* THE HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU + CRIMINAL APPEAL .NoS.480/06, 486/06, 499/06, 501/06, 513/06, 514/06, 515/06 AND 1425 of 2008 % Dated 07.03.2011 CRIMINAL APPEAL NO.480 OF 2006 and batch # P.Nagendra Kumar and others. .. Appellants. v. $ State: Central Bureau of Investigation, Represented by its Public Prosecutor, High Court of Andhra Pradesh, Hyderabad. .. Respondent. ! Counsel for the Petitioner : Sri K.Srinivasa Rao and others. ^ Counsel for Respondents : Public Prosecutor .. Respondent. < GIST: > HEAD NOTE: ? Cases referred (1) III (2005) Bank Cases 28. (2) 2009 (2) Supreme Court Cases (Cri) 941 (3) AIR 1989 SC 1982 COMMON JUDGMENT: These eight appeals arise out of judgment dated 16.03.2006 passed by the Special Judge for C.B.I Cases, Visakhapatnam in C.C.No.28 of 2001. 2. Criminal Appeal No.1425 of 2008 is filed by the State represented by Central Bureau of Investigation (C.B.I) against acquittal of A.1, A.3, A.5, A.6, A.10 and A.12. Other appeals are filed by the accused, who were convicted by the lower Court, namely A.2, A.4, A.7, A.8, A.9, A.11 and A.13 respectively. The convictions, acquittals and sentences recorded by the lower Court are as follows: (a) A.1 was acquitted of the charges under Sections 420, 471/465, 477-A, 468, 120-B IPC and Section 13 (1) (d) (ii)/13 (2) of the Prevention of Corruption Act, 1988 (in short P.C.Act). (b) A.12 was acquitted of the charges under Sections 420, 471/465, 477-A, 120-B IPC and Section 13 (1) (d) (ii)/13 (2) of the P.C.Act. (c) A.13, though was acquitted of the charge under Section 471/465 Indian Penal Code, was convicted for the offences under Sections 120-B, 420 IPC and Section 13 (1) (d) (ii)/13 (2) of the Prevention of Corruption Act. A.13 was sentenced to simple imprisonment for one Year and fine of Rs.3,000/- for the offences under Sections 120-B and 420 IPC; and to simple imprisonment for one year and fine of Rs.1,000/- for the offence under Section 13 (1) (d) (ii)/13 (2) of the P.C. Act. (d) A.2 was acquitted of the charge under Section 120-B IPC. A.2 was convicted for the offences under Sections 420, 468, 471/465 IPC. A.2was sentenced to simple imprisonment for two years and fine of Rs.5,000/- for the offence under Section 420 IPC; simple imprisonment for one year and fine of Rs.1,000/- for the offence under Section 468 IPC; and fine of Rs.2,000/- for the offence under section 471/465 IPC. (e) A.3 was acquitted of the charges under Sections 120-B, 420, 471/465 IPC. (f) A.4 was convicted for the offences under Sections 120-B, 420, 468, 471/465 IPC; and was sentenced to simple imprisonment for three years and fine of Rs.10,000/- for the offence under Section 120-B IPC, simple imprisonment for three years and fine of Rs.10,000/- for the offence under Section 420 IPC, simple imprisonment for two years and fine of Rs.5,000/- for the offence under Section 468 IPC, and fine of Rs.2,000/- for the offence under Section 471/465 IPC. (g) A.5 is acquitted of the charges under Sections 120-B, 420, 471/465 IPC. (h) A.6 was acquitted of the charges under Sections 120-B, 420, 471/465 IPC. (i) A.7 was convicted for the offences under Sections 120-B and 420 IPC; and was sentenced to simple imprisonment for one year and fine of Rs.3,000/- for the offence under Section 120-B IPC and simple imprisonment for one year and fine of Rs.3,000/- for the offence under Section 420 IPC. (j) A.8 was convicted for the offences under Sections 120-B and 420 IPC; and was sentenced to simple imprisonment for One year and fine of Rs.3,000/- for the offences under Sections 120-B and 420 IPC. (k) A.9 was convicted for the offences under Sections 120-B and 420 IPC; and was sentenced to simple imprisonment for one year and fine of Rs.3,000/- for the offences under Sections 120-B and 420 IPC. (l) A.10 was acquitted of the charges under Sections 120-B, 420, 471/465 IPC (m) A.11, though was acquitted of the offence under Section 471/465 IPC, was convicted for the offences under Sections 120-B and 420 IPC; and was sentenced to simple imprisonment for one year and fine of Rs.3,000/- for the offences under Sections 120-B and 420 IPC. (n) A.7, A.8 and A.9 were also acquitted of the charges under Section 471/465 IPC No appeal is filed by the prosecution against acquittal of the charges in respect of the accused, who were convicted and sentenced for other charges. 