THE HON’BLE SRI JUSTICE P.DURGA PRASAD CRIMINAL APPEAL Nos.2232, 2236, 2237, 2252 and 2255 of 2004. JUDGMENT: The appellant in Criminal Appeal No.2232 of 2004 is A.3. The appellant in Criminal Appeal No.2236 of 2004 is A.1. The appellant in Criminal Appeal No.2237 of 2004 is A.5. The appellant in Criminal Appeal No.2252 of 2004 is A.2. The appellant in Criminal Appeal No.2255 of 2004 is A.4. All these appeals arise out of the conviction and sentenced passed by the Special Judge for C.B.I Cases, Hyderabad in C.C.No.16 of 1994 on 29.09.2004. All the five appellants herein along with A.6 (the appeal against A.6 was already abated) were prosecuted for the offences under Sections 120-B read with 420 IPC, 468 read with 471 IPC and 5 (2) read with 5 (1) (d) of Prevention of Corruption Act (for short “P.C.Act”). The brief averments of the prosecution case as per the charge sheet are that A.1 functioned as Branch Manager, Somajiguda Branch, Vijaya Bank, Hyderabad from 24.06.1987 to 02.10.1988, A.4 functioned as Assistant Branch Manager, Somajiguda Branch, Vijaya Bank, Hyderabad from 1987 to October, 1989. A.3 functioned as Divisional Manager, Vijaya Bank, Hyderabad from 1987. A.2 and A.5 are close friends. A.2 worked as a Manager under A.5 for the real estate business by name M/s.Srinivasa Enterprises situated at Door No.6-3-390/391 (A), Panjagutta Cross Roads, Hyderabad. However, as per records, A.2 was shown as Proprietor of M/s.Srinivasa Enterprises, whereas he was paid employee as per the muster-roll. A.5 was controlling the affairs and he was the main beneficiary. Thus, A.5 was the real owner and A.2 was a benami proprietor. A.3 is maintaining S.B. account bearing No.4868 and 5193 and also a current account in the name of M/s S.S.Enterprises at Somajiguda branch of Vijaya Bank. M/s Srinivasa Enterprises is having current account No.472 in the said branch. A.6 is Managing Partner of M/s. J.D. Enterprises at Hyderabad and he is engaged in real estate business and he is also maintaining current account No.515 in Somajiguda branch of Vijaya Bank. All the six accused are the members of the criminal conspiracy during the year 1987-88 to cheat the Vijaya Bank in the matter of sanction and release of as many as 3077 pronote loans in favour of several persons, who were sponsored and recommended by M/s. Srinivasa Enterprises and M/s. J.D. Enterprises, to a tune of Rs.2,64,64,325/- by submitting false and forged documents at the time of sanction and release of loans. M/s. J.D. Enterprises, represented by A.6 approached A.3 during the year 1987 with a request to sanction loans to the persons sponsored by them for purchase of house plots against F.C.N.R. deposits mobilized by them. Though there is no such scheme in the bank, A.3 promised to do the same. A letter dated 03.07.1987 was also addressed to the Divisional Manager signed by one P.N.Ramesh, Chief Proprietor. A similar request was also made by M/s. J.J. Constructions by their letter dated 03.07.1987. A.3 as Divisional Manager recommended sanction of Rs.65,00,000/- for each of the limits and forwarded the proposal under his letter dated 06.07.1987. A.3 similarly recommended a loan of Rs.65,00,000/- and forwarded the proposal of M/s. Srinivasa Enterprises by his letter dated 14.08.1987. A.3 described the firms as real estate agents and promoters and the proposal was meant for the purchase of house sites for the employees of Government Department. A.3 further assured the Head Office that the advances made by the Bank will be safe since the payment was guaranteed. A.3 sent a telex on 14.08.1987 to the domestic credit department to expedite the sanction of loans for M/s. J.D. Enterprises and M/s. J.J. Constructions. The Head Office of the bank turned down the proposal and informed the branch vide telex and letter dated 18.08.1987 stating that the bank need not evince such interest. A.3 did not keep quiet and again addressed a letter dated 20.08.1987 to the A.G.M. Madras with a copy to Executive Director of the Bank stating that the proposal is worth consideration as the Bank will be able to secure deposits to the tune of Rs.8 to 10 crores. Finally, the Head Office agreed to sanction the loans on the condition that the party should provide F.C.N.R. deposits to the extent of twice the loan to be sanctioned. A.3 further pleaded with the bank that the sanction of the Board may not be required as the individual loans will be less than Rs.10,000/-, for which the Head Office agreed. The proposals were accepted by the Head Office by the end of 1987. As per the Circular No.94/87 dated 15.10.1987 issued by the Executive Director of Vijaya Bank referring to an earlier RBI Circular, it was the duty and responsibility of the branch to properly