THE HON’BLE SRI JUSTICE G. KRISHNA MOHAN REDDY CRIMINAL PETITION No. 8470 of 2008 ORDER: This Criminal Petition is filed by the petitioner/accused Nos.1 and 2 under Section 482 Cr.P.C. seeking to quash proceedings in C.C.No.34 of 2007, on the file of the Court of Special Judge for CBI Cases, City Criminal Courts, Hyderabad, registered for offences punishable under Sections 420 read with Section 120 B IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (for short, the Act). Whereas the petitioners are A1 and A2, the respondent No.1 is the complainant in the C.C. For the sake of convenience, I refer the parties as arrayed in the Calender Case. It is necessary to note briefly the prosecution version: A1 who represents A2, is the managing director of A2. He along with three others namely Smt. V. Manemma, Smt. Chandrakala, and Smt. V. Vijaya Lakshmi are the partners of the firm also. A3 in the case was working as the Commissioner in Customs and Central Excise Department, Hyderabad and hence, he was a public servant. A1 to A3 in the case conspired together with a dishonest and fraudulent intention to cheat the Government of India/Department of Customs and Central Excise in respect of purchase of 30 flats and 13 car parkings at VBG Gardens, Navodaya Colony, Mehdipatnam, Hyderabad by illegal means. Consequently, A3 deliberately recommended a proposal submitted by A2 to the Customs and Central Excise Department for the said works for Rs.3.68 Crores in 1997 emphasizing that the entire property along with the land and buildings was free from encumbrances and charges and A2 was the absolute owner of the property. However, on the publication of an advertisement made on 08.12.1995 in Deccan Chronicle English Daily news paper inviting tenders for the purchase of ready built flats of IV, V, and VI types for the department from private builders, 11 builders including A1 represented by A2 submitted their offers to the Department. After necessary scrutiny by a committee consisting of one Additional Commissioner and three Deputy Commissioners formed by the then Commissioner in the Department short listed the offers of A1 company, M/s Prime Constructions located at Srinagar Colony and M/s Western and M/s Meenakshi Constructions, following which a proposal was submitted to the JS (Administration) CBEC, New Delhi by A3 on 22.12.1995 without informing the same to the Chief Commissioner by virtue of the conspiracy he hatched with A1 and A2. On 13.02.1996 a telex sent by the Under Secretary, CBEC, New Delhi to the effect that necessary budget provision for the year 1995-96 was available with a request to submit necessary information through concerned Housing Board about the availability of ready built accommodation was received by A3, but A3 with dishonest intention did not take any follow up action in that regard and instead he wrote a letter to the JS Administration, CBEC on 16.02.1996 that A2 already offered 17 flats of type IV in an exclusive block at a cost of Rs.695/- per Sq.feet and further A2 was also offering five type IV flats, six type VI flats and two type VII flats asserting that the price offered by A2 for them appeared to be fair with a recommendation to send necessary sanction in that context as expeditiously as possible. Further, A2 represented by A1 wrote a letter to HUDCO, that there was a proposal to sell some of the flats and sought certificate about the structural safety of the apartment, for which, HUDCO replied that it had financed the project of A2 and they engaged certain consultants to evaluate the structural safety of the project and they further sanctioned an amount of Rs.3.20 Crores for that project. Thereafter, on 02.09.1996, A3 having received the letter informed to the Board about the structural safety of the apartment without mentioning anything about financing the project. Further, CPWD sent valuation report issued by the Government valuer in which the value of the fats was fixed at Rs.830/- per Sq.feet and A3 accepted it without obtaining second valuation report. However, on 22.11.1996 a price negotiation meeting was held and the negotiation committee thought that the other three bidders were no longer interested in the matter. However, A3 also issued a letter to the effect that 20% increase over the unit rate given by A2 was justified in view of the increase of the cost of the raw material to be used in the project. Further, thereafter CBEC, New Delhi sanctioned an amount of Rs.3.75 Crores for the purchase of flats subject to certain conditions which were accepted by A2 following which an agreement was entered on 18.03.1997 between A2 represented by A1 being its Managing Partner and A3 on behalf of the President of India. It was further alleged that from 21.03.1997 to 25.11.1997 flats were registered by A2 in favour of the Central Excise Department mentioning that the land was clear from any