3. A.1 was working as Manager in State Bank of India, Kothapet branch, Vijayawada. He was holding Middle Management Grade-II cadre. A.12 was working as Deputy Manager in the same bank. A.13 was working as attender in the same bank. Subject matter of the prosecution relates to discounting of third party cheques presented by A.2 and A.4 in State Bank of India, Kothapet branch, Vijayawada, where they were having accounts. A.2 was running business under the name and style of Rakesh enterprises, Vijayawada. A.3 is son of A.2. A.3 was running business under the name and style of Rakesh industries, Vijayawada. A.4, A.5 and A.6 are partners in Raghavendra Steel Corporation, Vijayawada. A.7 was erstwhile partner in Raghavendra Steel Corporation, Vijayawada, but he ceased to be so, with effect from 01.01.1998. A.9 is proprietor of Surya industries, Visakhapatnam. A.10 was running Kalyani Auto entriprises at Eluru of West Godavari District. A.11 was doing business under the name and style of Premier Agencies at Hyderabad in Pharmaceutical goods. A.8 is related to A.13. C.B.I. booked the case on source information. No report was given against A.1, A.12 and A.13 either by the Regional or Zonal offices of State Bank of India, much less vigilance wing of State Bank of India. A.12 is stated to have indulged in the activity of discounting of one cheque presented by A.4 during the temporary absence of A.1 as Manager of the bank when he was on leave. 4. It is the prosecution case that A.1 and A.12 entered into criminal conspiracy with A.2 and A.4, and A.2 entered into criminal conspiracy with A.3, and A.4 to A.6 inter alia entered into criminal conspiracy with A.7 to A.11 and A.13 and indulged in presenting high value third party cheques for discounting in State Bank of India, Kothapet branch, Vijayawada, even though there were no sufficient balances in the accounts of the account holders on whose accounts the cheques were drawn and that ultimately the bank suffered wrongful loss to the extent of Rs.10.39 lakhs in the transactions relating to A.2 and A.3 and total sum of Rs.39.16 lakhs in the transactions relating to Raghavendra Steel Corporation, in which A.4 to A.6 are partners. Plea of all the accused is one of not guilty. They did not take up any other specific plea of defence. Insofar as discounting relating to Raghavendra Steel Corporation is concerned, the prosecution alleges that the bank suffered loss to the tune of Rs.34.34 lakhs with regard to the discounted cheques purchased by A.1 on behalf of the bank; and the bank suffered loss to the tune of Rs.4.82 lakhs in relation to discounting of one cheque by A.12 during temporary absence of A.1; totaling Rs.39.16 lakhs. 5. At the outset, it may be noted that the prosecution has adopted different standards in relation to different transactions and different persons. P.Ws.1 and 3 are the persons, who are stated to have given blank cheques to A.3 in connection with their business transactions; and A.2 filled up those blank signed cheques and presented them as Exs.P.3 and P.19 cheques and obtained discounting of those cheques from the bank through A.1 and withdrew the proceeds of discounting through his account with the bank. It is the further prosecution case that A.13 through A.8 obtained cheque book of State Bank of Mysore, Abids branch, Hyderabad and gave blank cheques Exs.P.37 to P.39 to A.4, who presented the same for discounting with the bank and obtained proceeds of the discounting. In spite of it, though the prosecution impleaded A.8 and A.13 as accused persons, had chosen to cite P.Ws.1 and 3 as only prosecution witnesses. Similarly A.7 is the person, who received proceeds of discounting from A.4 and A.5 after Exs.P.37 to P.39 cheques were discounted. Similarly, when A.10 handed over Ex.P.58 cheque drawn by A.11 to A.4, A.4 presented the said cheque for discounting with the bank. After A.1 discounted Ex.P.58 cheque, the proceeds were stated to have been made over to P.W.32 towards the amount due by A.10 to P.W.32. In spite of it, the prosecution has preferred to cite P.W.32 as a witness and to implead A.7 as accused person. It is contended by the special Public Prosecutor that A.7 was erstwhile partner of Raghavendra Steel Corporation and he colluded with A.4 and A.5 and obtained the proceeds. Ex.P.118 is a document, which was seized by the Investigating Officer P.W.39 during the course of investigation under Ex.P.115 seizure list. Ex.P.118 shows that A.7 retired from Raghavendra Steel Corporation, Vijayawada with effect from 01.01.1998. Under Ex.P.118 the continuing partners A.4 toA.6 did not pay the dues payable to A.7 thereunder, though the amount was settled. Ex.P.118 reads that A.4 to A.6 will pay the settled amount to A.7 in due course. When A.4 and A.5 are stated to have paid proceeds of discounted cheques to A.7, it cannot be said that A.7 colluded with or conspired with A.4 and A.5 and obtained the proceeds of the discounted cheques. A.4 and A.5 paid the amount to A.7 towards the amount due and payable to A.7, in the similar manner in the which the discounted amount was paid to P.W.32 towards the alleged amount due by A.10 to P.W.32. Except receipt of the amount from A.4 and A.5 by A.7, there is no other participation for A.7 in the discounting transactions between Raghavendra Steel Corporation, Vijayawada and State Bank of India. 