IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPELLATE JURISDICTION CRIMINAL APPELLATE JURISDICTION CRIMINAL REVISION APPLICATION NO.34 OF 1998 CRIMINAL REVISION APPLICATION NO.34 OF 1998 CRIMINAL REVISION APPLICATION NO.34 OF 1998 Manipur Upendra Kini .. Applicant/ (Orig.Accused No.1) Versus The State of Maharashtra & Anr. .. Respondents. Shri.Nitin Pradhan, Sr.Counsel for the applicant. Shri.J.C.Satpute, P.P. for Union of India. Shri.Y.M.Nakhwa, A.P.P. for State. CORAM : S.C.DHARMADHIKARI, J. CORAM : S.C.DHARMADHIKARI, J. CORAM : S.C.DHARMADHIKARI, J. DATE OF RESERVING THE JUDGEMENT : 19/01/2007. DATE OF RESERVING THE JUDGEMENT : 19/01/2007. DATE OF RESERVING THE JUDGEMENT : 19/01/2007. DATE OF PRONOUNCEMENT OF THE JUDGEMENT : 09/04/2007. DATE OF PRONOUNCEMENT OF THE JUDGEMENT : 09/04/2007. DATE OF PRONOUNCEMENT OF THE JUDGEMENT : 09/04/2007. JUDGEMENT JUDGEMENT JUDGEMENT : - 1. This Criminal Application is directed against the order of the learned Special Judge dated 18th November, 1997 in Miscellaneous Application No.643 of 1997 rejecting the request for discharging the applicant from Special Case No.51 of 1991 on the file of the Court of Special Judge, Greater Bombay. 2. At the outset, it must be said that the Special Case arises out of the allegations against the applicant, who at the relevant time was the Executive Director of Union Bank of India. The applicant is original accused No.1. The charge-sheet is laid in this case by the Central Bureau of Investigation ("CBI" for short). : 2 : 3. The First Information Report, which has been recorded by Dy.Superintendent of Police, CBI-ACB, Bombay is on the basis that information was received that the applicant and one Anilkumar (Accused No.2) conspired with each other and cheated the Bank to the tune of Rs.25.00 lacs in the year 1986 in the following manner : - "1.: M/s.Neha Leasing and Holdings Ltd., New Delhi deals in giving Industrial Equipments on lease and have its offices at Jaipur and New Delhi. Their Bankers were Canara Bank, Corporation Bank and Bank of Rajasthan but had no dealing with Union Bank of India, Bombay. During the months of August, 1986, Shri.Anil Kumar Jaju approached Shri.M.U.Kini with undated letter for granting packing credit limit of Rs.100.00 lakhs against export orders from Russia for Agricultural products. Shri.Anil Kumar Jaju furnished a false Bombay address for the purpose of getting this limit sanctioned from the Union Bank of India, Bombay. 2. On the introduction of Shri.M.U.Kini (A-1) : 3 : the Managing Director of Union Bank of India, bombay, the current account in the name of M/s.Neha Leasing & Holdings Ltd. was opened with Bombay Main Office of Union Bank of India. Shri.Anil Kumar Jaju submitted a proposal for advance which was directly entertained by Shri.M.U.Kini (A-1). In the normal course, this proposal could have been marked to DGM/GM(C) for approval. Violating the normal procedure Shri.M.U.Kini (A-1) called for the proposal and accorded sanction for Rs.115.00 lakhs. As per directions of Shri.Kini, the proposal was then processed by Chief Manager (Central Advances & Monitoring Department) for facilities of following limits : - (i) Packing Credit - Rs.25 lakhs (ii) Shipping Loan - Rs.40 lakhs (iii) Foreign Bill Purchase - Rs.65 lakhs The Chief Manager (Central Advances & Monitoring Dept.) had put conditions that the facilities should be allowed against the Letter of Credit and after satisfactory Credit Report of the firm. : 4 : Meanwhile, the Credit Investigation Department of the Bank submitted a Credit Report which was adverse. Inspite of the fact that no L/C was opened a Credit Report was adverse of the firm and that there was no contract between the party and Russian Govt. for export of the item, Shri.M.U.Kini (A-1) sanctioned the facilities and ordered disbursement of packing credit to the extent of Rs.25 lakhs without any security. Subsequently, it was found that this party had no experience in export and they never had any dealing with Union Bank of India, Bombay. The Jaju Group was previously having adverse report with this Bank. Inspite of these facts Shri.M.U.Kini had shown undue favour to this firm by misusing his official position as Executive Director of Union Bank of India, Bombay. 