appraise and scrutinize all the credit proposals even though they were backed up by huge deposits. M/s. Srinivasa Enterprises mobilized F.C.N.R. deposits worth Rs.1,25,41,450/-. As against this, it sponsored 1466 loan accounts for the same amount and all the loans were sanctioned by the branch. M/s. J.D. Enterprises mobilized F.C.N.R. deposits to the extent of Rs.2,71,49,070/- and as against this 1611 loans for a total amount of Rs.1,35,32,975/- were sponsored and sanctioned. The scrutiny of the accounts revealed that Sri N.Surya Prakasharao (A.5) was the real beneficiary of the loan amounts to a tune of Rs.12,70,000/-. A.Janardhan Rao (A.6) also real beneficiary for the loan sanctioned by the branch. A.1 and A.4 Viz., Manager and Assistant Manager of the branch, did not cause any pre-sanction verification of the loanees. They also did not obtain any confidential report about the promoters from the erstwhile bankers, as required under banking norms. They also allowed A.2 and A.5 to print the loan documents and submit them to the branch. The officials of the Bank have sanctioned and released the loan amounts and credited to the current account of the promoters. Fifteen pronote loans at Rs.10,000/- each were sanctioned to the employees of M/s. Gayatri Industries on 23.02.1988 and 27.02.1988 by A.1. All these loans were sponsored by M/s. Srinivasa Enterprises and the proceeds were credited to the current account of the said firm. The investigation reveals that the said firm was a fictitious firm and did not exist and all the borrowers were employees of water works department of State Government working at Maredpally, Secunderabad. The entire amounts sanctioned to the company amounting to Rs.1,50,000/- is outstanding. All the borrowers, who purported to have signed the applications, denied the receipt of amount or the sale deeds from the promoters. Ninety-four pronote loans were sanctioned at Rs.10,000/- each on 20.04.1988 and 29.04.1988 sponsored by M/s. J.D. Enterprises. A.1 Manager sanctioned 50 pronote loans and the rest were sanctioned by A.4. The enquiry reveals that no firm exists at the address mentioned at any point of time. During the course of investigation, letters were seized, which were addressed by A.1 to A.5 and A.1 to A.2, in which A.1 expressed anxiety over the fictitious loans. Sixty-six pronote loans were sanctioned by A.1 amounting to Rs.6,60,000/- on 19.05.1988, which were sponsored by M/s. J.D. Enterprises, pertaining to the employees of Prakash Industries. The investigation revealed that no firm exists at any point of time. One hundred and four pronote loans were sanctioned on the recommendation of M/s. J.D. Enterprises, to the employees of M.E. Industries on 25.04.1988 and 14.05.1988, aggregating to Rs.10,40,000/-. All these loans were released by A.1. A.5 has paid Rs.75,088/- on 19.08.1988 and 12.09.1988 by cash vouchers and he has also issued cheque for Rs.37,544/- from his current account to be paid to these accounts. Enquires revealed that no unit existed at any point of time. Fifty pronote loans were sanctioned on 23.05.1988 on the recommendations of M/s. J.D. Enterprises by A.4 to the extent of Rs.5,00,000/-. Twenty pronote loan accounts were closed on 10.10.1988 by remitting an amount of Rs.1,83,380/-. This amount was withdrawn from current account of M/s. Sri Srinivasa Enterprises. A.5 paid the said cash and the enquiries revealed that no such unit is existed at any point of time. One hundred and thirty-nine pronote loans were sanctioned to the employees of MCH during February 1988 and May 1988. Many of the loanees denied receipt of loan amount or the sale deed from the promoters. Six loans were sanctioned on 18.04.1988 on the recommendation of J.D. Enterprises by A.1 to the employees of Indian Oxygen Employees Co-operative Society and the borrowers denied the receipt of the amount and sale deeds. During the course of investigation, a note book was seized, wherein A.5 made entries, showing payment of illegal gratification in cash and valuable articles to the bank staff including A.3, A.1 and A.4. The aforesaid acts disclose that A.1 and A.4 encouraged and permitted A.5 and A.6 to canvass for F.C.N.R. deposits and to sponsor the names of the borrowers even though there was no such scheme for sanction of loans for house plots, in spite of the caution given by Head Office to sanction the scheme with a view to help the promoters against the banking norms by misrepresenting the material facts with regard to feasibility of the said proposal and gave rosy picture. When the Head Office agreed to the proposal on specific conditions that each loan had to be sanctioned basing on the individual merit, they did not ensure the genuineness of the