Officer is to the effect that the appellant – A-1 had accommodated A-2 and A-3 by misusing the local clearing accounts of the Bank with dishonest intention, which squarely falls into the provisions of Section 13(1)(d)(iii) of PC Act. That the said action of the appellant – A-1 was in violation of the instructions issued by the Bank; that all the Branch Managers were to personally supervise and ensure that no entries were pending without reconciliation. That he had extended benefit to A-2 and A-3 by debiting local clearing account by misusing his official position. That likewise he had allowed withdrawals against the cheques deposited, which were subsequently dishonoured for want of sufficient funds. That, of course, the Bank had recovered about Rs.1.23 crores and the balance is yet to be recovered for which a civil suit has been filed. Further, the Bank has received about Rs.1.25 crores by way of one time settlement. 19. It is evident from the cheques in Exs.P-6 to P-8, P-13, P-14, P- 18 to P-21, P-26, P-27, P-30, P-34, P-38, P-42 to P-46, P-50, P-51, P-55, P-56, P-57, P-59 to P-65, P-70 to P-75, P-78, P-79 and P-87, that they are the instances, which can be referred to, as per which the appellant – A-1 could be said to have misused and/or abused his official position in extending pecuniary benefit to A-2. It goes without saying that the same has resulted in corresponding wrongful loss to the Bank. Thus, Ex.P-90 goes to show that the appellant – A-1 had also extended such monetary benefit to A-3 and the same resulted in corresponding wrongful loss to the Bank. 20. The above referred exhibits and transactions are the inward clearing transactions. So far as the outward clearing transactions are concerned, the same modus operandi was adopted by the appellant – A-1; that the pay-in-slips and the debit vouchers are under Exs.P-95 to 101, P-103, P-104, P-105, P-107 and P-108 to P-152. 21. Thus, the plea raised on behalf of the appellant – A-1 that he might have extended pecuniary advantage and/or benefit by allowing the parties to draw more than the balance in their accounts in view of pendency of loan proposal of M/s. ISE Steels Private Limited with the Regional Office of the Bank at Bangalore, cannot be sustained since it was not accepted for want of sufficient clarification from the Bank. However, none of the witnesses has spoken as to what happed to such a loan proposal except PW.1. It is evident from the record that such proposal was rejected outright and the appellant – A-1 was instructed not to extend overdraft facility to A-2 and A-3. 22. Though the appellant - A-1 did not pass any cheque, he prepared voucher for the value of the returned cheque and debited its contents to the local clearing account, which is nothing but accommodating A-2 by abusing his official powers and the same resulted in corresponding loss to the Bank. That it is only in the case of Class – I customers and where the proposal of overdraft is pending and also in the interest of the Bank, a facility in the nature of overdraft is extended, however that is not the case here. 23. It is in the evidence of PW.2, who at the relevant time had worked as Clerk of the Bank i.e. State Bank of Mysore, Mahindra Hills Branch, Secunderabad, that the vouchers in Exs.P-12, P-17, P-29, P-39, P-105 and P-129 are in his writings; that there was no sufficient balance to pass cheques and in spite of his reiterating the same to the appellant - A-1, he passed them. PW.3, who worked as Assistant Manager of the Bank i.e. State Bank of Mysore, Mahindra Hills Branch, Secunderabad, at the relevant time, has testified that A-3 was also having Current Account bearing Nos.6/328 and 6/330 for M/s. Basai Steels. Both the accounts had no overdraft facility. However, the appellant – A-1 had accommodated A-3 under Ex.P-90 cheque for Rs.7,196/- though there was balance of only Rs.1,070/-in the said account. That PW.3 has testified that when he questioned appellant – A-1 in this regard, he stated that the amount of accommodation would be adjusted in a day or two. 24. PW.4, who worked as cashier – cum – go-down keeper in the Bank i.e. State Bank of Mysore, Mahindra Hills Branch, Secunderabad at the relevant time, has testified that he had prepared 28 inward clearing cheques and 18 outward clearing cheques and all of them were passed by the appellant – A-1 including debit vouchers in Exs.P-37, 41, 49, 58, 68, 71, 77, 82, 86, 89, 112 and 148 pertaining to A-2 in the inward clearance and credit vouchers in Exs.P-116, 131, 140, 150 and 151 in the outward clearance. 25. That PW.11, who also worked as cashier – cum – go-down keeper of the Bank i.e. State Bank of Mysore, Mahindra Hills Branch, Secunderabad, has testified that he prepared the debit voucher in Ex.P-118 as per the instructions of the appellant – A-1 and the same was passed by him. PW.32, the then Administrative Officer of the State Bank of Mysore, Central Zone, Bangalore, has testified that appellant – A-1 had sent a proposal for approval seeking credit facility for Rs.1.00 crore in favour of M/s. ISE Steels Private Limited; that, however, no detailed clarifications were sent by the appellant – A-1 when he was required to do so, as such, the proposal was not cleared. It is, in this regard, stated that the plea of the appellant – A-1 that he has accommodated A-2 keeping in view that the said proposal was