3. After sanction of the credit facilities by Shri.M.U.Kini (A-1), Shri.Anil Kumar Jaju (A-2) withdrew the amount of Rs.25 lakhs through cheque issued in favour of M/s.Vardhman Solvent Extraction Ltd. who had their account in Bank of Rajasthan, Bombay. It is found that Shri.Anil : 5 : Kumar Jaju is one of the Directors in the said firm and the amount of Rs.25 lakhs deposited was transferred in the personal accounts of Shri.Anil Kumar Jaju, Shri.M.P.Jaju, his cousin and one Shri.J.P.Lahoti. The firm M/s.Vardhman Solvent Extraction Ltd. was not having any stock of de-oiled soyabean cakes and they were not in position to supply that item. They have prepared the false documents in favour of M/s.Neha Leasing & Holdings Ltd. to enable them to get the loan from Union Bank of India, Bombay. 4. The above facts disclose the commission of an offence by Shri.M.U.Kini (A-1) and Shri.Anil Kumar Jaju (A-2) U/s.120 B r/w. 420 IPC & 5(2) r/w.5(1) (d) of P.C.Act, 1947. Hence, a regular case is registered and the investigation is taken up." 4. After the investigations were complete, C.B.I. laid the charge-sheet alleging commission of offence under the Indian Penal Code and Prevention of Corruption Act, 1947 (P.C. Act, 1947). Applicant is arraigned as accused No.1 in the above special case which was registered : 6 : pursuant to the complaint received by C.B.I. 5. The applicant filed a Discharge Application being Miscellaneous Application No.643 of 1997 contending that allegations and charges sought to be framed by C.B.I. are false, frivolous and intended to harass the applicant. The applicant is not guilty of any offence much less those alleged against him. It was contended by the applicant that he drew the attention of the Hon’ble Special Judge to the fact that at the relevant time, he was an Executive Director. He was eligible and qualified to be elevated to the post of Managing Director. It is at that point of time that persons who were aspiring for the post and departmental rivals lodged a false case against him. 6. It is his case that he was not previously familiar with accused No.2 and had not taken any benefit from any of the accused so that any conspiracy can be imputed against him. He has set out various aspects considered by him for sanction of loan to the borrower, in para 10 of his application. He has referred to various other companies of the Jajoo group whose dealings with the bank were not satisfactory and the requirement to attract the customer M/s.Producin Pvt. Ltd. who was earlier the : 7 : bank’s customer and who had later withdrawn. He has further stated that he acted on the positive recommendations of the branch manager, and the process note dated 13.8.86 of the Chief Manager. He was anxious about bringing Jajoo group in the fold of UBI. He has further shown that he visited the Jaipur regional office to discuss the credit worthiness of the company of accused No.2 on 12.10.86, before he sanctioned the loan on 17.10.86. He has stated in para 12 of his application, how, he ultimately concluded, upon return from Jaipur and during his visit to Delhi and Jaipur, that the loan applied for by accused No.2 should be granted, in view of the credit report of another company being Premier Vegetables Products Ltd. of Jajoo group. However, he did not consider the credit report dated 19.9.86 relating to the company before granting credit finance. He accordingly contends that he bonafide accorded his sanction. 7. It is also contended by the applicant accused No.1 that he performed his duties properly since an equitable mortgage of the land was created. Further, Economic Credit and Guarantee Corporation (ECGC) was to indemnify 75% of the loan. Therefore, if at all there would be a : 8 : loss to the Bank, it would be minimum. 