loanees to be used by the private persons and submitting false and forged loan applications and supporting documents, A.1, A.3 and A.4 abused their position as public servants and allowed to gain wrongful pecuniary advantage to the M/s. Srinivasa Enterprises and M/s. J.D. Enterprises to a tune of Rs.2,64,74,325/-. Thus, the acts committed by A.1, A.3 and A.4 constitute an offence punishable under Sections 120-B read with 420 IPC and 468 read with 471 IPC and 5 (2) read with 5 (1) (d) of P.C. Act. The acts of A.2, A.5 and A.6 (the appeal against A.6 was already abated) constitute an offence punishable under Sections 120-B read with 420 IPC, 461 read with 471 IPC. Sanction was accorded by the Chairman and Managing Director of the Vijaya Bank, Bangalore for prosecution of A.1, A.3 and A.4 as required under Section 6 (1) (c) of P.C.Act. The learned Special Judge has framed the charges under Sections 120-B read with 420 IPC against A.1 to A.6, Section 420 IPC against A.1 to A.6, Section 468 read with 471 IPC against A.1 to A.6, Section 13 (1) (d) read with Section 13 (2) of P.C. Act, against A.1, A.3 and A.4. All the accused pleaded not guilty for the said charges. Prosecution in order to establish the said charges examined 38 witnesses and marked 565 documents. The accused, on their behalf examined D.Ws.1 to 3 and got marked Exs.D.1 to D.37 in defence. The learned Special Judge by taking into consideration of the said oral and documentary evidence found A.1 to A.6 guilty for the offence under Section 120-B read with 420 IPC, convicted and sentenced to undergo rigorous imprisonment for two years each and to pay fine of Rs.3,000/- each, in default of payment of fine, to undergo simple imprisonment for six months. A.1, A.3 and A.4 found guilty for the charge under Section 13 (1) (d) read with 13 (2) of P.C.Act and convicted and sentenced to under go rigorous imprisonment for one year each and to pay fine of Rs.1,000/- each, in default of payment of fine, to under go simple imprisonment for three months. A.1 to A.6 were found not guilty for the charges under Sections 468 and 471 IPC. Aggrieved by the said convictions and sentences, the present appeals are filed. Now, the point that arises for consideration is: Whether the prosecution could able to establish the charge under Section 120-B read with 420 IPC against A.1 to A.6, and under Section 13 (1) (d) read with 13 (2) of P.C.Act against A.1, A.3 and A.4 beyond reasonable doubt? P O I N T: The first contention raised by A.1, A.3 and A.4’s counsels is that there is no valid sanction for prosecuting them and P.W.30, who has granted sanction is not competent to give the sanction and the Board of Directors are only competent persons to issue the sanction as required under Section 19 (1) of the P.C. Act. According to the prosecution P.W.30 Chairman and Managing Director of Vijaya Bank has issued the sanction Ex.P.563 dated 18.11.1992 for prosecuting A.1, A.3 and A.4. The appellants’ counsels have pleaded that he is not a competent person to issue the sanction order and the Board of Directors are only competent to grant sanction prior to issuance of the Circular Ex.D.29 dated 10.11.1994. They further pleaded that P.W.30 has not applied his mind while issuing the sanction order for prosecution A.1, A.3 and A.4. P.W.30 has stated that as Chairman and Managing Director, he has got power to appoint and remove the employees up to scale IV and he issued the sanctioned order Ex.P.563 dated 18.11.1992 basing on the material placed before him by the Vigilance Department. In the cross-examination on behalf of A.1, he has stated that he does not remember now under what authority he derived powers to issue Ex.P.563. He took the assistance of Chief Vigilance Officer of Vijaya Bank before he issued Ex.P.563. He denied the suggestion that the Board of Directors of Vijaya Bank alone had got power to accord sanction and not the Chairman. He admitted that Ex.D.29 is the Xerox copy of circular No.259/94 dated 10.11.1994 issued by the Vijaya Bank, Head Office and signed by General Manager (P & S). According to him Ex.D.29 does not refer to any earlier circular. He denied that in view of Ex.D.29, he has no power to issue Ex.P.563. He admitted that Vijaya Bank officers employees (Disciplinary Appeal) Regulations 1981 are available to take disciplinary action against the Officers employees. Ex.D.30 is Xerox copy of Vijaya Bank officer employees’ (conduct) Regulations 1981 and Vijaya Bank officer employees’ (Discipline and Appeal) Regulations 1981. It does not cover the person competent to issue sanction order to prosecute employees of Vijaya Bank under P.C. Act. He also admitted that there are separate regulations under the name and style Vijaya Bank