6. As per the procedure, after the Manager purchases the cheque presented by a customer for discounting, and when the discounting procedure is completed, the amount of cheque minus discounted amount will be credited into the account of the customer. In this case the amount was credited to the account of Raghavendra steel Corporation, Vijayawada after A.4 presented cheques for discounting and after they were purchased by the Manager under the process of discounting. When once the proceeds are credited to the account of the customer namely Raghavendra Steel Corporation, then the amount ceased to have identify of the proceeds of the discounted cheque and the amount becomes property of the customer namely Raghavendra Steel Corporation, Vijayawada in whose account the amount is credited. When A.4 and A.5 obtained Demand Draft by issuing ‘yourself’ cheque for the purpose of obtaining Demand Draft, then it amounts to they purchasing Demand Draft with their own amount. By any stretch of imagination, it cannot be said that A.7 conspired with A.4 to A.6 in the discounting transactions. Therefore, conviction and sentences recorded by the lower Court insofar as A.7 is concerned, are wholly unsustainable either on facts or in law. 7. Whether in the case of Rakesh Industries or in the case of Raghavendra Steel Corporation, it is the prosecution case that the cheques were obtained by the respective establishments when they were blank mentioning no amount either in words or in letters and by filling up those blank signed cheques and presenting the same to the bank for the purpose of discounting even though there were no cash balances in the respective accounts of the drawers. It is contended by the Special Public Prosecutor that it is for the respective accused to come forward with their case as to in what connection and in respect of which business transaction they have issued those blank cheques to either Rakesh Industries or to Raghavendra Steel Corporation and to justify filling of those blank signed cheques with the amounts contained therein before presenting them for discounting. On the other hand, it is contended by the appellants’ counsel that the accused are entitled to maintain silence during the course of trial and it is for the prosecution to prove its case beyond all reasonable doubt by leading evidence in respect of all the circumstances and transactions justifying the prosecution of the accused. Reliance was placed on observations of Kerala High Court in M.P.ABDUL NAZAR V. S.V.DILEEPKUMAR AND ANOTHER[1] to the following effect. “This provision gives expression to the right to silence of an accused person recognized by the Anglo-Saxon system of jurisprudence. The accused need not open his mouth. It is for the prosecution to prove its case. The prosecution case has to be proved; proved beyond doubt, beyond reasonable doubt, beyond the shadow of reasonable doubt. The accused is entitled to the glorious right to silence. He need not reveal his defence. He may plead, not plead or even take up conflicting or mutually contradictory pleas. The law in its majesty, we are told, concedes to the accused the glorious right to silence.” 8. Apart from right of the accused to maintain silence, there is presumption in favour of holder of a cheque as per Section 139 of Negotiable Instruments Act, which reads as under: “Section 139. Presumption in favour of holder:- It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.” 9. The presumption under Section 139 of Negotiable Instruments Act is in favour of holder of a cheque. In the case on hand, the holder of the cheques in question are Rakesh enterprises of A.2 and Raghavendra Steel Corporation of A.4. As per Section 139 of the Negotiable Instruments Act, it has to be presumed that the cheques in question which were dishonoured, were issued by the respective parties for discharge of any debt or other liability, either in whole or in part. No doubt, the presumption under Section 139 of the said Act is rebuttable presumption. Insofar as those dishonoured cheques presented by A.4 for discounting are concerned, the prosecution did not at all lead any evidence to show that they were not issued towards discharge of any part of a debt or other liability. The presumption under Section 139 of Negotiable Instruments Act does not prescribe that the said presumption is applicable in favour of the prosecution alone in a case filed by the holder for prosecuting the drawer for dishonour of cheque. No doubt, Section 