8. On the other hand, the prosecution/respondent contended that accused No.1 in his capacity as the Executive Director of UBI sanctioned a loan of Rs.25 lakhs, from the loan of Rs.1 crore applied for by accused No.2 on behalf of accused No.3, despite an adverse credit report dated 19.9.86 in respect of the proposal submitted by accused No.2 to the bank. Accused No.2 misrepresented to the bank that his firm M/s.Neha had sold 5000 M.T. of soyabean extraction for export to a firm in Russia M/s.General Exports (Moscow) claiming that the goods were procured from the firm of Wardhaman. This representation has been made by Neha, of which accused No.2 is the Director, signed by accused No.6 as its authorised representative. The representation made in the letter dated 15.10.86 shows a completed sale of 5000 M.T. of soyabean extraction to the firm in Russia. It recites a contract of the supply of goods by Wardhaman. It was therefore represented to the bank that Wardhaman was to supply goods to Neha which Neha had to export to general exports. Despite the letters dated 15.10.86 stating that 5000 M.T. were sold, nothing is indeed shown to be sold. It is the case of the prosecution that without verifying : 9 : such a sale or the contracts mentioned to have been enclosed to the letter dated 15.10.86, accused No.1 sanctioned the loan of Rs.25 lakhs to accused No.2 as a Director of Neha, despite the adverse credit report with regard to the proposal. It is the prosecution case that two of the firms of Jajoo group had shown experience to the bank earlier in honouring their commitments. The prosecution relied upon the stock verification made by the bank by its official D.A. Bhiwandiwala, in the Regional Manager’s office, Bombay city shown only 950 bags of soyabean-de-oiled meals having been found in the clearing agent’s godown and further 67.612 bags from Wardhaman delivered for local sales only. The report states that stock statement submitted by the borrower differs widely from the statements submitted by the clearing agent. It is the prosecution case that applicant-accused No.1 arbitrarily, on his own, referring to his personal knowledge ordered the amount of loan to be released in favour of accused No.2. 9. It is rejecting these pleas of the applicant that the learned Special Judge concluded that a prima-facie case is made out of criminal conspiracy to cheat Union Bank of India by accused No.2 who applied for a loan which : 10 : was sanctioned by applicant accused No.1 and of which the other accused were beneficiaries. The sanction of the loan despite an adverse credit report, prima-facie, shows the role played by the applicant accused No.1. Further, the securities offered for securing the repayment were not investigated and scrutinized by applicant accused No.1. All this shows that there is a prima-facie case and the charge u/s.120(B) r/w. Sec.420 of I.P.C. cannot be said to be groundless. In such circumstances, the discharge application of the applicant accused No.1 is liable to be rejected. 10. It is this judgement and order of the learned Special Judge which is subject matter of challenge in this application filed invoking Sec.482 of the Code of Criminal Procedure. 11. Shri.Pradhan, learned counsel appearing for the applicant submits that the impugned order is vitiated by serious errors apparent on the face of the record because the learned Judge has failed to notice the fundamental aspect of the matter, namely, mere non-payment of the dues by the borrower is not enough to draw a conclusion that a criminal offence has been committed. He submits that the : 11 : Bank is not the complainant. There is no allegation that the amount is totally lost to the Bank. Further, there is no allegation that any amount is appropriated by the applicant. He submits that there is no fraud and no case of criminal breach of trust. As far as the offence of cheating is concerned, he submits that the ingredients of the said offence are not fulfilled in the facts of this case. He submits that there is no case made out of any offence under the Prevention of Corruption Act. For all these reasons, the impugned order be quashed and set aside. 