* 1 * CRA-486/2008 & W.P.-2085/2008 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL REVISION APPLICATION NO. 486 OF 2008 Mr. N.T.Bhavnani .....Applicant V/s. 1. The Union of India (Thru.CBI, New Delhi) 2. State of Maharashtra ....Respondents. ---------- Mr. Satish Maneshinde, adv.for applicant. Mr. D.J. Khambhatta, Additional Solicitor General with Mr. H.V. Mehta and Mr. Afroz Shah, adv.for respondent no.1. Mr. J.P. Kharge, APP for State-respondent no.2. W I T H CRIMINAL WRIT PETITION NO. 2085 OF 2008 Shri.R.Srinivasan .....Petitioner (Orig.Accused no.3) V/s. 1. The Union of India (Thru.CBI, New Delhi) ..... Respondent * 2 * CRA-486/2008 & W.P.-2085/2008 Mr. S.R.Chitnis, Senior Counsel with Mr. Ramesh Siraga, Advocate for applicant. Mr. D.J. Khambhatta, Additional Solicitor General with Mr. H.V. Mehta and Mr. Afroz Shah, Advocate for respondent. CORAM : SMT. R.P. SONDURBALDOTA, J. DATED : 4th SEPTEMBER, 2009. P.C :- 1. This is a common order on the above two proceedings that seek to assail the same order dated 25th July 2008 of the Sessions Court rejecting applications for discharge in CBI Special Case No.99 of 2000 accusing the petitioners abovenamed and two more persons of commission of offences punishable under Sections 120-B, 420 Indian Penal Code and Section 5(2) read with 5(1)(d) of Prevention of Corruption Act, 1947 and Section 120-B, 420 Indian Penal Code read with Section 13(1)(d) read with 13(2) Prevention of Corruption Act, 1988 and substantive offences thereof. 2. All the four accused in the case are former public servants who were holding high positions with Bank of * 3 * CRA-486/2008 & W.P.-2085/2008 India. They are alleged to have conspired and defrauded Bank of India to the extent of US$8992815 equivalent of Indian Rs.28,32,73,672/- by abusing their official positions. Accused no.1 G.C. Kathrani was working as Sr. Vice President, Bank of India, New York Branch, U.S.A. Accused no.2 K.N. Chaturvedi was Senior Vice President, Bank of India, New York Branch, U.S.A. He was also one of the members of the Credit Committee for sanction and/or recommendation to Head Office, Mumbai of loans to various parties. Accused no.3 R. Srinivasan was the Chairman and Managing Director of Bank of India. He is the petitioner in the writ petition herein. Accused no.4 N.T. Bhavnani was the General Manager (International) of Bank of India. He is the applicant in the revision application herein. 3. Srinivasan, Bhavnani and Chaturvedi filed applications before the Sessions court seeking their discharge from CBI Special Case No.99 of 2000 contending that the charge-sheet and the accompanying material does not, prima-facie, substantiate the allegations against them. The application for discharge filed by Srinivasan contains an additional * 4 * CRA-486/2008 & W.P.-2085/2008 ground that points out no sanction has been obtained by “ the prosecution to prosecute him. The ground does not ” specify the provision of law under which the sanction ought to have been obtained. The arguments advanced before the court however are in respect of sanction under Section 197 Criminal Procedure Code. The arguments were principally advanced by Mr. Chitnis, the learned Senior Counsel in the above writ petition. Mr. Maneshinde, the learned Senior Counsel for the petitioner in the revision application has, in order to avoid repetition, adopted the arguments of Mr. Chitnis on the need for sanction. In addition, he has drawn attention of this court to the correspondence which relates to his client, Bhavnani. 4. Mr. Chitnis, argued that the petitioners were public servants removable from office only with the sanction of the government. They have been accused of having committed offences while performing their official duties. Therefore, it was incumbent upon the prosecution to obtain sanction under Section 197 Criminal Procedure Code before initiating proceedings against them. The Union does not dispute that * 5 * CRA-486/2008 & W.P.-2085/2008 the petitioners are public servants who are not removable from service without it s prior sanction. It however, ’ contends that the acts constituting the offence alleged against the petitioners cannot be said to be committed while acting or purporting to act in discharge of official duties of the petitioners and therefore sanction under Section 197 Criminal Procedure Code is not required. 5. It would be convenient to set out at this stage the acts alleged against the petitioners in the proceedings initiated against them. Bank of India is a nationalised bank having its Head Office at Mumbai and branches at various places in India and abroad including at New York. The sanction of loans in the New York branch was governed by Loan Policy document approved by the Head Office keeping in view requirements of regulatory authorities of USA. There were also credit committees formed at Overseas Centres consisting of the Chief Incumbent at the centre, Manager of the branch, Manager of the branch whose proposal is under consideration and Credit Officer. The delegated authority of the committee to consider and decide * 6 * CRA-486/2008 & W.P.