139 of Negotiable Instruments Act refers to Section 138 while describing the cheque, in respect of which the presumption is available. In this case, the discounted cheques were sent to the respective bankers for the purpose of encashment, except Exs.P.37 to P.39. Exs.P.37 to P.39 were not sent A.8’s banker because they were found missing from State Bank of India, Kothapet branch, Vijayawada. All the discounted cheques other than Exs.P.37 to P.39 were dishonoured by the respective bankers on the ground that sufficient funds were not available in the respective accounts of the drawers. Thus, all the discounted cheques, except Exs.P.37 to P.39, were dishonoured cheques as contemplated under Section 138 of Negotiable Instruments Act. Therefore, for the purpose of application of presumption under Section 139 of Negotiable Instruments Act, there need not necessarily be a prosecution for the offence under Section 138 of the said Act. It is sufficient if the cheque in respect of which the presumption can be drawn, is one which was dishonoured as contemplated under Section 138 of the said Act. Therefore, I am of the opinion that the presumption under Section 139 of Negotiable Instruments Act is applicable in favour of a holder of a cheque irrespective of fact whether such holder is arrayed as complainant or as an accused person. Therefore, it is for the prosecution in the present case to rebut the presumption under Section 139 of Negotiable Instruments Act by showing that the discounted cheques, which were subsequently dishonoured, were not supported by any debt or liability on the part of the drawers in favour of the drawees. Though some attempt was made by the prosecution insofar as Rakesh enterprises is concerned, by examining P.Ws.1 and 3, the prosecution did not make any such attempt to rebut the presumption insofar as the discounted cheques presented by A.4 on behalf of Raghavendra Steel Corporation. 10. P.W.1 is doing business in coconut oil and dall at Tuni. P.W.3 is doing fancy goods business at Tiruvuru and distributes Tea Powder and coconut oil also. According to P.W.1, he issued Ex.P.3 blank signed cheque of Corporation Bank, Tuni to A.2 in connection with the business transactions with A.3, in which he became due. According to P.W1, he gave order for 20 tins of coconut oil and in that connection, he gave Ex.P.3 blank signed cheque. In cross examination P.W.1 stated that he is maintaining ledgers and that in those ledgers the quantity of oils received and the amount due are mentioned. He denied the suggestion that he was due an amount of Rs.3,11,475/- to Rakesh Industries and therefore he gave Ex.P.3 cheque for the said amount to Rakesh industries. The prosecution did not collect information from the ledgers of P.W.1 with regard to the amount due by P.W.1’s business concern to Rakesh industries. The investigating officer neither verified those ledgers nor seized ledgers of P.W.1 to show that P.W.1 did not owe Rs.3,11,475/- to Rakesh Industries, for which amount Ex.P.3 cheque was drawn with the signature of P.W.1. Similarly to substantiate the evidence of P.W.3 on issuing Ex.P.19 cheque in a blank signed fashion, the prosecution did not collect much less lead any evidence to show that P.W.3 did not owe Rs.4,00,000/- to Rakesh industries. P.W.3 also says that he has got ledgers to show the amount due by him. The investigating officer did not collect much less produce those ledgers of P.W.3 to show that he did not owe Rs.4,00,000/- to Rakesh industries. In the absence of production of such evidence by the prosecution, it cannot be said that P.Ws.1 and 3 gave blank signed cheques to Rakesh industries. According to the prosecution, A.3 of Rakesh industries handed over the blank cheques to Rakesh Industries enabling A.2 to present the same to A.1 for the purpose of discounting. In the absence of proof of the cheques Ex.P.3 and P.19 as blank signed cheques of P.Ws.1 and 3 respectively, it cannot be said that A.2 filled up those cheques with fancy figures and presented those cheques to A.1 for the purpose of discounting. 11. Insofar as liability of A.1 for the entire transactions is concerned, it is contended by the Special Public Prosecutor that powers of A.1 for discounting cheques is limited to Rs.50,000/- and that in this case A.1 exercised discretion of discounting cheques beyond his powers and beyond the sanction limits and without obtaining prior permission of the Zonal office and without obtaining securities. It is further contended by the Special Public Prosecutor that A.1 had deleted 8 DDPs from the computer system of the bank with a view to prevent sending those discounted cheques to the Drawee banks for the purpose of encashment. 