12. Shri.Pradhan submits that the applicant joined the Bank in 1955 as a clerk. He was promoted and appointed as General Manager (Credit) in 1983. He was, then, appointed as Executive Director but on contract of three years w.e.f. 21st February, 1986. The applicant was a part of the Board of Directors of the Bank. The Managing Director and the Executive Director were responsible for day-to-day affairs. However, the applicant’s role was limited to credit sanctions, development, procuring human resources and management and infrastructure development. Shri.Pradhan submits that Union Bank of India at the relevant time had 200 branches all over India. He submits : 12 : that in the hierarchy, there are several persons and officers. It is not as if the decision is taken by an individual. Shri.Pradhan submits that the sanctioning authority is the General Manager (Credit). This post was vacant at the relevant time i.e. between February 1986 to 31st October, 1986. He submits that sanctioning of loans by a Nationalised Bank is on the basis of the guidelines, which are framed by the Reserve Bank of India. He invites my attention to Clause 2 of the Manual and submits that the limits for sanction are Rs.75.00 lacs. He submits that a Packing Credit Limit (Export) could have been sanctioned to this extent. However, the present facility is for Rs.25.00 lacs. He invites my attention to the guidelines for Non Production Assets (N.P.A.) of 2003. He submits that in pursuance of these guidelines, a proposal for settlement had been accepted by the Bank and the amount therein is paid. He submits that Sec.420 of I.P.C. contemplates a wrongful gain. Shri.Pradhan submits that there is no charge u/s. 5(1)(e) of the P.C. Act against the applicant. He submits that there is no material to show that any favour was shown by the applicant to the accused No.2. There is no business or other relations. He submits that the charge-sheet is silent as far as the amount received from accused No.2. He submits that all : 13 : that the prosecution alleges is that the loan should not have been sanctioned and granted in the light of the credit report. However, the applicant, as an Executive Director, took a decision based on his own experience and judgement. He submits that there is no criminal intent and in any event, nothing survives in the special case after the one-time settlement with the borrower. He submits that the alleged error/mis-judgement is not an offence. He submits that such an error or mis-judgement would have been tolerated in proceedings under Banking Regulation Act, 1949. Shri.Pradhan submits that there is no intention to cheat. There is no gain to the applicant neither there is any corrupt motive. 13. Shri.Pradhan has placed strong reliance upon the decision of the Hon’ble Supreme Court reported in AIR 1996 AIR 1996 AIR 1996 S.C. 2452 (C.B.I. v/s. Duncans Agro Industries Ltd.) S.C. 2452 (C.B.I. v/s. Duncans Agro Industries Ltd.) S.C. 2452 (C.B.I. v/s. Duncans Agro Industries Ltd.). He submits that this judgement has been followed subsequently. He submits that if the sanctioning limits are not crossed, then, something more is required to be established. This is a regular banking transaction. There is no mis-representation but a bonafide exercise of authority. The charge-sheet is silent on mis-representation, meeting of mind and fraudulent intent. : 14 : He submits that the applicant was approached by the borrower during the course of the banking business. By this fact alone, culpability cannot be presumed. He submits that the borrower has not been charged with any wilful default, fraud and malfeasance and his proposal for settlement is accepted by the bank. Now, when settlement has been arrived at, the prosecution/proceedings in the special case deserve to be quashed. 