-2085/2008 credit proposals was same as that of the Chief Incumbent at the center who was to preside over the meeting. The allegations in the instant complaint pertain to grant of credit facility to M/s. Hospitality Reality, North Carolina and to M/s. Zurich Corporation, New York. 6. One Murlikrishna of M/s. Hospitality Reality had submitted an undated application to New York branch for sanction of term loan of US$ 1.5 million for acquiring a parking plot at La-Guardia Airport, New York stating that the amount would be repaid in four annual installments of US$ 1 lac each with the balloon payment of US$ 1.5 million in the fifth year. The application stated that Murlikrishna was in the hospitality line for the last four years. Kathrani and Chaturvedi recommended the request of Murlikrishna and placed it before the credit committee of the branch on 27th February, 1990. The proposal was approved by the credit committee on the same day. The recommendation contained a false statement that Murlikrishna was in hospitality line for the last ten years. It suppressed the information that Murlikrishna is the brother of one Dr. P.S. Prasad and the * 7 * CRA-486/2008 & W.P.-2085/2008 company M/s. Hospitality Reality is affiliated to Dr. Prasad. The proposal was recommended by these officers without proper evaluation of the party seeking term loan. The valuation report of the parking lot at La-Guardia Airport was prepared by one M/s. Calorina Appraisers, 1669- Cumberland under the signature of one Mr. F. Bruce Souter. The investigation revealed that no person by name Mr. Bruce Souter exists and the signature on the valuation report was a forged signature. The valuation report was also not submitted directly to the bank but was addressed to M/s. Hospitality Reality and had been forwarded to the bank by the company. The investigation also revealed that the parking lot for which the loan was sanctioned had already been mortgaged to BCCI, New York for a laon in the name of M/s. Travelers Renovations, New York. The term loan sought was for acquisition of the parking lot. However, it had already been transferred by M/s. Zurich Corporation of Dr. Prasad to M/s. Hospitality Reality of his brother, Murlikrishna. 7. The facts of M/s. Zurich Corporation transaction are * 8 * CRA-486/2008 & W.P.-2085/2008 that in 1988 Srinivasan Chairman and Managing Director introduced Dr. Prasad, a US citizen to Kathrani and Chaturvedi. On his instructions, Kathrani and Chaturvedi recommended loan to the extent of US$ 3 million to M/s. P.S. Investment Company belonging to Prasad vide proposal dated 29th August, 1988. The proposal was placed before the credit committee of the branch on 7th September, 1988 which recommended the proposal to the Head Office for sanction. The proposal came to be sanctioned by Bhavnani on 15th October 1988 on the instructions of Srinivasan. There were several serious irregularities in grant of the sanction. The sanction was granted without obtaining audited financial statement and securities as per the norms of the bank. Within two days, the sanction of the loan was communicated to the branch by telex. Thereafter, Dr. Prasad requested New York branch for disbursement of the loan in the name of a third person, i.e. M/s. Zurich Corporation. The request was recommended by Kathrani to the Head Office. He informed the Head Office that M/s. Zurich Corporation was a newly formed company and as such did * 9 * CRA-486/2008 & W.P.-2085/2008 not have any financial statements. The proposal was accepted by Bhavnani without proper analysis and without obtaining any securities or audited financial statements. Thus, the amount of loan in the sum of US$ 3 million sanctioned in the name of M/s. P.M. Investment Company was actually disbursed to M/s. Zurich Corporation. Thereafter, M/s. Zurich Corporation sought a term loan of US$ 4.5 million from the New York branch which was recommended by Kathrani and Chaturvedi vide their proposal dated 26th October, 1989. It was placed before the credit committee and the branch which recommended sanction of the term loan of US$ 4 million, forwarded the same to the Head Office in India. The Head Office credit committee under the chairmanship of Srinivasan sanctioned the loan on 15th February, 1990 without obtaining any securities, audited financial statements etc. When the sanction of the loan was communicated to the branch office, Dr. Prasad requested for disbursement of the loan in the joint names of M/s. Sumara International and M/s. Zurich Corporation. Chaturvedi recommended the request without * 10 * CRA-486/2008 & W.P.