Officers Service Regulations 1982. Ex.D.31 is Xerox copy of it. Regulations 1 to 3 covers the competent authority for the said regulations. In the cross-examination on behalf of A.4, he has stated that he do not remember whether the Board had authorized him to accord sanction in matters like the present case and he do not remember what was the authority which conferred upon him to issue sanction of prosecution against these officials. Therefore, according to him, he being the Chairman and Managing Director of Vijaya Bank, he has got power to appoint and remove the employees up to scale IV and he is competent to issue sanction Order. The appellants’ counsels relied upon Exs.D.29, D.30 and D.31. Ex.D.29 is the Xerox copy of Circular No.259/94 issued by the General Manager (P & S) of Vijaya Bank, Bangalore. In the above circular, it was mentioned that as per Regulation 4 of Vijaya Bank Officer Employees (Discipline & Appeal) regulations, 1981, the Disciplinary Authority is empowered to dismiss an officer employee from the service of the bank, and as per clause 19.6 (a) of the Bipartite settlement, the Disciplinary Authority is empowered to dismiss an award staff member from the service of the bank. In the circumstances, the Board of Directors have accorded their approval to delegate the power to the respective Disciplinary Authorities, as mentioned in Annexure – I to the circular to accord sanction for prosecution as required under Section 19 (1) (c) of the P.C. Act, 1988 in respect of both workmen employees and officer employees in scale 1 to VII. As per Annexure-I, the Chairman and Managing Director is authorized to accord sanction under Section 19 (1) (c) of P.C. Act. Ex.D.30 is the Vijaya Bank Officer Employees (Discipline and Appeal) Regulations, 1981. Clause (g) of Vijaya Bank Officer Employees (Discipline and Appeal) Regulations, 1981 deal with “Disciplinary Authority” means the authority specified in the Schedule which is competent to impose on an officer employee any of the penalties specified in regulation 4. Clause (f) deal with the “Competent Authority” means the authority appointed by the Board for the purposes of these regulations. As per the Annexure – I the General Manager is the competent authority for the Officers Grade III, II, I and Managers, Regional Managers, Chief Managers, Assistant General Managers. The Chairman and Managing Director is the competent authority for the Joint General Manager and General Manager. Therefore, the disciplinary authority under the said regulations is not the Board of Directors as pleaded by the appellants’ counsels. The competent authority is only to the extent of implementation of the said regulations, but disciplinary authority was mentioned in Annexure – I attached to the said regulations. The appellants’ counsels also relied upon Ex.D.31, which is Vijaya Bank (Officers’) Service Regulations, 1982. Clause 3 (e) defines competent authority means the authority designated for the purpose by the board, but the said regulations does not deals with the disciplinary authority and disciplinary action to be taken against the said officers. As stated by P.W.30, he is competent to appoint and remove the employees up to scale IV. As per Ex.D.29 disciplinary authority is competent to remove the officers and employees as mentioned in the schedule and the Board of Directors, Vijaya Bank nowhere indicated as disciplinary authority to any category of the officers. Therefore, it cannot be said that the Board of Directors of Vijaya Bank are only the competent authority to remove the officer of the bank from the service. The appellants’ counsel has pleaded that Board of Directors have delegated their power to issue sanction as required under Section 19 (1) of the P.C. Act to the disciplinary authorities with effect from 10.11.1994. The Board of Directors alone competent to issue sanction prior to that date. But the said circular does not refer to any earlier circulars and the said circular only authorized disciplinary authorities to issue sanction as required under Section 19 (1) of the P.C. Act. As per Section 19 (1) (c) of the P.C. Act, in case of any other person, of the authority competent to remove him from his office. Therefore, the authority competent to remove the person from office is competent authority for issuing the sanction as required under Section 19 (1) of the P.C. Act. Therefore, the contention of the appellants’ counsel that prior to 10.11.1994 the Board of Directors are alone competent to issue sanction order cannot be accepted. Since P.W.30 is competent authority to dismiss any employee from the service of the bank he is the competent authority for issuing the sanction under Section 19 (1) of the P.C. Act. The next