14. Alternatively, Shri.Pradhan submits that the proceedings are not maintainable as there is no sanction accorded for prosecution in this case. He submits that the sanction has to be previous sanction. Sec.197 of Cr.P.C. and Sec.6 of P.C. Act, 1947 have been referred to by Shri.Pradhan. He submits that the provision requiring sanction is mandatory. He, then, points out Sec.4(3) of the old P.C.Act and Sec.22 of the new P.C.Act i.e. 1988. He submits that in this case, the Applicant is a public servant. He points out that Sec.21 of the I.P.C. and the Criminal Law Amendment Act, 1952 would be relevant in this case. In the present case, the offences alleged are under General Law also. For such offences, Sec.197 of Cr.P.C. is applicable. In such circumstances and when there is no sanction granted, the prosecution : 15 : itself is bad in law. Shri.Pradhan has taken me through several provisions of the I.P.C. and Cr.P.C. He submits that the requirement of prior sanction before the Court takes cognizance of the case is mandatory and he relies upon the decision of the Supreme Court reported in 2005 2005 2005 (7) S.C.C. 467 (Cref Finance Ltd. v/s. Shree Shanthi (7) S.C.C. 467 (Cref Finance Ltd. v/s. Shree Shanthi (7) S.C.C. 467 (Cref Finance Ltd. v/s. Shree Shanthi Homes (P) Ltd. & Anr.) Homes (P) Ltd. & Anr.) Homes (P) Ltd. & Anr.). Shri.Pradhan submits that the applicant was prosecuted and produced before the Special Judge. However, his production after the charge-sheet is filed would not give jurisdiction to the Special Court because there is no sanction accorded in this case at all. The entire exercise, therefore, is without jurisdiction. Shri.Pradhan submits that the FIR would disclose that the only allegation is of cheating and Prevention of Corruption Act. The transaction is of the year, 1986 and the report is of the year, 1989. Shri.Pradhan has taken me through the Credit Report and has contended that even on merits, there is no offence committed by the applicant. There is no cheating. He has invited my attention to Page 93 of the charge-sheet. He submits that the Officers have taken a collective decision. He also relied upon the report of one Shri.Daruwala. He submits that there are some vague statements in the Adverse Credit Report. However, there is no callousness, negligence and the : 16 : interest of the Bank is fully secured. He submits that there are contradictions and the allegations in FIR are contrary to the report of Shri.Daruwala. This report exonerates everybody concerned. Thus, the FIR is contrary to the Bank documents. It is in such circumstances, it must be noted that the Bank has not come forward to make any complaint. 15. Finally, Shri.Pradhan submits that the prosecution is of 1989, we are in 2007. The applicant is 74 years of age and, therefore, this Court should exercise its inherent jurisdiction and quash the proceedings in the interest of justice. Shri.Pradhan has relied upon the following decisions. 1] AIR 1996 S.C. 2452 (C.B.I. V/s. Duncans Agro 1] AIR 1996 S.C. 2452 (C.B.I. V/s. Duncans Agro 1] AIR 1996 S.C. 2452 (C.B.I. V/s. Duncans Agro Industries Ltd. Calcutta). Industries Ltd. Calcutta). Industries Ltd. Calcutta). 2] 1986 (3) Bom.C.R. 422 (N.Vaghul V/s. State of 2] 1986 (3) Bom.C.R. 422 (N.Vaghul V/s. State of 2] 1986 (3) Bom.C.R. 422 (N.Vaghul V/s. State of Maharashtra. Maharashtra. Maharashtra. 3] Company Cases [Vol.72] 632 (State of Maharashtra 3] Company Cases [Vol.72] 632 (State of Maharashtra 3] Company Cases [Vol.72] 632 (State of Maharashtra V/s.L.D.Kanchan and Ors. V/s.L.D.Kanchan and Ors. V/s.L.D.Kanchan and Ors. : 17 : 4] (2005) 4 S.C.C. 512 (K.Kalimuthu V/s. State). 4] (2005) 4 S.C.C. 512 (K.Kalimuthu V/s. State). 4] (2005) 4 S.C.C. 512 (K.Kalimuthu V/s. State). 