-2085/2008 knowing anything about M/s. Sumara International. The recommendation was approved by Khatrani and the amount was disbursed in the joint names of the two companies, though the sanction of the loan by the Head Office was only in the name of M/s. Zurich Corporation. The disbursement of the loan in the names of the two companies came to be later ratified by Head Office committee under the chairmanship of Srinivasan. 8. The recommendation of the proposals and sanction thereof in both the transactions, violated a number of guidelines under the Loan Policy document. The policy included obtention of financial statements in all loans, except, the loan made against Bank of India own term deposits, adequate investigation into past record of the Borrower, critical analysis appraisal of business projections, adequate post sanction supervision to avoid a diversion of funds and obtention of audited financial statements in cases of credit limits aggregating to US$ 1 million or above. 9. The above are the acts for which the question of requirement of sanction under Section 197 Criminal * 11 * CRA-486/2008 & W.P.-2085/2008 Procedure Code is to be considered. Both the sides have relied upon a number of decisions of the Apex Court on the scope and ambit of Section 197 Criminal Procedure Code. Really speaking, the law discussed and laid down in the decisions cited by both the sides is not and cannot be different. I will therefore refer to all the citations in the order of chronology instead of citing them separately as coming from the rival parties. 10. The first decision on the subject is : (A) AIR 1956 Supreme Court page 44-Matajog Dobey V/s. H.C. Bhari . In the said proceedings, officials from income-tax department were being prosecuted under Section 323, 342 and 504 IPC. The four officials of the income-tax department had been authorised by Income-Tax Investigation Commission to take search of certain premises and a warrant was issued for the purpose in their favour. When the authorised officials went to the premises, the same were locked. Despite objections from the watchman, the officials broke open the door, entered the premises and interfered * 12 * CRA-486/2008 & W.P.-2085/2008 with some boxes and drawers of the tables. The objections and protests by the watchman and the owner of the premises resulted in they being assaulted and removed from the premises. It was contended by the accused persons that they being public servants had acted in discharge of official duty, sanction under Section 197 Criminal Procedure Code was required to initiate prosecution against them. The Apex Court after considering the provision and the decisions of privy council cited before it, held that, there must be a “ reasonable connection between the act and discharge of official duty; the act must bear such relation to the duty that the accused could lay a reasonable but not a pretended or fanciful claim, that he did it in the course of performance of his duty” (emphasis supplied). In the facts of the case, the Apex Court held that, it cannot be said that the acts of the officials was necessarily `mala fide or so entirely ’ divorced or unconnected with the discharge of their duty that it was an independent act maliciously done or perpetrated. They could reasonably claim that what they did, was in discharge of their official duty and held that in * 13 * CRA-486/2008 & W.P.-2085/2008 the facts of the case, sanction was called for. (B). (1972) 3 Supreme Court Cases page 89 - Harihar Prasad, etc. V/s. State of Bihar. . The Apex Court in this case was considering appeals against conviction for the offences punishable under Section 120, 120-B read with 409 Indian Penal Code. All the appellants were alleged to have entered into criminal conspiracy for committing the offence of criminal breach of trust and cheating in respect of large amounts of Government money earmarked for a project known as Mahuadar Development Block Pilot Project . The project “ ” was for the welfare of the Scheduled Tribes under a Scheme sponsored by the Government of India. The Apex Court favourably referred to its following observations in earlier decisions It is not every offence committed by public “ servant that requires sanction for prosecution under Section 197(1) Criminal Procedure Code nor even every act done by him while he is actually engaged in the performance of his official duties; but if the act complained of is directly concerned with his official duties, so that, if questioned, it * 14 * CRA-486/2008 & W.P.