encumbrances and was marketable. Thereafter, Rs.1.52 lakhs (40%) of the total amount was paid to the builders by issuing 31 cheques and second instalment of Rs.70.33 lakhs was released on 03.02.1999 and thereafter on the request of the builder third instalment of Rs.30 lakhs was released on 03.12.1998, and fourth instalment of Rs.1.17 lakhs was released on 09.02.1999 the total of which comes to Rs.3.68 crores and thus A2 was paid the entire amount for the 30 flats and 13 car parkings leaving a balance of Rs.2.33 crores. Further, on 12.09.2002 HUDCO published a public caution notice in the local news paper that A2 mortgaged his property to VGB Gardens along with three other properties as security for obtaining a loan from HUDCO on 29.03.1996 and then the Department requested the HUDCO to keep the flats purchased by it out of the attachments for which the HUDCO replied clarifying that the Department was aware of the finance made by it and advised to take action against the builder (A2) following which a complaint was filed against A2. Further, in fact A2 made the repayments as prescribed regularly till December, 1997 and later committed default. However, on 29.11.2002 after the issuance of public caution notice, A2 again made payments to a tune of Rs.9.20 lakhs. Further, A1 represented by A2 sold three flats bearing Nos.317, 318 and 320 to K. Katikey, represented by his GPA Sri K.V.V. Venkateshwara Rao and another three flats bearing Nos.417, 418 and 420 to Sri Muralidhar, represented by his GPA respectively though those six flats were already sold to the Central Excise Department on 21.03.1997 and the GPAs already obtained loans from LIC HFL, following which a report was given in the police station at Asifnagar and the purchasers repaid the said loans. It is the contention of learned counsel for A1 and A2 that they executed Sale deeds dated 21.03.1997 and 25.11.1997 in favour of the Customs Department (for short, the department), and immediately the possession of 30 flats and 13 car parkings was handed over to the department and about what transpired earlier on 30.08.1996 HUDCO wrote a letter to the department about its transaction with A1 and A2 and by that time the department ought to have taken necessary steps to know about any encumbrances of the property with the HUDCO and on 13.02.1996 a letter was written by the Joint Secretary of the department for including the Central Public Works Department (CPWD) with regards to the structural strength of the flats and also with regards to the final negotiations of the transactions and the tender was signed by A1 and A2 and in view of the earlier letter of HUDCO, there was no need for A1 and A2 to inform about the mortgage to the department and there has been no prohibition to sell any mortgaged property and on 14.03.1997, a draft agreement was adopted and it was sent to the Law Department, New Delhi for approval, but no objection was raised by the Law Department in that connection, and later on 18.03.1997, the final agreement between A1, A2 and the department was executed and in fact A1 and A2 sold six flats to Karthikeyan and Muralidharan by mistake, but however, subsequently A1 and A2 themselves paid the amounts due to them, in respect of those six flats. Further, in order to attract the provisions of Section 420 IPC, there must be a good basis to say that at the inception itself A1 and A2, along with A3, induced the department with a dishonest intention to enter into the contract suppressing the question of mortgage and accordingly the department acted upon their inducement and entered into the contract, and consequently there has been gain to A1, A2 and A3 and loss to the department but so far HUDCO did not take any steps to initiate action against the flats handed over to the department and a long time lapsed between the date of entering into the agreement and the date of filing the complaint before the Court and in fact, no loss has been caused to anybody and therefore, it cannot be said that A1 and A2 committed the offence punishable under Section 420 IPC, prima facie, and accordingly, the proceedings are to be quashed and A1 and A2 are to be discharged. On the other hand, it is the contention of learned Special Public Prosecutor appearing for the CBI that A1 and A2 never informed the department about the question of mortgage to HUDCO nor HUDCO informed about it to the department in the letter dated 13.02.1996 or subsequently at any point of time in any way and, throughout, the department was kept in dark with regard to that aspect and there are several allegations made against A1 to A3, the main aspect being that A3 involved in the crime in collusion with A1 and A2 and unless necessary trial of the case is conducted, it cannot be said that A1 to A3 are innocents of the crime and, at this stage, they cannot be discharged by allowing the petition and accordingly the