5] (2000) 2 S.C.C. 699 (State of Maharashtra V/s.Laljit 5] (2000) 2 S.C.C. 699 (State of Maharashtra V/s.Laljit 5] (2000) 2 S.C.C. 699 (State of Maharashtra V/s.Laljit Rajshi Shah and Ors. Rajshi Shah and Ors. Rajshi Shah and Ors. 6] Company Cases [Vol.75] 289 (M.V.Kini V/s. State 6] Company Cases [Vol.75] 289 (M.V.Kini V/s. State 6] Company Cases [Vol.75] 289 (M.V.Kini V/s. State (A.P.). (A.P.). (A.P.). 7] (2005) 7 S.C.C. 467 (Cref Finance Ltd. V/s. Shree 7] (2005) 7 S.C.C. 467 (Cref Finance Ltd. V/s. Shree 7] (2005) 7 S.C.C. 467 (Cref Finance Ltd. V/s. Shree Shanthi Homes (P) Ltd. and Anr. Shanthi Homes (P) Ltd. and Anr. Shanthi Homes (P) Ltd. and Anr. 16. Shri.Satpute, on the other hand, has contended that the order on the discharge application is based upon the tentative and prima-facie conclusion. The matter is at preliminary stage. The charge-sheet and other documents show that a prima-facie case is made out. In such circumstances, the discharge application has rightly been rejected. Shri.Satpute submits that the monies and the funds involved in this case are public money and public funds. The charge-sheet, if read as a whole, clearly shows the role of the applicant. He submits that all ingredients of the offences alleged are present. There is a clear case of conspiracy and it would not be proper to hold that this is a simple case of borrower : 18 : being unable to or failing to repay the debt. Shri.Satpute has relied upon the impugned order and more particularly the observations at pages 44 to 47 and 52 of the Paper-Book. 17. Shri.Satpute has, then, contended that no sanction u/s.197 of Cr.P.C. is necessary in this case. A Bank employee is not a public servant. He relies upon a decision of the Supreme Court reported in AIR 1987 S.C. 722 (K.Ch.Prasad V/s.Smt.J.Vanalata Devi and Ors.) and a judgement of the Allahabad High Court reported in 1989 (1) 1989 (1) 1989 (1) Crimes 518 (Bhagwan Prasad Saxena and 2 others v/s. State Crimes 518 (Bhagwan Prasad Saxena and 2 others v/s. State Crimes 518 (Bhagwan Prasad Saxena and 2 others v/s. State of U.P. and another) of U.P. and another) of U.P. and another). Shri.Satpute, then, emphasises that the application states that applicant is working on a contract. He submits that the contract is over and the prosecution is launched subsequently. Hence, sanction under the P.C. Act is not necessary. He relies upon the decision reported in (1998) 5 S.C.C. 91 (Mohd.Hadi Raja (1998) 5 S.C.C. 91 (Mohd.Hadi Raja (1998) 5 S.C.C. 91 (Mohd.Hadi Raja v/s. State of Bihar and another). v/s. State of Bihar and another). v/s. State of Bihar and another). He submits that it is not necessary that there should be a personal gain. The loss caused to the Bank itself is sufficient to bring home the charge. He submits that subsequent payment or alleged clearance of dues is not a relevant factor and in any event, the Bank has not come forward to corroborate this : 19 : statement made by the applicant. The Bank has not forwarded the details about the extent of the liability together with interest. For all these reasons and the case involves public money, therefore, this Court should refrain from exercising its inherent powers under Cr.P.C. He submits that the facts in the case of "Duncans Agro" "Duncans Agro" "Duncans Agro" were distinct and the decision of the Supreme Court is, therefore, distinguishable. In that case, the ingredients of the offences alleged were totally absent. In the facts of that case, the Supreme Court quashed the proceedings. Further, there were no offences alleged under the Prevention of Corruption Act in that case. Therefore, that decision is of no assistance. For all these reasons, the criminal application be dismissed. 18. With the assistance of Shri.Pradhan and Shri.Satpute, I have perused the application and the annexures thereto. 19. All that is to be decided by me is whether the learned Special Judge was in error in rejecting the discharge application preferred by the applicant. 20. Before I arrive at any finding in that behalf, it : 20 : would be proper to refer