contention of the learned counsel for A.1 is that A.1 is only implemented the scheme of sanction of pronote loans as approved by the Head Office and there is no conspiracy with any of the persons i.e. promoters for sanction of the said pronote loans and he has sanctioned the loans by obtaining necessary instructions from the Divisional Office and he never cheated the Vijaya Bank by conspiring with any of the accused, as such A.1 is not liable for the offence under Section 120-B read with 420 IPC. Learned counsel for A.3 has pleaded that A.3 is only Divisional Manager of the Vijaya Bank and he has only sent the proposals for sanction of the pronote loans against the F.C.N.R. deposits as per the proposals received from the promoters to the Head Office and as admitted by P.Ws.1, 2, 3 and 4 by sending the proposals, he has not committed any offence and he has send proposals in the usual course and the observation of the prosecution that he has shown much interest in getting the approval from the Head Office for granting of the said loans, is not correct as he has issued remainders to the Head Office with an intention to get deposits for the bank and by the time of sanction of the loans, he was not the Divisional Manager of the Vijaya Bank and at the stage of sending proposals, he is not aware who are the beneficiaries of the said loans, as such he has not committed any offence of conspiracy under Section 120 –B and cheating under Section 420 IPC. Learned counsel for A.4 has pleaded that A.4 is only Assistant Manager of the bank and in the absence of A.1, she has granted the loans as per the instructions given by A.1 Branch Manager and as per the circulars of the Vijaya Bank she has to follow the instructions of the Manager and she is not aware of any conspiracy of any of the accused to cheat the Vijaya Bank. Learned counsels for A.2 and A.5 have pleaded that the said accused have not committed any offence of conspiracy or cheating the Vijaya Bank. As per the proposals approved by the Head Office, they have submitted the loan applications of the borrowers for purchasing the plots through them and after sanction of the loans they have registered the plots in the name of the borrowers, but some of the borrowers refused to receive the registered sale deeds, as such some of the registered sale deeds are with them and they have not cheated the Vijaya Bank at any point of time and the prosecution has failed to establish the allegation of non-existence of the companies for whose employees the loans were sanctioned. The learned counsel has also further pleaded that the Investigating Officer has not done any investigation in this case except relying upon the report of P.W.1 and there is no material on record to show who are the real beneficiaries of the loans sanctioned by the Vijaya Bank, simply because the loan amounts were credited to their accounts, it cannot be said that they conspired to cheat the Vijaya Bank, as such they are entitled to be acquitted for the offence under Section 120-B read with 420 IPC. Now, it has to be examined whether the prosecution could able to establish the conspiracy between A.1 to A.5 with an intention to cheat the Vijaya Bank. A conspiracy from its very nature is generally hatched in secrecy. It is, therefore, extremely rare that direct evidence in proof of conspiracy can be forthcoming from wholly disinterested quarters or from utter strangers. But, like other offences, criminal conspiracy can be proved by circumstantial evidence. Indeed, in most cases proof of conspiracy is largely inferential though the inference must be founded on solid facts. Surrounding circumstances and antecedent and subsequent conduct, among other factors, constitute relevant material. 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 the law of evidence, relevant for proving both conspiracy and the offences committed pursuant thereto. In the present case, there is no direct evidence to establish the conspiracy between A.1 to A.5 to cheat the Vijaya Bank by obtaining pronote loans against F.C.N.R. deposits. Therefore, the circumstantial evidence available on record will establish the conspiracy between A.1 to A.5, has to be examined. P.W.1 is the Assistant General Manager, Head Office, Vijaya Bank, who inspected the branch along with other officers and brought the irregularities to light in his report Ex.P.346. According to P.W.1, A.1 was the Branch Manager of Somajiguda Branch of Vijaya Bank. During his tenure he disbursed loans under FCNR deposits linked loans. He disbursed 15 pronote loans totally amounting to Rs.1,50,000/- purportedly to the employees of one Gayatri Industries and the said unit is very tiny unit not employing more than two persons at any time. The