petition is liable to be dismissed. The point for consideration is whether sufficient grounds are there in order to quash the proceedings as prayed for. No document is filed before the Court to the effect that either at the time of making the proposals to enter into the transaction between A1 represented by A2 and the department or later, the question of mortgage of the flats and the car parkings in favour of HUDCO earlier was informed to the department. The letter dated 13.02.1996 of HUDCO does not disclose such information. There are clear allegations against A-1 to A-3 supported by record to the effect that by virtue of the said conspiracy among A- 1 to A-3, the last of them deliberately recommended a proposal submitted by A-2 to the Customs and Central Excise Department for the said works for Rs.3.68 crores in 1997 emphasising that the entire property along with the land and buildings was free from any encumbrances and charges even though prior to that A-1 represented by A-2 mortgaged the property with the flats and the car parkings in favour of HUDCO and after short listing the offers of three companies/ three tenderers for the purchase of ready builtl flats of IV, V and VI types for the department a proposal was made by A-3 on 22-12-1995 without informing the same to the Chief Commissioner and even though on 13-02-1996 A-3 received a telex from the Under Secretary CBEC, New Delhi about the budget for the years 1995-96 with a request to submit necessary information through the concerned Housing Board about the availability of ready built accommodation he did not take any follow-up action in that regard and instead wrote a letter to the J.S. Administration CBEC on 16.02.1996 that A-2 already offered 17 flats of type IV in an exclusive block at a cost of Rs.695 per square feet and further A-2 was also offering 5 type IV flats, 6 type VI flats and 2 type VII flats asserting that the price offered for A-2 by them appeared to be fair with a recommendation to send necessary sanction in that context as expeditiously as possible and A-3 issued a letter that 20% increase over the unit rate given by A-2 was justified in view of the increase of the cost of the raw material to be used in the project and further A-1 represented by A-2 also sold away six flats to different persons who purchased the flats obtaining loans, even though those flats were already sold to the Department (Central Excise Department) on 21-03-1997 and after coming to know about it the concerned GPAs of the purchasers repaid those loans. It was the duty of A-3 to carry out his duties as the Commissioner of Customs and Central Excise Department, Hyderabad. If he acted in the way alleged in order to cause benefit to A-1 and A-2 and consequently to have benefit for himself and loss to the department definitely the relevant penal provisions are attracted here. When the property was mortgaged to HUDCO prior to entering into the agreement between the Customs and Central Excise Department A-1 and A-2 were under the obligation to give necessary information to the later department and A-3 was also under obligation to make necessary enquiries and ascertain as to whether there were any encumbrances over the property before taking necessary action in that context. At this stage, it cannot be concluded as to whether any loss was caused to the Customs and Central Excise Department, if so, what loss was exactly caused to the department in doing so. Even supposing that no loss was caused by suppressing the factum of mortgage of the property the overall circumstances of the case on necessary examination only will ensure the actual criminal intention of A-1 to A-3 in the matter. When tenders are called for carrying out certain works in a public office, the corresponding process is to be carried out in a fair, open and straightforward manner and any suppression or concealment of relevant events or information makes it categorical that the process is not carried out in the manner required or carried out in a manner detrimental to the office. There is material prima-facie to prosecute A-1 to A-3 in the case in respect of the alleged offences. On the assessment of the allegations made, it appears clearly that A-1 to A-3 are interlinked with those allegations and it is not possible to separate any one of them from the same allegations and discharge them at this stage. If A-1 and A-2 are discharged there will be nothing to prosecute A-3 in the case for the offences alleged. Unless necessary trial of the case is conducted, the complicity of A-1 to A-3 for the charges cannot be decided. Therefore, for the reasons narrated above, I do not find any grounds to uphold the plea of A-1 and A-2 to quash the proceedings as prayed for. Ultimately, the Criminal Petition is dismissed as devoid of merits. _____________________________ G.KRISHNA MOHAN REDDY, J 27th December, 2011 KSM