-2085/2008 could be claimed to have been done by virtue of the office, then sanction would be necessary” (emphasis supplied). It then observed that as far as offence of criminal conspiracy punishable under Section 120-B read with Section 409 IPC is concerned and also Section 5(2) of the Prevention of Corruption Act are concerned, they cannot be said to be of the nature mentioned in Section 197 Criminal Procedure Code. To put it shortly, it is no part of duty of a public servant while discharging his official duties to enter into a criminal conspiracy or to indulge in criminal misconduct and held that want of sanction under Section 197 Criminal Procedure Code was no bar. (C). (1999) 5 Supreme Court Cases page 690 State of Kerala V/s. P. Padmanabhan Nair. . The applicant before the Apex Court had retired from government service as Superintending Engineer of P.W.D. He was arrayed along with certain other persons for offence under Section 5(2) of the Prevention of Corruption Act and Sections 406, 409, 201 read with Sections 120-B and 109 IPC. The High Court had quashed the criminal proceedings for * 15 * CRA-486/2008 & W.P.-2085/2008 want of sanction under Section 197 Criminal Procedure Code. The Apex Court relying its observation in the decision of Harihar Prasad (supra) reiterated that it is no part of the duty of the public servant to enter into a criminal conspiracy for committing breach of trust and set aside the order of quashing the proceedings. (D). (2004) 2 Supreme Court Cases page 349 State of Himachal Pradesh V/s. M.P. Gupta . The Chief Conservator of Forests was being prosecuted by the applicant-State for commission of the offences punishable under Section 120-B, Section 420 read with Section 511 IPC and Section 5(2)(1)(d) of the Prevention of Corruption Act, 1947. He had sought the protection given to public servant under Section 197 Criminal Procedure Code. In the case, the Apex Court took note of all its earlier decisions on the subject and observed that the official act can be performed both in the discharge of the official duty, as well as, in dereliction of it. There cannot be universal rule to determine whether there is a reasonable connection between the act done and the official duty. It gave the * 16 * CRA-486/2008 & W.P.-2085/2008 following as a safe and sure test in that regard. One safe and sure test in this regard would be to “ consider if the omission or neglect on the part of the public servant to commit the act complained of could have made him answerable for a charge of dereliction of his official duty; if the answer to this question is in the affirmative; it may be said that such act was committed by the public servant while acting in the discharge of his official duty and there was every connection with the act complained of and the official duty of the public servant. This aspect makes it clear that the concept of Section 197 does not get immediately attracted on institution of the complaint case.” Then as regards the application of the section, it held that the section has to be construed strictly, while determining it s applicability to any act or omission in the course of ’ service. Its operation has to be limited to those duties wich are discharged in the course of duty. A public servant is not entitled to indulge in criminal activities. To that extent the Section has to be construed narrowly and in a restricted manner. 11. The principle laid down in all the above decisions has * 17 * CRA-486/2008 & W.P.-2085/2008 been reiterated in the last decision cited in State of Uttar Pradesh V/S. Paras Nath Singh reported in (2009) 6 Supreme Court Cases page 372 . 12. The facts of the present case are now required to be considered in the light of the principle laid down in the above decisions. The acts alleged against the petitioners and the two more accused indicate gross violations of several guidelines under the loan policy document. The official duty of the petitioners and others was to strictly abide by the guidelines and not to violate the same. They have been alleged to have entered into conspiracy to defraud the bank by abusing their official positions. The acts alleged if proved will definitely amount to dereliction of official duty. In the circumstances, by no stretch of imagination it can be said that the acts alleged were performed in the discharge of the official duty. Therefore, no sanction under Section 197 Criminal Procedure Code is needed to prosecute the petitioners. 13. As regards the contention that the charge-sheet and the accompanying material does not prima-facie substantiate * 18 * CRA-486/2008 & W.P.-2085/2008 the allegations is concerned, the same must be outright rejected in view of the very facts alleged. The learned Sessions Judge has, nonetheless, in the impugned order, considered in detail the material available on record to hold that it is sufficient to direct the petitioners to stand for the trial. I see no reason to interfere with the view. Hence, the Criminal Revision Application No. 486 of 2008 and Criminal Writ Petition No. 2085 of 2008 are dismissed. [SMT. R.P. SONDURBALDOTA, J] * 19 * CRA-486/2008 & W.P.-2085/2008