12. At this stage, a reference to the evidence of P.W.17 becomes relevant. He was working as accountant in the bank when A.1 was its Manager during the relevant period. P.W.17 in cross-examination deposed that generally branch managers exceed their discretionary powers in respect of valued customers. He says that A.1, himself and other staff members used to work late in the night even upto 10.00 p.m. on account of heavy transactions and that there were no adverse remarks against A.1 in discharging his duties or procedural violation or showing official favour to the account holders of the bank during that period. He says that computer system was introduced in Kothapeta Branch in the year October, 1997 and that initially there were some problems in the computer software pertaining to Bank Master programme for DDP module and that on account of the said problem, the monthly returns in respect of DDP transactions could not be generated. He further deposed that on the night of 18/19-06-1998 at about 9.00 p.m., he received Telephone message from A.1 and that A.1 asked him to verify whether cheques pertaining to Raghavendra Steel Corporation discounted on 17.06.1998 were despatched or not. He says that A.1 wanted him to send the cheque for short collection if it was not despatched and that on the next day when he verified, he did not find the cheque in the despatch box and did not find any entry in the registers relating to that cheque and that he informed the same to A.1 over telephone to his residence. He further says that some more cheques pertaining to Raghavendra Steel corporation were not despatched and they were found missing. P.W.17 deposed that when he asked A.4 about duplicate cheques and asked him to pay the amounts if they were not paid at other branches, A.4 promised him to repay the amount if the cheques if remained unpaid. P.W.17 categorically says that after coming to know about missing of the cheques as branch manager, A.1 took all necessary precautions and also further steps. P.W.17 in further cross-examination deposed that head clerk will be in-charge of the cheques to be despatched. It is so, as per Ex.P.66 office order relating to division of work among the staff members of State Bank of India, Kothapet branch. The said head clerk is not figuring as accused person in this case. A.1 as branch manager cannot be held personally responsible for missing of the cheques, particularly when head clerk is the custodian of the cheques to be despatched. P.W.18 is another Deputy manager in the same branch when A.1 worked as manager. In cross-examination he says that branch manager is not responsible for despatch of DDP cheques to the concerned banks and that the despatch clerk has to despatch the same. 13. P.W.22 was the then chief Manager, advances at Vijayawada Region – III. According to him, A.1 had power to purchase outstation cheques upto Rs.50,000/- and that if he wants to purchase a cheque for more than Rs.50,000/-, he has to obtain prior sanction from Zonal office and that if A.1 purchased any outstation cheque beyond Rs.50,000/- without prior permission, he has to immediately intimate the same to the Zonal office. He filed Ex.P.109 circular of the bank in that regard. In cross-examination P.W.22 admits that periodically internal audit will be made in each and every branch including Kothapet branch and that every branch used to send branch clearing general amount daily statement which reflects DDP entries under V summary to their Zonal office daily and the Zonal office in turn will send the same to the Central office. He says that if there are outstanding amounts and if they are not reconciled, the Central office will issue caution memos to the concerned branch managers and that through the caution memos the branch managers will come to know whether the DDs have been cleared or not, so that branch managers will take necessary steps. He says that the branch manager has to see the credit worthiness of the customer before purchasing the cheques and has to look into security aspects before purchasing outstation cheques. He says that in case of default, the transaction will be treated as Overdraft transaction and the bank is entitled to collect interest thereon from the concerned party. 14. P.W.23 worked as Chief Manager in Vigilance department of State Bank of India at Hyderabad during the relevant period. He along with another conducted inspection and gave Ex.P.110 and P.111 reports. In cross-examination, he says that he did not find any caution memos issued to A.1 during that period by the central office. He admits that A.1 took steps for taking securities from Raghavendra Steel Corporation after the incident came into light. Though A.1 did not obtain securities from Raghavendra Steel Corporation of A.4